10-Q

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 July 31, 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	¨	Accelerated filer	¨
Non-accelerated filer	¨	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 September 14, 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 July 31, 2018, and October 31, 2017	3
	Unaudited Statements of Operations for the Three and Nine Months Ended July 31, 2018 and 2017	4
	Unaudited Statements of Cash Flows for the Nine Months Ended July 31, 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	15
Item 4:	Controls and Procedures	15
PART II—OTHER INFORMATION
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 5:	Other Events	16
Item 6:	Exhibits	17
	Signatures	18

 

2

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

XPLOSION INCORPORATED

Balance Sheets

July 31, 2018 and October 31, 2017

(unaudited)

	July 31			October 31
	2018			2017
Assets
Current assets:
Cash	$	284		$	1,562
Accounts receivable		-			3,595
Accrued interest receivable		912			-
Deposit		2,185			4,778
Inventory		53,972			117,709
Prepaid expenses		14,919			20,000
Loan receivable		10,000			-
Total current assets		82,272			147,644
Total assets	$	82,272		$	147,644
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	45,926		$	40,690
Accrued expenses		22,252			15,460
Accrued remmunereation		42,236			-
Loan		163,398			147,680
Due to shareholder		-			3,861
Total current liabilities		273,812			207,691
Total liabilities		273,812			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)		(1,128,550	)		(940,057	)
Total stockholders' (deficit) equity		(191,540	)		(60,047	)
Total liabilities and stockholders' (deficit) equity	$	82,272		$	147,644

 

See accompanying notes to financial statements

3

XPLOSION INCORPORATED

Statements of Operations

For the three and nine months ended July 31, 2018 and 2017

(unaudited)

	Three Months ended July 31						Nine Months ended July 31
	2018			2017			2018			2017
Revenue:	$	62,873		$	165,102		$	65,781		$	492,786
Cost of revenue		58,058			144,678			70,313			434,292
Gross margin		4,815			20,424			(4,532	)		58,494
Expenses:
General and administrative		10,248			13,843			75,696			56,971
Marketing		30,000			34,904			80,162			113,994
Amortization		-			24,999			-			74,997
		40,248			73,746			155,858			245,962
Income (loss) from operations		(35,433	)		(53,322	)		(160,390	)		(187,468	)
Other income and expense:
Interest expense		(10,351	)		(5,503	)		(29,015	)		(16,788	)
Interest income		912			5,102			912			56,102
		(9,439	)		(401	)		(28,103	)		39,314
Net Loss	$	(44,872	)	$	(53,723	)	$	(188,493	)	$	(148,154	)
Net loss per share	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)
Weighted average number of shares outstanding		49,560,000			49,487,600			49,538,142			49,432,472

 

See accompanying notes to financial statements

4

XPLOSION INCORPORATED

Statements of Cash Flows

For the nine months ended July 31, 2018 and 2017

(unaudited)

	2018			2017
Cash provided by (used in) operating activities:
Operating activities:
Net loss	$	(188,493	)	$	(148,154	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of distribution rights		-			74,997
Changes in assets and liabilities
Accounts receivable		3,595			17,032
Accounts payable		5,236			(21,073	)
Accrued interest receivable		(912	)		(18,613	)
Accrued expenses		49,028			15,749
Inventory		63,737			(130,489	)
Deposits and prepaid expenses		7,674			(4,778	)
Deferred revenue		-			(119,853	)
Net cash used in operating activities		(60,135	)		(335,182	)
Cash used in investing activities:
Loan receivable		(10,000	)		-
Net cash (used in) investing activities		(10,000	)		-
Cash provided by financing activities:
Proceeds from issuance of capital stock		57,000			87,500
Proceeds from loan payable		15,718			101,780
(Repayment) advance from shareholder,net		(3,861	)		(10,098	)
Net cash provided by financing activities		68,857			179,182
Increase in cash during the period		(1,278	)		(156,000	)
Cash at beginning of the period		1,562			157,773
Cash at end of the period	$	284		$	1,773
Cash paid for:
Interest paid	$	40,485		$	9,808
Income taxes	$	-		$	-

 

See accompanying notes to financial statements.

5

XPLOSION INCORPORATED

NOTES TO FINANCIAL STATEMENTS

July 31, 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 July 31, 2018 and October 31, 2017, the Company had $284 and $1,562 in cash, respectively, and working capital deficiency of $191,540 and $60,047, respectively, as at July 31, 2018 and October 31, 2017. For the nine months ended July 31, 2018 and 2017 the Company had net losses of $188,493 and $148,154, 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.

 

6

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 nine months ended July 31, 2018 $65,781 or 100% of the Company’s revenue was concentrated in the hands of two customers.

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.

 

7

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 nine months ended July 31, 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 nine months ended July 31, 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.

 

8

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.

 

9

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. Loan Receivable

During the nine months ended July 31, 2018 the Company advanced, on behalf of Interactive Holdings Ltd., $10,000 to settle the patent infringement case. The loan was due, together with interest accrued at 2% per month, on June 30, 2018. As the loan wasn’t repaid by the due date of June 30, 2018 there is an additional interest of 3% per month, charged on the outstanding principal and interest until such time as the loan and accrued interest is paid in full.

Note 3. Revolving Loan Facility

On November 1, 2016 the Company entered into an agreement, and amended May 18, 2018, for a revolving loan facility of up to $250,000. 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 July 31, 2018 was $163,398 with an available credit line of $86,602.

Note 4. Related Party Transactions

During the nine months ended July 31, 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 is no balance owing as at July 31, 2018.

During the nine months ended July 31, 2018 the Company accrued fees of $48,000 and paid $5,765 to its former officer and director. The balance outstanding as at July 31, 2018 of $42,236 is included in accrued remuneration.

 

10

Note 5. 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 July 31, 2018.

Common Stock

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

During the nine months ended July 31, 2018 the Company issued on

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

 

Note 6. Commitments

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

Note 7. Subsequent Events

Management has evaluated subsequent events up to the date of filing. There are no subsequent events to report.

 

11

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 nine month periods ended July 31, 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 July 31, 2018, following the settlement and conclusion of a product patent infringement civil suit that was previously filed against the SayberX product manufacturer and our Company as it’s distributor, we again undertook efforts to successfully generate sales for 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.

 

12

Results of Operations

Comparison of the Three and Nine Months Ended July 31, 2018

with the Three and Nine Months Ended July 31, 2017

We had gross revenue of $62,873 and $65,781 for the respective three and nine months ended July 31, 2018 as compared to $165,102 and $492,786 for the respective three and nine months ended July 31, 2017.

Our general and administrative expenses from continuing operations for the three and nine months ended July 31, 2018 were $10,248 and 75,696, respectively, as compared to $13,843 and 56,971 for the comparable three and nine month periods ended July 31, 2017. The difference is primarily attributable to management fees of $nil and $48,000 for the three and nine months ended July 31, 2018.

Our marketing expenses from continuing operations for the three and nine months ended July 31, 2018, were $30,000 and $80,162, respectively, as compared to $34,904 and $113,994, respectively, for the comparable three and nine month periods ended July 31, 2017.

Overall, we have a net loss of $44,872 and $188,493 for the respective three and nine months ended July 31, 2018, as compared to a net loss of $53,723 and $148,154, respectively, for the corresponding three and nine month periods of the preceding year.

Liquidity and Capital Resources

As of July 31, 2018, our current assets were $82,272, as compared to $147,644 at October 31, 2017. As of July 31, 2018, our current liabilities were $273,812, as compared to $207,691 at October 31, 2017.

Operating activities used net cash of $60,135 for the nine months ended July 31, 2018, as compared to use of $335,182 for the nine months ended July 31, 2017.

Investing activities used net cash of $10,000 for the nine months ended July 31, 2018, as compared to use of $nil for the nine months ended April 30, 2017.

Net cash of $68,857 was provided by financing activities during the nine months ended July 31, 2018, as compared to $179,182 net cash provided during the comparable nine months ended July 31, 2017. Financing activities during both the nine months ended July 31, 2018 and July 31, 2017 comprised of proceeds of issuance of share capital of $57,000 for the nine months ended July 31, 2018 as compared to $87,500 for the nine months ended July 31, 2017, net proceeds from loan of $15,718 for the nine months ended July 31, 2018 as compared to $101,780 for the nine months ended July 31, 2017 and net repayment of advances from shareholders of $3,861 for the nine months ended July 31, 2018 as compared to repayment of $10,098 for the nine months ended July 31, 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. The factors noted raise substantial doubt about our ability to continue as a going concern.

 

13

Critical Accounting Policies and Estimates

Revenue Recognition

The Company acquires full ownership of all products under its 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.

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.

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.

 

14

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 officer (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 July 31, 2018, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, as of July 31, 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 July 31, 2018, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

 

15

PART II—OTHER INFORMATION

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

None

ITEM 5. OTHER EVENTS

Not applicable

 

16

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.

 

17

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: September 14, 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)

 

18

EX-31.1

EXHIBIT 31.01

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO RULE 13a-14

I, Eugenio Gregorio, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Xplosion Incorporated;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
(c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: September 14, 2018

/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)

EX-32.1

EXHIBIT 32.01

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Xplosion Incorporated (the “Company”) on Form 10-Q for the three months ended July 31, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Eugenio Gregorio, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:

(1)	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

September 14, 2018

/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)

XML

Document and Entity Information - shares	9 Months Ended
	Jul. 31, 2018	Sep. 14, 2018
Document And Entity Information [Abstract]
Entity Registrant Name	Xplosion Incorporated
Entity Central Index Key	0001694688
Document Type	10-Q
Document Period End Date	Jul. 31, 2018
Amendment Flag	false
Current Fiscal Year End Date	--10-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	Yes
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		49,560,600
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2018

XML

Balance Sheets - USD ($)	Jul. 31, 2018	Oct. 31, 2017
Current assets:
Cash	$ 284	$ 1,562
Accounts receivable		3,595
Accrued interest receivable	912
Deposit	2,185	4,778
Inventory	53,972	117,709
Prepaid expenses	14,919	20,000
Loan receivable	10,000
Total current assets	82,272	147,644
Total assets	82,272	147,644
Current liabilities:
Accounts payable	45,926	40,690
Accrued expenses	22,252	15,460
Accrued remuneration	42,236
Loan	163,398	147,680
Due to shareholder		3,861
Total current liabilities	273,812	207,691
Total liabilities	273,812	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)	(1,128,550)	(940,057)
Total stockholders' (deficit) equity	(191,540)	(60,047)
Total liabilities and stockholders' (deficit) equity	$ 82,272	$ 147,644

XML

Balance Sheets (Parenthetical) - $ / shares	Jul. 31, 2018	Oct. 31, 2017
Stockholders' (Deficit) Equity
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	100,000,000	100,000,000
Preferred Stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	300,000,000	300,000,000
Common stock, shares issued	49,560,600	49,487,600
Common stock, shares outstanding	49,560,600	49,487,600

XML

Statements of Operations (unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Jul. 31, 2018	Jul. 31, 2017	Jul. 31, 2018	Jul. 31, 2017
Statements Of Operations
Revenue:	$ 62,873	$ 165,102	$ 65,781	$ 492,786
Cost of revenue	58,058	144,678	70,313	434,292
Gross margin	4,815	20,424	(4,532)	58,494
Expenses:
General and administrative	10,248	13,843	75,696	56,971
Marketing	30,000	34,904	80,162	113,994
Amortization		24,999		74,997
Total expenses	40,248	73,746	155,858	245,962
Income (loss) from operations	(35,433)	(53,322)	(160,390)	(187,468)
Other income and expense:
Interest expense	(10,351)	(5,503)	(29,015)	(16,788)
Interest income	912	5,102	912	56,102
Total other income and expenses	(9,439)	(401)	(28,103)	39,314
Net Loss	$ (44,872)	$ (53,723)	$ (188,493)	$ (148,154)
Net loss per share	$ (0.00)	$ (0.00)	$ (0.00)	$ (0.00)
Weighted average number of shares outstanding	49,560,000	49,487,600	49,538,142	49,432,472

XML

Statements of Cash Flows (unaudited) - USD ($)	9 Months Ended
	Jul. 31, 2018	Jul. 31, 2017
Cash provided by (used in) operating activities:
Net loss	$ (188,493)	$ (148,154)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of distribution rights		74,997
Changes in assets and liabilities
Accounts receivable	3,595	17,032
Accounts payable	5,236	(21,073)
Accrued interest receivable	(912)	(18,613)
Accrued expenses	49,028	15,749
Inventory	63,737	(130,489)
Deposits and prepaid expenses	7,674	(4,778)
Deferred revenue		(119,853)
Net cash used in operating activities	(60,135)	(335,182)
Cash used in investing activities:
Loan receivable	(10,000)
Net cash (used in) investing activities	(10,000)
Cash provided by financing activities:
Proceeds from issuance of capital stock	57,000	87,500
Proceeds from loan payable	15,718	101,780
(Repayment) advance from shareholder,net	(3,861)	(10,098)
Net cash provided by financing activities	68,857	179,182
Increase in cash during the period	(1,278)	(156,000)
Cash at beginning of the period	1,562	157,773
Cash at end of the period	284	1,773
Cash paid for:
Interest paid	40,485	9,808
Income taxes

XML

Description of Business and Summary of Significant Accounting Policies

9 Months Ended

Jul. 31, 2018

Notes to Financial Statements

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 July 31, 2018 and October 31, 2017, the Company had $284 and $1,562 in cash, respectively, and working capital deficiency of $191,540 and $60,047, respectively, as at July 31, 2018 and October 31, 2017. For the nine months ended July 31, 2018 and 2017 the Company had net losses of $188,493 and $148,154, 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.

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 nine months ended July 31, 2018 $65,781 or 100% of the Company’s revenue was concentrated in the hands of two customers.

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.

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 nine months ended July 31, 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 nine months ended July 31, 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.

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.

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.

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Loan Receivable

9 Months Ended

Jul. 31, 2018

Notes to Financial Statements

Note 2. Loan Receivable

During the nine months ended July 31, 2018 the Company advanced, on behalf of Interactive Holdings Ltd., $10,000 to settle the patent infringement case. The loan was due, together with interest accrued at 2% per month, on June 30, 2018. As the loan wasn’t repaid by the due date of June 30, 2018 there is an additional interest of 3% per month, charged on the outstanding principal and interest until such time as the loan and accrued interest is paid in full.

XML

Revolving Loan Facility

9 Months Ended

Jul. 31, 2018

Notes to Financial Statements

Note 3. Revolving Loan Facility

On November 1, 2016 the Company entered into an agreement, and amended May 18, 2018, for a revolving loan facility of up to $250,000. 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 July 31, 2018 was $163,398 with an available credit line of $86,602.

XML

Related Party Transactions

9 Months Ended

Jul. 31, 2018

Notes to Financial Statements

Note 4. Related Party Transactions

During the nine months ended July 31, 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 is no balance owing as at July 31, 2018.

During the nine months ended July 31, 2018 the Company accrued fees of $48,000 and paid $5,765 to its former officer and director. The balance outstanding as at July 31, 2018 of $42,236 is included in accrued remuneration.

XML

Share Capital

9 Months Ended

Jul. 31, 2018

Notes to Financial Statements

Note 5. 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 July 31, 2018.

Common Stock

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

During the nine months ended July 31, 2018 the Company issued on

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

XML

Commitments

9 Months Ended

Jul. 31, 2018

Notes to Financial Statements

Note 6. Commitments

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

XML

Subsequent Events

9 Months Ended

Jul. 31, 2018

Notes to Financial Statements

Note 7. Subsequent Events

Management has evaluated subsequent events up to the date of filing. There are no subsequent events to report.

XML

Description of Business and Summary of Significant Accounting Policies (Policies)

9 Months Ended

Jul. 31, 2018

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 July 31, 2018 and October 31, 2017, the Company had $284 and $1,562 in cash, respectively, and working capital deficiency of $191,540 and $60,047, respectively, as at July 31, 2018 and October 31, 2017. For the nine months ended July 31, 2018 and 2017 the Company had net losses of $188,493 and $148,154, 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. 

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 nine months ended July 31, 2018 $65,781 or 100% of the Company’s revenue was concentrated in the hands of two customers.

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.

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 nine months ended July 31, 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 nine months ended July 31, 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. 

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.

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.

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Description of Business and Summary of Significant Accounting Policies (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Jul. 31, 2018	Jul. 31, 2017	Jul. 31, 2018	Jul. 31, 2017	Oct. 31, 2017
Concentration Risk [Line Items]
State of incorporation			Nevada
Date of incorporation			Oct. 06, 2015
Cash	$ 284		$ 284		$ 1,562
Working capital deficit	(191,540)		(191,540)		$ (60,047)
Net Loss	$ (44,872)	$ (53,723)	(188,493)	$ (148,154)
Advertising costs			0	$ 0
Two Customer [Member]
Concentration Risk [Line Items]
Concentration risk net revenue			$ 65,781
Concentration risk revenue percentage			100.00%

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Loan Receivable (Details Narrative) - USD ($)	9 Months Ended
	Jul. 31, 2018	Jul. 31, 2017
Loan receivable	$ 10,000
Interactive Holdings Ltd [Member]
Loan receivable	$ 10,000
Interest rate	2.00%
Maturity date	Jun. 30, 2018
Additional interest rate, monthly	3.00%

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Revolving Loan Facility (Details Narrative) - On November 1, 2016 [Member]	9 Months Ended
	Jul. 31, 2018 USD ($)
Line of Credit Facility [Line Items]
Maximum borrowing under line of credit	$ 250,000
Interest rate per month under line of credit facility	2.00%
Default payment of total issued and outstanding shares of Company	4.49%
Outstanding revolving loan facility	$ 163,398
Available credit line	$ 86,602

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Related Party Transactions (Details Narrative) - USD ($)	9 Months Ended
	Jul. 31, 2018	Jul. 31, 2017	Oct. 31, 2017
Related Party Transaction [Line Items]
Advance (repayment) from shareholder	$ 3,861	$ 10,098
Accrued remuneration	42,236
Officer And Director [Member]
Related Party Transaction [Line Items]
Advance received from shareholder	5,072
Advance (repayment) from shareholder	(8,933)
Accrued fees	48,000
Fee paid to related parties	5,765
Accrued remuneration	$ 42,236

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Share Capital (Details Narrative) - USD ($)	1 Months Ended	9 Months Ended
	Jan. 25, 2018	Jul. 31, 2018	Jul. 31, 2017	Oct. 31, 2017
Share Capital
Preferred stock, shares authorized		100,000,000		100,000,000
Preferred stock, par value		$ 0.001		$ 0.001
Preferred Stock, shares issued		0		0
Preferred stock, shares outstanding		0		0
Common stock, shares authorized		300,000,000		300,000,000
Common stock, par value		$ 0.001		$ 0.001
Number of shares issued	73,000
Proceeds from issuance of common stock	$ 57,000	$ 57,000	$ 87,500

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Commitments (Details Narrative)	9 Months Ended
	Jul. 31, 2018 USD ($)
Commitments
Consulting contract monthly payments	$ 10,000