Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2014
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
For the transition period from ______ to _______
|
Commission File Number:
|
000-55137
|
|
SOLO INTERNATIONAL, INC.
|
|
|
(Name of small business issuer in its charter)
|
|
|
Nevada
|
68-0680819
|
|
(State or other jurisdiction of incorporation or organization
|
(I.R.S. Employer Identification No.)
|
|
871 Coronado Center Drive, Suite 200, Henderson, NV 89052
|
|
|
(Address of principal executive offices)(Zip Code)
|
|
|
(888) 612-9246
|
|
|
(Registrant’s telephone number)
|
|
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 [ ]
|
No [X]
|
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
|
[X]
|
|
(Do not check if a smaller reporting company)
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
|
Yes [ ]
|
No [X]
|
As of February 20, 2015, there were 547,029,250 shares of the registrant’s $0.001 par value common stock issued and outstanding.
SOLO INTERNATIONAL, INC. *
|
|
Page
|
|
|
PART I. FINANCIAL INFORMATION
|
||
|
|
||
|
FINANCIAL STATEMENTS
|
3 | |
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
4 | |
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
7 | |
|
CONTROLS AND PROCEDURES
|
7 | |
|
|
||
|
PART II. OTHER INFORMATION
|
||
|
|
8 | |
|
LEGAL PROCEEDINGS
|
||
|
RISK FACTORS
|
8 | |
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
8 | |
|
DEFAULTS UPON SENIOR SECURITIES
|
8 | |
|
MINE SAFETY DISCLOSURES
|
8 | |
|
OTHER INFORMATION
|
8 | |
|
EXHIBITS
|
9 | |
| 10 | ||
Special Note Regarding Forward-Looking Statements
Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Solo International, Inc. (the “Company”), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.
*Please note that throughout this Quarterly Report, and unless otherwise noted, the words "we," "our," "us," “SLIO,” “SOLO,” the "Company," refers to Solo International, Inc.
SOLO INTERNATIONAL, INC.
Consolidated Financial Statements
(Expressed in US dollars)
December 31, 2014
|
Financial Statement Index
|
Page
|
|
|
F-1
|
||
|
F-2
|
||
|
F-3
|
||
|
F-4 to F-16
|
||
SOLO INTERNATIONAL, INC.
|
December 31, 2014
(unaudited)
|
September 30, 2014
(audited)
|
|||||||
|
ASSETS
|
||||||||
|
Current
|
||||||||
|
Cash
|
$
|
104
|
$
|
20
|
||||
|
Prepaid expense
|
813
|
882
|
||||||
|
Total Current Assets
|
917
|
902
|
||||||
|
Total Assets
|
$
|
917
|
$
|
902
|
||||
|
LIABILTIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY)
|
||||||||
|
Current liabilities
|
||||||||
|
Accounts payable and accrued liabilities
|
$
|
186,405
|
$
|
164,763
|
||||
|
Accounts payable and accrued liabilities, related party
|
4,472
|
4,592
|
||||||
|
Advances from related parties
|
6,417
|
6,417
|
||||||
|
Convertible promissory notes, net (Note 5)
|
485,341
|
507,344
|
||||||
|
Derivate liabilities
|
289,851
|
335,918
|
||||||
|
Total Current Liabilities
|
972,486
|
1,019,034
|
||||||
|
STOCKHOLDERS’ EQUITY (DEFICIENCY)
|
||||||||
|
Common stock: 900,000,000 shares authorized, at $0.001 par value 547,029,250 and 497,690,625 shares issued and outstanding as at December 31, 2014 and September 30, 2014, respectively
|
547,029
|
497,691
|
||||||
|
Capital in excess of par value
|
(172,447
|
)
|
(117,245
|
)
|
||||
|
Accumulated Deficit
|
(1,346,151
|
)
|
(1,398,578
|
)
|
||||
|
Total Stockholders’ Equity (Deficiency)
|
(971,569
|
)
|
(1,018,132
|
)
|
||||
|
Total Liabilities and Stockholders’ Equity (Deficiency)
|
$
|
917
|
$
|
902
|
||||
The accompanying notes are an integral part of these consolidated financial statements.
SOLO INTERNATIONAL, INC.
For the three month periods ended December 31, 2014 and 2013
(unaudited)
|
Three Months Ended
December 31,
|
||||||||
|
2014
|
2013
|
|||||||
|
REVENUE
|
$
|
-
|
$
|
-
|
||||
|
EXPENSES
|
||||||||
|
Professional fees
|
11,818
|
19,222
|
||||||
|
Management fees
|
7,500
|
11,000
|
||||||
|
Other general and administrative expenses
|
5,124
|
8,939
|
||||||
|
OPERATING LOSS
|
(24,442
|
)
|
(39,161
|
)
|
||||
|
OTHER INCOME (EXPENSES)
|
||||||||
|
Derivate income (expenses)
|
96,531
|
-
|
||||||
|
Interest expenses
|
(19,662
|
)
|
(30,810
|
)
|
||||
|
NET LOSS
|
52,427
|
(69,971
|
)
|
|||||
|
Basic and diluted loss per share
|
$
|
(0.00
|
)*
|
$
|
(0.00
|
)*
|
||
|
Weighted average number of shares outstanding, basic and diluted
|
331,134,589
|
288,000,000
|
||||||
|
*
|
Less than $0.01 per share
|
The accompanying notes are an integral part of these consolidated financial statements.
For the three month periods ended December 31, 2014 and 2013
(unaudited)
|
Three Months Ended
December 31,
|
||||||||
|
2014
|
2013
|
|||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
|
Net loss
|
$
|
52,427
|
$
|
(69,971
|
)
|
|||
|
Adjustment to reconcile net loss to net cash (used in) operating activities:
|
||||||||
|
Change in fair value of derivative liabilities
|
(96,531
|
)
|
-
|
|||||
|
Interest expense-Amortization of discount on convertible promissory notes
|
7,097
|
17,254
|
||||||
|
Changes in operating assets and liabilities:
|
||||||||
|
(Increase) decrease in prepaid expense
|
69
|
3
|
||||||
|
Increase (decrease) in accounts payable and accrued liabilities
|
21,522
|
15,800
|
||||||
|
Net cash provided by (used) in operating activities
|
(15,416
|
)
|
(36,914
|
)
|
||||
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
|
Net cash used in investing activities
|
-
|
-
|
||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
|
Proceeds from convertible notes payable
|
15,500
|
37,500
|
||||||
|
Net cash provided by financing activities
|
15,500
|
37,500
|
||||||
|
Increase (decrease) in cash during the period
|
84
|
586
|
||||||
|
Cash, beginning of period
|
20
|
-
|
||||||
|
Cash, end of period
|
$
|
104
|
$
|
586
|
||||
|
Supplemental cash flow information:
|
||||||||
|
Cash paid for:
|
||||||||
|
Interest
|
$
|
-
|
$
|
-
|
||||
|
Taxes
|
$
|
-
|
$
|
-
|
||||
|
Non-cash transactions:
|
||||||||
|
Shares issued for convertible notes
|
$
|
30,000
|
$
|
-
|
||||
The accompanying notes are an integral part of these consolidated financial statements.
1. ORGANIZATION
SOLO INTERNATIONAL, INC. was founded in the State of Nevada on April 30, 2010 as a Poland based corporation intending to provide services in interior architectural design in Poland. During October 2011 as a result of a change in management and control, the Company determined not to pursue its operations in Poland and determined to enter into the mining business in the Province of Quebec and incorporated a wholly-owned Quebec subsidiary, 9252-4768 Quebec Inc.
The Company's principal business is the acquisition and exploration of mineral resources. The Company has not presently determined whether its properties contain mineral reserves that are economically recoverable, however additional exploratory efforts are planned to be undertaken.
Since Inception (April 30, 2010) through December 31, 2014, the Company has not generated any revenue and has an accumulated deficit of $1,346,151.
2. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted accounting principles (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 period. Actual results could differ from those estimates.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements present the balance sheets and statements of operations, stockholders' equity (deficit) and cash flows of the Company. These financial statements are presented in United States dollars and have been prepared in accordance with accounting principles generally accepted in the United States.
Going Concern
The consolidated financial statements have been prepared on a going concern basis that assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred losses since inception resulting in an accumulated deficit of $1,346,151 as of December 31, 2014 and further losses are anticipated in the development of its business raising substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand and loans from directors and/or private placement of common stock. These financials do not include any adjustments relating to the recoverability and reclassification of recorded asset amounts, or amounts and classifications of liabilities that might result from this uncertainty.
Cash and Cash equivalents
For purposes of Statement of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity date of six months or less to be cash equivalents.
Foreign Currency Translation
The Company's functional currency and its reporting currency is the United States dollar.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
(unaudited)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Stock-based Compensation
The Company records stock based compensation in accordance with the guidance in ASC Topic 718, which requires the Company to recognize expenses related to the fair value of its employee stock option awards. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.
Income Taxes
The Company follows the liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values and their respective income tax basis (temporary differences). The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Basic and Diluted Loss Per Share
Basic loss per share includes no dilution and is computed by dividing loss available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period.
The Company had the following potential common stock equivalents at December 31, 2014:
|
Warrants
|
700,000 | |||
|
Convertible Notes (Note 6(i))
|
525,556,601 | |||
|
Convertible Notes (Note 6(ii))
|
62,715,585 | |||
|
Convertible Notes (Note 6 (iii))
|
45,166,667 | |||
|
Convertible Notes (Note 6(iv))
|
30,000,000 | |||
|
Total
|
664,138,852 |
Since the Company reflected a net loss in the period ended December 31, 2014 and 2013, respectively, the effect of considering any common stock equivalents, if outstanding, would have been anti-dilutive. A separate computation of diluted earnings (loss) per share is not presented.
Mineral Property Costs
Mineral exploration and development costs are accounted for using the successful efforts method of accounting.
Property acquisition costs - Mineral property acquisition costs are capitalized as mineral exploration properties. Upon achievement of all conditions necessary for reserves to be classified as proved, the associated acquisition costs are reclassified to prove properties
Exploration costs - Geological and geophysical costs and the costs of carrying and retaining undeveloped properties are expensed as incurred.
SOLO INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
(unaudited)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Impairment of Mineral Properties
Unproved mineral properties are assessed at each reporting period for impairment of value, and a loss is recognized at the time of the impairment by providing an impairment allowance. An asset would be impaired if the undiscounted cash flows were less than its carrying value. Impairments are measured by the amount by which the carrying value exceeds its fair value. Because the Company uses the successful efforts method, the Company assesses its properties individually for impairment, instead of on an aggregate pool of costs. Impairment of unproved properties is based on the facts and circumstances surrounding each lease and is recognized based on management’s evaluation. Management’s evaluation follows a two-step process where (1) recoverability of the carrying value of the asset is reviewed to determine if there is sufficient value recoverable to support the capitalized value at the report date; and, (2) If assets fail the recoverability test, impairment testing is conducted, including the evaluation of various criteria such as: prior history of successful operations; production currently in place and/or future projected cash flows (if any); reserve reports or evaluations from which management can prepare future cash flow analyses; the Company’s ability to monetize the asset(s) under evaluation; and, Management’s intent regarding future development.
Beneficial Conversion Feature
From time to time, the Company may issue convertible notes that may have conversion prices that create an embedded beneficial conversion feature pursuant to the Emerging Issues Task Force guidance on beneficial conversion features. 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 any attached equity instruments, if any related equity instruments were granted with the debt. In accordance with this guidance, 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.
Fair value of financial instruments
The Financial Accounting Standards Board issued ASC (Accounting Standards Codification) 820-10 (SFAS No. 157), “Fair Value Measurements and Disclosures" for financial assets and liabilities. ASC 820-10 provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. FASB ASC 820-10 defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. FASB ASC 820-10 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required by the standard that the Company uses to measure fair value:
|
· Level 1: Quoted prices in active markets for identical assets or liabilities.
|
|
· Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.
|
|
· Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
|
SOLO INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
(unaudited)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair value of financial instruments (continued)
The following are the major categories of liabilities measured at fair value on a recurring basis as of December 31, 2014 and September 30, 2014, using quoted prices in active markets for identical liabilities (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3):
|
December 31,
2014
|
September 30,
2014
|
||||||||
|
Derivative liabilities
|
Level 3
|
$
|
300,021
|
$
|
335,918
|
||||
Derivative Liabilities
Fair value accounting requires bifurcation of embedded derivative instruments, such as ratchet provisions or conversion features in convertible debt or equity instruments, and measurement of their fair value. In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing model. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.
Once derivative liabilities are determined, they are adjusted to reflect fair value at the end of each reporting period. Any increase or decrease in the fair value is recorded in results of operations as an adjustment to fair value of derivatives. In addition, the fair value of freestanding derivative instruments such as warrants, are also valued using the Black-Scholes option-pricing model.
Recent Accounting Pronouncements
On June 10, 2014, The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 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 removes all incremental financial reporting requirements from GAAP for development stage entities, including the removal of Topic 915 from the FASB Accounting Standards Codification. For the first annual period beginning after December 15, 2014, the presentation and disclosure requirements in Topic 915 will no longer be required for the public business entities. The revised consolidation standards are effective one year later, in annual periods beginning after December 15, 2015. Early adoption is permitted. The Company adopted the amendment during the interim period ended June 30, 2014.
There are several new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) which are not yet effective. Each of these pronouncements, as applicable, has been or will be adopted by the Company. As of December 31, 2014, none of these pronouncements is expected to have a material effect on the financial position, results of operations or cash flows of the Company.
4. MINERAL PROPERTY
Through its wholly-owned Quebec subsidiary, 9252-4768 Quebec Inc., the Company has acquired a 100% right, title and interest in and to certain mineral claims located in Portland Township, Outaouais, Quebec subject to a royalty reserved to the Optionor.
During the fiscal year ended September 30, 2014 and 2013, the Company expended $0 and $17,630 on exploration, respectively. The claims remains in good standing until November 28, 2015. The Company has not expended any further amounts on the claims during the most recently completed three months ended December 31, 2014.
SOLO INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
(unaudited)
5. COMMON STOCK
The authorized capital of the Company is 900,000,000 common shares with a par value of $ 0.001 per share.
During the three month period ended December 31, 2014 the Company received Conversion Notices from a note holder that acquired a total of $30,000 in convertible loans from Craigstone Ltd. (ref: Note 6) The conversion notices, each for a total of $10,000 in principal, provide for the issuance of 14,814,815 shares at $0.00067 on October 7, 2014, 16,666,667 shares at $0.00060 on November 25, 2014 and 17,857,143 shares at $0.00056 on December 21, 2014 respectively.
As of December 31, 2014, 547,029,250 shares of common stock were issued and outstanding.
6. CONVERTIBLE PROMISSORY NOTE, NET and DERIVATIVE LIABILITIES
|
(i)
|
Craigstone Ltd. (“Craigstone”)
|
On November 4, 2011, the Company entered into a Securities Purchase Agreement with Craigstone pursuant to which the Company received $100,000 as a loan from Craigstone in exchange for one (1) Unit consisting of: a Convertible Promissory Note convertible to common stock in whole or in part, at any time and from time to time before maturity at the option of the holder at seventy-five percent (75%) of the average traded price of the common stock for the thirty (30) trading days immediately preceding the conversion date; and a three (3) year Warrant (the “Warrant”) to purchase two hundred fifty thousand (250,000) shares of the Company’s Common Stock exercisable at the lower of : (i) a price of $0.20 per share or (ii) seventy-five percent (75%) of the average traded price of common stock for the thirty (30) trading days immediately preceding the exercise date. The Note earns simple interest accruing at ten percent (10%) per annum and was due on or before the twelfth month anniversary of the date of execution. The due dates were extended as described further herein.
During the fiscal year ended September 30, 2012, the Company entered into additional Securities Purchase Agreements with Craigstone pursuant to which the Company received collectively $320,000 as loans whereby each funding received one (1) Unit consisting of: a Convertible Promissory Note convertible to common stock in whole or in part, at any time and from time to time before maturity at the option of the holder at seventy-five percent (75%) of the average traded price of the common stock for the thirty (30) trading days immediately preceding the conversion date; and a three (3) year Warrant (the “Warrant”). Collectively under the Securities Purchase Agreements, Craigstone was granted the rights to purchase seven hundred twelve thousand five hundred (712,500) shares of the Company’s Common Stock exercisable at the lower of : (i) a price of $0.20 per share or (ii) seventy-five percent (75%) of the average traded price of common stock for the thirty (30) trading days immediately preceding the exercise date. The Notes earn simple interest accruing at ten percent (10%) per annum and were due on or before the twelfth month anniversary of the date of execution. The due dates were extended as described further herein.
During the fiscal year ended September 30, 2013, the Company entered into three additional Securities Purchase Agreements with Craigstone pursuant to which the Company received a total of $45,000 as loans in exchange for which each funding received one (1) Unit consisting of a Convertible Promissory Note convertible to common stock in whole or in part, at any time and from time to time before maturity at the option of the holder at seventy-five percent (75%) of the average traded price of the common stock for the thirty (30) trading days immediately preceding the conversion date; and collectively received a three (3) year Warrant (the “Warrant”) to purchase one hundred twelve thousand five hundred (112,500) shares of the Company’s Common Stock exercisable at the lower of: (i) a price of $0.20 per share or (ii) seventy-five percent (75%) of the average traded price of common stock for the thirty (30) trading days immediately preceding the exercise date. The Notes earn simple interest accruing at ten percent (10%) per annum and is due on or before the twelfth month anniversary of the date of execution.
SOLO INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
(unaudited)
6. CONVERTIBLE PROMISSORY NOTE, NET and DERIVATIVE LIABILITIES (continued)
|
(i)
|
Craigstone Ltd. (“Craigstone”) (continued)
|
The beneficial conversion feature resulting from the discounted conversion price compared to market price was valued on the dates of grant to be $215,439 on the notes, and $60,439 on the warrants. This value was recorded as a discount on debt and offset to additional paid in capital. Amortization of the discount was $nil for the three months ended December 31, 2014 (December 31, 2013 - $2,335), which amount has been recorded as interest expense.
|
December 31,
2014
|
September 30,
2014
|
Issue Date
|
||||||||||
|
Convertible Promissory Note – face value, due on March 31, 2015
|
$
|
100,000
|
$
|
100,000
|
$
|
100,000
|
||||||
|
Convertible Promissory Note – face value, due on November 4, 2014
|
115,000
|
115,000
|
115,000
|
|||||||||
|
Convertible Promissory Note – face value, due on March 31, 2015
|
85,000
|
85,000
|
85,000
|
|||||||||
|
Convertible Promissory Note – face value, due on March 31, 2015
|
35,000
|
35,000
|
35,000
|
|||||||||
|
Convertible Promissory Note – face value, due on May 11, 2014
|
25,000
|
25,000
|
25,000
|
|||||||||
|
Convertible Promissory Note – face value, due on June 19, 2014
|
25,000
|
25,000
|
25,000
|
|||||||||
|
Convertible Promissory Note – face value, due on March 31, 2015
|
35,000
|
35,000
|
35,000
|
|||||||||
|
Convertible Promissory Note – face value, due on March 31, 2015
|
15,000
|
15,000
|
15,000
|
|||||||||
|
Convertible Promissory Note – face value, due on March 31, 2015
|
15,000
|
15,000
|
15,000
|
|||||||||
|
Convertible Promissory Note – face value, due on May 30, 2014
|
15,000
|
15,000
|
15,000
|
|||||||||
|
Note value converted to shares
|
(46,000
|
)
|
(16,000
|
)
|
||||||||
|
Total convertible promissory note – face value
|
419,000
|
449,000
|
465,000
|
|||||||||
|
Less: beneficial conversion feature
|
-
|
-
|
(215,439
|
)
|
||||||||
|
Warrant discount
|
-
|
-
|
(60,439
|
)
|
||||||||
|
$
|
419,000
|
$
|
449,000
|
$
|
189,122
|
|||||||
Interest expenses:
|
For the three months ended
|
|||||||||
|
December 31,
2014
|
December 31,
2013
|
|
|||||||
|
Amortization of debt discount
|
$ | - | $ | 2,335 | |||||
|
Interest at contractual rate
|
10,986 | 11,720 | |||||||
|
Totals
|
$ | 10,986 | $ | 14,055 | |||||
Presently the Company and Craigstone are in negotiation to extend the repayment terms of all notes which are presently due and payable.
On May 28, 2014 and June 20, 2014 respectively, Craigstone assigned a total of $16,000 from its original November 4, 2011 note in the principal amount of $100,000 to two arm’s length third parties. The conversion notices, each for a total of $8,000 in principal, provide for the issuance of 14,499,320 shares at $0.00055175 issued on August 27, 2014 and 17,778,778 shares at $0.00045 issued on September 11, 2014, respectively.
During the three month period ended December 31, 2014 the Company received Conversion Notices from a note holder that acquired a total of $30,000 in convertible loans from Craigstone Ltd. The conversion notices, each for a total of $10,000 in principal, provide for the issuance of 14,814,815 shares at $0.00067 on October 7, 2014, 16,666,667 shares at $0.00060 on November 25, 2014 and 17,857,143 shares at $0.00056 on December 21, 2014 respectively.
SOLO INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
(unaudited)
6. CONVERTIBLE PROMISSORY NOTE, NET and DERIVATIVE LIABILITIES (continued)
|
(ii)
|
Adams Ale Inc.
|
Effective February 15, 2013, the Company entered into a Securities Purchase Agreement with Adams Ale Inc. (“Adams”) pursuant to which Adams agreed to undertake a private placement in the amount of $100,000. On May 1, 2013, Adams had not fully funded the private placement, having funded an amount of $50,000 and agreed to convert to a Convertible Promissory Note on the same commercial terms as the Craigstone notes discussed above. The Company agreed to enter into a Securities Purchase Agreement with Adams for the funded amount of $50,000 in exchange for one (1) Unit consisting of: a Convertible Promissory Note convertible to common stock in whole or in part, at any time and from time to time before maturity at the option of the holder at seventy-five percent (75%) of the average traded price of the common stock for the thirty (30) trading days immediately preceding the conversion date; and a three (3) year Warrant (the “Warrant”) to purchase one hundred twenty-five thousand (125,000) shares of the Company’s Common Stock exercisable at the lower of : (i) a price of $0.20 per share or (ii) seventy-five percent (75%) of the average traded price of common stock for the thirty (30) trading days immediately preceding the exercise date. The Note earns simple interest accruing at ten percent (10%) per annum and is due on or before the twelfth month anniversary of the date of execution.
The beneficial conversion feature resulting from the discounted conversion price compared to market price was valued on the date of grant to be $17,473 on the note, and $806 on the warrants. This value was recorded as a discount on debt and offset to additional paid in capital. Amortization of the discount for the fiscal year ended December 31, 2014 was $nil (December 31, 2013 - $4,608), which amount has been recorded as interest expense.
|
December 31, 2014
|
September 30, 2014
|
Issue Date
|
||||||||||
|
Convertible Promissory Note – face value, due on February 15, 2014
|
$
|
50,000
|
$
|
50,000
|
$
|
50,000
|
||||||
|
Total convertible promissory note – face value
|
50,000
|
50,000
|
50,000
|
|||||||||
|
Less: beneficial conversion feature
|
-
|
-
|
(17,473
|
)
|
||||||||
|
Warrant discount
|
-
|
-
|
(806
|
)
|
||||||||
|
50,000
|
50,000
|
31,721
|
||||||||||
Interest expenses:
|
For the three months ended
|
||||||||
|
December 31,
2014
|
December 31,
2013
|
|||||||
|
Amortization of debt discount
|
$
|
-
|
$
|
4,608
|
||||
|
Interest at contractual rate
|
1,260
|
1,260
|
||||||
|
Totals
|
$
|
1,260
|
$
|
5,868
|
||||
Presently the Company and Adams Ale are in negotiation to extend the repayment terms of the aforementioned note which is currently due and payable.
SOLO INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
(unaudited)
6. CONVERTIBLE PROMISSORY NOTE, NET and DERIVATIVE LIABILITIES (continued)
|
(iii)
|
Investor Growth LLC (“IG”)
|
On May 11, 2014, the Company entered into 5% convertible promissory note with Investor Growth LLC (“IG”) pursuant to which the Company received $8,000 as a loan from IG. The Note earns simple interest accruing at five percent (5%) per annum and is due and payable no later than November 11, 2014 (“Maturity Date”). Any amount of principal or interest on the Note which is not paid when due shall bear interest at the rate of twelve percent (12%) per annum from the due date thereof until the same is paid (“Default Interest”). At any such date as IG may desire on or after the Maturity Date of this Note, any unpaid indebtedness shall be convertible into common shares of the Company at a price per share of $0.0005.
On July12, 2014, the Company entered into a 5% convertible promissory note with Investor Growth LLC (“IG”) pursuant to which the Company received $5,000 as a loan from IG. The Note earns simple interest accruing at five percent (5%) per annum and due and payable no later than January 12, 2015 (“Maturity Date”). Any amount of principal or interest on the Note which is not paid when due shall bear Default Interest from the due date thereof until the same is paid. At any such date as IG may desire on or after the Maturity Date of this Note, any unpaid indebtedness shall be convertible into common shares of the Company at a price per share of $0.0003.
On October 14, 2014, the Company entered into a 5% convertible promissory note with Investor Growth LLC (“IG”) pursuant to which the Company received $5,000 as a loan from IG. The Note earns simple interest accruing at five percent (5%) per annum and due and payable no later than April 14, 2015 (“Maturity Date”). Any amount of principal or interest on the Note which is not paid when due shall bear Default Interest from the due date thereof until the same is paid. At any such date as IG may desire on or after the Maturity Date of this Note, any unpaid indebtedness shall be convertible into common shares of the Company at a price per share of $0.0004.
The beneficial conversion feature resulting from the discounted conversion price compared to market price was valued on the dates of grant to be $8,000, $5,000 and $5,000, respectively, on the notes. This value was recorded as a discount on debt and offset to additional paid in capital. Amortization of the discount for the three months ended December 31, 2014 was $6,461 (December 31, 2013 - $nil), which amount has been recorded as interest expense.
Interest expenses:
| For the three months ended | ||||||||
|
December 31,
2014
|
December 31,
2013
|
|||||||
|
Amortization of debt discount
|
$ | 6,461 | $ | - | ||||
|
Interest at contractual rate
|
302 | - | ||||||
|
Totals
|
$ | 6,763 | $ | - | ||||
|
(iv)
|
Level Up Investments, LLC. (“LUI LLC”)
|
On December 15, 2014 and on December 29, 2014, we raised $7,500 and $3,000, respectively, through a private offering of a convertible promissory notes. Under the terms of the Notes, interest shall accrue at 5% per annum until June 15, 2015 and June 29, 2015, respectively (the “Maturity Date”), at which time, unless converted, all principal and accrued interest shall be due and payable. Any amount of principal or interest on the Notes which is not paid when due shall bear Default Interest from the due date thereof until the same is paid. Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed.
SOLO INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
(unaudited)
6. CONVERTIBLE PROMISSORY NOTE, NET and DERIVATIVE LIABILITIES (continued)
|
(iv)
|
Level Up Investments, LLC. (“LUI LLC”) (continued)
|
The holder shall have the right to convert the Notes at any such date as LUI LLC may desire on or after the Maturity Date of this Note, any unpaid indebtedness shall be convertible into common shares of the Company at a price per share equal to 50% of the lowest posted trade price of SLIO within the last 20 trading sessions.
In our evaluation of the financing arrangement, we concluded that the conversion features were not afforded the exemption as a conventional convertible instrument and it did not otherwise meet the conditions set forth in current accounting standards for equity classification. Accordingly, they do not meet the conditions necessary to obtain equity classification and are required to be carried as derivative liabilities.
Since equity classification is not available for the conversion feature, we were required to bifurcate the embedded conversion feature and carry it as a derivative liability, at fair value. Derivative financial instruments are carried initially and subsequently at their fair values.
We estimated the fair value of the compound derivative on the inception dates, and subsequently, using the Black-Scholes Merton valuation technique, adjusted for the effect of dilution, because that technique embodies all of the assumptions (including, volatility, expected terms, and risk free rates) that are necessary to fair value complex compound derivate instruments.
As a result of the application of ASC No. 815 in period ended December 31, 2014 and issued date of December 15, 2014 and December 29, 2014; the fair value of the conversion feature is summarized as follows:
|
December 15, 2014 NOTE
|
December 29, 2014 NOTE
|
Total
|
||||||||||
|
Derivative liabilities, issued date
|
$
|
6,800
|
$
|
2,800
|
$
|
9,600
|
||||||
|
Fair value mark to market adjustment
|
200
|
-
|
200
|
|||||||||
|
Derivative liabilities, December 31, 2014
|
$
|
7,000
|
$
|
2,800
|
$
|
9,800
|
||||||
The Company recorded the debt discount in the amount of $6,800, and $2,800 for each note as of issued date.
The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions as of December 31, 2014 and commitment date:
|
Commitment Date
|
Revaluation Date
|
||||||||
|
Expected dividends
|
0
|
0
|
|||||||
|
Expected volatility
|
213.28 ~ 231.52
|
%
|
231.52 %
|
||||||
|
Expect term
|
0.50 years
|
0.45~0.50 years
|
|||||||
|
Risk free interest rate
|
0.08 ~ 0.12
|
%
|
0.12
|
%
|
|||||
Amortization of the discount over the three months ended December 31, 2014 were $636 (December 31, 2013 - $nil), which amount has been recorded as interest expense and is reflected on the Company’s balance sheet as Convertible Note Liabilities, Net.
SOLO INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
(unaudited)
6. CONVERTIBLE PROMISSORY NOTE, NET and DERIVATIVE LIABILITIES (continued)
|
(iv)
|
Level Up Investments, LLC. (“LUI LLC”) (continued)
|
|
September 30, 2014
|
Issue Date
|
|||||||
|
Convertible Promissory Note – face value, due on June 15, 2015
|
$
|
7,500
|
$
|
7,500
|
||||
|
Convertible Promissory Note – face value, due on June 29, 2015
|
3,000
|
3,000
|
||||||
|
Total convertible promissory note – face value
|
10,500
|
10,500
|
||||||
|
Less: Debt discount
|
(8,964
|
)
|
(9,600)
|
|||||
|
1,536
|
900
|
|||||||
Interest expenses:
|
Three months ended
December 31, 2014
|
||||||||
|
2014
|
2013
|
|||||||
|
Amortization of debt discount
|
$
|
636
|
$
|
-
|
||||
|
Interest at contractual rate
|
17
|
-
|
||||||
|
Totals
|
$
|
653
|
$
|
-
|
||||
|
(v)
|
Derivative liabilities from exceed authorized shares of common stock
|
As of December 31, 2014 given the fact that the Company currently has only 900,000,000 shares of common stock authorized, the Company could exceed its authorized shares of common stock by approximately 311,168,102 shares (September 30, 2014 – 176,799,100 shares) if all of the financial instruments described in notes above are exercised or converted into shares of common stock. At December 31, 2014, 311,168,102 of these shares were in excess of the authorized shares and were accounted for as a derivative liability. The fair value of these 311,168,102 common shares was determined to be $280,051 ($335,918 as to 176,799,100 shares as of September 30, 2014) using the closing price of the Company’s common stock. Details of the derivative liability are provided below:
|
Balance at September 30, 2014
|
$ | 335,918 | ||
|
Derivative liabilities due to the tainting of convertible notes
|
40,864 | |||
|
(Gain) on change in fair value
|
(96,731 | ) | ||
|
Balance at December 31, 2014
|
$ | 280,051 |
7. RELATED PARTY TRANSACTIONS
On September 13, 2013, Mr. Michael Jacob Cooper Smith was appointed to the Board of Directors and as an officer of the Company.
On September 30, 2013, the Company entered a three-year employment agreement with Mr. Michael Jacob Cooper Smith. Under the terms of the agreement, the Company shall pay Mr. Smith a base salary of $30,000 per annum, paid monthly. The amount of base salary may be increased from time to time by the Board of Directors of the Company. Mr. Smith shall be eligible for periodic bonus in amounts to be determined by the Board of Directors.
During the three month period ended December 31, 2014, Mr. Michael Jacob Cooper Smith invoiced the Company for his services in the amount of $7,500. The Company paid $7,620 in cash, leaving $4,472 on the balance sheets as accounts payable – related party (September 30, 2014 - $4,592).
SOLO INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
(unaudited)
8. WARRANTS
An aggregate of 1,200,000 warrants were issued and outstanding as at September 30, 2014 and September 30, 2013 as required under the terms of a series of Securities Purchase Agreements discussed above in Note 5(i). The warrants are exercisable for a period of three years from the date of issue, exercisable at the lower of : (i) a price of $0.20 per share or (ii) seventy-five percent (75%) of the average traded price of the Company’s common stock for the thirty (30) trading days immediately preceding the exercise date.
The fair value of the 1,200,000 warrants totaling $61,245 was recorded as a discount on the convertible notes payable upon issuance. This value was calculated using the Black-Scholes model. The key inputs for the calculation are shown below:
|
Stock Price on Measurement Date
|
$
|
0.0068 ~ 0.135
|
|
|
Exercise Price of Warrants
|
$
|
0.0051 ~ 0.101
|
|
|
Term of Warrants (years)
|
3.00
|
||
|
Computed Volatility
|
125.84% ~ 147.91%
|
||
|
Annual Dividends
|
0.00
|
%
|
|
|
Discount Rate
|
0.33 ~ 0.49
|
%
|
A summary of the Company’s warrants as of December 31, 2014 and September 30, 2014 as follows:
|
December 31, 2014
|
September 30, 2014
|
|||||||||||||||
|
Warrants
|
Weighted average
exercise price
|
Warrants
|
Weighted average
exercise price
|
|||||||||||||
|
Outstanding at the beginning of the period
|
1,200,000
|
$
|
0.060
|
1,200,000
|
$
|
0.060
|
||||||||||
|
Granted
|
-
|
-
|
||||||||||||||
|
Exercised
|
-
|
-
|
||||||||||||||
|
Expired
|
(500,000
|
)
|
0.075
|
|||||||||||||
|
Cancelled
|
-
|
-
|
||||||||||||||
|
Outstanding at the end of the period
|
700,000
|
$
|
0.049
|
1,200,000
|
$
|
0.060
|
||||||||||
|
Vested and exercisable at the end of period
|
700,000
|
1,200,000
|
||||||||||||||
|
Weighted average fair value per share of warrants granted during the period
|
$
|
0.049
|
$
|
0.060
|
||||||||||||
The following table summarizes information regarding stock purchase warrants outstanding at December 31, 2014:
|
Warrants Outstanding
|
Warrants Exercisable
|
|||||||||||||||||||||||||
|
Exercise prices
|
Number
Outstanding
|
Weighted
average
remaining
contractual
life (years)
|
Weighted
average
exercise
price
|
Number
exercisable
|
Weighted
average
remaining
contractual
life (years)
|
Weighted
average
exercise
price
|
||||||||||||||||||||
| $ | 0.005-0.10 | 700,000 | 0.57 | $ | 0.049 | 700,000 | 0.57 | $ | 0.049 | |||||||||||||||||
SOLO INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
(unaudited)
8. WARRANTS (continued)
As at December 31, 2014, the Company had the following warrants outstanding:
|
Exercise Price
|
Expiry Date
|
Weighted Average Remaining Contractual Life (Years)
|
Outstanding at
September 30, 2014
|
Issued
|
Exercised
|
Expired
|
Outstanding at
December 31, 2014
|
|||||||||||||||||
|
$
|
0.075
|
November 4, 2014
|
0.10
|
250,000
|
-
|
-
|
250,000
|
-
|
||||||||||||||||
|
$
|
0.075
|
November 4, 2014
|
0.10
|
250,000
|
-
|
-
|
250,000
|
-
|
||||||||||||||||
|
$
|
0.101
|
February 3, 2015
|
0.09
|
177,083
|
-
|
-
|
-
|
177,083
|
||||||||||||||||
|
$
|
0.041
|
March 8, 2015
|
0.18
|
72,917
|
-
|
-
|
-
|
72,917
|
||||||||||||||||
|
$
|
0.052
|
May 11, 2015
|
0.36
|
62,500
|
-
|
-
|
-
|
62,500
|
||||||||||||||||
|
$
|
0.03
|
June 19, 2015
|
0.47
|
62,500
|
-
|
-
|
-
|
62,500
|
||||||||||||||||
|
$
|
0.03
|
September 11, 2015
|
0.70
|
87,500
|
-
|
-
|
-
|
87,500
|
||||||||||||||||
|
$
|
0.064
|
October 19, 2015
|
0.80
|
37,500
|
-
|
-
|
-
|
37,500
|
||||||||||||||||
|
$
|
0.056
|
October 26, 2015
|
0.82
|
37,500
|
-
|
-
|
-
|
37,500
|
||||||||||||||||
|
$
|
.008
|
February 15, 2016
|
1.13
|
125,000
|
-
|
-
|
-
|
125,000
|
||||||||||||||||
|
$
|
0.005
|
May 30, 2016
|
1.41
|
37,500
|
-
|
-
|
-
|
37,500
|
||||||||||||||||
|
0.57
|
1,200,000
|
-
|
-
|
-
|
700,000
|
|||||||||||||||||||
9. INCOME TAXES
The Company has losses carried forward for income tax purposes at December 31, 2014. There are no current or deferred tax expenses for the current period ended December 31, 2014 due to the Company’s loss position. The Company has fully reserved for any benefits of these losses. The deferred tax consequences of temporary differences in reporting items for financial statement and income tax purposes are recognized, as appropriate. Realization of the future tax benefits related to the deferred tax assets is dependent on many factors, including the Company’s ability to generate taxable income within the net operating loss carryforward period.
Management has considered these factors in reaching its conclusion as to the valuation allowance for financial reporting purposes.
|
December 31, 2014
|
December 31, 2013
|
|||||||
|
Net operating loss carry forward
|
1,346,151
|
1,030,824
|
||||||
|
Effective Tax Rate
|
35
|
%
|
35
|
%
|
||||
|
Deferred Tax Assets
|
471,100
|
360,788
|
||||||
|
Less: Valuation Allowance
|
(471,100
|
)
|
(360,788
|
)
|
||||
|
Net deferred tax asset
|
$
|
0
|
$
|
0
|
||||
The valuation allowance for deferred tax assets as of December 31, 2014 and 2013 was $471,100 and $360,788 respectively. In assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and tax planning strategies in making this assessment.
SOLO INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
(unaudited)
9. INCOME TAXES (continued)
As a result, management determined it was more likely than not the deferred tax assets would not be realized as of December 31, 2014 and 2013, and recorded a full valuation allowance.
Reconciliation between the statutory rate and the effective tax rate is as follows at December 31, 2014 and 2013:
|
December 31, 2014
|
December 31, 2013
|
|||||||
|
Federal statutory tax rate
|
(35.0
|
)%
|
(35.0
|
)%
|
||||
|
Permanent difference and other
|
35.0
|
%
|
35.0
|
%
|
||||
|
Effective tax rate
|
-
|
%
|
-
|
%
|
||||
The net federal operating loss carry forward will expire between 2030 and 2034. This carry forward may be limited upon the consummation of a business combination under IRC Section 381. All income tax years from fiscal year ended September 30, 2011 to current are open to examination by the taxing authorities.
10. SUBSEQUENT EVENTS
Subsequent to December 31, 2014 a further 177,083 share purchase warrants expired unexercised.
The Company has evaluated subsequent events from the balance sheet date through February 15, 2015, and determined that there were no other events to disclose.
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements. You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements. Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.
RESULTS OF OPERATIONS
Working Capital
|
|
December 31, 2014
$
|
September 30, 2014
$
|
||||||
|
Current Assets
|
917
|
902
|
||||||
|
Current Liabilities
|
972,486
|
1,019,034
|
||||||
|
Working Capital (Deficit)
|
(971,569
|
)
|
(1,018,132
|
)
|
||||
Cash Flows
|
|
December 31, 2014
$
|
December 31, 2013
$
|
||||||
|
Cash Flows from (used in) Operating Activities
|
(15,416
|
)
|
(36,914
|
)
|
||||
|
Cash Flows from (used in) Investing Activities
|
-
|
-
|
||||||
|
Cash Flows from (used in) Financing Activities
|
15,500
|
37,500
|
||||||
|
Net Increase (decrease) in Cash During Period
|
104
|
586
|
||||||
Operating Revenues
Operating revenues for the periods ended December 31, 2014 and 2013 were $0.
Operating Expenses and Net Loss
Comparison of three month periods ended December 31, 2014 and 2013
Operating and other expenses for the three month period ended December 31, 2014 totaled $24,442 and are comprised of $11,818 in professional fees, $7,500 in fees paid under a related party management contract, and $5,124 in other general and administrative expenses. In addition the Company recorded $19,662 as interest expenses, $7,097 of which was from the amortization of debt discount from convertible notes, and recorded $96,531 in derivate income as a result in the change in valuation of certain financial instruments.
During the prior comparative period, operating and other expenses for the three months ended December 31, 2013 totaled $39,161 and are comprised of $19,222 in professional fees, $11,000 in fees paid under a related party management contract and $8,939 in other general and administrative expenses. In addition the Company recorded $30,810 as interest expenses, $6,943 of which was the amortization of the debt discount from the beneficial conversion features and warrant discount resulting from convertible promissory notes and $10,311 from the amortization of debt discount from convertible notes.
Net income for the period ended December 31, 2014 was $52,427 as compared to net loss of $69,971 for the three month period ended December 31, 2013. The decrease in operating expenses is due to the decrease in other general and administrative expenses from $8,939 (December 31, 2013) to $5,124 (December 31, 2014), as well as the decrease in professional fees from $19,222 (December 31, 2013) to $11,818 (December 31, 2014). In addition during the current three month period the Company recorded a gain of $96,531 in derivate income (2013 - $Nil) as a result in the change in valuation of certain financial instruments which resulted in the Company reporting net income for the three month period.
Liquidity and Capital Resources
As at December 31, 2014, the Company had total assets of $917 compared to $902 as at September 30, 2014.
As at December 31, 2014, the Company had total liabilities of $972,486 as compared with total liabilities of $1,019,034 as at September 30, 2014. The decrease in total liabilities was mainly due to a decrease in derivative liabilities in respect of the Company’s convertible notes, combined with the settlement of $30,000 in principal by way of conversion to shares of common stock. Accounts payable and accrued liabilities also increased from $164,763 as at September 30, 2014 to $186,405 at December 31, 2014 as the Company was unable to raise sufficient funds to meet its obligations as they became due.
As at December 31, 2014, the Company had a working capital deficit of $971,569 compared with a working capital deficit of $1,018,132 as at September 30, 2014. The decrease in working capital deficit is mainly attributable to the decrease in current liabilities as a result of the financing activities of the Company by way of convertible loans, and the Company’s expenditures for operations.
The Company has commenced exploration as required under its mineral property option agreement and has earned its rights to transfer title to the property under the agreement.
In order to meet all of the current commitments and fund operations for the next twelve months the Company estimates it will require a minimum of $500,000. We intend to undertake exploration on our mineral properties of approximately $300,000 and have allocated an additional $200,000 for operations, which may include the acquisition of additional properties as well as general and administrative costs.
We do not have sufficient funds to meet our next twelve month obligations. Our ability to meet our financial liabilities and commitments is primarily dependent upon the continued issuance of equity to new stockholders, the ability to borrow funds, and ultimately upon our ability to achieve and maintain profitable operations. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. We do not currently have sufficient capital to meet our obligations as they come due and while we have been able to raise funding to ensure that we meet our filing obligations, we have been unable to raise sufficient funding to undertake any exploration on our property. Should we be unable to continue to raise funding for our filing obligations we may have to cease operations. If the Company cannot raise exploration funds the properties which the Company currently holds could be lost.
Cash flow from Operating Activities
During the three month period ended December 31, 2014, the Company used $15,416 for operating activities compared to the use of $36,914 for operating activities during the period ended December 31, 2013. The decrease in net cash used in operating activities is attributed to the Company’s inability to raise sufficient funds to allow it to maintain and grow its operations. Non-cash items include a substantial reduction to the amortization of the debt discount recorded in the current period of $7,097 as compared to $17,254 in the three months ended December 31, 2013, which accounts for the most substantial change in cash flows from operating activities.
Cash flow from Investing Activities
During the three month period ended December 31, 2014 and December 31, 2013 the Company has expended no cash on investing activities.
Cash flow from Financing Activities
During the three month period ended December 31, 2014, the Company received $15,500 cash from financing activities by way of notes payable compared to $37,500 cash from notes payable for the three month period ended December 31, 2013.
Going Concern
We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern without further financing.
Off-Balance Sheet Arrangements
We have no significant 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 are material to stockholders.
Critical Accounting Policies
Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, 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 periods.
We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.
Recently Issued Accounting Pronouncements
On June 10, 2014, The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 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 removes all incremental financial reporting requirements from GAAP for development stage entities, including the removal of Topic 915 from the FASB Accounting Standards Codification. For the first annual period beginning after December 15, 2014, the presentation and disclosure requirements in Topic 915 will no longer be required for the public business entities. The revised consolidation standards are effective one year later, in annual periods beginning after December 15, 2015. Early adoption is permitted. The Company has adopted the amendment as of the interim period ended June 30 2014.
We have reviewed all other recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may cause a material impact on our financial condition, or the results of our operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management carried out an evaluation under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act"). Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were not effective as of December 31, 2014, due to the material weaknesses resulting from the Board of Directors not currently having any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K, and controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Please refer to our Annual Report on Form 10-K as filed with the SEC on December 31, 2014 for a complete discussion relating to the foregoing evaluation of Disclosures and Procedures.
Changes in Internal Control over Financial Reporting
Our management has also evaluated our internal control over financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of our last evaluation.
The Company is not required by current SEC rules to include, and does not include, an auditor's attestation report. The Company's registered public accounting firm has not attested to Management's reports on the Company's internal control over financial reporting.
PART II - OTHER INFORMATION
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 our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
During the three month period ended December 31, 2014 the Company received Conversion Notices from a note holder that acquired a total of $30,000 in convertible loans from Craigstone Ltd. (ref: Note 6 to the financial statements included herein) The conversion notices, each for a total of $10,000 in principal, provide for the issuance of 14,814,815 shares at $0.00067 on October 7, 2014, 16,666,667 shares at $0.00060 on November 25, 2014 and 17,857,143 shares at $0.00056 on December 21, 2014 respectively.
The Company claims an exemption from the registration requirements of the Securities Act of 1933, as amended, for the issuance of shares to Asher Enterprises, Inc. pursuant to Section 4(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transaction does not involve a public offering, the purchasers are “accredited investors” and/or qualified institutional buyers, the purchasers have access to information about the Company and its purchase, the purchasers will take the securities for investment and not resale.
Other than as disclosed above, here were no issuances of unregistered securities to report which were sold or issued by the Company without the registration of these securities under the Securities Act of 1933 in reliance on exemptions from such registration requirements, within the period covered by this report, which have not been previously included in and Annual Report on Form 10-K, a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.
None.
None.
None
Exhibits:
|
Exhibit Number
|
Description of Exhibit
|
Filing
|
|
3.01
|
Articles of Incorporation
|
Filed with the SEC on October 22, 2010 as part of our Registration Statement on Form S-1.
|
|
3.01(a)
|
Certificate of Change
|
Filed with the SEC on November 7, 2012 as part of our Current Report on Form 8-K.
|
|
3.02
|
Bylaws
|
Filed with the SEC on October 22, 2010 as part of our Registration Statement on Form S-1.
|
|
10.01
|
Securities Purchase Agreement between Solo International, Inc. and Craigstone Ltd., dated November 4, 2012
|
Filed with the SEC on November 15, 2012 as part of our Current Report on Form 8-K.
|
|
10.02
|
Option Agreement by and between Solo International, Inc. and 9228-6202 Quebec Inc., dated November 15, 2012
|
Filed with the SEC on November 23, 2012 as part of our Current Report on Form 8-K
|
|
10.03
|
Amended Option Agreement by and between 9252-4768 Quebec Inc. and 9228-6202 Quebec Inc. dated December 20, 2012
|
Filed with the SEC on January 3, 2013 as part of our Amended Current Report on Form 8-K/A.
|
|
10.04
|
Securities Purchase Agreement between Solo International, Inc. and Craigstone Ltd., dated January 10, 2013
|
Filed with the SEC on January 12, 2013 as part of our Current Report on Form 8-K.
|
|
10.05
|
Employment agreement between the Company and Michael Jacob Cooper Smith dated September 30, 2013
|
Filed with the SEC on December 30, 2013 as part of our annual report on Form 10-K
|
|
10.06
|
Securities Purchase Agreement with Asher Enterprises Inc. dated September 18, 2013
|
Filed with the SEC on December 30, 2013 as part of our annual report on Form 10-K
|
|
10.07
|
Securities Purchase Agreement with Asher Enterprises Inc. dated December 18, 2013
|
Filed with the SEC on December 30, 2013 as part of our annual report on Form 10-K
|
|
10.08
|
October 14, 2014 Convertible Promissory Note between the Company and Investor Growth LLC
|
Filed herewith.
|
|
10.09
|
December 15, 2014 Convertible Promissory Note between the Company and Level Up Investments LLC
|
Filed herewith.
|
|
10.10
|
December 29, 2014 Convertible Promissory Note between the Company and Level Up Investments LLC
|
Filed herewith.
|
|
31.1
|
Certification of Principal Executive Officer Pursuant to Rule 13a-14
|
Filed herewith.
|
|
31.2
|
Certification of Principal Financial Officer Pursuant to Rule 13a-14
|
Filed herewith.
|
|
32.1
|
CEO and CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act
|
Filed herewith.
|
|
101.INS*
|
XBRL Instance Document
|
To be filed by amendment
|
|
101.SCH*
|
XBRL Taxonomy Extension Schema Document
|
To be filed by amendment
|
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
To be filed by amendment
|
|
101.LAB*
|
XBRL Taxonomy Extension Labels Linkbase Document
|
To be filed by amendment
|
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
To be filed by amendment
|
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase Document
|
To be filed by amendment
|
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
SOLO INTERNATIONAL, INC.
|
|||
|
Date: February 23, 2015
|
By:
|
/s/Michael Cooper Smith
|
|
|
Name:
|
Michael Cooper Smith
|
||
|
Title:
|
President, Principal Executive Officer & Principal Financial Officer (Principal Accounting Officer)
|
||