10-Q 1 form10q.htm FORM 10-Q Qornerstone Inc.: Form 10-Q - Filed by newsfilecorp.com

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019

or

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____to _____

Commission File Number: 000-52945

QORNERSTONE INC.
(Exact name of registrant as specified in its charter)

Nevada 98-0540833
State or other jurisdiction of incorporation of organization) (I.R.S. Employer Identification No.)

6, Shenton Way #21-08 OUE Downtown, Singapore 068809
(Address of principal executive offices) (Zip Code)

+65-65572516
(Registrant’s telephone number, including area code)

TechMedia Advertising, Inc.
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X]         No [   ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X]         No [   ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

[   ]     Large accelerated filer [   ]     Accelerated filer
   
[   ]     Non-accelerated filer [X]     Smaller reporting company
   
  [   ]     Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [   ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [   ]          No [X]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 30,490,095shares of common stock outstanding as of May 10, 2019.

2

QORNERSTONE INC.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION 4
   
               Item 1. Financial Statements F-1
     
               Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5
     
               Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
     
               Item 4. Controls and Procedures 14
     
PART II – OTHER INFORMATION 14
   
               Item 1. Legal Proceedings 14
     
               Item 1A. Risk Factors 15
     
               Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 15
     
               Item 3. Defaults Upon Senior Securities 15
     
               Item 4. Mine Safety Disclosures 15
     
               Item 5. Other Information 15
     
               Item 6. Exhibits 15
     
SIGNATURES 16

3

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Qornerstone Inc.

(formerly TechMedia Advertising, Inc)

Condensed Consolidated Financial Statements

March 31, 2019

(Expressed in U.S. Dollars)

(unaudited)


Qornerstone Inc.
(formerly Techmedia Advertising, Inc.)
Condensed Consolidated Balance Sheets
(Expressed in U.S. Dollars)

          March 31,     June 30,  
          2019     2018  
    Notes   $   $  
          (unaudited)        
ASSETS                  
Current Assets                  
   Cash         95,188     128,868  
   Accounts receivable, net of allowance for doubtful accounts of $37,638 and $25,714, respectively       139,363     121,742  
   Deferred contract costs         –     188,322  
   Prepaid expenses and deposits         96,001     91,744  
Total Current Assets         330,552     530,676  
   Property and equipment   4     12,737     15,028  
Total Assets         343,289     545,704  
LIABILITIES                  
Current Liabilities                  
   Accounts payable and accrued liabilities         173,223     108,726  
   Deferred revenue         123,851     421,178  
   Due to related parties   5     692,657     235,678  
Total Current Liabilities         989,731     765,582  
   Notes payable   6     –     1,406,522  
Total Liabilities         989,731     2,172,104  
                   
STOCKHOLDERS’ DEFICIT                  
   Common stock, 220,000,000 shares authorized, $0.001 par value; 30,490,095 and 18,998,211 shares issued and outstanding, respectively       30,490     18,998  
   Share subscriptions received   7     520,000     –  
   Additional paid-in capital         1,798,471     170,694  
   Accumulated other comprehensive income         78,272     39,810  
   Deficit         (3,073,675 )   (1,855,902 )
Total Stockholders’ Deficit         (646,442 )   (1,626,400 )
Total Liabilities and Stockholders’ Deficit         343,289     545,704  

(The accompanying notes are an integral part of these condensed consolidated financial statements)

F-1


Qornerstone Inc.
(formerly Techmedia Advertising, Inc.)
Condensed Consolidated Statement of Operations and Comprehensive Income (Loss)
(Expressed in U.S. Dollars)
(unaudited)

          Three months     Three months     Nine months     Nine months  
          ended     ended     ended     ended  
          March 31,     March 31,     March 31,     March 31,  
          2019     2018     2019     2018  
    Notes   $   $   $   $  
Revenue         361,916     251,664     1,475,005     671,127  
Cost of sales         52,984     27,540     533,161     139,873  
Gross Profit         308,932     224,124     941,844     531,254  
Expenses                              
   Advertising fees         15,644     –     15,644     –  
   Consulting fees         342,211     –     504,846     –  
   Depreciation         3,263     3,607     8,871     9,455  
   Directors' fees   5     67,724     68,354     199,258     201,255  
   General and administrative         70,329     45,000     114,317     185,421  
   Professional fees         65,456     25,770     125,488     75,083  
   Research and development         23,691     –     77,355     –  
   Rent         15,890     16,036     46,750     47,217  
   Salaries and benefits         300,916     265,348     781,961     715,075  
Total Expenses         905,124     424,115     1,874,490     1,233,506  
Loss from Operations         (596,192 )   (199,991 )   (932,646 )   (702,252 )
Other Income                              
   Other income         –     4,917     –     21,972  
Loss before Income Taxes         (596,192 )   (195,074 )   (932,646 )   (680,280 )
   Income tax recovery (expense)         2,676     (18 )   2,676     (1,913 )
Net Loss         (593,516 )   (195,092 )   (929,970 )   (682,193 )
Comprehensive Income                              
   Foreign currency translation gain         19,923     12,510     38,462     9,675  
Comprehensive Loss         (573,593 )   (182,582 )   (891,508 )   (672,518 )
Loss Per Share, Basic and Diluted         (0.02 )   (0.01 )   (0.04 )   (0.04 )
Weighted Average Number of Shares Outstanding, Basic and Diluted       30,490,095     18,998,211     22,898,741     18,998,211  

(The accompanying notes are an integral part of these condensed consolidated financial statements)

F-2


Qornerstone Inc.
(formerly Techmedia Advertising, Inc.)
Condensed Consolidated Statements Stockholders’ Equity (Deficit)
(Expressed in U.S. Dollars)
(unaudited)

                            Accumulated              
                Share     Additional     Other              
    Common Stock     Subscriptions     Paid-in     Comprehensive              
          Amount     Received     Capital     Income     Deficit     Total  
    #   $   $   $   $   $   $  
Balance, December 31, 2018   30,490,095     30,490     –     1,798,471     58,349     (2,480,159 )   (592,849 )
Share subscriptions received   –     –     520,000     –     –     –     520,000  
Foreign currency translation gain   –     –     –     –     19,923     –     19,923  
                      –                    
Net loss for the period   –     –                 –     (593,516 )   (593,516 )
Balance, March 31, 2019   30,490,095     30,490     520,000     1,798,471     78,272     (3,073,675 )   (646,442 )

                Accumulated              
                Other              
    Common Stock     Comprehensive              
          Amount     Income     Deficit     Total  
    #   $   $   $   $  
Balance, December 31, 2017   18,998,211     189,692     11,282     (611,333 )   (410,359 )
Foreign currency translation gain   –     –     12,510     –     12,510  
Net loss for the period   –     –     –     (195,092 )   (195,092 )
Balance, March 31, 2018   18,998,211     189,692     23,792     (806,425 )   (592,941 )

                            Accumulated              
                ShareSubscri Additional     Other              
    Common Stock     ptions     Paid-in     Comprehensive              
          Amount     Received     Capital     Income     Deficit     Total  
    #   $   $   $   $   $   $  
Balance, June 30, 2018   18,998,211     18,998     –     170,694     39,810     (1,855,902 )   (1,626,400 )
December 28, 2018 – recapitalization transactions                            
   Shares of TechMedia Advertising, Inc.   9,670,474     9,671     –     (9,671 )   –     –     –  
   Net liabilities assumed   –     –     –     –     –     (287,803 )   (287,803 )
Shares issued pursuant to conversion of debt   1,821,410     1,821     –     1,637,448     –     –     1,639,269  
Share subscriptions received               520,000     –     –     –     520,000  
Foreign currency translation gain   –     –     –     –     38,462     –     38,462  
Net loss for the period   –     –     –     –     –     (929,970 )   (929,970 )
Balance, March 31, 2019   30,490,095     30,490     520,000     1,798,471     78,272     (3,073,675 )   (646,442 )

                Accumulated              
                Other              
    Common Stock     Comprehensive              
          Amount     Income     Deficit     Total  
    #   $   $   $   $  
Balance, June 30, 2017   18,998,211     189,692     14,117     (124,232 )   79,577  
Foreign currency translation gain   –     –     9,675     –     9,675  
Net loss for the period   –     –     –     (682,193 )   (682,193 )
Balance, March 31, 2018   18,998,211     189,692     23,792     (806,425 )   (592,941 )

(The accompanying notes are an integral part of these condensed consolidated financial statements)

F-3


Qornerstone Inc.
(formerly Techmedia Advertising, Inc.)
Condensed Statements of Cash Flows
(Expressed in U.S. Dollars)
(unaudited)

    Nine months     Nine months  
    ended     ended  
    March 31,     March 31,  
    2019     2018  
  $   $  
             
Operating Activities            
Net loss for the period   (929,970 )   (682,193 )
Adjustments to reconcile net loss to net cash used in operating activities:            
   Bad debts   1,811     –  
   Depreciation   8,871     9,455  
   Unrealized foreign exchange loss   –     1,263  
Changes in operating assets and liabilities:            
   Accounts receivable   (19,432 )   49,098  
   Deferred contract costs   188,322     (59,556 )
   Prepaid expenses and deposits   (4,257 )   (647,734 )
   Accounts payable and accrued liabilities   (24,248 )   34,353  
   Deferred revenue   (297,327 )   13,913  
   Due to related parties   26,612     –  
Net Cash Used in Operating Activities   (1,049,618 )   (1,281,401 )
Investing Activities            
   Acquisition of subsidiary, net of cash acquired   –     10,179  
   Purchase of property and equipment   (6,290 )   (6,208 )
Net Cash Provided by (Used in) Investing Activities   (6,290 )   3,971  
Financing Activities            
   Proceeds from shareholders’ loans   –     603,103  
   Proceeds from notes payable   232,747     –  
   Proceeds from related parties   231,309     176,276  
   Shares subscriptions received   520,000     –  
Net Cash Provided by Financing Activities   984,056     779,379  
Effects of Foreign Exchange Rate Changes on Cash   38,172     (6,334 )
Decrease in Cash   (33,680 )   (504,385 )
Cash, Beginning of Period   128,868     585,840  
Cash, End of Period   95,188     81,455  
Non-cash Investing and Financing Activities:            
   Accounts payable assumed on reverse merger   88,745     –  
   Due to related parties assumed on reverse merger   199,058     –  
   Common stock issued for conversion of debt   1,639,269     –  
Supplemental Disclosures:            
   Interest paid   –     –  
   Income taxes paid   –     –  

(The accompanying notes are an integral part of these condensed consolidated financial statements

F-4


Qornerstone Inc.
(formerly Techmedia Advertising, Inc.)
Notes to the Condensed Consolidated Financial Statements
March 31, 2019
(Expressed in U.S. Dollars)
(unaudited)

1.

Nature of Operations and Going Concern

Qornerstone Inc. (the "Company") was incorporated in the State of Nevada on January 30, 2007 under the name Ultra Care, Inc. On February 17, 2009, the Company merged with its wholly owned subsidiary, TechMedia Advertising, Inc., in order to effect a name change from Ultra Care, Inc. to TechMedia Advertising, Inc. On March 15, 2019, the Company changed its name to Qornerstone Inc. The Company is in the business of being a solution provider of cloud-enabled real estate and facility management, financial management, security and enterprise turn-key systems/solutions for government-to-government, business-to-business and business-to-consumer.

On December 28, 2018, the Company completed its reverse merger with IBASE Technology Private Limited (“IBASE”) in accordance with the terms of a Share Exchange Agreement dated as of December 16, 2016, as extended on March 31, 2017, and amended on March 31, 2018. See Note 3 for additional information regarding the merger.

These condensed consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will continue to realize its assets and discharge its obligations and commitments in the normal course of operations. Realization values may be substantially different from carrying values as shown and these consolidated 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. As of March 31, 2019, the Company has a working capital deficit of $659,179, has incurred cumulative losses of $3,073,675, and expects to incur further losses in the development of its business. Management has taken several actions to ensure that the Company will continue as a going concern. The Company has obtained additional financing through the issuance of equity and advances from related parties. In addition, the Company has implemented cost savings measures to improve operational efficiency. Management believes that these actions will enable the Company to continue as a going concern for the next twelve months from the date issuance of these condensed consolidated financial statements.

2.

Significant Accounting Policies


  (a)

Principles of Consolidation and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and in conformity with the instructions on Form 10-Q and Rule 8-03 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission (“SEC”).Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements. However, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Results of operations for the interim periods are not necessarily indicative of the operating results to be attained in the entire fiscal year.

These condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, IBASE Technology Private Limited (“IBASE”), They also include the accounts of IBASE’s wholly-owned subsidiary,IBASE Technology International Pte. Ltd. (“IBASE International”).All significant inter-company transactions and balances have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements and notes should be read in conjunction with the audited financial statements and accompanying notes for the year ended June 30, 2018 included in the Current Report, as amended, on Form 10-12GA filed on November 9, 2018. There have been no significant and material changes in our critical accounting policies and significant judgments and estimates during the three and nine months ended March 31, 2019.

F-5


Qornerstone Inc.
(formerly Techmedia Advertising, Inc.)
Notes to the Condensed Consolidated Financial Statements
March 31, 2019
(Expressed in U.S. Dollars)
(unaudited)

2.

Significant Accounting Policies(continued)


  (b)

Use of Estimates

The preparation of these condensed consolidated financial statements 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 financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to allowance for doubtful accounts, the estimated useful lives and recoverability of property and equipment, and deferred income tax asset valuation allowances. 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.

  (c)

Cash and Cash Equivalents

The Company considers all highly liquid instruments with a maturity of three months or less at the time of acquisition to be cash equivalents.

  (d)

Accounts Receivable

The Company recognizes allowances for doubtful accounts to ensure accounts receivable are not overstated due to the inability or unwillingness of its customers to make required payments. The allowance is based on the business environment, historical bad debt expense, the age of receivables, and the specific identification of receivables the Company considers at risk. The Company reviews the adequacy of its allowance for doubtful accounts on a regular basis.

  (e)

Property and Equipment

Property and equipment consist of computer equipment, furniture and fixtures, leasehold improvements, and office equipmentand are measured at cost less accumulated depreciation and impairment losses. Property and equipment are depreciated on a straight-line basis over their expected useful life as follows:

Computer equipment   3 years  
Furniture and fixtures   5 years  
Office equipment   5 years  

  (f)

Impairment of Long-lived Assets

In accordance with ASC 360, “Property, Plant, and Equipment”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.

F-6


Qornerstone Inc.
(formerly Techmedia Advertising, Inc.)
Notes to the Condensed Consolidated Financial Statements
March 31, 2019
(Expressed in U.S. Dollars)
(unaudited)

2.

Significant Accounting Policies(continued)


  (g)

Government Grants

Grants from the government are recognized as a receivable at fair value when there is reasonable assurance that the grant will be received and the Company will comply with all the attached conditions.

Government grants relating to assets are deducted against the carrying amount of the assets.

  (h)

Leases

A lease that transfers substantially all of the benefits and risks of ownership is classified as a capital lease. At the inception of a capital lease, an asset and a payment obligation are recorded at an amount equal to the lesser of the present value of the minimum lease payments and the property’s fair market value. Assets classified as capital leases are amortized using the declining balance method, over their estimated useful lives. All other leases are accounted for as operating leases and rental payments are expensed as incurred.

  (i)

Financial Instruments and Fair Value Measures

ASC 820, “Fair Value Measurements and Disclosures” requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

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 principally of cash, accounts receivable, and accounts payable and accrued liabilities, and amounts due to related parties. Pursuant to ASC 820, the fair values of cash are determined based on “Level 1” inputs. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations. The Company operates in Singapore and its cash is held in Singapore dollars, and there is no significant exposure to foreign currency fluctuations.

F-7


Qornerstone Inc.
(formerly Techmedia Advertising, Inc.)
Notes to the Condensed Consolidated Financial Statements
March 31, 2019
(Expressed in U.S. Dollars)
(unaudited)

2.

Significant Accounting Policies(continued)


  (j)

Income Taxes

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes”. The asset and liability method provides that deferred income tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred income tax assets to the amount that is believed more likely than not to be realized.

  (k)

Foreign Currency Translation

The Company’s functional and reporting currency is the U.S. dollar. The functional currency of IBASE and IBASE International is the Singapore dollar. Management has adopted ASC 830, “Foreign Currency Matters”. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Average monthly rates are used to translate revenues and expenses. Gains and losses arising on translation of foreign currency denominated transactions or balances are included in the statement of operations.

The Company uses the current rate method to translate the financial statements of IBASE and IBASE International to its reporting currency. Accordingly, assets and liabilities are translated into U.S. dollars at the period end exchange rate while revenue and expenses are translated at the average exchange rates during the period. Related exchange gains and losses are included in a separate component of stockholders’ equity as accumulated other comprehensive income.

  (l)

Revenue Recognition

The Company derives revenue from the sale of software, product support and maintenance services, and other consulting services.

Revenue is recognized when control of products or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those promised products or services.

The Company determines revenue recognition through the following five steps:

  • Identification of the contract, or contracts, with a customer
  • Identification of the performance obligations in the contract
  • Determination of the transaction price
  • Allocation of the transaction price to the performance obligations in the contract
  • Recognition of revenue when, or as, performance obligations are satisfied

The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

The Company enters into contracts that can include various combinations of licenses, products and services, some of which are distinct and are accounted for as separate performance obligations. For contracts with multiple performance obligations, the Company allocates the transaction price of the contract to each performance obligation, generally on a relative basis using its standalone selling price.

F-8


Qornerstone Inc.
(formerly Techmedia Advertising, Inc.)
Notes to the Condensed Consolidated Financial Statements
March 31, 2019
(Expressed in U.S. Dollars)
(unaudited)

2.

Significant Accounting Policies(continued)


  (l)

Revenue Recognition (continued)

Management assesses the business environment, customers’ financial condition, historical collection experience, accounts receivable aging, and customer disputes to determine whether collectability is reasonably assured. If collectability is not considered reasonably assured at the time of sale, the Company does not recognize revenue until collection occurs.

Deferred revenue consists primarily of payments received in advance of revenue recognition for subscriptions and professional services and is recognized as the revenue recognition criteria is met.

  (m)

Employee Benefits

The Company make contributions to the Central Provident Fund Scheme in Singapore which is a defined contribution pension scheme. These contributions are recognized as compensation expense in the period in which the related service is performed.

Employee entitlements to annual leave are recognized as a liability when they accrue to employees. The estimated liability for leave is recognized for services rendered by employees up to the balance sheet date.

  (n)

Earnings Per Share

The Company computes earnings per share in accordance with ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing earnings available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As at March 31, 2019 and 2018, the Company had no potentially dilutive shares outstanding.

  (o)

Comprehensive Income

ASC 220, “Comprehensive Income” establishes standards for the reporting and display of comprehensive income and its components in the financial statements. For the three and nine months ended March 31, 2019, and 2018, the Company comprehensive income (loss) consists of foreign currency translation gains and losses.

  (p)

Reclassifications

Certain of the prior period figures have been reclassified to conform to the current period`s presentation.

F-9


Qornerstone Inc.
(formerly Techmedia Advertising, Inc.)
Notes to the Condensed Consolidated Financial Statements
March 31, 2019
(Expressed in U.S. Dollars)
(unaudited)

2.

Significant Accounting Policies (continued)


  (q)

Recent Accounting Pronouncements

On July 1, 2018, the Company adopted ASC Topic 606, “Revenue from Contracts with Customers” (“Topic 606”), using the modified retrospective transition method applied to those contracts which were not completed as of July 1, 2018. Under this method, the Company evaluated contracts that were in effect at the beginning of fiscal 2019 as if those contracts had been accounted for under Topic 606 from the beginning of their terms. The adoption of Topic 606 did not result in a material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases” (“Topic 842”). The new standard requires lessees to recognize most leases on their balance sheets as lease liabilities with corresponding right-of-use assets and eliminates certain real estate specific provisions. ASU 2016-02 will be effective for fiscal years beginning after December 15, 2018. The Company is still in the process of determining the effect of the adoption of this standard on its consolidated financial statements or the related disclosures.

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other” (“Topic 350”). This standard eliminates step 2 from the annual goodwill impairment test. This update is effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted, and is to be applied on a prospective basis. The Company does not anticipate that the adoption of this standard will have a significant impact on its consolidated financial statements or the related disclosures.

In February 2018, the FASB issued ASU No. 2018-02, “Income Statement - Reporting Comprehensive Income” (“Topic 220”): Reclassification of Certain Tax Effect from Accumulated Other Comprehensive Income. This update allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Job Act ("TCJA") enacted in December 2017. This update will be effective for the Company for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. The Company does not anticipate that the adoption of this standard will have a significant impact on its consolidated financial statements or the related disclosures.

In March 2018, the FASB issued ASUNo. 2018-05, ”Income Taxes” (“Topic 740”): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. The staff of the SEC recognized the complexity of reflecting the impacts of the TCJA, and on December 22, 2017, issued guidance in Staff Accounting Bulletin 118, which clarifies accounting for income taxes under ASC 740 if information is not yet available or complete and provides for up to a one year period in which to complete the required analysis and accounting (the measurement period).The Company does not anticipate that the adoption of this standard will have a significant impact on its consolidated financial statements or the related disclosures.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the U.S. Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements

F-10


Qornerstone Inc.
(formerly Techmedia Advertising, Inc.)
Notes to the Condensed Consolidated Financial Statements
March 31, 2019
(Expressed in U.S. Dollars)
(unaudited)

3.

Acquisition of IBASE Technology Private Limited

On December 16, 2016, the Company entered into a binding and definitive share exchange agreement (the “Share Exchange Agreement”) with IBASE, a company organized under the laws of Singapore, and all of the shareholders of IBASE, whereby the Company is to acquire 100% of the issued and outstanding shares in the capital of IBASE in exchange for the issuance of an aggregate of 18,998,211 post-reverse stock split shares of common stock to the shareholders of IBASE on a pro rata basis in accordance with each IBASE shareholders’ percentage of ownership in IBASE. Effectively upon closing, IBASE shareholders will hold approximately 66% of the Company’s post-closing outstanding shares, not including any shares issued upon the conversion of convertible notes in IBASE as discussed below.

On March 31, 2017, the Company entered into an extension agreement (the “Extension Agreement”) to the Share Exchange Agreement with IBASE and all of the shareholders of IBASE, whereby the parties agreed to extend the Closing Date (as defined in the Share Exchange Agreement) to March 31, 2018 and the Latest Closing Date (also as defined in the Share Exchange Agreement) to April 30, 2018.

On March 31, 2018, the Company entered into an amended share exchange agreement (the “Amended Share Exchange Agreement”) with IBASE and all of the shareholders of IBASE, whereby the parties agreed to further amend the Closing Date to be on or before December 15, 2018 and the Latest Closing Date to be December 31, 2018, subject to any extensions of 15 days per extension as mutually agreed to by the parties, as well as to reflect the convertible note financing (the “Convertible Notes”) of IBASE of up to $3,500,000, which upon closing of the Amended Share Exchange Agreement the Convertible Notes will automatically convert into shares of the Company’s common stock at a price of $0.90 per share (up to a maximum of 3,888,889 shares of common stock). Refer to Note 6.

The closing of the Amended Share Exchange Agreement occurred on December 28, 2018. Pursuant to the terms of the Amended Share Exchange Agreement, the Company acquired all of the issued and outstanding shares of capital stock of IBASE from the shareholders of IBASE in exchange for the issuance of 18,998,211 shares of the Company’s common stock to the shareholders of IBASE on a pro rata basis in accordance with each IBASE shareholders’ percentage ownership in IBASE.

The acquisition was a capital transaction in substance and therefore has been accounted for as a recapitalization, which is outside the scope ASC 805, “Business Combinations”. Under recapitalization accounting, IBASE is considered the acquirer for accounting and financial reporting purposes, and acquired the assets and assumed the liabilities of the Company. These consolidated financial statements include the accounts of the Company since the effective date of the recapitalization and the historical accounts of the business of IBASE since inception.

The liabilities assumed from the Company are as follows:

    $  
  Accounts payable  

(88,745

 )
  Due to related parties  

(199,058

 )
  Net liabilities assumed  

(287,803

 )

F-11


Qornerstone Inc.
(formerly Techmedia Advertising, Inc.)
Notes to the Condensed Consolidated Financial Statements
March 31, 2019
(Expressed in U.S. Dollars)
(unaudited)

4.

Property and Equipment


                Net Book     Net Book  
                Value     Value  
          Accumulated     March 31,     June 30,  
    Cost     Depreciation     2019     2018  
  $   $   $   $  
                         
Computer equipment   238,408     226,807     11,601     13,432  
Furniture and fixtures   25,619     24,724     895     1,080  
Office equipment   31,471     31,230     241     516  
                         
    295,498     282,761     12,737     15,028  

5.

Related Party Transactions


  (a)

As at March 31, 2019, the Company owed a total of $692,657(June 30, 2018 - $235,678) to shareholders of the Company, which is unsecured, non-interest bearing, and due on demand.

     
  (b)

During the ninemonths ended March 31, 2019, the Company incurred directors' fees of $199,258 (2018 - $201,255) to directors of the Company.


6.

Notes Payable

On March 31, 2018, the Company entered into an amended share exchange agreement (the “Amended Share Exchange Agreement”) with IBASE and all of the shareholders of IBASE, to further amend the closing date as well as to reflect the convertible note financing (the “Convertible Notes”) of IBASE of up to $3,500,000, which upon closing of the Amended Share Exchange Agreement the Convertible Notes would automatically convert into shares of the Company’s common stock at a price of $0.90 per share (up to a maximum of 3,888,889 shares of common stock).These notes were non-interest bearing with a maturity date of three years from the date of their respective date of issuance unless automatically converted sooner.

As of June 30, 2018, IBASE had convertible notes totaling $1,406,522. IBASE issued additional Convertible Notes totaling $232,747 subsequently. The Convertible Notes automatically converted into common stock of the Company at a price of $0.90 per share upon the closing of the Amended Share Exchange Agreement. Refer to Note 7.

7.

Common Stock


  (a)

On December 28, 2018, the Company issued 18,998,211 shares of common stock pursuant to the Amended Share Exchange Agreement. Refer to Note 3.

     
  (b)

On December 28, 2018, the Company issued 1,821,410 shares of common stock for the conversion of $1,639,269 in convertible notes. Refer to Note 6.

     
  (c)

As at March 31, 2019, the Company had share subscriptions received of $520,000. The Company is to issue 577,778 shares of common stock at $0.90 per share.

F-12


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following management’s discussion and analysis of the Company’s financial condition and results of operations (the “MD&A”) contain forward-looking statements that involve risks, uncertainties and assumptions including, among others, statements regarding our capital needs, business plans and expectations. In evaluating these statements, you should consider various factors, including the risks, uncertainties and assumptions set forth in reports and other documents we have filed with or furnished to the SEC and, including, without limitation, this Form 10-Q Quarterly Report for thenine months ended March 31, 2019, and our Form 10 Registration Statement, as amended containing our audited financial statements for the fiscal year ended June 30, 2018 and related notes contained therein. These factors, or any one of them, may cause our actual results or actions in the future to differ materially from any forward-looking statement made in this document. Refer to “Note About Forward-Looking Statements” as disclosed in our Form 8-K filed with the SEC on January 4, 2019 and Risk Factors under Item 2.01 of such Form 8-K.

General

We were incorporated in the State of Nevada under the name “Ultra Care, Inc.” on January 30, 2007. Effective February 17, 2009, we completed a merger with our wholly-owned subsidiary, TechMedia Advertising, Inc. As a result, we have changed our name from “Ultra Care, Inc.” to “TechMedia Advertising, Inc.”

In addition, effective February 17, 2009, we effected a forward stock split of our authorized, issued and outstanding common stock on a basis of one (1) old share for twenty-two (22) new shares. As a result, our authorized capital increased from 50,000,000 shares of common stock to 1,100,000,000 shares of common stock.

Our head and principal office is located at 6, Shenton Way #21-08 OUE Downtown, Singapore 068809. Our registered agent in the State of Nevada is Nevada Agency and Transfer Company located at 50 West Liberty Street, Suite 880, Reno, Nevada 89501.

On December 16, 2016, we entered into a binding and definitive share exchange agreement (the “Share Exchange Agreement”) with IBASE Technology Private Limited (“IBASE”), a company organized under the laws of Singapore, and all of the shareholders of IBASE, whereby we agreed to acquire 100% of the issued and outstanding shares in the capital of IBASE in exchange for the issuance of an aggregate of 18,998,211 post-reverse stock split shares of our common stock to the shareholders of IBASE on a pro rata basis in accordance with each IBASE shareholders’ percentage of ownership in IBASE.

On March 31, 2017, we entered into an extension agreement (the “Extension Agreement”) to the Share Exchange Agreement with IBASE and all of the shareholders of IBASE, whereby the parties agreed to extend the Closing Date (as defined in the Share Exchange Agreement) to March 31, 2018 and the Latest Closing Date (also as defined in the Share Exchange Agreement) to April 30, 2018.

On September 22, 2017, we effected a reverse stock split of our authorized and outstanding shares of common stock on a basis of one (1) new share of common stock for each five (5) old shares of common stock. As a result of the reverse stock split, our authorized capital decreased from 1,100,000,000 shares of common stock with a par value of $0.001 per share to 220,000,000 shares of common stock with a par value of $0.001 per share, and correspondingly our issued and outstanding capital decreased from 48,327,371 shares of common stock to approximately 9,665,474 shares of common stock.

On March 31, 2018, we entered into an amended share exchange agreement (the “Amended Share Exchange Agreement”) with IBASE and all of the shareholders of IBASE, whereby the parties agreed to further amend the Closing Date to be on or before December 15, 2018 and the Latest Closing Date to be December 31, 2018, subject to any extensions of 15 days per extension as mutually agreed to by the parties, as well as to reflect the convertible note financing (the “Convertible Notes”) of IBASE of up to US$3,500,000, which upon closing of the Amended Share Exchange Agreement the Convertible Notes will automatically convert into shares of our common stock at a price of US$0.90 per share (up to a maximum of 3,888,889 shares of our common stock).

The closing of the Amended Share Exchange Agreement occurred on December 28, 2018. Pursuant to the terms of the Amended Share Exchange Agreement, we acquired all of the issued and outstanding shares of capital stock of IBASE from the shareholders of IBASE in exchange for the issuance of 18,998,211 shares of our common stock to the shareholders of IBASE on a pro rata basis in accordance with each IBASE shareholders’ percentage ownership in IBASE. In addition, we issued an aggregate of 1,821,410 shares of our common stock to the holders of Convertible Notes representing an aggregate of $1,639,269.

5

As a result of the closing of the share exchange agreement, IBASE has become our direct wholly-owned subsidiaryand the shareholders of IBASE became our shareholders. This transaction is commonly referred to as a Reverse Take-Over (“RTO”) and effectively upon closing, the IBASE shareholders held approximately 66% of our post-closing outstanding shares, not including any shares issued upon the conversion of convertible notes in IBASE as discussed above.

On March 12, 2019, we incorporated a wholly-owned subsidiary named “Qornerstone Inc.” for the purpose of completing a merger of such subsidiary with and into the Company to change our name. Effective March 15, 2019, we completed a merger with our wholly-owned subsidiary, Qornerstone Inc. As a result, we have changed our name from “TechMedia Advertising, Inc.” to “Qornerstone Inc.”

Description of Business

IBASE is in the business of being a solution provider of cloud-enabled real estate and facility management, financial management, security and enterprise turn-key systems/solutions for business-to-government, business-to-business and business-to-consumer. IBASE’s web-based management solution UBERIQTM has been adopted by multiple enterprises internationally. The IBASE software technology is comprehensive and represents cutting edge technology made simple to use.

IBASE’s solutions help generate positive gains and returns in the following areas:

  • Financial & Tax management
  • Property management
  • Lease, rental and MCST* management
  • Facility and asset management
  • MyTenantWorld Web Portal
  • Mobile applications

*MCST – stands for Management Corporation Strata Title. It is a company or individual appointed to manage a real estate property that a company or individual owns. Manage of real estate property involves the maintaining good security, upkeep of commercial facilities, regulating rules, etc. IBASE’s solution aims to improve the operation challenges.

Results of Operations

The following table sets forth our results of operations for the three and ninemonth periods ended March 31, 2019 and 2018:

    Three months     Three months     Nine months        
    ended     ended     ended     Nine months  
    March 31,     March 31,     March 31,     ended  
    2019     2018     2019     March 31, 2018  
  $   $   $   $  
                         
Revenue   361,916     251,664     1,475,005     671,127  
Cost of sales   52,984     27,540     533,161     139,873  
Gross Profit   308,932     224,124     941,844     531,254  
                         
Expenses                        
   Advertising fees   15,644     –     15,644     –  
   Consulting fees   342,211     –     504,846     –  
   Depreciation   3,263     3,607     8,871     9,455  
   Directors' fees   67,724     68,354     199,258     201,255  
   General and administrative   70,329     45,000     114,317     185,421  
   Professional fees   65,456     25,770     125,488     75,083  
   Research and development   23,691     –     77,355     –  
   Rent   15,890     16,036     46,750     47,217  
   Salaries and benefits   300,916     265,348     781,961     715,075  
Other income   -     4,917     -     21,972  
                         
Income tax recovery (expense)   2,676     (18 )   2,676     (1,913 )
                         
Net Loss   (593,516 )   (195,092 )   (929,970 )   (682,193 )
                         
                         
Loss Per Share, Basic and Diluted   (0.02 )   (0.01 )   (0.04 )   (0.04 )

6

Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018

Revenues: We had revenues of $361,916 and cost of sales of $52,984 for the three month period ended March 31, 2019 as compared to revenues of $251,664 and cost of sales of $27,540 for the three month period ended March 31, 2018. The increase in revenue of $110,252 was due to an increase in sales generated from new contracts for the three month period ended March 31, 2019.The increase in cost of sales was due to skillset outsourcing expenditures as external expertise was required for the project deliverables.

Advertising fees: Advertising fees were $15,644 and $Nil for the three month periods ended March 31, 2019 and 2018, respectively. The increase in advertising fees of $15,644 was due to the start of advertising of our services to assist with increasing sales, which is in conjunction with our planned rebranding and marketing strategies.

Consulting fees: Consulting fees were $342,211 and $Nil for the three month periods ended March 31, 2019 and 2018, respectively. The increase in consulting fees of $342,211 was due to ongoing consulting services expenses related to the reverse merger.

Directors’ fees: Directors’ fees were $67,724 and $68,354 for the three month periods ended March 31, 2019 and 2018, respectively. The decrease in Directors’ fees of $630 was due to SGD/USD exchange rate differences. The effective Directors’ fees for the same three month period remains unchanged.

General and administrative expenses: General and administrative expenses were $70,329 and $45,000 for the three month periods ended March 31, 2019 and 2018, respectively. The increase in general and administrative expenses of $25,329 was due to payment of freelancers and part-time employee costs, subscription of services, staff welfare and insurance for the three month period ended March 31, 2019.

Professional fees: Professional fees were $65,456 and $25,770 for the three month periods ended March 31, 2019 and 2018, respectively. The increase in professional fees of $39,686 was due to more involvement of the US/Canadian professional firms for the reverse merger process and activities.

Research and development expenses: Research and development expenses were $23,691 and $Nil for the three month periods ended March 31, 2019 and 2018, respectively. The increase in research and development expenses of $23,691 was due to an increase in major R&D activities during the three month period ended March 31, 2019.

Salaries and benefits expenses: Salaries and benefits expenses were $300,916 and $265,348 for the three month periods ended March 31, 2019 and 2018, respectively. The increase in salaries and benefits expenses of $35,568 was due to an increase in headcount to support new business initiatives and plans.

7

Net income/loss: The net loss was $593,516 for the three month period ended March 31, 2019 as compared to a net loss of $195,092 for the three month period ended March 31, 2018. The increase in net loss of $398,424 resulted primarily from the increase in advertising, consulting fees, general and administrative expenses, professional fees, research and development and salaries and benefitsand the increase in costs of sales.

Nine Months Ended March 31, 2019 Compared to Nine Months Ended March 31, 2018

Revenues: We had revenues of $1,475,005and cost of sales of $533,161 for the nine month period ended March 31, 2019 as compared to revenues of $671,127 and cost of sales of $139,873 for the nine month period ended March 31, 2018. The increase in sales of $803,878 was due to recognition of deferred income from the previous financial year and also increase in sales and projects for the nine month period ended March 31, 2019. The increase in cost of sales was due to skillset outsourcing expenditures as external expertise was required for the project deliverables.

Advertising fees: Advertising fees were $15,644 and $Nil for the nine month periods ended March 31, 2019 and 2018, respectively. The increase in advertising fees of $15,644 was due to the start of advertising of our services to assist with increasing sales, which is in conjunction with our planned rebranding and marketing strategies.

Consulting fees: Consulting fees were $504,846 and $Nil for the nine month periods ended March 31, 2019 and 2018, respectively. The increase in consulting fees of $504,846 was due to ongoing consulting services expenses related to the reverse merger.

Directors’ fees: Directors’ fees were $199,258 and $201,255 for the nine month periods ended March 31, 2019 and 2018, respectively. The decrease in Directors’ fees of $1,997 was due to SGD/USD exchange rate differences. The effective Directors’ fees for the same nine month period remains unchanged.

General and administrative expenses: General and administrative expenses were $114,317 and $185,421 for the nine month periods ended March 31, 2019 and 2018, respectively. The decrease in general and administrative expenses of $71,104was due to a reduction in one-off payments for foreign currency losses, recruitment fees, IT equipment purchases and travelling expenses.

Professional fees: Professional fees were $125,488 and $75,083 for the nine month periods ended March 31, 2019 and 2018, respectively. The increase in professional fees of $50,405 was due to more involvement of the US/Canadian professional firms for the reverse merger process and activities.

Research and development expenses: Research and development expenses were $77,355 and $Nil for the nine month periods ended March 31, 2019 and 2018, respectively. The increase in research and development expenses of $77,355 was due to an increase in major R&D activities during the nine month period ended March 31, 2019.

Salaries and benefits expenses: Salaries and benefits expenses were $781,961 and $715,075 for the nine month periods ended March 31, 2019 and 2018, respectively. The increase in salaries and benefits expenses of $66,886 was due to an increase in headcount to support new business initiatives and plans.

Net income/loss: The net loss was $929,970 for the nine month period ended March 31, 2019 as compared to a net loss of $682,193 for the nine month period ended March 31, 2018. The increase in net loss of $247,777 resulted primarily from the increase in advertising, consulting fees, professional fees, research and development and salaries and benefitsand the increase in costs of sales.

8

Liquidity and Capital Resources

The following table sets out our cash and working capital as of March 31, 2019 and June 30, 2018:

    As of March 31, 2019     As of June 30, 2018*  
  (unaudited)           
Cash reserves   95,188   $ 128,868  
Working capital (deficit)   ($659,179 )   ($234,906 )
*Refer to “Principles of Consolidation and Basis of Presentation” in the “Critical Accounting Policies and Use of Estimates” section.  

As at March 31, 2019, our current assets were $330,552 and our current liabilities were $989,731 resulting in a working capital deficit of $659,179. Our current assets as at March 31, 2019 consisted of cash of $95,188, accounts receivable (net of allowance for doubtful accounts of $37,638) of $139,363 and prepaid expenses and deposits of $96,001. Our current liabilities as at March 31, 2019 consisted of accounts payable and accrued liabilities of $173,223, deferred revenue of $123,851 and due to related parties of $692,657.

As at June 30, 2018, our current assets were $530,676 and our current liabilities were $765,582 resulting in a working capital deficit of $234,906. Our current assets as at June 30, 2018 consisted of cash of $128,868, accounts receivable of $121,742, deferred contract costs of $188,322 and prepaid expenses and deposits of $91,744. Our current liabilities as at June 30, 2018 consisted of accounts payable and accrued liabilities of $108,726, deferred revenue of $421,178 and due to related parties of $235,678.

During the nine months ended March 31, 2019, we received an aggregate of $232,747 (2018: $Nil) pursuant to the issuance of convertible notes, which converted on December 28, 2018 along with all other outstanding convertible notes into 1,821,410 shares of our common stock at a price of $0.90 per share, representing an aggregate of $1,639,269 upon the closing of the Amended Share Exchange Agreement. The convertible notes were non-interest bearing. In addition, during the nine months ended March 31, 2019 we received proceeds from related parties of $231,309 (2018: $176,276) pursuant to shareholder loans, which are unsecured, non-interest bearing and due on demand, as well as $520,000 from subscriptions received for shares of our common stock at a price of $0.90 per share.

Our stockholders’ deficit as at March 31, 2019 was $646,442 as compared to our stockholders’ deficit of $1,626,400 at June 30, 2018.

Our plan of operations over the next twelve months is to focus on the following:

  Task Start Finish Duration
Research & Development ($300,000) - Ongoing Nov. 1, 2018 Oct. 30, 2019 52 weeks
•

Establish a R&D team to develop innovative products and run pilot projects for the industry (e.g. Big Data Analytics, Artificial Intelligence, Machine Learning, IoT Integrations, Service Platforms, etc.)

Branding Exercise ($100,000) - Ongoing      
• Evaluate & Appoint Branding Consultant Feb. 1, 2019 Mar. 8, 2019 4 weeks
         
• Execution of Branding Strategies Mar. 11, 2019 Aug.26, 2019 24 weeks
Sales & Marketing ($125,000) - Ongoing      
• Recruitment of Chief Marketing Officer Nov. 1, 2018 Dec. 26, 2018 8 weeks
         
•

Chief Marketing Officer to establish business collaborations and strategic partnerships (e.g. Channel Partnerships & resellers for local and overseas markets)

Dec. 27, 2018 Oct. 30, 2019 44 weeks
Technology Team ($300,000) – Pushed to next FY      
• Review compensation schemes for existing technical team Jun. 1, 2019 Jun. 30, 2019 4 weeks

9


•
Additional (replacements) headcounts to enhance technology capabilities Jul. 1, 2019 Aug. 30, 2020 60 weeks
HR Management ($80,000) – Pushed to next FY
     
•

Engage a HR Consultant to review existing Human Resource Management Processes and Practices

Sep. 1, 2019 Nov. 30, 2019 12 weeks
 
   Dec. 1, 2019 May.31, 2020 24 weeks
•

Execute strategies to improve HR Process and Policies and evaluate and appoint outsourcing companies

 
  
•
Outsourcing of Human Resource Management Processes June 1, 2020 Nov. 30, 2020 24 weeks
Investor Relations & Strategic Financial Advisors ($120,000) – Pushed to next FY
•
Engagement of Investor Relations Consultants to support financing activities Sep. 1, 2019 Aug. 30, 2020 52 weeks
 
        
•
Engagement of Strategic Financial Advisors to support operation strategies Sep. 1, 2019 Aug. 30, 2020 52 weeks

Therefore, based on the above, we anticipate that we will require a total of approximately $1,000,000 for our plan of operations over the next twelve months. At March 31, 2019, we had cash of $95,188 and a working capital deficit of $659,179.

Accordingly, we will be required to obtain additional financing in order to pursue our plan of operations for and beyond the next twelve months. We are currently examining ways to finance the anticipated expenditures and operations through equity and/or debt financings, but we currently do not have any firm commitments for financing at this time. We cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund the build out of the IBASE business going forward. In the absence of such financing, we will not be able to continue our planned expenditures to grow the IBASE business and we may need to curtail the anticipated plan of operations and our business plan may fail.

Statement of Cashflows

During the ninemonth period ended March 31, 2019, our net cash decreased by $33,680 (2018: $504,385), which included net cash used in operating activities of $1,049,618 (2018: $1,281,401), net cash used in investing activities of $6,290 (2018: $(3,971)) and net cash provided by financing activities of $984,056 (2018: $779,379).

Cash Flow used in Operating Activities

Operating activities in the nine month period ended March 31, 2019 used cash of $1,049,618 compared to $1,281,401 in the nine months ended March 31, 2018. Cash used in operating activities decreased in 2019 as a result of an increase in accounts receivable of $19,432, a decrease in deferred contract costs of $188,322, an increase in prepaid expenses and deposits or $4,257, adecrease in accounts payable and accrued liabilities of $24,248, an increase in deferred revenue of $297,327, an increase in due to related parties of $26,612and a net loss during the period of $929,970.

Cash Flow used in Investing Activities

During the nine month period ended March 31, 2019, investing activities used cash of $6,290 for the purchase or property and equipmentas compared to investing activities providing cash of $3,971 from the net result of the acquisition of subsidiary and the purchase of property and equipment during thenine month period ended March 31, 2018.

10

Cash Flow provided by Financing Activities

During the nine month period ended March 31, 2019, financing activities provided cashof $984,056 from the proceeds of notes payable, related parties and subscriptions received as compared to $779,379 from the proceeds of shareholders’ loans and proceeds from related parties for the nine month period ended March 31, 2018.

Off-balance sheet arrangements

There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Subsequent events

There are no subsequent events to report.

Critical Accounting Policies and Use of Estimates

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles in the United States (“GAAP”) and in conformity with the instructions on Form 10-Q and Rule 8-03 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission (“SEC”).Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements. However, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Results of operations for the interim periods are not necessarily indicative of the operating results to be attained in the entire fiscal year.

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

We believe the following critical accounting policies require us to make significant judgments and estimates in the preparation of our financial statements:

  (a)

Use of Estimates

     
 

The preparation of our condensed consolidated financial statements 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 financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to allowance for doubtful accounts, the estimated useful lives and recoverability of property and equipment, and deferred income tax asset valuation allowances. 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.

     
  (b)

Accounts Receivable

     
 

We recognize allowances for doubtful accounts to ensure accounts receivable are not overstated due to the inability or unwillingness of our customers to make required payments. The allowance is based on the business environment, historical bad debt expense, the age of receivables, and the specific identification of receivables we consider at risk. We review the adequacy of its allowance for doubtful accounts on a regular basis.

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  (c)

Property and Equipment

     
 

Property and equipment consist of computer equipment, furniture and fixtures, leasehold improvements, and office equipment and are measured at cost less accumulated depreciation and impairment losses. Property and equipment are depreciated on a straight-line basis over their expected useful life as follows:


Computer equipment   3 years  
Furniture and fixtures   5 years  
Office equipment   5 years  

  (d)

Impairment of Long-lived Assets

     
 

In accordance with ASC 360, “Property, Plant, and Equipment”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.

     
  (e)

Foreign Currency Translation

     
 

Our functional currency is the Singapore dollar and its reporting currency is the U.S. dollar. Management has adopted ASC 830, “Foreign Currency Matters”. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Average monthly rates are used to translate revenues and expenses. Gains and losses arising on translation of foreign currency denominated transactions or balances are included in the statement of operations.

     
 

We usethe current rate method to translate the financial statements to its reporting currency. Accordingly, assets and liabilities are translated into U.S. dollars at the period end exchange rate while revenue and expenses are translated at the average exchange rates during the period. Related exchange gains and losses are included in a separate component of stockholders’ equity as accumulated other comprehensive income.

     
  (f)

Revenue Recognition

     
 

The Company derives revenue from the sale of software, product support and maintenance services, and other consulting services.

     
 

Revenue is recognized when control of products or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those promised products or services.

     
 

The Company determines revenue recognition through the following five steps:


  • Identification of the contract, or contracts, with a customer
  • Identification of the performance obligations in the contract
  • Determination of the transaction price
  • Allocation of the transaction price to the performance obligations in the contract
  • Recognition of revenue when, or as, performance obligations are satisfied

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The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

The Company enters into contracts that can include various combinations of licenses, products and services, some of which are distinct and are accounted for as separate performance obligations. For contracts with multiple performance obligations, the Company allocates the transaction price of the contract to each performance obligation, generally on a relative basis using its standalone selling price.

Management assesses the business environment, customers’ financial condition, historical collection experience, accounts receivable aging, and customer disputes to determine whether collectability is reasonably assured. If collectability is not considered reasonably assured at the time of sale, we do not recognize revenue until collection occurs.

Deferred revenue consists primarily of payments received in advance of revenue recognition for subscriptions and professional services and is recognized as the revenue recognition criteria is met.

Recent Accounting Pronouncements

On July 1, 2018, the Company adopted ASC Topic 606, “Revenue from Contracts with Customers” (“Topic 606”), using the modified retrospective transition method applied to those contracts which were not completed as of July 1, 2018. Under this method, the Company evaluated contracts that were in effect at the beginning of fiscal 2019 as if those contracts had been accounted for under Topic 606 from the beginning of their terms. The adoption of Topic 606 did not result in a material impact on the Company’s unaudited condensed consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases” (“Topic 842”). The new standard requires lessees to recognize most leases on their balance sheets as lease liabilities with corresponding right-of-use assets and eliminates certain real estate specific provisions. ASU 2016-02 will be effective for fiscal years beginning after December 15, 2018. The Company is still in the process of determining the effect of the adoption of this standard on its consolidated financial statements or the related disclosures.

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other” (“Topic 350”). This standard eliminates step 2 from the annual goodwill impairment test. This update is effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted, and is to be applied on a prospective basis. The Company does not anticipate that the adoption of this standard will have a significant impact on its consolidated financial statements or the related disclosures.

In February 2018, the FASB issued ASU No. 2018-02, “Income Statement - Reporting Comprehensive Income” (“Topic 220”): Reclassification of Certain Tax Effect from Accumulated Other Comprehensive Income. This update allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Job Act ("TCJA") enacted in December 2017. This update will be effective for the Company for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. The Company does not anticipate that the adoption of this standard will have a significant impact on its consolidated financial statements or the related disclosures.

In March 2018, the FASB issued ASU No. 2018-05, “Income Taxes” (“Topic 740”): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. The staff of the SEC recognized the complexity of reflecting the impacts of the TCJA, and on December 22, 2017, issued guidance in Staff Accounting Bulletin 118, which clarifies accounting for income taxes under ASC 740 if information is not yet available or complete and provides for up to a one year period in which to complete the required analysis and accounting (the measurement period). The Company does not anticipate that the adoption of this standard will have a significant impact on its consolidated financial statements or the related disclosures.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the U.S. Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

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Item 4. Controls and Procedures

  (a)

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer, Ernest Ong, and our Chief Financial Officer, Willie Lian, to allow for timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining disclosure controls and procedures for our Company.

Our management has evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2019 (under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer), pursuant to Rule 13a-15(b) promulgated under the Securities Exchange Act of 1934, as amended. As part of such evaluation, management considered the matters discussed below relating to internal control over financial reporting. Based on this evaluation, our Company’s Chief Executive Officer and Chief Financial Officer has concluded that our Company’s disclosure controls and procedures were effective as of March 31, 2019.

  (b)

Internal Control Over Financial Reporting

The term “internal control over financial reporting” is defined as a process designed by, or under the supervision of, the registrant’s principal executive and principal financial officers, or persons performing similar functions, and effected by the registrant’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

  • pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the registrant;
     
  •

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the registrant are being made only in accordance with authorizations of management and directors of the registrant; and

     
  • provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the registrant’s assets that could have a material effect on the financial statements.

A material weakness is defined in Public Company Accounting Oversight Board Auditing Standard No. 5 as a significant deficiency, or a combination of significant deficiencies, in internal control over financial reporting that results in there being more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

There have not been any changes in our internal control over financial reporting that occurred during our fiscal quarter ended March 31, 2019 that have materially affected, or are likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

The Company is not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, affiliates or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

Item 1A. Risk Factors

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the three months ended March 31, 2019, we had share subscriptions received of $520,000. We will be issuing shares of common stock at $0.90 per share for such share subscriptions received.

Item 6. Exhibits

The following exhibits are included with this Quarterly Report:

Exhibit Description of Exhibit
   
31.1 Certification of Chief Executive Officer pursuant to the Securities Exchange Act of 1934 Rule 13a- 14(a) or 15d-14(a).
   
31.2 Certification of Chief Financial Officer pursuant to the Securities Exchange Act of 1934 Rule 13a- 14(a) or 15d-14(a).
   
32.1 Certifications pursuant to the Securities Exchange Act of 1934 Rule 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
101.1NS XBRL Instance Document
   
101.SCH XBRL Taxonomy Extension Schema Document
   
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
   
101.DEF XBRL Taxonomy Extension Definitions Linkbase Document
   
101.LAB XBRL Taxonomy Extension Label Linkbase Document
   
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

QORNERSTONE INC.
   
By: /s/ Ernest Ong
  Ernest Ong
  President, Chief Executive Officer, and Director
  (Principal Executive Officer)
  Date: May 15, 2019
   
   
By: /s/ Willie Lian
  Willie Lian
  Chief Financial Officer and Director (Principal
  Financial Officer)
  Date: May 15, 2019

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