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 January 31, 2020
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ___________ to ___________
Commission File Number 333-185909

 

Xplosion Incorporated

(Exact name of registrant as specified in its charter)

 

Nevada		30-0942823
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
Suite 3882 – 304 S. Jones Blvd
Las Vegas, NV		89107
(Address of principal executive offices)		(Zip Code)

 

1-702-583-3283

(Registrant’s telephone number)

n/a

(Former name, former address and former fiscal year, if changed since last report)

 

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.

 

x Yes

¨ No

 

Indicate by check mark whether the registrant has submitted electronically 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).

 

x 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. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer	o	Accelerated filer	¨
Non-accelerated filer	o	Smaller reporting company	x
		Emerging growth company	x

 

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 the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of April 20, 2020, the issuer had one class of common stock, with a par value of $0.001, of which 60,848,398 shares were issued and outstanding.

 

TABLE OF CONTENTS

 

		Page
PART I—FINANCIAL INFORMATION
Item 1:	Financial Statements:	3
	Unaudited Condensed Consolidated Balance Sheets as at January 31, 2020, and October 31, 2019	3
	Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended January 31, 2020 and 2019	4
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended January 31, 2020 and 2019	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended January 31, 2020 and 2019	6
	Notes to Financial Statements (Unaudited)	7
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	15
Item 4:	Controls and Procedures	15
PART II—OTHER INFORMATION
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 5:	Other Events	16
Item 6:	Exhibits	16
	Signatures	17

 

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PART I—FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

XPLOSION INCORPORATED

 

Condensed Consolidated Balance Sheets

January 31, 2020 and October 31, 2019

(unaudited)

 

		January 31				October 31
		2020				2019
Assets
Current assets:
Cash		$	21,627			$	32
Total current assets			21,627				32
Long-term lease, net			1,853,077				3,383,143
Total assets		$	1,874,704			$	3,383,175
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable		$	17,472			$	26,965
Accrued expenses			127,567				111,315
Accrued remuneration			42,236				42,236
Total current liabilities			187,275				180,516
Loan			145,036				144,176
Total liabilities			332,311				324,692
Stockholders' Equity
Preferred stock: $0.001 par value, authorized 100,000,000 shares, issued and outstanding nil shares			-				-
Common Stock: $0.001 par value, authorized 300,000,000 shares, issued and outstanding 60,848,398 shares (2019 - 60,848,398)			60,849				60,849
Additional paid-in capital			5,431,227				5,431,227
Accumulated deficit			(3,949,683	)			(2,433,593	)
Total stockholders' equity			1,542,393				3,058,483
Total liabilities and stockholders' equity		$	1,874,704			$	3,383,175

 

See accompanying notes to condensed consolidated financial statements 

 

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XPLOSION INCORPORATED

 

Condensed Consolidated Statements of Operations

For the three months ended January 31, 2020 and 2019

(unaudited)

 

		2020				2019
Revenue		$	-			$	-
Cost of Revenue			-				-
Gross Profit (Loss)			-				-
Expenses
Amortization			35,241				35,241
General and administrative			227				12,418
Marketing			-				30,000
Total operating expenses			35,468				77,659
Loss from operations			(35,468	)			(77,659	)
Other income and expense
Interest expense			(16,252	)			(6,581	)
Interest income			-				-
Gain on sale of leasehold interest			157,350				-
			141,098				(6,581	)
Net Income (Loss)		$	105,630			$	(84,240	)
Net income (loss) per share		$	0.002			$	(0.001	)
Weighted average number of shares outstanding			60,848,398				60,848,398

 

See accompanying notes to condensed consolidated financial statements

  

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XPLOSION INCORPORATED

 

Condensed Consolidated Statements of Stockholders' Equity

For the three months ended January 31, 2020 and 2019

(unaudited)

 

		Common Stock								Additional Paid-in				Accumulated				Total Stockholders'
		Number of Shares				Amount				Capital				Deficit				Equity
Balance October 31, 2018			58,233,705			$	58,234			$	4,387,964			$	(2,190,198	)		$	2,256,000
Net Loss															(84,240	)			(84,240	)
Shares issued for loan default			2,614,693				2,615				1,043,263								1,045,878
Balance January 31, 2019			60,848,398			$	60,849			$	5,431,227			$	(2,274,438	)		$	3,217,638
Balance October 31, 2019			60,848,398			$	60,849			$	5,431,227			$	(2,433,593	)		$	3,058,483
Net Income															105,630				105,630
Dividends paid															(1,621,720	)			(1,621,720	)
Balance  January 31, 2020			60,848,398			$	60,849			$	5,431,227			$	(3,949,683	)		$	1,542,393

 

See accompanying notes to condensed consolidated financial statements

 

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XPLOSION INCORPORATED

 

Condensed Consolidated Statements of Cash Flows

For the three months ended January 31, 2020 and 2019

(unaudited)

 

		2020				2019
Cash provided by (used in) operating activities:
Operating activities:
Net income (loss) for the year		$	105,630			$	(84,240	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of long-term lease			35,241				35,241
Gain on sale of leasehold interest			(157,350	)			-
Changes in assets and liabilities
Accounts payable and accrued expenses			6,759				45,904
Net cash from (used) in operating activities			(9,720	)			(3,095	)
Cash provided by investing activities:
Proceeds from sale of leasehold interest			30,455				-
Net cash provided by investing activities			30,455				-
Cash provided by financing activities:
Proceeds from loan payable			860				3,053
Net cash provided by financing activities			860				3,053
Increase (decrease) in cash during the period			21,595				(42	)
Cash at beginning of the period			32				200
Cash at end of the period		$	21,627			$	158
Supplementary Information:
Cash paid for:
Interest paid		$	-			$	-
Income taxes		$	-			$	-
Non-cash transactions:
Shares issued for settlement of accrued interest		$	-			$	1,045,877
Shares of Good Life Holdings Corporation received for sale of leasehold interest		$	1,621,720			$	-
Shares of Good Life Holdings Corporation distributed to shareholders		$	1,621,720			$	-

 

See accompanying notes to condensed consolidated financial statements.

 

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XPLOSION INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2020

 

Note 1. Description of Business and Summary of Significant Accounting Policies

 

Organization

 

Xplosion Incorporated (the “Company”) was incorporated under the laws of the State of Nevada on October 6, 2015.

The Company is in the business of marketing, distribution of innovative lifestyle and enhancement products and complimentary goods through a global distribution license for the SayberX line of self-stimulation devices for men and couples. During the year ended October 31, 2018 the Company acquired 588 acres of land, through a twenty-five year prepaid lease, where the Company has timber, water and agriculture rights that will allow the Company to pursue the business of lifestyle enhancement products, solutions and ancillary and goods and services. During the three months ended January 31, 2020 the Company sold 62.94 acres of the leased land.

 

Interim Period Financial Statements

 

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the Securities and Exchange Commission’s instructions. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. The results of operations reflect interim adjustments, all of which are of a normal recurring nature and, in the opinion of management, are necessary for a fair presentation of the results for such interim period. The results reported in these interim financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. Certain information and note disclosure normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the Securities and Exchange Commission’s rules and regulations. These unaudited interim condensed financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended October 31, 2019, filed April 9, 2020.

 

Going Concern

 

The Company’s condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. At January 31, 2020 and October 31, 2019, the Company had cash of $21,627 and $32, respectively, and negative working capital of $165,649 as at January 31, 2020 and $180,484 as at October 31, 2019. For the three months ended January 31, 2020 the Company had net income of $105,630 and for the three months ended January 31, 2019 a net loss of $84,280. The income for the three months ended January 31, 2020 was from the non-cash gain on sale of a leasehold interest and the Company continues to expect losses and is in need of further funding. Continued losses may adversely affect the liquidity of the Company in the future. Therefore, the factors noted raise substantial doubt about our ability to continue as a going concern. The recoverability of a major portion of the recorded assets amounts shown in the accompanying condensed consolidated financial statements is dependent upon continued operations of the Company, which in turn is dependent on the Company’s ability to raise additional capital, obtain financing and to succeed in its future operations. These condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s existence is dependent upon management’s ability to develop profitable operations and resolve its liquidity problems.

  

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Principles of Consolidation

 

The condensed consolidated financial statements include the accounts of Xplosion Incorporated and its wholly owned subsidiary Xplosion (Oregon) Corporation.

 

All significant intercompany balances and transactions have been eliminated.

 

Cash

 

Cash equivalents with maturity dates less than 90 days from the date of origination are considered to be cash equivalents for all financial reporting purposes. The Company currently has no cash equivalents.

 

Functional Currency

 

The financial statements are presented in United States dollars, which is the Company’s functional currency.

 

Fair Value Measurements

 

Fair value is defined as the exchange price that will be received for an asset or paid to transfer a liability (an exit price) in the principal. Valuation techniques used to measure fair value should maximize the use of observable inputs and minimize the use of unobservable inputs. To measure fair value, the Company uses the following fair value hierarchy based on three levels of inputs, of which the first two are considered to be observable and the third unobservable:

 

Level 1 – Quoted prices in active markets for identical assets or liabilities.

 

                Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3 – Unobservable inputs are supported by little or no market activity and are significant to the fair value of the assets or liabilities.

 

Advertising Expenses

 

Advertising costs are expensed as incurred. During the three months ended January 31, 2020 and 2019 the Company incurred no advertising costs.

 

Income Taxes

 

Deferred income tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities, operating loss, and tax credit carryforwards, and are measured using the enacted income tax rates and laws that will be in effect when the differences are expected to be recovered or settled. Realization of certain deferred income tax assets is dependent upon generating sufficient taxable income in the appropriate jurisdiction. The Company records a valuation allowance to reduce deferred income tax assets to amounts that are more likely than not to be realized. The initial recording and any subsequent changes to valuation allowances are based on a number of factors (positive and negative evidence). The Company considers its actual historical results to have a stronger weight than other, more subjective, indicators when considering whether to establish or reduce a valuation allowance.

 

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The Company continually evaluates its uncertain income tax positions and may record a liability for any unrecognized tax benefits resulting from uncertain income tax positions taken or expected to be taken in an income tax return. Estimated interest and penalties are recorded as a component of interest expense and other expense, respectively.

 

Because tax laws are complex and subject to different interpretations, significant judgment is required. As a result, the Company makes certain estimates and assumptions in: (1) calculating its income tax expense, deferred tax assets, and deferred tax liabilities; (2) determining any valuation allowance recorded against deferred tax assets; and (3) evaluating the amount of unrecognized tax benefits, as well as the interest and penalties related to such uncertain tax positions. The Company’s estimates and assumptions may differ significantly from tax benefits ultimately realized.

 

Long-term Lease

 

The long-term lease is being amortized on a straight-line basis over the twenty-five year term of the lease in the amount of approximately $78,000 per year.

 

Impairment of Other Long-Lived Assets

 

The Company evaluates the recoverability of its long-lived assets whenever events or changes in circumstances indicate impairment may have occurred. An impairment loss is recognized when the net book value of such assets exceeds the estimated future undiscounted cash flows attributed to the assets or the business to which the assets relate. Impairment losses, if any, are measured as the amount by which the carrying value exceeds the fair value of the assets. During the three months ended January 31, 2020 and 2019, the Company identified no impairment losses related to the Company’s long-lived assets.

 

Net Income (Loss) Per Share

 

Basic net income (loss) per share is calculated by dividing the net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding in the period. Diluted income (loss) per share takes into consideration common shares outstanding (computed under basic income (loss) per share) and potentially dilutive securities. For the three months ended January 31, 2020, there are no outstanding stock options and warrants. Common shares issuable are considered outstanding as of the original approval date for purposes of earnings per share computations.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the fiscal year. The Company bases its estimates on historical experience, current conditions and on other assumptions that it believes to be reasonable under the circumstances. Actual results could differ from those estimates and assumptions.

 

Financial Instruments

 

The Company has the following financial instruments: cash, accounts payable, accrued expenses and loan payable. The carrying value of these financial instruments approximates their fair value due to their liquidity or their short-term nature.

 

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Share Issuances for Services, Debt Instruments and Interest

 

The Company issues instruments to non-employees for the receipt of goods and services, and, in certain circumstances the settlement of short-term loan arrangements. The applicable GAAP establishes that share-based payment transactions with nonemployees 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.

 

In these transactions, the Company issues unregistered and restricted equity instruments. Additionally, the Company currently has no shares of freely-tradeable stock with a quoted market price (a Level 1input within the GAAP hierarchy).

 

When unregistered common shares are issued for the settlement of short-term financing arrangements (that are not initially convertible), the reacquisition price of the extinguished financing arrangement is determined by the value of the debt which is more clearly evident, and no additional inducement expense is recognized.

 

In situations in which the Company issues unregistered restricted common shares in exchange for goods and services, and the value of the goods and services are not the most reliably measurable, the Company recognizes the fair value of the unregistered restricted equity instruments based on the value of similar instruments issued in private placements in exchange for cash in the most recent transactions (a Level 2 input within the GAAP hierarchy). The Company has determined this methodology reflects the risk adjusted fair value of its unregistered restricted equity instruments using a commercially reasonable valuation technique.

 

Emerging Growth

 

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved

 

We have irrevocably opted out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the Act.

 

Recent Accounting Pronouncements

 

In February 2016, the FASB issued ASU2016-02, Leases (Topic 842), requiring entities to a right-of-use asset and a lease liability for virtually all of their leases. This standard is effective for annual and interim periods beginning after December 15, 2018, and early adoption is permitted. The Company has adopted this standard and it has no material impact on its condensed consolidated financial statements.

 

In August 2018, FASB issued Accounting Standards Update No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13). The new standard makes various modifications to the disclosure requirements on fair value measurement in Topic 820. Adoption of ASU 2018-13 is required for fiscal reporting periods beginning after December 15, 2019, including interim reporting periods within those fiscal years with early adoption being permitted. The Company does not expect the adoption of ASU 2018-13 to have a material impact on its condensed consolidated financial statements.

 

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Note 2. Long-term Lease

 

During the year ended October 31, 2018 the Company entered into a twenty-five year lease for approximately 588 acres of land in Jackson County, Oregon, USA. The fair value of the full twenty-five year lease of $3,509,188 was paid in full by the issuance of 8,673,105 shares of common stock. The cost of the lease is being amortized on a straight-line basis over the term of the lease.

 

On January 29, 2020, the Company sold 62.94 acres of the leased land for the remaining portion of the twenty-five years in return for $30,455 (CAD 40,000) and 21,299,670 shares, valued at $1,621,720 (CAD 2,129,967), of Good Life Holdings Corporation, a British Columbia corporation. This resulted in the Company recording a gain on sale of the leasehold interest of $157,350.

 

On January 31, 2020, the shares of Good Life Holdings Corporation, valued at $1,621,720, were distributed to the shareholders of the Company as a non-cash dividend.

 

Note 3. Revolving Loan Facility

 

On November 1, 2016 the Company entered into an agreement, and amended May 18, 2018 and October 25, 2019, for a revolving loan facility of up to $250,000. The loan, due on or before October 31, 2021, is unsecured and with interest of 3.75% per month, calculated based on the amount of principal outstanding at the end of each month.

 

The balance outstanding as at January 31, 2020 was $145,036 with an available credit line of $104,964.

 

Note 4. Related Party Transactions

 

The balance of accrued remuneration outstanding as at January 31, 2020 in the amount of $42,236 is due to its former officer and director.

 

 Note 5. Share Capital

 

Preferred Stock

 

The Company’s authorized capital includes 100,000,000 shares of preferred stock of $0.001 par value. The designation of rights including voting powers, preferences, and restrictions shall be determined by the Board of Directors before the issuance of any shares.

 

No shares of preferred stock are issued and outstanding as of January 31, 2020.

 

Common Stock

 

The Company is authorized to issue 300,000,000 shares of common stock, par value of $0.001.

 

No shares of common stock have been issued during the three months ended January 31, 2020.

 

Note 6. Subsequent Events

 

Management has evaluated subsequent events up to the date of filing. There are no subsequent events to report.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion should be read in conjunction with the accompanying unaudited financial statements for the three months ended January 31, 2020 and 2019, and our annual report for the year ended October 31, 2019, including the financial statements and notes thereto.

 

Forward-Looking Information May Prove Inaccurate

 

This report contains statements about the future, sometimes referred to as “forward-looking” statements. Forward-looking statements are typically identified by the use of the words “believe,” “may,” “could,” “should,” “expect,” “anticipate,” “estimate,” “project,” “propose,” “plan,” “intend,” and similar words and expressions. Statements that describe our future strategic plans, goals, or objectives are also forward-looking statements.

 

Readers of this report are cautioned that any forward-looking statements, including those regarding our management’s current beliefs, expectations, anticipations, estimations, projections, proposals, plans, or intentions, are not guarantees of future performance or results of events and involve risks and uncertainties. The forward-looking information is based on present circumstances and on our predictions respecting events that have not occurred, that may not occur, or that may occur with different consequences from those now assumed or anticipated. Actual events or results may differ materially from those discussed in the forward-looking statements as a result of various factors. The forward-looking statements included in this report are made only as of the date of this report. We are not obligated to update such forward-looking statements to reflect subsequent events or circumstances.

 

Introduction

 

We were incorporated in the State of Nevada on October 6, 2015. We are a development stage company engaged in the sales, marketing and distribution of innovative lifestyle enhancement products and complimentary goods that target millennials and progressive thinkers of Generation X and Y. We have acquired the URL address www.xplosionincorporated.com.

 

On December 7, 2015, we entered into an Exclusive Global Rights Agreement, that was since amended to non-exclusive rights, with Interactive Holdings Limited pursuant to which we had acquired the distribution license for the sales, marketing and distribution of the Sayber X line of self-stimulation devices for men and couples, such license since amended to be Non-exclusive. The Sayber X is a wearable, automated, blue tooth and software integrated sexual stimulation device which enables the user to engage in self-stimulation either alone, or with a partner using the X-Ring controller remote control device and related software. During the period of 2016 – 2018 we aggressively promoted and sold the product line throughout North America, Asia and Europe, prior to notification from the manufacturer of the SayberX product, Interactive Holdings, in early 2018, expressing their concern that they had been experiencing significant difficulty in maintaining their ability to continue to produce the product on a going forward basis as the product has not been adopted by the market as quickly as it thought it would. To that end, during our Fiscal year-end 2018, Xplosion was able to successfully negotiate the sale of our remaining inventory we held on hand at that time, whilst expending significant time and effort to successfully seek out consistent and parallel business opportunities for which we would continue to work to move ahead our directive to provide innovative lifestyle enhancement solutions.

 

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Under this assertion the Company was able to locate and successfully negotiate a viable business opportunity by securing a long-term land lease on a 588-acre property in Jackson County, Oregon. To most effectively manage this opportunity the Company also established and set up a wholly owned subsidiary Company, Xplosion (Oregon) Corporation during the Fiscal year of 2018. The site offers to the Company Timber, Water and Agricultural rights giving the Company the potential to develop and pursue a number of business initiatives and opportunities focused around its key goals and objectives of providing unique and innovative lifestyle enhancement products, solutions and ancillary goods to the Millennial and progressive Generation X and Y marketplace (continuing forth with the core business directives that Xplosion has always had since its date of inception). 

 

Effective the 24^th day of May 2019, a Land Lease Acquisition Agreement (the “Agreement”) was entered into by and between Xplosion Incorporated (“Obligor”, “Company”), and Xplosion (Oregon) Corporation, a 100% wholly-owned subsidiary of Xplosion Corporation (“Seller”) , and Good Life Holdings Corporation (“Buyer”), a British Columbia Corporation.

 

For further definition of the transaction, the Seller holds exclusive Lease rights as provided under a previously disclosed 25-year Prepaid Lease to three contiguous tax lots which when combined total 588.80 acres, which based on Jackson County, Oregon, USA assessment records, where the land is located, is inclusive of 62.94 acres of Irrigable land. As per allowable terms as defined under the 25-year Prepaid Lease, the Seller has entered into this Agreement to sell and assign to the Buyer this Sub-Lease agreement, and the Buyer has agreed to purchase and assume from the Seller this Sub-Lease, by way of payment to the Obligor, the rights and obligations of Seller specifically to that 62.94 acres of the land defined as Irrigable land. The original aggregate purchase price for the Closing of the transaction was to be Canadian Dollars of Two million Six Hundred and Forty-Five Thousand Dollars ($2,645,000 CAD), (the “Purchase Price”). Distributions for this sale were to be made by way of $645,000 CAD payable as cash to the Company, along with the equivalency of $2,000,000 CAD paid via the issuance of 20,000,000 shares of the Buyer common shares to the Company for irrevocable and immediate pro-rata dividend distribution to the existing shareholders of the Company.

 

In October 2019, an extension and recalculation of the payment timing and terms to satisfy the Closing of this transaction was entered into between our parties as defined above, and now during this Q1 Fiscal 2020 period, the Company has successfully closed this sub lease transaction covering the 62.94 acre irrigable portion of the property to the Buyer whereby the Company received a revised full value payment amount equal to $2,199, 670 CAD, by way of $40,000 CAD in cash and 21,299,670 shares of the Buyer. On January 31, 2020 the 21,299,670 shares received from Good Life Holdings Corporation were distributed pro-rata as a dividend payment to the Company’s shareholders.

 

In addition, during the Q1 period the Company and its wholly owned subsidiary have begun to develop and define its near-midterm business planning towards the establishment of a mineral grade bottled water production and distribution facility at the Jackson County property site.

 

Results of Operations

 

Comparison of the Three Months Ended January 31, 2020

with the Three Months Ended January 31, 2019

 

We had gross revenue of $nil and $nil for the respective three months ended January 31, 2020 and 2019.

 

Our general and administrative expenses from continuing operations for the three months ended July 31, 2019 were $227 as compared to $12,418 for the comparable three months ended January 31, 2019. For the three months ended January 31, 2020 and 2019 there is amortization of the prepaid lease in the amount of $35,241 and $35,241, respectively.

 

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Our marketing expenses from operations for the three months ended July 31, 2020 and 2019, were $nil and $30,000.

 

During the three months ended January 31, 2020 we had a gain on the sale of leasehold interests of $157,350 as compared to $nil for the respective three months ended January 31, 2019.

 

Overall, we have a net income of $105,630 for the three months ended January 31, 2020, as compared to a net loss of $84,240 for the corresponding three month period of the preceding year.

 

Liquidity and Capital Resources

 

As of January 31, 2020, our current assets were $21,627, as compared to $32 at October 31, 2019. As of January 31, 2020, our current liabilities were $187,276, as compared to $180,516 at October 31, 2019.

 

Operating activities used net cash of $9,720 for the three months ended January 31, 2020, as compared to use of $3,095 for the three months ended January 31, 2019.

 

Investing activities provided net cash of $30,455 and $nil for the three months ended January 31, 2020 and 2019, respectively.

 

Net cash of $860 was provided by financing activities during the three months ended January 31, 2020, as compared to $3,053 net cash provided during the comparable three months ended January 31, 2019.

 

Our current balances of cash will not meet our working capital and capital expenditure needs for the whole of the current year. Because we are not currently generating sufficient cash to fund our operations, we will need to rely on external financing to meet future capital and operating requirements. Any projections of future cash needs and cash flows are subject to substantial uncertainty. Our capital requirements depend upon several factors, including the rate of market acceptance, our ability to get to production and generate revenues, our level of expenditures for production, marketing, and sales, purchases of equipment, and other factors. We can make no assurance that financing will be available in amounts or on terms acceptable to us, if at all. Further, if we issue equity securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences, or privileges senior to those of existing holders of common stock, and debt financing, if available, may involve restrictive covenants that could restrict our operations or finances. If we cannot raise funds, when needed, on acceptable terms, we may not be able to continue our operations, grow market share, take advantage of future opportunities, or respond to competitive pressures or unanticipated requirements, all of which could negatively impact our business, operating results, and financial condition. The factors noted raise substantial doubt about our ability to continue as a going concern.

 

Critical Accounting Policies and Estimates

 

Revenue Recognition

 

The Company acquires full ownership of all products under its Global Distribution Agreement directly from the technology holder and in turn re-sells the products through by wholesale through sub-distributors and also directly to end users via e-commerce. The Company has determined that it is the primary obligator as it i) is responsible for fulfillment; ii) assumes full inventory risk; iii) has no right of return of unsold product; iv) has the sole right to establish selling prices; v) has physical loss inventory risk and vi) has credit risk. The Company recognizes revenue, at the gross amount invoiced, when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, price is fixed and determinable, and collectability is reasonably assured.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the fiscal year. The Company bases its estimates on historical experience, current conditions and on other assumptions that it believes to be reasonable under the circumstances. Actual results could differ from those estimates and assumptions.

 

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Income Taxes

 

Deferred income tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities, operating loss, and tax credit carryforwards, and are measured using the enacted income tax rates and laws that will be in effect when the differences are expected to be recovered or settled. Realization of certain deferred income tax assets is dependent upon generating sufficient taxable income in the appropriate jurisdiction. The Company records a valuation allowance to reduce deferred income tax assets to amounts that are more likely than not to be realized. The initial recording and any subsequent changes to valuation allowances are based on a number of factors (positive and negative evidence). The Company considers its actual historical results to have a stronger weight than other, more subjective, indicators when considering whether to establish or reduce a valuation allowance.

 

The Company continually evaluates its uncertain income tax positions and may record a liability for any unrecognized tax benefits resulting from uncertain income tax positions taken or expected to be taken in an income tax return. Estimated interest and penalties are recorded as a component of interest expense and other expense, respectively.

 

Because tax laws are complex and subject to different interpretations, significant judgment is required. As a result, the Company makes certain estimates and assumptions in: (1) calculating its income tax expense, deferred tax assets, and deferred tax liabilities; (2) determining any valuation allowance recorded against deferred tax assets; and (3) evaluating the amount of unrecognized tax benefits, as well as the interest and penalties related to such uncertain tax positions. The Company’s estimates and assumptions may differ significantly from tax benefits ultimately realized.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, such as this quarterly report, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer (our “Certifying Officers”), as appropriate, to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our Certifying Officers, the effectiveness of our disclosure controls and procedures as of January 31, 2020, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, as of January 31, 2020, our disclosure controls and procedures were not effective.

 

There have been no changes in our internal control over financial reporting that occurred during the quarter ended January 31, 2020, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

 

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PART II—OTHER INFORMATION

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None

 

ITEM 5. OTHER EVENTS

 

Not applicable

 

ITEM 6. EXHIBITS

 

The following exhibits are filed as a part of this report:

 

Exhibit Number*		Title of Document		Location
Item 31		Rule 13a-14(a)/15d-14(a) Certifications
31.01		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Rule 13a-14		Attached
Item 32		Section 1350 Certifications
32.01		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer) and (Chief Financial Officer)		Attached
Item 101		Interactive Data File
101		Interactive Data File		Attached

_______________

* All exhibits are numbered with the number preceding the decimal indicating the applicable SEC reference number in Item 601 and the number following the decimal indicating the sequence of the particular document.

 

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SIGNATURES

 

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

 

	Registrant
	XPLOSION INCORPORATED
Date: April  20, 2020	By:	/s/ EUGENIO GREGORIO /s/
		Eugenio Gregorio
		President, Chief Executive Officer, Chief Financial Officer, Treasurer and Director
		(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

 

XPLOSION Inc Reports 04/27/2018 - 10-K 04/09/2020 - 10-K 01/28/2021 - 10-K 09/19/2017 - 10-Q 05/11/2018 - 10-Q 06/19/2018 - 10-Q 09/14/2018 - 10-Q 04/20/2020 - 10-Q 07/02/2020 - 10-Q 09/14/2020 - 10-Q 03/12/2021 - 10-Q 06/11/2021 - 10-Q 09/14/2021 - 10-Q