NOTES TO FINANCIAL STATEMENTS
For the fiscal years ended January 31, 2017 and 2016
1. NATURE OF OPERATIONS
APT Systems, Inc
. (APT Systems, the Company, We or Us) was incorporated in the State of Delaware on October 29, 2010 (Inception) to operate as a Fintech Company to engage in the creation of innovative and intuitive stock trading platforms, financial apps and visualization solutions for charting the financial markets. While management works to deliver a mobile trading platform it also is strategically acquiring other compatible software or financial businesses which demonstrate strong growth potential stemming from a solid business plan. After we identify prospective opportunities then we continue with due diligence efforts that will and do include testing software performance within funded external trading accounts. The Company successfully acquired Global Trader predictive indicators and added to its intellectual property. Over the year, the Company had continued to claim income earned from its testing of strategies and trading software as other income. The testing continues to generate positive returns and mostly in the first three quarters. Some revenue continues to come from the Apple store from a previously launched publication promoting a trading strategy that is successfully testing Apple revenue payment delivery. After beta testing is completed, our proprietary custom charting tools and trading platform apps will later be available to subscribers for a fee.
2. GOING CONCERN AND LIQUIDITY
As of January 31, 2017, the Company had cash of $7,713, insufficient revenue to meet its ongoing operating expenses, liabilities of $530,097, accumulated losses of $1,287,417 and a stockholders deficit of $407,800.
In the financial statements for the fiscal years ended January 31, 2017 and 2016, the Reports of our Independent Registered Public Accounting Firm included an explanatory paragraph that describes substantial doubt about our ability to continue as a going concern.
The financial statements for the year ended January 31, 2017 have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company anticipates future losses in the development of its business raising substantial doubt about the Companys ability to continue as a going concern for one year from the issuance of the financial statements. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and, or, obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand, loans, loans from directors and, or, the sale of common stock. There is no assurance that this series of events will be satisfactorily completed.
These financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that may be necessary if the Company is unable to continue as a going concern.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturity of three months or less to be cash equivalents.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted accounting principles requires that management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. Due to uncertainties inherent in the estimation process, it is possible that these estimates could be materially revised within the next year.
Foreign Currency Translation
Gains or losses resulting from foreign currency transactions are included in results of operations.
F-7
Financial Instruments
Fair value measurements are determined based on the assumptions that market participants would use in pricing an asset or liability. Accounting Standards Codification (ASC) 820-10 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. ASC 820 establishes a fair value hierarchy that prioritizes the use of inputs used in valuation methodologies into the following three levels:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and must be used to measure fair value whenever available.
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs which reflect a reporting entitys own assumptions about the assumptions that market participants would use for pricing an asset or liability. For example, level 3 inputs would relate to forecasts of future earnings and cash flows used in a discounted future cash flows method.
The recorded amounts of financial instruments, including cash equivalents, investments, accounts payable, accrued expenses, note payable and loan from director approximate their market values as of January 31, 2017 and January 31, 2016 due to the intended short term maturities of these financial instruments.
Software
The Company has software for charting and technical indicators that it uses in the development of certain mobile applications. The software and any upgrades are being amortized over useful lives ranging from 3 5 years.
Website
The Company accounts for website development costs in accordance with ACS 350-50
Website Development Costs
. Costs incurred to register domain names, integrated databases and add additional functionality are being amortized over 1 3 years. Costs incurred in general maintenance of the website or hosting costs are expensed as incurred.
Revenue Recognition
The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer; (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
Research and Development Costs
Any costs incurred in research and development are listed separately and expensed as incurred.
Deferred Financing Costs
Costs with respect to issue of common stock, warrants, stock options or debt instruments by the Company are initially deferred and ultimately offset against the proceeds from such equity transactions or amortized as debt discount over the term of any debt funding if successful or expensed if the proposed equity or debt transaction is unsuccessful.
Impairment of Long-Lived and Intangible Assets
In the event that facts and circumstances indicated that the cost of long-lived and intangible assets may be impaired, an evaluation of recoverability will be performed. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset were compared to the assets carrying amount to determine if a write-down to market value or discounted cash flow value is required.
F-8
Advertising costs
Advertising costs are expensed as incurred. The Company recorded advertising and promotional costs of $12,929 and $37,003 for the year ending January 31, 2017 and for 2016 respectively.
Income Taxes
The Company accounts for income taxes in accordance with FASB ASC 740
Income Taxes
. Under FASB ASC 740, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial statement reported amounts at each period end, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized. The provision for income taxes represents the tax expense for the period, if any and the change during the period in deferred tax assets and liabilities. FASB ASC 740 also provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions. Under FASB ASC 740, the impact of an uncertain tax position on the income tax return may only be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. At January 31, 2017 and 2016, the Company has no unrecognized tax benefits.
Basic and Diluted Net Income (Loss) per Share
The Company computes net income (loss) per share in accordance with ASC 260,
Earnings per Share
which requires presentation of both basic and diluted earnings per share (EPS) on the face of the statement of operations. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and convertible preferred stock, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive. For the years ended January 31, 2017 and 2016, the Company did have potentially dilutive debt instruments that have been excluded from the earnings per share calculation; as such an inclusion would have been anti-dilutive due to the losses incurred in both periods. The debt instruments are convertible at a fixed price into 435,500,000 shares of common stock.
Stock Based Compensation
The Company accounts for employee and non-employee stock awards under ASC 718, whereby equity instruments issued to employees for services are recorded based on the fair value of the instrument issued and recognized over the requisite service period. The Company has adopted a stock option plan, as disclosed in
Note 10 Stockholders Deficit
below. During the year ended January 31, 2017 and 2016, no stock options had been issued or outstanding to date.
The Company accounts for stock-based payments to non-employees in accordance with ASC 505-50, Equity-Based Payments to Non-Employees. Stock-based payments to non-employees include grants of stock, grants of stock options and issuances of warrants that are recognized based on the value of the vested portion of the award over the requisite service period as measured at its then-current fair value as of each financial reporting date.
F-9
Trading Investments
The Companys trading investments are reported at fair value, with realized and unrealized gains and losses included in earnings.
In February of 2016, the Company contracted traders as testers as part of the due diligence process to test strategies, indicator reliability and trading platforms within their designated accounts. The contracted traders could use funds for trading securities or derivatives, which mainly consisted of various options, currency pairs and futures. All trading accounts will return to cash after the strategies are monitored over a reasonable period of time. While the Companys business model is not investing, short term investing is required to test elements of the software including connectivity to independent brokers. As of January 31, 2017, the fair value of trading accounts collectively was $14,681.
|
|
|
|
|
|
|
Year ending
January 31,
2017
|
|
Year ending
January 31,
2016
|
Investment available for trading in investments
|
$
|
20,550
|
$
|
-
|
Unrealized gains
|
|
8,036
|
|
-
|
Redemptions/commissions
|
|
(13,905)
|
|
-
|
Investments in trading at fair market value for period
|
$
|
14,681
|
$
|
-
|
Convertible debt
The Company records a beneficial conversion feature related to the issuance of convertible debts that have conversion features at fixed or adjustable rates. The beneficial conversion feature for the convertible instruments is recognized and measured by allocating a portion of the proceeds as an increase in additional paid-in capital and as a reduction to the carrying amount of the convertible instrument equal to the intrinsic value of the conversion features. The beneficial conversion feature will be accreted by recording additional non-cash interest expense over the expected life of the convertible notes.
Beneficial Conversion Features
If the conversion features of conventional convertible debt provides for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (BCF). A BCF is recorded by the Company as a debt discount pursuant to ASC Topic 470-20 Debt with Conversion and Other Options. In those circumstances, the convertible debt is recorded net of the discount related to the BCF and the Company amortizes the discount to interest expense over the life of the debt using the effective interest method.
Business Segments
The Company believes that its activities during the year ended January 31, 2017 and 2016 comprised a single segment.
Recently Issued Accounting Pronouncements
Starting in the second quarter of 2014, the FASB issued guidance applicable to revenue recognition that will be effective for the Company for the year ending January 31, 2019. The new guidance must be adopted using either a full retrospective approach for all periods presented or a modified retrospective approach. The FASB issued ASU No. 2014-15,
Presentation of Financial StatementsGoing Concern, Disclosure of Uncertainties about an Entitys Ability to Continue as a Going Concern.
The core principle of the new guidance is that management of public and private companies is required to evaluate whether there are conditions and events that raise substantial doubt about the entitys ability to continue as a going concern within one year after the financial statements are issued (or available to be issued when applicable) and, if so, disclose that fact. Management will be required to make this evaluation for both annual and interim reporting periods, if applicable. Management also is required to evaluate and disclose whether its plans alleviate that doubt. The standard is effective for annual periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016. Early adoption is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The new guidance applies a more principles-based approach to recognizing revenue. The Company is currently evaluating the impact this new standard will have on the reporting.
F-10
In November 2015, the FASB issued Accounting Standards Update No. 2015-17,
Balance Sheet Classification of Deferred Taxes
(ASU 2015-17). ASU 2015-17 requires companies to classify all deferred tax assets and liabilities as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted. The guidance may be adopted on either a prospective or retrospective basis. The Company does not expect the adoption of this guidance to have a material effect on the Companys consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The new standard requires recognition of the income tax effects of vested or settled awards in the income statement and involves several other aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. This new standard will be effective for the Company on February 1, 2017. The adoption of this standard is not expected to have a material impact on its financial position, results of operations or statements of cash flows upon adoption.
In August, 2016, the FASB issued Accounting Standards Update No. 2016-15,
Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)
(ASU 2016-15). The amendments in ASU 2016-15 address eight specific cash flow issues and apply to all entities that are required to present a statement of cash flows under ASC Topic 230,
Statement of Cash Flows
. The amendments in ASU 2016-15 are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption during an interim period. The Company has not yet completed the analysis of how adopting this guidance will affect its consolidated financial statements.
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other Than Inventory. This new standard eliminates the exception for an intra-entity transfer of an asset other than inventory. Under the new standard, entities should recognize the income tax consequences on an intra-entity transfer of an asset other than inventory when the transfer occurs. This new standard will be effective for the Company on February 1, 2018 and will be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company is currently evaluating the potential impact this standard may have on its financial position and results of operations.
In November 2016, the FASB issued Accounting Standards Update No. 2016-18,
Restricted Cash (a consensus of the FASB Emerging Issue Task Force)
(ASU 2016-18). This new standard addresses the diversity that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. The amendments in ASU 2016-18 require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within the year of adoption, with early adoption permitted. The Company does not expect that the adoption of ASU 2016-18 will have a material impact on its financial statements.
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. This new standard clarifies the definition of a business and provides a screen to determine when an integrated set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This new standard will be effective for the Company on February 1, 2018; however, early adoption is permitted with prospective application to any business development transaction.
In January 2017, the FASB issued Accounting Standards Update No. 2017-04,
Simplifying the Test for Goodwill Impairment
(ASU 2017-04). ASU 2017-04 simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. ASU 2017-04 is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, and should be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not anticipate the adoption of ASU 2017-04 will have a material impact on its financial statements.
F-11
4. RELATED PARTY TRANSACTIONS
Effective November 1, 2013, the Company began to accrue a monthly salary of $5,000 per month for the CEO and President on an ongoing basis. Accrued officer compensation as of January 31, 2017 and 2016 was $170,300 and $125,300, respectively. During the year ended January 31, 2017, the President elected to convert $15,000 of the accrual into 15,000,000 shares of the Companys common stock valued at $57,000, thereby recognizing a loss on conversion of accrued salary of $42,000. As resolved, the accrued compensation will only be paid after January 1, 2018 as and when the directors decide the Company has sufficient liquidity to pay some, or all, of the amounts accrued in cash or by issuing shares. The President of the Company can also consider submitting a request to the Board of Directors for permission to convert some, or all, of her accrued compensation into shares of the Companys common stock on payments due above of $170,300, but only after January 1, 2018. The share price considerations will be either the publicly quoted share price, when such a publicly quoted price is available; or equal to or above the last cash price the Company recorded for the sale of its common shares to third parties.
As of January 31, 2017 and 2016, the Company owed the President $4,465 and $2,672, respectively by way of loans. During the years ending January 31, 2017 and 2016, the Company repaid the Presidents short term advance of $5,014 and $7,953, respectively. The loans are unsecured, due on demand and interest free.
The Company provided consulting, technical writing and computer assisted design services to other startups provided by a contractor, a related person (family member to the Chief Executive Officer) to generate certain additional revenues. The Company paid $0 and $17,855 to the related party contractor in respect of the provision of these services during the year ended January 31, 2017 and 2016, respectively.
5. SOFTWARE
The Company has software that it uses for the development of certain mobile applications. The software and any upgrades are being amortized over useful lives ranging from 3 5 years. The Company recorded amortization expense of $11,110 and $2,112 for years ended January 31, 2017 and 2016, respectively.
|
|
|
|
|
|
|
January 31, 2017
|
|
January 31, 2016
|
|
|
|
|
|
Charting software
|
$
|
102,705
|
$
|
11,605
|
Website
|
|
2,080
|
|
2,080
|
|
|
104,785
|
|
13,685
|
Accumulated amortization
|
|
(22,291)
|
|
(11,271)
|
Net book value
|
$
|
82,494
|
$
|
2,414
|
6. CONVERTIBLE NOTE PAYABLE, RELATED AND UNRELATED PARTIES
|
|
|
Convertible notes Balance - February 1, 2016
|
$
|
82,621
|
Addition of convertible notes
|
|
185,505
|
Conversion of notes into common stock
|
|
(155,730)
|
Cash paid settlement of note
|
|
(58,750)
|
Gain on extinguishment of debt
|
|
(90,200)
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Change in fair value of convertible notes (including OID discount)
|
|
254,006
|
Convertible notes Balance - January 31, 2017
|
$
|
217,452
|
Convertible notes payable net of discount outstanding as of January 31, 2017 and 2016 were $217,452 and $82,621, respectively.
As of January 31, 2017, all convertible notes payable were due within the year ending January 31, 2018 with the exception of $26,276, which were classified as long term convertible notes payable. Of the long term convertible notes payable, $19,121 is due on December 31, 2018 and $7,155 is due on January 31, 2019.
As of January 31, 2016, all convertible notes payable were due within the year ending January 31, 2017 with the exception of $20,621, which were classified as long term convertible notes payable. Of the long term convertible notes payable, $19,121 is due on December 31, 2018 and $1,500 is due on January 31, 2019.
F-12
On January 8, 2014 the Company issued an unsecured convertible note to one accredited investor (as that term is defined under the Securities Act of 1933, as amended) in the aggregate amount of $50,000. This convertible note accrues interest at the rate of 19% per annum and is convertible only when a qualifying financing event takes place. The Company secured an initial extension of the convertible note to January 29, 2015 and subsequently obtained a further extension to December 31, 2016. The note has been reduced to $43,500 through the sales of part of the debt to unrelated third parties.
The note, but none of the accrued unpaid interest thereon, may convert into equity securities at the option of the holder if the Company issues equity securities and any other indebtedness in aggregate with gross proceeds of $1,200,000, including conversion of the note (a Qualified Financing). The conversion price is equal to 80% of the per share price paid by the purchasers of such equity securities in the Qualified Financing. Accrued and unpaid interest will be paid by the Company at time of conversion.
If a Qualified Financing has not occurred and the Company elects to consummate a sale of the company prior to the maturity date of the Note, the Company will give the holder a minimum ten days prior written notice of an anticipated closing date of such sale of the Company in order that the holder may consider a conversion of their Note into equity in advance of a sale transaction.
No value had been assigned to the conversion feature attached to this note prior, as the possibility of the Company completing such a Qualifying Financing or completing a sale of the Company before January 31, 2017 and 2016 was considered to be very remote.
On April 17, 2015, the Company received $5,000 by way of an unsecured short-term loan from a non-related party for a term of 60 days that was later extended until April 23, 2017. Principal and interest at 8% per annum accrued thereon are due and payable on April 23, 2017 and is further renewable. Also, the lender has the right to convert the principal and accrued interest into shares of the Companys common stock at $.01 cents. The Company is currently in discussions with the lender to further extend the maturity date and has been verbally extended to be later written. Until such time as that is completed the note is considered past due.
On October 2, 2015, the Company received $12,500 by way of an unsecured short-term loan from a non-related party for a term of one year. Principal and interest at 8% per annum accrued thereon are due and payable on October 1, 2016. Also, the lender has the right to convert the principal and accrued interest into shares of the Companys common stock. The conversion rate is equal to the fair market value of the Companys common stock on the date of conversion. This loan has been extended until October 1, 2017.
The Company had executed three lending arrangements with a related party, affiliated to the CEO of the company. The effective dates of the loans are November 24, 2015, December 8, 2015 and January 14, 2016. The loan amounts are $3,000, $16,121 and $1,500, respectively, with interest accruing at 5% per annum. Repayment is in one lump sum due and payable on or before December 31, 2018, December 31, 2018 and January 31, 2019, respectively.
The Company has executed two additional notes with the same related party. The effective dates of the additional loans are March 10, 2016 and March 15, 2016. The loan amounts are $2,770 and $2,885, respectively, with interest accruing at 5% per annum. Repayment is in one lump sum due and payable on or before January 31, 2019. All notes are convertible, at the holders request, into shares of the Companys common stock at the rate of $9.50 per share.
On February 9, 2016 and March 22, 2016, the Company entered into two loan agreements with unrelated parties for $33,000 and $25,600, respectively. The notes are due and payable twelve months from the issuance date and bear interest at 8% per annum. If the Notes are paid off prior to the due date, the Company is required to pay the face amount plus a scaled penalty ranging from 10% to 35% depending on the repayment date. Also noted, after 181 days from the issuance date, the Note is convertible into the shares of the Companys common stock. The conversion rate is equal to 55% of the market price during the previous 10 trading days. The loans were eligible for conversion in August and September 2016.
The Convertible Promissory Note for $33,000 with an Accredited Investor is subject to anti-dilution adjustments that allow for the reduction in the Conversion Price in the event the Company is in default as well as a variable conversion price that is calculated as a discount to market. The Company accounted for the conversion option in accordance with ASC Topic 815. Accordingly, the Conversion Option is not considered to be solely indexed to the Companys own stock and, as such, recorded as a liability.
Each convertible promissory note derivative liability has been measured at fair value at January 31, 2017 using a Black Scholes valuation model. Since the Conversion Price contains an anti-dilution adjustment as well as a variable conversion price that is calculated as a discount to market, the probability that the Conversion Price of the Notes would decrease as the share price decreased was incorporated into the valuation calculation.
During the year ending January 31, 2017, the Company issued 16,232,785 shares of common stock at a conversion price of $0.00143 per share in settlement of note payable. At September 14, 2016, the first Convertible Promissory Note for $33,000 was paid in full. As such, the fair value of the conversion feature at January 31, 2017 is $0.
F-13
The Convertible Promissory Note for $25,600 with an Accredited Investor is subject to anti-dilution adjustments that allow for the reduction in the Conversion Price in the event the Company is in default as well as a variable conversion price that is calculated as a discount to market. The Company accounted for the conversion option in accordance with ASC Topic 815. Accordingly, the Conversion Option is not considered to be solely indexed to the Companys own stock and, as such, recorded as a liability.
Each convertible promissory note derivative liabilities have been measured at fair value at January 31, 2017 using a Black Scholes model. Since the Conversion Price contains an anti-dilution adjustment as well as a variable conversion price that is calculated as a discount to market, the probability that the Conversion Price of the Notes would decrease as the share price decreased was incorporated into the valuation calculation.
During the year ending January 31, 2017 the Company issued 26,094,248 shares of common stock at a price ranging from $0.00083 to $0.00143 per share in full settlement of the note payable. At January 31, 2017, the second Convertible Promissory Note for $25,600 had a balance of $0. As such, the fair value of the conversion feature at January 31, 2017 is $0.
The inputs into the Black Scholes model were as follows related to valuation of this derivative during the year ending:
|
|
|
January 31, 2017
|
Closing share price
|
$0.0028 - $0.01490
|
Conversion price
|
$0.00083 - $0.00143
|
Risk free rate
|
0.39% 0.80%
|
Expected volatility
|
316.23% 399.44%
|
Dividend yield
|
0%
|
Expected life
|
.33 to .50 years
|
The convertible loan for $33,000 that was due on August 13, 2016 had been designated to be repaid in two stages as there was concern for the entire loan to be converted at current share prices. The outstanding portion of the loans converted to date representing 42,327,034 restricted and non-restricted common shares issued during the year. The Company recognized gain on conversion of $90,200. The remaining $14,815 outstanding balance of the $33,000 convertible loan was paid in cash resulting in full settlement of the balance. The Company borrowed $20,000 that is not convertible in nature and has allowed a partial conversion of the loans to reduce its liabilities and to provide further liquidity with free trading shares.
In April 2016, the Company entered into an agreement (Investment Agreement) for an unrelated third party (Investor) to purchase up to $5,000,000 of the Companys common stock. In conjunction with the Investment Agreement, the Company entered into a registration rights agreement (Registration Agreement). The Registration Agreement requires the Company to use its best effort, within thirty days, to file with the SEC a Form S-1 (Registration Statement) covering a certain number of shares to be used for the Investment Agreement. Upon the effective date of the Companys Registration Statement, the Company has the right to put (Put Notice) to the investor, for purchase, a certain amount of shares of the Companys common stock. For each Put Notice, the number of shares shall be equal to one-hundred and fifty percent of the average of the daily trading dollar volume of the Companys common stock for the ten consecutive trading days immediately prior to the Put Notice, so long as such amount does not exceed an accumulative amount per month of $150,000, unless prior approval of the Investor.
In conjunction with Investment Agreement, the Company entered issued two promissory Notes to the Investor in the amounts of $46,000 and $55,000. Both promissory notes accrue interest at the rate of 10% per annum and are due six and seven months respectively from the effective date of the Companys Registration Statement which was filed on May 17, 2016. This statement is not effective as of today. The first tranche of proceeds of $20,000 from the promissory note were used to pay the Companys fees associated with the Investment Agreement. The proceeds from the $55,000 promissory note are to be used to pay the Companys commitment fee to the Investor. The Investor did not advance the second tranche of the promissory note of $46,000 after the S-1 was filed on May 16, 2016. Further review of the S-1 by the Securities Exchange Commission has been set aside by the Company as it does not currently trade on the OTCQB marketplace. While the company may upgrade from the OTC Pink status at a cost of $12,500, it did not qualify to do so during the year ended January 31, 2017. A board decision on this matter is further complicated by the decision of our counsel to end their security practice in June of this year. The directors had chosen to discontinue matters pertaining to addressing the S-1 comments for the time being. However, the directors did negotiate with the Investor and agreed to repay the original advance and applied interest for sum of $25,000 and the second promissory note for $55,000 has been extinguished as part of this agreement Management included a portion of the promissory note for $46,000 as a liability for October 31, 2016 as it was outstanding and interpreted as due on October 19, 2016. Management opted for the settlement of this note as discussed below.
The Conversion Option is not considered to be solely indexed to the Companys own stock and, as such, recorded as a liability. While the first Promissory note for $46,000 was due October 16, 2016 and it was paid in November. The Promissory Note for $55,000 was not due until November 19, 2017 and was extinguished upon payment of first note.
F-14
Each convertible promissory note derivative liabilities have been measured at fair value at January 31, 2017 using a Black Scholes model. Since the Conversion Price contains an anti-dilution adjustment as well as a variable conversion price that is calculated as a discount to market, the probability that the Conversion Price of the Notes would decrease as the share price decreased was incorporated into the valuation calculation.
At November 15, 2016, the Convertible Promissory Note for $46,000 was paid in full. As such, the fair value of the conversion feature at January 31, 2017 is $0.
The inputs into the Black Scholes model were as follows related to valuation of this derivative during the year ending:
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|
|
January 31, 2017
|
Closing share price
|
$0.0027 - $0.0149
|
Conversion price
|
$0.0006 - $0.00128
|
Risk free rate
|
0.20%-0.29%
|
Expected volatility
|
183% -324.92%
|
Dividend yield
|
0%
|
Expected life
|
.01 to 0.12years
|
The Company took on a loan of $52,500, in the form of a convertible note, in November from an Accredited Investor (8K filed) in order to retire the outstanding note due to an Investor for $23,000 and to extinguish an additional note for a success fee in the amount of $55,000. The note is due and payable twelve months from the issuance date and bear interest at 5% per annum. If the Note is paid off prior to 181 days, the Company is required to pay the face amount plus a scaled penalty ranging from 10% to 30% depending on any repayment date being before May 8, 2017 otherwise the investor may convert loan to common shares.
The Company took on a further loan of $30,000, in the form of a convertible note on January 31, 2017 with unrelated parties. The note is due and payable twelve months from the issuance date and bears interest at 8% per annum. If the Note is paid off prior to the due date, the Company is required to pay the face amount plus a scaled penalty ranging from 10% to 35% depending on the repayment date. Also noted, after 181 days from the issuance date, the Note is convertible into the shares of the Companys common stock. The conversion rate is equal to 55% of the market price during the previous 10 trading days. The loan is convertible at the end of July.
7. NOTES PAYABLE
On November 20, 2014, the Company received $5,000 by way of an unsecured short-term loan from a non-related party for a term of nine months at 10% interest due upon repayment. The note payable and accrued interest was scheduled to be repaid on May 21, 2015. The Company was successful in obtaining an extension until December 31, 2015 upon making an interim renewal payment of $400. As of January 31, 2017, we are default under the loan agreement.
The Company entered into a stock transfer agency agreement dated November 19, 2014 with Pacific Stock Transfer. As part of the agreement, amounts owed to the Companys previous stock transfer agent of $7,430 were paid by Pacific Stock Transfer, of which $2,189 is to be repaid to Pacific Stock Transfer by the Company in installments of $250 per month beginning on January 3, 2015. Accordingly we also recognized a $3,931 gain on the settlement of the $7,430 balance of accounts payable by assuming a loan of $2,189. Interest at 5% per annum accrues on the unpaid balance of the loan for each month. As of January 31, 2017, we are not in default under this loan agreement as in August 2016 we renegotiated the terms for this loan and interest payment commenced in November 2016.
The Company had executed four short-term lending arrangements with a non-related party. The effective dates of the loans are May 1, 2015, June 22, 2015, June 27, 2015 and September 22, 2015. The loan amounts are $25,000, $3,000, $2,700 and $1,950, respectively, with interest accruing at 5% per annum. Repayment is in one lump sum due and payable on or before December 4 through January 31, 2016. The repayment date had been extended through to October 31, 2016 for the $25,000 loan. The other outstanding notes were extended to January 31, 2017. The note for $25,000 was sold in June after adding an allowance to facilitate a conversion to 2,500,000 free trading shares on May 27, 2016. The Directors agreed to approve the conversion of the note at $.01 (at a discount of $.006 creating a BCF of $15,000) and thereby extinguishing the debt upon completion of the sale.
One of the trader agreements included monthly compensation and to this end, part of the fees were paid in cash and then part of the fees were offset with a non-convertible note for $7,000 that is payable on or before June of 2017.
F-15
We borrowed $25,900 from an Accredited Investor on March 22, 2016, being a non-convertible note at 5% interest, as a short term bridge to facilitate longer term financial plans under discussion. Due to timing on the anticipated release of funds on this non-convertible note, we obtained a short term convertible loan from a non-related party, to assist with cash flow in the amount of $15,750; this was scheduled to be repaid within 60 days and no interest is due if repaid on time. The Company accepted a $15,750 bridge loan from the non-related party in September 23, 2016 and it was fully repaid on October 15, 2016 which prevented future interest becoming due.
On September 16, 2016, we borrowed $26,000 from an Accredited Investor, being a non-convertible note at 5% interest, as a short term loan to facilitate cash flow until longer term financial plans under discussion are completed. The loan will come due December 31, 2017.
8. FAIR VALUE MEASUREMENTS
The Companys assets and liabilities recorded at fair value have been categorized based upon a fair value hierarchy.
The following table presents information about the Companys liabilities measured at fair value on a recurring basis and the Companys estimated level within the fair value hierarchy of those assets and liabilities as of January 31, 2017 and January 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value measured at January 31, 2016
|
|
|
Total carrying value
at January 31,
|
|
|
Quoted prices in active
markets
|
|
|
Significant other
observable inputs
|
|
|
Significant
unobservable inputs
|
|
|
2016
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency investments
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value measured at January 31, 2017
|
|
|
Total carrying value
at January 31,
|
|
|
Quoted prices in active
markets
|
|
|
Significant other
observable inputs
|
|
|
Significant
unobservable inputs
|
|
|
2017
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency investments
|
|
$
|
14,681
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
14,681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
There were no transfers between Level 1, 2 or 3 during the years ended January 31, 2017 and 2016.
The following table presents additional information about Level 3 assets and liabilities measured at fair value. Both observable and unobservable inputs may be used to determine the fair value of positions that the Company has classified within the Level 3 category. As a result, the unrealized gains and losses for assets and liabilities within the Level 3 category may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs.
F-16
Changes in Level 3 liabilities measured at fair value for the year ended January 31, 2017:
|
|
|
Convertible notes Balance - February 1, 2016
|
$
|
82,621
|
Addition of convertible notes
|
|
185,505
|
Conversion of notes into common stock
|
|
(155,730)
|
Cash paid settlement of note
|
|
(58,750)
|
Gain on extinguishment of debt
|
|
(90,200)
|
Change in fair value of convertible notes (including OID discount)
|
$
|
254,006
|
Convertible notes Balance - January 31, 2017
|
$
|
217,452
|
The Companys derivative liabilities are measured at fair value using the Black Scholes valuation methodology. A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Companys derivative liabilities that are categorized within Level 3 of the fair value hierarchy for the year ended January 31, 2017 is as follows:
The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Companys Management.
9. COMMITMENTS AND CONTINGENCIES
The Company is required to file its annual and quarterly financial reports with SEDAR in Canada. Due to delays in filing its financial statements and other possible forms, the Company believes it may be subject to certain potentially significant penalties to be levied by the Alberta Securities Commission (ASC). These fines have now been stated to be CDN$10,120 or approximately US$7,500 as advised and invoiced by the ASC, and have been accrued into the financial statements as of January 31, 2017. The Company is considering engaging its legal counsel to assist in reducing or eliminating these penalties and requests to file. Further correspondence has been delivered to the ASC after filing the 10-K for January 31, 2016. Subsequently, the 10-Q ending April 30, 2016 and 10-Q ending July 31, 2016 were filed with SEDAR and this is ongoing.
The Company had retained TESO Communications as its Investor Relations and Public Relations manager and under the agreement the Company may pay the invoice with cash or by issuing shares against the invoices submitted. The Directors opted to issue shares before the end of the initial agreement period of January 16, 2015 but the same were not yet issued. The agreement represented a cash payment of $25,000 or the issuance of 50,000 restricted common shares at the completion of the agreement which has been extended to May 15, 2016. No invoice has been presented to the Company and no shares have been issued to date.
10. STOCKHOLDERS DEFICIT
Preferred Shares
The Company is authorized to issue 10,000,000 shares of preferred stock, par value $0.001 per share.
No shares of preferred stock were issued or outstanding during the fiscal years ended January 31, 2017 and 2016.
Subsequent to January 31, 2017, the directors signed a resolution to restructure the preferred shares. The preferred shares were changed to Preferred Series A shares with a par value of $.001 and the Series B preferred shares with a par value of $.001 that are redeemable after one year $1.00 at the holders option with interest of 6% payable annually on April 28, 2017. The Series B preferred shares become mandatorily redeemable at $1.00 five years after issuance.
Common Shares
On October 31, 2016 the directors unanimously agreed to increase the authorized common shares to 300,000,000 at par value of $.0001.
Subsequent to January 31, 2017, the Company restructured its common shares by increasing authorized shares from 300,000,000 to 750,000,000 common shares with a par value of $.0001. The preferred shares were changed to Preferred Series A super voting shares with a par value of $.001 and the Company added Series B preferred shares that are valued at 1.00 with interest of 6% payable annually.
F-17
On October 16, 2015, 102,000,000 shares of the Companys common stock were issued at $.0001 per share to management as follows: Jeffrey Jolliffe 1,000,000; Carl Hussey, Treasurer 2,000,000; Joseph Gagnon, Secretary - 2,000,000; Glenda Dowie, President & CEO 97,000,000. All shares are restricted Section 144 shares. $10,200 is added in the stockholders equity section of the financial statements for the value of these shares.
In addition, the Directors approved the new conversion terms for outstanding loan to Meador and subsequently, part of the debt was sold to an unrelated party. On October 26, 2015, the Company issued 5,000,000 shares of its common stock at a fair value of $0.0001 per share to an unrelated third party in satisfaction of $500 in notes payable that was assigned to the third party as referred to in
Note 6.-- Convertible Notes Payable.
The fair value of $0.0001 per share was established with the unrelated third party based on the fact that the Company has had only limited operations to date, incurred losses since inception and has a shareholder deficit in excess of $200,000. Further debt was sold on December 12, 2016 to an unrelated third party being 10,000,000 shares of its common stock at a fair par value of $0.0001 per share. The value was established based on that the Company had limited operations to date.
In December 23, 2015, the Company issued 26,670 shares of its common stock at a fair value of $ 20,000, respectively, for service rendered by unrelated third parties.
During the year ended January 31, 2016, the Company recognized a debt discount of $102,431 related to the conversion of notes payable for common stock.
On March 18, 2016, the directors approved 100,000 shares of the Companys common stock be issued to Azur Universal Inc and were issued at $.65 per share as per the agreement signed July 8, 2014 The amount was recorded as deposit on software acquisition under other current assets.
The Company has retained three unrelated parties as Consultants to help develop investor awareness in the Company through varied campaigns that revolve around contacting known sophisticated investors through media outlets, newsletters, emails and direct telephone calls. The consultants are compensated in combination of cash and restricted common shares. In May and June, the Company issued 4,283,333 shares of its common stock for services rendered by unrelated third parties. This represents payments to invoices totaling $229,182.
On July 20, 2016, the directors approved 900,000 of the Companys shares (book value of $26,100) be issued to Azur Universal Inc and were issued at $.029 cents per share to acquire the license rights and source code for the Global Trader software. The directors proceeded with purchasing the asset and declined to purchase the company at this time. An 8-K form was filed and a press release was sent out. The shares were issued in August and the license and rights have been acquired.
The Company also filed an 8-K form, in May 2016, noting a share buyback program adopted by the directors to help offset future share dilution stemming from borrowing activities. The directors believe it is important to demonstrate confidence in the strength of our business plan and to reinforce our ongoing commitment to improving shareholder returns. To date no shares have been purchased and we are continuing to work with our broker dealer to establish an active account and a trading plan within their guidelines.
The Company was able to partially pay its debt obligations and the balance of the outstanding notes was repaid from conversion of shares. The Company issued 93,027,033 with a total value of $240,704 throughout the year.
During the year ended January 31, 2017, the Company entered into a convertible note with a beneficial conversion feature. The beneficial conversion feature was valued at $15,000 and was recorded as a debt discount.
On December 14, 2016, the Company issued 15,000,000 shares of it restricted common stock at the fair value of $57,000 to the CEO, Glenda Dowie, against accrued compensation.
In January 27 2017, a consultant returned a certificate for 1,500,000 common shares used to secure an agreement with the Company when the parties mutually agreed the services sought were not provided to the full extent both anticipated. The total number of outstanding shares was adjusted accordingly.
Stock Options
The Company adopted the 2013 Equity Incentive Plan (the Plan) on January 31, 2012, reserving 5,500,000 shares for future issuances, of which a maximum of 2,500,000 may be issued as incentive stock options. The Plan provides for the issuance of non-statutory stock options or restricted stock to officers and employees, with an exercise price that is at least equal to the fair market value of the Companys common stock on the date of grant. Vesting terms and the lives of the options are to be determined by the Board of Directors upon grant. As of January 31, 2017 and 2016, no options have been issued under this Plan.
F-18
11. INCOME TAXES
The Company utilizes FASBASC740, Income Taxes, which requires the 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 determined based on the difference between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is recorded when it is more likely-than-not that a deferred tax asset will not be realized.
The Company generated a deferred tax asset through net operating loss carry-forwards. Based upon Managements evaluation, a valuation allowance of 100% has been established due to the uncertainty of the Companys realization of the benefit derived from net operating loss carry-forwards.
Deferred income taxes arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or noncurrent depending on the periods in which the temporary differences are expected to reverse. The Company does not have any uncertain tax positions.
The Company has net operating loss carryforwards of approximately $1,287,000 and $580,000 included in the deferred tax asset table below for 2017 and 2016, respectively. However, due to limitations of carryover attributes, it is unlikely the company will benefit from these NOL and thus Management has determined a 100% valuation reserved is required.
For U.S. purposes, the Company has not completed its evaluation of NOL utilization limitations under Internal Revenue Code, as amended (the Code) Section 382, change of ownership rules. If the Company has had a change in ownership, the NOLs would be limited as to the amount that could be utilized each year, based on the Code.
The Company has not filed all prior year income tax returns, as Management has stated. Due to the Net Operating Losses incurred it is not expected that there is any material Income Taxes due Federally or in State and Local jurisdictions, but any minimum tax payments due are delinquent and penalty and interest on such payments continue to accrue. Management is aware of its obligation to file income tax returns in jurisdictions the Company has Nexus.
The provision for federal income tax consists of the following for the periods ending:
|
|
|
|
|
|
|
January 31, 2017
|
|
January 31, 2016
|
Federal & State income tax benefit attributed to:
|
|
|
|
|
Net operating loss
|
$
|
511,196
|
$
|
230,389
|
Valuation allowance
|
|
(511,196)
|
|
(230,389)
|
Net benefit
|
$
|
-
|
$
|
-
|
The cumulative tax effect at the expected rate of 39.72% of significant items comprising our net deferred tax amount is as follows
|
|
|
|
|
|
|
January 31, 2017
|
|
January 31, 2016
|
Deferred tax attributed:
|
|
|
|
|
Net operating loss carryover
|
$
|
1,287,000
|
$
|
580,000
|
Less: change in valuation allowance
|
|
(1,287,000)
|
|
(580,000)
|
Net deferred tax asset
|
$
|
-
|
$
|
-
|
At January 31, 2017 and 2016, the Company had an unused net operating loss carry-forwards approximating $1,287,000 and $580,000, respectively that are available to offset future taxable income. The loss carry-forwards will start to expire in 2031.
F-19
In assessing the reliability of the deferred tax assets at January 31, 2017 and 2016 of $438,000 and $197,000, respectively, management considered whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, the projected future taxable income and tax planning strategies in making this assessment. Based on managements analysis, the Company concluded not to retain a deferred tax asset since it is uncertain whether the Company can utilize this asset in future periods. Therefore, the Company has established a full reserve against this asset. The valuation allowance was $438,000 and $197,000 as of January 31, 2017 and 2016, respectively.
The Companys policy is to recognize interest and/or penalties related to income tax matters in income tax expense. As of January 31, 2017 and 2016, the Company has no accrued interest and penalties related to uncertain tax positions.
The Company is subject to taxation in the U.S. The tax years for 2010 and forward are subject to examination by tax authorities. The Company is not currently under examination by any tax authority.
Management has evaluated tax positions in accordance with FASB ASC 740, and has not identified any tax positions, other than those discussed above, that require disclosure.
12. SUBSEQUENT EVENTS
The Company filed 14C on March 20, 2017 as part of share restricting program to fulfill future business needs of the Company.
On February 2, 2017, the directors signed a resolution to restructure the common and preferred shares. The Company restructured common shares by increasing authorized shares from 300,000,000 to 750,000,000 common shares with a par value of $.0001. The preferred shares were changed to Preferred Series A super voting shares with a par value of $.001 and the Company added Series B preferred shares that are valued at 1.00 with interest of 6% payable annually on April 28, 2017.
The Company raised $70,000 in a private placement with accredited investors where a combination of restricted common shares (20,588,263) and Preferred Series B shares (35,000) were issued May 8, 2017.
The Company opted to pay consultants invoice by issuing 8,832,500 common shares on May 8, 2017.
The Company converted $1,180 of notes payable with the issuance of 11,800,000 common shares on March 22, 2017 and April 17, 2017 that were issued in November 2016.
The Company reached an agreement on May 2, 2017with the lender of a note for $52,500 where by half of the note has been repaid in cash and the balance of the loan has been extended for an additional six months up to November 4, 2017 with no conversions during this time.
The Company entered into discussions and signed agreements with an accredited investor for a loan of $53,000 on May 8, 2017 and no funds from the investor have been received to date. The agreement calls for the company to be current in its filings to avoid any default. This note matures on February 20, 2018 and bears an interest rate of 8% and allows for prepayment between 112% and 137% depending on the date; and would be convertible on or about November 15 when funded. Once the conversion terms are effective the note is convertible into shares at the greater of $0.00008 or 61% of the market value as calculated per the agreement.
In accordance with
ASC 855, Subsequent Events
, the Company has evaluated events that occurred subsequent to the balance sheet date through the date of available issuance of these audited financial statements. The Company determined that other than as disclosed above, there were no material reportable subsequent events to be disclosed.
F-20
PART III
Item 10. Directors, Executive Officers, and Corporate Governance
The following table sets forth our directors and executive officers, their ages and the positions they hold:
|
|
|
|
|
Name
|
|
Age
|
|
Positions and Offices Held
|
|
|
|
|
|
Glenda Dowie
|
|
60
|
|
Director, President, Chief Executive Officer
|
|
|
|
|
|
Joseph Gagnon
|
|
59
|
|
Director, Secretary, Chief Technology Officer
|
|
|
|
|
|
Carl Hussey
|
|
65
|
|
Director, Treasurer, Chief Financial Officer
|
Glenda Dowie
has been President, Chief Executive Officer and a Director of the Company since inception. She is a full-time equities trader. She is the President and Founder of the stock trading site TraderZone.com and its affiliated newsletter-inspired BuyZoneReview.com. For the past eleven years, she has focused her energy and talents on stock trading indicators, refining her methodology for active trading and developing formulas that capture market momentum. During the past five years, Ms. Dowie had worked for the company that she owned: The TraderZone Corporation. Ms. Dowie is the director of TraderZone. Ms. Dowie has shared her experience through Published Articles on Investopedia (division of Forbes) as well as published a book entitled 6 Steps to Buying a Winning Stock made available through the Apple Store.
Joseph Gagnon
has been Secretary, Chief Technology Officer and a Director of the Company since inception. From 1997 to 2011 Mr. Gagnon was the Owner of JJG Consulting providing computer software consulting services. From February 2006 to 2011 Mr. Gagnon was a Java programmer with Branagh Information Group, a privately held computer networking company. Mr. Gagnon co-founded Abacus Concepts in 1984. With two MacUser Eddies, six MacWorld World Class awards and a 60% market share world-wide, Abacus was a leader of Macintosh Statistical Analysis and a significant player in the Win32 world. Mr. Gagnon served as Chief Technology Officer and served on the Board of Directors. His technical responsibilities were the user interface design, software architecture and implementation of the StatView product line. Mr. Gagnon left Abacus in 1997 when the business was sold to SAS Institute. Mr. Gagnon obtained a BS in Computer Science in 1981 from the University of Wisconsin-Madison.
Carl Hussey
has been Treasurer, Chief Financial Officer and a Director of the Company since inception. From January 2006 to the present Mr. Hussey has been the Owner of CH Strategic Management Group, providing management consulting to a broad range of companies. From June 2004 to August 2005 Mr. Hussey was the Chief Logistics Officer UNDOF at the United Nations. He was responsible for logistics for United Nations in UNDOF situated on Israel, Lebanon and Syria borders maintaining the disputed area of separation between the countries. From July 1999 to June 2004 he was a Comptroller for the Canadian Air Division of the Canadian Forces. Prior to this position he headed the Review and Audit Services within the Corporate Services Directorate of 1 Canadian Air Division. Mr. Hussey attended the University of New Brunswick.
Family Relationships
There are no family relationships among our directors and executive officers. No director or executive officer has been a director or executive officer of any business which has filed a bankruptcy petition or had a bankruptcy petition filed against it. No director or executive officer has been convicted of a criminal offense within the past five years or is the subject of a pending criminal proceeding. No director or executive officer has been the subject of any order, judgment or decree of any court permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities. No director or officer has been found by a court to have violated a federal or state securities or commodities law.
18
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has, during the past ten years:
·
been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
·
had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
·
been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;
·
been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
·
been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
·
been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
Except as set forth in our discussion below in Certain Relationships and Related Transactions, none of our directors or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the Commission.
Term of Office
Our directors are elected 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.
Committees of the Board of Directors
There is a new committee consisting of the Board of Directors formed January 31, 2015. Going forward into the new fiscal year, the Audit Committee can review, add policies and procedures; further, it will seek to add new members.
Audit Committee Financial Expert
The Board of Directors does not have an audit committee financial expert, as such term is defined in Item 401(h)(2) of Regulation S-K.
19
Section 16(a) Beneficial Ownership Reporting Compliance
The members of our Board of Directors, our executive officers and persons who hold more than 10% of our outstanding Common Stock are subject to the reporting requirements of Section 16(a) of the Exchange Act, which requires them to file reports with respect to their ownership of our Common Stock and their transactions in such Common Stock.
Based solely upon a review of copies of such forms filed on Forms 3, 4, and 5, and amendments thereto furnished to us, we believe that as of the date of this Report, our executive officers, directors and greater than 10 percent beneficial owners have complied on a timely basis with all Section 16(a) filing requirements, with the exception of our officers, directors and greater than 10 percent beneficial owners listed in the table below:
|
|
|
|
|
Name
|
|
Form
|
|
Description
|
Glenda Dowie
|
|
3
|
|
Was not filed timely on the effective date of the registration statement on Form 8-A (SEC File No. 000-54865)
|
Joseph Gagnon
|
|
3
|
|
Was not filed timely on the effective date of the registration statement on Form 8-A (SEC File No. 000-54865).
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Carl Hussey
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3
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Was not filed timely on the effective date of the registration statement on Form 8-A (SEC File No. 000-54865).
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Code of Ethics
Our board of directors has adopted a general code of ethics guideline. All directors, officers and employees of the Company must comply with the law and regulations and must act honestly and in good faith with a view to the best interests of the Company in exercising their powers and discharging their duties. Any director or officer of the Company shall disclose in writing or request to have it entered into the minutes of Board of Directors meeting or any of the committees of the directors the nature and extent of any interest in a material contract or a material transaction, whether made or proposed, as soon as the director or officer becomes aware of such a contract or transaction. In the event of such a case, the director shall abstain from voting on any resolution to approve such a contract or transaction.
Options/SAR Grants and Fiscal Year End Option Exercises and Values
We have not had a stock option plan or other similar incentive compensation plan for officers, directors and employees, and no stock options, other than as is discussed in this Annual Report.
20
Item 11. Executive Compensation
Summary Compensation Table
The following table shows for the fiscal years ended January 31, 2017 and 2016, compensation awarded to or paid to, or earned by, our Chief Executive Officer, our Chief Technology Officer, and our Chief Financial Officer (the Named Executive Officers).
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Name and
Principal Position
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Year
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Salary
($) (1)
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Bonus
($)
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Option
Awards (1)
($)
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All Other
Compensation
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Total
($)
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Glenda Dowie
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2017
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$60,000
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0
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0
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0
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$60,000
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2016
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$60,000
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0
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0
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0
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$60,000
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Chief Executive Officer
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2015
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$60,000
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0
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0
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0
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$60,000
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Joseph Gagnon
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2017
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0
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0
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0
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0
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0
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Chief Technology Officer
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2016
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0
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0
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0
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0
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0
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Carl Hussey
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2017
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0
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0
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0
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0
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0
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Chief Financial Officer
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2016
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0
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0
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0
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0
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0
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(1) Effective November 1, 2013, the Company began to accrue a monthly salary of $5,000 per month for the President on an ongoing basis. Accrued officer compensation as of January 31, 2017 and January 31, 2016 was $170,300 and $125,300, respectively. As resolved, the accrued compensation for quarter ending October 31, 2017 will only be paid out after January 1, 2018 as and when the directors decide the Company has sufficient liquidity to pay some, or all, of the amounts accrued in cash or by issuing shares. The President of the Company can also consider submitting a request to the Board of Directors for permission to convert some, or all, of her accrued compensation into shares of the Companys common stock on payments due above of $170,300, but only after January 1, 2018. The share price considerations will be either the publicly quoted share price, when such a publicly quoted price is available; or equal to or above the last cash price the Company recorded for the sale of its common shares to third parties.
Outstanding Equity Awards at the End of the Fiscal Year
No equity compensation has been paid under the Plan.
Compensation of Directors
Directors are permitted to receive fixed fees and other compensation for their services as directors. The Board of Directors has the authority to fix compensation of directors. No amounts have been paid to, or accrued to, directors in such capacity.
Employment Agreements
Effective November 1, 2013, the Company began to accrue a monthly salary of $5,000 per month for the President on an ongoing basis. Accrued officer compensation as of January 31, 2017 and January 31, 2016 was $170,300 and $125,300, respectively. As resolved, the accrued compensation for quarter ending October 31, 2017 will only be paid out after January 1, 2018 as and when the directors decide the Company has sufficient liquidity to pay some, or all, of the amounts accrued in cash or by issuing shares. The President of the Company can also consider submitting a request to the Board of Directors for permission to convert some, or all, of her accrued compensation into shares of the Companys common stock on payments due above of $170,300, but only after January 1, 2018. The share price considerations will be either the publicly quoted share price, when such a publicly quoted price is available; or equal to or above the last cash price the Company recorded for the sale of its common shares to third parties.
As of June 15, 2012, Mr. Gagnon took a leave of absence from his role under the consulting agreement; however, he will continue to serve as an officer and director of the Company during his leave of absence.
Mr. Gagnon provides contract services for a fee connected to maintenance on the servers and software on a consultant basis. Mr. Hussey does not receive compensation for his services at this time. Based upon the amount of the proceeds from additional sales of our common stock, other future employees and directors may receive salaries. Once we generate revenue, future salaries will be evaluated at that time. Additional employees may be added in the future to assist in the monitoring and fulfillment of orders.
21
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth certain information, as of May 10, 2017, with respect to the holdings of (1) each person who is the beneficial owner of more than 5% of our common stock, (2) each of our directors, (3) each executive officer, and (4) all of our current directors and executive officers as a group.
Beneficial ownership of the common stock is determined in accordance with the rules of the Securities and Exchange Commission and includes any shares of common stock over which a person exercises sole or shared voting or investment power, or of which a person has a right to acquire ownership at any time within 60 days of May 10, 2017. Except as otherwise indicated, we believe that the persons named in this table have sole voting and investment power with respect to all shares of common stock held by them. Applicable percentage ownership in the following table is based on 270,472,799 shares of common stock outstanding as May 10, 2017 plus, for each individual, any securities that individual has the right to acquire within 60 days of May 10, 2017.
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Name and Address
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Amount and Nature of
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Percent of
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of Beneficial Owner
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Beneficial Ownership (1)(2)
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Class
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Glenda Dowie (3)
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117,000,000
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43.26%
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505 Montgomery Street,
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11th Floor
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San Francisco, CA 94111
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Joseph Gagnon (3)
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2,200,000
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0.81%
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505 Montgomery Street,
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11th Floor
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San Francisco, CA 94111
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Carl Hussey (3)
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2,200,000
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0.81%
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505 Montgomery Street,
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11th Floor
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San Francisco, CA 94111
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All Officers and Directors as a Group
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121,400,000
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44.88%
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(1) All ownership is beneficial and of record, unless indicated otherwise.
(2) The Beneficial owner has sole voting and investment power with respect to the shares shown.
(3) An officer and director of the Company.
Securities Authorized for Issuance under Equity Compensation Plans
The following table provides information as of January 31, 2017, regarding shares of common stock that may be issued under the Companys 2012 Equity Incentive Award Plan (the Equity Plan). The Equity Plan was approved by the Companys shareholders and is the Companys sole equity compensation plan.
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Plan category
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(a)
Number of securities
to be issued
upon exercise
of outstanding
options, warrants
and rights
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(b)
Weighted-average
exercise price of
outstanding
options, warrants
and rights
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(c)
Number of securities
remaining available
for future issuance under equity
compensation plans
(excluding securities
reflected in column (a))
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Equity compensation plans approved by security holders (1)
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5,500,000
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-
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5,500,000
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Equity compensation plans not approved by security holders (2)
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-
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-
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-
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Total
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5,500,000
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-
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5,500,000
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22
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Transactions with Related Persons
Except as set forth below, since February 1, 2013, there has not been, nor is there currently proposed, any transaction or series of similar transactions to which the Company was or will be a party in which the amount involved exceeds the lesser of $120,000 or one percent of the average of the Companys total assets at year-end for the last two completed fiscal years; and in which any director, executive officer, other stockholders of more than 5% of the Companys Common Stock or any member of their immediate family had or will have a direct or indirect material interest:
Effective November 1, 2013, the Company began to accrue a monthly salary of $5,000 per month for the President on an ongoing basis. Accrued officer compensation as of January 31, 2017 and January 31, 2016 was $170,300 and $125,300, respectively. As resolved, the accrued compensation for quarter ending October 31, 2017 will only be paid out after January 1, 2018 as and when the directors decide the Company has sufficient liquidity to pay some, or all, of the amounts accrued in cash or by issuing shares. The President of the Company can also consider submitting a request to the Board of Directors for permission to convert some, or all, of her accrued compensation into shares of the Companys common stock on payments due above $170,300, but only after January 1, 2018. The share price considerations will be either the publicly quoted share price, when such a publicly quoted price is available; or equal to or above the last cash price the Company recorded for the sale of its common shares to third parties.
As of January 31, 2017 and 2016, the Company owed the President $4,465 and $2,672, respectively, by way of loan. The loan is unsecured, due on demand and interest free.
Director Independence
We do not have any independent directors. Because our common stock is not currently listed on a national securities exchange, we have used the definition of independence of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an independent director is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion of the Companys Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:
·
the director is, or at any time during the past three years was, an employee of the company;
·
the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);
·
a family member of the director is, or at any time during the past three years was, an executive officer of the company;
·
the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipients consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);
·
the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or
·
the director or a family member of the director is a current partner of the companys outside auditor, or at any time during the past three years was a partner or employee of the companys outside auditor, and who worked on the companys audit.
Ms. Dowie and Messrs. Gagnon and Hussey are not considered independent because they are executive officers of the Company.
We do not currently have a separately designated nominating or compensation committee but have created an audit committee.
23
Item 14: Principal Accountant Fees and Services.
Audit Fees
For the Companys fiscal year ended January 31, 2017 and 2016, we were billed approximately $24,500 and $7,000, respectively for professional services rendered for the audit and reviews of our financial statements. Costs increased due to change in auditor from Cutler & Co., LLC to RBSM LLP from the year ended January 31, 2016 onwards.
Audit Related Fees
For the Companys fiscal year ended January 31, 2017 and 2016, we were not billed for professional services related to our audits, other than the fees discussed in Audit Fees above.
Tax Fees
For the Companys fiscal years ended January 31, 2017 and 2016, we were not billed for professional services rendered for tax compliance, tax advice, and tax planning by our auditors.
All Other Fees
For the Companys fiscal year ended January 31, 2017 and 2016, we were billed approximately $4,000 and $0, respectively for professional services rendered for the audit related services pertaining to the S-1 filing.
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.
Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before our auditor is engaged by us to render any auditing or permitted non-audit related service, the engagement be:
·
approved by our audit committee; or
·
entered into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures are detailed as to the particular service, the audit committee is informed of each service, and such policies and procedures do not include delegation of the audit committees responsibilities to management.
Currently our entire board of directors, the active members of the audit committee, pre-approves all services provided by our independent auditors. The pre-approval process has just been implemented in response to the new rules. Therefore, our board of directors does not have records of what percentage of the above fees was pre-approved. However, all of the above services and fees were reviewed and approved by the entire board of directors either before or after the respective services were rendered. An Audit Committee was created on January 31, 2015 to better manage the audit process and remains in place.
24