(See accompanying notes to unaudited financial statements)
YSTRATEGIES CORP.
(Formerly India Ecommerce Corporation)
Notes to Financial Statements
For the Nine Months Ended September 30, 2016
NOTE 1 – DESCRIPTION OF BUSINESS
Ystrategies Corp., located in Pittsburgh PA, was incorporated, on January 19, 2011, under the laws of the state of Nevada as India Ecommerce Corporation,. On March 9, 2016, India Ecommerce Corporation completed a merger with its wholly owned subsidiary, Ystrategies Corp., a Nevada corporation, which was incorporated solely to effect a change of name. As a result, the Company changed its name from India Ecommerce Corporation to Ystrategies Corp. The Company has modified its business model to include the management of interests in technology platforms and growth businesses with strong intellectual property positions.
Ystrategies accelerates commercialization for early stage businesses with significant development and strategy support, guidance and management. Our focus is long term ownership positions in intellectual property driven businesses with strong technical leadership and proven, scalable value for clearly identified customer segments. Our ideal investments drive aggressively to revenue through high quality strategic partner driven sales with recurring revenue developed by a compelling intellectual property value proposition.
The Ystrategies team will work with motivated scientist-entrepreneurs identified by its senior management and will utilize proven market based analysis to deliver quality investments. The Company will provide strategic support to portfolio businesses as they accelerate growth through important partnerships and build sales momentum with high quality customers.
NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited interim financial statements of Ystratergies have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto for the years ended December 31, 2015 and 2014 contained in the Company's Form 10-K originally filed with the Securities and Exchange Commission on April 13, 2016. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited consolidated financial statements for years ended December 31, 2015 and 2014 as reported in the Company's Form 10-K have been omitted.
Use of Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. A change in managements' estimates or assumptions could have a material impact on the Company's financial condition and results of operations during the period in which such changes occurred.
Actual results could differ from those estimates. The Company's financial statements reflect all adjustments that management believes are necessary for the fair presentation of their financial condition and results of operations for the periods presented.
Cash and Cash Equivalents
For purposes of the statements of cash flows, cash equivalents include all highly liquid investments with original maturities of three months or less which are not securing any corporate obligations. The Company
maintains its cash in bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts.
Property and Equipment
Property and equipment are carried at cost. Expenditures for maintenance and repairs are charged against operations. Renewals and betterments that materially extend the life of the assets are capitalized. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in income for the period.
YSTRATEGIES CORP.
(Formerly India Ecommerce Corporation)
Notes to Financial Statements
For the Nine Months Ended September 30, 2016
NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
Depreciation is computed for financial statement purposes on a straight-line basis over estimated useful lives of the related assets. The estimated useful lives of depreciable assets are:
| | Estimated |
| Classification | Useful Lives |
| Furniture and fixtures | 5-7 years |
| Computers and office equipment | 3-5 years |
Revenue Recognition
The Company recognizes revenue for its professional services when persuasive evidence of an arrangement exists, performance of services has occurred, the sales price is fixed or determinable and collectability is probable. Revenue, from the sale of products, is recognized upon receipt from the internet vendor of the month's transactions.
Consulting revenue is earned by providing intellectual internet oriented professional services on a contractual basis, usually paid for in advance. If the scope of the engagement exceeds the Company's abilities, part or all of the project may be outsourced to a third party that possess the necessary disciplines.
Other revenue is generated through the sale of products, in which case, the Company will purchase inventory and resell it over the Internet.
During the nine months ended September 30, 2016, the Company earned no revenue from consulting services, provided to clients, and $8,580 for Internet based product sales generated through an Amazon web site. Because the Company utilized an independent third party as a partner in this product sales venture, the Company recorded, only, its share of the revenue and deducted the inventory cost as cost of sales. Subsequent to September 30, 2016, the Company is no longer receiving revenue from Amazon.com. That source of revenue was in addition to the Company's overall business plan and there are no immediate plans to reinstate that activity.
Impairment of Long-lived Assets
The Company reviews long-lived assets for impairment when circumstances indicate the carrying amount of an asset may not be recoverable based on the undiscounted future cash flows of the asset. If the carrying amount of
the asset is determined not to be recoverable, a write-down to fair value is recorded. Fair values are determined based on quoted market values, discounted cash flows, or external appraisals, as applicable. The Company reviews long-lived assets for impairment at the individual asset or the asset group level for which the lowest level of independent cash flows can be identified. No impairment expense has been recorded on long-lived assets for the nine months ended September 30, 2016 and September 30, 2015, respectively.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.
YSTRATEGIES CORP.
(Formerly India Ecommerce Corporation)
Notes to Financial Statements
For the Nine Months Ended September 30, 2016
NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
The Company also follows the guidance related to accounting for income tax uncertainties. In accounting for uncertainty in income taxes, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. No liability for unrecognized tax benefits was recorded as of September 30, 2016 or December 31, 2015.
Fair Value Measurements
The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities
Level 2: Observable market-based inputs or inputs that are corroborated by market data
Level 3: Unobservable inputs that are not corroborated by market data
Stock-Based Compensation
The Company records stock-based compensation at fair value as of the date of grant and recognizes the corresponding expense over the requisite service period (usually the vesting period), utilizing the Black-Scholes option-pricing model. The volatility component of the calculation is based on the historic volatility of the Company's stock or the expected future volatility. The expected life assumption is primarily based on historical
exercise patterns and employee post-vesting termination behavior. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
Loss per Common Share
Basic earnings per share are calculated dividing income available to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per share are based on the assumption that all dilutive convertible shares and stock options and warrants were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, warrants and options are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. There were potentially, 326,184 dilutive shares outstanding as of September 30, 2016.
Recently Adopted 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 pronouncements that have been issued that might have a material impact on its financial position or results of operations.
YSTRATEGIES CORP.
(Formerly India Ecommerce Corporation)
Notes to Financial Statements
For the Nine Months Ended September 30, 2016
NOTE 3 – GOING CONCERN
The accompanying financial statements have been prepared on a going concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the financial statements, during the nine months ended September 30, 2016, the Company incurred a net loss of $1,970,499 which included a deduction for stock based compensation and consulting fees of $1901,677 and as of the same date has an accumulated deficit of $2,716,062. If the Company is unable to generate profits and is unable to continue to obtain financing for its working capital requirements, it may have to curtail its business sharply or cease business altogether. These factors raise substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustment relating to the recoverability and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
The Company is taking certain steps to provide the necessary capital to continue its operations.
These steps include, but are not limited to: 1) develop a new business model which will provide sufficient revenue to become profitable; 2) focus on sales to minimize the need for capital; 3) raise equity financing; 4) continuous focus on reductions in cost where possible.
NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of September 30, 2016 and December 31, 2015:
| | | September 30, | | | December 31, | |
| | | 2016 | | | 2015 | |
| Computers and office equipment | | $ | 8,614 | | | $ | 8,614 | |
| less: accumulated depreciation | | | (8,614 | ) | | | (8,257 | ) |
| Equipment - net | | $ | - | | | $ | 357 | |
Depreciation expense included as a charge to income of $357 for the nine months ended September 30, 2016 and $1,293 for the nine months ended September 30, 2015.
NOTE 5 – RELATED PARTY TRANSACTIONS
On February 29, 2016, the Company resolved to sell 600,000 post-split common shares to, each of, two individuals, for a total consideration of $30,000 cash, which was received on March 3, 2016. On March 10, 2016, the Board of Directors appointed Messrs. Jim Kiles and Paul Overby to the two vacant positions on the Company's Board of Directors. Mr. Kiles was also appointed President and Chief Executive Officer in the place of Ashish Badjatia, who resigned as President and CEO. Mr. Overby was appointed Chief Strategy Officer.
On June 3, 2016 the Company issued 7,249,999 of its common restricted shares to seven individuals for past services provided as directors, officers and employees. The shares were recorded, based on the fair market value of the stock on that day, of $0.26, each, for a total cost of $1,885,000.
On April 1, 2016, the Board of Directors passed a resolution to pay Ashish Badjatia, a director and chief operating officer, $3,000 per month as compensation for services to be rendered. On September 30, 2016, Mr. Badjatia was owed a total of $30,500 in unpaid compensation.
On July 21, August 4 and August 5, 2016 two directors and two consultants, each, purchased convertible notes of $2,500 each, repayable on or before January 1, 2019, bearing interest of 5% per annum and convertible into common shares at a cost of $0.135 per share after 180 days, at the holder's option. Three of the four notes contained beneficial conversion features resulting in $945 being recorded to additional paid in capital with an offset to debt discount.
YSTRATEGIES CORP.
(Formerly India Ecommerce Corporation)
Notes to Financial Statements
For the Nine Months Ended September 30, 2016
NOTE 6 – NOTES PAYABLE
The components of notes payable at June 30, 2016 are summarized in the table below:
| | | September 30, | | | December 31, | |
| | | 2016 | | | 2015 | |
| | | | | | | | | |
| Related party note payable – 24% interest, unsecured and due January 2013 (1) | | $ | 4,500 | | | $ | 4,500 | |
| | | $ | 4,500 | | | $ | 4,500 | |
NOTE 7 – CONVERTIBLE NOTES PAYABLE
| | | September 30, | | | December 31, | |
| | | 2016 | | | 2015 | |
| | | | | | | | | |
| Convertible notes payable -5% interest due January 1, 2019 - net | | $ | 9,115 | | | $ | - | |
| | | $ | 9,115 | | | $ | - | |
On July 21, 2016 the Company issued a convertible promissory note for $2,500, bearing annual interest of 5%, with principal and interest due and payable on or before January 1, 2019. The note has a conversion feature for common shares at $0.135 per share. Because the trading price of our stock was less than the stated conversion rate of the note, there was no beneficial conversion feature.
On August 4, 2016, the Company issued a convertible promissory note for $2,500, bearing an annual interest rate of 5%. The principal amount of the note and all accrued interest is due and payable on or before January 1, 2019. The note has a conversion feature for common shares at $0.135 per share. Due to the fact that the trading price of our stock was greater than the stated conversion rate of the note, the Company calculated the effective conversion price of the note based on the relative fair value allocated to the debt to determine the fair value of any beneficial conversion feature, in accordance with ASC 470-20-30. A discount of $315 for the beneficial conversion was recorded against this note and will be amortized against interest expense through the life of the note. As of September 30, 2016 interest expense of $20 was recorded as part of the amortization of the beneficial conversion feature of the note.
On August 5, 2016, the Company issued two convertible promissory notes for $2,500 each. Both notes have an annual interest rate of 5%. The principal amount of the notes and all accrued interest is due and payable on or before January 1, 2019. The notes have a conversion feature for common shares at $0.135 per share. Due to the fact that the trading price of our stock was greater than the stated conversion rate of the note, the Company calculated the effective conversion price of the note based on the relative fair value allocated to the debt to determine the fair value of any beneficial conversion feature, in accordance with ASC 470-20-30. A discount of $315 each for the beneficial conversion was recorded against these notes and will be amortized against interest expense through the life of the notes. As of September 30, 2016 interest expense of $20 each was recorded as part of the amortization of the beneficial conversion feature of these notes.
YSTRATEGIES CORP.
(Formerly India Ecommerce Corporation)
Notes to Financial Statements
For the Nine Months Ended September 30, 2016
NOTE 8 – COMMITMENTS AND CONTINGENCIES
On March 14, 2016 the Company entered into a consulting agreement with an individual to provide marketing and consulting expertise. The agreement required compensation of 50,000 common restricted shares, to be issued within fourteen days or receipt of FINRA approval to the corporate re-organization, and 25,000 common restricted shares, to be issued each quarter, thereafter, until terminated by either party. That contract was canceled on August 15, 2016 and replaced with a new one, dated September 27, 2016 requiring the issuance of an additional 500,000 common restricted shares within 50 calendar days and 250,000 common restricted shares on or before March 31, 2017. The 500,000 common shares were valued at $0.01, based on the fair market value of the stock on September 27, 2016, and were recorded as a prepaid expense, of $5,000, to be amortized, over the term of the contract.
On September 27, 2016 the Company entered into a consulting agreement with an individual to provide senior Venture Partner and other expertise as required. This agreement requires compensation of 700,000 common restricted shares to be issued on or before November 30, 2016 plus an additional 300,000 common restricted shares to be issued not later than March 31, 2017, provided the consultant remains engaged as a service provider. The 700,000 common shares were recorded at $0.01per share, based on the fair market value of the stock on September 27, 2016, and were recorded as a prepaid expense, of $7,000, to be amortized, over the term of the contract. In addition, consultant is to receive monthly compensation of $8,000 per month, commencing at a to be determined future date, deferred, and paid in full, when the Company secures funding of at least $750,000, at which time the compensation shall increase to $12,000 per month, non-deferred. In any quarter, after the deferred compensation has commenced, the consultant may elect to convert that quarter's unpaid compensation into 25,000 common restricted shares.
NOTE 9 – STOCKHOLDERS' DEFICIT
The total number of common shares authorized that may be issued by the Company is 75,000,000 shares with a par value of $0.001 per share. There are no preferred shares authorized to be issued. On March 11, 2016 the Board of Directors approved a one for ten reverse stock split subject to FINRA approval which was received on June 1, 2016, to be effective June 3, 2016. There were 14,837,915 and 5,007,916 shares of post-split common stock issued and outstanding at September 30, 2016 and December 31, 2015, compared to 50,079,156 outstanding pre-reverse stock split at December 31, 2015.
On March 3, 2016 the Company received a cash payment of $30,000, for the sale of 12,000,000 pre-reverse split shares at a cost of $0.0025 per share or 1,200,000 post-reverse common shares, at a cost of $0.025 per share.
On June 3, 2016, the Company issued 7,249,999 common restricted shares to seven individuals, officers and directors, to compensate them for past services. The shares were recorded, based on the fair market value of the stock on that date, at $0.26 per share for a total cost of $1,885,000.
On June 3, 2016, the Company approved the issuance of 50,000 common restricted shares to a consultant for services provided and to be provided. The shares were recorded, based on the fair market value of the stock on that date, at $0.26 per share, for a total cost of $13,000.
On June 30, 2016 the Company issued 25,000 common restricted shares to the same consultant for services rendered, based on the fair market value of the stock on that date, at $0.1051 per share or a total cost of $2,628.
On September 27, 2016 the Company issued 700,000 and 500,000 shares, respectively, to two consultants for services to be provided, based on the fair market value of the stock on that date of $0.01 per share or a total cost of $12,000. The 700,000 common shares were recorded at $0.01per share, based on the fair market value of the stock on September 27, 2016, and were recorded as a prepaid expense, of $7,000, to be amortized, over the term of the contract. Similarly, the 500,000 common shares were valued at $0.01, based on the fair market value of the stock on September 27, 2016, and were recorded as a prepaid expense, of $5,000, to be amortized, over the term of the contract.
YSTRATEGIES CORP.
(Formerly India Ecommerce Corporation)
Notes to Financial Statements
For the Nine Months Ended September 30, 2016
NOTE 10 – STOCK PURCHASE WARRANTS
During the year ended December 31, 2014, the Company issued 1,666,667 warrants to creditors to acquire its common stock. In applying the Black-Scholes options pricing model to the options and warrant grants, the fair value of our share-based awards granted were estimated using the following assumptions.
| Risk-free interest rate | | | 1.52% | |
| Expected options life | | | 2.50 | |
| Expected dividend yield | | | - | |
| Expected price volatility | | | 701% | |
A summary of the status of the Company's stock options as of September 30, 2016 and changes during the nine months ended September 30, 2016 is presented below:
| | | Number of Warrants | |
| | | | |
| Outstanding at December 31, 2015 | | | 1,666,667 | |
| Warrants exercised | | | - | |
| Warrants forfeited or expired | | | - | |
| Outstanding at September 30, 2016 | | | 1,666,667 | |
| Exercisable at September 30, 2016 | | | 1,666,667 | |
The following table summarizes information about options and warrants as of September 30, 2016:
| | | | Warrants Outstanding | | | Warrants Exercisable | |
| Exercise Price | | | Number Outstanding | | | Weighted Average Remaining Contractual Life (in years) | | | Weighted Average Exercise Price | | | Number Exercisable | | | Weighted Average Exercise Price | |
| | | | | | | | | | | | | | | | | |
| $ | 0.06 | | | | 1,666,667 | | | | 2.25 | | | $ | 0.06 | | | | 1,666,667 | | | $ | 0.06 | |
| | | | | | 1,666,667 | | | | 2.25 | | | $ | 0.06 | | | | 1,666,667 | | | $ | 0.06 | |
NOTE 11 – SUBSEQUENT EVENTS
On October 17, 2016, the Company entered into an Intellectual Property Agreement with Alliance for Sustainable Energy LLC ("Alliance"), operator of the National Renewable Energy Laboratory, to secure an option, at a cost of $15,000, for an exclusive license to certain intellectual property belonging to Alliance. An initial payment of $5,000 was made on October 17, 2016. Additional payments of $5,000 each are due on November 15, and November 30, 2016. A final Exclusive License Agreement will be, during the option period, negotiated within the Field of Use based upon Key Commercial Terms.
Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and plan of operations should be read in conjunction with our unaudited interim financial statements and related notes appearing elsewhere in this Quarterly Report. Various statements have been made in this Quarterly Report on Form 10-Q that may constitute "forward-looking statements". Forward-looking statements may also be made in our other reports filed with or furnished to the United States Securities and Exchange Commission (the "SEC") and in other documents. In addition, through our management we may make oral forward-looking statements.
Forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from such statements. The words "believe," "expect," "anticipate," "optimistic," "intend," "plan," "aim," "will," "may," "should," "could," "would," "likely" and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance, and therefore, you should not put undue reliance upon them. Some of the statements that are forward-looking include: our ability to successfully implement our business plan; our estimates of revenues and of other expenses associated with our operations; and our ability to generate sufficient cash flows and maintain adequate sources of liquidity to finance our ongoing operations and capital expenditures. We undertake no obligation to update or revise any forward-looking statements.
History and Overview
Ystrategies Corp., located in Pittsburgh PA, was incorporated, on January 19, 2011, under the laws of the state of Nevada as India Ecommerce Corporation,. On March 9, 2016, India Ecommerce Corporation completed a merger with its wholly owned subsidiary, Ystrategies Corp., a Nevada corporation, which was incorporated solely to effect a change of name. As a result, the Company changed its name from India Ecommerce Corporation to Ystrategies Corp. The Company has modified its business model to include the management of interests in technology platforms and growth businesses with strong intellectual property positions.
Plan of Operations
Ystrategies is in the business of managing interests in technology platforms and growth businesses with strong intellectual property positions. The Company acquires these interests through partnership and investment. Ystrategies' business is based on recurring revenues from technology platforms and sales of new energy efficiency and renewable energy products to businesses and consumers.
Ystrategies accelerates commercialization for early stage businesses with significant development and strategy support, guidance and management. Our focus is long term ownership positions in intellectual property driven businesses with strong technical leadership and proven, scalable value for clearly identified customer segments. Our ideal investments drive aggressively to revenue through high quality strategic partner driven sales with recurring revenue developed by a compelling intellectual property value proposition.
Ystratgies CEO, Jim Kiles, is leading the Company in implementing its new businesses model. Mr. Kiles is a former Intel Capital Managing Director and currently a Member of the Lawrence Livermore National Laboratory (LLNL) Industrial Advisory Board (for technology transfer) and Instructor in the Department of Energy's Energy Efficiency and Renewable Energy Office (EERE) Lab Corps Program.
The Ystrategies team will work with motivated scientist-entrepreneurs identified by its senior management and will utilize proven market based analysis to deliver quality investments. The Company will provide strategic support to portfolio businesses as they accelerate growth through important partnerships and build sales momentum with high quality customers.
Intellectual Property
We currently have no patents or other protection for our intellectual property, and will rely on copyrights, trademarks, and corporate secrecy for protection for the foreseeable future.
Directors and Officers
On March 10, 2016, the Company's Board of Directors appointed Jim Kiles as the new Chief Executive Officer, and Paul Overby to the newly formed Chief Strategy Officer position. Both Mr. Kiles and Mr. Overby will also serve on the Board of Directors for the Company, with Mr. Kiles assuming the role of Chairman of the Board of Directors.
Together, Jim Kiles, Paul Overby and Ashish Badjatia comprise the Board of Directors. Mr. Badjatia continues his role as Chief Operating Officer.
Employees and Consultants
On March 29, 2016 the Company signed a consulting agreement with Neil Cohen, whereby Mr. Cohen, as Vice President of Marketing, will provide senior marketing and communications consulting services. Mr. Cohen's compensation consists of 50,000 shares delivered subsequent to FINRA approval of the reverse stock split, received on June 3, 2016, plus an additional 25,000 common restricted shares, to be delivered at the end of each fiscal quarter commencing June 30, 2016. That contract was canceled on August 15, 2016 and replaced with a new one, dated September 27, 2016 requiring the issuance of an additional 500,000 common restricted shares within 50 calendar days and 250,000 common restricted shares on or before March 31, 2017.
On June 10, 2016, the Company appointed Robert Petchel the Senior Vice President of Project Development.
On September 27, 2016, the Company signed a consulting agreement with Shirley Gee in the role of Venture Partner. In this role, Ms. Gee shall provide a broad range of services with the intent to organize the internal structure and operations of the Company to facilitate larger levels of fundraising. Ms. Gee's compensation in this role consists of 700,000 shares upon signing and an additional 300,000 shares at the end of 2017 Q1 contingent upon continuation of her role. In addition, consultant is to receive monthly compensation of $8,000 per month, commencing at a, to be determined future date, deferred, and paid in full, when the Company secures funding of at least $750,000, at which time the compensation shall increase to $12,000 per month, non-deferred. In any quarter, after the deferred compensation has commenced, the consultant may elect to convert that quarter's unpaid compensation into 25,000 common restricted shares.
We expect to maintain a small staff on our payroll so that we can be nimble and effective. To accomplish this goal, we expect to employ contract employees for our initial projects.
Recruiting top level personnel will be aided by share based compensation tied to overall performance.
Executive cash compensation will be minimal due to their equity stakes with our Company. Key executive operations, such as Finance and Human Resources will be outsourced until a full time presence is necessary.
Advisory Board
On September 27, 2016, the Company formally created, and approved, a Science and Technology Advisory Board ("Advisory Board"). Each of the initial seven members of this Board will receive 15,000 shares of common stock in this role.
The advisors include:
| § | Kevin T. McLoughlin is a Senior Consultant at Environmental Consultants Inc., and is an expert in energy efficiency. In the past, he held senior positions at the New York Power Authority and the Empire State Electric Energy Research Corporation. |
| § | Peter Therkelsen, Ph.D, is a Research Scientist in the Environmental Energy Technologies Division at the Lawrence Berkeley National Laboratory. His work focuses on industrial energy performance and management as well as the development and deployment of responsible energy efficiency and generation technologies. In this role he actively studies barriers to the implementation of industrial energy efficiency measures, supports the implementation of energy management systems in the United States, and serves as a delegate of the United States at International Standards Organization meetings for energy management and savings. Dr. Therkelsen conducts data driven analysis of energy management systems with a current focus on the costs and benefits of certification to the U.S. DOE Superior Energy Performance program. In addition, Dr. Therkelsen is head of the LBNL Combustion Laboratory where he studies and develops high efficiency, fuel flexible, and low emission installed and portable heat and power systems. |
| § | Scott Wallace, LEED AP and Certified Energy Manager, is an Associate Principal at Mazzetti, a leading healthcare engineering and technology company. Wallace manages the American Hospital Association's Energy to Care program designed to help hospitals develop and implement an energy and sustainability strategy. He brings 18 years of experience developing and implementing innovative energy solutions for large scale commercial buildings resulting in reduced cost, energy consumption, and greenhouse gas emissions while improving occupant comfort and productivity. |
| § | Dan Aronson was the co-founder and Chief Technology Officer of Fandor, a video streaming service for independent films, Dan has been at the forefront of technology since the '80s. He began building supercomputers at Thinking Machines Corporation and he was an early employee at WAIS, the first internet search engine company. He cofounded anti-spam company Brightmail and internet incubator Campsix, and has been on the boards of City Car Share and networked music player company Slim Devices. |
| § | Vi Rapp, Ph.D, is a Research Scientist working in the Energy Technologies Area at Lawrence Berkeley National Laboratory. Her research interests focus on ultra low emission and net zero carbon combustion technologies for heat and power generation. Her current activities include: improving combustion safety diagnostics for energy efficient homes; investigating efficient, low emission technologies for combustion appliances and small engine applications; and developing advanced biomass cookstoves for the developing world. Dr. Rapp holds a Ph.D. in Mechanical Engineering from the University of California, Berkeley. Her dissertation focused on reducing emissions and improving efficiency of internal combustion engines by implementing alternative modes of combustion and unconventional fuels. |
| § | Mike Tucker, Ph.D, is a Research Scientist and Principal Investigator at the Lawrence Berkeley National Laboratory. Mike has been engaged in R&D of electrochemical devices since 1997. His research experience is in Lithium Batteries, Direct Methanol Fuel Cells, Solid Oxide Fuel Cells, and Flow Cells. His experience is in resource-efficient development of new devices and concepts, with a clear focus on making devices work, and then making them work better. |
The Company has plans to expand this Advisory Board to 20 persons by the end of the first quarter of 2017.
Stock Buyback
On September 30, 2016, the Company's Board unanimously authorized the Company to buy back its own stock in the open market within compliance of Rule 10b-18 of the US Securities and Exchange Commission, and authorizes these repurchases for a period of one year commencing on October 1, 2016.
Subsidiaries
We do not currently have any subsidiaries.
Results of Operations
The following discussion of the financial condition and results of operations should be read in conjunction with the unaudited financial statements included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future.
We have generated minimal revenue from our core business model. However, during the nine months ended September 30, 2016, we earned commissions of $8,580 from internet sales compared to $22,327 during the same nine months in 2015, and no revenue from that source for the three months ended September 30, 2016 compared to $22,327 for the three months ended September 30, 2015. We had no consulting revenue during the three and nine months ended September 30, 2016 compared to $7,500, during the nine months ended September 30, 2015. Consulting contracts cover a variety of circumstances and needs and only become available from potential clients on an "as needed" basis. No such contracts were entered into during the nine months ended September 30, 2016.
Our total operating expenses of $1,977,309 incurred during the nine months ended September 30, 2016, consisted of administrative and general costs of $1,973,343 which included stock based compensation of $1,901,677, depreciation of $357, and cost of revenue of $3,966 compared to total operating expenses of $81,030 consisting of general and administrative costs of $79,251 and cost of revenue of $1,779 for the same nine months in 2015. Interest cost for the nine months ended September 30, 2016 increased to $1,770 for the nine months ended September 30, 2016 compared to $1,560 for the same nine months in 2015, and to $845 for the three months ended September 30, 2016 compared to $556 for the same three months in 2015, as a result of the addition of new loans. There were no costs of extinguishment or change in derivative liability during the nine months ended September 30, 2016 compared to $116,687 and $15 for the nine months ended September 30, 2015.
Liquidity and Capital Resources
Net cash used, by operating activities, during the nine months ended September 30, 2016 was $39,625 compared to cash used of $9,505 for the nine months ended September 30, 2015. The additional cash utilized was the result of increased general and administrative overhead less cash provided by the collection of accounts receivable of $7,090 and increase in accounts payable of $21,855 compared to an increase in accounts payable of $14,060 from the same nine months of 2015.
Investing Activities
We did not use any cash resources for investing activities during the nine months ended September 30, 2016 nor for the nine months ended September 30, 2015.
Financing Activities
During the nine months ended September 30, 2016 the Company generated $30,000 from the sale of common shares and $10,000 from the sale of convertible notes compared to no such activity during the nine months ended September 30, 2015.
Going Concern
During the nine months ended September 30, 2016, we incurred a net loss of $1,970,499, which included a non-cash stock based compensation expense of $1,901,677 and depreciation cost of $357. We have an accumulated deficit of $2,716,062 since inception. We are in the early stage of operations, and have, only, recently commenced generating revenue which amounted to commissions on internet sales of $8,580 for the nine months ended September 30, 2016 compared to $22,327 of internet commissions and $7,500 of consulting fees for the nine months ended September 30, 2015. We will continue to generate losses in the near future. These conditions raise substantial doubt about our ability to continue as a going concern.
These financial statements do not include adjustments relating to the recoverability and classification of reported asset amounts or the amount and classification of liabilities that might be necessary should we be unable to continue as a going concern. Our continuation as a going concern is dependent upon our ability to obtain additional financing or sale of its common stock and ultimately to attain profitability.
Management has adopted a new business plan and plans, in this regard, is to raise additional financing through a combination of equity and debt financing. Management believes this will be sufficient to finance the continuing development for the next twelve months. However, there is no assurance that we will be successful in raising such financing.
We currently do not have any other arrangements for financing and we may not be able to obtain the financing required. Obtaining additional financing would be subject to a number of factors, including our ability to attract investments prior to consistent revenue generation, and thereafter our ability to grow our brand and for success in our market. We may also require additional financing to sustain our business operations if we are not successful in earning significant revenues once our business plan is enacted.
Critical Accounting Policies
Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States ("GAAP"). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.
Our significant accounting policies are summarized in Note 2 of our unaudited interim financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our results of operations, financial position or liquidity for the periods presented in this report.
We believe the following critical accounting policies and procedures, among others, affect our more significant judgments and estimates used in the preparation of our unaudited interim financial statements:
Cash and Cash Equivalents
For purposes of the statements of cash flows, cash equivalents include all highly liquid investments with original maturities of three months or less which are not securing any corporate obligations. The Company maintains its cash in bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts.
Revenue Recognition
The Company recognizes revenue for its professional services when persuasive evidence of an arrangement exists, performance of services has occurred, the sales price is fixed or determinable and collectability is probable. During the nine months ended September 30, 2016, the Company earned $8,580 for product sales generated through the Amazon web site.
Website Development
We capitalize the costs associated with the development of our website. Other costs related to the maintenance of the website are expensed as incurred. Amortization will be provided over the estimated useful life of 3 years using the straight-line method for financial statement purposes.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as "special purpose entities" (SPEs).
Item 3 Quantitative and Qualitative Disclosures about Market Risk
Not required for a smaller reporting company.
Item 4 Controls and Procedures
Disclosure Controls and Procedures
As required by paragraph (b) of Rules 13a-15 or 15d-15 under the Securities Exchange Act of 1934, our management, with the participation of our principal executive officer and principal financial officer evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, management concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q, these disclosure controls and procedures were not effective. The ineffectiveness of our disclosure controls and procedures was due to material weaknesses identified in our internal control over financial reporting, as described in our annual report on Form 10-K for the year ended December 31, 2015.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the nine months ended September 30, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II
Item 1 Legal Proceedings
None.
Item 1A Risk Factors
Not required for a smaller reporting company.
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
On February 29, 2016 the Company resolved to sell, for cash, 1,200,000 post reverse common shares to two individuals, based on the fair market value of the stock on that day, of $0.025 per share, for a total of $30,000.
On June 3, 2016, the Company issued 7,249,999 common restricted shares to seven individuals, officers and directors, to compensate them for past services, based on the fair market value of the stock on that day, of $0.26 per share, for a total cost of $1,885,000.
On June 3, 2016, the Company approved the issuance of 50,000 common restricted shares to a consultant for services provided and to be provided, based on the fair market value of the stock on that day, of $0.26 per share, for a total cost of $13,000.
On June 30, 2016 the Company issued 25,000 common restricted shares to the same consultant for services rendered, based on the fair market value of the stock on that day, of $0.1051 per share or a total cost of $2,628.
On September 27, 2016 the Company issued 700,000 and 500,000 shares, respectively, to two consultants for services to be provided, based on the fair market value of the stock on that day, of $0.01 per share or a total cost of $12,000.
Item 3 Defaults upon Senior Securities
None.
Item 4 Mine Safety Disclosures
N/A.
Item 5 Other Information
None.
Item 6 Exhibits
| Number | Exhibit |
| | |
| 31.1 | Certification of Principal Executive and Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 32.1 | Certification of Principal Executive and Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 101.INS* | XBRL Instance Document |
| 101.SCH* | XBRL Taxonomy Extension Schema Document |
| 101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.LAB* | XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document |
| 101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document |
* Pursuant to applicable securities laws and regulations, we are deemed to have complied with the reporting obligation relating to the submission of interactive data files in such exhibits and are not subject to liability under any anti-fraud provisions of the federal securities laws as long as we have made a good faith attempt to comply with the submission requirements and promptly amend the interactive data files after becoming aware that the interactive data files fail to comply with the submission requirements. Users of this data are advised that, pursuant to Rule 406T, these interactive data files are deemed not filed and otherwise are not subject to liability.
SIGNATURES
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.
| | Ystrategies Corp. |
| | |
| Date: November 21, 2016 | /s/ Jim Kiles |
| | Jim Kiles President and CEO |
