Zoompass Holdings, Inc. - Quarter Report: 2017 March (Form 10-Q)

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

 

Commission File No. 333-203997

 (Exact name of registrant as specified in its charter)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   [X] Yes   [  ] No

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

 

 

 

 

 

 

TABLE OF CONTENTS

 

 

 

PART I – FINANCIAL INFORMATION			3
	Item 1.	Financial Statements	3
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	15
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
	Item 4.	Controls and Procedures	23
PART II – OTHER INFORMATION
	Item 1.	Legal Proceedings	23
	Item 1A.	Risk Factors	23
	Item 2.	Recent Unregistered Sales of Equity Securities	25
	Item 3.	Exhibits	24
SIGNATURES			24

 

 

 

PART I – FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

 

 

						March 31,				December 31,
ASSETS		Note				2017				2016
Current assets
Cash and cash equivalents			6			$	93,101			$	422,385
Cash held in trust and customer deposits							2,632,754				2,016,369
Accounts receivable (net of allowance for doubtful accounts of $16,531 – December 31, 2016 - $16,396)							178,065				63,274
Inventories							7,100				27,850
Prepaid expenses and other current assets			9				104,543				144,440
Total current assets							3,015,563				2,674,318
Equipment			4				50,214				54,519
Intangible assets			3,5				8,702,682				8,627,349
Total assets						$	11,768,459			$	11,356,186
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities			6,9			$	477,653			$	474,508
Client funds							2,512,177				1,840,210
Total liabilities							2,989,830				2,314,718
Shareholders' equity
Common stock, $0.0001 par value 500,000,000 shares authorized, 39,820,611 (December 31, 2016 – 39,300,400) shares issued and outstanding			1,7			$	3,981			$	3,929
Additional paid in capital			7,8				23,537,217				23,251,123
Accumulated deficit							(14,620,119	)			(13,984,951	)
Accumulated other comprehensive loss							(142,450	)			(228,633	)
Total liabilities and shareholders' equity							8,778,629				9,041,468
						$	11,768,459			$	11,356,186
Going concern			1
Commitments and contingencies			10

 

 

 

 

 

 

 

 

 

 

 

 

						For the three months ended
		Note				March 31, 2017
Cash flow from operating activities
Net loss						$	(635,168	)
Non-cash items:
Depreciation							4,810
Share-based payment expense			8				91,948
Foreign exchange loss							12,774
Changes in non-cash operating assets and liabilities
Accounts receivable							(114,858	)
Deposits							(601,931	)
Inventories							21,109
Prepaids and other current assets							(8,608	)
Accounts payable and accrued liabilities							18,968
Advances to related parties			9				50,000
Client funds							659,374
Net cash used in operating activities							(501,582	)
Cash flow from investing activities
Additions to intangibles			5				(20,000	)
Net cash used in investing activities							(20,000	)
Cash flow from financing activities
Issuance of common stock through the exercise of warrants			7				194,198
Net cash provided by financing activities							194,198
Effect of exchange rate changes on cash not held in U.S. dollars							(1,900	)
Decrease in cash and cash equivalents							(329,284	)
Cash and cash equivalents, beginning of period							422,385
Cash and cash equivalents, end of period						$	93,101

 

 

 

NOTE 1 — NATURE OF OPERATIONS AND GOING CONCERN

 

 

 

 

 

 

 

 

Cost		Computer equipment				Furniture				Total
Balance at December 31, 2016		$	61,670			$	2,333			$	64,003
Foreign exchange and other			541				21				562
Balance at March 31, 2017		$	62,211			$	2,354			$	64,565
Accumulated depreciation		Computer equipment				Furniture				Total
Balance at December 31, 2016		$	(9,250	)		$	(234	)		$	(9,484	)
Depreciation			(4,691	)			(119	)			(4,810	)
Foreign exchange and other			(56	)			(1	)			(57	)
Balance at March 31, 2017		$	(13,997	)		$	(354	)		$	(14,351	)
Balance at December 31, 2016		$	52,420			$	2,099			$	54,519
Balance at March 31, 2017		$	48,214			$	2,000			$	50,214

Cost		Acquired intangible assets				Payment platform				Total
Balance at December 31, 2016		$	8,527,349			$	100,000			$	8,627,349
Foreign exchange			75,333				-				75,333
Balance at March 31, 2017		$	8,602,682			$	100,000			$	8,702,682

 

 

 

NOTE 6 – FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

NOTE 7 – COMMON STOCK AND WARRANTS

Common stock

Grant date	Warrants	Weighted Average Exercise Price (C$)	Expiry
November 23, 2016	600,000	0.50	October 31, 2017
November 23, 2016(1)	-	0.50	March 31, 2017
	600,000

Date of grant		Contractual life		Number				Exercise price (C$)				Share- based payment expense				Share price (C$)				Risk-free rate				Volatility			Dividend yield		Expected life (years)
Option grant	December 1, 2016	December 1, 2021			917,500			$	1.50				66,569			$	1.50				1	%			108	%	Nil			5.00
Deferred stock unit grant	December 1, 2016	December 1, 2021			272,500			$	1.50				25,379			$	1.50				1	%			108	%	Nil			5.00
												$	91,948

Award		Fair Value				Contractual Life (years)				Units				Number of units vested				Weighted Average Exercise Price (C$)			Remaining Expiry Date
Options		$	493,080				4.67				562,500				562,500				0.50		December 1, 2021
Deferred stock units			210,961				4.67				187,500				187,500				-		December 1, 2021
Options			798,517				4.67				917,500				60,329				0.50		December 1, 2021
Deferred stock units			304,405				4.67				272,500				17,918				-		December 1, 2021
		$	1,806,963				4.67				1,940,000				828,247

 

 

 

NOTE 9– RELATED PARTY TRANSACTIONS AND BALANCES

During 2016, the Company paid an advance on behalf of certain shareholders in the amount of $250,000.  These shareholders also serve as directors and officers of the Company.  $120,000 was returned by December 31, 2016, and $50,000 was returned during the period ended March 31, 2017.  The $80,000 is reflected in prepaids and other current assets as at March 31, 2017 (December 31, 2016 - $130,000).

The total amount owing to the same shareholders, in relation to the services they provide to the Company in their capacity as Officers at March 31, 2017 was $211,205 (December 31, 2016 - $186,818) which includes expense reimbursements.  This amount is reflected in accounts payable and is further described below. 

As at March 31, 2017, the Company had an amount owing to an entity owned and controlled by the Chief Executive Officer of the Company of $156,769 (December 31, 2016 - $127,073).  The amount owing relates to services provided by the Chief Executive Officer and expense reimbursements.

As at December 31, 2016, the Company had an amount owing to an entity owned and controlled by the Secretary of the Company of $54,436 (December 31, 2016 - $59,745).  The amount owing relates to services provided by the Secretary and expense reimbursements.

As at March 31, 2017, the Company had an amount owing to the President of the Company of $26,086 (December 31, 2016 - $28,092) for salary. 

As at March 31, 2017, the Company had an amount owing to an entity owned and controlled by the Chief Financial Officer of the Company of $25,470 (December 31, 2016 - $31,653).  The amount owing relates to services provided by the Chief Financial Officer.

A total of $79,735 was recognized during the period ended March 31, 2017, for share-based payments expense to directors and officers of the Company.

As at March 31, 2017 and December 31, 2016, the amounts owing to officers of the Company are recorded in accounts payable and accrued liabilities.

 

NOTE 10 – COMMITMENTS AND CONTINGENCIES

The Company is currently using leased office space under a contract which runs to October 31, 2020.  The amount due under this contract is as follows:

 

 

 

Contingencies

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Forward-looking Statements

This Quarterly Report on Form 10-Q contains statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended as "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements included or incorporated by reference in this Quarterly Report on Form 10-Q, other than statements of historical fact, that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements appear in a number of places, including, but not limited to in this "Management's Discussion and Analysis of Financial Condition and Results of Operations." These statements represent our reasonable judgment of the future based on various factors and using numerous assumptions and are subject to known and unknown risks, uncertainties and other factors that could cause our actual results and financial position to differ materially from those contemplated by the statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts, and use words such as "anticipate," "believe," "estimate," "expect," "forecast," "may," "will", "should," "plan," "project" and other words of similar meaning. In particular, these include, but are not limited to, statements relating to the following:

Any or all of our forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and other factors including, among others:

In addition, there may be other factors that could cause our actual results to be materially different from the results referenced in the forward-looking statements, some of which are included in this Quarterly Report on Form 10-Q, including in this "Management's Discussion and Analysis of Financial Condition and Results of Operations." Many of these factors will be important in determining our actual future results. Consequently, no forward-looking statement can be guaranteed. Our actual future results may vary materially from those expressed or implied in any forward-looking statements. All forward- looking statements contained in this Quarterly Report on Form 10-Q are qualified in their entirety by this cautionary statement. Forward-looking statements speak only as of the date they are made, and the Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q, except as otherwise required by applicable law.

 

 

 

This discussion and analysis should be read in conjunction with the accompanying consolidated interim financial statements and related notes for the period ended March 31, 2017 as filed with the Securities and Exchange Commission and included in this Form 10-Q and the financial statements and management discussion and analysis for the period ended December 31, 2016.

The discussion and analysis of the financial condition and results of operations are based upon the financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-going basis management reviews our estimates and assumptions. The estimates were based on historical experience and other assumptions that management believes to be reasonable under the circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions.

As detailed in this 10-Q, the historic accounts are that of Zoompass Inc., a Company incorporated in June 2016.  As a result there is no comparative information for the three months ended March 31, 2016.

Nature of Operations

Zoompas Holdings, Inc. formerly known as UVIC. Inc. ("Zoompass Holdings," or the "Company") was incorporated under the laws of the State of Nevada on August 21, 2013.  Effective August 22, 2016, the Company entered into an Agreement for the Exchange of Stock (the "Agreement") with Zoompass, Inc., an Ontario, Canada corporation ("Zoompass").   Pursuant to the Agreement, the Company agreed to issue 8,050,784 shares of its restricted common stock to Zoompass' shareholders ("Zoompass' shareholders") in exchange for all the shares of Zoompass Inc. owned by the Zoompass Inc.'s Shareholders.  At the Closing Date, Rob Lee, a significant shareholder of the Company agreed to cancel 7,000,000 shares of the Company's common stock, which shares constituted the control shares of the Company.  Other than this one significant shareholder, shareholders of the Company held 2,670,000 shares. As a result of the Agreement, Zoompass is now a wholly owned subsidiary of the Company.  The Company has amended its Articles of Incorporation to change its name to Zoompass Holdings, Inc. and the appropriate forms were filed with FINRA and the SEC to change its name, address and symbol and complete a 3.5-1 forward split, which was consented to by the majority of shareholders on September 7, 2016 and approved in February 2017, for shareholders of record on September 7, 2016.

All share figures have been retroactively stated to reflect the stock split approved by shareholders, unless otherwise indicated.  Additionally, the Company's shareholders consented to an increase of the shares authorized to 500,000,000 and a revision of the par value to $0.0001.

As the former Zoompass shareholders ended up owning the majority of the Company, the transaction does not constitute a business combination and was deemed to be a recapitalization of the Company with Zoompass being the accounting acquirer, accordingly the accounting and disclosure information is that of Zoompass going forward.

Zoompass Inc., was incorporated under the laws of Ontario on June 8, 2016.  On June 28, 2016, pursuant to an agreement with a shareholder of Zoompass, certain net assets were acquired by Zoompass in exchange for shares of Zoompass (note 3).  The net assets primarily consisted of a virtual payment platform, certain customer contracts, cash held in trust and customer deposits as well as the associated client funds.

 

 

 

There is no certainty that the Company will be successful in generating sufficient cash flow from operations or achieving and maintaining profitable operations in the future to enable it to meet its obligations as they come due and consequently continue as a going concern. The Company will require additional financing this year to fund its operations and it is currently working on securing this funding through corporate collaborations, public or private equity offerings or debt financings. Sales of additional equity securities by the Company would result in the dilution of the interests of existing shareholders. There can be no assurance that financing will be available when required.

The Company expects the forgoing, or a combination thereof, to meet the Company's anticipated cash requirements for the next 12 months; however, these conditions raise substantial doubt about the Company's ability to continue as a going concern.

The Company has launched its mobility products and solutions program consisting of new and certified customer pre-owned phones and tablets, branded accessories and endless aisle program availability.

In connection with the launch of the mobility products and solutions programs the Company entered into several agreements more fully described below.

AGREEMENT WITH SYNNEX

The Company has entered into to a sales agent agreement with SYNNEX Canada Limited.  ("SYNNEX Canada").  SYNNEX Canada Limited, is a wholly-owned subsidiary of SYNNEX Corporation a leading distributor of technology products to resellers and system builders across Canada. It is expected that the agreement will propel the existing mobility strategy within Synnex to increase their reach within North America through national retail and wholesale channels, as well as value added resellers. The agreement should benefit Zoompass by giving direct access to those channels for cross-selling opportunities. Through this partnership, Synnex will gain access to Zoompass' expertise and established relationships with original equipment manufacturers and mobile virtual network operations and other channels opportunities.

 

 

 

AGREEMENT WITH SKY

The Company has agreed to a marketing partnership with SKY Devices LLC ("SKY") to provide international brand exposure into expanding markets and key retailers. "SKY is a fast growing mobile manufacturer developing smartphones with premium quality modern designs and robust performance". This partnership is in line with our strategy of being a unique integrated fintech company by bridging mobility with a global mobile money platform.

AGREEMENT WITH U-VEND GROUP

Zoompass has entered into an agreement with U-Vend Group to fit U-Vend Group vending solutions with mobility products and provide North American brand exposure into key markets and retailers.  U-Vend Group owns and operates kiosks and has partnered with numerous national consumer product companies to deliver new and innovative customer retail experiences in automated "frictionless" settings.  The Company is well positioned to sell U-Vend Group solutions within Canada, USA and Mexico by leveraging its existing relationships and network within the national retailer, airport and mall channels. The offering will leverage a "Grab and Go" model where consumers can use their credit card in a vending machine to purchase mobility devices and products.

AGREEMENT WITH STARLINK GROUP LLC

The Company has agreed to a marketing partnership with Starlink Group LLC ("STARLINK") to provide international brand exposure into expanding markets and key retailers.  STARKLINK is a wholesale distributor qualified in marketing cellphones and electorinc equipment offering a variety of models and brands.  This partnership is in line with Zoompass' strategy of being a unique integrated fintech company by bridging mobility with a global mobile money platform.

The Company has entered into a Lender Referral Agreement with a third party to provide financing allowing the Company to launch is virtual financing program.  Enabled by the Zoompass Mobile Money Platform, the program provides complete turnkey financing options for retail customers within locations across North America.

The program allows for real time credit approval and allows the Company to leverage its card products to provide greater credit to the consumer with residual approved funds issued through prepaid cards.

GIANT TIGER PROGRAM

The Company through its alliance with Home Trust, launched of an onsite credit program with retail chain Giant Tiger.  Giant Tiger was founded in 1961 and is Canadian owned and operated. The privately held, franchise based company, has over 200 stores in eight provinces, with many more opening, and employs over 7,000 team members. This program combines Zoompass' core competencies with its ability to facilitate the offering of credit facilities through its partners. The success of the launch hinged on the ability to offer "on-the-spot" quick credit approval for customers. This was accomplished utilizing Zoompass' mobile money platform in conjunction with Home Trust's credit and adjudication facilities. In total, consumers are on-boarded in under 5 minutes and are approved in under 20 seconds.

The Company launched its new reloadable prepaid card during December of 2016.  The Company shipped 15,000 prepaid cards to select retail locations in December 2016 and is currently in the process of delivering another 50,000 cards to retail locations.

Results of operations for the period ended March 31, 2017

Revenue and cost of sales

The Company's revenue consists of various fees associated with its prepaid debit card program.  For the period ended March 31, 2017, the Company generated gross card revenue of $245,481 and commissions and agent fees of $(26,843).  Additionally, the Company recognized revenue from the sale of mobility products of $36,045.  The Company recorded processing and card fees of $189,554 and cost of goods sold related to mobility products of $27,470.

General and administrative and other expenses

The Company incurred salaries and full-time consultant expenses of $395,896 for the period ended March 31, 2017.

Rent for the period ended March 31, 2017, was $35,203 and is related to the Company's corporate office.

For the period ended March 31, 2017, the Company incurred share-based payment expense of $91,948.  The share-based payment expense relates to certain options and deferred stock units that were granted in December, 2016 and vests over a period of 36 months from the date of grant.

The Company recognized depreciation expense of $4,810 and relates to the depreciation of computer equipment and furniture acquired.  As the Company, is currently enhancing the payment platform acquired to support its additional pipeline of revenue streams, costs incurred to enhance the platform are capitalized and are not being depreciated.

The Company incurred $38,532 in professional fees related to the costs of lawyers and reporting accountants.

Telecommunication expense is comprised of telephone and internet expenses.  Included in telecommunication expense is the costs related to regular and ongoing technological support.  For the period ended March 31, 2017, the Company incurred telecommunication expense of $2,991.

Office and sundry expense includes office expenses such as supplies, insurance and additional costs incurred to support the corporate head office.  For the period ended March 31, 2017, the Company incurred $74,381 in office and sundry expenses.

Included in filing fees and regulatory costs are costs associated with the Company's listing fees and transfer agent costs.  For the period ended March 31, 2017, the Company incurred filing fees and regulatory costs of $10,605.

The Company recorded a foreign exchange loss of $12,774.  The loss was primarily related to the realization and settlement of payables at exchange rates during the periods of strengthening of the US dollar relative to the Canadian dollar.

The Company incurred $5,687 in bank fees during the period ended March 31, 2017.

For the three months ended March 31, 2017, the Company incurred a net loss of $635,168 or $0.02 per share.

Liquidity and Capital Resources

As at March 31, 2017, the Company had a positive net working capital balance of $25,733 compared with $359,600 at December 31, 2016.  The decrease was primarily due to a use of cash for operating and investing activities during the period.

Operations for the period ended March 31, 2017, were primarily funded through cash balances at December 31, 2016, and the cash received from the issuances of shares of the Company's common stock as a result of the exercise of warrants.

Subject to the launch of the additional pipeline of revenue streams, there is no certainty that we will be successful in generating sufficient cash flow from operations or achieving and maintaining profitable operations in the future to enable us to meet our obligations as they come due and consequently continue as a going concern. The Company may require additional funds to further develop our expanded business plan.  The Company may require additional financing this year to fund our operations and is examining possible sources of funding beyond the existing cash generated from operations.  Sales of additional equity securities would result in the dilution of the interests of existing stockholders. There can be no assurance that financing will be available when required. In the event that the necessary additional financing is not obtained, the Company would reduce its discretionary overhead costs substantially, or otherwise curtail operations.

The Company expects the forgoing, or a combination thereof, to meet our anticipated cash requirements for the next 12 months; however, these conditions raise substantial doubt about our ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on recoverability and reclassification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

Net Cash Used in Operating Activities

During the period ended March 31, 2017, cash used in operations was $501,582.  This was primarily the result of the net loss incurred offset to some extent by changes in non-cash working capital of $24,054.

Net Cash Provided by Investing Activities

During the period ended March 31, 2017, the Company invested $20,000 during the period related to its software platform.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $194,198 through the issuance of shares in the common stock of the Company.

Commitments

The Company is currently using leased office space under a contract which runs to October 31, 2020.  The amount due under this contract is as follows:

Financial instruments and risk factors

The Company has exposure to liquidity risk and foreign currency risk.  The Company's risk management objective is to preserve and redeploy the existing treasury as appropriate, ultimately to protect shareholder value.  Risk management strategies, as discussed below, are designed and implemented to ensure the Company's risks and the related exposure are consistent with the business objectives and risk tolerance.

Liquidity Risk: Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due.  The Company manages its liquidity by ensuring that there is sufficient capital to meet short and long-term business requirements, after taking into account cash requirements from operations and the Company's holdings of cash and cash equivalents. The Company also strives to maintain sufficient financial liquidity at all times in order to participate in investment opportunities as they arise, as well as to withstand sudden adverse changes in economic circumstances.

Management forecasts cash flows for its current and subsequent fiscal years to predict future financing requirements.  Future requirements may be met through a combination of credit and access to capital markets.  The Company's cash requirements are dependent on the level of operating activity, a large portion of which is discretionary.  Should management decide to increase its operating activity, more funds than what is currently in place would be required.  It is not possible to predict whether financing efforts will be successful or sufficient in the future.   At March 31, 2017, the Company had $93,101 (December 31, 2016, $422,385), in cash and cash equivalents.

Related Party Transactions

During 2016, the Company paid an advance on behalf of certain shareholders in the amount of $250,000.  These shareholders also serve as directors and officers of the Company.  $120,000 was returned by December 31, 2016, and $50,000 was returned during the period ended March 31, 2017.  The $80,000 is reflected in prepaids and other current assets as at March 31, 2017 (December 31, 2016 - $130,000).

The total amount owing to the same shareholders, in relation to the services they provide to the Company in their capacity as Officers at March 31, 2017 was $211,205 (December 31, 2016 - $186,818) which includes expense reimbursements.  This amount is reflected in accounts payable and is further described below. 

As at March 31, 2017, the Company had an amount owing to an entity owned and controlled by the Chief Executive Officer of the Company of $156,769 (December 31, 2016 - $127,073).  The amount owing relates to services provided by the Chief Executive Officer and expense reimbursements.

As at December 31, 2016, the Company had an amount owing to an entity owned and controlled by the Secretary of the Company of $54,436 (December 31, 2016 - $59,745).  The amount owing relates to services provided by the Secretary and expense reimbursements.

As at March 31, 2017, the Company had an amount owing to the President of the Company of $26,086 (December 31, 2016 - $28,092) for salary. 

As at March 31, 2017, the Company had an amount owing to an entity owned and controlled by the Chief Financial Officer of the Company of $25,470 (December 31, 2016 - $31,653).  The amount owing relates to services provided by the Chief Financial Officer.

A total of $79,735 was recognized during the period ended March 31, 2017, for share-based payments expense to directors and officers of the Company.

 

 

In November 2015, the FASB issued ASU No. 2015-17, "Balance Sheet Classification of Deferred Taxes," which requires that deferred tax liabilities and assets be classified on our Consolidated Balance Sheets as noncurrent based on an analysis of each taxpaying component within a jurisdiction. ASU No. 2015-17 is effective for the fiscal year commencing after December 15, 2017. The Company does not anticipate that the adoption of ASU No. 2015-17 will have a material effect on the consolidated balance sheet or the consolidated results of operations.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 740): Recognition and Measurement of Financial Assets and Financial Liabilities. This ASU is effective for annual and interim reporting periods beginning after December 15, 2017. ASU 2016-01 enhances the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The Company is currently assessing the impact of ASU 2016-01.

 In February 2016, the FASB issued ASU 2016-02, Leases. This update requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The new guidance will also require additional disclosure about the amount, timing and uncertainty of cash flows arising from leases. The provisions of this update are effective for annual and interim periods beginning after December 15, 2018. The Company is still assessing the impact that the adoption of ASU 2016-02 will have on the consolidated balance sheet and the consolidated results of operations.

Off Balance Sheet Arrangements

The Company has no off-balance sheet transactions.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company" (as defined by §229.10(f)(1)), the Company is not required to provide the information required by this Item.

 

 

 

ITEM 4. CONTROLS AND PROCEDURES

During the period ended March 31, 2017, there were no changes in our internal controls over financial reporting (as defined in Rule 13a- 15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Evaluation of Disclosure Controls and Procedures

The Company maintains "disclosure controls and procedures" as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, that are designed to ensure that information required to be disclosed by the Company in reports that are filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As of the end of the period covered by this Quarterly Report, the Company carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(b) and 15d-15(b). Based upon this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures as of the end of the period covered by this Quarterly Report were ineffective due to a lack of segregation of duties,  due to limited administrative and financial personnel and related resources and as only one of our directors is independent segregation of duties as well as lack of administrative and financial personnel and related resources.

ITEM 1. LEGAL PROCEEDINGS

SIGNATURES

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