HearAtLast Holdings Inc. Consolidated Financial Statements. For the 9 months Ended December 31, 2017 and (Amounts expressed in US Dollars)

Transcription

1 Consolidated Financial Statements For the 9 months Ended December 31, 2017 and 2016 (Amounts expressed in US Dollars) (unaudited)

2 Index To the Stockholders of HearAtLast Holdings Inc. 2 Interim Consolidated Balance Sheets as at December 31, 2017 (unaudited) and March 31, 2017 (unaudited) 3 Interim Consolidated Statements of Operations and Comprehensive Loss for the 3 and 9 months Ended December 31, 2017 (unaudited) and December 31, 2016 (unaudited) 4 Interim Consolidated Statements of Changes in Stockholders Deficiency for the period from March 31, 2013 (unaudited) to December 31, 2017 (unaudited) 5 Interim Consolidated Statements of Cash Flows for the 3 and 9 months Ended December 31, 2017 (unaudited) and December 31, 2016 (unaudited) 6 Condensed Notes to the Interim Unaudited Consolidated Financial Statements 8 13 Page 1

3 TO THE STOCKHOLDERS OF HEARATLAST HOLDINGS INC. The interim consolidated balance sheets of HearAtLast Holdings Inc. at December 31, 2017 and March 31, 2017 and the consolidated Statements of Operations and Comprehensive Loss, Changes in Stockholders Deficiency and Cash Flows for the 3 and 9 months then ended have not been audited by the Company's auditors, Schwartz Levitsky Feldman LLP. These financial statements are the responsibility of management and have been reviewed and approved by the Company s audit committee and Board of Directors. Page 2

4 Interim Consolidated Balance Sheets As at December with comparative numbers as at March 31, 2017 Amounts expressed in US Dollars 31 Dec 2017 (unaudited) 31 Mar 2017 (unaudited) Total Assets $ $ Liabilities and Stockholders' Deficiency Current Liabilities Accounts Payable and Accrued Liabilities (note 4) $ 826,011 $ 826,011 Advances from Stockholders (note 5) 607, ,391 Total current liabilities 1,433,402 1,433,402 Total Liabilities 1,433,402 1,433,402 Stockholders' Deficiency Common Shares Issued (note 7) 1,000 1,000 Preferred Shares Issued (note 8) 1,530 1,530 Additional Paid In Capital 12,548,478 12,548,478 Accumulated Other Comprehensive Loss (1,318,370) (1,318,370) Deficit (12,666,040) (12,666,040) Stockholders' Deficiency (1,433,402) (1,333,402) Total Liabilities and Stockholders' Deficiency $ $ Going concern (note 1) Related party transactions (note 6) Commitments (note 11) Contingencies (note 12) The accompanying notes are an integral part of these interim unaudited Consolidated Financial Statements signed "Aldo Rotundi" President and CEO Page 4

5 Consolidated Interim Statements of Operations and Comprehensive Loss For the 3 and 9 Month Periods Ended December 31, 2017 and December 31, 2016 Amounts Expressed in US Dollars (unaudited) 9 Months Ended December 31 3 Months Ended December License Fee $ $ $ $ Gross Profit Expenses Administration Consulting Fees Total Net Income $ $ $ $ Proceeds of sale of business Debt Forgiveness Foreign Exchange Adjustment Comprehensive profit $ $ $ $ Basic Loss per Share Weighted Average Common Shares Outstanding 1,000,066 1,000,066 1,000,066 1,000,066 Net Loss per Common Share, basic and diluted $ $ $ $ The accompanying notes are an integral part of these interim unaudited Consolidated Financial Statements Page 4

6 HearAtLast Holdings Inc Consolidated Statements of Changes in Stockholders' Deficiency For the period from March 31, 2013 to December 31, 2017 (unaudited) Quantity of Quantity of Common preferred Preferred Additional Paidin common shares shares ($) shares shares ($) Capital Accumulated Other Comprehensive Loss Deficit Stockholders' Deficiency Balance March 31, 2013 (unaudited) 494,758, ,759 1,530,856 1,530 11,941,671 (1,318,370) (14,136,536) (3,016,946) November commons shares for legal serv 5,000,000 5, , ,500 Foreign Exchange Effects (14,790) (14,790) Balance March 31, 2014 (unaudited) 499,758, ,759 1,530,856 1,530 12,049,171 (1,318,370) (14,151,326) (2,919,236) Net Income 1,585,834 1,585,834 Balance March 31, 2015 (unaudited) 499,758, ,759 1,530,856 1,530 12,049,171 (1,318,370) (12,565,492) (1,333,402) Common Share 1:500 consolidation (498,759,463) (498,759) 498,759 - Round up on consolidation (548) - Net Income (100,000) (100,000) Balance March 31, 2016 (unaudited) 1,000,066 1,000 1,530,856 1,530 12,548,478 (1,318,370) (12,666,040) (1,433,402) Net Income - - Balance March 31, 2017 (unaudited) 1,000,066 1,000 1,530,856 1,530 12,548,478 (1,318,370) (12,666,040) (1,433,402) Net Income - - Balance December 31, 2017 (unaudited) 1,000,066 1,000 1,530,856 1,530 12,548,478 (1,318,370) (12,666,040) (1,433,402) The accompanying notes are an integral part of these interim unaudited Consolidated Financial Statements Page 5

7 Consolidated Interim Statements of Cash Flows For the 3-and 9-Month Periods Ended December 31, 2017 and December 31, 2016 Amounts Expressed in US Dollars For the 9-Month Periods ended December 31 For the 3-Month Periods ended December (unaudited) (unaudited) (unaudited) (unaudited) Cash Flows from Operating Activities Net (Loss) Income $ - $ - $ - $ - Cash Flows from Operating Activities Cash Flows from Financing Activities Advances from Shareholders Increase (decrease) in Loan Payable Increase (decrease) in Other Short term debt Cash Flows from Financing Activities Foreign Exchange Effects Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents - beginning of the period Cash and Cash Equivalents - end of the period $ - $ - $ - $ - Supplemental Information Interest Received $ - $ - $ - $ - Interest Paid Income Taxes Paid The accompanying notes are an integral part of these interim unaudited Consolidated Financial Statements Page 6

8 Notes to the Interim Consolidated Financial Statements for the 6 months ended September 30, Organization and Basis of Presentation Description of the Business 226 Music Group, Inc. ( TTMG ) was incorporated on May 12, 2004 in the State of Texas. On July 17, 2007 the name was changed to HearAtLast Holdings Inc. ( the Company ) and the Company was re domiciled to become a Nevada corporation. On February 3, 2011, the Company signed an Assignment of License agreement with an unrelated third party, pursuant to which all assets, liabilities, rights and obligations subject to the license arrangement have been transferred to the third party. The third party will pay a license fee of 5% on net sales, defined as sales less returns, to the Company for all product sales generated within the assigned clinics for the duration of the licenses for these stores, from the closing date of the transaction. Any new location opened in addition to the existing clinics shall have a monthly license fee payable equal to 2.5% of the net sales, defined as sales less returns, to the Company for all product sales generated in the first 18 months of operations, increasing to 5.0% in the 19 th month. Going Concern The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liabilities in the normal course of business. Accordingly, they do not include any adjustments relating to the realization of the carrying value of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company has accumulated losses and working capital and cash flows from operations are negative which raises doubt as to the validity of the going concern assumption. These financials do not include any adjustments to the carrying value of the assets and liabilities, the reported revenues and expenses and balance sheet classifications used that would be necessary if the going concern assumption were not appropriate; such adjustments could be material. The Company is planning expansion for which it requires funds. Continuance of the Company as a going concern is dependent on its future profitability and on the on going support of its shareholders, affiliates and creditors due to its negative cash flows from operations and need for cash to fund its expansion plans. Basis of Consolidation Effective July 17, 2007, TTMG completed a transaction with At Last Pain and Injury Solutions Inc. ( APIS ). This transaction was accounted for as a reverse acquisition as the control of TTMG was acquired by the former shareholders of APIS. After this transaction, the TTMG s name was changed to HearAtLast Holdings Inc. ( the Company ). As a result of this transaction ( Transaction ), pursuant to the Share Agreement, the TTMG issued 80,000,000 common shares to the former shareholders of APIS, resulting in the previous owners of APIS owning approximately 99.9% of the Company s voting capital stock. These consolidated financial statements include the accounts of APIS as well as those of TTMG, as of July 17, 2007 and the merger and recapitalization were reported as a line item in the Statements of Changes in the Stockholders Deficiency. Prior period results and comparatives are those of APIS. Although legally, the Company (formerly 226 Music Group Limited) is regarded as the continuing Company, APIS, whose stockholders now hold directly or indirectly more than 50% of the voting shares of the Company, is treated as the accounting acquirer under generally accepted accounting principles. Consequently, the Company (formerly 226 Music Group Limited) is deemed a continuation of APIS and control of the assets and business of the Company (formerly 226 Music Group Limited) is deemed to have been acquired in consideration for the issued shares. The Company owns 100% of HearAtLast Inc., an Ontario corporation. The Ontario Corporation is the company that transacted the day today business while the company was active; however, the licensing revenues have all occurred in the Holding company s books. All significant inter company accounts and transactions have been eliminated on consolidation. The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles ( US GAAP ). Basis of Presentation Statement of Compliance The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). Basis of Measurement The financial statements have been prepared on the historical cost basis and are presented in Canadian dollars, which is the Company s functional currency. Critical Accounting Estimates and Judgments The preparation of the financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Page 9

9 Notes to the Interim Consolidated Financial Statements for the 6 months ended September 30, 2017 Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts and disclosures of assets and liabilities within the next financial year are discussed below. Fair value measurement A number of assets and liabilities included in the Company's financial statements require disclosure of fair value. The fair value measurement of the Company s financial and non financial assets and liabilities utilizes market observable inputs and data as far as possible. Inputs used in determining fair value measurements are categorized into different levels based on how observable the inputs used in the valuation technique utilized are (the 'fair value hierarchy'): Level 1: Quoted prices in active markets for identical items (unadjusted) Level 2: Observable direct or indirect inputs other than Level 1 inputs Level 3: Unobservable inputs (i.e. not derived from market data) The classification of an item into the above levels is based on the lowest level of the inputs used that has a significant effect on the fair value measurement of the item. Transfers of items between levels are recognized in the period they occur. 2. Summary of Significant Accounting Policies (a) Cash Cash includes demand deposits with banks, money market accounts, and other short term investments with original maturities of 90 days or less. Cash balances at financial institutions may at times exceed the government insured limits. Bank borrowings are considered to be financing activities. (b) Revenue Recognition Revenue is recognized from services for pain therapy when treatment is rendered. Revenue from the sale of hearing aids is recognized when the units are delivered to the clients or when ancillary services are performed. Sales recognized to date represent services provided. In accordance with guidance provided in Securities and Exchange Commission ( SEC ) Staff Accounting Bulletin No. 104, Revenue Recognition in Financial Statements (SAB 104), the primary purpose of which is to expand on accounting guidance contained in SAB 101, these revenues are recognized when ( i ) persuasive evidence of an arrangement exists, ( ii ) delivery of the product has occurred or services have been rendered, ( iii ) the price to the customer is determinable and ( iv ) collectability is reasonably assured. (c) Advertising costs Advertising costs are expensed as incurred. (d) Income Taxes The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards ( SFAS ) No. 109, Accounting for Income Taxes. Under SFAS No. 109, deferred tax assets and liabilities are determined based on temporary differences between the financial statement and tax bases of assets and liabilities and net operating loss and credit carry forwards, using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. A provision for income tax expense is recognized for income taxes payable for the current period, plus the net changes in deferred tax amounts. (e) Use of Estimates The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses for the periods reported. Actual results could differ from those estimates. Significant estimates in these financial statements include, but are not limited to, useful lives of property and equipment and allowance for doubtful accounts. (f) Costs of Raising Capital Incremental costs incurred in respect of raising capital are charged against equity proceeds raised. In fiscal 2015, there were no costs associated with raising capital. (g) Translation of Foreign Currencies In accordance with SFAS No.52, Foreign Currency Translation, the financial statements of certain affiliates of the Company are measured using local currency (Canadian dollar) as the functional currency. Assets and liabilities have been translated at period end exchange rates, except for share capital which is translated at historical rates and related revenue and expenses which have been translated at average exchange rate. Gains and losses resulting from the translation of affiliates financial statements are included as a separate component of shareholders equity. (h) Fair Value of Financial Instruments (i) Recognition and Classification A financial asset or financial liability is measured initially at fair value plus transaction costs that are directly attributable to its acquisition or issue and are subsequently measured based on their classification. Page 10

10 Notes to the Interim Consolidated Financial Statements for the 6 months ended September 30, 2017 Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortized cost using the effective interest method and include cash, short term investments and accounts receivable. Financial liabilities are measured at amortized cost using the effective interest rate method and include accounts payable and accrued liabilities, and long term debt. (ii) Derecognition The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or when it transfers the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled or expire. (iii) Offsetting Financial assets and liabilities are offset and the net amount presented in the balance sheet when, and only when, the Company has a legal right to set off the recognized amounts and it intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. (iv) Financing Costs Costs directly incurred in the course of obtaining debt financing are capitalized as financing costs and netted against the corresponding debt obtained. These costs are then amortized over the life of the debt instrument to which they pertain using the effective interest method. Any financing costs related to the raising of debt, which is extinguished or for which efforts are subsequently abandoned, are expensed in the period in which the debt is extinguished or efforts for the raising of debt are abandoned. (v) Impairment Financial assets, other than those at Fair Value Through Profit or Loss ("FVTPL"), are assessed for indicators of impairment at the end of each reporting period. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after initially recognizing the financial asset, the present value of estimated future cash flows are lower than the asset's carrying amount. The financial asset's carrying amount is reduced by the impairment loss either directly, or in the case of accounts receivable, it is written off against an allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in net income. (vi) Fair Value Measurement The carrying amounts reported on the balance sheet for cash, short term investments, accounts receivable, accounts payable and accrued liabilities and long term debt approximate fair values due to the immediate or short term maturities of these financial instruments. Cash is within level 1 of the fair value hierarchy and short term investments, accounts receivable, and accounts payable and accrued liabilities are within level 2 of the fair value hierarchy (i) Stock Based Compensation Plan As per FASB 123R which came into effect January 1, 2006, the Company uses the fair value method of valuing stock options granted to Directors, Officers, Employees and Consultants. As at March 31, 2015, the Company has not authorized the creation of a stock based compensation plan. (i) Earnings (Loss) per Share Net earnings (loss) per share are reported in accordance with SFAS No. 128, Earnings Per Share. SFAS No. 128 requires dual presentation of basic earnings per share ( EPS ) and diluted EPS on the face of all statements of earnings, for all entities with complex capital structures. Diluted EPS reflects the potential dilution that could occur from common shares issuable through the exercise or conversion of stock options, restricted stock awards, warrants and convertible securities. In certain circumstances, the conversion of these options, warrants and convertible securities is excluded from diluted EPS if the effect of such inclusion would be anti dilutive. Fully diluted loss per share is not provided, as the effect will be anti dilutive. (k) Comprehensive Income (Loss) The Company follows Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income. This statement establishes standards for reporting and display of comprehensive income and its components. Comprehensive income is net income plus certain items that are recorded directly to shareholders equity bypassing net income. Other than foreign exchange gains and losses, the Company has no other comprehensive income (loss). Page 11

11 Notes to the Interim Consolidated Financial Statements for the 6 months ended September 30, 2017 (l) Segment Information The Company follows SFAS No. 131 Disclosures about Segments of an Enterprise and Related Information. SFAS No. 131 requires that the Company disclose its operations in the business segment as viewed by management. (m) Concentration of Credit Risk SFAS No. 105, Disclosure of Information about Financial Instruments with Off Balance Sheet Risk and Financial Instruments with Concentration of Credit Risk, requires disclosure of any significant off balance sheet risk and credit risk concentration. The Company does not have significant off balance sheet risk or credit concentration. 3. Recent Accounting Pronouncements Accounting Standards Adopted in the Current Year The nature and effect of the following new standards, interpretations and amendments adopted by the Company in the current year is detailed below: In December 2011, the IASB clarified its requirements for offsetting financial instruments by issuing Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32). The amendments address inconsistencies in practice when applying the offsetting criteria in IAS 32, Financial Instruments: Presentation by clarifying the meaning of 'currently has a legally enforceable right of set off, and clarifying that some gross settlement systems may be considered equivalent to net settlement. The amendments are effective for annual periods beginning on or after January 1, 2014 and are required to be applied retrospectively. The adoption of this standard had no effect on the Company's financial statements. In May 2013, the IASB issued IFRIC 21, Levies which provides clarification regarding the obliging event that gives rise to a liability to pay a levy. An entity is required to recognize a liability for a levy when the activity that triggers payment, as identified by the relevant legislation, occurs. The adoption of this standard had no effect on the Company s financial statements. The IASB issued Recoverable Amount Disclosures for Non Financial Assets (Amendments to IAS 36) in May The overall effect of the amendments is to reduce the circumstances in which the recoverable amount of assets or cash generating units is required to be disclosed, clarify the disclosures required, and to introduce an explicit requirement to disclose the discount rate used in determining impairment, or reversals, where the recoverable amount is determined using a present value technique. The adoption of this standard had no effect on the Company's financial statements. (i) New Accounting Pronouncements The International Accounting Standards Board ("IASB") or the International Financial Reporting Interpretations Committees ("IFRIC") have issued a number of new or revised standards or interpretations that will become effective for future periods and have a potential implication for the Company. The IASB aims to replace IAS 39, Financial Instruments Recognition and Measurement, in its entirety. The replacement standard (IFRS 9) is being issued in phases. To date, the chapters dealing with recognition, classification, measurement and de recognition of financial assets and liabilities have been issued, some of which were just carried forward from IAS 39 unchanged. IFRS 9 is effective for annual periods beginning on or after January 1, The restatement of comparative period financial statements will not be required for the initial classifications and measurement requirements, but will require modified disclosures upon transition. The IASB has issued IFRS 15 Revenue from Contracts with Customers" ( IFRS 15 ). The standard replaces IAS 11 Construction Contracts, IAS 18 Revenue", IFRIC 13 Customer Loyalty Programs, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfer of Assets From Customers and SIC 31 Revenue Barter Transactions Involving Advertising Services". IFRS 15 establishes principles for reporting the nature, amount, timing, and uncertainty of revenue and cash flows arising from an entity's contract with customers. This standard is effective for annual periods beginning on or after January 1, 2017, and permits early adoption. The Company has not early adopted any of these standards or interpretations and is currently assessing the impact of the revised standards and interpretations on its financial statements. 4. Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities are comprised of the following: Sept 30, 2017 March 31, 2016 $ $ Trade Payables 26,011 26,011 Professional Fees 800, , , ,011 Page 12

12 Notes to the Interim Consolidated Financial Statements for the 6 months ended September 30, 2017 As disclosed in Note 1 of these consolidated financial statements, the Company transferred its accounts payable subject to the license arrangement with a vendor to an unrelated third party pursuant to an Assignment of License agreement. The amounts left outstanding are amounts that are owed by the public company, HearAtLast Holdings Inc. The Professional Fees are for consulting and expenses expended on behalf of the Company. Part of the amount due is for consulting by Ramos and Ramos, pursuant to an agreement dated September 1, The Company entered into a contract in the principal amount of $400,000 for services rendered and to be rendered. 5. Advances from Stockholders During the period of debt settlement and consolidation, the major shareholder agreed to a further reduction in his debt from the Company. The amount agreed to was under $700,000, carrying no fixed repayment date and no interest. 6. Related Party Transactions No related party transactions occurred during the year. 7. Common Stock During the fiscal year ended March 31, 2015, the Company issued 285,000,000 common shares for consulting services. These services were commissioned to obtain financing for the repayment of some of the Company s outstanding obligations. During the fiscal year ended March 31, 2016, the Company authorized a 1:500 stock reverse. There were an additional 548 shares issued by the Transfer Agent to allow for round up of new share conversions. 8. Preferred Shares and Warrants At June , the Company had 1,530,856 preferred shares with a face value of $10/share and a stated value of $0.001/share. Each preferred share was granted with a warrant to purchase up to 10 common shares of the Company at $0.50 per share. These warrants expired at various times between October 23, 2011 and December 1, As a result, the grant date fair market value of these warrants of $52,893 was transferred to contributed surplus. The fair value of these warrants was estimated on the date of grant using the Black Scholes option pricing model, with the following assumptions: i) expected dividend yield of 0%, ii) expected volatility of 280%, iii) risk free interest rate of 3%, and iv) expected life of 2 years. The resulting fair value of each warrant was $ Provision for Income Tax The Company files US Federal income tax returns for its US operations. Separate income tax returns are filed, as locally required in Canada. No provision for income taxes was calculated. 10. Segmented Information The Company s operations comprise of a single reporting segment engaged in the provision of health related services in the areas of pain management treatments and clinical hearing and testing. In addition, all of the Company s assets are in North America, which is also the source of its revenues, and management considers North America a single geographical market. 11. Commitments The Company had entered into various contracts and operating leases. All of those commitment contracts expired during the year. The Company has no further minimum future payments as at June Contingencies A related party has claimed certain amounts as compensation. Management contends that non cash benefits that have accrued to this party are more than sufficient compensation and have determined that the claim is unwarranted. Therefore the amount has not been allowed for in these statements. Outstanding litigation The Company is involved in litigation and claims arising in the normal course of operations as well as litigation in regards to past debts and unpaid leases. Management is of the opinion that any pending litigation would not impact the Company s financial position or results of operations as reported as the Company has already taken into account the maximum losses under the various actions. Page 13