SocialPlay USA (SPLY) 10-Q 2016 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

[X]	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period endedMarch 31, 2016
[  ]	Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from __________ to__________
	Commission File Number:333-193736

SocialPlay USA, Inc.

(Exact name of registrant as specified in its charter)

Nevada	46-4412037
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
2532 Open Range Dr., Fort Worth TX 76177
(Address of principal executive offices)
(866) 281-1207
(Registrant’s telephone number)
_______________________________________________________________
(Former name, former address and former fiscal year, if changed since last report)

Indicated 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 [X] Yes [ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

[ ] Large accelerated filer [ ] Non-accelerated filer [ ] Accelerated filer [X] Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 11,820,000 common shares as of May 20, 2016.

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 (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [  ] No [X]

	TABLE OF CONTENTS	Page
PART I – FINANCIAL INFORMATION
Item 1:	Financial Statements	3
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	7
Item 4:	Controls and Procedures	7
PART II – OTHER INFORMATION
Item 1:	Legal Proceedings	9
Item 1A:	Risk Factors	9
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	9
Item 3:	Defaults Upon Senior Securities	9
Item 4:	Mine Safety Disclosures	9
Item 5:	Other Information	9
Item 6:	Exhibits	9

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Our financial statements included in this Form 10-Q are as follows:

F-1	Condensed Balance Sheets as of March 31, 2016 (unaudited) and December 31, 2015 (audited);
F-2	Condensed Statements of Operations for the Three Months ended March 31, 2016 and 2015 (unaudited);
F-3	Condensed Statements of Cash Flows for the Three Months ended March 31, 2016 and 2015 (unaudited);
F-4	Notes to Condensed Financial Statements.

3

SocialPlay USA, Inc. (formerly Artesanias Corp.)

Condensed Balance Sheets

As of March 31, 2016 (unaudited) and December 31, 2015 (audited)

(Expressed in United States Dollars)

	March 31,			December 31,
	2016			2015
	$			$
Current assets
Cash		382			69
Prepaid expenses		5,588			26,210
Total assets		5,970			26,279
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities
Accounts payable and accrued liabilities[note 8]		370,265			302,955
Convertible promissory notes[note 4]		—			58,829
Derivative liabilities[note 5]		—			178,258
Total current liabilities		370,265			540,042
Convertible promissory notes[note 4]		38,637			—
Derivative liabilities[note 5]		208,896			—
Total liabilities		617,798			540,042
Stockholders' deficiency
Preferred stock, $0.001 par value, 100,000,000 shares authorized, no shares issued and outstanding as of March 31, 2016 and December 31, 2015, respectively[note 6]		—			—
Common stock, $0.001 par value, 200,000,000 shares authorized, 11,770,000 and 11,720,000 common shares issued and outstanding as of March 31, 2016 and December 31, 2015 respectively[note 6]		11,770			11,720
Additional paid-in capital		601,230			545,280
Accumulated deficit		(1,224,828	)		(1,070,763	)
Total stockholders' deficiency		(611,828	)		(513,763	)
Total liabilities and stockholders' deficiency		5,970			26,279
Commitments[note 7]

See accompanying notes 

F-1

SocialPlay USA, Inc. (formerly Artesanias Corp.)

Condensed Statements of Operations

For the Three Months ended March 31, 2016 and 2015 (unaudited)

(Expressed in United States Dollars)

	For the three months			For the three months
	Ended March 31,			Ended March 31,
	2016			2015
	$			$
REVENUE		—			—
EXPENSES
Legal and professional fees		13,063			21,609
Consulting fees - Investor relations		135,499			—
Transfer agent fees		1,490			2,640
Directors' fees and other charges[note 8]		7,500			—
Other operating expenses		145			1,023
Total operating expenses		157,697			25,272
Interest and bank charges		19,928			—
Gain on extinguishment of debt[note 4]		(11,462	)		—
Change in fair value of derivatives[note 5]		(12,098	)		—
(Income) loss before income taxes		154,065			25,272
Income taxes		—			—
Net loss for the period		(154,065	)		(25,272	)
loss per share, basic and diluted		(0.0131	)		(0.0022	)
Weighted average number of common shares outstanding		11,743,889			11,520,000

See accompanying notes  

F-2

SocialPlay USA, Inc. (formerly Artesanias Corp.)

Condensed Statements of Cash Flows

For the Three Months ended March 31, 2016 and 2015 (unaudited)

(Expressed in United States Dollars)

	Period ended			Period ended
	March 31			March 31,
	2016			2015
	$			$
OPERATING ACTIVITIES
Net loss for the period		(154,065	)		(25,272	)
Shares issued for services		56,000
Interest expense - accretion of convertible notes		14,056			—
Gain on extinguishment of debt[note 4]		(11,462	)		—
Change in fair value of derivatives[note 5]		(12,098	)		—
Net change in non-cash working capital balances:
Prepaid expenses		20,622			—
Accounts payable and accrued liabilities		67,310			18,749
Cash used in operating activities		(19,637	)		(6,523	)
FINANCING ACTIVITIES
Proceeds from issuance of convertible promissory notes		19,950			—
Cash provided by financing activities		19,950			—
Net increase (decrease) in cash during the period		313			(6,523	)
Cash, beginning of period		69			6,544
Cash, end of period		382			21
Supplemental disclosure with respect to cash flows:
Cash paid for income taxes		—			—
Cash paid for interest		—			—

See accompanying notes   

F-3

SocialPlay USA, Inc. (formerly Artesanias Corp.)

Notes to Condensed Financial Statements

As of March 31, 2016 (unaudited)

(Expressed in United States Dollars)

Note 1 – History and Organization of the Company

The Company was incorporated on December 31, 2013 (Date of Inception) under the laws of the State of Nevada, as Artesanias Corp. (the “Company”). On June 12, 2015, the Board of Directors of the Company changed the name from Artesanias Corp. to SocialPlay USA, Inc. to reflect the business focus of the Company. The Company plans to develop a business that provides marketing, monetization, and support services for the companies in gaming and mobile application markets.

The Company has limited operations and is considered to be in the development stage.

Note 2 – Going Concern

The Company’s unaudited condensed financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The Company had an accumulated deficit of $1,224,828 and a working capital deficit of $364,295 as of March 31, 2016. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. In order to continue as a going concern, the Company will need, among other things, additional capital resources. The Company is contemplating conducting an offering of its debt or equity securities to obtain additional operating capital. The Company is dependent upon its ability, and will continue to attempt, to secure equity and/or debt financing. There are no assurances that the Company will be successful and without sufficient financing it would be unlikely for the Company to continue as a going concern.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

Note 3 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and the rules and regulations of the SEC and are expressed in US dollars. Accordingly, the unaudited condensed financial statements do not include all information and footnotes required by US GAAP for complete annual financial statements. In the opinion of management, the accompanying unaudited condensed financial statements reflect all adjustments, consisting of only normal recurring adjustments, considered necessary for a fair presentation. Interim operating results are not necessarily indicative of results that may be expected for the year ending December 31, 2016 or for any other interim period. The unaudited condensed financial statements should be read in conjunction with the audited financial statements of the Company and the notes thereto as of and for the year ended December 31, 2015.

Use of Estimates

The preparation of the financial statements in conformity with US GAAP 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 periods. Areas involving significant estimates and assumptions include valuation of derivatives, valuation allowance for deferred tax assets, accruals and going concern assessment.  These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the period in which they become known. Actual results could materially differ from those estimates.

F-4

SocialPlay USA, Inc. (formerly Artesanias Corp.)

Notes to Condensed Financial Statements

As of March 31, 2016 (unaudited)

(Expressed in United States Dollars)

Reclassification of comparative figures

Certain of the prior period figures have been reclassified to align with Management’s current view of the Company’s operations.

Recently Issued Accounting Standards

The Company evaluated all recent accounting pronouncements issued and determined that the adoption of these pronouncements would not have a material effect on the financial position, results of operations or cash flows of the Company.

Note 4 – Convertible Promissory Notes

The outstanding convertible promissory notes as at December 31, 2015 represent obligations of the Company to CMGT Inc. (CMGT). The movement in this obligation is as follows:

	$
Promissory notes issued during 2015		229,180
Discount recognised due to embedded derivatives		(217,900	)
Accretion on notes for 2015		47,549
Accreted value of notes as at December 31, 2015		58,829

On January 11, 2016, the Company consolidated all of its obligations to CMGT under a single Convertible Promissory Note due June 1, 2018 (the “Note”) and recognized gain on extinguishment of debt amounting to $11,462. The Note bears interest at a rate of ten percent (10%) per year, with all principal and interest due on or before June 1, 2018. Under the Note, the Company is obligated to pay quarterly payments of interest only commencing March 31, 2016. The Company may prepay the Note in whole or in part without penalty. The Note is convertible at a price equal to sixty percent (60%) of the market price for its common stock, which is defined as the average of the lowest three closing bid prices for the common stock in the ten trading days preceding the conversion. The conversion price of the Note is also subject to adjustment in the event of certain stock issuances which are lower than the conversion price otherwise in effect at the time of the conversion. In addition, CMGT’s right to convert is limited such that no conversion can be made which would result in CMGT or its affiliates owning more than 4.99% of the issued and outstanding common stock of the Company following the conversion.

Promissory notes issued during 2015	229,180
Promissory notes issued during Q1 2016	19,950
Discount recognised due to embedded derivatives	(217,959	)
Accretion on notes for Q1 2016	7,466
Accreted value of notes as at March 31, 2016	38,637

As of March 31, 2016, total principal due under the Note was $249,130, and accrued interest totaled $16,794 (December 31, 2015: $229,180 and $10,963).

The embedded conversion features and reset feature in the notes were accounted for as a derivative liability based on FASB guidance (also refer note 5).

F-5

SocialPlay USA, Inc. (formerly Artesanias Corp.)

Notes to Condensed Financial Statements

As of March 31, 2016 (unaudited)

(Expressed in United States Dollars)

Details of the advances under the convertible promissory note issued are as follows: 

Advance Date	Amount
	$
June 9, 2015		28,000
June 10, 2015		60,000
June 11, 2015		30,000
June 15, 2015		14,200
July 1, 2015		35,000
July 11, 2015		17,980
August 14, 2015		28,000
December 1, 2015		16,000
February 12, 2016		9,000
February 23, 2016		10,950
		249,130

Interest expense for the quarter ended March 31, 2016 recognized on these convertible promissory notes amounts to $5,831 included in interest and bank charges in the statements of operations.

Note 5 – Derivative Liabilities

In connection with the issuance of convertible promissory notes, the Company may sell options or warrants to purchase Company’s common stock. In certain circumstances, these options or warrants may be classified as derivative liabilities, rather than as equity. Additionally, the debt or equity instruments may contain embedded derivative instruments, such as embedded derivative features which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative instrument liability.

The Company's derivative instrument liabilities are re-valued at amendment and at the end of each reporting period, with changes in the fair value of the derivative liability recorded as charges or credits to income in the period in which the changes occur. For options, warrants and bifurcated embedded derivative features that are accounted for as derivative instrument liabilities, the Company estimates fair value using either quoted market prices of financial instruments with similar characteristics or other valuation techniques. The valuation techniques require assumptions related to the remaining term of the instruments and risk-free rates of return, our current common stock price and expected dividend yield, and the expected volatility of our common stock price over the life of the option.

F-6

SocialPlay USA, Inc. (formerly Artesanias Corp.)

Notes to Condensed Financial Statements

As of March 31, 2016 (unaudited)

(Expressed in United States Dollars)

The following table summarizes the movements in derivative liabilities:

	$
Face value of convertible promissory notes issued during Q2 2015		132,200
Day-one derivative loss recognized immediately		252,683
Derivative liabilities on issuance		384,883
Change in fair value of derivatives		(77,316	)
Derivative liabilities as at June 30, 2015		307,567
Derivative liability on issuance		73,249
Change in fair value of derivatives		(217,605	)
Derivative liabilities as at September 30, 2015		163,211
Derivative liability on issuance		12,369
Change in fair value of derivatives		2,678
Derivative liabilities as at December 31, 2015		178,258
Change due to Debt Extinguishment		(175,223	)
Change due to Consolidated Debt Re-issuance (note 4)		217,959
Change in Fair Value		(12,098	)
Fair value at March 31, 2016		208,896

The multinomial lattice model was used to value the convertible notes and the embedded derivative liabilities at issuance and period end date, using the following assumptions.

	March 31,
Assumptions	2016
Dividend yield		0.00	%
Risk-free rate for term		0.18% - 0.94%
Volatility		381	%
Remaining terms (years)		0.19-2.17 years
Stock price ($ per share)		1.10-2.14

Note 6 – Stockholders’ Deficiency

Authorized:

The Company is authorized to issue up to 200,000,000 shares of its $0.001 par value common stock and up to 100,000,000 shares of its $0.001 par value preferred stock.

F-7

SocialPlay USA, Inc. (formerly Artesanias Corp.)

Notes to Condensed Financial Statements

As of March 31, 2016 (unaudited)

(Expressed in United States Dollars)

Issued and outstanding:

On February 25, 2015, the Company executed a 12 for 1 forward stock split of issued shares of common stock. Further, on July 27, 2015, the Company effectuated a 1 for 5 reverse stock split. The accompanying condensed financial statements have been retrospectively adjusted for all periods presented to reflect the effect of the stock split.

On July 1, 2015, the Company issued 1,000,000 (200,000 after reverse split) shares of common stock pursuant to Exclusive License Agreement dated May 21, 2015 as explained in note 4 to the condensed financial statements.

As at March 31, 2016 and December 31, 2015, there were 11,770,000 (after stock split) and 11,720,000 (after stock-split) shares of common stock respectively, issued out of the authorized 200,000,000 common shares.

On February 17, 2016, the Company issued 50,000 shares of common stock to Ten West Holdings, Inc. as consideration for corporate advisory services amounting to $56,000 pursuant to agreement dated November 16, 2015. All services have been performed as of February 16, 2016.

Note 7 – Commitments

The Company has commitments to issue 1,000,000 (200,000 after reverse split) shares of common stock on or before each anniversary pursuant to Exclusive License Agreement dated May 21, 2015 as explained in note 4 to the condensed financial statements.

Note 8 – Related Party Transactions

On April 27, 2015, the Company entered into an Exclusive License Agreement (the “Agreement”) with related party Social Play, Inc. (“Social Play”). Under the Agreement, the Company has been granted the exclusive rights within the U.S. and Canada to develop, market and sell products and services based upon Social Play’s patent-pending “SP Cloud Goods” system.

Accounts payable and accrued liabilities include the following balances owed to related parties:

	March 31, 2016
Owed to Director Chitan Mistry for Director fees	$	65,000
Owed to former Director Lucie Letellier for Director fees last year		53,750
Owed to shareholder company, Social Play, Inc, as remaining balance for license agreement		83,067

Office space and services are provided without charge by an officer and director of the Company. Such costs are not significant to the condensed financial statements and, accordingly, have not been reflected therein.

Other than disclosed elsewhere in the condensed financial statements, the only related party transaction during the period ended March 31, 2016 and 2015 is directors’ fees to $7,500 and $nil respectively.

Note 9 – Subsequent Events

The Company’s management has evaluated subsequent events up to May 20, 2016 the date the unaudited condensed financial statements were issued, pursuant to the requirements of ASC Topic 855 and has determined the following subsequent events:

On April 15, 2016, the Company issued 50,000 shares of common stock to Ten West Holdings, Inc. as consideration for corporate advisory services amounting to $77,500 pursuant to agreement dated March 9, 2016. All services are expected to be performed by June 10, 2016. 

F-8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Company Overview

We were incorporated in the State of Nevada on December 31, 2013 as Artesanias Corp.  Our original business plan involved distribution of the arts and crafts of the indigenous tribes of Panama via the Internet. On January 20, 2015, we underwent a change in control when our former majority shareholder and sole officer, Jose Soto, sold his controlling interest and resigned after appointing our current CEO and Director, Chitan Mistry, and our former CFO and Director, Lucie Lettelier. Following the change in control, we are no longer pursuing our original business plan.

On April 27, 2015, we entered into an Exclusive License Agreement (the “Agreement”) with Social Play, Inc. (“Social Play”). Under the Agreement, we have been granted the exclusive rights within the U.S. and Canada to develop, market and sell products and services based upon Social Play’s patent-pending “SP Cloud Goods” system. SP Cloud Goods is cloud-based game hosting and management system where video game developers can add and remove virtual goods from the game, manage players, manage virtual store pricing, and view vital game and player statistics.  Using this system, game developers can affect their games in real-time, without the need to rebuild or republish the game. The SP Cloud Goods intellectual property also includes a system for game developers to collect payments for virtual goods sold to players in their games, as well as a marketplace component that will allow advertisers and game developers to choose where, when, and how advertisements are placed in games. The system will also facilitate the transfer of funds from advertisers to game developers.

The Agreement runs for an initial term of five (5) years, with an optional extension for an additional five years. In consideration for the license, we agreed to issue Social Play 1,000,000 (200,000 after reverse split) shares of common stock and an additional 1,000,000 (200,000 after reverse split) shares on each anniversary of the Agreement for so long as it is in effect. Further, we agreed to make cash payments to Social Play in the total amount of $120,000, payable in monthly payments of not less than $20,000 until paid in full.

Significant Equipment

We do not intend to purchase any significant equipment for the next twelve months.  

4

Results of Operations

Balance Sheet – As at March 31, 2016 and December 31, 2015:

Cash

At March 31, 2016 we had cash of $382 compared to $69 as at December 31, 2015.

Prepaid expenses

At March 31, 2016 we had prepaid expenses of $5,588 compared to $26,210 as at December 31, 2015. The amount relates to the unamortized balance of the payments made in connection with advisory services provided by consultants. The decrease is due to the amortization during the period.

Accounts payable and accrued liabilities

At March 31, 2016 we had $370,265 of accounts payable and accrued liabilities as compared to $302,955 as at December 31, 2015. The balance primarily represents $118,750 payable to directors as consideration for their services, $83,067 payable to Social Play Inc. in connection with the license agreement, $46,277 payable to Ten West Holdings Inc. as consideration for Corporate Advisory services and $54,000 for advertising services.

Convertible promissory notes and derivative liabilities

During the previous year, we entered into agreements with CMGT and issued them convertible promissory notes. As of March 31, 2016, the total principal due was $249,130 ($229,180 as of December 31, 2015) and interest accrued on these notes during the period amounted to $5,831 ($10,963 for the year ended December 31, 2015).

On January 11, 2016, the Company consolidated all of its obligations to CMGT under a single Convertible Promissory Note due June 1, 2018. These amounts were accordingly reclassified to long-term liabilities.

Statement of Operations - For the three months ended March 31, 2016 and 2015:

Expenses

We have not earned any revenues since our inception. During the quarter ended March 31, 2016, we incurred total operating expenses of $157,697, which consisted of consulting fees for investor relations of $135,499, legal and professional fees of $13,063, directors’ fees and other charges of $7,500, transfer agent fees of $1,490, and other expenses of $145. We also incurred interest and bank charges of $19,928 and recorded a gain on extinguishment of debt in the amount of $11,462 and a gain on the change in fair value of derivatives of $12,098. Our net loss for the quarter ended March 31, 2016 was $154,065. By comparison, during the quarter ended March 31, 2015, we incurred operating expenses and a net loss of $25,272. Expenses during the quarter ended March 31, 2015 consisted of legal and professional fees of $21,609, transfer agent fees of $2,640, and other operating expenses of $1,023.

Our expenses and net loss increased for the quarter ended March 31, 2016 as compared to the same period last year primarily due to increased expenses for investor relations consulting fees. We anticipate our operating expenses will increase as we move toward developing more active operations in our current line of business.

5

Liquidity and Capital Resources

As of March 31, 2016, we had current assets of $5,970, consisting of prepaid consulting expenses of $5,588 and cash $382. Our current liabilities as of March 31, 2016 were $370,265, consisting of accounts payable and accrued liabilities of $370,265. Thus, we had a working capital deficit of $364,295 as of March 31, 2016.

Cash Used in Operating Activities. Operating Activities used a net $19,637 in cash for the quarter ended March 31, 2016, as compared to a net $6,523 for the same period last year.

Cash Flows from Financing Activities. During the quarter ended March 31, 2016, financing activities provided $19,950 in cash, all from the issuance of convertible promissory note obligations. Financing activities provided no cash during the same period last year.

In recent months, we have relied upon financing in the form of convertible promissory notes from CMGT, Inc. (“CMGT”). On January 11, 2016, we consolidated all of our obligations to CMGT under a single Convertible Promissory Note due June 1, 2018 (the “Note”). The Note bears interest at a rate of ten percent (10%) per year, with all principal and interest due on or before June 1, 2018. Under the Note, we are obligated to pay quarterly payments of interest only commencing March 31, 2016. We may prepay the Note in whole or in part without penalty. The Note is convertible at a price equal to sixty percent (60%) of the market price for our common stock, which is defined as the average of the lowest three closing bid prices for our common stock in the ten trading days preceding the conversion. The conversion price of the Note is also subject to adjustment in the event of certain stock issuances which are lower than the conversion price otherwise in effect at the time of the conversion. In addition, CMGT’s right to convert is limited such that no conversion can be made which would result in CMGT or its affiliates owning more than 4.99% of our issued and outstanding common stock following the conversion. This limit may be waived at CMGT option with 61 days’ prior notice. 

As of March 31, 2016, total principal due under the Note was $249,130, and accrued interest totaled $16,794. The Note has a face value of $500,000, and additional advances to us up to that maximum amount may be made from time to time in the discretion of CMGT. 

Our ability to continue operations and to develop our planned business will be contingent upon us obtaining additional financing through the issuance of debt or equity. The debt and/or equity financing arrangements available to us, if any, may be insufficient to fund significant capital expenditures, working capital, or other cash requirements. We do not have any formal commitments or arrangements for the sales of stock or the advancement or loan of funds at this time. There can be no assurance that such additional financing will be available to us on acceptable terms, or at all.

Going Concern

As discussed in the notes to our financial statements, we have no established source of revenue.  This has raised substantial doubt for our auditors about our ability to continue as a going concern.  Without realization of additional capital, it would be unlikely for us to continue as a going concern.

Our activities to date have been supported by debt and equity financing.  Management continues to seek funding from its shareholders and other qualified investors. 

6

Off Balance Sheet Arrangements

As of March 31, 2016, there were no off balance sheet arrangements.

Critical Accounting Policies

In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Currently, we do not believe that any accounting policies fit this definition.

Recently Issued Accounting Pronouncements

Accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

A smaller reporting company is not required to provide the information required by this Item.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures.

We recently evaluated the effectiveness of our disclosure controls and procedures, as required by paragraph (b) of Rule 13a-15 or Rule 15d-15 under the Securities Exchange Act of 1934, as of the end of the period covered by this report, being March 31, 2016.  This evaluation was conducted with the participation of our principal executive officer and our principal accounting officer.

We maintain disclosure controls and procedures designed to provide reasonable assurance that material information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that the information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. We performed an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on their evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were not effective in giving us reasonable assurance that the information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and to ensure that such information 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. This conclusion was based on the existence of significant deficiencies in our internal control over financial reporting mainly due to lack of resources and number of employees.

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We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Management Report on internal control over financial reporting.

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of our assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.

Management conducted an evaluation of the effectiveness of our internal control over financial reporting and identified significant deficiencies in internal control over financial reporting.

A material weakness is a deficiency, or combination of deficiencies, in internal control over the financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. 

A significant deficiency is a deficiency, or a combination of deficiencies, that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting.  We not believe that we have sufficient documentation with our existing financial processes, risk assessment and internal controls.  We plan to work closely with financial advisors to document the existing financial processes, risk assessment and internal controls systematically as soon as resources are available. To address the need for more effective internal controls, management has plans to improve the existing controls and implement new controls appropriate to a business of its size and scale as our financial position and capital availability improves.  

Although we have not identified any material weaknesses with our financial reporting or any other significant deficiencies with our internal controls, no assurances can be given that there are no such material weaknesses or significant deficiencies existing.  

Changes in internal control over financial reporting.

There have been no changes in our internal controls over financial reporting that occurred during our last fiscal quarters and have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

Item 1A: Risk Factors

A smaller reporting company is not required to provide the information required by this Item.

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

Exhibit Number	Description of Exhibit
31.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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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.

	SocialPlay USA, Inc.
Date:	May 23, 2016
By:	/s/ Chitan Mistry Chitan Mistry
Title:	Chief Executive Officer, Chief Financial Officer and Director

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