Annual Report (10-k)

Date : 12/17/2018 @ 6:49PM
Source : Edgar (US Regulatory)
Stock : Lifelogger Technologies Corp. (PN) (LOGG)
Quote : 0.076  -0.0001 (-0.13%) @ 8:56PM

Annual Report (10-k)

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

Form 10-K

 

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2017

 

OR

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file number: 000-55505

 

 

LIFELOGGER TECHNOLOGIES CORP.

(Exact name of registrant as specified in its charter)

 

Nevada   45-5523835

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

11380 Prosperity Farms Road, Suite 221E,

Palm Beach Gardens, Florida

  33410
(Address of principal executive offices)   (Zip Code)

 

(561) 515-6928

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered under Section 12(b) of the Act: None

 

Securities registered under Section 12(g) of the Act: Common Stock, Par Value $0.001 per share

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] No [X]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [  ] No [X]

 

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ] Accelerated filer [  ]
   
Non-accelerated filer [  ] (Do not check if a smaller reporting company) Smaller reporting company [X]
   
Emerging growth company [  ]  

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold as of the last business day of the registrant’s most recently completed second fiscal quarter $67,557 on June 30, 2017.

 

The number of shares of the registrant’s Common Stock issued and outstanding was 9,640,915 shares as of December 17, 2018.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

None.

 

 

 

 
 

 

Table of Contents

 

      Page
       
  Part I    
       
Item 1 Business   4
       
Item 1A Risk Factors   6
       
Item 1B Unresolved Staff Comments   6
       
Item 2 Properties   6
       
Item 3 Legal Proceedings   6
       
Item 4 Mine Safety Disclosures   6
       
  Part II    
       
Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities   6
       
Item 6 Selected Financial Data   9
       
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations   9
       
Item 7A Quantitative and Qualitative Disclosures About Market Risk   11
       
Item 8 Financial Statements and Supplementary Data   11
       
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure   11
       
Item 9A Controls and Procedures   12
       
Item 9B Other Information   13
       
  Part III    
       
Item 10 Directors, Executive Officers and Corporate Governance   13
       
Item 11 Executive Compensation   15
       
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters   16
       
Item 13 Certain Relationships and Related Transactions, and Director Independence   17
       
Item 14 Principal Accounting Fees and Services   17
       
  Part IV    
       
Item 15 Exhibits, Financial Statements Schedules   18
       
  Signatures   22

 

2
 

 

FORWARD-LOOKING STATEMENTS

 

This report contains forward-looking statements. The Securities and Exchange Commission encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This report and other written and oral statements that we make from time to time contain such forward-looking statements that set out anticipated results based on management’s plans and assumptions regarding future events or performance. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, future performance or results of current and anticipated sales efforts, expenses, the outcome of contingencies, such as legal proceedings, and financial results.

 

We caution that the factors described herein and other factors could cause our actual results of operations and financial condition to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

 

3
 

 

PART I

 

ITEM 1. BUSINESS

 

The Company

 

LifeLogger Technologies Corp. (“we,” “us,” the “Company” or “LifeLogger”) was incorporated in Nevada on June 4, 2012 under the name Snap Online Marketing Inc. We changed our name effective January 31, 2014.

 

The Company and its business

 

We are a lifelogging software company that developed and host a proprietary cloud-based software solution accessible on iOS and Android devices that offers an enhanced media experience for consumers by augmenting videos, livestreams and photos with additional context information and providing a platform that makes it easy to find and use that data when viewing or sharing media. Lifelogging is a way of journaling one’s life using media, often through the use of wearable electronic devices. We want to make lifelogging accessible to the mass market by taking videos and images right from users’ smart phones, wearable camera and/or sensor solutions, and adding geographic, visual and test data designed to enhance the relevance and context of the information collected.

 

Following the launch of our private beta version of the LifeLogger platform in August 2015 to users who expressed interest for exclusive testing with their iOS and Android devices, we launched an open public version during the first quarter of 2016. This release has the primary value proposition built in with geo-coordinates, face detection, playback with interactive map, social engagement features that enable easy sharing and ability to “like” other postings. Among the potential uses of our platform are the ability to share a video of a customer’s vacation in Europe with others that is integrated with an interactive map showing the viewer where the video is taking place, allowing the viewer to switch to the map view and even show additional views of those locations and other media taken by other people nearby. The end result is designed to provide an enhanced media experience much richer than just sharing the video alone.

 

We maintain the operation of this platform and are seeking potential distributors, joint venture and strategic alliance partners and additional sources of financing to enable us to pursue marketing and future development and commercialization activities to increase engagement and make improvements to the user interface and experience.

 

We completed a prototype of our integrated LifeLogger wearable video camera for testing in 2014 and seek potential distributors and joint venture and strategic alliance partners for this product. We will evaluate opportunities from these efforts to determine the extent of our future development and marketing of this device.

 

Operational Resources

 

We will rely on third party product development and software engineering and consulting providers for the development and support of our LifeLogger Platform on an as-needed basis.

 

Principal Suppliers

 

We believe we will have adequate access to a qualified development team for the LifeLogger Platform.

 

Competition

 

We will initially license our platform exclusively via the Internet. Our competition includes other Internet based sellers of LifeLogger services. Some of our competitors may have significantly greater financial, marketing and other resources than we do. Our competitors may undertake more far-reaching marketing campaigns, including print and television advertisements, and adopt more aggressive pricing policies that may allow them to build larger customer and distribution bases than ours. Our competitor’s services may be equal or superior to our proposed platform or that achieve greater market acceptance than ours.

 

Government Regulation

 

Our LifeLogger Platform business operates in a regulated environment under various federal and state consumer protection and other laws, rules and regulations, including the federal Gramm-Leach-Bliley Act and the federal Telemarketing and Consumer Fraud and Abuse Prevention Act. Some of the more significant regulations that we will become subject are described below.

 

4
 

 

Our LifeLogger Platform is subject to a number of U.S. federal and state, and foreign laws and regulations that affect companies conducting business on the Internet. Many of these laws and regulations are still evolving and being tested in courts, and could be interpreted in ways that could harm our business. These may involve user privacy, rights of publicity, data protection, content, intellectual property, distribution, electronic contracts and other communications, competition, protection of minors, consumer protection, taxation and online payment services. In particular, we will become subject to federal, state, and foreign laws regarding privacy and protection of user data. Foreign data protection, privacy, and other laws and regulations can be more restrictive than those in the United States. U.S. federal and state and foreign laws and regulations are constantly evolving and can be subject to significant change. In addition, the application and interpretation of these laws and regulations are often uncertain, particularly in the new and rapidly-evolving industry in which we intend to operate, and may be interpreted and applied inconsistently from country to country and inconsistently with our current policies and practices. There are also a number of legislative proposals pending before the U.S. Congress, various state legislative bodies, and foreign governments concerning data protection which could affect us. For example, the European Commission is currently considering a data protection regulation that may include operational requirements for companies that receive personal data that are different than those currently in place in the European Union, and that may also include significant penalties for non-compliance.

 

We believe we are in substantial compliance with all governmental regulations applicable to our business. As we expand our operations, we will employ a number of external resources to assist us in complying with our regulatory obligations. These external resources may include outside technology providers and consultants. As we expand our business, we will be required to raise additional capital to cover the expected increase in costs to hire and train additional internal and external resources to ensure we remain in substantial compliance with our governmental obligations.

 

Patents and Trademarks

 

We own the trademark for “LL Life Logger,” “LifeLogger,” and “What’s Your Story”. These trademarks are registered in the United States and a trademark for “Life Logger” has been registered in the European Union.

 

Employees

 

As of December 17, 2018, we have no full-time employees. However, we have a consulting contract with our Chief Executive Officer to provide services to us on a part-time basis.

 

Our Corporate History and Recent Developments

 

We were incorporated in Nevada on June 4, 2012 under the name Snap Online Marketing Inc. We changed our name effective January 31, 2014 when we embarked on the development and commercialization of innovative lifelogging solutions enabling the recording, secure online storage, organizing, retrieving, appreciation and selective sharing of personal information, data, photos, videos and other activities with friends and the public at large. Prior to January 31, 2014, we were engaged in providing web based marketing services.

 

On June 30, 2016, we completed the acquisition of certain assets of Pixorial, Inc. (“Pixorial”) pursuant to the terms of the Amended and Restated Asset Purchase Agreement entered into among us, Pixorial and Andres Espiniera dated June 20, 2016 (the “Amended Agreement”). Pursuant to the terms of the Amended Agreement, we acquired the trademark “What’s Your Story” and Pixorial’s customer list (the “Pixorial Asset Acquisition”). Under the terms of the Amended Agreement, we agreed to issue 86,673 shares of our unregistered common stock to the existing shareholders and certain creditors of Pixorial. In addition, we amended the exercise price of Mr. Espineira’s November 10, 2015 stock option award to acquire 200,000 shares of our common stock to $3.00 per share. The shares of our common stock to be issued to Pixorial’s shareholders and creditors are subject to a lock-up agreement whereby one-third the number received by each may be sold beginning as of each of the first three anniversaries of the closing of the Pixorial Asset Acquisition.

 

We amended our amended and restated articles of incorporation to increase our authorized capital stock from 125,000,000 shares to 500,000,000 shares, of which 495,000,000 shares will be common stock and 5,000,000 will be preferred stock and also effected a 1 for 30 reverse split of our common stock outstanding. This corporate action was approved by FINRA on March 24, 2017 and became effective as of March 27, 2017.

 

5
 

 

On January 9, 2018, the Company entered into an Asset Purchase Agreement, as of December 31, 2017, to acquire 94.8% of the working interest in North West Lost Hills producing oil property from Sage Exploration & Production, Inc., in exchange for 6,821,584 shares of the Company’s common shares to be issued by the Company at closing. The Asset Purchase Agreement was mutually terminated by the parties to that agreement in March 2018 prior to the closing.

 

ITEM 1A. RISK FACTORS

 

Not applicable to a smaller reporting company.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 2. PROPERTIES

 

Our executive offices are located in a shared executive office suite at 11380 Prosperity Farms Road, Suite 221E, Palm Beach Gardens, Florida 33410 on a month to month basis. In addition, we maintain office space provided by Mr. Garner, our Chief Executive Officer, Chief Financial Officer and sole director, in Ontario, Canada under the terms of his consulting agreement with our company.

 

ITEM 3. LEGAL PROCEEDINGS

 

We are not presently a party to any material litigation, nor to the knowledge of management is any litigation threatened against us that may materially affect us.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

PART II

 

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES

 

Our common stock is quoted on the OTC Pink tier of the OTC Markets and is labeled at this time as “no information” and has traded under the symbol “LOGG” since February 2014. Trading of our common stock is limited and sporadic. There can be no assurance that a liquid market for our common stock will ever develop.

 

The following table reflects the high and low closing sales information for our common stock for each fiscal quarter during the fiscal years ended December 31, 2016 and 2017. This information was obtained from the OTC Pink and reflects inter-dealer prices without retail mark-up, markdown or commission and may not necessarily represent actual transactions.

 

Quarter Ended   High     Low  
Fiscal Year 2016                
December 31, 2016   $ 2.22     $ 0.3090  
September 30, 2016   $ 2.97     $ 1.95  
June 30, 2016   $ 5.97     $ 1.71  
March 31, 2016   $ 8.97     $ 1.95  
                 
Fiscal Year 2017                
December 31, 2017   $ 0.03     $ 0.01  
September 30, 2017   $ 0.04     $ 0.01  
June 30, 2017   $ 0.14     $ 0.02  
March 31, 2017   $ 0.60     $ 0.03  

 

As of December 17, 2018, there were approximately 6 record holders, an unknown number of additional holders whose stock is held in “street name” and 9,640,915 shares of common stock issued and outstanding.

 

6
 

 

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future.

 

Recent Sales of Unregistered Securities

 

Issuances of Common Stock upon Conversion of Notes:

 

On January 3, 2017 $10,000 of June 2016 Note debt was converted to 36,792 shares of common stock at a conversion price of $0.2718 per share.

 

On January 6, 2017 $27,180 of March 2016 Note debt was converted to 100,000 shares of common stock at a conversion price of $.2718 per share.

 

On January 17, 2017 $15,000 of June 2016 Note debt was converted to 55,180 shares of common stock at a conversion price of $.2718 per share.

 

On February 8, 2017 $10,000 of June 2016 Note debt was converted to 44,092 shares of common stock at a conversion price of $.2268 per share.

 

On February 27, 2017 $10,000 of June 2016 Note debt was converted to 65,359 shares of common stock at a conversion price of $.1530 per share.

 

On February 28, 2017 $15,300 of March 2016 Note debt was converted to 100,000 shares of common stock at a conversion price of $.1530 per share.

 

On March 13, 2017 $5,000 of June 2016 Note debt was converted to 69,444 shares of common stock at a conversion price of $.0720 per share.

 

On March 14, 2017 $10,000 of March 2016 Note debt was converted to 129,199 shares of common stock at a conversion price of $.0774 per share.

 

On March 23, 2017 $5,000 of June 2016 Note debt was converted to 77,161 shares of common stock at a conversion price of $.0648 per share.

 

On April 20, 2017 $5,646 of June 2016 Note debt was converted to 136,967 shares of common stock at a conversion price of $.04122 per share.

 

On May 2, 2017 $7,000 of March 2016 Note debt was converted to 254,731 shares of common stock at a conversion price of $.02748 per share.

 

On May 23, 2017 $3,700 of June 2016 Note debt was converted to 156,513 shares of common stock at a conversion price of $.02364 per share.

 

On June 9, 2017 $6,988 of March 2016 Note debt was converted to 317,340 shares of common stock at a conversion price of $.02202 per share.

 

On June 12, 2017 $3,523 of June 2016 Note debt was converted to 159,998 shares of common stock at a conversion price of $.02202 per share.

 

On June 19, 2017 $3,699 of June 2016 Note debt was converted to 167,982 shares of common stock at a conversion price of $.02202 per share.

 

On June 26, 2017 $5,791 of March 2016 Note debt was converted to 380,000 shares of common stock at a conversion price of $.01524 per share.

 

7
 

 

On June 27, 2017 $2,801 of June 2016 Note debt was converted to 183,817 shares of common stock at a conversion price of $.01524 per share.

 

On July 12, 2017 $1,704 of June 2016 Note debt was converted to 200,000 shares of common stock at a conversion price of $.00852 per share.

 

On August 1, 2017 $3,578 of June 2016 Note debt was converted to 420,000 shares of common stock at a conversion price of $.00852 per share

 

On August 1, 2017 $3,762 of March 2016 Note debt was converted to 380,000 shares of common stock at a conversion price of $.0099 per share.

 

On August 1, 2017 $3,762 of March 2016 Note debt was converted to 380,000 shares of common stock at a conversion price of $.0099 per share.

 

On August 7, 2017 $4,132 of June 2016 Note debt was converted to 485,000 shares of common stock at a conversion price of $.00852 per share

 

On August 7, 2017 $4,263 of March 2016 Note debt was converted to 490,000 shares of common stock at a conversion price of $.0087 per share.

 

On August 9, 2017 $4,422 of March 2016 Note debt was converted to 670,000 shares of common stock at a conversion price of $.0066 per share.

 

On August 15, 2017 $3,720 of June 2016 Note debt was converted to 500,000 shares of common stock at a conversion price of $.00744 per share.

 

On October 10, 2017 $4,500 of March 2016 Note debt was converted to 750,000 shares of common stock at a conversion price of $.006 per share.

 

The above shares of our common stock were issued in reliance on the exemption from registration provided by Sections 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act “).

 

Issuance of Convertible Notes:

 

On April 7, 2017, the Company entered into a Securities Purchase Agreement with two investors (the “Investors”) whereby it agreed to and issued to each of the investors (each an “Investor” and collectively, the “Investors”) a 10% Convertible Promissory Note in the principal amount of up to $75,000 (each, the “April 2017 Note” and collectively, the “April 2017 Notes”) payable in tranches as follows to date: April 11, 2017 $19,167 consisting of $17,250 (less $1,250 for The Investor’s legal fees) paid to the Company in cash, and less original issue discount of $1,917. Tranche two on May 2, 2017 $14,444 consisting of $13,000 paid to the Company in cash, and less original issue discount of $1,444. Tranche 3 paid on June 1, 2017: $15,000 consisting of $13,500 paid to the Company in cash, and less original issue discount of $1,500. Tranche 4 paid on August 8, 2017: $12,778 consisting of $11,500 paid to the Company in cash, and less original issue discount of $1,278. Tranche 5 paid on September 1, 2017: $11,667 consisting of $10,500 paid to the Company in cash, and less original issue discount of $1,167. Tranche 6 paid on November 15, 2017: $10,278 consisting of $9,250 paid to the Company in cash, and less original issue discount of $1,028. Each Investor may pay such additional amounts of the consideration and at such dates as mutually agreed upon by the Company and The Investor. The maturity date for each tranche funded shall be twelve (12) months from the effective date of each payment (each a “Maturity Date”) or such earlier date as the April 2017 Notes is required or permitted to be, and is the date upon which the principal sum of each respective tranche, as well as any accrued and unpaid interest and other fees relating to that respective tranche, shall be due and payable. Each Investor has the right to convert all or any part of the outstanding and unpaid principal and interest into shares of the Company’s common stock. The terms of the Convertible Note are as follows:

 

  1. Each Investor has the right from and after a 180 day delay from the Date of Issuance, and until any time until the April 2017 Note is fully paid, to convert any outstanding and unpaid principal portion of the Note, and accrued interest, into fully paid and non–assessable shares of Common (par value $.001 per share). Bi–weekly amortization payments are due after 6 months.
     
  2. The Convertible Notes are convertible at a fixed rate of $0.07 with no reset provisions.
     
  3. Beneficial ownership is limited to 9.99%.
     
  4. The Company may redeem the April 2017 Notes for 150% of the redemption amount and accrued interest at any time upon ten days written notice to each of the Investors.
     
  5. In the event of default each of the April 2017 Notes bear interest at 24% per annum.

 

8
 

 

Participation in Future Financing. Subject to any existing obligations of the Company, from the date hereof until the date that is the 12-month anniversary of the date each of the April 2017 Notes, upon any issuance by the Company or any of its subsidiaries of its Common Stock or other securities convertible into Common Stock, other than any issuance that is through a public underwritten offering or to an investor or a group of investors that already own Common Stock or securities of the Company, Each of the Investors shall have the right to participate in the subsequent Financing in an amount up to 100% of such Each of the Investors’ pro rata portion as defined below in the April 2017 Notes on the same terms, conditions and price provided for in the Subsequent Financing, subject to any existing obligations of the Company with respect to participation rights.

 

During the period ended September 30, 2017, the holders of convertible notes in the aggregate principal amount of $431,118 are in default. See Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations – Current Indebtedness.

 

The Company believes that the issuance and sale of the above notes was exempt from registration pursuant to Section 4(a)(2) of the Securities Act as privately negotiated, isolated, non-recurring transactions not involving any public solicitation.

 

ITEM 6. SELECTED FINANCIAL DATA

 

Not applicable to a smaller reporting company.

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

We define our accounting periods as follows:

 

  “fiscal 2016” – January 1, 2016 through December 31, 2016
     
  “fiscal 2017” – January 1, 2017 through December 31, 2017

 

The Company

 

We are a lifelogging software company that developed and hosts a proprietary cloud-based software solution accessible on iOS and Android devices that offers an enhanced media experience for consumers by augmenting videos, livestreams and photos with additional context information and providing a platform that makes it easy to find and use that data when viewing or sharing media.

 

Following the launch of our private beta version of the LifeLogger platform in August 2015 to users who expressed interest for exclusive testing with their iOS and Android devices, we launched an open public version during the first quarter of 2016. This release has the primary value proposition built in with geo-coordinates, face detection, playback with interactive map, social engagement features that enable easy sharing and ability to “like” other postings. Among the uses of our platform are the ability to share a video of a customer’s vacation in Europe with others that is integrated with an interactive map showing the viewer where the video is taking place, allowing the viewer to seamlessly switch to the map view and even show additional views of those locations and other media taken by other people nearby. The end result is designed to provide an enhanced media experience much richer than just sharing the video alone.

 

We maintain the operation of this platform and are seeking potential distributors, joint venture and strategic alliance partners and additional sources of financing to enable us to pursue marketing and future development and commercialization activities to increase engagement and make improvements to the user interface and experience.

 

We completed a prototype of our integrated LifeLogger wearable video camera for testing in 2014 and seek potential distributors and joint venture and strategic alliance partners. We will evaluate opportunities from these marketing efforts to determine the extent of our future development and marketing of this device.

 

9
 

 

RESULTS OF OPERATIONS

 

The following comparative analysis on results of operations was based primarily on the comparative audited financial statements, footnotes and related information for the periods identified below and should be read in conjunction with the financial statements and the notes to those statements that are included elsewhere in this report.

 

Revenue

 

The company currently has no revenues in fiscal 2017 nor 2016. The Company currently cannot predict when the Company will become revenue producing.

 

Operating Expenses

 

Total operating expenses for fiscal 2017 decreased by $913,106 compared to fiscal 2016 mainly as a result of a decreases in option expenses to a consultant, research and development, consulting and general and administrative.

 

Other Income (Expenses)

 

Other expenses for fiscal 2017 decreased by $962,172 compared to fiscal 2016 as a result of no impairment of intangible assets related to our acquisition of certain assets from Pixorial, change in fair value of derivative warrants and notes, loss on extinguishment of debt, commitment fee expense and partially offset by an increase in interest expense.

 

The net loss for fiscal 2017 was $1,389,972, a decrease of $1,875,278 compared to fiscal 2016, as a result of an decreases in operating expenses and other expenses discussed above.

 

Liquidity and Capital Resources

 

Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. As of December 31, 2017 our working capital deficit amounted to $2,022,298 an increase of $788,599 as compared to $1,233,699 as of December 31, 2016. This increase is primarily a result of a decrease in cash and increases in accounts payable and notes payable and derivative liabilities.

 

Net cash used in operating activities was $237,360 during fiscal 2017 compared to $865,543 in fiscal 2016. The decrease in cash used in operating activities is primarily attributable to our net loss and derivative liabilities, partially offset by an increase in options issued for consulting services, interest expense, original issue discount on new financing, commitment fee expense for new debt financing, changes in derivative liabilities, extinguishment of debt and impairment of intangible assets.

 

Net cash provided by financing activities during fiscal 2017 was $137,100 compared to $834,885 in fiscal 2016. The decrease was primarily a result of the reduction in proceeds from the note payable.

 

Capital Resources

 

We currently have no cash resources on hand and our projected operating expenses and working capital needs exceed our income and cash resources. We have curtailed our future development and marketing plans until we are able to enter into an agreement with a potential distributor, joint venture or strategic alliance partner or source of additional financing to provide us with sufficient cash to continue these activities. As a result, capital raising has been and continues to be essential for our continued operations, sales and marketing efforts and further development of our LifeLogger platform. We potentially will have to issue additional debt or equity, or enter into a strategic arrangement with a third party to carry out some aspects of our business plan. There can be no assurance that additional capital will be available to us. Other than the agreements discussed below, we currently have no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources. Since we have no other such arrangements or plans currently in effect, our inability to raise funds for the above purposes will have a severe negative impact on our ability to remain a viable company.

 

10
 

 

Current and Future Financings

 

Current Indebtedness

 

Following is an analysis of convertible debt issued to Old Main Capital and SBI Investments at December 31, 2017:

 

    December 31, 2017  
Contractual balance   $ 1,125,108  
Less unamortized discount     (44,074 )
         
Convertible debt   $ 1,081,034  

 

The above stated amount does not include the accrued expenses, including default interest and penalties, as at December 31, 2017 of $467,733. The Company is in default under the terms and conditions of the convertible debt issued to Old Main Capital and SBI.

 

Going Concern Consideration

 

We have been in the development stage since our inception on June 4, 2012 and continue to incur significant losses. We had an accumulated deficit of $5,983,910 as of December 31, 2017 and $237,360 in cash was used in operating activities. In addition, the Company is in default on convertible debt obligations of $1,081,034. This raises substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent our ability to raise additional capital and generate additional revenues and profits from our business plan.

 

In the opinion of our independent registered public accounting firm for our fiscal year end December 31, 2017, our auditor included a statement that as a result of our deficit accumulated during the development stage at December 31, 2017, our net loss and net cash used in operating activities for the reporting period then ended, there is a substantial doubt as our ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Inflation

 

In the opinion of management, inflation has not and will not have a material effect on our operations in the immediate future. Management will continue to monitor inflation and evaluate the possible future effects of inflation on our business and operations.

 

Off-Balance Sheet Arrangements

 

Under SEC regulations, we are required to disclose our off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, such as changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. As of December 31, 2017, we have no off-balance sheet arrangements.

 

CRITICAL ACCOUNTING POLICIES

 

Our significant accounting policies are disclosed in Note 2 of our Financial Statements included elsewhere in this Annual Report on Form 10-K.

 

ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

See Financial Statements and Financial Statement Schedules appearing on pages F-1 through F-24 of this annual report on Form 10-K.

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.

 

11
 

 

ITEM 9A. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed by us in reports that we file under the Exchange Act is recorded, processed, summarized and reported as specified in the SEC’s rules and forms and that such information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Management, with the participation of our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2017. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were not effective as of December 31, 2017 for the reasons discussed below.

 

Management’s Annual Report on Internal Control over Financial Reporting

 

Management is responsible for the preparation of our financial statements and related information. Management uses its best judgment to ensure that the financial statements present fairly, in material respects, our financial position and results of operations in conformity with generally accepted accounting principles.

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in the Exchange Act. These internal controls are designed to provide reasonable assurance that the reported financial information is presented fairly, that disclosures are adequate and that the judgments inherent in the preparation of financial statements are reasonable. There are inherent limitations in the effectiveness of any system of internal controls including the possibility of human error and overriding of controls. Consequently, an ineffective internal control system can only provide reasonable, not absolute, assurance with respect to reporting financial information.

 

Our internal control over financial reporting includes policies and procedures that: (i) pertain to maintaining records that, in reasonable detail, accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements in accordance with generally accepted accounting principles and that the receipts and expenditures of company assets are made in accordance with our management and directors authorization; and (iii) provide reasonable assurance regarding the prevention of or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.

 

Under the supervision of management, including our Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and subsequent guidance prepared by the Commission specifically for smaller public companies. Based on that evaluation, our management concluded that our internal control over financial reporting was not effective as of December 31, 2017 because it identified the following material weakness and significant deficiencies:

 

  Material Weakness – The Company did not maintain effective controls over certain aspects of the financial reporting process because we (i) lacked a sufficient complement of personnel with a level of accounting expertise and an adequate supervisory review structure that is commensurate with our financial reporting requirements.
     
  Significant Deficiencies – Inadequate segregation of duties.

 

A material weakness is a deficiency or a combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim consolidated financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the Company’s financial reporting.

 

We expect to be materially dependent upon third parties to provide us with accounting consulting services related to derivative liability treatment and for other accounting services for the foreseeable future. We believe this will be sufficient to remediate the material weaknesses related to our accounting for derivative liability treatment discussed above. Until such time as we have a chief financial officer with the requisite expertise in U.S. GAAP, there are no assurances that the material weaknesses and significant deficiencies in our disclosure controls and procedures will not result in errors in our financial statements which could lead to a restatement of those financial statements.

 

12
 

 

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.

 

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the company’s registered public accounting firm pursuant to SEC rules that permit us to provide only management’s report on internal control over financial reporting in this annual report on Form 10-K.

 

Changes in Internal Controls over Financial Reporting

 

There have been no changes in our internal control over financial reporting during the quarter ended December 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 9B. OTHER INFORMATION

 

None.

 

PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Set forth below are the names and ages of our directors and executive officers and their principal occupations at present and for at least the past five years.

 

Name   Age   Positions and Offices to be Held
         
Stewart Garner   52   Chief Executive Officer, Chief Financial Officer and Director

 

Our director is appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board. All officers and directors listed above will remain in office until the next annual meeting of our stockholders, and until their successors have been duly elected and qualified. There are no agreements with respect to the election of Directors. Our Board of Directors appoints officers annually and each Executive Officer serves at the discretion of our Board of Directors.

 

Stewart Garner . Mr. Garner has served as our Chief Executive Officer, Chief Executive Officer and sole director since December 2013. Mr. Garner has over 20 years in finance and business development in both the private and public sectors. Since 2007, Mr. Garner has been the founder and sole officer and director of 2128112 Ontario, Inc., an entity which invests in and develops real estate projects and invests in and consults with public and private entities. Recently, Mr. Garner, has been focused on real estate with the acquisition and development of properties on a consulting basis.

 

As the Chief Executive Officer and Chief Financial Officer of our company, Mr. Garner brings our board his considerable experience in the strategic planning and growth of companies and qualifies him to continue to serve as a director or our company.

 

Committees of our Board of Directors

 

Our securities are not quoted on an exchange that has requirements that a majority of our Board members be independent and we are not currently otherwise subject to any law, rule or regulation requiring that all or any portion of our Board of Directors include “independent” directors, nor are we required to establish or maintain an Audit Committee or other committee of our Board of Directors.

 

13
 

 

The Board does not have standing audit, compensation or nominating committees. The Board does not believe these committees are necessary based on the size of our company, the current levels of compensation to corporate officers and the ownership by Mr. Garner of 1,000 shares of our Series A Preferred Stock which gives him control over all matters submitted to a vote of the Company’s stockholders. The Board will consider establishing audit, compensation and nominating committees at the appropriate time.

 

The entire Board of Directors participates in the consideration of compensation issues and of director nominees. Candidates for director nominees are reviewed in the context of the current composition of the Board and the Company’s operating requirements and the long-term interests of its stockholders. In conducting this assessment, the Board of Directors considers skills, diversity, age, and such other factors as it deems appropriate given the current needs of the Board and the Company, to maintain a balance of knowledge, experience and capability.

 

The Board’s process for identifying and evaluating nominees for director, including nominees recommended by stockholders, will involve compiling names of potentially eligible candidates, conducting background and reference checks, conducting interviews with the candidate and others (as schedules permit), meeting to consider and approve the final candidates and, as appropriate, preparing an analysis with regard to particular recommended candidates.

 

Through their own business activities and experiences each of directors have come to understand that in today’s business environment, development of useful products and identification of undervalued real estate, along with other related efforts, are the keys to building our company. The directors will seek out individuals with relevant experience to operate and build our current and proposed business activities.

 

Director Compensation

 

Our directors do not receive any compensation as directors and there is no other compensation being considered at this time.

 

Board Oversight in Risk Management

 

Our Chief Executive Officer, who is our principal executive officer, also serves as Chairman of the Board of Directors, and we do not have a lead director. In the context of risk oversight, we believe that our selection of one person to serve in both positions provides the Board with additional perspective which combines the operational experience of a member of management with the oversight focus of a member of the Board. The business and operations of our Company are managed by our Board as a whole, including oversight of various risks, such as operational and liquidity risks, that our Company faces. Because our Board includes a member of our management, this individual is responsible for both the day-to-day management of the risks we face as well as the responsibility for the oversight of risk management.

 

Compliance with Section 16(a) of the Securities Exchange Act

 

Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially own more than 10% of our common stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Executive officers, directors and greater than 10% beneficial shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.

 

Based solely upon our review of copies of such forms received by us, we believe that, during the fiscal year ended December 31, 2017, we are not aware that any officer, director or 10% or greater shareholder failed to file on a timely basis, as disclosed in the aforementioned Forms, reports required by Section 16(a) of the Exchange Act during the fiscal year ended December 31, 2017.

 

14
 

 

ITEM 11. EXECUTIVE COMPENSATION

 

The following table sets forth certain compensation information for: (i) our principal executive officer or other individual serving in a similar capacity during fiscal 2016 and 2017; (ii) our two most highly compensated executive officers other than our principal executive officers who were serving as executive officers at December 31, 2017 and 2016 whose compensation exceed $100,000; and (iii) up to two additional individuals for whom disclosure would have been required but for the fact that the individual was not serving as an executive officer at December 31, 2017. Compensation information is shown for the fiscal years ended December 31, 2017 and 2016:

 

2017 SUMMARY COMPENSATION TABLE

 

Name and principal position   Year     Salary     Bonus     Stock Awards     Option Awards     Non-Equity Incentive Plan Compensation     Nonqualified Deferred Compensation Earnings     All Other Compensation (1)     Total  
                                                       
Stewart Garner,     2016       $ 84,000     $      0     $      0     $       0               0              0     $        17,723     $ 101,723  
Chief Executive Officer and Chief Financial Officer     2017       $ 63,000       -       -       -       -       -     $ 12,600     $ 75,600  

 

  (1) Other compensation consists of an allowance for car, insurance and cell phone expenses.

 

Employment Agreements with Executive Officers

 

Stewart Garner . Effective as of January 1, 2014, we orally agreed to retain Stewart Garner on a consulting basis whereby he agreed to serve as our Chief Executive Officer and a Director. The consulting agreement provides for a base payment of $84,000 per year, a discretionary bonus, a monthly automobile allowance of $1,000 and automobile insurance, medical insurance, cellular phone allowance and reimbursement of business expenses, which includes the use of Mr. Garner’s home office. The consulting agreement is subject to termination by the Company for cause and also in the event of Mr. Garner’s death or disability. In the event of a termination of the agreement for cause or due to death or disability, Mr. Garner would be entitled to his base salary and benefits for the balance of the then existing term.

 

Outstanding Equity Awards at 2017 Fiscal Year-End

 

The following tables set forth, for each person listed in the Summary Compensation Table set forth above, as of December 31, 2017:

 

With respect to each option award -

 

  the number of shares of our common stock issuable upon exercise of outstanding options that have been earned, separately identified by those exercisable and unexercisable;
     
  the number of shares of our common stock issuable upon exercise of outstanding options that have not been earned;
     
  the exercise price of such option; and
     
  the expiration date of such option; and
     
  with respect to each stock award -
     
  the number of shares of our common stock that have been earned but have not vested;
     
  the market value of the shares of our common stock that have been earned but have not vested;
     
  the total number of shares of our common stock awarded under any equity incentive plan that have not vested and have not been earned; and
     
  the aggregate market or pay-out value of our common stock awarded under any equity incentive plan that have not vested and have not been earned.

 

15
 

 

OUTSTANDING EQUITY AWARDS AT 2017 FISCAL YEAR-END

 

OPTION AWARDS     STOCK AWARDS  
Name     Number of Securities Underlying Unexercised Options (#) Exercisable       Number of Securities Underlying Unexercised Options (#) Unexercisable       Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)       Option Exercise Price ($)       Option Expiration Date     Number of Shares or Units of Stock That Have Not Vested (#)     Market Value of Shares or Units of Stock That Have Not Vested ($)       Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)       Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (#)  
Stewart Garner     -       -       -       -       -     -     -       -       -  

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following tables set forth certain information, as of December 13, 2018 with respect to the beneficial ownership of our outstanding common stock and preferred stock by (i) any holder of more than 5%, (ii) each of our named executive officers and directors, and (iii) our directors and executive officers as a group.

 

Unless otherwise indicated, the business address of each person listed is in care of LifeLogger Technologies Corp., 11380 Prosperity Farms Road, Suite 221E, Palm Beach Gardens, Florida 33410. The information provided herein is based upon a list of our shareholders and our records with respect to the ownership of common stock. The percentages in the table have been calculated on the basis of treating as outstanding for a particular person, all shares of our common stock outstanding on that date and all shares of our common stock issuable to that holder in the event of exercise of outstanding options, warrants, rights or conversion privileges owned by that person at that date which are exercisable within 60 days of that date. Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our common stock owned by them, except to the extent that power may be shared with a spouse.

 

Capital Stock

 

Name and Address of Beneficial Owner   Common Stock Beneficial Ownership     Percent of Class     Series A Preferred Beneficial Ownership     Percent of Class  
Named Executive Officers and Directors:                                
Stewart Garner (1)         -          -       1,000       100.0 %
All executive officers and directors as a group (one person)     -       -       1,000       100.0 %
                                 
Other 5% Stockholders:                                
None.                                

 

* Less than 1%.

 

  (1) Each share of Series A Preferred Stock entitles the holder to 50,000 votes on all matters submitted to a vote of the Company’s stockholders. In the event that such votes do not total at least 51% of all votes, then the votes cast by the holders of the Series A Preferred Stock shall be equal to 51% of all votes cast at any meeting of the Company’s stockholders or any issue put to the stockholders for voting. The holders of the Series A Preferred Stock do not have any conversion rights.

 

16
 

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

 

Related Party Transactions

 

Related parties with whom the Company had transactions are:

 

Related Parties   Relationship
     
Stewart Garner   Chief Executive Officer, Chief Financial Officer and director

 

Advances from CEO

 

From time to time, Stewart Garner, the Company’s Chief Executive Officer, Chief Financial Officer and sole director, provides advances to the Company for its working capital purposes. Those advances bore no interest and were due on demand. The Company owed Mr. Garner $28,623 at December 31, 2016 and $8,065 at December 31, 2017.

 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

 

The following table shows the fees that were billed for the audit and other services provided by SRCO Professional Corporation for the fiscal year ended December 31, 2017 and Anton and Chia, LLP and Li and Company, PC for the fiscal years ended December 31, 2017 and 2016.

 

    2016     2017  
             
Audit Fees   $ 21,670     $ 35,500  
Audit-Related Fees   $ -     $ -  
Tax Fees   $ 1,300     $ 1,300  
All Other Fees     -       -  
Total   $ 22,970     $ 36,800  

 

Audit Fees — This category includes the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the independent registered public accounting firm in connection with engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.

 

Audit-Related Fees — This category consists of assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence with the Securities and Exchange Commission and other accounting consulting.

 

Tax Fees — This category consists of professional services rendered by our independent registered public accounting firm for tax compliance and tax advice. The services for the fees disclosed under this category include tax returns preparation and technical tax advice.

 

17
 

 

All Other Fees — This category consists of fees for other miscellaneous items.

 

Our Board of Directors has adopted a procedure for pre-approval of all fees charged by our independent registered public accounting firm. Under the procedure, the Board approves the engagement letter with respect to audit, tax and review services. Other fees are subject to pre-approval by the Board, or, in the period between meetings, by a designated member of Board. Any such approval by the designated member is disclosed to the entire Board at the next meeting.

 

PART IV

 

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

(a) 1. Financial Statements
     
    The financial statements and Report of Independent Registered Public Accounting Firm are listed in the “Index to Financial Statements and Schedules” on page F-1 and included on pages F-2 through F-24
     
  2. Financial Statement Schedules
     
    All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission (the “Commission”) are either not required under the related instructions, are not applicable (and therefore have been omitted), or the required disclosures are contained in the financial statements included herein.
     
  3. Exhibits (including those incorporated by reference).

 

Exhibit
No.
  Description
     
3.1(a)   Articles of Incorporation filed with the Nevada Secretary of State on June 13, 2012 (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 filed with the SEC on February 4, 2013).
     
3.1(b)   Amended and Restated Articles of Incorporation filed with the Nevada Secretary of State on January 6, 2014 (incorporated by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K filed on February 4, 2014).
     
3.1(c)   Certificate of Designation of Series A Preferred Stock filed with the Nevada Secretary of State on December 28, 2016 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on February 22, 2017).
     
3.1(d)   Certificate of Amendment to the Amended and Restated Articles of Incorporation filed with the Nevada Secretary of State on February 23, 2017 (incorporated by reference to Exhibit A to the Company’s Definitive Information Statement on Schedule 14C filed on March 16, 2017).
     
3.2   Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 filed on February 4, 2013).
     
4.1   Subscription Agreement (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-1 filed with the SEC on February 4, 2013).
     
4.2   Promissory Note dated as of July 20, 2015, between LifeLogger Technologies Corp. and Glamis Capital SA (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 27, 2015).
     
4.3   Promissory Note dated as of September 8, 2015 between LifeLogger Technologies Corp. and Old Main Capital, LLC (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 18, 2015).
     
4.4   Common Stock Purchase Warrant dated as of September 8, 2015 between LifeLogger Technologies Corp. and Old Main Capital, LLC (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on September 18, 2015).

 

18
 

 

4.5   10% Convertible Promissory Note in the original principal amount of $296,153 dated March 9, 2016 between LifeLogger Technologies Corp. and Old Main Capital, LLC (incorporated by reference to Exhibit 4.5 to the Company’s Amendment No. 1 to Quarterly Report on Form 10-Q/A filed with the SEC on March 16, 2016).
     
4.6   Amendment No. 1 dated March 9, 2016 to Convertible Promissory Note dated September 8, 2015 between LifeLogger Technologies Corp. and Old Main Capital, LLC (incorporated by reference to Exhibit 4.6 to the Company’s Amendment No. 1 to Quarterly Report on Form 10-Q/A filed with the SEC on March 16, 2016).
     
4.7   8% Convertible Promissory Note in the principal amount of $250,000 dated March 9, 2016 between LifeLogger Technologies Corp. and Old Main Capital, LLC (incorporated by reference to Exhibit 4.7 to the Company’s Amendment No. 1 to Quarterly Report on Form 10-Q/A filed with the SEC on March 16, 2016).
     
4.8   10% Convertible Promissory Note in the principal amount of $87,912 dated June 9, 2016 between LifeLogger Technologies Corp. and Old Main Capital, LLC (incorporated by reference to Exhibit 4.7 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 15, 2016).
     
4.9   Amendment dated June 9, 2016 to $296,153 Principal Amount Convertible Promissory Note dated March 9, 2016 issued by LifeLogger Technologies Corp. to Old Main Capital, LLC (incorporated by reference to Exhibit 4.8 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 15, 2016).
     
4.10   Amendment dated June 9, 2016 to $250,000 Principal Amount Convertible Promissory Note dated March 9, 2016 issued by LifeLogger Technologies Corp. to Old Main Capital, LLC (incorporated by reference to Exhibit 4.9 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 15, 2016).
     
4.11   Promissory Note dated June 30, 2016, by and between LifeLogger Technologies Corp. and SBI Investments LLC, 2014-1 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 7, 2016).
     
4.12   Series A Common Stock Purchase Warrant dated June 30, 2016, by and between LifeLogger Technologies Corp. and SBI Investments LLC, 2014-1 (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on July 7, 2016).
     
4.13   Series B Common Stock Purchase Warrant dated June 30, 2016, by and between LifeLogger Technologies Corp. and SBI Investments LLC, 2014-1 (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed with the SEC on July 7, 2016).
     
4.14   10% Convertible Promissory Note dated April 7, 2017 issued by LifeLogger Technologies Corp. to Old Main Capital, LLC (incorporated by reference to Exhibit 4.14 to the Company’s Annual Report on Form 10-K filed with the SEC on April 17, 2017).
     
4.15   10% Convertible Promissory Note dated April 7, 2017 issued by LifeLogger Technologies Corp. to SBI Investments LLC, 2014-1(incorporated by reference to Exhibit 4.15 to the Company’s Annual Report on Form 10-K filed with the SEC on April 17, 2017).
     
10.1   Product Development Agreement dated as of January 7, 2014 between Matrico Holdings, Ltd. and LifeLogger Technologies Corp. (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 12, 2014).
     
10.2   Addendum to Product Development Agreement effective as of June 1, 2014 between Matrico Holdings, Ltd. and LifeLogger Technologies Corp. (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 12, 2014).
     
10.3   Securities Purchase Agreement dated as of September 24, 2014 between LifeLogger Technologies Corp. and Glamis Capital S.A. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 26, 2014).
     
10.4   Securities Purchase Agreement dated as of December 8, 2014 between LifeLogger Technologies Corp. and Glamis Capital S.A. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 9, 2014).

 

19
 

 

10.5   Securities Purchase Agreement dated as of May 7, 2015 between LifeLogger Technologies Corp. and SSID Limited (incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 14, 2015).
     
10.6   Securities Purchase Agreement dated as of July 20, 2015 between LifeLogger Technologies Corp. and Glamis Capital SA (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 27, 2015).
     
10.7   Securities Purchase Agreement dated as of September 8, 2015 between LifeLogger Technologies Corp. and Old Main Capital, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 27, 2015).
     
10.8   Asset Purchase Agreement dated November 10, 2015 entered into among LifeLogger Technologies Corp., Pixorial, Inc. and Andres Espineira (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 16, 2015).
     
10.9+   Consulting Agreement dated as of November 10, 2015 between LifeLogger Technologies Corp. and Andres Espineira (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on November 16, 2015).
     
10.10+   Stock Option Agreement dated as of November 10, 2015 between LifeLogger Technologies Corp. and Andres Espineira (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on November 16, 2015).
     
10.11   Amendment dated November 12, 2015 to Promissory Note and Securities Purchase Agreement dated as of July 20, 2015, between LifeLogger Technologies Corp. and Glamis Capital SA (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on November 16, 2015).
     
10.12   Securities Purchase Agreement dated March 9, 2016 between LifeLogger Technologies Corp. and Old Main Capital, LLC (incorporated by reference to Exhibit 10.14 to the Company’s Amendment No. 1 to Quarterly Report on Form 10-Q/A filed with the SEC on March 16, 2016).
     
10.13   First Amendment to Asset Purchase Agreement entered into on March 30, 2016 between LifeLogger Technologies Corp. and Pixorial, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 5, 2016).
     
10.14   Debt Settlement Agreement dated March 1, 2016 entered into between LifeLogger Technologies Corp. and Glamis Capital SA (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 7, 2016).
     
10.15   Amendment No. 2 to Asset Purchase Agreement entered into as of May 3, 2016 by LifeLogger Technologies Corp. and Pixorial, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 5, 2016).
     
10.16   Stock Redemption Agreement between LifeLogger Technologies Corp. and Consumer Electronics Ventures Corp. dated May 5 May, 2016 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 18, 2016).
     
10.17   Amended and Restated Asset Purchase Agreement dated as of June 20, 2016 between LifeLogger Technologies Corp., Pixorial, Inc. and Andres Espiniera (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A (Amendment No. 1) filed with the SEC on June 21, 2016).
     
10.18   Securities Purchase Agreement dated June 30, 2016, by and between LifeLogger Technologies Corp. and SBI Investments LLC, 2014-1 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 7, 2016).

 

20
 

 

10.19   Investment Agreement dated as of February 21, 2017 between LifeLogger Technologies Corp. and Stewart Garner (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 22, 2017).
     
10.20   Securities Purchase Agreement between LifeLogger Technologies Corp. and Old Main Capital, LLC dated as of April 7, 2017 (incorporated by reference to Exhibit 10.20 to the Company’s Annual Report on Form 10-K filed with the SEC on April 17, 2017).
     
10.21   Securities Purchase Agreement between LifeLogger Technologies Corp. and SBI Investments LLC, 2014-1 dated as of April 7, 2017 (incorporated by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K filed with the SEC on April 17, 2017).
     
31.1*   Section 302 Certificate of Principal Executive Officer.
     
31.2*   Section 302 Certificate of Principal Financial Officer.
     
32.1*   Section 906 Certificate of Principal Executive Officer and Principal Financial Officer.
     
101.INS*   XBRL Instance Document
     
101.SCH*   XBRL Taxonomy Extension Schema Document
     
101.CAL*   XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF*   XBRL Taxonomy Extension Definition Linkbase Document
     
101.LAB*   XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE*   XBRL Taxonomy Extension Presentation Linkbase Document

 

* Filed herewith.

 

+ Management contract or compensatory plan or arrangement.

 

21
 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  LIFELOGGER TECHNOLOGIES CORP.
     
Date: December 17, 2018 By: /s/ Stewart Garner
   

Stewart Garner

Chief Executive Officer and Chief Financial Officer

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signature   Title   Date
         
/s/ Stewart Garner   Chief Executive Officer, Chief Financial Officer and Director   December 17, 2018
Stewart Garner   (principal executive officer and principal financial and accounting officer)    

 

22
 

 

LIFELOGGER TECHNOLOGIES CORP.

 

TABLE OF CONTENTS

 

  Page
   
Financial Statements for the years ended December 31, 2017 and December 31, 2016:  
   
Report Of Independent Registered Public Accounting Firm F-1
   
Balance Sheets F-2
   
Statements of Operations F-3
   
Statements of Changes in Stockholders’ Deficiency F-4
   
Statements of Cash Flows F-5
   
Notes to the Financial Statements F-6 - F-24

 

23
 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of LifeLogger Technologies Corp.:

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of LifeLogger Technologies Corp. (the “Company”) as of December 31, 2017 and 2016 and the related statements of operations, stockholders’ deficiency, and cash flows for each of the years in the two-year period ended December 31, 2017 and related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2017 and 2016 and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

 

Going Concern Matter

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has incurred recurring losses from operations and has an accumulated deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

  /s/ SRCO Professional Corporation
   
We have served as the Company’s auditor since 2016 CHARTERED PROFESSIONAL ACCOUNTANTS
Richmond Hill, Ontario, Canada Authorized to practise public accounting by the
December 12, 2018 Chartered Professional Accountants of Ontario

 

F- 1
 

 

LIFELOGGER TECHNOLOGIES CORP.

BALANCE SHEETS

 

    As at     As at  
    December 31, 2017     December 31, 2016  
ASSETS                
                 
Current Assets:                
Cash   $ 781     $ 101,041  
Prepaid expenses     2,000       1,250  
Deferred financing costs     683       3,360  
Total current assets     3,464       105,651  
                 
Non-Current Assets                
Furniture and fixtures     9,578       9,578  
Accumulated depreciation     (9,578 )     (2,737 )
                 
Furniture and fixtures, net     -       6,841  
                 
Total Assets     3,464       112,492  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY                
                 
Current Liabilities:                
Accounts payable (Note 4)     129,295       73,855  
Accrued expenses on convertible notes payable     467,733       16,079  
Convertible notes payable, net of unamortized discount of $44,074 and (2016 - $134,628) (Note 5)     1,081,034       1,008,461  
Derivative liability - notes and warrants (Note 6)     347,700       240,955  
Total current liabilities     2,025,762       1,339,350  
Total liabilities     2,025,762       1,339,350  
Stockholders’ Deficiency:                
                 
Preferred stock par value $0.001: 5,000,000 shares authorized;                
Preferred Shares Series A 1,000 and 0 shares issued and outstanding, respectively (Note 11)     1       -  
Common stock par value $0.001: 495,000,000 shares authorized; 8,772,734 and 2,063,151 shares issued and outstanding, respectively (Note 11)     8,774       2,063  
Additional paid-in capital     3,952,837       3,365,116  
Accumulated deficit     (5,983,910 )     (4,594,037 )
                 
Total stockholders’ deficiency     (2,022,298 )     (1,226,858 )
Total Liabilities and Stockholders’ Deficiency     3,464       112,492  

 

Subsequent events (Note 13)

 

See accompanying notes to the financial statements.

 

F- 2
 

 

LIFELOGGER TECHNOLOGIES CORP.

STATEMENTS OF OPERATIONS

 

    For the Year  
    Ended     Ended  
    December 31, 2017     December 31, 2016  
             
Revenue   $ -     $ -  
                 
Cost of revenue     -       -  
                 
Gross margin     -       -  
                 
Operating Expenses:                
Research and development     12,726       280,600  
Advertising and promotions     -       15,351  
Consulting - related parties (Note 9)     75,600       101,723  
Consulting - other     68,553       276,908  
Option expense - consulting - other     285,850       632,356  
General and administrative     142,014       190,911  
Total operating expenses     584,743       1,497,849  
                 
Loss from operations     (584,743 )     (1,497,849 )
Other income (expenses)                
                 
Impairment of intangible assets (Note 12)     -       (195,015 )
Change in fair value of derivative-warrants (Note 6)     5,517       60,639  
Change in fair value of derivative-notes (Note 6)     (185,057 )     (251,095 )
Loss on extinguishment of debt (Note 5)     -       (682,067 )
Commitment fee expense     -       (250,000 )
Interest expense     (625,689 )     (449,863 )
Total other expenses     (805,229 )     (1,767,401 )
Loss before income tax provision     (1,389,972 )     (3,265,250 )
Income tax provision (Note 10)     -       -  
Net Loss   $ (1,389,972 )   $ (3,265,250 )
                 
Net Loss Per Common Share:                
- Basic and Diluted   $ (0.26 )   $ (1.51 )
Weighted Average Common Shares Outstanding:                
- Basic and Diluted     5,252,137       2,162,038  

 

See accompanying notes to the financial statements.

 

F- 3
 

 

LIFELOGGER TECHNOLOGIES CORP.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIENCY

FOR THE YEARS ENDED DECEMBER 31, 2017 AND DECEMBER 31, 2016

 

    Preferred stock par value $0.001     Common stock par value $0.001     Additional           Total
Stockholders’
 
    Number of           Number of           Paid-in     Accumulated     Equity  
    Shares     Amount
$
    Shares     Amount
$
    Capital
$
    Deficit
$
    (Deficiency)
$
 
    (a)           (a)                          
Balance December 31, 2015     -                -       2,747,683     $ 2,748     $ 927,487     $ (1,328,787 )   $ 398,552 )
Common stock issued on conversion of note payable (Note 5)     -       -       60,276       60       497,218       -       497,278  
Options granted for consultant (Note 8)     -       -       -       -       632,356       -       632,356  
Common stock issued for intangible assets (Note 11)     -       -       86,673       86       194,929       -       195,015  
Common stock issued on conversion of convertible notes payable (Note 5)     -       -       501,852       502       1,111,793       -       1,112,295  
Shares redeemed (Note 11)     -       -       (1,333,333 )     (1,333 )     1,333       -       -  
Net loss     -       -       -       -       -       (3,265,250 )     (3,265,250 )
                                                         
Balance, December 31, 2016     -       -       2,063,151     $ 2,063     $ 3,365,116     $ (4,594,037 )   $ (1,226,858 )
                                                         
Preferred stock issued     1,000       1       -               -       99       100  
Common stock issued on conversion of convertible notes payable (Note 11)     -       -       6,709,583       6,711       301,871       -       308,582  
Options granted for consultant (Note 8)     -       -       -       -       285,850       -       285,850  
Net loss     -       -       -       -       -       (1,389,972 )     (1,389,972 )
                                                         
Balance, December 31, 2017     1,000       1       8,772,734       8,774       3,952,837       (5,983,910       (2,022,298 )

 

(a) Common shares are after reverse stock split of 30:1 as explained in Note 1

 

See accompanying notes to the financial statements

 

F- 4
 

 

LIFELOGGER TECHNOLOGIES CORP.

STATEMENTS OF CASH FLOWS

 

    For the year ended  
    December 31, 2017     December 31, 2016  
Operating Activities:                
Net loss   $ (1,389,972 )   $ (3,265,250 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation expenses     384       1,369  
Loss on disposal of asset     6,457       -  
Options issued - consulting     285,850       632,356  
Interest expense recognized through accretion of discount on debt     94,406       449,863  
Original issue discount on new financing     15,500       -  
Interest expense recognized through amortization of deferred financing costs     5,177       7,092  
Amortization of commitment fee     -       250,000  
Change in fair value of derivative liabilities-notes     185,057       251,095  
Change in fair value of derivative liabilities-warrants     (5,517 )     (60,639 )
Extinguishment of debt     -       682,067  
Impairment of intangible asset     -       195,015  
Changes in Operating Assets and Liabilities:                
Accounts receivable     -       -  
Prepaid expenses     (750 )     9,069  
Accounts payable     114,394       (4,570 )
Accrued expenses on convertible notes payable     451,654       (13,010 )
Net Cash Used in Operating Activities     (237,360 )     (865,543 )
                 
Financing Activities:                
Issuance of preferred stock     100       -  
Proceeds from note payable     137,000       834,885  
Net Cash Provided by Financing Activities     137,100       834,885  
                 
Net Change in Cash     (100,260 )     (30,658 )
                 
Cash - Beginning of Reporting Period     101,041       131,699  
                 
Cash - End of Reporting Period   $ 781     $ 101,041  
                 
Supplemental Disclosure of Cash Flow Information:                
Interest paid   $ -     $ -  
Income Tax Paid   $ -     $ -  
                 
Supplemental Cash Flow Information                
Issuance of common stock for settlement of notes payable and accrued interest   $ -     $ 497,278  
Note payable issued for financing cost   $ -     $ 250,000  
Acquisition of intangible assets   $ -     $ 195,015  
Issuance of common stock for settlement of convertible notes payable   $ 308,582     $ 1,112,295  

 

See accompanying notes to the financial statements

 

F- 5
 

 

LIFELOGGER TECHNOLOGIES CORP.

For the Years Ended December 31, 2017 and 2016

Notes to the Financial Statements

 

Note 1 - Organization and Operations

 

LifeLogger Technologies Corp. (the “Company”) was incorporated under the laws of the State of Nevada on June 4, 2012 under the name Snap Online Marketing Inc. The Company changed its name effective as of January 31, 2014 and is a lifelogging software company that developed and hosts a proprietary cloud-based software solution accessible on iOS and Android devices that offers an enhanced media experience for consumers by augmenting videos, livestreams and photos with additional context information and providing a platform that makes it easy to find and use that data when viewing or sharing media.

 

Effective as of February 22, 2017, the Company amended its Articles of Incorporation to increase its authorized capital stock from 125,000,000 to 500,000,000 shares, of which 495,000,000 will be common stock and 5,000,000 will be preferred stock, of which, 1,000 preferred shares have been previously designated as Series A Preferred Stock (the “Series A Preferred Stock”) and effected a 1 for 30 reverse stock split of its issued and outstanding shares of common stock. The number of shares outstanding prior to the reverse stock split was 68,976,690, and was converted into 2,299,223 number of shares. All per share amounts and number of shares in the financial statements and related notes have been retroactively restated to reflect the reverse stock split.

 

Note 2 - Summary of Significant Accounting Policies

 

Basis of Presentation

 

The financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the Unites States of America (“US GAAP”), applied on a consistent basis, and are expressed in United States dollars (“USD”).

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Areas involving significant estimates and assumptions include: deferred income tax assets and related valuation allowance, accruals and valuation of derivatives, convertible promissory notes, stock options, and assumptions used in the going concern assessment. Actual results could differ from those estimates. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the period in which they become known.

 

Fair Value of Financial Instruments

 

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 

Level 1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
   
Level 2 Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
   
Level 3 Pricing inputs that are generally observable inputs and not corroborated by market data.

 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

 

F- 6
 

 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability including certain market assumptions and pertinent information available to management.

 

The carrying amount of the Company’s financial assets and liabilities, such as cash, accounts payable and accrued liabilities approximate their fair value because of the short maturity of those instruments. The notes payables and derivative liabilities are fair valued as described below.

 

Valuation of Derivatives

 

The Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.” The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date. The change in fair value is recorded in the statement of operations as other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date. The Company analyzed the derivative financial instruments in accordance with ASC 815. The objective is to provide guidance for determining whether an equity-linked financial instrument is indexed to an entity’s own stock. This determination is needed for a scope exception which would enable a derivative instrument to be accounted for under the accrual method. The classification of a non-derivative instrument that falls within the scope of ASC 815-40-05 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” also hinges on whether the instrument is indexed to an entity’s own stock. A non-derivative instrument that is not indexed to an entity’s own stock cannot be classified as equity and must be accounted for as a liability. There is a two-step approach in determining whether an instrument or embedded feature is indexed to an entity’s own stock. First, the instrument’s contingent exercise provisions, if any, must be evaluated, followed by an evaluation of the instrument’s settlement provisions. The Company utilized multinomial lattice models that value the derivative liability based on a probability weighted discounted cash flow model. The Company utilized the fair value standard set forth by the Financial Accounting Standards Board, defined as the amount at which the assets (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale.

 

The derivative liabilities result in a reduction of the initial carrying amount (as unamortized discount) of the Convertible Notes. This derivative liability is marked-to-market each quarter with the change in fair value recorded in the statement of operations. Unamortized discount is amortized to interest expense using the effective interest method over the life of the Convertible Note.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with an original maturity of 90 days or less to be cash and cash equivalents.

 

Furniture and Fixtures

 

Furniture and fixtures are recorded at cost less depreciation. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is computed by the straight-line method (after taking into account their respective estimated residual values) over the estimated useful lives of the respective assets as follows:

 

    Estimated
Useful Life
(Years)
 
Furniture and fixture     7  

 

Upon sale or retirement, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations.

 

F- 7
 

 

Related Parties

 

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.

 

Commitments and contingencies

 

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, is disclosed.

 

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.

 

Stock-Based Compensation

 

The Company accounts for stock-based compensation awards issued in accordance with the provision of ASC 718, which requires that all stock-based compensation issued to acquire goods or services, including grants of employee stock options, be recognized in the statement of operations based on their fair values, net of estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Compensation expense related to stock-based awards is recognized over the requisite service period, which is generally the vesting period.

 

There were 200,000 options outstanding as of December 31, 2017 (December 31, 2016 – 200,000).

 

Research and Development

 

The Company follows paragraph 730-10-25-1 of the FASB Accounting Standards Codification (formerly Statement of Financial Accounting Standards No. 2 “Accounting for Research and Development Costs” ) and paragraph 730-20-25-11 of the FASB Accounting Standards Codification (formerly Statement of Financial Accounting Standards No. 68 “Research and Development Arrangements” ) for research and development costs. Research and development costs are charged to expense as incurred. Research and development costs consist primarily of remuneration for research and development staff, depreciation and maintenance expenses of research and development equipment, material and testing costs for research and development as well as research and development arrangements with unrelated third party research and development institutions.

 

Deferred Tax Assets and Income Tax Provision

 

The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized.

 

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.

 

F- 8
 

 

Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

 

Earnings per Share

 

Earnings Per Share (“EPS”) is the amount of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings or loss per share. EPS is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Pursuant to ASC Paragraphs 260-10-45-10 through 260-10-45-16 Basic EPS shall be computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Income available to common stockholders shall be computed by deducting both the dividends declared in the period on preferred stock (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned) from income from continuing operations (if that amount appears in the statements of operations) is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants.

 

Diluted earnings per share exclude all potentially dilutive shares if their effect is anti-dilutive. The Company excluded 200,000 shares of their common stock issuable upon exercise of options and 36,667 shares of their common stock issuable upon exercise of warrants as of December 31, 2017 as their effect was anti-dilutive.

 

Subsequent Events

 

The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.

 

Recently issued accounting pronouncements

 

In August, 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates disclosures such as the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and adds new disclosure requirements for Level 3 measurements. The ASU is effective for fiscal years beginning after December 15, 2019, with early adoption is permitted. We are currently in the process of evaluating the effects of this pronouncement on our financial statements, including potential early adoption.

 

In June 2018, the FASB issued an accounting pronouncement (FASB ASU 2018-07) to expand the scope of ASC Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. We are currently in the process of evaluating the effects of this pronouncement on our financial statements, including potential early adoption.

 

Classification of restricted cash – In November 2016, the FASB issued accounting guidance related to the presentation and classification of changes in restricted cash on the statement of cash flows where diversity in practice exists. The new standard is required to be applied with a retrospective approach. The guidance is effective January 1, 2018, with early adoption permitted. We do not expect the adoption to have a material impact on our financial statements.

 

In May 2017, an accounting pronouncement was issued by the Financial Accounting Standards Board (“FASB”) ASU 2017-09, “Compensation - Stock Compensation: Scope of Modification Accounting.” ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The updated guidance is effective for interim and annual periods beginning after December 15, 2017, and early adoption is permitted. The adoption of this pronouncement will not have a material impact on the financial position and/or results of operations.

 

The Company adopted the accounting pronouncement issued by the Financial Accounting Standards Board (“FASB”) to update guidance on how companies account for certain aspects of share-based payments to employees.

 

F- 9
 

 

In February 2016, an accounting pronouncement was issued by the FASB to replace existing lease accounting guidance. This pronouncement is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet for most leases. Expenses associated with leases will continue to be recognized in a manner similar to current accounting guidance. This pronouncement is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. The adoption is required to be applied on a modified retrospective basis for each prior reporting period presented. The Company has not yet determined the effect that the adoption of this pronouncement may have on the financial position and/or results of operations.

 

In November 2015, an accounting pronouncement was issued by the FASB to simplify the presentation of deferred income taxes within the balance sheet. This pronouncement eliminates the requirement that deferred tax assets and liabilities are presented as current or noncurrent based on the nature of the underlying assets and liabilities. Instead, the pronouncement requires all deferred tax assets and liabilities, including valuation allowances, be classified as noncurrent. This pronouncement is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. The Company has adopted this pronouncement on January 1, 2017, and the adoption did not have a material impact on the financial position and/or results of operations.

 

Clarification on the definition of a business – In January 2017, the FASB issued accounting guidance to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The guidance is effective January 1, 2018, with early adoption permitted. We adopted the guidance effective January 1, 2017, and the adoption did not have a material impact on our financial statements.

 

Simplifying the measurement for goodwill – In January 2017, the FASB issued guidance to simplify the accounting for goodwill impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The new guidance will be applied prospectively and is effective January 1, 2020, with early adoption permitted beginning January 1, 2017.

 

Clarification on stock-based compensation – In May 2017, the FASB issued accounting guidance to clarify which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The new standard is required to be applied prospectively. The guidance is effective January 1, 2018, with early adoption permitted. We do not expect the adoption to have a material impact on our financial statements.

 

Note 3 - Going Concern

 

The financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

 

As reflected in the financial statements, the Company had an accumulated deficit of $5,983,910 at December 31, 2017, a net loss of $1,389,972 and net cash used of $237,360 in operating activities for the year ended December 31, 2017. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

The Company is attempting to further implement its business plan and generate sufficient revenue; however, its cash position may not be sufficient to support its daily operations. While the Company believes in the viability of its strategy to further implement its business plan and generate sufficient revenue and in its ability to raise additional funds by way of a public or private offering, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon its ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.

 

The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as a going concern.

 

Note 4 - Accounts Payable

 

    As at
December 31, 2017
($)
    As at
December 31, 2016
($)
 
Trade accounts payable   $ 104,988     $ 51,587  
Other payable     24,307       22,268  
    $ 129,295     $ 73,855  

 

Trade accounts payable include $28,623 (2016: $8,065) due to an executive of the Company. The payable balance arose primarily due to consulting charges. The payable is unsecured, non-interest bearing and due on demand.

 

F- 10
 

 

Note 5 – Convertible Notes Payable

 

a. Convertible Notes Payable

 

The movement in convertible notes payable is as follows:

 

        Original
amount
   

Unamortized
discount

    Guaranteed
interest
accrued
    Net
settlement
    December, 31, 2017     December 31, 2016  
Opening as of January 1, 2016       $ -     $ -     $ -     $ -     $ -     $ 189,921  
Conversion on opening balance   (i)     -       -       -       -       -       (189,921 )
Issued: March 9, 2016   (ii)     250,000       -       10,000       -       260,000       260,000  
Issued: March 9, 2016   (iii)     296,153       -       14,808       (180,908 )     130,053       218,781  
Issued: June 9, 2016   (iv)     87,912       -       4,396       -       92,308       64,919  
Issued: June 30, 2016   (v)     550,000       (8,956 )     22,000       (92,004 )     471,040       464,761  
Issued: April 11, 2017   (vi)     19,167       (4,142 )     958       -       15,983       -  
Issued: April 11, 2017   (vii)     19,167       (4,142 )     958       -       15,983       -  
Issued: May 2, 2017   (vi)     14,444       (2,891 )     722       -       12,275       -  
Issued: May 2, 2017   (vii)     14,444       (2,889 )     722       -       12,277       -  
Issued: June 1, 2017   (vi)     15,000       (3,318 )     750       -       12,432       -  
Issued: June 1, 2017   (vii)     15,000       (3,318 )     750       -       12,432       -  
Issued: August 8, 2017   (vi)     12,778       (2,901 )     639       -       10,516       -  
Issued: August 8, 2017   (vii)     12,778       (2,902 )     639       -       10,515       -  
Issued: September 1, 2017   (vi)     11,667       (2,578 )     584       -       9,673       -  
Issued: November 15, 2017   (vi)     10,278       (3,019 )     514       -       7,773       -  
Issued: November 15, 2017   (vi)     10,278       (3,018 )     514       -       7,774       -  
                                                     
Ending as of December 31, 2017       $ 1,339,066     $ (44,074 )   $ 58,954     $ (272,912 )     1,081,034       1,008,461  
Ending as of December 31, 2016       $ 1,184,065     $ (134,628 )   $ 51,204     $ (92,180 )   $ -     $ 1,008,461  

 

(i) Old Main Capital, LLC – September 2015:

 

On September 14, 2015 (the “Issuance Date”), the Company closed on the transactions contemplated by the securities purchase agreement (the “SPA”) with Old Main Capital, LLC (“Old Main”), whereby Old Main agreed to invest $450,000 (the “Purchase Price”) in the Company’s -share capital in exchange for the Note (as defined below) and Warrants (as defined below). Pursuant to the SPA, the Company issued a promissory note to Old Main, in the original principal amount of $473,684, which bears interest at 10% per annum (the “September 2015 Note”). The Purchase Price will be paid as follows: (1) $250,000 funded in cash to the Company on the Issuance Date, (2) the remaining $200,000 within 30 days after the Issuance Date. The principal from each funding date, coupled with the accrued and unpaid interest relating to that principal amount, is due and payable on September 8, 2016 (the “Maturity Date”). Any amount of principal or interest that is due under the September 2015 Note, which is not paid by the Maturity Date, will bear interest at the rate of 24% per annum until it is paid.

 

Beginning 6 months after the Issuance Date, the Company is required to make bi-weekly amortization payments (one payment every 2 weeks), consisting of 1/12 th of the outstanding principal and interest, until the September 2015 Note is on longer outstanding (each a “Bi-Weekly Payment”). Such Bi-Weekly Payments may be made in cash, or in the Company’s common stock (“Common Stock”) if certain equity conditions are satisfied. Such equity conditions include but are not limited to an average daily dollar volume of the Common Stock greater than $25,000 for the 20 trading days prior to a Bi-Weekly Payment. If the equity conditions are satisfied, and the Company decide to make a Bi-Weekly payment in Common Stock, then the shares of Common Stock to be delivered shall be calculated as follows: the amount of the Bi-Weekly Payment divided by the Base Conversion Price (as defined below). The Base Conversion Price shall equal the lower of (i) the closing price of the Common Stock on September 8, 2015, or (ii) 70% of the average of the lowest VWAP of the Common Stock for the 15 trading days immediately prior to the date of the Bi-Weekly Payment. Additionally, Old Main has the right at any time to convert amounts owed under the September 2015 Note into Common Stock at the closing price of the Common Stock on September 8, 2015. If an event of default under the September 2015 Note occurs, Old Main has the right to convert amounts owed under the September 2015 Note into Common Stock at 52% multiplied by the lowest VWAP of the Common Stock for the 15 trading days immediately prior to the applicable conversion date.

 

F- 11
 

 

The September 2015 Note can be prepaid by the Company at any time while the September 2015 Note is outstanding, at a prepayment price of 125% multiplied by the outstanding principal and interest of the September 2015 Note, subject to Old Main’s discretionary acceptance. If an event of default occurs under the September 2015 Note, which is not cured within 10 business days, Old Main has the option to require the Company’s redemption of the September 2015 Note in cash at a redemption price of 130% multiplied by the outstanding principal and interest of the September 2015 Note. The September 2015 Note contains representations, warranties, events of default, beneficial ownership limitations, and other provisions that are customary of similar instruments.

 

Effective on March 9, 2016, the September 2015 Note was amended whereby the conversion price in effect on any Conversion Date shall be equal to the lesser of the (i) closing price of the Common Stock on September 8, 2015 (“Fixed Conversion Price”), or (ii) 60% of the lowest traded price of the Common Stock for the 15 consecutive trading days ending on the trading day that is immediately prior to the applicable Conversion Date. All such determinations were appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the Common Stock during such measuring period. This amendment triggered an extinguishment of the debt since the change in the fair value of the embedded derivative exceeded 10% of the carrying value of the debt. The Company booked a $144,205 loss on extinguishment based on the amendment during the year ended December 31, 2016.

 

Old Main has converted $473,684 of principal and $28,033 of interest for 283,645 shares ranging in price per share of $1.17 to $2.55. This was completely settled by July 2016.

 

(ii) Equity Line of Credit

 

On March 9, 2016, the Company issued an 8% convertible promissory note in the principal amount of $250,000 to Old Main as a commitment fee for entering into a term sheet whereby Old Main agreed to provide the Company with up to $5,000,000 in financing over a 24 month period through the purchase of the Company’s common stock. The proposed equity line will be subject to certain conditions, including, but not limited to, the Company’s filing of a Registration Statement covering the resale of the securities issued to Old Main and the Company’s continued compliance with the disclosure requirements under the Securities Exchange Act of 1934, as amended. Old Main’s commitment to provide funding under the equity line of credit is subject to the Company entering into a definitive and binding agreement related to the proposed equity line of credit and as of September 30, 2016 the Company have not entered into any such agreement.

 

The terms and conditions of the $250,000 note are substantially identical to the March 2016 Note below except the interest rate which is 8% per annum, half of which is guaranteed and the total amount of interest due on the Note for a period of six months is deemed earned as of the date the note was issued. All interest payments will be payable in cash, or subject to certain equity conditions in cash or common stock in the Company’s discretion. Accrued and unpaid interest shall be due on payable on each conversion date and on the date the note matures, or as otherwise provided for in the note.

 

Beginning six months after the date of the note, the Company is required to begin to make bi-weekly amortization payments (for the avoidance of doubt, bi-weekly shall mean every two weeks), in cash to Old Main until the note is repaid in full. Each bi-weekly payment shall consist of at least 1/12 th of the total outstanding amount under the note as of the amortization payment date, including the principal, accrued and unpaid interest (prorated through the entire pay-off period pursuant to this paragraph), and any applicable penalties. The Company may make a bi-weekly payment to Old Main in the Company’s common stock, in the event that the equity conditions provided for in the note are satisfied. The maturity date of the note was March 9, 2017 and the holder of the Note have agreed to extend the maturity until September 30, 2017. The Note was in default as of October 1, 2017 and was subject to interest at 24% per annum as well as a default penalty of 25% calculated annually. Management is in the process of negotiating terms of the Note.

 

The Company amended this convertible note on June 9, 2016 to remove the equity condition limitations, removed the amortization payment requirements, to permit voluntary conversions in common stock and revised the conversion price to mean the lesser of (a) the closing price of the Company’s common stock on March 9, 2016 or (b) 60% of the lowest VWAP price of the Company’s common stock for the 15 consecutive trading days ending on the trading day that is immediately prior to any applicable conversion date. This amendment was treated as an extinguishment of debt and a resultant loss on extinguishment of debt of $94,030 was realized, and recorded in other expenses during the year ended December 31, 2016.

 

As at December 31, 2017 the Company owed $250,000 (December 31, 2016 - $250,000) in principal and the accrued interest is $123,208 (December 31, 2016 - $16,724), which consists of the guaranteed interest accrued of $10,000 (December 31, 2016 - $10,000) included in the convertible notes balance and the remainder of $113,208 (December 31, 2016 - $6,274) is recorded in accrued expenses on convertible notes payable, which includes the interest accrued and penalty charges.

 

F- 12
 

 

(iii) Securities Purchase Agreement and Convertible Notes Issued to Old Main Capital, LLC

 

On March 9, 2016 (the “Issuance Date”) the Company closed on the transaction contemplated by the securities purchase agreement (the “SPA”) the Company entered into with Old Main Capital, LLC (“Old Main”), whereby Old Main agreed to purchase from the Company a convertible promissory note (the “March 2016 Note”) in the original principal amount of $296,153 for $269,500, net of an original issuance discount of $26,653 (the “Purchase Price”), included in interest expenses. The March 2016 1bears interest at the rate of 10% per annum, of which there is a guaranteed interest for a period of six (6) months as of the Issuance date. The Purchase Price paid were as follows: (i) $84,500 was paid in cash to the Company on March 12, 2016 (ii) $100,000 was paid in cash to the Company on April 6, 2016 (iii) $85,000 May 6, 2016. The principal from each funding date and the accrued and unpaid interest relating to that principal amount is due and payable on March 9, 2017 (the “Maturity Date”). Any amount of principal or interest that is due under the March 2016 Note which is not paid by the Maturity Date will bear interest at the rate of 24% per annum until it is paid and subject to further increase as discussed below.

 

Beginning 6 months after the Issuance Date, the Company are required to make bi-weekly amortization payments (one payment every 2 weeks), consisting of 1/12 th of the outstanding principal and interest, until the March 2016 Note is no longer outstanding (each a “Bi-Weekly Payment”). Such Bi-Weekly Payments may be made in cash, or in the Company’s common stock (“Common Stock”) if certain equity conditions are satisfied. Such equity conditions include but are not limited to an average daily dollar volume of the Common Stock greater than $30,000 for the 20 trading days prior to a Bi-Weekly Payment. If the equity conditions are satisfied, and the Company decide to make a Bi-Weekly payment in Common Stock, then the shares of Common Stock to be delivered shall be calculated as follows: the amount of the Bi-Weekly Payment divided by the Base Conversion Price (as defined below). The Base Conversion Price shall equal the lower of (i) the closing price of the Common Stock on March 9, 2016, or (ii) 70% of the lowest VWAP of the Common Stock for the 15 trading days immediately prior to the date of the Bi-Weekly Payment.

 

The March 2016 Note can be prepaid by the Company at any time while the March 2016 Note is outstanding, at a prepayment price of 125% multiplied by the outstanding principal and interest of the March 2016 Note, subject to Old Main’s discretionary acceptance. If an event of default occurs under the March 2016 Note, which is not cured within three business days, then upon Old Main’s provision of notice to the Company of the occurrence of such event of default, the Company shall within three business days of such default notice, pay the total amount outstanding under the March 2016 Note in cash (including principal, accrued and unpaid interest, applicable penalties (including default multipliers). In the event that the Company does not pay the total amount outstanding within three (3) business days of such default notice, then the total amount outstanding under the March 2016 Note (post-default amount) at that time shall increase by 50%, and on the fourth business day after such default notice (the “Second Amortization Payment Date”), the Company shall begin to make weekly amortization payments (for the avoidance of doubt, weekly shall mean every week) (each a “Weekly Payment”), in (1) cash to Old Main or (2) Common Stock at a price per share equal to the lesser of (i) the closing price of the Company’s common stock on March 9, 2016 or (ii) 52% of the lowest VWAP of the Common Stock for the 15 consecutive Trading Days ending on the Trading Day that is immediately prior to the applicable conversion date. Each Weekly Payment shall consist of the greater of (i) $10,000 of value under the March 2016 Note or (ii) 1/24 th of the total outstanding amount under this March 2016 Note as of the Second Amortization Payment Date, including the principal, accrued and unpaid interest (prorated through the entire pay-off period), and any applicable penalties. As at December 31, 2017, there were no prepayments made on the Note. During the year ended December 31, 2017 $180,908 (year ended December 31, 2016 - $92,180) of the principal balance had been converted into equity shares. Refer to Note 11 for further details.

 

On June 9, 2016 the Company amended the March 2016 Note whereby the Company revised the note to remove the equity condition limitations, removed the amortization payment requirements and to permit voluntary conversions in common stock. The Company also revised the conversion price to mean the lesser of (a) the closing price of the Company’s common stock on March 9, 2016 or (b) 60% of the lowest VWAP price of the Company’s common stock for the 15 consecutive trading days ending on the trading day that is immediately prior to any applicable conversion date. The amendment was accounted for using the extinguishment of debt method. The Company recorded nil (December 31, 2016 - $88,956) loss on extinguishment of debt, which is included in other expenses. This loan was in default as of October 1, 2017 and was subject to interest at 24% per annum as well as a default penalty of 25% calculated annually. Management is in the process of negotiating terms of the Note.

 

As at December 31, 2017 the Company owes $115,245 (December 31, 2016 - $203,973) in principal and the accrued interest is $82,711 (December 31, 2016 - $24,098), which consists of the guaranteed interest accrued of $14,808 (December 31, 2016 - $14,808) included in the convertible notes balance and the remainder of $62,903 (December 31, 2016 - $9,290) is recorded in accrued expenses on convertible notes payable, which includes the accrued interest and penalty charges.

 

(iv) Securities Purchase Agreement and Convertible Notes Issued to Old Main Capital, LLC

 

On June 9, 2016 (the “Issuance Date”), the Company closed on the transaction contemplated by the securities purchase agreement (the “SPA”) the Company entered into with Old Main Capital, LLC (“Old Main”), whereby Old Main agreed to purchase from the Company a convertible promissory note (the “Note”) in the original principal amount of $87,912 for $80,000, net of an original issuance discount of $7,912 (the “Purchase Price”). The Note bears interest at the rate of 10% per annum, of which there is a guaranteed interest for a period of six (6) months as of the Issuance date. The Purchase Price was paid on June 9, 2016 in cash. The principal from the funding date and the accrued and unpaid interest relating to that principal amount was due and payable on June 9, 2017 (the “Maturity Date”). Any amount of principal or interest that is due under the Note which is not paid by the Maturity Date will bear interest at the rate of 24% per annum until it is paid and subject to further increase as discussed below. The conversion price is the lesser of (a) the closing price of our common stock on June 9, 2016 or (b) 60% of the lowest VWAP price of the Company’s common stock for the 15 consecutive trading days ending on the trading day that is immediately prior to any applicable conversion date. This loan was in default as of October 1, 2017 and was subject to interest at 24% per annum as well as a default penalty of 25% calculated annually. Management is in the process of negotiating terms of the Note.

 

F- 13
 

 

As at December 31, 2017 the Company owes $87,912 (December 31, 2016 - $87,912) in principal and the accrued interest is $44,038 (December 31, 2016 - $4,913), which consists of the guaranteed interest accrued of $4,396 (December 31, 2016 - $4,396) included in the convertible notes balance and the remainder of $39,642 (December 31, 2016 - $518) is recorded in accrued expenses on convertible notes payable, which includes the accrued interest and penalty chares.

 

(v) Securities Purchase Agreement and Convertible Note Issued to SBI Investments LLC, 2014-1

 

On June 30, 2016 (the “Issuance Date”) the Company closed on the transaction contemplated by the securities purchase agreement (the “SPA”) the Company entered into with SBI Investments LLC, 2014-1 (“SBI”), whereby SBI agreed to purchase from the Company a convertible promissory note (the “Note”) in the original principal amount of $550,000 for $500,000 net of an original issuance discount of $50,000 (the “Purchase Price”). The Note bears interest at the rate of 8% per annum, half of which is guaranteed and the total amount of interest due on the Note for a period of six months is deemed earned as of the date the note was issued. The Purchase Price was paid on June 30, 2016 in cash. The principal from the funding date and the accrued and unpaid interest relating to that principal amount was due and payable on June 30, 2017 (the “Maturity Date”). Any amount of principal or interest that is due under the Note which is not paid by the Maturity Date will bear interest at the rate of 24% per annum until it is paid and subject to further increase as discussed below. The conversion price is the lesser of (a) the closing price of the Company’s common stock on June 30, 2016 ($2.40 per share) or (b) 60% of the lowest VWAP price of the Company’s common stock for the 20 consecutive trading days ending on the trading day that is immediately prior to any applicable conversion date. This convertible debt has been accounted for as a derivative liability and is included in the Note 6 derivative liability calculations below. This loan was in default as of October 1, 2017 and was subject to interest at 24% per annum as well as a default penalty of 25% calculated annually. Management is in the process of negotiating terms of the Note.

 

Beginning 6 months after the Issuance Date, the Company are required to make bi-weekly amortization payments (one payment every 2 weeks), consisting of 1/12 th of the outstanding principal and interest, until the Note is no longer outstanding (each a “Bi-Weekly Payment”). Such Bi-Weekly Payments may be made in cash, or in the Company’s common stock (“Common Stock”) if certain equity conditions are satisfied. Such equity conditions include but are not limited to an average daily dollar volume of the Common Stock greater than $25,000 for the 20 trading days prior to a Bi-Weekly Payment. If the equity conditions are satisfied, and the Company decide to make a Bi-Weekly payment in Common Stock, then the shares of Common Stock to be delivered shall be calculated as follows: the amount of the Bi-Weekly Payment divided by the Base Conversion Price (as defined below). The Base Conversion Price shall equal the lower of (i) the closing price of the Common Stock on June 30, 2016, $2.40 per share, or (ii) 60% of the lowest VWAP of the Common Stock for the 20 trading days immediately prior to the date of the Bi-Weekly Payment.

 

The Note can be prepaid by the Company at any time while the Note is outstanding, at a prepayment price of 125% multiplied by the outstanding principal and interest of the Note, subject to SBI’s discretionary acceptance. If an event of default occurs under the Note, which is not cured within three business days, then upon SBI’s provision of notice to the Company of the occurrence of such event of default, the Company shall within three business days of such default notice, pay the total amount outstanding under the Note in cash (including principal, accrued and unpaid interest, applicable penalties (including default multipliers). In the event that the Company does not pay the total amount outstanding within three (3) business days of such default notice, the company will pay interest at 24%. As at December 31, 2017, there were no prepayments made on the Note. During the year ended December 31, 2017, $92,004 (December 31, 2016 – Nil) of the principal balance had been converted into equity shares. Refer to Note 11 for further details.

 

As at December 31, 2017 the Company owes $457,996 (December 31, 2016 - $550,000) in principal and the accrued interest is $217,448 (December 31, 2016 - $22,000), which consists of the guaranteed interest accrued of $22,000 (December 31, 2016 - $22,000) included in the convertible notes balance and $195,448 (December 31, 2016 – nil) is recorded in accrued expenses on convertible notes payable, which includes the accrued interest and penalty chares.

 

(vi) Securities Purchase Agreement and Convertible Note Issued to Old Main Capital

 

On April 7, 2017, the Company entered into a Securities Purchase Agreement with Old Main whereby it agreed to and issued a 10% Convertible Promissory Note in the principal amount of up to $75,000 (the “April 2017 Old Main Note”) payable in tranches as follows: Tranche 1 paid on April 11, 2017: $19,167 consisting of $17,250 (less $1,250 for Old Main’s legal fees) paid to the Company in cash, and less original issue discount of $1,917. Tranche 2 paid on May 2, 2017: $14,444 consisting of $13,000 paid to the Company in cash, and less original issue discount of $1,444. Tranche 3 paid on June 1, 2017: $15,000 consisting of $13,500 paid to the Company in cash, and less original issue discount of $1,500. Tranche 4 paid on August 8, 2017: $12,778 consisting of $11,500 paid to the Company in cash, and less original issue discount of $1,278. Tranche 5 paid on September 1, 2017: $11,667 consisting of $10,500 paid to the Company in cash, and less original issue discount of $1,167. Tranche 6 paid on November 15, 2017: $10,278 consisting of $9,250 paid to the Company in cash, and less original issue discount of $1,028.

 

F- 14
 

 

Old Main may pay such additional amounts of the Consideration and at such dates as mutually agreed upon by the Borrower and Old Main. The maturity date for each tranche funded shall be twelve (12) months from the effective date of each payment (each a “Maturity Date”) (or such earlier date as the April 2017 Old Main Note is required or permitted to be repaid as provided hereunder, and is the date upon which the principal sum of each respective tranche, as well as any accrued and unpaid interest and other fees relating to that respective tranche, shall be due and payable. The Old Main has the right to convert all or any part of the outstanding and unpaid principal and interest into shares of the Company’s common stock. The terms of the Convertible Note are as follows:

 

  1. Old Main has the right from and after a 180 day delay from the Date of Issuance, and until any time until the Note is fully paid, to convert any outstanding and unpaid principal portion of the Note, and accrued interest, into fully paid and non–assessable shares of Common (par value $.001 per share). Bi–weekly amortization payments are due after 6 months.
     
  2. The Convertible Notes are convertible at a fixed rate of $0.07 with no reset provisions.
     
  3. Beneficial ownership is limited to 9.99%.
     
  4. The Company may redeem the Notes for 150% of the redemption amount and accrued interest at any time upon ten days written notice to the Old Main.
     
  5. In the event of default the Note bears interest at 24% per annum.

 

Participation in Future Financing. Subject to any existing obligations of the Company, from the date hereof until the date that is the 12-month anniversary of the date of the April 2017 Old Main Note, upon any issuance by the Company or any of its subsidiaries of its Common Stock or other securities convertible into Common Stock, other than any issuance that is through a public underwritten offering or to an investor or a group of investors that already own Common Stock or securities of the Company, Old Main shall have the right to participate in the subsequent Financing in an amount up to 100% of such Old Main’s pro rata portion as defined below in the April 2017 Old Main Note on the same terms, conditions and price provided for in the Subsequent Financing, subject to any existing obligations of the Company with respect to participation rights. This loan was in default as of October 1, 2017 and was subject to interest at 24% per annum as well as a default penalty of 25% calculated annually. Management is in the process of negotiating terms of the Note.

 

As at December 31, 2017 the Company owes $83,333 (December 31, 2016 - nil) in principal and the accrued interest is $31,923 (December 31, 2016 - nil), which consists of the guaranteed interest accrued of $4,167 (December 31, 2016 - nil) included in the convertible notes balance and $27,757 (December 31, 2016 – nil) is recorded in accrued expenses on convertible notes payable, which includes the accrued interest and penalty chares.

 

(vii) Securities Purchase Agreement and Convertible Note Issued to SBI Investments LLC, 2014-1

 

On April 7, 2017, the Company entered into a Securities Purchase Agreement with SBI Investments LLC, 2014-1 (“SBI”) whereby it agreed to and issued a 10% Convertible Promissory Note in the principal amount of up to $75,000 (the “April 2017 SBI note”) in tranches as follows: Tranche 1 paid on April 11, 2017: $19,167 consisting of $17,250 (less $1,250 for SBI’s legal fees) paid to the Company in cash, and less original issue discount of $1,917. Tranche 2 paid on May 2, 2017: $14,444 consisting of $13,000 paid to the Company in cash, and less original issue discount of $1,444. Tranche 3 paid on June 1, 2017: $15,000 consisting of $13,500 paid to the Company in cash, and less original issue discount of $1,500. Tranche 4 paid on August 8, 2017: $12,778 consisting of $11,500 paid to the Company in cash, and less original issue discount of $1,678. Tranche 5 paid on November 15, 2017: $10,278 consisting of $9,250 paid to the Company in cash, and less original issue discount of $1,028.

 

SBI may pay such additional amounts of the Consideration and at such dates as mutually agreed upon by the Borrower and SBI. The maturity date for each tranche funded shall be twelve (12) months from the effective date of each payment (each a “Maturity Date”) (or such earlier date as the April 2017 SBI is required or permitted to be repaid as provided hereunder, and is the date upon which the principal sum of each respective tranche, as well as any accrued and unpaid interest and other fees relating to that respective tranche, shall be due and payable. The SBI has the right to convert all or any part of the outstanding and unpaid principal and interest into shares of the Company’s common stock. The terms of the Convertible Note are as follows:

 

F- 15
 

 

  1. SBI has the right from and after a 180 day delay from the Date of Issuance, and until any time until the Note is fully paid, to convert any outstanding and unpaid principal portion of the Note, and accrued interest, into fully paid and non–assessable shares of Common (par value $.001 per share). Bi–weekly amortization payments are due after 6 months.
     
  2. The Convertible Notes are convertible at a fixed rate of $0.07 with no reset provisions.
     
  3. Beneficial ownership is limited to 9.99%.
     
  4. The Company may redeem the Notes for 150% of the redemption amount and accrued interest at any time upon ten days written notice to the SBI.
     
  5. In the event of default the Note bears interest at 24% per annum.

 

This loan was in default as of October 1, 2017 and was subject to interest at 24% per annum as well as a default penalty of 25% calculated annually. Management is in the process of negotiating terms of the Note.

 

As at December 31, 2017 the Company owes $71,667 (December 31, 2016 - nil) in principal and the accrued interest is $27,359 (December 31, 2016 - nil), which consists of the guaranteed interest accrued of $3,583 (December 31, 2016 - nil) included in the convertible notes balance and $23,775 (December 31, 2016 – nil) is recorded in accrued expenses on convertible notes payable, which includes the accrued interest and penalty chares.

 

Participation in Future Financing. Subject to any existing obligations of the Company, from the date hereof until the date that is the 12-month anniversary of the date of the April 2017 SBI, upon any issuance by the Company or any of its subsidiaries of its Common Stock or other securities convertible into Common Stock, other than any issuance that is through a public underwritten offering or to an investor or a group of investors that already own Common Stock or securities of the Company, SBI shall have the right to participate in the subsequent Financing in an amount up to 100% of such SBI’s pro rata portion as defined below in the April 2017 SBI on the same terms, conditions and price provided for in the Subsequent Financing, subject to any existing obligations of the Company with respect to participation rights.

 

b. Warrants

 

In conjunction with the issuance of the September 2015 Note, the Company simultaneously issued 28,333 common stock purchase warrants to Old Main (the “Warrants”). The Warrants may be exercised by Old Main at any time in the 5-year period following the issuance. The exercise price for each share of the Common Stock is equal to the closing price of the Common Stock on September 8, 2015, $7.88 per share.

 

On June 9, 2016 and June 30, 2016, the Company entered (either a new issuance or amendment to the March 9, 2016 issuance which requires derivative treatment on June 9, 2016) into convertible derivative notes with Old Main Capital, LLC and SBI Investments LLC – Sea Otter Global Ventures LLC (referred to as the “the Holders”), in the initial amount of $250,000 (Old Main Capital Commitment Fee Note), $296,153 (Old Main Capital Bridge Note), $87,912 (Old Main Capital Note), and $550,000 (SBI Investments LLC – Sea Otter Global Vent (with Original Issue Discounts and deferred financing costs). The notes bear an interest rate of 8% or 10% per annum and matures in 1 year or less under the convertible note agreements, the lender has the right to convert all or any part of the outstanding and unpaid principal and interest into shares of the Company’s common stock. In addition, the Company issued the SBI–Sea Otter Holder a warrant to acquire 8,334 shares of the Company’s common stock. The terms of the Convertible Note are as follows:

 

  1. The Holders have the right from and after a 180 day delay from the Date of Issuance, and until any time until the Note is fully paid, to convert any outstanding and unpaid principal portion of the Note, and accrued interest, into fully paid and non–assessable shares of Common (par value $.001 per share). Bi–weekly amortization payments are due after 6 months.
     
  2. The Convertible Notes are convertible at a fixed rate of $2.34 or $2.25 with no reset provisions. The June 9, 2016 notes convert at the lower of the fixed rate or this variable rate.
     
  3. Beneficial ownership is limited to 9.99%.

 

F- 16
 

 

  4. The Company may redeem the Notes for 125% or 150% of the redemption amount and accrued interest. The Company may upon certain equity conditions redeemed certain notes at the lessor of fixed conversion price and 60% of 15 Trading day low VWAP.
     
  5. In the event of default the Note bears interest at 24% per annum and converts at 60% of 15 trading day low VWAP (default or fundamental transaction) – a derivative feature.

 

The June 9 th amendments triggered an extinguishment of the debt since the change in the fair value of the embedded derivative exceeded 10% of the carrying value of the debt. The Company booked a $182,986 loss on extinguishment based on the amendments on the quarter and six-month period ended June 30, 2016.

 

The terms of the SBI Warrants are as follows:

 

1. The Warrants have a 3 year term.
   
2. The 2 issuances of 4,167 Warrants each may be exercised at a conversion price of the lesser of: (i) $2.46 or $2.88, or (ii) any lower price of equity linked instruments issued by the Company while the warrant is issued and outstanding (full ratchet reset). This anti–dilution protections provides a full reset upon the issuance of lower price securities by the Company and is available to SBI during the initial 180 days that the Warrant is outstanding.
   
3. Beneficial ownership is limited to 4.99% initially and upon Holder request to 9.99%.

 

On June 9, 2016, the amended Old Main notes (Bridge Note and Commitment Fee) provided the holder with a variable rate conversion feature. This feature taints all warrants/notes and ongoing derivative treatment is required until the note is paid or converted in full.

 

  1. The Company may redeem the Notes for 125% or 150% of the redemption amount and accrued interest. The Company may upon certain equity conditions redeemed certain notes at the lessor of fixed conversion price and 60% of 15 Trading day low VWAP.
     
  2. In the event of default the Note bears interest at 24% per annum and converts at 60% of 15 trading day low VWAP (default or fundamental transaction) – a derivative feature.

 

This note is a derivative because it contains an embedded conversion feature that resets the conversion price upon a fundamental transaction event. The Company recorded a debt discount based on the original issue discount, the embedded derivative, and the derivative warrant issued. The debt discount is being amortized over the term of the convertible debt.

 

Note 6 – Derivative Liability

 

In connection with the sale of debt or equity instruments, the Company may sell options or warrants to purchase the Company’s common stock. In certain circumstances, these options or warrants may be classified as derivative liabilities, rather than as equity. Additionally, the debt or equity instruments may contain embedded derivative instruments, such as embedded derivative features which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative instrument liability.

 

The Company’s derivative instrument liabilities are re-valued at the end of each reporting period, with changes in the fair value of the derivative liability recorded as charges or credits to income in the period in which the changes occur. For options, warrants and bifurcated embedded derivative features that are accounted for as derivative instrument liabilities, the Company estimates fair value using either quoted market prices of financial instruments with similar characteristics or other valuation techniques. The valuation techniques require assumptions related to the remaining term of the instruments and risk-free rates of return, the Company’s current common stock price and expected dividend yield, and the expected volatility of the Company’s common stock price over the life of the instrument.

 

F- 17
 

 

The following table summarizes the warrant derivative liabilities and convertible notes activity for the two year ended December 31, 2017:

 

Description   Derivative Liabilities  
Fair value at December 31, 2015   $ 106,265  
Change due to Issuances     371,562  
Change due to debt extinguishment     91,070  
Change due to Exercise/Conversion     (518,398 )
Change in Fair Value of warrants and notes     190,456  
Fair value at December 31, 2016   $ 240,955  
Change due to Issuances     55,316  
Change due to debt extinguishment     -  
Change due to Exercise/Conversion     (128,111 )
Change in Fair Value of warrants and notes     179,540  
Fair value at December 31, 2017   $ 347,700  

 

The lattice methodology was used to value the embedded derivatives within the convertible note and the warrants issued, with the following assumptions.

 

Assumptions   December 31, 2017     December 31, 2016  
Dividend yield     0.00 %     0.00 %
Risk-free rate for term     1.08-1.53 %     0.51-1.47 %
Volatility     279%-446 %     120.4-142.8 %
Maturity dates     .50-2.69 years       .19-3.69 years  
Stock Price     0.0135-0.0189       0.453  

 

During the period ended March 31, 2016, the Company amended the derivative notes on March 9, 2016. The amendment included revising the “Alternate Conversion Price to mean 60% of the lowest traded price of the common stock for the 15 consecutive trading days prior to the conversion date. The derivative liability increased by $91,070 due to the amendment which was booked as an additional debt discount.

 

During the quarter ended September 30, 2015, the Company issued 28,333 warrants to an investor as part of their Securities Purchase Agreement in which the investor acquired a Convertible Note. The warrants have an exercise price of $7.88 and a five-year term. The warrants are treated as derivative liabilities since the holder has anti-dilution protections that will re-price the warrant upon the issuance of lower priced equity linked instruments by the Company for the period of 180 days after issuance. The fair value of the derivative liability related to these warrants at issuance was valued at $169,270 and was booked as a debt discount to the Convertible Note and booked as a derivative liability on the balance sheet. The embedded conversion feature of the Convertible Note is treated as a derivative liability since the conversion price is reset upon a fundamental transaction event. The fair value of the derivative liability related to the embedded conversion feature was valued at $92,659 and was booked as a debt discount, included in interest expense (up to the amount of the note, with the excess expensed as interest expense).

 

Note 7 – Fair Value of Financial Instruments

 

The Company’s financial instruments consist of cash and cash equivalents, accounts payable, accrued expenses on convertible notes payable, derivative liabilities and convertible debt. The estimated fair value of cash and cash equivalents, accounts payable and accrued liabilities approximate their carrying amounts due to the short-term nature of these instruments.

 

The Company utilizes various types of financing to fund its business needs, including convertible debt with warrants attached. The Company reviews its warrants and conversion features of securities issued as to whether they are freestanding or contain an embedded derivative and, if so, whether they are classified as a liability at each reporting period until the amount is settled and reclassified into equity with changes in fair value recognized in current earnings. At December 31, 2017, the Company had convertible debt and warrants to purchase common stock. The fair value of the warrants and the embedded conversion feature of the convertible debt is classified as a liability. Some of these units have embedded conversion features that are treated as a discount on the notes. Such financial instruments are initially recorded at fair value and amortized to interest expense over the life of the debt using the effective interest method.

 

Inputs used in the valuation to derive fair value are classified based on a fair value hierarchy which distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:

 

Level one - Quoted market prices in active markets for identical assets or liabilities;
   
Level two - Inputs other than level one inputs that are either directly or indirectly observable; and
   
Level three - Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

 

F- 18
 

 

Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter. The Company’s derivative liability is measured at fair value on a recurring basis. The Company classifies the fair value of these convertible notes and warrants derivative liability under level three. The Company’s settlement payable is measured at fair value on a recurring basis based on the most recent settlement offer. The Company classifies the fair value of the settlement payable under level three. The Company’s rescission liability is measured at fair value on a recurring basis based on the most recent stock price. The Company classifies the fair value of the rescission liability under level one.

 

Based on ASC Topic 815 and related guidance, the Company concluded the common stock purchase warrants are required to be accounted for as derivatives as of the issue date due to a reset feature on the exercise price. At the date of issuance warrant derivative liabilities were measured at fair value using either quoted market prices of financial instruments with similar characteristics or other valuation techniques. The Company records the fair value of these derivatives on its balance sheet at fair value with changes in the values of these derivatives reflected in the statements of operations as “Gain (loss) on derivative liabilities.” These derivative instruments are not designated as hedging instruments under ASC 815-10 and are disclosed on the balance sheet under Derivative Liabilities.

 

The following table presents liabilities that are measured and recognized at fair value on a recurring and non-recurring basis:

 

Description   Level 1     Level 2     Level 3     Gains
(Losses)
 
Derivatives   $ -     $ -     $ 347,700     $ (179,540 )
Fair Value at December 31, 2017   $ -     $ -     $ 347,700     $ (179,540 )
                                 
Derivatives   $ -     $ -     $ 240,955     $ (190,456 )
Fair Value at December 31, 2016   $ -     $ -     $ 240,955     $ (190,456 )

 

Note 8 – Stock Options:

 

The following is a summary of stock option activity:

 

                Weighted        
          Weighted     Average        
          Average     Remaining     Aggregate  
    Options     Exercise     Contractual     Intrinsic  
    Outstanding     Price     Life     Value  
Outstanding, December 31, 2016     200,000     $ 3.00                  
Granted     -                          
Forfeited     -                          
Exercised     -                          
Outstanding, December 31, 2017     200,000     $ 3.00       3.17     $           -  
Exercisable, December 31, 2017     -     $ -       -     $ -  

 

The exercise price for options outstanding and exercisable at December 31, 2017 is as follows:

 

Outstanding     Exercisable  
Number of     Exercise     Number of     Exercise  
Options     Price     Options     Price  
  200,000     $         3.00              -     $            -  
  200,000               -          

 

For options granted during 2015 where the exercise price was equal to the stock price at the date of the grant, the weighted-average fair value of such options was $5.70 and the weighted-average exercise price of such options was $6.00. No options were granted during 2015 where the exercise price was greater than the stock price at the date of grant or where the exercise price was less than the stock price at the date of grant. During 2016 the company reduced the exercise price to $3.00.

 

F- 19
 

 

The fair value of the stock options is being amortized to stock option expense over the vesting period. The Company recorded stock option expense of $285,850, included in operating expenses, during the year ended December 31, 2017, and $632,356 during the year ended December 31, 2016. At December 31, 2017, the unamortized stock option expense was $106,639 (December 31, 2016 - $392,218) which will be amortized to expense through December 2018.

 

The assumptions used in calculating the fair value of options granted using the Black-Scholes option- pricing model for options granted are as follows:

 

    2017     2016  
Risk-free interest rate     1.5 %     1.5 %
Expected life of the options     4.8 to 6.5 years       5.5 to 6.5 years  
Expected volatility     150 %     150 %
Expected dividend yield     0 %     0 %

 

As at December 31, 2017, the Company had the following warrant securities outstanding:

 

    Common Stock
Warrants
 
December 31, 2016     36,667  
Less: Exercised     -  
Less: Expired     -  
Add: Issued     -  
December 31, 2017     36,667  
         
Warrants (Note 6)     28,333  
Exercise Price   $ 7.88  
Expiration Date     September 8, 2015 to
September 8, 2020
 
Warrants (Note 5)     8,334  
Exercise Price     **  
Expiration Date     June 30, 2016 to
June 30, 2019
 

 

** Lessor of: $2.46 or $2.88 or any price of equity linked instruments issued by the Company while the warrant is issued and outstanding

 

During the year ended December 31, 2017, nil warrants expired unexercised.

 

Note 9 – Related Party Transactions

 

Related Parties

 

Related parties with whom the Company had transactions are:

 

Related Parties   Relationship
     
Stew Garner   Chairman, CEO, CFO and director

 

Consulting services from Officer

 

Consulting services provided by the officer for the year ended December 31, 2017 and 2016

 

    December 31, 2017     December 31, 2016  
             
President, Chief Executive Officer and Chief Financial Officer   $ 75,600     $ 101,723  

 

F- 20
 

 

Note 10 – Income Tax Provision

 

Deferred Tax Assets

 

At December 31, 2017, the Company had net operating loss (“NOL”) carry–forwards for Federal income tax purposes of $2,681,541 (2016: $1,851,367) that may be offset against future taxable income through 2036. No tax benefit has been reported with respect to these net operating loss carry-forwards in the accompanying financial statements because the Company believes that the realization of the Company’s net deferred tax assets of approximately $911,724 (2016: $629,465) was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance.

 

Deferred tax assets consist primarily of the tax effect of NOL carry-forwards. The Company has provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its realizability. The valuation allowance increased approximately $282,259 and $318,739 for the years ended December 31, 2017 and 2016, respectively.

 

Components of deferred tax assets are as follows:

 

    December 31, 2017     December 31, 2016  
Net deferred tax assets – Non-current:                
                 
Expected income tax benefit from NOL carry-forwards   $ 911,724     $ 629,465  
Less valuation allowance     (911,724 )     (629,465 )
Deferred tax assets, net of valuation allowance   $ -     $ -  

 

Income Tax Provision in the Statements of Operations

 

A reconciliation of the federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes is as follows:

 

    Year ended December 31, 2017     Year ended December 31, 2016  
    $     $  
Net loss for the year before income taxes     (1,389,972 )     (3,265,250 )
                 
Expected income tax recovery from net loss     (472,590 )     (1,110,185 )
Non-deductible expenses     190,331       791,446  
Other temporary differences            
Change in valuation allowance     282,259       318,739  
             

 

The Company is neither under examination by any taxing authority, nor has it been notified of any impending examination. The Company’s tax years for its Federal and State jurisdictions which are currently open for examination are the years of 2014 - 2017.

 

Note 11- Stockholders’ Deficiency

 

Shares Authorized

 

The Company’s authorized capital stock consists of 495,000,000 shares of common stock, par value $0.001 per share and 5,000,000 shares of preferred stock, par value $0.001 per share.

 

On December 28, 2016, the Company filed a certificate of designation, preferences and rights of Series A Preferred Stock (the “Certificate of Designation”) with the Secretary of State of the State of Nevada to designate 1,000 shares of its previously authorized preferred stock as Series A Preferred Stock. The holders of shares of Series A Preferred Stock that are not entitled to dividends or distributions have the following voting rights:

 

  Each share of Series A Preferred Stock entitles the holder to 50,000 votes on all matters submitted to a vote of the Company’s stockholders. In the event that such votes do not total at least 51% of all votes, then the votes cast by the holders of the Series A Preferred Stock shall be equal to 51% of all votes cast at any meeting of the Company’s stockholders or any issue put to the stockholders for voting.

 

F- 21
 

 

  Except as otherwise provided in the Certificate of Designation, the holders of Series A Preferred Stock, the holders of Company common stock and the holders of shares of any other Company capital stock having general voting rights and shall vote together as one class on all matters submitted to a vote of the Company’s stockholders.
     
  The holders of the Series A Preferred Stock do not have any conversion rights.

 

Effective as of February 22, 2017, the Company amended its Articles of Incorporation to increase its authorized capital stock from 125,000,000 to 500,000,000 shares, of which 495,000,000 will be common stock and 5,000,000 will be preferred stock, of which, 1,000 shares have been previously designated as Series A Preferred Stock (the “Series A Preferred Stock”) and effected a 1 for 30 reverse stock split of its issued and outstanding shares of common stock. The number of shares outstanding prior to the reverse stock split was 68,976,690, and was converted into 2,299,223 number of shares. All per share amounts and number of shares in the financial statements and related notes have been retroactively restated to reflect the reverse stock split.

 

Common Stock

 

Common Shares Issued for Cash

 

No common shares were issued for cash during the year ended December 31, 2016.

 

No common shares were issued for cash during the year ended December 31, 2017.

 

Common Shares Issued for Non- Cash

 

During the year ended December 31, 2017, a total of $92,003 of the June 2016 Note was converted to 3,508,313 shares of common stock at an average price of $0.0262 per share as follows:

 

On January 3, 2017 $10,000 of June 2016 Note debt was converted to 36,792 shares of common stock at a conversion price of $0.2718 per share.
   
On January 17, 2017 $15,000 of June 2016 Note debt was converted to 55,188 shares of common stock at a conversion price of $.2718 per share.
   
On February 8, 2017 $10,000 of June 2016 Note debt was converted to 44,092 shares of common stock at a conversion price of $.2268 per share.
   
On February 27, 2017 $10,000 of June 2016 Note debt was converted to 65,359 shares of common stock at a conversion price of $.1530 per share.
   
On March 13, 2017 $5,000 of June 2016 Note debt was converted to 69,444 shares of common stock at a conversion price of $.0720 per share.
   
On March 23, 2017 $5,000 of June 2016 Note debt was converted to 77,161 shares of common stock at a conversion price of $.0648 per share.
   
On April 20, 2017 $5,646 of June 2016 Note debt was converted to 136,967 shares of common stock at a conversion price of $.04122 per share.
   
On May 23, 2017 $3,700 of June 2016 Note debt was converted to 156,513 shares of common stock at a conversion price of $.02364 per share.
   
On June 12, 2017 $3,523 of June 2016 Note debt was converted to 159,998 shares of common stock at a conversion price of $.02202 per share.

 

F- 22
 

 

On June 19, 2017 $3,699 of June 2016 Note debt was converted to 167,982 shares of common stock at a conversion price of $.02202 per share
   
On June 27, 2017 $2,801 of June 2016 Note debt was converted to 183,817 shares of common stock at a conversion price of $.01524 per share.
   
On July 12, 2017 $1,704 of June 2016 Note debt was converted to 200,000 shares of common stock at a conversion price of $.00852 per share.
   
On August 1, 2017 $3,578 of June 2016 Note debt was converted to 420,000 shares of common stock at a conversion price of $.00852 per share.
   
On August 7, 2017 $4,132 of June 2016 Note debt was converted to 485,000 shares of common stock at a conversion price of $.00852 per share.
   
On August 15, 2017 $3,720 of June 2016 Note debt was converted to 500,000 shares of common stock at a conversion price of $.00744 per share.
   
  On October 10, 2017 $4,500 of March 2016 Note debt was converted to 750,000 shares of common stock at a conversion price of $.006 per share.

 

December 31, 2017, a total of $88,468 of the March 2016 Note was converted to 3,201,270 shares of common stock at an average price of $0.0276 per share as follows:

 

On January 6, 2017 $27,180 of March 2016 Note debt was converted to 100,000 shares of common stock at a conversion price of $.2718 per share.
   
On February 28, 2017 $15,300 of March 2016 Note debt was converted to 100,000 shares of common stock at a conversion price of $.1530 per share.
   
On March 14, 2017 $10,000 of March 2016 Note debt was converted to 129,199 shares of common stock at a conversion price of $.0774 per share.
   
On May 2, 2017 $7,000 of March 2016 Note debt was converted to 254,731 shares of common stock at a conversion price of $.02748 per share.
   
On June 9, 2017 $6,988 of March 2016 Note debt was converted to 317,340 shares of common stock at a conversion price of $.02202 per share.
   
On June 26, 2017 $5,791 of March 2016 Note debt was converted to 380,000 shares of common stock at a conversion price of $.01524 per share.

 

On August 1, 2017 $3,762 of March 2016 Note debt was converted to 380,000 shares of common stock at a conversion price of $.0099 per share.
   
On August 1, 2017 $3,762 of March 2016 Note debt was converted to 380,000 shares of common stock at a conversion price of $.0099 per share.
   
On August 7, 2017 $4,263 of March 2016 Note debt was converted to 490,000 shares of common stock at a conversion price of $.0087 per share.
   
On August 9, 2017 $4,422 of March 2016 Note debt was converted to 670,000 shares of common stock at a conversion price of $.0066 per share.

 

F- 23
 

 

The related derivative liability of $128,111, as disclosed in Note 6, was transferred to the additional paid-in capital during the year ended December 31, 2017.

 

Preferred Stock

 

On February 21, 2017, the Company entered into an investment agreement (the “Investment Agreement”) with Stewart Garner, the Company’s Chief Executive Officer and the sole member of its board of directors. Pursuant to the terms of the Investment Agreement, the Company sold to Mr. Garner 1,000 shares of the Company’s Series A Preferred Stock, par value of $0.001 per share, at a purchase price of $0.10 per share, or an aggregate of $100.

 

Note 12 - Acquisition of Assets

 

On June 30, 2016, the Company completed the acquisition of certain assets of Pixorial pursuant to the terms of the Amended and Restated Asset Purchase Agreement entered into among the Company, Pixorial and Andres Espiniera dated June 20, 2016 (the “Amended Agreement”). Pursuant to the terms of the Amended Agreement, the Company agreed to purchase, and Pixorial agreed to sell certain assets of Pixorial comprised of the trademark “What’s Your Story” and its customer list (the “Pixorial Asset Acquisition”).

 

Under the terms of the Amended Agreement, the Company issued 86,673 shares of its unregistered common stock to the existing shareholders and certain creditors of Pixorial. In addition, the Company amended the exercise price of Mr. Espineira’s November 10, 2015 stock option award to acquire 200,000 shares of the Company’s common stock to $3.00 per share. The shares of the Company’s common stock to be issued to Pixorial’s shareholders and creditors will also be subject to a lock-up agreement whereby one-third the number received by each may be sold beginning as of each of the first three anniversaries of the closing of the Pixorial Asset Acquisition.

 

Consummation of the Pixorial Asset Acquisition, which shall occur no later than July 15, 2016, is subject to certain conditions, including: (i) consent to the Asset Purchase Transaction by both the shareholders of Pixorial and the principals of Siena Pier Ventures 2007 Fund, LLP and Siena Pier Ventures, LLC (the “Secured Creditors”), holders of certain indebtedness of the Company in the aggregate principal sum of $2,025,000 (the “Siena Debt”), shall have been delivered; (ii) the Secured Creditors shall have agreed to cancel a portion of the Siena Debt for 81,260 of the total 86,673 shares of the Company’s common stock to be tendered as consideration, (iii) such Secured Creditors’ shares also being subject to a lock-up agreement whereby only one-third of the shares may be sold beginning on each of the first three anniversaries of the closing of the Pixorial Asset Acquisition; and (iv) the parties shall have reaffirmed to one another as of closing their customary representations and warranties made as of the execution date under the Amended Agreement.

 

The common stock was valued at $195,015 based on the closing price of $2.25/share of the Company’s common stock on the acquisition date. The purchase price was allocated as follows: trademark - $5,000 and customer list - $190,015. Management determined that these intangible assets were impaired and took a charge to earnings of $195,015 during the year ended December 31, 2016.

 

Note 13 - Subsequent Events

 

The Company’s management has evaluated subsequent events up to December 12, 2018 the date the financial statements were issued, pursuant to the requirements of ASC 855 and has determined the following material subsequent events:

 

On January 15, 2018 $7,709 of June 2016 Note debt was converted to 868,181 shares of common stock at a conversion price of $.0148 per share.

 

On January 9, 2018, the Company entered into an Asset Purchase Agreement, as of December 31, 2017, to acquire 94.8% of the working interest in North West Lost Hills producing oil property from Sage Exploration & Production, Inc., in exchange for 6,821,584 shares of the Company’s common shares to be issued by the Company at closing. The Asset Purchase Agreement was mutually terminated by the parties to that agreement in March 2018 prior to the closing.

 

The Company obtained financing of $32,345 from a related party to settle outstanding accounts payable. The balance is unsecured, non-interest bearing and repayable on demand.

 

F- 24
 

LifeLogger Technologies Corp. (USOTC:LOGG)
Historical Stock Chart

1 Year : From Dec 2018 to Dec 2019

Click Here for more LifeLogger Technologies Corp. Charts.

LifeLogger Technologies Corp. (USOTC:LOGG)
Intraday Stock Chart

Today : Sunday 15 December 2019

Click Here for more LifeLogger Technologies Corp. Charts.

Latest LOGG Messages

{{bbMessage.M_Alias}} {{bbMessage.MSG_Date}} {{bbMessage.HowLongAgo}} {{bbMessage.MSG_ID}} {{bbMessage.MSG_Subject}}

Loading Messages....


No posts yet, be the first! No {{symbol}} Message Board. Create One! See More Posts on {{symbol}} Message Board See More Message Board Posts


Your Recent History
LSE
GKP
Gulf Keyst..
LSE
QPP
Quindell
FTSE
UKX
FTSE 100
LSE
IOF
Iofina
FX
GBPUSD
UK Sterlin..
Stocks you've viewed will appear in this box, letting you easily return to quotes you've seen previously.

Register now to create your own custom streaming stock watchlist.


NYSE, AMEX, and ASX quotes are delayed by at least 20 minutes.
All other quotes are delayed by at least 15 minutes unless otherwise stated.