Item
1. Financial Statements
Our
financial statements included in this Form 10-Q are as follows:
F-1
|
Balance
Sheets as of May 31, 2016 and November 30, 2015 (unaudited);
|
F-2
|
Statements of Operations
for the three and six months ended May 31, 2016 and May 31, 2015 (unaudited);
|
F-3
|
Statements of Cash
Flows for the six months ended May 31, 2016 and May 31, 2015 (unaudited);
|
F-4
|
Notes to Financial
Statements.
|
These
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. Operating results for the interim period ended May 31, 2016 are not necessarily
indicative of the results that can be expected for the full year.
LANS
HOLDINGS, INC.
BALANCE
SHEETS
AS
OF MAY 31, 2016 AND NOVEMBER 30, 2015
(UNAUDITED)
|
|
May 31,
|
|
November 30,
|
|
|
2016
|
|
2015
|
ASSETS
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
916
|
|
|
$
|
15,540
|
Accounts receivable
|
|
|
10,000
|
|
|
|
13,712
|
Prepaid expenses
|
|
|
5,807
|
|
|
|
11,216
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
16,723
|
|
|
$
|
40,468
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
135,115
|
|
|
$
|
64,170
|
Accounts payable and accrued expenses – related parties
|
|
|
233,991
|
|
|
|
159,965
|
Stock payable
|
|
|
—
|
|
|
|
75,000
|
Stock payable – related parties
|
|
|
—
|
|
|
|
45,000
|
Notes payable
|
|
|
289,700
|
|
|
|
289,700
|
Notes payable – related parties
|
|
|
43,258
|
|
|
|
5,000
|
Convertible debentures, net of unamortized discount
|
|
|
319
|
|
|
|
—
|
Convertible debentures – related parties, net of unamortized discount
|
|
|
1,171
|
|
|
|
—
|
Derivative liabilities
|
|
|
32,849
|
|
|
|
—
|
Total Liabilities
|
|
|
736,403
|
|
|
|
638,835
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, 100,000,000 shares authorized, $0.001 par value; 599,859 Series A preferred shares issued and outstanding
|
|
|
600
|
|
|
|
600
|
Common stock, 500,000,000 shares authorized, $0.001 par value; 44,807,582 and 44,433,333 shares issued and outstanding, respectively
|
|
|
44,808
|
|
|
|
44,433
|
Additional paid-in capital
|
|
|
2,393,414
|
|
|
|
2,264,081
|
Accumulated deficit
|
|
|
(3,158,502
|
)
|
|
|
(2,907,481)
|
|
|
|
|
|
|
|
|
Total Stockholders’ Deficit
|
|
|
(719,680
|
)
|
|
|
(598,367)
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
$
|
16,723
|
|
|
$
|
40,468
|
See
accompanying notes to these unaudited financial statements.
LANS
HOLDINGS, INC.
STATEMENTS
OF OPERATIONS
FOR
THE THREE AND SIX MONTHS ENDED MAY 31, 2016 AND 2015
(UNAUDITED)
|
|
For the Three Months Ended
|
|
For the Three Months Ended
|
|
For the Six Months Ended
|
|
For the Six Months Ended
|
|
|
May 31,
|
|
May 31,
|
|
May 31,
|
|
May 31,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
$
|
49,425
|
|
|
$
|
—
|
|
|
$
|
83,762
|
|
|
$
|
—
|
COST OF REVENUES
|
|
|
45,620
|
|
|
|
—
|
|
|
|
55,120
|
|
|
|
—
|
GROSS PROFIT
|
|
|
3,805
|
|
|
|
—
|
|
|
|
28,642
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
151,644
|
|
|
|
34,166
|
|
|
|
249,718
|
|
|
|
47,412
|
Impairment of intangible asset
|
|
|
—
|
|
|
|
2,150,000
|
|
|
|
—
|
|
|
|
2,150,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL OPERATING EXPENSES
|
|
|
151,644
|
|
|
|
2,184,166
|
|
|
|
249,718
|
|
|
|
2,197,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING LOSS
|
|
|
(147,839
|
)
|
|
|
(2,184,166
|
)
|
|
|
(221,076
|
)
|
|
|
(2,197,412)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion of discounts on convertible debentures
|
|
|
(1,490
|
)
|
|
|
—
|
|
|
|
(1,490
|
)
|
|
|
—
|
Change in fair value of derivatives
|
|
|
(10,859
|
)
|
|
|
—
|
|
|
|
(10,859
|
)
|
|
|
—
|
Interest expense
|
|
|
(10,100
|
)
|
|
|
(955
|
)
|
|
|
(17,596
|
)
|
|
|
(955)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL OTHER EXPENSES
|
|
|
(22,449
|
)
|
|
|
(955
|
)
|
|
|
(29,945
|
)
|
|
|
(955)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(170,288
|
)
|
|
$
|
(2,185,121
|
)
|
|
$
|
(251,021
|
)
|
|
$
|
(2,198,367)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share – basic and diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.05)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding – basic and diluted
|
|
|
44,630,516
|
|
|
|
44,433,333
|
|
|
|
44,533,541
|
|
|
|
44,333,333
|
See
accompanying notes to these unaudited financial statements.
LANS
HOLDINGS, INC.
STATEMENTS
OF CASH FLOWS
FOR
THE SIX MONTHS ENDED MAY 31, 2016 AND 2015
(UNAUDITED)
|
|
For the Six Months Ended
|
|
|
May 31,
|
|
May 31,
|
|
|
2016
|
|
2015
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(251,021
|
)
|
|
$
|
(2,198,367)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
Accretion of discounts on convertible debentures
|
|
|
1,490
|
|
|
|
—
|
Change in fair value of derivatives
|
|
|
10,859
|
|
|
|
—
|
Stock-based compensation
|
|
|
9,708
|
|
|
|
—
|
Impairment of intangible asset
|
|
|
—
|
|
|
|
2,150,000
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
3,712
|
|
|
|
—
|
Prepaid expenses
|
|
|
5,409
|
|
|
|
—
|
Accounts payable and accrued expenses
|
|
|
122,435
|
|
|
|
25,689
|
Accounts payable and accrued expenses – related parties
|
|
|
38,526
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Net Cash Used in Operating Activities
|
|
|
(58,882
|
)
|
|
|
(22,678)
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of intangible asset
|
|
|
—
|
|
|
|
(50,000)
|
|
|
|
|
|
|
|
|
Net Cash Used in Investing Activities
|
|
|
—
|
|
|
|
(50,000)
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from notes payable – related parties
|
|
|
38,258
|
|
|
|
75,000
|
Proceeds from convertible debentures
|
|
|
6,000
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Net Cash Provided by Financing Activities
|
|
|
44,258
|
|
|
|
75,000
|
|
|
|
|
|
|
|
|
Net Decrease in Cash and Cash Equivalents
|
|
|
(14,624
|
)
|
|
|
2,322
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, Beginning of Period
|
|
|
15,540
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, End of Period
|
|
$
|
916
|
|
|
$
|
2,322
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY CASH FLOWS INFORMATION:
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
—
|
|
|
$
|
—
|
Income taxes paid
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
Convertible debentures issued to settle accounts payable
|
|
$
|
15,990
|
|
|
$
|
—
|
Issuance of preferred stock for acquisition of assets
|
|
$
|
—
|
|
|
$
|
2,100,000
|
See
accompanying notes to these unaudited financial statements.
LANS
HOLDINGS, INC.
NOTES
TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE
1 – NATURE OF BUSINESS
Nature
of Business
Lans
Holdings is in the business of providing secure payment and communication solutions. The Company’s aim is to make it easier
for sellers to start selling, and buyers to buy with confidence. The Company intends that its solutions will be used to enable
businesses to process payments more efficiently whether online or in a retail store front. The Company intends to offer white
label solutions for payment service providers to enable business to consumer and business to business payments through physical
POS, mobile devices, online and software integrations. The Company also intends to provide business processing outsourcing through
its Fractional I.T. Services, and complaint ready hosted solutions through its Infrastructure on Demand.
Lans
Holdings is focused to provide emerging payment "breakthrough" technology that motivates and rewards clients for adopting
more secure infrastructure to support their businesses.
Going
Concern
The
Company has incurred losses since inception and has negative working capital. These factors create substantial doubt about the
Company’s ability to continue as a going concern. The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. The financial statements do not include any adjustments that might be necessary
if the Company is unable to continue as a going concern. The ability of the Company to continue as a going concern is dependent
on the Company generating cash from the sale of its common stock and/or obtaining debt financing and attaining future profitable
operations.
Management’s
plans include selling its equity securities and obtaining debt financing to fund its capital requirement and ongoing operations;
however, there can be no assurance the Company will be successful in these efforts.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
These
financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United
States and are expressed in US dollars. The Company’s fiscal year end is November 30.
Interim
Financial Statements
The
accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles
generally accepted in the United States of America (“US GAAP”) and the rules of the Securities and Exchange Commission
("SEC"), and should be read in conjunction with the audited financial statements and notes thereto. In the opinion of
management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position
and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim
periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which
would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year end
November 30, 2015 have been omitted.
LANS
HOLDINGS, INC.
NOTES
TO FINANCIAL STATEMENTS
(UNAUDITED)
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 long-lived assets, 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.
Financial
Instruments
The
Company’s financial instruments consist of cash, accounts receivable, prepaid expenses, accounts payable and accrued expenses,
amounts due to officers, notes payable and convertible debentures. The carrying amount of these financial instruments approximates
fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed
in these financial statements.
Cash
and Cash Equivalents
The
Company considers all highly liquid instruments with maturity of three months or less be cash equivalents.
Intangible
Assets
Software,
licenses and other rights have been capitalized in accordance with ASC 350-40 “Intangibles – Goodwill and Other –
Internal-Use Software.” Amortization is calculated on a straight line basis over its estimated useful life.
If
the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, an impairment is recognized
for the excess of the carrying value over the fair value of the asset.
Income
Taxes
The
Company utilizes the liability method of accounting for income taxes. Under the liability method deferred tax assets and liabilities
are determined based on the differences between financial reporting basis and the tax basis of the assets and liabilities and
are measured using enacted tax rates and laws that will be in effect, when the differences are expected to reverse. An allowance
against deferred tax assets is recognized, when it is more likely than not, that such tax benefits will not be realized.
Any
deferred tax asset is considered immaterial and has been fully offset by a valuation allowance because at this time Company believes
that it is more likely than not that the future tax benefit will not be realized as the Company has no current operations.
Revenue
Recognition
The
Company derives revenue from subscriptions for software that provide secure payment solutions, from the provision of customized
development services and from the provision of secure on demand infrastructure.
The
Company recognizes revenue when persuasive evidence of an arrangement exists, products are fully delivered and services have been
provided, the sales price is fixed or determinable and collectability is reasonably assured.
All
of the Company’s revenues during the six months ended May 31, 2016 resulted from three customers.
LANS
HOLDINGS, INC.
NOTES
TO FINANCIAL STATEMENTS
(UNAUDITED)
Stock-based
Compensation
The
Company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Based 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 behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an
expense in the statement of operations 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.
Loss
Per Common Share
Basic
earnings (loss) per common share is computed by dividing net income (loss) available to common shareholders (numerator) by the
weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential
common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted
method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to
be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect
is anti-dilutive. As of May 31, 2016, the Company had 4,169,154 (2015 – nil) dilutive potential shares outstanding.
Subsequent
Events
The
Company has evaluated all transactions through the date the financial statements were issued for subsequent event disclosure consideration.
Recent
Accounting Pronouncements
The
Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements.
In
August 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-15, “Presentation of Financial
Statements - Going Concern”. The Update provides US GAAP guidance on management’s responsibility in evaluating whether
there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures.
For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial
doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are
issued. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods
and interim periods thereafter. The Company is currently evaluating the effects of ASU 2014-15 on its financial statements.
LANS
HOLDINGS, INC.
NOTES
TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE
3 – NOTES PAYABLE
|
a)
|
On
November 24, 2014, the Company issued a $25,000 promissory note to a former director
of the Company pursuant to the Agreement of Conveyance, Transfer and Assignment of Obligations
described in Note 6(k). The promissory note is unsecured, non-interest bearing and was
due within six months of the date of issuance. As of May 31, 2016, the note was not yet
repaid. The Lender has agreed to extend the note period until financing is secured. This
note was reclassified from note payable to related party to notes payable during the
year ended November 30, 2015 as the lender is no longer a related party.
|
|
b)
|
On
March 26, 2015, the Company entered into a $75,000 loan agreement with a third party.
The loan is unsecured, bears interest at 7.5% per year and was due on March 31, 2016.
On September 30, 2015, the Company missed a required semi-annual payment of accrued interest,
resulting in the interest rate increasing to 15% per year going forward. At May 31, 2016,
the Company had accrued interest of $10,357 related to this agreement. This loan is currently
in default and payable on demand.
|
|
c)
|
On
August 7, 2015, the Company entered into a $50,000 loan agreement with a third party.
The loan is unsecured, bears interest at 8.5% per year and is due on August 7, 2016.
On January 15, 2016, the Company missed a required semi-annual payment of accrued interest,
resulting in the interest rate increasing to 17% per year going forward. At May 31, 2016,
the Company had accrued interest of $5,332 related to this agreement.
|
|
d)
|
On
September 25, 2015, the Company entered into a $14,700 loan agreement with a third party.
The loan is unsecured, bears interest at 1.5% per month and is due on demand. At May
31, 2016, the Company had accrued interest of $1,901 related to this agreement.
|
|
e)
|
On
October 5, 2015, the Company entered into a $25,000 loan agreement with the President
of the Company. The loan is unsecured, bears interest at 8% per year compounded and payable
monthly, and is due on demand. During October 2015, the Company repaid $20,000 of the
loan’s principal. At May 31, 2016, the Company had accrued interest of $383 related
to this agreement.
|
|
f)
|
On
October 15, 2015, the Company entered into a $125,000 loan agreement with a third party.
The loan is unsecured, bears interest at 7% per year and is due on October 31, 2016.
On April 15, 2016, the Company missed a required semi-annual payment of accrued interest,
resulting in the interest rate increasing to 14% per year going forward. At May 31, 2016,
the Company had accrued interest of $6,592 related to this agreement.
|
|
g)
|
On
February 12, 2016, the Company entered into a $32,258 loan agreement with a significant
shareholder of the Company. The loan is unsecured, bears interest at 8% per year compounded
monthly, and is due on demand. At May 31, 2016, the Company had accrued interest of $897
related to this agreement.
|
|
h)
|
On
April 26, 2016, the Company entered into a $6,000 loan agreement with the President of
the Company. The loan is unsecured, bears interest at 8% per year compounded and payable
monthly. The loan is payable on the earliest of demand or from 50% of future revenue
or from funding received in excess of $100,000. At May 31, 2016, the Company had accrued
interest of $65 related to this agreement.
|
NOTE
4 – CONVERTIBLE DEBENTURES
|
a)
|
On
March 23, 2016, the Company issued a convertible debenture for $6,000. Pursuant to the
terms of the agreement, the note is unsecured, bears interest at 8% per year, and is
due one year from the date of issuance with the option of extending for an additional
six months at the holder’s discretion. At the maturity date, the unpaid amount
of principal can be converted at the holder’s option at a price of 50% of the ask
price at the date of conversion. The embedded conversion option qualifies for derivative
accounting and bifurcation under ASC 815-15 “Derivatives and Hedging”. The
initial fair value of the derivative liability of $9,815 resulted in a full discount
to the note payable of $6,000 and the recognition of a loss on derivatives of $3,815.
At May 31, 2016, the Company had amortized $319 of the discount to this convertible debenture
and had accrued interest of $91 related to this convertible debenture.
|
LANS
HOLDINGS, INC.
NOTES
TO FINANCIAL STATEMENTS
(UNAUDITED)
|
b)
|
On
May 1, 2016, the Company issued a convertible debenture to a related party to settle
accounts payable of $15,990. Pursuant to the terms of the agreement, the note is unsecured,
bears interest at 8% per year, and is due one year from the date of issuance with the
option of extending for an additional six months at the holder’s discretion. At
the maturity date, the unpaid amount of principal can be converted at the holder’s
option at a price of 50% of the ask price at the date of conversion. The embedded conversion
option qualifies for derivative accounting and bifurcation under ASC 815-15 “Derivatives
and Hedging”. The initial fair value of the derivative liability of $23,757 resulted
in a full discount to the note payable of $15,990 and the recognition of a loss on derivatives
of $7,767. At May 31, 2016, the Company had amortized $1,171 of the discount to this
convertible debenture and had accrued interest of $105 related to this convertible debenture.
|
Convertible
Debentures consist of the following as of May 31, 2016:
Noteholder (issue date)
|
|
May 31,
2016
|
|
|
|
|
|
March 23, 2016 debenture
|
|
$
|
6,000
|
|
May 1, 2016 debenture
|
|
|
15,990
|
|
|
|
|
21,990
|
|
|
|
|
|
|
Less: debt discount
|
|
|
(20,500
|
)
|
|
|
|
|
|
Total
|
|
$
|
1,490
|
|
NOTE
5 – DERIVATIVE LIABILITIES
The
embedded conversion options of the Company’s convertible debentures described in Note 4 contain conversion features that
are accounted for as derivative liabilities. The fair value of these liabilities will be re-measured at the end of every reporting
period and the change in fair value will be reported in the statement of operations as a gain or loss on derivative financial
instruments.
The
Company uses Level 3 inputs for its valuation methodology for the derivative liabilities and embedded conversion option liabilities
as their fair values were determined by using the Black-Scholes option pricing model based on various assumptions. The model incorporates
the price of a share of the Company’s common stock (as quoted on NASDAQ), volatility, risk free rate, dividend rate and
estimated life. Significant changes in any of these inputs in isolation would result in a significant change in the fair value
measurement. As required, these are classified based on the lowest level of input that is significant to the fair value measurement.
The following table shows the assumptions used in the calculations:
|
|
Expected Volatility
|
|
Risk-free Interest Rate
|
|
Expected Dividend Yield
|
|
Expected Life (in years)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At May 31, 2016
|
|
|
176% - 223%
|
|
0.56% - 0.68%
|
|
|
|
0%
|
|
0.81-1.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
fair value of the derivative liabilities were $32,849 and $nil at May 31, 216 and November 30, 2015, respectively:
|
|
Derivative Values
|
|
Noteholder (issue date)
|
|
|
November 30, 2015
|
|
|
|
Additions
|
|
|
|
Conversions
|
|
|
|
Fair Value Increase (Decrease)
|
|
|
|
May 31,
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 23, 2016 debenture
|
|
$
|
—
|
|
|
$
|
9,815
|
|
|
$
|
—
|
|
|
$
|
(924
|
)
|
|
$
|
8,891
|
|
May 1, 2016 debenture
|
|
|
—
|
|
|
|
23,757
|
|
|
|
|
|
|
|
201
|
|
|
|
23,958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
—
|
|
|
$
|
33,572
|
|
|
$
|
—
|
|
|
$
|
(724
|
)
|
|
$
|
32,849
|
|
LANS
HOLDINGS, INC.
NOTES
TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE
6 – RELATED PARTY TRANSACTIONS
|
a)
|
During
the six months ended May 31, 2016, the Company incurred consulting and other business-related
fees of $25,500 (2015 - $nil) to a company whose CEO is the President of the Company.
|
|
b)
|
During
the six months ended May 31, 2016, the Company incurred consulting fees and other business-related
fees of $6,124 (2015 - $nil) to a company controlled by the Chief Technology Officer
of the Company.
|
|
c)
|
During
the six months ended May 31, 2016, the Company incurred consulting and other business-related
fees of $6,000 (2015 - $nil) to the Chief Revenue Officer of the Company.
|
|
d)
|
During the six months ended May 31, 2016, the Company incurred advisory, consulting and other business-related
fees of $43,700 (2015 - $nil) to an Advisory Board Member of the Company who was appointed to Chief Strategy Officer of the Company
by the board of directors of the Company on May 24, 2016.
|
|
e)
|
As
of May 31, 2016, the Company owed $200 (November 30, 2015 - $200) to the President of
the Company, which is non-interest bearing, unsecured and due on demand.
|
|
f)
|
As
of May 31, 2016, the Company owed $24,533 (November 30, 2015 - $1,000) to a company whose
CEO is the President of the Company. The amount is related to consulting fees incurred
during the period.
|
|
g)
|
As
of May 31, 2016, the Company owed $5,000 (November 30, 2015 - $18,850) to a company controlled
by the Chief Technology Officer of the Company. The amount is related to consulting fees
incurred during the period. Of the amount owing at November 30, 2015, $15,000 was settled
on April 12, 2016, by issuing 66,667 shares of the Company’s common stock at $0.225
per share.
|
|
h)
|
As
of May 31, 2016, the Company owed $5,000 (November 30, 2015 - $17,665) to the Chief Revenue
Officer of the Company. The amount is related to consulting fees incurred during the
period. Of the amount owing at November 30, 2015, $15,000 was settled on April 12, 2016,
by issuing 39,683 shares of the Company’s common stock at $0.378 per share.
|
|
i)
|
As
of May 31, 2016, the Company owed $13,938 (November 30, 2015 – $28,938) to the
Chief Strategy Officer of the Company. The amount is related to advisory and consulting
fees incurred during the period. Of the amount owing at November 30, 2015, $30,000 was
settled on April 12, 2016, by issuing 111,112 shares of the Company’s common stock
at $0.27 per share.
|
|
j)
|
As
of May 31, 2016, the Company owed $35,320 (November 30, 2015 - $nil) to a company that
is a significant shareholder of the Company. The amount is related to cost of revenue
incurred during the period.
|
|
k)
|
On
November 21, 2014, the Company entered into an Agreement of Conveyance, Transfer and
Assignment of Assets and Assumption of Obligations with directors of the Company. Pursuant
to the agreement, the Company transferred all assets and business operations associated
with hexagon fishing nets to the directors of the Company. In exchange, the directors
of the Company agreed to cancel 24,438,333 shares in the Company and assume and cancel
all liabilities relating to the Company’s former business, including officer loans
amounting to $100,814. A director of the Company retained 361,667 shares of common stock
in the Company. In consideration for the cancellation of amounts due to officer and the
return of the shares, the Company issued a $25,000 promissory note to the director of
the Company. Refer to Note 3(a). As a result of the forgiveness of the loans and cancellation
of stock, the Company recognized $75,814 as a contribution to capital.
|
LANS
HOLDINGS, INC.
NOTES
TO FINANCIAL STATEMENTS
(UNAUDITED)
|
l)
|
On
November 21, 2014, the Company entered into a License Agreement with the Chief Executive
Officer of the Company (Note 9(g)). At November 30, 2014, the Company was indebted to
the Chief Executive Officer of the Company for $150,000 related to the License Agreement.
The amount was due by February 19, 2015. As of May 31, 2016, the amount has not
been paid by the Company.
|
NOTE
7 – CAPITAL STOCK
|
a)
|
On
April 12, 2016, certain shareholders returned a net total of 24,438,333 shares of common
stock pursuant to the Agreement of Conveyance, Transfer, and Assignment of Assets and
Assumption of Obligations referred to in Note 6(k).
|
|
b)
|
On
April 12, 2016, the Company issued 24,438,333 shares of common stock pursuant to the
License Agreement with PayFlex Systems referred to in Note 9(g).
|
|
c)
|
On
April 12, 2016, certain shareholders transferred an aggregate of 6,661,667 shares of
common stock pursuant to a prior Asset Acquisition Agreement with Transaction Data USA
Inc.
|
|
d)
|
On
April 12, 2016, the Company issued 66,667 shares of common stock, valued at $15,000,
to the Chief Technology Officer of the Company pursuant to the consultancy agreement
referred to in Note 9(a).
|
|
e)
|
On
April 12, 2016, the Company issued 39,683 shares of common stock, valued at $15,000,
to the former Chief Operations Officer of the Company pursuant to the consultancy agreement
referred to in Note 9(b).
|
|
f)
|
On
April 12, 2016, the Company issued 39,683 shares of common stock, valued at $15,000,
to the Chief Revenue Officer of the Company pursuant to the consultancy agreement referred
to in Note 9(c).
|
|
g)
|
On
April 12, 2016, the Company issued an aggregate 228,214 shares of common stock, valued
at $60,000, to Advisory Board Members of the Company pursuant to the advisory board agreements
referred to in Notes 9(d), 9(e) and 9(f).
|
|
h)
|
On
April 14, 2016, the Company’s board of directors and a majority of the shareholders
of the Company approved an amendment to the Articles of Incorporation to effectuate a
one for three reverse stock split of the outstanding shares of common stock of the Company.
The reverse stock split became effective on May 24, 2016. All share and per share data
in these financial statements and footnotes have been retrospectively adjusted to account
for this reverse stock split.
|
NOTE
8 – STOCK - BASED COMPENSATION
On
May 23, 2016, the Company adopted an Equity Incentive Plan under which the Company can grant up to 8,333,333 common shares to
its officers, directors, employees and consultants. The Equity Incentive Plan provides for the granting of incentive stock options,
non-qualified stock options, stock appreciation rights, restricted stock, stock units, performance shares and performance units.
|
m)
|
On May 24, 2016, the Company granted 4,000,000 stock options to the Chief Strategy Officer of
the Company, each of which is exercisable into one common share of the Company at a price of $0.04 per share until May 24, 2018.
The stock options will vest as follows: 2,000,000 options will vest on May 24, 2017 and 2,000,000 options will vest on May 24,
2018. As a result of these stock options vesting over a period of two years, during the six months ended May 31, 2016, the Company
recognized $9,708 in stock-based compensation.
|
LANS
HOLDINGS, INC.
NOTES
TO FINANCIAL STATEMENTS
(UNAUDITED)
The
fair value of each option granted was estimated on the date of grant using the Black-Scholes option pricing model with the weighted
average assumption for each of the following six month periods ending May 31, 2016:
|
|
2016
|
Expected dividend yield
|
|
|
0
|
%
|
Risk-free interest rate
|
|
|
0.92
|
%
|
Expected volatility
|
|
|
303
|
%
|
Expected option life (in years)
|
|
|
2.00
|
|
The
following table summarizes the continuity of the Company’s stock options:
|
|
Number of Options
|
|
Weighted Average Exercise Price
|
|
Weighted-Average Remaining Contractual Term (years)
|
|
Aggregate Intrinsic Value
|
|
|
|
|
$
|
|
|
|
$
|
Outstanding, November 30, 2015
|
|
–
|
|
–
|
|
–
|
|
–
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
4,000,000
|
|
|
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, May 31, 2016
|
|
|
|
4,000,000
|
|
|
|
0.04
|
|
|
|
1.98
|
|
|
|
880,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, May 31, 2016
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
NOTE
9 – COMMITMENTS
|
a)
|
On
June 25, 2015, the Company entered into a consultancy agreement with a company controlled
by the Chief Technology Officer of the Company. Pursuant to the agreement, the Company
will pay $1,000 a month for consulting services for a term of one year and issue 66,667
shares of the Company’s common stock, valued at $15,000, on the date of the agreement.
The shares were issued on April 12, 2016.
|
|
b)
|
On
August 17, 2015, the Company entered into a consultancy agreement with the former Chief
Operations Officer of the Company. Pursuant to the agreement, the Company was required
to pay $2,250 a month for consulting services for a term of one year and issue 39,683
shares of the Company’s common stock, valued at $15,000, on the date of the agreement.
On January 6, 2016, the Chief Operations Officer of the Company resigned and was no longer
considered a related party to the Company. On the same date, the consultancy agreement
was terminated.
|
|
c)
|
On
August 17, 2015, the Company entered into a consultancy agreement with the Chief Revenue
Officer of the Company. Pursuant to the agreement, the Company will pay $1,000 a month
for consulting services for a term of one year and issue 39,683 shares of the Company’s
common stock, valued at $15,000, on the date of the agreement. The shares were issued
on April 12, 2016.
|
|
d)
|
On
August 17, 2015, the Company entered into an advisory board agreement with two Advisory
Board Members of the Company for terms of one year each. Pursuant to the agreement, the
Company will issue the Members 39,683 shares each of the Company’s common stock,
valued at $15,000 for each member, on the date of the agreement. The shares were issued
on April 12, 2016.
|
|
e)
|
On
August 28, 2015, the Company entered into an advisory board agreement with an Advisory
Board Member of the Company for a term of one year. Pursuant to the agreement, the Company
will issue a total of 37,736 shares of the Company’s common stock, valued at $15,000,
on the date of the agreement. The shares were issued on April 12, 2016.
|
LANS
HOLDINGS, INC.
NOTES
TO FINANCIAL STATEMENTS
(UNAUDITED)
|
f)
|
On
September 17, 2015, the Company entered into an advisory board agreement with an Advisory
Board Member of the Company. Pursuant to an amendment to the agreement dated January
1, 2016, the Company will pay $8,000 a month for advisory services until September 17,
2016, and issue a total of 111,112 shares of the Company’s common stock, valued
at $30,000, on the date of the agreement. The shares were issued on April 12, 2016. On
May 24, 2016, the Company’s board of directors appointed this Advisory Board Member
to become the Chief Strategy Officer of the Company.
|
|
g)
|
The
Company entered into the agreement on April 12, 2016 with the Chief Executive Officer of the Company. Pursuant
to the agreement, the Company is required to pay $150,000 in cash for a license and
issue a number of shares of the Company’s common stock necessary to give 55% of
the total issued and outstanding shares of the Company to PayFlex Systems (“PayFlex”)
or its nominees. In addition, the Company is required to issue a number of shares of
the Company’s common stock necessary to give 70% of the total issued and outstanding
shares of the Company to PayFlex or its nominees on the anniversary of the Licensing
Agreement in which the Company’s audited filed financial statements for gross annual
revenues attributable to the business exceeds $5,000,000. The President of PayFlex is
the Company’s Chief Executive Officer. The Company is also required to raise $200,000
for its own working capital needs within 90 days of closing the License Agreement. As
of the date of these financial statements, the Company was not able to raise the funding
requirement for the agreement with PayFlex.
|
|
h)
|
Pursuant
to an Asset Acquisition Agreement the Company has agreed to use its best efforts to raise
an additional $325,000 for its own working capital needs and to develop the business
surrounding the acquired Assets. As of the date of these financial statements, the Company
was not able to raise the funding requirement for the Agreement.
|
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking
Statements
Certain
statements, other than purely historical information, including estimates, projections, statements relating to our business plans,
objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified
by the words “believes,” “project,” “expects,” “anticipates,” “estimates,”
“intends,” “strategy,” “plan,” “may,” “will,” “would,”
“will be,” “will continue,” “will likely result,” and similar expressions. We intend such
forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions.
Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which
may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual
effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations
and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory
changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties
should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.
We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information,
future events or otherwise. Further information concerning our business, including additional factors that could materially affect
our financial results, is included herein and in our other filings with the SEC.
Company
Overview
We
are in the business of providing secure payment and communication solutions. Our aim is to make it easier for sellers to sell,
and buyers to buy with confidence. Our solutions are intended to enable businesses to process payments more efficiently whether
online or in a retail store front. We intend to offer white label solutions for payment service providers to enable business to
consumer and business to business payments through physical POS, mobile devices, online and software integrations.
We
also provide business processing outsourcing through our Fractional I.T. services, and complaint ready hosted solutions through
our Infrastructure on Demand.
We
have only generated a small amount of revenue from our payment processor business and from our solutions outsourcing business.
In order to implement our business plan, we will need to raise additional capital. We estimate that we will need approximately
$375,000 in the next twelve months. These funds will be used to cover our debt obligations, overhead, consulting fees, marketing
expenses and IP development, along with our general working capital needs. If we are unable to raise money, we will not be able
to able to service our existing and prospective customers.
Results
of operations for the three and six months ended May 31, 2016 and May 31, 2015
We
generated $49,425 in revenues during the three months ended May 31, 2016, as compared with no revenues for three months ended
May 31, 2015. We generated $83,762 in revenues during the six months ended May 31, 2016, as compared with no revenues for six
months ended May 31, 2015. All of our revenues in 2016 resulted from our two customers. We expect that our client base will expand
and provide more revenues for the remaining quarters in 2016, provided we receive adequate financing.
Our
cost of revenues was $45,620 resulting in gross profit of $3,805 for the three months ended May 31, 2016. Our cost of revenues
was $55,120 resulting in gross profit of $28,642 for the six months ended May 31, 2016.
We
incurred operating expenses in the amount of $151,644 for the three months ended May 31, 2016, compared with operating expenses
of $2,184,166 for the three months ended May 31, 2015. We incurred operating expenses in the amount of $249,717 for the six months
ended May 31, 2016, compared with operating expenses of $2,197,412 for the six months ended May 31, 2015. Our operating expenses
for the six months ended May 31, 2016 mainly consisted of $83,574 in consulting fees, $80,810 in development costs, $32,427 in
professional fees and $15,100 in audit fees. Our operating expenses for the six months ended May 31, 2015 consisted mainly of
a $2,150,000 impairment of our license agreement with TDUSA along with $15,632 in professional fees and $14,750 in investor relation
fees.
We
anticipate our operating expenses will increase as we undertake our plan of operations. The increase will be attributable to undertaking
development of our payment processor and IT businesses and the professional fees associating with being a reporting company under
the Securities Exchange Act of 1934.
We
incurred other expenses of $22,449 for the three months ended May 31, 2016, as compared with $955 for the three months ended May
31, 2015. Our other expenses for the three months ended May 31, 2016 consisted of $10,859 in the fair value of derivative liabilities,
$10,100 in interest expense and $1,490 in accretion of discounts on convertible debentures. Our other expenses for the three months
ended May 31, 2015 resulted entirely of interest expense.
We
incurred other expenses of $29,945 for the six months ended May 31, 2016, as compared with $955 for the six months ended May 31,
2015. Our other expenses for the six months ended May 31, 2016 consisted of $10,859 in the fair value of derivative liabilities,
$17,596 in interest expense and $1,490 in accretion of discounts on convertible debentures. Our other expenses for the six months
ended May 31, 2015 resulted entirely of interest expense.
We
incurred a net loss in the amount of $170,288 for the three months ended May 31, 2016, as compared with a net loss in the amount
of $2,185,121 for the three months ended May 31, 2015. We incurred a net loss in the amount of $251,021 for the six months ended
May 31, 2016, as compared with a net loss in the amount of $2,198,367 for the six months ended May 31, 2015. Our losses for each
period are attributable to operating expenses together with a lack of significant revenues.
Liquidity
and Capital Resources
As
of May 31, 2016, we had $16,723 in current assets consisting of cash, accounts receivable and prepaid expenses. Our total current
liabilities as of May 31, 2016 were $736,403. As a result, we have a working capital deficit of $719,680 as of May 31, 2016.
Operating
activities used $58,882 in cash for the six months ended May 31, 2016, as compared with $22,678 used for the six months
ended May 31, 2015. Our negative operating cash flow in 2016 was mainly the result of our net loss of $251,021, offset by
changes in accounts payable and accrued expenses of $122,435 and accounts payable and accrued expenses – related
parties of $38,526. We primarily relied on cash from loans to fund our operations during the six months ended May 31,
2016.
Investing
activities used $0 in cash for the six months ended May 31, 2016, as compared with $50,000 used for the six months ended May
31, 2015.
Financing
activities provided $44,258 in cash for the six months ended May 31, 2016, as compared with $75,000 for the six months ended May
31, 2015. Our positive financing cash flow in 2016 was a result of proceeds from notes payable to related parties.
On
April 12, 2016, we entered into a loan agreement in the amount of $32,258 from a related party with an effective date of February
12, 2016. The loan is unsecured, bears interest at 8% per year compounded monthly and is due on demand.
On
April 26, 2016, we entered into a $6,000 loan agreement with our President. The loan is unsecured, bears interest at 8% per year
compounded and payable monthly. The loan is payable on the earliest of demand or from 50% of future revenue or from funding received
in excess of $100,000.
On
March 23, 2016, we issued a convertible debenture for $6,000. Pursuant to the terms of the agreement, the note is unsecured, bears
interest at 8% per year, and is due one year from the date of issuance with the option of extending for an additional six months
at the holder’s discretion. At the maturity date, the unpaid amount of principal can be converted at the holder’s
option at a price of 50% of the ask price at the date of conversion.
On
May 1, 2016, we issued a convertible debenture to a related party to settle accounts payable of $15,990. Pursuant to the terms
of the agreement, the note is unsecured, bears interest at 8% per year, and is due one year from the date of issuance with the
option of extending for an additional six months at the holder’s discretion. At the maturity date, the unpaid amount of
principal can be converted at the holder’s option at a price of 50% of the ask price at the date of conversion.
Despite
the recent loan and loans we received in 2015, we will need approximately $375,000 in financing to implement our business plan.
Thus, the success of our business plan beyond the next 12 months is contingent upon us obtaining additional financing. We intend
to fund operations through debt and/or equity financing arrangements, which may be insufficient to fund our capital expenditures,
working capital, or other cash requirements. We do not have any formal commitments or arrangements for the sales of stock or the
advancement or loan of funds at this time. There can be no assurance that such additional financing will be available to us on
acceptable terms, or at all.
Off
Balance Sheet Arrangements
As
of May 31, 2016, there were no off balance sheet arrangements.
Going
Concern
We
have negative working capital and have not yet received significant revenues from sales of products. These factors have caused
our accountants to express substantial doubt about our ability to continue as a going concern. The financial statements do not
include any adjustment that might be necessary if we are unable to continue as a going concern.
Our
ability to continue as a going concern is dependent on our generating cash from the sale of our common stock and/or obtaining
debt financing and attaining future profitable operations. Management’s plans include selling our equity securities and
obtaining debt financing to fund our capital requirement and ongoing operations; however, there can be no assurance we will be
successful in these efforts.