United states
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
quarterly report under section 13 0r 15(d) of the securities exchange act of 1934 |
For the quarterly period endedSeptember 30, 2017March 31, 2022
transition report under section 13 0r 15(d) of the securities exchange act of 1934 |
For the transition period from ___________________to ___________________________________________to _______________________
Commission file number000-51302
madison technologies inc.
Madison Technologies Inc.
(Exact name of registrant as specified in its charter)
Nevada | ||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) | (Zip Code) |
Not Applicable |
(Registrant’s telephone number, including area code) |
n/a |
(Former name, former address and former fiscal year, if changed since last report) |
206-203-0474
(Registrant’s telephone number, including area code)
n/a
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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.
[X] ☒Yes [ ] ☐ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (s. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
[X] Yes [ ] No
☒Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company in Rule 12b-2 of the Exchange Act.
Larger accelerated filer | Accelerated filer | |||
Non-accelerated filer | Smaller reporting company | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
[ ]
☐ Yes [X] ☒ No
Applicable only to corporate issuers
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date.
Class | Outstanding at September | |
Common Stock - $0.001 par value |
Form 10-Q | Madison Technologies Inc. | Page 2 |
MADISON TECHNOLOGIES INC.
INTERIM Financial Statements
SEPTEMBER 30, 2017MARCH 31, 2022 and 2021
(unaudited)
Form 10-Q | Madison Technologies Inc. | Page 3 |
MADISON TECHNOLOGIES INC.
(UNAUDITED)
TABLE OF Contents
4 | |
5 | |
6 | |
7 | |
Form 10-Q | Madison Technologies Inc. | Page 4 |
condensed consolidated Balance Sheets
(Unaudited)
March 31, 2022 | December 31, 2021 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ | 206,399 | $ | 55,656 | ||||
Accounts receivables, net | 122,979 | 167,800 | ||||||
Note receivables | 799,362 | 749,603 | ||||||
Due from related party | - | 709,259 | ||||||
Total Current Assets | 1,128,740 | 1,682,318 | ||||||
Intangible assets, net | 12,225,195 | 12,196,646 | ||||||
Equipment, net | 1,449,021 | 1,486,347 | ||||||
Investments | 101 | 101 | ||||||
Operating lease right-of-use assets, net | 1,374,203 | 1,400,980 | ||||||
Total Assets | $ | 16,177,260 | $ | 16,766,392 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable and accrued expenses | $ | 896,437 | $ | 791,802 | ||||
Derivative liability | 3,664,329 | 3,464,529 | ||||||
Current portion of lease liabilities | — | 3,767 | ||||||
Promissory notes | 824,904 | 491,741 | ||||||
Convertible notes payable | 1,374,761 | 850,000 | ||||||
Interest payable on senior secured notes | 825,000 | 453,750 | ||||||
Total current liabilities | 7,534,431 | 6,055,589 | ||||||
Long term portion of lease liability obligations | 1,468,233 | 1,464,728 | ||||||
Long term convertible notes, net of discount | 13,333,601 | 12,919,392 | ||||||
Total liabilities | 22,387,265 | 20,439,709 | ||||||
Preferred Shares - Series C, $2%, stated value $100 per share shares designated, issued and outstanding, March 31, 2022 and December 31, 2021, respectively; | par value;- | - | ||||||
Preferred Shares - Series D, $3.32 per share, shares designated, and shares issued and outstanding, March 31, 2022 and December 31, 2021, respectively; converted | par value; convertible, stated value $155 | 155 | ||||||
Preferred Shares - Series E, $1,000 per share, shares designated, issued and outstanding, March 31, 2022 and December 31, 2021, respectively; shares exchanged to Series E-1 | par value; convertible, stated value $- | - | ||||||
Preferred Shares - Series E-1, $0.87 per share, shares designated, and shares issued and outstanding, March 31, 2022 and December 31, 2021, respectively; | par value; convertible, stated value $1,153 | 1,153 | ||||||
Preferred Shares - Series F, $1 per share, shares designated, issued and outstanding, March 31, 2022 and December 31, 2021, respectively; shares converted | par value; convertible, stated value $- | - | ||||||
Preferred Shares - Series G, $1,000 per share, shares designated, issued and outstanding, March 31, 2022 and December 31, 2021, respectively; shares converted | par value; convertible, stated value $- | - | ||||||
Preferred Shares – Series H, $1 per share, shares designated, issued and outstanding, March 31, 2022 and December 31, 2021, respectively; | par value; convertible, stated value $40 | 40 | ||||||
Temporary equity value | ||||||||
STOCKHOLDERS’ DEFICIT | ||||||||
Capital Stock: | ||||||||
Preferred Shares – 3%, stated value $100 per share shares designated, and shares issued and outstanding, March 31, 2022 and December 31, 2021, respectively; | shares authorized, $ par value Preferred Shares - Series A, $ par value;- | - | ||||||
Preferred Shares - Series B, $ | par value; shares designated, shares issued and outstanding, March 31, 2022 and December 31, 2021, respectively- | - | ||||||
Preferred Stock value | ||||||||
Common Shares - $ | par value; shares authorized shares issued and outstanding, March 31, 2022 and December 31, 2021, respectively1,599,095 | 1,599,095 | ||||||
Additional paid in capital | 10,473,261 | 10,473,261 | ||||||
Accumulated deficit | (18,283,709 | ) | (15,747,021 | ) | ||||
Total stockholders’ deficit | (6,211,353 | ) | (3,674,665 | ) | ||||
Total liabilities and stockholders’ deficit | $ | 16,177,260 | $ | 16,766,392 |
INTERIM Balance Sheets
(UNAUDITED)
September 30, | December 31, | |||||||
2017 | 2016 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ | 4,720 | $ | 14,259 | ||||
4,720 | 14,259 | |||||||
Intangible asset, at amortized cost License agreement (Note 5) | 24,010 | 42,760 | ||||||
Total Assets | $ | 28,730 | $ | 57,019 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable and accrued liabilities | $ | 37,696 | $ | 36,510 | ||||
License fee payable (Note 5) | 33,500 | 33,500 | ||||||
Notes and accrued interest payable (Note 6) | 121,839 | 114,683 | ||||||
Convertible notes payable (Note 8, 9) | 145,970 | 146,013 | ||||||
Related party advance (Note 7) | 261 | 261 | ||||||
TOTAL LIABILITIES | 339,266 | 330,967 | ||||||
STOCKHOLDERS’ DEFICIT | ||||||||
Common Stock (Note 8) Par Value: $0.001 Authorized 500,000,000 shares Issued and outstanding: 12,257,556 shares (Dec 31, 2016 - 11,302,000 shares) | 12,257 | 11,302 | ||||||
Additional Paid in Capital | 302,387 | 285,600 | ||||||
Accumulated deficit | (625,180 | ) | (570,850 | ) | ||||
Total stockholders’ deficiency | (310,536 | ) | (273,948 | ) | ||||
Total liabilities and stockholders’ deficiency | $ | 28,730 | $ | 57,019 |
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
Form 10-Q | Madison Technologies Inc. | Page 5 |
INTERIMCONDENSED CONSOLIDATED STATEMENTS of Operations
(Unaudited)
Three Months Ended | ||||||||
March 31, 2022 | March 31, 2021 | |||||||
Revenues | $ | 474,999 | $ | - | ||||
Operating Expenses | ||||||||
Selling, general and administrative | 181,994 | 82,179 | ||||||
Television operations | 87,632 | - | ||||||
Amortization of intangible assets | 80,494 | 35,284 | ||||||
Professional fees | 1,098,279 | 340,531 | ||||||
Loss on asset disposals | 52,668 | - | ||||||
Total operating expenses | 1,501,067 | 457,994 | ||||||
Loss before other expense | (1,026,068 | ) | (457,994 | ) | ||||
Other income (expense) | ||||||||
Interest expense | (1,520,001 | ) | (359,948 | ) | ||||
Other income | 9,381 | - | ||||||
Total non operating expense | (1,510,620 | ) | (359,948 | ) | ||||
Loss from continuing operations | (2,536,688 | ) | (817,942 | ) | ||||
Loss from discontinued operations | - | (38,835 | ) | |||||
Net loss and comprehensive loss | $ | (2,536,688 | ) | $ | (856,777 | ) | ||
Net loss per share-Basic and diluted | $ | (0.002 | ) | $ | (0.037 | ) | ||
Average number of shares of common stock outstanding | 1,599,095,027 | 23,472,565 |
(uNAUDITED)
For the three | For the three | For the nine | For the nine | |||||||||||||
month ended | month ended | month ended | month ended | |||||||||||||
September 30 | September 30 | September 30 | September 30 | |||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenues | ||||||||||||||||
Sales | $ | 1,456 | $ | 0 | $ | 6,255 | $ | 0 | ||||||||
Cost of sales | 798 | 0 | 4,359 | 0 | ||||||||||||
Gross Margin | 658 | 0 | 1,896 | 0 | ||||||||||||
Operating expenses | ||||||||||||||||
Amortization expense | 6,250 | 0 | 18,750 | 0 | ||||||||||||
General and administrative | 5,180 | 4,617 | 9,984 | 13,349 | ||||||||||||
11,430 | 4,617 | 33,914 | 13,349 | |||||||||||||
Loss before other expense | (10,772 | ) | (4,617 | ) | (32,018 | ) | (13,349 | ) | ||||||||
Other expense - interest | (5,586 | ) | (7,583 | ) | (22,312 | ) | (22,608 | ) | ||||||||
Net loss | (16,358 | ) | (12,200 | ) | (54,330 | ) | (35,957 | ) | ||||||||
Other Comprehensive income | ||||||||||||||||
Translation gain(loss) | 0 | 476 | 0 | (1,714 | ) | |||||||||||
Total comprehensive loss | $ | (16,358 | ) | $ | (11,724 | ) | $ | (54,330 | ) | $ | (37,671 | ) | ||||
Net loss per share | ||||||||||||||||
-Basic and diluted | $ | (0.001 | ) | $ | (0.001 | ) | $ | (0.005 | ) | $ | (0.003 | ) | ||||
Average number of shares of common stock outstanding | 12,216.010 | 11,302,000 | 11,575,016 | 11,302,000 |
See Accompanying Notes to Interimthe Unaudited Condensed Consolidated Financial Statements.
Form 10-Q | Madison Technologies Inc. | Page 6 |
INTERIMCONDENSED CONSOLIDATED StatementS of stockholders’ DEFICIencyDEFICIT
(UNAUDITED)(Unaudited)
Accumulated | ||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||
Common | Paid-in | Comprehensive | Accumulated | |||||||||||||||||||||
Shares | Amount | Capital | Income | Deficit | Total | |||||||||||||||||||
Balance December 31, 2015 | 11,302,000 | $ | 11,302 | $ | 224,600 | $ | 3,109 | $ | (504,761 | ) | $ | (265,750 | ) | |||||||||||
Foreign currency adjustments | - | - | - | (3,109 | ) | - | (3,109 | ) | ||||||||||||||||
Convertible debt - Note 7 | - | - | 61,000 | - | - | 61,000 | ||||||||||||||||||
Net loss, December 31, 2016 | - | - | - | - | (66,089 | ) | (66,089 | ) | ||||||||||||||||
Balance December 31, 2016 | 11,302,000 | 11,302 | 285,600 | - | (570,850 | ) | (273,948 | ) | ||||||||||||||||
Debt converted to shares – Note 7 | 955,556 | 955 | 16,787 | - | - | 17,742 | ||||||||||||||||||
Net loss, September 30, 2017 | - | - | - | - | (54,330 | ) | (54,330 | ) | ||||||||||||||||
Balance September 30, 2017 | 12,257,556 | $ | 12,257 | $ | 302,387 | $ | - | $ | (625,180 | ) | $ | (310,536 | ) |
Shares | Amount | Stock | Capital | Deficit | Total | |||||||||||||||||||
Additional | ||||||||||||||||||||||||
Common | Preferred | Paid In | Accumulated | |||||||||||||||||||||
Shares | Amount | Stock | Capital | Deficit | Total | |||||||||||||||||||
Balance, December 31, 2021 | 1,599,095,027 | $ | 1,599,095 | $ | 1,348 | $ | 10,473,261 | $ | (15,747,021 | ) | $ | (3,674,665 | ) | |||||||||||
Net loss for the period | - | - | - | - | (2,536,688 | ) | (2,536,688 | ) | ||||||||||||||||
Balance, March 31, 2022 | 1,599,095,027 | $ | 1,599,095 | $ | 1,348 | $ | 10,473,261 | $ | (18,283,709 | ) | $ | (6,211,353 | ) |
Additional | ||||||||||||||||||||||||
Common | Preferred | Paid In | Accumulated | |||||||||||||||||||||
Shares | Amount | Stock | Capital | Deficit | Total | |||||||||||||||||||
Balance, December 31, 2020 | 23,472,565 | $ | 23,472 | $ | - | $ | 1,302,977 | $ | (1,484,442 | ) | $ | (157,900 | ) | |||||||||||
Conversion of debt to Series D Preferred | - | - | - | 667,984 | - | 667,984 | ||||||||||||||||||
Series E Preferred issued for assets | - | - | - | 4,225,061 | - | 4,225,061 | ||||||||||||||||||
Series G Preferred issued for subscriptions sold | - | - | - | 510,000 | - | 510,000 | ||||||||||||||||||
Equity portion on convertible debt issued | - | - | - | 30,000 | - | 30,000 | ||||||||||||||||||
Net loss for the period | - | - | - | - | (856,777 | ) | (856,777 | ) | ||||||||||||||||
Balance, March 31, 2021 | 23,472,565 | $ | 23,472 | $ | - | $ | 6,736,115 | $ | (2,341,219 | ) | $ | (4,418,368 | ) |
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
Form 10-Q | Madison Technologies Inc. | Page 7 |
INTERIM
CONDENSED CONSOLIDATED StatementS of cash flows
(UNAUDITED)
For the nine | For the nine | |||||||
months ended | months ended | |||||||
September 30, | September 30, | |||||||
2017 | 2016 | |||||||
Cash Flows from operating activities: | ||||||||
Net loss | $ | (54,330 | ) | $ | (35,957 | ) | ||
Adjustments to reconcile net loss to cash used in operating activities | ||||||||
Amortization of convertible debt discount recorded as interest | 17,698 | 18,000 | ||||||
Amortization of license | 18,750 | - | ||||||
Accrued interest on notes payable | 4,614 | 4,608 | ||||||
Foreign exchange on notes payable | 2,543 | - | ||||||
Changes in assets and liabilities | ||||||||
Accounts payable and accruals | 1,186 | (10,611 | ) | |||||
Net cash used in operating activities | (9,539 | ) | (23,960 | ) | ||||
Cash Flows from investing activities: | ||||||||
Purchase of Intangible asset | - | (10,000 | ) | |||||
Net cash used in investing activities | - | (10,000 | ) | |||||
Cash Flows from financing activities: | ||||||||
Proceeds of convertible notes payable | - | 41,000 | ||||||
Net cash provided by financing activities | - | 41,000 | ||||||
Net increase (decrease) in cash | (9,539 | ) | 7,040 | |||||
Cash, beginning of period | 14,259 | 501 | ||||||
Cash, end of period | $ | 4,720 | $ | 7,541 | ||||
SUPPLEMENTAL DISCLOSURE | ||||||||
Interest | $ | 22,313 | $ | 22,608 | ||||
Taxes paid | $ | - | $ | - |
(unaudited)
For the Three Months Ended | ||||||||
March 31 2022 | March 31 2021 | |||||||
Cash Flows from operating activities: | ||||||||
Net loss for the period | $ | (2,536,688 | ) | $ | (856,777 | ) | ||
Adjustments to reconcile net loss to cash used in operating activities: | ||||||||
Amortized interest | 707,999 | 133,200 | ||||||
Amortization | 80,494 | 35,284 | ||||||
Fair value of Warrant issued for services | 9,000 | - | ||||||
Foreign exchange on notes payable | - | 311 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts payable and accruals | 475,884 | 518,286 | ||||||
Payment of lease liability | (55,327 | ) | - | |||||
Accounts receivable | 44,821 | - | ||||||
Due from related party | 709,259 | - | ||||||
Prepaid expenses | 1,760 | (966,903 | ) | |||||
Net cash used in operating activities | (562,799 | ) | (1,136,599 | ) | ||||
Cash Flows from investing activities: | ||||||||
Purchases of equipment, intangible assets and goodwill | (44,941 | ) | - | |||||
Funds advanced for note receivable | (51,517 | ) | - | |||||
Net cash used in investing activities | (96,458 | ) | - | |||||
Cash Flows from financing activities: | ||||||||
Proceeds from convertible notes sold | $ | 810,000 | $ | 15,030,000 | ||||
Shares subscribed but not issued | - | 510,000 | ||||||
Net cash provided by financing activities | 810,000 | 15,540,000 | ||||||
Net increase (decrease) in cash | 150,743 | 14,403,401 | ||||||
Cash, beginning of period | 55,656 | 9,491 | ||||||
Cash, end of period | $ | 206,399 | $ | 14,412,892 | ||||
SUPPLEMENTAL DISCLOSURE | ||||||||
Interest paid | $ | 453,750 | $ | - | ||||
Taxes paid | $ | - | $ | - |
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
Form 10-Q | Madison Technologies Inc. | Page 8 |
MADISON TECHNOLOGIES INC.
NOTES TO THE INTERIMCONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)(Unaudited)
September 30, 2017March 31, 2022
Note 1Interim Reporting
While the information presented in the accompanying interim nine months consolidated financial statements is unaudited, it includes all adjustments, which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in accordance with accounting principles generally accepted in the United States of America. These interim financial statements follow the same accounting policies and methods of their application as the Company’s December 31, 2016 annual consolidated financial statements. All adjustments are of a normal recurring nature. It is suggested that these interim financial statements be read in conjunction with the Company’s December 31, 2016 annual financial statements. Operating results for the nine months ended September 30, 2017 are not necessarily indicative of the results that can be expected for the year ended December 31, 2017.
Note 2Nature and Continuance of Operations
TheOur Company was incorporated on June 15, 1998 in the State of Nevada, USA and the Company’sour common shares are publicly traded on the OTC Bulletin Board.Markets OTCQB.
Up until fiscal 2014, the Company wasWe, through our wholly-owned subsidiary, Sovryn Holdings, Inc. (“Sovryn”) acquired three un-affiliated Class A/LPTV TV. Each licensed TV station can broadcast between 10 and 12 channels over-the-air, 24 hours per day/7 days per week. In 2021, we generated revenue by leasing channels to third parties on KNLA/KNET, a Class A television station in the business of mineral exploration. Los Angeles, KVVV, a low power television station in Houston and KYMU-LD, a low power television station in Seattle.
On May 28, 2014, the Company formalized an agreement whereby it purchased assets associated with a smokeless cannabis delivery system. The Company planned to develop this system for commercial purposes. On December 14, 2014, this asset purchase agreement was terminated.
On January 21, 2015, a majority of the Company’s stockholders approved a consolidation of the issued and outstanding shares of common stock, on a 10 for 1 basis, thereby decreasing the issued and outstanding share capital from 113,020,000 to 11,302,000. On March 11, 2015, the Company changed its name from Madison Explorations, Inc. to Madison Technologies Inc. and effected the stock consolidation. These financial statements give retroactive effect to both these changes.
On September 16, 2016, the Company entered into an exclusive distribution product license agreement with Tuffy Packs, LLC to distribute products into the United Kingdom and 43 other essentially European countries. The Company will be selling ballistic panels which are personal body armors, that conforms to the National Institute of Justice (NIJ) Level IIIA threat requirements. The Company’s plan of operations and sales strategy include online and social media marketing, as well as attending various tradeshows and conferences.
Effective December 31, 2016, the Company dissolved itsNovember 15, 2021, we sold our wholly owned subsidiary, Scout ResourcesCZJ License Inc. (“Scout”)for $250,000.
During August 2021, our shareholders approved to amend and assumed all the debt that Scout owed.restate our Articles of Incorporation to increase our authorized common stock from shares to shares.
TheseNote 2 Going Concern
The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable toassuming we will continue as a going concern, which assumes thatcontemplates the Company will be able to meet its obligations and continue its operations for its next twelve months. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classificationrecoverability of assets and the satisfaction of liabilities shouldin the Company be unable to continue asnormal course of business. For the year ended December 31, 2021, we incurred a going concern. At September 30, 2017, the Companynet loss of $14,262,579 and had a working capital deficit and an accumulated deficit of $4,373,271 and $15,747,021, respectively, at December 31, 2021. We have not yet achieved profitable operations, had accumulated lossesmade the $0.4 million interest payments on the Notes held by Arena Partners LP that were due on April 1, 2022 and July 1, 2022, and we are currently in discussions with Arena Capital LP on a plan of $625,180 since its inception and expects to incur further losses in the development of its business, all of which castsforbearance. It is management’s opinion that these matters raise substantial doubt about the Company’sour ability to continue as a going concern. The Company’sconcern for a period of twelve months from the issuance date of this report. Our ability to continue as a going concern is dependent upon itsmanagement’s ability to generate future profitable operations and/obtain a plan of forbearance, further implement our business plan and raise additional capital as needed from the sales of stock or debt. The accompanying consolidated financial statements do not include any adjustments that might be required should we be unable to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity financing and/or related party advances. That said, there is no assurance of additional funding being available.continue as a going concern.
Note 3Summary of Significant Accounting Policies
Use of estimates
The preparation of the consolidated interim financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Management makes its best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available to management. Actual results could differ from those estimates.
There
Form 10-Q - Q1 | Madison Technologies Inc. | Page 9 |
Consolidation
The accompanying consolidated financial statements include the accounts of our wholly owned subsidiaries, Sovryn Holdings Inc. and CZJ License Inc. CZJ License Inc. was consolidated up until it was sold on November 15, 2021. All the intercompany balances and transactions have been no changeseliminated in the consolidation. During the year ended December 31, 2021, the operations of CZJ License Inc. were consolidated into our operation and were designated as discontinued.
Interim Reporting
While the information presented in the accompanying interim three month financial statements is unaudited, it includes all adjustments, which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in accordance with accounting principles generally accepted in the United States of America. These interim financial statements follow the same accounting policies from those disclosedand methods of their application as the Company’s December 31, 2021 annual financial statements. All adjustments are of a normal recurring nature. It is suggested that these interim financial statements be read in conjunction with the notes toCompany’s December 31, 2021 annual financial statements. Operating results for the audited consolidated financial statementsthree months ended March 31, 2022 are not necessarily indicative of the results that can be expected for the year ended December 31, 2016.2022.
Segment reporting
We use “the management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by our chief operating decision maker for making operating decisions and assessing performance as the source for determining our reportable segments. Our chief operating decision maker is our chief executive officer, who reviews operating results to make decisions about allocating resources and assessing our entire performance. We did not report any segment information since we primarily generates sales from its television stations.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
Revenue recognition
We adopted the ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). We recognize revenue when we transfer promised services to the customer. The performance obligation is the monthly services rendered. We have one main revenue source which is leasing of television station channels. Accordingly, we recognize revenue when services are provided as time passes the customers have access to utilize the channel. These revenues are billed in advance, arrears and/or are prepaid. The performance obligation is the monthly services rendered. At the moment, we have one main revenue source which is leasing of television channels. Where there is a leasing contract for channels, we bill monthly for our services as rendered. Where there is no contract, the revenue is recognized as provided.
We recognize revenue in accordance with ASC 606 using the following 5 steps to identify revenues:
● | identify the contract with a customer; |
● | identify the performance obligations in the contract; |
● | determine the transaction price; |
● | allocate the transaction price to performance obligations in the contract; and |
● | recognize revenue as the performance obligation is satisfied. |
Form 10-Q - Q1 | Madison Technologies Inc. | Page 10 |
Advances from Client’s deposits are contract liabilities with customers that represent our obligation to either transfer goods or services in the future, or refund the amount received. Where possible, we obtain retainers to lessen our risk of non-payment by our customers. Advances from Client’s deposits are recognized as revenue as we meet specified performance obligations as detailed in the contract.
Accounts receivables
Trade accounts receivable are stated at the amount we expect to collect. Management considers the following factors when determining the collectability of specific customer accounts: customer credit worthiness, past transaction history, current economic industry trends and changes in customer payment terms. Past due balances over 90 days and other higher risk amounts are reviewed individually for collectability. Based on the management’s assessment, we provide for estimated uncollectible amounts through a charge to earnings and a credit to a valuation allowance. Balances that remain outstanding after we have used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. As of March 31, 2022, our allowance for doubtful accounts receivable was $31,500.
Operating leases
In February 2016, the FASB issued ASU 2016-02, Leases (“Topic 842”). The new standard establishes a right-of-use model that requires a lessee to record a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. For leases with an initial term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the term of the lease. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition. Similarly, lessors will be required to classify leases as sales-type, finance or operating, with classification affecting the pattern of income recognition. Classification for both lessees and lessors will be based on an assessment of whether risks and rewards as well as substantive control have been transferred through a lease contract. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. We adopted the new standard April 19, 2021. We have elected not to recognize lease assets and lease liabilities for leases with an initial term of 12 months or less.
Intangible assets
Intangible assets are non-monetary identifiable assets, controlled by us that will produce future economic benefits, based on reasonable and supportable assumptions about conditions that will exist over the life of the asset. An intangible asset that does not meet these attributes will be recognized as an expense when it is incurred. Intangible assets that do, are capitalized and initially measured at cost. Those with a determinable life will be amortized on a systematic basis over their future economic life. Those with an indefinite useful life shall not be amortized until its useful life is determined to be longer indefinite. An intangible asset subject to amortization shall be periodically reviewed for impairment. A recoverability test will be performed and, if applicable, unscheduled amortization is considered.
License agreements have been capitalized, recorded at cost and amortized over the life of the contracts. They will be amortized over the life of the license to which it supports.
Equipment
Equipment represents purchases made for assets, whose useful life was determined to be greater than one year. The assets are initially recorded at cost and depreciated over their estimated useful lives.
Form 10-Q - Q1 | Madison Technologies Inc. | Page 11 |
Website development costs
We recognized the costs associated with developing a website in accordance with ASC 350-50 “Website Development Cost”. The website development costs are divided into three stages, planning, development and production. The development stage can further be classified as application and infrastructure development, graphics development and content development. In short, website development cost for internal use should be capitalized except content input and data conversion costs in content development stage.
Costs associated with the website consist primarily of website development costs paid to third party. These capitalized costs will be amortized based on their estimated useful life over three years upon the website becoming operational. Internal costs related to the development of website content will be charged to operations as incurred. Website development costs related to the customers are charged to cost of sales.
Impairment of Long-Lived Assets
In accordance with the provisions of ASC Topic 360, “Impairment or Disposal of Long-Lived Assets”, all long-lived assets such as plant and equipment and intangible assets we hold and use are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets.
Concentration of credit risk
We place our cash and cash equivalents with a high credit quality financial institution. We maintain United States Dollars. We minimize its credit risks associated with cash by periodically evaluating the credit quality of its primary financial institution.
Financial instruments
Our financial instruments consist principally of cash, accounts payable, accrued liabilities and notes payable. The carrying amounts of such financial instruments in the accompanying financial statements approximate their fair values due to their relatively short-term nature or the underlying terms are consistent with market terms. It is the management’s opinion that we are not exposed to any significant currency or credit risks arising from these financial instruments.
Fair value measurements
We follow the guidelines in ASC Topic 820 “Fair Value Measurements and Disclosures”. Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk.
Form 10-Q - Q1 | Madison Technologies Inc. | Page 12 |
We apply the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement. All financial instruments approximate their fair value.
Level 1 — Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets. | ||
Level 2 — Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities | ||
Level 3—inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models. |
Convertible Notes with Fixed Rate Conversion Options
We may enter into convertible notes, some of which contain, predominantly, fixed rate conversion features, whereby the outstanding principal and accrued interest may be converted by the holder, into common shares at a fixed discount to the market price of the common stock at the time of conversion. This results in a fair value of the convertible note being equal to a fixed monetary amount. We record the convertible note liability at its fixed monetary amount by measuring and recording a premium, as applicable, on the Note 4Recentdate with a charge to interest expense in accordance with ASC 480 - “Distinguishing Liabilities from Equity”.
Derivative Liabilities
We have certain financial instruments that are derivatives or contain embedded derivatives. We evaluate all our financial instruments to determine if those contracts or any potential embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 810-10-05-4 and 815-40. This accounting treatment requires that the carrying amount of any derivatives be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the fair value is recorded as a liability, as is the case with us, the change in the fair value during the period is recorded as either other income or expense. Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at the conversion, repayment or exercise date and then the related fair value amount is reclassified to other income or expense as part of gain or loss on extinguishment.
Net Loss Per Share
Basic loss per share is calculated by dividing the loss attributable to stockholders by the weighted-average number of shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that shared in our earnings (loss). Diluted loss per share is computed by dividing the loss available to stockholders by the weighted average number of shares outstanding for the period and dilutive potential shares outstanding unless such dilutive potential shares would result in anti-dilution. As of March 31, 2022, no options were outstanding and 19,383,713 and was convertible into shares of Common Stock. We issued shares of Preferred Stock that may be converted into our Common Stock. Of the outstanding shares of Preferred Stock as of March 31, 2022, Series D Preferred Stock was convertible into Common shares, Series E-1 Preferred Stock was convertible into Common shares and Series H Preferred Stock was convertible into Common shares. The total potentially dilutive shares calculated are . It should be noted that contractually the limitations on the third-party notes (and the related warrants) limit the number of shares converted to either 4.99% or 9.99% of the then outstanding shares. As of March 31, 2022, and 2021, potentially dilutive securities consisted of the following: warrants were outstanding and exercisable. Additionally, as of March 31, 2022, the outstanding principal balance, including accrued interest of the third-party convertible debt, totaled $
March 31, 2022 | March 31, 2021 | |||||||
Warrants | 203,673,016 | 192,073,017 | ||||||
Convertible Preferred Stock | 1,346,895,000 | 230,000,000 | ||||||
Convertible debt | 951,018,661 | 835,839,600 | ||||||
Total | 2,501,586,677 | 1,257,912,617 |
Form 10-Q - Q1 | Madison Technologies Inc. | Page 13 |
Business Combinations
In accordance with ASC 805-10, “Business Combinations”, we account for all business combinations using the acquisition method of accounting. Under this method, assets and liabilities, including any remaining non-controlling interests, are recognized at fair value at the date of acquisition. The excess of the purchase price over the fair value of assets acquired, net of liabilities assumed, and non-controlling interests is recognized as goodwill. Certain adjustments to the assessed fair values of the assets, liabilities, or non-controlling interests made subsequent to the acquisition date, but within the measurement period, which is up to one year, are recorded as adjustments to goodwill. Any adjustments subsequent to the measurement period are recorded in income. Any cost or equity method interest that we hold in the acquired company prior to the acquisition is re-measured to fair value at acquisition with a resulting gain or loss recognized in income for the difference between fair value and the existing book value. Results of operations of the acquired entity are included in our results from the date of the acquisition onward and include amortization expense arising from acquired tangible and intangible assets.
Credit losses
In June 2016, the FASB issued ASU 326, “Financial Instruments – Credit Losses”. The ASU sets forth a “current expected credit loss” (CECL) model which requires us to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. Recently, the FASB issued the final ASU to delay adoption for smaller reporting companies to calendar year 2023. We are currently assessing the impact of the adoption of this ASU on its financial statements.
Related Party Transactions
We follow FASB ASC subtopic 850-10, “Related Party Transactions”, for the identification of related parties and disclosure of related party transactions.
Pursuant to ASC 850-10-20, related parties include: a) our affiliates; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and profit sharing trusts that are managed by or under the trusteeship of management; d) our principal owners; e) our management; f) other parties with which we may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
Material related party transactions are required to be disclosed in the consolidated financial statements, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which statements of operation are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which statements of operations are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Form 10-Q - Q1 | Madison Technologies Inc. | Page 14 |
Discontinued operations
Discontinued operations are components of an entity that either have been disposed or abandoned or is classified as held for sale. Additionally, in order to qualify as a discontinued operation, the disposal or abandonment must represent a strategic shift that has or will have a major effect on an entity’s operations and financial results.
Income taxes
We follow the guideline under ASC Topic 740 Income Taxes. “Accounting for Income Taxes” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. Due to the uncertainty regarding our future profitability, the future tax benefits of its losses have been fully reserved.
Recently Issued Accounting Pronouncements
The Company adoptsWe adopt new pronouncements relating to generally accepted accounting principles applicable to the Companyus as they are issued, which may be in advance of their effective date. Management does
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40). The new ASU addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options. This amendment is effective for all entities, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact this new guidance will have on its financial statements
We do not believe that any pronouncementother recently issued but not yet effective but recently issued would,accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.
Note 5License Agreement4 Notes Receivable
Schedule of Notes Receivable
March 31, 2022 | December 31, 2021 | |||||||
Secured note – Top Dog Productions Inc. | $ | 520,268 | $ | 468,750 | ||||
Convertible note – ZA Group | 250,000 | 250,000 | ||||||
Prepaid expenses | 12,902 | 24,042 | ||||||
Accrued interest | 16,192 | 6,811 | ||||||
Total Notes Receivable | $ | 799,362 | $ | 749,603 |
The CompanyOn September 9, 2021, we entered into a secured promissory note with Top Dog Productions Inc. We agreed to lend an exclusive product license agreementaggregate principal sum of up to $2,000,000 that accrues at a rate of 5% per annum. The note receivable and all accrued interest is due on September 16, 2016 with Tuffy Packs, LLC, a Texas corporation, to sell Ballistic Panels in certain countries, essentially in Europe.9, 2022. The license is for a periodprincipal and interest amount of two years unless terminated andthe note may be renewed for successive terms of two years each. The payment termsprepaid in whole or in part at any time, without penalty nor premium. Accrued interest is $11,526 at March 31, 2022.
On November 15, 2021, we entered into a $250,000 convertible promissory note with ZA Group Inc. for the license is as follows:
At September 30, 2017, the Company had paid $16,500 to the Licensor, leaving an unpaid balancesale of $33,500. To date, the Company has recordedits wholly owned subsidiary, CZJ License Inc. The note accrues at a total license amortizationrate of $25,990.
As a result5% per annum. The principal and accrued interest of the failure to make payments as required under the agreement, the Company was informed on March 20, 2017, that going forward, the agreement wouldnote receivable will be on a non-exclusive basis.
Note 6Notes and Accrued Interest Payable
The Company has two notes payable to Paleface Holdings Inc. Each note is unsecureddue and payable on demand.
The company also has an unsecured note payable on demand to Gens Incognito Inc. for $25,000, bearing interest at 12%. As at September 30, 2017, accrued interest on the note was $9,942 (September 30, 2016 - $6,950). Thereceivable, we may convert all or any part of the outstanding and unpaid amount of the note payable balance including accruedinto fully paid and non-assessable shares of common stock of ZA Group Inc. at a fixed conversion price of $0.005 per share. Accrued interest was $34,942 asis $4,666 at September 30, 2017 (September 30, 2016 - $31,950).March 31, 2022.
Form 10-Q | Madison Technologies Inc. | Page |
Note 5 -Intangible Assets
Our Federal Communication Commission Licenses (“FCC”) and domain name are considered indefinite-lived intangible assets that are not amortized, but instead are tested at least annually for impairment. The Market Advantage intangible asset is being amortized on a straight-line basis over 94 months from the acquisition date. Amortization expense for the three months ended March 31, 2022 and 2021 was $6,260 and $0, respectively.
Schedule of Intangible Assets
March 31, 2022 | ||||||||||||
Cost | Amortization | Net | ||||||||||
Domain Name | $ | 172,427 | $ | - | $ | 172,427 | ||||||
Market Advantage | 58,843 | 6,260 | 52,583 | |||||||||
FCC Licenses | 10,159,063 | - | 10,159,063 | |||||||||
$ | 10,390,333 | $ | 6,260 | $ | 10,384,073 |
Future amortization expense of the intangible assets is as follows:
Schedule of Future Amortization Expenses of Intangible Assets
For the Twelve Months Ending March 31, | ||||
2022 | $ | 7,512 | ||
2023 | 7,512 | |||
2024 | 7,512 | |||
2025 | 7,512 | |||
2026 | 7,512 | |||
Thereafter | 15,023 | |||
Total | $ | 52,583 |
Note 6 Goodwill
As of March 31, 2022, we carry goodwill for the following television station asset purchases made in 2021:
Schedule of Goodwill Asset Purchase
KNLA - KNET acquisition | $ | 977,059 | ||
KVVV acquisition | 613,097 | |||
KYMU acquisition | 225,966 | |||
Total | $ | 1,816,122 |
Note 7Related Party AdvanceEquipment
Schedule of Equipment
Useful Life | Cost | Accumulated Depreciation | Net | |||||||||||
Transmitter | 10 years | $ | 854,059 | $ | (72,718 | ) | $ | 781,341 | ||||||
Antenna | 10 years | 283,029 | (23,784 | ) | 259,245 | |||||||||
Tech Equipment | 5 years | 446,155 | (61,713 | ) | 384,442 | |||||||||
Office Equipment | 5 years | 7,389 | (1,232 | ) | 6,157 | |||||||||
Microwave | 5 years | 22,065 | (4,229 | ) | 17,836 | |||||||||
$ | 1,612,697 | $ | (169,938 | ) | $ | 1,449,021 |
Depreciation expense was $53,718 and $0 for the three months ended March 31, 2022 and 2021, respectively.
Form 10-Q - Q1 | Madison Technologies Inc. | Page 16 |
Note 8 Right of Use Assets
We have six operating leases ranging from a period of 80 months to a period of 332 months. The annual interest rate used was 15%. As at March 31, 2022, the remaining right of use assets are as follows:
Schedule of Remaining Right of Use Assets
Term | Accumulated | |||||||||||||||
(in months) | Amount | Amortization | Net | |||||||||||||
Tower Lease 1 | 171.5 | $ | 547,663 | $ | 36,092 | $ | 511,571 | |||||||||
Tower lease - 2 | 91 | 244,079 | 25,966 | 218,113 | ||||||||||||
Tower Lease - 3 | 332 | 233,043 | 4,174 | 228,869 | ||||||||||||
Generator Lease | 171.5 | 109,507 | 7,217 | 102,290 | ||||||||||||
Studio Lease - 1 | 217.5 | 280,084 | 12,703 | 267,381 | ||||||||||||
Studio Lease - 2 | 80 | 49,561 | 3,582 | 45,979 | ||||||||||||
$ | 1,463,937 | $ | 89,734 | $ | 1,374,203 |
The remaining lease liability at March 31, 2022 was $1,468,233. The current portion of the lease liability was $0 and the non-current portion of the lease liability was $1,468,233.
Schedule of Remaining Lease Liability
2022 | $ | 168,553 | ||
2023 | 231,120 | |||
2024 | 239,780 | |||
2025 | 253,163 | |||
2026 | 261,433 | |||
Remaining | 3,244,121 | |||
Lease obligations, net | 4,398,170 | |||
Amount representing interest | 2,929,937 | |||
Remaining lease liability | 1,468,233 | |||
Less current portion | - | |||
Non-current lease obligation | $ | 1,468,233 |
Note 9 Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities as of December 31 are summarized below:
Schedule of Accounts Payable and Accrued Liabilities
March 31, 2022 | December 31. 2021 | |||||||
Accounts payable | $ | 729,970 | $ | 659,219 | ||||
Customer deposits | 67,313 | 78,812 | ||||||
Accrued expenses | 44,456 | 38,238 | ||||||
Accrued interest | 54,698 | 15,533 | ||||||
Total | $ | 896,437 | $ | 791,802 |
Form 10-Q - Q1 | Madison Technologies Inc. | Page 17 |
Note 10 Securities Exchange Agreements
Sovryn Holdings, Inc.
We entered into a Securities Exchange Agreement on February 16, 2021 with Sovryn, a Delaware corporation and acquired % of the shares of Sovryn in exchange for i) shares of our Series B Preferred Stock to be transferred by Jeffrey Canouse, our CEO at the time, to a designee of Sovryn and ii) shares of Series E Preferred Stock. Upon the effectiveness of an amendment to out Articles of Incorporation to increase our authorized common stock, from par value $ to par value $ per share, from shares to shares, all shares of Series E Preferred Stock issued to the shareholders shall automatically convert into approximately shares of our Common Stock. The Series E Preferred Stock votes on an as-converted basis with our Common Stock prior to their conversion. The Series E Preferred Stock represented approximately % of the fully diluted shares of our Common Stock after the closing of the transactions contemplated by the Securities Purchase Agreement. The valuation for the Preferred Series E shares was determined to be $ based on the market value of our shares we exchanged at the date the transaction. The transaction was recorded as an asset purchase and we recorded goodwill of $ which was based on the market value of our shares exchanged at the date of the transaction.
Note 11 Asset Purchase
On April 19, 2021, pursuant to a February 17, 2021 asset purchase agreement, Sovryn paid a total of $10,182,534 to acquire the licenses and Federal Communications Commission (“FCC”) authorizations to the KNET-CD and KNLA-CD Class A television stations (“the Los Angeles Stations”), certain tangible personal property, real property, contracts, intangible property, files, claims and prepaid items together with certain assumed liabilities in connection with the Los Angeles Stations.
The following table shows the estimated fair values of the Los Angeles Stations’ assets acquired and liabilities assumed at the April 19, 2021 purchase date:
Schedule of Asset Acquisitions
ASSETS ACQUIRED | ||||
Transmitter equipment | $ | 576,944 | ||
Technical equipment | 183,841 | |||
Antenna systems | 128,562 | |||
Microwave equipment | 22,065 | |||
Total tangible assets acquired | 911,412 | |||
Total liabilities assumed | - | |||
NET TANGIBLE ASSETS ACQUIRED | $ | 911,412 | ||
INTANGIBLE ASSETS ACQUIRED | ||||
FCC licenses | 8,294,063 | |||
Transmitter site leasehold | ||||
Goodwill | 977,059 | |||
INTANGIBLE ASSETS ACQUIRED | 9,271,122 | |||
NET ASSETS ACQUIRED | $ | 10,182,534 |
Form 10-Q - Q1 | Madison Technologies Inc. | Page 18 |
On June 1, 2021, pursuant to a March 14, 2021 an asset purchase agreement, Sovryn paid a total of $1,500,000 to acquire the licenses and Federal Communications Commission (“FCC”) authorizations to the KVVV-LD low power television station (“the Houston Station”), certain tangible personal property, certain real property leases, contracts, intangible property, files, claims and prepaid items together with certain assumed liabilities in connection with the Houston Station.
The following table shows the estimated fair values of the Houston Station’s assets acquired and liabilities assumed at the June 1, 2021 purchase date:
ASSETS ACQUIRED | ||||
Transmitter equipment | $ | 107,141 | ||
Technical equipment | 71,399 | |||
Antenna systems | 112,211 | |||
Furniture and equipment | 7,389 | |||
Total tangible assets acquired | 298,140 | |||
Total liabilities assumed | - | |||
NET TANGIBLE ASSETS ACQUIRED | $ | 298,140 | ||
INTANGIBLE ASSETS ACQUIRED | ||||
FCC licenses | 530,000 | |||
Transmitter site leasehold | 58,763 | |||
Goodwill | 613,097 | |||
INTANGIBLE ASSETS ACQUIRED | 1,201,860 | |||
NET ASSETS ACQUIRED | $ | 1,500,000 |
On September 24, 2021, pursuant to a March 29, 2021 an asset purchase agreement, Sovryn paid a total of $1,864,920 to acquire the licenses and Federal Communications Commission (“FCC”) authorizations to the KYMU-LD low power television station (“the Seattle Station”), certain tangible personal property, certain real property leases, contracts, intangible property, files, claims and prepaid items together with certain assumed liabilities in connection with the Seattle Station.
The following table shows the estimated fair values of the Seattle Station’s assets acquired and liabilities assumed at the September 24, 2021 purchase date:
ASSETS ACQUIRED | ||||
Transmitter equipment | $ | 169,974 | ||
Technical equipment | 91,274 | |||
Antenna systems | 42,256 | |||
Microwave equipment | - | |||
Total tangible assets acquired | 303,954 | |||
Total liabilities assumed | - | |||
NET TANGIBLE ASSETS ACQUIRED | $ | 303,954 | ||
Goodwill | ||||
INTANGIBLE ASSETS ACQUIRED | ||||
FCC licenses | 1,335,000 | |||
Goodwill | 225,966 | |||
INTANGIBLE ASSETS ACQUIRED | 1,560,966 | |||
NET ASSETS ACQUIRED | $ | 1,864,920 |
Note 12 Note Payable
On December 28, 2021, we sold a $500,000 promissory note that bears interest at 12% per annum and matures on April 5, 2022, as amended. In 2008,connection with the former President advanced the Company $561 repayable without interest or any other terms. The unpaid balance as at June 30, 2017 is $261. There were no related party transactions during the nine month period ended September 30, 2017 or 2016.
Note 8note sale, we issued 500,000 Warrants that expire on December 31, 2023 and may be converted in shares of our Common Stock
On July 14, 2017, two convertible notes were converted into shares. One note for $25,000 was converted into 555,556 shares starting June 26, 2022 at $0.045a price of $ per share. We estimate the value the Warrant to be approximately $9,000, based on a value of $ per share of our Common Stock as of December 28, 2021.The promissory note is subordinate to the Notes we issued to the Investors. As of March 31, 2022, $500,000 in note principal is outstanding.
On January 14, 2022, we sold an unsecured $165,000 note payable that matures on April 5, 2022, has a $15,000 original issuance discount and $15,000 in fees that we paid and amortize over the other was converted to 400,000 shares at $0.05 per shares. The carrying valueterm of the notes was $17,742.note. The obligation is subordinate to the Notes we issued to the Investors. As of March 31, 2022, $165,000 in note principal is outstanding.
On January 21, 2015,14, 2022, we sold an unsecured $165,000 note payable that matures on April 5, 2022, has a majority$15,000 original issuance discount and $15,000 in fees that we paid and amortize over the term of the Company’s stockholders approved a consolidation of the issued and outstanding shares of common stock, on a 10 for 1 basis, thereby decreasing the issued and outstanding share capital from 113,020,000 to 11,302,000. This was effected on March 11, 2015. This consolidation has been applied retroactively and all referencesnote. The obligation is subordinate to the numberNotes we issued to the Investors. As of shares issued reflect this consolidation.March 31, 2022, $165,000 in note principal is outstanding.
On March 30, 2006, the Company entered into a private placement agreement whereby the Company issued 20,000 Regulation-S shares in exchange for $50,000. ($2.50 per share).
On June 7, 2004, the Company issued 5,907,000 in consideration of $472 in cash. ($.00008 per share.)
On June 14, 2001, the Company approved a forward stock split of 5,000:1. These financial statements have been retroactively adjusted to effect this split.
On June 15, 1998, the Company authorized and issued 5,375,000 shares of its common stock in consideration of $430 in cash. ($.00008 per share.)
There are no shares subject to warrants or options as of September 30, 2017.
Form 10-Q - Q1 | Madison Technologies Inc. | Page 19 |
Note 913 Convertible Notes Payable
In total, there are nineThe principal portions of our convertible notes payable remaining. Twoare as follows as of:
Schedule of Convertible Notes Payable
March 31, 2022 | December 31, 2021 | |||||||||||
Senior Secured | [a] | $ | 16,500,000 | $ | 16,500,000 | |||||||
Series 1 | [b] | 850,000 | 850,000 | |||||||||
Series 2 | [c] | 325,000 | - | |||||||||
Series 3 | [d] | 275,000 | - | |||||||||
Total | 17,950,000 | 17,350,000 | ||||||||||
Less current portion | 1,450,000 | 850,000 | ||||||||||
Long-term portion | $ | 16,500,000 | $ | 16,500,000 |
[a] | On February 17, 2021, we entered into a securities purchase agreement with funds affiliated with Arena Investors LP (the “Investors”) pursuant to which it issued two convertible notes having an aggregate principal amount of $16,500,000 for an aggregate purchase price of $15,000,000 (collectively, the “Notes”). In connection with the issuance of the Notes, we issued to the Investors Warrants to purchase an aggregate of 192,073,017 shares of our Common Stock (collectively, the “Warrants”) and 1,000 shares of Series F Preferred Stock that convert into 192,073,017 shares of our Common Stock (the “Series F Preferred Stock”). The Warrants and Series F Preferred Stock were each valued at $864,000 based on a $ price per share of our Common Stock and treated as a debt discount this is amortized over the term of the Notes. |
The Notes have a term of thirty-six months and mature on February 17, 2024, unless earlier converted. The Notes accrue interest at a rate of 11% per annum, subject to increase to 20% per annum upon default. Interest is payable in cash on a quarterly basis beginning on March 31, 2021. Notwithstanding the above, at our election, any interest payable on an applicable payment date may be paid in registered shares of our Common Stock in an amount equal (A) the amount of the interest payment due on such date, divided by (B) an amount equal to 80% of the average volume-weighted average price of our Common Stock for the five (5) days immediately preceding the date of conversion. At March 31, 2022 and December 31, 2021 accrued and unpaid interest was $825,000 and $453,750, respectively. We have not yet made the $453,750 million interest payments on the Notes held by Arena Partners LP that were due on April 1, 2022 and July 1, 2022, and we are currently in discussions with Arena Capital LP on a plan of forbearance.
On September 24, 2021, the Company and the Investors amended the Notes and related closing documents, by executing the Limited Waiver and First Amendment the closing documents (“the amendment”). The amendment also waived specified events of default. The Notes are henceforth convertible notes payable were settledat any time, at the holder’s option, into shares of our Common Stock at a price of $ per share, subject to default event adjustment. Notwithstanding the foregoing, at any time during the period ended September 30, 2017. All notes are non-interest bearing, unsecured and payable on demand. The notes are convertible into common stockcontinuance of any Event of Default, the Conversion price in effect shall be equal to the alternate conversion price. If at any time the conversion price as determined hereunder for any conversion would be less than the par value of the Common Stock, then at the sole discretion of the holder at six differentHolder, the conversion rates: $0.01 debtprice hereunder may equal such par value for such conversion and the conversion amount for such conversion may be increased to 1 common share, $0.045include Additional Principal, where Additional Principal means such additional amount to 1 common share; $0.005be added to 1 common share; $0.15the principal amount of this Note to 1 common share; $0.05the extent necessary to 1 common share; and $0.04cause the number of conversion shares issuable upon such conversion to 1 common share. The effect thatequal the same number of conversion shares as would have on earningsbeen issued had the conversion price not been adjusted by the Holder to the par value price, subject to certain beneficial ownership limitations (with a maximum ownership limit of 9.99%). The conversion price is also subject to adjustment due to certain events, including stock dividends, stock splits and in connection with our issuance of our Common Stock or common stock equivalents at an effective price per share haslower than the conversion price then in effect. We may not been disclosed due toredeem the anti-dilutive effect.Notes.
There are four convertible notes payable convertible on the basis of $0.01 of debt to 1 common share.
Form 10-Q | Madison Technologies Inc. | Page |
The balanceAs part of the first convertible note payable convertibleagreement with the Investors, we issued 192,073,017 Warrants. On September 24, 2021, we and the Investor amended the warrant agreement such that each Warrant is exercisable for a period of five (5) years from the date of issuance at an initial exercise price equal to $ per share, that is adjusted to $ per share when interest is paid late, subject to certain beneficial ownership limitations (with a maximum ownership limit of 9.99%). The exercise price is also subject to adjustment due to certain events, including stock dividends, stock splits and recapitalizations. The Holder may be eligible for cashless exercise.
The Series F Preferred Stock has no voting rights and shall convert into 4.9% of our issued and outstanding shares of our Common Stock on a fully diluted basis upon Common Shareholder Approval. The Series F Preferred Stock was converted and 192,073,017 common shares were issued on October 11, 2021.
The Investors have contractually agreed to restrict their ability to exercise the basisWarrants and convert the Notes such that the number of $0.01shares of debt to 1 common share is as follows:our Common Stock held by the Investors and their affiliates after such conversion or exercise does not exceed 9.99% of our then issued and outstanding shares of Common Stock.
Sep 30, | Dec 31, | |||||||
Balance | 2017 | 2016 | ||||||
Proceeds from promissory note | $ | 40,000 | $ | 40,000 | ||||
Value allocated to additional paid-in capital | 40,000 | 40,000 | ||||||
Balance allocated to convertible note payable | - | - | ||||||
Amortized discount | 40,000 | 40,000 | ||||||
Balance, convertible note payable | $ | 40,000 | $ | 40,000 |
[b] | Series 1: We sold a total of $850,000 in subordinated convertible note that bear interest at 6% per annum, mature on December 31, 2022 and may be converted at the noteholder’s option at any time into shares of our Common Stock at a fixed price of $ per share. |
The total discount of $40,000 was amortized over 5 years (20%) starting April 2008 and was fully amortized as at April 2013.
The balance of the second convertible note payable convertible on the basis of $0.01 of debt to 1 common share is as follows:
Sep 30, | Dec 31, | |||||||
Balance | 2017 | 2016 | ||||||
Proceeds from promissory note | $ | 20,000 | $ | 20,000 | ||||
Value allocated to additional paid-in capital | 20,000 | 20,000 | ||||||
Balance allocated to convertible note payable | - | - | ||||||
Amortized discount | 20,000 | 20,000 | ||||||
Balance, convertible note payable | $ | 20,000 | $ | 20,000 |
[c] | Series 2: On January 6, 2022, we sold one of our shareholders a $250,000 unsecured note payable that bears interest at 12% per annum and matures on April 6, 2022. In connection with the note sale, we issued the noteholder a Warrant to purchase 6,250,000 shares of our Common Stock, on a cashless exercise basis, at $0.021 per share at any time starting July 1, 2022 and ending July 1, 2024. We estimate the value of the Warrant to be $112,500, based on a $ price per share of our Common Stock that is treated as a debt discount to be amortized over the term of the note. We have not yet repaid the noteholder. On January 14, 2022, we sold one of our shareholders a $25,000 unsecured note payable that bears interest at 12% per annum and matures on April 6, 2022. In connection with the note sale, we issued the noteholder a Warrant to purchase 600,000 shares of our Common Stock, on a cashless exercise basis, at $0.021 per share at any time starting July 1, 2022 and ending July 1, 2024. We estimate the value of the Warrant to be $10,800, based on a $ price per share of our Common Stock that we treated as a debt discount to be amortized over the term of the note. In May 2022, we repaid the note. On February 17, 2022, we sold a $50,000 unsecured note payable that bears interest at 12% per annum and matures on April 6, 2022. In connection with the note sale, we issued the noteholder a Warrant to purchase 1,250,000 shares of our Common Stock, on a cashless exercise basis, at $0.021 per share at any time starting July 1, 2022 and ending July 1, 2024. We estimate the value of the Warrant to be $22,500, based on a $ price per share of our Common Stock that we treat as a debt discount that we amortized over the term of the note. In April 2022, we repaid the note. |
The total discount of $20,000 was amortized over 5 years (20%) starting June 2010 and was fully amortized as at June 2015.
The balance of the third convertible note payable convertible on the basis of $0.01 of debt to 1 common share is as follows:
Sep 30 | Dec 31 | |||||||
Balance | 2017 | 2016 | ||||||
Proceeds from promissory note | $ | 25,000 | $ | 25,000 | ||||
Value allocated to additional paid-in capital | 25,000 | 25,000 | ||||||
Balance allocated to convertible note payable | - | - | ||||||
Amortized discount | 25,000 | 22,500 | ||||||
Balance, convertible note payable | $ | 25,000 | $ | 22,500 |
The total discount of $25,000 was being amortized over 5 years starting July 2012. Accordingly, the annual interest rate was 20% and for the six months ended June 30, 2017 and 2016, $2,500 was recorded as interest expense. The note was fully amortized as at June 30, 2017.
[d] | Series 3:
On February 15, 2022, we sold two $137,500 unsecured convertible notes payable bearing an 11.25% interest rate per annum that mature on February 23, 2023 and have a $15,000 original issuance discount. In connection with the note sales, we issued the noteholders Warrants to purchase a total of 2,500,000 shares of our Common Stock at $0.10 per share, on a cashless exercise basis, that are exercisable at any time until February 11, 2027. We estimate the total value of the Warrants to be $90,000, based on a $ price per share of our Common Stock that we treat as a debt discount and amortize over the terms of the notes along with the deferred financing fees. The notes’ principal and interest may be converted into our Common Stock at $ per share. |
Form 10-Q | Madison Technologies Inc. | Page |
Note 14 Related Party
We entered into a consulting agreement with Warren Zenna of Zenna Consulting Group to provide oversight of marketing and communications services. The balanceagreement commenced March 1, 2021 and ended on July 31, 2021. We paid Zenna Consulting Group $0 fees in the three months ended March 31, 2022 and 2021, respectively. Mr. Zenna is a member of our Board of Directors. On March 1, 2022, we granted a Warrant to Mr. Zenna to purchase up to shares of our Common Stock at $ per share, on a cashless exercise basis, at any time beginning September 1, 2022 and ending September 1, 2026. We estimate the value the Warrant to be approximately $9,000, based on the $ price per share of our Common Stock on March 1, 2022.
Effective January 1, 2022, we entered into a management consulting agreement with GreenRock LLC, a company controlled by Philip Falcone, for a period of one year ending December 31, 2022, under which we provide monthly remuneration of $35,000, plus expenses in connection with his duties, responsibilities and performance as our chief executive officer. In February 2021, our subsidiary, Sovryn Holdings Inc., entered into consulting agreement with GreenRock LLC to provide us with chief executive officer services. In the three months ended March 31, 2022 and 2021, we paid GreenRock LLC $40,000 and $0 in fees, respectively. Mr. Falcone is the managing member of GreenRock LLC and is our Chief Executive Officer. We paid GreenRock LLC a $233,140 bonus for the three months ended March 31, 2022.
On April 7, 2021, we issued 1,500. The shares of Series B Preferred Stock that provide a 51% voting control regardless of the fourth convertible note payable convertiblenumber of common or other voting securities we have issued at present or at any time in the future, such that the holder of the Series B Preferred shares shall maintain majority voting control over matters voted on by our shareholders. FFO1 Irrevocable Trust also holds Preferred Series E-1 shares and FFO2 Irrevocable Trust holds Preferred Series E-1 shares. Lisa Falcone, wife of Mr. Falcone, is the trustee of FFO2 Irrevocable Trust and Ms. Falcone has shared voting and dispositive power. shares of our Common Stock to Mr. Canouse in exchange for transferring his shares of our Series B Preferred Stock to FFO1 Irrevocable Trust, an entity controlled by Mr. Falcone, our CEO and Chairman of our Board of Directors. The shares were valued at $
Note 15 Mezzanine Equity
We account for certain of our Preferred Stock in accordance with the guidance in ASC Topic 480, Distinguishing Liabilities from Equity. Based on this guidance, preferred stock that is conditionally redeemable is classified as temporary or “mezzanine” equity. Accordingly, the various Series of Preferred Stock, which is subject to conditional redemption, is presented at redemption value as mezzanine equity outside of the stockholders’ equity section of the consolidated balance sheets
Preferred Shares
Series A Preferred Stock
On February 16, 2021, we cancelled all the Preferred Series A shares. In exchange, the holders of Series A Preferred shares received one-year option agreements to purchase shares of our wholly owned subsidiary at the time, CZJ License, Inc. at $ per share for up to shares. The option agreement expired without being exercised.
Series C Preferred Stock
There are Holders of Series C Preferred Stock shall be entitled to receive, when and as declared, dividends equal to 2% per annum on the basisstated value, payable in additional shares of $0.01Series C Preferred Stock. As of debt to 1 common share at is as follows:March 31, 2022 and December 31, 2021, no shares of Series C Preferred Stock are outstanding. designated and authorized Series C Preferred Stock.
Sep 30 | Dec 31, | |||||||
Balance | 2017 | 2016 | ||||||
Proceeds from promissory note | $ | 25,000 | $ | 25,000 | ||||
Value allocated to additional paid-in capital | 25,000 | 25,000 | ||||||
Balance allocated to convertible note payable | - | - | ||||||
Amortized discount | 22,500 | 18,750 | ||||||
Balance, convertible note payable | $ | 22,500 | $ | 18,750 |
The total discount of $25,000 is being amortized over 5 years starting April 2013. Accordingly, the annual interest rate is 20% and for the nine months ended September 30, 2017 and 2016, $3,750 was recorded as interest expense. As at September 30, 2017 the unamortized discount is $2,500.
There are two convertible notes payable convertible on the basis of $0.005 of debt to 1 common share
The balance of the first convertible note payable convertible on the basis of $0.005 of debt to 1 common share is as follows:
Sep 30 | Dec 31, | |||||||
Balance | 2017 | 2016 | ||||||
Proceeds from promissory note | $ | 10,000 | $ | 10,000 | ||||
Value allocated to additional paid-in capital | 10,000 | 10,000 | ||||||
Balance allocated to convertible note payable | - | - | ||||||
Amortized discount | 10,000 | 10,000 | ||||||
Balance, convertible note payable | $ | 10,000 | $ | 10,000 |
The total discount of $10,000 was amortized over 5 years (20%) starting April 2011 and was fully amortized as at April 2016.
The balance of the second convertible note payable convertible on the basis of $0.005 of debt to 1 common share is as follows:
Sep 30 | Dec 31, | |||||||
Balance | 2017 | 2016 | ||||||
Proceeds from promissory note | $ | 10,000 | $ | 10,000 | ||||
Value allocated to additional paid-in capital | 10,000 | 10,000 | ||||||
Balance allocated to convertible note payable | - | - | ||||||
Amortized discount | 10,000 | 9,250 | ||||||
Balance, convertible note payable | $ | 10,000 | $ | 9,250 |
Form 10-Q | Madison Technologies Inc. | Page |
The total discount
Series D Preferred Stock
There are 4.99% conversion cap which may be increased to a maximum of $10,000 was amortized over 5 years (20%) starting May 20119.99% by holder by written notice to us. There is a stated value of $ per share, subject to adjustment for stock splits, stock dividends, recapitalizations, reorganizations, reclassifications, combinations, subdivisions or other similar events occurring after the date which the Series D are issued. Series D are ranked as a Senior Preferred Stock and was fully amortized as at May 2016.have no voting rights. Each share of Series D Preferred Stock may be converted to common shares. designated and authorized Series D Preferred Stock with a
There was oneOn February 16, 2021, we settled $1,028,000 in note payables, convertible notes payable convertibleand accrued interest for 230,000 shares of our Series D Preferred Stock, of which shares of Series D Preferred Stock were converted into shares of our Common Stock and Series D Preferred shares remain unconverted and outstanding as of March 31, 2022 and December 31, 2021.
Series E Preferred Stock
On February 16, 2021, we issued 4,225,062 based on value of 100% of our Common Stock at the time. shares of Series E Preferred Stock to acquire Sovryn that we valued at $
On September 16, 2021, the holders of our Series E Preferred Stock entered into an Exchange Agreement with us whereby on October 11, 2021, the 4,225,062 value as was assigned to the shares of Series E Preferred Stock. As of March 31, 2022 and December 31, 2021, shares of Series E Preferred Stock are outstanding. Series E Preferred shares were exchanged for Series E-1 Preferred shares and shares of Common Stock. We valued the exchange at the same $
Series E-1 Preferred Stock
There are designated and authorized Series E-1 Preferred Stock that we issued on October 11, 2021 in exchange for our Series E Preferred Stock. At March 31, 2022 and December 31, 2021, Preferred Series E-1 shares remain outstanding. Each share of Series E-1 Preferred Stock may be converted to common shares.
Series F Preferred Stock
There are 864,000, based on the basisunderlying value of $0.045shares our Common Stock that were $ per share at the time. On October 11, 2021, the shares of debt to 1 common share that wasSeries F Preferred Stock were converted into 555,556 shares of Common Stock. As of March 31, 2022 and December 31, 2021, shares of Series F Preferred Stock are outstanding. designated and authorized Series F Preferred Stock. On February 17, 2021, we issued the Investors shares of Series F Preferred Stock that convert into shares of Common Stock, which we valued at $
Series G Preferred Stock
We received $1,000 per share based on the cash price. On November 2, 2021, all of the authorized and issued shares of Series G Preferred Stock were converted into shares of our Common Stock. At March 31, 2022 and December 31, 2021, shares of Series G Preferred Stock are outstanding. in subscriptions for of Series G Preferred Shares that we valued at $
Series H Preferred Stock
On November 11, 2021, pursuant to an Exchange Agreement that we entered into with the Investors, 39,895,000 Common shares. Each share of Series H Preferred Stock may be converted to common shares, subject to a maximum ownership limit of 9.99%. We valued the Company on July 14, 2017: Common shares and Series H Preferred shares at $3,989,500. At March 31, 2022 and December 31, 2021, shares of Series H Preferred Stock remain outstanding. of our Common shares held by the Investors were exchanged for shares of our Series H Preferred Stock and we cancelled the
The balance of this convertible note payable is as follows:
Sep 30 | Dec 31, | |||||||
Balance | 2017 | 2016 | ||||||
Proceeds from promissory note | $ | 25,000 | $ | 25,000 | ||||
Value allocated to additional paid-in capital | 25,000 | 25,000 | ||||||
Balance allocated to convertible note payable | - | |||||||
Amortized discount | 16,042 | 13,333 | ||||||
Converted into shares | (16,042 | ) | - | |||||
Balance, convertible note payable | $ | - | $ | 13,333 |
The total discount of $25,000 was being amortized over 5 years starting May 2014. Accordingly, the annual interest rate was 20% and for the nine months ended September 30, 2017 was $2,709 and for the nine months ended September 30, 2016, $3,750 was recorded as interest expense.
There is one convertible notes payable convertible on the basis of $0.15 of debt to 1 common share
The balance of this convertible note payable is as follows:
Sep 30 | Dec 31, | |||||||
Balance | 2017 | 2016 | ||||||
Proceeds from promissory note | $ | 25,000 | $ | 25,000 | ||||
Value allocated to additional paid-in capital | 25,000 | 25,000 | ||||||
Balance allocated to convertible note payable | ||||||||
Amortized discount | 12,500 | 8,750 | ||||||
Balance, convertible note payable | $ | 12,500 | $ | 8,750 |
The total discount of $25,000 is being amortized over 5 years starting April 2015. Accordingly, the annual interest rate is 20% and for the nine months ended September 30, 2017 and 2016, $3,750 was recorded as interest expense. As at September 30, 2017 the unamortized discount was $12,500.
There were two convertible notes payable convertible on the basis of $0.05 of debt to 1 common share
Form 10-Q | Madison Technologies Inc. | Page |
The balance
Note 16 Shareholders’ Equity
Preferred Stock
As of March 31, 2022 and December 31, 2021, we are authorized to issue shares of $ par value Preferred Stock, with designations, voting, and other rights and preferences to be determined by our Board of Directors of which remain available for designation and issuance.
Series B Preferred Stock
There are Holders of Series B Preferred Stock have the right to vote on all shareholder matters equal to 51% of the first convertibletotal vote of Common stockholders. The Series B Preferred Stockholder is entitled to 51% voting rights regardless of the number of common shares or other voting shares issued by the company at any time. Such provision grants the holder of Series B Preferred Stock majority control of us, unless otherwise canceled. designated and authorized Series B Preferred Stock.
On July 17, 2020, Series B Preferred Stock were issued pursuant to the License Agreement. The Series B Preferred Stock was valued at par at $. Although the Series B Preferred Stock is entitled to 51% voting rights as described above, the stock has no dividend rate nor conversion feature. Furthermore, the shares were not issued to the investors, but rather were granted to new unrelated management.
On February 17, 2021, the Series B Preferred Stock were transferred from Mr. Canouse (our former director and CEO), to FFO1 Irrevocable Trust, a company Mr. Falcone (our director and CEO) is the trustee and has the voting and dispositive power.
At March 31, 2022 and December 31, 2021, there were Series B Preferred shares outstanding, respectively.
Common Stock
In August 14, 2021, our shareholders approved an increase in authorized Common Stock to from , which became effective the same day. As of March 31, 2022 and December 31, 2021 there were , and , shares outstanding, respectively.
Our Board of Directors and majority stockholder approved the decision to not move forward with a reverse stock split ratio of 25 to 1 share, and approved a reverse stock split ratio from 10 to 1 share, which is currently subject to regulatory approval.
Warrants
On February 17, 2021, we issued 192,073,017Warrants to Arena Investors that are exercisable for a five-year period from the date of issuance and, based on an amendment made on September 24, 2021, the Warrants may be converted into our Common Stock at $0.02 per share, subject to a maximum ownership limit of 9.99%. The exercise price is subject to adjustment due to stock dividends, stock splits and recapitalizations and other events. We valued the Warrants at $864,000 based on a value of $ per share for our Common Stock at the time.
On December 28, 2021, we entered into a promissory note payable and provided 500,000 Warrants. Each Warrant is as follows:
Sep 30 | Dec 31, | |||||||
Balance | 2017 | 2016 | ||||||
Proceeds from promissory note | $ | 21,000 | $ | 21,000 | ||||
Value allocated to additional paid-in capital | 21,000 | 21,000 | ||||||
Balance allocated to convertible note payable | - | - | ||||||
Amortized discount | 3,570 | 1,680 | ||||||
Balance, convertible note payable | $ | 3,570 | $ | 1,680 |
The total discount of $21,000 is being amortizedexercisable at 12% starting May 2016. For the nine months ended September 30, 2017, $1,890 was recorded as interest expense,$0.025 per share and $1,680 was recorded as interest expense during year ended expires on December 31, 2016. As2023. We valued the Warrants at September 30, 2017$9,000 based on a value of $ per share for our Common Stock at the unamortized discount is $17,430.time.
The second convertible note payable convertibleWarrants issued are loan incentives. The value was allocated to the warrants based on fair value on the basis of $0.05 of debt to 1 common share was converted into 400,000 common sharesdate of the Company on July 14, 2017grant as follows:determined using the Black-Scholes option pricing model.
Sep 30 | Dec 31, | |||||||
Balance | 2017 | 2016 | ||||||
Proceeds from promissory note | $ | 20,000 | $ | 20,000 | ||||
Value allocated to additional paid-in capital | 20,000 | 20,000 | ||||||
Balance allocated to convertible note payable | - | - | ||||||
Amortized discount | 1,700 | 400 | ||||||
Converted into shares | (1,700 | ) | - | |||||
Balance, convertible note payable | $ | - | $ | 400 |
The total discount of $20,000 was being amortized at 12% starting November 2016. For the nine months ended September 30, 2017, $1,300 was recorded as interest expense, and $400 was recorded as interest expense during the year ended December 31, 2016. This note converted into 400,000 common shares of the Company on July 14, 2017.
There is one convertible notes payable convertible on the basis of $0.04 of debt to 1 common share
The balance of this convertible note payable is as follows:
Sep 30 | Dec 31 | |||||||
Balance | 2017 | 2016 | ||||||
Proceeds from promissory note | $ | 20,000 | $ | 20,000 | ||||
Value allocated to additional paid-in capital | 20,000 | 20,000 | ||||||
Balance allocated to convertible note payable | - | |||||||
Amortized discount | 1,800 | 600 | ||||||
Balance, convertible note payable | $ | 1,800 | $ | 600 |
The total discount of $20,000 is being amortized at 12% starting October 2016. For the nine months ended September 30, 2017, $1,800 was recorded as interest expense, and $600 was recorded as interest expense during the year ended December 31, 2016. As at September 30, 2017 the unamortized discount is $17,600.
Form 10-Q | Madison Technologies Inc. | Page |
For the three months ended March 31, 2022, a summary of our warrant activity is as follows:
Schedule of Warrants Activity
Number of Warrants | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term (Years) | Weighted- Average Grant-Date Fair Value | Aggregate Intrinsic Value | ||||||||||||||||
Outstanding and exercisable at January 1, 2022 | 192,573,017 | $ | 0.020 | 4.13 | $ | 482,666 | $ | 3,465,573 | ||||||||||||
- | ||||||||||||||||||||
Issued | 11,100,000 | $ | 0.039 | 2.90 | 71,935 | $ | 199,800 | |||||||||||||
Exercised | - | - | - | - | - | |||||||||||||||
Expired | - | - | - | — | - | |||||||||||||||
Outstanding and exercisable at March 31, 2022 | 203,673,016 | $ | 0.021 | 4.06 | $ | 446,578 | $ | 3,664,329 |
Note 17 Discontinued Operations
On February 16, 2021, we cancelled all the Series A Preferred Stock shares and offered their holder’s option agreements to purchase up to shares of CZJ License, Inc., our wholly owned subsidiary at the time, at an option price of $ per share. The option agreements are exercisable for a period of one year from the date of issuance and were not exercised.
On November 15, 2021, we entered into a Purchase and Sale agreement with ZA Group Inc. to sell CZJ License Inc. for $250,000. At Closing, the ZA Group Inc. delivered a convertible promissory note with a principal amount equal to the purchase price. The interest rate on the note was 5% per annum and matures on November 5, 2023. The note may be converted, from time to time, after 180 days from the issuance date of the note into common stock of ZA Group Inc., at a fixed conversion price of $0.005 per share, subject to a beneficiary ownership limitation of not more than 4.99% of the outstanding shares of common stock of ZA Group Inc.
At November 15, 2021, CZJ License Inc.’s accounts were eliminated from the consolidated financial statements. All expenses incurred by CZJ License Inc. up to November 15, 2021 have been disclosed as discontinued operations. The previous year’s assets, liabilities and expenses have been similarly classified for comparative purposes.
Schedule of Previous Year Assets Liabilities and Expenses
Assets | ||||||||
Prepaid Expenses | $ | - | $ | 37,218 | ||||
Website | - | 10,000 | ||||||
Intangible Assets - License | - | 423,410 | ||||||
Assets | - | 470,628 | ||||||
Liabilities | ||||||||
Accounts Payable & Accrued | - | 33,500 | ||||||
Liabilities | - | 33,500 | ||||||
Expenses | ||||||||
Amortization | 74,760 | 64,687 | ||||||
Selling, general and administrative | 190,857 | 152,939 | ||||||
Professional fees | 213,500 | 172,750 | ||||||
- | ||||||||
Expenses | $ | 479,117 | $ | 390,376 |
Form 10-Q - Q1 | Madison Technologies Inc. | Page 25 |
Note 18 Commitments
On September 28, 2020, we entered into a one-year renewable employment agreement with Mr. Canouse, our Chief Executive Officer at the time. In the three months ended March 31, 2022 and 2021, Mr. Canouse received $24,487 and $0, respectively. Mr. Canouse resigned on July 1, 2022.
On February 17, 2021, we sold the Investors $16,500,000 of Notes and we entered into a Security Agreement and a Guaranty Agreement with the Investors that secure the Notes with liens on all of our tangible and intangible assets. We have not yet made the $0.4 million interest payments on the Notes held by Arena Partners LC that were due on April 1, 2022 and July 1, 2022, and as a result, under the Note terms, the interest rate is 20.0% per annum. We are currently in discussions with the Investors on a plan of forbearance; however, there is no assurance that we will be successful in completion of a plan, which may disrupt our operations and result in a restructuring of obligations.
On October 20, 2021, we entered into a Stock Acquisition Agreement with Top Dog Productions Inc., Jay Blumefield and Anthony Marsh whereby we will acquire all of the shares of Top Dog Productions Inc., and in exchange, we will pay the purchase price of $10,000,000 in shares of our Common Stock. The number of shares of Common Stock to be issued will be subject to a “collar”, with a minimum number of 16,666,667 shares in the event that the closing bid and ask price before the Closing for our is $0.60 or greater, and a maximum number of 25,000,000 shares in the event that the closing bid and ask price before the Closing for our stock is $0.40 or less, with ratable adjustments for a Closing Price between $0.40 and $0.60. The Closing is subject to receipt of audited and other financial statements of Top Dog Productions, other deliverables, and terms and conditions. This agreement is also subject to standard termination provisions including if the Closing had not occurred within 60 days of the execution of the Agreement. As of March 31, 2022, the agreement has not closed.
On January 12, 2022, we entered into a consulting agreement with EF Hutton as a lead underwriter. The agreement is for one year and we may terminate the agreement on or after 270th day with 30-days written notice. EF Hutton may terminate the agreement on or after 120 days from execution of the agreement. EF Hutton agrees to provide underwriting the sale of up to $20 million of securities. In return, we grant EF Hutton an option to acquire up to 15% of the total number of securities we offer , provide an underwriting discount of 7% of the total gross proceeds, provide warrants equal to 5% of the aggregate number of shares of Common Stock sold in the offering, warrants to be exercisable at any time in whole or in part for 4 ½ years commencing 6 months from the effective date of offering at a price per share equal to 100% of the public offering price per security. EF Hutton may also provide advisory services for a cash fee of 7% of capital raised for equity placements, 6% for debt placements, closing warrants equal to 3% of aggregate proceeds sold in offering with the warrants to expire in 5 years. We agree to pay expenses for marketing, promotional materials and other costs associated with the work.
In January 2022, we entered into a six-month consulting agreement with a third party to provide strategic and business services relating to the blockchain project that we amended in February 2022. The first two months are payable at $25,000 per month and the remaining four months are payable at $10,000 per month. We have paid $25,000 to date.
In February 2022, we entered into a consulting agreement to establish, launch, manage, operate and produce a 24/7 broadcast network devoted to cryptocurrency, NFT, Web3 and blockchain technology. In consideration for the wide range and scope of work, we agreed to pay the consultant a fee in the aggregate of $600,000, of which $450,000 has been paid and $150,000 is payable upon the launch of the network.
In February 2022, we entered into a consulting agreement with a third party to provide corporate marketing strategy, creation and development of content for distribution, market development, communications, products and growth. The agreement ends the earlier of June 30, 2022 or when an executed Employment Agreement is signed with us. Upon execution of the consulting agreement, we paid the consultant $100,000 and we are obligated to pay a service fee $30,000 per month for March through June. As part of the arrangement, we granted the consultant a Warrant to acquire up to shares of our Common Stock at an exercise price of $0.025 per share that is contingent upon our entering into an Employment Agreement or extending the consulting agreement, which did not occur. As of the date of this report, we paid $160,000.
In March 2022, we entered into a six-month service agreement for press releases, campaigns and social media advertisings. The service fee is $30,000 per month plus expenses. The agreement may not be terminated during the initial six months and we must provide no less than 30-day prior written notice to the termination.
Form 10-Q - Q1 | Madison Technologies Inc. | Page 26 |
Note 19 Income Taxes
Income tax recovery differs from that which would be expected from applying the effective tax rates to the net income (loss) as follows:
Schedule of Income Tax Expense
March 31, 2022 | March 31, 2021 | |||||||
Net loss for the three-month period | $ | (2,536,688 | ) | $ | (856,777 | ) | ||
Statutory and effective tax rates | 21.0 | % | 21.0 | % | ||||
Income taxes expenses (recovery) at the effective rate | $ | (532,704 | ) | $ | (179,923 | ) | ||
Effect of change in tax rates | - | - | ||||||
Permanent differences | - | - | ||||||
Valuation allowance | 532,704 | 179,923 | ||||||
Income tax expense and income tax liability | $ | - | $ | - |
As of March 31, 2022 and December 31, 2021 the tax effect of the temporary timing differences that give rise to significant components of deferred income tax asset are noted below. A valuation allowance has been recorded as management believes it is more likely than not that the deferred income tax asset will not be realized.
Schedule of Deferred Income Tax Asset
March 31, 2022 | December 31, 2021 | |||||||
Tax loss carried forward | $ | - | $ | - | ||||
Deferred tax assets | $ | 3,527,846 | $ | 2,995,142 | ||||
Valuation allowance | (3,527,846 | ) | (2,995,142 | ) | ||||
Deferred taxes recognized | $ | - | $ | - |
Tax losses of approximately $14 million will expire in 2040
Note 20 Subsequent Events
In April 2022, we sold unsecured convertible subordinate notes totaling $275,000 that accrue interest at 6% per annum and mature on December 31, 2022. The loans may be converted into shares of our Common Stock at $0.021 per share, subject to a beneficial ownership limitation of %. In connection with one of the notes sold, we issued the noteholder a Warrant to purchase up to 2,500,000 shares of our Common Stock at $ per share starting September 15, 2022 and ending April 15, 2024.
In May 2022, we sold a shareholder a convertible subordinate note totaling $110,000 that accrues interest at 12% per annum and matures in May 2023. The loan may be converted into shares of our Common Stock at $0.02 per share. In connection with the note sale, we issued the noteholder a Warrant to purchase 5,000,000 shares of our Common Stock at $ per share
In June 2022, we sold a convertible subordinate note totaling $110,000 that accrues interest at 12% per annum and matures in May 2023. The loan may be converted into shares of our Common Stock at $0.02 per share. In connection with the note sale, we issued the noteholder a Warrant to purchase 5,000,000 shares of our Common Stock at $ per share.
On June 10, 2022, we entered into an agreement with a third party pursuant to which we received $125,000 in cash that we repay daily at $1,837 per diem until we have paid $183,750 in total. As of June 30, 2022, we owe $163,538.
Form 10-Q - Q1 | Madison Technologies Inc. | Page 27 |
Item
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.
The following discussion of Madison Technologies Inc’sour financial condition, changes in financial condition and results of operations for the ninethree months ended September 30, 2017March 31, 2022, should be read in conjunction with Madison’sour unaudited condensed consolidated financial statements and related notes for the ninethree months ended September 30, 2017.March 31, 2021.
Forward Looking Statements
This quarterly reportQuarterly Report on Form 10-Q contains forward-looking statements withinthat have been made pursuant to the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve risks and uncertainties, including statements regarding Madison’s capital needs, business plans and expectations. Such forward-looking statements involve risks and uncertainties regarding Madison’s ability to carry out its planned exploration programs on its mineral properties. Forward-looking statements are made, without limitation, in relation to Madison’s operating plans, Madison’s liquidity and financial condition, availability of funds, operating and exploration costs and the market in which Madison competes. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expect”, “plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or “continue”, the negative of such terms or other comparable terminology. Actual events or results may differ materially. In evaluating these statements, you should consider various factors, including the risks outlined below, and, from time to time, in other reports Madison files with the SEC. These factors may cause Madison’s actual results to differ materially from any forward-looking statement. Madison disclaims any obligation to publicly update these statements, or disclose any difference between its actual results and those reflected in these statements. The information constitutes forward-looking statements within the meaningprovisions of the Private Securities Litigation Reform Act of 1995. GivenThese forward-looking statements are based on current expectations, estimates, and projections about DLT Resolutions’ industry, management’s beliefs, and certain assumptions made by management. Forward-looking statements include our expectations regarding product, services, and maintenance revenue, annual savings associated with the organizational changes effected in prior years, and short- and long-term cash needs. In some cases, words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “estimates,” variations of these uncertainties, readerswords, and similar expressions are cautioned notintended to place undue reliance on suchidentify forward-looking statements. In addition, statements about the potential effects of the COVID-19 pandemic on the Company’s businesses, results of operations and financial condition may constitute forward-looking statements. The statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed or forecasted in any forward-looking statements. Risks and uncertainties of our business include those set forth in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on August 26, 2022, under “Item 1A. Risk Factors” as well as additional risks described in this Form 10-Q. Unless required by law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. However, readers should carefully review the risk factors set forth in other reports or documents we file from time to time with the Securities and Exchange Commission, particularly the Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K.
GENERAL
Madison Technologies Inc. (”(“Madison”) is a Nevada corporation that was incorporated on June 15, 1998. Madison was initially incorporated under the name “Madison-Taylor General Contractors, Inc.” Effective May 24, 2004, Madison changed its name to “Madison Explorations, Inc.” by a majority vote of the shareholders. Effective March 9, 2015, Madison changed its name to “Madison Technologies Inc.,” by a majority vote of the shareholders. See Exhibit 3.3 – Certificate of Amendment for more details.
On September 6, 2016, Joseph Gallo resigned as the Chief Financial Officer, the Chief Financial Officer, and the Corporate Secretary, and as a director of Madison. In addition, on September 6, 2016, Mr. Thomas Brady consented to and was appointed the Chief Executive Officer, the Chief Financial Officer and the Corporate Secretary of Madison by the board of directors.
The board of directors of Madison currently consists of Thomas Brady as the Chief Executive Officer and the Corporate Secretary and Joseph Gallo, the Chief Financial Officer of Madison. Please see Item 5.02 of the Form 8-K filed on September 8, 2016 and May 31, 2017 for information relating to these director and officer changes
On September 16, 2016 Madison entered into a material definitive agreement with Tuffy Packs, LLC to acquire an exclusive licensing agreement for the distribution of Tuffy Pack’s product line into the United Kingdom and 43 European countries. According to the terms and conditions of the product license agreement Madison will pay an aggregate amount of $50,000 for the exclusive license to distribute Tuffy Packs’ product line. Tuffy Packs manufactures a line of custom inserts that provide a level of personal protection from ballistic threats similar to what law enforcement officers wear daily as bulletproof vests. The ballistic panels conform to the National Institute of Justice (NIJ) Level IIIA threat requirements.
Please see Item 1.01 of the Form 8-K filed on September 19, 2016 for information relating to the Product License Agreement as well please see Item 1.01 and Item 2.01 of the Form 8-K filed on September 23, 2016 for information relating to the Product License Agreement and for a description of Madison’s business.
On September 26, 2016, Thomas Brady and Steven Cozine entered into a share purchase agreement for the purchase and sale of 3,088,500 shares in the capital of Madison for the purchase price of $1,000.00. Please see Item 5.01 of the Form 8K filed on October 3, 2016 and see Exhibit 10.1 – Share Purchase Agreement for information relating to the change in control of the registrant.
On October 12, 2016, Madison TechnologiesWe, through our wholly-owned subsidiary, Sovryn Holdings, Inc. (“Madison”Sovryn”) received approval from Amazon Europeacquired three un-affiliated Class A/LPTV TV. Each licensed TV station can broadcast between 10 and 12 channels over-the-air, 24 hours per day/7 days per week. We generated revenue by leasing channels to begin sales of its Tuffy Pack line of productsthird parties on KNLA/KNET, a Class A television station in the United Kingdom through the Amazon Marketplace. On October 14, 2016, Madison received approval from Amazon Europe to begin sales of its Tuffy Pack line of productsLos Angeles, KVVV, a low power television station in Germany, Italy, SpainHouston and France through the Amazon Marketplace. As of October 21, 2016, Madison had completed its first sale through the Amazon Marketplace also on October 21, 2016 Madison ceased to beKYMU-LD, a shell company as definedlow power television station in Rule 12b-2 of the Exchange Act. Please see Item 5.06 of the Form 8-K filed on October 21, 2016 for information relating to the change in shell status.Seattle.
On May 26, 2017, Joseph Gallo consented to and was appointed as an additional director of Madison. Also, on May 26, 2017, Mr. Gallo consented to and was appointed the Chief Financial Officer of Madison by the board of directors. Please see item 5.02 of the Form 8-K filed on May 31, 2017 for information relating to the director and officer changes
Form 10-Q | Madison Technologies Inc. | Page |
RESULTS OF OPERATIONS
Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.
Three months ended March 31, 2022 and 2021
Revenues
Net Revenues increased to $474,999 for the three months ended March 31, 2022 from $0 for the three months ended March 31, 2021. The increase resulted from the acquisitions of television stations in 2021 and the $474,999 revenues generated by the lease agreements held by those stations. We anticipate 2022 Net Revenues will increase compared to 2021 Net Revenues as a result a full year of operating the television stations acquired during 2021 and the launch of BLOCKCHAIN.TV in 2022.
Amortization
Amortization increased to $80,494 for the three months ended March 31, 2022 from $35,284 for the three months ended March 31, 2021. The increase resulted from the Sovryn acquisitions in 2021 of television stations that have amortizable tangible and intangible assets.
Selling, general and administrative fees
Selling, general and administrative fees increased to $181,994 for the three months ended March 31, 2022 from $82,179 for the three months ended March 31, 2021. The increase was primarily the result of selling and overhead expenses for our television stations that we started operating in 2021 following their acquisitions.
Television operations
Television operation expenses are $87,632 and $0 for the three months ended March 31, 2022 and 2021. The expenses are direct costs of operating the television stations we acquired in 2021.
Professional Fees
Professional Fees increased to $1,098,279 for the three months ended March 31, 2022 from $340,531 for the three months ended March 31, 2021. The increase was primarily the result of an increase in the legal and accounting expense associated with the acquisitions of television stations, the financing associated with those acquisitions, management fees, and, the expense associated with regulatory filings for the SEC, including the Form S1 Registration.
Form 10-Q - Q1 | Madison Technologies Inc. | Page 29 |
Loss on asset disposals
Our loss on asset disposals was $52,668 and $0 for the three months ended March 31, 2022 and 2021. Our initial objective was to create one the largest, most comprehensive, state of the art OTA content distribution platforms to capitalize on the changing media and distribution landscape and on the growing OTA viewership in the U.S. We are exploring more capital efficient and technology centric alternatives to its planned station acquisition distribution platform. While there is no guarantee that it will be successful with this alternative approach, we have determined that it will postpone further capital expenditures on acquisitions and as a result, the planned acquisitions have been terminated and future acquisition plans have been put on hold while we evaluate this alternative approach. As a result, we recognized a $52,668 of loss from disposition of OTA assets.
Interest Expense
Interest expense increased to $1,520,001 for the three months ended March 31, 2022 from $359,948 for the three months ended March 31, 2021. The $1,160,053 increase resulted from the financings associated with the acquisition of television stations and development of BLOCKCHAIN.TV.
Nine months ended September 30, 2017 and September 30, 2016Discontinued Operations
Our net loss from discontinued operations was $0 and $38,835 for the nine-month periodthree months ended September 30, 2017March 31, 2022 and 2021, respectively. On November 15, 2021, we sold our subsidiary, CZJ License Inc. and designated its operations as discontinued. The previous year’s assets, liabilities and expenses have been similarly classified for comparative purposes.
Net Loss
Net Loss increased to $2,536,688 for the three months ended March 31, 2022 from $856,777 for the three months ended March 31, 2021. The increase was $54,330(2016: $35,957), which consistedprimarily the result of general$1,520,001 of interest expense for debt instruments we issued in 2021 and administration expenses2022. Net Loss on a basic and amortization and interest. We generated $6,255 in revenue during nine-month period in fiscal 2017diluted basis of $0.002 per share for the three months ended March 31, 2022, based on 1,599,095,027 weighted average shares outstanding, as compared to nil duringa Net Loss of $0.037 per share for the nine-month period in 2016.three months ended March 31, 2021, based on 23,472,567 weighted average shares outstanding. The increase in expensesweighted average shares outstanding relates primarily to issuances of 192,073,017 shares to the Investors on October 11, 2021 in connection with the current fiscal year relate$16,500,000 Notes we sold, the 1,091,388,889 shares we issued on October 11, 2021 to Preferred Series E-1 holders in pursuant to an increaseExchange Agreement and the 255,555,556 shares we issued on November 2, 2021 in both general and administrative expense and amortization expense related almost exclusively toexchange for 4,600 shares of our Tuffy Pack licence agreement obligations.Series G Preferred Stock.
The weighted average number of shares outstanding was 11,575,016 for the nine-month period ended September 30, 2017 and 11,302,000 for the nine-month period ended September 30, 2016.
Form 10-Q - Q1 | Madison Technologies Inc. | Page 30 |
Liquidity and Capital Resources
Cash and Working Capital
As at September 30, 2017, MadisonMarch 31, 2022, we had $206,399 in cash of $4,720 and a $6,405,680 working capital deficit, of $334,546, compared to cash of $14,259$55,656 and working capital deficit of $316,708$4,373,271 as at December 31, 2016.2021.
ThereWe will require additional capital to meet our long-term operating requirements. We have not yet made the $0.4 million interest payments on the Notes held by Arena Partners LC that were due on April 1, 2022 and July 1, 2022, and as a result, under the Note terms, the interest rate is 20.0% per annum. We are currently in discussions with Arena Capital LP, on a plan of forbearance; however, there is no assurancesassurance that Madisonwe will be able to achieve further salessuccessful in completion of its common stock or any other forma plan, which may disrupt our operations and result in a restructuring of additional financing. If Madison is unable to achieve the financing necessary to continue its plan of operations, then Madison will not be able to continue and its business will fail.obligations.
The officers and directors have agreed to pay all costs and expenses of having Madison comply with the federal securities laws (and being a public company, should Madison be unable to do so). Madison’s officers and directors have also agreed to pay the other expenses of Madison, should Madison be unable to do so. To continue its business plan, Madison will need to secure financing for its business development. Madison currently has no source for funding at this time.
If Madison is unableWe expect to raise additional fundscapital through the sale of equity and/or debt securities; however, there is no assurance that we will be successful at raising additional capital in the future. If our plans are not achieved and/or if significant unanticipated events occur, we may have to satisfy its reporting obligations, investorsfurther modify our business plan, which may require us to raise additional capital. As of March 31, 2022, our principal source of liquidity was our cash, which totaled $206,399. Historically, our principal sources of cash have included proceeds from the sale of common stock and preferred stock and related party loans. Our principal uses of cash have included cash used in operations, to make acquisitions and to pay interest on our Notes. We expect that the principal uses of cash in the future will no longer have access to current financialbe for continuing operations associated with rolling out the business plan and other information about its business affairsfor interest payments.
Net Cash Used in Operating Activities
MadisonWe used cash of $9,539$562,799 in operating activities during three months ended March 31, 2022 compared to cash used of $1,136,599 in operating activities during the first nineprevious year’s three-month period. The increase was primarily the result of increase in expenses associated with the build out and roll out of our business plan.
Net Cash Used in Investing Activities
We used cash of $96,458 in investing activities during the three months of fiscal 2017ended March 31, 2022 compared to cash used of $23,960$0 in operatinginvesting activities during the same period inprevious year’s three-month period. The increase was the previous fiscal year. The decrease in cash out flow from operations reflects the fact that the company had revenue in 2017.result of enhancements to our website and funds advanced to Top Dog Productions Inc. associated with our agreement to acquire them.
Net Cash Provided (Used in) Investing Activities
Net cash used in investing activities was nil for the first Nine months of fiscal 2017 as compared with cash flow from investing activities of nil for the same period in the previous fiscal year.
Net Cash Provided by Financing Activities
Net cash flows provided by financing activities were nilof $810,000 for the first ninethree months of fiscal 2017,ended March 31, 2022 were from the proceeds of a convertible note payable. Madison generated $41,000 fromsubordinated notes payable and Warrants that we sold to investors, compared to $15,540,000 of cash provided by financing activities during the first nine months ofprevious fiscal 2016.year that we generated from the Arena financing in February 2021.
Form 10-Q | Madison Technologies Inc. | Page |
Plan of Operation
Off-balance Sheet Arrangements
Our plan of operation is to continue to deliver the Tuffy Pack licensed products into the EuropeanWe have no off-balance sheet arrangements including arrangements that would affect its liquidity, capital resources, market risk support and UK retailcredit risk support or other benefits.
Going Concern
The independent auditors’ reports accompanying our December 31, 2021 and wholesale markets via the use of online market and fulfilment services including but not limited to Amazon.eu, Ebay and Ecwid. By implementing these companies’ services Madison will be able to establish a reliable supply chain that will receive delivery of the Licensed Products, warehouse the Licensed Products, package the Licensed Package as per each customer order, and ship the Licensed Products to the customer efficiently and cost effectively.
Management expects Madison’s sales distribution strategy to be operational by September 2017, this includes the following components:
At the date of this filing Madison has paid $16,500 of the $50,000.
Madison sales strategy is to develop online exposure through the use of social media marketing and sending demo packs of the Licensed Products to both online bloggers and established gun owner clubs. The demo packs will include both new products as well as examples of the products that have been tested and exposed to gunfire to demonstrate the products effectiveness.
Management anticipates incurring the following expenses during the next 12 month period:
As at September 30, 2017, Madison had cash of $4,720 and a working capital deficit of $334,546. Accordingly, Madison will require additional financing in the amount of $374,826 in order to fund its obligations as a reporting company under theSecurities Act of 1934and its general and administrative expenses for the next 12 months.
Going Concern
Madison has not attained profitable operations and is dependent upon obtaining financing to pursue any extensive business activities. For these reasons, Madison’s auditors stated in their report that they have2020 financial statements contain an explanatory paragraph expressing substantial doubt Madison will be ableabout our ability to continue as a going concern. The financial statements have been prepared assuming that we will continue as a going concern, which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.
Future Financings
Management anticipates continuing to rely on equity sales of Madison’s common stockour Common Stock in order to continue to fund itsour business operations. Issuances of additional common stockCommon Stock will result in dilution to Madison’sour existing stockholders. There is no assurance that Madisonwe will achieve any additional sales of its common stockour Common Stock or arrange for debt or other financing to fund itsour planned activities.
Off-balance Sheet Arrangements
Madison has no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Material Commitments for Capital Expenditures
At September 30, 2017 MadisonWe had an outstanding liability of $33,500 owing to Tuffy Packs LLC for the purchase of the Product Licensing agreement. As of the date of this filing Madison is in arrears $33,500 according to the Product Licensing Agreement. Please see Exhibit 10.5 Product License Agreement datedno contingencies or long-term commitments at March 16, 2016 between Tuffy Packs, LLC and Madison Technologies Inc.31, 2022.
Tabular Disclosure of Contractual Obligations
Madison isWe are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item.
Critical Accounting Policies
Madison’sWe follow certain significant accounting policies when preparing our consolidated financial statementsstatements. A complete summary of these policies is included in Note 1 of Notes to Consolidated Financial Statements. Certain of the policies require management to make significant and accompanying notessubjective estimates or assumptions that may deviate from actual results. In particular, management makes estimates regarding the useful life of long-lived assets related to depreciation and amortization expense, estimates regarding fair value of our reporting units and future cash flows with respect to assessing potential impairment of both long-lived assets and goodwill and estimates of expense related to our debt and equity instruments. Each of these estimates is discussed in greater detail in the following discussion.
Long-Lived Assets, Depreciation and Amortization Expense and Valuation
We review the carrying value of long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount of an asset, or related asset group, may not be recoverable from estimated future undiscounted cash flows. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or asset group to estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. In 2021, we recognized that we would not complete the acquisition of the TV station assets of W27EB and KPHE TV and we wrote off $1,150,000 in deposits paid to sellers of those assets.
Goodwill Valuation
Management performed the annual goodwill and indefinite-lived intangible assets impairment assessments as of December 31, 2021 and concluded that our goodwill for the Sovryn acquisition was impaired as of that date. Goodwill and indefinite lived assets are preparedtested annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. We follow a two-step process for testing impairment. First, the fair value of each reporting unit is compared to its carrying value to determine whether an indication of impairment exists. If impairment is indicated, then the fair value of the reporting unit’s goodwill is determined by allocating the unit’s fair value of its assets and liabilities (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination. The amount of impairment for goodwill is measured as the excess of its carrying value over its implied fair value.
Derivative Liabilities
We have certain financial instruments that are derivatives or contain embedded derivatives. We evaluate all of our financial instruments to determine if those contracts or any potential embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with generally acceptedASC 810-10-05-4 and 815-40. This accounting principlestreatment requires that the carrying amount of any derivatives be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the fair value is recorded as a liability, as is the case with us, the change in the United States. Preparing financial statements requires managementfair value during the period is recorded as either other income or expense. Upon conversion, exercise or repayment, the respective derivative liability is marked to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. Management believes that understanding the basis and nature of the estimates and assumptions involved with the following aspects of Madison’s financial statements is critical to an understanding of Madison’s financial statements.
Use of Estimates
The preparation of financial statements in accordance with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilitiesfair value at the conversion, repayment or exercise date and then the related fair value amount is reclassified to other income or expense as part of the financial statements and the reported amounts of revenue and expenses in the reporting period. Madison regularly evaluates estimates and assumptions related to the recovery of long-lived assets, donated expenses and deferred income tax asset valuation allowances. Madison bases its estimates and assumptionsgain or loss on current facts, historical experience and various other factors that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by Madison may differ materially and adversely from Madison’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.extinguishment.
Form 10-Q - Q1 | Madison Technologies Inc. | Page 32 |
Item
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Madison isWe are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item.
ItemITEM 4. Controls and Procedures.CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Management maintains “disclosureIn connection with the preparation of this annual report on Form 10-K, an evaluation was carried out by our management, with the participation of our Chief Executive Officer, who also serves as our Principal Financial and Accounting Officer, of the effectiveness of our disclosure controls and procedures” as such term is (as defined in RuleRules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “(“Exchange Act”Act”), that as of December 31, 2021. Disclosure controls and procedures are designed to ensure that information required to be disclosed in Madison’sreports filed or submitted under the Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange CommissionSEC rules and forms and that such information is accumulated and communicated to management, including Madison’s President andthe Chief FinancialExecutive Officer, as appropriate, to allow timely decisions regarding required disclosure.disclosures.
In connection with the preparation of this quarterly reportBased on Form 10-Q, anthat evaluation, was carried out byour management with the participationconcluded, as of the President and the Chief Financial Officer,end of the effectiveness of Madison’speriod covered by this report, that our disclosure controls and procedures (as definedwere not effective in Rules 13a-15(e)recording, processing, summarizing, and 15d-15(e) underreporting information required to be disclosed, within the Exchange Act as of September 30, 2017.
Based ontime periods specified in the evaluationSEC rules and the identification of theforms and that such information was accumulated or communicated to management to allow timely decisions regarding required disclosure. In particular, we identified material weaknesses in Madison’s internal control over financial reporting, as describeddiscussed below.
Management’s Report on Internal Controls over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as required by Sarbanes-Oxley (SOX) Section 404 A. Our internal control over financial reporting is a process designed under the supervision of our Chief Executive Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that:
● | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; |
● | provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the Board of Directors; and |
● | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements. |
Because of its Form 10-K forinherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the year endedrisk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2009,2021, based on criteria established in Internal Control –Integrated Framework issued by the PresidentCommittee of Sponsoring Organizations of the Treadway Commission (“COSO”). As a result of this assessment, management identified material weaknesses in internal control over financial reporting.
A material weakness is a control deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The matters involving internal controls and procedures that management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee and lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; (3) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and (4) ineffective controls over period end financial disclosure and reporting processes. The aforementioned material weaknesses were identified and communicated to management in connection with the preparation and audit of our financial statements as of December 31, 2021 and the Chief Accounting Officerpreparation of our 2021 quarterly financial statements.
As a result of the material weakness in internal control over financial reporting described above, management has concluded that, as of September 30, 2017, Madison’sMarch 31, 2022, our internal control over financial reporting was not effective based on the criteria in Internal Control – Integrated Framework issued by COSO.
Management believes that the material weaknesses set forth in items (2), (3) and (4) above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and lack of a majority of outside directors on our board of directors caused and continues to cause an ineffective oversight in the establishment and monitoring of the required internal controls over financial reporting.
We are committed to improving its financial organization. As part of this commitment and when funds are available, we will create a position to segregate duties consistent with control objectives and will increase its personnel resources and technical accounting expertise within the accounting function by: (i) appointing one or more outside directors to its board of directors who will also be appointed to our audit committee, resulting in a fully functioning audit committee that will undertake the oversight in the establishment and monitoring of required internal controls over financial reporting; and (ii) preparing and implementing sufficient written policies and checklists that will set forth procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure controlsrequirements.
Form 10-Q - Q1 | Madison Technologies Inc. | Page 33 |
Management believes that the appointment of one or more outside directors, who will also be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board. In addition, management believes that preparing and implementing sufficient written policies and checklists will remedy the following material weaknesses: (i) insufficient written policies and procedures were effective.for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and (ii) ineffective controls over period end financial close and reporting processes. Further, management believes that the hiring of additional personnel who have the technical expertise and knowledge will result proper segregation of duties and provide more checks and balances within the department. Additional personnel will also provide the cross training needed to support our internal controls if personnel turn-over issues within the department occur. This, coupled with the appointment of additional outside directors, is designed to greatly decrease any control and procedure issues we may encounter in the future.
Management will continue to monitor and evaluate the effectiveness of our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.
Our independent auditors have not issued an attestation report on management’s assessment of our internal control over financial reporting. As a result, this quarterly report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. We are not required to have, nor have we, engaged our independent registered public accounting firm to perform an audit of internal control over financial reporting pursuant to the temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this quarterly report.
Changes in Internal Controls over Financial Reporting
There were no changes in Madison’sour internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended September 30, 2017,March 31, 2022, that materially affected, or are reasonably likely to materially affect, Madison’s internal control over financial reporting.
Limitations on the Effectiveness of Controls and Procedures
Management, including our President and Chief Financial Officer, does not expect that Madison’s controls and procedures will prevent all potential error and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
Form 10-Q | Madison Technologies Inc. | Page |
Part II – Other Information
ItemITEM 1. Legal Proceedings.LEGAL PROCEEDINGS.
Madison is not a party to any pending legal proceedings and, to the best of Madison’s knowledge, none of Madison’s property or assets are the subject of any pending legal proceedings.None.
ItemITEM 1A. Risk Factors.RISK FACTORS
Madison is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item.
ItemITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the quarter of the fiscal year covered by this report, (i) Madison did not modify the instruments defining the rights of its shareholders, (ii) no rights of any shareholders were limited or qualified by any other class of securities, and (iii) Madison did not sell any unregistered equity securities.securities, except as follows:
On March 1, 2022, we granted a Warrant to Mr. Zenna, our Director, to purchase up to 500,000 shares of our Common Stock at $0.025 per share.
In 2022, we sold a total of $1,370,000 of notes payable, some of which are convertible into our Common Stock at fixed prices, and we issued certain noteholders, Warrants to purchase an aggregate of 17,350,000 shares of our Common Stock, on a cashless exercise basis, at prices ranging from $0.02 to $0.10 per share.
ItemITEM 3. Defaults upon Senior Securities.DEFAULTS UPON SENIOR SECURITIES
DuringWe have not yet made the quarter$453,750 million interest payments on the senior secured Notes held by Arena Partners LP that were due on April 1, 2022 and July 1, 2022, and we are currently in discussions with Arena Capital LP on a plan of the fiscal year covered by thisforbearance.
ITEM 4. MINE SAFETY DISCLOSURES
No report no material default has occurred with respect to any indebtedness of Madison. In addition, during this quarter, no material arrearage in the payment of dividends has occurred.required.
Item 4. Mining Safety Disclosures.
There are no current mining activities at the date of this report.
ItemITEM 5. Other Information.OTHER INFORMATION
During the quarter of the fiscal year covered by thisNo report Madison reported all information that was required to be disclosed in a report on Form 8-K.required.
Madison has adopted a new code of ethics that applies to all its executive officers and employees, including its CEO and CFO. See Exhibit 14 – Code of Ethics for more information. Madison undertakes to provide any person with a copy of its financial code of ethics free of charge. Please contact Madison at 206-203-0474 to request a copy of Madison’s code of ethics. Management believes Madison’s code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code.
Form 10-Q | Madison Technologies Inc. | Page |
Item
ITEM 6. ExhibitsEXHIBITS
(a) | Index to and Description of Exhibits |
All Exhibits required to be filed with the Form 10-Q are included in this quarterly report or incorporated by reference to Madison’s previous filings with the SEC, which can be found in their entirety at the SEC website atwww.sec.gov under SEC File Number 000-51302.
Form 10-Q | Madison Technologies Inc. | Page |
Signatures
Signatures
In accordance with the requirements of the Securities Exchange Act of 1934, Madison Technologies, Inc. has caused this report to be signed on its behalf by the undersigned duly authorized person.
Madison Technologies, Inc. | |||
Dated: | By: | /s/ | |
Name: | |||
Title: | President | ||
(Principal Executive Officer) |