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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

Commission File Number:  000-54635

 

EXCELSIS INVESTMENTS, INC.

(Exact name of registrant as specified in its charter)

 

NEVADA

(State or other jurisdiction of incorporation or organization)

 

27-2758155

(I.R.S. Employer Identification No.)

 

801 West Bay Drive, Suite 470

Largo, Florida 33770

(Address of principal executive offices, including zip code.)

 

727-330-2731

(Registrant's telephone number, including area code)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 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," "non-accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

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

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:

53,811,162 as of November 20, 2015.

 

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TABLE OF CONTENTS

 

 

 

PART I – FINANCIAL INFORMATION

EXCELSIS INVESTMENTS, INC.

Financial Statements

(Expressed in US dollars)

September 30, 2015 (unaudited) and December 31, 2014

Financial Statement Index

EXCELSIS INVESTMENTS, INC.

Balance Sheets

The accompanying notes are an integral part of these unaudited financial statements)

EXCELSIS INVESTMENTS, INC.

Statements of Operations

           (unaudited)

 

 

 

The accompanying notes are an integral part of these unaudited financial statements)

 

 

EXCELSIS INVESTMENTS INC.

Statement of Cashflows

(unaudited)

 

 

The accompanying notes are an integral part of these unaudited financial statements)

 

EXCELSIS INVESTMENTS, INC.

Notes to the Financial Statements

(unaudited)

Pub Crawl Holdings, Inc. (the "Company") was incorporated in the state of Nevada on May 27, 2010. On June 14, 2010, the Company entered into an Assignment Agreement (the "Acquisition") with PB PubCrawl.com LLC ("PubCrawl"), a California limited liability company, whereby the Company acquired a 100% interest in the member shares of PubCrawl in exchange for 5,000,000 common shares of the Company.  The Acquisition was accounted for in accordance with ASC 805-50, Related Issues, as the companies were under common control prior to acquisition. On September 3, 2012, the Company sold their rights to PubCrawl to the former President and Director of the Company.

On November 28, 2012, the Company acquired 100% of the members shares of Mobile Dynamic Marketing, Inc. ("Mobile Dynamic"), a company incorporated in the state of Florida on November 7, 2012, in exchange for the issuance of 10,000,000 common shares.  As part of the acquisition, the Company cancelled 150,000,000 issued and outstanding common shares held by the former President and Director of the Company and the management and directors of Mobile Dynamic acquired 75,000,000 common shares of the Company in a private transaction with the former President and Director of the Company.  Effectively, Mobile Dynamic held 73% of the issued and outstanding common shares of the Company and the transaction has been accounted for as a reverse merger, where Mobile Dynamic is deemed to be the acquirer for accounting purposes.

On July 13, 2013, the Company entered into a share exchange agreement with Career Start, Inc. ("Career"), a private corporation formed under the state of Florida on February 4, 2013.  Under the terms of the agreement, the Company acquired the net assets of Career in exchange for 4,714,286 common shares of the Company. The acquisition was between two related parties and has been accounted on a cost basis, as disclosed in Note 3 of the financial statements. On October 24, 2013, the Company effected a corporation name change to Excelsis Investments Inc.

On September 1, 2014, the Company entered into a purchase agreement with a non-related party to purchase intangible assets by issuing 30% of the outstanding common shares of the Company as determined on an as-converted, fully-diluted basis, which shall not be subject to dilution by any future issuances for the purchase of 3,000 customer accounts The Company is recognizing the revenue generated from the intangible asset on a net basis.

On November 5, 2014, the Company entered into share exchange agreement with a former officer of the Company in regards to common shares in the Company's wholly-owned subsidiaries, Career Start, Inc ("CSI") and Career Start Management ("CSM"), private corporations incorporated in the state of Florida and New York, respectively. Under the terms of the agreement, the Company received 3,111,429 shares of the Company held by the former officer in exchange for 100% of the issued and outstanding common shares of CSI and CSM.

These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. As at September 30, 2015, the Company has a working capital deficit of $1,047,272 and an accumulated deficit of $2,312,582. The continuation of the Company as a going concern is dependent upon the continued financial support from its management, and its ability to identify future investment opportunities and obtain the necessary debt or equity financing, and generating profitable operations from the Company's future operations. These factors raise substantial doubt regarding the Company's ability to continue as a going concern.  These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States ("US GAAP") and are expressed in U.S. dollars. The Company's fiscal year end is December 31.

 

 

EXCELSIS INVESTMENTS, INC.

Notes to the Financial Statements

(unaudited)

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to share-based payments, collectability of accounts receivable, impairment of goodwill and intangible assets, and the deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company's estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

 

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.  As at September 30, 2015 and December 31, 2014, the Company had no cash equivalents.

 

These interim unaudited financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company's financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.

 

Accounts receivable represents amounts owed from customers Stealth Card orders and from consulting services. Amounts are presented net of the allowance for doubtful accounts, which represents the Company's best estimate of the amount of probable credit losses in the existing accounts receivable balance. The Company determines allowance for doubtful accounts based upon historical experience and current economic conditions. The Company reviews the adequacy of its allowance for doubtful accounts on a regular basis.  As of September 30, 2015 and December 31, 2014, the Company had no allowances for doubtful accounts.

 

Inventory is comprised of stealth cards purchased for resell, and is recorded at the lower of cost or net realizable value on a first-in first-out basis.  The Company establishes inventory reserves for estimated obsolete or unsaleable inventory equal to the difference between the cost of inventory and the estimated realizable value based upon assumptions about future and market conditions.

 

Goodwill is carried at cost less impairment. On acquisition of business, fair values are attributed to the assets and liabilities of the acquired business at the date of acquisition. Goodwill arises when the fair value of the consideration given for a business exceeds the fair value of the net assets. During the year ended December 31, 2014, the Company recorded a full impairment of its goodwill account of $198,834 as the Company sold its interest in Career Start Inc, and Career Start Management. As at September 30, 2015 and December 31, 2014, the Company had no amount recorded for goodwill.

 

Intangible assets are stated at cost less accumulated amortization and are comprised of customer accounts acquired with a useful life of three years and amortized straight line over three years. During the nine months ended September 30, 2015, the Company incurred $110,068 (2014 - $nil) in amortization expense.

 

EXCELSIS INVESTMENTS, INC.

Notes to the Financial Statements

(unaudited)

 

In accordance with ASC 360, "Property, Plant and Equipment", the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.

 

The Company computes net loss per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share ("EPS") on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive. As at September 30, 2015 and December 31, 2014, the Company had 43,745,762 and 2,898,983 potentially dilutive common shares, respectively.

 

The Company recognizes and accounts for revenue in accordance with ASC 605 as a principal on the sale of goods. Pursuant to ASC 605, Revenue Recognition, revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the amount is fixed and determinable, risk of ownership has passed to the customer and collection is reasonably assured. The Company considered ASC 605-45, Principal Agent Considerations, and determined that the Company acts as a principal in its revenue-earnings activities as they are responsible for the production of goods purchased by the customer, can determine the pricing costs, goods purchased are paid directly by the Company, and has a credit risk with respect to collection of amounts owed by its customers.

The Company considered ASC 605-45, Principal Agent Considerations, and determined that the Company does not act as the  principal in its revenue-earnings activities related to certain service revenues where we do not bear enough of the risks in the transaction to record them on the gross basis. Revenues for these activities are recorded based on the net amount earned by the Company.  

 

For the Company's product sales, cost of revenue consists of inventory sold in each transaction. For the Company's service sales, cost of revenue consists of engineering services provided by a related party.

 

Research and development costs are charged to operations as incurred.

 

Pursuant to ASC 820, Fair Value Measurements and Disclosures, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

 

 

 

EXCELSIS INVESTMENTS, INC.

Notes to the Financial Statements

(unaudited)

Level 1

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

Level 2

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

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, accounts receivable, accounts payable and accrued liabilities, loan payable, amount due to related party, and convertible debentures.  Pursuant to ASC 820, the fair value of our cash is determined based on "Level 1" inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

The following table represents assets and liabilities that are measured and recognized at fair value as of September 30, 2015, on a recurring basis:

The following table represents assets and liabilities that are measured and recognized in fair value as of December 31, 2014 on a recurring basis:

 

EXCELSIS INVESTMENTS, INC.

Notes to the Financial Statements

(unaudited)

 

Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted ASC 740 "Accounting for Income Taxes" as of its inception. Pursuant to ASC 740, the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in this financial statement because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.

 

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

On November 5, 2014, the Company discontinued operations and sold its interest in its wholly owned subsidiaries, Career Start Inc. and Career Start Management Inc.  As a result of the Company's decision, all assets, liabilities, and expenses related to the subsidiaries have been classified as discontinued operations. The results of Career Start Inc. and Career Start Management Inc. discontinued operations are summarized as follows:

Statement of Operations:

a)

On January 23, 2014, the Company issued a $53,000 convertible note which is unsecured, bears interest at 8% per annum and due on October 23, 2014. The Company received $50,000, net of issuance fee of $3,000. The note is convertible into shares of common stock 180 days after the date of issuance (July 22, 2014) at a conversion rate of 58% of the average of the three lowest closing bid prices of the Company's common stock for the ten trading days ending one trading day prior to the date the conversion notice is sent by the holder to the Company. Upon an event of default, the entire principal balance and accrued interest outstanding is due immediately, and interest shall accrue on the unpaid principal balance at 22% per annum.

 

EXCELSIS INVESTMENTS, INC.

Notes to the Financial Statements

(unaudited)

On July 22, 2014, the note became convertible resulting in the Company recording a derivative liability of $57,846 with a corresponding adjustment to loss on change in fair value of derivative liabilities of $2,767 as accretion expense. During the year ended December 31, 2014, the Company issued 1,574,830 common shares for the conversion of $45,000 and recorded amortization of $17,663. Pursuant to the agreement, the convertible note matured on October 23, 2014 and 150% of the remaining balance in principal and interest is payable. During the year ended December 31, 2014, the Company included a penalty of $9,000 in interest expense for the additional amount payable due to defaulting on the loan. During the nine months ended September 30, 2015, the Company issued 1,912,000 common shares for the conversion of the remaining $17,000 in principal and $2,120 in accrued interest. As at September 30, 2015, the carrying value of the debenture was $nil (December 31, 2014 - $17,000) and the fair value of the derivative liability was $nil (December 31, 2014 - $22,852). The Company recognized a gain of $3,061 for accrued interest forgiven.

b)

On March 25, 2014, the Company issued a $53,000 convertible note which is unsecured, bears interest at 8% per annum and due on January 2, 2015. The Company received $50,000, net of issuance fee of $3,000. The note is convertible into shares of common stock 180 days after the date of issuance (September 21, 2014) at a conversion rate of 58% of the average of the three lowest closing bid prices of the Company's common stock for the ten trading days ending one trading day prior to the date the conversion notice is sent by the holder to the Company. Upon an event of default, the entire principal balance and accrued interest outstanding is due immediately, and interest shall accrue on the unpaid principal balance at 22% per annum. As at September 30, 2015, accrued interest of $nil (December 31, 2014 - $3,264) has been recorded in accounts payable and liabilities.

 

c)

June 13, 2014, the Company issued a $53,000 convertible note which is unsecured, bears interest at 8% per annum and due on March 17, 2015. The Company received $50,000, net of issuance fee of $3,000. The note is convertible into shares of common stock 180 days after the date of issuance (December 10, 2014) at a conversion rate of 58% of the average of the three lowest closing bid prices of the Company's common stock for the ten trading days ending one trading day prior to the date the conversion notice is sent by the holder to the Company. Upon an event of default, the entire principal balance and accrued interest outstanding is due immediately, and interest shall accrue on the unpaid principal balance at 22% per annum. As at September 30, 2015, accrued interest of $nil (December 31, 2014 - $2,335) has been recorded in accounts payable and accrued liabilities.

 

EXCELSIS INVESTMENTS, INC.

Notes to the Financial Statements

(unaudited)

d)

On June 20, 2014, the Company entered into a consulting agreement for consulting services. Pursuant to the agreement, the Company is to pay the consultant a commencement fee of $250,000. On June 23, 2014, the Company issued a $250,000 convertible note which is unsecured, non-bearing interest and due on June 22, 2015. The note is convertible into shares of common stock 180 days after the date of issuance (December 17, 2014) at a conversion rate of 90% of the lowest closing bid prices of the Company's common stock for the ten trading days ending one trading day prior to the date the conversion notice is sent by the holder to the Company. As at September 30, 2015, accrued interest of $18,560 (December 31, 2014 -$nil) has been recorded in accounts payable and accrued liabilities.

 

e)

On June 23, 2014, the Company issued a $50,000 convertible note which is unsecured, bears interest at 8% per annum and due on June 22, 2015. The Company received $49,400, net of issuance fee of $600. The note is convertible into shares of common stock 180 days after the date of issuance (December 20, 2014) at a conversion rate of 60% of the lowest closing bid prices of the Company's common stock for the five trading days ending one trading day prior to the date the conversion notice is sent by the holder to the Company. Upon an event of default, the entire principal balance and accrued interest outstanding is due immediately, and interest shall accrue on the unpaid principal balance at 18% per annum. As at September 30, 2015, accrued interest of $nil (December 31, 2014 - $2,093) has been recorded in accounts payable and accrued liabilities.

 

f)

On June 23, 2014, the Company issued a $50,000 convertible note which is unsecured, bears interest at 8% per annum and due on June 22, 2015. The Company received $49,400, net of issuance fee of $600. The note is convertible into shares of common stock 180 days after the date of issuance (December 20, 2014) at a conversion rate of 60% of the lowest closing bid prices of the Company's common stock for the five trading days ending one trading day prior to the date the conversion notice is sent by the holder to the Company. As at September 30, 2015, accrued interest of $8,180 (December 31, 2014 - $2,093) has been recorded in accounts payable and accrued liabilities.

 

EXCELSIS INVESTMENTS, INC.

Notes to the Financial Statements

(unaudited)

g)

On June 25, 2014, the Company issued a $50,000 convertible note which is unsecured, bears interest at 8% per annum and due on June 24, 2015. The Company received $49,400, net of issuance fee of $600. The note is convertible into shares of common stock 180 days after the date of issuance (December 22, 2014) at a conversion rate of 60% of the lowest closing bid prices of the Company's common stock for the five trading days ending one trading day prior to the date the conversion notice is sent by the holder to the Company. As at September 30, 2015, accrued interest of $9,999 (December 31, 2014 - $2,071) has been recorded in accounts payable and accrued liabilities.

 

The Company records the fair value  of the conversion price of the convertible debentures disclosed in Note 4 in accordance with ASC 815, Derivatives and Hedging. The fair value of the derivative was calculated using a multi-nominal lattice model performed by an independent qualified business valuator. The fair value of the derivative liability is revalued on each balance sheet date with corresponding gains and losses recorded in the consolidated statement of operations. During the nine months ended September 30, 2015, the Company recorded a loss on the change in fair value of derivative liability of $289,859 (December 31, 2014 – gain of $672,095). As at September 30, 2015, the Company recorded a derivative liability of $439,916 (December 31, 2014 - $347,672).

The following inputs and assumptions were used to value the convertible debenture outstanding during the period ended September 30, 2015:

·	The range of stock prices for the valuation of the derivative instruments at September 30, 2015 ranged from $0.0144 to $0.018 per share of common stock.

·	The debtholder would redeem (with penalties of 0% to 50% depending on the date and full-partial redemption) based on availability of alternative financing, at a rate of 0% increasing 1.0% monthly to a maximum of 10%.

·	The debtholder would automatically convert the note at maturity if the registration was effective and the Company is not in default.

·	The projected annual volatility for each valuation period based on the historic volatility of the Company 341% - 444%

·	Capital raising events of $100,000 would occur in each quarter for a total of $100,000 in 2014 at 75% of market generating dilutive reset events at prices below $0.007 (rounded) for the convertible debentures.

 

EXCELSIS INVESTMENTS, INC.

Notes to the Financial Statements

(unaudited)

A summary of the activity of the derivative liability is shown below:

a)	As at September 30, 2015, the Company was owed $24,500 (December 31, 2014 - 87,500) from a significant shareholder which is non-interest bearing, unsecured, and due on demand.

b)	As at September 30, 2015, the Company owed $13,370 (December 31, 2014 - $36,574) to the President of the Company, which is non-interest bearing, unsecured, and due on demand.

c)	As at September 30, 2015, the Company owed $11,063 (December 31, 2014 - $49,150) to the Chief Financial Officer of the Company, which is non-interest bearing, unsecured, and due on demand.

d)

As at September 30, 2015, the Company recorded a liability for shares issuable of $40,990 (December 31, 2014 - $513,101) relating to 2,846,553 common shares to be issued to a significant shareholder pursuant to the acquisition agreement for the intangible assets. During the period ended September 30, 2015, the Company recorded $472,111 as a gain in the fair value of the shares issuable to the significant shareholder.

e)	As at September 30, 2015, the Company owed $75,000 (December 31, 2014 - $75,000) to a significant shareholder for a loan payable. The loan is unsecured, non-interest bearing, and due on July 25, 2017. Refer to Note 7(a).

f)	During the nine months ended September 30, 2015, the Company generated revenues of $615,600 (2014 – $nil), revenue of goods of $10,000 (2014 - $nil), and $2,700 of cost of goods sold (2014 - $nil) to a significant shareholder.

g)	During the nine months ended September 30, 2015, the Company incurred payroll expense of $193,527 (2014 - $97,727) to management and officers of the Company.

h)

During the nine months ended September 30, 2015, the Company incurred engineering expense of $132,550 (2014 - $nil) to a company owned by the mother of the President of the Company, which was included in cost of goods sold. As at September 30, 2015, the Company owed $43,698 (December 31, 2014 - $7,490) to the company owned by the mother of the President of the Company, which is non-interest bearing, unsecured, and due on demand. The amount owing has been recorded as accounts payable – related party.

 

EXCELSIS INVESTMENTS, INC.

Notes to the Financial Statements

(unaudited)

a)

On July 25, 2014, the Company entered into a loan agreement with a related party for a loan of $175,000. Under the terms of the note, the amount is unsecured, non-interest bearing, and due on July 25, 2017. The unpaid principal is to be repaid in installments defined as the collected sum of 10% of the unadjusted gross sales revenue (net of returns and charge backs) with the installments to begin once the Company has received the gross proceeds of $175,000. As at September 30, 2015, the Company had received loan proceeds of $75,000 (December 31, 2014 - $75,000). During the nine months ended September 30, 2015, the Company recorded imputed interest of $4,488 (2014 - $nil).

b)

At September 30, 2015, Company owes $56,645 (December 31, 2014 - $nil) pursuant to a future receivable sales agreement with a non-related party. Under the terms of the agreement, the amount is secured by $73,639 of the Company's accounts receivable, bears interest at 30%, and due in instalments of $792 payable on each business day.

c)	At September 30, 2015, the Company owes $120,000 (December 31, 2014 - $120,000) in a note payable to a non-related party. Under the terms of the note, the amount is unsecured, bears interest at 10% per annum, and due on demand.

a)	On January 12, 2015, the Company issued 1,912,000 common shares for the conversion of a convertible note with a non-related party, as noted in Note 4(a), with a book value of $19,120. $17,589 was reclassified from derivative liabilities to additional paid-in capital on conversion.

b)	On January 29, 2015, the Company approved a ten-for-one reverse split of its issued and outstanding common shares, which has been applied on a retroactive basis.

c)	On March 13, 2015, the Company issued 1,400,000 common shares for the conversion of a convertible note with a non-related party, as noted in Note 4(b), with a book value of $2,380. $1,791 was reclassified from derivative liabilities to additional paid-in capital on conversion.

d)	On April 28, 2015, the Company issued 1,414,286 common shares for the conversion of a convertible note with a non-related party, as noted in Note 4(b), with a book value of $1,980. $1,486 was reclassified from derivative liabilities to additional paid-in capital on conversion.

e)	On May 4, 2015, the Company issued 1,414,706 common shares for the conversion of a convertible note with a non related party, as noted in Note 4(b), with a book value of $4,810. $3,720 was reclassified from derivative liabilities to additional paid-in capital on conversion.

f)	On May 6, 2015, the Company issued 1,415,116 common shares for the conversion of a convertible note with a non-related party, as noted in Note 4(b), with a book value of $6,085. $4,705 was reclassified from derivative liabilities to additional paid-in capital on conversion.

g)	On May 20, 2015, the Company issued 1,485,556 common shares for the conversion of a convertible note with a non-related party, as noted in Note 4(b), with a book value of $6,685. $5,291 was reclassified from derivative liabilities to additional paid-in capital on conversion.

h)	On June 1, 2015, the Company issued 1,485,776 common shares for the conversion of a convertible note with a non-related party, as noted in Note 4(b), with a book value of $17,235. $14,633 was reclassified from derivative liabilities to additional paid-in capital on conversion.

i)	On June 12, 2015, the Company issued 2,001,225 common shares for the conversion of a convertible note with a non-related party, as noted in Note 4(e), with a book value of $24,495. $28,034 was reclassified from derivative liabilities to additional paid-in capital on conversion.

j)	On June 12, 2015, the Company issued 2,001,225 common shares for the conversion of a convertible note with a non-related party, as noted in Note 4(f), with a book value of $24,495. $28,034 was reclassified from derivative liabilities to additional paid-in capital on conversion.

k)	On June 16, 2015, the Company issued 1,226,538 common shares for the conversion of a convertible note with a non-related party, as noted in Note 4(b), with a book value of $15,945. $12,237 was reclassified from derivative liabilities to additional paid-in capital on conversion.

 

 

 

EXCELSIS INVESTMENTS, INC.

Notes to the Financial Statements

(unaudited)

l)	On June 16, 2015, the Company issued 1,226,538 common shares for the conversion of a convertible note with a non-related party, as noted in Note 4(b), with a book value of $15,945. $12,237 was reclassified from derivative liabilities to additional paid-in capital on conversion.

m)	On July 7, 2015, the Company issued 1,485,632 common shares for the conversion of a convertible note with a non-related party, as noted in Note 4(c), with a book value of $12,925. $11,477 was reclassified from derivative liabilities to additional paid-in capital on conversion.

n)	On July 8, 2015, the Company issued 1,760,111 common shares for the conversion of a convertible note with a non-related party, as noted in Note 4(e), with a book value of $15,841. $18,857 was reclassified from derivative liabilities to additional paid-in capital on conversion.

o)	On July 9, 2015, the Company issued 500,000 common shares for financial advisory services upon execution of an advisory agreement with a non related party. The shares were recorded at their fair value of $15,000 based on the closing market price on the date of the agreement. Refer to Note 9(b).

p)	On July 23, 2015, the Company issued 1,363,636 common shares for the conversion of a convertible note with a non-related party, as noted in Note 4(c), with a book value of $12,000. $10,788 was reclassified from derivative liabilities to additional paid-in capital on conversion.

q)	On July 30, 2015, the Company issued 2,069,335 common shares for the conversion of a convertible note with a non related party, as noted in Note 4(e), with a book value of $13,658. $11,789 was reclassified from derivative liabilities to additional paid-in capital on conversion.

r)	On August 19, 2015, the Company issued 2,261,538 common shares for the conversion of a convertible note with a non related party, as noted in Note 4(c), with a book value of $14,700. $13,535 was reclassified from derivative liabilities to additional paid-in capital on conversion.

s)	On September 16, 2015, the Company issued 2,148,171 common shares for the conversion of a convertible note with a non related party, as noted in Note 4(c), with a book value of $17,615. $13,649 was reclassified from derivative liabilities to additional paid-in capital on conversion

a)

On February 16, 2015, the Company entered into a lease agreement for a six month term commencing on March 1, 2015. The Company will have three consecutive options to renew the lease for an additional nine months each. Pursuant to the agreement the Company has agreed to pay monthly amounts of $1,092 plus applicable sales taxes and pay a deposit of $2,668 consisting of the first month's rent and a $1,500 security deposit.

b)	On July 9, 2015, the Company entered into a advisory agreement for financial advisory services for a twelve month term commencing on the execution of the agreement. The Company is to compensate the advisor through the issuance of 2,000,003 common stock as follows:

 

 

 

 

 

 

 

 

 

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

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

Cash Flows

Operating Revenues

During the nine months ended September 30, 2015, the Company earned revenues from continuing operations of $893,625 compared with revenues of $165,064 during the nine months ended September 30, 2014.  The increase in revenues and gross profit margin is due to the fact that the Company earned increased revenues from services relating to net revenue earned from a related party for receipts on accounts purchased with 30% equity interest during the fiscal year as well as sales of a new product. For the period ended September 30, 2015, the Company recorded a gross margin of $717,546 or 80.29% compared to $162,359 during the period ended September 30, 2014. During the nine months ended September 30, 2015, the Company incurred cost of revenues relating to engineering costs as well as costs of inventory.

Operating Expenses and Net Loss

During the three months ended September 30, 2015, the Company incurred operating expenses from continuing operations of $316,133 compared with $483,692 during the three months ended September 30, 2014.  The decrease is due to a decrease in $198,834 in impairment of goodwill, $17,430 in payroll costs as the Company incurred less salaries and benefits to management and employees of the Company, $3,204 for professional fees, and $102,035 for research and development costs relating to the Company's research of the Stealth Card technology. The decrease is offset by an increase of $37,093 in amortization, $60,805 for consulting, $92 in transfer agent fees, and $59,274 for general and administrative costs due to increased overall office costs as compared to prior year.

 

 

During the nine months ended September 30, 2015, the Company incurred operating expenses from continuing operations of $831,645 compared with $938,984 during the nine months ended September 30, 2014.  The increase in operating expenses from continuing operations were due to $110,068 for amortization, $95,800 of payroll costs as the Company incurred more salaries and benefits to management and employees of the Company, and $136,463 for general and administrative costs due to increased overall office costs as compared to prior year, offset by a decrease in consulting of $133,148, $151 in transfer agent fees, $198,934 in impairment of goodwill, and $15,502 for professional fees.

During the nine months ended September 30, 2015, the Company incurred a net loss from discontinued operations of $nil compared to a net loss of $38,813 during the nine months ended September 30, 2015.  The decrease in net loss for discontinued operations was due to the fact that the Company disposed of the Career Start on November 5, 2014 and thus did not generate any sales revenue from its Career Start subsidiaries during the nine months ended September 30, 2014 compared with revenues of $4,085,502 and a gross margin of $488,391 or 11.95% during the nine months ended September 30, 2015.  As the Company disposed of the Career Start business on November 5, 2014, the overall operating expense decreased from $526,083 for the nine months ended September 30, 2014 to $nil during the nine months ended September 30, 2015.

For the nine months ended September 30, 2015, the Company had a net loss of $413,559 and basic and diluted net loss per share of $0.01. During the nine months ended September 30, 2015, the Company did not record any income or loss from discontinued operations as the Career Start business was disposed of on November 5, 2014. In addition to operating expenses from continuing operations, the Company also incurred a loss of $289,859 for the change in fair value of derivative liabilities relating to the floating conversion price of its convertible debenture, $91,615 gain related to the forgiveness of debt, and a make whole gain of $472,111, offset by interest expense of $573,327 relating to interest charges incurred on its convertible debentures.  During the nine months ended September 30, 2014, the Company incurred net loss from continuing operations of $150,603 and overall net loss of $189,416, with the difference relating to discontinued operations as discussed above.  The increase in net loss for the period ended September 30, 2015 was due to a increase in loss of change in fair value of derivative liabilities of $941,793 related to the conversion of the convertible debentures, decrease in gain on forgiveness of convertible debt of $78,111, and an increase in interest expense of $377,689, offset by an increase of make whole gain of $472,111 when compared to the amounts recorded in September 30, 2014.

Liquidity and Capital Resources

As at September 30, 2015, the Company had cash of $112,766 and total current assets of $339,093 compared with cash of $189,104 and total current assets of $313,516 at December 31, 2014. The decrease in cash is due to the fact that the Company has incurred more overhead costs for operating activities relating to the business operations of the Company. The increase in total current assets is due to increase in inventory and accounts receivable primarily due to a timing difference between the revenue transaction date and the collection of revenues, offset by decreases in accounts receivable – related party and deferred financing costs.

The overall working capital deficit decreased from $1,170,853 at December 31, 2014 to $1,047,272 at September 30, 2015 due in part to the fact that the Company had a derivative liability relating to the fair value of the floating conversion price of the convertible debenture.

As at September 30, 2015, the Company had a cash balance of $112,766 and total assets of $622,123 compared with $189,104 of cash and total assets of $706,614 as at December 31, 2014. The decrease in total assets is due to the factors impacting current assets as noted above as well as a decrease in intangible assets related to amortization.

Cashflow from Operating Activities

During the nine months ended September 30, 2015, the Company used $132,983 of cash for operating activities, which is reflective of the cash used for day-to-day business operations.   Comparatively, the Company used cash of $58,987 during the nine months ended September 30, 2014. The decrease in the use of cash is due to a lower level of operating cash needs for the Company's operating activities in the current period compared to the prior year.

Cashflow from Investing Activities

During the nine months ended September 30, 2015 and September 30, 2014, the Company received no cash from investing activities.

 

 

 

 

Cashflow from Financing Activities

During the nine months ended September 30, 2015, the Company received $56,645 of cash proceeds from financing activities, compared with cash proceeds of $373,200 during the nine months ended September 30, 2014 from the issuance of convertible debentures and loan payable.

Convertible Promissory Notes

On January 23, 2014, the Company issued a $53,000 convertible note which is unsecured, bears interest at 8% per annum and due on October 23, 2014. The Company received $50,000, net of issuance fee of $3,000. The note is convertible into shares of common stock 180 days after the date of issuance (July 22, 2014) at a conversion rate of 58% of the average of the three lowest closing bid prices of the Company's common stock for the ten trading days ending one trading day prior to the date the conversion notice is sent by the holder to the Company. Upon an event of default, the entire principal balance and accrued interest outstanding is due immediately, and interest shall accrue on the unpaid principal balance at 22% per annum.

ASC 815, "Accounting for Derivative Instruments and Hedging Activities", the Company recognized the intrinsic value of the embedded beneficial conversion feature of $53,000. On July 22, 2014, the note became convertible resulting in the Company recording a derivative liability of $57,846 with a corresponding adjustment to loss on change in fair value of derivative liabilities of $2,767 as accretion expense. During the year ended December 31, 2014, the Company issued 1,574,830 common shares for the conversion of $45,000 and recorded amortization of $17,663. Pursuant to the agreement, the convertible note matured on October 23, 2014 and 150% of the remaining balance in principal and interest is payable. During the year ended December 31, 2014, the Company included a penalty of $9,000 in interest expense for the additional amount payable due to defaulting on the loan. During the six months ended June 30, 2015, the Company issued 1,912,000 common shares for the conversion of the remaining $17,000 in principal and $2,120 in accrued interest. As at September 30, 2015, the carrying value of the debenture was $nil (December 31, 2014 - $17,000) and the fair value of the derivative liability was $nil (December 31, 2014 - $22,852). The Company recognized a gain in $3,061 for accrued interest forgiven

On March 25, 2014, the Company issued a $53,000 convertible note which is unsecured, bears interest at 8% per annum and due on January 2, 2015. The Company received $50,000, net of issuance fee of $3,000. The note is convertible into shares of common stock 180 days after the date of issuance (September 21, 2014) at a conversion rate of 58% of the average of the three lowest closing bid prices of the Company's common stock for the ten trading days ending one trading day prior to the date the conversion notice is sent by the holder to the Company. Upon an event of default, the entire principal balance and accrued interest outstanding is due immediately, and interest shall accrue on the unpaid principal balance at 22% per annum. As at September 30, 2015, accrued interest of $nil (December 31, 2014 - $3,264) has been recorded in accounts payable and accrued liabilities.

In accordance with ASC 815, "Accounting for Derivative Instruments and Hedging Activities", the Company recognized the intrinsic value of the embedded beneficial conversion feature of $53,000. On September 21, 2014, the note became convertible resulting in the Company recording a derivative liability of $55,382 with a corresponding adjustment to loss on change in fair value of derivative liabilities of $303 as accretion expense. Pursuant to the agreement, the convertible note matured on January 2, 2015 and 150% of the remaining balance in principal and interest is payable. During the nine months ended September 30, 2015, the Company included a penalty of $26,500 (2014 - $nil) in interest expense for the additional amount payable due to defaulting on the loan. During the nine months ended September 30, 2015, the Company issued 9,841,978 common shares for the conversion of $53,000 and $2,120 of accrued interest and had amortized $1,029 (2014 - $nil) of the debt discount to interest expense. As at September 30, 2015, the carrying value of the debenture was $nil (December 31, 2014 - $51,971) and the fair value of the derivative liability was $nil (December 31, 2014 - $37,823). The Company recognized a gain in $26,500 and $11,104 for the default penalty and accrued interest forgiven, respectively. During the nine months ended September 30, 2015, the Company amortized $21 in financing costs (2014 - $975).

On June 13, 2014, the Company issued a $53,000 convertible note which is unsecured, bears interest at 8% per annum and due on March 17, 2015. The Company received $50,000, net of issuance fee of $3,000. The note is convertible into shares of common stock 180 days after the date of issuance (December 10, 2014) at a conversion rate of 58% of the average of the three lowest closing bid prices of the Company's common stock for the ten trading days ending one trading day prior to the date the conversion notice is sent by the holder to the Company. Upon an event of default, the entire principal balance and accrued interest outstanding is due immediately, and interest shall accrue on the unpaid principal balance at 22% per annum. As at September 30, 2015, accrued interest of $nil (December 31, 2014 - $2,335) has been recorded in accounts payable and accrued liabilities.

In accordance with ASC 815, "Accounting for Derivative Instruments and Hedging Activities", the Company recognized the intrinsic value of the embedded beneficial conversion feature of $53,000. On December 10, 2014, the note became convertible resulting in the Company recording a derivative liability of $55,314 with a corresponding adjustment to loss on change in fair value of derivative liabilities of $2,314 as accretion expense. Pursuant to the agreement, the convertible note matured on March 17, 2015 and 150% of the remaining balance in principal and interest is payable. During the nine months ended September 30, 2015, the Company included a penalty of $26,500 (2014 - $nil) in interest expense for the additional amount payable due to defaulting on the loan. During the nine months ended September 30, 2015, the Company issued 7,258,977 common shares for the conversion of $53,000 and $4,240 of accrued interest and had amortized $41,526 (2014 - $nil) of the debt discount to interest expense. As at September 30, 2015, the carrying value of the debenture was $nil (December 31, 2014 - $11,474) and the fair value of the derivative liability was $nil (December 31, 2014 - $54,348). The Company recognized a gain in $26,500 and $9,040 for the default penalty and accrued interest forgiven, respectively. During the nine months ended September 30, 2015, the Company amortized $823 in financing costs (2014 - $996).

On June 20, 2014, the Company entered into a consulting agreement for consulting services. Pursuant to the agreement, the Company is to pay the consultant a commencement fee of $250,000. On June 23, 2014, the Company issued a $250,000 convertible note which is unsecured, non-bearing interest and due on June 22, 2015. The note is convertible into shares of common stock 180 days after the date of issuance (December 17, 2014) at a conversion rate of 90% of the lowest closing bid prices of the Company's common stock for the ten trading days ending one trading day prior to the date the conversion notice is sent by the holder to the Company. As at September 30, 2015, accrued interest of $18,560 (December 31, 2014 - $nil) has been recorded in accounts payable and accrued liabilities.

On December 17, 2014, the note became convertible resulting in the Company recording a derivative liability of $94,188 with a corresponding adjustment to loss on change in fair value of derivative liabilities of $1,050 as accretion expense. Pursuant to the agreement, the convertible note matured on June 22, 2015 and 150% of the remaining balance in principal and interest is payable. During the nine months ended September 30, 2015, the Company included a penalty of $125,000 (2014 - $nil) in interest expense for the additional amount payable due to defaulting on the loan. During the nine months ended September 30, 2015, the Company had amortized $88,357 (2014 - $nil) of the debt discount to interest expense. As at September 30, 2015, the carrying value of the debenture was $375,000 (December 31, 2014 - $161,443) and the fair value of the derivative liability was $270,797 (December 31, 2014 - $84,615).

On June 23, 2014, the Company issued a $50,000 convertible note which is unsecured, bears interest at 8% per annum and due on June 22, 2015. The Company received $49,400, net of issuance fee of $600. The note is convertible into shares of common stock 180 days after the date of issuance (December 20, 2014) at a conversion rate of 60% of the lowest closing bid prices of the Company's common stock for the five trading days ending one trading day prior to the date the conversion notice is sent by the holder to the Company. Upon an event of default, the entire principal balance and accrued interest outstanding is due immediately, and interest shall accrue on the unpaid principal balance at 18% per annum. As at September 30, 2015, accrued interest of $nil (December 31, 2014 - $2,093) has been recorded in accounts payable and accrued liabilities.

In accordance with ASC 815, "Accounting for Derivative Instruments and Hedging Activities", the Company recognized the intrinsic value of the embedded beneficial conversion feature of $50,000. On December 20, 2014, the note became convertible resulting in the Company recording a derivative liability of $49,618 with a corresponding adjustment to loss on change in fair value of derivative liabilities. Pursuant to the agreement, the convertible note matured on June 22, 2015 and 150% of the remaining balance in principal and interest is payable. During the six months ended June 30, 2015, the Company included a penalty of $12,752 (2014 - $nil) in interest expense for the additional amount payable due to defaulting on the loan. During the nine months ended September 30, 2015, the Company issued 5,830,671 common shares for the conversion of $50,000 and $3,994 of accrued interest and had amortized $46,652 (2014 - $nil) of the debt discount to interest expense. As at September 30, 2015, the carrying value of the debenture was $nil (December 31, 2014 - $3,348) and the fair value of the derivative liability was $nil (December 31, 2014 - $50,071). The Company recognized a gain in $12,752 and $2,658 for the default penalty and accrued interest forgiven, respectively. During the nine months ended September 30, 2015, the Company amortized $285 in financing costs (2014 - $152).

On June 23, 2014, the Company issued a $50,000 convertible note which is unsecured, bears interest at 8% per annum and due on June 22, 2015. The Company received $49,400, net of issuance fee of $600. The note is convertible into shares of common stock 180 days after the date of issuance (December 20, 2014) at a conversion rate of 60% of the lowest closing bid prices of the Company's common stock for the five trading days ending one trading day prior to the date the conversion notice is sent by the holder to the Company. As at September 30, 2015, accrued interest of $8,180 (December 31, 2014 - $2,093) has been recorded in accounts payable and accrued liabilities.

In accordance with ASC 815, "Accounting for Derivative Instruments and Hedging Activities", the Company recognized the intrinsic value of the embedded beneficial conversion feature of $50,000. On December 20, 2014, the note became convertible resulting in the Company recording a derivative liability of $49,618 with a corresponding adjustment to loss on change in fair value of derivative liabilities. Pursuant to the agreement, the convertible note matured on June 22, 2015 and 150% of the remaining balance in principal and interest is payable. During the nine months ended September 30, 2015, the Company included a penalty of $12,753 (2014 - $nil) in interest expense for the additional amount payable due to defaulting on the loan. During the nine months ended September 30, 2015, the Company issued 2,001,225 common shares for the conversion of $24,495. During the nine months ended September 30, 2015, the Company had amortized $46,652 (2014 - $nil) of the debt discount to interest expense. As at September 30, 2015, the carrying value of the debenture was $38,258 (December 31, 2014 - $3,348) and the fair value of the derivative liability was $59,751 (December 31, 2014 - $50,071). During the nine months ended September 30, 2015, the Company amortized $285 in financing costs (2014 - $152).

On June 25, 2014, the Company issued a $50,000 convertible note which is unsecured, bears interest at 8% per annum and due on June 24, 2015. The Company received $49,400, net of issuance fee of $600. The note is convertible into shares of common stock 180 days after the date of issuance (December 22, 2014) at a conversion rate of 60% of the lowest closing bid prices of the Company's common stock for the five trading days ending one trading day prior to the date the conversion notice is sent by the holder to the Company. As at September 30, 2015, accrued interest of $9,999 (December 31, 2014 - $2,071) has been recorded in accounts payable and accrued liabilities.

In accordance with ASC 815, "Accounting for Derivative Instruments and Hedging Activities", the Company recognized the intrinsic value of the embedded beneficial conversion feature of $50,000. On December 22, 2014, the note became convertible resulting in the Company recording a derivative liability of $49,464 with a corresponding adjustment to loss on change in fair value of derivative liabilities. Pursuant to the agreement, the convertible note matured on June 24, 2015 and 150% of the remaining balance in principal and interest is payable. During the nine months ended September 30, 2015, the Company included a penalty of $25,000 (2014 - $nil) in interest expense for the additional amount payable due to defaulting on the loan.  During the nine months ended September 30, 2015, the Company had amortized $47,044 (2014 – $nil) of the debt discount to interest expense. As at September 30, 2015, the carrying value of the debenture was $75,000 (December 31, 2014 - $2,956) and the fair value of the derivative liability was $109,368 (December 31, 2014 - $50,031). During the nine months ended September 30, 2015, the Company amortized $288 in financing costs (2014 - $152).

We prepared our financial statements and the accompanying notes in conformity with accounting principles generally accepted in the United States of America, which require management to make estimates and assumptions about future events that affect the reported amounts in the financial statements and the accompanying notes. We identified certain accounting policies as critical based on, among other things, their impact on the portrayal of our financial condition, results of operations, or liquidity and the degree of difficulty, subjectivity, and complexity in their deployment. Critical accounting policies cover accounting matters that are inherently uncertain because the future resolution of such matters is unknown. Management routinely discusses the development, selection, and disclosure of each of the critical accounting policies. The following is a discussion of our most critical accounting policies:

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company's estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Pursuant to ASC 820, Fair Value Measurements and Disclosures, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1

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

Level 2

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

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, accounts receivable, accounts receivable – related party, accounts payable and accrued liabilities, accounts payable – related party, loan payable, amount due to related party, and convertible debenture. Pursuant to ASC 820, the fair value of our cash is determined based on "Level 1" inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

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.

Under the supervision and with the participation of our management, including the Principal Executive Officer and Principal Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer have concluded that these disclosure controls and procedures are not effective.

Management's assessment identified several material weaknesses in our internal control over financial reporting. These material weaknesses include the following:

-

Insufficient number of qualified accounting personnel governing the financial close and reporting process

-

Lack of proper segregation of duties

There was no change in our internal control over financial reporting during the nine months ended September 30, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION.

None.

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.

None.

None.

None.

None.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on this 20th day of November, 2015.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXHIBIT INDEX

Exhibit		Incorporated by reference			Filed
Number	Document Description	Form	Date	Number	Herewith
2.1	Exchange Agreement between Pub Crawl Holdings, Inc. and Mobile Dynamic Marketing, Inc.	8-K	1/31/13	2.1
2.2	Exchange Agreement between Pub Crawl Holdings, Inc. and Career Start, Inc.	10-Q	11/19/13	2.2
3.1	Articles of Incorporation - Pub Crawl.	S-1	10/07/10	3.1
3.2	Articles of Incorporation - Mobile Dynamic Marketing, Inc.	10-K/A	4/16/13	3.2
3.3	Articles of Incorporation – Career Start, Inc.	10-K	4-15-14	3.3
3.4	Bylaws - Pub Crawl Holdings, Inc.	S-1	10/07/10	3.2
3.5	Bylaws - Mobile Dynamic Marketing, Inc.	S-1	6/14/13	3.4
3.6	Bylaws – Career Start, Inc.	10-K	4-15-14	3.6
3.7	Amended Articles of Incorporation – March 26, 2013.	10-K	4-15-14	3.7
3.8	Amended Articles of Incorporation – October 24, 2013.	10-K	4-15-14	3.8
10.1	Assignment Agreement between the Company, Peter Kremer, and PBPubCrawl.com, LLC dated June 14, 2010.	S-1	10/07/10	10.1
10.2	Form of Management Agreement between the Company and Peter Kremer dated June 22, 2010.	S-1	10/07/10	10.2
10.3	Promissory Note between the Company and Sun Valley Investments dated August 5, 2010.	S-1	10/07/10	10.3
10.4	Consulting Agreement between the Company and Voltaire Gomez dated September 23, 2010.	S-1	10/07/10	10.4
10.5	Settlement Agreement between the Company and Sun Valley Investments dated May 25, 2012.	8-K	08/11/12	10.1
10.6	Promissory Note between the Company and Deville Enterprises, Inc. dated June 1, 2012.	8-K	08/11/12	10.2
10.7	Debt Forgiveness Agreement with Hermaytar SA.	10-K/A-2	07/21/14	10.7
14.1	Code of Ethics.	S-1	10/07/10	14.1
21.1	List of Subsidiaries.	S-1	10/07/10	21.1
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X
101.INS	XBRL Instance Document.				X
101.SCH	XBRL Taxonomy Extension – Schema.				X
101.CAL	XBRL Taxonomy Extension – Calculations.				X
101.DEF	XBRL Taxonomy Extension – Definitions.				X
101.LAB	XBRL Taxonomy Extension – Labels.				X
101.PRE	XBRL Taxonomy Extension – Presentation.				X