Item 1. Interim Consolidated Financial Statements
The information in this report for the six
months ended June 30, 2013, is unaudited but includes all adjustments (consisting only of normal recurring accruals, unless otherwise
indicated) which Sanwire Corporation (Formerly, NT Mining Corporation) ("
Sanwire
" or the "
Company
")
considers necessary for a fair presentation of the financial position, results of operations, changes in stockholders' deficiency
and cash flows for those periods.
The interim consolidated financial statements
should be read in conjunction with Sanwire’s consolidated financial statements and the notes thereto contained in Sanwire's
audited consolidated financial statements for the year ended December 31, 2012 in the Form 10-K.
Interim results are not necessarily indicative of results for the
full fiscal year.
The unaudited interim consolidated financial statements start on
the next page.
SANWIRE CORPORATION
(formerly NT Mining Corporation)
Consolidated financial statements
June 30, 2013
(Expressed in U.S. dollars)
(unaudited)
|
Index
|
Consolidated balance sheets
|
6
|
|
|
Consolidated statements of operations
|
7
|
|
|
Consolidated statements of stockholders’ equity (deficit)
|
8
|
|
|
Consolidated statements of cash flows
|
9
|
|
|
Notes to the consolidated financial statements
|
10
|
SANWIRE CORPORATION
(formerly NT Mining Corporation)
Consolidated balance sheets
(Expressed in U.S. dollars)
|
|
June 30,
2013
$
|
|
December 31,
2012
$
|
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
2,413
|
|
|
|
1,094
|
|
Accounts receivable
|
|
|
82,800
|
|
|
|
—
|
|
Loan receivable (Note 6)
|
|
|
28,620
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
113,833
|
|
|
|
1,094
|
|
|
|
|
|
|
|
|
|
|
Technology intellectual property (Note 4)
|
|
|
9,774,862
|
|
|
|
—
|
|
Property and equipment (Note 5)
|
|
|
1,682
|
|
|
|
—
|
|
Goodwill
|
|
|
1,352,212
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
11,242,589
|
|
|
|
1,094
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
581,294
|
|
|
|
455,083
|
|
Accrued liabilities
|
|
|
132,339
|
|
|
|
113,201
|
|
Loans payable (Note 7)
|
|
|
673,624
|
|
|
|
630,624
|
|
Due to related parties (Note 9)
|
|
|
332,404
|
|
|
|
174,222
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
1,719,661
|
|
|
|
1,373,130
|
|
|
|
|
|
|
|
|
|
|
Convertible debt, net of unamortized discount of $1,941,904 (Note 8)
|
|
|
8,038,096
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
9,757,757
|
|
|
|
1,373,130
|
|
|
|
|
|
|
|
|
|
|
Nature of operations and continuance of business (Note 1)
|
|
|
|
|
|
|
|
|
Commitments (Note 12)
|
|
|
|
|
|
|
|
|
Subsequent events (Note 13)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity (deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
Authorized: 750,000,000 shares, par value $0.00001
Issued and outstanding: 46,273,147 (December 31, 2012 – 1,151,937) shares
|
|
|
463
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
13,711,742
|
|
|
|
9,408,186
|
|
|
|
|
|
|
|
|
|
|
Shares issuable (Note 10)
|
|
|
60,000
|
|
|
|
60,000
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation (Note 10)
|
|
|
(566,488
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss
|
|
|
(5,776
|
)
|
|
|
(5,776
|
)
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
(11,715,109
|
)
|
|
|
(10,834,458
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders’ equity (deficit)
|
|
|
1,484,832
|
|
|
|
(1,372,036
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity (deficit)
|
|
|
11,242,589
|
|
|
|
1,094
|
|
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
SANWIRE CORPORATION
(formerly NT Mining Corporation)
Consolidated statements of operations
(Expressed in U.S. dollars)
(unaudited)
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
2013
$
|
2012
$
|
2013
$
|
2012
$
|
|
|
|
|
|
Revenue
|
117,800
|
–
|
117,800
|
–
|
|
|
|
|
|
Cost of sales
|
112,670
|
–
|
112,670
|
–
|
|
|
|
|
|
Gross profit
|
5,130
|
–
|
5,130
|
–
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets
|
250,638
|
–
|
250,638
|
–
|
Depreciation of property and equipment
|
329
|
–
|
329
|
–
|
General and administrative (Note 9)
|
439,290
|
67,057
|
470,628
|
87,523
|
Royalties
|
–
|
36,000
|
–
|
36,000
|
|
|
|
|
|
Total operating expenses
|
690,257
|
103,057
|
721,595
|
123,523
|
|
|
|
|
|
Loss before other income (expense)
|
(685,127)
|
(103,057)
|
(716,465)
|
(123,523)
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
Accretion of discount on convertible debt
|
(177,598)
|
–
|
(177,598)
|
–
|
Interest expense
|
(14,478)
|
(18,014)
|
(29,138)
|
(36,068)
|
Write-off of accounts payable
|
42,550
|
–
|
42,550
|
–
|
|
|
|
|
|
Total other income (expense)
|
(149,526)
|
(18,014)
|
(164,186)
|
(36,068)
|
|
|
|
|
|
Net loss for the period
|
(834,653)
|
(121,071)
|
(880,651)
|
(159,591)
|
|
|
|
|
|
Net loss per share, basic and diluted
|
(0.02)
|
(0.13)
|
(0.04)
|
(0.17)
|
|
|
|
|
|
Weighted average number of shares outstanding
|
43,066,576
|
951,937
|
24,028,385
|
951,937
|
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
7
|
SANWIRE CORPORATION
(formerly NT Mining Corporation)
Consolidated statements of stockholder’s equity (deficit)
(expressed in U.S. dollars)
(unaudited)
|
|
Common Stock
|
|
Additional paid-in capital
$
|
|
Shares
issuable
$
|
|
Deferred compensation
$
|
|
Accumulated other comprehensive loss
$
|
|
Deficit
$
|
|
Total
stockholders’
equity (deficit)
$
|
|
|
|
Number
|
|
|
|
Amount
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2012
|
|
|
1,151,937
|
|
|
|
12
|
|
|
|
9,408,187
|
|
|
|
60,000
|
|
|
|
—
|
|
|
|
(5,776
|
)
|
|
|
(10,834,458
|
)
|
|
|
(1,372,035
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued to acquire technology intellectual property
|
|
|
20,300,000
|
|
|
|
203
|
|
|
|
45,297
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
45,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued to settle debt
|
|
|
20,000,000
|
|
|
|
200
|
|
|
|
19,800
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services
|
|
|
2,421,000
|
|
|
|
24
|
|
|
|
774,346
|
|
|
|
—
|
|
|
|
(566,488
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
207,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued to acquire Aero Networks, LLC
|
|
|
2,400,000
|
|
|
|
24
|
|
|
|
599,976
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
600,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share purchase warrants issued to acquire Aero Networks, LLC
|
|
|
—
|
|
|
|
—
|
|
|
|
699,750
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
699,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share purchase warrants issued for services
|
|
|
—
|
|
|
|
—
|
|
|
|
44,884
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
44,884
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity component of convertible debt
|
|
|
—
|
|
|
|
—
|
|
|
|
2,119,502
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,119,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment for reverse stock split
|
|
|
210
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(880,651
|
)
|
|
|
(880,651
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2013
|
|
|
46,273,147
|
|
|
|
463
|
|
|
|
13,711,742
|
|
|
|
60,000
|
|
|
|
(566,488
|
)
|
|
|
(5,776
|
)
|
|
|
(11,715,109
|
)
|
|
|
1,484,832
|
|
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
SANWIRE CORPORATION
(formerly NT Mining Corporation)
Consolidated statements of cash flows
(Expressed in U.S. dollars)
(unaudited)
|
|
Six Months Ended
June 30,
2013
$
|
|
Six Months Ended
June 30,
2012
$
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
|
(880,651
|
)
|
|
|
(159,591
|
)
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Accretion of discount on convertible debt
|
|
|
177,598
|
|
|
|
—
|
|
Amortization of intangible asset
|
|
|
250,638
|
|
|
|
—
|
|
Depreciation of property and equipment
|
|
|
329
|
|
|
|
6,730
|
|
Stock-based compensation
|
|
|
252,752
|
|
|
|
—
|
|
Write off of accounts payable
|
|
|
(42,550
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(82,800
|
)
|
|
|
—
|
|
Prepaid expenses and deposits
|
|
|
—
|
|
|
|
(1,000
|
)
|
Accounts payable
|
|
|
154,760
|
|
|
|
125,469
|
|
Accrued liabilities
|
|
|
19,138
|
|
|
|
—
|
|
Due to related parties
|
|
|
113,993
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(36,793
|
)
|
|
|
(28,392
|
)
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable advances
|
|
|
(5,000
|
)
|
|
|
—
|
|
Purchase of property and equipment
|
|
|
(766
|
)
|
|
|
—
|
|
Cash acquired on purchase of subsidiary
|
|
|
9,696
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities
|
|
|
3,930
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from notes payable
|
|
|
22,012
|
|
|
|
—
|
|
Proceeds from related parties
|
|
|
12,170
|
|
|
|
34,451
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
34,182
|
|
|
|
34,451
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
—
|
|
|
|
(1,122
|
)
|
|
|
|
|
|
|
|
|
|
Change in cash
|
|
|
1,319
|
|
|
|
4,973
|
|
|
|
|
|
|
|
|
|
|
Cash, beginning of period
|
|
|
1,094
|
|
|
|
1,136
|
|
|
|
|
|
|
|
|
|
|
Cash, end of period
|
|
|
2,413
|
|
|
|
6,073
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares and warrants issued for the acquisition of Aero Networks, LLC
|
|
|
1,299,765
|
|
|
|
—
|
|
Technology intellectual property acquired with convertible debt and share issuance
|
|
|
10,025,500
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
|
—
|
|
|
|
—
|
|
Income taxes paid
|
|
|
—
|
|
|
|
—
|
|
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
SANWIRE CORPORATION
(formerly NT Mining Corporation)
Notes to the consolidated financial statements
June 30, 2013
(Expressed in U.S. dollars)
(unaudited)
|
|
|
|
1.
|
Nature of Operations and Continuance of Business
|
Sanwire Corporation (formerly NT
Mining Corporation) (the “Company”) was incorporated in the State of Nevada on February 10, 1997. The Company’s
subsidiary, Bullmoose Mines Ltd. owns mineral lease #2775 plus 4 mineral claims located in the South Mackenzie Mining District,
Northwest Territories, Canada.
On March 22, 2013, the Company
exercised its option under a license agreement to acquire 100% ownership of the iPMine communication and mine safety system. Refer
to Note 4. On May 28, 2013, the Company completed the
acquisition of Tulsa, Oklahoma-based Aero Networks,
LLC (“Aero”). Refer to Note 3.
The Company has broadened its business plan to include wireless application in
the mining sector through the acquisition of iPMine, which is operated under its subsidiary, iPTerra Technologies, Inc. (“iPTerra”),
and Aero plays a role in the design and deployment of the underground network. iPTerra is a designer, developer, manufacturer and
marketer of a real-time 2-way wireless and/or wireline communications, and mine safety solution for the global mining and industrial
industry. Aero provides advanced telecommunications and broadband services to rural communities and Native American tribes with
focus on the public safety, education and healthcare sectors.
Upon the acquisition of Aero, th
e
Company is no longer a development stage company as defined by Financial Accounting Standards Board Accounting Standards Codification
(“ASC”) 915, “Development Stage Entities”.
These consolidated financial statements
have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities
in the normal course of business. The continuation of the Company as a going concern is dependent upon the continued financial
support from its shareholders, the ability of management to raise additional equity capital through private and public offerings
of its common stock, and the attainment of profitable operations. As at June 30, 2013, the Company has a working capital deficit
of $1,605,828 and has an accumulated deficit of $11,715,109 since inception. These factors raise substantial doubt regarding the
Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments
to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern.
|
2.
|
Summary of Significant Accounting Policies
|
|
(a)
|
Basis of Presentation and Principles of Consolidation
|
These consolidated financial statements
and related notes are presented in accordance with accounting principles generally accepted in the United States. These consolidated
financial statements are expressed in US dollars. These consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, Bullmoose Mines Ltd., iPTerra Technologies, Inc., and Aero Networks, LLC. All inter-company balances
and transactions have been eliminated.
|
(b)
|
Interim Financial Statements
|
|
|
These interim unaudited consolidated financial statements have been prepared on the same basis
as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring
adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods
shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for
any future period.
|
The preparation of 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 and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period.
The Company
regularly evaluates estimates and assumptions related to allowance for doubtful accounts, the estimated useful lives and recoverability
of long-lived assets, fair value of convertible debt, stock-based compensation, and deferred income tax asset valuation allowances.
The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes
to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of
assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results
experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material
differences between the estimates and the actual results, future results of operations will be affected
.
|
(d)
|
Cash and Cash Equivalents
|
The Company considers all highly
liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.
SANWIRE CORPORATION
(formerly NT Mining Corporation)
Notes to the consolidated financial statements
June 30, 2013
(Expressed in U.S. dollars)
(unaudited)
2. Summary of Significant Accounting Policies
(continued)
The Company recognizes allowances
for doubtful accounts to ensure accounts receivable are not overstated due to the inability or unwillingness of its customers to
make required payments. The allowance is based on the age of receivable and the specific identification of receivables the Company
considers at risk.
|
(f)
|
Property and Equipment
|
Property and
equipment are stated at cost. The Company depreciates the cost of property and equipment over their estimated useful lives at the
following annual rates:
|
Computer equipment
|
55% declining balance
|
Intangible assets are stated at cost
less accumulated amortization. The Company’s intangible asset is the iPMine technology which is being amortized straight-line
over 10 years.
In accordance with ASC 360, “Property,
Plant and Equipment”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances
indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited
to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors;
accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset;
current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with
the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before
the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value,
which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual
disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount
is not recoverable and exceeds fair value.
Goodwill represents the excess of
the acquisition price over the fair value of identifiable net assets acquired. Goodwill is allocated at the date of the business
combination. Goodwill is not amortized, but is tested for impairment annually, during the fourth quarter, or more frequently if
events or changes in circumstances indicate the asset may be impaired. These events and circumstances may include a significant
change in legal factors or in the business climate, a significant decline in the Company’s share price, an adverse action
of assessment by a regulator, unanticipated competition, a loss of key personnel, significant disposal activity and the testing
of recoverability for a significant asset group.
The Company consists of a single
reporting unit. The impairment test is carried out in two steps. In the first step, the carrying amount of the reporting unit including
goodwill is compared with its fair value. The estimated fair value is determined utilizing a market-based approach, based on the
quoted market price of the Company’s stock in an active market, adjusted by an appropriate control premium. When the carrying
amount of a reporting unit exceeds its fair value, goodwill of the reporting unit is considered to be impaired and the second step
is necessary.
In the second step of the goodwill
impairment test, the implied fair value of the reporting unit’s goodwill is compared with its carrying amount to measure
the amount of the impairment loss, if any. The implied fair value of goodwill is determined in the same manner as the value of
goodwill is determined in a business combination using the fair value of the reporting unit as if it were the acquisition price.
When the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of the goodwill, an impairment loss
is recognized in an amount equal to the excess and is presented as a separate line item in the consolidated statements of operations.
Establishing an implied fair value of goodwill requires the Company to make estimates for key inputs into complex valuation models
and to apply significant judgment in the selection of estimates, assumptions and methodologies required to complete the analysis.
Areas of judgment include, but are not limited to, development of multi-year business cash flow forecasts, the selection of discount
rates and the identification and valuation of unrecorded assets.
SANWIRE CORPORATION
(formerly NT Mining Corporation)
Notes to the consolidated financial statements
June 30, 2013
(Expressed in U.S. dollars)
(unaudited)
2. Summary of Significant Accounting Policies
(continued)
|
(j)
|
Foreign Currency Translation
|
Transactions in foreign currencies
are translated into the currency of measurement at the exchange rates in effect on the transaction date. Monetary balance sheet
items expressed in foreign currencies are translated into U.S. dollars at the exchange rates in effect at the balance sheet date.
The resulting exchange gains and losses are recognized in income.
The Company’s integrated foreign
subsidiaries are financially or operationally dependent on the Company. The Company uses the temporal method to translate the accounts
of its integrated operations into U.S. dollars. Monetary assets and liabilities are translated at the exchange rates in effect
at the balance sheet date. Non-monetary assets and liabilities are translated at historical rates. Revenues and expenses are translated
at average rates for the period, except for amortization, which is translated on the same basis as the related asset. The resulting
exchange gains or losses are recognized in income.
The Company accounts for income
taxes using the asset and liability method in accordance with ASC 740, “Accounting for Income Taxes”. The asset and
liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of
temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax
credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will
be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets
to the amount that is believed more likely than not to be realized.
The Company earns revenue from
the provision of advanced telecommunications and broadband services. The Company recognizes revenue in accordance with ASC 605,
“Revenue Recognition”. Revenue is recognized when the price is fixed or determinable, persuasive evidence of an arrangement
exists, the service has been performed, and collectability is reasonably assured.
|
(m)
|
Financial Instruments and Fair Value Measures
|
ASC 820, “Fair Value Measurements
and Disclosures” requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs
when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding
the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon
the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that
may be used to measure fair value:
Level 1
Level 1 applies to assets or liabilities
for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities
for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar
assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume
or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can
be derived principally from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities
for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value
of the assets or liabilities.
The Company’s financial instruments
consist principally of cash, accounts receivable, accounts payable, accrued liabilities, loans payable, convertible debt, and amounts
due to related parties. Pursuant to ASC 820, the fair value of cash is determined based on “Level 1” inputs, which
consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate
their current fair values because of their nature and respective maturity dates or durations.
SANWIRE CORPORATION
(formerly NT Mining Corporation)
Notes to the consolidated financial statements
June 30, 2013
(Expressed in U.S. dollars)
(unaudited)
2. Summary of Significant Accounting Policies
(continued)
|
(n)
|
Stock-based Compensation
|
The Company records stock-based
compensation in accordance with ASC 718, “Compensation – Stock Compensation”, using the fair value method. All
transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for
based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably
measurable.
The Company uses the Black-Scholes
option pricing model to calculate the fair value of stock-based awards. This model is affected by the Company’s stock price
as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to the
Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise
behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the consolidated
statement of operations over the requisite service period.
The Company
computes loss per share in accordance with ASC 260, "Earnings per Share" which requires presentation of both basic and
diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing the loss
available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period.
Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method
and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period
is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS
excludes all dilutive potential shares if their effect is anti dilutive. As at June 30, 2013, the Company
had
13,230,000
dilutive potential shares outstanding.
ASC 220,
“Comprehensive Income,” establishes standards for the reporting and display of comprehensive loss and its components
in the financial statements. As at June 30, 2013 and 2012, the Company had no items that represent a comprehensive loss and, therefore,
has not included a schedule of comprehensive loss in the consolidated financial statements.
|
(q)
|
Recent Accounting Pronouncements
|
The Company has implemented all
new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are
any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results
of operations.
|
3.
|
Acquisition of Aero Networks, LLC
|
On May 28, 2013 the Company completed
a stock purchase agreement with all the shareholders of
Aero Networks, LLC (“Aero”). The
Company acquired 100% of the issued and outstanding shares of Aero by issuing 2,400,000 shares of common stock and 3,000,000 share
purchase warrants in three 1,000,000 blocks expiring in 2014, 2015, and 2017 at an exercise price of $0.50, $0.75, and $1.00 respectively.
The Company also agreed to issue future earn-out performance bonus shares based on revenue growth and extended a three year agreement
to Aero’s management team. Refer to Note 11(f).
As a result, the Company issued
2,400,000 shares of common stock with a fair value of $600,000, and 3,000,000 share purchase warrants with a fair value of $699,765
to the shareholders of Aero. The Company determined the fair value of the share purchase warrants using the Black-Scholes option
pricing model with the following weighted average assumptions: risk-free interest rate of 0.63%, expected life of 2.9 years, expected
volatility of 256%, and no expected dividends.
|
|
$
|
|
|
|
Fair value of shares issued
|
|
600,000
|
Fair value of share purchase warrants issued
|
|
699,765
|
|
|
|
Total purchase price
|
|
1,299,765
|
SANWIRE CORPORATION
(formerly NT Mining Corporation)
Notes to the consolidated financial statements
June 30, 2013
(Expressed in U.S. dollars)
(unaudited)
|
3.
|
Acquisition of Aero Networks, LLC
(continued)
|
At the date of acquisition, the
fair values of the assets and liabilities of Aero consisted of the following
|
|
$
|
|
|
|
Cash
|
|
9,696
|
Loans receivable
|
|
23,620
|
Property and equipment
|
|
1,245
|
Goodwill
|
|
1,352,212
|
Accounts payable
|
|
(34,001)
|
Loans payable
|
|
(20,988)
|
Due to related parties
|
|
(32,019)
|
|
|
|
Total purchase price
|
|
1,299,765
|
|
4.
|
Technology Intellectual Property
|
|
Cost
$
|
Accumulated amortization
$
|
June 30,
2013
Net carrying value
$
|
December 31,
2012
Net carrying value
$
|
|
|
|
|
|
iPMine technology
|
10,025,500
|
250,638
|
9,774,862
|
–
|
On January 2, 2013, the Company signed
an exclusive licensing and distribution agreement (the “License Agreement”) to sell and market the iPMine communication
and mine safety system for underground mines for the European continent. The terms of the agreement includes exclusivity for the
European market for a five year term renewable with an additional five year term and first right of refusal to acquire 100% of
the iPMine intellectual property. The Company issued 300,000 shares of common stock with a fair value of $25,500 to the licensor.
On January 14, 2013, the Company
acquired 100% ownership of newly created iPTerra. for $5,500, which is to be paid to the seller within a one year period from the
closing date. The iPMine system will operate under iPTerra.
On March 22, 2013, the Company exercised
its option under the License Agreement to acquire 100% ownership of the iPMine communication and mine safety system. The Company
acquired 100% of the iPMine intellectual property for total consideration of $10,000,000 comprised of 20,000,000 shares of common
stock with a fair value of $20,000 and the assumption of $9,980,000 in debt owing to two companies controlled by a director of
the Company (the director also became the President and Chief Executive Officer of the Company on April 17, 2013). The debt was
non-interest bearing, due on demand, and secured by the iPMine technology. On May 10, 2013, the Company entered into an agreement
to convert the debt into non-interest bearing convertible promissory notes. Refer to Note 8.
5. Property and Equipment
|
Cost
$
|
Accumulated depreciation
$
|
June 30,
2013
Net carrying value
$
|
December 31,
2012
Net carrying value
$
|
|
|
|
|
|
Computer equipment
|
2,011
|
329
|
1,682
|
–
|
As at June 30, 2013, the Company
has loans receivable totaling $28,620, which are non-interest bearing, unsecured, and due on demand.
SANWIRE CORPORATION
(formerly NT Mining Corporation)
Notes to the consolidated financial statements
June 30, 2013
(Expressed in U.S. dollars)
(unaudited)
|
(a)
|
As at June 30, 2013, the amount of $150,000 (December 31, 2012 - $150,000)
is owed to a non-related party which bears interest at 10% per annum, unsecured, and due on demand. As at June 30, 2013, the Company
has accrued interest of $25,431 (December 31, 2012 - $37,931) which is included in accrued liabilities.
|
|
(b)
|
As at June 30, 2013, the amount of $480,624 (December 31, 2012 - $480,624)
is owed to a non-related party, which bears interest at 12% per annum, due on demand, and secured by the assets of the Company.
As at June 30, 2013, the Company has accrued interest of $96,808 (December 31, 2012 - $75,270) which is included in accrued liabilities.
|
|
(c)
|
As at June 30, 2013, the amount of $28,000 (December 31, 2012 –
$nil) is owed to a non-related party, which is non-interest bearing, unsecured, and due on demand.
|
|
(d)
|
As at June 30, 2013, the amount of $15,000 (December 31, 2012 - $nil)
is owed to a non-related party which is non-interest bearing, unsecured, and due on demand.
|
On May 10, 2013, the Company issued
convertible promissory notes to two companies controlled by the President of the Company for the $9,980,000 debt that arose from
the purchase of the iPMine system. Refer to Note 4. The notes are non-interest bearing, unsecured, and due eighteen months from
the date of issuance. The unpaid amount of principal can be converted at any time at the holder’s option into shares of the
Company’s common stock at a price of $1.00 per share.
The convertible loan was recorded
using the relative fair value method where the loan has been bifurcated into a debt component and equity component comprised of
the convertible feature embedded within the liability. The value of the liability component, at the time of issuance was determined
using a net present value calculation assuming a discount rate of 15% per annum. The fair value of the equity component was estimated
using the Black-Scholes option pricing model with the following assumptions: risk-free interest rate of 0.18%, dividend of 0%,
expected life of 1.5 years, and expected volatility of 266%. The equity component was determined to be $2,119,502 which was recorded
as equity and an equivalent discount on the convertible debt which will be accreted to the face value of $9,980,000 over the term
of the debt. During the period ended June 30, 2013, the Company recorded accretion expense of $177,958, increasing the carrying
value to $8,038,096 as at June 30, 2013.
|
9.
|
Related Party Transactions
|
(a)
During the six months ended June 30, 2013, the Company incurred consulting fees of $55,000
(2012 - $nil) to the President of the Company.
(b)
During the six months ended June 30, 2013, the Company incurred consulting fees of $68,000
(2012 - $nil) to the Chief Financial Officer of the Company.
(c)
During the six months ended June 30, 2013, the Company incurred consulting fees of $20,000
(2012 - $nil) to the Chairman of the Board of the Company.
(d)
During the six months ended June 30, 2013, the Company incurred consulting fees of $10,000
(2012 - $nil) to the President of Aero.
(e)
During the six months ended June 30, 2013, the Company incurred management fees of $nil (2012
- $15,900) to a company controlled by the former Chief Executive Officer of the Company.
(f)
As at June 30, 2013, the amount of $94,517 (December 31, 2012 - $nil) is owed to the President
and a company controlled by the President of the Company, which is non-interest bearing, unsecured, and due on demand.
(g)
As at June 30, 2013, the amount of $10,000 (December 31, 2012 - $nil) is owed to the Chief
Financial Officer of the Company, which is non-interest bearing, unsecured, and due on demand.
(h)
As at June 30, 2013, the amount of $121,757 (December 31, 2012 - $106,557) is owed to the Chairman
of the Board of the Company and companies controlled by the Chairman, which is non-interest bearing, unsecured, and due on demand.
SANWIRE CORPORATION
(formerly NT Mining Corporation)
Notes to the consolidated financial statements
June 30, 2013
(Expressed in U.S. dollars)
(unaudited)
9. Related Party Transactions
(continued)
(i)
As at June 30, 2013, the amount of $22,948 (December 31, 2012 - $22,948) is owed to a former
director and a company controlled by a former director of the Company, which is non-interest bearing, unsecured, and due on demand.
(j)
As at June 30, 2013, the amount of $44,717 (December 31, 2012 - $44,717) is owed to a former
director and a company controlled by a former director of the Company, which is non-interest bearing, unsecured, and due on demand.
(k)
As at June 30, 2013, the amount of $38,465 (December 31, 2012 - $nil) is owed to the President
of Aero, which is non-interest bearing, unsecured, and due on demand.
(a)
On January 3, 2013, the Company issued 300,000 shares of common stock with a fair value of
$25,500 pursuant to the License Agreement. Refer to Note 4.
(b)
On March 8, 2013, the Company effected a 1 for 50 reverse split of the issued and outstanding
shares of common stock. All share amounts have been retroactively restated for all periods presented. The Company also increased
the number of authorized shares of common stock from 500,000,000 shares to 750,000,000 shares with no change in par value.
(c)
On March 22, 2013, the Company issued 20,000,000 shares of common stock with a fair value of
$20,000 pursuant to the acquisition of intellectual property. Refer to Note 4.
(d)
On March 27, 2013, the Company issued 20,000,000 shares of common stock with a fair value of
$20,000 to settle debt of $20,000.
(e)
On May 17, 2013, the Company issued 200,000 shares of common stock with a fair value of $58,000
to the Chief Financial Officer of the Company. Refer to Note 12(a).
(f)
On May 17, 2013, the Company issued 200,000 shares of common stock with a fair value of $58,000
to a consultant, of which $7,150 was expensed as consulting fees for the pro-rate portion of services rendered to June 30, 2013.
The remaining $50,850 was recorded as deferred compensation and will be expensed pro-rata over the remaining term of the agreement
ending on May 15, 2014. Refer to Note 12(d).
(g)
On May 17, 2013, the Company issued 275,000 shares of common stock with a fair value of $79,750
to a consultant, of which $9,832 was expensed as consulting fees for the pro-rate portion of services rendered to June 30, 2013.
The remaining $69,918 was recorded as deferred compensation and will be expensed pro-rata over the remaining term of the agreement
ending on May 15, 2014. Refer to Note 12(e).
(h)
On May 29, 2013, the Company issued 2,400,000 shares of common stock with a fair value of $600,000
to acquire Aero. Refer to Note 3.
(i)
On May 29, 2013, the Company issued 300,000 shares of common stock with a fair value of $75,000
to the management team of Aero. Refer to Note 12(f).
(j)
On June 1, 2013, the Company issued 50,000 shares of common stock with a fair value of $12,500
to a consultant. Refer to Note 12(h).
(k)
On June 3, 2013, the Company issued 50,000 shares of common stock with a fair value of $13,500
to two consultants. Refer to Note 12(g).
(l)
On June 12, 2013, the Company issued 500,000 of common stock with a fair value of $170,000
to a consultant, of which $18,580 was expensed as consulting fees for the pro-rate portion of services rendered to June 30, 2013.
The remaining $151,420 was recorded as deferred compensation and will be expensed pro-rata over the remaining term of the agreement
ending on December 11, 2013.
(m)
On June 12, 2013, the Company issued 250,000 shares of common stock with a fair value of $92,500
to a consultant, of which $9,604 was expensed as consulting fees for the pro-rate portion of services rendered to June 30, 2013.
The remaining $82,896 was recorded as deferred compensation and will be expensed pro-rata over the remaining term of the agreement
ending on December 11, 2013.
SANWIRE CORPORATION
(formerly NT Mining Corporation)
Notes to the consolidated financial statements
June 30, 2013
(Expressed in U.S. dollars)
(unaudited)
10. Common Stock
(continued)
(n)
On June 27, 2013, the Company issued 500,000 shares of common stock with a fair value of $170,000
to a consultant, of which $3,716 was expensed as consulting fees for the pro-rate portion of services rendered to June 30, 2013.
The remaining $166,284 was recorded as deferred compensation and will be expensed pro-rata over the remaining term of the agreement
ending on December 27, 2013.
(o)
On June 28, 2013, the Company issued 96,000 shares of common stock with a fair value of $45,120
to a consultant which was recorded as deferred compensation which will be expensed on the vesting date of July 1, 2013. Refer to
Note 13(a).
(p)
As at June 30, 2013, the Company has share subscriptions proceeds of $60,000 which were received
in 2010.
|
11.
|
Share Purchase Warrants
|
On June 1, 2013, the Company issued
250,000 share purchase warrants at an exercise price of $0.50 per share expiring on May 31, 2014 to a consultant. The fair value
of $44,884 was determined using the Black-Scholes option pricing model using the following assumptions: risk-free interest rate
of 0.14%, expected life of 1 year, expected volatility of 254%, and no expected dividends.
The Company also issued share purchase
warrants as part of the acquisition of Aero. Refer to Note 3.
The following table summarizes
the continuity of share purchase warrants:
|
Number of
warrants
|
Weighted average exercise price
$
|
|
|
|
Balance, December 31, 2012
|
–
|
–
|
|
|
|
Issued
|
3,250,000
|
0.73
|
|
|
|
Balance, June 30, 2013
|
3,250,000
|
0.73
|
As at June 30, 2013, the following share purchase
warrants were outstanding:
Number of warrants
|
Exercise
price
$
|
Expiry date
|
|
|
|
250,000
|
0.50
|
May 31, 2014
|
1,000,000
|
0.50
|
December 31, 2014
|
1,000,000
|
0.75
|
December 31, 2015
|
1,000,000
|
1.00
|
December 31, 2016
|
|
|
|
3,250,000
|
|
|
12. Commitments
(a)
On April 17, 2013, the Company entered into an agreement with a consultant to become the Chief
Financial Officer and director of the Company. Commending May 1, 2013, the Company is to pay the Chief Financial Officer $5,000
per month for the first year, $8,000 per month for the second year, and $10,000 per month for the third year. The Chief Financial
Officer has the right to convert all or part of the consulting fee or outstanding accrued amount plus interest into shares of common
stock of the Company at $1.00 per share Upon execution of the agreement, the Company issued 200,000 shares of common stock (refer
to Note 10(e)) and must pay $10,000 signing bonus prior to the end of the first year of the agreement. The signing bonus bears
interest at 1% per month until it is paid in full.
SANWIRE CORPORATION
(formerly NT Mining Corporation)
Notes to the consolidated financial statements
June 30, 2013
(Expressed in U.S. dollars)
(unaudited)
12. Commitments
(continued)
(b)
On April 17, 2013, the Company entered into an agreement with a director to become the President
and Chief Executive Officer of the Company (the “President”). Commending May 1, 2013, the Company is to pay the President
$15,000 per month for the first year, $18,000 per month for the second year, and $20,000 per month for the third year. The President
has the right to convert all or part of the consulting fee or outstanding accrued amount plus interest into shares of common stock
of the Company at $0.01 per share The Company must pay the President a $25,000 signing bonus prior to the end of the first year
of the agreement. The signing bonus bears interest at 1% per month until it is paid in full.
(c)
On April 17, 2013, the Company entered into an agreement with a director to become the Chairman
of the Board of Directors of the Company (the “Chairman”). Commending May 1, 2013, the Company is to pay the Chairman
$10,000 per month for the first year, $12,000 per month for the second year, and $15,000 per month for the third year. The Chairman
has the right to convert all or part of the consulting fee or outstanding accrued amount plus interest into shares of common stock
of the Company at $0.01 per share The Company must pay a $10,000 signing bonus prior to the end of the first year of the agreement.
The signing bonus bears interest at 1% per month until it is paid in full.
(d)
On May 15, 2013, the Company entered into an agreement with a consultant whereby the Company
issued 200,000 shares of common stock for services to be provided over a period of one year. Refer to Note 10(f). The Company will
pay a finder’s fee of 10% on any financing brought to the Company by the consultant.
(e)
On May 15, 2013, the Company entered into an agreement with a consultant whereby the Company
issued 275,000 shares of common stock for services to be provided over a period of one year. Refer to Note 10(g). The Company will
pay a finder’s fee of 10% on any financing brought to the Company by the consultant.
(f)
On May 28, 2013, as part of the acquisition of Aero, the Company agreed to issue performance
bonus shares to the former shareholders of Aero based on Aero’s revenue growth over a three year period. The increase in
gross revenue over the previous year is converted to shares of common stock of the Company at $1.00 per share.
The Company will also pay finders’
fee shares to the former shareholders of Aero if they introduce an acquisition target to the Company. The finders’ fee shares
will be calculated as a percentage of the Company’s valuation purchase price of each acquisition target as follows: (i) 1.5%
for the first $2,000,000 and (ii) 0.75% on the balance.
In addition, commencing June 1, 2013,
the Company is to pay consulting fees to three members of Aero’s management team. Each member is to be paid $10,000 per month
for the first year, $12,000 per month for the second year, and $15,000 per month for the third year. Any unpaid amounts bear interest
at 1% per month. The members have the right to convert all or part of the consulting fee or outstanding accrued amount plus interest
into shares of common stock of the Company at $1.00 per share. Upon execution of the agreement, the Company issued 100,000 shares
of common stock to each of the three individuals as a signing bonus (issued). Refer to Note 10(i).
(g)
On June 1, 2013, the Company entered into an agreement with two consultants whereby the Company
issued a total of 50,000 shares of common stock (refer to Note 10(k) and is to pay a total of $1,000 per month for a period of
six months. The agreement can be extended for an additional six month term at the option of the Company for a total of $1,500 per
month. The Company will pay a commission of 10% of any iPMine sales and a 5% finder’s fee for any financing brought to the
Company by the consultants.
(h)
On June 1, 2013, the Company entered into an agreement with a consultant whereby the Company
is to pay the consultant $5,000 per month with either party able to terminate the agreement on two months written notice to the
other party. Upon execution of the agreement, the Company issued 50,000 shares of common stock and 250,000 share purchase warrants
exercisable at $0.50 per share expiring on May 31, 2014. Refer to Notes 10(i) and Note 11.
(i)
On June 1, 2013, the Company entered into an agreement with a consultant whereby the Company
is to pay the consultant $15,000 per quarter over a period of one year. The Company will pay a finder’s fee of 10% on any
financing brought to the Company by the consultant.
SANWIRE CORPORATION
(formerly NT Mining Corporation)
Notes to the consolidated financial statements
June 30, 2013
(Expressed in U.S. dollars)
(unaudited)
13. Subsequent
Events
|
(a)
|
On July 1, 2013, the Company entered into a consulting agreement with
an investor relations firm whereby the Company is to pay the consultant $5,500 per month until December 31, 2013 and issue 96,000
shares of common stock (issued June 28, 2013 and recorded as deferred compensation as at June 30, 2013). Refer to Note 10(l).
|
|
(b)
|
On July 31, 2013, the Company issued a convertible note with a principal
value of $405,000 for proceeds of $300,000. The note bears interest at a rate of 8% per annum and matures on January 27, 2014.
The note is convertible ninety days after issuance, at the holder’s option, into shares of common stock of the Company at
$0.2325 per share. Under terms of the note, the principal amount of $405,000 will be reduced to the purchase price of $300,000
if the Company meets all of their filing obligations. If the Company files a registration statement covering the resale of all
of the shares issued or issuable upon conversion of the convertible note with the Securities and Exchange Commission (“SEC”)
on or before September 3, 2013, $30,000 of the outstanding principal amount, together with any accrued and unpaid interest with
respect to such portion of the principal amount, will be extinguished. If the registration statement is declared effective by the
SEC by October 14, 2013 then a further $75,000 of the outstanding principal amount, together with any accrued and unpaid interest
with respect to such portion of the principal amount, will be extinguished. The Company has the right at any time to redeem all,
but not less than all, of the total outstanding amount then remaining under the convertible note in cash at a price equal to 120%
of the total amount of the convertible note then outstanding. In the event of default, the note has a default interest rate of
18% per annum and customary event default provisions.
|