UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 2013
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________.
Commission file number: 333-175667
Yappn Corp.
(Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation or organization) | 27-3848069 (I.R.S. Employer Identification No.) |
1001 Avenue of the Americas, 11th Floor, New York, NY (Address of principal executive offices) | 10018 (Zip Code) |
Registrant’s telephone number, including area code 888-859-4441
(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 o
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 such files). x Yes □ No.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):
Large accelerated filer o | Accelerated filer o |
Non-accelerated filer o | Smaller reporting company x |
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of April 15, 2013, there were 100,000,000 shares of common stock, par value $0.0001, issued and outstanding.
YAPPN CORP.
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION | Page | |
ITEM 1 | Financial Statements | 1 |
ITEM 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 12 |
ITEM 3 | Quantitative and Qualitative Disclosures About Market Risk | 14 |
ITEM 4 | Controls and Procedures | 14 |
PART II – OTHER INFORMATION | ||
ITEM 1 | Legal Proceedings | 15 |
ITEM 1A | Risk Factors | 15 |
ITEM 2 | Unregistered Sales of Equity Securities and Use of Proceeds | 15 |
ITEM 3 | Defaults Upon Senior Securities | 15 |
ITEM 4 | Mine Safety Disclosures | 15 |
ITEM 5 | Other Information | 15 |
ITEM 6 | Exhibits | 15 |
PART I – FINANCIAL INFORMATION
This Quarterly Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based on management’s beliefs and assumptions, and on information currently available to management. Forward-looking statements include the information concerning our possible or assumed future results of operations set forth under the heading “Management’s Discussion and Analysis of Financial Condition or Plan of Operation.” Forward-looking statements also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider” or similar expressions are used.
Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions. Our future results and shareholder values may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to put undue reliance on any forward-looking statements.
1
ITEM 1 Financial Statements
(A DEVELOPMENT STAGE COMPANY)
INDEX TO CONDENSED FINANCIAL STATEMENTS
FEBRUARY 28, 2013
Condensed Financial Statements | |
Condensed Balance Sheets as of February 28, 2013 (unaudited) and May 31, 2012 (audited) | 2 |
Condensed Statements of Operations for the Three and Nine Months Ended February 28, 2013 and February 29, 2012 and for the period from November 3, 2010 (Inception) Through February 28, 2013 (unaudited) | 3 |
Condensed Statement of Stockholders’ Deficit for the Periods from November 3, 2010 (Inception) Through February 28, 2013 (unaudited) | 4 |
Condensed Statements of Cash Flows for the Nine Months Ended February 28, 2013 and February 29, 2012 and for the period from November 3, 2010 (Inception) Through February 28, 2013 (unaudited) | 5 |
Notes to Condensed Financial Statements | 6 |
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YAPPN CORP.
CONDENSED BALANCE SHEETS
ASSETS | ||||||||
As of | As of | |||||||
February 28, | May 31, | |||||||
2013 | 2012 | |||||||
(Unaudited) | (Audited) | |||||||
Current Assets | $ | - | $ | - | ||||
Property and Equipment: | ||||||||
Computer equipment | - | 2,034 | ||||||
Less: accumulated depreciation | - | (989 | ) | |||||
Total property and equipment, net | - | 1,045 | ||||||
Total Assets | $ | - | $ | 1,045 | ||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
Current Liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 2,013 | $ | 10,762 | ||||
Loans from related parties - directors and stockholders | - | 6,359 | ||||||
Total current liabilities | 2,013 | 17,121 | ||||||
Total liabilities | 2,013 | 17,121 | ||||||
Commitments and Contingencies | ||||||||
Stockholders' Deficit: | ||||||||
Preferred stock, par value $.0001 per share, 50,000,000 shares | ||||||||
authorized; 0 shares issued and outstanding | - | - | ||||||
Common stock, par value $.0001 per share, 200,000,000 shares | ||||||||
authorized; 142,500,000 shares issued and outstanding* | 14,250 | 14,250 | ||||||
Additional paid-in capital | 60,747 | 24,672 | ||||||
Deficit accumulated during the development stage | (77,010 | ) | (54,998 | ) | ||||
Total stockholders' deficit | (2,013 | ) | (16,076 | ) | ||||
Total Liabilities and Stockholders' Deficit | $ | - | $ | 1,045 |
* Restated to reflect forward 15 for 1 stock split
The accompanying notes to the unaudited condensed financial
statements are an integral part of these statements.
3
YAPPN CORP.
(A DEVELOPMENT STAGE COMPANY)
(Unaudited)
Three Months Ended | Nine Months Ended | From November 3, 2010 (inception) through | ||||||||||||||||||
February 28, | February 29, | February 28, | February 29, | February 28, | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | 2013 | ||||||||||||||||
Revenues | $ | - | $ | - | $ | - | $ | - | $ | 5,916 | ||||||||||
Total revenues | - | - | - | - | 5,916 | |||||||||||||||
Cost of Goods Sold | - | - | - | - | 3,124 | |||||||||||||||
Total cost of goods sold | - | - | - | - | 3,124 | |||||||||||||||
Gross Profit | - | - | - | - | 2,792 | |||||||||||||||
Expenses: | ||||||||||||||||||||
General and administrative | 249 | 2,198 | 1,235 | 4,190 | 10,011 | |||||||||||||||
Consulting | - | - | 7,521 | 281 | 17,802 | |||||||||||||||
Filing Fees | - | - | 2,413 | 1,503 | 5,989 | |||||||||||||||
Professional fees | 4,750 | 2,500 | 25,743 | 19,775 | 55,518 | |||||||||||||||
Travel expenses | - | - | 100 | 2,777 | 5,482 | |||||||||||||||
Total expenses | 4,999 | 4,698 | 37,012 | 28,526 | 94,802 | |||||||||||||||
Loss from Operations | (4,999 | ) | (4,698 | ) | (37,012 | ) | (28,526 | ) | (92,010 | ) | ||||||||||
Reversal of Accrued Web Development Fees | 15,000 | - | 15,000 | - | 15,000 | |||||||||||||||
Provision for Income Taxes | - | - | - | - | - | |||||||||||||||
Net Profit (Loss) | $ | 10,001 | $ | (4,698 | ) | $ | (22,012 | ) | $ | (28,526 | ) | $ | (77,010 | ) | ||||||
Loss Per Common Share: | ||||||||||||||||||||
Loss per common share - Basic and Diluted | $ | 0.00 | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | |||||||||
Weighted Average Number of Common Shares | ||||||||||||||||||||
Outstanding - Basic and Diluted | 142,500,000 | * | 142,500,000 | * | 142,500,000 | * | 142,500,000 | * |
* Restated to reflect forward 15 for 1 stock split
The accompanying notes to the unaudited condensed financial
statements are an integral part of these statements
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YAPPN CORP.
(A DEVELOPMENT STAGE COMPANY)
FOR THE PERIODS FROM NOVEMBER 3, 2010 (INCEPTION)
THROUGH FEBRUARY 28, 2013
(Unaudited)
Deficit | ||||||||||||||||||||
Accumulated | ||||||||||||||||||||
Additional | During the | |||||||||||||||||||
Common stock* | Paid-in | Development | ||||||||||||||||||
Shares | Amount | Capital | Stage | Total | ||||||||||||||||
Balance - November 3, 2010 (Inception) | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
Common stock issued for cash ($.0001 per share) | 112,500,000 | 11,250 | (10,500 | ) | - | 750 | ||||||||||||||
Common stock issued for cash ($.02 per share) | 30,000,000 | 3,000 | 37,000 | - | 40,000 | |||||||||||||||
Payment of common stock issuance costs | - | - | (1,828 | ) | - | (1,828 | ) | |||||||||||||
Net loss for the period | - | - | - | (18,392 | ) | (18,392 | ) | |||||||||||||
Balance - May 31, 2011 | 142,500,000 | 14,250 | 24,672 | (18,392 | ) | 20,530 | ||||||||||||||
Net loss for the period | - | - | - | (36,606 | ) | (36,606 | ) | |||||||||||||
Balance - May 31, 2012 | 142,500,000 | 14,250 | 24,672 | (54,998 | ) | (16,076 | ) | |||||||||||||
Forgiveness of officer and director advances | - | - | 36,075 | - | 36,075 | |||||||||||||||
Net loss for the period | - | - | - | (22,012 | ) | (22,012 | ) | |||||||||||||
Balance - February 28, 2013 | 142,500,000 | $ | 14,250 | $ | 60,747 | $ | (77,010 | ) | $ | (2,013 | ) |
* Restated to reflect forward 15 for 1 stock split
The accompanying notes to the unaudited condensed financial
statements are an integral part of these statements.
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YAPPN CORP.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
From | ||||||||||||
November 3, 2010 | ||||||||||||
Nine Months Ended | (inception) through | |||||||||||
February 28, | February 29, | February 28, | ||||||||||
2013 | 2012 | 2013 | ||||||||||
Operating Activities: | ||||||||||||
Net loss | $ | (22,012 | ) | $ | (28,526 | ) | $ | (77,010 | ) | |||
Depreciation | 509 | 509 | 1,498 | |||||||||
Decrease in accounts receivable | - | 5,916 | - | |||||||||
Increase in accounts payable and accrued liabilities | 6,021 | 8,775 | 2,013 | |||||||||
Net Cash Used in Operating Activities | (15,482 | ) | (13,326 | ) | (73,499 | ) | ||||||
Investing Activities: | ||||||||||||
Purchase of computer equipment | - | - | (2,034 | ) | ||||||||
Net Cash Used in Investing Activities | - | - | (2,034 | ) | ||||||||
Financing Activities: | ||||||||||||
Net advances from stockholders | 15,482 | - | 36,611 | |||||||||
Net proceeds from issuance of common stock | - | - | 38,922 | |||||||||
Net Cash Provided by Financing Activities | 15,482 | - | 75,533 | |||||||||
Net Decrease in Cash | - | (13,326 | ) | - | ||||||||
Cash - Beginning of Period | - | 13,641 | - | |||||||||
Cash - End of Period | $ | - | $ | 315 | $ | - | ||||||
Supplemental Disclosure of Cash Flow Information: | ||||||||||||
Cash paid during the period for: | ||||||||||||
Interest | $ | - | $ | - | $ | - | ||||||
Income taxes | $ | - | $ | - | $ | - | ||||||
Schedule of Non Cash Investing and Financing Activities: | ||||||||||||
Forgiveness of Officer and Director advances | $ | 36,075 | $ | - | $ | 36,075 | ||||||
Assumption of obligation for deferred revenue by stockholder | $ | 19,795 | $ | - | $ | 19,795 | ||||||
Payment of accrued expenses by stockholder | $ | 4,771 | $ | - | $ | 4,771 |
statements are an integral part of these statements.
6
YAPPN CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
February 28, 2013
(Unaudited)
Basis of Presentation and Organization
Plesk Corp. (the “Company”) was incorporated under the laws of the State of Delaware on November 3, 2010. The business plan of the Company was to import consumer electronics, home appliances and plastic house wares. In March 2013, the company changed its name to YAPPN Corp. and entered into an asset purchase agreement to acquire a prospective social media platform. The Company has abandoned its plan to import consumer electronic home appliances and plastic wares. See note 8. The accompanying financial statements of the Company were prepared from the accounts of the Company under the accrual basis of accounting.
In March 2013, the company’s board of directors approved a stock dividend providing for the issuance of an additional 14 shares of common stock for each share of common stock outstanding as of March 25, 2013. The effect of the stock dividend has been retroactively applied to all periods presented.
Unaudited Interim Financial Statements
The interim financial statements of the Company as of February 28, 2013, and for the periods then ended, and cumulative from inception, are unaudited. However, in the opinion of management, the interim financial statements include all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the Company’s financial position as of February 28, 2013, and the results of its operations and its cash flows for the periods ended February 28, 2013 and cumulative from inception. These results are not necessarily indicative of the results expected for the fiscal year ending May 31, 2013. The accompanying financial statements and notes thereto do not reflect all disclosures required under accounting principles generally accepted in the United States. Refer to the Company’s audited financial statements as of May 31, 2012, filed with the SEC, for additional information, including significant accounting policies.
Development Stage
As a development stage enterprise, the Company discloses the deficit accumulated during the development stage and the cumulative statements of operations and cash flows from inception to the current balance sheet date.
Cash and Cash Equivalents
For purposes of reporting within the statement of cash flows, the Company considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less to be cash and cash equivalents.
Property and Equipment
Property and equipment consists of computer equipment, which is stated at cost and depreciated using the straight-line method based on an estimated useful life of three years. Depreciation expense totaled $509 and $509 for the nine months ended February 28, 2013, and February 29, 2012, respectively and $1,498 for the period from November 3, 2010 (inception) through November 30, 2012.
Expenditures for maintenance and repairs are charged to expense as incurred. When an asset is sold or otherwise disposed of, the cost and associated accumulated depreciation are removed from the accounts and the resulting gain or loss is recognized in the statement of operations.
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Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. An impairment loss is recognized if the carrying amount of the asset exceeds its fair value.
Deferred Revenue
Deferred revenue represents payments received for future sales.
Revenue Recognition
The Company recognizes revenues when delivery of goods or completion of services has occurred provided there is persuasive evidence of an agreement, acceptance has been approved by its customers, the fee is fixed or determinable based on the completion of stated terms and conditions, and collection of any related receivable is probable.
Shipping and Handling Costs
Shipping and handling costs are included in cost of goods sold on the accompanying statement of operations and totaled $574 for the period from November 3, 2010 (inception) through February 28, 2013. There were no such costs incurred during the three and nine months ended February 28, 2013 and February 29, 2012 .
Advertising and Promotion Costs
Advertising and marketing costs are expensed as incurred and totaled $0 during the three and nine months ended February 28, 2013 and February 29, 2012 and $644 for the period from November 3, 2010 (inception) through February 28, 2013.
Loss per Common Share
Basic loss per share is computed by dividing the net loss attributable to the common stockholders by the weighted average number of shares of common stock outstanding during the period. Fully diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There were no dilutive financial instruments issued or outstanding during the period from November 3, 2010 (inception) through February 28, 2013.
Income Taxes
Deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is established when necessary to reduce deferred tax assets to the amounts expected to be realized.
The Company accounts for income taxes under the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, “Accounting for Income Taxes. It prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As a result, the Company has applied a more-likely-than-not recognition threshold for all tax uncertainties. The guidance only allows the recognition of those tax benefits that have a greater than 50% likelihood of being sustained upon examination by the various taxing authorities. The Company is subject to taxation in the United States. All of the Company’s tax years since inception remain subject to examination by Federal and state jurisdictions.
The Company classifies penalties and interest related to unrecognized tax benefits as income tax expense in the Statements of Operations.
8
Fair Value of Financial Instruments
The Company estimates the fair value of financial instruments using the available market information and valuation methods. Considerable judgment is required in estimating fair value. Accordingly, the estimates of fair value may not be indicative of the amounts the Company could realize in a current market exchange. As of February 28, 2013, the carrying value of accounts payable and accrued liabilities approximated fair value due to the short-term nature of these instruments.
Estimates
The financial statements are prepared on the basis of accounting principles generally accepted in the United States. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, and revenues and expenses for the periods from November 3, 2010 (inception) through February 28, 2013. Actual results could differ from those estimates made by management.
Fiscal Year End
The Company has adopted a fiscal year end of May 31.
Recent Accounting Pronouncements
The Company does not expect the adoption of any recently issued accounting pronouncements to have a significant impact on our net results of operations, financial position, or cash flows.
2. Concentration of Credit Risk
All of the Company’s sales for the period from November 3, 2010 (inception) through February 28, 2013 are attributed to one customer. All of the related purchases were from one vendor.
3. Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has net losses for the period from November 3, 2010 (inception) to February 28, 2013 of $77,010. Implementation of the Company’s business plan will require additional debt or equity financing and there can be no assurance that additional financing can be obtained on acceptable terms. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s continuation as a going concern is dependent on its ability to meet its obligations, to obtain additional financing as may be required and ultimately to attain profitability. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Management’s Plans
The Company has entered into an asset purchase agreement and plans to pursue profitable operations in the social media industry. See note 8.
There can be no assurance that the Company will be successful in implementing its plans or achieving profitable operations.
4. Common Stock
On December 8, 2010, the Company issued 112,500,000 post-split (7,500,000 pre-split) shares of common stock to the officers and directors of the Company for cash proceeds of $750.
During the period from November 3, 2010 (inception) through May 31, 2011 the company issued 30,000,000 post-split (2,000,000 pre-split) shares of its common stock for net proceeds of $38,172, par value $0.0001 per share, at an offering price of $0.02 per share.
9
5. Income Taxes
As of November 30, 2012 the Company had a net operating loss carry-forward of approximately $77,000 which may be used to offset future taxable income and expires in 2031.
6. Related Party and Transactions
On December 8, 2010, the Company issued 112,500,000 post-split (7,500,000 pre-split) shares of common stock to the officers and directors of the Company for cash proceeds of $750.
During the period from November 3, 2010 (inception) through May 31, 2011, a stockholder advanced $13,525 to the Company for working capital purposes. These amounts were non-interest bearing, due on demand, and forgiven by the stockholder and charged to additional paid capital in February 2013.
During the year ended May 31, 2012, a stockholder advanced $6,359 to the Company for working capital purposes. These amounts are non-interest bearing, due on demand, and were forgiven by the stockholder and charged to additional paid capital in February 2013.
During the nine months ended February 28, 2013, a stockholder advanced $29,716 to the Company for working capital purposes.
In February 2013, a stockholder assumed the company’s obligation to fulfill a sale of product from which the company previously received $19,795. These amounts were offset against the stockholders advances.
In February 2013, a stockholder paid certain vendors $4,771 on behalf of the Company.
In February 2013, a stockholder forgave stockholder advances totaling $36,075. No amounts are due to the stockholder as of February 28, 2013.
7. Commitments
In November 2010, the Company entered into an agreement for website design and maintenance services to be provided over a two year period beginning in May 2011. Pursuant to the terms of the agreement, the total fee of $20,000 is payable in four installments of $5,000 each in May 2012, August 2012, November 2012, and February 2013. The Company had accrued $17,521 for this agreement as of February 28, 2013. Total expenses recognized for this agreement totaled $0 and $5,000 for the three and nine months ended February 28, 2013, respectively and $17,521 for the period from November 3, 2010 (inception) through February 28, 2013.
In February 2013, the agreement was terminated, settled for a payment of $2,521, and the remaining $15,000 was recognized as other income.
8. Subsequent Events
On March 14, 2013, we filed an Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to, among other things, (i) change our name to Yappn Corp. and (ii) change our authorized stock to two hundred million (200,000,000) shares of common stock, par value $0.0001 per share, and fifty million (50,000,000) shares of preferred stock, par value $0.0001 per share.
On March 11, 2013, our board of directors approved and adopted Amended and Restated Bylaws.
On March 11, 2013, our board of directors authorized a dividend, whereby an additional 14 shares of common stock, par value $0.0001 per share, was issued on each one share of common stock outstanding to each holder of record on March 25, 2013.
10
On March 28, 2013, we purchased a prospective social media platform and related group of assets known as Yappn (“Yappn”) from Intertainment Media, Inc., a corporation organized under the laws of Canada (“IMI”), for 70,000,000 shares of our common stock, pursuant to an asset purchase agreement (the “Purchase Agreement”) by and among IMI, the Company, and our newly formed wholly owned subsidiary, Yappn Acquisition Sub., Inc., a Delaware corporation (“Yappn Sub”). Included in the purchased assets is a services agreement (the “Services Agreement”) dated March 21, 2013 by and among IMI and its wholly owned subsidiaries Ortsbo, Inc., a corporation organized under the laws of Canada (“Ortsbo Canada”), and Ortsbo USA, Inc., a Delaware corporation (“Ortsbo USA” and, collectively with Ortsbo Canada, “Ortsbo”). Ortsbo is the owner of certain multi-language real time translation intellectual property that will be a significant component of the Yappn business opportunity. Additionally, on March 28, 2013, we sold an aggregate of 4,001,000 units (“Units”) in a private placement (the “Private Placement”) to certain investors. $401,000 of the Units were sold at a per Unit price of $0.10. Additionally, and included in the foregoing Unit total, an aggregate of $200,000 of our bridge notes (plus $1,000 in accrued but unpaid interest on such bridge notes) converted into the Private Placement at a per Unit price of $0.10. Each Unit consisted of (i) one share of our newly designated Series A Convertible Preferred Stock, par value $0.0001 per share, which is convertible into one share of our common stock and (ii) a five year warrant to purchase an additional share of our common stock at a per share exercise price of $0.10.
In connection with the Private Placement, we agreed to register for resale on a registration statement on Form S-1 (i) the shares of common stock issuable upon conversion of the Series A Preferred Stock and (ii) the shares of common stock underlying the Warrants. We agreed to file the Registration Statement with the Securities and Exchange Commission (the “SEC”) within 90 days of the final closing of the Private Placement and to cause the Registration Statement to be declared effective within 180 days of the filing date.
Immediately following the Asset Purchase, under the terms of an Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations, we transferred all of our pre-Asset Purchase assets and liabilities to our wholly owned subsidiary, Plesk Holdings, Inc., a Delaware corporation (“SplitCo”). Thereafter, pursuant to a Stock Purchase Agreement, we transferred all of the outstanding capital stock of SplitCo to certain of our former shareholders in exchange for cancellation of an aggregate of 112,500,000 shares of the Company’s common stock held by such persons.
On March 28, 2013, we adopted, and our stockholders approved, an equity incentive plan pursuant to which 10,000,000 shares of our authorized but unissued common stock may be issued as incentive awards to officers, directors, employees, consultants and other qualified persons.
11
ITEM 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
We were incorporated under the laws of the State of Delaware on November 3, 2010. We are a development stage company, which, until March 28, 2013, engaged in the marketing and distribution of consumer electronics, home appliances and plastic housewares, which were manufactured in China. Our product line included fans, alarm clocks, DVD players, radiators, vacuum cleaners, irons, grills, juice squeezers, deep fryers, pancake makers, slow cookers, blenders, microwaves, sandwich makers, coffee makers, toaster ovens, toasters, MP3 & MP4 players, hot water kettles, USB flash drives, memory cards, folding tables and chairs, cutlery sets and disposable tableware, as well as other trendy small electronic gadgets that come to our attention. To date, we had one sale in the amount of $5,916 which generated $2,792 in gross profits.
Plan of Operation
Our historical business model was based on the sale of a comprehensive supply of household appliances and electronic devices on our Internet website primarily to distributors and retailers of these products. We offered consumer electronics, home appliances and plastic house wares products for sale on our website and/or provided direct links to other websites which we believed would stimulate an interest in our products.
The Company currently does not have sufficient funds to implement its planned activities and will require additional financing. If for any reason the Company is not able to obtain the necessary funds, the Company will not be able to implement its business plan and expand its operations.
Recent Developments
On March 14, 2013, we filed an Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to, among other things, (i) change our name to Yappn Corp. and (ii) change our authorized stock to two hundred million (200,000,000) shares of common stock, par value $0.0001 per share, and fifty million (50,000,000) shares of preferred stock, par value $0.0001 per share.
On March 11, 2013, our board of directors approved and adopted Amended and Restated Bylaws.
On March 11, 2013, our board of directors authorized a dividend, whereby an additional 14 shares of common stock, par value $0.0001 per share, was issued on each one share of common stock outstanding to each holder of record on March 25, 2013.
On March 28, 2013, we purchased a prospective social media platform and related group of assets known as Yappn (“Yappn”) from Intertainment Media, Inc., a corporation organized under the laws of Canada (“IMI”), for 70,000,000 shares of our common stock, pursuant to an asset purchase agreement (the “Purchase Agreement” and the transaction, the “Asset Purchase”) by and among IMI, the Company, and our newly formed wholly owned subsidiary, Yappn Acquisition Sub., Inc., a Delaware corporation (“Yappn Sub”). Included in the purchased assets is a services agreement (the “Services Agreement”) dated March 21, 2013 by and among IMI and its wholly owned subsidiaries Ortsbo, Inc., a corporation organized under the laws of Canada (“Ortsbo Canada”), and Ortsbo USA, Inc., a Delaware corporation (“Ortsbo USA” and, collectively with Ortsbo Canada, “Ortsbo”). Ortsbo is the owner of certain multi-language real time translation intellectual property that will be a significant component of the Yappn business opportunity. Additionally, on March 28, 2013, we sold an aggregate of 4,001,000 units (“Units”) in a private placement (the “Private Placement”) to certain investors. $401,000 of the Units were sold at a per Unit price of $0.10. Additionally, and included in the foregoing Unit total, an aggregate of $200,000 of our bridge notes (plus $1,000 in accrued but unpaid interest on such bridge notes) converted into the Private Placement at a per Unit price of $0.10. Each Unit consisted of (i) one share of our newly designated Series A Convertible Preferred Stock, par value $0.0001 per share, which is convertible into one share of our common stock and (ii) a five year warrant to purchase an additional share of our common stock at a per share exercise price of $0.10.
In connection with the Private Placement, we agreed to register for resale on a registration statement on Form S-1 (i) the shares of common stock issuable upon conversion of the Series A Preferred Stock and (ii) the shares of common stock underlying the Warrants. We agreed to file the Registration Statement with the Securities and Exchange Commission within 90 days of the final closing of the Private Placement and to cause the Registration Statement to be declared effective within 180 days of the filing date.
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Immediately following the Asset Purchase, under the terms of an Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations, we transferred all of our pre-Asset Purchase assets and liabilities to our wholly owned subsidiary, Plesk Holdings, Inc., a Delaware corporation (“SplitCo”). Thereafter, pursuant to a stock purchase agreement, we transferred all of the outstanding capital stock of SplitCo to certain of our former shareholders in exchange for cancellation of an aggregate of 112,500,000 shares of the Company’s common stock held by such persons.
On March 28, 2013, we adopted, and our stockholders approved, an equity incentive plan pursuant to which 10,000,000 shares of our authorized but unissued common stock may be issued as incentive awards to officers, directors, employees, consultants and other qualified persons.
Results of Operations
For the three months ended February 28, 2013 and February 29, 2012
Revenues
The Company did not generate any revenues during the three months ended February 28, 2013. The Company also did not generate any revenues during the three months ended February 29, 2012.
Total operating expenses
During the three months ended February 28, 2013, total operating expenses were $4,999. The operating expenses consisted of professional fees of $4,750 and general and administrative expenses of $249, as compared with total operating expenses of $4,698 during the three months ended February 29, 2012, which consisted of professional fees of $2,500 and administrative expenses of $2,198.
Net loss
During the three months ended February 28, 2013, the Company had a net loss of $10,001 compared with a net loss of $4,698 for the three months ended February 29, 2012.
For the nine months ended February 28, 2013 and February 29, 2012
Revenues
The Company did not generate any revenues during the nine months ended February 28, 2013. The Company also did not generate any revenues during the nine months ended February 29, 2012.
Total operating expenses
During the nine months ended February 28, 2013, total operating expenses were $37,012. The operating expenses consisted of professional fees of $25,743, general and administrative expenses of $1,235, consulting fees of $7,521, travel expenses of $100 and filing fees of $2,413, as compared with total operating expenses of $28,526 during the nine months ended February 29, 2012, which consisted of professional fees of $19,775, consulting fees of $281, filing fees of $5,989 travel expenses of $2,777 and general and administrative expenses of $4,190.
Other Income
During the three months ended February 28, 2013, the Company terminated its agreement with a third party to provide the Company with website design and maintenance services and reversed $15,000 of reserved fees.
Net loss
During the nine months ended February 28, 2013, the Company had a net loss of $22,012 compared with a net loss of $28,526 for the nine months ended February 29, 2012.
Liquidity and Capital Resources
As of February 28, 2013, the Company had a cash balance of $0. The Company does not have sufficient funds to fund its expenses over the next twelve months. There can be no assurance that additional capital will be available to the Company. Since the Company has no other financial arrangements or plans currently in effect, its inability to raise funds for the above purposes will have a severe negative impact on its ability to remain a viable company.
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Going Concern Consideration
We incurred net losses totaling $77,010 for the period from November 3, 2010 (inception) through February 28, 2013. Our independent auditors have included an explanatory paragraph in their report on our financial statements for the fiscal year ending May 31, 2012 regarding concerns about our ability to continue as a going concern. Such financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.
Implementation of our business plan will require additional debt or equity financing and there can be no assurance that additional financing can be obtained on acceptable terms. The Company is in the development stage, and has limited revenues to cover its operating costs. As such, it has incurred an operating loss since inception. This and other factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s continuation as a going concern is dependent on its ability to meet its obligations, to obtain additional financing as may be required and ultimately to attain profitability. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.
On February 28, 2013, we sold a 6% convertible promissory note (the “Bridge Note”) in the aggregate principal amount of $200,000 to an accredited investor, with gross proceeds to the Company of $200,000. On March 28, 2013, we sold an aggregate of 4,001,000 Units in the Private Placement to certain investors. $401,000 of the Units were sold at a per Unit price of $0.10. Additionally, and included in the foregoing Unit total, the Bridge Note in the principal amount of $200,000 plus $1,000 in accrued but unpaid interest thereon converted into the Private Placement at a per Unit price of $0.10. Each Unit consisted of (i) one share of our newly designated Series A Convertible Preferred Stock, par value $0.0001 per share, which is convertible into one share of our common stock and (ii) a five year warrant to purchase an additional share of our common stock at a per share exercise price of $0.10.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Smaller reporting companies are not required to provide the information required by this item.
ITEM 4 Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation, with the participation of our Chief Financial Officer who is our Principal Executive Officer and Principal Financial and Accounting Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of February 28, 2013 to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities Exchange Commission's rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Financial Officer has concluded that as of February 28, 2013, our disclosure controls and procedures were not effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1 | Legal Proceedings |
None.
ITEM 1A | Risk Factors |
There are no material changes to the risk factors in our most recent Annual Report on Form 10-K, other than as set forth in our Current Report on Form 8-K, filed with the SEC on April 3, 2013.
ITEM 2 | Unregistered Sales of Equity Securities and Use of Proceeds |
None.
ITEM 3 | Defaults Upon Senior Securities |
None.
ITEM 4 | Mine Safety Disclosures . |
Not applicable.
ITEM 5 | Other Information |
None.
ITEM 6 | Exhibits |
31.1 | Certification of Principal Executive Officer and Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act | |
32.1 | Certification of Principal Executive Officer and Principal Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act | |
101** | The following materials from Yappn Corp.’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2013 are formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Income, (ii) the Consolidated Statements of Cash Flow, (iii) the Consolidated Balance Sheets, and (iv) Notes to Consolidated Financial Statements tagged as blocks of text. |
EX-101.INS | XBRL INSTANCE DOCUMENT | |
EX-101.SCH | XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT | |
EX-101.CAL | XBRL TAXONOMY EXTENSION CALCULATION LINKBASE | |
EX-101.DEF | XBRL TAXONOMY EXTENSION DEFINITION LINKBASE | |
EX-101.LAB | XBRL TAXONOMY EXTENSION LABELS LINKBASE | |
EX-101.PRE | XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE |
** In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
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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.
Yappn Corp. | |||
Dated: April 15, 2013 | By: | /s/ Gavriel Bolotin | |
Gavriel Bolotin | |||
Its: Chief Financial Officer (Principal Executive Officer and Principal Financial and Accounting Officer) |