UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

 

FORM 10-Q

 

 

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

 

For the quarterly period ended September 30, 2017

 

Commission File Number: 0-55081

 

KinerjaPay Corp.

(Exact name of small business issuer as specified in its charter)

 

Delaware	42-1771817
(State of Incorporation)	(I.R.S. Employer Identification No.)
Jl. Multatuli, No.8A, Medan, Indonesia	20151
(Address of Principal Executive Offices)	(ZIP Code)

 

Registrant’s Telephone Number, Including Area Code: +62-819-6016-168

 

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

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

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act) or a smaller reporting company.

 

Large accelerated filer [  ]

Accelerated filer [  ]

Non-Accelerated filer [  ]

Smaller reporting company [X]

 

On December 7, 2017 the Registrant had 11,661,036 shares of common stock outstanding.

 

 

 

TABLE OF CONTENTS

 

Item		Description		Page
		PART I - FINANCIAL INFORMATION
ITEM 1.		FINANCIAL STATEMENTS.		3
ITEM 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND PLAN OF OPERATIONS.		4
ITEM 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.		8
ITEM 4.		CONTROLS AND PROCEDURES.		8
		PART II - OTHER INFORMATION
ITEM 1.		LEGAL PROCEEDINGS.		8
ITEM 1A.		RISK FACTORS.		8
ITEM 2.		UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.		8
ITEM 3.		DEFAULT UPON SENIOR SECURITIES.		9
ITEM 4.		MINE SAFETY DISCLOSURE.		9
ITEM 5.		OTHER INFORMATION.		9
ITEM 6.		EXHIBITS.		9

 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS Back to Table of Contents

 

Consolidated Balance Sheets as of September 30, 2017 (Unaudited) and December 31, 2016	F-1
Consolidated Statements of Operations for the Three and Nine-Month Periods Ended September 30, 2017 and 2016 (Unaudited).	F-2
Consolidated Statements of Comprehensive Loss for the Three and Nine-Month Periods Ended September 30, 2017 and 2016 (Unaudited)	F-3
Consolidated Statements of Cash Flows for the Nine-Month Periods September 30, 2017 and 2016 (Unaudited)	F-4
Notes to Unaudited Interim Consolidated Financial Statements	F-5

 

 

KINERJAPAY CORP.

Consolidated Balance Sheets

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

Back to Table of Contents

 

		September 30, 2017				December 31, 2016
		(Unaudited)
ASSETS
Current assets:
Cash		$	60,488			$	32,591
Restricted cash			29,841				16,181
Accounts receivable			22,632				-
Prepaid expenses			11,448				28,966
Total current assets			124,409				77,738
Equipment, net of accumulated depreciation of $2,217 and $289, respectively.			13,636				3,845
Intangible assets			25,000				-
Total assets		$	163,045			$	81,583
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable - trade		$	2,782			$	3,461
Accounts payable - related party			51,849				-
Tax payable			907				95
Accrued interest			1,830				-
Accrued expenses			3				4,107
Unissued stock subscriptions			-				150,000
Total current liabilities			57,371				157,663
Total liabilities			57,371				157,663
Stockholders’ equity (deficit):
Preferred stock, par value $0.0001 per share; 10,000,000 shares authorized; none issued			-				-
Common stock, par value $0.0001 per share; 500,000,000 shares authorized; 11,661,036 shares issued and outstanding at September 30, 2017 and 8,627,013 shares issued and outstanding at December 31, 2016			1,165				862
Additional paid-in capital			8,039,502				3,508,529
Stock payable			178,000				-
Accumulated deficit			(8,113,752	)			(3,585,626	)
Accumulated other comprehensive loss			759				155
Total stockholders’ equity (deficit)			105,674				(76,080	)
Total liabilities and stockholders’ equity		$	163,045			$	81,583

 

See notes to unaudited interim consolidated financial statements.

 

 

KINERJAPAY CORP.

Consolidated Statements of Operations

For the Three and Nine Months Ended September 30, 2017 and 2016

(Unaudited)

Back to Table of Contents

 

		For the				For the				For the				For the
		Three Months Ended				Three Months Ended				Nine Months Ended				Nine Months Ended
		September 30, 2017				September 30, 2016				September 30, 2017				September 30, 2016
Revenue from services - related entity		$	1,763,608			$	-			$	1,914,358			$	-
Costs related to service revenue			1,842,985				-				2,002,073				-
Gross margin			(79,377	)			-				(87,715	)			-
Expenses:
General and administrative			444,732				363,434				3,993,974				2,444,238
Depreciation expense			940				17				1,896				103
Total general and administrative expenses			445,672				363,451				3,995,870				2,444,341
(Loss) from operations			(525,049	)			(363,451	)			(4,083,585	)			(2,444,341	)
Other income (expense):
Interest expense			(1,830	)			(137	)			(1,844	)			(31	)
Loss on debt conversion			-				-				(442,697	)			-
Loss on extinguishment of debt			-				-				-				(9,003	)
Total other costs and expenses			(1,830	)			(137	)			(444,541	)			(9,034	)
Net loss before income taxes			(526,879	)			(363,588	)			(4,528,126	)			(2,453,375	)
Income taxes			-				-				-				-
Net loss		$	(526,879	)		$	(363,588	)		$	(4,528,126	)		$	(2,453,375	)
Basic and diluted per share amounts:
Basic and diluted net loss		$	(0.04	)		$	(0.04	)		$	(0.39	)		$	(0.33	)
Weighted average shares outstanding (basic and diluted)			12,718,139				8,195,491				11,530,039				7,405,638

 

See notes to unaudited interim consolidated financial statements.

 

 

KINERJAPAY CORP.

Consolidated Statements of Comprehensive Loss

For the Three and Nine Months Ended September 30, 2017 and 2016

(Unaudited)

Back to Table of Contents

 

		Three months				Three months				Nine months				Nine months
		ended				ended				ended				ended
		September 30, 2017				September 30, 2016				September 30, 2017				September 30, 2016
Net loss		$	(526,879	)		$	(363,588	)		$	(4,528,126	)		$	(2,453,375	)
Foreign currency translation adjustments			(115	)			8,430				(139	)			8,656
Total comprehensive loss, net of tax		$	(526,994	)		$	(355,158	)		$	(4,528,265	)		$	(2,444,719	)

 

See notes to unaudited interim consolidated financial statements.

 

 

KINERJAPAY CORP.

Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2017 and 2016

(Unaudited)

Back to Table of Contents

 

		For the				For the
		Nine Months Ended				Nine Months Ended
		September 30, 2017				September 30, 2016
Cash flows from operating activities:
Net loss		$	(4,528,126	)		$	(2,453,375	)
Adjustments required to reconcile net loss to cash used in operating activities:
Shares issued for services			2,097,751				1,508,133
Loss on conversion of debt			442,697				-
Depreciation expense			1,896				103
Loss on extinguishment of debt			-				9,003
Share-based compensation			1,116,829				-
Changes in net assets and liabilities:
(Increase) decrease in accounts receivable			(22,632	)			-
(Increase) decrease in other assets			(25,000	)			-
(Increase) decrease in prepaid expenses			17,518				(4,616	)
Increase (decrease) in accounts payable			(148,019	)			31,230
Increase (decrease) in accrued liabilities			(2,274	)			7,094
Net cash used in operating activities			(1,049,360	)			(902,428	)
Cash flows from investing activities:
Purchase of equipment			(11,687	)			(2,720	)
Cash used in investing activities			(11,687	)			(2,720	)
Cash flows from financing activities:
Proceeds from issuance of common stock			952,000				804,987
Payments on debt			-				(8,689	)
Borrowings on debt - related party			50,000				-
Borrowings on debt			100,000				-
Net cash provided by financing activities			1,102,000				796,298
Foreign currency adjustment			604				8,656
Change in cash			41,557				(100,194	)
Cash - Beginning of period			48,772				250,194
Cash - End of period		$	90,329			$	150,000
Supplemental Cash Flow Disclosure:
Non-cash transactions:
Settlement of restricted cash with common stock		$	-			$	250,013
Stock issued to settle debt		$	100,000			$	15,750

 

See notes to unaudited interim consolidated financial statements.

 

 

KINERJAPAY CORP.
(formerly Solarflex Corp.)
Notes to Unaudited Consolidated Financial Statements
Back to Table of Contents

 

1. The Company and Significant Accounting Policies

 

Organizational Background

 

KinerjaPay Corp. (“Kinerja” or the “Company”) is a Delaware corporation and commenced operations during the period ended September 30, 2017. The Company was incorporated under the laws of the State of Delaware on February 12, 2010. The business plan of the Company was to develop a commercial application of the design in a patent of a “Solar element and method of manufacturing the same”. On November 10, 2015 this plan was abandoned and all related contracts and agreements rescinded.

 

On December 1, 2015, the Company entered into a license agreement with PT Kinerja Indonesia, an entity organized under the laws of Indonesia and controlled by Mr. Ng (“PT Kinerja”), for an exclusive, world-wide license to use and commercially exploit certain technology and intellectual property and its website, KinerjaPay.com. Pursuant to the License Agreement, the Company was granted the exclusive, world-wide rights to the KinerjaPay IP, an e-commerce platform that provides users with the convenience of e-wallet service for bill transfer and online shopping and is among the first portals to allow users the convenience to top-up phone credit. In conjunction with the agreement the company changed its name from Solarflex Corp. to KinerjaPay Corp. On April 6, 2016, P.T. KinerjaPay Indonesia a subsidiary was organized under the laws of Indonesia. PT KinerjaPay Indonesia is a wholly-owned subsidiary of the Company, and both PT Kinerja Indonesia and PT KinerjaPay Indonesia are owned and controlled by Mr. Ng, the Company’s CEO and control shareholder, and are deemed to be related entities.

 

The accompanying financial statements of the Company were prepared from the accounts of the Company under the accrual basis of accounting.

 

Basis of Presentation:

 

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has not established sufficient revenue to cover its operating costs, and as such, has incurred an operating loss since inception. Further, as of September 30, 2017, the cash resources of the Company were insufficient to meet its current business plan. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying 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.

 

Principles of Consolidation:

 

The financial statements include the accounts of KinerjaPay Corp. and its wholly owned subsidiary PT KinerjaPay, Indonesia. All significant inter-company balances and transactions have been eliminated.

 

 

Significant Accounting Policies

 

Use of Estimates:

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates.

 

Cash and Cash Equivalents:

 

For financial statement presentation purposes, the Company considers those short-term, highly liquid investments with original maturities of six months or less to be cash or cash equivalents. There were no cash equivalents as of September 30, 2017 and December 31, 2016.

 

Property and Equipment:

 

New property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 5 years. Expenditures for renewals and betterments are capitalized. Expenditures for minor items, repairs and maintenance are charged to operations as incurred. Gain or loss upon sale or retirement due to obsolescence is reflected in the operating results in the period the event takes place.

 

Valuation of Long-Lived Assets:

 

We review the recoverability of our long-lived assets including equipment, goodwill and other intangible assets, when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on our ability to recover the carrying value of the asset from the expected future pre-tax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value. Our primary measure of fair value is based on discounted cash flows. The measurement of impairment requires management to make estimates of these cash flows related to long-lived assets, as well as other fair value determinations.

 

Stock-Based Compensation:

 

Stock-based awards are accounted for using the fair value method in accordance with ASC 718, Share-Based Payments. Our primary type of share-based compensation consists of stock options. We use the Black-Scholes option pricing model in valuing options. The inputs for the valuation analysis of the options include the market value of the Company’s common stock, the estimated volatility of the Company’s common stock, the exercise price of the warrants and the risk free interest rate.

 

Accounting For Obligations And Instruments Potentially To Be Settled In The Company’s Own Stock:

 

We account for obligations and instruments potentially to be settled in the Company’s stock in accordance with FASB ASC 815, Accounting for Derivative Financial Instruments. This issue addresses the initial balance sheet classification and measurement of contracts that are indexed to, and potentially settled in, the Company’s own stock.

 

Fair Value of Financial Instruments:

 

FASB ASC 825, “Financial Instruments,” requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value. FASB ASC 825 defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. At September 30, 2017 and December 31, 2016, the carrying value of certain financial instruments (cash and cash equivalents, accounts payable and accrued expenses.) approximates fair value due to the short-term nature of the instruments or interest rates, which are comparable with current rates.

 

 

Fair Value Measurements:

 

The Company measures fair value under a framework that utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of inputs which prioritize the inputs used in measuring fair value are:

 

Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.

 

Level 2: Inputs to the valuation methodology include:

 

- Quoted prices for similar assets or liabilities in active markets;

- Quoted prices for identical or similar assets or liabilities in inactive markets;

- Inputs other than quoted prices that are observable for the asset or liability;

- Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

 

If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.

 

Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

 

The assets or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The following table presents assets that were measured and recognize at fair value on September 30, 2017 and December 31, 2016 and the years then ended on a recurring basis:

 

Fair Value Measurements at September 30, 2017

 

Quoted Prices in Active

Markets for Identical Assets

Significant Other Observable Inputs

Significant Unobservable Inputs

Total

(Level 1)

(Level 2)

(Level 3)

None

$

-

$

-

$

-

$

-

Total assets at fair value

$

-

$

-

$

-

$

-

 

Fair Value Measurements at December 31, 2016

 

Quoted Prices in Active

Markets for Identical Assets

Significant Other Observable Inputs

Significant Unobservable Inputs

Total

(Level 1)

(Level 2)

(Level 3)

None

$

-

$

-

$

-

$

-

Total assets at fair value

$

-

$

-

$

-

$

-

 

When the Company changes its valuation inputs for measuring financial assets and liabilities at fair value, either due to changes in current market conditions or other factors, it may need to transfer those assets or liabilities to another level in the hierarchy based on the new inputs used. The Company recognizes these transfers at the end of the reporting period that the transfers occur. For the periods ended September 30, 2017 and December 31, 2016, there were no significant transfers of financial assets or financial liabilities between the hierarchy levels.

 

 

Revenue Recognition:

 

Our principal products and services are: (i) our electronic payment service (“EPS”) and (ii) our virtual marketplace both of which are available on our portal under the domain name KinerjaMall.com. Through our Portal and Mobile App we provide EPS to consumers and merchants. Our EPS provides an affordable, secure and reliable method to consumers and merchants, as well as friends and family, to pay and transfer money using electronic devices (e.g., mobile, tablets and personal computers). In addition, consumers, merchants and businesses of all sizes can accept payments from merchant websites and mobile devices. Our EPS service enables consumers to conveniently pay utility bills, phone bills, credit card payments and add credit to their cell phone accounts. We developed a proprietary digital e-wallet software, which provides users with the ability to complete EPS transactions safely and conveniently. The e-wallet acts as an escrow account as payments will only be released to the seller once the buyer has received the product. Revenue from sales of products in our marketplace (KinerjaMall.com) and remittance services are net commission earned, whereas we book gross revenue from sales of prepaid phone pulse, data plan, prepaid electricity token and utility bills (water and electricity). Revenue from net commission contributed less than 1% of the total revenue generated.

 

The Company purchases data, prepaid mobile plans, and more from a list of vendors that specialize in these transactions. We have a risk of loss as we are buying the plans without the right to return them, therefore we are a principal to the transaction and not an agent. Based upon this, gross revenue treatment appears reasonable for these transactions.

 

Both PT Kinerja and PT KinerjaPay Indonesia, the Company’s subsidiary created under the laws of Indonesia, are owned and controlled by Mr. Ng, and considered related. All revenue is earned by PT Kinerja, and then transferred to us either gross or net depending on the revenue transaction.

 

We pay transaction fees as follows: (i) 3.9% + $0.30 when senders fund payment transactions using PayPal; (ii) no fees when customers fund payment transactions by electronic transfer of funds from a bank accounts; and (iii) fees of $0.25 to $0.50 per transaction if customers fund payment transactions by using a third party payment gateway. To date, 0%, 80% and 20%, respectively, of our fees are represented by transactions (i), (ii) and (iii), respectively.

 

Accounts Receivable

 

Accounts receivable consist primarily of trade receivables. The Company provides an allowance for doubtful trade receivables equal to the estimated uncollectible amounts. That estimate is based on historical collection experience, current economic and market conditions and a review of the current status of each customer’s trade accounts receivable. As of September 30, 2017, the Company had $22,632 in accounts receivable due from customer sales on the Company’s Portal which have not yet been collected. The allowance for doubtful trade receivables was $0 as of September 30, 2017 as we believe all of our receivables are less than 30 days old, and are fully collectable.

 

Earnings per Common Share:

 

We compute net income (loss) per share in accordance with ASC 260, Earning 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 income (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.

 

 

Common Stock Split:

 

On January 15, 2016 we declared a reverse split of our common stock. The formula provided that every thirty (30) issued and outstanding shares of common stock of the Corporation be automatically split into one (1) share of common stock. The reverse split was effective upon receipt of approval from FINRA. Except as otherwise noted, all share, option and warrant numbers have been restated to give retroactive effect to this split. All per share disclosures retroactively reflect post-split shares.

 

Income Taxes:

 

We have adopted ASC 740, Accounting for Income Taxes. Pursuant to ASC 740, we are required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.

 

We must make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.

 

Deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax basis of assets and liabilities using the tax rates and laws in effect when the differences are expected to reverse. ASC 740 provides for the recognition of deferred tax assets if realization of such assets is more likely than not to occur. Realization of our net deferred tax assets is dependent upon our generating sufficient taxable income in future years in appropriate tax jurisdictions to realize benefit from the reversal of temporary differences and from net operating loss, or NOL, carryforwards. We have determined it more likely than not that these timing differences will not materialize and have provided a valuation allowance against substantially all of our net deferred tax asset. Management will continue to evaluate the realizability of the deferred tax asset and its related valuation allowance. If our assessment of the deferred tax assets or the corresponding valuation allowance were to change, we would record the related adjustment to income during the period in which we make the determination. Our tax rate may also vary based on our results and the mix of income or loss in domestic and foreign tax jurisdictions in which we operate.

 

In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for anticipated tax audit issues in the U.S. and other tax jurisdictions based on our estimate of whether, and to the extent to which, additional taxes will be due. If we ultimately determine that payment of these amounts is unnecessary, we will reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary. We will record an additional charge in our provision for taxes in the period in which we determine that the recorded tax liability is less than we expect the ultimate assessment to be.

 

ASC 740 which requires recognition of estimated income taxes payable or refundable on income tax returns for the current year and for the estimated future tax effect attributable to temporary differences and carry-forwards. Measurement of deferred income tax is based on enacted tax laws including tax rates, with the measurement of deferred income tax assets being reduced by available tax benefits not expected to be realized.

 

Uncertain Tax Positions:

 

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of FASB ASC 740-10, Accounting for Uncertain Income Tax Positions, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

 

 

Our federal and state income tax returns are open for fiscal years ending on or after December 31, 2013. We are not under examination by any jurisdiction for any tax year. At September 30, 2017 we had no material unrecognized tax benefits and no adjustments to liabilities or operations were required under FASB ASC 740-10.

 

Recent Issued Accounting Standards

 

Effective January, 2017, the Company adopted Accounting Standards Update (ASU) No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which changes how deferred taxes are classified in organizations’ balance sheets. The ASU eliminates the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, all deferred tax assets and liabilities will be required to be classified as noncurrent. The amendments apply to all organizations that present a classified balance sheet. For public companies, the amendments are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods (i.e., in the first quarter of 2017 for calendar year-end companies). Early adoption is permitted for all entities as of the beginning of an interim or annual reporting period. The guidance may be applied either prospectively, for all deferred tax assets and liabilities, or retrospectively (i.e., by reclassifying the comparative balance sheet). If applied prospectively, entities are required to include a statement that prior periods were not retrospectively adjusted. If applied retrospectively, entities are also required to include quantitative information about the effects of the change on prior periods. The adoption of this ASU did not have a significant impact on the condensed consolidated financial statements.

 

Management does not anticipate that the adoption of these standards will have a material impact on the financial statements.

 

Effective January, 2017, the Company adopted Accounting Standards Update (ASU) No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments are intended to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees.

 

Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The amendments also simplify two areas specific to private companies.

 

For public business entities, the amendments are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted in any interim or annual period periods (i.e., in the first quarter of 2017 for calendar year-end companies).

 

The adoption of these ASU’s did not have a significant impact on the consolidated financial statements.

 

During 2016, the FASB issued several Accounting Standard Updates that focuses on certain implementation issues of the new revenue recognition guidance including Narrow-Scope Improvements and Practical Expedients, Principal versus Agent Considerations and Identifying Performance Obligations and Licensing. An entity should apply the amendments in this ASU using one of the following two methods:

 

1.            Retrospectively to each prior reporting period presented with a possibility to elect certain practical expedients, or,

 

2.            Retrospectively with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application. If an entity elects the latter transition method, it also should provide certain additional disclosures.

 

 

For a public business entity, the amendments in ASU 2014-09 (including the amendments introduced through recent ASU’s) are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period (the first quarter of fiscal year 2018 for the Company). Early application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.

 

The Company intends to adopt ASU 2014-09 as of January 1, 2018.

 

The Company is in the process of evaluating the impact of ASU 2014-09 on its revenue streams and selling contracts, if any, and on its financial reporting and disclosures. Management is expecting to complete the evaluation of the impact of the accounting and disclosure changes on the business processes, controls and systems throughout 2017. Since the Company did not report so far, material revenues, management believes that the adoption of ASU 2014-09 will not have significant impact on its financial statements.

 

2. Stockholders’ Equity

 

On January 15, 2016, we amended our certificate of incorporation to increase authorized capital to include 10 million shares of $.0001 par value preferred shares. No preferred shares have been issued.

 

Issuance of Shares of Common Stock as of September 30, 2017:

 

During the three months ended September 30, 2017, the Company authorized the issuance of 181,818 shares of common stock for cash at $1.10 per share for a total to be earned of $200,000. As of September 30, 2017 none of these shares have been issued and outstanding even though the Company received $50,000 with respect to these shares. As a result, the Company recorded $50,000 in stock payable as of September 30, 2017.

 

During the three months ended September 30, 2017, the Company authorized the issuance of 80,000 shares of common stock valued at $1.60 per share to Ace Legends Pte Ltd. for services provided. As of September 30, 2017 none of these shares have been issued and outstanding. As a result, the Company recorded $128,000 in stock payable as of September 30, 2017.

 

Debt Conversion into Shares of Common Stock

 

During the nine months ended September 30, 2017, the Company agreed to convert $100,000 in debt into 200,000 shares of common stock and 200,000 warrants. The debt was non-convertible, and the borrowings took place on May 7, 2017, but were subsequently fully converted on May 23, 2017. In addition, the Company incurred a loss of $442,697 in connection with the debt conversion, which was recorded as additional paid-in capital.

 

Common Stock and Warrants Issued for Cash

 

During the nine months ended September 30, 2017, the Company received $902,000 through a placement of 1,359,000 common stock units to investors for an offering price of $0.50 and $1.00 per unit. Each unit consisted of one share of common stock and one warrant to purchase common stock. The 1,214,000 warrants are exercisable at $2.00 and $1.00 and expire one year from the date of issuance. The warrants were valued using the Black-Scholes pricing model to estimate the relative fair value of $781,714. The Black-Sholes-Merton pricing model assumptions used are as follows: expected dividend yield of 0%; risk-free interest rate of 1.36%; expected volatility between 179% and 181%, and warrant exercise period based upon the stated terms. The warrants were classified within stockholders’ equity.

 

Stock-Based Compensation

 

During the nine months ended September 30, 2017, the Company issued 1,475,000 fully vested shares of the Company common stock and 1,900,000 warrants to consultants as payment for services. As the equity instruments issued are fully vested and non-forfeitable, the fair value of the grants was recognized as an increase additional paid-in capital at the measurement date. The shares were valued at the closing price as of the date of the underlying agreements (ranging from $0.65 to $2.93).

 

 

The warrants were valued using the Black-Scholes pricing model to estimate the fair value of $1,051,973 and resulted in current recognition in additional consulting services. The Black-Sholes pricing model assumptions used are as follows: expected dividend yield of 0%; risk-free interest rate of 1.21%; expected volatility between 179% and 185%, and warrant exercise period based upon the stated terms.

 

3. Related Party Transactions not Disclosed Elsewhere

 

On December 1, 2015, the Company entered into an agreement with PT Kinerja Indonesia, an entity organized under the laws of Indonesia (“PT Kinerja”), for an exclusive, world-wide license to use and commercially exploit certain KinderjaPay technology and intellectual property. Pursuant to the License Agreement and in consideration for the payment of royalties, the Company has been granted the exclusive, world-wide rights to the KinerjaPay IP, an e-commerce platform that provides users with the convenience of e-commerce services for bill transfer and online shopping. Mr. Ng is the control person of PT Kinerja and a controlling shareholder, CEO and Chairman of the Company.

 

The Company purchases data, prepaid mobile plans, and more from a list of vendors that specialize in these transactions. We have a risk of loss as we are buying the plans without the right to return them, therefore we are a principal to the transaction and not an agent. Based upon this, gross revenue treatment appears reasonable for these transactions.

 

Both PT Kinerja and PT KinerjaPay Indonesia, the Company’s subsidiary created under the laws of Indonesia, are owned and controlled by Mr. Ng, and considered related. All revenue is earned by PT Kinerja, and then transferred to us either gross or net depending on the revenue transaction.

 

On February 19, 2016, we issued 1,333,333 shares of our common stock to Mr. Ng, our CEO, sole director and control person. Mr. Ng is the sole officer and directors and control person of PT Kinerja, the other party to this agreement, as payment for services as part of a service agreement resulting from the license agreement. The shares were valued at the closing price as of the date of the agreement ($0.9001) and resulted in full recognition of $1,200,133 in consulting services expense. The services provided and to be provided under this service agreement are as follows:

 

(a) The Service Company shall provide the Company and the Subsidiary with the following services during a term of three (3) years from the date first set forth above (the “Services”), for which the Subsidiary shall pay the Service Company:

 

I. General Business Services: which shall include personnel, office facilities and equipment, utilities, and related overhead and operational expenses and shall be provided under the direction and control of a designated project manager; and

 

II. Technical Services: which shall include, but not be limited to, Web Hosting, Web Maintenance, Web Updates and System Upgrades, from time-to-time, which Technical Services will be fulfilled by a minimum of five (5) experienced computer engineers / programmers, one (1) algorithm specialist and two (2) trained technical engineers who shall maintain the servers provided by the Service Company and support the Subsidiary’s full time operations. In addition, the Service Company, in support of the Technical Services, shall guarantee ninety-nine point nine-nine (99.99%) percent uptime of the Company’s domains and applications, and provide all requisite support for the traffic to the Company’s domains with unlimited bandwidth and scalable uplink whenever the traffic to the domains increases, from time-to-time; and

 

 

III. R&D Services: which shall include, but not be limited to, the development of new features, products, or services related to the KinerjaPay IP and KinerjaPay.com. In connection with the R&D Services, the Parties acknowledge that all new KinerjaPay IP that is developed or for which enhancements are created for KinerjaPay IP already in existence at the date of this Agreement (“Additional IP”) shall belong exclusively to the Company and its Subsidiary. The Parties further agree that in each instance, they will, in “good faith,” negotiate and execute separate, supplemental addendums to this Agreement to address the Services to be provided by the Service Company with respect to the Additional IP.

 

(b) The Subsidiary shall responsible for the following:

 

I. Sales and Marketing: PT. KinerjaPay Indonesia shall cover and be directly responsible for all sales and marketing activities and expenses associated with the commercial exploitation of the License for the KinerjaPay IP; and

 

II. Billing and Collections: PT. KinerjaPay Indonesia shall be responsible for all billing and collections and book all revenues generated by and from commercial exploitation of the License; and　

 

III. Advertising and Sales Reps: PT. KinerjaPay Indonesia shall at all times maintain a staff of at least three (3) sales reps;　

 

IV. Office and Administration: PT. KinerjaPay Indonesia shall retain at least one (1) person to provide office/administrative/accounting services to fulfill the duty of Subsidiary in Section 1B(ii) above.

 

In consideration for the Services to be provided, the Company shall pay or compensate the Service Company as follows: (i) Edwin Witarsa Ng, CEO and Chairman - 3,000,000 shares representing 34.77%; (ii)P.T. Starest Asset Management - 640,000 shares representing 7.42%; and (iii) Desa Sebong Lagoi Kec and Teluk Sebong Bintan Kepulauan Riau, Indonesia, 3,000,000 shares representing 34.77%.

 

The Company shall issue to the Service Company 1,333,333 restricted shares. The restricted shares shall not be deemed fully-paid and non-assessable until eighteen (18) months from the date first set forth above; and (ii) The Subsidiary, on a quarterly basis, shall pay the Service Company for the services, facilities and personnel provided by the Service Company be at the rate set forth in Appendix A attached hereto; and (iii) The Subsidiary, on a quarterly basis, shall pay the Service Company royalties equal to one (1%) percent of the net revenues generated from the commercial exploitation of the License; and (iv) The Service Company shall be paid a one-time set-up fee of $55,000 within three (3) business days of the execution of this Agreement.

 

As of September 30, 2017, we had $51,849 in accounts payable due to our CEO consisting of a $50,000 loan and $1,849 in expenses paid on behalf of the Company by our CEO. The balance is due on demand and accrues interest at 8% per annum. As of September 30, 2017, $1,830 in accrued interest was due and was expensed during the three months ended September 30, 2017.

 

4. Other Assets

 

On July 31, 2017, the Company entered into an 18 month license agreement through January 31, 2019, with Ace Legends Pte Ltd. (the “Service Company”) for an exclusive, world-wide license to acquire and market the games currently owned and developed by the Service Company. In consideration for receiving the license and for becoming the game publisher for all of the Service Company’s games indefinitely, the Company agreed to pay to the Service Company $100,000 in four installments of $25,000 each. In addition, the Company agreed to issue to the Service Company 80,000 restricted shares of common stock, which shall be deemed fully paid.

 

 

The Company shall pay to the Service Company royalty fees of 21% of all sales generated under the license agreement, which payments shall paid on a quarterly basis. PT KinerjaPay Indonesia, the subsidiary of the Company, shall also pay a monthly fee of $5,000 to the Service Company during the 18 month term of the license agreement for further business development.

 

The amortization expense for the period ended September 30, 2017 was immaterial to the Company.

 

5. Going Concern

 

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has not established sufficient revenue to cover its 2017 operating costs, and as such, has incurred an operating loss since inception. Further, as of September 30, 2017, the cash resources of the Company were insufficient to meet its current business plan. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying 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.

 

6. Subsequent Events

 

There were no material subsequent events following the period ended September 30, 2017 and throughout the date of the filing of Form 10-Q.

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS. Back to Table of Contents

 

As used in this Form 10-Q, references to the “KinerjaPay,” Company,” “we,” “our” or “us” refer to KinerjaPay Corp. Unless the context otherwise indicates.

 

The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which refer to future events. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.

 

Plan of Operations

 

The Company was incorporated in Delaware on February 12, 2010 under the name Solarflex Corp. for the purpose of developing, manufacturing and selling a solar photovoltaic element, a device that converts light into electrical flow (also known as a photovoltaic cell) based on certain proprietary technology to enable an increase in solar energy conversion and provide energy at a lower cost. We did not generate any revenues from the sale of any solar photovoltaic element, nor did we successfully manufacturer or construct a working prototype. We determined during the 4th quarter of 2015 to evaluate potential business opportunities.

 

 

On December 1, 2015, the Company entered into a license agreement (the “License Agreement”) with PT Kinerja Indonesia, an entity organized under the laws of Indonesia and controlled by Mr. Ng (“PT Kinerja”), for an exclusive, world-wide license to use and commercially exploit certain technology and intellectual property (the “KinerjaPay IP”) and its website, KinerjaPay.com. Pursuant to the License Agreement, the Company was granted the exclusive, world-wide rights to the KinerjaPay IP, an e-commerce portal.

 

The Company purchases data, prepaid mobile plans, and more from a list of vendors that specialize in these transactions. We have a risk of loss as we are buying the plans without the right to return them, therefore we are a principal to the transaction and not an agent. Based upon this, gross revenue treatment appears reasonable for these transactions.

 

Both PT Kinerja and PT KinerjaPay Indonesia, the Company’s subsidiary created under the laws of Indonesia, are owned and controlled by Mr. Ng, and considered related. All revenue is earned by PT Kinerja, and then transferred to us either gross or net depending on the revenue transaction.

 

In connection with the License Agreement, we agreed to: (i) change the name of the Company from Solarflex Corp to KinerjaPay Corp.; (ii) implement a reverse split of our common stock on a one-for-thirty (1:30) basis; and raise equity capital in the minimum offering amount of $500,000 and the maximum offering amount of $2,500,000 through the offering of units at a price of $0.50, each Unit, each consisting of 1 share of common stock (post-reverse) and 1 class A warrant exercisable for a period of 24 months to purchase 1 additional share of common stock (post-reverse) at $1.00. The Unit Offering was made only to “accredited investors” who are not U.S. Persons in reliance upon Regulation S promulgated by the SEC under the Securities Act of 1933, as amended (the “Act”). On January 20, 2016, the Company closed the Minimum Offering after it received subscription proceeds in excess of $500,000.

 

As of March 10, 2016, the Company’s name change to KinerjaPay Corp. and its one-for-thirty reverse stock split became effective. The Company’s shares of common stock are subject to quotation on the OTCQB market under the symbol KPAY.

 

Our principal products and services are (i) our electronic payment service (the “EPS”); and (ii) our virtual marketplace (the “Marketplace”) both of which are available on our portal under the domain name KinerjaPay.com (the “Portal”). Our Android-based mobile app not only serves as an extension of desktop or laptop access to our website, but has additional in-app services that cater to mobile users, such as social engagement and digital entertainment (the “Mobile App”). We believe that in combining our EPS function (“PAY”) with the ability to buy and sell products via our virtual marketplace (“Buy”) enhanced by a gamification component (“Play”) our customers and merchants increase their loyalty to our services.

 

Indonesia, the world’s fourth most-populous country, having a population estimated to be 255 million people, is becoming an economic power in the Southeast Asia region. Over 50% of its population is below the age of 30 and we believe that the young Indonesian population is highly adaptive to new technology. The rise of Smartphones and tablets that sell for less than US$100 is rapidly broadening internet access and pushing the Indonesian e-commerce market toward a critical point in terms of scale and profitability, in spite of significant challenges due to poor infrastructure and payment systems. The number of internet users is excepted to double to 125 million by 2018 and Smartphone ownership is to rise from 20 per cent to 52 per cent in the same period, the highest percentage compared to other Southeast Asian countries, according to Redwing, an advisory group.

 

Notwithstanding our belief that our Portal represents a significant advance as compared to other Indonesian portals, there are a number of potential difficulties that we might face, including the following:

 

● We may not be able to raise sufficient additional funds to fully implement our business plan and grow our business;

● Competitors may develop alternatives that render our Portal services redundant or unnecessary;

● Our proprietary technology may be shown to have characteristics that may render it insufficient for our business;

● Our Portal may not become widely accepted by consumers and merchants; and

● Strict, new government regulations and inappropriate e-commerce policies, especially in an emerging economy such as Indonesia, may hinder the growth of the e-commerce market.

 

 

We may be expected to require up to an additional $2.5 million in capital during the next 12 months to fully implement our business plan and fund our operations.

 

Results of Operations during the three months ended September 30, 2017 as compared to the three months ended September 30, 2016

 

During the three months ended September 30, 2017 and 2016, we generated revenue from services of $1,763,608 and $0, respectively. During the three months ended September 30, 2017, we had costs related to our services revenue of $1,842,985 resulting in a negative gross margin of $79,377. We incurred no costs related to service revenues during the three months ended September 30, 2017.

 

During the three months ended September 30, 2017, we had general and administrative expenses of $444,732 and depreciation expense of $940 as compared to $363,434 and $17, respectively, during the same period in the prior year . During the three months ended September 30, 2017, we had other costs and expenses related to interest expense of $1,830 as compared to $137 in the same period in the prior year. Our total other costs and expenses were $1,830 during the three months ended September 30, 2017 as compared to $137 in the same period in the prior year.

 

We had a net loss of $526,879 during the three months ended September 30, 2017 as compared to a net loss $363,588 during the three months ended September 30, 2016.

 

Results of Operations during the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016

 

During the nine months ended September 30, 2017 and 2016, we generated revenue from services of $1,914,358 and $0, respectively. During the nine months ended September 30, 2017, we had costs related to our services revenue of $2,002,073 resulting in a negative gross margin of $87,715. We incurred no costs related to service revenues during the nine months ended September 30, 2016.

 

During the nine months ended September 30, 2017, we had general and administrative expenses of $3,993,974 and depreciation expense of $1,896 as compared to $2,444,238 and $103, respectively, during the same period in the prior year . During the nine months ended September 30, 2017, we had other costs and expenses related to interest expense of $1,844 and a loss of $442,697 related to debt conversion as compared to interest expenses of $31 and a loss of $9,003 due to the extinguishment of debt during the nine months ended September 30, 2016. Our total costs and expenses were $444,541 during the nine months ended September 30, 2017 as compared to $9,034 in the same period in the prior year.

 

We had a net loss of $4,528,126 during the nine months ended September 30, 2017 as compared to a net loss $2,453,375 during the nine months ended September 30, 2016.

 

Liquidity and Capital Resources

 

On September 30, 2017, we had $124,409 in current assets represented by cash of $60,488, restricted cash of $29,841, accounts receivable of $22,632 and prepaid expenses of $11,448. On December 31, 2016, we had $77,738 in current assets consisting of $32,591 in cash, $16,181 in restricted cash and $28,966 in prepaid expenses.

 

We had fixed assets of $13,636 and intangible assets of $25,000 as of September 30, 2017 and fixed assets of $3,845 as of December 31, 2016. We had total assets of of $163,045 as of September 30, 2017 and $81,583 as of December 31, 2016. As of September 30, 2017, we had $57,371 in current liabilities comprised of $2,782 in accounts payable, $51,849 in accounts payable to a related party, tax payable of $907, accrued interest of $1,830 and accrued expense of $3. As of December 31, 2016, we had total current liabilities of $157,663 consisting of accounts payable of $3,461, tax payable of $95, accrued expenses of $4,107 and unissued stock subscriptions of $150,000.

 

We had no long-term liabilities as of September 30, 2017 and December 31, 2016.

 

 

We used $1,049,360 in our operating activities during the nine months ended September 30, 2017, which was due to a net loss of $4,528,126 offset by total non-cash compensation charges of $3,214,580, a loss on debt conversion of $442,697, $1,896 in depreciation expense, an increase in accounts receivable of $22,632, an increase in other assets of $25,000, a decrease in prepaid expenses of $17,518, a decrease in accounts payable of $148,019 and a decrease in accrued liabilities of $2,274.

 

We used $902,428 in our operating activities during the nine months ended September 30, 2016, which was due to a net loss of $2,453,375 offset by depreciation expense of $103, a loss on extinguishment of debt of $9,003, non-cash compensation charges of $1,508,133, an increase in accounts payable of $31,230, an increase in accrued liabilities of $7,094 and an increase in prepaid expenses of $4,616.

 

We financed our negative cash flow from operations during the nine months ended September 30, 2017 through the issuance of common stock of $952,000 and debt borrowings of $150,000. We financed our negative cash flow from operations during the nine-month period ended September 30, 2016 through the issuance of common stock of $804,987 reduced by payments of $8,689 related to principal payments on debt.

 

We had investing activities of $11,687 during the nine months ended September 30, 2017 related to the purchase of equipment as compared to $2,720 during the same period in the prior year.

 

Availability of Additional Capital

 

Notwithstanding our success in raising over $952,000 from the private sale of equity securities during the nine-month period ended September 30, 2017, there can be no assurance that we will continue to be successful in raising additional equity capital to fund our operations. If we determine that it is necessary to raise additional funds, we may choose to do so through public or private equity or debt financing, a bank line of credit, or other arrangements. If we are unable to obtain adequate capital resources to fund operations, we may be required to delay, scale back or eliminate some or all of our plan of operations, which may have a material adverse effect on our business, results of operations and ability to operate as a going concern.

 

Any additional equity financing may be dilutive to our stockholders, new equity securities may have rights, preferences or privileges senior to those of existing holders of our shares of common stock. Debt or equity financing may subject us to restrictive covenants and significant interest costs.

 

Capital Expenditure Plan During the Next Twelve Months

 

During the nine-month period ended September 30, 2017, we raised $952,000 in equity capital and $150,000 through borrowings on debt. We may be expected to require up to an additional $1.6 million in capital during the next 12 months to fully implement our business plan and fund our operations. Our plan is to utilize the equity capital and debt that we raise, together with anticipated cash flow from operations, to fund a very significant investment in sales and marketing, concentration principally on online advertising and incentivizing existing customers for the introduction of new customers, among other strategies. However, there can be no assurance that: (i) we will continue to be successful in raising equity capital in sufficient amounts and/or at terms and conditions satisfactory to the Company; or (ii) we will generate sufficient revenues from operations, to fulfill our plan of operations. Our revenues are expected to come from the sale of our portal services. As a result, we will continue to incur operating losses unless and until we are able to generate sufficient cash flow to meet our operating expenses and fund our planned sales and market efforts. There can be no assurance that the market will adopt our portal or that we will generate sufficient cash flow to fund our enhanced sales and marketing plan. In the event that we are not able to successfully: (i) raise equity capital and/or debt financing; or (ii) market and significantly increase the number of portal users and revenues from such users, our financial condition and results of operations will be materially and adversely affected and we will either have to delay or curtail our plan for funding our sales and marketing efforts.

 

 

Going Concern Consideration

 

Our registered independent auditors have issued an opinion on our financial statements which includes a statement describing our going concern status. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills and meet our other financial obligations. This is because we have not generated any revenues and no revenues are anticipated until we begin marketing the product. Accordingly, we must raise capital from sources other than the actual sale of the product. We must raise capital to implement our project and stay in business.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK. Back to Table of Contents

 

A smaller reporting company, as defined by Item 10 of Regulation S-K, is not required to provide the information required by this item.

 

ITEM 4. CONTROLS AND PROCEDURES. Back to Table of Contents

 

Evaluation of disclosure controls and procedures.

 

As of September 30, 2017, the Company’s chief executive officer and chief financial officer conducted an evaluation regarding the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act. Based upon the evaluation of these controls and procedures as provided under the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013), our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were ineffective as September 30, 2017. Management has identified corrective actions to address the weaknesses and plans to implement them during the fourth quarter of 2017.

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in the Company’s internal control over financial reporting during the period covered by this report, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS. Back to Table of Contents

 

There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company’s property is not the subject of any pending legal proceedings.

 

ITEM 1A. RISK FACTORS. Back to Table of Contents

 

A smaller reporting company, as defined by Item 10 of Regulation S-K, is not required to provide the information required by this item.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES UND USE OF PROCEEDS. Back to Table of Contents

 

In July 2016, we issued 100,000 shares of our common stock to an unrelated party as payment for a service agreement. The shares were valued at the closing price as of the date of the agreement ($0.77) and offset by $1,000 in cash received for the shares. This resulted in full recognition of the excess of fair value over cash received of $76,000 as consulting services expense.

 

 

Share based payment transactions were accounted for in accordance with the requirements of ASC 505-50 Equity Based Payments to Non Employees. Paragraph 505-50-30-6 establishes that share-based payment transactions with non-employees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The Company measured share-based payment transactions at the fair value of the shares issued at date of grant, the Company believes that the value of the shares is more reliably measurable.

 

During the three months ended September 30, 2017, the Company authorized the issuance of 181,818 shares of common stock valued at $1.10 per share. As of September 30, 2017 none of these shares have been issued and outstanding even though the Company received $50,000 with respect to these shares. As a result, the Company recorded $50,000 in stock payable as of September 30, 2017.

 

During the three months ended September 30, 2017, the Company authorized the issuance of 80,000 shares of common stock valued at $1.60 per share to Ace Legends Pte Ltd. for services provided. As of September 30, 2017 none of these shares have been issued and outstanding. As a result, the Company recorded $128,000 in stock payable as of September 30, 2017

 

The Company believes that the issuances and sale of the restricted shares were exempt from registration pursuant to Section 4(2) of the Act as privately negotiated, isolated, non-recurring transactions not involving any public solicitation. The recipients in each case represented their intention to acquire the securities for investment only and not with a view to the distribution thereof. Appropriate restrictive legends are affixed to the stock certificates issued in such transactions. All recipients of restricted shares either received adequate information about the Company or had access, through employment, relation and/or business relationships with the Company to such information.

 

ITEM 3. DEFAULT UPON SENIOR SECURITIES. Back to Table of Contents

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURE. Back to Table of Contents

 

None.

 

ITEM 5. OTHER INFORMATION. Back to Table of Contents

 

None.

 

ITEM 6. EXHIBITS. Back to Table of Contents

 

Exhibit No.		Description
31.1		Certification of CEO pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of CFO pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of CEO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of CFO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Signature		Title		Date
/s/ Edwin Witarsa Ng		Chief Executive Officer (Principal Executive Officer)		December 8, 2017
Edwin Witarsa Ng
/s/ Meigisonnata Widjaja		Chief Financial Officer (Principal Financial and Principal		December 8, 2017
Meigisonnata Widjaja		Accounting Officer)