ClickStream Corp - Quarter Report: 2016 June (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended June 30, 2016

For the transition period from ___________ to ___________

Commission file number: 000-54389

 (Exact name of registrant as specified in its charter)

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 

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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 62,111,665 shares of common stock, par value $0.0001, were outstanding as of September 19, 2016.

 

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CLICKSTREAM CORP.

FORM 10-Q

 

Table of Contents

 

 

 

 

 

PART I - FINANCIAL INFORMATION

 

 

CLICKSTREAM CORP.

Condensed Consolidated Balance Sheets

		June 30				September 30,
		2016				2015
Assets:		(unaudited)
Current assets
Cash and cash equivalents		$	303			$	-
Prepaid expenses			9,500				-
Total assets		$	9,803			$	-
Liabilities and Stockholders' Deficit:
Current liabilities
Accounts payable		$	292,061			$	109,286
Accounts payable  - related parties			320,533				144,500
Note payable			10,000				-
Derivative liability			1,205,275				-
Liabilities assumed upon merger			335,550				335,550
Loan payable - shareholder			45,000				45,000
Total current liabilities			2,208,419				634,336
Commitments and Contingencies
Stockholders' Deficit:
Preferred stock,  par value $0.001, 5,000,000 shares
authorized, no shares issued and outstanding as of June 30, 2016 and September 30
2015, respectively			-				-
Common stock,  par value $0.0001, 300,000,000 shares
authorized and 62,111,665 and 60,736,665 shares issued and
outstanding as of June 30, 2016 and September 30, 2015, respectively			6,212				6,074
Additional paid in capital			1,095,710				958,348
Accumulated deficit			(3,300,538	)			(1,598,758	)
Total stockholders' deficit			(2,198,616	)			(634,336	)
Total liabilities and stockholders' deficit		$	9,803			$	-

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

CLICKSTREAM CORP.

Condensed Consolidated Statements of Operations

(Unaudited)

		For the Three Months Ended								For the Nine Months Ended
		June 30,								June 30,
		2016				2015				2016				2015
Revenues		$	-			$	-			$	-			$	-
Operating Expenses:
Consulting and professional fees			15,344				-				1,195,888				64,800
Consulting and professional fees - related party			66,833				-				184,833				-
Research and development			30,800				-				30,800				50,575
General and administrative			12,551				366				23,206				50,356
Loss from Operations			125,528				366				1,434,727				165,731
Other Expense
Change in fair value of derivative liability			7,010,944				-				(267,053	)			-
Total Other Expense			7,010,944				-				(267,053	)			-
Net Income (Loss)		$	6,885,416			$	(366	)		$	(1,701,780	)		$	(165,731	)
Net income (loss)
Basic		$	0.11			$	(0.00	)		$	(0.03	)		$	(0.00	)
Diluted		$	0.10			$	(0.00	)		$	(0.03	)		$	(0.00	)
Weighted average common shares outstanding
Basic			62,111,665				60,236,665				61,860,753				59,897,249
Diluted			71,278,810				60,236,665				61,860,753				59,897,249

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

CLICKSTREAM CORP.

Condensed Consolidated Statements of Stockholders' Deficit

For the Nine Months Ended June 30, 2016 (unaudited)

		Common Stock								Additional Paid in				Accumulated
		Shares				Amount				Capital				Deficit				Total
Balance, September 30, 2015			60,736,665			$	6,074			$	958,348			$	(1,598,758	)		$	(634,336	)
Fair value of common shares issued for services			1,375,000				138				137,362								137,500
Net Loss															(1,701,780	)			(1,701,780	)
Balance, June 30, 2016			62,111,665			$	6,212			$	1,095,710			$	(3,300,538	)		$	(2,198,616	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

CLICKSTREAM CORP.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

		For the Six Months Ended
		June 30,
		2016				2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(1,701,780	)		$	(165,731	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Fair value of warrants issued for services accounted as derivative liability			938,222				-
Change in fair value of derivative liability			267,053				-
Fair value of common shares issued for services			137,500				-
Changes in operating liabilities
Increase in prepaid expenses			(9,500	)			-
Increase in accounts payable and accounts payable - related party			358,808				-
Net Cash Provided by (Used in) Operating Activities			(9,697	)			(165,731	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable			10,000
Proceeds from sale of common stock			-				100,000
Net Cash Provided by Financing Activities			10,000				100,000
Net Increase (Decrease)  in Cash			303				(65,731	)
Cash at Beginning of Period			-				65,731
Cash at End of Period			303				-
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest		$	-			$	-
Income taxes paid		$	-			$	-

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

CLICKSTREAM CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended June 30, 2016 and 2015 (Unaudited)

 

Note 1: Organization and Business

 

 

We were incorporated in the state of Nevada on September 30, 2005 and previously operated under the name Peak Resources Incorporated. In August 2008, we changed our name to “Mine Clearing Corporation” (MCCO). The Company had been operating as an exploration division in the mining sector until May 2014.

 

On May 2, 2014, the Company acquired all of the outstanding shares of ClickStream Corporation, a Delaware corporation (“CS Delaware”), pursuant to a merger into a wholly-owned subsidiary of the Company.  Subsequent to the merger, we have been operating as a data analytics tool developer and have sought to further develop and exploit our data analytics technology and proprietary algorithms.

 

 

ClickStream is a technology based data analytics company focused on development of analytical tools for high volume data analysis and related internet trends and associations.  We are currently in late-stage development of a fantasy sports analytical service platform, DraftClick.

 

DraftClick is designed to assist in the fantasy sport player’s ability to monitor changes in betting lines, breaking news releases, injury reports, real-time discussions in sports forums, fan sentiment, historical matchup data and other sources of data by incorporating all of this information into prediction results.  These results are then presented using a tailored version of DraftClick's user interface which has been designed to enable seamless transition of player selections to fantasy game sites such as DraftKingsTM and FanDuelTM.  We plan to launch DraftClick in the Fall of 2016.

NOTE 2 – Basis of Presentation and Going Concern

 

The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") as promulgated in the United States of America ("U.S.") and with instructions to Form 10-Q pursuant to the rules and regulations of Securities and Exchange Act of 1934, as amended (the "Exchange Act") and Article 8-03 of Regulation S-X under the Exchange Act. Accordingly, these condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, we have included all adjustments considered necessary (consisting of normal recurring adjustments) for a fair presentation. Operating results for the three and nine months ended June 30, 2016 are not indicative of the results that may be expected for the fiscal year ending September 30, 2016. You should read these unaudited condensed consolidated financial statements in conjunction with the audited financial statements and the notes thereto included in the Company's annual report on Form 10-12 G/A (as amended) for the year ended September 30, 2015 filed on January 20, 2016. The condensed consolidated balance sheet as of September 30, 2015 has been derived from the audited financial statements included in the Form 10-12 G/A for that year.

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles which contemplate continuation of the Company as a going concern.  The Company has not yet generated any revenues, has incurred recurring net losses since inception and has a working capital deficiency.  During the nine months ended June 30, 2016, the Company incurred a net loss of $1,701,780 and as of June 30, 2016, the Company had a working capital deficiency and stockholders’ deficit of $2,198,616.  These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. In addition, our independent registered public accounting firm, in their report on our audited financial statements for the fiscal year ended September 30, 2015 expressed substantial doubt about our 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 an inability of the Company to continue as a going concern.

 

 

 

 

We are an early-stage company with a limited operating history, which makes it difficult to evaluate our current business and future prospects.  As a result, the Company has limited operating history upon which an evaluation of the ClickStream’s performance can be made.  There have been no revenues generated from our business operations and we expect to incur further losses in the foreseeable future due to significant costs associated with our business development.  There can be no assurance that our operations will ever generate sufficient revenues to fund our continuing operations, or that we will ever generate positive cash flow from our operations, or that we will attain or thereafter sustain profitability in any future period.

 

We will also attempt to raise additional debt and/or equity financing to fund operations and to provide additional working capital.  There is no assurance that such financing will be available in the future or obtained in sufficient amounts necessary to meet the Company's needs, that the Company will be able to achieve profitable operations or that the Company will be able to meet its future contractual obligations. Should management fail to obtain such financing, the Company may curtail its operations. 

 

Management believes it will take approximately $3 million for operations and to launch DraftClick in the Fall of 2016. In October 2015 and June 2016, the Company hired consultants to assist in raising the capital required.

 

NOTE 3- Summary of Significant Accounting Policies

 

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 certain reported amounts and disclosures. Significant estimates for the years reported include certain assumptions used in deriving the fair value of derivative liabilities and share-based compensation. Assumptions and estimates used in these areas are material to our reported financial condition and results of our operations. Actual results will differ from those estimates. 

 

 

The Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by the Financial Accounting Standards Board whereas the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the Financial Accounting Standards Board whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete.

 

Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date.

 

The fair value of the Company's common stock option and warrant grants is estimated using the Black-Scholes option pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the common stock options, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes option pricing model, and based on actual experience. The assumptions used in the Black-Scholes option pricing model could materially affect compensation expense recorded in future periods.

 

 

Our computation of earnings per share (“EPS”) includes basic and diluted EPS.  Basic EPS is measured as the income available to common stockholders divided by the weighted average common shares outstanding for the period.  Diluted income per share reflects the potential dilution, using the treasury stock method, that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the income of the Company as if they had been converted at the beginning of the periods presented, or issuance date, if later. In computing diluted income per share, the treasury stock method assumes that outstanding options and warrants are exercised and the proceeds are used to purchase common stock at the average market price during the period. Options and warrants may have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options and warrants. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

 

 

The following table sets forth the computation of basic and diluted income per common share.

There were no adjustments to net income (loss) required for purposes of computing diluted earnings per share.  At June 30, 2016 and 2015, we excluded the outstanding securities summarized below, which entitle the holders thereof to acquire shares of common stock, from our calculation of our diluted earnings per share, as their effect would have been antidilutive.

 

For the nine months ended June 30, 2016 and 2015, potentially issuable securities were excluded because their effect would be anti-dilutive.

 

 

 

 

 

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 

 

As of June 30, 2016, the carrying value of certain accounts such as accounts payable, note payable and loan payable to shareholder approximates their fair value due to the short-term nature of such instruments.

 

As of June 30, 2016 the Company’s balance sheet included the fair value of derivative liability of $1,205,275, which was based on Level 2 measurements.  

 

 

 

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

 

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers.  ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition.  ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract.  The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.  ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017.   Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein.  Entities will be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption.  The Company is in the process of evaluating the impact of ASU 2014-09 on the Company’s financial statements and disclosures.

In February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases.  ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months.  ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018.  Early adoption is permitted.  A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.  The Company is in the process of evaluating the impact of ASU 2016-02 on the Company’s financial statements and disclosures.

 

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements. 

 

NOTE 4 –Note Payable

On June 20, 2016, the Company issued a promissory note for $10,000 in exchange for cash.  The note is unsecured and bears interest at 8% per annum and will mature in September 2016.

 

NOTE 5 –Loan Payable –Shareholder

On September 17, 2014, the Company issued a promissory note to a shareholder for $45,000.  The note is unsecured and is due within ten days upon on the completion of an initial financing by the Company which is expected to be on or before December 2016.   

NOTE 6 – Stockholders’ Deficit

During the nine months ended June 30, 2016, the Company issued a total of 1,375,000 shares of common stock to various consultants with a fair value of $137,500 for services rendered.  The shares were valued at $0.10 per share based upon our recent sale of common stock for cash since our stock was not traded at the time the shares were issued.  The entire $137,500 was expensed upon issuance and was reported as part of consulting and professional fees in the accompanying Statement of Operations.

 

 

 

 

NOTE 7 – Derivative Liability

In October 2015, the Company issued 10,000,000 warrants to a financial consultant. The warrant agreement included an anti-dilution provision that would reduce the exercise price if the Company were to issue similar instruments at a price below the exercise price of $0.05 per share.

 

Pursuant to ASC Topic 815, “Derivatives and Hedging”, the Company determined that these warrants met the definition of a derivative, and are to be re-measured at the end of every reporting period with the change in fair value reported in the statement of operations. As of October 19, 2015 (issuance date of the warrants) and June 30, 2016, the derivative liabilities were valued using a probability weighted average Black-Scholes-Merton pricing model with the following assumptions:

Stock price of $0.10 per share at issuance date was based upon our recent sale of common stock for cash since our stock was not traded at that time.  Stock price of $0.13 per share at June 30, 2016 was based upon the closing price of our common stock on the over-the-counter market in the United States (commonly known as “the Pink Sheets”) as a result of our stock being publicly traded starting in January 2016.  The risk-free interest rate was based on rates established by the Federal Reserve Bank. The Company uses the averaged historical volatility of similar companies since we did not have sufficient market and historical information to estimate the volatility of our own stock. The expected life of the warrants was determined by the expiration dates of the warrants. The expected dividend yield was based on the fact that the Company has not paid dividends to its common stockholders in the past and does not expect to pay dividends to its common stockholders in the future.

At the issuance date of the warrants on October 14, 2015, the Company determined the fair value to be $938,222, and was accounted for as a derivative liability and consulting costs which was included as part of Consulting and professional fees in the accompanying Statement of Operations. For the period ended June 30, 2016, the Company recorded a change in fair value of the derivative liability of $267,053. As of June 30, 2016, the fair value of the derivative liabilities was $1,205,275.

NOTE 8 – Warrants

The following schedule summarizes the changes in the Company’s outstanding warrants during the three months ended June 30, 2016: 

 

 

 

 

(1)

In October 2015, the Company granted a financial consultant fully vested warrants to purchase up to 10,000,000 shares of common stock at an exercise price of $0.05 per share for a period of five years.  The warrant exercise price is subject to certain reset provisions in case the Company will sell or issue similar instrument in the future at a price lower than $0.05 per share.  As result, the fair value of these warrants of $938,222 was accounted for as consulting cost and derivative liability upon issuance.  See Note 7.

 

NOTE 9 – Related Party Transactions

 

Pursuant to a consulting agreement with a major shareholder of the Company, during the nine months ended June 30, 2016 the Company incurred consulting fees of $65,000 for services rendered and reported as part of Consulting and professional fees - Related Party in the accompanying Statement of Operations.  There was no similar transaction in 2015.

 

During the nine months ended June 30, 2016 and 2015, the Company incurred $20,000 and $12,500, respectively for legal services rendered by a shareholder and officer of the Company and reported as part of Consulting –and professional fees - Related Party in the accompanying Statement of Operations.

 

During the nine months ended June 30, 2016, the Company incurred an aggregate of $99,833 for services rendered by the two officers of the Company and was reported as part of Consulting and professional fees - Related Party in the accompanying Statement of Operations. There was no similar transaction in 2015.

As of June 30, 2016 and September 30, 2015, the Company had accounts payable to our officers and the major shareholders in the amount of $320,533 and $144,500, respectively for unpaid consulting and professional fees.  These amounts are unsecured, non-interest bearing and due upon demand.

 

During the periods ended June 30, 2016 and 2015, the Company’s office facility has been provided without charge by the Company’s major stockholders. Such cost was not material to the financial statements and accordingly, have not been reflected therein.  In view of the Company’s limited operations and resources, management did not receive any compensation from the Company during the nine months ended June 30, 2016 and 2015.

 

 

 

 

The following discussion and analysis of our results of operations, financial condition and liquidity and capital resources should be read in conjunction with our unaudited financial statements and related notes for the nine months ended June 30, 2016. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements.

 

Overview

 

The MD&A is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make certain estimates and judgments that affect the reported amounts of assets, liabilities and expenses and related disclosure of contingent assets and liabilities. Management bases its 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 sources. Actual results may differ from these estimates under different assumptions and conditions.

 

Organization

 

We were incorporated in the state of Nevada on December 30, 2005 and previously operated under the name Peak Resources Incorporated. Effective August 18, 2008, we changed our name to “Mine Clearing Corporation” (MCCO). The Company had been operating as an exploration division in the mining sector until May 2014.

 

On April 25, 2014, the Company’s shareholders adopted Amended and Re-Stated Articles of Incorporation, (the “New Articles”). The New Articles provided for a one for 300 reverse split of all outstanding shares of common stock, authorization of 5 million shares of “blank check” preferred stock, an increase in the authorized shares of common stock to 300,000,000 shares and changing the name of the Company to ClickStream Corporation. All share and per share amounts have been adjusted to reflect the one for 300 reverse split of the common stock as of the earliest period presented.

 

On May 2, 2014, the Company acquired all of the outstanding shares of ClickStream Corporation, a Delaware corporation (“CS Delaware”), pursuant to a merger into a wholly-owned subsidiary of the Company.  As part of the merger agreement, the Company issued a total of 600,798 shares of common stock in exchange for the entire issued and outstanding shares of MCCO of 600,798 shares of common stock.

 

Since former holders of Clickstream common stock owned, after the Merger, substantially all of MCCO’s shares of common stock, and as a result of certain other factors, including that all members of the Company’s executive management are members of Clickstream management, Clickstream is deemed to be the acquiring company for accounting purposes and the merger was accounted for as a reverse merger and a recapitalization in accordance with generally accepted accounting principles in the United States (“GAAP”).  

 

Subsequent to the merger, we have been operating as a data analytics tool developer and have sought to further develop and exploit our data analytics technology and proprietary algorithms.

 

Our Business

 

ClickStream is a technology based data analytics company focused on development of analytical tools for high volume data analysis and related internet trends and associations.  We are currently in late-stage development of a fantasy sports analytical service platform, DraftClick.

 

DraftClick is designed to assist in the fantasy sport player’s ability to monitor changes in betting lines, breaking news releases, injury reports, real-time discussions in sports forums, fan sentiment, historical matchup data and other sources of data by incorporating all of this information into prediction results.  These results are then presented using a tailored version of DraftClick's user interface which has been designed to enable seamless transition of player selections to fantasy game sites such as DraftKingsTM and FanDuelTM.  DraftClick uses over 40 types of algorithms and it uses over 100 player specific variables as input data points. The specific algorithms to use for each player each day is selected by the system based on the training data. The training data consists of thousands of historical contests where the outcome is known and the values of the data points are known before and after each contest. This so-called historical “back testing” is also used to establish proper confidence levels. As each day goes by, the set of training data increases by the outcomes for that day. We plan to launch DraftClick in the Fall 2016.

 

 

 

 

Results of Operations

Comparison of Results of Operations for the Three Months Ended June 30, 2016 and 2015

Below is a discussion of our operating results for the nine months ended June 30, 2016, compared to our operating results during the comparable period in 2015. Net income for the three months ended June 30, 2016, was $6,885,416 compared to net loss of $366 for the three months ended June 30, 2015. The change resulted from the gain resulting due to the change in fair value of derivative liability, net of an increase of operating expenses as described below.

  

Operating Expenses.

 

 

For the three months ended June 30, 2016, Consulting and professional fees increased by $15,344 as compared to the prior period as the Company retained various consultants during the current period as a result of the Company becoming a reporting entity and filing requirements with the Securities Exchange Commission.

For the three months ended June 30, 2016, Consulting and professional fees – related party increased by $66,833 as compared to the prior period as additional finance and legal fees were incurred by the Company as a result of the Company becoming a reporting entity and filing requirements with the Securities Exchange Commission.

For the three months ended June 30, 2016, Research and development costs increased by $30,800 as compared to the prior period as the Company did not have the capital required and slowed down research and development of the product in the prior period. In the current period there was work performed on the Company’s development of analytical tools for high volume data analysis and related internet trends and associations.  

For the three months ended June 30, 2016, General and administrative expenses increased by $12,185 as compared to the prior period  as the Company did not have the capital required and slowed down operations in the prior period. The aggregate increase in these costs results primarily to the increase of filing costs, maintain a website and investor costs as a result of the Company becoming a reporting entity and filing requirements with the Securities Exchange Commission.

 

Other Expense.

 

Change in fair value of derivative liability increased by $7,010,944 as compared to the prior period where there was no derivative liability.  The recorded gain was due to decrease in the fair value of the derivative liability from $8.2 million at March 31, 2016 to $1.2 million at June 30, 2016.  The decrease between the two reporting periods was due to the decrease in the Company’s stock price which was one of the inputs used in calculating the fair value of the derivative liability.  At March 31, 2016, the Company’s stock price was $0.84 per share compared to $0.13 per share at June 30, 2016.

 

 

Comparison of Results of Operations for the 9 months Ended June 30, 2016 and 2015

Below is a discussion of our operating results for the nine months ended June 30, 2016, compared to our operating results during the comparable period in 2015. Net loss for the nine months ended June 30, 2016, was $1,701,780 compared to net loss of $165,731 for the nine months ended June 30, 2015. The increase in net loss resulted from an increase in operating expenses and change in fair value of derivative liability,  as described below.

Operating Expenses.

 

 

For the nine months ended June 30, 2016, Consulting and professional fees increased by $1,131,088 as compared to the prior period as additional consultants were retained by the Company.  The majority of the increase relates to grant of fully vested warrants to a financial consultant to purchase up to 10,000,000 shares of common stock at an exercise price of $0.05 per share for a period of five years with a fair value of $938,222 at the date of grant.  In addition, the Company also issued 1.4 million shares of common stock for services rendered with a fair value of $137,500.

For the nine months ended June 30, 2016, Consulting and professional fees – related party increased by $184,833 as compared to the prior period as additional finance and legal fees were incurred by the Company as a result of the Company becoming a reporting entity and filing requirements with the Securities Exchange Commission.

For the nine months ended June 30, 2016, Research and development costs decreased by $19,775 as compared to the prior period as the Company did not have the capital required and slowed down research and development of the product.

For the nine months ended June 30, 2016, General and administrative expenses decreased by $27,150 as compared to the prior period as the Company did not have the capital required and slowed down operations.

 

Other Expense.

 

Change in fair value of derivative liability increased by $267,053 as compared to the prior period where there was no derivative liability.  The recorded loss was due to increase in the fair value of the derivative liability from $938,000 at October 2015, when the corresponding warrants that were accounted for as derivative liability were granted to $1.2 million at June 30, 2016.  The increase between the two periods was due to the increase in the Company’s stock price which was one of the inputs used in calculating the fair value of the derivative liability.  Upon issuance of the warrants in October 2015, the Company’s stock price was $0.10 per share compared to $0.13 per share at June 30, 2016.

 

Liquidity

 

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles which contemplate continuation of the Company as a going concern.  The Company has not yet generated any revenues, has incurred recurring net losses since inception and has a working capital deficiency.  During the nine months ended June 30, 2016 the Company incurred a net loss of $1,701,780 and as of June 30, 2016, the Company had a working capital deficiency and stockholders’ deficit of $2,198,616.  These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. In addition, our independent registered public accounting firm, in their report on our audited financial statements for the fiscal year ended September 30, 2015 expressed substantial doubt about our 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 an inability of the Company to continue as a going concern.

 

 

 

 

We are an early-stage company with a limited operating history, which makes it difficult to evaluate our current business and future prospects.  As a result, the Company has limited operating history upon which an evaluation of the ClickStream’s performance can be made.  There have been no revenues generated from our business operations and we expect to incur further losses in the foreseeable future due to significant costs associated with our business development.  There can be no assurance that our operations will ever generate sufficient revenues to fund our continuing operations, or that we will ever generate positive cash flow from our operations, or that we will attain or thereafter sustain profitability in any future period.

We will also attempt to raise additional debt and/or equity financing to fund operations and to provide additional working capital.  There is no assurance that such financing will be available in the future or obtained in sufficient amounts necessary to meet the Company's needs, that the Company will be able to achieve profitable operations or that the Company will be able to meet its future contractual obligations. Should management fail to obtain such financing, the Company may curtail its operations. 

 

Management believes it will take approximately $3 million for operations and to launch DraftClick in the Fall of 2016. In October 2015, the Company hired a consultant to assist in raising the capital required.

 

Comparison of Cash Flows for the Nine months Ended June 30, 2016 and 2015

 

 Cash totaled $303 at June 30, 2016 and $0 at June 30, 2015, respectively. The change in cash is as follows:

 

 

Operating Activities

 

Cash used in operating activities in the nine months ended June 30, 2016 was $9,697 as compared to cash used of $165,731 during the prior period, representing an decrease in cash used in operating activities of $156,034 based on the operating results discussed above. 

Financing Activities

 

Cash generated from financing activities during the nine months ended June 30, 2016 was $10,000 as compared to $100,000 generated in the comparable period in 2015 representing a decrease of $90,000. During the period ended June 30, 2015, the Company received proceeds from the sale of its common stock of $100,000 compared to receipt of $10,000 in exchange for a promissory note during the period ended June 30, 2016.

Capital Resources

 

As of June 30, 2016, the Company does not have any material commitments for capital expenditures.

 

Critical Accounting Policies

 

The Company’s accounting policies are described in Note 3 in the accompanying financial statements. Below is a summary of the critical accounting policies, among others, that management believes involve significant judgments and estimates used in the preparation of its financial statements. 

 

 

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 certain reported amounts and disclosures. Significant estimates for the years reported include certain assumptions used in deriving the fair value of share-based compensation. Assumptions and estimates used in these areas are material to our reported financial condition and results of our operations. Actual results will differ from those estimates. 

 

 

 

 

 

The Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by the Financial Accounting Standards Board whereas the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the Financial Accounting Standards Board whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete.

 

Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date.

 

The fair value of the Company's common stock option and warrant grants is estimated using the Black-Scholes option pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the common stock options, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes option pricing model, and based on actual experience. The assumptions used in the Black-Scholes option pricing model could materially affect compensation expense recorded in future periods. 

 

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.  The fair value of these derivative liabilities were estimated using a probability weighted average Black-Scholes-Merton pricing model which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the warrants, and future dividends.  The assumptions used in the calculation could materially affect the recorded fair value of the derivative liability in future periods.

 

Recent Accounting Pronouncements

 

Recent Accounting Pronouncements applicable to the Company are discussed in notes to the Financial Statements included elsewhere in this Form 10Q. 

 

Off Balance Sheet Arrangements

 

As of June 30, 2016, the Company has no off-balance sheet arrangements.

 

 

Not applicable.

 

 

Disclosure Controls and Procedures

 

Our principal executive officer and principal financial officer evaluated the effectiveness of our “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) of the United States Securities Exchange Act of 1934, as amended), as of June 30, 2016.  Based on that evaluation we have concluded that our disclosure controls and procedures were not effective as of June 30, 2016.

 

Management’s Report on Internal Control over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting.  Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, a company’s principal executive and principal financial officers and effected by a company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

 

 

 

 

●

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;

 

●

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

 

●

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

 

All internal control systems, no matter how well designed, have inherent limitations and can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

 

As of June 30, 2016, management of the Company conducted an assessment of the effectiveness of the company’s internal control over financial reporting.  In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework.  In the course of the assessment, material weaknesses were identified in the Company’s internal control over financial reporting.

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

 

Management determined that fundamental elements of an effective control environment were missing or inadequate as of June 30, 2016.  The most significant issues identified were: 1) lack of segregation of duties due to very small staff and significant reliance on outside consultants, and 2) risks of executive override also due to lack of established policies, and small employee staff.  Based on the material weaknesses identified above, management has concluded that internal control over financial reporting was not effective as of June 30, 2016.  As the company’s operations increase, the company intends to hire additional employees in its accounting department.

 

 

There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Inherent Limitations Over Internal Controls

 

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations, including the possibility of human error and circumvention by collusion or overriding of controls. Accordingly, even an effective internal control system may not prevent or detect material misstatements on a timely basis. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

 

 

   

PART II - OTHER INFORMATION

 

 

There are presently no material pending legal proceedings to which the Company is a party or as to which any of its property is subject, and no such proceedings are known to the Company to be threatened or contemplated against it.

 

 

Not applicable.

 

 

None.

 

 

There were no reportable events under this Item 3 during the three months ended June 30, 2015.

 

 

Not applicable.

 

 

None.

  

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934 as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

 

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