Madison Technologies Inc. 10-K

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. (a) Market Information Madison’s Common Stock has been quoted on the NASD OTC Bulletin Board under the symbol “MDEX” since April 26, 2006. The following table gives the high and low price information for each fiscal quarter Madison’s common stock has been quoted for the last two fiscal years and for the interim period ended March 30, 2020. The price information was obtained from OTC Markets Group Inc. and reflects inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions. High & Low Prices (1) Period ended High Low Source 31 March 2020 $ 0.100 $ 0.095 OTC Markets Group Inc. 31 December 2019 $ 0.188 $ 0.050 OTC Markets Group Inc. 30 September 2019 $ 0.050 $ 0.050 OTC Markets Group Inc. 30 June 2019 $ 0.095 $ 0.01 OTC Markets Group Inc. 31 March 2019 $ 0.100 $ 0.095 OTC Markets Group Inc. 31 December 2018 $ 0.101 $ 0.100 OTC Markets Group Inc. 30 September 2018 $ 0.150 $ 0.100 OTC Markets Group Inc. 30 June 2018 $ 0.200 $ 0.100 OTC Markets Group Inc. 31 March 2018 $ 0.180 $ 0.110 OTC Markets Group Inc. (1) All high & low price data for all periods reflect Madison’s 10:1 consolidation, which was effective March 11, 2015 Effective March 11, 2015, by a majority vote of the shareholders, Madison consolidated its issued and outstanding shares of common stock, without correspondingly decreasing the number of authorized shares of common stock, on a 10 “old” shares for every one “new” share basis, resulting in a decrease of Madison’s issued and outstanding share capital from 113,020,000 shares to approximately 11,302,000 shares of common stock, not including any rounding up of fractional shares to be issued on consolidation. Madison Technologies Inc. Form 10-K - 2019 Page 8 (b) Holders of Record Madison has approximately 20 holders of record of Madison’s Common Stock as of December 31, 2019 according to a shareholders’ list provided by Madison’s transfer agent as of that date. The number of registered shareholders does not include any estimate by Madison of the number of beneficial owners of Common Stock held in street name. The transfer agent for Madison’s Common Stock is Pacific Stock Transfer, 4045 South Spencer Street, Suite 403, Las Vegas, Nevada 89119 and their telephone number is (702) 361-3033 . (c) Dividends Madison has declared no dividends on its Common Stock, and is not subject to any restrictions that limit its ability to pay dividends on its shares of Common Stock. Dividends are declared at the sole discretion of Madison’s Board of Directors. (d) Recent Sales of Unregistered Securities There have been no sales of unregistered securities within the last three years that would be required to be disclosed pursuant to Item 701 of Regulation S-K., with the exception of the following: July 2017 – Conversion of Promissory Notes On July 13, 2017, Madison issued an aggregate 955,556 restricted shares of common stock in the capital of Madison pursuant to the terms and conditions of (1) a convertible promissory note dated May 1, 2014 in the principle amount of $25,000 at a conversion price of $0.045 per share and (2) a convertible promissory note dated October 27, 2016 in the principle amount of $20,000 at a conversion price of $0.05 per share. For this share issuance, Madison relied upon Section 4(2) of the Securities Act of 1933 and Rule 903 of Regulation S promulgated pursuant to that Act by the Securities and Exchange Commission. The value of the restricted shares was set by Madison and the lenders as part of the negotiations of the terms and conditions of the convertible promissory notes. Madison Technologies Inc. Form 10-K - 2019 Page 9 January 2018 – Conversion of Promissory Notes On January 25, 2018, Madison issued an aggregate 4,500,000 restricted shares of common stock in the capital of Madison pursuant to the terms and conditions of (1) a convertible promissory note dated March 19, 2013 in the principle amount of $25,000 at a conversion price of $0.01 per share and (2) a convertible promissory note dated March 24, 2011 in the principle amount of $10,000 at a conversion price of $0.005 per share For this share issuance, Madison relied upon Section 4(2) of the Securities Act of 1933 and Rule 903 of Regulation S promulgated pursuant to that Act by the Securities and Exchange Commission. The value of the restricted shares was set by Madison and the lenders as part of the negotiations of the terms and conditions of the convertible promissory notes. There is currently $163,490 in outstanding debt securities convertible into 13,136,467 shares of Madison’s Common Stock. February 2018 - $0.10 Private Placement Offering On February 16, 2018, the board of directors authorized the issuance of 150,000 restricted shares of common stock at a subscription price of $0.10 per restricted share. Madison raised $15,000 in cash in this closing, and will issue an aggregate 150,000 restricted shares of common stock to one non-US subscriber outside the United States. Madison set the value of the restricted shares arbitrarily without reference to its assets, book value, revenues or other established criteria of value. All the restricted shares issued in this offering were issued for investment purposes in a “private transaction”. For the one non-US subscriber outside the United States in this closing, Madison relied upon Section 4(2) of the Securities Act of 1933 and Rule 903 of Regulation S promulgated pursuant to that Act by the Securities and Exchange Commission. Management is satisfied that Madison complied with the requirements of the exemption from the registration and prospectus delivery of the Securities Act of 1933. The offering was not a public offering and was not accompanied by any general advertisement or any general solicitation. Madison received from each subscriber a completed and signed subscription agreement containing certain representations and warranties, including, among others, that (a) the subscriber was not a U.S. person, (b) the subscriber subscribed for the shares for their own investment account and not on behalf of a U.S. person, and (c) there was no prearrangement for the sale of the shares with any buyer. No offer was made or accepted in the United States and the share certificates representing the shares will be issued bearing a legend with the applicable trading restrictions. March 2018 - $0.10 Private Placement Offering On March 2, 2018, the board of directors authorized the issuance of 150,000 restricted shares of common stock at a subscription price of $0.10 per restricted share. Madison raised $15,000 in cash in this closing, and will issue an aggregate 150,000 restricted shares of common stock to one non-US subscriber outside the United States. Madison set the value of the restricted shares arbitrarily without reference to its assets, book value, revenues or other established criteria of value. All the restricted shares issued in this offering were issued for investment purposes in a “private transaction”. For the one non-US subscriber outside the United States in this closing, Madison relied upon Section 4(2) of the Securities Act of 1933 and Rule 903 of Regulation S promulgated pursuant to that Act by the Securities and Exchange Commission. Management is satisfied that Madison complied with the requirements of the exemption from the registration and prospectus delivery of the Securities Act of 1933. The offering was not a public offering and was not accompanied by any general advertisement or any general solicitation. Madison received from each subscriber a completed and signed subscription agreement containing certain representations and warranties, including, among others, that (a) the subscriber was not a U.S. person, (b) the subscriber subscribed for the shares for their own investment account and not on behalf of a U.S. person, and (c) there was no prearrangement for the sale of the shares with any buyer. No offer was made or accepted in the United States and the share certificates representing the shares will be issued bearing a legend with the applicable trading restrictions. Madison Technologies Inc. Form 10-K - 2019 Page 10 February 2019 - $0.05 Private Placement Offering On February 26, 2019, the board of directors authorized the issuance of 400,000 restricted shares of common stock at a subscription price of $0.05 per restricted share. Madison raised $20,000 in cash in this closing, and will issue an aggregate 400,000 restricted shares of common stock to one non-US subscriber outside the United States. Madison set the value of the restricted shares arbitrarily without reference to its assets, book value, revenues or other established criteria of value. All the restricted shares issued in this offering were issued for investment purposes in a “private transaction”. For the one non-US subscriber outside the United States in this closing, Madison relied upon Section 4(2) of the Securities Act of 1933 and Rule 903 of Regulation S promulgated pursuant to that Act by the Securities and Exchange Commission. Management is satisfied that Madison complied with the requirements of the exemption from the registration and prospectus delivery of the Securities Act of 1933. The offering was not a public offering and was not accompanied by any general advertisement or any general solicitation. Madison received from each subscriber a completed and signed subscription agreement containing certain representations and warranties, including, among others, that (a) the subscriber was not a U.S. person, (b) the subscriber subscribed for the shares for their own investment account and not on behalf of a U.S. person, and (c) there was no prearrangement for the sale of the shares with any buyer. No offer was made or accepted in the United States and the share certificates representing the shares will be issued bearing a legend with the applicable trading restrictions. March 2019 - $0.05 Private Placement Offering On March 13, 2019, the board of directors authorized the issuance of 600,000 restricted shares of common stock at a subscription price of $0.05 per restricted share. Madison raised $30,000 in cash in this closing, and will issue an aggregate 600,000 restricted shares of common stock to one non-US subscriber outside the United States. Madison set the value of the restricted shares arbitrarily without reference to its assets, book value, revenues or other established criteria of value. All the restricted shares issued in this offering were issued for investment purposes in a “private transaction”. For the one non-US subscriber outside the United States in this closing, Madison relied upon Section 4(2) of the Securities Act of 1933 and Rule 903 of Regulation S promulgated pursuant to that Act by the Securities and Exchange Commission. Management is satisfied that Madison complied with the requirements of the exemption from the registration and prospectus delivery of the Securities Act of 1933. The offering was not a public offering and was not accompanied by any general advertisement or any general solicitation. Madison received from each subscriber a completed and signed subscription agreement containing certain representations and warranties, including, among others, that (a) the subscriber was not a U.S. person, (b) the subscriber subscribed for the shares for their own investment account and not on behalf of a U.S. person, and (c) there was no prearrangement for the sale of the shares with any buyer. No offer was made or accepted in the United States and the share certificates representing the shares will be issued bearing a legend with the applicable trading restrictions. Madison Technologies Inc. Form 10-K - 2019 Page 11 (e) Penny Stock Rules Trading in Madison’s Common Stock is subject to the “penny stock” rules. The SEC has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. These rules require that any broker-dealer who recommends Madison’s Common Stock to persons other than prior customers and accredited investors, must, prior to the sale, make a special written suitability determination for the purchaser and receive the purchaser’s written agreement to execute the transaction. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated with trading in the penny stock market. In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered representative and current quotations for the securities they offer. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in Madison’s securities, which could severely limit their market price and liquidity of Madison’s securities. The application of the “penny stock” rules may affect your ability to resell Madison’s securities. Item 6. Selected Financial Data. Madison is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. THE FOLLOWING PRESENTATION OF THE PLAN OF OPERATION OF MADISON TECHNOLOGIES INC. SHOULD BE READ IN CONJUNCTION WITH THE AUDITED FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION INCLUDED HEREIN. Overview Madison was incorporated in the State of Nevada on June 15, 1998 under the name “Madison-Taylor General Contractors, Inc.” Effective May 24, 2004, Madison changed its name to “Madison Explorations, Inc.” by a majority vote of the shareholders. Effective March 9, 2015, Madison changed its name to “Madison Technologies Inc,” by a majority vote of the shareholders. See Exhibit 3.3 – Certificate of Amendment for more details. Pursuant to the terms and conditions of a product license agreement dated September 16, 2016 between Tuffy Packs, LLC and Madison Technologies Inc. Tuffy Packs has granted an exclusive license to Madison for the distribution of Tuffy Pack’s product line (collectively, the “ Licensed Products ”) into the United Kingdom and 43 European countries. According to the terms and conditions of the product license agreement Madison will pay an aggregate amount of $50,000 for the exclusive license to distribute the Licensed Products in Europe. See Exhibit 10.5 - Product License Agreement for more details. Madison Technologies Inc. Form 10-K - 2019 Page 12 Tuffy Packs manufactures a line of custom inserts that provide a level of personal protection from ballistic threats similar to what law enforcement officers wear daily as bullet proof vests. The ballistic panels conform to the National Institute of Justice (NIJ) Level IIIA threat requirements. Results of Operation for the Period Ended December 31, 2019 During the fiscal year ended December 31, 2019, we incurred net losses of $42,263, compared to our net losses in fiscal 2017 of $53,906. Our losses in the current fiscal year were lower due to a reduction in amortization expense. We have not attained profitable operations and are dependent upon obtaining financing to complete our proposed business plan. For these reasons our auditors believe that there is substantial doubt that we will be able to continue as a going concern. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. Liquidity and Capital Resources As of December 31, 2019, Madison had total assets of $6,544, and a working capital deficit of $358,377, compared with a working capital deficit of $366,114 as of December 31, 2018. The decrease in the working capital deficit was primarily due to a reduction in accounts payable and accrued liabilities. The assets consisted of $1,366 in cash and $5,178 in prepaid expenses. The liabilities consisted of $33,655 in accounts payable and accrued liabilities ($48,169 in 2018), $33,500 in license fee payable ($33,500 in 2018), $134,276 in notes payable and accrued interest ($126,498 in 2018), $163,000 in convertible notes payable to third parties ($163,000 in 2018), and $490 in convertible notes payable to a related party. There are no assurances that Madison will be able to achieve further sales of its Common Stock or any other form of additional financing. If Madison is unable to achieve the financing necessary to continue its plan of operations, then Madison will not be able to continue its plan of operations and its business will fail. Net Cash Used in Operating Activities For the fiscal year ended December 31, 2019, net cash used in operating activities increased to $51,177 compared with $32,967 for the same period in the previous fiscal year. The use of cash was primarily due to a net loss of $42,263 less non-cash items of interest on the convertible debt of $6,141, a reduction in amortization of license , the increase in accounts payable and accruals. Gain on the foreign exchange on notes payable and the balances in prepaid expenses were factors in increasing the cash used in operations. Net Cash Used in Investing Activities The Company did not invest any cash in investing activities in either the year ending December 31, 2019 or 2018. Net Cash Provided by Financing Activities Net cash flows provided by financing activities was $50,000 for the fiscal year ended December 31, 2019 as compared with financing activities of $32,290 for the same period in the previous fiscal year. The net cash provided by financing activities was due to the proceeds from shares issued. Plan of Operation Madison’s plan of operation for the next 12 months is to deliver the Licensed Products into the European and UK retail and wholesale markets via the use of online market and fulfillment services including but not limited to Amazon.eu, Redstag and MCS Fulfilment. By implementing these companies’ services Madison will be able to establish a reliable supply chain that will receive delivery of the Licensed Products, warehouse the Licensed Products, package the Licensed Package as per each customer order, and ship the Licensed Products to the customer efficiently and cost effectively. Madison Technologies Inc. Form 10-K - 2019 Page 13 Management expects to expand Madison’s sales distribution strategy beginning in May 2020 and to be operational by September 2020, this includes the following components: 1. Initial inventory with an estimated cost of $10,000 2. Social media and online advertising of $10,000 3. Payments to be made under Product License Agreement of $33,500 Madison sales strategy is to develop online exposure through the use of social media marketing and sending demo packs of the Licensed Products to both online bloggers and established gun owner clubs. The demo packs will include both new products as well as examples of the products that have been tested and exposed to gunfire to demonstrate the products effectiveness. In addition to the costs associated to Madison’s sales and distribution strategy, management anticipates incurring the following expenses during the next 12 month period: ● Management anticipates spending approximately $2,500 in ongoing general and administrative expenses per month for the next 12 months, for a total anticipated expenditure of $30,000 over the next 12 months. The general and administrative expenses for the year will consist primarily of professional fees for the audit and legal work relating to Madison’s regulatory filings throughout the year, as well as transfer agent fees, annual mineral claim fees and general office expenses. ● Management anticipates spending approximately $15,000 in complying with Madison’s obligations as a reporting company under the Securities Exchange Act of 1934 and as a reporting issuer in Canada. These expenses will consist primarily of professional fees relating to the preparation of Madison’s financial statements and completing and filing its annual report, quarterly report, and current report filings with the SEC and with SEDAR in Canada. As at December 31, 2019, Madison had cash of $1,366 and a working capital deficit of $358,360. Accordingly, Madison will require additional financing in the amount of $396,816 in order to fund its obligations as a reporting company under the Securities Act of 1934 and its general and administrative expenses for the next 12 months. During the 12 month period following the date of this annual report, management anticipates that Madison will not generate any revenue. Accordingly, Madison will be required to obtain additional financing in order to continue its plan of operations. Management believes that debt financing will not be an alternative for funding Madison’s plan of operations as it does not have tangible assets to secure any debt financing. Rather, management anticipates that additional funding will be in the form of equity financing from the sale of Madison’s Common Stock. However, Madison does not have any financing arranged and cannot provide investors with any assurance that it will be able to raise sufficient funding from the sale of its Common Stock to fund its plan of operations. In the absence of such financing, Madison will not be able to acquire any interest in a new technology and its business plan will fail. Even if Madison is successful in obtaining equity financing and acquire an interest in a new technology, additional research and development will be required before a determination as to whether the technology will be commercially viable. If Madison does not continue to obtain additional financing, it will be forced to abandon its business and plan of operations. Purchase of Significant Equipment We do not intend to purchase any significant equipment during the next 12 months. Off-Balance Sheet Arrangements Madison has no off-balance sheet arrangements including arrangements that would affect its liquidity, capital resources, market risk support and credit risk support or other benefits. Material Commitments for Capital Expenditures Madison had no contingencies or long-term commitments at December 31, 2019. Madison Technologies Inc. Form 10-K - 2019 Page 14 Going Concern The independent auditors’ report accompanying our December 31, 2019 and 2018 financial statements contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared assuming that we will continue as a going concern, which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business. Tabular Disclosure of Contractual Obligations Madison is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item. Critical Accounting Policies Madison’s financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. Management believes that understanding the basis and nature of the estimates and assumptions involved with the following aspects of Madison’s financial statements is critical to an understanding of Madison’s financial statements. Use of Estimates The preparation of financial statements in accordance with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. Madison regularly evaluates estimates and assumptions related to deferred income tax asset valuation allowances. Madison bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by Madison may differ materially and adversely from Madison’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Fair Value Measurements Madison follows FASB ASC 820, “ Fair Value Measurements and Disclosures” , for all financial instruments and non-financial instruments accounted for at fair value on a recurring basis. This new accounting standard establishes a single definition of fair value and a framework for measuring fair value, sets out a fair value hierarchy to be used to classify the source of information used in fair value measurement and expands disclosures about fair value measurements required under other accounting pronouncements. It does not change existing guidance as to whether or not an instrument is carried at fair value. Madison defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, Madison considers the principal or most advantageous market in which Madison would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk. Madison has adopted FASB ASC 825, “ Financial Instruments”, which allows companies to choose to measure eligible financial instruments and certain other items at fair value that are not required to be measured at fair value. Madison has not elected the fair value option for any eligible financial instruments. Impairment of Long-Lived Assets Impairment losses on long-lived assets, such as mining claims, are recognized when events or changes in circumstances indicate that the undiscounted cash flows estimated to be generated by such assets are less than their carrying value and, accordingly, all or a portion of such carrying value may not be recoverable. Impairment losses are then measured by comparing the fair value of assets to their carrying amounts. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Madison is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item. Madison Technologies Inc. Form 10-K - 2019 Page 15