Notes
to Unaudited Consolidated Financial Statements
1.
The Company and Significant Accounting Policies
Organizational
Background
KinerjaPay
Corp. (the “Company”) is a Delaware corporation, was incorporated under the laws of the State of Delaware on February
12, 2010 as Solarflex Corp. The business plan of Solarflex 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 by Solarflex
and all related contracts and agreements related to the solar energy business ceased.
On
December 1, 2015, the Company entered into a license agreement with P.T. Kinerja Indonesia (“P.T. Kinerja”), an entity
organized under the laws of Indonesia and controlled by Mr. Edwin Ng, our chairman, CEO and control stockholder, 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 this agreement, the Company changed its name
from Solarflex Corp. to KinerjaPay Corp. On April 6, 2016, P.T. Kinerja Pay Indonesia, a wholly-owned subsidiary of the Company,
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, 2018,
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 P.T. 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, 2018 and December 31, 2017.
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.
Other
Assets:
Other
assets consist of cash payments made to Ace Legends Pte. Ltd. in connection with a partnership in game development for a total
of $100,000 and $60,000, as of June 30, 2018 and December 31, 2017, respectively. The Company entered into an agreement with Ace
Legends Pte Ltd on July 31, 2017, but the agreement was amended subsequently to commence on December 1, 2017. The agreement is
for a period of 18 months and as part of the agreement, the Company agreed to issue 80,000 shares of common stock that were valued
at $128,000 the date of the agreement. The shares were issued on March 7, 2018 reducing other assets and stock payable. As of
June 30, 2018 and December 31, 2017, $57,865 and $9,292 of amortization expense has been recognized, respectively.
On
November 3, 2017, the Company issued a commitment fee note payable of $75,000 to Tangiers Global, LLC in connection with an investment
agreement as discussed throughout the report. The Company did not receive cash in connection with this commitment fee note. We
recorded the commitment fee as an asset that will be netted with funds received once shares of common stock are issued under the
investment agreement. No shares have been issued under the terms of the investment agreement.
Accounts
Receivable - Related Party:
Accounts
receivable consist primarily of trade receivables from a related party. The Company provides an allowance for doubtful trade receivables
equal to the estimated uncollectible amounts. That estimate is based on historical collection experience, current economic and
market conditions and a review of the current status of each customer’s trade accounts receivable. The allowance for doubtful
trade receivables was $0 at June 30, 2018 and December 31, 2017, respectively.
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, 2018 and December 31, 2017, 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, 2018 and December 31, 2017 and the years then ended on a recurring basis:
Fair
Value Measurements at June 30, 2018
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Quoted
Prices in
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Active
Markets for Identical Assets
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Significant
Other Observable Inputs
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Significant
Unobservable Inputs
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Total
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(Level
1)
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|
(Level
2)
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|
(Level
3)
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None
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total assets
and liabilities at fair value
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Fair
Value Measurements at December 31, 2017
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Quoted Prices in
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Active Markets for
Identical Assets
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Significant
Other
Observable Inputs
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Significant Unobservable
Inputs
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Total
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(Level
1)
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(Level
2)
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|
(Level
3)
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None
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total assets
and liabilities 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, 2018 and December 31, 2017, there were no significant transfers of financial assets or financial
liabilities between the hierarchy levels.
Revenue
from Purchased Products:
Effective
January 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes
revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following
steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the
transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue
when each performance obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be
reported under ASC 605 — Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met:
(1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has
occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably
assured.
There
was no impact on the Company’s financial statements as a result of adopting Topic 606 for the three months ended June 30,
2018 and 2017, or the twelve months ended December 31, 2017.
We
recognize our revenue at net since we are an agent and not a principal to the various transactions with other financial institutions
and or technology companies through our leased portal. We have five different revenue streams. Gross revenue from the various
steams were as follows: Mobile phone prepaid $1,202,789, Kinerja Store $10,754, Instant Pay Fees Collection $27,949, Business2Business
sales $1,096,050, and Unipin $579. Gross cost of goods sold did not exceed gross revenues for the period ended June 30, 2018.
Earnings
per Common Share:
We
compute net income (loss) per share in accordance with ASC 260, Earning per Share. ASC 260 rquires 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.
Inventories
Inventories
are stated at the lower of cost or market value, using the first-in, first but convention. Inventories consist of raw materials
in the form of coins and finished goods, such as instant noodles for sale. The gold plated coins were manufactured in connection
with the far future plan of coin offerings and supposed to be distributed at the first launch of the coin offering. However, the
plan for coin offering is postponed. As of June 30, 2018, and December 31, 2017, the Company had inventories of $15,463 and $0,
respectively.
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, 2013. We are not under examination
by any jurisdiction for any tax year. At June 30, 2018 we had no material unrecognized tax benefits and no adjustments to liabilities
or operations were required under FASB ASC 740-10.
Recent
Issued Accounting Standards
Effective
in January 2017, the Company adopted Accounting Standards Update (ASU) No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification
of Deferred Taxes, which changes how deferred taxes are classified in organizations’ balance sheets. The ASU eliminates
the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified
balance sheet. Instead, all deferred tax assets and liabilities will be required to be classified as noncurrent. The amendments
apply to all organizations that present a classified balance sheet. For public companies, the amendments are effective for financial
statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods (i.e.,
in the first quarter of 2017 for calendar year-end companies). Early adoption is permitted for all entities as of the beginning
of an interim or annual reporting period. The guidance may be applied either prospectively, for all deferred tax assets and liabilities,
or retrospectively (i.e., by reclassifying the comparative balance sheet). If applied prospectively, entities are required to
include a statement that prior periods were not retrospectively adjusted. If applied retrospectively, entities are also required
to include quantitative information about the effects of the change on prior periods. The adoption of this ASU did not have a
significant impact on the condensed consolidated financial statements.
Management
does not anticipate that the adoption of these standards will have a material impact on the financial statements.
Effective
in January 2017, the Company adopted Accounting Standards Update (ASU) No. 2016-09, Compensation - Stock Compensation (Topic 718):
Improvements to Employee Share-Based Payment Accounting. The amendments are intended to improve the accounting for employee share-based
payments and affect all organizations that issue share-based payment awards to their employees.
Several
aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b)
classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The amendments
also simplify two areas specific to private companies.
For
public business entities, the amendments are effective for annual periods beginning after December 15, 2016, and interim periods
within those annual periods. Early adoption is permitted in any interim or annual period periods (i.e., in the first quarter of
2017 for calendar year-end companies).
The
adoption of these ASU’s did not have a significant impact on the consolidated financial statements.
In
May 2014, The FASB issued Accounting Standard Update 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”).
ASU 2014-09 outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers and supersedes
most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 also requires entities to disclose
sufficient information, both quantitative and qualitative, to enable users of financial statements to understand the nature, amount,
timing, and uncertainty of revenue and cash flows arising from contracts with customers.
During
2016, the FASB issued several Accounting Standard Updates that focuses on certain implementation issues of the new revenue recognition
guidance including Narrow-Scope Improvements and Practical Expedients, Principal versus Agent Considerations and Identifying Performance
Obligations and Licensing. An entity should apply the amendments in this ASU using one of the following two methods:
1.
Retrospectively to each prior reporting period presented with a possibility to elect certain practical expedients, or,
2.
Retrospectively with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application. If
an entity elects the latter transition method, it also should provide certain additional disclosures.
For
a public business entity, the amendments in ASU 2014-09 (including the amendments introduced through recent ASU’s) are effective
for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period (the first
quarter of fiscal year 2018 for the Company). Early application is permitted only as of annual reporting periods beginning after
December 15, 2016, including interim reporting periods within that reporting period.
The
Company is in the process of evaluating the impact of ASU 2014-09 on its revenue streams and selling contracts, if any, and on
its financial reporting and disclosures. Management is expecting to complete the evaluation of the impact of the accounting and
disclosure changes on the business processes, controls and systems throughout 2017. Since the Company did not report so far, material
revenues, management believes that the adoption of ASU 2014-09 will not have significant impact on its financial statements.
The
accompanying balance sheet as of June 30, 2018, which was derived from unaudited 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, 2017, 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, 2018 and 2017. 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.
Prepaid Expenses and Deposit to Vendors
Prepaid
assets represent advance payments to suppliers and purchase deposits to vendors. The Company paid in advance $26,739 and $22,861,
respectively, for professional fees, rents and other prepaid expenses during the six-months ended June 30, 2018 and twelve months
ended December 31, 2017. Deposits to vendors of $77,584 and $41,150 represent mostly prepayments to third party vendors who provide
the Company with vouchers, prepaid phone credit, etc, that the Company sells through it licensed portal. The Company deposits
cash, as needed, to the vendors and once the sale is made, the vendors deduct the deposit from their account. Each transaction
is done electronically to record the purchase (to the vendors) and the sale (to the user), and the products are then transferred
to the users. Once the transaction is executed, it cannot be cancelled or refunded by the Company to the vendors. The unused funds
can only be refunded to the Company upon the termination of the agreement with the vendors, and only after both parties settle
their obligations. The Company is independent in setting up the selling price of each product.
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June
30, 2018
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December
31, 2017
|
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Individual components giving rise to
prepaid expenses are as follows:
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|
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|
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Professional fees, rent
and other prepaid expenses
|
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$
|
26,739
|
|
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$
|
22,861
|
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Third party vendor
deposits
|
|
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77,584
|
|
|
|
41,150
|
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Total
|
|
$
|
104,323
|
|
|
$
|
64,011
|
|
3.
Stockholders’ Equity
We
are authorized to issue 500,000,000 shares of Common Stock, $0.0001 par value per share. We are authorized to issue 10,000,000
shares of Preferred Stock, $0.0001 par value per share. The Board of Directors has the authority to establish one or more series
of Preferred Stock and fix relative rights and preferences of any series of Preferred Stock. On January 2, 2018, the board of
directors authorized the issuance of a Series A Convertible Preferred Stock, of which Four Hundred Thousand (400,000) shares are
outstanding. Each Preferred Share shall have a par value of $0.0001.
Stock-Based
Compensation
During
the six months ended June 30, 2018, the Company did not issue stock-based compensation.
Shares
issued for services
During
the six months ended June 30, 2018, the Company issued 2,257,778 shares of restricted common stock for services provided. The
shares were valued at the closing price as of the date of the underlying agreements (ranging from $0.85 to $1.39) and resulted
in current recognition of $3,298,941 in consulting service expense.
Based
on agreement with Bear Creek Capital on January 29, 2018, the Company shall issue an additional 25,000 shares 120 days from the
agreement, provided the Company is still using the service of the party. Consequently, the Company recorded the new stock payable
amounting to $34,000 to the party, as the shares were not issued prior to June 30, 2018.
Preferred
Stock for Cash
On
January 2, 2018, the Company issued 400,000 Series A Convertible Preferred Stock to an institutional investor for an aggregate
purchase price of $500,000. The Series A Convertible Preferred Stock is convertible into 400,000 shares of the Company’s
common stock at a conversion price of $1.25 per Share. In addition, the Company issued to the Investor Class N Warrants exercisable
to purchase 400,000 Shares on a cashless basis, at an exercise price of $1.25 per Share, during a period of three (3) years from
the date of the Agreement. The warrants were valued using the Black-Scholes pricing model to estimate the relative fair value
of $300,772.
Warrant
Exercise
On
January 4, 2018, First Fire Global Opportunities Fund LLC opted to exercise the warrant and paid $ 100,000 for obtaining 100,000
shares.
Notes
Payable Conversion
On
June 25, 2018, Tangiers elected to convert $75,000 in the principal amount of these notes together with accrued interest of $7,500
into 198,317 shares of Common Stock based upon a conversion price of $1.25. The conversion resulted in the loss of conversion
for the Company amounting to $126,016 which is included in the additional paid in capital.
4.
Notes Payable
On
May 9, 2017, we had a $50,000 note payable outstanding to our CEO, and control stockholder. The balance is due on demand and accrues
interest at 8% per annum.
On
November 9, 2017, the Company executed a 10% fixed convertible promissory note payable to Tangiers Global LLC (“Tangiers”)
in the principal amount of $330,000. This note, which is due seven and one-half months from the date of funding, was funded by
the investor in the initial sum of $150,000 on November 15, 2017 and $150,000 on December 19, 2017. The note is convertible into
shares of Common Stock at a conversion price of $1.25 per share if converted within seven and one half months, or thereafter the
conversion price shall be equal to the lower of (i) the fixed price or (ii) 65% of the average of the two (2) lowest trading prices
of the Common Stock during the twenty (20) trading days prior to which the Holder elects to convert all or part of the note and
holder gives notice of conversion to the Company and its transfer agent.
In
connection with the Company’s investment agreement with Tangiers, as discussed throughout this quarterly report, the Company
issued a commitment fee note payable of $75,000 to Tangiers. The commitment fee note bears an interest rate of 10% and was due
on June 17, 2018. The note had a conversion price of $1.25, but in case of maturity default, the conversion price was subject
to adjustment to a price equal to the lower of: (i) the conversion price or (ii) 65% of the average of the two (2) lowest trading
prices of the Common Stock during the twenty (20) trading days prior to which the Holder (Tangiers) elects to convert all or part
of this $75,000 note upon notice of conversion to the Company and its transfer agent.
On
June 25, 2018, Tangiers elected to convert $75,000 in the principal amount of these notes together with accrued interest of $7,500
into 198,317 shares of Common Stock based upon a conversion price of $1.25. The conversion resulted in the loss of conversion
for the Company amounting to $126,016 which is included in the additional paid in capital.
The
Tangiers fixed convertible promissory notes payable and the commitment fee note are guaranteed an interest payment of 10% of the
beginning note balance. As such, the Company had to immediately expense the balances during 2017.
On
November 1, 2017, the Company executed an 8% fixed convertible promissory note payable to Crossover Capital Fund I, LLC in the
principal amount of $115,000. The note is due eight months from the date as mentioned above. The note is convertible into shares
of Common Stock at a conversion price of $1.3 per share if converted within 8 months, or thereafter the conversion price shall
be equal to the lower of (i) the fixed price or (ii) 65% of the average of the two (2) lowest trading prices of the Common Stock
as reported on the National Quotations Bureau OTC market on which the Company’s shares are traded, for the twenty (20) prior
trading days including the day upon which a notice of conversion is received by the Company or its transfer agent. As of June
30, 2018, $4,562 in interest was expensed during the six months ended June 30, 2018.
On
January 12, 2018, the Company executed an 12% fixed convertible promissory note payable to Power Up Lending, LLC in the principal
amount of $153,000. The note is due on September 30, 2018. The note is convertible into shares of Common Stock at a conversion
price of $1.75 per share. As of June 30, 2018, $8,501 in interest was expensed during the six months ended June 30, 2018.
On
March 7, 2018, the Company executed an 12% fixed convertible promissory note payable to Power Up Lending, LLC in the principal
amount of $63,000. The note is due on November 30, 2018. The note is convertible into shares of Common Stock at a conversion price
of $1.75 per share. As of June 30, 2018, $2,382 in interest was expensed during the six months ended June 30, 2018.
On
May 1, 2018, the Company executed an 12% fixed convertible promissory note payable to Power Up Lending, LLC in the principal amount
of $53,000. The note is due on February 15, 2019. The note is convertible into shares of Common Stock at a conversion price of
$ 1.75 per share. As of June 30, 2018, $1,045 in interest was expensed during the six months ended June 30, 2018.
On
June 13, 2018, the Company executed an 10% convertible promissory note payable to Crown Bridge Partners in the principal amount
of $75,000. The note is due on June 13, 2019. As of June 30, 2018, $349 in interest was expensed during the six months ended June
30, 2018.
In
accordance with ASC 470, the Company has analyzed the beneficial nature of the initial conversion terms of the fixed convertible
notes and determined that a beneficial conversion feature (BCF) exists because the effective conversion price was lower than the
quoted market price at the time of the issuance. As of June 30, 2018, the Company recognized a BCF, and amortization expenses
of $39,655 on the discount created during the twelve month-period ended December 31, 2017.
For
the six months ended June 30, 2018, the Company has recognized $18,823 in interest expense related to the notes as described above.
5.
Related Party Transactions
As
of June 30, 2018, we had $51,904 in accounts payable due to our CEO consisting of a $50,000 loan and $1,904 in expenses paid on
behalf of the Company by our CEO. The loan is due on demand and accrues interest at 8% per annum. As of June 30, 2018, $1,984
in interest was expensed during the six months ended June 30, 2018.
All
revenue received during 2018 was received from PT Kinerja Indonesia, which has the same control person residing at both companies.
PT Kinerja Indonesia receives payments from the portal that we license and then remits the funds back to us. We paid our sister
company $89,364 for costs associated with servicing customers and maintaining the website and license agreement during 2018.
As
of June 30, 2018, we were owed an accounts receivable balance of $61,278 and once revenues are positively earned, we owe a 1%
royalty fee on net revenues on a quarterly basis.
6.
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 2018 operating costs, and as such, has incurred an operating loss since inception. Further, as of June 30,
2018, 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.
7.
Subsequent Events
From
July 1, 2018 to August 14, 2018, there were new issuance of shares for Lawrence Partners LLC and Crown Bridge Partners LLC amounting
to 416,667 shares and 200,000 shares respectively. There were also transfer of reserved shares by Tangiers Global LLC, Power Up
Lending Group Ltd and Crossover Capital Fund I, LLC amounting to 362,043 shares, 424,018 shares, and 160,000 shares respectively
resulting of the increase in the outstanding shares of the Company to 17,042,986 shares.