NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) Business Description
ZD Ventures Corporation (the Company), incorporated on February 23, 2005 under the laws of the state of Nevada, operates from one of its shareholders premises in Toronto, Ontario, Canada. Most of the activities of the Company to date relate to its organization, funding, and seeking business opportunities in the emerging technologies.
At the end of the fiscal year 2015, the Company discontinued its plan for further development of a social website acquired in July 2012 and decided to write off the carrying costs as non-temporary impairment. During the year ended March 31, 2016, the Company was not able to conclude satisfactorily on several business negotiations. The management continues its efforts in reviewing business opportunities that will meet its criteria.
(B) Basis of Presentation
The audited financial statements for the year ended March 31, 2016 are presented in accordance with accounting principles generally accepted in the United States, and are expressed in U.S. dollars.
(C) Use of estimates
The financial statements have been prepared in conformity with generally accepted accounting principles (GAAP). In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statement of financial position, and revenues and expenses for the year then ended. Actual results may differ significantly from those estimates.
(D) Investments available for sale
The Companys investments in emerging private entities through a Spanish Pledge fund (Fund) are classified as available for sale and are reported at fair value based on performance reports of each of the investee entities provided by the Fund. Unrealized gains and losses, net of taxes, are reported as a component of stockholders equity. Realized gains and losses on investments are included in investment and other income, net when realized. Any impairment loss to reduce an investments carrying amount to its fair market value is recognized as an expense when a decline in the fair market value of an individual security below its cost or carrying value is determined to be other than temporary.
(E) Furniture
Furniture items are stated at cost and depreciated to their estimated residual value over their estimated useful lives, which are presently considered to be three years. When assets are retired or otherwise disposed of, the assets and related accumulated depreciation are relieved from the accounts and the resulting gains or losses are included in the Statements of Operations. Repairs and maintenance costs are expensed as incurred. Depreciation is provided using the straight-line method.
(F) Foreign Currency Translation
The Companys functional and reporting currency is the United States Dollar. Assets and liabilities recorded in currencies other than US dollars are translated into USD at the prevailing exchange rates in effect at the end of the reporting period, the historical rate for stockholders equity (deficiency) and revenues, expenses, gains and losses shall be translated at the exchange rate on the dates on which these elements are recognized, or if found to be impractical, the average exchange rate for the period may be used to translate these elements. Adjustments that arise from translation into the reporting currency are recorded as an exchange gain or loss to be included as other comprehensive gain or loss.
F-8
ZD Ventures Corporation
Year ended March 31, 2016
NOTES TO FINANCIAL STATEMENTS
(G) Net income (loss) per share
Net loss per share was computed by dividing the net loss by the weighted average number of common shares outstanding during the year. The weighted average number of shares was calculated by taking the number of shares outstanding and weighting them by the amount of time that they were outstanding. Diluted net loss per share for the Company is the same as basic net loss per share, as the inclusion of common stock equivalents would be antidilutive.
H) Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid investments with original maturity of three months or less to be cash equivalents. As of March 31, 2016 and 2015 the Company had no cash equivalents.
(I) Income taxes
The Company accounts for income taxes under FASB Codification Topic 740 which requires use of the liability method. Topic 740 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences. Deferred tax assets and liabilities at the end of each period are determined using the currently enacted tax rates applied to taxable income in the periods in which the deferred tax assets and liabilities are expected to be settled or realized. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
(J) Share-Based Compensation
FASB ASC 718 Compensation - Stock Compensation prescribes accounting and reporting standards for all stock-based payments awarded to employees, including employee stock option, restricted stock, employee stock purchase plans and stock appreciation rights, that may be classified as either equity or liabilities. The Company determines if a present obligation to settle the share-based payment transaction in cash or other assets exists. A present obligation to settle in cash or other assets exists if: (A) the option to settle by issuing equity instruments lacks commercial substance or (B) the present obligation is implied because of an entitys past practice or stated policies. If a present obligation exists, the transaction should be recognized as a liability; otherwise, the transaction should be recognized as equity.
(K) Fair Value of Financial Instruments
The Companys balance sheet includes certain financial instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.
FASB Accounting Standards Codification (ASC) topic, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entitys own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three-level hierarchy for fair value measurements is defined as follows:
F-9
ZD Ventures Corporation
Year ended March 31, 2016
NOTES TO FINANCIAL STATEMENTS
·
Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets;
·
Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable of the asset or liability other than quoted prices, either directly or indirectly including inputs in markets that are not considered to be active;
·
Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement.
NOTE 2 - GOING CONCERN
The Companys financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Managements plan is to obtain such resources for the Company by obtaining capital from significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. As of March 31, 2016, the Company has an accumulated deficit amount of approximately $3.2 million.
NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS
In August 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40)-Disclosure of Uncertainties about an Entitys Ability to Continue as a Going Concern (ASU 2014-15). ASU 2014-15 provides guidance to United States Generally Accepted Accounting Principles ("U.S. GAAP") about managements responsibility to evaluate whether there is a substantial doubt about an entitys ability to continue as a going concern and to provide related footnote disclosures. Specifically, ASU 2014-15 (1) defines the term substantial doubt, (2) requires an evaluation of every reporting period including interim periods, (3) provides principles for considering the mitigating effect of managements plan, (4) requires certain disclosures when substantial doubt is alleviated as a result of consideration of managements plans, (5) requires an express statement and other disclosures when substantial doubt is not alleviated, and (6) requires an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this update are effective for annual periods beginning after December 15, 2017 and interim periods within those reporting periods. Earlier adoption is permitted. This ASU is not anticipated to have a material impact on the Company's financial statements and notes to the financial statements.
F-10
ZD Ventures Corporation
Year ended March 31, 2016
NOTES TO FINANCIAL STATEMENTS
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. This ASU is the result of a convergence project between the FASB and the International Accounting Standards Board. The core principle behind ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for delivering those goods and services. This model involves a five-step process that includes identifying the contract with the customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction prices to the performance obligations in the contract and recognizing revenue when (or as) the entity satisfies the performance obligations. The guidance in the ASU supersedes existing revenue recognition guidance and is effective for annual reporting periods beginning after December 15, 2016 with early application not permitted. The ASU allows two methods of adoption; a full retrospective approach where three years of financial information are presented in accordance with the new standard, and a modified retrospective approach where the ASU is applied as a cumulative effect adjustment as of the date of adoption. The company will evaluate the impact of adopting the new standard once it begins generating revenue.
In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest. ASU No. 2015-03 changes the presentation of debt issuance costs in financial statements. Under the new guidance, an entity presents such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs is reported as interest expense. This guidance is effective beginning in the first quarter of fiscal year 2017 and early adoption is permitted in an interim period with any adjustments reflected as of the beginning of the fiscal year that includes that interim period. The company does not believe the guidance will result in a material impact to its financial statements.
In November 2015, the FASB issued Accounting Standards Update ("ASU") 2015-17, "Balance Sheet Classification of Deferred Taxes" ("ASU 2015-17"), which will require entities to present all deferred tax liabilities and assets as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts. The standard is effective for annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods. Early application is permitted. The standard can be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. This ASU is not anticipated to have a material impact on the Company's financial statements and notes to the financial statements.
In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which provides guidance for the recognition, measurement, presentation, and disclosure of financial assets and liabilities. This ASU will be effective for the Company beginning in the first quarter of fiscal year 2019. The Company is evaluating the effects of the adoption of this ASU to its financial statements.
In March 2016, the FASB issued an update (ASU 2016-09) to the standard on CompensationStock Compensation, which simplifies several aspects of the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. For public business entities, the amendments in this update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any entity in any interim or annual period. Upon adoption, entities will be required to apply a modified retrospective, prospective or retrospective transition method depending on the specific section of the guidance being adopted. The Company is currently evaluating the effect the update will have on its financial statements and related disclosures.
The Company evaluates new pronouncements as issued and evaluates the effect of adoption on the Company at the time. The Company has determined that the adoption of recently adopted accounting pronouncements will not have an impact on the financial statements.
F-11
ZD Ventures Corporation
Year ended March 31, 2016
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - RECEIVABLE AND PREPAID EXPENSES
|
|
|
|
|
| |
|
|
March 31, 2016
|
|
March 31, 2015
|
Prepaid fee
|
i
|
$
|
583
|
|
$
|
--
|
Prepaid rent
|
ii
|
|
--
|
|
|
10,133
|
Note receivable
|
iii
|
|
--
|
|
|
42,800
|
|
|
$
|
583
|
|
$
|
52,933
|
i.
Prepaid fee comprises fee paid for the calendar year 2016 to State of Nevada for renewal of license. Eight months fee is considered prepaid.
ii.
The Company paid a rent deposit in connection with a lease for an office premises in Barcelona, Spain signed on June 15, 2014. Effective April 1, 2015, the Company gave three months lease cancellation notice to the landlord as per the terms of the lease and requested the landlord to adjust three months rent and related costs against the deposit. These adjustments net of exchange differences amounted to $8,560. The balance of $1,807 was written off as additional rent.
iii.
The amount,
40,000, was advanced in instalments between July 2014 and September 2014, under a loan agreement dated July 4, 2014, to Mr. Sergi Vargas Vila, a non -related Spanish national who owns Bluesence Innovation Group, S.L., a Spanish private company engaged in commercialization of software and IT consulting services primarily relating to IBM software for small and medium enterprises (Bluesence). The Company was negotiating acquisition of all shares in Bluesence from Mr. Vila. The amount loaned was to be adjusted against the purchase price. However, the purchase agreement was terminated by both the parties and the advance revalued at the prevailing exchange rate at $44,800 was considered irrecoverable and written off as a bad debt.
NOTE 5 - INVESTMENTS AVAILABLE FOR SALE
The Company was a member of Necotium, a pledge fund in Spain. The Fund on behalf of its members invests in early stage companies with strong growth potential. The investments are usually disposed of when the fund manager believes that expected growth is achieved. The proceeds are distributed among the members in proportion to their investments, after the funds fees and related costs.
While the Company is no longer a member of the fund, it made the following investments through the fund during the fiscal year 2015. The investments constituted less than 10% of the total equity of the related investee entities:
|
|
|
|
| |
|
Original amount
|
Date of
|
|
As at March 31
|
|
Invested
|
investment
|
|
2016
|
2016*
|
Mailtrack Company SL
|
20,000
|
June 6, 2014
|
|
$ --
|
$21,400
|
Mobile Media Content
|
15,000
|
April 16, 2014
|
|
--
|
16,050
|
|
|
|
|
$ --
|
$37,450
|
The Fund ceased to provide updates on the above investments. The Company was unable to access any details from the investee companies. As a result, the Company concluded that the fair value of these investments was nil. The carrying costs of $39,200 was therefore considered impaired and expensed.
F-12
ZD Ventures Corporation
Year ended March 31, 2016
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - CONVERTIBLE DEBTS
|
|
|
|
|
| |
March 31
|
|
2016
|
|
2015
|
Balance, at beginning of period
|
|
$
|
4,836
|
|
$
|
7,808
|
Converted to additional paid in capital
|
i
|
|
(30,000)
|
|
|
(146,901)
|
Converted to common stock
|
i & ii
|
|
(40,000)
|
|
|
(3,100)
|
BCF amortization of discount
|
i & ii
|
|
63,164
|
|
|
97,029
|
Unsecured loans
|
i
|
|
30,000
|
|
|
88,000
|
Debt discount to paid in capital
|
|
|
--
|
|
|
(38,000)
|
|
|
$
|
28,000
|
|
$
|
4,836
|
i.
In April 2015, the Company received two unsecured convertible loans totalling to $30,000 repayable within one year and carrying coupon at 8%. The loans and coupons accrued can be converted into common shares of the Company at US$0.05 per common share at the discretion of the lenders within the repayment period. The entire loan amount was transferred to paid-in capital since the present value of its beneficial conversion feature (BCF) value was greater than its face value. Debt discount of $14,877 was charged to interest and included under convertible debt. In addition, debt discount of $30,619 on existing convertible debt was also charged to interest and included under convertible debt.
On October 8, 2015, both the debt holders converted their loans and accrued interest to date of $1,593 into 631,856 common shares as per the terms of the agreement. $15,123 of the unamortized portion of the debt was charged to interest expense.
ii.
On September 14, 2015, a convertible debt holder of $38,000 loan converted $10,000 of the loan into 246,305 common shares as per the terms of the agreement. $2,545 of the unamortized portion of the debt was charged to interest expense.
The 8% convertible note for $38,000 is covered by a Securities Purchase Agreement dated February 24, 2015 with an independent lender and repayable on November 26, 2015. The note holder, at their discretion, shall have a right to convert the principal amount of the note and interest accrued thereon at any time after 180 days from the date of the issuance of the note into common shares of the Company at a price which is 58% of the market price, being the average of the lowest three trading prices for the Companys common shares during the ten trading days prior to the conversion date. After the expiry of the repayment date, interest rate went up to 22%. Total interest accrued for the year was $4,292.
NOTE 7- ADVANCES FROM AND PAYABLE TO SHAREHOLDERS
On March 29, 2016, amount due to Current Capital Corp., a private corporation owned by a shareholder of the Company had a carrying cost of $319,809 after adjusting for the exchange gain and transfer of $6,000 from payable. The entire debt was assumed by the CEO, Mr. Terence Robinson. The amount was settled by issuance of 10,660,312 restricted common shares of the Company at $0.03 per share.
On the same day, Mr. Robinson also agreed to accept another 1,110,140 restricted common shares at $0.05 per share value, in settlement of the amount of $55,507 due to him on account of fees and expenses.
The total number of shares issued 11,770,452 were valued at $0.07 being the quoted price of the Companys share on OTC Markets on the date of the issuance for a total cost of $823,932. $ 11,770 was credited to common stock (Note 8) and the balance $812,162 was credited to additional paid in capital and difference between the total debt settled and the value of the shares issued being $448,615 was expensed as loss on disposition of debt.
F-13
ZD Ventures Corporation
Year ended March 31, 2016
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - COMMON STOCK
|
|
|
|
| |
|
|
March 31,
|
|
|
2016
|
2015
|
|
|
#
|
$
|
#
|
$
|
Balance, beginning of year
|
|
25,868,848
|
25,868
|
15,943,300
|
15,943
|
Conversion of convertible debt
|
Note 6 (i) and (ii)
|
878,161
|
878
|
2,096,438
|
2,096
|
Settlement of unsecured debts
|
Note 7
|
11,770,452
|
11,771
|
1,004,110
|
1,004
|
Cancellation of previously issued shares
|
i
|
(5,000,000)
|
(5,000)
|
|
|
Settlement of notes payable
|
|
|
|
6,825,000
|
6,825
|
Balance, end of year
|
|
33,517,461
|
33,517
|
25,868,848
|
25,868
|
At March 31, 2016, the Company had 200,000,000 common shares of par value $0.001 common stock authorized.
i.
On February 25, 2016, Mr. Jeffrey Robinson, brother of the CEO, returned a certificate covering 5 million restricted common shares of the Company for cancellation without any consideration. These shares were cancelled on February 26, 2016.
NOTE 9 - RELATED PARTY TRANSACTIONS
ADVANCES FROM STOCKHOLDER
|
| |
March 31,
|
2016
|
2015
|
Balance, beginning of year
|
$344,145
|
$186,758
|
Funds advanced ( net)
|
174
|
203,803
|
fee payable transferred from accounts payable
|
6,000
|
--
|
Exchange difference
|
(30,510)
|
(46,416)
|
Debt assumed by CEO (Note 7)
|
(319,809)
|
|
Balance, end of year
|
$ --
|
$344,145
|
Funds were advanced from time to time by Current Capital Corporation (CCC), a Canadian based private company in Ontario, fully owned by Mr. John Robinson, a shareholder of the Company. Advances were repayable on demand and carried no interest.
CONSULTING FEES
|
|
|
|
|
| |
Year ended March 31,
|
|
2016
|
|
2015
|
Fee charged by management
|
|
$
|
25,000
|
|
$
|
61,108
|
Fee charged by a consultant holding over 10%
equity interest in the Company
|
|
|
(3,745)
|
|
|
54,886
|
Other consulting fees
|
|
|
64,475
|
|
|
52,341
|
|
|
$
|
85,730
|
|
$
|
168,335
|
The fees of $nil charged by the management are included in accounts payable as at March 31, 2016 ($ 43,507 as at March 31, 2015).
TRAVEL, MEALS AND PROMOTIONS
Travel and meals costs included net $5,000 charged by the CEO and a consultant holding over 10% equity interest in the Company. (2015: $11,732).
F-14
ZD Ventures Corporation
Year ended March 31, 2016
NOTES TO FINANCIAL STATEMENTS
GENERAL AND ADMINISTRATIVE EXPENSES
Includes $ nil (2015: $12,000) charged for investor and public relations by CCC.
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Includes $36,000 charged by an entity owned by a shareholder of the Company. The Company has however not accepted this charge and is currently negotiating the amount charged.
NOTE 10 - INCOME TAXES
The Company accounts for income taxes under FASB ASC 740-10, which provides for an asset and liability approach of accounting for income taxes. Under this approach, deferred tax assets and liabilities are recognized based on anticipated future tax consequences, using currently enacted tax laws, attributed to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts calculated for income tax purposes.
For the years ended March 31, 2016, and 2015, respectively, the Company produced net operating losses before provision for income taxes of $721,057 and $2,329,863 respectively; accordingly, a provision for income taxes of $0 was recorded during the year ended March 31, 2016 and 2015.
The component of the Companys deferred tax assets as of March 31, 2016 and 2015 are as follows:
|
|
|
| |
|
2016
|
2015
|
Net operating loss carryover
|
$
|
(477,600)
|
$
|
(382,240)
|
Valuation allowance
|
|
477,600
|
|
382,240
|
Net provision for federal income taxes
|
$
|
--
|
$
|
--
|
The Companys effective income tax rate of 0.0% differs from the statutory rate of 35% for the reason set forth below for the years ended March 31:
|
|
|
| |
|
2016
|
2015
|
Income tax (recoverable) payable at statutory rate
|
$
|
(95,300)
|
$
|
(313,800)
|
Valuation allowance
|
|
95,300
|
|
313,800
|
Net provision for federal income taxes
|
$
|
--
|
$
|
--
|
As at the year-end the Company had an approximate net tax loss carried forward of $1,365,000 (2015: $1,092,000). Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards. These losses expire between 2028 and 2036. There is a three-year limitation on IRS audit.
NOTE 11 - SUBSEQUENT EVENT
On April 11, 2016, the holder of the convertible note for $28,000 converted $20,000 of the note into 689,655 common shares of the Company.
F-15