UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-Q/A
___________________
ý
QUARTERLY REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
June 30, 2016
Commission
File Number: 0-55081
K
inerja
P
ay
C
orp.
(Exact
name of small business issuer as specified in its charter)
Delaware
|
42-1771817
|
(State of Incorporation)
|
(I.R.S. Employer Identification No.)
|
|
|
Jl. Multatuli, No.8A, Medan, Indonesia
|
20151
|
(Address of Principal Executive Offices)
|
(ZIP Code)
|
Registrant's
Telephone Number, Including Area Code: +62-819-6016-168
Indicate by check
mark whether the registrant (1) has filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes
x
No
¨
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
Yes
¨
No
x
Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer
(as
defined in Rule 12b-2 of the Exchange Act)
or a smaller
reporting company
.
Large accelerated
filer
¨
|
Accelerated filer
¨
|
Non-Accelerated
filer
¨
|
Smaller reporting
company
x
|
On August
22, 2016,
the Registrant had 8,127,036 shares of common stock outstanding.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Back to Table of Contents
KINERJAPAY CORP.
|
(formerly Solarflex Corp.)
|
Consolidated Balance Sheets
|
As of
June 30, 2016 (Unaudited) and December 31, 2015
|
Back to Table of Contents
|
|
|
|
June 30, 2016
|
|
|
|
|
(Unaudited)
|
|
December 31, 2015
|
ASSETS
|
|
|
|
|
Current assets:
|
|
|
|
|
Cash
|
$
|
276,803
|
$
|
81
|
Restricted cash
|
|
-
|
|
250,113
|
Prepaid expenses
|
|
59,181
|
|
-
|
Total current assets
|
|
335,984
|
|
250,194
|
|
|
|
|
|
Equipment, net of accumulated depreciation of $86 and $0, respectively.
|
|
1,636
|
|
-
|
Total assets
|
$
|
337,620
|
$
|
250,194
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
Accounts payable - trade
|
$
|
81,426
|
$
|
-
|
Accrued expenses
|
|
7,142
|
|
-
|
Accrued
interest
|
|
-
|
|
15
|
Unissued stock
subscriptions
|
|
-
|
|
250,013
|
Notes payable
|
|
-
|
|
24,439
|
Total current liabilities
|
|
88,568
|
|
274,467
|
|
|
|
|
|
Total liabilities
|
|
88,568
|
|
274,467
|
|
|
|
|
|
Stockholders'
equity (deficit):
|
|
|
|
|
Preferred stock, par value
$0.0001 per share; 10,000,000 shares authorized; none issued
|
|
-
|
|
-
|
Common
stock, par value $0.0001 per share; 500,000,000 shares authorized;
|
|
|
|
|
8,127,036 shares issued and outstanding at June 30, 2016
and
|
|
|
|
|
4,653,680 shares issued and outstanding at December 31, 2015
|
|
812
|
|
465
|
Additional
paid-in capital
|
|
3,223,858
|
|
863,093
|
Accumulated deficit
|
|
(2,975,618)
|
|
(887,831)
|
Accumulated other comprehensive loss
|
|
226
|
|
-
|
Total stockholders' equity (deficit)
|
|
249,052
|
|
(24,273)
|
Total liabilities and stockholders' equity
|
$
|
337,620
|
$
|
250,194
|
|
See notes
to unaudited interim consolidated financial statements.
|
KINERJAPAY CORP.
|
(formerly Solarflex Corp.)
|
Consolidated Statements of Operations
|
For the Three
and Six Months Ended June 30, 2016 and 2015
|
(Unaudited)
|
Back to Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
For the
|
|
For the
|
|
For the
|
|
For the
|
|
|
Three Months Ended
|
|
Three Months Ended
|
|
Six Months Ended
|
|
Six Months Ended
|
|
|
June 30, 2016
|
|
June 30, 2015
|
|
June 30, 2016
|
|
June 30, 2015
|
Revenue
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
Expenses:
|
|
|
|
|
|
|
|
|
General and administrative
|
|
728,653
|
|
15,886
|
|
2,078,804
|
|
25,034
|
Depreciation expense
|
|
86
|
|
-
|
|
86
|
|
-
|
Total general and
administrative expenses
|
|
728,739
|
|
15,886
|
|
2,078,890
|
|
25,034
|
|
|
|
|
|
|
|
|
|
(Loss) from operations
|
|
(
728,739
)
|
|
(
15,886
)
|
|
(
2,078,890)
|
|
(
25,034
)
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
Interest expense
|
|
109
|
|
(3,585)
|
|
106
|
|
(6,900)
|
Amortization of debt
discount
|
|
-
|
|
(8,921)
|
|
-
|
|
(24,896)
|
Loss on extinguishment of debt
|
|
-
|
|
-
|
|
(9,003)
|
|
-
|
Total costs and expenses
|
|
(
728,630
)
|
|
(
28,392
)
|
|
(
2,087,787)
|
|
(56,830)
|
|
|
|
|
|
|
|
|
|
Net loss before income taxes
|
|
(728,630)
|
|
(28,392)
|
|
(2,087,787)
|
|
(56,830)
|
Income taxes
|
|
-
|
|
-
|
|
-
|
|
-
|
Net loss
|
$
|
(728,630)
|
$
|
(28,392)
|
$
|
(2,087,787)
|
$
|
(56,830)
|
|
|
|
|
|
|
|
|
|
Basic and diluted per share amounts:
|
|
|
|
|
|
|
|
|
Basic and diluted net loss
|
$
|
(0.10)
|
$
|
(0.00)
|
$
|
(0.30)
|
$
|
(0.00)
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding (basic and diluted)
|
|
7,592,630
|
|
135,249,991
|
|
7,006,372
|
|
135,249,991
|
|
See notes
to unaudited interim consolidated financial statements.
|
KINERJAPAY CORP.
|
Consolidated Statements of
Comprehensive Loss
|
For the Three and
Six Months Ended
June 30, 2016 and 2015
|
(Unaudited)
|
Back to Table of
Contents
|
|
|
|
Three months
|
|
Three months
|
|
Six months
|
|
Six months
|
|
|
ended
|
|
ended
|
|
ended
|
|
ended
|
|
|
June 30, 2016
|
|
June 30, 2015
|
|
June 30, 2016
|
|
June 30, 2015
|
Net loss
|
$
|
(728,630)
|
$
|
(28,392)
|
$
|
(2,087,787)
|
$
|
(56,830)
|
Foreign currency translation
adjustments
|
|
226
|
|
-
|
|
226
|
|
-
|
Total comprehensive
loss, net of tax
|
$
|
(728,404)
|
$
|
(28,392)
|
$
|
(2,087,561)
|
$
|
(56,830)
|
|
See notes to unaudited interim
consolidated financial
statements.
|
KINERJAPAY CORP.
|
(formerly Solarflex Corp.)
|
Consolidated Statements of Cash
Flows
|
For the Six Months Ended June 30, 2016 and 2015
|
(Unaudited)
|
Back to Table of Contents
|
|
|
|
For
the
|
|
For
the
|
|
|
Six
Months Ended
|
|
Six
Months Ended
|
|
|
June 30, 2016
|
|
June 30, 2015
|
Cash flows from operating activities:
|
|
|
|
|
Net loss
|
$
|
(2,087,787)
|
$
|
(56,830)
|
Adjustments required to
reconcile net loss to cash used in operating activities:
|
|
|
|
|
Depreciation and amortization
|
|
86
|
|
-
|
Amortization of debt discount
|
|
-
|
|
24,896
|
Loss on extinguishment of debt
|
|
9,003
|
|
-
|
Common stock issued for services
|
|
1,431,133
|
|
-
|
Changes in net assets and liabilities:
|
|
|
|
|
(Increase) decrease in
prepaid expenses
|
|
(59,181)
|
|
-
|
Increase (decrease) in
accounts payable
|
|
81,426
|
|
-
|
Increase (decrease) in
accrued liabilities
|
|
7,127
|
|
10,726
|
Net cash used in operating activities
|
|
(618,193)
|
|
(21,208)
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
Purchase
of equipment
|
|
(1,722)
|
|
-
|
Cash used in investing activities
|
|
(1,722)
|
|
-
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
Proceeds from issuance of common stock
|
|
654,987
|
|
-
|
Proceeds from debt
|
|
-
|
|
20,000
|
Principal
payments made on debt
|
|
(8,689)
|
|
-
|
Net cash provided by financing activities
|
|
646,298
|
|
20,000
|
|
|
|
|
|
Foreign currency adjustment
|
|
226
|
|
-
|
|
|
|
|
|
Change in cash
|
|
26,609
|
|
(1,208)
|
Cash - Beginning of period
|
|
250,194
|
|
1,824
|
Cash - End of
period
|
$
|
276,803
|
$
|
616
|
|
|
|
|
|
Supplemental Cash Flow Disclosure:
|
|
|
|
|
Non-cash transactions:
|
|
|
|
|
Debt discount
attributable to beneficial conversion feature
|
$
|
-
|
$
|
13,333
|
Stock issued to settle
debt
|
$
|
15,750
|
$
|
-
|
Issuance of shares for
restricted cash
|
$
|
250,013
|
$
|
-
|
|
See notes to unaudited interim
consolidated financial
statements.
|
KINERJAPAY CORP.
(formerly Solarflex Corp.)
Notes to Unaudited
Consolidated Financial Statements
Back to Table of Contents
1. The Company and Significant Accounting Policies
Organizational Background
KinerjaPay Corp. ("Kinerja" or the "Company") is a Delaware corporation
and has not commenced operations. The Company was incorporated under the
laws of the State of Delaware on February 12, 2010. The business plan of the
Company was to develop a commercial application of the design in a patent of
a "Solar element and method of manufacturing the same". On November 10, 2015
this plan was abandoned and all related contracts and agreements rescinded.
On December 1, 2015, the Company entered into a license agreement with PT
Kinerja Indonesia, an entity organized under the laws of Indonesia and
controlled by Mr. Ng ("PT Kinerja"), for an exclusive, world-wide license to
use and commercially exploit certain technology and intellectual property
and its website, KinerjaPay.com. Pursuant to the License Agreement, the
Company was granted the exclusive, world-wide rights to the KinerjaPay IP,
an e-commerce platform that provides users with the convenience of e-wallet
service for bill transfer and online shopping and is among the first portals
to allow users the convenience to top-up phone credit. In conjunction with
the agreement the company changed its name from Solarflex Corp. to
KinerjaPay Corp. On April 6, 2016, P.T. Kinerja Pay Indonesia a subsidiary
was organized under the laws of Indonesia.
The accompanying financial statements of the Company were prepared from
the accounts of the Company under the accrual basis of accounting.
Basis of Presentation:
The accompanying financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of
America, which contemplate continuation of the Company as a going concern.
The Company has not established sufficient revenue to cover its operating
costs, and as such, has incurred an operating loss since inception. Further,
as of June 30, 2016, the cash resources of the Company were insufficient to
meet its current business plan. These and other factors raise substantial
doubt about the Company's ability to continue as a going concern. The
accompanying financial statements do not include any adjustments to reflect
the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from
the possible inability of the Company to continue as a going concern.
Principles of Consolidation:
The financial statements include the accounts of KinerjaPay Corp. and its
wholly owned subsidiary PT KinerjaPay, Indonesia. All significant
inter-company balances and transactions have been eliminated.
Significant Accounting Policies
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statement and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from the estimates.
Cash and Cash Equivalents:
For financial statement presentation
purposes, the Company considers those short-term, highly liquid investments
with original maturities of three months or less to be cash or cash
equivalents. There were no cash equivalents as of June 30, 2016 and December
31, 2015.
Property and Equipment:
New property and equipment are recorded at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the
assets, generally 5 years. Expenditures for renewals and betterments are
capitalized. Expenditures for minor items, repairs and maintenance are
charged to operations as incurred. Gain or loss upon sale or retirement due
to obsolescence is reflected in the operating results in the period the
event takes place.
Valuation of Long-Lived Assets:
We review the recoverability of our long-lived assets including
equipment, goodwill and other intangible assets, when events or changes in
circumstances occur that indicate that the carrying value of the asset may
not be recoverable. The assessment of possible impairment is based on our
ability to recover the carrying value of the asset from the expected future
pre-tax cash flows (undiscounted and without interest charges) of the
related operations. If these cash flows are less than the carrying value of
such asset, an impairment loss is recognized for the difference between
estimated fair value and carrying value. Our primary measure of fair value
is based on discounted cash flows. The measurement of impairment requires
management to make estimates of these cash flows related to long-lived
assets, as well as other fair value determinations.
Stock Based Compensation:
Stock-based awards are accounted for using the fair value method in
accordance with ASC 718, Share-Based Payments. Our primary type of
share-based compensation consists of stock options. We use the Black-Scholes
option pricing model in valuing options. The inputs for the valuation
analysis of the options include the market value of the Company's common
stock, the estimated volatility of the Company's common stock, the exercise
price of the warrants and the risk free interest rate.
Accounting For Obligations And Instruments Potentially To Be Settled
In The Company's Own Stock:
We account for obligations and instruments potentially to be settled in
the Company's stock in accordance with FASB ASC 815, Accounting for
Derivative Financial Instruments. This issue addresses the initial balance
sheet classification and measurement of contracts that are indexed to, and
potentially settled in, the Company's own stock.
Fair Value of Financial Instruments:
FASB ASC 825, "Financial Instruments," requires entities to
disclose the fair value of financial instruments, both assets and
liabilities recognized and not recognized on the balance sheet, for which it
is practicable to estimate fair value. FASB ASC 825 defines fair value of a
financial instrument as the amount at which the instrument could be
exchanged in a current transaction between willing parties. At June 30, 2016
and December 31, 2015, the carrying value of certain financial instruments
(cash and cash equivalents, accounts payable and accrued expenses.)
approximates fair value due to the short-term nature of the instruments or
interest rates, which are comparable with current rates.
Fair Value Measurements:
The Company measures fair value under a framework that utilizes a
fair value hierarchy that prioritizes the inputs to valuation techniques
used to measure fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or
liabilities (level 1 measurements) and the lowest priority to unobservable
inputs (level 3 measurements). The three levels of inputs which prioritize
the inputs used in measuring fair value are:
Level 1: Inputs to the valuation methodology are unadjusted quoted prices
for identical assets or liabilities in active markets that the Company has
the ability to access.
Level 2: Inputs to the valuation methodology
include:
- Quoted prices for similar assets or liabilities in active
markets;
- Quoted prices for identical or similar assets or liabilities
in inactive markets;
- Inputs other than quoted prices that are
observable for the asset or liability;
- Inputs that are derived
principally from or corroborated by observable market data by correlation or
other means.
If the asset or liability has a specified (contractual)
term, the level 2 input must be observable for substantially the full term
of the asset or liability.
Level 3: Inputs to the valuation
methodology are unobservable and significant to the fair value measurement.
The assets or liability's fair value measurement level within the fair value
hierarchy is based on the lowest level of any input that is significant to
the fair value measurement. Valuation techniques used need to maximize the
use of observable inputs and minimize the use of unobservable inputs. The
following table presents assets that were measured and recognize at fair
value on June 30, 2016 and December 31, 2015 and the years then ended on a
recurring basis:
Fair Value Measurements at
June 30, 2016
|
|
|
|
|
Quoted Prices in Active
|
|
Significant Other
|
|
Significant
|
|
|
|
|
Markets for Identical Assets
|
|
Observable Inputs
|
|
Unobservable Inputs
|
|
|
Total
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
None
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
Total assets at fair value
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
Fair Value Measurements at
December 31, 2015
|
|
|
|
|
Quoted Prices in Active
|
|
Significant Other
|
|
Significant
|
|
|
|
|
Markets for Identical Assets
|
|
Observable Inputs
|
|
Unobservable Inputs
|
|
|
Total
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
None
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
Total assets at fair value
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
When the Company changes its valuation inputs for measuring financial
assets and liabilities at fair value, either due to changes in current
market conditions or other factors, it may need to transfer those assets or
liabilities to another level in the hierarchy based on the new inputs used.
The Company recognizes these transfers at the end of the reporting period
that the transfers occur. For the periods ended June 30, 2016 and 2015,
there were no significant transfers of financial assets or financial
liabilities between the hierarchy levels.
Revenue Recognition:
Our principal products and services are: (i) our electronic payment
service ("EPS") and (ii) our virtual marketplace both of which are available
on our portal under the domain name KinerjaPay.com. Through our Portal and
Mobile App we provide EPS to consumers and merchants. Our EPS provides an
affordable, secure and reliable method to consumers and merchants, as well
as friends and family, to pay and transfer money using electronic devices
(e.g., mobile, tablets and personal computers). In addition, consumers,
merchants and businesses of all sizes can accept payments from merchant
websites and mobile devices. Our EPS service enables consumers to
conveniently pay utility bills, phone bills, credit card payments and add
credit to their cell phone accounts. We developed a proprietary digital
e-wallet software, which provides users with the ability to complete EPS
transactions safely and conveniently. The e-wallet acts as an escrow account
as payments will only be released to the seller once the buyer has received
the product. We recognize revenue as a percentage the dollar value of each
at the completed transaction.
We pay transaction fees as follows: (i) 3.9% + $0.30 when senders fund
payment transactions using PayPal; (ii) no fees when customers fund payment
transactions by electronic transfer of funds from a bank accounts; and (iii)
fees of $0.25 to $0.50 per transaction if customers fund payment
transactions by using a third party payment gateway.
Earnings per Common Share:
We compute net income (loss) per share in accordance with ASC
260, Earning per Share. ASC 260 requires presentation of both basic and
diluted earnings per share (EPS) on the face of the income statement. Basic
EPS is computed by dividing net income (loss) available to common
shareholders (numerator) by the weighted average number of shares
outstanding (denominator) during the period. Diluted EPS gives effect to all
dilutive potential common shares outstanding during the period using the
treasury stock method and convertible preferred stock using the if-converted
method. In computing Diluted EPS, the average stock price for the period is
used in determining the number of shares assumed to be purchased from the
exercise of stock options or warrants. Diluted EPS excludes all dilutive
potential shares if their effect is anti-dilutive.
Common Stock Split
On January 15, 2016 we declared a reverse split of our common stock. The
formula provided that every thirty (30) issued and outstanding shares of
common stock of the Corporation be automatically split into one (1) share of
common stock. The reverse split was effective upon receipt of approval from
FINRA. Except as otherwise noted, all share, option and warrant numbers have
been restated to give retroactive effect to this split. All per share
disclosures retroactively reflect post-split shares.
Income Taxes:
We have adopted ASC 740, Accounting for Income Taxes. Pursuant to ASC
740, we are required to compute tax asset benefits for net operating losses
carried forward. The potential benefits of net operating losses have not
been recognized in these financial statements because the Company cannot be
assured it is more likely than not it will utilize the net operating losses
carried forward in future years.
We must make certain estimates and judgments in determining income tax
expense for financial statement purposes. These estimates and judgments
occur in the calculation of certain tax assets and liabilities, which arise
from differences in the timing of recognition of revenue and expense for tax
and financial statement purposes.
Deferred tax assets and liabilities are determined based on the
differences between financial reporting and the tax basis of assets and
liabilities using the tax rates and laws in effect when the differences are
expected to reverse. ASC 740 provides for the recognition of deferred tax
assets if realization of such assets is more likely than not to occur.
Realization of our net deferred tax assets is dependent upon our generating
sufficient taxable income in future years in appropriate tax jurisdictions
to realize benefit from the reversal of temporary differences and from net
operating loss, or NOL, carryforwards. We have determined it more likely
than not that these timing differences will not materialize and have
provided a valuation allowance against substantially all of our net deferred
tax asset. Management will continue to evaluate the realizability of the
deferred tax asset and its related valuation allowance. If our assessment of
the deferred tax assets or the corresponding valuation allowance were to
change, we would record the related adjustment to income during the period
in which we make the determination. Our tax rate may also vary based on our
results and the mix of income or loss in domestic and foreign tax
jurisdictions in which we operate.
In addition, the calculation of our tax liabilities involves dealing with
uncertainties in the application of complex tax regulations. We recognize
liabilities for anticipated tax audit issues in the U.S. and other tax
jurisdictions based on our estimate of whether, and to the extent to which,
additional taxes will be due. If we ultimately determine that payment of
these amounts is unnecessary, we will reverse the liability and recognize a
tax benefit during the period in which we determine that the liability is no
longer necessary. We will record an additional charge in our provision for
taxes in the period in which we determine that the recorded tax liability is
less than we expect the ultimate assessment to be.
ASC 740 which
requires recognition of estimated income taxes payable or refundable on
income tax returns for the current year and for the estimated future tax
effect attributable to temporary differences and carry-forwards. Measurement
of deferred income tax is based on enacted tax laws including tax rates,
with the measurement of deferred income tax assets being reduced by
available tax benefits not expected to be realized.
Uncertain Tax Positions:
When tax returns are filed, it is highly certain that some positions
taken would be sustained upon examination by the taxing authorities, while
others are subject to uncertainty about the merits of the position taken or
the amount of the position that would be ultimately sustained. In accordance
with the guidance of FASB ASC 740-10, Accounting for Uncertain Income Tax
Positions, the benefit of a tax position is recognized in the financial
statements in the period during which, based on all available evidence,
management believes it is more likely than not that the position will be
sustained upon examination, including the resolution of appeals or
litigation processes, if any. Tax positions taken are not offset or
aggregated with other positions. Tax positions that meet the
more-likely-than-not recognition threshold are measured as the largest
amount of tax benefit that is more than 50 percent likely of being realized
upon settlement with the applicable taxing authority. The portion of the
benefits associated with tax positions taken that exceeds the amount
measured as described above should be reflected as a liability for
unrecognized tax benefits in the accompanying consolidated balance sheets
along with any associated interest and penalties that would be payable to
the taxing authorities upon examination.
Our federal and state income tax returns are open for fiscal years ending
on or after December 31, 2009. We are not under examination by any
jurisdiction for any tax year. At June 30, 2016 we had no material
unrecognized tax benefits and no adjustments to liabilities or operations
were required under FASB ASC 740-10.
Recent Accounting Pronouncements
In April 2015, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 2015-03, "Interest-Imputation of
Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance
Costs." ASU 2015-03 requires that debt issuance costs related to a
recognized debt liability be presented in the balance sheet as a direct
deduction from the carrying amount of that debt liability, consistent with
debt discounts. Currently, debt issuance costs are recognized as deferred
charges and recorded as other assets. The guidance is effective for annual
and interim periods beginning after December 15, 2015 with early adoption
permitted and is to be implemented retrospectively. Adoption of the new
guidance will only affect the presentation of the Company's consolidated
balance sheets and will have no impact to our financial statements.
Management does not anticipate that the adoption of these standards will
have a material impact on the financial statements.
The accompanying balance sheet as of June 30, 2016, which was derived
from audited financial statements, and the unaudited interim financial
statements have been prepared in accordance with accounting principles
generally accepted in the United States of America ("U.S. GAAP") for interim
financial information and in accordance with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by U.S. GAAP for complete financial
statements. These financial statements should be read in conjunction with
the audited financial statements and related notes for the fiscal year ended
December 31, 2015, included in the Company's Annual Report on Form 10-K
covering that period.
The preparation of these financial statements in conformity with
accounting principles generally accepted in the United States requires us to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. On an on-going basis, we evaluate our estimates,
including those related intangible assets, income taxes, insurance
obligations and contingencies and litigation. We base our estimates on
historical experience and on various other assumptions that are believed to
be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other resources. Actual results may
differ from these estimates under different assumptions or conditions. The
results of operations for the periods presented are not necessarily
indicative of the results for the full fiscal year or any future period.
In the opinion of management, the information furnished in these interim
financial statements reflects all adjustments necessary for a fair statement
of the financial position and results of operations and cash flows as of and
for the three and six-month periods ended June 30, 2016 and 2015. All such
adjustments are of a normal recurring nature. The Financial Statements do
not include some information and notes necessary to conform to annual
reporting requirements.
2. Stockholders' Equity
On January 15, 2016 we amended our certificate of incorporation to
increase authorized capital to include 10 million shares of $.0001 par value
preferred shares. No preferred shares have been issued.
Transactions in our Common Stock
Stock issued upon conversion of debt- On February 19, 2016 we issued
30,000 shares of our common stock in settlement of $15,750 in accounts
payable. The settlement resulted in a loss of $9,003.
Stock issued upon completion of Regulation S Offering
We received $654,987 during the six months ended June 30, 2016 and
$250,013 in Q4 of 2015 through a placement of common stock units. Each unit
consists of one share of common stock and one warrant to purchase common
stock. The units were sold for the offering price of $0.50 per unit. The
warrants are exercisable at $1.00 and expire two years from the date of
issuance. The relative fair market value of the common stock issued is
$359,146 and the relative fair market value of the warrants is $415,854.
Stock Issued for Services
On February 19, 2016 we issued 1,333,333 shares of our common stock to
Mr. Ng (an officer and director of the company) individually and as control
person of PT Kinerja as payment for services as part of a service agreement
resulting from the license agreement. The shares were valued at the closing
price as of the date of the agreement ($0.9001) and resulted in full
recognition of $1,200,133 in consulting services expense.
On June 15, 2016 we issued 300,000 shares of our common stock to an
unrelated party as payment for a service agreement. The shares were valued
at the closing price as of the date of the agreement ($0.77) and resulted in
full recognition of $231,000 in consulting services expense.
3. Related Party Transactions not Disclosed Elsewhere
On December 1, 2015, the Company entered into an agreement with PT
Kinerja Indonesia, an entity organized under the laws of Indonesia ("PT
Kinerja"), for an exclusive, world-wide license to use and commercially
exploit certain KinderjaPay technology and intellectual property. Pursuant
to the License Agreement and in consideration for the payment of royalties,
the Company has been granted the exclusive, world-wide rights to the
KinerjaPay IP, an eCommerce platform that provides users with the
convenience of e-Wallet service for bill transfer and online shopping having
advanced functionality and "gamification" features, among others, and is
among the first portals to allow users the convenience to top-up phone
credit. Mr. Ng is a control person of PT Kinerja and a controlling
shareholder and board member of KinerjaPay Corp. PT Kinerja Indonesia
provides all necessary R&D, technical support, procurement/logistic and IT
operational services and other technology support needed to operate our
Portal. On December 1, 2015, the Company entered into an agreement with PT
Kinerja Indonesia for an exclusive, world-wide license to use and
commercially exploit certain KinderjaPay technology and intellectual
property. The licensing agreement requires a 1% royalty on sales generated
by the Company. The company plans to conduct operations through its
subsidiary P.T. Kinerja Pay Indonesia which was formed on April 6, 2016.
During the period ended June 30, 2016, related party prepaid expenses of
$55, 019 were paid in conjunction with the services agreement signed on
December 1, 2015 between PT Kinerja Indonesia and the subsidiary for for
technical and R&D services. The services will be performed throughout
July-September 2016.
4. Going Concern
The accompanying financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of
America, which contemplate continuation of the Company as a going concern.
The Company has not established sufficient revenue to cover its 2016
operating costs, and as such, has incurred an operating loss since
inception. Further, as of June 30, 2016, the cash resources of the Company
were insufficient to meet its current business plan. These and other factors
raise substantial doubt about the Company's ability to continue as a going
concern. The accompanying financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities
that may result from the possible inability of the Company to continue as a
going concern.
5. Subsequent Events
There were no other material subsequent events following the period ended
June 30, 2016 and throughout the date of the filing of Form 10-Q.
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
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As used in this Form 10-Q, references to the "KinerjaPay," Company," "we," "our" or
"us" refer to KinerjaPay Corp.
Unless the context otherwise indicates.
The following plan of operation provides information which management
believes is relevant to an assessment and understanding of our results of operations and
financial condition. The discussion should be read along with our financial statements and
notes thereto. This section includes a number of forward-looking statements that reflect
our current views with respect to future events and financial performance. Forward-looking
statements are often identified by words like believe, expect, estimate, anticipate,
intend, project and similar expressions, or words which refer to future
events. These
forward-looking statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from our predictions.
Plan of Operations
The Company was incorporated in Delaware on February 12, 2010 under the
name Solarflex Corp. for the purpose of developing, manufacturing and
selling a solar photovoltaic element, a device that converts light into
electrical flow (also known as a photovoltaic cell) based on certain
proprietary technology to enable an increase in solar energy conversion and
provide energy at a lower cost. We did not generate any revenues from the sale of any solar
photovoltaic element, nor did we successfully manufacturer or construct a
working prototype. We
determined during the 4th quarter of 2015 to evaluate potential business
opportunities.
On December 1, 2015, the Company entered into a license agreement (the
"License Agreement") with PT Kinerja Indonesia, an entity organized under
the laws of Indonesia and controlled by Mr. Ng ("PT Kinerja"), for an
exclusive, world-wide license to use and commercially exploit certain
technology and intellectual property (the "KinerjaPay IP") and its website,
KinerjaPay.com. Pursuant to the License Agreement, the Company was granted
the exclusive, world-wide rights to the KinerjaPay IP, an e-commerce
portal.
In connection with the License Agreement, we agreed to: (i) change the name
of the Company from Solarflex Corp to KinerjaPay Corp.; (ii) implement a
reverse split of our common stock on a one-for-thirty (1:30) basis; and
raise equity capital in the minimum offering amount of $500,000 and the
maximum offering amount of $2,500,000 through the offering of units at a
price of $0.50, each Unit, each consisting of 1 share of common stock
(post-reverse) and 1 class A warrant exercisable for a period of 24 months
to purchase 1 additional share of common stock (post-reverse) at $1.00. The
Unit Offering was made only to "accredited investors" who are not U.S.
Persons in reliance upon Regulation S promulgated by the SEC under the
Securities Act of 1933, as amended (the "Act"). On January 20, 2016, the
Company closed the Minimum Offering after it received subscription proceeds
in excess of $500,000. To date, we have raised $905,000 under the Unit
Offering, while the Unit Offering is continuing.
As of March 10, 2016, the Company's name change to KinerjaPay Corp.
and its one-for-thirty reverse stock split became effective. The Company's
shares of common stock are subject to quotation on the OTCQB market under
the symbol KPAY.
Our principal products and services are (i) our
electronic payment service (the "EPS"); and (ii) our virtual marketplace
(the "Marketplace") both of which
are available on our portal under the domain name KinerjaPay.com (the
"Portal").
Our Android-based mobile app not only
serves as an extension of desktop or laptop access to our website, but has additional
in-app services that cater to mobile users, such as social engagement and
digital entertainment (the "Mobile App").
We believe that in
combining our EPS function
("PAY") with the ability to buy and sell products via our
virtual marketplace ("Buy") enhanced by a
gamification component ("Play")
our customers and merchants increase their loyalty to our
services.
Indonesia, the world's fourth most-populous country, having a population
estimated to be 255 million people, is becoming an economic
power in the Southeast Asia region. Over 50% of its population is below the
age of 30 and we believe that the young Indonesian population is highly adaptive to
new technology. The rise of Smartphones and tablets that sell for less than US$100 is rapidly
broadening internet access and pushing the Indonesian e-commerce
market toward a critical point in terms of scale and profitability, in spite
of significant challenges due to poor infrastructure and payment systems. The number of internet users is excepted to double to
125 million by 2017 and Smartphone ownership is to rise from 20 per cent to
52 per cent in the same period,
the
highest percentage compared to other Southeast Asian countries,
according to Redwing, an advisory group.
Notwithstanding
our belief that our Portal represents a significant advance as compared to other
Indonesian portals, there are a number of potential difficulties that we might face,
including the following:
We may not be able to raise sufficient additional funds
to fully implement our business plan and grow our business;
Competitors may develop
alternatives that render our Portal services redundant or
unnecessary;
Our
proprietary technology may be shown to have characteristics that may render
it insufficient for our business;
Our
Portal may not become widely accepted by consumers and merchants; and
Strict,
new government regulations and
inappropriate e-commerce policies, especially in an emerging economy such as
Indonesia, may
hinder the growth of the e-commerce market.
To date, we raised $905,000 in equity capital and we may be expected to require up to an additional $2.5 million
in capital during the next 12 months to
fully implement
our business plan and fund our operations.
Results of Operations during the three months
ended June 30, 2016 as compared
to the three months ended June 30, 2015
During the three months ended June 30, 2016 and 2015, we did not generate
revenues.
During the three months ended June 30, 2016, we had operating expenses related to general and administrative expenses being a public company and interest expenses.
During
the three months ended June 30, 2016
, we incurred a net loss of $728,630 due to general and administrative expenses of $728,653,
depreciation expense of $86 and interest expenses of $109.
During
the three months ended June 30, 2015
, we incurred a net loss of
$28,392 due to general and administrative expenses
of $15,886, interest expenses of $3,585 and
expenses related to amortization of debt discount of $8,921
.
The significant increase in net loss during the three month ended June 30,
2106 as compared to the same period in the prior year was mainly due to
increased professional fees and non-cash compensation expenses.
Results of Operations during the six months
ended June 30, 2016 as compared
to the six months ended June 30, 2015
During the
six months ended June 30, 2016 and 2015, we did not generate revenues.
During the six months ended June 30, 2016, we had operating expenses related to general and administrative expenses being a public company,
amortization expenses and interest expenses.
During
the six months ended June 30, 2016
, we incurred a net loss of $2,087,787 due to general and administrative expenses of $2,078,804,
depreciation expense of $86,
interest expenses of $106
and a loss on extinguishment of debt of $9,003.
During
the six months ended June 30, 2015
, we incurred a net loss of
$56,830 due to general and administrative expenses
of $25,034, interest expenses of $6,900 and
expenses related to amortization of debt discount of $24,896
.
Liquidity and Capital Resources
On June 30, 2016, we had $335,984 in current assets
represented by $276,803 in cash and $59,181 in prepaid expenses.
On December 31, 2015, we had $250,194 in current assets consisting of
$81 in cash and $250,113 in restricted cash.
We had fixed assets of $1,636 as of June 30,
2016 and $0 as of December 31, 2015. We had total assets of $337,620 as of
June 30, 2016 and $250,194 as of December 31, 2015.
As of
June 30, 2016, we had total current liabilities of $88,568 representing
accounts payable of $81,426 and accrued expenses of $7,142.
As of December 31, 2015, we had total current liabilities of $274,467
consisting of $15 in accrued interest, $250,013 in unissued stock
subscriptions and $24,439 in short-term notes payable. We had no long-term liabilities
as of June 30, 2016 and December 31, 2015.
We used $618,193 in our operating activities during the six months ended June
30, 2016, which was due to a net loss of $2,087,787 offset by depreciation
expense of $86, a loss on extinguishment of debt of $9,003, non-cash
compensation charges of $1,431,133, an increase in accounts payable of $81,426,
an increase in other current liabilities of $7,127 and a decrease in prepaid
expenses of $59,181.
We used $21,208 in our operating activities during the
six months ended June 30, 2015, which was
due to a net loss of $56,830 offset by amortization of debt
discount expenses of $24,896 and an increase in
accrued liabilities of $10,726.
We financed our negative cash flow from operations during the
six-month period ended June 30, 2016 through the issuance of common stock of $654,987
reduced by payments of $8,689 related to principal payments on debt.
We financed our negative cash flow from
operations during the six-month period ended June 30, 2015 through proceeds of $20,000
from debt issuance.
We had investing activities of $1,722 during the six
months ended June 30, 2016 related to the purchase of fixed assets and no investing activities during the same period in
the prior year.
Availability of Additional Capital
Notwithstanding our success in raising over $905,000 from the private
sale of equity securities in January 2016 and our expectation that we will
be successful in raising up to an additional $1.6 million during 2016, there can be no assurance that we will continue to be
successful in raising equity capital and have adequate capital resources to
fund our operations or that any additional funds will be available to us
on favorable
terms or in amounts required by us.
If we determine that it is necessary to raise additional funds, we may
choose to do so through public or private equity or debt financing, a bank
line of credit, or other arrangements.
If we are unable to obtain adequate
capital resources to fund operations, we may be required to delay, scale
back or eliminate some or all of our plan of operations, which may have a
material adverse effect on our business, results of operations and ability
to operate as a going concern.
Any additional equity financing may be dilutive
to our stockholders, new equity securities may have rights, preferences or
privileges senior to those of existing holders of our shares of common
stock. Debt or equity financing may subject us to restrictive covenants and
significant interest costs.
Capital Expenditure Plan During the Next
Twelve Months
To date, we raised $905,000 in equity capital
and we may be expected to require up to an additional $1.6 million in
capital during the next 12 months to fully implement our business plan and
fund our operations. Our plan is to utilize the equity capital that we
raise, together with anticipated cash flow from operations, to fund a very
significant investment in sales and marketing, concentration principally on
online advertising and incentivizing existing customers for the introduction
of new customers, among other strategies. However, there can be no assurance
that: (i) we will continue to be successful in raising equity capital in
sufficient amounts and/or at terms and conditions satisfactory to the
Company; or (ii) we will generate sufficient revenues from operations, to
fulfill our plan of operations. Our revenues are expected to come from the
sale of our portal services. As a result, we will continue to incur
operating losses unless and until we are able to generate sufficient cash
flow to meet our operating expenses and fund our planned sales and market
efforts. There can be no assurance that the market will adopt our portal or
that we will generate sufficient cash flow to fund our enhanced sales and
marketing plan. In the event that we are not able to successfully: (i) raise
equity capital and/or debt financing; or (ii) market and significantly
increase the number of portal users and revenues from such users, our
financial condition and results of operations will be materially and
adversely affected and we will either have to delay or curtail our plan for
funding our sales and marketing efforts.
Going Concern Consideration
Our registered independent auditors have issued an opinion on our financial statements which includes a statement describing our going concern status. This means that there is substantial doubt that we can continue as an on-going business for the next
twelve months unless we obtain additional capital to pay our bills and meet our other financial obligations. This is because we have not generated any revenues and no revenues are anticipated until we begin marketing the product. Accordingly, we must raise capital from sources other than the actual sale of the product. We must raise capital to implement our project and stay in business.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
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A smaller reporting company, as defined by Item 10 of Regulation S-K, is not required
to provide the information required by this item.
ITEM 4. CONTROLS AND PROCEDURES.
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Evaluation of disclosure controls and procedures.
As of June 30, 2016, the Company's chief executive officer and chief financial officer conducted an evaluation regarding the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act).
Management has assessed the effectiveness of our internal control over financial reporting as of June 30, 2016. Management's assessment was based on criteria set forth in Internal Control - Integrated Framework (1992), issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based upon this assessment, management concluded that, as of June 30, 2016, our internal control over financial reporting was not effective, based upon those criteria, as a result of the identification of the material weaknesses described below.
A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
Specifically, management identified the following control weaknesses: (i) the Company has not implemented measures that would prevent one individual from overriding the internal control system. (ii) The Company utilizes accounting software that does not prevent erroneous or unauthorized changes to previous reporting periods and/or can be adjusted so as not to provide an adequate audit trail of entries made in the accounting software.
Accordingly, while the Company has identified certain material weaknesses in its system of internal control over financial reporting, it believes that it has taken reasonable steps to ascertain that the financial information contained in this report is in accordance with generally accepted accounting principles. The Company does not believe that this control weakness has resulted in deficient financial reporting because the Chief Financial Officer and Chief Executive Officers are aware of their responsibilities under the SEC's reporting requirements and personally certify the financial reports.
Management has determined that current resources would be appropriately applied elsewhere and when resources permit, they will alleviate material weaknesses through various steps.
Changes in internal controls.
During the quarterly period covered by this report, no changes occurred in our internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.