NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 – NATURE OF BUSINESS
Nature of Business
Lans Holdings, Inc. 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 requirements 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, 2016 have been omitted.
Recent Accounting Pronouncements
The Company has implemented all new accounting
pronouncements that are in effect and that may impact its financial statements.
In May 2014, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers
(Topic 606).” The new guidance provides new criteria for recognizing revenue to depict the transfer of goods or services
to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods
or services. The new guidance requires expanded disclosures to provide greater insight into both revenue that has been recognized
and revenue that is expected to be recognized in the future from existing contracts. Quantitative and qualitative information will
be provided about the significant judgments and changes in those judgments that management made to determine the revenue that is
recorded. This accounting standard update, as amended, will be effective for annual reporting periods beginning after December
15, 2017, including interim reporting periods within that reporting periods. The new revenue standard may be applied retrospectively
to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company is currently assessing the provisions
of the guidance and has not determined the impact of the adoption of this guidance on its financial statements.
NOTE 3 – SOFTWARE ASSETS
On September 22, 2016, the Company entered into
a Software Purchase Agreement (the “Software Agreement”) with two related parties Transaction Data USA Inc. (“TDUSA”),
whose CEO is the President of the Company, and Melcent Technology SRL (“Melcent”), a significant shareholder of the
Company. Pursuant to the Software Agreement, the Company acquired a PSWITCH software application (the “Software”),
including the invention, source code, object code, components and tools. In exchange for the Software, the Company issued to each
of TDUSA and Melcent, 375,000 shares of the Company’s newly created Series B Preferred Stock. The asset acquired was recorded
at the fair value of the 750,000 shares of Series B Preferred Stock of $5,820,000. At August 31, 2017, the 750,000 shares of Series
B Preferred Stock had not been issued and $5,820,000 of stock payable to related parties was accrued by the Company.
At November 30, 2016, the Company’s uncertain
future revenues generated by the asset indicated that the carrying amount of the long-lived asset may not be recoverable. The Company
performed an impairment test which resulted in an impairment of $5,820,000.
NOTE 4 – NOTES PAYABLE
Notes payable consist of the following:
Issue date
|
|
August 31,
2017
|
|
November 30,
2016
|
November 24, 2014 note (a)
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
March 26, 2015 note (b)
|
|
|
75,000
|
|
|
|
75,000
|
|
August 7, 2015 note (c)
|
|
|
50,000
|
|
|
|
50,000
|
|
September 25, 2015 note (d)
|
|
|
14,700
|
|
|
|
14,700
|
|
October 15, 2015 note (e)
|
|
|
125,000
|
|
|
|
125,000
|
|
Total
|
|
$
|
289,700
|
|
|
$
|
289,700
|
|
Notes payable – related party consist
of the following:
Issue date
|
|
August 31,
2017
|
|
November 30,
2016
|
October 5, 2015 note (f)
|
|
$
|
—
|
|
|
$
|
5,000
|
|
October 15, 2015 note (g)
|
|
|
32,258
|
|
|
|
32,258
|
|
February 12, 2016 note (h)
|
|
|
3,425
|
|
|
|
3,733
|
|
October 18, 2016 note (i)
|
|
|
3,045
|
|
|
|
3,045
|
|
March 20, 2017 note (j)
|
|
|
5,000
|
|
|
|
—
|
|
Total
|
|
$
|
43,728
|
|
|
$
|
44,036
|
|
|
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 7(h). The promissory
note is unsecured, non-interest bearing and was due within six months of the date of issuance. As of August 31, 2017, the note
was not yet repaid. The lender has agreed to extend the note period until financing is secured.
|
|
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 August 31,
2017, the Company had accrued interest of $24,442 (November 30, 2016 - $15,997) 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 August 31,
2017, the Company had accrued interest of $15,975 (November 30, 2016 - $9,594) related to this agreement. This loan is currently
in default and payable on demand.
|
|
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 August 31, 2017, the Company had accrued interest
of $769 (November 30, 2016 - $1,146) related to this agreement.
|
|
e)
|
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 August 31,
2017, the Company had accrued interest of $28,503 (November 30, 2016 - $15,366) related to this agreement. This loan is currently
in default and payable on demand.
|
|
f)
|
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. During December 2016, the Company repaid $5,000 of the loan’s
remaining principal. At August 31, 2017, the Company had accrued interest of $636 (November 30, 2016 - $603) 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 August 31, 2017,
the Company had accrued interest of $4,241 (November 30, 2016 - $2,245) 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. As of August 31, 2017, the Company repaid
$2,575 (November 30, 2016 - $2,267) of the loan’s principal. At August 31, 2017, the Company had accrued interest of $187
(November 30, 2016 - $95) related to this agreement.
|
|
i)
|
On October 18, 2016, the Company entered into a $3,045 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 August 31, 2017,
the Company had accrued interest of $219 (November 30, 2016 - $nil) related to this agreement.
|
|
j)
|
On March 20, 2017, the Company entered into a $5,000 loan agreement with a significant shareholder
of the Company. The loan is unsecured, bears interest at 8% per year compounded annually, and is due on March 20, 2018. At August
31, 2017, the Company had accrued interest of $180 related to this agreement.
|
NOTE 5 – CONVERTIBLE DEBENTURES
Convertible debentures consist of the following:
Issue date
|
|
August 31,
2017
|
|
November 30,
2016
|
March 23, 2016 debenture (a)
|
|
$
|
6,000
|
|
|
$
|
6,000
|
|
June 15, 2016 debenture (b)
|
|
|
10,000
|
|
|
|
10,000
|
|
June 30, 2016 debenture (c)
|
|
|
2,000
|
|
|
|
2,000
|
|
July 12, 2016 debenture (d)
|
|
|
30,000
|
|
|
|
30,000
|
|
July 28, 2016 debenture (e)
|
|
|
4,000
|
|
|
|
4,000
|
|
September 12, 2016 debenture (f)
|
|
|
15,000
|
|
|
|
15,000
|
|
December 12, 2016 debenture (g)
|
|
|
55,745
|
|
|
|
—
|
|
December 15, 2016 debenture (h)
|
|
|
74,830
|
|
|
|
—
|
|
January 27, 2017 debenture (i)
|
|
|
56,962
|
|
|
|
—
|
|
June 12, 2017 debenture (i)
|
|
|
33,750
|
|
|
|
—
|
|
|
|
|
288,287
|
|
|
|
67,000
|
|
Less: unamortized debt discount
|
|
|
(105,072
|
)
|
|
|
(39,688
|
)
|
Total
|
|
$
|
183,215
|
|
|
$
|
27,312
|
|
Convertible debentures – related party
consist of the following:
Issue date
|
|
August 31,
2017
|
|
November 30,
2016
|
May 1, 2016 debenture (j)
|
|
$
|
15,990
|
|
|
$
|
15,990
|
|
|
|
|
15,990
|
|
|
|
15,990
|
|
Less: unamortized debt discount
|
|
|
—
|
|
|
|
(12,177
|
)
|
Total
|
|
$
|
15,990
|
|
|
$
|
3,813
|
|
During the nine months ended August 31, 2017 and
2016, the Company recorded amortization of debt discount of $184,293 and $4,994, respectively.
|
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. On March 23, 2017, the Company missed the required
payment of all principal and accrued interest, resulting in the interest rate increasing to 15% per year going forward. 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 interest expense of $3,815. At August 31, 2017, the Company had amortized $6,000 of the discount
to this convertible debenture and had accrued interest of $877 (November 30, 2016 - $331) related to this convertible debenture.
|
|
b)
|
On June 15, 2016, the Company issued a convertible debenture for $10,000. Pursuant to the terms
of the agreement, the note is unsecured, bears interest at 8% per year, and is due on December 31, 2016. On December 31, 2016,
the Company missed the required payment of all principal and accrued interest, resulting in the interest rate increasing to 15%
per year going forward. 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. The initial fair value of the derivative liability of $14,129 resulted in a full discount to the note payable of $10,000
and interest expense of $4,129. At August 31, 2017, the Company had amortized $10,000 of the discount to this convertible debenture
and had accrued interest of $1,435 (November 30, 2016 - $368) related to this convertible debenture.
|
|
c)
|
On June 30, 2016, the Company issued a convertible debenture for $2,000. Pursuant to the terms
of the agreement, the note is unsecured, bears interest at 8% per year, and is due on December 31, 2016. On December 31, 2016,
the Company missed the required payment of all principal and accrued interest, resulting in the interest rate increasing to 15%
per year going forward. 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. The initial fair value of the derivative liability of $2,782 resulted in a full discount to the note payable of $2,000
and interest expense of $782. At August 31, 2017, the Company had amortized $2,000 of the discount to this convertible debenture
and had accrued interest of $281 (November 30, 2016 - $67) related to this convertible debenture.
|
|
d)
|
On July 12, 2016, the Company issued a convertible debenture for $30,000. Pursuant to the terms
of the agreement, the note is unsecured, bears interest at 8% per year, and is due on December 31, 2016. On December 31, 2016,
the Company missed the required payment of all principal and accrued interest, resulting in the interest rate increasing to 15%
per year going forward. 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. The initial fair value of the derivative liability of $40,472 resulted in a full discount to the note payable of $30,000
and interest expense of $10,472. At August 31, 2017, the Company had amortized $30,000 of the discount to this convertible debenture
and had accrued interest of $4,127 (November 30, 2016 - $927) related to this convertible debenture.
|
|
e)
|
On July 28, 2016, the Company issued a convertible debenture for $4,000. Pursuant to the terms
of the agreement, the note is unsecured, bears interest at 8% per year, and is due on January 28, 2017. On
|
January 28, 2017, the Company missed the required
payment of all principal and accrued interest, resulting in the interest rate increasing to 15% per year going forward. 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. The initial fair
value of the derivative liability of $5,449 resulted in a full discount to the note payable of $4,000 and interest expense of $1,449.
At August 31, 2017, the Company had amortized $4,000 of the discount to this convertible debenture and had accrued interest of
$514 (November 30, 2016 - $110) related to this convertible debenture.
|
f)
|
On September 12, 2016, the Company issued a convertible debenture for $15,000. Pursuant to the
terms of the agreement, the note is unsecured, bears interest at 8% per year, and is due on January 31, 2017. On January 31, 2017,
the Company missed the required payment of all principal and accrued interest, resulting in the interest rate increasing to 15%
per year going forward. 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. The initial fair value of the derivative liability of $18,895 resulted in a full discount to the note payable of $15,000
and interest expense of $3,895. At August 31, 2017, the Company had amortized $15,000 of the discount to this convertible debenture
and had accrued interest of $1,771 (November 30, 2016 - $260) related to this convertible debenture.
|
|
g)
|
On December 12, 2016, the Company issued a convertible debenture with a principal amount of $85,000
in exchange for proceeds of $75,000. Pursuant to the terms of the agreement, the note is unsecured, bears interest at 10% per year,
and is due on December 12, 2017. The note has an original issue discount (“OID”) of $5,000 and the Company paid expenses
of $5,000. At any time on or after June 2, 2017, the unpaid amount of principal and interest can be converted at the holder’s
option at the lowest price of either the closing price prior to the issue date or a price of 60% of the lowest trading price of
the common stock during the 25-trading day period prior to the conversion date. If at any time while the note is outstanding, the
lowest trading price is equal to or lower than $0.034, then a discount rate of 55% will be assumed rather than the original 40%.
The embedded conversion option qualifies for derivative accounting and bifurcation. The initial fair value of the derivative liability
of $108,482 resulted in a full discount to the note payable of $85,000 and interest expense of $33,482. During the nine months
ended August 31, 2017, the Company issued 16,970,400 shares of common stock upon the conversion of $29,254 of principal, $4,500
of fees related to the conversions, and $2,113 in penalties. Upon conversions, the Company recognized a net gain on derivatives
of $2,758 in accordance with extinguishment accounting. At August 31, 2017, the Company had amortized $45,363 of the discount to
this convertible debenture and had accrued interest of $5,811 related to this convertible debenture.
|
|
h)
|
On December 15, 2016, the Company issued a convertible debenture with a principal amount of $85,000
in exchange for proceeds of $75,000. Pursuant to the terms of the agreement, the note is unsecured, bears interest at 12% per year,
and is due on September 15, 2017. The Company paid expenses of $10,000. At any time on or after 180 days from the date of issuance,
the unpaid amount of principal and interest can be converted at the holder’s option at a price of 60% of the lowest trading
price of the common stock during the 25-trading day period prior of either the issue date or the conversion date. The embedded
conversion option qualifies for derivative accounting and bifurcation. The initial fair value of the derivative liability of $91,802
resulted in a full discount to the note payable of $85,000 and interest expense of $16,802. During the nine months ended August
31, 2017, the Company issued 8,135,900 shares of common stock upon the conversion of $10,170 of principal, $6,760 of accrued interest
and $1,500 of fees related to the conversions. Upon conversions, the Company recognized a net loss on derivatives of $37,305 in
accordance with extinguishment accounting. At August 31, 2017, the Company had amortized $69,804 of the discount to this convertible
debenture and had accrued interest of $396 related to this convertible debenture.
|
|
i)
|
On January 18, 2017, the Company issued a convertible debenture with a principal of $135,000
in consideration for tranches of an aggregate $118,500. Pursuant to the terms of the agreement, the note is unsecured, bears interest
at 6% per year, and is due one year from when each tranche is received. The note has an original issue discount of $16,500. At
any time, the unpaid amount of principal and interest can be converted at the holder’s option at a price of 60% of the lowest
trading price of the common stock during the 25-trading day period prior to conversion. If at any time while the note is outstanding,
the lowest trading price is equal to or lower than $0.035, then a discount rate of 50% will be assumed rather than the original
40%.
|
On January 27, 2017, the Company received $38,000
from the initial tranche of $45,000. The Company paid a prorated amount of OID of $5,500 and expenses of $1,500. The embedded conversion
option qualifies for derivative accounting and bifurcation. The initial fair value of the derivative liability of $130,176 resulted
in a full discount to the note payable of $45,000 and interest expense of $92,176. On June 12, 2017, the Company received a notice
of default from the lender resulting in an increase in principal of $22,500 and an increase in the interest rate of 22% per annum.
The embedded conversion option qualifies for derivative accounting and bifurcation. The initial fair value of the derivative liability
of $192,919 resulted in a full discount to the increase in principal of $22,500 and interest expense of $192,919. During the nine
months ended August 31, 2017, the Company issued 10,490,000 shares of common stock upon the conversion of $10,538 of principal,
and $2,000 of fees related to the conversions. Upon conversions, the Company recognized a net gain on derivatives of $1,503 in
accordance with extinguishment accounting. At August 31, 2017, the Company had amortized $16,097 of the discount to this convertible
debenture and had accrued interest of $4,131 related to this convertible debenture.
On June 12, 2017, the Company received $19,750
from the second tranche of $22,500. The Company paid a prorated amount of OID of $2,750 and expenses of $1,500. Pursuant to the
second tranche, the Company also issued 225,000 warrants exercisable at $0.10 per share for a period of 5 years. Additionally,
upon receiving the notice of default from the lender on June 12, 2017, the Company recognized additional principal of $11,250 on
the second tranche. The embedded conversion option qualifies for derivative accounting and bifurcation. The initial fair value
of the derivative liability of $300,962 resulted in a full discount to the note payable of $33,750 and interest expense of $281,212.
At August 31, 2017, the Company had amortized $1,164 of the discount to this convertible debenture and had accrued interest of
$1,627 related to this convertible debenture.
|
j)
|
On May 1, 2016, the Company issued a convertible debenture to a significant shareholder 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.
On May 1, 2017, the Company missed the required payment of all principal and accrued interest, resulting in the interest rate increasing
to 15% per year prospectively. At the maturity date, the unpaid amount of principal can be converted at the holder’s option
at a price of 50% of the quote price at the date of conversion. The embedded conversion option qualifies for derivative accounting
and bifurcation. The initial fair value of the derivative liability of $23,757 resulted in a full discount to the note payable
of $15,990 and interest expense of $7,767. At August 31, 2017, the Company had amortized $15,990 of the discount to this convertible
debenture and had accrued interest of $2,081 (November 30, 2016 - $746) related to this convertible debenture.
|
NOTE 6 – DERIVATIVE LIABILITIES
The embedded conversion options of the Company’s
convertible debentures described in Note 5 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 November 30, 2016
|
|
|
131% - 223%
|
|
0.36% - 0.68%
|
|
|
0%
|
|
0.08-1.00
|
At August 31, 2017
|
|
|
268% - 576%
|
|
0.95% - 1.23%
|
|
|
0%
|
|
0.04-1.00
|
The fair value of the derivative liabilities
was $1,298,313 and $89,071 at August 31, 2017 and November 30, 2016, respectively:
|
Derivative Values
|
Issue date
|
|
|
November 30, 2016
|
|
|
|
Additions
|
|
|
|
Conversions
|
|
|
|
Fair Value Increase
|
|
|
|
August
31, 2017
|
March 23, 2016 debenture
|
|
$
|
6,951
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,566
|
|
|
$
|
10,517
|
May 1, 2016 debenture
|
|
|
19,799
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,231
|
|
|
|
28,030
|
June 15, 2016 debenture
|
|
|
10,158
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,371
|
|
|
|
17,529
|
June 30, 2016 debenture
|
|
|
2,032
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,474
|
|
|
|
3,506
|
July 12, 2016 debenture
|
|
|
30,472
|
|
|
|
—
|
|
|
|
—
|
|
|
|
22,116
|
|
|
|
52,588
|
July 28, 2016 debenture
|
|
|
4,134
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,881
|
|
|
|
7,015
|
September 12, 2016 debenture
|
|
|
15,525
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,769
|
|
|
|
26,294
|
December 12, 2016 debenture
|
|
|
—
|
|
|
|
108,482
|
|
|
|
(90,378
|
)
|
|
|
234,701
|
|
|
|
252,805
|
December 15, 2016 debenture
|
|
|
—
|
|
|
|
91,802
|
|
|
|
(51,065
|
)
|
|
|
382,291
|
|
|
|
423,028
|
January 27, 2017 debenture
|
|
|
—
|
|
|
|
323,095
|
|
|
|
(33,812
|
)
|
|
|
6,066
|
|
|
|
295,349
|
June 12, 2017 debenture and attached warrants
|
|
|
—
|
|
|
|
300,962
|
|
|
|
—
|
|
|
|
(119,310
|
)
|
|
|
181,652
|
Total
|
|
$
|
89,071
|
|
|
$
|
824,341
|
|
|
$
|
(175,255
|
)
|
|
$
|
560,156
|
|
|
$
|
1,298,313
|
NOTE 7 – RELATED PARTY TRANSACTIONS
During the nine months ended August 31, 2017,
the Company incurred consulting and other business-related fees of $33,581 (2016 - $36,000) to a company whose CEO is the President
of the Company. As of August 31, 2017, the Company owed $62,953 (November 30, 2016 - $41,453) to the company whose CEO is the President
of the Company.
During the nine months ended August 31, 2017,
the Company incurred consulting fees and other business related fees of $7,001 (2016 - $9,124) to the company controlled by the
Chief Technology Officer of the Company. As of August 31, 2017, the Company owed $17,000 (November 30, 2016 - $11,000) to a company
controlled by the Chief Technology Officer of the Company.
During the nine months ended August 31, 2017,
the Company incurred consulting and other business-related fees of $6,000 (2016 - $9,000) to the former Chief Revenue Officer of
the Company. As of August 31, 2017, the Company owed $16,000 (November 30, 2016 - $10,000) to the former Chief Revenue Officer
of the Company. The amount owed to the former Chief Revenue Officer is included in accounts payable at August 31, 2017.
During the nine months ended August 31, 2017,
the Company incurred advisory, consulting and other business-related fees of $48,000 (2016 - $67,700) to the Chief Strategy Officer
of the Company. As of August 31, 2017, the Company owed $32,807 (November 30, 2016 – $31,639) to the Chief Strategy Officer
of the Company.
During the nine months ended August 31, 2017,
the Company incurred consulting and other business-related fees of $49,500 (2016 - $nil) to a significant shareholder of the Company.
As of May 31, 2017, the Company owed $104,500 (November 30, 2016 - $55,000) to the significant shareholder of the Company.
As of August 31, 2017, the Company owed $197,815
(November 30, 2016 - $79,385) to a company that is significant shareholder of the Company. The amount due is related to cost of
revenues incurred during the period.
As of August 31, 2017, the Company owed $600 (November
30, 2016 - $200) to the President of the Company, which is non-interest bearing, unsecured and due on demand.
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 4(a).
As a result of the forgiveness of the loans and cancellation of stock, the Company recognized $75,814 as a contribution to capital.
On November 21, 2014, the Company entered into
a License Agreement with the Chief Executive Officer of the Company (Note 10(f)). 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 August 31, 2017, the amount has not been paid by the Company.
NOTE 8 – CAPITAL STOCK
The authorized capital of the Company is 500,000,000
common shares with a par value of $ 0.001 per share and
100,000,000 preferred shares with a par value
of $0.001 per share.
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.
On September 14, 2016, the Company designated,
at its discretion, a class of Series B Preferred Stock. The Series B Preferred Stock consists of 2,000,000 shares. The holders
of The Series B Preferred Stock have no dividend rights except as may be declared by the Company at its discretion. The Series
B Preferred Shares have voting rights of 10 votes per share and liquidation preference on an equal basis per share with holders
of the Common Stock and the Series A Preferred Stock, subject to any preference given to the holders of the Series A Preferred
Stock. Series B Preferred Stock are convertible into common shares on a 1:100 basis. As of August 31, 2017, the Company has $5,820,000
of stock payable related to the issuance of 750,000 shares of Series B Preferred Stock pursuant to the asset acquisition described
in Note 3.
During the nine months ended August 31, 2017,
the Company issued 35,596,300 shares of common stock in aggregate pursuant to the conversion of $49,963 of convertible notes payable,
$6,760 of accrued interest, $2,113 in penalties, and $8,000 of fees upon conversion.
NOTE 9 – 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.
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. On the grant date, the stock options were deemed to have a fair value of $0.1476
per option, totaling $590,492. The stock options vest as follows: 2,000,000 options vested on May 24, 2017 and 2,000,000 options
will vest on May 24, 2018. During the nine months ended August 31, 2017, the Company recognized $251,869 (2016 - $120,425) in stock-based
compensation. The fair value of the options granted was estimated on the date of grant using the Black-Scholes option pricing model
with the following assumptions:
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 Company’s
stock options:
|
|
Number of Options
|
|
Weighted Average Exercise Price
$
|
|
Weighted-Average Remaining Contractual Term (years)
|
|
Aggregate Intrinsic Value
$
|
Outstanding, November 30, 2016
|
|
|
|
4,000,000
|
|
|
|
0.04
|
|
|
|
1.48
|
|
|
|
112,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, August 31, 2017
|
|
|
|
4,000,000
|
|
|
|
0.04
|
|
|
|
0.73
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, August 31, 2017
|
|
|
|
2,000,000
|
|
|
|
0.04
|
|
|
|
0.73
|
|
|
|
—
|
NOTE 10 – COMMITMENTS
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.
On August 17, 2015, the Company entered into
a consultancy agreement with the former Chief Revenue Officer of the Company. Pursuant to the agreement, the Company paid $1,000
a month for consulting services for a term of one year. Until May 26, 2017, the former Chief Revenue Officer continued to provide
consulting services for the Company and the Company continued to accrue $1,000 a month for these services. Effective May 26, 2017,
the former Chief Revenue Officer resigned.
On August 17, 2015, the Company entered into
a consultancy agreement with the President of the Company. Pursuant to the agreement, the Company will pay $3,500 a month for consulting
services for a term of one year. On August 17, 2017, the Company entered into an amendment to the consultancy agreement, whereby
the compensation structure was revised and shall now consist of a percentage of revenues. In the event the agreement is terminated,
the President of the Company will be entitled to ongoing compensation at the rate of 25% of the total monthly revenue generated
by the President for a period of 12 months so long as the Company receives a minimum recurring revenue of $25,000 per month.
On September 1, 2015, the Company entered into
a consultancy agreement with a significant shareholder of the Company. Pursuant to the agreement, the Company will pay $5,500 a
month for consulting services for a term of one year. The Company extended the consultancy agreement with this significant shareholder
for a term of one year and will continue to pay $5,500 a month until September 2017.
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. On May 24, 2016, the Company’s
board of directors appointed this Advisory Board Member to become the Chief Strategy Officer of the Company. Effective September
17, 2016, the agreement was extended for an additional six months.
The Company entered into an 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.
NOTE 11 – SUBSEQUENT EVENT
Subsequent to August 31, 2017, the Company issued
161,884,300 shares of common stock in aggregate pursuant to the conversion of $50,594 of convertible notes payable, $1,342 of accrued
interest, $33,612 in penalties, and $14,250 of fees upon conversion.