NOTES
TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
JULY
31, 2016 AND 2015
NOTE
1 – GENERAL ORGANIZATION AND BUSINESS
Tianci
International, Inc. (“the Company”, “Tianci”) was incorporated under the laws of the State of Nevada,
U.S. as Freedom Petroleum, Inc. on June 13, 2012. In May 2015, the Company changed its name to Steampunk Wizards Inc. and on November
9, 2016, the Company changed its name to Tianci International, Inc. The Company’s fiscal year end is July 31.
Share
Exchange and Recapitalization
On
July 16, 2015, the Company entered into a share exchange agreement (the “Exchange Agreement”), which was consummated
on August 21, 2015, with Steampunk Wizards Ltd., a company incorporated pursuant to the laws of Malta (“Malta Co.”)
, the Company’s sole officer and director (the “Officer”), being the owner of record of 11,451,541 common shares
of the Company and the persons (the “Shareholders”), being the owners of record of all of the issued share capital
of Malta Co. (the “Steampunk Stock”) as of July 15, 2015. Pursuant to the Exchange Agreement, upon surrender by the
Shareholders and the cancellation by Malta Co. of the certificates evidencing the Steampunk Stock as registered in the name of
each Shareholder, and pursuant to the registration of the Company in the register of members maintained by Malta Co. as the new
holder of the Steampunk Stock and the issuance of the certificates evidencing the aforementioned registration of the Steampunk
Stock in the name of the Company, the Company would issue 4,812,209 shares (the “New Shares”) of the Company’s
common stock to the Shareholders (or their designees), and the Officer would cause 10,096,229 shares of the Company’s common
stock that he owns (the “Officer Stock,” together with the New Shares, the “Acquisition Stock”) to be
transferred to the Shareholders (or their designees), which collectively should represent 55% of the issued and outstanding common
stock of the Company immediately after the closing, in exchange for the Steampunk Stock, representing 100% of the issued share
capital of Malta Co. As a result of the exchange of the Steampunk Stock for the Acquisition Stock (the “Share Exchange”),
Malta Co. would become a wholly owned subsidiary (the “Subsidiary”) of the Company and there would be a change of
control of the Company following the closing. There were no warrants, options or other equity instruments issued in connection
with the Exchange Agreement.
For
financial accounting purposes, the Share Exchange is accounted for as a reverse acquisition by the Malta Co., and resulted in
a recapitalization, with Malta Co. being the accounting acquirer and the Company as the acquired entity. The closing of Share
Exchange resulted in a change of control. Accordingly, the historical financial statements prior to the acquisition are those
of the accounting acquirer, Malta Co., and have been prepared to give retroactive effect to the reverse acquisition completed
on August 21, 2015, and represent the operations of Malta Co. The consolidated financial statements after the acquisition date
include the balance sheets of both companies at historical cost, the historical results of Malta Co. and the results of the Company
from the acquisition date. All share and per share information in the accompanying consolidated financial statements and footnotes
has been retroactively restated to reflect the recapitalization.
Incorporated
in 2014, Malta Co. was a games development and technology company specialized in developing enchanting games and gaming technology
where the real and virtual worlds blur.
On
October 13, 2016, the Company entered into a spin-off agreement (the “Spin-Off Agreement”) with Steampunk Wizards
Ltd., the Company’s wholly owned subsidiary and a company incorporated pursuant to the laws of Malta (“Steampunk”),
and Praefidi Holdings Limited (the “Buyer”), an entity organized under the laws of Malta and owned by Brendon Grunewald,
former director of the Company. Pursuant to the Spin-Off Agreement, the Buyer shall receive all of the issued and outstanding
capital stock of Steampunk and the Company shall receive $2,000 as purchase price. The Buyer shall become the sole equity owner
of the Steampunk and the Company shall have no further interest in Steampunk.
On
October 26, 2016, the Company entered into an Agreement and Plan of Merger with its wholly-owned subsidiary, Tianci International,
Inc., a newly formed Nevada Corporation ("Merger Sub"), formed on November 09, 2016, with Merger Sub being the surviving
entity. The transaction contemplated in the Merger Agreement (“Merger”) which became effective on November 9, 2016.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES
Basis
of Presentation
The
Financial Statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange
Commission (“SEC”). The Financial Statements have been prepared using the accrual basis of accounting in
accordance with Generally Accepted Accounting Principles (“GAAP”) of the United States and are presented in U.S. dollars.
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted accounting principles of 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 revenues and expenses during the year.
The more significant areas requiring the use of estimates include asset impairment and future income tax amounts. Management bases
its estimates on historical experience and on other assumptions considered to be reasonable under the circumstances. However,
actual results may differ from the estimates.
Basis
of Consolidation
These
financial statements include the accounts of the Company and its subsidiary, Steampunk Wizards Ltd. All material intercompany
balances and transactions have been eliminated.
Cash
and Cash Equivalents
Cash
and cash equivalents include cash in hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments
with original maturities of three months or less. The Company had $339 and $53,472 of cash at July 31, 2016 and 2015, respectively.
The same are shown as asset held for sale in the financial statements.
Fair
Value of Financial Instruments
The
Company follows ASC 820, "Fair Value Measurements and Disclosures", which 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 entity's 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 levels of the fair value hierarchy are described below:
Level
1
Level
1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level
2
Level
2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability
such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in
markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant
inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level
3
Level
3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to
the measurement of the fair value of the assets or liabilities.
The
Company's financial instruments consist of cash, accounts receivable, prepaid expenses and other deposits, accounts payable and
accrued liabilities, amounts due to related parties and loans. The carrying amounts of these financial instruments
approximate fair value due either to length of maturity or interest rates that approximate prevailing rates unless otherwise disclosed
in these financial statements.
Revenue
Recognition
The
Company has yet to realize revenues from operations. The Company will recognize revenue when delivery of goods or completion of
services has occurred provided there is persuasive evidence of an agreement, acceptance has been approved by its customers, the
fee is fixed or determinable based on the completion of stated terms and conditions, and collection of any related receivable
is reasonably assured.
Property,
Plant and Equipment
Property,
plant and equipment are carried at cost less accumulated depreciation and accumulated impairment. Cost includes all direct costs
necessary to acquire and prepare assets for use, including internal labor and overhead in some cases. Depreciation is calculated
on the straight-line basis so as to write off the cost of each asset to its residual value over its estimated useful economic
life. Costs of repairs and maintenance are expensed when incurred, while expenditures for refurbishments and improvements that
significantly add to the productive capacity or extend the useful life of an asset are capitalized. When assets are retired or
sold, the asset cost and related accumulated depreciation are eliminated with any remaining gain or loss recognized in net earnings.
Long-lived
Assets
Long-lived
assets such as property, equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate
that the carrying value may not be recoverable. When required impairment losses on assets to be held and used are recognized based
on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar
assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not
recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount
and fair value of the asset. When fair values are not available, the Company estimates fair value using the expected
future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets.
Income
Taxes
The
Company provides for income taxes using an asset and liability approach. Deferred tax assets and liabilities are recorded based
on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect currently.
Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than
not that some or all of the deferred tax assets will not be realized. No provision for income taxes is included in the statement
due to its immaterial amount, net of the allowance account, based on the likelihood of the Company to utilize the loss carry-forward.
Basic
and Diluted Earnings (Loss) Per Share
Basic
income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted
average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net
income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted
weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt
or equity. There are no such common stock equivalents outstanding as of July 31, 2016 and 2015.
Concentrations
of Credit Risk
The
Company's financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents
and accounts receivable. The Company places its cash and cash equivalents with financial institutions of high credit worthiness.
The Company's management plans to assess the financial strength and credit worthiness of any parties to which it extends funds,
and as such, it believes that any associated credit risk exposures are limited.
Foreign Currency Translation and Re-measurement
The
Company's functional and reporting currency is the U.S. dollar. All transactions initiated in EURO are translated into U.S. dollars
in accordance with ASC 830-30, "Translation of Financial Statements," as follows:
i)
|
Assets
and liabilities at the rate of exchange in effect at the balance sheet date.
|
ii)
|
Equities
at historical rate
|
iii)
|
Revenue
and expense items at the average rate of exchange prevailing during the period.
|
Adjustments
arising from such translations are included in accumulated other comprehensive income in shareholders’ equity.
|
|
July 31,
|
|
|
July 31,
|
|
|
|
2016
|
|
|
2015
|
|
Spot EURO: USD exchange rate
|
|
$
|
1.12
|
|
|
$
|
1.10
|
|
Average EURO: USD exchange rate
|
|
$
|
1.11
|
|
|
$
|
1.14
|
|
Recent
Accounting Pronouncements
Management
has considered all recent accounting pronouncements issued. The Company's management
believes
that these recent pronouncements will not have a material effect on the Company's financial statements.
NOTE
3 – GOING CONCERN
The
financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets
and discharge its liabilities in the normal course of business for the foreseeable future. As at July 31, 2016, the Company has
working capital deficiency of $426,981 and has incurred losses since inception resulting in an accumulated deficit of $1,157,538.
Further losses are anticipated in the development of the business, raising substantial doubt about the Company’s ability
to continue as a going concern. The consolidated financial statements do not include any adjustment that might result from the
outcome of this uncertainty
The
ability to continue as a going concern is dependent upon the Company generating profitable operations in the future 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 intends to finance operating costs over the next twelve months with loans from directors and/or private
placements of common stock.
NOTE
4 –ASSETS/LIABILITIES HELD FOR SALE
On
October 13, 2016, the Company entered into a spin-off agreement (the “Spin-Off Agreement”) with Steampunk Wizards
Ltd., the Company’s wholly owned subsidiary and a company incorporated pursuant to the laws of Malta (“Steampunk”),
and Praefidi Holdings Limited (the “Buyer”), an entity organized under the laws of Malta and owned by Brendon Grunewald.
Pursuant to the Spin-Off Agreement, the Buyer shall receive all of the issued and outstanding capital stock of Steampunk and the
Company shall receive $2,000 as purchase price. The Buyer shall become the sole equity owner of the Steampunk and the Company
shall have no further interest in Steampunk.
The
following table shows the results of operations of Steampunk for fiscal years 2016 and 2015 which are included in the loss from
discontinued operations:
|
|
|
|
|
October 27,
|
|
|
|
For the
Years Ended
|
|
|
2014
(Inception) to
|
|
|
|
July 31,
|
|
|
July 31,
|
|
|
|
2016
|
|
|
2015
|
|
Operating expenses
|
|
|
|
|
|
|
Development costs
|
|
$
|
145,002
|
|
|
$
|
-
|
|
Impairment
|
|
|
-
|
|
|
|
224,723
|
|
Office and miscellaneous
|
|
|
199,932
|
|
|
|
207,710
|
|
Professional fees
|
|
|
21,822
|
|
|
|
47,641
|
|
|
|
|
|
|
|
|
|
|
Other Income (expense)
|
|
|
|
|
|
|
|
|
Interest expenses
|
|
|
7,077
|
|
|
|
1,450
|
|
Other income
|
|
|
(5,908
|
)
|
|
|
(7,487
|
)
|
|
|
|
|
|
|
|
|
|
Total loss from discontinued operation
|
|
$
|
367,925
|
|
|
$
|
474,037
|
|
The
following table summarizes the carrying amounts of the assets and liabilities held for sale,
|
|
|
|
|
July 31,
|
|
|
|
Note
|
|
|
2016
|
|
|
2015
|
|
Assets held for sale
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
$
|
339
|
|
|
$
|
53,472
|
|
Prepaid expenses and other deposits
|
|
|
|
|
|
|
4,808
|
|
|
|
12,670
|
|
Other current assets
|
|
|
5
|
|
|
|
13,698
|
|
|
|
7,282
|
|
Property and equipment, net
|
|
|
6
|
|
|
|
12,764
|
|
|
|
4,807
|
|
Total assets held for sale
|
|
|
|
|
|
$
|
31,609
|
|
|
$
|
78,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities held for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
7
|
|
|
$
|
21,590
|
|
|
$
|
47,773
|
|
Due to related parities
|
|
|
9
|
|
|
|
92,379
|
|
|
|
22,114
|
|
Short-term loans
|
|
|
8
|
|
|
|
138,757
|
|
|
|
228,756
|
|
Total liabilities held for sale
|
|
|
|
|
|
$
|
252,726
|
|
|
$
|
298,643
|
|
NOTE
5 – OTHER CURRENT ASSETS HELD FOR SALE
Other
current assets consist of other receivable and value-added tax (“VAT”) held by the Company. As of July 31, 2016, and,
2015, the Company has $3,814 and $7,282 in VAT receivable from the Malta government and other receivable of $9,884 and $0, respectively.
NOTE
6 – PROPERTY AND EQUIPMENT HELD FOR SALE
|
|
July 31,
|
|
|
July 31,
|
|
|
|
2016
|
|
|
2015
|
|
Cost
|
|
|
|
|
|
|
IT Equipment
|
|
$
|
10,732
|
|
|
$
|
6,593
|
|
Furniture
|
|
|
6,012
|
|
|
|
-
|
|
Total
|
|
|
16,744
|
|
|
|
6,593
|
|
Depreciation
|
|
|
(4,207
|
)
|
|
|
(1,867
|
)
|
Foreign currency translation effect
|
|
|
227
|
|
|
|
81
|
|
Balance
|
|
$
|
12,764
|
|
|
$
|
4,807
|
|
The
equipment comprised of IT and other equipment with an estimated average useful life of 4 years. The Company recorded $2,340 and
$1,867 as depreciation expenses for the years ended July 31, 2016 and from October 27, 2014 (inception) to July 31, 2015, respectively.
NOTE
7 – ACCOUNTS PAYABLE AND ACCRUED LIABILITES
The
Company’s accounts payable and accrued liabilities consist of the following:
|
|
July 31,
|
|
|
July 31,
|
|
|
|
2016
|
|
|
2015
|
|
Accounts payable
|
|
|
|
|
|
|
Trade payable
|
|
$
|
74,040
|
|
|
$
|
-
|
|
|
|
$
|
74,040
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities held for sale
|
|
|
|
|
|
|
|
|
Trade payable
|
|
|
7,193
|
|
|
|
271
|
|
Accrued liabilities
|
|
|
5,864
|
|
|
|
1,387
|
|
Accrued interest
|
|
|
8,533
|
|
|
|
46,115
|
|
|
|
$
|
21,590
|
|
|
$
|
47,773
|
|
NOTE
8 – SHORT-TERM LOANS HELD FOR SALE
The
Company’s short-term loans consist of the following:
|
|
July 31,
|
|
|
July 31,
|
|
|
|
2016
|
|
|
2015
|
|
Short-term loans from Deep Blue Trading
|
|
$
|
97,448
|
|
|
$
|
64,026
|
|
Short-term loans from Galloway Financial Services
|
|
|
41,309
|
|
|
|
-
|
|
Loans from Steampunk Wizards Inc.
|
|
|
-
|
|
|
|
164,730
|
|
|
|
$
|
138,757
|
|
|
$
|
228,756
|
|
During
the year ended July 31, 2016 and the period ended July 31, 2015, the Company accrued interest of $8,533 and $1,387, respectively.
The
Deep Blue Trading loans are secured, bear interest rate of 7% per annum and are payable, together with interest, within one year
from date of grant. Of the total balance $97,448 to Deep Blue Trading, the Company is in default for $52,773 as at July 31, 2016.
One of the shareholders of the Company is a director in Deep Blue Trading.
The
Galloway Financial Services (“Galloway”) loans were borrowed from a shareholder, who has approximately 1% of the Company’s
common shares. The Galloway loans are unsecured, bears interest rate of 7% per annum and are payable, together with interest,
within one year from date of grant. As at July 31, 2016 and 2015, the Company owed $41,309 and $0, respectively, to Galloway.
One of the shareholders of the Company is a director in Galloway.
On
July 16, 2015, Steampunk Wizards, Inc. entered into a share exchange agreement with Malta Co. The exchange was closed on August
21, 2015. As a result of the exchange of Malta Co. became a wholly owned subsidiary of Steampunk Wizards, Inc. Prior to the closing,
Steampunk Wizards, Inc. advanced $164,730 (EUR 145,000) to the Malta Co. The advance was unsecured, non-interest bearing and reclassified
as inter-company loans during the period ended July 31, 2016.
NOTE
9 – DUE TO RELATED PARTY
Due
to related party
On
August 21, 2015, the Company assumed $101,095 loans provided by the former Chief Executive Officer (“CEO”) and shareholder
of the Company through the share exchange transaction. During the period ended July 31, 2016, the former CEO advanced $16,822
to the Company and the Company repaid $57,917 to the former CEO. In addition, pursuant to an employee agreement effective on March
1, 2014, the Company was obligated to pay $10,000 per month to the former CEO for management services until January 31, 2016.
Accordingly, $60,000 management fees for the period during August 1, 2015 to January 31, 2016, were accrued as amount due to related
parties. As at July 31, 2016, the Company owed $120,000 to the former CEO and shareholder.
During
the period ended July 31, 2016, a shareholder of the Company made vendor payments of $11,824 directly on behalf of the Company.
As at July 31, 2016 and 2015, the Company owed $11,824 and $0 to a shareholder of the Company. This loan is non-interest bearing
and due on demand.
As
at July 31, 2016 and 2015, related parties were owed $131,824 and $0, respectively.
Due
to related party held for sale
During
the period ended July 31, 2016, a shareholder of the Company advanced $64,564 to the Company. During the year ended July 31, 2016,
the Company repaid $11,169 to this shareholder. As at July 31, 2016 and 2015, the Company owed $53,395 and $0, respectively, to
a shareholder of the Company. This loan is non-interest bearing and due on demand.
During
the year ended July 31, 2016, a company owned by a shareholder of the Company advanced $15,637 to the Company. As at July 31,
2016 and 2015, the Company owed $15,637 and $0, respectively, to this company. This loan is non-interest bearing and due on demand.
As
at July 31, 2016 and 2015, the Company owed $22,553 and $22,114, respectively, to a shareholder of the Company. The increase in
due to this shareholder was due to change of foreign exchange rate. This loan is non-interest bearing and due on demand.
As
at July 31, 2016 and 2015, the Company owed $794 and $0 to a shareholder of the Company. This loan is non-interest bearing and
due on demand.
During
the year ended July 31, 2016, a company, which is owned by the Company’s chief technology officer, provided management services
of $38,838 to the Company. As at July 31, 2016 and 2015, $6,811 and $1,042 due to this company was included in accounts payable
and accrued liabilities, respectively.
As
at July 31, 2016 and 2015, due to related party held for sale was $92,379 and $22,114, respectively.
NOTE
10 – EQUITY
Preferred
Stock
The
Company has 20,000,000 authorized preferred shares with a par value of $0.0001 per share. The Board of Directors are authorized
to divide the authorized shares of Preferred Stock into one or more series, each of which shall be so designated as to distinguish
the shares thereof from the shares of all other series and classes.
There
were no shares of preferred stock issued and outstanding as of July 31, 2016 and 2015.
Common
Stock
The
Company has authorized 100,000,000 common shares with a par value of $0.0001 per share. Each common share entitles the holder
to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.
On
August 21, 2015, pursuant to the Share Exchange Agreement (See Note 1), the Company issued 14,908,438 shares of common
stock to the stockholders of Malta in exchange for 3,170,000 shares of Malta’s common stock, representing 100% of its
issued and outstanding common stock. As a result of the reverse acquisition accounting, these shares issued to the former
Malta stockholders are treated as being outstanding from the date of issuance of the Malta shares.
During
the year ended July 31, 2016, the Company issued 12,858,831 shares of common stock as follows;
●
|
613,593
shares of common stock for cash of $440,579.
|
●
|
As
part of reverse acquisition, the Company’s existing shareholders retained 12,245,238
share of the Company common stock, which was considered an addition during the year ended
July 31, 2016.
|
●
|
During
the year ended July 31, 2016, the shareholder of the Company paid expenses of $3,250
on behalf of the Company which was recorded as capital contribution.
|
During
the period ended July 31, 2015, the Company issued prorated 14,908,438 (pre-reverse merger 3,170,000) shares of common stock as
follows;
●
|
On
October 27, 2014, the Company issued 4,702,977 (pre-reverse merger 1,000,000) ordinary
shares of Common Stock to its founders pursuant to a subscription agreement, and received
$1,523 (Euro 1,200) in consideration.
|
●
|
On
November 14, 2014, 5,502,484 (pre-reverse merger 1,170,000) shares were issued to Ventus
Investment Holding Limited for intangible assets, receivables and cash of total $145,724
(Euro 117,000).
|
●
|
On
December 4, 2014, 4,702,977 (pre-reverse merger 1,000,000) shares were issued to an unaffiliated
party for cash of $123,490 (Euro 100,000).
|
There
were 27,767,269 and 14,908,438 shares of common stock issued and outstanding as of July 31, 2016 and July 31, 2015, respectively.
NOTE
11 – INCOME TAXES
Tianci
International, Inc. (formerly Steampunk Wizards Inc.), was formed in June 2012 under the name Freedom Petroleum, Inc. Prior to
the Share Exchange in August 21, 2015, the Company only had operations in the United States. In August 2015, the Company became
the parent of Malta Co., a wholly owned Malta subsidiary, which files tax returns in Malta.
The
Malta and U.S. components of (loss) income before income taxes were as follows:
|
|
For the
|
|
|
October 27,
2014
|
|
|
|
Years Ended
|
|
|
(Inception) to
|
|
|
|
July 31,
|
|
|
July 31,
|
|
|
|
2016
|
|
|
2015
|
|
United States
|
|
$
|
(315,576
|
)
|
|
$
|
-
|
|
Malta
|
|
|
(367,925
|
)
|
|
|
(474,037
|
)
|
Loss before income taxes
|
|
$
|
(683,501
|
)
|
|
$
|
(474,037
|
)
|
The
income tax provision (benefit) for the years ended July 31, 2016 and the period ended July 31, 2015 consists of the following:
|
|
|
|
|
October 27,
|
|
|
|
For the Years Ended
|
|
|
2014
(Inception) to
|
|
|
|
July 31,
|
|
|
July 31,
|
|
|
|
2016
|
|
|
2015
|
|
Income tax expense at statutory rate:
|
|
|
|
|
|
|
United States
|
|
$
|
107,296
|
|
|
$
|
-
|
|
Malta
|
|
|
128,774
|
|
|
|
165,913
|
|
Total
|
|
|
236,070
|
|
|
|
165,913
|
|
Change in valuation allowance
|
|
|
(236,070
|
)
|
|
|
(165,913
|
)
|
Income tax expense (benefit)
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred
taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts recorded for tax purposes. Significant components of the Company’s deferred tax assets
and liabilities are as follows:
|
|
July 31,
|
|
|
|
2016
|
|
|
2015
|
|
NOL Carryover:
|
|
|
|
|
|
|
United States
|
|
$
|
541,636
|
|
|
$
|
-
|
|
Malta
|
|
|
294,687
|
|
|
|
165,913
|
|
Total
|
|
|
836,323
|
|
|
|
165,913
|
|
Valuation allowance
|
|
|
(836,323
|
)
|
|
|
(165,913
|
)
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
The
reconciliation of the effective income tax rate to the U.S. federal statutory rate as of July 31, 2016 and 2015:
Federal income tax rate
|
|
|
34.0
|
%
|
Increase in valuation allowance
|
|
|
(34.0
|
%)
|
Effective income tax rate
|
|
|
0.0
|
%
|
The
reconciliation of the effective income tax rate to Malta statutory rate as of July 31, 2016 and 2015:
Income tax rate
|
|
|
35.0
|
%
|
Increase in valuation allowance
|
|
|
(35.0
|
%)
|
Effective income tax rate
|
|
|
0.0
|
%
|
At
July 31, 2016 and 2015, the Company had $1,593,047 and $1,272,471, respectively of US Net Operating Losses (“NOLs”),
that are available to offset future taxable income until 2035.
At
July 31, 2016 and 2015, the Company had $841,962 and $474,037, respectively of foreign net operating losses (“NOLs”)
that may be available to offset future taxable income until 2035. Due to a subsequent event on October 13, 2016 (Spin off), the
foreign NOL will no longer be available to the Company.
The
Company assesses the likelihood that deferred tax assets will be realized. ASC 740, “Income Taxes” requires that a
valuation allowance be established when it is “more likely than not” that all, or a portion of, deferred tax assets
will not be realized. A review of all available positive and negative evidence needs to be considered, including the scheduled
reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. After consideration of all
the information available, management believes that uncertainty exists with respect to future realization of its deferred tax
assets and has, therefore, established a full valuation allowance as of July 31, 2016 and 2015.
The
Company has not completed its evaluation of NOL utilization limitation under IRC Section 382, change of ownership rules, but believes
that it had a change of ownership that would limit the amount of NOLs that could be utilized each year based on the “ Internal
Revenue Code, as Amended “
The
Company’s tax returns are subject to examination by tax authorities beginning with the year ended July 31, 2012 (U.S) and
July 31, 2015 (Malta).
NOTE
12 – COMMITMENTS AND CONTINGENCIES
On
July 2, 2015, Malta Co. entered into a lease agreement with Central Garage Ltd. The term of the lease is one year with monthly
payments of EUR 1,200.
The
Company has no other commitments or contingencies as of July 31, 2016.
From
time to time the Company may become a party to litigation matters involving claims against the Company.
Management
believes that it is adequately insured for its operations and there are no current matters that would have a material effect on
the Company's financial position or results of operations.
NOTE
13 – IMPAIRMENT
During
the year ended July 31, 2016 and the period ended July 31, 2015, the Company recognized impairment loss of $0 and $224,723, respectively.
Loan
receivable
|
|
July 31,
2015
|
|
|
|
|
|
Loans receivable
|
|
$
|
40,603
|
|
Allowance for impairment
|
|
|
(40,603
|
)
|
Balance - July 31, 2015
|
|
$
|
-
|
|
The
Company’s receivables are comprised of loans assigned by the Ventus Investment Holding Limited to the Company (Note 9).
These receivables were fully impaired during the period ended July 31, 2015.
Intangible
asset
|
|
July 31,
2015
|
|
|
|
|
|
Cost
|
|
$
|
176,215
|
|
Impairment
|
|
|
(176,215
|
)
|
Balance - July 31, 2015
|
|
$
|
-
|
|
On
November 25, 2014, the Company acquired certain intangible assets from Ventus Investment Holding Limited (“Ventus’)
against an issue of shares (Note 9). Additionally, the Company assumed Ventus’ obligation to remit a 10% royalty to a third
party based on the net revenue generated from the use of the intangible assets purchased. The intangible assets represented game
assets including software codes, software and license, digital images, drawings and marketing and customer information, intellectual
property, trademarks and copyrights and all rights thereto and promotion material related to the game assets. During the period,
the Company further developed the game and gaming assets.
As
at the reporting date, management has decided to discontinue developing the intangible assets since it was not deemed to be economically
and commercially feasible any longer. Accordingly, the intangible asset was fully impaired for $184,120 based on average rate,
during
the period ended July 31, 2015
.
NOTE
14 – SUBSEQUENT EVENTS
Management
has evaluated subsequent events through the date these financial statements were available to be issued.
In
connection with the spin off (see Note 1), the following occurred:
●
|
The
Company received $2,000 from Brendon Grunewald, the former shareholder of the Company
for the purchase of our wholly-owned subsidiary, Steampunk Wizards, Ltd.
|
●
|
The
Company had a change of control, pursuant to which former shareholders paid $118,640
for outstanding accounts payable. The $118,640, was immediately forgiven and recorded
as contributed capital, pursuant conditions of the change of control.
|
●
|
On
September 27, 2016, $120,000 owed to our former officer and director, was converted to
2,553,191 shares of common stock.
|
On January 4, 2017, the Company sold and issued an aggregate
of 19,532,820 shares of its Common Stock, at a per share price of $0.005, in a private placement to 42 investors, for
which it received gross cash proceeds to the Company of $97,664.10. The private placement was made pursuant to an exemption
from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Regulation
S thereunder.