UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

☒   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

 

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2016

 

or

 

☐   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number: 333-105778

 

MOPALS.COM, INC. 

(Exact name of registrant as specified in its charter)

 

DELAWARE		05-0554486
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

393 King Street West, Suite 304

Toronto, Ontario, CANADA, M5V 3G8

(Address of principal executive offices) (Zip Code)

 

(416) 362-4888

(Registrant’s telephone number, including area code)

 

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 periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒   No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate 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 ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer. See definition 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	☒

(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 ☒

 

Indicate the number of shares outstanding of the Registrant’s common stock, as of the latest practicable date. 

 

Class				Outstanding at September 9, 2016
	Common Stock, $0.0001 par value				52,200,700

 

 

 

MOPALS.COM, INC.

 

QUARTERLY REPORT ON FORM 10-Q

June 30, 2016

 

TABLE OF CONTENTS

 

Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5
Item 4.	Controls and Procedures	5
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	6
Item 1A.	Risk Factors	6
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6
Item 3.	Defaults Upon Senior Securities	6
Item 4.	Mine Safety Disclosures	6
Item 5.	Other Information	6
Item 6.	Exhibits	7
SIGNATURES		8

 

 

PART I: FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Basis of Presentation

 

The accompanying condensed and interim consolidated financial statements are presented in accordance with U.S. generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal occurring adjustments) considered necessary in order to make the financial statements not misleading, have been included. Operating results for the three and six months ended June 30, 2016 are not necessarily indicative of results that may be expected for the year ending December 31, 2016.

 

The condensed consolidated interim financial statements of the Company appear elsewhere in this report beginning with the Index to Financial Statements on page F-1 and ending on F-11.

 

 

 

 

 

 

 

 

MOPALS.COM, INC.

AND SUBSIDIARIES

 

 

 

 

 

 

 

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

 

 

JUNE 30, 2016

 

 

 

 

UNAUDITED

 

 

 

 

 

 

 

 

MOPALS.COM, INC. AND SUBSIDIARIES

 

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

JUNE 30, 2016 AND 2015

 

CONTENTS

 

Condensed Interim Consolidated Balance Sheets as at June 30, 2016 & December 31, 2015 (unaudited)	F-2
Condensed Interim Consolidated Statements of Operations and Comprehensive (Loss) for the three and six months ended June 30, 2016 and  2015 (unaudited)	F-3
Condensed Interim Consolidated Statements of Cash Flows for the six months ended June 30, 2016  and  2015 (unaudited)	F-4
Condensed Interim Consolidated Statements of Stockholders' Deficit for the six months ended  June 30, 2016  (unaudited)	F-5
Notes to the Condensed Interim Consolidated Financial Statements (unaudited)	F-6 to F-11

  

 

MOPALS.COM, INC.

CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS

Unaudited

 

		June 30,				December 31,
		2016				2015
ASSETS
Cash		$	6,079			$	6,079
Prepaid & Other Assets (Note 4)			173,617				295,253
Total Current Assets			179,696				301,332
Equipment, net (Note 5)			10,180				16,768
Total Assets		$	189,876			$	318,100
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Accounts Payable & Accrued Liabilities			300,898				231,726
Employee Tax Deductions Payable			1,078,201				832,831
MoCoins™ Liability			33,576				2,644
Share Based Accrual			14,924				14,924
Loans from Shareholder (Note 6)			2,065,281				1,429,055
Total Liabilities		$	3,492,880			$	2,511,180
Commitments and Contingencies (Note 7)
Capital Stock; par value $0.0001 (Note 8)			5,220				5,220
Additional Paid In Capital			3,631,840				3,469,078
Deficit			(7,233,100	)			(6,147,574	)
Foreign Currency Translation			293,036				480,196
Total Stockholders’ Deficit		$	(3,303,004	)		$	(2,193,080	)
Total Liabilities and Stockholders’ Deficit		$	189,876			$	318,100

 

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

 

 

MOPALS.COM, INC.

CONDENSED INTERIM CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS

Unaudited

 

		For the Three Months Ended				For the Three Months Ended				For the Six Months Ended				For the Six Months Ended
		June 30, 2016				June 30, 2015				June 30, 2016				June 30, 2015
EXPENSES (RECOVERIES)
Consultants & Contractors			235,705				250,186				573,306				541,607
General & Administrative Expenses			79,960				83,166				154,471				193,625
Occupancy Costs			141,132				35,248				168,733				68,610
Share Based Compensation (Note 9)			83,802				(141,242	)			181,460				(42,315	)
Depreciation			3,896				4,133				7,556				7,954
Total Operating Expense & Loss before Income Taxes			544,495				231,491				1,085,526				769,481
Provision for Income Taxes			-				-				-				-
Net loss from Operations			(544,495	)			(231,491	)			(1,085,526	)			(769,481	)
Foreign currency translation adjustment, net of taxes			(11,440	)			(22,220	)			(187,160	)			112,879
Other Comprehensive (Loss) Income			(11,440	)			(22,220	)			(187,160	)			112,879
Total Comprehensive Loss			(533,055	)			(253,711	)			(898,366	)			(656,602	)
Loss per common share (Note 10):
Basic and Diluted:
Net (Loss) per common share			(0.01	)			(0.01	)			(0.02	)			(0.02	)
Weighted Average Number of Shares Outstanding - Basic and Diluted During the Period			52,200,700				45,804,884				52,200,700				45,804,884

 

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

 

 

MOPALS.COM, INC.

CONDENSED INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS

Unaudited

 

		For the Six Months Ended				For the Six Months Ended
		June 30, 2016				June 30, 2015
Cash Flows used in Operating Activities
Net (Loss)		$	(1,085,526	)			(769,481	)
Adjustments to reconcile net (loss) to net cash from operating activities:
Depreciation			7,556				7,954
Stock-based compensation expense (recovery)			181,460				(42,315	)
Increase (Decrease) in net assets:
Decrease (increase) in Prepaids & Other Assets			113,251				(13,203	)
Increase in MoCoins™ liability			29,829				2,463
Increase in Accounts Payable & Accrued Liabilities and Employee Tax Deductions Payable			236,020				200,993
Net Cash Flows used in Operating Activities			(517,410	)			(613,589	)
Cash Flows from Financing Activities
Shares to be issued			-				70
Additional Paid In Capital			-				126,397
Increase in Shareholders’ Loan			680,175				254,346
Net Cash Flows from Financing Activities			680,175				380,813
Cash Flows used in Investing Activities
Purchases of Capital Equipment			-				(3,066	)
Net Cash Flows used in Investing Activities			-				(3,066	)
Net Cash Flows		$	162,765				(235,842	)
Effects of Exchange Rate on Cash			(162,765	)			148,220
Cash – Beginning of Period			6,079				143,482
Cash – End of Period		$	6,079			$	55,860
Supplemental Cash Flow Information
Interest Paid		$	-				-
Income Taxes Paid			-				-

  

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

 

 

MOPALS.COM, INC.

CONDENSED INTERIM CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT

Unaudited

 

										Additional								Accumulated other				Total
		Common Stock								Paid in				Accumulated				Comprehensive				Shareholders
		Shares				Amount				Capital				Deficit				Income				Deficit
Balance, January 1, 2016			52,200,700			$	5,220			$	3,469,078			$	(6,147,574	)		$	480,196			$	(2,193,080	)
Shares granted to employees (Note 9)			-				-				162,762				-				-				162,762
Foreign currency translation			-				-				-				-				(187,160	)			(187,160	)
Net Loss			-				-				-				(1,085,526	)			-				(1,085,526	)
Balance, June 30, 2016			52,200,700				5,220				3,631,840				(7,233,100	)			293,036				(3,303,004	)

 

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

 

 

MOPALS.COM, INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2016

 

1.	NATURE OF OPERATIONS AND ORGANIZATION

  

Mopals.com, Inc. ("Mopals" or the “Company”) was incorporated February 6, 2003 and was organized under the laws of the State of Delaware.

 

Mopals’ operations are presently conducted through the Company’s wholly owned subsidiary, Mopals Canada Inc. (an Ontario, Canada company).   The planned operations of the Company consist of becoming a social media rewards platform in Canada and the United States. The Company is currently conducting development activities to operationalize certain technology that the Company has developed so it can attract users to its platform. The Company also is in the process of raising additional equity capital to support the completion of its development activities to begin the launch of its application.

 

The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding to operationalize the Company’s current technology before another company develops similar technology and applications.

 

2.	BASIS OF PRESENTATION

 

These unaudited condensed interim consolidated financial statements should be read in conjunction with the annual financial statements for Mopals.com, Inc. for the most recently completed fiscal year ended December 31, 2015. These unaudited condensed interim consolidated financial statements do not include all disclosures required in annual financial statements, but rather are prepared in accordance with recommendations for interim financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). These unaudited condensed interim consolidated financial statements have been prepared using the same accounting policies and methods as those used by the Company in the annual consolidated financial statements for the year ended December 31, 2015, except when disclosed below.

 

The unaudited condensed interim consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) which are necessary to present fairly the financial position of the Company as at June 30, 2016, and the results of its operations for the three and six month periods ended June 30, 2016 and 2015 and its cash flows for the six month periods ended June 30, 2016 and 2015. Note disclosures have been presented for material updates to the information previously reported in the annual consolidated financial statements.

 

 

MOPALS.COM, INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2016

 

2.	BASIS OF PRESENTATION (Continued)

 

a)

Estimates

 

The preparation of these consolidated financial statements has required management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of the revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including those related to accrued liabilities, income taxes and stock based compensation. The Company bases its estimates on historical experiences and on various other assumptions believed to be reasonable under the circumstances. Actual results could differ from those estimates. As adjustments become necessary, they are reported in earnings in the period in which they become known.

 

3.	GOING CONCERN

 

These financial statements have been prepared assuming the Company will continue on a going-concern basis. The Company is in the development stage and has not yet realized profitable operations and has relied on non-operational sources to fund operations. The Company has suffered recurring losses and additional future losses are anticipated as the Company has not yet been able to generate revenue. The Company has incurred losses since inception and the ability of the Company to continue as a going-concern depends upon its ability to develop profitable operations and to continue to raise adequate financing. Accumulated losses from inception to June 30, 2016 total $7,233,100 and the Company had a working capital deficiency of $3,313,184 as at June 30, 2016.  In order for the Company to meet its liabilities as they come due and to continue its operations, the Company is solely dependent upon its ability to generate such financing. The Company will continue to seek additional forms of debt or equity financing, but it cannot provide assurances that it will be successful in doing so. These circumstances raise substantial doubt as to the ability of the Company to meet its obligations as they come due and accordingly, the appropriateness of the use of accounting principles applicable to a going concern. The accompanying condensed consolidated interim financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Such adjustments could be material.

 

4.	PREPAID AND OTHER ASSETS

 

		June 30,				December 31,
		2016				2015
Prepaid Assets		$	19,447			$	158,894
Harmonized Sales Tax			154,170				136,359
Total		$	173,617			$	295,253

 

The Harmonized Sales Tax (“HST”) is a federal - provincial harmonized sales tax that applies to the supply of most property and services in Canada. Generally, HST registrants must charge and account for the HST on taxable supplies of property and services made in Canada. The HST rate in Ontario is 13%. Registrants collect the HST on most of their sales and pay HST on most purchases they make to operate their business. They can claim an input tax credit, to recover the HST paid or payable on the purchases they use in their commercial activities.

 

 

MOPALS.COM, INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2016

 

5.

EQUIPMENT

 

The net book value of equipment as of June 30, 2016 was as follows:

 

		Cost				Amortization				NBV
Computer Hardware		$	21,695			$	16,442			$	5,253
Computer Software			25,059				22,977				2,082
Furniture & Equipment			7,742				4,897				2,845
Total		$	54,496			$	44,316			$	10,180

 

The net book value of property, plant & equipment as of December 31, 2015 was as follows:

 

		Cost				Amortization				NBV
Computer hardware		$	20,247			$	12,308			$	7,939
Computer Software			23,387				17,936				5,451
Furniture & Equipment			7,225				3,847				3,378
Total		$	50,859			$	34,091			$	16,768

 

Depreciation expense for the six months ending June 30, 2016 and 2015 was $7,556 and $7,954, respectively.

 

6.	LOANS FROM SHAREHOLDER

 

As of June 30, 2016, the controlling shareholder and Chief Executive Officer of the Company had advanced $2,065,281 (December 31, 2015 - $1,429,055) to fund the working capital of the Company. The advances are unsecured, non-interest bearing and due on demand.

 

7.	COMMITMENTS & CONTINGENCIES

 

On February 10, 2014, the Company entered into a new lease agreement for office space. The schedule below outlines the expected remaining lease payments over the life of the lease.

 

2016		$	66,440
2017			139,542
2018			47,466

 

In the normal course of business, the Company becomes involved in various legal actions seeking compensatory and occasionally punitive damages, including actions brought on behalf of various purported classes of claimants and claims relating to employee and third-parties.

 

8.	CAPITAL STOCK

 

a) Authorized

 

100,000,000 Common Shares with a par value of $0.0001.

 

 

MOPALS.COM, INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2016

 

9.	STOCK-BASED COMPENSATION

 

The Company’s Stock Option Plan is currently being established in order to enable the Company to attract and retain the services of highly qualified and experienced directors, officers, employees and consultants, and to give such persons an interest in the success of the Company and its subsidiaries. The options and awards will be granted at the discretion of the Board of Directors. The fair value of each option granted is estimated at the time of grant using the Black-Scholes option pricing model.

 

During the year ended December 31, 2015, the Company agreed to grant 2,109,000 common shares to certain employees. Of these common shares, 675,000 vest over 12 months, 750,000 vest over 18 months and the remaining 684,000 vest immediately. During the six month period ended June 30, 2016, the Company agreed to grant 470,000 common shares to certain employees. Of these common shares, 350,000 vest over 12 months and the remaining 120,000 vest immediately. These shares were valued at $669,750 based on the current stock price at the date of grant of $0.25 and an estimate forfeiture rate of 56%, of which $460,208 was recorded at June 30, 2016 (December 31, 2015 - $214,947) as additional paid in capital and recorded as stock based compensation on the condensed consolidated interim statements of operations. During the year ended December 31, 2015, 50,000 common shares were issued in accordance with an employment agreement and valued at $12,500. 

 

As at June 30, 2016, the Company had 1,254,000 (December 31, 2015 - 704,000) vested share grants. As at June 30, 2016, the number of unvested share grants expected to vest (including the impact of expected forfeitures) had been estimated at 1,425,000 (December 31, 2015 – 1,425,000). As at June 30, 2016, the total fair value of future expense to be recorded in subsequent periods (assuming no forfeiture occurs) is $209,542 (December 31, 2015 - $254,802). The weighted average time remaining for these share grants to vest is 0.60 years (December 31, 2015 – 0.86 years). For the three and six month periods ended June 30, 2016, the Company recorded $74,452 and $162,762, respectively as share based compensation related to these share grants. Also for the three and six month periods ended June 30, 2016, the Company recorded $9,349 and $18,698, respectively, as share based compensation for the amortization of common shares granted under a consulting agreement.

 

The following table summarizes the stock option activities of the Company:

 

		Number of Options				Weighted Average Exercise Price
Balance, December 31, 2014			3,050,000			$	0.36
Exercised			(600,000	)			0.30
Options Forfeited			(1,300,000	)			0.35
Balance, December 31, 2015 and June 30, 2016			1,150,000				0.41

 

 

MOPALS.COM, INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2016

 

9.	STOCK-BASED COMPENSATION (continued)

 

The Company’s computation of expected volatility for the periods ended June 30, 2016 is based on the Company’s market close price over the period equal to the expected life of the options. The Company’s computation of expected life reflects actual historical exercise activity and assumptions regarding future exercise activity of unexercised, outstanding options.

 

The Company’s expected dividend yield is 0%, since there is no history of paying dividends and there are no plans to pay dividends. The Company’s risk-free interest rate is the Canadian Treasury Bond rate for the period equal to the expected term.

 

The total number of options outstanding as at June 30, 2016 was 1,150,000 (December 31, 2015 – 1,150,000).

 

As at June 30, 2016, the Company had 1,150,000 (December 31, 2015 – 1,150,000) vested options. As at June 30, 2016, the number of unvested options expected to vest (including the impact of expected forfeitures) had been estimated at nil (December 31, 2015 – nil) with a weighted average contractual life of n/a years (December 31, 2015 – n/a years) and exercise price of $n/a (December 31, 2015 - $n/a).

 

The Company recognizes compensation expense for the fair values of stock options using the graded vesting method over the requisite service period for the entire award.

 

The following table presents information relating to stock options outstanding and exercisable at June 30, 2016.

 

Options Outstanding												Options Exercisable
Number of Shares				Weighted Average Remaining Contractual Life (Years)				Weighted Average Exercise Price				Number of Shares				Weighted Average Exercise Price				Weighted Average Remaining Contractual Life (Years)
	900,000				0.14			$	0.25				900,000			$	0.25				0.14
	250,000				1.83				1.00				250,000				1.00				1.83
	1,150,000				0.51			$	0.41				1,150,000			$	0.41				0.51

 

The Company recorded $nil for share-based compensation expense related to stock options for the six month period ending June 30, 2016 (2015 – recovery of $42,315).

 

 

MOPALS.COM, INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2016

 

10.	LOSS PER SHARE

 

The Company calculates basic loss per common share using net loss divided by the weighted-average number of common shares outstanding. The Company calculates diluted loss per common share in the same manner as basic, except for the use of the weighted-average number of diluted common shares outstanding in the denominator, when the stock options and warrants are not anti-dilutive.

 

		Three Months ended June 30, 2016				Three Months ended June 30, 2015				Six Months ended June 30, 2016				Six Months ended June 30, 2015
Weighted average number of common shares outstanding			52,200,700				45,804,884				52,200,700				45,804,884
Weighted-average number of diluted common shares outstanding			52,200,700				45,804,884				52,200,700				45,804,884

 

11.	INCOME TAXES

 

The Company accounts for income taxes in accordance with ASC 740-20. ASC 740-20 prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates. The effects of future changes in tax laws or rates are not anticipated.

 

Under ASC 740-20 income taxes are recognized for the following: a) amount of tax payable for the current year, and b) deferred tax liabilities and assets for future tax consequences of events that have been recognized differently in the financial statements than for tax purposes.

 

As of June 30, 2016, the Company did not have any amounts recorded pertaining to uncertain tax positions. Deferred taxes as at June 30, 2016 and December 31, 2015 have not been recorded due to the fact that they are fully reserved. All tax years remain open to examination by the Internal Revenue Service and the Canada Revenue Agency.

 

 

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

 

The following is management’s discussion and analysis of the consolidated financial condition and results of operations of Mopals.com, Inc. (“Mopals”, the “Company”, “we”, and “our”) for the six month period ended June 30, 2016. The following information should be read in conjunction with the consolidated interim financial statements for the period ended June 30, 2016 and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q (this “Report”).

 

Overview

 

Mopals.com, Inc. was incorporated under the laws of Delaware on February 6, 2003 as MagnaData, Inc. In February of 2005, articles of amendment were filed with the State of Delaware changing the name of our company to MortgageBrokers.com Holdings, Inc. and thereafter, operated as a mortgage brokerage in Canada. On March 26, 2013, articles of amendments were filed with the State of Delaware changing the name of our company to Mopals.com, Inc. pursuant to execution of an asset spin out and shareholder loan cancellation agreement and subsequent execution of a share exchange agreement. Pursuant to the terms of the share exchange agreement, the Company acquired 100% of the issued and outstanding equity securities of Mopals Inc., a Nevada private corporation, in exchange for the issuance of 50,000,000 shares of the Company’s common stock.

 

Mopals carries out all business through its wholly owned subsidiary, Mopals Canada Inc. Mopals Canada Inc. (formerly IQIC.com Inc.) was incorporated federally in Canada on August 7, 2012.

 

Mopals is a development stage internet and mobile based social media brand-loyalty company. Mopals has launched the first version of our web and mobile software application for both the iOS and Android mobile device operating systems. It is our intent that the Mopals technology platform under development will allow consumers to earn incentives for their spending and referral behavior with retail businesses and allow retail businesses to build their customer base and enhance customer experiences through promotional programs. Using a unique digital currency, MoCoins™, members can be rewarded for making a purchase at participating retailers, buying and referring offers, creating and completing polls, liking brands, uploading photos, writing reviews, and inviting friends. Through MoPals™, social media influencers monetize their following. Similarly, retailers who use the MoPals™ platform have a means to engage and convert their current social media following to brand ambassadors who foster word-of-mouth advertising. Our members can earn reward incentives (MoCoins) for a number of online and ‘in-store’ behaviors within a consumer’s social network including rewards for promotional participation; ‘liking’, sharing or reviewing an experience at a business; referring business promotions; creating content driving polls; or referring friends to join the Mopals community. Mopals aims to be a leader in how brands inspire customer loyalty, driving online, brand enhancing behavior and sales. It is our aim that our technology platform will enable businesses to connect with their customers, giving them a cost effective means to encourage and reward brand enhancing behavior. It is our intent that our proprietary platform ‘Big Data IQ Engine’ under development will also allow businesses to receive Big Data insights and analytics associated with their consumer’s behavior from which they can use to provide targeted offers and marketing strategies.

 

The Company’s corporate offices are located at 393 King Street West, Suite 304, Toronto, Ontario, Canada, M5V 3G8. Our current contact information for our Ontario office is telephone number: (416) 362-4888. Our internet website can be found under the domain name: www.mopals.com.

 

Plan of Operation

 

It is Mopals’ plan to earn revenue from business subscriptions and transaction fees to receive ongoing consumer data, as well as from receiving a percentage of promotion-based sales revenue from participating businesses couponing engine.

 

In addition to the financial condition and results of operations of the Company, it is management’s belief that growth of our Company will also, in part, be demonstrated through the metrics of MoCoins points sold, the total number of consumers signed up and making use of the Mopals platform and the number of retail businesses who sign on to and offer promotions through the Mopals community.

 

 

Results of Operations

 

Three months ended June 30, 2016 as compared to 2015.

 

Revenues

 

Mopals had no reported revenue during the three month period ended June 30, 2016, and 2015. 

 

Operating Expenses

 

The Company’s reported operating expenses during the three month period ended June 30, 2016 were $544,495. Comparatively, the Company’s reported operating expenses during the three month period ended June 30, 2015 were $231,491. This increase was mainly due to termination of the old lease agreement, resulting in a write-down of prepaid rent and an increase in occupancy costs for the period. In addition, stock based compensation increased due to vesting of stock options during the period.

 

The primary components that comprise our operating expenses during the three months ended June 30, 2016 reporting period were salaries and consultant/contractor fees, general and administrative expenses, occupancy costs and stock-based compensation which are explained in detail as follows:

 

●	52.8% of the operating expenses in the reporting period were associated with salaries, contractor expenses and consulting fees (2015 – 70.4%).
●	16.7% of the operating expenses in the reporting period were associated with stock-based compensation (2015 – (61.0%)).
●	14.2% of the operating expenses in the reporting period were associated with general and administrative expenses (2015 – 35.9%).
●	25.9% of our operating expenses in the reporting period were associated with occupancy costs associated with an office lease (2015 – 15.2%).

 

Net Loss

 

During the three months ended June 30, 2016 and 2015, we incurred a net loss of $544,495 and $231,491, respectively, an increase of $313,004. This increase was mainly due to termination of the old lease agreement, resulting in a write-down of prepaid rent and an increase in occupancy costs for the period. In addition, stock based compensation increased due to vesting of stock options during the period. As we did not generate any revenues during the three months ended June 30, 2016, our net loss equaled our operating expenses.

 

Six months ended June 30, 2016 as compared to 2015.

 

Revenues

 

Mopals had no reported revenue in first six months of 2016.

 

Operating Expenses

 

The Company’s reported operating expenses during the six month period ended June 30, 2016 were $1,085,526. Comparatively, the Company’s reported operating expenses during the six month period ended June 30, 2015 were $769,481. The primary components that comprise our operating expenses during the six months ended June 30, 2016 reporting period were salaries and consultant/contractor fees, general and administrative expenses, occupancy costs and stock-based compensation which are explained in detail as follows:

 

●	43.2% of the operating expenses in the reporting period were associated with salaries, contractor expenses and consulting fees (2015 – (108.1%)).
●	15.4% of the operating expenses in the reporting period were associated with stock-based compensation (2015 – (5.5%)).
●	14.7% of the operating expenses in the reporting period were associated with general and administrative expenses (2015 – 25.1%).
●	15.5% of our operating expenses in the reporting period were associated with occupancy costs associated with an office lease (2015 – 8.9%).

 

Net Loss

 

During the six months ended June 30, 2016 and 2015, we incurred a net loss of $1,085,526 and $769,481 respectively, an increase of $316,045. This increase was mainly due to termination of the old lease agreement, resulting in a write-down of prepaid rent and an increase in occupancy costs for the period. In addition, stock based compensation increased due to vesting of stock options during the period. As we did not generate any revenues during the three months ended June 30, 2016, our net loss equaled our operating expenses.

 

Liquidity and Capital Resources

 

At June 30, 2016, we had $6,079 in cash, $154,170 in harmonized sales tax receivable, $19,447 in prepaid assets and $10,180 in equipment, computer software, computer hardware and furniture for a total of $189,876 in assets. Comparatively as at December 31, 2015, we had $6,079 in cash, $136,359 in harmonized sales tax receivable, $158,894 in prepaid expenses, and $16,768 in equipment, computer hardware, computer software and furniture for a total of $318,100 in assets.

 

 

At June 30, 2016, we had $300,898 in accounts payable and accrued liabilities, $1,078,201 in employee tax deductions payable due to Canada Revenue Agency, $14,924 in accruals for stock-based compensation associated with former discontinued operations, $33,576 in MoCoins payable and $2,065,281 in loans payable to the Company’s principal shareholder for a total of $3,492,880 in liabilities. Comparatively as at December 31, 2015, we had $231,726 in accounts payable and accrued liabilities, $832,831 in employee tax deductions payable due to Canada Revenue Agency, $14,924 in accruals for stock-based compensation associated with former discontinued operations, $2,644 in MoCoins payable, and $1,429,055 in loans payable to the Company’s principal shareholder for a total of $2,511,180 in liabilities.

 

Management makes the following comments regarding the most significant factors affecting the Company’s liquidity and capital resources and their measured trends over the reporting period:

 

The Company’s cash position did not change over the first six months of 2016 associated with the following:

 

●	the Company used $517,410 in cash from operating activities over the first six months of 2016. As a development stage company, Mopals has no revenue yet while it is building its products and services, hires software development, marketing and sales staff and establishes market partners to launch our business; and,
●	the Company received $680,175 in cash from financing activities over the first six months of 2016 from our principal shareholder.

 

The Company reported a net cash flow loss from operating activities for the first six months of 2016 of $517,410 with a net increase in cash flow from financing activities of $680,175 and a positive effect of exchange rate on cash of $162,765 during the same period for an overall net cash flow of $nil out of the Company during the six month period.

 

The Company needs to raise additional capital to fund our development stage Company activities and to position the Company for a market launch of its planned products and services or to generate revenue before the existing capital resources are depleted.

 

In the event that the Company runs out of available working capital resources or experiences an unforeseen negative impact to cash flow, our Company will need to rely upon the issuance of common stock and additional capital contributions from shareholders and/or loans from shareholders and third-party lenders to meet its working capital needs. There is no certainty that shareholders will be able to provide capital contributions or loans to the Company. There is no certainty that there will be a market for the Company’s capital stock. There is no certainty that lenders will find the Company’s financial health and development stage suitable to provide debt financing.

 

Off-Balance Sheet Arrangements

 

None.

 

Critical Accounting Policies

 

The financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates, assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue, and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

 

 

Going Concern

 

The Company’s consolidated financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

 

For the six months reporting period ended June 30, 2016, the Company reported a net loss from operations of $1,085,526 with a working capital deficiency of $3,313,184. Certain conditions noted below raise doubt about the Company’s ability to continue as a going concern.

 

As a development stage company, the Company’s ability to continue as a going concern is contingent upon its ability to secure additional debt or equity financing. Management’s plan is to secure additional working capital funds through future debt or equity financings. There is no certainty that there will be a market for the Company’s capital stock. There is also no certainty that shareholders will be able to provide future capital contributions or loans to the Company.

 

The interim consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

We do not hold any derivative instruments and do not engage in any hedging activities.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

As of the end of the period covered by this report, the Company’s principal executive officer and principal financial officer evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d -15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on the evaluation of the Company’s disclosure controls and procedures, the Company’s principal executive officer and principal financial officer, with the participation of the Company’s management, have concluded that the Company’s disclosure controls and procedures were not effective as of March 31, 2016, to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is (a) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (b) accumulated and communicated to management, including the Company’s principal executive officer and principal financial officer, as appropriate to allow for timely decisions regarding required disclosure.

 

Specifically, our management identified certain matters involving internal control and our operations that it considered to be material weaknesses. As defined in the Exchange Act, a material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the registrant’s annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness identified by our management as of June 30, 2016, is described below:

 

i.

We did not maintain sufficient personnel with an appropriate level of technical accounting knowledge, experience and training in the application of GAAP commensurate with our complexity and our financial accounting and reporting requirements.  This control deficiency is pervasive in nature.  Further, there is a reasonable possibility that material misstatements of the financial statements including disclosures will not be prevented or detected on a timely basis as a result.

 

As a result of the material weakness identified above, our internal control over financial reporting was not effective as of June 30, 2016.

 

Changes in Internal Control Over Financial Reporting

 

There have been no changes in the Company’s internal controls over financial reporting during the six month period ending June 30, 2016.

 

 

PART II: OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

Item 1A. Risk Factors

 

Smaller reporting companies are not required to provide the information required by this item.

 

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

 

None.

 

Item 3. Defaults Upon Senior Securities

 

There has been no default in the payment of principal, interest, sinking or purchase fund installment, or any other material default, with respect to any indebtedness of the Company.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

There is no other information required to be disclosed under this item which was not previously disclosed.

 

 

Item 6. Exhibits

 

Exhibit No.		Description
31.1		Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of Sarbanes Oxley Act of 2002
32.1+		Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes Oxley Act of 2002
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Schema
101.CAL		XBRL Taxonomy Calculation Linkbase
101.DEF		XBRL Taxonomy Definition Linkbase
101.LAB		XBRL Taxonomy Label Linkbase
101.PRE		XBRL Taxonomy Presentation Linkbase

 

+ In accordance with SEC Release 33-8238, Exhibits 32.1 is furnished and not filed.

 

 

SIGNATURES

 

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

 

	MOPALS.COM, INC.
Dated: September 9, 2016	By:	/s/ Alex Haditaghi
		Alex Haditaghi
		Chief Executive Officer,
		Chief Financial Officer,
		President, Secretary and Director
		(Duly Authorized Officer, Principal Executive Officer and Principal Financial Officer)

 

 

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