GENTECH HOLDINGS, INC. - Annual Report: 2016 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

Commission file number: 333-192939

POCKET GAMES, INC.

(Exact name of registrant as specified in its charter)

(347) 464 7532

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes ☐  No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes ☐  No ☒

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 website, 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 checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

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

Based on the closing price of our common stock as listed on the OTC Markets listing service, the aggregate market value of the common stock of Pocket Games, Inc. held by non-affiliates as of April 30, 2016 was $169,574.21.

As of October 5, 2018, there were 7,866,905,522 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:  None.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Please see the note under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation,” for a description of special factors potentially affecting forward-looking statements included in this report.

PART I

ITEM 1. BUSINESS.

Company History

Pocket Games, Inc. (“us”, “we”, “our”, or the “Company”) is a Florida corporation formed on October 4, 2013, by our chief executive officer David Lovatt to develop and distribute mobile sports games. Our principal executive office is located at 17321st Avenue #25955, New York. NY 10128. Our telephone number is 347-318-8859. Our website is www.pocketgamesinc.com. The Company has limited customers and products and revenues to date.

Our Business

Pocket Games, Inc. is an emerging company in the video games industry. Our goal is to deliver quality PC and mobile games to the fast growing gaming community.

The Company intends to acquire intellectual property and other assets to create a base from which to fulfill our business plan. The Company has already acquired its first asset, Idol Hands, a PC game.

On March 18, 2015, we created GodSpeed Games, Ltd., a limited company organized in accordance with the laws of India, and a wholly-owned subsidiary. GodSpeed operates out of Pune, India. GodSpeed Games provides Quality Assurance and testing services across all the major platforms and has vast experience in different game genres. Our experienced team is a mix of hardcore gamers and trained testing professionals, who understand both the technical and game-play aspects of a title. We help Game Studios to stay competitive in the challenging global market and ensure they keep production costs at a minimum

We develop games and provide end-end services for software and application development. We also have a dedicated division for server support and cloud management. Our clients rely on us to support their core IT architecture and provide 24/7 support for their business critical infrastructure

As disclosed in our Form 8-K filed with the Securities and Exchange Commission on February 16, 2016, we issued a total of 400,000 shares of our Series B Convertible Preferred Stock in connection with our acquisition of 80% of the Class A common stock and 100% of the Class B common stock of Social Technology Holdings, Inc. (“STH”), and reserved an additional 80,000 shares of our Class B voting Convertible Preferred Stock for issuance in a contemplated merger transaction to acquire the 20% minority interest in the STH Class A common stock. STH is the owner and operator of “Viximo”, a software platform that allows game providers to access multiple websites from a single source API.”

As disclosed in our Form 8-K filed with the Securities and Exchange Commission on May 3, 2016, we issued a total of 270,000 shares of our Series C Convertible Preferred Stock and a $3,960,000 convertible note due March 31, 2019 in connection with our acquisition of 100% of the outstanding common stock of Kicksend Holdings, Inc., a Delaware corporation (“Kicksend”). Upon the occurrence of a “conversion event” (defined as such time as the market valuation of our common stock, based on the volume weighted average closing prices of our common stock, as traded on the OTC bulletin board or toehr national securities exchange for any 20 consecutive trading days, equals or exceeds $10.0 milllion), the Series C Convertible Preferred Stock automatically converts into 12% of our Fully-Diluted Common Stock and the $3,960,000 convertible note is convertible at the option of the holder into an additional 7.2% of our Fully-Diluted Common Stock. Kicksend is engaged in the business of file storage and sharing in real-time on digital platforms, including desktop, mobile and webapps, to permit users to organize, download and sent storage files.

Under the terms of these acquisitions, both of which were organized and under the control of Vert Capital’s Adam Levin, Pocket Games was to receive full financial disclosure  in order to maintain its ‘fully reporting’ status with the SEC. Subsequent to the closing, neither acquisition target was able to provide full financial disclosure and Pocket Games’ attorney opined that this was a material breach of the contracts and the acquisitions were unwound. The unwinding activity was completed in February 2016 with cancelation of and and all shares issued for said acquisition activity. Subsequent court action is outlined in SEC filings.

In the case of Venture Lending & Leasing -vs- Vert Capital Corp, Pocket Games and its recently acquired subsidiary, Kicksend, were named as defendants in court documents and a judgement filed against Pocket Games as Adam Levin’s company, Vert Capital, put up no defense to the case against them. Pocket Games is in communication with Venture Lending & Leasing and, as of August 2018, an agreement in principle is in discussion to resolve the issue. Based on this judgement, the Company has recorded accrued judgement payable and loss on deconsolidation in the amount of $1,068,339 for the year ended October 31, 2016.

Subsequent to the financial year ended October 2016, Pocket Games undertook various gaming and technology activities including the acquisition of various ‘crypto-currency mining’ servers. It is currently involved in the re-development of old titles that it owns and exploring ways in which revenue can be derived from existing IP.

The Pocket Games Products

Idol Hands – The First Release from Pocket Games, Inc.

The History of this Title

This game was developed by Chromativity in 2012 as a joint partnership with Intel and Relative Technologies as part of an OEM (Original Equipment Manufacturer).It was originally part of a twelve month exclusive release license to bundle the game with a gesture control camera. Development continued and with the game being released August 2013, the exclusivity period ran out in September 2014.Pocket Games acquired Idol Hands in May 2014 and launched a PC version in February, 2015, with releases on other platforms to follow.

Related Party Game Development

On October 22, 2013 we entered into an agreement with DNA Interactive Games Limited, a company formed under the laws of the United Kingdom (“DNAIG”), which is controlled by our Chief Executive Officer, David Lovatt, to develop a game known as SH3G for iPad and the Android tablet platforms. DNAIG paid us an aggregate of $56,050 as we completed the development of SH3G.

As set forth in the chart below, we received or expect to receive the following payments from DNAIG as we meet the milestones:

Through July 31, 2014, we paid $35,178 to FGL to assist us with the development of SH3G.

Meeting the milestones above is dependent upon us raising sufficient capital through placement of our common stock or issuance of debt securities. We have not located investors to provide us with the capital required to meet these milestones and we may not be successful in locating investors to provide us with capital. If we are unable to obtain financing, we will not meet the milestones above and may have to suspend or cease operations.

Market

The video games industry continues to show very strong year on year growth. Worldwide, the gaming industry is due to be worth $103 billion in 2017 with 8.9% year on year growth ¹.Next generation consoles purchased by consumers is greater than previous projections, bucking the projected trend, with PlayStation4 sales at 7 million by April 2014. This was just five months after launch. Both the PlayStation 3 & the Xbox360 took 14 months to reach 7.7 million.²

Digital sales on console are increasing year on year. These are sales where no physical media is provided and the game is downloaded directly to the unit from the manufacturer’s in-platform store. Revenue splits for console software in 2017 are project to be 61% from physical sales of media, 36% of digital downloading of a title and with 3% of revenue coming from advertising in and around the game.³

Overall, taking both PC and Console platforms, US gaming revenue from physical product dropped to just above 30% in 2013 and is predicted to be less than 20% by end of 2015.⁴ Contrary to previous predictions, PC games are now outselling console games in a market that is to be worth $25 billion by end of 2014⁴

The number of gamers worldwide continues to rise at an unprecedented and impressive rate. The 1.6 billion gamers from 2013 is due to rise to more than 2 billion by 2016. ⁴ The Asian-Pacific region continues to be an important market and maintains its exponential growth pattern.82% of the last year’s $6 billion growth came from Asia Pacific and China will be the biggest gaming market ahead of the US by 2015. ⁴

¹http://www.newzoo.com/insights/games-industry-disrupted-10-key-moments-towards-2017

²http://www.gamesindustry.biz/articles/2013-10-30-console-resurgence-starts-with-ps4-xbox-one-launches-riccitiello&http://www.forbes.com/sites/insertcoin/2014/04/17/sony-announces-7-million-ps4-sales-microsoft-still-silent-on-xbox-one/

³http://www.gamesindustry.biz/articles/2013-10-30-console-revenues-to-grow-29-percent-by-2017

⁴http://www.siliconrepublic.com/digital-life/item/36658-pc-games-are-now-outselling

The Consumer

USA

UK:

Other Countries

¹http://www.bigfishgames.com/blog/2014-global-gaming-stats-whos-playing-what-and-why/

Sources:

http://www.theesa.com/facts/index.asp

http://www.theesa.com/games-improving-what-matters/The_Transformation_of_the_Video_Game_Industry.pdf

http://fr.slideshare.net/slideshow/view?login=wearesocialsg&title=social-digital-mobile-around-the-world-january-2014

http://www.vg247.com/2013/07/04/survey-finds-average-uk-gamer-is-35-male-plays-for-almost-3-hours-a-day/

http://www.theesa.com/facts/pdfs/esa_ef_2013.pdf

http://www.theesa.com/games-improving-what-matters/The_Evolution_of_Mobile_Games.pdf

http://www.theesa.com/games-improving-what-matters/Games_and_Family_Life.pdf

http://services.google.com/fh/files/blogs/AdMob%20-%20Tablet%20Survey.pdf

http://www.margaretwallace.com/state-of-video-game-industr/

http://www.reportlinker.com/ci02073/Video-Game.html

http://www.digitalbuzzblog.com/infographic-2013-mobile-growth-statistics/

Competition

The mobile game market is highly competitive and rapidly changing. Our ability to compete depends upon many factors within and outside our control, including the timely development and introduction of our mobile game and its enhancements, its functionality, performance, reliability, customer service and support and marketing efforts. Due to the relatively low barriers to entry in the mobile game market, we expect additional competition from other emerging companies. Many of the Company’s existing and potential competitors are substantially larger than us and have significantly greater financial, technical and marketing resources. As a result, they may be able to respond more quickly to new or emerging technologies and changes in customer requirements, or to devote greater resources to the development and promotion of their mobile games. There can be no assurance that we will be able to compete successfully against current or future competitors or that competitive pressure will not have a material adverse effect on our business, operating results and financial condition.

Employees

As of October 31, 2016, we had eleven (11) employees who were also our officers and sole director. Our chief executive officer, president and sole director, David Lovatt oversees our day to day operations and product development.

None of our employees are employed under a collective bargaining agreement. We believe we have an excellent relationship with our employees and independent contractors.

We intend to hire additional employees and independent contractors on an as needed basis.

The loss of our CEO David Lovatt would likely have a material adverse effect on the Company. We intend to reduce this risk by obtaining key-man insurance after the Offering, in the event that affordable insurance coverage may be obtained. We cannot assure you that the Company will be able to obtain such insurance or that the Company will be successful in recruiting needed personnel.

Available Information

Pocket Games, Inc. is subject to the information requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith files quarterly and annual reports, as well as other information with the Securities and Exchange Commission (“Commission”) under File No. 000-54163. Such reports and other information filed with the Commission can be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates, and at various regional and district offices maintained by the Commission throughout the United States. Information about the operation of the Commission’s public reference facilities may be obtained by calling the Commission at 1-800-SEC-0330. The Commission also maintains a website at http://www.sec.gov that contains reports and other information regarding the Company and other registrants that file electronic reports and information with the Commission.

ITEM 1A. RISK FACTORS.

Since we are a smaller reporting company, we are not required to supply the information required by this Item 1A.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

ITEM 2. PROPERTIES.      

We do not expect that office facilities costs will be substantial relative to our overall operational expenditures.

ITEM 3. LEGAL PROCEEDINGS.

In the case of Venture Lending & Leasing -vs- Vert Capital Corp, Pocket Games and its recently acquired subsidiary, Kicksend, were named as defendants in court documents and a judgement filed against Pocket Games as Adam Levin’s company, Vert Capital, put up no defense to the case against them. The awarded judgement was $963,460, plus interest of $100,465 and court costs of $4,414. The Company has recorded accrued judgement payable and loss on deconsolidation in the amount of $1,068,339 for the year ended October 31, 2016. Pocket Games is in communication with Venture Lending & Leasing and, as of August 2018, an agreement in principle is in discussion to resolve the issue.

From time to time, we are also a party to certain legal proceedings incidental to the normal course of our business including the enforcement of our rights under contracts with contractors, purchasers and suppliers. While the outcome of these legal proceedings cannot at this time be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

Our common stock is listed on the OTCQB under the symbol “PKGM”. We had approximately 39 registered holders of our common stock as of October 31, 2016. Registered holders do not include those stockholders whose stock has been issued in street name. The last reported price for our common stock on September 19, 2018 was $.0001 per share.

The following table reflects the high and low closing sales prices per share of our common stock during each calendar quarter as reported on the OTCQB, during the two fiscal years ended October 31, 2016:

___________________

Dividends and Distributions

We have not paid any cash dividends on our common stock since inception and do not anticipate paying cash dividends in the foreseeable future. We expect that that any future earnings will be retained for use in developing and/or expanding our business.

Sales of Unregistered Securities

During the second quarter ended April 30, 2015, the Company issued 1,265,000 shares of common stock for consulting services. The fair value of the common stock was $68,041 based on the market price of the Company’s common stock on the date of grant.

During the second quarter ended April 30, 2015, the Company issued 478,850 shares of common stock for payment of accrued compensation. The fair value of the common stock was $47,885 based on the market price of the Company’s common stock on the date of grant.

During the second quarter ended April 30, 2015, the Company issued 630,000 shares of common stock for cash in the amount of $6,300.

During the second quarter ended April 30, 2015, the Company issued 927,077 shares of common stock for the conversion of convertible notes payable in the amount of $27,000.

During the third quarter ended July 31, 2015, the Company issued 1,415,000 shares of common stock for consulting services. The fair value of the common stock was $70,841 based on the market price of the Company’s common stock on the date of grant.

During the third quarter ended July 31, 2015, the Company issued 907,850 shares of common stock for payment of accrued compensation. The fair value of the common stock was $67,190 based on the market price of the Company’s common stock on the date of grant.

During the third quarter ended July 31, 2015, the Company issued 1,230,000 shares of common stock for cash in the amount of $12,300.

During the third quarter ended July 31, 2015, the Company issued 2,211,679 shares of common stock for the conversion of convertible notes payable in the amount of $50,168.

During the year ended October 31, 2016, the Company granted 54,900,000 and issued 54,400,000 shares of common stock for consulting services. The fair value of the common stock issued was $316,075 based on the market price of the Company’s common stock on the date of grant. The 500,000 shares authorized but not issued is recorded as $1,500 (based on the market value on the date of grant) stock payable as of October 31, 2016.

During the year quarter ended October 31, 2016, the Company converted $251,432 of debt for 737,861,718 shares of common stock. The Company recognized a loss on conversion of $167,169; the excess shares were valued based on fair market value on the date of conversion.

With respect to the transactions noted above. Each of the recipients of securities of the Company was an accredited investor, or is considered by the Company to be a “sophisticated person”, inasmuch as each of them has such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of receiving securities of the Company. No solicitation was made and no underwriting discounts were given or paid in connection with these transactions. The Company believes that the issuance of its securities as described above was exempt from registration with the Securities and Exchange Commission pursuant to Section 4(2) of the Securities Act of 1933.

Penny Stock Rules

The SEC has also adopted rules that regulate broker-dealer practices in connection with transactions in “penny stocks” as such term is defined by Rule 15g-9. Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system).

Our shares constitute penny stocks under the Exchange Act. The shares may remain penny stocks for the foreseeable future. The classification of our shares as penny stocks makes it more difficult for a broker-dealer to sell the stock into a secondary market, which makes it more difficult for a purchaser to liquidate his or her investment. Any broker-dealer engaged by the purchaser for the purpose of selling his or her shares in PKGM will be subject to the penny stock rules.

The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, deliver a standardized risk disclosure document approved by the SEC, which: (i) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (ii) contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of the Securities Act; (iii) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and significance of the spread between the bid and ask price; (iv) contains a toll-free telephone number for inquiries on disciplinary actions; (v) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (vi) contains such other information and is in such form as the SEC shall require by rule or regulation. The broker-dealer also must provide to the customer, prior to effecting any transaction in a penny stock, (i) bid and offer quotations for the penny stock; (ii) the compensation of the broker-

dealer and its salesperson in the transaction; (iii) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (iv) monthly account statements showing the market value of each penny stock held in the customer’s account.

In addition, the penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement. These disclosure requirements will have the effect of reducing the trading activity in the secondary market for our stock because it will be subject to these penny stock rules. Therefore, stockholders may have difficulty selling those securities.

ITEM 6. SELECTED FINANCIAL DATA.

Not required.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This report contains forward-looking statements that involve risks and uncertainties. We use words such as anticipate, believe, plan, expect, future, intend and similar expressions to identify such forward-looking statements. You should not place too much reliance on these forward-looking statements. Our actual results are likely to differ materially from those anticipated in these forward-looking statements for many reasons.

Overview

We were incorporated in the State of Florida on October 4, 2013, to engage in the development and distribution of mobile games. Our independent registered public accounting firm has issued a going concern opinion. This means there is substantial doubt that we can continue as an on-going business unless we obtain additional capital to pay our ongoing operational costs. Accordingly, we must locate sources of capital to pay our operational costs. Since the Company’s inception we have generated only minimal revenues from business operations from a related party. Expenses which comprise the costs of goods sold include licensing agreements, and royalties, as well as operational and staffing costs related to the development, management, and support of the Company’s mobile applications. General and administrative expenses have been comprised of administrative wages and benefits; occupancy and office expenses; outside legal, accounting and other professional fees; travel and other miscellaneous office and administrative expenses. Selling and marketing expenses include selling/marketing wages and benefits, advertising and promotional expenses, as well as travel and other miscellaneous related expenses.

Because we have incurred losses, income tax expenses are immaterial. No tax benefits have been booked related to operating loss carryforwards, given our uncertainty of being able to utilize such loss carryforwards in future years. We anticipate incurring additional losses during the coming year.

Revenues:

Revenue recognized were $3,332 and $24,374 for the years ended October 31, 2016 and 2015, respectively. A total of $3,332 and $6,608 were from related parties for the years ended October 31, 2016 and 2015, respectively.

Cost of Revenues:

Cost of revenues was $10,942 and $32,824 for the years ended October 31, 2016 and 2015, respectively.

General and Administrative:

General and administrative expense was $229,465 and $136,065 for the years ended October 31, 2016 and 2015, respectively, an increase of $93,400, or 69%. General and administrative expenses consisted of bank fees, SEC filing costs and costs associated with the pursuit of getting our stock traded on the OTCBB.

Officer Compensation:

Officer compensation expense was $145,606 and $281,533 for the years ended October 31, 2016 and 2015, respectively, a decrease of 135,927, or 49%. Officer compensation expense consisted of a monthly fee of $10,000 to each of our two officers.

Professional Fees:

Professional fees expense was $382,284 and $584,230 for the years ended October 31, 2016 and 2015, respectively, a decrease of $201,946, or 35%. Professional fees consisted of legal, consulting, accounting and auditing costs necessary to prepare our public filings.

Net Operating Loss:

Net operating loss for the years ended October 31, 2016 and 2015 was $764,965 and $1,010,278, respectively, a decrease of $245,313. Net operating loss consisted primarily of fees incurred in connection with the pursuit of listing of our Common Stock on the OTCBB and with establishing an account with our transfer agent, as well as legal and audit fees related to our SEC filing costs, along with the development of our software products during the year ended October 31, 2016.

Other Income and Expenses:

Other expense was $879,960 for the year ended October 31, 2016 compared to other expenses of $1,449,167 for the year ended October 31, 2015. Other expense for the year ended October 31, 2016 consisted of the loss on deconsolidation of $1,068,339 (1,068,339), gain on change in fair value of derivative liabilities ($1,247,736), interest expense ($892,188), and loss on settlement of debt ($167,169). Other expenses for the year ended October 31, 2015 consisted of the loss on change in fair value of derivative liabilities ($1,072,689), interest expense ($349,704), loss on settlement of debt ($26,530), and loss on foreign currency transactions ($2,314). Also included in this category was other income in the amount of $2,070 for the year ended October 31, 2015.

Net Loss:

Net loss for the years ended October 31, 2016 and 2015 was $1,644,925, or ($0.00) per share, and $2,459,445, or ($0.13) per share, respectively, a decrease of $814,520, or 34%. Net loss consisted primarily of fees incurred in connection with the pursuit of listing of our Common Stock on the OTCBB and with establishing an account with our transfer agent, as well as legal and audit fees related to our SEC filing costs, along with the development of our software products, and interest on related party and convertible debts incurred during the years ended October 31, 2016 and 2015. A total of $565 of our net operating loss for the year ended October, 2016 was attributable to common and preferred stock payments in lieu of cash.

LIQUIDITY AND CAPITAL RESOURCES

The following table summarizes total current assets, liabilities, accumulated (deficit) and working capital (deficit) at October 31, 2016 and October 31, 2015.

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. To date, we have funded our operations through the sale of our common stock. Our primary uses of cash have been for the development of games, compensation, and professional fees. All funds received have been expended in the furtherance of growing the business and establishing brand portfolios. The following trends are reasonably likely to result in a material decrease in our liquidity over the near to long term:

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Critical Accounting Policies

We believe the following more critical accounting policies are used in the preparation of our financial statements:

JOBS Act

The Company is an “emerging growth company” as defined in the recently-enacted JOBS Act, and is eligible to take advantage of certain exemptions from various reporting and disclosure requirements that are applicable to public companies that are not “emerging growth companies.” As an “emerging growth company” under the JOBS Act, the Company is permitted to, and intends to, rely on exemptions from certain reporting and disclosure requirements, which may make our future public filings different than that of other public companies.

Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain new accounting standards until those standards would otherwise apply to private companies. The Company has elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act, that allows the Company to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, the Company’s financial statements may not be comparable to companies that comply with public company effective dates.

The Company will remain an “emerging growth company” until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1 billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement, (iii) the date on which the Company has, during the previous 3-year period, issued more than $1 billion in non-convertible debt or (iv) the date on which the Company is deemed a “large accelerated filer” as defined under the federal securities laws.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the 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. Significant estimates in the financial statements include the valuation of stock based compensation and deferred tax assets.

Segment Reporting

Under FASB ASC 280-10-50, the Company operates as a single segment and will evaluate additional segment disclosure requirements as it expands its operations.

Fair Value of Financial Instruments

Under FASB ASC 820-10-05, the Financial Accounting Standards Board establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The adoption of this standard did not have a material effect on the Company’s financial statements as reflected herein. The carrying amounts of cash, accounts payable and accrued interest reported on the balance sheet are estimated by management to approximate fair value primarily due to the short term nature of the instruments. The Company also had debt instruments that required fair value measurement on a recurring basis.

Foreign Currency Transactions

The Company translates foreign currency transactions to the Company's functional currency (United States Dollar), at the exchange rate effective on the invoice date. If the exchange rate changes between the time of purchase and the time actual payment is made, a foreign exchange transaction gain or loss results which is included in determining net income for the period.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable may result from our product sales or outsourced application development services. Management must make estimates of the uncollectability of accounts receivables. Management specifically analyzed customer concentrations, customer credit-worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts.

Loan Origination Costs

Loan origination costs consist of legal fees and the associated costs of debt financing. The costs are being amortized over the life of the debt associated with each cost. During the year ended October 31, 2016, the Company recorded amortization expense of $39,044 which is included in interest expense on the statement of operations. As of October 31, 2016, the Company had $9,631 of unamortized loan origination costs.

Revenue Recognition

The Company generates revenue from three sources; sale of game applications, sale of advertising provided with games, and outsourced application development services. The Company recognizes revenue using four basic criteria that must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured, which is typically after receipt of payment and delivery, net of any credit card charge-backs and refunds. Determination of criteria (3) and (4) are based on management’s judgment regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required. Revenues on advertising are deferred and recognized ratably over the advertising period.

Effective November 1, 2018, the Company will adopt ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 — Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured.

There was no impact on the Company’s financial statements as a result of adopting Topic 606 for the years ended October 31, 2016 and 2015.

Concentration of Revenue

All the revenue included in the accompanying financial statements is from one line of business, outsourced application development services, from a single related party customer, based in the United Kingdom.

Development Costs

Expenditures for product development costs are expensed as incurred. The Company has expensed development costs of $-0- during the years ended October 31, 2016 and 2015.

Income Taxes

The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax basis of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not.

The Company follows the provisions of FASB ASC 740-10 “Uncertainty in Income Taxes” (ASC 740-10). Certain recognition thresholds must be met before a tax position is recognized in the financial statements. An entity may only recognize or continue to recognize tax positions that meet a "more-likely-than-not" threshold. As of October 31, 2016, the Company does not believe it has any uncertain tax positions that would require either recognition or disclosure in the accompanying financial statements.

Basic and Diluted Loss Per Share

The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss adjusted on an “as if converted” basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For the periods presented, there were no outstanding potential common stock equivalents and therefore basic and diluted earnings per share result in the same figure.

Stock-Based Compensation

Under FASB ASC 718-10-30-2, all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. The Company issued $317,576 and $537,973 of stock based compensation for services for the years ended October 31, 2016 and 2015, respectively.

Derivative Liability

The Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.” The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense). Upon conversion or exercise of a derivative

instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date. We analyzed the derivative financial instruments (the Convertible Note and tainted Warrant), in accordance with ASC 815. The objective is to provide guidance for determining whether an equity-linked financial instrument is indexed to an entity’s own stock. This determination is needed for a scope exception which would enable a derivative instrument to be accounted for under the accrual method. The classification of a non-derivative instrument that falls within the scope of ASC 815-40-05 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” also hinges on whether the instrument is indexed to an entity’s own stock. A non-derivative instrument that is not indexed to an entity’s own stock cannot be classified as equity and must be accounted for as a liability. There is a two-step approach in determining whether an instrument or embedded feature is indexed to an entity’s own stock. First, the instrument's contingent exercise provisions, if any, must be evaluated, followed by an evaluation of the instrument's settlement provisions. The Company utilized multinomial lattice models that value the derivative liability within the notes based on a probability weighted discounted cash flow model. The Company utilized the fair value standard set forth by the Financial Accounting Standards Board, defined as the amount at which the assets (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale.

Recent Accounting Pronouncements

See Note 1 in the Notes to the Financial Statements for recent accounting pronouncements. There were various other accounting standards and interpretations recently issued, none of which are expected to a have a material impact on the Company's consolidated financial position, operations or cash flows.

Forward-Looking Statements

This report contains or incorporates by reference forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 concerning our future business plans and strategies, the receipt of working capital, future revenues and other statements that are not historical in nature. In this report, forward-looking statements are often identified by the words “anticipate,” “plan,” “believe,” “expect,” “estimate,” and the like. These forward-looking statements reflect our current beliefs, expectations and opinions with respect to future events, and involve future risks and uncertainties which could cause actual results to differ materially from those expressed or implied.

Other uncertainties that could affect the accuracy of forward-looking statements include:

This list is not exhaustive of the factors that may affect any of our forward-looking statements. You should read this report completely and with the understanding that our actual future results may be materially different from what we expect. These forward-looking statements represent our beliefs, expectations and opinions only as of the date of this report. We do not intend to update these forward looking statements except as required by law. We qualify all of our forward-looking statements by these cautionary statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Pocket Games, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Pocket Games, Inc. (the Company) as of October 31, 2016 and 2015, and the related statements of income, stockholders’ equity, and cash flows for each of the years in the two-year period ended October 31, 2016, and the related notes and schedules (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of October 31, 2016 and 2015, and the results of its operations and its cash flows for each of the years in the two-year period ended October 31, 2016, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company suffered a net loss from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ M&K CPAS, PLLC

We have served as the Company’s auditor since 2014.

Houston, TX

October 5, 2018

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2016 and 2015

Note 1 - Nature of Business and Significant Accounting Policies

Nature of Business

Pocket Games, Inc. (the “Company”) was incorporated on October 4, 2013 (“Inception”) under the laws of the State of Florida. The Company is engaged in the development, marketing and sale of interactive games for mobile devices, tablets and computers. The Company has limited customers and products and revenues to date.

We develop games and provide end-end services for software and application development. We also have a dedicated division for server support and cloud management. Our clients rely on us to support their core IT architecture and provide 24/7 support for their business critical infrastructure

The Company has adopted a fiscal year end of October 31.

JOBS Act

The Company is an “emerging growth company” as defined in the recently-enacted JOBS Act, and is eligible to take advantage of certain exemptions from various reporting and disclosure requirements that are applicable to public companies that are not “emerging growth companies.” As an “emerging growth company” under the JOBS Act, the Company is permitted to, and intends to, rely on exemptions from certain reporting and disclosure requirements, which may make our future public filings different than that of other public companies.

Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain new accounting standards until those standards would otherwise apply to private companies. The Company has elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act, that allows the Company to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, the Company’s financial statements may not be comparable to companies that comply with public company effective dates.

The Company will remain an “emerging growth company” until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1 billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement, (iii) the date on which the Company has, during the previous 3-year period, issued more than $1 billion in non-convertible debt or (iv) the date on which the Company is deemed a “large accelerated filer” as defined under the federal securities laws.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the 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.

Segment Reporting

Under FASB ASC 280-10-50, the Company operates as a single segment and will evaluate additional segment disclosure requirements as it expands its operations.

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2016 and 2015

Fair Value of Financial Instruments

Under FASB ASC 820-10-05, the Financial Accounting Standards Board establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The adoption of this standard did not have a material effect on the Company’s financial statements as reflected herein. The carrying amounts of cash, accounts payable and accrued interest reported on the balance sheet are estimated by management to approximate fair value primarily due to the short term nature of the instruments. The Company also had debt instruments that required fair value measurement on a recurring basis.

Foreign Currency Transactions

The Company translates foreign currency transactions to the Company's functional currency (United States Dollar), at the exchange rate effective on the invoice date. If the exchange rate changes between the time of purchase and the time actual payment is made, a foreign exchange transaction gain or loss results which is included in determining net income for the period.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and short-term highly liquid investments purchased with original maturities of three months or less. Cash and cash equivalents at October 31, 2016 and 2015 were $4,141 and $24,404, respectively.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable may result from our product sales or outsourced application development services. Management must make estimates of the uncollectability of accounts receivables. Management specifically analyzed customer concentrations, customer credit-worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts.

Loan Origination Costs

Loan origination costs consist of legal fees and the associated costs of debt financing. The costs are being amortized over the life of the debt associated with each cost. During the year ended October 31, 2016, the Company recorded amortization expense of $39,044 which is included in interest expense on the statement of operations. As of October 31, 2016, the Company had $9,631 of unamortized loan origination costs.

Revenue Recognition

The Company generates revenue from three sources; sale of game applications, sale of advertising provided with games, and outsourced application development services. The Company recognizes revenue using four basic criteria that must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured, which is typically after receipt of payment and delivery, net of any credit card charge-backs and refunds. Determination of criteria (3) and (4) are based on management’s judgment regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required. Revenues on advertising are deferred and recognized ratably over the advertising period.

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2016 and 2015

Effective November 1, 2018, the Company will adopt ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 — Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured.

There was no impact on the Company’s financial statements as a result of adopting Topic 606 for the years ended October 31, 2016 and 2015.

Concentration of Revenue

Total revenue recognized was $3,332 and $24,374 for the years ended October 31, 2016 and 2015, respectively. The Company entered into a contract with a related party during the fiscal year ended October 31, 2015, whereby, the Company will perform testing on games and application. The revenue recognized as a result of this agreement is $3,332 and $6,608 for the years ended October 31, 2016 and 2015, respectively.

Software Development Costs

Costs incurred in connection with the development of software products are accounted for in accordance with the Financial Accounting Standards Board Accounting Standards Codification ("ASC") 985 “Costs of Software to Be Sold, Leased or Marketed.” Costs incurred prior to the establishment of technological feasibility are charged to research and development expense. Software development costs are capitalized after a product is determined to be technologically feasible and is in the process of being developed for market but may be expensed if the Company is in the development stage. Amortization of capitalized software development costs begins upon initial product shipment. Capitalized software development costs are amortized over the estimated life of the related product (generally thirty-six months), using the straight-line method. The Company evaluates its software assets for impairment whenever events or change in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of software assets to be held and used is measured by a comparison of the carrying amount of the asset to the future net undiscounted cash flows expected to be generated by the asset. If such software assets are considered to be impaired, the impairment to be recognized is the excess of the carrying amount over the fair value of the software asset. During the years ended October 31, 2016 and 2015, the Company did not capitalize any software development costs.

Advertising and Promotion

All costs associated with advertising and promoting products are expensed as incurred.

Research and Development

Expenditures for research and product development costs are expensed as incurred. The Company has expensed development costs of $-0- during the years ended October 31, 2016 and 2015, respectively.

Income Taxes

The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax basis of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not.

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2016 and 2015

Basic and Diluted Loss Per Share

The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss adjusted on an “as if converted” basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For the periods presented, there were no outstanding potential common stock equivalents and therefore basic and diluted earnings per share result in the same figure.

Stock-Based Compensation

The Company adopted FASB guidance on stock based compensation. Under FASB ASC 718-10-30-2, all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. The Company recognized $317,576 and $537,973 for services and compensation for the years ended October 31, 2016 and 2015, respectively.

Derivative Liability

The Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.” The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income(expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date. We analyzed the derivative financial instruments (the Convertible Note and tainted Warrant), in accordance with ASC 815. The objective is to provide guidance for determining whether an equity-linked financial instrument is indexed to an entity’s own stock. This determination is needed for a scope exception which would enable a derivative instrument to be accounted for under the accrual method. The classification of a non-derivative instrument that falls within the scope of ASC 815-40-05 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” also hinges on whether the instrument is indexed to an entity’s own stock. A non-derivative instrument that is not indexed to an entity’s own stock cannot be classified as equity and must be accounted for as a liability. There is a two-step approach in determining whether an instrument or embedded feature is indexed to an entity’s own stock. First, the instrument's contingent exercise provisions, if any, must be evaluated, followed by an evaluation of the instrument's settlement provisions. The Company utilized multinomial lattice models that value the derivative liability within the notes based on a probability weighted discounted cash flow model. The Company utilized the fair value standard set forth by the Financial Accounting Standards Board, defined as the amount at which the assets (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale.

Recent Accounting Pronouncements

In June 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-12, Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The new guidance requires that share-based compensation that require a specific performance target to be achieved in order for employees to become eligible to vest in the awards and that could be achieved after an employee completes the requisite service period be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation costs should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2016 and 2015

has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. This new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2015. Early adoption is permitted. Entities may apply the amendments in this Update either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. The adoption of ASU 2014-12 is not expected to have a material impact on our financial position or results of operations.

In June 2014, the FASB issued ASU No. 2014-10: Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation, to improve financial reporting by reducing the cost and complexity associated with the incremental reporting requirements of development stage entities. The amendments in this update remove all incremental financial reporting requirements from U.S. GAAP for development stage entities, thereby improving financial reporting by eliminating the cost and complexity associated with providing that information. The amendments in this Update also eliminate an exception provided to development stage entities in Topic 810, Consolidation, for determining whether an entity is a variable interest entity on the basis of the amount of investment equity that is at risk. The amendments to eliminate that exception simplify U.S. GAAP by reducing avoidable complexity in existing accounting literature and improve the relevance of information provided to financial statement users by requiring the application ofthe same consolidation guidance by all reporting entities. The elimination of the exception may change the consolidation analysis, consolidation decision, and disclosure requirements for a reporting entity that has an interest in an entity in the development stage. The amendments related to the elimination of inception-to-date information and the other remaining disclosure requirements of Topic 915 should be applied retrospectively except for the clarification to Topic 275, which shall be applied prospectively. For public companies, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. The Company has elected to early adopt these amendments and accordingly have not labeled the financial statements as those of a development stage entity and have not presented inception-to-date information on the respective financial statements.

Note 2 - Going Concern

As shown in the accompanying financial statements, the Company has incurred continuous losses from operations, has an accumulated deficit of $7,263,913, has a negative working capital of $2,455,558 and has cash on hand of $4,141 as of October 31, 2016, and has generated minimal revenues to date. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management is currently seeking additional sources of capital to fund short term operations through debt or equity investments, including loans from Officers and Directors. The Company, however, is dependent upon its ability to secure equity and/or debt financing and there are no assurances that the Company will be successful, therefore, without sufficient financing it would be unlikely for the Company to continue as a going concern.

The financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Company’s ability to continue as a going concern. The financial statements also do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2016 and 2015

Note 3 - Fair Value of Financial Instruments

Under FASB ASC 820-10-5, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.

The Company has convertible notes that must be measured under the new fair value standard. The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2016 and 2015

The following schedule summarizes the valuation of financial instruments at fair value on a non-recurring basis in the balance sheets as of October 31, 2016 and 2015, respectively:

There were no transfers of financial assets or liabilities between Level 1 and Level 2 inputs for the years ended October 31, 2016 and 2015.

Level 2 liabilities consist of short term unsecured loans payable to related parties. No fair value adjustment was necessary during the years ended October 31, 2016 and 2015.

Level 3 liabilities consist of a total of $756,887 of convertible debentures and related derivative liability of $402,542 as of October 31, 2016. A discount of $76,133 and $298,497 was recognized at October 31, 2016 and 2015, respectively, on the convertible debts.

Note 4 - Related Party Transactions

Promissory Note

From time to time the Company received unsecured loans, bearing interest at 12% per annum, maturing on December 31, 2014 (in default) from one of the Company’s Directors and Treasurer, as disclosed in Note 5.

Stock Issuances

On February 17, 2015, the Company issued 478,850 shares of common stock to an officer of the Company as payment for accrued compensation in lieu of cash. The fair value of the common stock was $47,885 based on the closing stock price of the Company’s common stock on the date of grant which is the best evidence of fair value.

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2016 and 2015

On June 4, 2015, the Company issued 429,000 shares of common stock to an officer of the Company as payment for accrued compensation in lieu of cash. The fair value of the common stock was $19,305 based on the closing stock price of the Company’s common stock on the date of grant which is the best evidence of fair value.

On September 9, 2015, the Company issued 300,000 shares to employees of the Company as payment for compensation in lieu of cash. The fair value of the common stock was $50,550 based on closing stock price of the Company’s common stock on the date of grant which is the best evidence of fair value.

On October 20, 2015, the Company issued 1,000,000 shares to employees of the Company as payment for compensation in lieu of cash. The fair value of the common stock was $80,000 based on closing stock price of the Company’s common stock on the date of grant which is the best evidence of fair value.

Revenues

The Company entered into a contract with a related party during the fiscal year ended October 31, 2015, whereby, the Company will perform testing on games and application. The total revenue recognized as a result of such agreement is $3,332 which represents 100% of total revenue during the year ended October 31, 2016. The total revenue recognized as a result of such agreement is $6,608 out of the total $24,374 or 27% of total revenue during the year ended October 31, 2015.

Employment Contracts

On October 4, 2013, the Company entered into two employment agreements with the two officers of the Company. Both agreements are for a term of three years and require monthly payments of $10,000 to each officer. Accrued compensation was $42,000 and $131,923 at October 31, 2016 and 2015, respectively.

Rents

The Company leases office space from a shareholder and consultant (the “Landlord”). The amounts due to the Landlord were $3,500 and $2,000 as of October 31, 2016 and 2015, respectively. These amounts are included in accrued expenses, related parties on the accompanying balance sheets.

Note 5 - Loans Payable, Related Parties

Loans payable, related parties, consists of the following at October 31, 2016 and October 31, 2015, respectively:

The Company recognized interest expense of $1,604 and $1,343 during the years ended October 31, 2016 and 2015, respectively. No interest has been paid to date.

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2016 and 2015

Note 6 – Convertible Debenture

Convertible debentures consist of the following at October 31, 2016 and 2015, respectively:

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2016 and 2015

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2016 and 2015

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2016 and 2015

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2016 and 2015

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2016 and 2015

The Company recognized interest expense in the amount of $57,495 and $36,523 for the years ended October 31, 2016 and 2015, respectively, related to the convertible debentures above.

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2016 and 2015

In addition, a total of $23,000 and $48,000 of debt issuance cost were incurred pursuant to the closings of the convertible debentures during the years ended October 31, 2016 and 2015, respectively, which are being amortized to interest expense over the term of the debentures using the straight line method, which approximate the effective interest method. The Company recorded a total of $39,044 and $24,692 of interest expense pursuant to the amortization of the issuance cost during the years ended October 31, 2016 and 2015, respectively.

In accordance with ASC 815-15, the Company determined that the variable conversion features and shares to be issued represented derivative features, and these are shown as derivative liabilities on the balance sheet. The Company calculated the fair value of the compound embedded derivative associated with the convertible debentures utilizing a lattice model.

The aforementioned accounting treatment resulted in a total ending debt discount equal to $76,133 for the year ended October 31, 2016 and $298,497 for the year ended October 31, 2015. The discount is amortized on a straight line basis, which approximated the effective interest method due to the short term duration of the note, from the dates of issuance until the stated redemption date of the debts, as noted above. During the years ended October 31, 2016 and 2015, the Company recorded debt amortization expense in the amount of $397,763 and $263,470, respectively, attributed to the aforementioned debt discount.

During the year ended October 31, 2016, the Company converted accrued compensation of $143,995 and warrants of $72,344 into convertible debentures.

During the year ended October 31, 2016, a total of $251,432 of debt and accrued interest was converted into 737,861,718 shares of the Company’s common stock. As a result, a loss of $167,170 was recognized.

Note 7 - Derivative Liability

As discussed in Note 6 under Convertible Debentures, the Company issued convertible notes payable that provide for the issuance of convertible notes with variable conversion provisions. The conversion terms of the convertible notes are variable based on certain factors, such as the future price of the Company’s common stock. The number of shares of common stock to be issued is based on the future price of the Company’s common stock. The number of shares of common stock issuable upon conversion of the promissory note is indeterminate. Due to the fact that the number of shares of common stock issuable could exceed the Company’s authorized share limit, the equity environment is tainted and all additional convertible debentures and warrants are included in the value of the derivative. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion option and warrants and shares to be issued were recorded as derivative liabilities on the issuance date.

The fair values of the Company’s derivative liabilities were estimated at the issuance date and are revalued at each subsequent reporting date, using a lattice model. The Company recognized current derivative liabilities of $402,542 and $1,369,662 at October 31, 2016 and 2015, respectively. The change in fair value of the derivative liabilities resulted in a gain of $1,247,736 and a loss of $1,072,689 for the twelve months ended October 31, 2016 and 2015, respectively, which has been reported as other expense in the statements of operations.

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2016 and 2015

The following presents the derivative liability value at October 31, 2016 and 2015, respectively:

The following is a summary of changes in the fair market value of the derivative liability during the year ended October 31, 2016:

Key inputs and assumptions used to value the convertible debentures and warrants issued during the year ended October 31, 2016:

Convertible notes derivatives:

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2016 and 2015

Warrant derivatives:

Note 8 - Changes in Stockholders’ Equity (Deficit)

Authorized Shares, Common Stock

The Company is authorized to issue 499,000,000 shares of $0.0001 par value common stock. As of October 31, 2016, 816,601,647 shares were issued and outstanding.

Authorized Shares, Preferred Stock

The Company is also authorized to issue 1,000,000,000 shares of its preferred stock. On April 25, 2014, the Company designated (the “Designation”) a series of our preferred stock as Series A Preferred Stock, (“Series A Preferred Stock”) and issued 1,000 shares of the Series A Preferred Stock to its chief executive officer and sole director.

As a result of the Designation:

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2016 and 2015

Common Stock Issuances, for the Period Ending October 31, 2015

During the year ended October 31, 2015, the Company issued 4,295,000 shares of common stock for consulting services. The fair value of the common stock was $471,232 based on the market price of the Company’s common stock on the date of grant.

During the year ended October 31, 2015, the Company issued 907,850 shares of common stock for payment of accrued compensation to the president of the Company. The fair value of the common stock was $67,190 based on the market price of the Company’s common stock on the date of grant.

During the year ended October 31, 2015, the Company issued 1,230,000 shares of common stock for cash in the amount of $12,300.

During the year ended October 31, 2015, the Company issued 2,211,679 shares of common stock for the conversion of convertible notes payable in the amount of $50,168. As the conversions were within the terms of the agreement, no additional gain or loss on the conversion has been recognized.

Stock Options, for the Period Ending October 31, 2015

During the year ended October 31, 2015, the Company issued 500,000 stock options to a service provider and exercisable over a 4 year term expiring on April 28, 2019. The values of the options were estimated using a Black-Scholes option pricing model equal to $16,614. The key inputs to the model were the number of options 500,000, share price on the grant date of $0.04, exercise price of $0.20, terms of 4 years, volatility of 211% and a discount rate of 0.43%.As the shares are fully vested on the date of agreement, the value of the options of $16,614 was fully expensed on the date of grant.

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2016 and 2015

The following table summarizes the changes in options outstanding as of October 31, 2015 and 2016:

Common Stock Warrants, for the Period Ending October 31, 2015

The Company issued 6,846,394 warrants on May 8, 2015 with an exercise price of $0.0140 per share and a term of 5 years in conjunction with the convertible debt issuance. The exercised price of the warrants is updated to the lowest offering price of common stock based on subsequent equity sales. As such, the number of share of common stock issuable upon exercise of the warrants is indeterminate. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the warrants and shares to be exercised were recorded as derivative liabilities on the issuance date.

On August 4, 2015, the Company issued warrants of 203,500 with an exercise price of $0.011 per share and a term of 5 years in conjunction with the convertible debt issuance. The exercised price of the warrants is updated to the lowest offering price of common stock based on subsequent equity sales. As such, the number of share of common stock issuable upon exercise of the warrants is indeterminate. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the warrants and shares to be exercised were recorded as derivative liabilities on the issuance date.

On August 17, 2015, the Company issued warrants of 486,662 with an exercise price of $0.0580 per share and a term of 5 years in conjunction with the convertible debt issuance. The exercised price of the warrants is updated to the lowest offering price of common stock based on subsequent equity sales. As such, the number of share of common stock issuable upon exercise of the warrants is indeterminate. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the warrants and shares to be exercised were recorded as derivative liabilities on the issuance date.

On September 10, 2015, the Company issued warrants of 573,706 with an exercise price of $0.0580per share and a term of 5 years in conjunction with the convertible debt issuance. The exercised price of the warrants is updated to the lowest offering price of common stock based on subsequent equity sales. As such, the number of share of common stock issuable upon exercise of the warrants is indeterminate. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the warrants and shares to be exercised were recorded as derivative liabilities on the issuance date.

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2016 and 2015

On October 9, 2015, the Company issued warrants of 560,000 with an exercise price of $0.011 per share and a term of 5 years in conjunction with the convertible debt issuance. The exercised price of the warrants is updated to the lowest offering price of common stock based on subsequent equity sales. As such, the number of share of common stock issuable upon exercise of the warrants is indeterminate. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the warrants and shares to be exercised were recorded as derivative liabilities on the issuance date.

On October 15, 2015, the Company issued warrants of 573,706 with an exercise price of $0.0580per share and a term of 5 years in conjunction with the convertible debt issuance. The exercised price of the warrants is updated to the lowest offering price of common stock based on subsequent equity sales. As such, the number of share of common stock issuable upon exercise of the warrants is indeterminate. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the warrants and shares to be exercised were recorded as derivative liabilities on the issuance date.

The following table summarizes the changes in warrants outstanding as of October 31, 2015 and 2016:

Subscriptions Payable, for the Period Ending October 31, 2015

On November 6, 2014, the Company issued 155,400 shares of common stock pursuant to an agreement with a consultant which had previously been recorded as Subscriptions Payable in the amount of $10,878 in the accompanying balance sheet at October 31, 2014.

Settlement of convertible debt, for the Period Ending October 31, 2015

During the period, the Company repaid back convertible debt in the amount of $134,000 and converted $50,168 of debt for 2,211,679 shares of the common stock. As a result of such conversion and repayment, the Company reduced its derivative liability by $66,913.

Common Stock Issuances, for the Period Ending October 31, 2016

During the period, the Company granted 54,900,000 and issued 54,400,000 shares of common stock for consulting services. The fair value of the common stock issued was $317,576 based on the market price of the Company’s common stock on the date of grant. The 500,000 shares authorized but not issued is recorded as $1,500 (based on the market value on the date of grant) stock payable as of October 31, 2016.

Settlement of convertible debt, for the Period Ending October 31, 2016

During the period, the Company converted $251,432 of debt for 737,861,718 shares of common stock. Due to excess share issuance, the Company recognized a loss on conversion of $167,179; the excess shares were valued based on fair market value on the date of conversion.

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2016 and 2015

Note 9 - Income Taxes

The Company accounts for income taxes under FASB ASC 740-10, which requires use of the liability method. FASB ASC 740-10-25 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences.

For the years ended October 31, 2016 and 2015, the Company incurred net operating losses and, accordingly, no provision for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. The net operating loss carry forwards, if not utilized, will begin to expire in 2028.

Based on the available objective evidence, including the Company’s history of its loss, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets at October 31, 2016 and 2015, respectively.

A reconciliation between the amounts of income tax benefit determined by applying the applicable U.S. and State statutory income tax rate to pre-tax loss is as follows:

Note 10 – Subsidiaries

As disclosed in our Form 8-K filed with the Securities and Exchange Commission, we issued a total of 400,000 shares of our Series B Convertible Preferred Stock in connection with our acquisition of 80% of the Class A common stock and 100% of the Class B common stock of Social Technology Holdings, Inc. (“STH”), and reserved an additional 80,000 shares of our Class B voting Convertible Preferred Stock for issuance in a contemplated merger transaction to acquire the 20% minority interest in the STH Class A common stock. STH is the owner and operator of “Viximo”, a software platform that allows game providers to access multiple websites from a single source API.”

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2016 and 2015

As disclosed in our Form 8-K filed with the Securities and Exchange Commission, we issued a total of 270,000 shares of our Series C Convertible Preferred Stock and a $3,960,000 convertible note due March 31, 2019 in connection with our acquisition of 100% of the outstanding common stock of Kicksend Holdings, Inc., a Delaware corporation (“Kicksend”). Kicksend is engaged in the business of file storage and sharing in real-time on digital platforms, including desktop, mobile and webapps, to permit users to organize, download and sent storage files.

Under the terms of these acquisitions, the Company was to receive full financial disclosure  in order to maintain its ‘fully reporting’ status with the SEC. Subsequent to the closing, neither acquisition target was able to provide full financial disclosure and Pocket Games’ attorney opined that this was a material breach of the contracts and the acquisitions described above were unwound. This resulted in the unwinding, return, and cancellation of all items related to the acquisitions. The Company has recorded a loss on deconsolidation in the amount of $1,068,339 for the year ended October 31, 2016.

Note 11 – Commitments and Contingencies

Intellectual Property Purchase Agreement

On February 12, 2014, the Company entered into an Intellectual Property Purchase Agreement, whereby the Company purchased from the seller a certain software game application. Subject to the terms and conditions of this Agreement, the Company issued to the seller 1,500,000 shares of common shares. Additionally, the Company agreed to pay to the Seller the cost for development and modification of $40,000, of which $20,000 was paid during the year ended October 31, 2014. The remaining balance of $20,000 shall be paid as the work passes through quality control.

In the case of Venture Lending & Leasing -vs- Vert Capital Corp, Pocket Games and its recently acquired subsidiary, Kicksend, were named as defendants in court documents and a judgement filed against Pocket Games as Adam Levin’s company, Vert Capital, put up no defense to the case against them. The awarded judgement was $963,460, plus interest of $100,465 and court costs of $4,414. The Company has recorded accrued judgement payable and loss on deconsolidation in the amount of $1,068,339 for the year ended October 31, 2016. Pocket Games is in communication with Venture Lending & Leasing and, as of August 2018, an agreement in principle is in discussion to resolve the issue.

From time to time, we are also a party to certain legal proceedings incidental to the normal course of our business including the enforcement of our rights under contracts with contractors, purchasers and suppliers. While the outcome of these legal proceedings cannot at this time be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

Note 12 – Subsequent Events

Subsequent to October 31, 2016, the Company issued a total of 7,050,303,875 shares of common stock all for the conversion of debt and accrued interest.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

On September 18, 2014, we dismissed our previous independent accountant, Salberg & Company, P.A. (hereafter “SCPA). Our Board of Directors approved the decision to change the Company’s independent accountants on September 5, 2014.

The report of SCPA regarding the Company’s financial statements for the past fiscal year ended October 31, 2013, contained in its S-1 registration statement for the past fiscal year ended October 31, 2013, did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to audit scope or accounting principles, except that the report contains an explanatory paragraph stating that there was substantial doubt about the Company's ability to continue as a going concern.

During the fiscal year ended October 31, 2013 and during the period from October 31, 2013 through to September 5, 2014, the date of dismissal, there were no disagreements with SCPA on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of SCPA would have caused it to make reference to the subject matter of the disagreements in connection with its report.

On September 5, 2014, we engaged M&K CPAS, PLLC (“M&K”), independent registered accountants, as our independent accountant.

From October 4, 2013 (inception) until September 5, 2014, the Company did not consult with M&K CPAS, PLLC with respect to any of (i) the application of accounting principles to a specified transaction, either completed or proposed; (ii) the type of audit opinion that might be rendered on the Company's financial statements; or (iii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K) or an event of the type described in Item 304(a)(1)(v) of Regulation S-K.

ITEM 9A.  CONTROLS AND PROCEDURES.

Management’s Report on Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, to allow for timely decisions regarding required disclosure.

As of October 31, 2016, the end of our fiscal year covered by this report, we carried out an evaluation, under the supervision of our Chief Executive Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, we concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this annual report because there was no segregation of the duties with only a sole member in our management team. Our board of directors has only one member. We do not have a formal audit committee.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act, as amended). In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of control procedures. The objectives of internal control include providing management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management’s authorization and recorded properly to permit the preparation of financial statements in conformity with accounting principles generally accepted in the United States. Our management assessed the effectiveness of our internal control over financial reporting as of October 31, 2016. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Our management has concluded that, as of October 31, 2016, our internal control over financial reporting is ineffective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with US generally accepted accounting principles. This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

Inherent limitations on effectiveness of controls

Internal control over financial reporting has inherent limitations which include but is not limited to the use of independent professionals for advice and guidance, interpretation of existing and/or changing rules and principles, segregation of management duties, scale of organization, and personnel factors. Internal control over financial reporting is a process which involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis, however these inherent limitations are known features of the financial reporting process and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

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.

Changes in Internal Control over Financial Reporting

None.

ITEM 9B.  OTHER INFORMATION.

None.

PART III

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Board of Directors

Our board of directors consists of the following individual:

(1) The business address of each of our directors is 17321st Avenue #25955, New York. NY 10128

Director Independence

Because our common stock is not currently listed on a national securities exchange, we have used the definition of “independence” of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the Company or any other individual having a relationship which, in the opinion of the Company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:

We do not have any independent directors. We do not have an audit committee, compensation committee or nominating committee. We do however have a code of ethics that applies to our officers, employees and director.

Compensation of Directors

From time to time, our board members may receive cash or additional shares of common stock of the Company for their services. We do not regularly compensate our directors with cash in respect of their capacities as members of the Board, although we may do so in the future.

Board of Directors Meetings and Committees

Although various items were reviewed and approved by the Board of Directors via unanimous written consent during fiscal year ended October 31, 2016, the Board held no formal meetings.

We do not have Audit or Compensation Committees of our board of directors. Because of the lack of financial resources available to us, we also do not have an “audit committee financial expert” as such term is described in Item 401 of Regulation S-K promulgated by the SEC.

Changes in Procedures by which Security Holders May Recommend Nominees to the Board

Any security holder who wishes to recommend a prospective director nominee should do so in writing by sending a letter to the Board of Directors. The letter should be signed, dated and include the name and address of the security holder making the recommendation, information to enable the Board to verify that the security holder was the holder of record or beneficial owner of the company’s securities as of the date of the letter, and the name, address and resumé of the potential nominee. Specific minimum qualifications for directors and director nominees which the Board believes must be met in order to be so considered include, but are not limited to, management experience, exemplary personal integrity and reputation, sound judgment, and sufficient time to devote to the discharge of his or her duties. There have been no changes to the procedures by which a security holder may recommend a nominee to the Board during our most recently ended fiscal year.

Executive Officers

David Lovatt and Elliott Polatoff are the Company’s executive officers. Mr. Lovatt serves as the Company’s Chief Executive Officer, as well as our principal accounting and financial officer. Mr. Polatoff serves as the Company’s Secretary. Further information pertaining Mr. Lovatt and Mr. Polatoff’s business background and experience is contained in the section above marked DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Section 16(a) Beneficial Ownership Reporting Compliance

We are required to identify each person who was an officer, director or beneficial owner of more than 10% of our registered equity securities during our most recent fiscal year and who failed to file on a timely basis reports required by Section 16(a) of the Securities Exchange Act of 1934.

To our knowledge, during the fiscal year ended October 31, 2016, based solely upon a review of such materials as are required by the Securities and Exchange Commission, no other officer, director, or beneficial holder of more than ten percent of our issued and outstanding shares of Common Stock failed to timely file with the Securities and Exchange Commission any form or report required to be so filed pursuant to Section 16(a) of the Exchange Act of 1934.

Code of Ethics

The Company expects that its Officers and Directors will maintain appropriate standards of honesty and ethical conduct in connection with the performance of their duties on behalf of the Company. In recognition of this expectation, the Company has adopted a Code of Ethics. The purpose of this Code of Ethics is to codify standards the Company believes are reasonably necessary to deter wrongdoing and to promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships and full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with, or submits to, the Securities and Exchange Commission (the “SEC”), or other regulatory bodies and in other public communications made by the Company.

ITEM 11.  EXECUTIVE COMPENSATION.

The following table summarizes the total compensation for the two fiscal years ended October 31, 2016 and 2015 of each person who served as our principal executive officer or principal financial and accounting officer collectively, (the “Named Executive Officers”) including any other executive officer who received more than $100,000 in annual compensation from the Company. Except as noted in footnote (2) below, we did not award cash bonuses, stock awards, stock options or non-equity incentive plan compensation to any Named Executive Officer during the two years ended October 31, 2016 and 2015, thus these items are omitted from the table below:

There is no other arrangement or understanding between our directors and officers and any other person pursuant to which any director or officer was or is to be selected as such.

Outstanding Equity Awards at Fiscal Year-End

There were no grants or equity awards to our Named Executive Officers or directors during the fiscal year ended October 31, 2016.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table describes the ownership of our voting securities (i) by each of our officers and directors, (ii) all of our officers and directors as a group, and (iii) each person known to us to own beneficially more than 5% of our common stock or any shares of our preferred stock. Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. Unless otherwise indicated, we believe that each beneficial owner set forth in the table has sole voting and investment power. Our address is 1732 First Avenue, Suite 25955, New York, NY 10128.