NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 - GENERAL
Darkstar
Ventures, Inc. (“the Company” or “we”) was incorporated on May 8, 2007 under the laws of the State of
Nevada.
The
Company established a wholly-owned subsidiary in Israel, Bengio Urban Renewals Ltd ("Bengio")., to focus its limited
resources in the area of real estate development, particularly focusing on the urban renewal market in Israel.
The
Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding
to operationalize the Company’s current business plan.
NOTE
2 - GOING CONCERN
The
Company has not commenced planned principal operations. The Company had an accumulated deficit of $959,268 as of July 31,
2017. In addition, the Company continues to have negative cash flows from operations. These factors raise substantial doubt
about the Company’s ability to continue as a going concern.
There
can be no assurance that sufficient funds required during the next year or thereafter will be generated from operations or that
funds will be available from external sources such as debt or equity financings or other potential sources. The lack of additional
capital resulting from the inability to generate cash flow from operations or to raise capital from external sources would force
the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business.
Furthermore, there can be no assurance that any such required funds, if available, will be available on attractive terms or that
they will not have a significant dilutive effect on the Company’s existing stockholders.
The
accompanying financial statements do not include any adjustments related to the recoverability or classification of asset-carrying
amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.
NOTE
3 - SIGNIFICANT ACCOUNTING POLICIES
The
functional currency of the Company is the U.S. dollar (“$” or “dollar"), which is the currency of the primary
economic environment in which the operations of the Company are conducted. The functional currency of its foreign subsidiary is
the New Israeli Shekel ("NIS").
The
financial statements of the subsidiary were translated into dollars in accordance with the relevant standards of the
Financial Accounting Standards Board ("FASB"). Accordingly, assets and liabilities were translated from NIS to $
using year-end exchange rates and income and expense items were translated at average exchange rates during the
year.
Gains
or losses resulting from translation adjustments are reflected in stockholders' deficit, under “accumulated other comprehensive
income (loss)”.
DARKSTAR
VENTURES, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Balances
denominated in, or linked to foreign currency are stated on the basis of the exchange rates prevailing at the balance sheet date.
|
|
Year ended July 31,
|
|
|
2017
|
|
2016
|
Official exchange rate of NIS 1 to U.S. dollar
|
|
|
0.281
|
|
|
|
0.261
|
|
|
b.
|
Principles
of consolidation
|
The
consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Inter-company balances
and transactions have been eliminated upon consolidation.
Cash
equivalents are short-term highly liquid investments which include short term bank deposit (up to three months from date of deposit),
that are not restricted as to withdrawals or use that are readily convertible to cash with maturities of three months or less
as of the date acquired.
The
company’s cash and cash equivalents are maintained with major banking institutions in Israel.
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 disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.
Actual results may differ from those estimates
Share-based
payments to employees are measured at the fair value of the options issued and amortized over the vesting periods. Share-based
payments to non-employees are measured at the fair value of the goods or services received or the fair value of the equity instruments
issued if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the
goods or services are received. The amount recognized as an expense is adjusted to reflect the number of awards expected to vest.
The offset to the recorded cost is to share-based payments reserve. Consideration received on the exercise of stock options is
recorded as capital stock and the related share-based payments reserve is transferred to share capital.
Net
loss per share, basic and diluted, is computed on the basis of the net loss for the period divided by the weighted average number
of common shares outstanding during the period. Diluted net loss per share is based upon the weighted average number of common
shares and of common shares equivalents outstanding when dilutive. Common share equivalents include: (i) outstanding stock options
under the Company’s share incentive plan and warrants which are included under the treasury share method when dilutive,
and (ii) common shares to be issued under the assumed conversion of the Company’s outstanding convertible notes, which are
included under the if-converted method when dilutive. The computation of diluted net loss per share for the years ended July 31,
2016, and 2015, does not include common share equivalents, since such inclusion would be anti-dilutive.
DARKSTAR
VENTURES, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred
taxes are determined utilizing the asset and liability method based on the estimated future tax effects of differences between
the financial accounting and tax bases of assets and liabilities under the applicable tax laws. Deferred tax balances are computed
using the tax rates expected to be in effect when those differences reverse. A valuation allowance in respect of deferred tax
assets is provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred
tax assets will not be realized. The Company has provided a full valuation allowance with respect to its deferred tax assets.
|
h.
|
Property, plant and equipment
|
Property,
plant and equipment are stated at cost, less accumulated depreciation. Assets are depreciated using the straight-line method over
their estimated useful lives. Computers, software and electronic equipment are depreciated over three years. Tools and equipment
are depreciated over ten years.
|
i.
|
Land
development costs
|
Land
development costs, including estimated value of land, under TAMA 38 purchase agreements are capitalized when definite agreement
is signed with the tenants.
Tax arising from such agreements is recorded as Obligation under construction agreements when
the Company can estimate the tax obligation.
|
j.
|
Fair
value measurements
|
The
Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are
recognized or disclosed at fair value in the financial statements on a recurring basis. The Company defines fair value as the
price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded
at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based
risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent
in valuation techniques, transfer restrictions and credit risk. Fair value is estimated by applying the following hierarchy, which
prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the
lowest level of input that is available and significant to the fair value measurement:
Level
1 – Quoted prices in active markets for identical assets or liabilities.
Level
2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for
identical or similar assets or liabilities in inactive markets, 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 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market
participants would use in pricing the asset or liability.
In
accordance with the fair value accounting requirements, companies may choose to measure eligible financial instruments and certain
other items at fair value. The Company has not elected the fair value option for any eligible financial instruments.
As
of July 31, 2016 and 2015, the carrying value of accounts payable and loans that are required to be measured at fair value, approximated
fair value due to the short-term nature and maturity of these instruments
DARKSTAR
VENTURES, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
k.
|
Adoption
of New Accounting Standards
|
ASC
Update 2014-15
“Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties
about an Entity’s Ability to Continue as a Going Concern
"
In
August 2014, the FASB issued ASC Update 2014-15, "Presentation of Financial Statements—Going Concern (Subtopic 205-40):
Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern" ("ASU 2014-15"). ASU
2014-15 provide guidance on management’s responsibility in evaluating whether there are conditions or events, considered
in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year
after the date that the financial statements are issued (or within one year after the date that the financial statements are available
to be issued when applicable). ASU 2014-15 also provide guidance related to the required disclosures as a result of management
evaluation.
The
amendments in ASU 2014-15 became effective for the annual period ending after December 15, 2016, and for annual periods and interim
periods thereafter. Management applied the guidance of ASU 2014-15 to these financial statements and has determined that there
is a substantial doubt about the Company’s ability to continue as a going concern. Certain disclosures were updated to conform
to the disclosures required under ASU 2014-15.
|
l.
|
Newly
issued accounting pronouncements
|
ASC
Update 2014-09
“Revenue from Contracts with Customers (Topic 606)” and Related Updates
In
May of 2014, the FASB issued ASC Update 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASC Update 2014-09
provides guidance for the recognition, measurement and disclosure of revenue related to the transfer of promised goods or services
to customers. This update was effective for fiscal years beginning after December 15, 2016, for which early adoption was prohibited.
However,
in August of 2015, the FASB issued ASC Update 2014-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the
Effective Date,” deferring the effective date of ASC Update 2014-09 to fiscal years beginning after December 15, 2017(the
first quarter of fiscal year 2018 for the Company), and permitting early adoption of this update, but only for annual reporting
periods beginning after December 15, 2016, and interim reporting periods within that reporting period.
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.
DARKSTAR
VENTURES, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
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 potential revenue streams, 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 any revenues since its inception, management believes that the adoption of ASU 2014-09
will not have significant impact on its financial statements.
Newly
issued accounting pronouncements (continue)
ASC
Update 2016 - 02 “
Leases (Topic 842): Section A – Leases: Amendments to the FASB Accounting Standards Codification;
Section B – Conforming Amendments Related to Leases: Amendments to the FASB Accounting Standards Codification; Section C
– Background Information and Basis for Conclusions
”
In
February of 2016, the FASB issued ASC Update 2016 - 02, “Leases (Topic 842): Section A – Leases: Amendments to the
FASB Accounting Standards Codification; Section B – Conforming Amendments Related to Leases: Amendments to the FASB Accounting
Standards Codification; Section C – Background Information and Basis for Conclusions.” ASC Update 2016-02 amends guidance
related to the recognition, measurement, presentation and disclosure of leases for lessors and lessees. This update is effective
for fiscal years beginning after December 15, 2018, including the interim periods within those years, with early adoption permitted.
The Company is in the process of evaluating the effect that ASU 2016-02 will have on the results of operations and financial statements.
ASC
Update 2016-13 “
Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
”
In
June 2016, the FASB issued ASC Update 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments.” ASC Update 2016-13 revised the criteria for the measurement, recognition, and reporting
of credit losses on financial instruments to be recognized when expected. This update is effective for fiscal years beginning
after December 15, 2019, including the interim periods within those years, with early adoption permitted for fiscal years beginning
after December 15, 2018, including interim periods within those years. Adoption is not expected to have a material effect on its
results of operations, financial position, and cash flows.
ASC
Update (ASU) No. 2016-09 "
Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment
Accounting
"
In
March 2016, the FASB has issued ASC 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.
DARKSTAR
VENTURES, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
public companies, 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
Company is in the process of assessing the impact, if any, of ASU 09-2016 on its financial statements.
NOTE
4 - RELATED PARTY
As
of July 31, 2017 the balance includes loans to an officer of the Companyin the amount of $126,382 and accrued interest of $9,261.
The loan is due twenty four months from the date of the loanand bears an interest of 26% per annum.
NOTE
5 - LAND DEVELOPMENT COSTS
During
the period ended July 31, 2017 the Company signed two definite agreements with tenants one under "Tama 38" Israeli national
zoning plan ("Tama 38") and another under “PinuiBinui” project.
According
to the Tama 38 signed project the Company assumes the responsibility of renovating 32 apartments in exchange for covering all
costs of renovations, securing building permits and paying requisite taxes. The Company wasgranted the right to build an
additional 28 apartments connected to the existing building that would be sold upon completion of the
project.
According
to the “PinuiBinui” project the residents of 12 apartments are temporarily evacuated so that the buildings may
be demolished and rebuilt. Under the agreement the Company will pay all costs for demolition, construction, relocating
apartment owners and renting their temporary homes during construction. In exchange, the Company intends to add 24 new
apartments to the building that would be sold upon completion of the project.
Both agreements are conditional upon
obtaining the final approval from the cities' planning institutions and other conditions set forth in the agreements. As the Company
could not estimate the land purchase taxes arising from the agreements such costs were not accrued in this financial statements.
Land purchase taxes are notdue until final approvals are obtained.
NOTE
6 - PREFERRED STOCK
The
Company’s Board of Directors may issue authorized but unissued shares of preferred stock in series and at the time
of issuance, determine the rights,preferences and limitation of each series. The holders of preferred stock may be entitled
to receive a preference payment in the event of any liquidation, dissolution or winding-up of the Company before any payment
is made to the holders of the common stock. Furthermore, the board of directors could issue preferred stock with voting and
other rights that could adversely affect the voting power of the holders of the common stock.
DARKSTAR
VENTURES, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
7 - COMMON SHARES:
On
February 16,2016, the Board of Directors of the Company and the holder of a majority of the issued and outstanding shares
of common stock of the Company (the "Majority Consenting Stockholder"), together, executed a joint written consent
to authorize and approve a Certificate of Amendment to the Company's Articles of Incorporation to increase the
authorized capital stock of the Company from 505,000,000 shares (the "Capital Stock"), consisting of 500,000,000
shares of common stock, par value $0.0001 (the "Common Stock") and 5,000,000 shares of preferred stock,par value
$0.0001 (the "Preferred Stock"), to an authorized capital stock of the Corporation of 2,005,000,000 shares
consisting of 2,000,000,000 shares of Common Stock and five million 5,000,000 shares of Preferred Stock. It was also decided
that the Board of Directors shall have the authority to establish one or more series of Preferred Stock and fix relative
rights and preferences of any series of Preferred Stock, without any further action or approval of our
stockholders.
On
April 14, 2016 the Board of Directors of the Company approved the issuance of 270,000,000 restricted shares of common stock of
the Company to Avraham Bengio, the Company's shareholder, Sole Director, CEO and CFO in consideration for the conversion of $270,000
loan granted to the Company. In addition, the Board of Directors of the Company has issued 120,000,000 restricted shares of the
Company to Avraham Bengio as compensation for services in the amount of $120,000.
In
addition, the Board of Directors of the Company approved the grant of 200,000 restricted shares of the Company to a service provider
as compensation for consulting services in the amount of $200. The shares were valued at $0.001 per share based on the sale of
shares to third parties on the same date.
On
April 14, 2016, the Board of Directors of the Company has approved the issuance of 150,000,000 restricted shares under a subscription
agreement with investors for total consideration of $150,000. During the period ended July 31, 2017, the Company received $137,439
of such subscription amounts. During August 2017 the Company received the remaining balance of $12,561.
DARKSTAR
VENTURES, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
8 - LONG TERM LOAN:
On
February 28, 2016, Bengio and TCSM INC signed a loan agreement according to which TCSM would grant the Company a loan of up to
$256,016 (NIS 1,000,000). As of July 31, 2017 the Company received loan installments of NIS 925,000. The loan bears interest at
an annual rate of 25%. The principal and interest will be repaid at March 1, 2019.
On
February 28, 2016 TCSM INC assigned its rights in the above loan agreement to a third party. The loan is secured by Avraham Bengio,
the Company's majority holder of the issued and outstanding shares of common stock and its Sole Director, CEO and CFO in an amount
of up to $172,826 (NIS 650,000).
On
March 8, 2017 Bengio entered into a loan agreement with a third party (the "Lender") according to which the lender
will lend the company up to $207,240 (NIS 750,000). The loan bears annual nominal interest of 25%. The loan and accrued
interest matures on March 15, 2020. In addition, the Company undertook to issue the Lender 1% of the outstanding common
shares of the Company (6,473,450 common shares) and to finance the cost of its par value ($6,473). As of the balance sheet
date such shares have not been issued yet. The value of the obligation to issues shares was valued at $64,735 and was
recorded as additional paid in capital and was offset against the loan balance.
NOTE
9 - INCOME TAXES:
At
July 31, 2017 the Company had available net-operating loss carryforwards for Federal tax purposes of approximately $354,000,
which may be applied against future taxable income, if any, through 2037. Certain significant changes in ownership of the
Company may restrict the future utilization of these tax loss carry forwards.
At
July 31, 2017 the Company had a deferred tax asset of approximately $120,000 representing the benefit of its net
operating loss carryforwards. The Company has not recognized the tax benefit because realization of the tax benefit is
uncertain and thus a valuation allowance has been fully provided against the deferred tax asset. The difference between the
Federal Statutory Rate of 34% and the Company’s effective tax rate of 0% is due to an increase in the valuation
allowance of approximately $10,000 and $36,000 for the years ended July 31, 2017 and 2016, respectively.
The
Company’s subsidiary has estimated total available carryforward operating tax losses for Israeli income tax purposes
of approximately $240,000 as of July 31,2017, which may be carryforward to offset against future income for an indefinite
period of time.
The
Company has no uncertain tax positions that require the Company to record a liability.
The
Company had no accrued penalties and interest related to taxes as of July 31, 2016.
DARKSTAR
VENTURES, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
10 - RELATED PARTY TRANSACTIONS:
On
April 14, 2016 the Board of Directors of the Company approved the issuance of 270,000,000 restricted shares of common stock of
the Company to Avraham Bengio, the Company's shareholder, Sole Director, CEO and CFO in consideration for the conversion of $270,000
loan granted to the Company. In addition, the Board of Directors of the Company has issued 120,000,000 restricted shares of the
Company to Avraham Bengio as compensation for services in the amount of $120,000.
NOTE 11 – SUBSEQUENT EVENT
On August 22, 2017 the Company received payment of $12,561 for shares issued from receivables on account of
shares issued.