UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

[X]	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended September 30, 2017
[  ]	Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from __________ to __________
	Commission File Number: 333-193736

 

SocialPlay USA, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada	46-4412037
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
8275 S. Eastern Avenue, Suite 200, Las Vegas NV 89123
(Address of principal executive offices)
(702) 430-2850
(Registrant’s telephone number)
__________________________________________________
(Former name, former address and former fiscal year, if changed since last report)

 

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

 

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

 

[ ] Large accelerated filer [ ] Non-accelerated filer

[ ] Accelerated filer [X] Smaller reporting company [ ] Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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

 

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 11,870,003 common shares as of December 1, 2017.

 

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

 

 

	TABLE OF CONTENTS	Page
PART I – FINANCIAL INFORMATION
Item 1:	Financial Statements	3
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	8
Item 4:	Controls and Procedures	9
PART II – OTHER INFORMATION
Item 1:	Legal Proceedings	10
Item 1A:	Risk Factors	10
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	10
Item 3:	Defaults Upon Senior Securities	10
Item 4:	Mine Safety Disclosures	10
Item 5:	Other Information	10
Item 6:	Exhibits	10

 

PlART I - FINANCIAL INFORMATION

Item 1. Financial Statements

 

Our financial statements included in this Form 10-Q are as follows:

 

F-1	Condensed Balance Sheets as of September 30, 2017 (unaudited) and December 31, 2016 (audited);
F-2	Condensed Statements of Operations for the Three and Nine months ended September 30, 2017 and 2016 (unaudited);
F-3	Condensed Statements of Cash Flows for the Nine Months ended September 30, 2017 and 2016 (unaudited);
F-4	Notes to Condensed Financial Statements.

 

SocialPlay USA, Inc.

Condensed Balance Sheets

As of September 30, 2017 (unaudited) and December 31, 2016 (audited) 

 

	September  30,				December 31,
	2017				2016
	$				$
Current assets
Cash		2,455				2,865
Deposits for investments (note 5)		100,000				—
Total assets		102,455				2,865
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities
Accounts payable		144,925				127,956
Accrued liabilities		50,134				60,391
Payable to related parties [note 9]		133,817				133,817
Convertible promissory notes [note 6]		33,402				—
Total Current Liabilities		362,278				322,164
Convertible promissory notes [note 6]		—				107,629
Derivative Liabilities [note 6]		—				318,234
Total Liabilities		362,278				748,027
Stockholders' deficiency
Preferred stock, $0.001 par value, 100,000,000 shares authorized, no shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively [note 7]		—				—
Common stock, $0.001 par value, 200,000,000 shares authorized, 11,870,000 and 11,820,000 shares issued and outstanding as of September 30, 2017 and December 31, 2016 [note 7]		11,870				11,820
Additional paid-in capital		1,276,271				678,680
Shares to be issued [notes 4 and 7]		348,000				228,000
Accumulated deficit		(1,895,964	)			(1,663,662	)
Total stockholders' deficiency		(259,823	)			(745,162	)
Total liabilities and stockholders' deficiency		102,455				2,865

 

See accompanying notes 

SocialPlay USA, Inc.

Condensed Statements of Operations

For the Three and Nine Months ended September 30, 2017 and 2016 (unaudited) 

 

	Three months				Three months				Nine months				Nine months
	ended				ended				ended				ended
	September 30,				September 30,				September 30,				September 30,
	2017				2016				2017				2016
	$				$				$				$
REVENUE		—				—				—				—
EXPENSES
Legal and professional fees		4,262				9,306				28,246				36,363
Advertising and promotion		—				—				998				5,000
Consulting fees - Investor relations		—				1,000				47,958				233,587
Transfer agent fees		1,350				1,254				13,605				15,009
Directors' fees [note 9]		—				—				—				15,000
Other operating expenses		2,201				148				26,873				1,488
Total operating expenses		7,813				11,708				117,680				306,447
Forgiveness of debt [note 10]		—				(62,500)								(62,500)
Interest and bank charges		23,724				7,744				35,686				34,544
Licensing fees [note 4]		—				1,140,000				120,000				1,140,000
Accretion of discount on convertible notes		26,323				14,900				55,411				25,627
Gain on extinguishment of debt		—				—				(550,962)				(11,462)
Day-one derivative loss [notes 6 and 7]		—				—				30,579				—
Change in fair value of derivatives [notes 6 and 7]		—				6,444				423,908				13,937
Loss (Income) before income taxes		57,860				1,118,296				232,302				1,446,593
Income taxes						—								—
Net income (loss) for the period		(57,860)				(1,118,296)				(232,302)				(1,446,593	)
(Earnings) loss per share, basic and diluted		(0.0049)				(0.095)				(0.0196)				(0.1227	)
Weighted average number of common shares outstanding		11,870,003				11,820,003				11,853,245				11,792,161

 

See accompanying notes 

SocialPlay USA, Inc.

Condensed Statements of Cash Flows

For the Nine Months ended September 30, 2017 and 2016 (unaudited)

 

	Nine Months Ended				Nine Months Ended
	September 30,				September 30,
	2017				2016
		$				$
OPERATING ACTIVITIES
Net loss for the period		(232,302	)			(1,446,593	)
Shares issued for services		24,000				133,500
Accretion of discount on convertible notes		55,411				39,683
Day-one derivative loss [notes 6 and 7]		30,579				—
License fees [note 4]		120,000				1,140,000
Change in fair value of derivatives [notes 6 and 7]		423,908				13,937
Gain on extinguishment of debt		(550,962	)			(11,462)
Net change in non-cash working capital balances:
Prepaid expenses		—				26,210
Accounts payable and accrued liabilities		39,456				12,768
Cash used in operating activities		(89,910	)			(91,957	)
INVESTING ACTIVITIES
Deposits made for investments [note 5]		(100,000)				—
Cash used in investing activities		(100,000)				—
FINANCING ACTIVITIES
Proceeds from issuance of convertible promissory notes		189,500				91,950
Proceeds for stock receivable		—				—
Cash provided by financing activities		189,500				91,950
Net (decrease) increase in cash during the period		(410	)			(7	)
Cash, beginning of period		2,865				69
Cash, end of period		2,455				62
Supplemental disclosure with respect to cash flows:
Cash paid for income taxes		—				—
Cash paid for interest		—				—

 

See accompanying notes 

SocialPlay USA, Inc.

Notes to Condensed Financial Statements

As of September 30, 2017 (unaudited)

 

Note 1 – Nature of Operations

 

The Company was incorporated on December 31, 2013 (Date of Inception) under the laws of the State of Nevada, as Artesanias Corp. (the “Company”). On June 12, 2015, the Board of Directors of the Company changed the name from Artesanias Corp. to SocialPlay USA, Inc. to reflect the business focus of the Company. The Company plans to develop a business that provides marketing, monetization, and support services for the companies in gaming and mobile application markets. On January 10, 2017, the former majority shareholder sold 7,082,000 shares of common stock to the Company’s current President and CEO, Robert Rosner, in a private transaction. As result of this transaction, a change in control of the company occurred. 

 

The Company has limited operations and is considered to be in the development stage.

 

Note 2 – Going Concern

 

The Company’s unaudited interim condensed financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The Company has an accumulated deficit of $1,895,964 and a working capital deficit of $259,823 as of September 30, 2017 ($1,663,662 and $319,299 respectively, as at December 31, 2016). The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. In order to continue as a going concern, the Company will need, among other things, additional capital resources. The Company is contemplating conducting an offering of its debt or equity securities to obtain additional operating capital. The Company is dependent upon its ability, and will continue to attempt, to secure equity and/or debt financing. There are no assurances that the Company will be successful and without sufficient financing it would be unlikely for the Company to continue as a going concern.

 

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

 

Note 3 – Summary of Significant Accounting Policies

 

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and the rules and regulations of the SEC and are expressed in US dollars. Accordingly, the unaudited condensed financial statements do not include all information and footnotes required by US GAAP for complete annual financial statements. In the opinion of management, the accompanying unaudited condensed financial statements reflect all adjustments, consisting of only normal recurring adjustments, considered necessary for a fair presentation. Interim operating results are not necessarily indicative of results that may be expected for the year ending December 31, 2016 or for any other interim period. The unaudited condensed financial statements should be read in conjunction with the audited financial statements of the Company and the notes thereto as of and for the year ended December 31, 2016.

 

SocialPlay USA, Inc.

Notes to Condensed Financial Statements

As of September 30, 2017 (unaudited)

 

Note 3 – Summary of Significant Accounting Policies (continued)

 

Reclassification of comparative figures 

Certain of the prior period figures have been reclassified to align with Management’s current view of the Company’s operations.

 

Use of Estimates

The preparation of the financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Areas involving significant estimates and assumptions include valuation of derivatives, valuation allowance for deferred tax assets, accruals and going concern assessment.  These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the period in which they become known. Actual results could materially differ from those estimates.

 

Recently Issued Accounting Standards

The Company evaluated all recent accounting pronouncements issued and determined that the adoption of these pronouncements would not have a material effect on the financial position, results of operations or cash flows of the Company.

 

SocialPlay USA, Inc.

Notes to Condensed Financial Statements

As of September 30, 2017 (unaudited)

 

Note 4 – Licensing Fees

 

Pursuant to Exclusive License Agreement dated May 21, 2015 with a related party, the Company acquired an exclusive license to develop, market and sell products and services based upon any and all intellectual property. The initial term of this Agreement was five years. This Agreement may be renewed for an additional five year term upon written notice to be given by the Company no later than thirty days prior to the expiration of the initial term. On May 21, 2015, in consideration for the license granted hereunder, the Company issued 1,000,000 (200,000 after reverse split) shares of common stock. In addition, the Company shall issue 1,000,000 (200,000 after reverse split) shares of common stock on or before each anniversary of this Agreement for so long as it shall remain in effect. The Company also agreed to make payments totaling $120,000 through an agreed payment schedule.

 

As technological feasibility has not been achieved, the Company recognizes expense at the end of each anniversary (triggering event) for the shares to be issued, the fair value of which to be determined based on the market price of the share on anniversary day as further explained in note 7 to the financial statements.

 

The Company has recorded 400,000 common shares to be issued and the related license fee expense as explained in Note 7.

  

Note 5 – Deposits for Investment

 

On March 11, 2017, the Company entered into a binding Letter of Intent (LOI) with a certain company. The LOI contemplates provision of an option to the Company, to purchase 100% equity of such company. The Company has made a deposit of $50,000 as the first stage in the acquisition, however, no formal and definitive acquisition agreement has been entered into yet.

 

On May 30, 2017, the Company entered into a binding LOI with a certain corporation. The LOI contemplates acquisition of a 33% ownership interest in the corporation for an agreed total purchase price. The Company has made a deposit of $50,000 as the first stage in the acquisition, however, no formal and definitive acquisition agreement has been entered into yet.

 

When the Company signs definitive acquisition agreements, the above two deposits will be treated as investments under the guidance available in US GAAP.

 

Note 6 – Convertible Promissory Notes and Derivative Liabilities

 

The outstanding convertible promissory notes as at September 30, 2017 represent obligations of the Company to CMGT Inc. (CMGT).

 

On January 11, 2016, the Company consolidated all of its obligations to CMGT under a single Convertible Promissory Note due June 1, 2018 (the “Note”) and recognized gain on extinguishment of debt amounting to $11,462. The Note bears interest at a rate of ten percent (10%) per year, with all principal and interest due on or before June 1, 2018. Under the Note, the Company is obligated to pay quarterly payments of interest only commencing March 31, 2016. The Company may prepay the Note in whole or in part without penalty. CMGT’s right to convert is limited such that no conversion can be made which would result in CMGT or its affiliates owning more than 4.99% of the issued and outstanding common stock of the Company following the conversion.

 

Effective February 17, 2017, the Company entered into a First Amendment to Convertible Promissory Note (the “Amendment”) with CMGT. Under the Amendment, the Company modified the conversion feature of the Note so that the conversion price for all amounts owing thereunder is now $0.10 per share of common stock. In addition, the Amendment waives the Company’s prior defaults in payment of interest under the Note in the amount of $44,289, and adds such sum to the principal balance of the Note. The Company is now required to make quarterly interest payments commencing September 30, 2017. The amendment resulted in the extinguishing of the old notes and re-issuance according to the new terms and discounts.

 

On April 28, 2017 the Company made an amendment on all its outstanding notes having face value of $436,141, removing all dilutive and reset provisions from these notes, therefore ending derivative treatment. The notes issued subsequent to amendment did not require derivative valuations.

 

Post amendment, the Company carried out beneficial conversion feature analysis of all the notes and concluded that based on the intrinsic value of these notes, 100% face value of the above notes of $558,641 were transferred to additional paid-in-capital and these notes are being amortized using an effective interest rate over the term of these notes.

 

SocialPlay USA, Inc.

Notes to Condensed Financial Statements

As of September 30, 2017 (unaudited)

 

The movement in convertible notes principal amount, accreted value of notes and derivative liabilities are detailed below:

 

	Face value of notes			Cumulative discount on notes		Accreted value of notes				Derivative liabilities
		$		$			$				$
Balances as at December 31, 2016		351,397		—			107,629				318,234
Issuance of notes during Q1 2017		37,000		—			2,247				34,753
Conversion of accrued interest		32,744		—			32,744				—
Day-one derivative losses		—		—			—				13,486
Adjustment of unamortized discount on extinguishment		—		—			(148,697	)			148,697
Loss on extinguishment of debt		—		—			—				116,703
Accretion expense		—		—			18,228				—
Change in fair value of derivatives		—		—			—				132,387
Balances as at March 31, 2017		421,141					12,151				764,260
Pre-Amendment (End of Derivatives)
Issuance of note		15,000		—			—				—
Full discount recognized on the note		—		—			—				15,000
Day-one derivative loss on the note		—		—			—				17,093
Change in fair value of derivatives		—		—			—				291,521
Accretion expense		—		—			3,781				—
Balance, pre-amendment		436,141		—			15,932				1,087,874
Transfer due to end of derivatives		—		—			420,209				(420,209	)
Gain on extinguishment		—		—			—				(667,665	)
Balance, post-amendment		436,141		—			436,141				—
Issuances of notes after amendment		137,500		—			137,500				—
Beneficial conversion feature – Transferred to equity		—		573,641			(573,641	)			—
Accretion expense		—		(33,402)			33,402				—
Balances as at September 30, 2017		573,641		540,239			33,402				—

 

The Company recognized interest expense of $14,397 during the quarter ended September 30, 2017 (September 30, 2016: $17,600). As of September 30, 2017, accrued interest was $31,698 (December 31, 2016: $27,805).

 

Effective April 28, 2017, the Company entered into a second amendment of Convertible Promissory Note. As a result of the amendment, derivative treatment has ended.

 

Prior to the amendment on April 28, 2017, the multinomial lattice model was used to value the convertible notes and the embedded derivative liabilities at issuance and period end date, using the following assumptions:

 

Assumptions
Dividend yield		0.00	%
Risk-free rate for term		1.01% - 1.07	%
Volatility		284.6% - 285.4	%
Remaining terms (years)		1.09 to 1.11
Stock price ($ per share)		0.60-0.75

 

SocialPlay USA, Inc.

Notes to Condensed Financial Statements

As of September 30, 2017 (unaudited)

 

Note 7 – Stockholders’ Deficiency

 

Authorized:

 

The Company is authorized to issue up to 200,000,000 shares of its $0.001 par value common stock and up to 100,000,000 shares of its $0.001 par value preferred stock.

 

On March 14, 2017, the Company designated a new class of Series A Preferred Stock. Series A Preferred Stock consists of 10,000,000 shares, par value $0.001 per share. Series A Preferred stock has no stated value, ranks pari passu with our common stock upon liquidation, and has no special dividend rights. Shares of Series A Preferred Stock are convertible to common stock, at the option of the holder, at a rate of 20 shares of common stock for each share of preferred stock. Shares of Series A Preferred Stock may be voted on an as-of-converted basis on all matters submitted to the vote or consent of the holders of our common stock. The Company has not issued any shares of Series A Preferred Stock at this time.

 

Issued and outstanding:

 

During the year ended December 31, 2014, the Company sold 21,600,000 (4,320,000 after reverse split) shares of its $0.001 par value common stock in a registered public offering for total cash proceeds of $27,000.

 

On February 25, 2015, the Company executed a 12 for 1 forward stock split of issued shares of common stock. Further, on July 27, 2015, the Company effectuated a 1 for 5 reverse stock split.

 

The accompanying condensed financial statements have been retrospectively adjusted for all periods presented to reflect the effect of the forward and reverse stock split.

 

On July 1, 2015, the Company issued 1,000,000 (200,000 after reverse split) shares of common stock pursuant to Exclusive License Agreement dated May 21, 2015 as explained in note 4 to the interim condensed financial statements.

 

On February 17, 2016, the Company issued 50,000 shares of common stock to Ten West Holdings, Inc. as consideration for corporate advisory services amounting to $56,000 pursuant to agreement dated November 16, 2015. All services have been performed as of February 16, 2016.

 

On April 15, 2016, the Company issued 50,000 shares of common stock to Ten West Holdings, Inc. as consideration for corporate advisory services amounting to $77,500 pursuant to agreement dated March 9, 2016. All services have been performed as of June 10, 2016. 

 

On February 8, 2017, the Company agreed to issue 50,000 shares of common stock to Ten West Holdings, Inc. as consideration for corporate advisory services pursuant to agreement dated February 8, 2017 for a term of three months. The fair value of the shares amounting to $24,000 was determined based on the market price of $0.48 per share on the date of agreement. The Company recognized the entire amount as consulting expense during the period. The shares were issued on April 3, 2017.

 

As at September 30, 2017 and December 31, 2016, there were 11,870,003 (7,333,000 restricted shares) and 11,820,003 (7,383,000 restricted shares) (after stock split) shares of common stock respectively, issued out of the authorized 200,000,000 common shares.

 

Shares to be issued:

 

As at September 30, 2017, shares to be issued amounting to $348,000 (400,000 shares) comprise of:

 

During the year ended December 31, 2016, the Company recognized as expense licensing fee of $228,000 representing the fair value of additional 1,000,000 (200,000 after reverse split) shares to be issued under the agreement (as explained in Note 4) , valued at the market price of $1.14 per share.

 

During the period ended September 30, 2017, the Company recognized as expense licensing fee of $120,000 representing the fair value of additional 200,000 shares to be issued under the agreement (as explained in Note 4) , valued at the market price of $0.6 per share on May 19, 2017.

 

Note 8 – Commitment

 

The Company has commitment to issue 200,000 (after stock split) shares of common stock on or before each anniversary pursuant to Exclusive License Agreement dated May 21, 2015 as explained in note 4 to the condensed financial statements.

  

Note 9 – Related Party Transactions

 

Other than disclosed elsewhere in the condensed financial statements, the only related party transaction during the nine months ended September 30, 2017 and 2016 is directors’ fees of $nil and $15,000 respectively. Director fees of $15,000 relate to a former director, who resigned in the previous year.

 

SocialPlay USA, Inc.

Notes to Condensed Financial Statements

As of September 30, 2017 (unaudited)

 

Note 9 – Related Party Transactions (continued)

 

Accounts payable and accrued liabilities include the following balances, which are unsecured, non-interest bearing and have no set repayment term, owed to related parties:

 

	September  30				December 31
	2017				2016
Owed to a former director for director fees		50,750				50,750
Owed to a related party for license agreement [note 4]		83,067				83,067
		133,817				133,817

 

Note 10 – Forgiveness of Debt

 

On August 22, 2016, the Company entered into a severance and mutual release agreement with a former President, CEO and Director. The Company made a severance payment in the amount of $10,000 and both the Company and the former President provided mutual general releases of any liability. As a result of the said agreement, the amount of $62,500 owed to the former President was written back.

 

Note 11 – Subsequent Events

 

The Company’s management has evaluated subsequent events up to December 1, 2017 the date the unaudited condensed financial statements were issued, pursuant to the requirements of ASC Topic 855 and has determined that there are no material subsequent events to report.

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements

 

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Company Overview

 

We were incorporated in the State of Nevada on December 31, 2013 as Artesanias Corp.  Our original business plan involved distribution of the arts and crafts of the indigenous tribes of Panama via the Internet. On January 20, 2015, we underwent a change in control when our former majority shareholder and sole officer, Jose Soto, sold his controlling interest and resigned after appointing our current CEO and Director, Chitan Mistry, and our former CFO and Director, Lucie Lettelier. Following the change in control, we are no longer pursuing our original business plan. On June 12, 2015, the Board of Directors of the Company changed the name from Artesanias Corp. to SocialPlay USA, Inc. to reflect the business focus of the Company.

 

On April 27, 2015, we entered into an Exclusive License Agreement (the “Agreement”) with Social Play, Inc. (“Social Play”). Under the Agreement, we have been granted the exclusive rights within the U.S. and Canada to develop, market and sell products and services based upon Social Play’s patent-pending “SP Cloud Goods” system. SP Cloud Goods is cloud-based game hosting and management system where video game developers can add and remove virtual goods from the game, manage players, manage virtual store pricing, and view vital game and player statistics.  Using this system, game developers can affect their games in real-time, without the need to rebuild or republish the game. The SP Cloud Goods intellectual property also includes a system for game developers to collect payments for virtual goods sold to players in their games, as well as a marketplace component that will allow advertisers and game developers to choose where, when, and how advertisements are placed in games. The system will also facilitate the transfer of funds from advertisers to game developers.

 

The Agreement runs for an initial term of five (5) years, with an optional extension for an additional five years. In consideration for the license, we agreed to issue Social Play 1,000,000 (200,000 after reverse split) shares of common stock and an additional 1,000,000 (200,000 after reverse split) shares on each anniversary of the Agreement for so long as it is in effect. Further, we agreed to make cash payments to Social Play in the total amount of $120,000, payable in monthly payments of not less than $20,000 until paid in full.

 

On August 22, 2016, the board of directors appointed Robert Rosner as our new President, CEO, CFO and Director. Following these appointments, the board accepted the resignation of Chitan Mistry as our former sole officer and director.

 

 Letter of Intent with Spot and Play, Inc.

On March 11, 2017, we entered into a binding Letter of Intent (the “LOI”) with Spot and Play, Inc. (“Spot and Play”) and its sole shareholder, Karthik Mani. Spot and Play is developing the “Spot and Pay” application, which provides a way to centralize payment or donate money using a unique business code in form of a visual code at location, or using business name if remote. The LOI contemplates our acquisition of up to 100% of Spot and Play for a total purchase price of $1,000,000. Our initial investment will consist of $300,000 in cash, to be paid for a 30% ownership interest in Spot and Play. These funds are to be paid as follows: (i) $50,000 to be paid upon execution of the LOI, (ii) an additional $100,000 to be paid upon certain development milestones for Spot and Play’s business, and no later than 15 days after the execution of a definitive agreement, and (iii) the final $150,000 upon Spot and Play’s achievement of certain additional milestones, and no later than 75 days after the execution of a definitive agreement. Further, we will be granted the exclusive option to purchase the remaining 70% of Spot and Play to be paid as follows: (i) issuance of shares of our common stock valued at $200,000, no later than 150 days from execution of a definitive agreement, in order to purchase an additional 19% of Spot and Play, and (ii) issuance of shares of our common stock valued at $500,000, no later than 180 days from execution of a definitive agreement, in order to purchase the remaining 51% of Spot and Play. Shares issued as purchase consideration will be valued based on the five-day average trading price of our common stock immediately preceding their issuance. Shares to be issued as consideration for our acquisition of Spot and Play will be subject to a one (1) year lock-up, with certain leak-out restrictions on their re-sale thereafter. Upon our acquisition of 100% of the ownership interests in Spot and Play, Mr. Mani will be granted a royalty based on the gross profits of Spot and Play, with specific royalty terms to be negotiated. The transaction contemplated by the LOI is subject to final negotiation of a definitive agreement, requisite corporate approvals, and other conditions. Under the LOI, we have the exclusive rights, through June 30, 2017, to negotiate and conclude an acquisition agreement for Spot and Play. 

Working with Spot and Pay, we have recently integrated Bitcoin payments into the Spot&Pay mobile payment platform. Bitcoin is the first digital currency to be added to the existing Spot&Pay payment system infrastructure and allows users an additional choice when it comes to paying for goods and services. In addition to the current method of paying by credit card or direct debit, users can scan a QR code and choose the Bitcoin payment option on the checkout screen. If Bitcoin is selected, Spot&Pay will connect to our gateway and generate the URL for the user to complete the transaction by opening their Bitcoin wallet and providing payment for the purchase.

The Spot&Pay platform is now integrated with Bitpay, a leading Bitcoin payment gateway and digital currency wallet service and is available on both IOS and Android apps. As the digital currency market continues to grow, Spot and Pay plans to add other cryptocurrencies such as Ethereum, Ripple, and Speedcoin options to its payment solutions.

Additionally, we are is in the initial stages of planning and developing our own reward based cryptocrrency, which will form the basis of a planned strategic User Loyalty Program.

Letter of Intent with Friendship Socks, Inc.

On May 30, 2017, we entered into a binding Letter of Intent (the “LOI”) with Friendship Socks, Inc., a British Columbia corporation (“Friendship Socks”). Friendship Socks is a company that manufactures a line of unique designer socks in the USA and markets its products online. The company leverages social media to connect people through the gifting of a pair of socks. The LOI contemplates our acquisition of a 33% ownership interest in Friendship Socks for a total purchase price of $150,000. Our initial investment will consist of $50,000 in cash to be delivered immediately for an 11% ownership interest in Friendship Socks. Upon the parties’ execution of a definitive acquisition agreement, we have agreed to acquire an additional 11% interest in exchange for an additional $50,000 upon Friendship Socks achievement of certain business milestones within 30 days of the execution of the definitive agreement. The final 11% ownership interest will be acquired for a final $50,000 upon Friendship Socks achievement of certain additional business milestones within 60 days of the execution of the definitive agreement. Upon completion of all payments as set forth above, Friendship Socks shall immediately issue sufficient shares of its capital in the name of the Company equal to 33% of its issued and outstanding stock. Should the definitive acquisition agreement not be entered into, we shall receive 11% equity interest in Friendship Socks as a result of the initial $50,000 Investment. In the event that the definitive agreement is executed but Friendship Socks does not achieve the specified milestones, we will have the option to waive the milestones and proceed with acquisition of the additional 22% ownership interest or, in the alternative, to terminate the agreement without penalty. Finally, the LOI specifies that will have the right of first refusal with regard to any additional equity investment, loan, or other financing for Friendship Socks. On November 8, 2017 we advanced $30,000 to Friendship Socks.

Although the agreements with Spot and Play and Friendship Socks have not been extended in writing or amended, the parties to both agreements remain verbally committed to moving forward, and we are working toward completing these acquisitions.

Significant Equipment

 

We do not intend to purchase any significant equipment for the next twelve months.  

 

Results of Operations

 

Balance Sheet – As at September 30, 2017 and December 31, 2016:

 

Cash

 

At September 30, 2017 we had cash of $2,455 compared to $2,865 as at December 31, 2016.

 

Deposits for investments

 

At September 30, 2017, we had made deposits in the amount of $100,000 to two companies under LOIs signed with the companies.

 

 

Accounts payable, accrued liabilities and payable to related parties

 

At September 30, 2017, our accounts payable were $144,925 (September 30, 2016: $127,956). The balance primarily represents $54,000 for advertising services, $20,385 payable to Clark Corporate Law Group for legal services, $56,277 payable to Ten West Holdings as consideration for consulting services, $5,000 to Ched Corporate Solutions for consulting services, $5,950 payable to Doty Scott Enterprises for accounting services and $3,260 payable to Globex for transfer agent services. At December 31, 2016, the balance primarily represents $54,000 for advertising services, $20,385 payable to Clark Corporate Law Group for legal services, $46,277 payable to Ten West Holdings as consideration for consulting services, $1,544 payable to Laxague Law for legal services and $450 payable to Globex for transfer agent services.

 

At September 30, 2017, our accrued liabilities were $50,134 (September 30, 2016: $60,391). Accrued liabilities comprise accrued interest of $31,698 (September 30, 2016: $39,671) and other accrued expenses of $18,437 (September 30, 2016: $20,720).

 

At September 30, 2017, our payable to related parties was $133,817 (September 30, 2016: $133,817). Payable to related parties represents $50,750 (2016: $50,750) payable to a former director as consideration for director fee services, $83,067 (2016: $83,067) payable to Social Play Inc. in connection with the license agreement.

 

Convertible promissory notes and derivative liabilities

 

During the previous year, we entered into agreements with CMGT and issued them convertible promissory notes. As of September 30, 2017, the total principal due was $573,641 ($351,397 as of December 31, 2016) and interest accrued on these notes as at September 30, 2017 amounted to $31,698 ($28,497 as at December 31, 2016).

 

On January 11, 2016, we consolidated all of its obligations to CMGT under a single Convertible Promissory Note due June 1, 2018.

 

On February 17, 2017, we entered into a First Amendment to Convertible Promissory Note with CMGT, Inc. Under the Amendment, we modified the conversion feature of the Note so that the conversion price for all amounts owing thereunder is now $0.10 per share of common stock. In addition, the Amendment waived our prior defaults in payment of interest under the Note in the amount of $32,744, and added such sum to the principal balance of the Note. We are now required to make quarterly interest payments commencing September 30, 2017 . On April 28, 2017, we entered into a Second Amendment to the CMGT Note to remove certain anti-dilution features of the Note. All other terms of the original Note remain in full force and effect.

Effective April 28, 2017, we entered into an agreement with CMGT for the second amendment in convertible promissory notes dated January 11, 2016 (first amendment date) relating to certain warranties and covenants included in the convertible promissory notes as explained in note 7 to the interim condensed financial statements.

Statement of Operations - For the three and nine months ended September 30, 2017 and September 30, 2016 respectively:

 

Expenses

 

Three months ended September 30, 2017 and September 30, 2016

 

We have not earned any revenues since our inception. During the three months ended September 30, 2017, we incurred operating expenses of $7,813, which consisted of legal and professional fees of $4,262, transfer agent fees of $1,350, and other expenses of $2,201.

 

We also incurred accretion expense of $26,323 and interest and bank charges of $23,724. We had a net loss for the three months ended September 30, 2017 of $57,860.

 

 

By comparison, during the three months ended September 30, 2016, we incurred operating expenses of $11,708 and net loss of $1,118,296.

 

Our operating expenses during the three months ended September 30, 2016 comprised legal and professional fees of $9,306, consulting fees for investor relations of $1,000, transfer agent fees of $1,254, and other expenses of $148.

 

We also incurred interest and bank charges of $7,744, licensing fees of $1,140,000, Accretion expense of $14,900, loss on the change in fair value of derivatives of $6,444 and a gain due to forgiveness of debt amounting to $62,500.

 

Our expenses and net loss decreased for the three months ended September 30, 2017 as compared to the same period last year primarily due to decrease in legal and professional fee and licensing fees. We anticipate our operating expenses will increase as we move toward developing more active operations in our current line of business.

 

Nine months ended September 30, 2017 and September 30, 2016 

 

During the nine months ended September 30, 2017, we incurred operating expenses of $117,680, which consisted of legal and professional fees of $28,246, Advertising and promotion expense of $998, Consulting fee of $47,958, transfer agent fees of $13,605, and other expenses of $26,873.

 

We also incurred Interest and Bank Charges of $35,686, Licensing Fee of $120,000, Accretion expense of $55,411, Gain on extinguishment of Debt of $550,962, Day-one derivative loss of $30,579 and loss due to Change in fair value of derivatives of $423,908. We had a net loss for the nine months ended September 30, 2017 of $232,302.

 

By comparison, during the nine months ended September 30, 2016, we incurred operating expenses of $306,447 and net loss of $1,446,593.

 

Our operating expenses during the three months ended September 30, 2016 comprised legal and professional fees of $36,363, Advertising and promotion expense of $5,000, Consulting fee of $233,587, transfer agent fees of $15,009, Directors fee of $15,000 and other expenses of $1,488.

 

We also incurred Interest and Bank Charges of $34,544, Licensing Fee of $1,140,000, Accretion expense of $25,627, Gain on extinguishment of Debt of $11,462 and loss due to Change in fair value of derivatives of $13,937. We had a net loss for the nine months ended September 30, 2017 of $1,446,593.

 

Our expenses and net loss decreased for the three months ended September 30, 2017 as compared to the same period last year primarily due to decrease in legal and professional fee and licensing fees. We anticipate our operating expenses will increase as we move toward developing more active operations in our current line of business.

 

Liquidity and Capital Resources

As of September 30, 2017, we had cash of $2,455 and deposits of $100,000. Our current liabilities as of September 30, 2017 were $362,278. Thus, we had a working capital deficit of $259,823, as of September 30, 2017.

 

Cash Used in Operating Activities.

 

Net cash used in operating activities was of $89,910 for the period ended September 30, 2017 as compared to $91,957 for the period ended September 30, 2016.

 

Cash Used in Investing Activities.

 

Deposits made for investments amounted to $100,000.

 

Cash Flows from Financing Activities.

 

During the period ended September 30, 2017, the Company raised $189,500 from convertible promissory notes as compared to $91,950 during the period ended September 30, 2016.

 

 

Going Concern

 

As discussed in the notes to our financial statements, we have no established source of revenue.  This has raised substantial doubt for our auditors about our ability to continue as a going concern.  Without realization of additional capital, it would be unlikely for us to continue as a going concern.

 

Our activities to date have been supported by debt and equity financing.  Management continues to seek funding from its shareholders and other qualified investors. 

 

Off Balance Sheet Arrangements

 

As of September 30, 2017, there were no off balance sheet arrangements.

 

Critical Accounting Policies

 

In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Currently, we do not believe that any accounting policies fit this definition.

 

Recently Issued Accounting Pronouncements

 

Recently issued accounting pronouncements have been disclosed in note 3 to the interim condensed financial statements.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

A smaller reporting company is not required to provide the information required by this Item.

 

 

Item 4. Controls and Procedures

 

Evaluation of disclosure controls and procedures.

 

We recently evaluated the effectiveness of our disclosure controls and procedures, as required by paragraph (b) of Rule 13a-15 or Rule 15d-15 under the Securities Exchange Act of 1934, as of the end of the period covered by this report, being September 30, 2017.  This evaluation was conducted with the participation of our principal executive officer and our principal accounting officer.

 

We maintain disclosure controls and procedures designed to provide reasonable assurance that material information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that the information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. We performed an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on their evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were not effective in giving us reasonable assurance that the information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and to ensure that such information is accumulated and communicated to our management, including our Principal Executive and Principal Financial Officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. This conclusion was based on the existence of significant deficiencies in our internal control over financial reporting mainly due to lack of resources and number of employees.

 

We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

Management Report on internal control over financial reporting.

 

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of our assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.

 

Management conducted an evaluation of the effectiveness of our internal control over financial reporting and identified significant deficiencies in internal control over financial reporting.

 

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

 

A significant deficiency is a deficiency, or a combination of deficiencies, that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting.  We not believe that we have sufficient documentation with our existing financial processes, risk assessment and internal controls.  We plan to work closely with financial advisors to document the existing financial processes, risk assessment and internal controls systematically as soon as resources are available. To address the need for more effective internal controls, management has plans to improve the existing controls and implement new controls appropriate to a business of its size and scale as our financial position and capital availability improves.  

 

Although we have not identified any material weaknesses with our financial reporting or any other significant deficiencies with our internal controls, no assurances can be given that there are no such material weaknesses or significant deficiencies existing.  

 

Changes in internal control over financial reporting.

 

There have been no changes in our internal controls over financial reporting that occurred during our last fiscal quarters and have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

 

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

 

Item 1A: Risk Factors

 

A smaller reporting company is not required to provide the information required by this Item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3. Defaults upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable. 

 

Item 5. Other Information

 

None.

Item 6. Exhibits

 

Exhibit Number	Description of Exhibit
31.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

SIGNATURES

 

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

 

	SocialPlay USA, Inc.
Date:	December 1, 2017
By:	/s/ Robert Rosner Robert Rosner
Title:	Chief Executive Officer, Chief Financial Officer and Director