UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

FORM 10-K

 

[X]		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the year ended October 31, 2015
[   ]		TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to

Commission file number: 333-192939

 

POCKET GAMES, INC.

(Exact name of registrant as specified in its charter)

 

Florida		46-3813936
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
909 Plainview Ave., Far Rockaway, New York		11691
(Address of principal executive offices)		(Zip Code)

 

(347) 318-8859

(Registrant’s telephone number, including area code)

 

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

 

None		N/A
Title of each class		Name of each exchange on which registered

 

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.

 

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer  ☐		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

 

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, 2015 was $482,699.

 

As of February 12, 2016, there were 61,196,255 shares of common stock outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE:  None.

 

 

 

TABLE OF CONTENTS
PART I			4
ITEM 1.	BUSINESS		4
ITEM 1A.	RISK FACTORS		7
ITEM 1B.	UNRESOLVED STAFF COMMENTS		7
ITEM 2.	PROPERTIES		7
ITEM 3.	LEGAL PROCEEDINGS		7
ITEM 4.	MINE SAFETY DISCLOSURES		7
PART II			8
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUERS PURCHASES OF EQUITY SECURITIES		8
ITEM 6.	SELECTED FINANCIAL DATA		9
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		9
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		15
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		16
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE		43
ITEM 9A.	CONTROLS AND PROCEDURES		43
ITEM 9B.	OTHER INFORMATION		44
PART III			45
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE		45
ITEM 11.	EXECUTIVE COMPENSATION		48
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS		49
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE		50
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES		51
PART IV			52
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES		52
SIGNATURES			53

 

 

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 909 Plainview Ave., Far Rockaway, New York 11691. 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

 

We anticipate other acquisitions and changes to the Company in the coming year.

 

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.

 

 

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 growth¹. 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 PlayStation3 &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

·

58% of Americans play video games

·

Average age of players: 30

·

68% are above 18 and older

·

45% are female (up from 42% in 2012) and are usually over 18

·

Average of 2 gamers per household

·

51% of households own at least one console

·

Average age of purchaser: 35

·

77% of gamers play at least one hour a week

·

36% play games on their smart phone

UK:

·

The average UK gamer is 35

·

Most are male

·

Plays for almost 3 hours a day

·

The average gamer fights with their partner over their gaming hobby twice a week, with some 15% of people saying they’ve broken up over the amount of time spent gaming.

·

The UK is just behind the U.S. in terms of iPad game purchases.

 

Other Countries

·

Japan and China lead the pack when it comes to iPhone/iPad games. Russia is also a major user, ranking #6 in the world.

·

The games industry in India grew 16% in 2012, to $227 million.

·

91% of all people on earth have a mobile phone

·

56% of people own a smart phone

·

50% of mobile phone users use mobile as their primary Internet source

·

80% of time on mobile is spent inside apps or games

 

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

 

We have eleven (11) employees who are 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.      

 

Presently, our business is operated out of an office of 200 square feet located in Cedarhurst, New York, and is leased for $250 per month. This is a month to month sublease agreement. We intend to secure additional office and administrative facilities. We do not expect that office facilities costs will be substantial relative to our overall operational expenditures.

 

ITEM 3. LEGAL PROCEEDINGS.

 

The Company currently has no litigation pending, threatened or contemplated, or unsatisfied judgments.

 

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 37 registered holders of our common stock as of October 31, 2015. Registered holders do not include those stockholders whose stock has been issued in street name. The last reported price for our common stock on February 15, 2016 was $.0125 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, 2015:

 

		Price Range(1)
		High				Low
Fiscal October 31, 2015
Fourth quarter		$	0.18			$	0.0754
Third quarter		$	0.169			$	0.025
Second quarter		$	0.1199			$	0.032
First quarter		$	0.125			$	0.05
Fiscal October 31, 2014
Fourth quarter		$	0.25			$	0.05
Third quarter		$	0.50			$	0.50
Second quarter			N/A
First quarter			N/A

___________________

(1)

The above quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions.

 

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

 

On March 17, 2014, we entered into an agreement with Fluid Games, Ltd to acquire certain intellectual property for the game known as Idol Hands. In exchange for the game, we issued 1,500,000 shares of common stock valued at $0.05 per share. We also paid $40,000 as additional consideration.

 

On October 29, 2014, we issued 155,400 shares of our common stock valued at $0.05 per share for legal services.

 

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 $24,374 and $40,540 for the year ended October 31, 2015 and 2014, respectively. A total of $6,608 and $40,540 were from related party for the year ended October 31, 2015 and 2014, respectively.

 

Cost of Revenues:

 

Cost of revenues was $32,824 and $165,118 for the years ended October 31, 2015 and 2014, respectively. Cost of revenues during 2014 consisted of software and game cost of revenues and included $75,000 of stock based compensation for the purchase of Intellectual Property on May 14, 2014.

 

General and Administrative:

 

General and administrative expense was $136,065 and $25,203, for the years ended October 31, 2015 and 2014, respectively, an increase of $110,862, or 440%.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 $281,533 and $2,740,000 for the years ended October 31, 2015 and 2014, respectively, a decrease of $2,458,467, or 90%.Officer compensation expense consisted of a monthly fee of $10,000 to each of our two officers. A total of $50,000 of officer compensation was paid with the issuance of 1,000,000 shares of common stock in lieu of cash during the year ended October 31, 2014. Another 1,000 shares of Series A Preferred Stock valued at $2,500,000 were issued as a bonus to the CEO on April 25, 2014.

 

Professional Fees:

 

Professional fees expense was $584,230 and $217,572 for the years ended October 31, 2015 and 2015, respectively, an increase of $366,658, or 169%. Professional fees consisted of legal, consulting, accounting and auditing costs necessary to prepare our public filings. A total of $71,878 of compensation for consulting and legal services was paid with the issuance of common stock in lieu of cash during the year ended October 31, 2014, consisting of 1,220,000 shares and subscriptions payable for 155,400 shares.

 

 

Net Operating Loss:

 

Net operating loss for the years ended October 31, 2015 and 2014 was $1,010,278, and $3,107,353, respectively, a decrease of $2,097,075, or 67%. 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, 2014. A total of $2,696,878 of our net operating loss for the year ended October, 2014 was attributable to common and preferred stock payments in lieu of cash.

 

Other Expense:

 

Other expense was $1,449,167 and $5,270 for the years ended October 31, 2015 and 2014, respectively. 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).

 

Net Loss:

 

Net loss for the years ended October 31, 2015 and 2014 was $2,459,445, or ($0.13) per share, and $3,112,623, or ($0.24) per share, respectively, a decrease of $653,178, or 21%. 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, 2015 and 2014. A total of $2,696,878 of our net operating loss for the year ended October, 2014 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, 2015 and October 31, 2014.

 

	October 31,			October 31,
	2015			2014
Current Assets	$	51,824		$	3,158
Current Liabilities	$	1,851,638		$	204,839
Accumulated (Deficit)	$	(5,618,984)		$	(3,159,539)
Working Capital (Deficit)	$	(1,799,814)		$	(201,681)

 

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:

 

• An substantial increase in working capital requirements to finance our operations,
• Addition of administrative and professional personnel as the business grows,
• The cost of being a public company, and
• Payments for development of games.

 

 

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.

 

Beneficial Conversion Features

From time to time, the Company may issue convertible notes that may contain an imbedded beneficial conversion feature. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of warrants, if related warrants have been granted. The intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method.

 

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.

 

Revenue for the year ended October 31, 2014, includes only outsourced application development services recognized in accordance with ASC 605-28 "Milestone Method". The application development revenue, totaling $45,540, as amended (see Note 4), has been earned upon attainment of stipulated milestones through October 31, 2014 pursuant to a contract with an entity related to an officer of the Company. The officer is an owner and a director on the customer's Board. The Company may bill for these services prior to attainment of the performance milestones. Revenues recognized under this arrangement for the year ended October 31, 2014 were $40,540, all of which were from a related party.

 

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- and $165,118 during the years ended October 31, 2015 and 2014, respectively, which has been presented as a cost of revenues in the Company’s statements of operations.

 

 

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, 2015, 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 $537,973 and $2,696,878 of stock based compensation for services for the years ended October 31, 2015 and 2014, 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:

 

•

the worldwide economic situation;

•

any changes in interest rates or inflation;

•

the willingness and ability of third parties to honor their contractual commitments;

•

our ability to raise additional capital, as it may be affected by current conditions in the stock market and competition for risk capital;

•

our capital expenditures, as they may be affected by delays or cost overruns;

•

environmental and other regulations, as the same presently exist or may later be amended;

•

our ability to identify, finance and integrate any future acquisitions; and

•

the volatility of our common stock price.

 

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.

 

CONTENTS
		Page
Reports of Independent Registered Public Accounting Firm		17
Balance Sheets		18
Statements of Operations		19
Statements of Stockholders’ Equity (Deficit)		20
Statements of Cash Flows		21
Notes to the Financial Statements		22

 

 

 

 

 

 

 

 

 

 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors of

Pocket Games, Inc.

 

We have audited the accompanying balance sheets of Pocket Games, Inc. (the “Company”) as of October 31, 2015 and 2014 and the related statements of operations, stockholders’ equity (deficit), and cash flows for the year ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company was not required to have, nor were we engaged to perform, an audit of internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Pocket Games, Inc. as of October 31, 2015 and 2014 and the results of its operations and its cash flows for the periods described above in conformity with accounting principles generally accepted in the United States of America.

 

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 has accumulated a deficit of $5,618,984 and negative working capital of $1,799,814,which raises doubt about its ability to continue as a going concern. Management’s plans concerning these 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

Houston, TX

www.mkacpas.com

February 15, 2016

 

 

 

POCKET GAMES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
		October 31,
		2015				2014
CURRENT ASSETS
Cash and cash equivalents		$	24,404			$	430
Loan origination costs			25,675				2,728
Other assets			1,745				—
Total Current Assets			51,824				3,158
Fixed assets			4,420				—
TOTAL ASSETS		$	56,244			$	3,158
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable		$	49,834			$	27,852
Accrued expenses, related parties			13,224				4,071
Accrued expenses			31,762				263
Accrued compensation			131,923				150,679
Derivative liability			1,369,662				—
Loans payable, related parties			14,781				15,789
Convertible debenture, net of discount of
$298,497 and $41,815, respectively			240,452				6,185
Total Current Liabilities			1,851,638				204,839
TOTAL LIABILITIES			1,851,638				204,839
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $0.0001 par value; 1,000,000,000 shares authorized
Preferred stock designated, Series A, $0.0001 par value, 1,000 and -0-
shares issued and outstanding, respectively			—				—
Common stock, $0.0001 par value; 499,000,000 shares authorized,
24,339,929 and 15,540,000 shares issued and outstanding, respectively			2,434				1,554
Additional paid-in capital			3,821,210				2,945,426
Subscriptions payable, consisting of -0- and 155,400 shares, respectively			—				10,878
Accumulated deficit			(5,618,984	)			(3,159,539	)
Accumulated other comprehensive loss			(54	)			—
Total Stockholders' Equity (Deficit)			(1,795,394	)			(201,681	)
TOTAL LIABILITIES AND STOCKHOLDERS'  EQUITY (DEFICIT)		$	56,244			$	3,158
The accompanying notes are an integral part of these consolidated financial statements.

 

 

POCKET GAMES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
		For the Years Ended
		October 31,
		2015				2014
REVENUES
Revenues - Related Party		$	6,608			$	40,540
Revenues			17,766				—
Cost of revenues			(32,824	)			(165,118	)
Gross profit (loss)			(8,450	)			(124,578	)
OPERATING EXPENSES
General and administrative			136,065				25,203
Officer compensation			281,533				2,740,000
Professional fees			584,230				217,572
Total Operating Expenses			1,001,828				2,982,775
LOSS FROM OPERATIONS			(1,010,278	)			(3,107,353	)
OTHER INCOME (EXPENSES)
Other income			2,070				—
Loss on change in fair value of derivative liability			(1,072,689	)			—
Interest expense			(349,704	)			(5,270	)
Loss on settlement of debt			(26,530	)			—
Loss on foreign currency transactions			(2,314	)			—
Total Other Income (Expenses)			(1,449,167	)			(5,270	)
NET LOSS BEFORE INCOME TAXES			(2,459,445	)			(3,112,623	)
PROVISION FOR INCOME TAXES			—				—
NET LOSS		$	(2,459,445	)		$	(3,112,623	)
NET LOSS PER SHARE, BASIC AND FULLY DILUTED		$	(0.13	)		$	(0.24	)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING, BASIC AND FULLY DILUTED			19,311,709				13,045,699
The accompanying notes are an integral part of these consolidated financial statements.

 

 

POCKET GAMES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
October 31, 2014 and 2015
																														Accumulated
		Series A																Additional												Other				Total
		Preferred Stock								Common Stock								Paid-In				Subscriptions				Accumulated				Comprehensive				Stockholders'
		Shares				Amount				Shares				Amount				Capital				Payable				Deficit				Income				Equity (Deficit)
Balance, November 1, 2013			—				—				6,600,000				660				79,840				—				(46,916	)			—				33,584
Preferred stock issued for services,
related party			1,000				—				—				—				2,500,000				—				—				—				2,500,000
Common stock issued for services,
related party			—				—				1,000,000				100				49,900				—				—				—				50,000
Common stock sold for cash			—				—				5,220,000				522				133,978				—				—				—				134,500
Common stock issued for services			—				—				1,220,000				122				60,878				10,878				—				—				71,878
Common stock issued in exchange
for intellectual property			—				—				1,500,000				150				74,850				—				—				—				75,000
Beneficial conversion feature of
convertible debenture			—				—				—				—				45,980				—				—				—				45,980
Net loss for the year ended
October 31, 2014			—				—				—				—				—				—				(3,112,623	)			—				(3,112,623	)
Balance, October 31, 2014			1,000				—				15,540,000				1,554				2,945,426				10,878				(3,159,539	)			—				(201,681	)
Common stock issued for subscriptions
payable			—				—				155,400				16				10,862				(10,878	)			—				—				—
Common stock issued for services			—				—				4,295,000				430				470,802				—				—				—				471,232
Common stock issued for accrued compensation			—				—				907,850				91				67,099				—				—				—				67,190
Common stock issued for cash			—				—				1,230,000				123				12,177				—				—				—				12,300
Common stock issued for conversion of debt			—				—				2,211,679				221				49,947				—				—				—				50,168
Settlement of derivative due to conversion and repayment of convertible debt			—				—				—				—				66,913				—				—				—				66,913
Issuance of stock options			—				—				—				—				16,614				—				—				—				16,614
Beneficial conversion feature of
convertible debenture			—				—				—				—				180,959				—				—				—				180,959
Foreign currency translation adjustment			—				—				—				—				—				—				—				(54	)			(54	)
Donated Capital			—				—				—				—				411				—				—				—				411
Net loss for the year ended
October 31, 2015			—				—				—				—				—				—				(2,459,445	)			—				(2,459,445	)
Balance, October 31, 2015			1,000			$	—				24,339,929			$	2,434			$	3,821,210			$	—			$	(5,618,984	)		$	(54	)		$	(1,795,394	)
The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

 

POCKET GAMES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
		For the Years Ended
		October 31,
		2015				2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(2,459,445	)		$	(3,112,623	)
Adjustments to reconcile net loss to net cash
used by operating activities:
Amortization of loan origination costs			—				272
Amortization of discount on convertible debenture			288,162				4,165
Contributed capital, related party			411
Depreciation expense			296
Shares issued for services, related parties			227,490				2,550,000
Shares issued for services			310,483				146,878
Interest expense for note derivative			16,614				—
Change in fair value of derivative liabilities			1,072,689				—
Changes in operating assets and liabilities:
Deferred costs			—				53,055
Other current assets			(24,692	)			2,000
Accounts payable			22,430				14,463
Accrued expenses, related parties			9,153				2,531
Accrued expenses			33,667				263
Accrued officer compensation			(18,756	)			131,179
Deferred revenues			—				(8,500	)
Net Cash Used by Operating Activities			(521,498	)			(216,317	)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for purchase of fixed assets			(4,716	)			—
Net Cash Used by Investing Activities			(4,716	)			—
CASH FLOWS FROM FINANCING ACTIVITIES
Debt issuance costs			—				(3,000	)
Payments on convertible debt			(134,000	)			—
Payments on loans payable - related parties			(5,500	)			—
Proceeds from convertible debenture			672,950				48,000
Proceeds from loans payable, related parties			4,492				15,789
Proceeds from sale of common stock			12,300				134,500
Net Cash Provided by Financing Activities			550,242				195,289
Foreign currency translation			(54	)			—
DECREASE IN CASH AND CASH EQUIVALENTS			23,974				(21,028	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			430				21,458
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	24,404			$	430
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest		$	—			$	—
Cash paid for income taxes		$	—			$	—
Non-cash investing and financing activities:
Derivative on convertible notes		$	363,886			$	—
Stock issued for conversion of debt		$	50,167			$	—
Settlement of derivative		$	66,913			$	—
Discount on beneficial conversion feature of
convertible debentures		$	180,959			$	45,980
Stock issued for stock payable		$	10,878			$	—
The accompanying notes are an integral part of these consolidated financial statements.

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2015 and 2014

 

 

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.

 

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

 

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.

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2015 and 2014

 

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.

 

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, 2015 and 2014 were $24,404 and $430, 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.

 

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.

 

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.

 

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2015 and 2014

 

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, 2015 and 2014, 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, 2015 and 2014, 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.

 

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 $537,973 and $2,696,878 for services and compensation for the years ended October 31, 2015 and 2014, 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

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2015 and 2014

 

(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 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

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2015 and 2014

 

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 of the 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 $5,618,984, has a negative working capital of $1,799,814 and has cash on hand of $24,404 as of October 31, 2015, and has generated minimal revenues to date, all of which are from a related party. 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.

 

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.

 

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2015 and 2014

 

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.

 

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, 2015 and 2014, respectively:

 

		Fair Value Measurements at October 31, 2015
		Level 1				Level 2				Level 3
Assets
Cash		$	24,404			$	—			$	—
Total assets			24,404				—				—
Liabilities
Loans payable, related parties			—				14,781				—
Convertible debenture, net of discount of $298,497			—				—				240,452
Derivative liability			—				—				1,369,662
Total Liabilities			—				(14,781	)			(1,610,114	)
		$	24,404			$	(14,781	)		$	(1,610,114	)

 

		Fair Value Measurements at October 31, 2014
		Level 1				Level 2				Level 3
Assets
Cash		$	430			$	—			$	—
Total assets			430				—				—
Liabilities
Loans payable, related parties			—				15,789				—
Convertible debenture, net of discount of $41,815			—				6,185				—
Total liabilities			—				(21,974	)			—
		$	430			$	(21,974	)		$	—

 

There were no transfers of financial assets or liabilities between Level 1 and Level 2 inputs for the years ended October 31, 2015 and 2014.

 

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, 2015 and 2014.

 

Level 3 liabilities consist of a total of $240,452 of convertible debentures and related derivative liability of $1,369,662 as of October 31, 2015. A discount of 298,497 and $41,815 was recognized at October 31, 2015 and 2014, respectively

 

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2015 and 2014

 

 

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 December 15, 2013, the Company issued 1,000,000 shares of common stock to an officer of the Company as payment for compensation in lieu of cash. The fair value of the common stock was $50,000 based on recent sales prices of the Company’s common stock on the date of grant, and was paid ratably against accrued compensation over the subsequent six month period.

 

On April 25, 2014, the Company issued 1,000 shares of Series A Preferred Stock to its chief executive officer and sole director as a bonus for services provided. The fair value of the common stock was $2,500,000 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 November 6, 2014, the Company issued 350,000 shares to a related party of the Company as payment for compensation in lieu of cash. The fair value of the common stock was $29,750 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 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.

 

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, as amended in January 2014 and again in June 2014, whereby the Company will develop and deliver, on a milestone schedule, a game application, to an entity related to an officer of the Company. The officer is an owner and a director on the customer's Board. The Company was established on October 4, 2013 and had no independent revenues or significant operations during the year ended October 31, 2014. Related party revenues $40,540 for the year ended October 31, 2014.

 

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 $6,608 out of the total $24,374 or 27% of total revenue.

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2015 and 2014

 

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 $131,923 and $150,679 at October 31, 2015 and 2014, respectively.

 

Rents

The Company leases office space from a shareholder and consultant (the “Landlord”). The amounts due to the Landlord were $2,000 and $500 as of October 31, 2015 and 2014, 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, 2015 and October 31, 2014, respectively:

 

		October 31,				October 31,
		2015				2014
12% unsecured promissory note, bearing interest at 12% per annum from a related party, one of the Company’s Directors and Treasurer, maturing on December 31, 2014 (in default).		$	9,500			$	—
Miscellaneous loans, non-interest bearing, due on demand			5,281				15,789
		$	14,781			$	15,789

 

The Company recognized interest expense of $1,343 and $570 during the years ended October 31, 2015 and 2014, respectively. No interest has been paid to date.

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2015 and 2014

 

Note 6 – Convertible Debenture

 

Convertible debentures consist of the following at October 31, 2015 and 2014, respectively:

 

		October 31,				October 31,
		2015				2014
Originated October 6, 2014, unsecured $48,000 convertible promissory note, which carries an 8% interest rate and matures on July 9, 2015 (“First KBM Note”). The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-eight percent (58%) of the average of the three lowest closing bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date, or $0.00005 per share, whichever is greater. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company paid total debt issuance cost of $3,000 that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method. Note was converted to stock during the nine months ended July 31, 2015 (less unamortized discount on beneficial conversion feature of $-0- and $41,815, respectively)		$	—			$	6,185
Originated November 7, 2014, unsecured $43,000 convertible promissory note, which carries an 8% interest rate and matures on August 11, 2015 (“Second KBM Note”). The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-eight percent (58%) of the average of the three lowest closing bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date, or $0.00005 per share, whichever is greater. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company paid total debt issuance cost of $3,000 that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method. Note was paid in full during the nine months ended July 31, 2015 (less unamortized discount on beneficial conversion feature of $-0- and $-0-, respectively)			—				—
Originated December 10, 2014, unsecured $33,000 convertible promissory note, which carries an 8% interest rate and matures on September 12, 2015 (“Third KBM Note”). The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-eight percent (58%) of the average of the three lowest closing bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date, or $0.00005 per share, whichever is greater. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company paid total debt issuance cost of $3,000 that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method. Note was paid in full during the nine months ended July 31, 2015 (less unamortized discount on beneficial conversion feature of $-0- and $-0-, respectively)			—				—

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2015 and 2014

 

Originated February 23, 2015, unsecured $33,000 convertible promissory note, which carries an 8% interest rate and matures on November 25, 2015 (“First Vis Vires Note”). The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-eight percent (58%) of the average of the three lowest closing bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company paid total debt issuance cost of $3,000 that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method.(less unamortized discount on beneficial conversion feature of $-0- and $-0-, respectively)			—				—
Originated June 8, 2015, unsecured $53,000 convertible promissory note, which carries an 8% interest rate and matures on March 8, 2016 (“Second Vis Vires Note”). The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-eight percent (58%) of the average of the three lowest closing bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date. In the event of default, the minimum amount due is 150% x (outstanding principal plus unpaid interest), and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company paid total debt issuance cost of $4,000 that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method.(less unamortized discount on beneficial conversion feature of $22,791 and $-0-, respectively)			30,209				—
Originated July 22, 2015, unsecured $38,000 convertible promissory note, which carries an 8% interest rate and matures on April 22, 2016 (“Third Vis Vires Note”). The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-eight percent (51%) of the average of the three lowest closing bid prices of the Company’s common stock for the thirty (30) trading days prior to the conversion date. In the event of default, the minimum amount due is 150% x (outstanding principal plus unpaid interest), and the debt holder is limited to owning 9.99% of the Company’s issued and outstanding shares. The Company paid total debt issuance cost of $3,000 that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method. (less unamortized discount on beneficial conversion feature of $24,873 and $-0-, respectively)			13,127				—

 

Originated August 17, 2015, unsecured $48,000 convertible promissory note, which carries an 8% interest rate and matures on May 20, 2016 (“Fourth Vis Vires Note”). The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-eight percent (51%) of the average of the three lowest closing bid prices of the Company’s common stock for the thirty (30) trading days prior to the conversion date. In the event of default, the minimum amount due is 150% x (outstanding principal plus unpaid interest), and the debt holder is limited to owning 9.99% of the Company’s issued and outstanding shares. The Company paid total debt issuance cost of $5,500 that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method. (less unamortized discount on beneficial conversion feature of $35,003 and $-0-, respectively)			12,997				—
Originated May 7, 2015, unsecured $10,000 convertible promissory note, which carries an 8% interest rate and matures on February 8, 2016 (“First 145 Carroll Note”). The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-eight percent (58%) of the average of the three lowest closing bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares.(less unamortized discount on beneficial conversion feature of $2,311 and $-0-, respectively)			7,689				—
Originated May 8, 2015, unsecured $110,000 convertible promissory note, which carries a 10% interest rate and matures on May 8, 2016 (“First JDF Note”). The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-eight percent (58%) of the average of the three lowest closing bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company paid total debt issuance cost of $6,000 that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method.(less unamortized discount due to derivative of $62,146 and $-0-, respectively)			47,854				—
Originated October 9, 2015, unsecured $61,600 convertible promissory note, which carries a 10% interest rate and matures on October 9, 2016 (“Second JDF Note”). The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-eight percent (58%) of the average of the three lowest reported sales prices of the Company’s common stock for the ten (10) trading days prior to the conversion date. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company paid total debt issuance cost of $6,000 that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method. (less unamortized discount due to derivative of $57,897 and $-0-, respectively)			3,703				—

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2015 and 2014

 

Originated June 10, 2015, unsecured $25,000 convertible promissory note ($25,000 received as of July 31, 2015), which carries a 0% interest rate for the first three months, and matures on June 10, 2017 (“First JMJ Note”). The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to sixty percent (60%) of the lowest trade price of the Company’s common stock for the twenty-five (25) trading days prior to the conversion date. (less unamortized discount due to derivative of $-0- and $-0-, respectively)			—				—
Originated May 27, 2015, unsecured $74,500 convertible promissory note, which carries an 8% interest rate and matures on November 27, 2015 (“First Minerva Note”). The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-eight percent (58%) of the average of the three lowest closing bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company paid total debt issuance cost of $4,500 that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method.(less unamortized discount on beneficial conversion feature of $3,563 and $-0-, respectively)			70,937				—
Originated June 29, 2015, unsecured $10,000 convertible promissory note, which carries an 8% interest rate and matures on February 28, 2016 (“Second Minerva Note”). The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-eight percent (58%) of the average of the three lowest closing bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. (less unamortized discount due to derivative of $2,974 and $-0-, respectively)			7,026				—
Originated July 9, 2015, unsecured $53,000 convertible promissory note, which carries a 10% interest rate and matures on July 9, 2016 (“First Essex Note”). The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-eight percent (58%) of the lowest closing price of the Company’s common stock for the ten (10) trading days prior to the conversion date. The Company paid total debt issuance cost of $3,000 that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method. (less unamortized discount due to derivative of $17,160 and $-0-, respectively)			35,840				—

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2015 and 2014

 

Originated August 4, 2015 unsecured $20,350 convertible promissory note, which carries an 8% interest rate and matures on August 6, 2016 (“First Abramowitz Note”). The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-eight percent (58%) of the average of the (3) lowest closing prices of the Company’s common stock, or $0.00005 per share, for the ten (10) trading days prior to the conversion date. The Company paid total debt issuance cost of $2,000 that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method.  (less unamortized discount due to derivative of $15,457 and $-0-, respectively).  In conjunction with this note, the company issued 203,500 common stock warrants with an exercise price of $0.011 per share with a term of 5 years.			4,893				—
Originated September 10, 2015, unsecured $30,250 convertible promissory note, which carries an 8% interest rate and matures on September 10, 2016 (“First VigereNote”). The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-eight percent (58%) of the average of the (3) lowest closing prices of the Company’s common stock for the ten (10) trading days prior to the conversion date. The Company paid total debt issuance cost of $2,500 that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method.(less unamortized discount due to derivative of $26,035 and $-0-, respectively).  In conjunction with this note, the company issued 298,029 common stock warrants with an exercise price of $0.11165 per share with a term of 5 years.			4,215				—
Originated October 15, 2015, unsecured $30,250 convertible promissory note, which carries an 8% interest rate and matures on October 15, 2016 (“Second VigereNote”). The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-eight percent (58%) of the average of the (3) lowest closing prices of the Company’s common stock for the ten (10) trading days prior to the conversion date. The Company paid total debt issuance cost of $2,500 that is being amortized over the life of the loan on the straight line method, which approximates the effective interest method.(less unamortized discount due to derivative and $-0-, respectively).  In conjunction with this note, the company issued 263,043 common stock warrants with an exercise price of $0.1265 per share with a term of 5 years.			1,962				—
Convertible debenture			240,452				6,185
Less: current maturities of convertible debenture			(240,452	)			(6,185	)
Long term convertible debenture		$	—			$	—

 

The Company recognized interest expense in the amount of $36,523 and $263 for the years ended October 31, 2015 and 2014, respectively, related to the convertible debentures above.

 

In addition, the Company recognized and measured the embedded beneficial conversion feature present in the convertible debts by allocating a portion of the proceeds equal to the intrinsic value of the feature to additional paid-in-capital. The intrinsic value of the feature was calculated on the commitment date using the effective conversion price of the convertible debt. This intrinsic value is limited to the portion of the proceeds allocated to the convertible debt.

 

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2015 and 2014

 

The aforementioned accounting treatment resulted in a total debt discount equal to $544,845 for the year ended October 31, 2015 and $45,980 for the year ended October 31, 2014. 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, 2015 and 2014, the Company recorded debt amortization expense in the amount of $263,470 and $3,893, respectively, attributed to the aforementioned debt discount.

 

In addition, a total of $48,000 and $3,000 of debt issuance cost were incurred pursuant to the closings of the convertible debentures during the years ended October 31, 2015 and 2014, 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 $24,692 ($25,672 net of discount) and $272 ($2,728 net discount) of interest expense pursuant to the amortization of the issuance cost during the years ended October 31, 2015 and 2014, 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.

 

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 multinomial lattice model. The Company’s current convertible debt derivative liabilities were $1,369,662 and $-0- at October 31, 2015 and 2014, respectively.

 

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 $1,369,662 and $0 at October 31, 2015 and 2014, respectively. The change in fair value of the derivative liabilities resulted in a loss of $1,072,689 and $0 for the twelve months ended October 31, 2015 and 2014, respectively, which has been reported as other expense in the statements of operations. The loss of $1,072,689 for the twelve months ended October 31, 2015 consisted of a loss of $181,659 due to the value in excess of the face value of the convertible notes, a net loss of $618,157 attributable to the fair value of warrants and a net loss in market value of $272,873 on the convertible notes.

 

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2015 and 2014

 

The following presents the derivative liability value at October 31, 2015 and 2014, respectively:

 

		October 31,				October 31,
		2015				2014
Convertible notes		$	751,505			$	—
Warrants			618,157				—
		$	1,369,662			$	—

 

The following is a summary of changes in the fair market value of the derivative liability during the year ended October 31, 2015:

 

		Derivative
		Liability
		Total
Balance, October 31, 2014		$	—
Increase in derivative value due to issuances of convertible promissory notes			545,545
Increase in derivative value due to issuances of Warrant			423,826
Decrease due to debt conversion			(66,913	)
Change in fair market value of derivative liabilities due to the mark to market adjustment			467,204
Balance, October 31, 2015		$	1,369,662

 

Key inputs and assumptions used to value the convertible debentures and warrants issued during the year ended October 31, 2015:

 

Convertible notes derivatives:

 

·

The stock price would fluctuate with the Company projected volatility. The stock price increased in this period ending 10/31/15 from $0.025 to $0.16.

·

The projected volatility curve from an annualized analysis for each valuation period was based on the historical volatility of the Company and the term remaining for each note:

·

The derivative Investor Convertible Notes convert after 90-180 days at the lessor of 51% or 58% of the average 3 lows in 10 or 30 trading days or the fixed exercise price set at issuance subject to full ratchet reset provisions;

·

Capital raising events are a factor for this Notes full reset provisions.

·

An event of default at 15% - 24% interest rate would occur 0% of the time, increasing 1.00%per month to a maximum of 10% with a 150% penalty;

·

The company would redeem the notes (with a 120% – 135% – 145% penalty) projected initially at 0% of the time and increase monthly by 10.0% to a maximum of 50.0% (from alternative financing being available for a Redemption event to occur);and

·

The Holder would automatically convert the note at the maximum of 2 times the conversion price or the stock price if the registration was effective (assumed after 180 days) and the Company was not in default with the target conversion price dropping as maturity approaches.

 

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2015 and 2014

 

Warrant derivatives:

 

·

The Warrants exercise prices are fixed and subject to full ratchet reset provisions;

·

The stock price would fluctuate with the Company projected volatility. The stock price increased in this period ending 10/31/15 from $0.025 to $0.16.

·

The projected volatility curve from an annualized analysis for each valuation period was based on the historical volatility of the Company and the term remaining for each note:

·

The Holder would exercise the Warrant as they become exercisable (effective registration is projected 90 days from issuance and the earliest exercise is projected 180 days from issuance) at target prices of 2 times the higher of the projected reset price or stock price.

·

Capital raising events (a single financing at 6 months from the issuance date) are a factor for these Warrants – full reset events projected to occur based on future stock issuance (quarterly) resulting in a reset exercise price.

·

No Warrants expired nor reset nor exercised in this period ending 10/31/15.

 

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, 2015, 24,339,929 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:

 

·

The Company is authorized to issue 1,000 shares of Series A Preferred Stock;

·

Holders of the A Preferred Stock will not be entitled to receive dividends;

·

The holders of the Series A Preferred Stock then outstanding shall not be entitled to receive any distribution of Company assets;

·

The Series A Preferred Stock will not be convertible into shares of the Company’s common stock.

·

The holders of the Series A Preferred Stock shall have the following voting rights:

(i)

To vote together with the holders of the Common Stock as a single class on all matter submitted for a vote of holders of Common Stock;

(ii)

Each one (1) share of Series A Preferred Stock shall have voting rights equal to 50,000 shares of our Common Stock, providing for the holder of the Series A Preferred Stock to have aggregate voting rights equal to 50,000,000 shares of our Common Stock;

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2015 and 2014

 

(iii)

The holder of the Series A Preferred Stock shall be entitled to receive notice of any stockholders’ meeting in accordance with the Articles of Incorporation and By-laws of the Company.

(iv)

So long as any shares of Series A Preferred Stock remain outstanding, we will not, without the written consent or affirmative vote of the holders of 100% of the outstanding shares of the Series A Preferred Stock, (i) amend, alter, waive or repeal, whether by merger consolidation, combination, reclassification or otherwise, the Articles of Incorporation, including this Certificate of Designation, or our By-laws or any provisions thereof (including the adoption of a new provision thereof), (ii) create, authorize or issue any class, series or shares of Preferred Stock or any other class of capital stock. The vote of the holders of at least one-hundred percent of the outstanding Series A Stock, voting separately as one class, shall be necessary to adopt any alteration, amendment or repeal of any provisions of this Resolution, in addition to any other vote of stockholders required by law.

 

Preferred Stock Issuances, for the Period Ending October 31, 2014

On April 25, 2014, the Company issued 1,000 shares of Series A Preferred Stock to its chief executive officer and sole director as a bonus for services provided. The fair value of the common stock was $2,500,000 based on recent sales prices of the Company’s common stock on the date of grant.

 

Common Stock Issuances, for the Period Ending October 31, 2014

On various dates between November 4, 2013 and November 6, 2013, the Company sold a total of 1,500,000 shares of common stock at $0.004 per share amongst three individuals, resulting in total proceeds of $6,000.

 

On various dates between November 6, 2013 and November 11, 2013, the Company sold a total of 500,000 shares of common stock at $0.05 per share amongst three individuals, resulting in total proceeds of $25,000.

 

On various dates between November 15, 2013 and December 5, 2013, the Company sold a total of 1,100,000 shares of common stock at $0.025 per share amongst five individuals, resulting in total proceeds of $27,500.

 

On December 12, 2013, the Company issued 200,000 vested common shares to an attorney for legal services. The fair value of the common stock was $10,000 based on recent sales prices of the Company’s common stock on the date of grant.

 

On December 15, 2013, the Company issued 1,000,000 shares of common stock to an officer of the Company as payment for compensation in lieu of cash. The fair value of the common stock was $50,000 based on recent sales prices of the Company’s common stock on the date of grant, and was paid ratably against accrued compensation over the subsequent six month period.

 

On various dates between February 21, 2014 and March 24, 2014, the Company sold a total of 1,120,000 shares of common stock at $0.05 per share amongst nine individuals, resulting in total proceeds of $56,000.

 

On various dates between March 11, 2014 and March 17, 2014, the Company sold a total of 1,000,000 shares of common stock at $0.02 per share amongst four individuals, resulting in total proceeds of $20,000.

 

On May 8, 2014, the Company issued 600,000 shares of common stock pursuant to an agreement with our transfer agent to provide DTC advisory services. The fair value of the common stock was $30,000 based on recent sales prices of the Company’s common stock on the date of grant.

 

On May 14, 2014, the Company issued 1,500,000 shares of common stock for the purchase of Intellectual Property pursuant to a Purchase Agreement. The fair value of the common stock was $75,000 based on recent sales prices of the Company’s common stock on the date of grant. The Intellectual Property, consisting of the fair value of the common stock, along with a cash payment of $20,000, was subsequently impaired and expensed as Development Costs within the Statement of Operations.

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2015 and 2014

 

On June 11, 2014, the Company issued 120,000 vested common shares to an attorney for legal services. The fair value of the common stock was $6,000 based on recent sales prices of the Company’s common stock on the date of grant.

 

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.

 

The following table summarizes the changes in options outstanding:

				Number of Shares				Weighted Average Exercise Price
	Outstanding as of November 1, 2013				—			$	—
	Granted				—				—
	Exercised				—				—
	Cancelled				—				—
	Outstanding at October 31, 2014				—			$	—
	Granted				500,000				0.20
	Exercised				—				—
	Cancelled				—				—
	Outstanding at October 31, 2015				500,000			$	0.20

 

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2015 and 2014

 

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 $0.0580 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 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 $0.0580 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.

 

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2015 and 2014

 

The following table summarizes the changes in warrants outstanding:

				Number of Shares				Weighted Average Exercise Price
	Outstanding as of November 1, 2013				—			$	—
	Granted				—				—
	Exercised				—				—
	Cancelled				—				—
	Outstanding at October 31, 2014				—			$	—
	Granted				9,243,968				0.022
	Exercised				—				—
	Cancelled				—				—
	Outstanding at October 31, 2015				9,243,968			$	0.022

 

Subscriptions Payable, for the Period Ending October 31, 2014

On May 1, 2014, the Company granted 300,000 shares of common stock pursuant to an agreement with a consultant to provide services from May 1, 2014 through June 30, 2014. The fair value of the common stock was $15,000 based on recent sales prices of the Company’s common stock on the date of grant. The shares were presented as Subscriptions Payable in the accompanying Balance Sheet and subsequently issued.

 

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.

 

Beneficial Conversion feature, for the Period Ending October 31, 2015

During the period, the Company issued convertible promissory note with a variable conversion price; as a result, the Company recorded $180,959 in discount and amortized the balance over the life of the notes.(see Note 6 and Note 7).

 

Note 9 – 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 and is included in development costs in the accompanying statement of operations, and the remaining balance of $20,000 shall be paid as the work passes through quality control.

 

POCKET GAMES, INC.

Notes to the Consolidated Financial Statements

October 31, 2015 and 2014

 

Note 10 – 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, 2015 and 2014, 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.

 

		October 31,				October 31,
Deferred tax assets:		2015				2014
Net operating loss carryforwards		$	1,243,762			$	372,642
Net deferred tax assets before valuation allowance			435,317				98,350
Less: Valuation allowance			(435,317	)			(98,350	)
		$	—			$	—

 

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, 2015 and 2014, 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:

 

		October 31,				October 31,
		2015				2014
Federal and state statutory rate			35	%			35	%
Change in valuation allowance on deferred tax assets			(35	%)			(35	%)

 

Note 11 – Subsequent Events

 

Subsequent to October 31, 2015, the Company issued a total of 36,856,326 shares of common stock.

 

On February 9, 2016, Pocket Games, Inc. entered into a Share Exchange Agreement (the “Exchange Agreement”) with Social Technology Holdings, Inc., a Delaware corporation (“STH”), AEL Irrevocable Trust (“AIT”), Sugar House Trust (“SHT”, and together with AIT, the “STH Majority Shareholders”) and David Lovatt, the principal and controlling shareholder of the Company (“Lovatt”) regarding the acquisition by the Company from the STH Majority Shareholders of 20,000,000 shares of Class A common stock, par value $0.0001 per share, of STH (the “STH Class A Common Stock”) and 2,000,000 shares of Class B common stock, par value $0.0001 per share, of STH (the “STH Class B Common Stock”). The STH Class A Common Stock and the STH Class B Common Stock transferred to the Company by the STH Majority Shareholders constitute 80% of the issued and outstanding shares of STH Class A Common Stock and 100% of the STH Class B Common Stock.

 

In exchange for the STH Class A Common Stock and STH Class B Common Stock, the Company issued to the STH Majority Shareholders an aggregate of 320,000 shares of non-redeemable, voting convertible shares of Series B preferred stock of the Company (the “Company Series B Preferred Stock”). In addition, Lovatt, as the owner of 1,000 shares, or 100%, of Company’s Series A Preferred Stock, returned such shares to the Company treasury, in exchange for which the Company reissued 500 shares of such Series A Preferred Stock to the STH Majority Shareholders, and 500 shares of Company Series A Preferred Stock, together with 80,000 shares of Company Series B Preferred Stock, to Lovatt. Each share of the Company’s Series A Preferred Stock entitles the holder(s) to cast 50,000 votes at any meeting of Company stockholders or in connection with any consents required of Company common stockholders.

 

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, 2015, 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, 2015. 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, 2015, 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:

 

Name and Year First Elected Director(1)		Age		Background Information
David Lovatt (2013)		40		Mr. Lovatt became our Chief Executive Officer and Director on October 4, 2013. From November 10, 2010 to December 1, 2013. Mr. Lovatt was the chief executive officer of DNA Dynamics, Inc. His responsibilities included overseeing product development and operations. From September 1, 2008 until February 1, 2011, Mr. Lovatt was the chief executive officer of Cloud Centric System Inc.
Elliott Polatoff (2013)		47		Mr. Polatoff became our treasurer and secretary on October 4, 2013. From December 1, 2012 until May 1, 2013, Mr. Polatoff was the office manager of Five Towns Neurology. From June 2012, until October 2012, Mr. Polatoff was the residential manager of Human Care Services. From September 2007 until September 2009, Mr. Polatoff was the Chief Executive Officer of Party Source, Inc., an entertainment company.

 

(1) The business address of each of our directors is 909 Plainview Ave., Far Rockaway, New York 11691

 

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:

 

· the director is, or at any time during the past three years was, an employee of the company;

 

· the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);

 

· a family member of the director is, or at any time during the past three years was, an executive officer of the company;

 

· the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);

 

· the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.

 

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, 2015, 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, 2015, 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, 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, 2015, thus these items are omitted from the table below:

 

		Summary Compensation Table
Name and Principal Position		Fiscal Year				Salary				Stock Awards				All Other Compensation				Total
David Lovatt			2015			$	120,000			$	—			$	—			$	120,000
Chief Executive Officer			2014			$	120,000			$	—			$	—			$	120,000
Principal financial officer
Elliott Polatoff			2015			$	120,000			$	—			$	—			$	120,000
Secretary and Treasurer			2014			$	120,000			$	—			$	—			$	120,000

 

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, 2015.

 

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

 

The following table sets forth the beneficial ownership of each of our directors and executive officers, and each person known to us to beneficially own 5% or more of the outstanding shares of our common stock, and our executive officers and directors as a group, as of February 6, 2016. 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 and has the same address as us. Our address is 909 Plainview Ave., Far Rockaway, New York 11691. As of February 15, 2016, we had 61,196,255shares of common stock issued and outstanding and 1,000 shares of preferred stock outstanding. While each of our shares of common stock holds one vote, each share of our Series A Preferred Stock holds fifty thousand (50,000) votes. 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.

Name		Sole Voting and Investment Power				Other Beneficial Ownership				Total				Percent of Class Outstanding
David Lovatt(1)			4,015,579				-0-				4,015,579				6.56	%
Elliott Polatoff(2)			2,288,401				-0-				2,288,401				3.74	%
All directors/director nominees and executive officers as a group (2 persons)			6,303.980				-0-				6,303,980				10.30	%

____________________

* Indicates less than one percent.

 

(1)

Member of the Board of Directors. Includes 3,500,000 shares of common stock held directly. Excludes 1,000 shares of Series “A” Preferred Stock which are not convertible into common stock but which hold substantial voting rights and are entitled to vote together with holders of common stock on all matters. If the votes of these 1,000 shares of Series “A” Preferred Stock are taken into account, Mr. Lovatt holds voting rights with respect to 48% of the Company’s voting rights outstanding.

(2)

Treasurer and Secretary. Includes 2,288,401 shares of common stock held directly.

 

Limitation of Liability of Directors and Officers; Indemnification and Advance of Expenses

 

Pursuant to our charter and under Section 607.0850 of the 2012 Florida Statutes (hereafter, the “Statutes”), our directors are not liable to us or our stockholders for monetary damages for breach of fiduciary duty, except for liability in connection with a breach of duty of loyalty, for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, for authorization of illegal dividend payments or stock redemptions under Florida law or any transaction from which a director has derived an improper personal benefit. Our charter provides that we are authorized to provide indemnification of (and advancement of expenses) to our directors, officers, employees and agents (and any other persons to which applicable law permits us to provide indemnification) through Bylaw provisions, agreements with such persons, vote of stockholders or disinterested directors, or otherwise, to the fullest extent permitted by applicable law.

 

We intend to enter into indemnification agreements with certain of our current directors and officers. The indemnification agreement will indemnify the indemnitee to the fullest extent permitted by law, including against third-party claims and claims by or in right of the Company or any subsidiary or majority-owned partnership of the Company by reason of that person (including the advancement of expenses subject to certain

 

conditions) (a) being a director, officer employee or agent of the Company, or of any subsidiary or majority-owned partnership of the Company or (b) serving at our request as a director, officer, employee or agent of another entity. If appropriate, we will be entitled to assume the defense of the claim with counsel selected by us and approved by the indemnitee (which approval may not be unreasonably withheld). Separate counsel employed by the indemnitee will be at his or her own expense unless (1) the employment of separate counsel has been previously authorized by us, (2) the indemnitee reasonably concludes there may be a conflict of interest or (3) we have not, in fact, employed counsel to assume the defense of such claim.

 

The Bylaws of the Company provide for indemnification of Covered Persons substantially identical in scope to that permitted under the Florida Law. Such Bylaws provide that the expenses of directors and officers of the Company incurred in defending any action, suit or proceeding, whether civil, criminal, administrative or investigative, must be paid by the Company as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of such director or officer to repay all amounts so advanced if it is ultimately determined by a court of competent jurisdiction that the director or officer is not entitled to be indemnified by the Company.

 

Disclosure of Commission Position on Indemnification for Securities Act Liabilities

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the provisions above, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable.

 

In the event that a claim for indemnification against such liabilities, other than the payment by us of expenses incurred or paid by one of our directors, officers, or controlling persons in the successful defense of any action, suit or proceeding, is asserted by one of our directors, officers, or controlling persons in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification is against public policy as expressed in the Securities Act, and we will be governed by the final adjudication of such issue

 

Provisions of Our Charter and Bylaws

 

Our charter and bylaws provide that our board of directors will have the exclusive power to make, alter, amend or repeal any provision of our bylaws.

 

Change of Control

 

None

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

 

Certain Relationships and Related Transactions

 

On March 17, 2014, we entered into an agreement with Fluid Games, Ltd to acquire certain intellectual property for the game known as Idol Hands. In exchange for the game, we issued to deliver 1,500,000 shares of common stock. We paid $40,000 as additional consideration.

 

We occupy office space owned by a shareholder and consultant on a month to month basis pursuant to a written agreement. No rent has been paid and rent accrues at the rate of $250 per month.

 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

 

The following table sets forth fees paid to our independent registered accounting firm, M&K CPAS, PLLC, for the fiscal year ending October 31, 2015, and 2014:

 

		2015				2014
Audit Fees
M&K CPAS, PLLC		$	12,000			$	2,000
Salberg & Company, P.A.			—				19,400
Audit Related Fees			—				—
Tax Fees			—				—
All Other Fees			—				—
Total Fees		$	12,000			$	21,400

 

It is the policy of the Board of Directors, which presently completes the functions of the Audit Committee, to engage the independent accountants selected to conduct our financial audit and to confirm, prior to such engagement, that such independent accountants are independent of the company. All services of the independent registered accounting firms reflected above were pre-approved by the Board of Directors.

PART IV

 

ITEM 15.  EXHIBITS.

 

The following exhibits are filed with or incorporated by referenced in this report:

 

Exhibit Number		Description
3.1		Articles of Incorporation (incorporated by reference to Exhibit 3.2 of the Form 8-K filed with the Securities and Exchange Commission by Black Ridge Oil & Gas, Inc. on December 12, 2012)
10.1		Executive Employment Agreement between David Lovatt and Pocket Games, Inc. dated October 4, 2013 (incorporated by reference to Exhibit 10.1 of the Form S-1 filed with the Securities and Exchange Commission by Pocket Games, Inc. on December 18, 2013)
10.2		Executive Employment Agreement between Elliot Polatoff and Pocket Games, Inc. dated October 4, 2013(incorporated by reference to Exhibit 10.1 of the Form S-1 filed with the Securities and Exchange Commission by Pocket Games, Inc. on December 18, 2013)
10.3		Executive Employment Agreement between Yaakov Fulda and Pocket Games, Inc. dated October 15, 2013(incorporated by reference to Exhibit 10.1 of the Form S-1 filed with the Securities and Exchange Commission by Pocket Games, Inc. on December 18, 2013)
10.4		Amended Milestones Agreement between Pocket Games, Inc. and DNA Interactive Games Limited Dated January 10, 2014(incorporated by reference to Exhibit 10.4 of the Form S-1/A filed with the Securities and Exchange Commission by Pocket Games, Inc. on January 15, 2014)
10.5		Lease Agreement between Pocket Games, Inc. and Yaakov Fulda (incorporated by reference to Exhibit 10.6 of the Form S-1/A filed with the Securities and Exchange Commission by Pocket Games, Inc. on January 15, 2014)
10.6		Deliverables Agreement effective January 13, 2014 between Fluid Games Ltd and Pocket Games, Inc. (incorporated by reference to Exhibit 10.6 of the Form S-1/A filed with the Securities and Exchange Commission by Pocket Games, Inc. on February 21, 2014)
10.7		Intellectual Property Purchase Agreement dated March 17, 2014, between Fluid Games Ltd and Pocket Games, Inc. for the acquisition of Idol Hands (incorporated by reference to Exhibit 10.7 of the Form S-1/A filed with the Securities and Exchange Commission by Pocket Games, Inc. on March 27, 2014)
10.8		Convertible Promissory Note dated October 6, 2014, with KBM Worldwide, Inc.(incorporated by reference to Exhibit 4.1 of the Form 8-K filed with the Securities and Exchange Commission by Pocket Games, Inc. on October 15, 2014)
10.9		Securities Purchase Agreement dated October 6, 2014, with KBM Worldwide, Inc.(incorporated by reference to Exhibit 4.2 of the Form 8-K filed with the Securities and Exchange Commission by Pocket Games, Inc. on October 15, 2014)
31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for David Lovatt.
32		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for David Lovatt.

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

			POCKET GAMES, INC.
			/s/ David Lovatt
Dated: February 16, 2016			By: David Lovatt, Chief Executive Officer, and Principal Financial Officer

 

In accordance with the Exchange Act, this Report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.

 

/s/ David Lovatt		CEO and sole Director	February 16, 2016
David Lovatt