NOTES
TO THE FINANCIAL STATEMENTS
April
30, 2016 and 2015
NOTE
1 – ORGANIZATION AND NATURE OF BUSINESS
Mobile
Lads Corp. (“the Company”) was incorporated under the laws of the State of Nevada, U.S. on March 26, 2013. Our
business is focused on marketing products and services using short message service (SMS) technology. SMS technology involves sending
marketing offers through cell phones that target specific audiences at the last minute.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United
States of America (“U.S. GAAP”).The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Management
further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system
of internal accounting control and preventing and detecting fraud. The Company's system of internal accounting control is designed
to assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions
are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results
of operations and cash flows of the Company for the respective periods being presented.
Translation
Adjustment
For
the years ended April 30, 2016 and 2015, the accounts of the Company were maintained, and its financial statements were expressed,
in both Canadian and US dollars. The Canadian financial statements were translated into USD in accordance with the
Foreign Currency Matters Topic of the Codification (ASC 830), with the CAD as the functional currency. According to
the Codification, all assets and liabilities were translated at the current exchange rate at respective balance sheets dates,
members’ capital are translated at the historical rates and income statement items are translated at the average exchange
rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with the
Comprehensive Income Topic of the Codification (ASC 220), as a component of members’ capital. Transaction gains
and losses are reflected in the income statement.
Comprehensive
Income
The
Company uses SFAS 130 “Reporting Comprehensive Income” (ASC Topic 220). Comprehensive income is comprised
of net income and all changes to the statements of members’ capital, except those due to investments by members, changes
in paid-in capital and distributions to members. Comprehensive income for the years ended April 30, 2016 and 2015 is included
net income and foreign currency translation adjustments.
Use
of estimates
The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Reclassifications
Certain
reclassifications have been made to the prior year financial information to conform to the presentation used in the financial
statements for the year ended April 30, 2016.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents.
There were no cash equivalents as of April 30, 2016 and 2015.
Intangible
assets
Intangible
assets are carried at cost and amortized over their estimated useful lives, generally on a straight-line basis over three years.
The Company reviews identifiable amortizable intangible assets to be held and used for impairment whenever events or changes in
circumstances indicate that the carrying value of the assets may not be recoverable. Determination of recoverability is based
on the lowest level of identifiable estimated undiscounted cash flows resulting from use of the asset and its eventual disposition.
Measurement of any impairment loss is based on the excess of the carrying value of the asset over its fair value.
Fair
Value of Financial Instruments
The
Company’s financial instruments consist of cash and cash equivalents and amounts due to shareholder. The carrying amount
of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing
market rates unless otherwise disclosed in these financial statements.
ASC
Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments
held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation
hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying
amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments and are a
reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their
expected realization and their current market rate of interest.
The
three levels of valuation hierarchy are defined as follows:
|
·
|
Level 1.
Observable inputs such as quoted prices in active markets;
|
|
·
|
Level 2.
Inputs, other than the quoted prices in active markets, that are observable either directly
or indirectly;
|
|
·
|
Level 3.
Unobservable inputs in which there is little or no market data, which require the reporting
entity to develop its own assumptions.
|
Income
Taxes
The
Company follows Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets
and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax
returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and
tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected
to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than
not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Income in the period
that includes the enactment date.
The
Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”) with regards
to uncertainty income taxes. Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to
be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize
the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination
by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements
from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of
being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest
and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material
adjustments to its liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.
Stock-based
Compensation
We
account for equity-based transactions with nonemployees under the provisions of ASC Topic No. 505-50,
Equity-Based Payments
to Non-Employees
(“ASC 505-50”). ASC 505-50 establishes that equity-based payment transactions with nonemployees
shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever
is more reliably measurable. The fair value of common stock issued for payments to nonemployees is measured at the market price
on the date of grant. The fair value of equity instruments, other than common stock, is estimated
using
the Black-Scholes option valuation model. In general, we recognize the fair value of the equity instruments issued as deferred
stock compensation and amortize the cost over the term of the contract.
We
account for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718,
Compensation—Stock
Compensation,
which requires all share-based payments to employees, including grants of employee stock options, to be recognized
in the financial statements based on their fair values. The fair value of the equity instrument is charged directly to compensation
expense and credited to additional paid-in capital over the period during which services are rendered.
Basic
Income (Loss) Per Share
Basic
income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted
average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net
income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted
weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt
or equity. As of April 30, 2016, there were 2,000,000 common stock equivalents (Note 5). Our diluted loss per share is the same
as the basic loss per share for the years ended April 30, 2016 and 2015, as the inclusion of any potential shares would have had
an anti-dilutive effect due to our generating a loss.
Recent
Accounting Pronouncements
In
November 2015, the FASB issued ASU No. 2015-17,
Balance Sheet Classification of Deferred Taxes
. The new guidance requires
that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance
sheet. This update is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods.
The Company does not anticipate the adoption of this ASU will have a significant impact on its consolidated financial position,
results of operations, or cash flows.
In
February 2016, the FASB issued ASU No. 2016-02,
Leases (Topic 842)
. The guidance in ASU No. 2016-02 supersedes the lease
recognition requirements in ASC Topic 840,
Leases (FAS 13)
. ASU 2016-02 requires an entity to recognize assets and liabilities
arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures.
ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently
evaluating the effect this standard will have on its consolidated financial statements.
In
March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share Based Payment Accounting, to simplify several aspects
of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either
equity or liabilities, and classification on the statement of cash flows. The guidance will be effective for annual periods beginning
after December 15, 2016 and interim periods within those annual periods. Early adoption is permitted, including adoption in an
interim period. The Company is currently evaluating the impact of the adoption of this newly issued guidance to its consolidated
financial statements.
The
Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact
on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting
pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE
3 – GOING CONCERN
The
accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business. The Company has had no revenue and has accumulated a deficit
of $
3,958,707
as
of April 30, 2016. The Company requires capital for its contemplated operational and marketing activities. The Company’s
ability to raise additional capital through the future issuances of common stock is unknown. The obtainment of additional financing,
the successful development of the Company’s contemplated plan of operations, and its transition, ultimately, to the attainment
of profitable operations are necessary for the Company to continue operations. These conditions and the ability to successfully
resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern within one year
from the date these financial statements are issued. The financial statements of the Company do not include any adjustments that
may result from the outcome of these uncertainties.
The
Company has discussed ways in order to mitigate conditions or events that may raise substantial doubt about its ability to continue
as a going concern, there are no assurances that any of these measures will successfully mitigate or be effective at all. (1)
The Company shall pursue financing plans to raise funds to judiciously spend towards operational expenses, (2) The Company shall
continue to employ low cost measures to operate its business and analyze any unnecessary cost or expense, (3) The Company will
seek to avoid unnecessary expenditures, travel, and lodging costs that are not mission critical to its business.
NOTE
4 – INTANGIBLE ASSETS
Effective
March 31, 2015, the Company finalized an asset purchase agreement with KZRP Partners. The assets purchased include software, intellectual
property, code, processes and other software and processes known as “Coubox”. The purchase price is $150,000 to be
paid with the issuance of 1,000,000 shares of common stock. As of April 30, 2016, the shares have not yet been issued and are
therefore shown as a stock payable in the financial statements. The assets will be amortized over their estimated useful life
of three years.
Assets
stated at cost, less accumulated amortization consisted of the following:
|
|
April 30, 2016
|
|
April 30, 2015
|
Intangible asset
|
|
$
|
150,000
|
|
|
$
|
150,000
|
|
Less: accumulated amortization
|
|
|
(54,171
|
)
|
|
|
(4,167
|
)
|
Intangible assets, net
|
|
$
|
95,829
|
|
|
$
|
145,833
|
|
Amortization
expense for the years ended April 30, 2016 and 2015, were $50,004 and $4,167, respectively.
As
of April 30, 2016, the Company performed an impairment analysis and determined there had been no impairment to the value of its
intangible assets as recorded on the balance sheet.
Future
amortization expense is as follows:
|
2017
|
|
|
$
|
50,000
|
|
|
2018
|
|
|
|
45,829
|
|
|
|
|
|
$
|
95,829
|
|
NOTE
5 – WARRANTS
On
April 29, 2016, pursuant to the terms of a stock purchase agreement, the Company granted a warrant to purchase 2,000,000 shares
of common stock. The warrant vested immediately upon grant. The aggregate fair value of the vested warrant totaled $141,197 based
on the Black-Scholes-Merton pricing model using the following estimates: exercise price of $0.15, stock price of $0.09, 0.77%
risk free rate, 194% volatility, and expected life of the warrant of 2 years.
|
|
Shares Available to Purchase with Warrants
|
|
Weighted
Average
Price
|
|
Weighted
Average
Fair Value
|
|
|
|
|
|
|
|
|
Outstanding, April 30, 2015
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued
|
|
|
|
2,000,000
|
|
|
|
0.15
|
|
|
|
0.07
|
|
|
Exercised
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Cancelled
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Expired
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Outstanding, April 30, 2016
|
|
|
|
2,000,000
|
|
|
$
|
0.15
|
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, April 30, 2016
|
|
|
|
2,000,000
|
|
|
$
|
0.15
|
|
|
$
|
0.07
|
|
Range of Exercise Prices
|
|
Number Outstanding 4/30/2016
|
|
Weighted Average Remaining Contractual Life
|
|
Weighted Average Exercise Price
|
$
|
0.15
|
|
|
|
2,000,000
|
|
|
|
2 years
|
|
|
$
|
0.15
|
|
NOTE
6 – COMMON STOCK
On
January 14, 2016, the Company increased the authorized capital stock from 250 million shares of common stock to 950 million shares
of common stock.
On
January 19, 2016, the Company issued 14,000,000 shares of common stock to a director, for director and consulting services. The
shares were valued at the closing price on the date of grant for total non-cash expense of $1,365,000.
On
January 19, 2016, the Company issued 14,100,000 shares of common stock for consulting services. The shares were valued at the
closing price on the date of grant for total non-cash expense of $1,353,002.
On
February 1, 2016, 50,000,000 shares of common stock were issued to Leagoo Canada Inc. (“Leagoo”). Leagoo is owned
by Muhammad Afzal Khan, a Director and Director of Business Development. The shares were issued as payment for an invoice for
the purchase of inventory. The inventory was delivered subsequent to April 30, 2016 so the purchase price of $1,438,491 has been
debited prepaid inventory.
During
the year ended April 30, 2016, the Company sold 7,600,000 shares of common stock for total cash proceeds of $378,606.
During
the year ended April 30, 2016, the Company converted $384,593 of related party debt into 120,941,105 shares of common stock. No
gain or loss was recognized on the conversion.
NOTE
7 – PREFERRED STOCK
On
January 14, 2016, the Company created a new class of 10,000,000 shares of preferred stock, par value $0.00001.
On
January 20, 2015, the Company filed a Certificate of Designation of Series A Preferred Stock with the Nevada Secretary of State
designating 1,000,000 of the Company's previously authorized preferred stock. Each share of Series A Preferred Stock entitles
the holder thereof to one thousand votes per share on all matters to be voted on by the holders of the Company’s common
stock and is not convertible into any shares of the Company's common stock. With respect to rights on liquidation, dissolution
or winding up, shares of Series A Preferred Stock rank on a parity with the Company's common stock.
On
January 25, 2016, the Company authorized the issuance of 500,000 shares of Series A Preferred Stock to its Chairman and CEO. The
shares were valued at $0.001 as there is no active market for the preferred stock and they are not convertible to common. The
issuance of the Series A Preferred was made in consideration for services provided to the Company for total non-cash compensation
of $500.
On
January 25, 2016, the Company authorized the issuance of 500,000 shares of Series A Preferred Stock to a consultant. The
shares were valued at $0.001 as there is no active market for the preferred stock and they are not convertible to common. The
issuance of the Series A Preferred was made in consideration for services provided to the Company for total non-cash compensation
of $500.
NOTE
8 – RELATED PARTY TRANSACTIONS
On
February 1, 2016, 50,000,000 shares of common stock were issued to Leagoo Canada Inc. (“Leagoo”). Leagoo is owned
by Muhammad Afzal Khan, a Director and Director of Business Development. The shares were issued as payment for an invoice for
the purchase of inventory. The inventory was delivered subsequent to April 30, 2016 so the purchase price of $1,438,491 has been
debited prepaid inventory.
As of April 30, 2016, the Company owed
a shareholder $45,000 for consulting services.
Loans
Payable
As
of April 30, 2016 and 2015, the Company owed companies owned by Michael A. Paul, CEO a total of $180,675 and $260,776, respectively.
Funds were advanced to pay for legal, auditing, consulting fees and other general operating costs. The advances are unsecured,
bear interest at 12% and due on demand. In March 2016, $230,015 was converted into 72,331,800 shares of common stock. As of April
30, 2016 there is $16,221 of accrued interest still due.
During
the year ended April 30, 2016, Steve Katmarian an independent contractor for the Company, made a series of loans to the Company
for a total due of $154,578. The loans were unsecured, non-interest bearing and due on demand. On November 1, 2015, the terms
of the note were renegotiated to include a 12% interest rate per annum. In March 2016, the $154,578 was converted into 48,609,305
shares of common stock. As of April 30, 2016 there is $10,142 of accrued interest still due.
The
above amounts are not necessarily indicative of the amounts that would have been incurred had a comparable transaction been entered
into with independent parties.
NOTE
9 – COMMITMENTS
Operating
Leases
The
Company currently leases four units in Oakville, Ontario, Canada. The first unit was leased on February 1, 2015. Monthly rent
is $1,850 plus additional charges for utilities and other office expense. The second unit was leased on November 1, 2015. Monthly
rent is $2,947 plus additional charges for utilities and other office expense. The third unit was leased on January 1, 2016. Monthly
rent is $3,453 plus additional charges for utilities and other office expense. The fourth unit was leased on April 1, 2016. Monthly
rent is $1,850 plus additional charges for utilities and other office expense. All lease agreements are on a month to month basis.
In total the Company pays $10,100 for its monthly rent expense. For the years ended April 30, 2016 and 2015 the Company paid approximately
$51,900 and $1,100, respectively for rent expense.
NOTE
10 – INCOME TAXES
Deferred
taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating
loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences
are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment.
The
provision for Federal income tax consists of the following April 30:
|
|
2016
|
|
2015
|
Federal income tax benefit attributable to:
|
|
|
|
|
|
|
|
|
Current Operations
|
|
$
|
1,237,000
|
|
|
$
|
98,219
|
|
Less: valuation allowance
|
|
|
(1,237,000
|
)
|
|
|
(98,219
|
)
|
Net provision for Federal income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
The
cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:
|
|
2016
|
|
2015
|
Deferred tax asset attributable to:
|
|
|
|
|
|
|
|
|
Net operating loss carryover
|
|
$
|
1,346,000
|
|
|
$
|
109,065
|
|
Less: valuation allowance
|
|
|
(1,346,000
|
)
|
|
|
(109,065
|
)
|
Net deferred tax asset
|
|
$
|
—
|
|
|
$
|
—
|
|
At
April 30, 2016, the Company had net operating loss carry forwards of approximately $4,000,000 that may be offset against
future taxable income from the year 2017 to 2036. No tax benefit has been reported in the April 30, 2016 financial statements
since the potential tax benefit is offset by a valuation allowance of the same amount.
Due
to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal Income tax
reporting purposes are subject to annual limitations. Should a change in ownership occur net operating loss carry forwards may
be limited as to use in future years.
With
few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for
years before 2012.
NOTE
11 – SUBSEQUENT EVENTS
In
accordance with SFAS 165 (ASC 855-10) management has performed an evaluation of subsequent events through the date that the financial
statements were available to be issued and through the date of the filing, and has determined that it has the following material
subsequent events to disclose in these financial.
Subsequent
to April 30, 2016, the Company issued 2,000,000 shares of common stock for services.
Subsequent
to April 30, 2016, the Company issued 1,500,000 shares of common stock for total proceeds of $75,000.
Subsequent
to April 30, 2016 the Company acquired two wholly owned subsidiaries. The first, Fonia Mobile Inc. was incorporated on May
15, 2016, and was acquired on June 1, 2016. The second, 2440499 Ontario Inc., was incorporated on November 3, 2014 and was acquired
by Mobile Lads on Dec 01, 2016. Financial information was not available for either company; therefore, the Company was unable
to provide proforma financial statements.