ITEM 1.
|
CONDENSED FINANCIAL STATEMENTS
|
INDEX
|
F-1
|
|
|
Unaudited Balance Sheets as of April 30, 2014, and Balance Sheet as of October 31, 2013.
|
F-2
|
|
|
Unaudited Statement of Operations for the Three and Six Months Ended April 30, 2014 and 2013, and Cumulative Since Inception.
|
F-3
|
|
|
Unaudited Statement of Cash Flows for the Six Months Ended April 30, 2014 and 2013, and Cumulative Since Inception.
|
F-4
|
|
|
Notes to the Financial Statements
|
F-5
|
ON4 COMMUNICATIONS INC.
(A Development Stage Company)
Balance Sheets
(Expressed in US Dollars)
|
|
April 30,
|
|
|
October 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
$
|
|
|
$
|
|
|
|
(unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
–
|
|
|
|
–
|
|
Loan receivable (Note 3)
|
|
|
117,639
|
|
|
|
121,090
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
117,639
|
|
|
|
121,090
|
|
|
|
|
|
|
|
|
|
|
Deferred financing costs
|
|
|
–
|
|
|
|
778
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
117,639
|
|
|
|
121,868
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank indebtedness
|
|
|
–
|
|
|
|
1,022
|
|
Accounts payable and accrued liabilities (Note 5)
|
|
|
1,484,645
|
|
|
|
1,378,983
|
|
Due to related parties (Note 4)
|
|
|
40,622
|
|
|
|
4,858
|
|
Notes payable (Note 6)
|
|
|
388,790
|
|
|
|
390,320
|
|
Convertible notes payable, net of unamortized discount of $nil and $38,099, respectively (Note 7)
|
|
|
167,740
|
|
|
|
80,933
|
|
Derivative liabilities (Note 8)
|
|
|
208,327
|
|
|
|
121,632
|
|
Total Liabilities
|
|
|
2,290,124
|
|
|
|
1,977,748
|
|
|
|
|
|
|
|
|
|
|
Nature of Operations and Continuance of Business (Note 1)
|
|
|
|
|
|
|
|
|
Commitments (Note 12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock: 30,000,000 shares authorized, non-voting, no par value;
No shares issued and outstanding
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
Common stock: 600,000,000 shares authorized, $0.0001 par value;
12,075,121 and 1,465,566 shares issued and outstanding, respectively
|
|
|
1,208
|
|
|
|
147
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
13,518,723
|
|
|
|
13,381,883
|
|
|
|
|
|
|
|
|
|
|
Common stock issuable
|
|
|
70,000
|
|
|
|
70,000
|
|
|
|
|
|
|
|
|
|
|
Deficit accumulated during the development stage
|
|
|
(15,762,416
|
)
|
|
|
(15,307,910
|
)
|
|
|
|
|
|
|
|
|
|
Total Stockholders’ Deficit
|
|
|
(2,172,485
|
)
|
|
|
(1,855,880
|
)
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Deficit
|
|
|
117,639
|
|
|
|
121,868
|
|
|
|
|
|
|
|
|
|
|
(The accompanying notes are an integral part of these unaudited financial statements)
ON4 COMMUNICATIONS, INC.
(A Development Stage Company)
Statements of Operations
(Expressed in US Dollars)
(Unaudited)
|
|
Three Months
Ended
|
|
|
Three Months
Ended
|
|
|
Six Months
Ended
|
|
|
Six Months
Ended
|
|
|
Accumulated From
June 5, 2006
(Date of Inception)
|
|
|
|
April 30,
|
|
|
April 30,
|
|
|
April 30,
|
|
|
April 30,
|
|
|
to April 30,
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising and marketing
|
|
|
55,000
|
|
|
|
62,000
|
|
|
|
55,000
|
|
|
|
62,000
|
|
|
|
299,182
|
|
Amortization of intangible assets
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
18,138
|
|
Amortization of property and equipment
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
32,677
|
|
Consulting fees
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
5,232
|
|
|
|
2,173,938
|
|
Foreign exchange loss (gain)
|
|
|
2,681
|
|
|
|
(1,259
|
)
|
|
|
(7,748
|
)
|
|
|
(18
|
)
|
|
|
242,214
|
|
General and administrative
|
|
|
3,775
|
|
|
|
5,843
|
|
|
|
4,127
|
|
|
|
8,834
|
|
|
|
1,131,792
|
|
Impairment of goodwill
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
3,274,109
|
|
Impairment of assets
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2,220,609
|
|
Management fees (Note 4)
|
|
|
139,000
|
|
|
|
–
|
|
|
|
139,000
|
|
|
|
15,610
|
|
|
|
1,365,409
|
|
Payroll
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
29,516
|
|
Professional fees
|
|
|
15,112
|
|
|
|
19,146
|
|
|
|
40,636
|
|
|
|
41,827
|
|
|
|
857,794
|
|
Research and development
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
318,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses
|
|
|
215,568
|
|
|
|
85,730
|
|
|
|
231,015
|
|
|
|
133,485
|
|
|
|
11,963,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Loss
|
|
|
(215,568
|
)
|
|
|
(85,730
|
)
|
|
|
(231,015
|
)
|
|
|
(133,485
|
)
|
|
|
(11,963,738
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion of discounts on convertible notes payable (Note 6)
|
|
|
(102
|
)
|
|
|
(72,913
|
)
|
|
|
(38,099
|
)
|
|
|
(153,037
|
)
|
|
|
(540,000
|
)
|
Amortization of deferred financing costs
|
|
|
(125
|
)
|
|
|
(3,409
|
)
|
|
|
(778
|
)
|
|
|
(6,131
|
)
|
|
|
(20,500
|
)
|
Gain on settlement of debt
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
807,352
|
|
Interest and other income
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
181,682
|
|
Interest expense
|
|
|
(23,799
|
)
|
|
|
(25,793
|
)
|
|
|
(69,310
|
)
|
|
|
(70,148
|
)
|
|
|
(1,011,523
|
)
|
Gain (loss) on change in fair value of derivative liabilities (Note 7)
|
|
|
28,793
|
|
|
|
(32,723
|
)
|
|
|
(115,304
|
)
|
|
|
(172,134
|
)
|
|
|
(812,253
|
)
|
Write-off of note receivable
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(1,114,182
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Income (Expense)
|
|
|
4,767
|
|
|
|
(134,838
|
)
|
|
|
(223,491
|
)
|
|
|
(401,450
|
)
|
|
|
(2,509,424
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations
|
|
|
(210,801
|
)
|
|
|
(220,568
|
)
|
|
|
(454,506
|
)
|
|
|
(534,935
|
)
|
|
|
(14,473,162
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(1,282,616
|
)
|
Gain on disposal of discontinued operations
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
76,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Discontinued Operations
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(1,205,782
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
(210,801
|
)
|
|
|
(220,568
|
)
|
|
|
(454,506
|
)
|
|
|
(534,935
|
)
|
|
|
(15,678,944
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss Per Share – Basic and Diluted
|
|
|
(0.04
|
)
|
|
|
(0.43
|
)
|
|
|
(0.14
|
)
|
|
|
(1.20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding
|
|
|
4,686,000
|
|
|
|
507,933
|
|
|
|
3,272,000
|
|
|
|
445,482
|
|
|
|
|
|
(The accompanying notes are an integral part of these unaudited financial statements)
ON4 COMMUNICATIONS INC.
(A Development Stage Company)
Statements of Cash Flows
(Expressed in US Dollars)
(Unaudited)
|
|
Six Months
Ended
April 30,
2014
$
|
|
|
Six Months
Ended
April 30,
2013
$
|
|
|
Accumulated From
June 5, 2006
(Date of Inception)
to April 30,
2014
$
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operations
|
|
|
(454,506
|
)
|
|
|
(534,935
|
)
|
|
|
(14,473,162
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion of discounts on convertible notes payable
|
|
|
38,099
|
|
|
|
153,037
|
|
|
|
540,000
|
|
Amortization of property and equipment
|
|
|
–
|
|
|
|
–
|
|
|
|
32,677
|
|
Amortization of intangible assets
|
|
|
–
|
|
|
|
–
|
|
|
|
18,138
|
|
Amortization of deferred financing costs
|
|
|
778
|
|
|
|
6,131
|
|
|
|
20,500
|
|
Gain on settlement of debt
|
|
|
–
|
|
|
|
–
|
|
|
|
(807,352
|
)
|
Impairment of goodwill
|
|
|
–
|
|
|
|
–
|
|
|
|
3,274,109
|
|
Impairment of assets
|
|
|
–
|
|
|
|
–
|
|
|
|
2,220,609
|
|
Issuance of notes payable for services and penalties
|
|
|
55,000
|
|
|
|
62,000
|
|
|
|
207,402
|
|
Issuance of shares for services
|
|
|
–
|
|
|
|
–
|
|
|
|
576,750
|
|
Loss on change in fair value of derivative liabilities
|
|
|
115,304
|
|
|
|
172,134
|
|
|
|
812,253
|
|
Stock-based compensation
|
|
|
103,000
|
|
|
|
–
|
|
|
|
1,239,981
|
|
Write-off of notes receivable
|
|
|
–
|
|
|
|
–
|
|
|
|
1,114,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
–
|
|
|
|
–
|
|
|
|
(5,431
|
)
|
Prepaid expenses and deposits
|
|
|
–
|
|
|
|
–
|
|
|
|
(10,678
|
)
|
Accounts payable and accrued liabilities
|
|
|
105,662
|
|
|
|
104,320
|
|
|
|
1,666,383
|
|
Due to related parties
|
|
|
34,234
|
|
|
|
(1,535
|
)
|
|
|
671,632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used In Operating Activities
|
|
|
(2,429
|
)
|
|
|
(38,848
|
)
|
|
|
(2,902,007
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of intangible assets
|
|
|
–
|
|
|
|
–
|
|
|
|
(182,687
|
)
|
Cash acquired in reverse merger
|
|
|
–
|
|
|
|
–
|
|
|
|
1,523
|
|
Cash from disposition of subsidiary
|
|
|
–
|
|
|
|
–
|
|
|
|
15,709
|
|
Loan receivable
|
|
|
3,451
|
|
|
|
(54,137
|
)
|
|
|
(117,639
|
)
|
Acquisition of property and equipment
|
|
|
–
|
|
|
|
–
|
|
|
|
(33,562
|
)
|
Advances for note receivable
|
|
|
–
|
|
|
|
–
|
|
|
|
(1,114,182
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used In Investing Activities
|
|
|
3,451
|
|
|
|
(54,137
|
)
|
|
|
(1,430,838
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank indebtedness
|
|
|
(1,022
|
)
|
|
|
390
|
|
|
|
–
|
|
Proceeds from issuance of common stock
|
|
|
–
|
|
|
|
–
|
|
|
|
1,821,267
|
|
Proceeds from issuance of preferred stock
|
|
|
–
|
|
|
|
–
|
|
|
|
1,000,000
|
|
Proceeds from notes payable and convertible notes payable
|
|
|
–
|
|
|
|
98,935
|
|
|
|
1,092,022
|
|
Repayment of notes payable
|
|
|
–
|
|
|
|
–
|
|
|
|
(81,250
|
)
|
Payment of deferred financing costs
|
|
|
–
|
|
|
|
(6,500
|
)
|
|
|
(20,500
|
)
|
Proceeds from related parties
|
|
|
–
|
|
|
|
–
|
|
|
|
561,935
|
|
Repayments to related parties
|
|
|
–
|
|
|
|
–
|
|
|
|
(84,780
|
)
|
Share issuance costs
|
|
|
–
|
|
|
|
–
|
|
|
|
(8,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided By Financing Activities
|
|
|
(1,022
|
)
|
|
|
92,825
|
|
|
|
4,280,694
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effects of Exchange Rate Changes on Cash
|
|
|
–
|
|
|
|
(210
|
)
|
|
|
53,674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
–
|
|
|
|
–
|
|
|
|
(119,701
|
)
|
Investing activities
|
|
|
–
|
|
|
|
–
|
|
|
|
(661,509
|
)
|
Financing activities
|
|
|
–
|
|
|
|
–
|
|
|
|
779,687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used in Discontinued Operations
|
|
|
–
|
|
|
|
–
|
|
|
|
(1,523
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Cash
|
|
|
–
|
|
|
|
(370
|
)
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash - Beginning of Period
|
|
|
–
|
|
|
|
370
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash - End of Period
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
–
|
|
|
|
|
|
Supplemental Disclosures (Note 11)
|
|
|
|
|
|
|
|
|
|
|
|
|
(The accompanying notes are an integral part of these unaudited financial statements)
ON4 COMMUNICATIONS INC.
(A Development Stage Company)
Notes to the Financial Statements
April 30, 2014
(Expressed in US dollars)
(Unaudited)
These interim unaudited financial statements of On4 Communications, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Securities and Exchange Commission (“SEC”) Form 10-Q. They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Therefore, these financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended October 31, 2013, included in the Company’s Annual Report on Form 10-K filed on March 18, 2014 with the SEC.
The financial statements included herein are unaudited; however, they contain all normal recurring accruals and adjustments that, in the opinion of management, are necessary to present fairly the Company’s financial position at April 30, 2014, and the results of its operations and cash flows for the six months ended April 30, 2014. The results of operations for the six months ended April 30, 2014, are not necessarily indicative of the results to be expected for future quarters or the full year.
Sound Revolution Inc. (the "Company"), was incorporated on June 4, 2001 under the laws of the State of Delaware and on October 2, 2009 changed its name to On4 Communications, Inc. On May 1, 2009, the Company merged with On4 Communications, Inc. (“On4”), an Arizona corporation incorporated on June 5, 2006. Pursuant to the terms of the merger agreement, the Company acquired all assets and liabilities of On4 by issuing new shares to all former shareholders of On4 on a 1-to-1 basis. The Company issued 27,955,089 common shares to the former shareholders of On4 and the merger was accounted for as a “reverse merger” using the purchase method of accounting, with the former shareholders of On4 controlling 68% of the issued and outstanding common shares of the Company after the closing of the transaction. Accordingly, On4 was deemed to be the acquirer for accounting purposes and the financial statements are presented as a continuation of On4 and include the results of operations of On4 since incorporation on June 5, 2006, and the results of operations of the Company since the date of acquisition on May 1, 2009. On May 3, 2012, the Company’s shareholders approved a name change to NetCents Systems International Ltd., however, this has not been declared effective as of the date of issuance of these financial statements.
On4 is in the business of manufacturing two-way communication and location devices with applications that include tracking people, pets, assets, and inventory, among others. The Company is a Development Stage Company, as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915,
Development Stage Entities
, and has not yet generated significant revenues from their intended business activities.
Going Concern
These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated significant revenues since inception and is unlikely to generate significant revenue or earnings in the immediate or foreseeable future. As at April 30, 2014, the Company has not generated any revenues since inception, has a working capital deficiency of $2,172,485 and has an accumulated deficit of $15,762,416 since inception. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These 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.
The Company will need additional working capital to continue or to be successful in any future business activities. Therefore, continuation of the Company as a going concern is dependent upon obtaining the additional working capital necessary to accomplish its objective. Management plans to seek debt or equity financing, or a combination of both, to raise the necessary working capital.
2.
|
Summary of Significant Accounting Principles
|
Comprehensive Loss
ASC 220, “Comprehensive Income” establishes standards for the reporting and display of comprehensive income and its components in the financial statements. As at April 30, 2014 and 2013, the Company had no items that represent comprehensive income or loss.
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.
On December 15, 2011, the Company entered into the share exchange agreement with NetCents Systems Ltd. (“NetCents”), as described in Note 12(b). At April 30, 2014, the Company was owed $117,639 (October 31, 2013 - $121,090) for expenses paid on behalf of NetCents. The amount is unsecured, non-interest bearing, and due on demand.
4.
|
Related Party Transactions
|
(a)
|
As at April 30, 2014, the Company owed $37,984 (October 31, 2013 - $2,085) to the Chief Executive Officer of the Company. The amounts owing are unsecured, non-interest bearing, and due on demand.
|
(b)
|
As at April 30, 2014, the Company owed $2,638 (October 31, 2013 - $2,773) to the Chief Operating Officer of the Company. The amounts owing are unsecured, non-interest bearing, and due on demand.
|
(c)
|
During the six months ended April 30, 2014, the Company incurred $139,000 (2013 - $15,610) of management fees to officers and directors of the Company, including the issuance of 9,000,000 common shares with a fair value of $103,000 for management fees. Refer to Note 9.
|
5.
|
Accounts Payable and Accrued Liabilities
|
|
|
April 30,
2014
$
(unaudited)
|
|
|
October 31,
2013
$
|
|
|
|
|
|
|
|
|
Trade payables
|
|
|
1,017,636
|
|
|
|
956,100
|
|
Accrued interest expense
|
|
|
467,009
|
|
|
|
422,883
|
|
|
|
|
1,484,645
|
|
|
|
1,378,983
|
|
|
|
April 30,
2014
$
(unaudited)
|
|
|
October 31,
2013
$
|
|
|
|
|
|
|
|
|
Kestrel Gold Inc., unsecured, due interest at prime plus 2% per annum, and due on demand.
|
|
|
22,445
|
|
|
|
23,975
|
|
|
|
|
|
|
|
|
|
|
Scottsdale Investment Corporation, unsecured, due interest at 18% per annum, and due on demand.
|
|
|
319,980
|
|
|
|
319,980
|
|
|
|
|
|
|
|
|
|
|
Gordon Jessop, unsecured, due interest at 5% per annum, and due on demand
|
|
|
46,365
|
|
|
|
46,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
388,790
|
|
|
|
390,320
|
|
7.
|
Convertible Notes Payable
|
(a)
|
On February 1, 2013, the Company entered into a convertible promissory note agreement for $62,000 of marketing services. Pursuant to the agreement, the promissory note is convertible at any time after issuance into shares of common stock. The promissory note is unsecured, bears interest at 1% per year, and the principal amount and any interest thereon are due on January 31, 2014. On February 1, 2014, the conversion price was fixed at $0.01 per common share. Refer to Note 13.
|
(b)
|
On February 10, 2013, the Company entered into a convertible promissory note agreement for $27,500. Pursuant to the terms of the agreement, the loan is unsecured, bears interest at 8% per annum, and is due on February 10, 2014. Furthermore, the note is convertible into shares of the Company’s common stock at any time at a variable conversion price equal to 50% of the average of the lowest three closing bid prices for the common stock during the 10 trading days prior to the date of the conversion notice. Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a full discount to the note payable of $27,500. The carrying value of the convertible note will be accreted over the term of the convertible note up to the value of $27,500. During the year ended October 31, 2013, the Company issued 244,437 shares of common stock for the conversion of $26,000 of the note. During the six months ended April 30, 2014, $586 (2013 - $nil) of accretion expense had been recorded and the carrying value of the note is $1,500 (October 31, 2013 - $914). The Company paid financing costs of $1,500 relating to the issuance of the note.
|
(c)
|
On February 20, 2013, the Company entered into a convertible promissory note agreement for $37,500. Pursuant to the agreement, the loan is convertible 180 days after issuance into shares of common stock at a variable conversion price equal to 51% of the average of the lowest two closing bid prices for the common stock during the 20 trading days prior to the date of the conversion notice. The loan bears interest at 8% per year and the principal amount and any interest thereon are due on November 22, 2013. Pursuant to ASC 815, “Derivatives and Hedging,” the Company will recognize the fair value of the embedded conversion feature as a derivative liability when the note becomes convertible on August 29, 2013. On June 20, 2013, the Company defaulted on the loan. As a result, a penalty of 150% of the principal balance was applied, increasing the loan to $56,250. The carrying value of the convertible note will be accreted over the term of the convertible note up to the value of $56,250. During the year ended October 31, 2013, the Company issued 132,962 shares of common stock for the conversion of $718 of the note. During the six months ended April 30, 2014, the Company issued 1,609,555 shares of common stock for the conversion of $6,292 of the note. During the six months ended April 30, 2014, $37,513 (2013 - $nil) of accretion expense had been recorded and the carrying value of the note is $49,240 (October 31, 2013 - $18,019). The Company paid financing costs $2,500 relating to the issuance of the note. Refer to Note 13.
|
(d)
|
On March 1, 2014, the Company entered into a convertible promissory note agreement for $55,000 of marketing services. Pursuant to the agreement, the promissory note is convertible at any time after issuance into shares of common stock at a price of $0.013 per share. The promissory note is unsecured, bears interest at 1% per year, and the principal amount and any interest thereon are due on July 15, 2014.
|
8.
|
Derivative Liabilities
|
The conversion options of the convertible notes payable, as disclosed in Note 7, are required to record a derivative at their estimated fair value on each balance sheet date with changes in fair value reflected in the statement of operations.
The fair value of the derivative liabilities for the February 10, 2013 and February 20, 2013 convertible notes were $57,147 and $91,023, respectively, on vesting. The fair values as at April 30, 2014 and October 31, 2013 are as follows:
|
|
April 30, 2014
$
(unaudited)
|
|
|
October 31,
2013
$
|
|
|
|
|
|
|
|
|
$27,500 convertible debenture issued February 10, 2013
|
|
|
6,281
|
|
|
|
2,777
|
|
$37,500 convertible debenture issued February 20, 2013
|
|
|
202,046
|
|
|
|
118,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
208,327
|
|
|
|
121,632
|
|
8.
|
Derivative Liabilities (continued)
|
During the six months ended April 30, 2014, the Company recorded a loss on the change in fair value of the derivative liabilities of $115,304 (April 30, 2013 – $172,134). The Company uses the Black-Scholes option pricing model to calculate the fair values of the derivative liabilities. The following table shows the assumptions used in the calculations:
|
|
Expected Volatility
|
|
|
Risk-free Interest Rate
|
|
|
Expected Dividend Yield
|
|
|
Expected Life (in years)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 10, 2013 convertible note
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at February 10, 2013 (date of vesting)
|
|
307%
|
|
|
0.17%
|
|
|
0%
|
|
|
1.00
|
|
As at April 30, 2014
|
|
545%
|
|
|
0.11%
|
|
|
0%
|
|
|
1.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 20, 2013 convertible note
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at August 19, 2013 (date of vesting)
|
|
301%
|
|
|
0.04%
|
|
|
0%
|
|
|
0.25
|
|
As at April 30, 2014
|
|
537%
|
|
|
0.11%
|
|
|
0%
|
|
|
1.00
|
|
(a)
|
During the six months ended April 30, 2014, the Company issued an aggregate of 1,609,555 shares of common stock for the conversion of $6,292 of convertible notes payable as described in Note 7.
|
(b)
|
On March 26, 2014, the Company issued 5,000,000 shares of the Company’s common stock with a fair value of $15,000 to the Chief Executive Officer of the Company.
|
(c)
|
On April 23, 2014, the Company issued 3,000,000 shares of the Company’s common stock with a fair value of $66,000 to the Chief Operating Officer of the Company.
|
(d)
|
On April 23, 2014, the Company issued 1,000,000 shares of the Company’s common stock with a fair value of $22,000 to a director of the Company
|
The following table summarizes stock option plan activities:
|
|
Number of Options
|
|
|
Weighted Average Exercise Price
$
|
|
|
Weighted Average Remaining Contractual Life (years)
|
|
|
Aggregate Intrinsic Value
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, October 31, 2013 and April 30, 2014 (unaudited)
|
|
|
5,833
|
|
|
|
135.00
|
|
|
|
1.46
|
|
|
|
–
|
|
The Company’s had no unvested stock options at April 30, 2014 or October 31, 2013.
Additional information regarding stock options as of April 30, 2014 is as follows:
Number of
Options
|
|
|
Exercise
Price
$
|
|
|
Expiry Date
|
|
|
|
|
|
|
|
|
4,444
|
|
|
|
67.50
|
|
|
March 3, 2015
|
|
611
|
|
|
|
225.00
|
|
|
July 23, 2017
|
|
778
|
|
|
|
450.00
|
|
|
December 18, 2017
|
|
5,833
|
|
|
|
|
|
|
|
11.
|
Supplemental Disclosures
|
|
|
Six Months Ended
April 30,
2014
$
|
|
|
Six Months Ended
April 30,
2013
$
|
|
|
Accumulated From
June 5, 2006
(Date of Inception)
to April 30,
2014
$
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
Shares issued for settlement of notes payable and accrued interest
|
|
|
6,292
|
|
|
|
66,365
|
|
|
|
428,757
|
|
Supplemental Disclosures:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
(a)
|
On February 23, 2010, the Company entered into a trademark license agreement (the “Agreement”). Pursuant to the Agreement, the Company was granted an exclusive license to use certain trademarks and trade names on the Company’s hardware, software and services that provide tracking and location monitoring for people, animals and property of any other nature, but excluding firearms and related accessories, as well as existing licensed products and services of the Company. The licensed territory includes the United States, Canada and Mexico. The Agreement expires on February 1, 2015.
|
The Company must pay a royalty of net sales and incurred a non-refundable advance against royalties of $5,000. The Company must pay guaranteed royalties with 25% of each royalty for the year due at the end of each calendar quarter. Further, the Company has agreed to spend an amount equal to at least 2% of all net sales of the licensed products during each contract year for promotional activities.
(b)
|
On December 15, 2011, the Company entered into a share exchange agreement (the “Agreement”) with NetCents. Pursuant to the terms of the Agreement, the Company will issue two shares of common stock for every one share of NetCents stock issued and outstanding on the date of closing. Upon completion of the transaction, NetCents would become a wholly owned subsidiary of the Company. The Agreement is subject to conditions precedent to closing and the risk that these conditions precedent will not be satisfied results in there being no assurance that the Agreement will be completed as contemplated, or at all. As of the date of issuance of these financial statements, the agreement had yet to be completed.
|
(c)
|
On May 10, 2013, the Company entered into debt settlement agreements with certain creditors for amounts owed by the Company. Under the terms of the settlement, the Company agreed to settle $60,614 of accounts payable and accrued liabilities for cash payment of $12,122, and $215,299 of accounts payable and accrued liabilities in exchange for the issuance of 1,595 units. Each unit will be comprised of one common share of the Company and one share purchase warrant, which is exercisable into common shares of the Company at $135.00 per share for a period of two years from the effective date. The effective date of these debt settlement agreements will occur upon the closing of the Agreement, as noted in Note 12(b). As of the date of filing, the Agreement has not been completed, and the terms of the settlements have not yet been satisfied.
|
13. Subsequent Events
(a)
|
On May 12, 2014, the Company issued 374,378 shares of common stock at $0.001 per share to settle $3,744 of the note payable to Gordon Jessop (Note 6).
|
(b)
|
Subsequent to April 30, 2014, the Company issued 3,603,788 common shares upon the conversion of $14,670 of convertible notes payable, as noted in Note 7(c).
|
(c)
|
On May 6, 2014, the Company issued 600,000 common shares upon the conversion of $2,400 of convertible notes payable, as noted in Note 7(a). The conversion resulted in a loss on conversion of shares of $3,600.
|
END OF NOTES TO FINANCIALS
ITEM 2.
|
MANAGE
MENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION
|
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements. You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements. Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.
Business Overview
We were incorporated as a Delaware company on June 4, 2001 under the name Sound Revolution Inc. On July 2, 2009 we changed our name to On4 Communications, Inc. Our fiscal year end is October 31. Our address is Suite 1704 – 1188 West Pender Street, Vancouver, BC, Canada, V6E 0A2. Our telephone number is (604) 620-6879.
Our common stock is quoted on the Pink Sheets Quotation system under the symbol “ONCI.PK” and on the Berlin Stock Exchange under the symbol O4C:GR.
On June 10, 2008, our company effected a 1 for 42 reverse stock split of the outstanding shares of common stock our company and also increased the number of authorized share capital of our company from 100,000,000 to 110,000,000 shares. 100,000,000 shares out the total authorized capital shall be common stock and 10,000,000 shall be preferred stock. On June 26, 2008, the reverse stock split and the increase in our company’s authorized capital came into effect. As a result of the reverse split, the number of the outstanding shares of common stock of our company was decreased from 10,854,629 shares to 258,444 shares of common stock.
On March 13, 2012, we received written consent from the board of directors and the holders of 52.40% of our company’s voting securities to amend the Articles of Incorporation to increase our authorized capital.
On April 19, 2012, the Delaware Secretary of State accepted for filing of a Certificate of Amendment, wherein, we amended our Articles of Incorporation to increase the authorized number of shares of our common stock from 100,000,000 to 200,000,000 shares of common stock, par value of $0.0001 per share, effective April 20, 2012. Our preferred stock remained unchanged.
On November 1, 2012, our company received written consent from the board of directors and the holders of 78.72% of our company’s voting securities to amend the Articles of Incorporation to increase our authorized capital.
On November 30, 2012, the Delaware Secretary of State accepted for filing of a Certificate of Amendment, wherein, our company amended its Articles of Incorporation to increase the authorized number of shares of our common stock from 210,000,000 to 630,000,000 shares, with a par value of $0.0001, which consists of 600,000,000 shares of common stock and 30,000,000 shares of preferred stock.
On October 11, 2013, the Financial Industry Regulatory Authority (“FINRA”) approved a reverse stock split (the “Reverse Split”) of the common shares of the Company, whereby every four hundred and fifty (450) old shares of the Company’s common stock shall be exchanged for one (1) new share of the Company’s common stock. As a result, the issued and outstanding shares of common stock of the Company decreased from five hundred ninety nine million, six hundred fifty seven thousand, three hundred and forty six (599,657,346) shares prior to the Reverse Split to one million, three hundred thirty two thousand, five hundred seventy two (1,332,572) shares following the Reverse Split. The Reverse Split became effective on October 15, 2013.
Corporate History
On March 12, 2009, we entered into a merger agreement with On4 Communications, Inc., a private Arizona company incorporated on June 5, 2006. We subsequently amended this agreement on April 7, 2009, and on May 1, 2009 we completed the merger with On4, with our company as the surviving entity. Upon the completion of the merger, we had three wholly-owned subsidiaries: (i) Charity Tunes Inc., a Delaware company incorporated on June 27, 2005 for the purpose of operating a website for the distribution of music online; (ii) Sound Revolution Recordings Inc., a British Columbia, Canada company incorporated on June 20, 2001 for the purpose of carrying on music marketing services in British Columbia; and (iii) PetsMobility Inc., a Delaware company incorporated on March 23, 2006 for the purpose of operating the website www.petsmo.com and related business.
On April 29, 2010, we sold our interest in PetsMobility Inc., excluding certain specific assets, to On4 Communications Inc., a private Canadian company and our shareholder (“On4 Canada”), pursuant to an asset purchase agreement in exchange for On4 Canada returning 2,000,000 shares of our common stock to our treasury for cancellation. On October 29, 2010 we amended the asset purchase agreement to clarify certain terms of the purchase and sale.
On March 16, 2011, we sold our interest in Charity Tunes and Sound Revolution to Empire Success, LLC, a private Nevada limited liability company, in exchange for $15,000 and 6,300 shares of Empire’s common stock. As a result, we currently have no subsidiaries.
On November 3, 2011, we entered into a binding letter of intent to acquire 100% of the issued and outstanding shares of NetCents Systems Ltd., a private Alberta corporation engaged in the development and implementation of a unique and secure electronic payment system for online merchants and consumers. The letter of intent provides for a period of due diligence which will lead to a formal agreement whereby we will acquire 100% of the issued and outstanding capital of NetCents. Clayton Moore, an officer and director of our company, and Ryan Madson, an officer of our company, are shareholders of NetCents and Mr. Moore is the president and director of Net Cents.
On December 15, 2011, we entered into a share exchange agreement with NetCents and the selling shareholders of NetCents. Pursuant to the terms of the share exchange agreement, our company and NetCents agreed to engage in a share exchange which, if completed, would result in NetCents becoming a wholly owned subsidiary of our company. The share exchange has not been completed as of the date of this quarterly report and is subject to completion of due diligence by the parties, and to the following material terms and conditions:
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1.
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We will issue 2 shares of our common stock from treasury for every 1 share of NetCents stock issued and outstanding on the date of closing;
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2.
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NetCents will have no more than 16,245,421 shares of its common stock issued and outstanding on the closing date of the Share Exchange Agreement. Additional issuances must be authorized by our company;
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3.
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NetCents will have delivered to our company audited financial statements for its last two fiscal years and any applicable interim period ended no more than 35 days before the closing of the share exchange agreement, prepared in accordance with United States GAAP and audited by an independent auditor registered with the Public Company Accounting Oversight Board in the United States; and
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4.
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NetCents will file all required documentation with the Province of Alberta to effect the share exchange.
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Also on December 15, 2011, NetCents received the approval for the share exchange agreement and the share exchange transaction from holders of approximately 76% of its voting securities through written resolution in lieu of holding a meeting. However, as reported above, as of the date of this quarterly report, the share exchange has yet to be completed.
Our Current Business
We are a development stage company, providing wireless communications services to telecommunication companies, consumers and businesses. Our platform comprises global positioning system (“GPS”) device management, location-based services (“LBS”) capabilities, and the broadcasting of proprietary and non-proprietary content. LBS is a term used to describe the delivery of information and entertainment content to consumers with mobile devices based on the geographical position of the mobile device. We intend to deliver LBS via two-way communication tracking devices with applications that are able to track people, pets, assets and inventory. Our solution platform integrates various location-aware devises, such as GPS receivers, and transmits data to a range of devices, including Web browsers, instant messengers, short message service/mail, and mobile phones.
Research and Development Expenditures
We have incurred $Nil in research and development expenditures over the last two fiscal years.
Employees
As of April 30, 2014, our only employees are our directors and officers. We plan to hire additional employees when circumstances warrant.
Results of Operations
Three and Six Months Ended April 30, 2014 and April 30, 2013, and the Period from June 5, 2006 (Date of Inception) to April 30, 2014.
Our results of operations are presented below:
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Accumulated from
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June 5, 2006
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Three Months
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Three Months
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Six Months
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Six Months
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(Date of
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Ended
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Ended
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Ended
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Ended
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Inception) to
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April 30,
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Aril 30,
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Aril 30,
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Aril 30,
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April 30,
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2014
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2013
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2014
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2013
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2014
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(unaudited)
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(unaudited)
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(unaudited)
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(unaudited)
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(unaudited)
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($)
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($)
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($)
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($)
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($)
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Revenue
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Nil
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Nil
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Nil
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Nil
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Nil
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Total Operating Expenses
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215,568
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85,730
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231,015
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133,485
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11,963,738
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Total Other Expenses (Income)
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(4,767
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134,838
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223,491
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401,450
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2,509,424
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Net Loss from continuing operations
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(210,801
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(220,568
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(454,506
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(534,935
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(14,473,162
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From our inception on June 5, 2006 to April 30, 2014, we did not generate any revenue.
Expenses
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Accumulated
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from
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Three Months
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Three Months
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Six Months
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Six Months
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June 5, 2006
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Ended
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Ended
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Ended
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Ended
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(Date of
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April 30,
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April 30,
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April 30,
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April 30,
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Inception) to
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2014
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2013
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2014
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2013
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April 30, 2014
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(unaudited)
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(unaudited)
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(unaudited)
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(unaudited)
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(unaudited)
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($)
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($)
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($)
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($)
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($)
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Advertising and Marketing
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55,000
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62,000
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55,000
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62,000
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299,182
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Amortization of intangible assets
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–
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–
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–
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–
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18,138
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Amortization of property and equipment
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–
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–
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–
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–
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32,677
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Consulting fees
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–
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–
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–
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5,232
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2,173,938
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Foreign exchange (gain) loss
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2,681
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(1,259
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(7,748
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(18
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242,214
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General and administrative
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3,775
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5,843
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4,127
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8,834
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1,131,792
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Impairment of goodwill
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–
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–
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–
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–
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3,274,109
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Impairment of assets
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–
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–
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–
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–
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2,220,609
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Management fees
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139,000
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–
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139,000
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15,610
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1,365,409
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Payroll
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–
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–
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–
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–
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29,516
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Professional fees
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15,112
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19,146
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40,636
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41,827
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857,794
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Research and development
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–
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–
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–
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–
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318,360
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Our total operating expenses during the three months ended April 30, 2014 were $215,568 which consisted of $55,000 in advertising and marketing, $2,681 in foreign exchange gain, $3,775 in general and administrative expenses, $139,000 in management fees, and $15,112 in professional fees. During this period we also incurred $102 in accretion of discounts on convertible notes payable, $125 in amortization of deferred financing costs, $23,799 in interest expenses, and offset by a $28,793 gain on change in fair value of derivative liabilities.
Our total operating expenses during the three months ended April 30, 2013 were $85,730 which consisted of $62,000 in advertising and marketing, $5,843 in general and administrative expenses, and $19,146 in professional fees offset by $1,259 in foreign exchange gain. During this period we also incurred $72,913 in accretion of discounts on convertible notes payable, $3,409 in amortization of deferred financing costs, $25,793 in the form of interest expenses and $32,723 in loss on change in fair value of derivative liabilities.
Our total operating expenses from our inception on June 5, 2006 to April 30, 2014 were $11,963,738 which consisted of $299,182 in advertising and marketing expenses, $18,138 in amortization of intangible assets, $32,677 in amortization of property and equipment, $2,173,938 in consulting fees, $242,214 in foreign exchange loss, $1,131,792 in general and administrative expenses, $3,274,109 in impairment of goodwill, $2,220,609 in impairment of assets, $1,365,409 in management fees, $29,516 in payroll expenses, $857,794 in professional fees and $318,360 in research and development expenses.
Our general and administrative expenses consisted of travel, meals and entertainment, office maintenance, communication expenses (cellular, internet, fax and telephone), office supplies and courier and postage costs. Our professional fees consisted of legal, accounting and auditing fees.
The increase in our operating expenses during the three months ended April 30, 2014 compared to the same period in 2013 was primarily due to increased management fees, which included the issuance of 9,000,000 common shares with a fair value of $103,000.
During the three months ended April 30, 2014 we incurred an operating loss of $215,568, and a net loss of $210,801. During the three months ended April 30, 2013, we incurred an operating loss of $85,730 and a net loss of $220,568. We experienced a net loss per share of $0.04 during the three months ended April 30, 2014 and $0.43 during the same period ended 2013. From our inception on June 5, 2006 to April 30, 2014 we incurred a total of $11,963,738 in operating loss, incurred a $1,205,782 loss from discontinued operations and incurred a net loss $15,678,944.
Liquidity and Capital Resources
Working Capital
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At
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At
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April 30,
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October 31,
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2014
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2013
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($)
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($)
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Current Assets
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117,639
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121,090
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Current Liabilities
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2,290,124
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1,977,748
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Working Capital/(Deficit)
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(2,172,485
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(1,856,658
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Cash Flows
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Period from
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Six Months
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Six Months
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Inception
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Ended
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Ended
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(June 5, 2006)
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April 30,
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April 30,
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to April 30,
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2014
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2013
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2014
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($)
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($)
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($)
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Net Cash used in Operating Activities
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(2,429
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(38,848
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(2,902,007
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Net Cash used in Investing Activities
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3,451
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(54,137
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(1,430,838
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Net Cash provided by Financing Activities
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(1,022
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92,825
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4,280,694
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Net Increase (Decrease) in Cash During Period
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Nil
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(370
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Nil
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As of April 30, 2014, we had $Nil in cash, $117,639 in total current assets, $2,290,124 in total current liabilities and a working capital deficit of $2,172,485. As of October 31, 2013, we had working capital deficit of $1,856,658. The increase in our working capital deficit was due to the fact that we incurred operating expenditures during the period, but had no cash on hand or raised any financing during the period.
During the three months ended April 30, 2014, we spent $2,429 on operating activities, compared to $38,848 during the same period in fiscal 2013. The decrease in our expenditures on operating activities during the three months ended April 30, 2014 was largely due to the fact that we had limited cash flows from financing activities, which restricted the amount of operating expenditure that we incurred during the period. From our inception on June 5, 2006 to April 30, 2014 we spent $2,902,007 on operating activities.
During the three months ended April 30, 2014, we received $3,451in investing activities, whereas we spent $54,137 on investing activities during the same period in fiscal 2013. From our inception on June 5, 2006 to April 30, 2014 we have spent a total of $1,430,838 on investing activities, the bulk of which was in the form of advances for notes receivable of $1,114,182, loan receivables of $117,639 and the acquisition of intangible assets of $182,687.
During the three months ended April 30, 2014 we spent $1,022 in financing activities related to our bank indebtedness. During the three months ended April 30, 2013, we received $92,825 in proceeds from financing activities, including $98,935 from the issuance of convertible notes payable less $6,500 in deferred financing costs. From our inception on June 5, 2006 to April 30, 2014, we received $4,280,694 from financing activities, primarily in the form of proceeds from the issuance of our common and preferred stock, proceeds from notes payable and convertible notes payable, and contributions from related parties.
For the next 12 months (beginning October 2013), we estimate our planned expenses to be approximately $1,400,000, as summarized in the table below:
Description
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Potential
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Estimated
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Completion
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Expenses
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Date
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($)
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General and administrative expenses
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12 months
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250,000
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Professional fees
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12 months
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150,000
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Unallocated working capital
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12 months
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100,000
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Debt repayment
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12 months
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900,000
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Total
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1,400,000
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Based on our planned expenditures, we require additional funds of approximately $1,400,000 to proceed with our business plan over the next 12 months (beginning October 2013). If we are not able to obtain additional financing on a timely basis, we will be unable to conduct our operations as planned, and we will not be able to meet our obligations as they become due. In such event, we will be forced to scale down or perhaps even cease our operations.
Future Financings
We have not generated significant revenues since inception and are unlikely to generate significant revenues or earnings in the immediate or foreseeable future. We rely upon the sale of our securities and proceeds from related parties to fund our operations. We anticipate that we will incur substantial losses for the foreseeable future, and we are dependent upon obtaining outside financing to carry out our operations.
We will require approximately $1,400,000 over the next 12 months (beginning October 2013) to enable us to proceed with our plan of operations, including paying our ongoing expenses. These cash requirements are in excess of our current cash and working capital resources. Accordingly, we intend to raise funds from private placements, loans or possibly a registered public offering (either self-underwritten or through a broker-dealer). At this time we do not have a commitment from any broker-dealer to provide us with financing, and there is no guarantee that any financing will be available to us or if available, on terms that will be acceptable to us.
If we are unable to obtain the necessary additional financing, then we plan to reduce the amounts that we spend on our operations, our professional fees and our general and administrative expenses so as not to exceed the amount of capital resources that are available to us. If we do not secure additional financing our current cash reserves and working capital will be not be sufficient to enable us to sustain our operations for the next 12 months, even if we do decide to scale them down.
Going Concern
Our financial statements for the three months ended April 30, 2014 have been prepared on a going concern basis and contain an additional explanatory paragraph in Note 1 which identifies issues that raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.
Inflation
The amounts presented in our financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.
Critical Accounting Policies
Our financial statements are affected by the accounting policies used and the estimates and assumptions made by management during their preparation. We have identified below the accounting policies that are of particular importance in the presentation of our financial position, results of operations and cash flows, and which require the application of significant judgment by management.
Comprehensive Loss
ASC 220, “Comprehensive Income” establishes standards for the reporting and display of comprehensive income and its components in the financial statements. As at April 30, 2014 and 2013, our company had no items that represent comprehensive income or loss.
Recently Issued Accounting Pronouncements
Our 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.