UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X.QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2016
Commission File Number: 333-175146
BINGO NATION INC.
(Exact name of registrant as specified in its charter)
Nevada | 98-0492900 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification Number) |
6440 Sky Pointe Drive, Suite 140/149
Las Vegas, NV 89131
(Address of principal executive offices)(Zip code)
888-648-0488
(Registrant’s telephone number, including area code)
311 Division Street
Carson City, NV 89703
Nexgen Applied Solutions Inc.
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X.No .
Indicate by check mark whether the registrant has submitted electronically 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post files). Yes X.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 definition of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer . | Accelerated filer . | Non-accelerated filer . | Smaller reporting company X.. |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes .No X.
Indicate the number of shares outstanding of the issuer’s classes of common stock, as of the latest practicable date:
52,633,027 common shares as of November 18, 2016
PART I - FINANCIAL INFORMATION
BINGO NATION INC.
(formerly Nexgen Applied Solutions Inc.)
Condensed Consolidated Financial Statements
September 30, 2016
(Expressed in U.S. dollars)
(unaudited)
| Index |
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Condensed Consolidated Balance Sheets | 3 |
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Condensed Consolidated Statements of Operations | 4 |
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Condensed Consolidated Statements of Cash Flows | 5 |
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Notes to the Condensed Consolidated Financial Statements | 6 |
2
BINGO NATION INC.
(formerly Nexgen Applied Solutions Inc.)
Condensed Consolidated Balance Sheets
(Expressed in U.S. dollars)
| September 30, 2016 $ | March 31, 2016 $ |
| (unaudited) | |
ASSETS |
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Current assets |
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Cash | 22 | 22 |
Prepaid expenses | – | 287 |
Assets of discontinued operations (Note 3) | 1,710 | 360 |
Total current assets | 1,732 | 669 |
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Non-current assets |
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Assets of discontinued operations (Note 3) | 275,363 | 280,291 |
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Total assets | 277,095 | 280,960 |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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Current liabilities |
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Accounts payable and accrued liabilities | 87,150 | 66,237 |
Convertible notes payable | 469,370 | 436,512 |
Due to related party | 300 | – |
Liabilities of discontinued operations (Note 3) | 132,650 | 42,862 |
Total current liabilities | 689,470 | 545,611 |
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Non-current liabilities |
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Deferred vendor incentive | – | 3,049 |
Due to related party | – | 180 |
Liabilities of discontinued operations (Note 3) | – | 85,752 |
Total non-current liabilities | – | 88,981 |
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Total liabilities | 689,470 | 634,592 |
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Nature of operations and continuance of business (Note 1) |
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Subsequent event (Note 11) |
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Stockholders’ deficit |
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Preferred stock Authorized: 100,000,000 preferred shares, $0.001 par value nil shares issued and outstanding | – | – |
Common stock Authorized: 400,000,000 common shares, $0.001 par value 52,633,027 and 2,633,027 shares issued and outstanding, respectively | 52,633 | 2,633 |
Additional paid-in capital | 142,022,003 | 114,539,145 |
Deficit | (142,487,011) | (114,895,410) |
Total stockholders’ deficit | (412,375) | (353,632) |
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Total liabilities and stockholders’ deficit | 277,095 | 280,960 |
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(The accompanying notes are an integral part of these condensed consolidated financial statements)
3
BINGO NATION INC.
(formerly Nexgen Applied Solutions Inc.)
Condensed Consolidated Statements of Operations
(Expressed in U.S. dollars)
(unaudited)
| Three Months | Three Months | Six Months | Six Months |
| Ended | Ended | Ended | Ended |
| September 30, | September 30, | September 30, | September 30, |
| 2016 | 2015 | 2016 | 2015 |
| $ | $ | $ | $ |
| ||||
Operating expenses |
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General and administrative | 1,766 | 3,295 | 17,996 | 5,648 |
Professional fees | 8,090 | 7,428 | 19,635 | 18,488 |
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Total operating expenses | 9,856 | 10,723 | 37,631 | 24,136 |
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Net income (loss) from operations | (9,856) | (10,723) | (37,631) | (24,136) |
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Other expenses |
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Impairment of intangible assets | – | – | (27,500,000) | – |
Interest expense | (5,915) | (23,577) | (45,040) | (71,482) |
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Total other expenses | (5,915) | (23,577) | (27,545,040) | (71,482) |
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Loss from continuing operations | (15,771) | (34,300) | (27,582,671) | (95,618) |
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Discontinued operations |
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Gain (loss) from discontinued operations (Note 3) | 687 | 141,407 | (8,930) | 230,435 |
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Net income (loss) | (15,084) | 107,107 | (27,591,601) | 134,817 |
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Basic earnings (loss) per share | 0.00 | 0.08 | (3.65) | 0.10 |
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Continuing operations | 0.00 | (0.02) | (3.65) | (0.06) |
Discontinued operations | 0.00 | 0.10 | 0.00 | 0.16 |
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Diluted earnings (loss) per share | 0.00 | 0.00 | (3.65) | 0.00 |
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Continuing operations | 0.00 | 0.00 | (3.65) | 0.00 |
Discontinued operations | 0.00 | 0.00 | 0.00 | 0.00 |
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Weighted average shares outstanding – basic | 52,633,027 | 1,408,820 | 7,551,060 | 1,408,820 |
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Weighted average shares outstanding - diluted | 522,003,027 | 505,352,820 | 7,551,060 | 505,352,820 |
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(The accompanying notes are an integral part of these condensed consolidated financial statements)
4
BINGO NATION INC.
(formerly Nexgen Applied Solutions Inc.)
Condensed Consolidated Statements of Cash Flows
(Expressed in U.S. dollars)
(unaudited)
| Six Months | Six Months |
| Ended | Ended |
| September 30, | September 30, |
| 2016 | 2015 |
| $ | $ |
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Operating activities |
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Net income (loss) | (27,582,671) | (95,618) |
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Adjustments to reconcile net income to net cash used in operating activities: |
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Bad debt expense | – | – |
Depreciation | – |
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Impairment of intangible assets | 27,500,000 | – |
Non-cash interest expense | 44,349 | 59,690 |
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Changes in operating assets and liabilities: |
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Accounts receivable | – |
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Prepaid expenses | – | – |
Deferred tenant inducement | – | – |
Accounts payable and accrued liabilities | 6,661 | (16,249) |
Deferred vendor incentive | – | (572) |
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Net cash used in operating activities | (31,661) | (52,749) |
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Financing activities |
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Repayments to related parties | 120 | (95) |
Advances for convertible notes payable | 32,858 | 59,690 |
Repayments to related parties | – | – |
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Net cash provided by financing activities | 32,978 | 59,595 |
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Cash flow from discontinued operations |
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Net cash provided by (used in) operating activities | 286 | (10,202) |
Net cash used in investing activities | – | (796) |
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Net cash provided by (used in) discontinued operations | 286 | (10,998) |
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Change in cash | 1,603 | (4,152) |
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Cash, beginning of period | 129 | 4,469 |
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Cash, end of period | 1,732 | 317 |
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Supplemental disclosures: |
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Interest paid | 1,502 | 5,595 |
Income taxes paid | – | – |
(The accompanying notes are an integral part of these condensed consolidated financial statements)
5
BINGO NATION INC.
(formerly Nexgen Applied Solutions Inc.)
Notes to the Condensed Consolidated Financial Statements
September 30, 2016
(Expressed in U.S. dollars)
(unaudited)
1.
Nature of Operations and Continuance of Business
Viking Minerals Inc., (the “Company”), was incorporated in the State of Nevada on March 24, 2006 with 75,000,000 authorized common shares with a par value of $0.001 per share. In January 2011, the Company filed an amendment with the State of Nevada to increase the authorized shares to 400,000,000 common shares with a par value of $0.001 per share.
On April 14, 2014, the Company changed its name to Indie Growers Association and completed a 1:200 reverse stock consolidation.
The Company was originally organized for the purpose of acquiring and developing mineral claims (SIC Code: 1000). On June 30, 2014, the Company acquired River Ridge Sunshine Farms LLC (“River Ridge”), a Washington State corporation, and in so doing, changed its business to that of real estate development for the purpose of leasing and agricultural buildings to licensed cannabis producers (SIC Code: 5319).
On April 4, 2016, the Company changed its name to Nexgen Applied Solutions Inc. and completed a 1:100 reverse stock consolidation. All share amounts in these interim condensed consolidated financial statements have been restated to reflect stock consolidations on April 14, 2014 and April 4, 2016.
On July 1, 2016, the Company changed its name to Bingo Nation Inc.
These interim condensed consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. As at September 30, 2016, the Company has a working capital deficiency of $687,738 and accumulated losses of $142,487,011 since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. While the Company is attempting to generate sufficient revenue, the Company’s cash position may not be enough to support the Company’s daily operations. Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently being taken to further implement its business plan and generate sufficient revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to increase revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenues. These interim financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
2.
Significant Accounting Policies
(a)
Basis of Presentation and Consolidation
The accompanying interim condensed consolidated financial statements of the Company should be read in conjunction with the financial statements and accompanying notes filed with the U.S. Securities and Exchange Commission for the fiscal year ended March 31, 2016. In the opinion of management, the accompanying interim financial statements reflect all adjustments of a recurring nature considered necessary to present fairly the Company’s financial position and the results of its operations and its cash flows for the periods shown.
These interim condense consolidated financial statements are expressed in U.S. dollars and include the accounts of the Company and those of its wholly-owned subsidiary, River Ridge. All intercompany balances and transactions are eliminated on consolidation.
6
BINGO NATION INC.
(formerly Nexgen Applied Solutions Inc.)
Notes to the Condensed Consolidated Financial Statements
September 30, 2016
(Expressed in U.S. dollars)
(unaudited)
2.
Significant Accounting Policies(continued)
(b)
Use of Estimates
The preparation of these interim condensed consolidated financial statements are in accordance with accounting principles generally accepted in the United States and requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from these estimates. The results of operations and cash flows for the period shown are not necessarily indicative of the results to be expected for the full year.
(c)
Accounts Receivable and Concentration of Credit Risk
The Company has extended unsecured credit to its only tenant. Accounts receivable related to lease revenue is recorded monthly in accordance with the sublease agreement between the tenant and our subsidiary. At March 31, 2016, the tenant was unable to meet its financial obligations due to low crop yield and dropping cannabis prices. Consequently, the company wrote down accounts receivable from the tenant in its entirety.
As we currently only have one tenant and the cannabis industry is still in a state of unpredictable change, there is the potential risk that this could occur again. However, to mitigate the risk, commencing May 1, 2016, the monthly lease rate has been reduced and the tenant was required to make minimum monthly payments to pay down a portion of the accounts receivable.
During the six months ended September 30, 2016, the Company has recorded an allowance for doubtful accounts of $103,650 (2015 - $nil). The Company will continue to evaluate the need for an allowance for doubtful accounts on a regular basis.
(d)
Property, Plant, and Equipment
Property, plant, and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses. Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of operations during the financial period in which they are incurred.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized in the statement of operations.
Depreciation of capital assets is computed as follows:
Buildings and infrastructure | 30 year straight line |
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(e)
Intangible Assets
Intangible assets are carried at the purchased costs less accumulated amortization. Amortization is computed over the estimated useful lives of the assets.
(f)
Convertible Debentures
According to ASC 470-20-25-5 “Recognition General Beneficial Conversion Features”, an embedded beneficial conversion feature present in a convertible instrument shall be recognized separately at issuance by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital.
Paragraph 470-20-30-4 provides guidance on measuring intrinsic value that applies to both the determination of whether an embedded conversion feature is beneficial and the allocation of proceeds and paragraph 470-20-30-5 states that the effective conversion price based on the proceeds received for or allocated to the convertible instrument shall be used to compute the intrinsic value, if any, of the embedded conversion option.
7
BINGO NATION INC.
(formerly Nexgen Applied Solutions Inc.)
Notes to the Condensed Consolidated Financial Statements
September 30, 2016
(Expressed in U.S. dollars)
(unaudited)
2.
Significant Accounting Policies(continued)
(f)
Convertible Debentures (continued)
According to paragraphs intrinsic value shall be calculated at the commitment date as the difference between the conversion price and the fair value of the common stock or other securities into which the security is convertible, multiplied by the number of shares into which the security is convertible.
In accordance with the convertible debt agreement, the conversion price is at par value of $0.001 per share. Accordingly, the Company assessed the conversion option and determined that during the period the notes had a beneficial conversion feature with intrinsic values in excess of the debt. Therefore, the Company fully amortized the conversion benefit in each fiscal year and recorded is as an interest expense. During the period ended September 30, 2016, the Company recognized a beneficial conversion feature of $32,858 (2015 - $59,690).
(g)
Revenue Recognition
The Company recognizes revenue pursuant to revenue recognition principles presented inASC 605,Revenue Recognition,which requires that there is persuasive evidence of an arrangement, delivery has occurred or services have been rendered, the seller’s price to the buyer is fixed or determinable, and collectability is reasonably assured.
(h)
Basic and Diluted Earnings (Loss) per Share
The Company computes earnings (loss) per share in accordance with ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As at September 30, 2016, the Company has 469,370,000 (2015 – 503,944,000) potentially dilutive shares outstanding.
(i)
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
(j)
Reclassifications
Certain of the prior period figures have been reclassified to conform to the current period’s presentation.
8
BINGO NATION INC.
(formerly Nexgen Applied Solutions Inc.)
Notes to the Condensed Consolidated Financial Statements
September 30, 2016
(Expressed in U.S. dollars)
(unaudited)
3. Discontinued Operations
Subsequent to period end, the Company entered into a settlement agreement whereby the Company cancelled its lease agreement and transferred River Ridge to the owners of the property to settle the early termination of the lease without penalties. Refer to Note 11.
Accordingly, the operations River Ridge have been treated as discontinued operations for the period ended September 30, 2016 and the comparative balances for 2015 have been reclassified.
Assets of discontinued operations
| September 30, 2016 $ | March 31, 2016 $ |
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Current assets of discontinued operations |
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Cash | 1,710 | 107 |
Prepaid assets | – | 253 |
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| – |
Total current assets of discontinued operations | 1,710 | 360 |
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Non-current assets of discontinued operations |
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Property, plant, and equipment, net of accumulated depreciation of $19,529 and $14,601, respectively | 275,363 | 280,291 |
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Total non-current assets of discontinued operations | 275,363 | 280,291 |
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Total assets of discontinued operations | 277,073 | 280,651 |
Liabilities of discontinued operations
| September 30, 2016 $ | March 31, 2016 $ |
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Current liabilities of discontinued operations |
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Accounts payable and accrued liabilities | 132,650 | 42,862 |
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Total current liabilities of discontinued operations | 132,650 | 42,862 |
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Non-current liabilities of discontinued operations |
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Due to related parties | – | 85,752 |
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Total liabilities of discontinued operations | 132,650 | 128,614 |
9
BINGO NATION INC.
(formerly Nexgen Applied Solutions Inc.)
Notes to the Condensed Consolidated Financial Statements
September 30, 2016
(Expressed in U.S. dollars)
(unaudited)
3. Discontinued Operations (continued)
Net income (loss) from discontinued operations
| 3 months ended September 30, 2016 $ | 3 months ended September 30, 2015 $ | 6 months ended September 30, 2016 $ | 6 months ended September 30, 2015 $ |
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Revenue |
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Rental income | 39,690 | 156,000 | 118,650 | 260,000 |
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Operating expenses |
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Bad debt expense | 30,690 | – | 103,650 | – |
Depreciation | 2,478 | 2,454 | 4,928 | 4,908 |
General and administrative | 2,427 | 6,152 | 6,098 | 9,579 |
Land lease | 3,000 | 3,000 | 6,000 | 6,000 |
Management fees | – | 2,500 | 6,000 | 6,540 |
Professional fees | – | – | – | 800 |
Repairs and maintenance | – | 90 | 93 | 1,341 |
Interest expense | 408 | 397 | 811 | 397 |
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Total operating expenses | 39,003 | 14,593 | 127,580 | 29,565 |
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Net income (loss) from discontinued operations | 687 | 141,407 | (8,930) | 230,435 |
4. Intangible Assets
| Cost $ | Accumulated amortization $ | Impairment $ | Net book value as at September 30, 2016 $ | Net book value as at March 31, 2016 $ |
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Intangible assets | 27,500,000 | – | (27,500,000) | – | – |
On April 18, 2016, the Company acquired a business development contract, an exclusive software technology license to a bingo-themed Class II game recognized by the Indian Gaming Regulatory Act, and related television broadcast rights. Under the term of the agreement, the Company issued 50,000,000 restricted common shares of the Company. Refer to Note 10.
As at June 30, 2016, the Company had not put these assets into use and has not yet recorded any amortization. At as June 30, 2016, the Company reviewed the assets for indication of impairment. Due to the inability to estimate future cash flows, the assets have been written-off.
10
BINGO NATION INC.
(formerly Nexgen Applied Solutions Inc.)
Notes to the Condensed Consolidated Financial Statements
September 30, 2016
(Expressed in U.S. dollars)
(unaudited)
5. Accounts payable
|
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| September 30, 2016 $ | March 31, 2016 $ |
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Trade accounts payable |
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| 87,150 | 66,237 |
6. Vendor Incentive
In December 2013, the Company’s transfer agent paid off the outstanding balance of $5,717 owed to the former transfer agent which had been recorded as deferred vendor incentive. It is being amortized on a straight-line baseover the contract term of five yearsand offset against transfer agent fees in the statement of operations.
During the period ended September 30, 2016, the Company changed transfer agents. As a result of the early termination, the Company was required to pay back the original amount of the vendor incentive, which has been added to the termination fees charged by the outgoing transfer agent.
7. Convertible Notes Payable
As of June 30, 2016, the Company had recorded $469,370 (March 31, 2016 - $436,512) in convertible notes payable. The amounts are unsecured, bear interest at 5% per annum, due on demand, and convertible at a price of $0.001 per share. The shares are not subject to forward or reverse stock splits unless the shares have been converted and issued prior to any such forward or reverse stock split. Therefore, if the balance outstanding was converted into common shares, the amount of stock to be issued would be 469,370,000 (March 31, 2016 – 436,512,000) common shares.
During the period ended September 30, 2016, the Company received $32,858 (March 31, 2016 - $107,258). The Company assessed the conversion option and determined that during the period the debenture had a beneficial conversion feature with intrinsic value in excess of the debt. Therefore, the Company fully amortized a conversion benefit of $32,858 (March 31, 2016 - $107,258) for the current period, which was recorded as interest expense.
During the period ended September 30, 2016, the Company issued nil (March 31, 2016 – 1,150,000) common shares for the settlement of $nil (March 31, 2015 - $115,000) of convertible notes payable. As at September 30, 2016, the Company has accrued $11,491 (March 31, 2016 - $41,784) in interest expense which has been recorded in accounts payable and accrued liabilities.
8. Rental Income
On April 13, 2015, the Company entered into a sublease agreement with a tenant effective May 1, 2015, whereby the Company will earn rental income of $52,500 per month for the sublease of land and buildings. On May 1, 2016, the Company and the tenant entered into an amendment to the agreement reducing the rental fees to $13,230 per month and requiring a minimum monthly payment of $3,000 per month with the balance accruing until the harvest and sale of the tenant’s crops. For the period ended September 30, 2016, the Company recorded $118,650 (September 30, 2015 - $260,000) in revenue in accordance with the sublease agreement. As at September 30, 2016, the Company had $nil (March 31, 2016 - $nil) recorded in accounts receivable net of allowance for uncollectable accounts of $103,650 (March 31, 2016 - $416,000).
9. Related Party Transactions
As at September 30, 2016, the Company owed $300 (March 31, 2016 - $180) to the Chief Executive Officer of the Company, which is unsecured, non-interest bearing, and due on demand.
11
BINGO NATION INC.
(formerly Nexgen Applied Solutions Inc.)
Notes to the Condensed Consolidated Financial Statements
September 30, 2016
(Expressed in U.S. dollars)
(unaudited)
10.
Share Capital
Authorized: 400,000,000 common shares with $0.001 par value
100,000,000 preferred shares with $0.001 par value
On April 18, 2016, the Company issued 50,000,000 common shares with a fair value of $27,500,000 based on the market price of the shares issued for the acquisition of various intangible assets. Refer to Note 4.
11.
Subsequent Event
On October 31, 2016, the Company entered into a settlement agreement whereby the Company cancelled its lease agreement and transferred River Ridge, its wholly-owned subsidiary, to the owners of the property to settle the early termination of the lease without penalties. Pursuant to the agreement, the Company would forgive any debt owed to the Company by River Ridge. Refer to Note 3 for classification of River Ridge assets, liabilities, and operations as discontinued operations.
12
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements. You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements. Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.
RESULTS OF OPERATIONS
Working Capital
|
|
|
| September 30, 2016 $ | March 31, 2016 $ |
Current Assets | 22 | 309 |
Current Assets – discontinued operations | 1,710 | 360 |
Current Liabilities | 556,820 | 502,749 |
Current Liabilities – discontinued operations | 132,650 | 42,862 |
Working Capital (Deficit) – continuing operations | (556,798) | (502,440) |
Working Capital (Deficit) – discontinued operations | (130,940) | (42,502) |
Cash Flows
|
|
|
| September 30, 2016 $ | September 30, 2015 $ |
Cash Flows used in Operating Activities | (31,661) | (52,749) |
Cash Flows used in Investing Activities | Nil | Nil |
Cash Flows provided by Financing Activities | 32,978 | 59,595 |
Cash Flows provided by (used in) Discontinued Operations | 286 | (10,998) |
Net Increase (Decrease) in Cash During Period | 1,603 | (4,152) |
Operating Revenues
Continuing Operations
During the three months ended September 30, 2016 and 2015, the Company earned no revenues from continuing operations.
Discontinued Operations
During the three months ended September 30, 2016, the Company earned rental income of $39,690 compared with rental income of $156,000 during the three months ended September 30, 2015 from discontinued operations. The decrease in revenues is due to the fact that the Company entered into an amended sublease agreement on May 1, 2016 which reduced the month rental fee charged from $52,500 to $13,230.
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Operating Expenses and Net Loss
Operating Expenses
Continuing Operations
During the three months ended September 30, 2016, the Company incurred operating expenses of $9,856 compared with $10,723 during the three months ended September 30, 2015. The decrease is mainly due to lower general and administrative expenses as the Company had minimal cash flows for operating activities.
During the six months ended September 30, 2016, the Company incurred operating expenses of $37,631 compared to $24,136 during the six months ended September 30, 2015. The increase in operating expenses was attributed to an increase in general and administrative expenses due to a termination fee paid to a previous transfer agent of $14,144
Discontinued Operations
During the three months ended September 30, 2016, the Company recorded a gain of $687 from discontinued operations compared to $141,407 during the three months ended September 30, 2015. The decrease was due to the fact that the Company earned higher lease revenues during fiscal 2015 of which none of the amounts were written off for bad debt expense whereas in the current year, the majority of the lease receivables were written off given the history of non-collectability from the lease tenants.
During the six months ended September 30, 2016, the Company recorded a loss of $8,930 compared to a gain of $230,435 during the six months ended September 30, 2015. The decrease is due to the write off of all rental income with the exception of $15,000 that was collected during the period. In the prior year, the Company recorded no impairment on rental income.
Net Income (Loss)
For the three months ended September 30, 2016, the Company had a net loss of $15,084 and basic and diluted net loss per share of $0.00. In addition to operating expenses, the Company also incurred $5,915 in interest expense for interest charges incurred on its convertible notes payable and beneficial conversion feature on new debt.For the three months ended September 30, 2015, the Company had a net income of $107,107 and basic and diluted net earnings per share of $0.08, comprised of a loss per share of $0.02 for continuing operations and an earnings per share of $0.10 for discontinued operations.
For the six months ended September 30, 2016, the Company had a net loss of $27,591,601 and loss per share of $3.65 from continuing operations. In addition to the net loss from operations, the Company also recorded an impairment charge of $27,500,000 for the acquisition of intangible assets through the issuance of common shares, and $45,050 of interest and accretion expense for its convertible notes payable. For the six months ended September 30, 2015, the Company incurred a net income of $134,817 or $0.10 per share, comprising of a loss of $0.06 per share for continuing operations and earnings of $0.16 per share for discontinued operations.
Liquidity and Capital Resources
Continuing and Discontinued Operations
As at September 30, 2016, the Company had cash and total current assets of $1,732 compared with cash and total current assets of $669 as at September 30, 2015.The increase in cash is attributed to a decrease in cash used for operations.
The overall working capital deficit increased from $544,942 at March 31, 2016 to $687,738 at September 30, 2016 due to increases in both accounts payable and accrued liabilities and convertible notes payable.
Cash flow from Operating Activities
During the six months ended September 30, 2016, the Company used $31,661 compared to $52,749 during the six months ended September 30, 2015. The decrease in cash is due to the fact that the Company did not have any cash inflows from continuing operations and were fully supported by cash received from financing activities which decrease during the current year.
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Cash flow from Investing Activities
During the six months ended September 30, 2016 and 2015, the Company had no investing activities from continuing operations.
Cash flow from Financing Activities
During the six months ended September 30, 2016, the Company received $32,978 of cash for financing activities, compared with $59,595 received during the six months ended September 30, 2015. The decrease in cash received for financing activities relates to a decrease in proceeds received from convertible notes payable.
Cash flow from Discontinued Operations
During the six months ended September 30, 2016, the Company received cash of $286 from discontinued operations from operating activities compared to the use of $10,998 during the six months ended September 30, 2015 which was comprised of $10,202 for operating activities and $796 for financing activities. The Company’s former subsidiary receives funding from cash generated by rental income as well as funding supporting from the Company on an as-needed basis.
Convertible Notes Payable
As of September 30, 2016, the Company had recorded $469,370 (March 31, 2016 - $436,512) in convertible notes payable. The amounts are unsecured; bear interest at 5% per annum, due on demand, and convertible at a price of $0.001 per share. The shares are not subject to forward or reverse stock splits unless the shares have been converted and issued prior to any such forward or reverse stock split. Therefore, if the balance outstanding was converted into common shares, the amount of stock to be issued would be 469,370,000 (March 31, 2016 – 436,512,000) common shares.
During the period ended June 30, 2016, the Company received $32,858 (March 31, 2016 - $107,258). The Company assessed the conversion option and determined that during the period the debenture had a beneficial conversion feature with intrinsic value in excess of the debt. Therefore, the Company fully amortized a conversion benefit of $32,858 (March 31, 2016 - $107,258) for the current period which was recorded as interest expense.
During the period ended September 30, 2016, the Company issued nil (March 31, 2016 – 1,150,000) common shares for the settlement of $nil (March 31, 2015 - $115,000) of convertible notes payable. As at September 30, 2016, the Company has accrued $11,491 (March 31, 2016 - $41,784) in interest expense which has been recorded in accounts payable and accrued liabilities.
Critical Accounting Policies and Estimates
We prepared our financial statements and the accompanying notes in conformity with accounting principles generally accepted in the United States of America, which require management to make estimates and assumptions about future events that affect the reported amounts in the financial statements and the accompanying notes. We identified certain accounting policies as critical based on, among other things, their impact on the portrayal of our financial condition, results of operations, or liquidity and the degree of difficulty, subjectivity, and complexity in their deployment. Critical accounting policies cover accounting matters that are inherently uncertain because the future resolution of such matters is unknown. Management routinely discusses the development, selection, and disclosure of each of the critical accounting policies. The following is a discussion of our most critical accounting policies:
Basis of Presentation and Consolidation
The accompanying interim condensed consolidated financial statements of the Company should be read in conjunction with the financial statements and accompanying notes filed with the U.S. Securities and Exchange Commission for the fiscal year ended March 31, 2016. In the opinion of management, the accompanying interim financial statements reflect all adjustments of a recurring nature considered necessary to present fairly the Company’s financial position and the results of its operations and its cash flows for the periods shown.
These interim condense consolidated financial statements are expressed in U.S. dollars and include the accounts of the Company and those of its wholly-owned subsidiary, River Ridge. All intercompany balances and transactions are eliminated on consolidation
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Use of Estimates
The preparation of these interim condensed consolidated financial statements are in accordance with accounting principles generally accepted in the United States and requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from these estimates. The results of operations and cash flows for the period shown are not necessarily indicative of the results to be expected for the full year.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
None.
Item4. Controls and Procedures
Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Securities Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC rules and forms, and that such information is accumulated and communicated to management, as appropriate, to allow timely decisions regarding required disclosures. Our management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management's control objectives.
Our management evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Annual Report. Based upon this evaluation, our management concluded that our disclosure controls and procedures were not effective as of September 30, 2016, because of the identification of a material weakness in our internal control over financial reporting which is described below. We intend to continue to review and document our disclosure controls and procedures, including our internal controls over financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Rule 13a-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance to our management regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with U.S. GAAP.
Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP and our receipts and expenditures are being made only in accordance with authorizations of our management; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our consolidated financial statements.
Our management assessed the effectiveness of our internal control over financial reporting as of September 30, 2016. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in their Internal Control-Integrated Framework. Based on this evaluation, our management concluded that that our internal control over financial reporting was not effective as of September 30, 2016.
Our CEO concluded we have a material weakness due to: (i) lack of a functioning audit committee; (ii) lack of outside directors on our board of directors; (iii) ineffective oversight in the establishment and monitoring of required internal controls and procedures; (iv) inadequate segregation of duties because of lack of staff; and (v) ineffective controls over period end financial disclosure and reporting processes. A material weakness is a deficiency, or a combination of control 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.
While we would like to segregate duties as much as practicable, there are insufficient resources at this point in time to justify accounting staff. We believe that this is typical in many start-up companies. We may not be able to fully remediate our material weaknesses until we increase our operations at which time we would expect to hire more staff and consider increasing the number of directors on our board. We will continue to monitor and assess the costs and benefits of additional staffing.
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Notwithstanding the identified material weaknesses, our management believes these consolidated financial statements fairly represent in all material respects our financial condition, results of operations and cash flows at and for the periods presented in accordance with U.S. GAAP.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the three months ended September 30, 2016, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Controls and Procedures
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On February 29, 2016, the Company reported that it had entered into a share exchange agreement to acquire 100% of the outstanding shares of Teascom UK Limited (“Teascom”). The acquisition was expected to close on April 15, 2016. On April 7, 2016, Secure Channels Inc. (the “Plaintiff”) filed a complaint in the Superior Court of California alleging that Teascom was in breach of a contract over the Plaintiff’s planned use of the intellectual property owned by Teascom. A hearing on this matter was held on April 11, 2016. The court dismissed the lawsuit but granted leave for the Plaintiff to amend their complaint and re-file. With the uncertainty surrounding the lawsuit, the Company and Teascom mutually agreed to terminate the share exchange agreement effective April 13, 2016.
Even with the termination of the share exchange agreement, the Plaintiff amended and refiled the lawsuit on April 23, 2016, specifically alleging that the Company and Robert Coleridge conspired with Teascom to breach the Plaintiff’s contract with Teascom. The matter was heard on July 11, 2016 before the Orange County Superior Court of California which granted the Company’s motion to quash. We consider this matter now closed.
We are not aware of any other pending or threatened legal actions to which we are a party or of which our property is the subject that would, if determined adversely to us, have a material adverse effect on our business and operations.
We have from time to time been involved in disputes and proceedings arising in the ordinary course of business. In addition, as a public company, we are also potentially susceptible to litigation, such as claims asserting violations of securities laws. Any such claims, with or without merit, if not resolved, could be time-consuming and result in costly litigation. There can be no assurance that an adverse result in any future proceeding would not have a potentially material adverse effect on our business, results of operations or financial condition.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
N/A
Item 4. Mine Safety Procedures
N/A
Item 5. Other Information
N/A
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Item 6. Exhibits
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| BINGO NATION INC. | |
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Date: November 21, 2016 |
| /s/ Robert Coleridge |
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| Robert Coleridge Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, and Director |
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