[X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
[ ] Transition Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] 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 ST (ss.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 [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer, a non-accelerated filer, or a smaller reporting company.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:
As of January 25, 2016, there were 26,747,009 shares of the Issuer's common stock, par value $0.001 per share outstanding.
Certain statements in this quarterly report on Form 10-Q contain or may contain forward-looking statements that are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Readers should carefully review this quarterly report in its entirety, including but not limited to our financial statements and the notes thereto. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. For any forward-looking statements contained in any document, we claim the protection of the safe harbour for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
The accompanying notes are an integral part of the condensed unaudited financial statements.
NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) Business Description
ZD Ventures Corporation (the Company), incorporated on February 23, 2005 under the laws of the state of Nevada, operates from its Toronto, Canada office. Most of the activities of the Company to date relate to its organization, funding, and seeking business opportunities in the emerging technologies.
At the end of the fiscal year 2015, the Company discontinued its plan for further development of a social website and wrote off the carrying costs as non-temporary impairment. During the nine months ended December 31, 2015, the Company was not able to conclude satisfactorily on several business negotiations. The management continues its efforts in reviewing business opportunities that will meet its criteria.
(B) Basis of Presentation
The unaudited interim financial statements as of and for the three and nine months ended December 31, 2015 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC) for interim financial reporting. These financial statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary to present fairly the balance sheets, operating results and cash flows for the periods presented in accordance with accounting principles generally accepted in the United States of America. Operating results for the three and nine months ended December 31, 2015 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2016. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted in accordance with the SECs rules and regulations for interim reporting.
The unaudited interim financial statements should be read in conjunction with the Companys Annual Report filed on Form 10-K for the year ended March 31, 2015. The significant accounting policies followed are the same as those detailed in the said Annual Report.
(C) Use of estimates
The financial statements have been prepared in conformity with generally accepted accounting principles (GAAP). In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period then ended. Actual results may differ significantly from those estimates.
NOTE 2 - GOING CONCERN
The Companys financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
ZD Ventures Corporation
Nine months ended December 31, 2015
NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS
NOTE 2 - GOING CONCERN (CONTINUED)
In order to continue as a going concern, the Company will need, among other things, new business opportunities and additional capital resources. Managements plan is to obtain such resources for the Company by obtaining capital from significant shareholders sufficient to acquire and /or participate in new business ventures, to meet its minimal operating expenses and seeking equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. As of December 31, 2015, the Company has an accumulated deficit amount of approximately $2,747,863.
NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS
In August 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40)-Disclosure of Uncertainties about an Entitys Ability to Continue as a Going Concern (ASU 2014-15). ASU 2014-15 provides guidance to United States Generally Accepted Accounting Principles ("U.S. GAAP") about managements responsibility to evaluate whether there is a substantial doubt about an entitys ability to continue as a going concern and to provide related footnote disclosures. Specifically, ASU 2014-15 (1) defines the term substantial doubt, (2) requires an evaluation of every reporting period including interim periods, (3) provides principles for considering the mitigating effect of managements plan, (4) requires certain disclosures when substantial doubt is alleviated as a result of consideration of managements plans, (5) requires an express statement and other disclosures when substantial doubt is not alleviated, and (6) requires an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this update are effective for annual periods beginning after December 15, 2016 and interim periods within those reporting periods. Earlier adoption is permitted. This ASU is not anticipated to have a material impact on the Company's financial statements and notes to the financial statements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. This ASU is the result of a convergence project between the FASB and the International Accounting Standards Board. The core principle behind ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for delivering those goods and services. This model involves a five-step process that includes identifying the contract with the customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction prices to the performance obligations in the contract and recognizing revenue when (or as) the entity satisfies the performance obligations. The guidance in the ASU supersedes existing revenue recognition guidance and is effective for annual reporting periods beginning after December 15, 2016 with early application not permitted. The ASU allows two methods of adoption; a full retrospective approach where three years of financial information are presented in accordance with the new standard, and a modified retrospective approach where the ASU is applied as a cumulative effect adjustment as of the date of adoption. The Company will evaluate the impact of adopting the new standard once it begins generating revenue.
In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest. ASU No. 2015-03 changes the presentation of debt issuance costs in financial statements. Under the new guidance, an entity presents such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs is reported as interest expense. This guidance is effective beginning in the first quarter of fiscal year 2017 and early adoption is permitted in an interim period with any adjustments reflected as of the beginning of the fiscal year that includes that interim period. The company does not believe the guidance will result in a material impact to its financial statements.
ZD Ventures Corporation
Nine months ended December 31, 2015
NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS
NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which provides guidance for the recognition, measurement, presentation, and disclosure of financial assets and liabilities. This ASU will be effective for the Company beginning in the first quarter of fiscal year 2019. The Company is evaluating the effects of the adoption of this ASU to its financial statements.
NOTE 4- INVESTMENTS, AVAILABLE FOR SALE
The Company was a member of Necotium, a pledge fund in Spain. The Fund on behalf of its members invests in early stage companies with strong growth potential. The investments are usually disposed of when the fund manager believes that expected growth is achieved. The proceeds are distributed among the members in proportion to their investments, after the funds fees and related costs.
While the Company is no longer a member of the fund, it made the following investments through the fund during the fiscal year 2015. The investments constituted less than 10% of the total equity of the related investee entities:
The Fund ceased to provide updates on the above investments. The Company was unable to access any details from the investee companies. As a result, the Company concluded that as at December 31, 2015, the fair value of these investments was nil. The carrying costs of $39,200 was therefore considered impaired and expensed.
In April 2015, the Company received two unsecured convertible loans totalling to $30,000 repayable within one year and carrying coupon at 8%. The loans and coupons accrued can be converted into common shares of the Company at US$0.05 per common share at the discretion of the lenders within the repayment period. The entire loan amount was transferred to paid-in capital since the present value of its beneficial conversion feature (BCF) value was greater than its face value. Debt discount of $14,876 was charged to interest and included under convertible debt. In addition, debt discount of $30,619 on existing convertible debt was also charged to interest and included under convertible debt.
Funds were advanced from time to time by Current Capital Corporation (CCC), a Canadian based private company in Ontario, fully owned by Mr. John Robinson, a shareholder of the Company. Advances are repayable on demand and carry no interest; they have therefore been classified as current liabilities.
Payables as at December 31, 2015 include $15,507 due to management (As at March 31, 2015: $43,507 due to the management) and $ nil (As at March 31, 2015: $3,745 due to a consultant holding over 10% equity interest in the Company) and $6,000 due to CCC (As at March 31, 2015: $12,000). Accruals include fee to CEO accrued of $25,000 (March 31, 2015: $ nil).
The Company has evaluated subsequent events from the balance sheet date through the date these financial statements were issued and concluded that there are no events to disclose.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our Financial Statements and Notes thereto appearing elsewhere in this Report on Form 10-Q as well as our other SEC filings.
The Company was incorporated on February 23, 2005 under the laws of the state of Nevada. Effective December 31, 2014, Mr. Terence Robinson was appointed as the Chairman of the Board of directors and Chief Executive Officer of the Company. Mr. Shah continued as a director and a Chief Financial Officer and Secretary of the Company until July 15, 2015 when he resigned and Mr. Robinson took over as Chief Financial Officer also.
On June 28, 2013, the Company changed its name from Webtradex International Corporation to ZD Ventures Corporation (ZDV, the Company).
The Company has no subsidiaries. Our principal office is located at 47 Avenue Road, Suite 200, Toronto, Ontario, Canada M5R 2G3. Our telephone number is (416) 840-0211. Our fiscal year end is March 31.
The following discussion and analysis should be read in conjunction with the unaudited financial statements and accompanying notes of the Company for the nine months ended December 31, 2015 and the audited financial statements and notes for the year ended March 31, 2015.
Business Plan and Strategy
ZDVs business strategy until March 2015 involved developing a social website, B Wished, acquired in July 2012 aimed at driving traffic for various sellers of products and services which can generate revenue through commissions from the associated sellers and advertisements, as well as other related sources for the Company. However, at the end of March 31, 2015, the Management concluded that this was not a commercially viable business and decided to expense all the costs related to this project. The Company has not yet generated or realized any revenues from business operations. The Company currently had small investments available for sale in a couple of emerging technology companies through its former membership to a pledge fund in Barcelona, however, they were written off as at December 31, 2015 since the Company concluded that their carrying cost was impaired and is now negotiating new business opportunities.
Results of operations
The Company did not have any operating income since its inception on February 23, 2005 through December 31, 2015. For the nine months ended December 31, 2015, the Company recognized a net loss of $222,520 compared to net loss of $241,530 for the nine months ended December 31, 2014.
Approximately $ 84,000 of the costs relate to one-time write offs of advances and investments as explained elsewhere in this report. The net operating costs for the fiscal period 2016 was thus approximately $ 140,000
Overall operating expenses declined significantly during the 2016 fiscal period compared to 2015 fiscal period. During the 2015 fiscal period, the Company incurred significant costs in setting up an office in Barcelona including hiring of various consultants and legal costs in negotiating with Bluesence owners. However, effective April 1, 2015, the Company canceled contracts with most of its consultants, and discontinued using its Barcelona lawyer. As a result of these measures, operating costs declined significantly.
Professional fees for the three and nine months ended December 31, 2015 were $1,100 and $8,400 respectively compared to $10,203 and $53,481 respectively for the three and nine months ended December 31, 2014. The fees for the three and nine months ended December 31, 2014 included legal fees of approximately $12,000 and $36,000 respectively charged by a lawyer in Spain which were due to various investment activities initiated during the periods. There were no legal fees during the fiscal period ended December 31, 2015. The balance of the professional fees represent review and annual audit fees charged by the independent accountant.
Consulting fees for the three and nine months to December 31, 2015 includes $2,000 and $12,000 respectively charged by the ex-CFO and $ 25,000 and $ 25,000 respectively by the CEO. Approximately nil and $14,500 was charged by three other consultants. These consultants are not currently providing any services. The ex-CFO continues to provide accounting and other corporate services as an independent consultant for a fee of $ 2,000 per quarter. $15,000 fee for the previous year charged by CEO was forgiven and as a result was reversed to additional paid in capital.
Consulting fees for the three and nine months ended December 31, 2014 included $20,508 and $44,743 respectively charged by the management, approximately $14,000 and $45,000 respectively charged by a consultant who owns over 10% equity in the Company and is based in Barcelona, Spain and provided investor relation services and oversaw BWished development. The balance of the consulting fee of approximately $13,200 and $16,300 respectively was charged by various non-related consultants in Barcelona, Spain, providing administration and web site development services.
General and administrative expenses
These costs for the three and nine months ended December 31, 2015 include rent of approximately $nil and $12,808 respectively , reversal of fee of $ nil and $2,800 respectively, previously provided for annual renewal of the Companys membership to hedge fund which the management decided to cancel effective January 1, 2015, and reversal of fee charged by Current Capital Corp for investor relations of $ nil and $6,000 respectively, in the previous period, which CCC decided to forgive and agreed for cancelation of their contract without any further charges.
Major general and administrative costs for the three and nine months ended December 31, 2014 included rent of $6,823 and $12,818 respectively for the Barcelona office. Rent for this period also included commission of $3,927charged by the real estate broker and $2,700 for minor repairs. In June 2014, the Company signed a five-year lease on an approximately 180 square metre of office premises in Barcelona, Spain at a monthly lease of 2,291.74, subject to 50% reduction for the first seven months. The lease was however canceled effective July 1, 2015.
Interest expense, which also included amortization of BCF value of convertible loans for the three and nine months ended December 31, 2015 totalled $22,329 and $66,737 respectively, and was $13,863 and $41,438 respectively for the three and nine months ended December 31, 2014.
Interest expense for the period to December 31, 2015 comprised interest of approximately $3,133 at 5% and 8% on three convertible debts and amortized amount of approximately $63,600 representing the convertible feature of the convertible debts and unamortized value of the converted debts.
Interest expense for the nine months ended December 31, 2014, was comprised of interest of $3,767 at 5% on a convertible debt and amortized amount of approximately $37,600 representing the convertible feature of the convertible debt.
Financial Condition, Liquidity and Capital Resources
For the nine months ended December 31, 2015, the Company generated a negative cash flow from operations of approximately $40,500 (nine months to December 31, 2014: negative cash flow of approximately $169,000), which was primarily met from existing cash and new borrowings. In absence of any potential revenue in the near future, the Company will continue to be dependent upon its shareholders and associates to fund its cash requirements.
Our present material commitments are professional and administrative fees and expenses associated with the preparation of our filings with the U.S. Securities and Exchange Commission (SEC) and other regulatory requirements
As of December 31, 2015, the Company had cash of $11,828 (as at March 31, 2015: $21,271). The Company's total assets decreased significantly from $116,327 as at March 31, 2015 to $12,528 as at December 31, 2015, mainly due to write off of advances and investments as explained elsewhere in the report. Total liabilities also declined marginally from $453,351 as of March 31, 2015 to $451,903 as of December 31, 2015, mainly due to exchange gain on a debt payable in Canadian dollars. While the Company actually borrowed $30,000 during the nine months to December 31, 2015, they were covered by two convertible notes whose beneficial conversion feature value exceeded their face value and hence were transferred to equity. As a result, overall liability did not change significantly.
The Company continues to seek to raise capital to implement the Company's business strategy. Appointment of a CEO with significant experience in raising financing for small cap and emerging businesses and significant reduction of operating costs will enable the Company to pursue new investors. However, in the event additional capital is not raised or alternatively debt financing is not available from our shareholders, the Company may seek a merger or outright sale.
Note receivable comprised $44,800 (40,000) advanced in instalments between July 2014 and September 2014 to Mr. Sergi Vargas Vila, a non -related Spanish national who owns Bluesence Innovation Group, S.L., a Spanish private company, with whom the Company was negotiating acquisition of all shares in Bluesence from Mr. Vila. The advances were covered by a Loan agreement dated July 4, 2014 and were due on or before March 31, 2015, if no acquisition took place.
The negotiations with Bluesence concluded unsuccessfully and Mr. Vila refused to repay the advances. Management is of the opinion that the expected recovery through legal means does not justify the cost and efforts involved. As a result, the Note receivable was written off as bad debt as at December 31, 2015.
Investments available for sale
In fiscal year 2015, the Company made two investments through a pledge fund in Spain. Details of these investments are given in Note 4 to the unaudited condensed financial statements for the three and nine months ended December 31, 2015.
During the fiscal period 2016, the Company discontinued its membership to the pledge fund and was not provided with any updates on the investments. Inquiries by the management failed to generate any information to substantiate the carrying costs of these investments. The management therefore concluded that the value has been impaired and investments carrying value should be fully written off.
The accompanying financial statements have been prepared assuming that we will continue as a going concern. We have a retained deficit of approximately $2.7 million as at December 31, 2015. The Company realized a net loss from operations of approximately $223,000 and $242,000, respectively, for the nine months ended December 31, 2015 and 2014. These conditions raise substantial doubt about our ability to continue as a going concern. The Company continued to secure additional convertible loans and is currently negotiating with others to raise equity funding needed. However, there is no guarantee that such negotiations will be successful or result in the availability of the required funding. Particularly, if the Company is unable to negotiate a viable business, it may fail to attract further funding. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
Off-balance sheet arrangements
The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect or change on the Companys financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
* Filed herewith.
(b) The following sets forth the Company's reports on Form 8-K that have been filed during the period for which this report is filed:
8-K filed on July 17, 2015 concerning resignation of Mr. Kam Shah as director and chief financial officer and appointment of Mr. Terence Robinson as chief financial officer.
8-k filed on August 17, 2015 concerning a letter from outgoing certifying Accountant