The accompanying notes are an integral
part of these financial statements.
The accompanying footnotes are an integral part
of these financial statements.
The accompanying footnotes are an integral part
of these financial statements.
The accompanying notes are an integral part of
these financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Organization and Basis of Presentation
Organization and Line of Business
Token Communities Ltd. (the “Company”
or “Limited”) was organized under the laws of the State of Delaware on March 6, 2014, under the name Pacific Media Group Enterprises,
Inc. On April 7, 2017, the Company amended its Certificate of Incorporation with the Secretary of State of Delaware, changing its
name to Extract Pharmaceuticals Inc. On January 26, 2018, the Board of Directors adopted an Amendment to its Certificate of Incorporation,
changing its name to Token Communities Ltd. The Company researches and creates white paper analysis for companies regarding block
chain technology through its subsidiary Token Communities PLC (“PLC”).
PLC is a Gibraltar Financial Advisory firm which
specializes in Blockchain, Artificial Intelligence and Fin-Tech investment in incubating as well as advising and managing qualified companies
in the blockchain and distributed ledger technologies arena, including smart contracts, TGEs, DApps, and more. Advisement comprises the
authoring of industry standard White Papers, technical aspects, design and implementation of market strategies, business appraisal and
more. All potential clients are vetted and Anti-Money Laundering / Know-Your-Customer approved.
The historical financial statements presented
are the financial statements of PLC. The Acquisition and Share Exchange Agreement was treated as a recapitalization and not as a business
combination; therefore, no pro forma information is disclosed. At the date of the merger, the net liabilities of the legal acquirer, Limited,
were $57,107.
The combined entities are referred to hereafter as the “Company.”
On July 14, 2020, a change in control of the Company
was affected by a privately held corporation (American Software Company, controlled by an executive officer of the Company) acquiring
83% of the outstanding stock from other control individuals. As part of this transaction, the Company transferred the 3.5 billion iRide
tokens and 1,745,406 shares of it’s common stock to American Software in exchange for all technology, software codes and other intelligent
products of the Lukki Exchange, a non-operating cyber coin exchange. Since the Lukki exchange had no previous material revenue nor assets,
the acquisition has been accounted for as an asset acquisition and due to the facts that it has no value, and the parties to this transaction
are related, the transaction has been accounted for as $(0), the value of the tokens are $(0), and no financial statements are being provided
as part of the transaction.
Basis of Presentation
The accompanying consolidated financial statements
(“CFS”) were prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”).
Limited’s functional currency is the United States Dollars (“$” or “USD”) and Limited’s wholly-owned
subsidiary, PLC’s functional currency is the Pound Sterling (“GBP”).
Going Concern
The accompanying CFS were prepared in conformity
with U.S. GAAP, which contemplates the continuation of the Company as a going concern. The Company had a stockholders’ deficit
of $3,223,321 at March 31, 2022 and has incurred losses from operations since inception and expects to continue to generate operating
losses and negative cash flows for the foreseeable future. These factors raise substantial doubt about the Company’s ability to
continue as a going concern. The continued operations of the Company are dependent upon its ability to raise additional capital, obtain
additional financing and/or acquire or develop a business that generates sufficient positive cash flows from operations.
The accompanying CFS do not include any adjustments
relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary
in the event the Company cannot continue as a going concern.
Foreign Currency Translation
The accounts of Limited are maintained in USD
and the accounts of PLC are maintained in GBP. The accounts of PLC are translated into USD in accordance with Financial Accounting Standards
Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 830 Foreign Currency Transaction , with
the GBP as the functional currency. According to Topic 830, all assets and liabilities are translated at the exchange rate on the balance
sheet date, stockholders’ equity is translated at historical rates and statement of operations items are translated at the weighted
average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income (loss) in accordance
with ASC Topic 220, Comprehensive Income . Gains and losses resulting from the translations of foreign currency transactions and
balances are reflected in the statement of operations and comprehensive income (loss). The following table details the exchange rates
used for the periods.
| | |
March 31, 2022 | | |
March 31,
2021 | |
| Period end: GBP to USD exchange rate | |
$ | 1.37 | | |
$ | 1.37 | |
| Average period: GBP to USD exchange rate | |
$ | 1.31 | | |
$ | 1.31 | |
Note 2 – Summary of Significant Accounting Policies
Use of Estimates
The preparation of CFS in conformity with
U.S. GAAP 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 CFS and the reported amounts of revenues and expenses during the
reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on
current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs
and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially
and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual
results, future results of operations will be affected.
Principles of Consolidation
The accompanying CFS include the accounts of Limited
and its wholly-owned Subsidiary, PLC. All significant intercompany transactions and balances were eliminated in consolidation.
Cash Equivalents
For the purpose of the statement of cash flows,
cash equivalents include time deposits, certificate of deposits, and all highly liquid debt instruments with original maturities of three
months or less.
Accounts Receivable
Accounts receivable are recorded, net of allowance
for doubtful accounts and sales returns. Management reviews the composition of accounts receivable and analyzes historical bad debts,
customer concentration, customer credit worthiness, current economic trends and changes in customer payment patterns to determine if the
allowance for doubtful accounts is adequate. An estimate for doubtful accounts is made when collection of the full amount is no longer
probable. Delinquent account balances are written-off after management has determined that the likelihood of collection is not probable
and known bad debts are written off against the allowance for doubtful accounts when identified. As of March 31, 2022 and 2021,
the allowance for uncollectible accounts receivable was zero, respectively.
Fair Value of Financial Instruments
For certain of the Company’s financial instruments,
including cash and equivalents, accounts receivable, accounts payable, trust liability and advances, the carrying amounts approximate
their fair values due to their short maturities.
FASB ASC Topic 820, Fair Value Measurements
and Disclosures, requires disclosure of the fair value (“FV”) of financial instruments held by the Company. FASB ASC Topic
825, Financial Instruments, defines FV, and establishes a three-level valuation hierarchy for disclosures of FV measurement that
enhances disclosure requirements for FV measures. The carrying amounts reported in the consolidated balance sheets for receivables and
current liabilities each qualify as financial instruments and are a reasonable estimate of their FVs because of the short period of time
between the origination of such instruments and their expected realization and their current market rate of interest. The three levels
of valuation hierarchy are defined as follows:
| ● | Level
1 inputs to the valuation methodology are quoted prices 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, quoted prices for identical
or similar assets in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for
substantially the full term of the financial instrument. |
| ● | Level
3 inputs to the valuation methodology use one or more unobservable inputs which are significant to the FV measurement. |
The Company analyzes all financial
instruments with features of both liabilities and equity under FASB ASC Topic 480, Distinguishing Liabilities from Equity, and
FASB ASC Topic 815, Derivatives and Hedging.
The Company uses Level 2 inputs
for its valuation methodology for derivative liabilities as their fair values were determined by using the Black-Scholes-Merton pricing
model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect FV at each period end, with any
increase or decrease in the FV being recorded in results of operations as adjustments to fair value of derivatives.
Revenue Recognition
ASU No. 2014-09, Revenue from
Contracts with Customers (“Topic 606”), became effective for the Company on July 1, 2018. The Company’s revenue
recognition disclosure reflects its updated accounting policies that are affected by this new standard. The Company applied the “modified
retrospective” transition method for open contracts for the implementation of Topic 606. As sales are and have been
primarily from advisory fees and related services, and the Company has no significant post-delivery obligations, this did not result in
a material recognition of revenue on our accompanying CFS for the cumulative impact of applying this new standard. The Company made no
adjustments to its previously-reported total revenues, as those periods continue to be presented in accordance with its historical accounting
practices under Topic 605, Revenue Recognition.
Revenue from advisory fees and related services
are recognized under Topic 606 in a manner that reasonably reflects the delivery of services to customers in return for
expected consideration and includes the following elements:
| ● | executed
contract(s) with our customer(s) that we believe is legally enforceable; |
| ● | identification
of performance obligation in the respective contract; |
| ● | determination
of the transaction price for each performance obligation in the respective contract; |
| ● | allocation
of the transaction price to each performance obligation; and |
| ● | recognition
of revenue only when the Company satisfies each performance obligation. |
These five elements, as applied to the Company’s only revenue
category, are summarized below:
| ● | Advisory
fees and related services – the Company charges advisory fees for a suite of one to two dozen services that include advising
on where to establish a corporation, establishing the corporation (often Gibraltar or Malta), writing white paper, setting up website,
making videos or animations describing the company and its business, engaging in public relations, and introducing potential investors. |
Income Taxes
The Company accounts for income taxes in accordance
with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes,
whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some
portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.
Under ASC 740, a tax position is recognized as
a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination
being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized
on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company has
no material uncertain tax positions for any of the reporting periods presented.
Basic and Diluted Earnings (loss) Per Share
Earnings per share is calculated in accordance
with ASC Topic 260, Earnings Per Share. Basic earnings per share (“EPS”) is based on the weighted average number of
common shares outstanding. Diluted EPS is based on the assumption that all dilutive securities are converted. Dilution is computed
by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period
(or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price
during the period. There were no potentially dilutive securities outstanding during any of the periods presented in these financial statements.
Foreign Currency Transactions and Comprehensive Income
U.S. GAAP generally requires recognized revenue,
expenses, gains and losses be included in net income. Certain statements, however, require entities to report specific changes in assets
and liabilities, such as gain or loss on foreign currency translation, as a separate component of the equity section of the balance sheet.
Such items, along with net income, are components of comprehensive income. The functional currency of the Company’s subsidiary is
the GBP. Translation gain of $19,609 at March 31, 2022 is classified as an item of other comprehensive income in the stockholders’
deficit section of the balance sheet.
Statement of Cash Flows
Cash flows from the Company’s operations
are calculated based upon the local currencies using the average translation rates. As a result, amounts related to assets and liabilities
reported on the statements of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842). ASU 2016-02 requires lessees to recognize lease assets and lease liabilities on the balance sheet and
requires expanded disclosures about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018
and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is in the process
of evaluating the impact of this ASU on the Company’s CFS.
In May 2014, FASB issued ASU No. 2014-09, Revenue
from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing
revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for determining revenue recognition.
ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract.
The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from
customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill
a contract. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. Early adoption
is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein. Entities will
be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The
Company adopted this ASU on October 13, 2017 and used the modified retrospective method of adoption. The adoption of this ASU did not
have a material impact on the Company’s CFS.
Management does not believe that any recently
issued, but not yet effective, accounting standards could have a material effect on the accompanying CFS. As new accounting pronouncements
are issued, we will adopt those that are applicable under the circumstances.
Risks and Uncertainties
In December 2019, a novel strain of coronavirus
(COVID-19) emerged in Wuhan, Hubei Province, China. While initially the outbreak was largely concentrated in China and caused significant
disruptions to its economy, it has now spread to several other countries and infections have been reported globally fiscal first quarter
and potentially beyond.
Because COVID-19 infections have been reported
throughout the United States, certain federal, state and local governmental authorities have issued stay-at-home orders, proclamations
and/or directives aimed at minimizing the spread of COVID-19. Additional, more restrictive proclamations and/or directives may be issued
in the future. As a result, all of our office locations have been closed effective April 1, 2020.
The ultimate impact of the COVID-19 pandemic on
the Company’s operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with
confidence, including the duration of the COVID-19 outbreak, new information which may emerge concerning the severity of the COVID-19
pandemic, and any additional preventative and protective actions that governments, or the Company, may direct, which may result in an
extended period of continued business disruption, reduced customer traffic and reduced operations. Any resulting financial impact cannot
be reasonably estimated at this time but is anticipated to have a material adverse impact on our business, financial condition and results
of operations.
The measures taken to date will impact the Company’s
business for the fiscal fourth quarter and potentially beyond. Management expects that all of its business segments, across all of its
geographies, will be impacted to some degree, but the significance of the impact of the COVID-19 outbreak on the Company’s business
and the duration for which it may have an impact cannot be determined at this time.
Management’s Evaluation of Subsequent Events
The Company evaluates events that have occurred
after the balance sheet date of March 31, 2022, through the date which the CFS were issued. Based upon the review, the Company did not
identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the CFS.
Note 3 – Accrued Expenses
Accrued expenses payable
consisted of the following at March 31, 2022 and June 30, 2021:
| | |
March 31,
2022 | | |
June 30,
2021 | |
| Director fees | |
$ | 236,582 | | |
$ | 236,582 | |
| Accrued professional services | |
| 31,000 | | |
| 31,000 | |
| Other | |
| 86,960 | | |
| 86,960 | |
| Total Accrued Expenses | |
$ | 354,542 | | |
$ | 354,542 | |
Note 4 – Stockholders’ Equity
As of March 31, 2022, the authorized share capital
of the Company consists of 5,000,000,000 shares of common and 20,000,000 shares of preferred stock with $0.0001 par value. Each outstanding
share of common stock entitles the holder to one vote per share on all matters submitted to a stockholder vote. All shares of common stock
are non-assessable and non-cumulative, with no pre-emptive rights.
On July 14, 2020, the Company
issued 1,745,000,585 shares as part of the acquisition agreement described in Note 1. This resulted in an expense on the income
statement in the amount of $ 174,500.
On August 12, 2020, the Company issued 595,162 shares of common stock
for services with a deemed value of $ 595,162.
Note 5 – Related Party Transactions
Amounts due to a related party are for advances
made by a stockholder of the Company. The balance due of $1,153,826 and $927,987 as at March 31, 2022 and June 30, 2021 respectively,
is presented as due to related parties in the accompanying consolidated balance sheet. The amounts due are non-interest bearing
and payable upon demand. In the period ended June 30, 2021, certain related parties forgave advances and accrued expenses in the amount
of $262,116. This resulted in a gain on forgiveness of debt on the income statement in the amount of $262,116.
Note 6 – Commitments and Contingencies
The Company is party to certain legal proceedings
from time to time incidental to the conduct of its business. These proceedings could result in fines, penalties, compensatory or treble
damages or non-monetary relief. The nature of legal proceedings is such that the Company cannot assure the outcome of any particular matter,
and an unfavorable ruling or development could have a materially adverse effect on the Company’s CFS in the period in which a ruling
or settlement occurs. However, based on information available to the Company’s management to date, the Company’s management
does not expect the outcome of any matter pending against the Company is likely to have a material effect on the Company’s CFS.
Note 7 – Subsequent Events
On April 25, 2022 the Company closed on the sale
of the “Lukki Exchange” and related Lukki tokens in exchange for Fifty Thousand Dollars. With the sale of the Lukki Exchange
the Company instead will only be involved in the advisory and consulting or companies regarding block chain technology.