Note: All share and per share information has been restated for all periods presented giving retroactive effect of the April 11, 2016 approved four to one forward stock split (see note 8).
The accompanying notes are an integral part of these condensed consolidated financial statements
The accompanying notes are an integral part of these condensed consolidated financial statements
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of June 30, 2016
1.
Condensed financial statements
The accompanying unaudited condensed consolidated financial statements are presented in United States dollars and are prepared using the accrual method of accounting which conforms to generally accepted accounting principles in the United States of America ("US GAAP") for interim financial reporting and the instructions for Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all information and footnote disclosures necessary for a complete presentation of the financial position, results of operations, cash flows, and stockholders equity in conformity with generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.
The unaudited condensed consolidated balance sheet of the Company as of June 30, 2016, and the related consolidated balance sheet of the Company as of March 31, 2016, which is derived from the Company's audited financial statements, the unaudited condensed consolidated statement of operations and cash flows for the Three Months ended June 30, 2016 and 2015 and the condensed consolidated statement of stockholders equity for the period of March 31, 2015 to June 30, 2016 and are included in this document. These unaudited condensed consolidated financial statements should be read in conjunction with the March 31, 2016 audited financial statements and related notes included in the Company's most recent Form 10-K as filed with the Securities and Exchange Commission on July 18, 2016.
Operating results for the Three Months ended June 30, 2016 are not necessarily indicative of the results that can be expected for the year ending March 31, 2017.
2. Nature of operations
Madison Ventures Inc. ("Company") was incorporated in the State of Nevada as a for-profit company on September 14, 2009 and established a fiscal year end of March 31. The Company initially was engaged in the acquisition, exploration and development of natural resource properties. On February 27, 2015, the Company terminated the acquisition of the mineral claim and entered into a letter of intent with Ocure Ltd. ("Ocure"), pursuant to which the Company agreed to exclusively license certain technology from Ocure related to the development of products and devices for the treatment of anal fissures (the "Ocure LOI"). On July 9, 2015, the Company established the wholly-owned subsidiary Madison-IL Ltd., incorporated under the laws of the country of Israel to address the Company's requirement for an Israeli company to operate and hold the assets associated with Ocure LOI. The Company has no revenues and has limited operating history.
The success of the Company is dependent upon the development of products for the treatment of anal fissures, the ability of the Company to obtain the necessary financing to complete the acquisition, development and commercialize of the Licensed Technology, and upon future profitable operations.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods presented. The Company is required to make judgments and estimates about the effect of matters that are inherently uncertain. The Company regularly evaluates estimates and assumptions related to the useful life and recoverability of long-lived assets, deferred income tax asset valuations and loss contingences. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. Although, we believe our judgments and estimates are appropriate, actual future results may be different; if different assumptions or conditions were to prevail, the results could be materially different from our reported results.
Madison Ventures Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of June 30, 2016
2. Nature of operations (continued)
License Agreement
On February 27, 2015, we entered into a letter of intent (the "Letter of Intent") with Ocure Ltd. ("Ocure"), an Israeli corporation, pursuant to which the Company would be obligated to exclusively license certain technology from Ocure under terms of a license agreement to be negotiated between the Company and Ocure. The Letter of Intent terminated when the Company did not make the second required payment, however the Company continued to negotiate with Ocure. On August 5, 2015, as amended February 26, 2016, the company entered into an exclusive license agreement (the "License Agreement") with Ocure and Madison-IL Ltd., a wholly-owned subsidiary of the Company incorporated in Israel on July 9, 2015 (the "Subsidiary"). Pursuant to the License Agreement, Ocure granted to the Subsidiary an exclusive, sub-licensable, worldwide, license (the "License") to Ocure's semi-occlusive wound dressing for ambulatory treatment of acute and chronic anal fissure, pursuant to Ocure's patents and patent applications (the "Licensed Technology") and to its production, use, import, offer for sale, sell, lease, distribute, or otherwise commercialize the Licensed Technology for uses classified as medical devices, or those otherwise approved ultimately as an OTC (over-the-counter) remedy.
Under the License Agreement, the Company is obligated as consideration for the Licensed Technology to provide the Subsidiary $250,000 for the commercialization of the Licensed Technology, payable according to the following schedule: $10,000 upon execution of the Letter of Intent (paid February 27, 2015 to Ocure), $90,000 at the later of May 11, 2015 or the final signing date of the License Agreement (the "Effective Date"), and $50,000 on or before March 4, 2016, and $100,000 on or before April 8, 2016 (collectively, the "First $250,000 Tranche"). The Effective Date will occur upon satisfaction of the Condition Precedent, as defined in the License Agreement, and approval of the Agreement by the Chief Scientist of the Israeli Ministry of the Economy. The License Agreement Effective Date is November 11, 2015; the date approval of the Chief Scientist of the Israeli Ministry of the Economy was received. Upon the 6-month anniversary of the Effective Date, if the Company has paid the First $250,000 Tranche, then Ocure will transfer certain assets, as defined, to the Subsidiary, and the Company will be obligated to provide the Subsidiary a second $250,000 tranche, payable as follows: $100,000 on or before August 12, 2016, $100,000 on or before September 23, 2016, and $50,000 on or before October 28, 2016. The License Agreement terminates, on a country-by-country basis, the later of: (a) the date of expiration of the last to expire of Ocure's rights in Ocure Patents in such country or such other grant of statutory exclusivity, or (b) the end of a period of fifteen (15) years from the date of making the first commercial sale, as defined, in such country; unless sooner terminated pursuant to the terms of the License Agreement. As of June 30, 2016 and March 31, 2016, the Company has advanced $221,850 and $131,850, respectively, to the Subsidiary and paid Ocure $10,000 in furtherance of the commercialization of the Licensed Technology.
Immediately after the Effective Date of the License Agreement and for the period ending March 31, 2016 (as amended), the shareholders of Ocure and certain individuals designated by Ocure will have opportunity to purchase up to an aggregate of 7,100,000 (1,775,000 presplit) shares of the Company's Common Stock at the par value of $0.001 per share. In addition, the Company will establish an incentive stock option plan reserving up to 20% of the Company's issued share capital, as of the closing. The right to purchase an aggregate of 7,100,000 (1,775,000 presplit) shares of the Company's Common Stock expired unexercised, but by mutual agreement the purchase right will be extended under similar terms.
In consideration of the license for the Licensed Technology and with respect to any inventions, improvement, development or enhancement based upon, consists of, comprises, contains or incorporates the Licensed Technology invented following the Effective Date by the Subsidiary, its affiliate or sublicensee (the "New Inventions"), the Subsidiary will pay to Ocure royalties calculated as 5% of gross sales. In addition, the Subsidiary will pay to Ocure 20% of any cash or non-cash consideration received, whether for sublicense initiation fee, annual fee, sublicense milestone payments, or other such non-sale based royalty consideration payable by a sublicense as consideration for or under a sublicense.
Madison Ventures Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of June 30, 2016
2. Nature of operations (continued)
Mineral Properties
Mineral property acquisition costs are capitalized in accordance with Codification topic 930 "Extractive Activities - Mining". Mineral property pre-exploration and exploration costs are expensed as incurred. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to develop such property are capitalized. The Company did not establish any reserves on its mineral properties prior to terminating its option under the Revised and Restated Mineral Property Option Agreement (see footnote 3).
Rehabilitation Provisions
The Company was subject to various government laws and regulations relating to environmental disturbances which are caused by exploration and evaluation activities. The Company will record the present value for the estimated costs of legal and constructive obligations required to restore the exploration sites in the period in which the obligation is incurred. The nature of the rehabilitation activities includes restoration, reclamation and re-vegetation of the affected exploration sites. The Company has determined that there were no rehabilitation provisions at February 27, 2015 when the option to acquire the mineral claim was terminated.
Share-based Compensation
Codification topic 718 "Stock Compensation" requires that the cost resulting from all share-based transactions be recorded in the financial statements and establishes fair value as the measurement objective for share-based payment transactions with employees and acquired goods or services from non-employees. The codification also provides guidance on valuing and expensing these awards, as well as disclosure requirements of these equity arrangements. The Company adopted the codification upon creation of the company and will expense share based costs in the period incurred. The Company has not adopted a stock option plan or completed a share-based transaction; accordingly no stock-based compensation has been recorded to date.
Recent Accounting Pronouncements
The Company's management has evaluated all the recently issued, but not yet effective, accounting standards that have been issued or proposed by the FASB or other standards-setting bodies through the filing date of these financial statements and does not believe the future adoption of any such pronouncements will have a material effect on the Company's financial position and results of operations.
3. Mineral claim
On March 3, 2012, the Company entered into a Revised and Restated Mineral Property Option Agreement with 3 individuals (the "Optionors") for an exclusive and irrevocable three year option to acquire a 100% undivided interest in three contiguous unpatented mining claims comprising 34 units (the "Claim" or the "Property") situated in the Thunder Bay Mining Division in the province on Ontario, Canada (the "Agreement"). The option payments aggregating $30,000 (U.S. Dollars) (the "Option Price") were due: i) $15,000 upon signing but deferred for eight months, ii) $5,000 on or before March 3, 2013, iii) $5,000 on or before March 3, 2014, and iv) $5,000 on or before March 3, 2015 (the "Option Payments"). During the term of the Agreement the Company is granted free and unrestricted access and use of the Property to act as the operator of the Property with the right to bring buildings, plant, equipment, machinery, tools, appliances and supplies onto the Property. The Optionors hold title to the Property until the full payment of the Option Price. Upon full payment of the Option Price the Optionors would deliver a duly executed transfer of mining claims in respect of the Property to transfer a 100% undivided interest in the Property to the Company free and clear of all encumbrances except for a retained net smelter return royalty (the "NSR"). The NSR is a 2% royalty paid within 30 days of each calendar month calculated, as defined, from gross Property revenues less permissible deductions. The Company had the right, at any time, to reduce the NSR to a 1% royalty by a One Million Dollar payment to the Optionors.
Madison Ventures Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of June 30, 2016
3. Mineral claim
(continued)
Upon the February 27, 2015 termination of the Agreement had the Company brought any buildings, plant, equipment, machinery, tools, appliances and supplies onto the Property it would have been responsible to remove all such items not later than twelve months after termination of the Agreement unless arrangements are made with the Optionors to retain some or all of the items brought onto the Property.
The Company deferred the first option payment for an eight month term and made the $15,000 payment on October 27, 2012. Upon execution of the Agreement, the Company recorded the first option payment net of imputed interest as $14,984 and accrued the imputed interest ratably over the deferral period. Annually the Company had the option to retain the mineral claim and make the next contractual Option Payment or to terminate the Agreement. The Company made the March 3, 2013 Option Payment on March 1, 2013 and the March 3, 2014 Option Payment on February 25, 2014. On February 27, 2015, the Company concluded to terminate the Agreement and not make the final Option Payment. The aggregate total of $24,984 previously included in the mineral claim was expensed as a discontinued operation.
Previously in response to the new GPS standards for unpatented claims issued by the Ontario Ministry of Northern Development and Mines, the Company expended $1,975 to provide upgraded geo-referenced location information on its Claim during the quarter ended September 30, 2013. An aggregate total of zero and $1,975 have been expensed for exploration and evaluation of the Company's Claim as of March 31, 2015 and 2014, respectively.
4. Investment in technology license
On August 5, 2015, as amended February 26, 2016, the company entered into an exclusive license agreement (the "License Agreement") with Ocure and Madison-IL Ltd., a wholly-owned subsidiary of the Company incorporated in Israel on July 9, 2015 (the "Subsidiary"). Pursuant to the License Agreement, Ocure granted to the Subsidiary an exclusive, sub-licensable, worldwide, license (the "License") to Ocure's semi-occlusive wound dressing for ambulatory treatment of acute and chronic anal fissure, pursuant to Ocure's patents and patent applications (the "Licensed Technology") and to its production, use, import, offer for sale, sell, lease, distribute, or otherwise commercialize the Licensed Technology for uses classified as medical devices, or those otherwise approved ultimately as an OTC (over-the-counter) remedy.
Under the License Agreement, the Company is obligated as consideration for the Licensed Technology to provide the Subsidiary $250,000 for the commercialization of the Licensed Technology, payable according to the following schedule: $10,000 upon execution of the Letter of Intent, $90,000 at the later of May 11, 2015 or the final signing date of the License Agreement (the "Effective Date"), and $50,000 on or before March 4, 2016, and $100,000 on or before April 8, 2016 (collectively, the "First $250,000 Tranche"). The License Agreement Effective Date is November 11, 2015; the date approval of the Chief Scientist of the Israeli Ministry of the Economy was received. Upon the 6-month anniversary of the Effective Date, if the Company has paid the First $250,000 Tranche, then Ocure will transfer certain assets, as defined, to the Subsidiary, and the Company will be obligated to provide the Subsidiary a second $250,000 tranche, payable as follows: $100,000 on or before August 12, 2016, $100,000 on or before September 23, 2016, and $50,000 on or before October 28, 2016. The License Agreement terminates, on a country-by-country basis, the later of: (a) the date of expiration of the last to expire of Ocure's rights in Ocure Patents in such country or such other grant of statutory exclusivity, or (b) the end of a period of fifteen (15) years from the date of making the first commercial sale, as defined, in such country; unless sooner terminated pursuant to the terms of the License Agreement. As of June 30, 2016 and March 31, 2016, the Company has advanced $221,850 and $131,850, respectively, to the Subsidiary and paid Ocure $10,000 in furtherance of the commercialization of the Licensed Technology.
As of June 30, 2016 and March 31, 2016, the Company has expended and aggregate of $169,606 and $70,998 recorded as the investment in technology license, respectively.
The Company was in default of its payment schedule by June 30, 2016 and no assets had been transferred to the Company's subsidiary. As of the date of filing of this 10-Q, the Company is also in default of its $100,000 payment that was due August 12, 2016. There is no extension agreement or amendment negotiated, and there is a risk that the License will be cancelled.
Madison Ventures Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of June 30, 2016
5. Due to related party
Due to related parties at June 30, 2016 and March 31, 2016 consisted of the following:
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
|
2016
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
213,442
|
|
|
$
|
25,523
|
|
|
Funds advanced
|
|
|
-
|
|
|
|
187,919
|
|
|
Funds repaid
|
|
|
-
|
|
|
|
-
|
|
|
Funds forgiven
|
|
|
-
|
|
|
|
-
|
|
|
Balance at end of period
|
|
$
|
213,442
|
|
|
$
|
213,442
|
|
On July 3, July 8, July 10, August 12, November 12, November 13, 2014, January 23, February 27, March 5, May 16, June 17, June 30, July 6, August 13, November 17, 2015, February 13, February 20, March 7, and March 17,2016 a shareholder of the Company advanced the Company $2,000, $775, $1,460, $2,000, $2,000, $1,763, $2,000, $10,000, $3,525, $4,093, $2,755, $1,083, $5,000, $3,000, $2,041, $961, $5,000, $3,300, and $50,000, respectively, as a series of unsecured obligations. The funds aggregating $102,756 were used to pay operating costs of the Company. The aggregate obligations bears no interest, has no fixed term and is not evidenced by any written agreement. The shareholder is under no obligation to advance additional funds to the Company.
On December 3, December 24, 2015, January 4, January 6, and January 15, 2016 a shareholder of the Company advanced the Company $37,473, $7,500, $7,326, $8,412, and $49,975, respectively, as a series of unsecured obligations. The funds aggregating $110,686 were used to pay operating costs of the Company. On January 8, 2016, the aggregate advances received and future advances were structured as a noninterest bearing unsecured non-recourse loan due January 31, 2017. The shareholders, if requested by the Company, agreed to advance additional funds to the Company up to a maximum of $250,000 subject to certain timing limitation as defined.
6.
Long-term debt
Long term debt at June 30, 2016 and March 31, 2016 consisted of the following:
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
|
2016
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Funds advanced
|
|
|
110,000
|
|
|
|
-
|
|
|
Funds repaid
|
|
|
-
|
|
|
|
-
|
|
|
Balance at end of period
|
|
$
|
110,000
|
|
|
$
|
-
|
|
On April 18, 2016, the Company entered into a five year non-interest bearing loan agreement for $110,000. Proceeds were used to fund the Technology acquisition and operations. If the loan is not repaid on or before April 15, 2021 the loan amount will be subject to default interest on the amount then outstanding of ten percent (10%) per month during the first 30 days of delinquency, fifteen percent (15%) per month during the 31 to 60 days of delinquency, twenty percent (20%) per month during the 61 to 90 days of delinquency (the "Default Interest"). If the loan amount remains unpaid after 90 days the lender, at its option, will be entitled to a default payment of one hundred fifty-nine percent (159%) of the then outstanding loan amount inclusive of the Default Interest.
Madison Ventures Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
As of June 30, 2016
7. Related party transactions
Employment Agreements
On April 2, 2014, Mr. Gene Gregorio was appointed the Company's President, Chief Executive Officer, Chief Financial Officer and sole Director. On April 20, 2014, the Company agreed to issue Mr. Gregorio 1,000,000 (250,000 presplit) restricted shares of the Company's Common Stock, valued at $25,000, based on the market close, as compensation for his services for an initial term of one year (the "April 20
th
Agreement"). On March 31, 2015, the Company issued Mr. Gregorio the agreed 250,000 restricted shares of the Company's Common Stock. At March 31, 2015, $1,387 was recorded as a prepaid expense for the period April 1 to April 20, 2015.
In addition, if during the term of the April 20
th
Agreement Mr. Gregorio's direct efforts result in a consummated financing for the Company he shall be paid a 5.0% fee on such financing received by the Company, at his option, as either cash or shares of Company's Common Stock at the offering price. Additionally, the Company will grant Mr. Gregorio a 2 year stock option priced at the current market trading price equal to 5% of the aggregate shares issued to investors within the financing.
On April 14, 2015, the April 20
th
Agreement with Mr. Gene Gregorio was extended for a second year under the same terms and conditions. Mr. Gregorio will be issued 1,000,000 (250,000 presplit) restricted shares of the Company's Common Stock, valued at $25,000, based on the market close, as compensation for his services for the second year the extended April 20
th
Agreement. At June 30, 2016, $25,000 was recorded as an accrued liability for the period April 21, 2015 to April 20, 2016.
On August 9, 2016, the Company issued Mr. Gregorio the agreed 1,000,000 (presplit 250,000) restricted shares of the Company's Common Stock.
8. Going concern
These financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company anticipates future losses in the development of its business raising substantial doubt about the Company's ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. The Company's operating expenditure plan for the next fiscal year ending March 31, 2017 will require cash of approximately $500,000. Management intends to finance operating costs over the next twelve months with the issuance of common shares and/or related party borrowings.
9. Capital stock
The Company's capitalization is 300,000,000 shares of common stock, with a par value of $0.001 per share, with 28,400,000 shares issued and outstanding at March 31, 2016 and 2015. On April 11, 2016, the Company effected a four for one forward stock split of our i) authorized and ii) issued and outstanding shares of common stock. All share information has been restated for all periods presented giving retroactive effect of the April 11, 2016 four to one forward stock split. Prior to the forward stock split the Company had 75,000,000 authorized shares of common stock, with a par value of $0.001 per share and 7,100 shares issued and outstanding at March 31, 2016 and 2015.
As of June 30, 2016 and March 31, 2016, the Company has not granted any stock options or stock warrants. As a requirement of the Ocure License Agreement, the Company will establish an incentive stock option plan reserving up to 20% of the Company's issued and outstanding common stock, as of the closing of the License Agreement.
Madison Ventures Inc.
Notes to Condensed Consolidated Financial Statements
As of June 30, 2016
10
. Contingency Liability
The Licensed Technology requires an aggregate first tranche payment to the Subsidiary of $250,000 by April 8, 2016; an aggregate of $231,850 has been advanced to the Subsidiary as of June 30, 2016. Upon the 6-month anniversary of the Effective Date, if the Company has paid the First $250,000 Tranche, then Ocure will transfer certain assets, as defined, to the Subsidiary, and the Company will be obligated to provide the Subsidiary a second $250,000 tranche, payable as follows: $100,000 on or before August 12, 2016, $100,000 on or before September 23, 2016, and $50,000 on or before October 28, 2016.
11. Subsequent events
On August 9, 2016, pursuant to the terms of the April 20
th
Agreement the Company issued 1,000,000 (250,000 presplit) shares of the Company's Common Stock at Mr. Gene Gregorio the Company's President, Chief Executive Officer, Chief Financial Officer and sole Director.
On August 12, 2016, the Company failed to pay an amount due under the August 5, 2015 Licensing Agreement. The Company has not negotiated the terms of any extension and there is a substantial risk the agreement will be cancelled.