10-Q 1 xpl_10q.htm FORM 10-Q xpl_10q.htm

 

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 April 30, 2018

 

¨

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 333-185909

 

Xplosion Incorporated

(Exact name of registrant as specified in its charter)

 

Nevada

 

30-0942823

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

Suite 223 – 468 North Camden Drive

Beverly Hills, CA

 

90210

(Address of principal executive offices)

 

(Zip Code)

 

1-310-601-3080

(Registrant’s telephone number)

 

n/a

(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. x Yes    ¨ No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). x Yes    ¨ No

 

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

 

Large accelerated filer

o

Accelerated filer

o

Non-accelerated filer

o

Smaller reporting company

x

 

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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of June 19, 2018, the issuer had one class of common stock, with a par value of $0.001, of which 49,560,600 shares were issued and outstanding.

 

 
 
 
 

 

TABLE OF CONTENTS

 

 

Page

 

PART I—FINANCIAL INFORMATION

 

Item 1:

Financial Statements:

3

 

Unaudited Balance Sheets as at April 30, 2018, and October 31, 2017

 

3

 

Unaudited Statements of Operations for the Three and Six Months Ended April 30, 2018 and 2017

 

4

 

Unaudited Statements of Cash Flows for the Six Months Ended April 30, 2018 and 2017

 

5

 

Notes to Financial Statements (Unaudited)

 

6

 

Item 2:

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

12

 

Item 3:

Quantitative and Qualitative Disclosures About Market Risk

 

14

 

Item 4:

Controls and Procedures

 

14

 

PART II—OTHER INFORMATION

 

Item 2:

Unregistered Sales of Equity Securities and Use of Proceeds

15

 

Item 5:

Other Events

15

 

Item 6:

Exhibits

 

16

 

Signatures

 

17

 

 
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PART I—FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

  

XPLOSION INCORPORATED

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheets

 

 

 

 

 

 

April 30, 2018 and October 31, 2017

 

 

 

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

April 30

 

 

October 31

 

 

 

2018

 

 

2017

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

$ 284

 

 

$ 1,562

 

Accounts receivable

 

 

-

 

 

 

3,595

 

Deposit

 

 

1,803

 

 

 

4,778

 

Inventory

 

 

109,858

 

 

 

117,709

 

Prepaid expenses

 

 

14,919

 

 

 

20,000

 

 

 

 

 

 

 

 

 

 

Total current assets

 

 

126,864

 

 

 

147,644

 

 

 

 

 

 

 

 

 

 

Total assets

 

$ 126,864

 

 

$ 147,644

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$ 40,693

 

 

$ 40,690

 

Accrued expenses

 

 

29,493

 

 

 

15,460

 

Accrued remmunereation

 

 

42,236

 

 

 

-

 

Loan

 

 

161,110

 

 

 

147,680

 

Due to shareholder

 

 

-

 

 

 

3,861

 

Total current liabilities

 

 

273,532

 

 

 

207,691

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

273,532

 

 

 

207,691

 

 

 

 

 

 

 

 

 

 

Stockholders' (Deficit) Equity

 

 

 

 

 

 

 

 

Preferred stock: $0.001 par value, authorized 100,000,000 shares, issued and outstanding nil shares

 

 

-

 

 

 

-

 

Common Stock: $0.001 par value, authorized 300,000,000 shares, issued and outstanding 49,560,600 shares (2017 - 49,487,600)

 

 

49,561

 

 

 

49,488

 

Additional paid-in capital

 

 

887,449

 

 

 

830,522

 

Retained Earnings (Deficit)

 

 

(1,083,678 )

 

 

(940,057 )

Total stockholders' (deficit) equity

 

 

(146,668 )

 

 

(60,047 )

Total liabilities and stockholders' (deficit) equity

 

$ 126,864

 

 

$ 147,644

 

 

See accompanying notes to financial statements

 

 
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XPLOSION INCORPORATED

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Statements of Operations

 

 

 

 

 

 

 

 

 

 

 

 

For the three and six months ended April 30, 2018 and 2017

 

 

 

 

 

 

 

 

 

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months ended April 30

 

 

Six Months ended April 30

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue:

 

$ -

 

 

$ 327,684

 

 

$ 2,908

 

 

$ 327,684

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

 

2,731

 

 

 

289,614

 

 

 

12,255

 

 

 

289,614

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin

 

 

(2,731 )

 

 

38,070

 

 

 

(9,347 )

 

 

38,070

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

33,305

 

 

 

16,042

 

 

 

65,448

 

 

 

43,128

 

Marketing

 

 

30,000

 

 

 

40,358

 

 

 

50,162

 

 

 

79,090

 

Amortization

 

 

-

 

 

 

24,999

 

 

 

-

 

 

 

49,998

 

 

 

 

63,305

 

 

 

81,399

 

 

 

115,610

 

 

 

172,216

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

 

(66,036 )

 

 

(43,329 )

 

 

(124,957 )

 

 

(134,146 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income and expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(9,713 )

 

 

(6,519 )

 

 

(18,664 )

 

 

(11,285 )

Interest income

 

 

-

 

 

 

45,000

 

 

 

-

 

 

 

51,000

 

 

 

 

(9,713 )

 

 

38,481

 

 

 

(18,664 )

 

 

39,715

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

$ (75,749 )

 

$ (4,848 )

 

$ (143,621 )

 

$ (94,431 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share

 

$ (0.00 )

 

$ (0.00 )

 

$ (0.00 )

 

$ (0.00 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding

 

 

49,560,000

 

 

 

49,487,600

 

 

 

49,526,727

 

 

 

49,404,451

 

 

See accompanying notes to financial statements

 

 
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XPLOSION INCORPORATED

 

 

 

 

 

 

 

 

 

 

 

 

 

Statements of Cash Flows

 

 

 

 

 

 

For the six months ended April 30, 2018 and 2017

 

 

 

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2018

 

 

2017

 

 

 

 

 

 

 

 

Cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating activities:

 

 

 

 

 

 

Net loss

 

$ (143,621 )

 

$ (94,431 )

 

 

 

 

 

 

 

 

 

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of distribution rights

 

 

-

 

 

 

49,998

 

 

 

 

 

 

 

 

 

 

Changes in assets and liabilities

 

 

 

 

 

 

 

 

Accounts receivable

 

 

3,595

 

 

 

18,447

 

Accounts payable

 

 

3

 

 

 

32,196

 

Accrued interest receivable

 

 

-

 

 

 

(51,001 )

Accrued expenses

 

 

56,269

 

 

 

7,182

 

Inventory

 

 

7,851

 

 

 

(137,464 )

Deposits and prepaid expenses

 

 

8,056

 

 

 

(136,803 )

Deferred revenue

 

 

-

 

 

 

36,387

 

 

 

 

 

 

 

 

 

 

Net cash used in operating activities

 

 

(67,847 )

 

 

(275,489 )

 

 

 

 

 

 

 

 

 

Cash used in investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loan

 

 

-

 

 

 

(27,500 )

 

 

 

 

 

 

 

 

 

Net cash (used in) investing activities

 

 

-

 

 

 

(27,500 )

 

 

 

 

 

 

 

 

 

Cash provided by financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of capital stock

 

 

57,000

 

 

 

87,500

 

Proceeds from loan payable

 

 

13,430

 

 

 

71,237

 

(Repayment) advance from shareholder,net

 

 

(3,861 )

 

 

(10,421 )

 

 

 

 

 

 

 

 

 

Net cash provided by financing activities

 

 

66,569

 

 

 

148,316

 

 

 

 

 

 

 

 

 

 

Increase in cash during the period

 

 

(1,278 )

 

 

(154,673 )

Cash at beginning of the period

 

 

1,562

 

 

 

157,773

 

 

 

 

 

 

 

 

 

 

Cash at end of the period

 

$ 284

 

 

$ 3,100

 

 

 

 

 

 

 

 

 

 

Cash paid for:

 

 

 

 

 

 

 

 

Interest paid

 

$ 4,293

 

 

$ 9,808

 

Income taxes

 

$ -

 

 

$ -

 

 

See accompanying notes to financial statements.

 

 
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XPLOSION INCORPORATED

NOTES TO FINANCIAL STATEMENTS

April 30, 2018

(unaudited)

 

Note 1. Description of Business and Summary of Significant Accounting Policies

 

Organization

 

Xplosion Incorporated (the “Company”) was incorporated under the laws of the State of Nevada on October 6, 2015. The Company is in the business of marketing, distribution of innovative lifestyle and enhancement products and complimentary goods. On December 7, 2015 the Company entered into an Exclusive Global Rights Agreement with Interactive Holdings Limited (“Interactive”) for a global distribution license for the SayberX line of self-stimulation devices for men and couples.

 

Interim Period Financial Statements

 

The accompanying unaudited interim condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the Securities and Exchange Commission’s instructions. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. The results of operations reflect interim adjustments, all of which are of a normal recurring nature and, in the opinion of management, are necessary for a fair presentation of the results for such interim period. The results reported in these interim financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. Certain information and note disclosure normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the Securities and Exchange Commission’s rules and regulations. These unaudited interim condensed financial statements should be read in conjunction with the Company’s audited financial statements for the year ended October 31, 2017, filed April 27, 2018.

 

Going Concern

 

The Company’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. At April 30, 2018 and October 31, 2017, the Company had $284 and $1,562 in cash, respectively, and working capital deficiency of $146,668 and $60,047, respectively, as at April 30, 2018 and October 31, 2017. For the six months ended April 30, 2018 and 2017 the Company had net losses of $143,621 and $94,431, respectively. Continued losses may adversely affect the liquidity of the Company in the future. Therefore, the factors noted raise substantial doubt about our ability to continue as a going concern. The recoverability of a major portion of the recorded assets amounts shown in the accompanying is dependent upon continued operations of the Company, which in turn is dependent on the Company’s ability to raise additional capital, obtain financing and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s existence is dependent upon management’s ability to develop profitable operations and resolve its liquidity problems.

 

Cash

 

Cash equivalents with maturity dates less than 90 days from the date of origination are considered to be cash equivalents for all financial reporting purposes. The Company currently has no cash equivalents.

 

 
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Functional Currency

 

The financial statements are presented in United States dollars, which is the Company’s functional currency.

 

Fair Value Measurements

 

Fair value is defined as the exchange price that will be received for an asset or paid to transfer a liability (an exit price) in the principal. Valuation techniques used to measure fair value should maximize the use of observable inputs and minimize the use of unobservable inputs. To measure fair value, the Company uses the following fair value hierarchy based on three levels of inputs, of which the first two are considered to be observable and the third unobservable:

 

Level 1 – Quoted prices in active markets for identical assets or liabilities.

 

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3 – Unobservable inputs are supported by little or no market activity and are significant to the fair value of the assets or liabilities.

 

Revenue Recognition

 

The Company acquires full ownership of all products under its Exclusive Global Distribution Agreement directly from the technology holder and in turn re-sells the products through by wholesale through sub-distributors and also directly to end users via e-commerce. The Company has determined that it is the primary obligator as it i) is responsible for fulfillment; ii) assumes full inventory risk; iii) has no right of return of unsold product; iv) has the sole right to establish selling prices; v) has physical loss inventory risk and vi) has credit risk. The Company recognizes revenue, at the gross amount invoiced, when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, price is fixed and determinable, and collectability is reasonably assured.

 

During the six months ended April 30, 2018 $2,908 or 100% of the Company’s revenue was concentrated in the hands of one major customer.

 

Accounts Receivable

 

Accounts receivable result from sale of SayberX units and are recorded at their principal amounts.Receivables are generally unsecured.

 

The Company does not have off-balance sheet credit exposure related to its customers.

 

 
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Inventory

 

Inventory consisting of SayberX units is stated at the lower of cost (first in, first out method) or net realizable value.

 

Advertising Expenses

 

Advertising costs are expensed as incurred. During the six months ended April 30, 2018 and 2017 the Company incurred advertising costs of $nil and $nil, respectively.

 

Income Taxes

 

Deferred income tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities, operating loss, and tax credit carryforwards, and are measured using the enacted income tax rates and laws that will be in effect when the differences are expected to be recovered or settled. Realization of certain deferred income tax assets is dependent upon generating sufficient taxable income in the appropriate jurisdiction. The Company records a valuation allowance to reduce deferred income tax assets to amounts that are more likely than not to be realized. The initial recording and any subsequent changes to valuation allowances are based on a number of factors (positive and negative evidence). The Company considers its actual historical results to have a stronger weight than other, more subjective, indicators when considering whether to establish or reduce a valuation allowance.

 

The Company continually evaluates its uncertain income tax positions and may record a liability for any unrecognized tax benefits resulting from uncertain income tax positions taken or expected to be taken in an income tax return. Estimated interest and penalties are recorded as a component of interest expense and other expense, respectively.

 

Because tax laws are complex and subject to different interpretations, significant judgment is required. As a result, the Company makes certain estimates and assumptions in: (1) calculating its income tax expense, deferred tax assets, and deferred tax liabilities; (2) determining any valuation allowance recorded against deferred tax assets; and (3) evaluating the amount of unrecognized tax benefits, as well as the interest and penalties related to such uncertain tax positions. The Company’s estimates and assumptions may differ significantly from tax benefits ultimately realized.

 

Net Loss Per Share

 

Basic net loss per share is calculated by dividing the net loss attributable to common shareholders by the weighted average number of common shares outstanding in the period. Diluted loss per share takes into consideration common shares outstanding (computed under basic loss per share) and potentially dilutive securities. For the three and six months ended April 30, 2018, there are no outstanding stock options and warrants. Common shares issuable are considered outstanding as of the original approval date for purposes of earnings per share computations.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the fiscal year. The Company bases its estimates on historical experience, current conditions and on other assumptions that it believes to be reasonable under the circumstances. Actual results could differ from those estimates and assumptions.

 

 
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Financial Instruments

 

The Company has the following financial instruments: cash, accounts receivable, inventory, deposits and prepaid expenses, accounts payable and loan payable. The carrying value of these financial instruments approximates their fair value due to their liquidity or their short-term nature.

 

Share Issuances for Services, Debt Instruments and Interest

 

The Company issues instruments to non-employees for the receipt of goods and services, and, in certain circumstances the settlement of short-term loan arrangements. The applicable GAAP establishes that share-based payment transactions with nonemployees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.

 

In these transactions, the Company issues unregistered and restricted equity instruments. Additionally, the Company currently has no shares of freely-tradeable stock with a quoted market price (a Level 1input within the GAAP hierarchy).

 

When unregistered common shares are issued for the settlement of short-term financing arrangements (that are not initially convertible), the reacquisition price of the extinguished financing arrangement is determined by the value of the debt which is more clearly evident, and no additional inducement expense is recognized.

 

In situations in which the Company issues unregistered restricted common shares in exchange for goods and services, and the value of the goods and services are not the most reliably measurable, the Company recognizes the fair value of the unregistered restricted equity instruments based on the value of similar instruments issued in private placements in exchange for cash in the most recent transactions (a Level 2 input within the GAAP hierarchy). The Company has determined this methodology reflects the risk adjusted fair value of its unregistered restricted equity instruments using a commercially reasonable valuation technique.

 

Emerging Growth

 

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved

 

We have irrevocably opted out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the Act.

 

Recent Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09 – Revenue From Contracts with Customers, which will supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principal of this ASU is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires 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.

 

 
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The original effective date for ASU 2014-09 would have required the Company to adopt beginning in its first quarter 2017. In July 2015, the FASB voted to amend ASU 2014-09 by approving a one year deferral of the effective date as well as providing the option to early adopt the standard on the original effective date. Accordingly, the Company may adopt the standard in either its first quarter of 2017 or 2018. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company is currently evaluating the timing of its adoption and the impact of adopting the new revenue standard on its financial statements.

 

In June 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-10, which eliminated certain financial reporting requirements of companies previously identified as “Development Stage Entities” (Topic 915). The amendments in this ASU simplify accounting guidance by removing all incremental financial reporting requirements for development stage entities. The amendments also reduce data maintenance and, for those entities subject to audit, audit costs by eliminating the requirement for development stage entities to present inception-to-date information in the statements of income, cash flows, and shareholder equity. Early application of each of the amendments is permitted for any annual reporting period or interim period for which the entity’s financial statements have not yet been issued (public business entities) or made available for issuance (other entities). Upon adoption, entities will no longer present or disclose any information required by Topic 915. The Company has adopted this standard.

 

In April 2015, the FASB issued ASU2015-03, Imputation of Interest, requiring entities to present debt issuance costs related to a debt liability as a reduction of the carrying amount of the liability. In August 2015, the FASB issued ASU 2015-15 to provide additional guidance related to debt issuance costs related to line-of-credit arrangements. The guidance is effective for annual and interim periods beginning after December 15, 2015, and early adoption is permitted. The Company has adopted this standard.

 

In February 2016, the FASB issued ASU2016-02, Leases (Topic 842), requiring entities to a right-of-use asset and a lease liability for virtually all of their leases. This standard is effective for annual and interim periods beginning after December 15, 2018, and early adoption is permitted. The Company is currently evaluating the timing of its adoption and the impact of adopting the new standard on its financial statements.

 

Note 2. Revolving Loan Facility

 

On November 1, 2016 the Company entered into an agreement for a revolving loan facility of up to $150,000. The loan, due on or before October 31, 2018, is unsecured and with interest of 2% per month, calculated based on the amount of principal outstanding at the end of each month. If the total principal outstanding and accrued interest is not paid at maturity the Company will make a Default Payment consisting of 4.49% of the total of issued and outstanding shares of the Company at that date. The balance outstanding as at April 30, 2018 was $161,110 with an available credit line of $nil. Subsequent to April 30, 2018 the revolving loan was increased to a maximum of $250,000.

 

Note 3. Related Party Transactions

 

During the six months ended April 30, 2018 the Company received advances from the Company’s former sole officer and director in the amount of $5,072 and repaid $8,933. The no balance owing as at April 30, 2018.

 

During the six months ended April 30, 2018 the Company accrued fees of $48,000 and paid $5,765 to its former officer and director. The balance outstanding as at April 30, 2018 of $42,236 is included in accrued remuneration.

 

 
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Note 4. Share Capital

 

Preferred Stock

 

The Company’s authorized capital includes 100,000,000 shares of preferred stock of $0.001 par value. The designation of rights including voting powers, preferences, and restrictions shall be determined by the Board of Directors before the issuance of any shares.

 

No shares of preferred stock are issued and outstanding as of April 30, 2018.

 

Common Stock

 

The Company is authorized to issue 300,000,000 shares of common stock, par value of $0.001.

 

During the six months ended April 30, 2018 the Company issued on

 

 

· January 25, 2018, 73,000 shares of common stock for proceeds of $57,000

 

Note 5. Commitments

 

The Company has extended a consulting contract, which has monthly payments amount of $10,000, to January 31, 2019.

 

On or about February 9, 2018, the Company received notice that it has been served as a co-defendant in a Complaint for Infringement of US Patent 6,368,268. The Complaint alleges that the Company and the co-defendant, Interactive Holdings Limited, have infringed on the Plaintiff’s patent and seek a permanent injunction plus an award of damages.

 

Subsequent to April 30, 2018 the action was settled in full by the Company and the co-defendant by the payment of $10,000 for a non-exclusive, worldwide, fully paid license to the Complainant’s technology.

  

 
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion should be read in conjunction with the accompanying unaudited financial statements for the three and six month periods ended April 30, 2018 and 2017, and our annual report for the year ended October 31, 2017, including the financial statements and notes thereto.

 

Forward-Looking Information May Prove Inaccurate

 

This report contains statements about the future, sometimes referred to as “forward-looking” statements. Forward-looking statements are typically identified by the use of the words “believe,” “may,” “could,” “should,” “expect,” “anticipate,” “estimate,” “project,” “propose,” “plan,” “intend,” and similar words and expressions. Statements that describe our future strategic plans, goals, or objectives are also forward-looking statements.

 

Readers of this report are cautioned that any forward-looking statements, including those regarding our management’s current beliefs, expectations, anticipations, estimations, projections, proposals, plans, or intentions, are not guarantees of future performance or results of events and involve risks and uncertainties. The forward-looking information is based on present circumstances and on our predictions respecting events that have not occurred, that may not occur, or that may occur with different consequences from those now assumed or anticipated. Actual events or results may differ materially from those discussed in the forward-looking statements as a result of various factors. The forward-looking statements included in this report are made only as of the date of this report. We are not obligated to update such forward-looking statements to reflect subsequent events or circumstances.

 

Introduction

 

We are a Company engaged in the sale, marketing and distribution of innovative lifestyle enhancement products and complimentary goods that target millennials and progressive thinkers of Generation X and Y. To date, we have generated our revenues from the distribution of our products to sub-distributors, wholesalers, and/or third party retailers, as well as from the direct sale of our products to consumers via various websites or via other online affiliate or third-party websites. Our initial product offering has been the Sayber X automated self-stimulation device for men and the X-Ring controller. The Sayber X is a wearable, automated, blue tooth and software integrated sexual stimulation device which enables the user to engage in self-stimulation either alone or with a partner using the X-Ring controller remote control device and related software.

 

During the quarter ended April 30, 2018, although we continued to make efforts to generate sales for the SayberX line of products, during the quarter our sales were hampered by a product patent infringement civil suit that was filed against the SabyberX product manufacturer and our Company as it’s distributor. The civil action has since been settled and is now concluded, but was principally responsible for our lack of revenue from sales of the SayberX line of products. During the quarter we also aggressively investigated other opportunities that may exist to expand our business to include additional further future offerings of innovative lifestyle enhancement products and complimentary goods. Discussions have been engaged with parties to a variety of potential business opportunities as it would relate to establishing formal working relationships with them, yet these discussions still have not resulted into a material agreement, and there can be no assurance that we will have any formal agreement with any additional party at all.

 
 
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Results of Operations

 

Comparison of the Three and Six Months Ended April 30, 2018

with the Three and Six Months Ended April 30, 2017

 

We had gross revenue of $nil and $2,908 for the respective three and six months ended April 30, 2018 as compared to $327,684 and $327,684for the respective three and six months ended April 30, 2017.

 

Our general and administrative expenses from continuing operations for the three and six months ended April 30, 2018 were $33,305 and 65,448, respectively, as compared to $16,042 and 43,128 for the comparable three and six month periods ended April 30, 2017. The difference is primarily attributable to management fees of $24,000 and $48,000 for the three and six months ended April 30, 2018.

 

Our marketing expenses from continuing operations for the three and six months ended April 30, 2018, were $30,000 and $50,162, respectively, as compared to $40,358 and $79,090, respectively, for the comparable three and six month periods ended April 30, 2017.

 

Overall, we have a net loss of $75,749 and $143,621 for the respective three and six months ended April 30, 2018, as compared to a net loss of $4,848 and $94,431, respectively, for the corresponding three and six month periods of the preceding year.

 

Liquidity and Capital Resources

 

As of April 30, 2018, our current assets were $128,684, as compared to $147,644 at October 31, 2017. As of April 30, 2018, our current liabilities were $273,532, as compared to $207,691 at October 31, 2017.

 

Operating activities used net cash of $67,847 for the six months ended April 30, 2018, as compared to use of $275,489 for the six months ended April 30, 2017.

 

Investing activities used net cash of $nil for the six months ended April 30, 2018, as compared to use of $27,500 for the six months ended April 30, 2017.

 

Net cash of $66,569 was provided by financing activities during the six months ended April 30, 2018, as compared to $148,316 net cash provided during the comparable six months ended April 30, 2017. Financing activities during both the six months ended April30, 2018 and April 30, 2017 comprised of proceeds of issuance of share capital of $57,000 for the six months ended April 30, 2018 as compared to $87,500 for the six months ended April 30, 2017, net proceeds from loan of $13,430 for the six months ended April 30, 2018 as compared to $71,237 for the six months ended April 30, 2017 and net repayment of advances from shareholders of $3,861 for the six months ended April 30, 2018 as compared to repayment of $10,421 for the six months ended April 30, 2017.

 

Our current balances of cash will not meet our working capital and capital expenditure needs for the whole of the current year. Because we are not currently generating sufficient cash to fund our operations, we will need to rely on external financing to meet future capital and operating requirements. Any projections of future cash needs and cash flows are subject to substantial uncertainty. Our capital requirements depend upon several factors, including the rate of market acceptance, our ability to get to production and generate revenues, our level of expenditures for production, marketing, and sales, purchases of equipment, and other factors. We can make no assurance that financing will be available in amounts or on terms acceptable to us, if at all. Further, if we issue equity securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences, or privileges senior to those of existing holders of common stock, and debt financing, if available, may involve restrictive covenants that could restrict our operations or finances. If we cannot raise funds, when needed, on acceptable terms, we may not be able to continue our operations, grow market share, take advantage of future opportunities, or respond to competitive pressures or unanticipated requirements, all of which could negatively impact our business, operating results, and financial condition.

 
 
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, such as this quarterly report, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officers (our “Certifying Officers”) , as appropriate, to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our Certifying Officers, the effectiveness of our disclosure controls and procedures as of April 30, 2018, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, as of April 30, 2018, our disclosure controls and procedures were not effective.

 

There have been no changes in our internal control over financial reporting that occurred during the quarter ended April 30, 2018, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

 
 
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PART II—OTHER INFORMATION

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None

 

ITEM 5. OTHER EVENTS

 

Not applicable

 
 
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ITEM 6. EXHIBITS

 

The following exhibits are filed as a part of this report:

 

Exhibit

Number*

Title of Document

Location

 

Item 31

 

Rule 13a-14(a)/15d-14(a) Certifications

 

31.01

 

Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Rule 13a-14

 

Attached

 

Item 32

 

Section 1350 Certifications

 

32.01

 

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer) and (Chief Financial Officer)

 

Attached

 

Item 101

 

Interactive Data File

 

101

 

Interactive Data File

 

Attached

_______________

* All exhibits are numbered with the number preceding the decimal indicating the applicable SEC reference number in Item 601 and the number following the decimal indicating the sequence of the particular 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.

 

 

Registrant

 

 

 

XPLOSION INCORPORATED

 

 

 

Date: June 19, 2018

By:

/s/ EUGENIO GREGORIO /s/

 

 

Eugenio Gregorio

 

 

President, Chief Executive Officer, Chief Financial Officer, Treasurer and Director

 

 

(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

 

 

 

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