In
this report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common stock” refer to the common shares in our capital
stock. As used in this report, the terms “we”, “us”,
“our”, the “Company”, “Strategic”, and “SIII” mean Strategic Internet
Investments, Incorporated, unless otherwise
indicated.
Our
financial statements are stated in United States dollars (US$) and are prepared
in accordance with United States Generally Accepted Accounting Principles.
This
report contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These statements relate to future events or
our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as “may”, “should”, “expects”,
“plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or
“continue” or the negative of these terms or other comparable terminology.
These statements are only predictions and involve known and unknown risks,
uncertainties and other factors, including the risks in the section entitled
“Risk Factors” and the risks set out below, any of which may cause our or our
industry’s actual results, levels of activity, performance or achievements to
be materially different from any future results, levels of activity,
performance or achievements expressed or implied by these forward-looking
statements.
This
list is not an exhaustive list of the factors that may affect any of our
forward-looking statements. These and other factors should be considered
carefully and readers should not place undue reliance on our forward-looking
statements.
The
Company intends that such forward-looking statements be subject to the Safe
Harbors for such statements. Forward looking statements are made based on
management’s beliefs, estimates and opinions on the date the statements are
made and we undertake no obligation to update forward-looking statements if
these beliefs, estimates and opinions or other circumstances should change. Although
we believe that the expectations reflected in the forward-looking statements
are reasonable, we cannot guarantee future results, levels of activity,
performance or achievements. Except as required by applicable law, including
the securities laws of the United States, we do not intend to update any of the
forward-looking statements to conform these statements to actual results.
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
BALANCE SHEETS
(
Expressed in U.S. Dollars
)
(
Unaudited
)
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
Cash
|
$
|
621
|
|
$
|
14,630
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
$
|
621
|
|
$
|
14,630
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
Accounts payable
|
$
|
90,122
|
|
$
|
84,123
|
|
Accounts payable - related party
|
|
21,737
|
|
|
20,727
|
|
Accrued interest
|
|
11,604
|
|
|
10,106
|
|
Accrued interest - related party
|
|
538,330
|
|
|
514,760
|
|
Convertible loan payable
|
|
50,000
|
|
|
50,000
|
|
Loans and convertible notes payable - related party
|
|
758,724
|
|
|
752,726
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
1,470,517
|
|
|
1,432,442
|
|
|
|
|
|
|
|
|
Stockholders’ deficit:
|
|
|
|
|
|
|
Capital Stock
|
|
|
|
|
|
|
Class A Convertible Preferred stock, $0.001 par value 10,000,000 authorized, 198,000 outstanding
|
|
198
|
|
|
198
|
|
Class B Preferred stock, $0.001 par value 10,000,000 authorized, none outstanding
|
|
-
|
|
|
-
|
|
Common stock, $0.001 par value 100,000,000 authorized 40,359,391 (2015: 40,359,391) issued and outstanding
|
|
40,359
|
|
|
40,359
|
|
Additional paid-in capital
|
|
12,156,359
|
|
|
12,156,359
|
|
Accumulated deficit
|
|
(13,666,812
|
)
|
|
(13,614,728
|
)
|
|
|
|
|
|
|
|
TOTAL STOCKHOLDERS’ DEFICIT
|
|
(1,469,896
|
)
|
|
(1,417,812
|
)
|
|
|
|
|
|
|
|
TOTAL STOCKHOLDERS’ DEFICIT AND LIABILITIES
|
$
|
621
|
|
$
|
14,630
|
|
The accompanying notes are an integral part of these unaudited financial statements.
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
INTERIM STATEMENTS OF OPERATIONS
(
Expressed in U.S. Dollars
)
(
Unaudited
)
|
|
Three months ended
March 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
General and Administrative Expenses
|
|
|
|
|
|
|
Accounting and audit fees
|
$
|
19,898
|
|
$
|
20,528
|
|
Legal fees
|
|
276
|
|
|
256
|
|
Management fees
|
|
1,000
|
|
|
6,000
|
|
Office and general
|
|
157
|
|
|
262
|
|
Regulatory fees
|
|
2,729
|
|
|
5,370
|
|
Transfer agent fees
|
|
375
|
|
|
570
|
|
|
|
|
|
|
|
|
Operating loss
|
|
(24,435
|
)
|
|
(32,986
|
)
|
|
|
|
|
|
|
|
Other income and expenses
|
|
|
|
|
|
|
Interest
|
|
(25,068
|
)
|
|
(22,502
|
)
|
Gain (loss) on foreign exchange
|
|
(2,581
|
)
|
|
11,077
|
|
|
|
|
|
|
|
|
Net loss for the period
|
$
|
(52,084
|
)
|
$
|
(44,411
|
)
|
|
|
|
|
|
|
|
Basic and diluted loss per share
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
40,359,391
|
|
|
37,642,724
|
|
The accompanying notes are an integral part of these unaudited financial statements.
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
INTERIM STATEMENTS OF CASH FLOWS
(
Expressed
in U.S. Dollars
)
(
Unaudited
)
|
|
Three months ended
March 31,
|
|
|
|
2016
|
|
|
2015
|
|
Operating
Activities
|
|
|
|
|
|
|
Net loss for the period
|
$
|
(52,084
|
)
|
$
|
(44,411
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
Unrealized foreign exchange loss (gain)
|
|
698
|
|
|
(2,868
|
)
|
Changes in non-cash item:
|
|
|
|
|
|
|
Accounts payable
|
|
5,999
|
|
|
9,272
|
|
Accounts payable - related party
|
|
6,310
|
|
|
(55,616
|
)
|
Accrued interest
|
|
1,498
|
|
|
1,396
|
|
Accrued interest - related party
|
|
23,570
|
|
|
21,106
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
(14,009
|
)
|
|
(71,121
|
)
|
|
|
|
|
|
|
|
Financing
Activities
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
-
|
|
|
80,000
|
|
Repayment of loans - related party
|
|
-
|
|
|
(6,066
|
)
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
-
|
|
|
73,934
|
|
|
|
|
|
|
|
|
Change
in cash during the period
|
|
(14,009
|
)
|
|
2,813
|
|
|
|
|
|
|
|
|
Cash,
beginning of the period
|
|
14,630
|
|
|
1,324
|
|
|
|
|
|
|
|
|
Cash,
end of the period
|
$
|
621
|
|
$
|
4,137
|
|
|
|
|
|
|
|
|
Supplementary
disclosure of cash flows:
|
|
|
|
|
|
|
Expenses paid by related party on behalf of the Company
|
$
|
(5,300
|
)
|
$
|
-
|
|
Cash paid for Interest
|
$
|
-
|
|
$
|
-
|
|
The accompanying notes are an integral part of these unaudited financial statements.
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
March 31, 2016
(
Expressed
in U.S. Dollars
)
(
Unaudited
)
|
The accompanying unaudited interim financial statements have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission. Certain information and disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these financial statements have been included. Such adjustments consist of normal recurring adjustments. These interim financial statements should be read in conjunction with the annual audited financial statements of the Company for the fiscal year ended December 31, 2015 included in the Company’s 10-K Annual Report as filed with the United States Securities and Exchange Commission.
|
|
The results of operations for the period ended March 31, 2016 are not indicative of the results that may be expected for the full year.
|
|
These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At March 31, 2016, the Company had not yet achieved profitable operations, has an accumulated deficit of $13,666,812 since its inception, has a working capital deficiency of $1,469,896 and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Company’s ability to continue as a going concern. Management anticipates that it requires approximately $128,000 over the twelve months ended March 31, 2017 to continue operations as well as the Company estimates it will accrue related interest expenses of $98,000 over the next 12 months on loans due to related parties. In addition to funding the Company’s general, administrative and corporate expenses the Company is obligated to address its current obligations totalling $1,470,517. To the extent that cash needs are not achieved from operating cash flow and existing cash on hand, the Company will be required to raise necessary cash through shareholder loans, equity issuances and/or other debt financing. Amounts raised will be used to continue the development of the Company's investment activities, and for other working capital purposes.
|
|
The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity financing and/or related party advances; however there is no assurance of additional funding being available. The Company has historically satisfied its capital needs primarily by issuing equity securities. Management plans to continue to provide for its capital needs during the twelve months ended March 31, 2017, by issuing equity securities and/or related party advances.
|
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
March 31, 2016
(
Expressed
in U.S. Dollars
)
(
Unaudited
)
3.
|
Convertible Loan Payable
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
Loan payable, plus accrued interest of $11,604 (2015 - $10,106), pursuant to a Convertible Loan Agreement. The loan is unsecured, bearing interest at 10% per annum and is repayable on demand. At any time, the lender may convert the principle amount of the loan into units of the Company, each unit consisting of one common share and one non-transferable share purchase warrant, at a conversion rate of $0.20 per unit. Each share purchase warrant entitles the holder to purchase one additional common share for a period of two years from the warrant issue date, at an exercise price of $0.20 during the first year, and $0.35 during the second year. Upon conversion of this loan, the $42,000 fair value of the warrants will be recognized as an interest expense and credited to additional paid-in capital.
|
|
$
|
50,000
|
|
$
|
50,000
|
|
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
March 31, 2016
(
Expressed
in U.S. Dollars
)
(
Unaudited
)
4.
|
Loans and Convertible Loans Payable – related party
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
a)
|
Loan payable to a company controlled by a director of the Company plus accrued interest of $18,162 (2015 - $17,437). The loan is unsecured, bearing interest at 12% per annum and is repayable on demand.
|
|
$
|
6,802
|
|
$
|
4,883
|
|
|
|
|
|
|
|
|
|
|
|
|
b)
|
Loans payable to a company controlled by a director of the Company. The loans are unsecured, non-interest bearing, and repayable upon demand.
|
|
|
325,470
|
|
|
326,949
|
|
|
|
|
|
|
|
|
|
|
|
|
c)
|
Loans payable to a company controlled by a former director of the Company. The loans are unsecured, non-interest bearing, and repayable upon demand.
|
|
|
7,477
|
|
|
1,919
|
|
|
|
|
|
|
|
|
|
|
|
|
d)
|
Loan payable to a company controlled by a former director of the Company, plus accrued interest payable of $207,875 (2015 - $198,835), pursuant to a Convertible Loan Agreement. The loan is unsecured, bearing interest at 10% per annum and is repayable on demand. The lender may at anytime convert the principal sum into units of the Company. Each unit will consist of one common share plus one common share purchase warrant. Each warrant is exercisable for a period of 2 years from the date of conversion at a price ranging from $0.05 to $0.23. The principal sum of $163,766 may be converted into 2,320,858 units. Conversion of these loans and resulting associated warrants to equity will be based on the conversion price set at the time the principal amount was drawn ranging from $0.05 to $0.23. Upon conversion of this loan, the $73,685 fair value of the warrants will be recognized as an interest expense and credited to additional paid-in capital.
|
|
|
163,766
|
|
|
163,766
|
|
|
|
|
|
|
|
|
|
|
|
|
e)
|
Loan payable to a company controlled by a director of the Company, plus accrued interest of $312,293 (2015 - $298,488), pursuant to a Convertible Loan Agreement. The loan is unsecured, bearing interest at 10% per annum and is repayable on demand. The lender may at anytime convert the principal sum into units of the Company. Each unit will consist of one common share plus one common share purchase warrant. Each warrant is exercisable for a period of 2 years from the date of conversion at a price ranging from $0.05 to $0.12. The principal sum of $255,209 may be converted into 4,526,436 units. Conversion of this loan and resulting associated warrants to equity will be based on the conversion price set at the time the principal amount was drawn ranging from $0.05 to $0.12. Upon conversion of this loan, the $113,338 fair value of the warrants will be recognized as an interest expense and credited to additional paid-in capital.
|
|
|
255,209
|
|
|
255,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
758,724
|
|
$
|
752,726
|
|
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
March 31, 2016
(
Expressed
in U.S. Dollars
)
(
Unaudited
)
|
During the three months ended March 31, 2016, the Company did not issue any common shares (2015: issued 1,500,000 common shares for proceeds of $80,000).
|
|
The Company’s board of directors approved a stock option plan. Under the plan directors, employees and consultants may be granted options to purchase common stock of the Company at a price of not less than 100% of the fair market value of the stock. The total number of options granted must not exceed 15% of the outstanding common stock of the Company. The plan expires on July 1, 2017.
|
|
No options were granted and no compensation expense was recorded during the periods ended March 31, 2016 and 2015.
|
|
The fair value of each option grant was estimated on the date of the grant using the Black-Scholes option valuation model. The Black-Scholes option valuation model requires the input of highly subjective assumptions including the expected price volatility. Changes in the subjective input assumptions can materially affect the fair value estimate and therefore the Black-Scholes model does not necessarily provide a reliable single measure of the fair value of the Company’s share purchase options.
|
|
As at March 31, 2016, the Company had share purchase options outstanding as follows:
|
|
Expiry Date
|
Exercise Price
|
Remaining Contractual Life
|
Number of Options
|
|
|
|
|
|
|
October
15, 2017
|
$0.10
|
1.54 years
|
1,200,000
|
|
January
16, 2018
|
$0.12
|
1.80 years
|
2,940,000
|
|
|
|
|
|
|
Total options outstanding
|
|
1.72 years
|
4,140,000
|
|
At March 31, 2016 all of the outstanding share purchase options were exercisable.
|
6.
|
Related Party Transactions
|
|
At March 31, 2016, accounts payable includes $21,737 due to a director, to a former director, and a company controlled by a director of the Company, in respect of unpaid management fees, expenses incurred on behalf of the Company, and operating costs paid on behalf of the Company.
|
|
At March 31, 2016, accrued interest includes $538,330 due to companies controlled by a director and a former director of the Company.
|
|
During the period ended March 31, 2016 the Company paid a director $1,000 in management fees.
|
2.
Management’s
Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should
be read in conjunction with our unaudited interim financial statements and the
related notes that appear elsewhere in this quarterly report. The following
discussion contains forward-looking statements that reflect our plans,
estimates and beliefs. Our actual results could differ materially from those
discussed in the forward looking statements. Factors that could cause or
contribute to such differences include those discussed below and elsewhere in
this annual report.
Our
unaudited interim financial statements are stated in United States dollars and
are prepared in accordance with United States generally accepted accounting
principles (“GAAP”).
The Company is in the development
stage, accordingly certain matters discussed herein are based on potential
future circumstances and developments, which the Company anticipates, but which
cannot be assured.
Plan of Operation
The Company has been devoting its
business efforts to real estate development projects located in Europe and the
Middle East. The Company will continue to explore new investment opportunities,
including real estate development projects, during its 2016 fiscal year.
On
June 10, 2014 SIII entered into a Sale and Purchase Agreement (the “Akcenter Agreement”)
with PG Proje Gelistirme Gayrimenkul A.S. and Star Leisure & Entertainment
Inc. to acquire certain retail real estate in Turkey, namely the Akcenter
Outlet and Shopping Center (the ”Akcenter Property”). This Akcenter Agreement
was cancelled by mutual consent, and replaced by a new restated Sale and
Purchase Agreement (the “Restated Akcenter Agreement”), effective November 3,
2014.
The
Restated Akcenter Agreement was entered into between SIII and ARIS Foreign
Trade and Construction Inc. (“ARIS”) and Muzaffer Mithat Ataman (“Ataman”) and
PG Proje Gelistirme Gayrimenkul A.S. (“PG”). ARIS and Ataman are jointly the “First
Party”; and ARIS, Ataman, and PG are jointly the “Sellers”. The First Party is
the owner, or where not the direct owner, represents the owners through Power
of Attorney, of the Akcenter Property.
SIII
is desirous of purchasing the Akcenter Property by either acquiring 100% of PG
or 100% of the Akcenter Property as more particularly described within the
Restated Akcenter Agreement. The Sellers agree to accept Convertible Debenture
Securities of SIII, issued and deposited into trust, as full payment of the
purchase price for the Akcenter Property as more particularly described within
the Restated Akcenter Agreement. PG will accept title transfer of the Akcenter
Property and act as the Akcenter Property’s registered owner and property
manager, and will hold certain Convertible Securities of SIII, registered in
its name and deposited into trust, for and on behalf of the Sellers. The
Restated Akcenter Agreement can be viewed in its entirety by visiting SIII’s
web site at the following address: www.siiincorporated.com/images/Legal/2014/Amended_Agreement_Akcenter_11032014.pdf
This
is a non-arm’s length transaction based on the fact that Mr. Abbas Salih is the
President, Director and CEO as well as the controlling shareholder of SIII and
indirectly holds a minority interest in PG.
Any
funding that maybe required to complete the Akcenter Property transaction has
not yet been fully secured, there can be no assurances the transaction will
proceed and SIII management cautions investors of this risk.
On
September 30, 2015 SIII entered into a Conditional Sale and Purchase Agreement
(the “Skytower Agreement”) for the purchase of the Skytower Hotel Atayol, with
Atayol Otelcilik Isletmecilik Turizm Insaat vd Ticaret A.S., (hereinafter
“Atayol”), Najibi Investment Incorporation (hereinafter “Najibi”), G7
Entertainment Incorporated, (hereinafter “G7”), Royaltun General Trading LLC.,
(hereinafter “Royaltun”), and Soha Investment Inc., (hereinafter “Soha)
(jointly hereinafter the “Seller’s”)
Within
the Skytower Agreement, Atayol declares that it is the 100% owner of certain
Real Estate located in Akcakoca Turkey known as the Skytower Hotel Atayol (the
“Skytower Property”), and has entered into a Joint Venture Agreement (the “JV
Agreement”) dated July 22, 2015 among the parties making up the Seller. The JV
Agreement provides that shareholders of Najibi, G7, Royaltun and Soha are to
provide financial assistance to Atayol in exchange for Atayol transferring 100%
of the Skytower Property into a newly formed Special Purpose Vehicle (the
“SPV’) that the Sellers will control by own common shares ownership.
The
Skytower Agreement contemplates that SIII will purchase up to 100% of the Skytower
Property, either directly or through a staged purchase of the SPV at the
“Purchase Price”, which is defined within the Skytower Agreement to be the
lower of the net appraised value of the Skytower Property as determined by a
mutually acceptable, fully independent, professional valuator experienced in
hotel real estate valuation appraisal within the jurisdiction of the Skytower Property
location or alternatively, Atayol’s estimated value of US $50,000,000 minus
deduction of all associated Skytower Property debt.
Under
the Skytower Agreement the parties have agreed that SIII will, upon completion
of due diligence and the contemplated property valuation referred to above,
finance the Purchase Price through the issuance, of Convertible Debenture
Securities of SIII with deemed value equal to the Purchase Price. Each
Convertible Debenture is to have a deemed value of US$100,000 and is
convertible into common share of SIII at US$1.00 per share. The convertible
debentures will be issued into the name of the SPV and delivered to a mutually
acceptable Escrow Agent which agent will administer the convertible debenture
under the terms of the convertible debenture and an escrow agreement to be
implemented among the parties.
It
is the intent of certain parties within the Seller’s group to market the
convertible debentures to their business contacts and associates whom are
sophisticated and accredited investors, within the Middle East and Turkey and
when, and if, the debentures are purchased by these third parties, the
debenture will be converted into shares and the proceeds distributed amongst
the shareholders of the SPV and the pro rata share of the Skytower Property or
the SPV will be transferred to SIII.
The
closing of the Agreement is subject to the acceptable completion of due
diligence by SIII.
This
is a non-arm’s length transaction on the basis that Mr. Abbas Salih is an
insider of SIII as well as some members of the Sellers.
Any
funding that maybe required to complete the Skytower Property transaction has
not yet been fully secured, there can be no assurances the transaction will
proceed and SIII management cautions investors of this risk.
On March 21, 2016 SIII entered
into a Letter of Intent (“LOI”) with Dogu Karadeniz Saglik Hizmetleri Anonim
Sirketi, S.P.V. (“Dogu”), and Par-San Turizm Anonim Sirkeci, S.P.V.(“ParSan”)(jointly
the “Vendors”); and Najibi Investment Investment Incorporation (“Najibi”), Royaltun
General Trading L.L.C. (“Royaltun”), G7 Entertainment Incorporated (“G7”), SOHA
Investment Inc.(“Soha”)(jointly the Second Party), whereby SIII may acquire from
the Vendors up to 100% of the Medical Park Private Hospital and the Hotel Marriot
Izmir in Trabzon, Turkey for a Purchase Price of US$35,000,000. Under the LOI,
the parties have agreed that upon completion of due diligence, the parties will
enter into a formal agreement, and SIII will finance the Purchase Price through
the issuance of Convertible Debenture Securities of SIII with a deemed value
equal to the Purchase Price.
This
is a non-arm’s length transaction on the basis that Mr. Abbas Salih is an
insider of SIII as well as some members of the Second Party. The complete LOI
is available upon request to the Company.
Our estimated cash expenses over
the next twelve months are as follows:
Accounting, audit, and legal fees
|
$
|
40,000
|
|
General and administrative expenses
|
|
7,000
|
|
Interest
|
|
6,000
|
|
Management fees
|
|
55,000
|
|
Regulatory and transfer agent fees
|
|
14,000
|
|
Rent
|
|
6,000
|
|
|
$
|
128,000
|
|
The
Company also estimates it will continue to accrue interest expense of $98,000
over the next 12 months on loans due to related parties. It is not anticipated
the related party interest will be paid in cash during 2016, and therefore related
party interest has been excluded from the above list of cash expenses.
To date we have funded our operations primarily with
loans from shareholders and issue new equity. In addition to funding the
Company’s general, administrative and corporate expenses the Company is
obligated to address its current obligations totalling $1,470,517. To the
extent that cash needs are not achieved from operating cash flow and existing
cash on hand, the Company will be required to raise necessary cash through
shareholder loans, equity issuances and/or other debt financing. Amounts raised
will be used to continue the development of the Company's investment
activities, and for other working capital purposes, which may be dilutive to
existing shareholders. The Company currently has no agreement in place to raise
funds for current liabilities and no guarantee can be given that we will be
able to raise funds for this purpose on terms acceptable to the company.
Failure to raise funds for general, administrative and corporate expenses and
current liabilities could result in a severe curtailment of the Company’s
operations.
Any advance in the real estate
development strategy set-out herein will require additional funds. These funds
may be raised through equity financing, debt financing or other sources which
may result in further dilution of the shareholders percentage ownership in the
company. See “Future Financing” below.
Results of Operations
Three Months ended March 31, 2016
During the quarter ended March
31, 2016, the Company incurred general and administrative expenses totaling $24,435
compared to $32,986 during the same period of the previous year.
The volume of transactions and
business activities has changed little compared to the prior year. The significant
changes in our expenses for the three month period ended March 31, 2016 when
compared to the three month period ended March 31, 2015 was primarily due to:
a)
|
Management fees relate to a director engaged in October 2012 to provide general management and administrative services. This director was remunerated by fees of $20 per hour for time spent directly managing the Company’s affairs. In addition, in January 2013, the Company agreed to pay another director/officer a periodic management stipend. The management fees charged by these two directors for the period ended March 31, 2016 were $1,000 compared to $6,000 in the 2015 period.
|
|
In addition, in January 2013, the Company agreed to pay another director/officer a periodic management stipend. During the period ended March 31, 2016 this director was paid $Nil compared to $5,000 in the 2015 period.
|
b)
|
Office and general expense relates to costs in a workplace shared with a related company. These shared costs include secretarial services, office supplies, printing, photocopier, parking, and telephone expenses.
|
c)
|
Regulatory fees relate to charges by EDGAR (USA) and SEDAR (Canada) regulatory filing service providers for making submissions to the regulatory authorities, as well as fees paid to the regulators themselves. The 2016 Q1 period was $2,641 lower because the Company is no longer required make regulatory filings in Canada.
|
d)
|
Interest on loans increased by $2,566; this is attributed to the compounding effect of the quarterly interest calculation as the Company has not been making any payments on these debts.
|
Funding for operating and
investing activities was provided by both non-interest and interest bearing
advances and loans from related parties, including directors of the Company,
and companies controlled by these directors; plus loans and equity investments
from third parties.
As of March 31, 2016, the Company
had total current assets of $621 and total liabilities of $1,470,517. The
Company had cash of $621 and a working capital deficiency of $1,469,896 as of March
31, 2016 compared to cash on hand of $14,630 and a working capital deficiency
of $1,417,812, for the year ended December 31, 2015. We anticipate that we
will incur approximately $128,000 for cash operating expenses, including
professional, legal and accounting expenses associated with our reporting
requirements under the Exchange Act during the next twelve months. In addition to
funding the Company’s general, administrative and corporate expenses the
Company is obligated to address its current obligations totaling $1,470,517. To
the extent that cash needs are not achieved from operating cash flow and
existing cash on hand, the Company will be required to raise necessary cash
through shareholder loans, equity issuances and/or other debt financing.
Amounts raised will be used to continue the development of the Company's
investment activities, and for other working capital purposes. Accordingly, we
will need to obtain additional financing in order to continue our planned
business activities.
Cash
used in operating activities for the period ended March 31, 2016 was $19,567 as
compared to cash used by operating activities for the same period in 2015 of $71,121. The
decrease in cash used in operating activities was primarily due to a $55,616 reduction
in accounts payable to related parties in the 2015 period, whereas there was no
similar reduction in the 2016 period. Cash used in operating activities also decreased
due to decreases in both management fees and regulatory fees.
The Company has the following
loans outstanding as of March 31, 2016:
A $7,477 loan is payable to a
company controlled by a former director of the Company. This loan is unsecured,
non-interest, and is repayable on demand.
A $163,766 loan is payable to a
company controlled by a former director of the Company, plus accrued interest payable
of $207,875 pursuant to a Convertible Loan Agreement. The loan is unsecured,
bearing interest at 10% per annum and is repayable on demand. The lender may
at anytime convert the principal sum into units of the Company. Each unit will
consist of one common share plus one common share purchase warrant. The
principal sum of $163,766 may be converted into 2,320,858 units. Conversion of
these loans and resulting associated warrants to equity will be based on the
conversion price set at the time the principal amount was drawn ranging from
$0.05 to $0.23.
A $50,000 loan
payable, plus accrued interest of $11,604, pursuant to a Convertible Loan
Agreement. This loan is unsecured, bearing interest at 10% per annum, and is
repayable on demand. At any time, the lender may convert the principle amount
of the loan into units of the Company, each unit consisting of one common share
and one non-transferable share purchase warrant, at a conversion rate of $0.20
per unit. Each share purchase warrant entitles the holder to purchase one
additional common share for a period of two years from the warrant issue date,
at an exercise price of $0.20 during the first year, and $0.35 during the
second year.
A $6,802 loan is payable to a
company controlled by a director of the Company plus accrued interest of $18,162.
This loan is unsecured, bearing interest at 12% per annum and is repayable on
demand.
Loans totaling $325,470 are
payable to a company controlled by a director of the Company. These loans are
unsecured, non-interest bearing, and repayable upon demand.
A $255,209
loan is payable to a company controlled by a director of the Company, plus
accrued interest of $284,875 pursuant to a Convertible Loan Agreement. The loan
is unsecured, bearing interest at 10% per annum and is repayable on demand.
The lender may at anytime convert the principal sum into units of the Company. Each
unit will consist of one common share plus one common share purchase warrant.
The principal sum of $255,209 may be converted into 4,526,436 units.
Conversion of this loan and resulting associated warrants to equity will be
based on the conversion price set at the time the principal amount was drawn
ranging from $0.05 to $0.12.
Going Concern
The unaudited financial statements accompanying this
report have been prepared on a going concern basis, which implies that our
company will continue to realize its assets and discharge its liabilities and
commitments in the normal course of business. Our company has not generated
revenues since inception and has never paid any cash dividends and is unlikely
to pay cash dividends or generate earnings in the immediate or foreseeable
future. The continuation of our company as a going concern is dependent upon
the continued financial support from related party advances, the ability of our
company to obtain necessary equity financing to achieve our operating
objectives, and the attainment of profitable operations. As of March 31, 2016,
we had cash of $621 and we estimate that we will require approximately $128,000
to fund our business operations over the next twelve months. In addition to
funding the Company’s general, administrative and corporate expenses the
Company is obligated to address its current obligations totalling $1,470,517.
To the extent that cash needs are not achieved from operating cash flow and
existing cash on hand, the Company will be required to raise necessary cash
through shareholder loans, equity issuances and/or other debt financing. Amounts
raised will be used to continue the development of the Company's investment
activities, and for other working capital purposes.
Accordingly,
we do not have sufficient funds for planned operations and we will be required
to raise additional funds for operations.
These circumstances
raise substantial doubt about our ability to continue as a going concern, as
described in the Note 2 of our March 31, 2016 unaudited financial statements.
The financial statements do not include any adjustments that might result from
the outcome of that uncertainty. The
continuation of our business is dependent upon us raising additional financial
support. The issuance of additional equity securities by us could result in a
significant dilution in the equity interests of our current stockholders.
Obtaining commercial loans, assuming those loans would be available, will
increase our liabilities and future cash commitments.
There are no
assurances that we will be able to obtain further funds required for our
continued operations. We are pursuing various financing alternatives to meet
our immediate and long-term financial requirements. There can be no assurance
that additional financing will be available to us when needed or, if available,
that it can be obtained on commercially reasonable terms. If we are not able to
obtain the additional financing on a timely basis, we will be forced to scale
down or perhaps even cease the operation of our business.
Future Financings
As of March 31, 2016, we had cash of $621 and we
estimate that we will require approximately $128,000 to fund our business
operations over the next twelve months. In addition to funding the Company’s
general, administrative and corporate expenses the Company is obligated to
address its current obligations totaling $1,470,517. Accordingly, we do not
have sufficient funds for planned operations and we will be required to raise
additional funds for operations. We anticipate continuing to rely on equity
sales of our common shares or shareholder loans in order to continue to fund
our business operations. Issuances of additional shares will result in dilution
to our existing stockholders. There is no assurance that we will achieve any
additional sales of our equity securities or arrange for debt or other
financing to fund our planned activities.
Off-balance sheet arrangements
As of the date of this Report, the Company does not have any off-balance sheet
arrangements that have or are reasonably likely to have a current or future
effect on the company's financial condition, change in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources that are material to investors. The term "off-balance
sheet arrangement" generally means any transaction, agreement, or other
contractual arrangement to which an entity unconsolidated with the Company is a
party under which the Company has (i) any obligation arising under a guarantee
contract, derivative instrument or variable interest; or (ii) a retained or
contingent interest in assets transferred to such entity or similar arrangement
that serves as credit, liquidity or market risk support for such assets.
3.
Quantitative and
Qualitative Disclosures About Market Risk
The
Company has no market risk sensitive instruments.
4.
Controls and Procedures
As required by Rule 13(a)-15
under the Exchange Act, in connection with this quarterly report on Form 10-Q,
under the direction of our Chief Executive Officer and Chief Financial Officer,
we have evaluated our disclosure controls and procedures as of March 31, 2016, our disclosure controls and
procedures were ineffective. As of the date of this filing, we are still in the
process of remediating such material weaknesses in our internal controls and
procedures. Additionally, we are currently inactive as we seek new business
opportunities.
It should be noted that while our
management believes our disclosure controls and procedures provide a reasonable
level of assurance, they do not expect that our disclosure controls and
procedures or internal controls will prevent all error and all fraud. A control
system, no matter how well conceived or operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met.
Further, the design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative
to their costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues and
instances of fraud, if any, within our company have been detected. These
inherent limitations include the realities that judgments in decision making
can be faulty, and that breakdowns can occur because of simple error or
mistake. Additionally, controls can be circumvented by the individual acts of
some persons, by collusion of two or more people, or by management override of
the controls. The design of any system of internal control is based in part
upon certain assumptions about the likelihood of future events, and there can
be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions. Over time, controls may become
inadequate because of changes in conditions, or the degree of compliance with
the policies or procedures may deteriorate. Because of the inherent limitations
in a cost-effective control system, misstatements due to error or fraud may
occur and not be detected.
There were no changes in our
internal control over financial reporting during the period ended March 31,
2016 that have materially affected or are reasonably likely to materially
affect, our internal control over financial reporting.