FORM 10–Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2014

or

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ________________

Commission file number: 333-184026

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation 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 [X] No [  ]

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

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

As of June 20, 2014, there were 77,536,256 shares of the issuer's common stock, par value $0.01, outstanding.

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3D PIONEER SYSTEMS, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED APRIL 30, 2014

TABLE OF CONTENTS

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PART I – FINANCIAL INFORMATION

Item 1.      Financial Statements.

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company's Form 10K filed with the SEC on October 29, 2013. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have been reflected herein. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year ending July 31, 2014.

 

3D PIONEER SYSTEMS, INC.

(A Development Stage Company)

INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

From Inception on April 22, 2008 through April 30, 2014

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 The accompanying notes are an integral part of these condensed  consolidated financial statements.

 

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The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

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The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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3D Pioneer Systems, Inc. (formerly Mobile Gaming International Corp.) (the "Company") was incorporated on April 22, 2008 in the State of Nevada, U.S.A. The Company's fiscal year end is July 31.

 

Effective October 14, 2013, the Company changed its name to "3D Pioneer System, Inc." by way of a vote of the majority of the stock holders. On March 21, 2014, the Company incorporated its wholly-owned subsidiaries, 3D Pioneer Systems Malta (Holding) Ltd. and 3D Pioneer Systems Malta I Ltd. in Malta.

 

The Company is considered to be in the development stage as defined in Accounting Standards Codification (ASC) 915 "Development Stage Entities." The Company is devoting substantially all of its efforts to development of business plans.

Basis of Consolidation

7

8

·

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

·

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or 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); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

·

Level 3 - Inputs that are both significant to the fair value measurement and unobservable.

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of April 30, 2014. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments.

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

 

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company's financial instruments consist principally of cash and cash equivalents, accounts payable and accrued liabilities, due to related party and convertible notes payable.

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Concentrations of Credit Risk

The Company's financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents and related party payables it will likely incur in the near future.  The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company's management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.

Revenue Recognition

The Company recognizes revenue from the sale of services in accordance with ASC 605, "Revenue Recognition."  Revenue will consist of smart phone application monthly subscription fees and advertising and will be recognized only when all of the following criteria have been met:

i)

Persuasive evidence for an agreement exists;

ii)

Service has been provided;

iii)

The fee is fixed or determinable; and

iv)

Revenue is reasonably assured.

Net Loss Per Share of Common Stock

The Company has adopted ASC 260, "Earnings per Share," ("EPS") which requires presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements, basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period.

For the period ended April 30, 2014, 161,541 shares of potentially dilutive common stock, from a convertible note payable, were excluded from the EPS computation because their effect would be anit-dilutive.

Recent Accounting Pronouncements

Except for rules and interpretive releases of the SEC under authority of federal securities laws and a limited number of grandfathered standards, the FASB Accounting Standards Codification™ ("ASC") is the sole source of authoritative GAAP literature recognized by the FASB and applicable to the Company.  Management has reviewed the aforementioned rules and releases and believes any effect will not have a material impact on the Company's present or future consolidated financial statements.

NOTE 3 -GOING CONCERN AND LIQUIDITY CONSIDERATIONS

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		2014				2013
Office equipment		$	49,035			$	-
Office furniture			2,685				-
Gross equipment at cost			51,720				-
Accumulated depreciation and amortization			(1,044	)			-
Net equipment		$	50,676			$	-

NOTE 6 -   CAPITAL STOCK

 

On February 22, 2014, the Company entered into a transfer and assignment of intellectual property agreement with Mark Flores Martin and Pencil Pig Ltd., a company wholly owned by Flores.  In connection with the transaction, the Corporation's CEO has agreed to cancel 7,000,000 shares of the Corporation's common stock owned directly by him.  The effect of this cancellation will be that no net shares are issued as a result of the transaction. 

On September 26, 2013, the Company issued a note payable ("the note") to an unrelated party for $50,000. The note bears interest at 12%, is unsecured, and matures on September 26, 2016. The note holder has the right to immediately convert the note at any time and from time-to-time, in whole or in part, before the maturity date.  The note is convertible into shares of the Company's common stock at 65% of the average closing prices for the previous five trading days prior to the conversion.

Since the note is convertible into a variable number of shares based on a fixed monetary value, the Company followed guidance in ASC 480-10-25-14.  This guidance requires the note and accrued interest to be classified as a liability and reported at its full fair value, which is the fixed monetary value of shares into which the note and accrued interest is convertible.  The excess of the amount recognized as a liability for the convertible debt over the proceeds received upon issuance was recognized as interest expense on the dates of issuance.

Convertible note payable at April 30, 2014 and July 31, 2013 is summarized as follows:

 

NOTE 8 – RELATED PARTY TRANSACTIONS

NOTE 10 -SUBSEQUENT EVENTS

In accordance with ASC 855-10, Company management reviewed all material events through the date of this report and determined that there are the following material subsequent events to report:

 

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

Forward-Looking Statements

Except for historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Such forward-looking statements involve risks and uncertainties, including, among other things, statements regarding our business strategy, future revenues and anticipated costs and expenses.  Such forward-looking statements include, among others, those statements including the words "expects," "anticipates," "intends," "believes" and similar language.  Our actual results may differ significantly from those projected in the forward-looking statements.   Factors that might cause or contribute to such differences include, but are not limited to, those discussed herein as well as in the "Description of Business – Risk Factors" section in our Annual Report, Form 10-K, as filed on October 29, 2013.  You should carefully review the risks described in our Prospectus and in other documents we file from time to time with the Securities and Exchange Commission.  You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this report.  We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document.

Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements.

All references in this Form 10-Q to the "Company," "3D Pioneer Systems," "we," "us," or "our" are to 3D Pioneer Systems, Inc.

Corporate Overview

We were incorporated in the State of Nevada on April 22, 2008 and our fiscal year end is July 31. Effective October 14, 2013 we changed our name from Mobile Gaming International Corp. to 3D Pioneer Systems, Inc. The Company's administrative address is 22, Hanover Square, West Central, London, United Kingdom, W1S 1JP. The telephone number is 0044-203-700-8925.

3D Pioneer Systems, Inc. has no revenues, and has only limited cash on hand.  We have sustained losses since inception and have relied solely upon the sale of our securities and loans from our corporate officers and directors for funding.

3D Pioneer has never declared bankruptcy, been in receivership, or involved in any kind of legal proceeding.

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Results of Operations

We have generated no revenues since inception (April 22, 2008) and have incurred $393,291 in expenses through April 30, 2014.

The following table provides selected financial data about our company for the period ended April 30, 2014 and the year ended July 31, 2013.

Three and Nine Month Periods Ended April 30, 2014 Compared to the Three and Nine Month Periods Ended April 30, 2013.

Our net loss for the three and nine months ended April 30, 2014 was $271,111 and 377,324, as compared to a net loss of $18,674 and 41,798 during the comparable periods ended April 30, 2013.  Our increase in net loss, for the three months ended April 30, 2014 was due primarily to an increase in general and administrative fees of $141,807 due to management fees commenced in November 2013, software development costs of $42,401 for development of mobile games and 3D printer software, and increase general expenses in Malta subsidiaries.  Our increase in net loss, for the nine months ended April 30, 2014 was due primarily to an increase in general and administrative expenses of $187,498, from the $70,500 in management fees that commenced in November 2013, $30,474 in interest expense from a convertible feature on a note payable and increase in general expenses in Malta subsidiaries.

Plan of Operation

Our auditors have issued a going concern opinion on our audited financial statements for the year ended July 31, 2013.  This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay for our expenses.  This is because we have not generated any revenues and no sales are yet possible.  There is no assurance we will ever reach this point.  Accordingly, we must raise sufficient capital from sources.  Our only other source for cash at this time is investments by others.  We must raise cash to stay in business.  In response to these problems, management intends to raise additional funds through public or private placement offerings, and to make drawdowns pursuant to the Financing Agreement as described below.

On September 26, 2013, the Company issued a note payable to an unrelated party for $50,000. The note bears interest at 12%, is unsecured, and matures on September 26, 2016. The note holder has the right to immediately convert the note at any time and from time-to-time, in whole or in part, before the maturity date.  The note is convertible into shares of the Company's common stock at 65% of the average closing prices for the previous five trading days prior to the conversion.

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During the period ended April 30, 2014, the Company issued 1,504,256 to non-U.S. person for $500,000, which was exempt from registration under Regulation S of the Securities Act of 1933 (the "Act").

As of April 30, 2014, the Company had $257,491 in cash on hand.

For entering into that market, our plans during the next 12 months, we plan to further our research and development on 3D printing hardware and software, to introduce to the market our first prototype 3D printer with the brand name Wyatt, our web enable printer controller with the brand name Whip, and 3D Pioneer Systems' innovative Appaloza Cloud Platform, a simple web-enabled platform that allows users to log in, upload designs, and print objects on demand, with both the Wyatt and the Whip being capable of integrating into our Cloud Platform.

To supplement our printing products and diversify our operations, we are also intending on entering into the mobile gaming market. The Company's first mobile game acquisition, Tangled Tut, is anticipated to launch in the summer of 2014 across all common mobile platforms. After the anticipated Tangled Tut release, the Company intends on creating additional mobile games based on 2.5 environment technology.

There is no historical financial information about us on which to base an evaluation of our performance.  We are a development stage company and have not generated revenues from operations.  We cannot guarantee we will be successful in our business operations.  Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, possible delays in developing our products or services and possible cost overruns due to the price and cost increases in supplies and services.

We will require additional funds to operate for the next year and to develop our planned business development. We feel we will need at least $300,000 for professional fees for the next 12-months related to your regulatory filing requirements.

We have no assurance that future financing will be available to us on acceptable terms.  If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations.  Equity financing could result in additional dilution to existing shareholders.

We have plans, dependent upon our current financing, to undertake product research and development during the next twelve months, including but not limited to further developing mobile games developed on 2.5 D and 3D application environments, as well software applications that consumers can download and use on a variety of operating systems as iOS, android, windows, and other platforms.  We also plan and expect to acquire intellectual property, and will further seek to protect the Company's intellectual property and add value to our assets through further research and development.

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As at April 30, 2014 Compared to July 31, 2013

As at April 30, 2014, our company's cash balance was $257,491 compared to $2,231 as at July 31, 2013 and our total assets at April 30, 2014 were $334,047 compared with $2,231 as at July 31, 2013. The increase in cash was primarily due to the sales of our common equity as fully described in Note 4 to the financial statements.

As at April 30, 2014, our company had total liabilities of $212,475 compared with total liabilities of $3,335 as at July 31, 2013. The increase in total liabilities was primarily attributed to financing the commencement of our operations during the period ended April 30, 2014.

As at April 30, 2014, our company had a working capital surplus of $147,819 compared with working capital deficiency of $1,104 as at July 31, 2013. The increase in working capital surplus was primarily due to the current assets increasing by $281,140 and slightly offset by our increase in current liabilities of $132,217 from July 31, 2013. Our current liabilities increased, as compared to July 31, 203, primarily from an increase in trade accounts payable, accrued interest, and related party loans increasing by $124,606, $3,551, and $4,060, respectively.

 

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Cash Flow from Operating Activities

During the period ended April 30, 2014, cash used in operating activities was $247,080 compared to cash used in operating activities of $41,616 during the comparable period ended April 30, 2013. The increase in cash used in operating activities was attributed to a focused program of developing the company's brand, facilities, and the commencement of operations during the period.

Cash Flow from Investing Activities

During the period ended April 30, 2014, the Company purchased equipment of $51,720.

Cash Flow from Financing Activities

During the period ended April 30, 2014, cash provided by financing activities was $554,060 compared to $27,500 for the same period in 2013.  The increase in 2014 is attributable to $500,000 from the issuance of common stock, $4,060 from related parties and $50,000 from a convertible note payable, respectively.  From inception (April 22, 2008) through April 30, 2014 cash flows from financing activities was $604,815, $547,520 from the issuance of common stock, $7,295 from a related party and $50,000 from a convertible note payable.

To meet our need for cash, we raised money from our public offering.  We raised $27,500 from the sale of 2,750,000 registered shares pursuant to our S-1 Registration Statement filed with the SEC under file number 333-184026, which became effective on December 7, 2012.  The offering was closed on February 28, 2013.

During the period ended April 30, 2014, the Company issued 1,504,256 to non-U.S. person for $500,000, which was exempt from registration under Regulation S of the Act.

On September 26, 2013, the Company issued a note payable to an unrelated party for $50,000. The note bears interest at 12%, is unsecured, and matures on September 26, 2016. The note holder has the right to immediately convert the Note at any time and from time-to-time, in whole or in part, before the maturity date.  The note is convertible into shares of the Company's common stock at 65% of the average closing prices for the previous five trading days prior to the conversion.

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

As a "smaller reporting company", we are not required to provide the information required by this Item.

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Item 4.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of April 30, 2014, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.

 

The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee, (2) lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (3) inadequate segregation of duties consistent with control objectives; and (4) management dominated by a single  individual without adequate compensating controls. The aforementioned material weaknesses were identified by our Chief Executive and Financial Officer in connection with the review of our financial statements as of April 30, 2014.

 

Management believes that the material weaknesses set forth above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal controls over financial reporting that occurred during the quarter ended April 30, 2014, that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II – OTHER INFORMATION

Item 1.  Legal Proceedings.

We know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

Item 1A.  Risk Factors.

As a "smaller reporting company", we are not required to provide the information required by this Item.

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

During the period ended April 30, 2014, the Company issued 1,504,256 to non-U.S. person for $500,000, which was exempt from registration under Regulation S of the Act.

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Item 3.  Defaults Upon Senior Securities.

None.

Item 4.  Mine Safety Disclosures.

Not applicable.

Item 5.  Other Information.

Termination of Consulting Agreement with Mark Flores Martin

On February 22, 2014, the Company entered into a consulting agreement with Mark Flores Martin ("Flores") in which Flores was to provide certain advisory services to the Company (the "Consulting Agreement").  Pursuant to the Consulting Agreement, the Company has given Flores a 30-day notice of termination of the Consulting Agreement, effective June 16, 2014, which shall make the Consulting Agreement null and void and of no further effect, except to those provisions which are explicitly stated to survive therein.

Appointment of Chief Operating Officer

On June 20, 2014, the board of directors of the Corporation appointed Mr. Brendon Grunewald as the Chief Operating Officer of the Company ("COO") until his successor is elected and qualified or until an earlier resignation or removal from office.

Also on June 20, 2014, the board of directors received and reviewed, and retroactively resolved for the Company to enter into, an executed Consulting Agreement dated May 1, 2014 ("COO Agreement"), in which IceVista Bvba ("IceVista") shall provide certain advisory services to the Corporation through Mr. Grunwald in his appointment as COO.  Mr. Grunwald, through IceVista, shall be a) paid a consulting fee of €5,000 per month, which shall be increased to €10,000 per month upon the closing of the next or secondary financing of the Company; b) shall be entitled to expense reimbursement for necessary expenses incurred in connection with the performance of the COO Agreement; and c) if approved by the non-interested members of the board of directors, the board of directors may also grant additional incentive compensation to IceVista for the services of Mr. Grunwald as COO.  In the event that the COO is terminated  by an action of the board of directors, Mr. Grunwald's resignation, or by any other lawful method of removal, then the COO Agreement shall terminate, and the Company shall pay IceVista the equivalent of the then COO Fee over a period of one year from the date of termination.

Item 6.  Exhibits.

The following exhibits are included as part of this report:

31.1	Rule 13(a)-14(a)/15(d)-14(a) Certification of Principal Executive and Financial Officer

*  XBRL Information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

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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.