Notes to the Consolidated Financial Statements
March 31, 2016 and 2015
1.
Nature of Operations and Continuance of Business
Mobetize,
Corp.
(the
“Company”)
was
incorporated
in
the
state
of
Nevada
on
February
23,
2012
under the name Slavia, Corp.
Mobetize
Corp.
is
an
emerging
Fintech
Company
which
provides
Fintech
solutions
and
services
to
enable and support the convergence of global telecom and financial services providers (“Customers”).
This
is
achieved
through
the
Company’s
Global
Mobile
B2B
Fintech
and
Financial
Services
Marketplace
(the
“Hub”).
Mobetize
is
focused
on
selling
fintech
solutions
and
services
to
global
telecom and financial services providers.
The
Company’s activities
are
subject
to
significant
risks
and
uncertainties,
including
the
need
to
secure
additional
funding
to
operationalize
the
Company’s
current
technology
before
another
company develops competitive products.
Going Concern
These
consolidated
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. As of March 31, 2016, the Company has an accumulated deficit of $6,325,061 and a history
of
net
losses
and
cash
used
in
operating
activities.
These
factors
raise
substantial
doubt
regarding
the
Company’s
ability
to
continue
as
a
going
concern.
The
continuation
of
the
Company
as
a
going
concern
is
dependent
upon
the
continued
financial
support
from
its
management,
and
its
ability
to
identify
future
investment
opportunities
and
obtain
the
necessary
debt
or
equity
financing,
cutting
operating costs, launching a
viable product, and generating profitable operations from the Company’s
future
operations. 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.
F-6
2.
Summary of Significant Accounting Policies
a)
Basis of Presentation
The
consolidated
financial
statements
of
the
Company
have
been
prepared
in
accordance
with
accounting
principles
generally
accepted
in
the
United
States
(“US
GAAP”)
which
include
the
accounts
of
Mobetize
Canada
Inc.
and
Mobetize
USA
Inc.,
both
of
which
are
wholly-owned
subsidiaries
of the Company.
The consolidated
financial
statements
are expressed in U.S.
dollars.
All
significant
intercompany
transactions
and
balances
have
been
eliminated.
The
Company’s
fiscal year end is March 31.
b)
Use of Estimates
The
preparation
of
financial
statements
in
conformity
with
US
GAAP
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 the collectability of
accounts
receivable,
valuation
of
intangible
assets,
revenue
recognition,
fair
value
of
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.
c)
Financial Statements
These
consolidated
financial
statements
have
been
prepared
in
the
opinion
of
management
to
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 the
results
for a full year but not necessarily
indicative for any future period.
d)
Cash
The
Company considers all
highly liquid instruments
with
maturity of
three
months
or
less
at
the
time
of
issuance
to
be
cash
equivalents.
As
of
March
31,
2016
and
2015,
the
Company
had
no
cash equivalents.
e)
Accounts Receivable
The
Company
evaluates
the
collectability
of
accounts
receivable
based
on
the
age
of
receivable
balances
and
customer
credit-worthiness.
If
the
Company
determines
that
financial
conditions
of
its customers
have
deteriorated,
an allowance
for doubtful
accounts
may be
made
or the
accounts
receivable written off if all collection attempts have failed.
F-7
2.
Summary of Significant Accounting Policies – Continued
f) Accounts Receivable
The
Company
evaluates
the
collectability
of
accounts
receivable
based
on
the
age
of
receivable
balances
and
customer
credit-worthiness.
If
the
Company
determines
that
financial
conditions
of
its customers
have
deteriorated,
an allowance
for doubtful
accounts
may be
made
or the
accounts
receivable written off if all collection attempts have failed.
g)
Prepaid Expenses
The
Company pays
for
some
services
in
advance
and
recognizes
these
expenses as
prepaid
at
the
balance
sheet
date.
If
certain
prepaid
expenses
extend
beyond
one-year,
those
are
classified
as
non-current assets.
h)
Revenue Recognition
The
Company
recognizes
revenue
from
licensing
and
professional
fees.
Revenue
will
be
recognized only when
the price is fixed and determinable, persuasive evidence of an arrangement
exists, the service has been provided, and collectability is reasonably assured.
i) Property and Equipment
Property
and equipment is accounted for at cost less accumulated depreciation and includes
computer equipment and office furniture. Depreciation is computed using the straight-line method
over the estimated useful lives of the assets, which are five years.
j) Research and Development Costs
The
Company
incurs
research
and
development
costs
during
the
course
of
its
operations.
The
costs
are
expensed
except
in
cases
where
development
costs
meet
certain
identifiable
criteria
for
capitalization. Capitalized development costs are
amortized over the life of the related
commercial production.
F-8
2.
Summary of Significant Accounting Policies – Continued
k)
Stock-Based Compensation
The
Company
records
stock-based
compensation
in
accordance
with
ASC
718,
Compensation
–
Stock
Compensation,
which
requires
the
measurement
and
recognition
of
compensation
expense
based on estimated fair values for all share-based awards made to employees and directors,
including stock options.
ASC
718 requires companies to estimate the
fair
value of share-based awards on the date of grant
using
an
option-pricing
model.
The
Company uses
the
Black-Scholes
option-pricing
model
as
its
method of determining fair value. 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
behaviours. The value of the portion of the award that is ultimately expected to vest is recognized
as
an
expense
in
the
consolidated
statement
of
comprehensive
loss
over
the
requisite
service
period.
Options
granted to consultants are
valued at
the fair
value of
the equity instruments issued,
or
the
fair value of the services received, whichever is more reliably measureable.
l) Income Taxes
Deferred
income
taxes
are
determined
using
the
liability
method
for
the
temporary
differences
between the financial reporting basis and income tax basis of the Company’s assets and liabilities.
Deferred
income
taxes
are
measured
based
on
the
tax
rates
expected
to
be
in
effect
when
the
temporary differences are included in the Company’s tax return. Deferred tax assets and liabilities
are
recognized
based
on
anticipated
future
tax
consequences
attributable
to
differences
between
financial statement carrying amounts of assets and liabilities and their respective tax bases.
The
Company’s policy
is
to
recognize
penalties and
interest, if
any, related
to
uncertain
tax
positions as general and administrative expense.
m)
Basic and Diluted Net Income (Loss) per Share
The
Company
computes
net
income
(loss)
per
share
in
accordance
with
ASC
260,
Earnings
per
Share. ASC
260 requires
presentation of basic and diluted earnings
per share
(“EPS”)
on the face
of the income statement. Basic EPS is computed by dividing net loss available to common
shareholders
and
preferred
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.
Due
to
the
continued
losses
in
the
Company,
all
convertible
instruments,
stock options,
and
warrants are
considered
anti-dilutive. Consequently,
as
of
March
31, 2016,
the
Company has nil (2014 – nil) potentially dilutive shares.
F-9
2.
Summary of Significant Accounting Policies – Continued
n)
Comprehensive Loss
ASC
220,
Comprehensive
Income
,
establishes
standards
for
the
reporting
and
display
of
comprehensive loss and its components in the financial statements.
o)
Financial Instruments / Concentration
Financial
instruments
consist
principally of
cash,
accounts
receivable,
accounts
payable,
deposits
due to customers, promissory note, shareholder loans, and due to related parties. Pursuant to ASC
820,
Fair
Value
Measurements
and
Disclosures
and
ASC
825,
Financial
Instruments
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
relatively short
maturity dates
and
current
market
rates
for
similar instruments. The Company is
exposed
to credit
risk through
its
cash
and
accounts
receivable,
but
mitigates
this
risk
by
keeping
deposits
at
major
financial
institutions
and
advancing
credit
only
to
bona
fide
creditworthy
entities.
The
maximum
amount
of
credit
risk
is
equal to the carrying amount.
p)
Financial Instruments
Pursuant
to
ASC
820,
Fair
Value
Measurements and Disclosures
,
an entity is
required
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.
F-10
2.
Summary of Significant Accounting Policies – Continued
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,
amounts
receivable,
accounts
payable
and
accrued
liabilities,
and
amounts
due
to
related
parties.
Pursuant
to
ASC
820,
the
fair
value
of
our
cash
is
determined
based
on
“Level
1”
inputs,
which
consist
of
quoted
prices
in
active markets for identical assets. We believe that the recorded values of all of our other
financial
instruments
approximate
their
current
fair
values
because
of
their
nature
and
respective
maturity dates or durations.
q)
Embedded Conversion Features
The
Company
evaluates
embedded
conversion
features
within
convertible
debt
under
ASC
815
Derivatives
and
Hedging
to
determine
whether
the
embedded
conversion
feature(s)
should
be
bifurcated from the host instrument and accounted for as a derivative at fair value with changes in
fair
value
recorded
in
earnings.
If
the
conversion
feature
does
not
require
derivative
treatment
under
ASC
815, the
instrument
is evaluated under
ASC
470-20,
Debt
with Conversion
and Other
Options
for consideration of any beneficial conversion feature.
r) Derivative Financial Instruments
The
Company
does
not
use
derivative
instruments
to
hedge
exposures
to
cash
flow,
market,
or
foreign
currency
risks.
The
Company
evaluates
all
of
it
financial
instruments,
including
stock
purchase warrants, to determine if such instruments are derivatives or contain features that qualify
as embedded derivatives.
For
derivative
financial
instruments
that
are
accounted
for
as
liabilities,
the
derivative
instrument
is
initially
recorded
at
its
fair
value
and
is
then
re-valued
at
each
reporting
date,
with
changes
in
the fair value reported as charges or credits to income. For option-based simple derivative
financial
instruments,
the
Company
uses
the
Black-Scholes
option-pricing
model
to
value
the
derivative
instruments
at
inception
and
subsequent
valuation
dates.
The
classification
of
derivative
instruments,
including
whether
such
instruments
should
be
recorded
as
liabilities
or
as
equity, is re-assessed at the end of each reporting period.
s) Beneficial Conversion Feature
For conventional convertible debt where the rate of conversion is below market value, the
Company records a Beneficial Conversion Feature (the "BCF") and related debt discount.
When
the
Company
records
a
BCF,
the
intrinsic
value
method
of
the
BCF
is
recorded
as
a
debt
discount
against
the
face
amount
of
the
respective
debt
instrument
(offset
to
additional
paid
in
capital)
and
amortized to
interest
expense
over the
life
of
the
debt.
The Company has
determined
that there is no BCF with its convertible debt.
F-11
2.
Summary of Significant Accounting Policies – Continued
t) Debt Issue Costs and Debt Discount
The
Company may record
debt
issue costs
and/or
debt
discounts
in connection
with raising
funds
through
the
issuance
of
debt.
These
costs
may
be
paid
in
the
form
of
cash,
or
equity
(such
as
warrants).
These
costs
are
amortized
to
interest
expense
over
the
life
of
the
debt.
If
a
conversion
of
the
underlying
debt
occurs,
a
proportionate
share
of
the
unamortized
amounts
is
immediately
expensed.
u)
Foreign Currency
The
functional
and
reporting
currency
of
the
Company
and
its
subsidiary,
Mobetize
USA
Inc.
is
the
United
States
Dollar. The
functional
currency
of the
Company’s
international subsidiary,
Mobetize
Canada
Inc.,
is
the
local
currency,
which
is
Canadian
dollar.
The
Company
translates
the
financial
statements
of
this
subsidiary
to
U.S.
dollars
in
accordance
with
ASC
740,
Foreign
Currency
Translation
Matters
using
month-end
rates
of
exchange
for
assets
and
liabilities,
and
average rates for the annual period are derived from daily spot rates for revenues and expenses.
Translation gains and losses are recorded in accumulated other comprehensive income as a
component of
stockholders’ equity. The
Company
has not, to the date of these
consolidated
financial
statements,
entered
into
derivative
instruments
to
offset
the
impact
of
foreign
currency
fluctuations.
v)
Recently Adopted Accounting Standards
In June 2014, ASU guidance was issued to resolve the diversity of practice relating to the
accounting
for
stock
based
performance
awards
that
the
performance
target
could
be
achieved
after the employee
completes the required service period. The update is effective prospectively or
retrospectively for annual reporting periods beginning after December 15, 2015.
The adoption of the pronouncement did not have a material effect on the Company’s consolidated
financial statements.
In
June
2014,
the
FASB
issued
ASU
No.
2014-10,
Development
Stage
Entities
(Topic
915):
Elimination
of
Certain
Financial
Reporting
Requirements.
The
amendments
in
this
Update
remove
the
definition
of
a
development
stage
entity from
the
Master
Glossary of
the
Accounting
Standards Codification, thereby
removing the financial reporting distinction between
development
stage
entities and other reporting entities. In
addition, the amendments
eliminate the
requirements
for
development
stage
entities
to
(1)
present
inception-to-date
information
in
the
statements
of
income,
cash
flows,
and
shareholder
equity,
(2)
label
the
financial
statements
as
those of
a
development
stage
entity,
(3)
disclose
a
description
of
the development
stage
activities
in
which
the
entity is
engaged,
and
(4)
disclose
in
the
first
year
in
which
the
entity is
no
longer
a
development
stage
entity that in
prior
years
it had been in the
development stage.
This ASU
was
effective
for
annual
periods
beginning
after
December
15,
2014.
Early
adoption
is
permitted.
Accordingly, we have elected to adopt ASU No. 2014-10 on April 1, 2014.
F-12
2.
Summary of Significant Accounting Policies – Continued
w)
Recent Accounting Pronouncements
In
May
2014,
ASU
guidance
was
issued
related
to
revenue
from
contracts
with
customers.
The
new standard
provides a
five-step
approach
to be
applied to
all contracts
with
customers and also
requires
expanded
disclosures
about
revenue
recognition.
The
ASU
is
effective
for
annual
reporting
periods
beginning
after
December
15, 2017,
including
interim
periods
and
is
to
be
retrospectively
applied.
Early
application
is
permitted
only
as
of
annual
reporting
periods
beginning
after
December
15,
2016,
including
interim
reporting
periods
within
that
reporting
period.
The
Company
is
currently
evaluating
this
guidance
and
the
impact
it
will
have
on
its
consolidated financial statements.
In
January 2015,
an
ASU
was
issued
to
simplify the
income
statement
presentation
requirements
in
Subtopic
225-20
by
eliminating
the
concept
of
extraordinary
items. Extraordinary
items
are
events
and
transactions
that
are
distinguished
by
their
unusual
nature
and
by
the
infrequency
of
their occurrence. Eliminating
the extraordinary
classification simplifies
income statement
presentation
by
altogether
removing
the
concept
of
extraordinary
items
from
consideration.
This
ASU is effective for annual periods beginning after December 15, 2015, including interim periods
within those annual periods. An entity may apply this ASU prospectively or retrospectively to all
prior
periods
presented
in
the
financial
statements.
Early
adoption
is
permitted. The
Company
does
not
expect
the
amendments
in
this
ASU
to
have
any
impact
on
its
consolidated
financial
statements.
In
November
2015,
an
ASU
was
issued
to
simplify
the
presentation
of
deferred
income
taxes.
The
amendments
in
this
ASU
require
that
deferred
tax
liabilities
and
assets
be
classified
as
non-
current
in
a
classified
balance
sheet
as
compared
to
the
current
requirements
to
separate
deferred
tax
liabilities
and
assets
into
current
and
non-current
amounts.
This
ASU
is
effective
for
annual
periods
beginning
after
December
15,
2016,
including
interim
periods
within
those
annual
periods.
Earlier
application
is
permitted. This
ASU
may
be
applied
either
prospectively
to
all
deferred
tax
liabilities
and
assets
or
retrospectively
to
all
periods
presented.
The
Company
is
currently evaluating this guidance and the impact it will have on its consolidated financial
statements.
In
February 2016,
Topic
842,
Leases
was
issued
to
replace
the
leases
requirements
in
Topic
840,
Leases.
The
main
difference
between
previous
GAAP
and
Topic
842
is
the
recognition
of
lease
assets
and lease liabilities by lessees
for those leases
classified as operating leases under previous
GAAP.
A
lessee
should
recognize
in
the
balance
sheet
a
liability
to
make
lease
payments
(the
lease
liability)
and
a
right-of-use
asset
representing
its
right
to
use
the
underlying
asset
for
the
lease term. For leases with a term of 12 months or less, a lessee is permitted to make an
accounting
policy
election
by
class
of
underlying
asset
not
to
recognize
lease
assets
and
lease
liabilities. If a lessee makes this election, it should recognize lease expense for such leases
generally
on
a
straight-line
basis
over
the
lease
term.
The
accounting
applied
by
a
lessor
is
largely
unchanged
from
that
applied
under
previous
GAAP.
Topic
842
will
be
effective
for
annual
reporting
periods
beginning
after
December
15,
2018,
including
interim
periods
within
those
annual
periods
and
is
to
be
retrospectively
applied. Earlier
application
is
permitted. The
Company
is
currently
evaluating
this
guidance
and
the
impact
it
will
have
on
its
consolidated
financial statements.
F-13
2.
Summary of Significant Accounting Policies - Continued
In
March
2016,
an
ASU
was
issued
to
reduce
complexity
in
the
accounting
for
employee
share-
based
payment
transactions. One
of
the
simplifications
relates
to
forfeitures
of
awards. Under
current GAAP,
an entity estimates the
number
of
awards
for
which
the
requisite
service
period
is
expected
to
be
rendered
and
base
the
accruals
of
compensation
cost
on
the
estimated
number
of
awards
that
will
vest.
This
ASU
permits
an
entity
to
make
an
entity-wide
accounting
policy
election either to estimate the number of forfeitures expected to occur or to account for forfeitures
in
compensation
cost
when
they occur.
This
ASU
is
effective
for
annual
periods
beginning
after
December
15,
2016, including
interim
periods
within
those
annual
periods.
Earlier
application is
permitted.
The
Company
is
currently
evaluating
this
guidance
and
the
impact
it
will
have
on
its
consolidated financial statements.
3.
Property and Equipment
Property and equipment, net consisted of the following:
March 31,
March 31,
2016
2015
Computer equipment
$ 14,787
$ 13,428
Furniture
1,204
1,231
Total
15,991
14,659
Less: accumulated amortization
4,163
1,053
Property and equipment, net
$ 11,828
$ 13,606
During the
year
ended March
31,
2016,
property and equipment
decreased
by $1,778
(2015
- $nil) as
a result of foreign currency translation adjustments.
4.
Investment
On
December
24,
2013
the
Company completed
a
debt
for
equity swap
transaction,
through
which
it
converted the notes receivable and accrued interest it held from Telupay International Inc. (“Telupay”)
into 3,268,097 common shares in Telupay. As a result of this transaction, the Company
owned
approximately 2.02% of the outstanding share capital of Telupay.
The
Company recognizes
the
holding of
these shares as
an investment
available
for
sale
and
values it
at
the
fair
value
of
the
shares.
As
Telupay
is
a
public
company
on
the
OTC
market,
the
shares
are
valued at the market price.
During
the
year
ended
March
31,
2015,
the
Company
fully
liquidated
3,268,097
common
shares
of
Telupay
for
$130,527
in
cash
proceeds,
realizing
a
loss
on
sale
of
investment
of
$1,503,523.
As
at
March 31, 2016, the value of the Telupay shares was $nil (2015 - $nil).
F-14
5.
Related Party Transactions
a)
During
the
year
ended
March
31,
2016,
the
Company incurred
$nil
(2015
-
$114,382)
of
management
fees,
and
$1,380
(2015
-
$94,168)
of
general
and
administrative
expenses
to
the
former
President and former Chief Financial Officer (the
“Former CFO”) of the Company, noting
that
the
Former
CFO
resigned
from
the
role
on
February
4,
2016.
In
2016
the
Former
CFO
was
remunerated as an employee.
b)
During
the
year
ended
March
31,
2016,
the
Company
incurred
$120,000
(2015
-
$108,000)
of
management
fees,
$74,227 (2015 - $261,607) of development and engineering fees,
$1,533 (2015
- $5,527) of general and administration expenses, and $nil (2015 - $2,638) of sales and marketing
expenses to a company controlled by the Chief Executive Officer (the “CEO”) of the Company.
c)
During the year ended March 31, 2016, the Company generated $nil (2015 - $13,393) in revenues
from a company controlled by the CEO.
d) As
at
March
31,
2016,
the
Company
owes
to
the
Former
CFO
or
a
company
controlled
by
the
Former
CFO
$5,943
(March
31,
2015
-
$53,105)
for
advances,
management
fees,
and/or
shareholder
loans, as
applicable,
incurred
but
unpaid
during
the
year.
Amounts
owing
to
the
Former CFO are unsecured, non-interest bearing, and due on demand.
e)
As
at
March
31,
2016,
the
Company
owes
to
the
CEO
or
a
company
controlled
by
the
CEO
$41,533
(2015
-
$nil)
in
shareholder
loans,
$44,759 (2015
-
$nil)
in
a
promissory note
(described
below)
which
comprises
$50,000
principal
less
$5,241
in
prepaid
interest,
and
$45,749
(2015
–
$72,810)
in
amounts
payable
for
services
and
expenses
received
by
the
Company.
The
$50,000
promissory note
(the “Promissory Note”) has a twelve
month term with principal
due on maturity
(February
14,
2017),
12%
annual
interest
rate
with
$6,000
interest
prepaid
to
the
holder.
The
other amounts owing to the CEO are unsecured, non-interest bearing, and due on demand.
f) During
the
year
ended
March
31,
2016,
the
Company
received
additional
advances
of
$137,000
(2015
-
$nil)
from
the
Former
CFO,
which
were
reinvested
during
the
year
as
part
of
a
$175,000
private
placement
for
common
shares
of
the
Company
(see
Note
7(h))
by
the
CFO
and
direct
members
of
the
CFO’s
family.
During
the
year
ended
March
31,
2016,
the
Company
also
paid
$994 (2015 - $nil) in interest to the CFO relating to the above noted advances.
g)
During
the
year
ended
March
31,
2016,
the
Former
CFO
exercised
25,000
warrants
at
$0.50
(see
Note 7(f)).
h) During
the
year
ended
March
31,
2016,
the
Company
received
additional
advances
of
$40,741
(2015
-
$nil)
from
the
CEO,
which
were
reinvested
during
the
year
as
part
of
a
$40,741
private
placement
for
common
shares
of
the
Company
(see
Note
7(i))
by
a
company
controlled
by
the
CEO.
F-15
6.
Common Stock and Preferred Stock
a)
Shares for Services:
During
the
years
ended
March
31,
2016
and
2015,
the
Company
entered
into
various
consulting
and advisory agreements with consultants and advisors to provide services in exchange
for shares
and/or cash, as applicable. Shares issued for services have been valued
at the service value
amount
and
exchanged
to
common
shares based
on
either the
quoted
closing price of the
Company’s
common
stock on
the date
of
settlement, or
where
issuance is
delayed,
at the
average
market price of the Company’s stock for the respective period of service, as applicable.
During the year ended March 31, 2016, the Company incurred $18,181 (2015 - $38,690) in shares
for
services,
and
settled
$32,484
(2015
-
$24,388)
of
services
into
common
shares
with
54,727
(2015 – 19,861) common shares issued at $0.001 per share and $32,429 (2015 - $24,367)
recorded to additional paid-in capital as follows:
On
April
4,
2014,
the
Company
issued
1,334
common
shares
at
$0.001
per
share
with
$1,799
recorded
to
additional
paid-in
capital
in
exchange
for
services
in
the
amount
of
$1,800.
On
September
8,
2014,
the
Company
issued
9,990
common
shares
at
$0.001
per
share
with $12,078 recorded to additional paid-in capital in exchange for services in the amount
of $12,087.
§
On
March
4,
2015,
the
Company
issued
8,537
shares
at
$0.001
per
share
with
$10,491
recorded
to
additional
paid-in
capital
to
settle
$10,500
of
services
payable
in
common
shares.
§
On March
31,
2016, the
Company issued
54,727
shares
at
$0.001
per
share
with $32,429
recorded
to
additional
paid-in
capital
to
settle
$32,484
of
services
payable
in
common
shares.
As at March 31, 2016, $ nil (2015 - $14,303) was included in share subscriptions payable.
F-16
6.
Common Stock and Preferred Stock – Continued
b)
Private Placements:
During
the
years
ended
March
31,
2016
and
2015,
the
Company
conducted
four
private
placements
of
investment
units
(comprising
common
shares
and
warrants),
some
of
which
had
repricing and warrant term extensions as follows:
§
On June 25, 2014 the Company closed a
private placement under which it sold 1,122,831
investment
units
for
proceeds
of
$783,623,
net
of
financing
fees
of
$58,500
paid
in
cash.
Each
investment
unit
consisted
of
one
common
share
of
the
Company’s
stock
and
one
half-warrant.
The
561,414
warrants
are
exercisable
at
$1.00
per
share
and
were
initially
valid
for
two
years
from the
date
of
issue
with
an
extension
provided
on
March
17,
2015
for
an
additional
two
years
(see
Note
7e).
133,000
financing
warrants
were
issued
on
the
same terms, plus extension, as those in the investment units (seen Note 7f).
§
On
December
11,
2014
the
Company
closed
a
private
placement
under
which
it
sold
490,000
investment
units
for
proceeds
of
$490,000.
Each
investment
unit
consisted
of
one common share of the Company’s stock and one half-warrant. On March 17, 2015, the
Company repriced
the
investment
units
from
$1.00
per
unit
to
$0.75
per
unit
resulting
in
additional
163,333
investment
units
issued
and
provided
an
extension
of
one
year
to
the
warrant
term.
The
resulting 326,670
warrants
are exercisable at
$1.25
per
share
and
were
initially
valid
for
three
years
from
the
date
of
issue
with
the
March
17,
2015
extension
extending
the
term
an
additional
one
year
(see
Note
7g).
60,000
financing
warrants
were
issued on the same terms, plus extension, as those in the investment units (seen Note 7h).
§
On
September
1,
2015,
the
Company
closed
a
private
placement
under
which
it
sold
2,724,668 investment units for $0.25 per unit for gross proceeds of $681,167, which were
exclusively offered
to subscribers
of
previous
$0.75
private
placements. Each
investment
unit
consists
of
one
common
share
of
the
Company’s
stock
and
one
half-warrant.
The
1,362,332
warrants
are
exercisable
at
$1.00
per
share
and
are
valid
for
three
years
from
the date
of issue (see Note 7b).
$8,750 cash financing fees and 17,500 financing warrants
with a value of $3,372 (see Note 7d) are payable with this private placement.
§
On
September
1,
2015,
the
Company
closed
a
private
placement
under
which
it
sold
161,481
investment
units
for
$0.50
per
unit
for
gross
proceeds
of
$80,739.
Each
investment
unit
consists
of
one
common
share
of
the
Company’s
stock
and
one
half-
warrant.
The
80,740
warrants
are
exercisable
at
$1.00
per
share
and
are
valid
for
three
years from the date of issue (see Note 7(c)). Neither financing fees nor financing warrants
were payable with this private placement.
F-17
6.
Common Stock and Preferred Stock - Continued
c)
Issuance of Shares on Exercise of Warrants, Options, and Settlement of Amounts:
§
On
March
4,
2015,
the
Company
issued
25,280
shares
at
a
price
of
$0.20
per
share
to
convert interest payable on notes payable in the amount of $5,056 to equity.
§
On
June
10,
2015,
the
Company
issued
184,500
shares
at
a
price
of
$0.50
per
share
for
proceeds of
$92,250 upon the exercise of warrants.
$184
was recorded to common shares
at
the
par
value
of
$0.001
per
share
and
$92,066
was
recorded
to
additional
paid-in
capital.
§
On
August
15,
2015,
the
Company
issued
5,000
shares
at
a
price
of
$0.50
per
share
for
proceeds
of
$2,500
upon
the
exercise
of
warrants.
$5
was
recorded
to
common
shares
at
the par value of $0.001 per share and $2,495 was recorded to additional paid-in capital.
d)
Authorization and Issuance of Series A Preferred Shares:
During
the
year
ended
March
31,
2016,
the
Company
authorized
the
issuance
of
250,000,000
shares
of
preferred
stock
with
a
par
value
of
$0.001
per
share
and
designated
10,000,000
of
the
preferred
stock
as
Series
A
preferred
shares
(the
“Preferred
Shares”).
The
Preferred
Shares
have
the
same
rights
and
privileges
as
the
common
shares,
with
the
exception
that
Preferred
Share
holder has 10 votes per Preferred Share versus one vote per common share.
On
February 4,
2016,
the
Company converted
4,565,000
common
shares
held
by
the
CEO
of the
Company into
4,565,000
Preferred
Shares.
As
at
March
31,
2016,
4,565,000
(2015
–
nil)
Preferred Shares were issued and outstanding.
e)
Convertible Debenture:
In
March
2016,
the
Company
closed
a
convertible
debenture
financing
for
gross
proceeds
of
$275,000 (the “Convertible Debentures”), net of $30,000 of prepaid interest, noting that $3,000 of
prepaid
interest
was
paid
by
the
Company
to
one
Convertible
Debenture
holder
after
year
end.
The
Convertible
Debentures
have
a
12
month
term,
12%
annual
interest
rate,
pay
the
holder
12
months of prepaid interest on issuance,
and have
a
conversion feature
exercisable
at
the option of
the
holder
(the
“Conversion
Feature”). The Conversion
Feature
enables
the
holder
to
convert
any
portion
of
their
outstanding
Convertible
Debenture
principal
balance
into
common
shares
at
a
variable
and
discounted
conversion
price
(the
“Conversion
Price”
-
see
below)
after
180
days
from
issue
date,
but
no
later
than
the
maturity date.
The
Conversion
Price
is
calculated
as
a
50%
discount
to the
average
of
the
three lowest
closing
market
prices
over
any ten
day trading period,
ending
one
day
prior
to
a
notice
of
conversion
provided
by
the
holder.
The
Conversion
Feature
represents
an
embedded
contingent
redemption
feature
and
is
accounted
for
as
a
derivative.
The
fair
value
of
the
contingent
redemption
feature
is
immaterial
and
therefore
not
recognized
at
inception and at March 31, 2016.
F-18
7.
Share Purchase Warrants
The following table summarizes the continuity of share purchase warrants:
Weighted average
Number of warrants
exercise price (US$)
Balance, March 31, 2014
500,000
0.50
Issued, June 25, 2014
694,414
1.00
Issued, December 11, 2014
305,000
1.25
Issued, March 17, 2015
81,670
1.25
Balance, March 31, 2015
1,581,084
0.90
Exercised, June 10, 2015
(184,500)
0.50
Exercised, August 15, 2015
(5,000)
0.50
Issued, July 15, 2015
94,750
1.00
Issued, September 1, 2015
1,460,572
1.00
Expired, September 2, 2015
(310,500)
0.50
Balance, March 31, 2016
2,636,406
1.04
During
the
year
ended
March
31,
2016,
the
Company
issued
the
following
tranches
of
warrants
relating to private placements (refer to Note 6b) in the year:
a)
On
July
15,
2015,
94,750
warrants
were
issued
with
an
exercise
price
of
$1.00
and
a
three
year
term ending September 1, 2018 to holders of the September 3, 2013 warrants who had exercised a
total
of
189,500
warrants
during
the
six
months
ended
September
30,
2015
prior
to
the
expiry
date
of
September
2,
2015.
These
warrant
holders
each
received
a
half
warrant
for
each
full
warrant
they
exercised.
These
warrants
were
valued
at
$18,255
using
the
Black
Scholes
method
criteria as below.
b)
On
September
1,
2015,
1,362,332
warrants
were
issued
with
an
exercise
price
of
$1.00
and
a
three
year term ending September 1, 2018 to the parties
participating in the
$0.25 private
placement
for
common
shares
(the
“$0.25
PP”)
in
the
quarter
(see
Note
6b).
Each
subscriber
to
the
private
placement
received
a
half
warrant
for
each
common
share
they
subscribed
for.
These
warrants were valued at $262,470 using the Black Scholes method criteria as below.
c)
On
September
1,
2015,
80,740
warrants
were
issued
with
an
exercise
price
of
$1.00
and
a
three
year term ending September
1, 2018 to the parties participating in the $0.50 private
placement for
common
shares
(the
“$0.50
PP”)
in
the
quarter
(see
Note
6b).
Each
subscriber
to
the
private
placement
received
a
half
warrant
for
each
common
share
they
subscribed
for.
These
warrants
were valued at $15,566 using the Black Scholes method criteria as below.
d)
On September 1, 2015, 17,500 finder’s warrants were issued with an exercise price of $1.00 and a
three
year
term
ending
September
1,
2018
to
an
arms-length
third
party assisting
in
the
$0.25
PP
(see
Note
6b).
These
warrants
were
valued
at
$3,372
using
the
Black
Scholes
method
criteria
as
below.
Each
of
the
warrant
issuances
above
were
valued
using
the
Black
Scholes
method,
which
included
the dividend yield as nil, risk-free interest rate of 1.07%, expected volatility of 70.42%, and expected
term of 3 years.
F-19
7.
Share Purchase Warrants - Continued
During
the
year
ended
March
31,
2015,
the
Company
issued
the
following
tranches
of
warrants
relating to private placements (refer to Note 6b) in the year:
e)
On
June
25,
2014,
561,414
warrants
were
issued
with
an
exercise
price
of
$1.00
and
a
two
year
term
ending
June
18,
2016.
On
March
17,
2015,
the
term
was
extended
two
years
to
June
18,
2018.
The
extended
warrants
were
valued
at
$150,659
using
the
Black
Scholes
method,
which
included
a
dividend
yield
of
nil,
risk-free
interest
rate
of
1.07%,
expected
volatility
of
107.0%,
and expected term of 3.3 years.
f) On
June
25,
2014,
133,000
financing
warrants
were
issued
with
an
exercise
price
of
$1.00
and
a
two
year
term
ending
June
18,
2016.
On
March
17,
2015,
the
term
was
extended
two
years
to
June
18,
2018.
The
warrants
were
valued
at
$103,356
using
the
Black
Scholes
method,
which
included
a
dividend
yield
of
nil,
risk-free
interest
rate
of
0.47%,
expected
volatility
of
111.0%,
and expected term of 2 years. No amount was recorded relating to the extension.
g)
On December 11,
2014,
326,670 warrants were issued with an exercise price
of $1.25 and a three
year
term
ending
December
10,
2017.
On
March
17,
2015,
the
term
was
extended
one
year
to
December
10,
2018.
The
extended
warrants
were
valued
at
$112,452
using
the
Black
Scholes
method,
which
included
a
dividend
yield
of
nil,
risk-free
interest
rate
of
1.32%,
expected
volatility of 168%, and expected term of 3.7 years.
h)
On
December
11,
2014,
60,000
financing
warrants
were
issued
with
an
exercise
price
of
$1.25
and a three
year
term ending December 10, 2017. On March 17, 2015, the term was extended one
year to December 10, 2018. The warrants were valued at $38,074 using the Black Scholes
method,
which
included
a
dividend
yield
of
nil,
risk-free
interest
rate
of
1.10%,
expected
volatility of 96.4%, and expected term of 4 years. No amount was recorded relating to the
extension.
As at March 31, 2016, the following share purchase warrants were outstanding:
Number of warrants
Exercise
outstanding
price (US$)
Expiry date
694,414
1.00
June 24, 2018
386,670
1.25
December 10, 2018
1,555,322
1.00
September 1, 2018
2,636,406
F-20
8.
Share Options
The following table summarizes the continuity of share purchase options:
Number of options
Weighted average
outstanding
exercise price (US$)
Balance, March 31, 2014
5,500
1.00
Issued in period
250,000
1.25
Expired in period
(5,500)
1.00
Cancelled in period
(192,709)
1.25
Balance, March 31, 2015
57,291
1.25
Issued in period
2,630,000
0.60
Expired in period
(36,000)
0.65
Cancelled in period
(270,029)
0.74
Balance, March 31, 2016
2,381,262
0.60
As at March 31, 2016, the following share purchase options were outstanding:
Number of options
Number of options
Exercise
outstanding
vested
price (US$)
Expiry date
2,381,262
1,294,262
0.60
September 30, 2020
On September 1, 2014 the Company issued 250,000 share options for consulting services
with a three
year
term,
expiring
on
August
31,
2017.
The
options
vested
monthly
in
equal
installments
and
were
valued
at
$201,150
using
the
Black
Scholes
method,
which
included
the
dividend
yield
of
nil,
risk-
free interest rate of 0.99%, expected volatility of
111.0%,
and expected term of 3 years. At March 31,
2015 192,709 options were cancelled
as a
result of
the
termination of
consulting
services while
57,291
options
were
cancelled
at
March
31,
2016.
There
were
no
options
exercised
since
the
date
of
issue.
For
the
year
ended
March
31,
2016,
$nil
(2015
-
$46,097)
stock
based
compensation
expense
was
recorded,
noting
that
for
the
year
ended
March
31,
2015
$46,097
of
the
value
of
the
vested
options were cancelled and $46,097 was
recorded to
additional paid in capital. The remaining
cancelled balance did not vest.
On August 10, 2015, the
Company’s directors adopted the 2015 Stock
Option Plan (“the Stock
Option
Plan”)
which
permits
the Company to
issue
stock
options
for
up
to 3,000,000
common
shares
of
the
Company
to
directors,
officers,
employees
and
consultants
of
the
Company.
The
3,000,000
shares allocation was approximately 10% of the issued and outstanding shares as of August 10, 2015.
On
October
1,
2015,
2,630,000
stock
options
from
the
Stock
Option
Plan
were
issued
to
directors,
employees,
advisors
and
consultants
for
the
exercise
of
up
to
2,630,000
common
shares
with
a
$0.60
exercise
price,
a
5
year
life,
and
vesting
terms
ranging
from
immediate
to
32
months
depending,
generally, on the tenure of staff.
The
vested
options
are
measured
using
the
Black
Scholes
method,
which
included
the
dividend
yield
of nil, risk-free interest rate of 0.68%, expected volatility of 76.7%, and expected term of 5 years. As
at March
31, 2016, 1,294,262, of the granted options are vested, nil have been
exercised, 36,000 have
expired and 212,738 of the unvested options have been cancelled leaving 1,087,000 options unvested.
For
the
year
ended
March
31,
2016
$711,427
(2015
-
$46,097)
stock
based
compensation
expense
was recorded.
F-21
9.
Reserves
The Company had the following Share Purchase Warrants and Share Options in Reserves:
Share Purchase
Share
Warrants
Options
Total
(Note 7)
(Note 8)
Reserves
Balance - March 31, 2014
$
-
$
-
$
-
Sale of 1,122,831 shares at
$0.75/share net of $58,500
financing fees (Note 7e)
150,659
-
150,659
Sale of 490,000 shares at
$1.00/share (Note 7g)
112,452
-
112,452
Valuation of financing warrants
on sale of shares (Notes 6b)
114,200
-
114,200
Valuation of options issued for
consultancy services received -
cancelled (Note 8)
-
46,097
46,097
Balance - March 31, 2015
$
377,311
$
46,097
$
423,408
Sale of 161,481 shares at
$0.50/share (Note 7c)
15,556
-
15,556
Sale of 2,724,688 shares at
$0.25/share, net of $12,122
financing fee (Note 7b)
262,470
-
262,470
Valuation of financing warrants
(Note 7d)
3,372
-
3,372
Warrants issued on exercise of
expiring warrants (Note 7a)
18,255
-
18,255
Share options issued in the
period
-
711,427
711,427
Balance – March 31, 2016
$
676,964
$
757,524
$
1,434,488
F-22
10.
Income Taxes
At March 31, 2016 the Company had no deferred tax assets.
At
March
31,
2016,
the
Company
had
a
federal
operating
loss
in
the
amount
of
$2,069,545
for
the
year
and
cumulative
losses
of
$6,325,061.
Non-capital
losses
amounted
to
$2,069,545
with
$1,386,822
of
the losses
occurring
within the
State
of
Washington,
USA,
and $682,723
of
the losses
occurring within the Province of British Columbia, Canada.
A
reconciliation
of
the
Company’s
effective
tax
rate
as
a
percentage
of
income
before
taxes
and
federal statutory rate for the periods ended March 31, 2016 and 2015 is summarized as follows:
US$
Years ended March 31,
2016
2015
Loss before income taxes
$
2,069,545 $
3,009,018
Income tax recovery at statutory rates
(662,255)
(992,976)
Non-deductible expenses
257,059
591,669
Change in unrecognized deferred tax asset
519,671
453,105
Foreign exchange impact
(958)
29,030
Other
(113,518)
(80,828)
Income tax expense
- -
-
The
valuation
allowance
for
deferred
tax
assets
as
of
March
31,
2016
and
2015
was
$1,323,411
and
$803,740,
respectively,
which
will
begin
to
expire
in
2033.
In
assessing
the
recovery
of
the
deferred
tax
assets,
management
considers
whether
it
is
more
likely
than
not
that
some
portion
or
all
of
the
deferred
tax assets
will
be realized.
The
ultimate
realization
of
deferred
tax
assets is
dependent
upon
the
generation
of
future
taxable
income
in
the
periods
in
which
those
temporary differences
become
deductible.
Management
considers
the
scheduled
reversals
of
future
deferred
tax
assets,
projected
future
taxable
income,
and
tax
planning
strategies
in
making
this
assessment.
As
a
result,
management
determined
it
was
more
likely than
not
the
deferred
tax
assets
would
not
be
realized
as
of March 31, 2016 and 2015 and maintained a full valuation allowance.
The
unrecognized
deferred
tax
assets
include
tax
losses
and
difference
between
the
carrying
amount
and tax basis of the following items.
US$
Years ended March 31,
2016
2015
Deferred tax assets:
Losses available for deductions
$
1,323,411
$
725,440
Share issuance costs carried forward
-
78,300
1,323,411
803,740
Less unrecognized deferred tax assets
(1,323,411)
(803,740)
Recognized deferred tax assets
$
-
$
-
F-23
11.
Concentration of Risk
During
the
year
ended
March
31,
2016,
revenues
generated
were
$125,934
compared
to
revenues
of
$101,835 during the same period in 2015. Revenues are generated through consulting services
provided by Mobetize to existing customers, payment processing, and licensing.
During
the
year
ended
March
31,
2016,
the
Company
had
revenues
from
five
customers
(2015
–
revenues
from
four
customers)
with
75%
(2015
–
55%)
of
revenues
generated
from
the
Company’s
largest
customer.
During
the
year
ended
March
31,
2016,
the
Company
had
$nil
(2015
-
$13,716)
revenues from Alligato Inc.
12.
Commitment and Contingencies
The
Company
has
an
obligation
under
a
rental
lease
for
its
operating
office.
As
of
March
31,
2016,
the remaining term of the lease is six months with monthly payments of $4,900. The Company’s lease
includes a renewal option.
13.
Supplemental Cash Flow Disclosures
US$
Years ended March 31,
2016
2015
CASH PAID DURING THE PERIOD FOR:
Interest paid
$
36,000
$
-
SUPPLEMENTAL NONCASH
INFORMATION:
Shares issued for services
32,484
289,771
Shares issued to settle debt
-
5,056
14.
Segment Information
The
company
has
currently
one
operating
segment
located
in
Canada.
Therefore,
there
is
a
single
reportable segment and operating unit structure. The Company’s chief operating decision maker
reviews
financial
information
presented
on
a
consolidated
basis
for
purposes
of
allocating
resources
and evaluating financial performance.
15.
Comparative Periods
Certain
comparative
amounts
for
the
prior
period
have
been
reclassified
to
conform
to
the
current
period presentation.
F-24
16.
Subsequent Events
Subsequent
to
year
end,
the
Company
has
sought
recovery
of
578,733
common
shares
and
101,726
share purchase warrants issued as an overpayment in settlement of expenses and liabilities.
On May 20,
2016, the Company filed a Certificate of Amendment to its Articles of Incorporation (the
“Series
A
Amendment”)
with
the
Nevada
Secretary
of
State
to
amend
its
Designation
of
Series
A
Preferred
Stock
dated
February
25,
2016
(the
“Series
A
Preferred
Designation”),
in
its
entirety,
to
amend the provision related to conversion adjustments.
On
May
23,
2016,
the
Company
filed
a
Certificate
of
Designation
for
Series
B
Preferred
Stock
(the
“Series
B
Preferred
Designation”)
with
the
Nevada
Secretary of
State.
The
Series
B
Designation
was
approved
by the
Board
on
May 11,
2016.
The
Series
B
Preferred
Designation
designated
twenty five
million
(25,000,000)
shares
of
the
authorized
preferred
share
capital
as
Series
B
Preferred
Stock
and
provides
certain
preferences
to
holders
of
Series
B
Preferred
Stock
over
those
rights
held
by
holders
of the Company’s common stock
On May 31,
2016, the Company filed a Certificate of Amendment to its Articles of Incorporation (the
“Series
B
Amendment”)
with
the
Nevada
Secretary
of
State
to
amend
its
Designation
of
Series
B
Preferred
Stock
dated
May
23,
2016,
in
its
entirety,
to
amend
the
protection
provision
related
to
the
limitations placed on the issuance of Series B Preferred Stock.
On June 1, 2016, the Company entered into Consulting and Debt Settlement Agreements with
Francisco Kent Carasquero pursuant to which the Company agreed to settle an amount of $30,000 for
services rendered by Mr. Carasquero in exchange for 200,000 shares of Series B Preferred Stock in
total satisfaction of the amounts owed and to enter into a monthly consulting arrangement.
On June 2, 2016, the Company and Alligato, Inc. entered into a Share Exchange Agreement pursuant
to which Alligato exchanged 4,081,481 shares of the Company’s common stock for 4,081,481 shares
of the Company’s Series B Preferred Stock.
On June 2, 2016, the Company and Don Duberstein, a member of the board of directors, entered into
a Share Exchange Agreement pursuant to which Mr. Duberstein exchanged 1,039,167 shares of the
Company’s common stock for 1,039,167 shares of the Company’s Series B Preferred Stock.
On June 2, 2016, the Company” and Malek Ladki, a member of the board of directors, entered into a
Share Exchange Agreement pursuant to which Mr. Ladki exchanged 300,000 shares of the
Company’s common stock for 300,000 shares of the Company’s series B Preferred Stock.
F-25