Notes
to Consolidated Financial Statements
December
31, 2017
(Unaudited)
1.
Nature of Operations and Continuance of Business
Mobetize
Corp. (the “Company”) was incorporated in the state of Nevada on February 23, 2012, as Slavia, Corp. On August 13,
2013, its name changed to “Mobetize Corp.”. The Company provides Fintech solutions and services to enable and support
the convergence of global telecom and financial services providers (“Customers”) through its Global Mobile B2B Fintech
and Financial Services Marketplace (“Hub”). The Company’s activities are subject to significant risks and uncertainties,
including the need to secure additional funding to optimize the Company’s existing technology.
The
Company’s unaudited consolidated financial statements are prepared in accordance with accounting principles generally accepted
in the United States. These unaudited consolidated financial statements include the accounts of its wholly owned subsidiaries,
Mobetize Canada Inc., and Mobetize USA Inc. All significant intercompany transactions and balances have been eliminated. The accompanying
quarterly unaudited consolidated financial statements should be read in conjunction with the annual consolidated financial statements
and accompanying notes filed with the U.S. Securities and Exchange Commission on Form 10-K for the fiscal year ended March 31,
2017.
In
the opinion of management, the accompanying financial statements reflect all adjustments of a recurring nature considered necessary
to present fairly the Company’s financial position and the results of its operations and cash flows for the periods shown.
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those
estimates. The results of operations and cash flows for the periods shown are not necessarily indicative of the results to be
expected for the full year.
On
July 11, 2017, the Company completed a consolidation of its issued and outstanding common shares on a one for one hundred (1/100)
basis and a decrease in the number of its authorized common and preferred shares. All share and per share amounts have been retroactively
restated to reflect the share consolidation.
Going
Concern
These
unaudited consolidated financial statements have been prepared on a going concern basis, which implies that the Company will continue
to realize assets and discharge liabilities in the normal course of business. As of December 31, 2017, the Company has an accumulated
deficit of $8,572,201, a history of net losses and a working capital deficiency of $763,891. These factors raise substantial doubt
regarding the Company’s ability to continue as a going concern. The continuation of the Company as a going concern is dependent
upon continuing financial support from management, increasing sales, securing debt or equity financing, cutting operating costs,
launching viable products, and realizing profitable operations. These consolidated financial statements do not include any adjustments
to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern.
2.
Recent Accounting Pronouncements
In
March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Updates ASU 2017-07, requiring certain
changes to the presentation of the expenses related to post retirement benefits accounted for under Topic 715. The amendments
are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those
fiscal years. The adoption of this standard is not expected to have a significant impact on the Company’s results of operations,
financial condition, and cash flows. The adoption of this standard is expected to result in additional financial statement disclosures.
MOBETIZE
CORP.
Notes
to Consolidated Financial Statements
December
31, 2017
(Unaudited)
In
February 2016, Topic 842,
Leases
was issued to replace the leases requirements in Topic 840,
Leases
. The main difference
between previous GAAP and Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases classified
as operating leases under previous GAAP. A lessee should recognize in the balance sheet a liability to make lease payments (the
lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with
a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize
lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally
on a straight-line basis over the lease term. The accounting applied by a lessor is largely unchanged from that applied under
previous GAAP. Topic 842 will be effective for annual reporting periods beginning after December 15, 2018, including interim periods
within those annual periods and is to be retrospectively applied. Earlier application is permitted. The adoption of this standard
is not expected to have a significant impact on the Company’s results of operations, financial condition, cash flows, and
financial statement disclosures.
In
May 2014, the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers
. The new standard provides a five-step
approach to be applied to all contracts with customers and also requires expanded disclosures about revenue recognition. The ASU
is effective for annual reporting periods beginning after December 15, 2017, including interim periods and is to be retrospectively
applied. Early application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim
reporting periods within that reporting period. The adoption of this standard is not expected to have a significant impact on
the Company’s results of operations, financial condition, and cash flows. The adoption of this standard is expected to result
in additional financial statement disclosures.
3.
Joint Venture
On
January 12, 2017, the Company entered into a Gateway License Agreement and Joint Venture Agreement (“Joint Venture”)
with CPT Secure, Inc. (“CPT”), a company controlled by a shareholder (related party) of the Company, to further develop
certain payment processing technology (“CPT IP”) on a 50/50 basis. In connection with the Joint Venture, the Company
issued 500,000 Series B Preferred Shares with a fair value of $125,000 on January 12, 2017, to CPT in consideration for the license
to the CPT IP which was contributed to MPAY Gateway Services Inc., (see below) (“MPAY”). The license to the CPT IP
has a term to January 11, 2019, and can be automatically renewed for successive two year periods unless either party elects not
to renew 60 days prior to expiration. The license fee of $125,000 is being amortized over the initial term of the license. During
the nine months ended December 31, 2017, the Company recognized amortization of $10,103 on the license prior to the transfer to
MPAY which amount has been included in research and development expense.
Effective
May 29, 2017, the Company and CPT incorporated a joint venture company, MPAY. Upon incorporation of MPAY, the Company transferred
the remaining carrying value (after accumulated amortization) of the license to the CPT IP of $101,541 to MPAY, which has been
presented on the balance sheet as an investment in joint venture. During the nine months ended December 31, 2017, the Company
recognized a loss on joint venture of $18,599, representing the Company’s 50% interest in the change in net assets of MPAY.
MOBETIZE
CORP.
Notes
to Consolidated Financial Statements
December
31, 2017
(Unaudited)
4.
Equipment
Equipment,
net consisted of the following:
|
|
December
31, 2017
|
|
March
31, 2017
|
Computer
equipment
|
|
$
|
15,255
|
|
|
$
|
14,421
|
|
Furniture
|
|
|
1,242
|
|
|
|
1,174
|
|
Total
|
|
|
16,497
|
|
|
|
15,595
|
|
Less:
accumulated amortization
|
|
|
10,901
|
|
|
|
7,966
|
|
Equipment,
net
|
|
$
|
5,596
|
|
|
$
|
7,629
|
|
During
the three months ended December 31, 2017, equipment cost increased by $902, and accumulated amortization was impacted by $519,
as a result of foreign currency translation adjustments.
5.
Promissory Note
On
September 13, 2017, the Company entered into a Bridge Loan Promissory Note with a third party, whereby the Company received proceeds
of $20,152 (CDN$25,000), which is non-interest bearing, and matured on October 13, 2017. During the nine months ended December
31, 2017, the Company repaid the loan and paid a bridge loan fee of $1,942 (CDN$2,500) in consideration for the loan.
6.
Convertible Promissory Notes
Date
of issuance
|
|
Principal
December 31,
2017
|
|
Principal
March 31,
2017
|
|
Interest
|
|
Maturity
|
|
November
21, 2016
(1)
|
|
|
$
|
—
|
|
|
|
40,000
|
|
|
|
6%
per annum
|
|
|
|
November
21, 2017
|
|
|
January
27, 2017
(2)
|
|
|
$
|
—
|
|
|
|
125,000
|
|
|
|
12%
per annum
|
|
|
|
January
27, 2018
|
|
|
January
30, 2017
(3)
|
|
|
$
|
—
|
|
|
|
75,000
|
|
|
|
12%
per annum
|
|
|
|
January
30, 2018
|
|
|
|
|
|
$
|
—
|
|
|
$
|
240,000
|
|
|
|
|
|
|
|
|
|
|
(1)
|
November
21, 2016 Issuance - $40,000 (converted):
|
|
•
|
Issued
net of $2,400 of prepaid interest, based on an interest rate of 6% per annum.
|
|
•
|
The
conversion feature was exercisable at the option of the holder (the “Conversion
Feature”). The Conversion Feature enabled the holder to convert any portion of
their outstanding Convertible Promissory Note principal balance into common shares at
$0.25 per share on or after May 20, 2017, but no later than the maturity date.
|
|
•
|
The
Company evaluated whether separate financial instruments with the same terms as the conversion
features above would meet the characteristics of a derivative instrument as described
in paragraphs ASC 815-15-25. The terms of the contracts do not permit net settlement,
as the shares delivered upon conversion are not readily convertible to cash. As the conversion
features would not meet the characteristics of a derivative instrument as described in
paragraphs ASC 815-15-25, the conversion features are not required to be separated from
the host instrument and accounted for separately. As a result, it was determined that
no beneficial conversion feature existed on the commitment date.
|
|
•
|
On
April 21, 2017, the Company issued 160,000 Series B Preferred Shares pursuant to the
conversion of $40,000 of the convertible promissory notes. $20,000 of this issuance was
owed to a director of the Company (Note 7 (j)).
|
MOBETIZE
CORP.
Notes
to Consolidated Financial Statements
December
31, 2017
(Unaudited)
|
(2)
|
January
27, 2017 Issuance - $125,000 (converted):
|
|
•
|
Issued
net of $15,000 of prepaid interest, based on an interest rate of 12% per annum.
|
|
•
|
Of
the $125,000 Convertible Promissory Notes, $50,000 is owed to a Director of the Company
(Note 7(j)).
|
|
•
|
The
Conversion Feature enabled the holder to convert any portion of their outstanding Convertible
Promissory Note principal balance into common shares at $0.50 per share on or after July
26, 2017, but no later than the maturity date.
|
|
•
|
The
Company has evaluated whether separate financial instruments with the same terms as the
conversion features above would meet the characteristics of a derivative instrument as
described in paragraphs ASC 815-15-25. The terms of the contracts do not permit net settlement,
as the shares delivered upon conversion are not readily convertible to cash. As the conversion
features would not meet the characteristics of a derivative instrument as described in
paragraphs ASC 815-15-25, the conversion features are not required to be separated from
the host instrument and accounted for separately. As a result, it was determined that
no beneficial conversion feature existed on the commitment date.
|
|
•
|
On
August 3, 2017, the Company issued 250,000 Series B Preferred Shares pursuant to the
conversion of $125,000 of the convertible promissory notes.
|
|
(3)
|
January
30, 2017 Issuance - $75,000 (converted):
|
|
•
|
Issued
net of $9,000 of prepaid interest, based on an interest rate of 12% per annum.
|
|
•
|
The
$75,000 Convertible Promissory Note is owed to a Director of the Company (Note 7(j)).
|
|
•
|
The
Conversion Feature enabled the holder to convert any portion of their outstanding Convertible
Promissory Note principal balance into common shares at $0.50 per share on or after July
29, 2017, but no later than the maturity date.
|
|
•
|
The
Company has evaluated whether separate financial instruments with the same terms as the
conversion features above would meet the characteristics of a derivative instrument as
described in paragraphs ASC 815-15-25. The terms of the contracts do not permit net settlement,
as the shares delivered upon conversion are not readily convertible to cash. As the conversion
features would not meet the characteristics of a derivative instrument as described in
paragraphs ASC 815-15-25, the conversion features are not required to be separated from
the host instrument and accounted for separately. As a result, it was determined that
no beneficial conversion feature existed on the commitment date.
|
|
•
|
On
August 3, 2017, the Company issued 150,000 Series B Preferred Shares pursuant to the
conversion of $75,000 of the convertible promissory note.
|
MOBETIZE
CORP.
Notes
to Consolidated Financial Statements
December
31, 2017
(Unaudited)
7.
Related Party Transactions
|
|
Nine
months ended December 31,
|
Transactions
with related parties
|
|
2017
|
|
2016
|
(a)
Transactions incurred with the CEO or companies controlled by the CEO:
|
|
|
|
|
|
|
|
|
Management
fees
|
|
$
|
92,269
|
|
|
$
|
91,039
|
|
Management
fees – Stock-based compensation
|
|
|
613
|
|
|
|
25,340
|
|
Research
and development
|
|
|
115,782
|
|
|
|
97,027
|
|
General
and administrative
|
|
|
20,684
|
|
|
|
11,843
|
|
|
|
$
|
229,348
|
|
|
$
|
225,249
|
|
(b)
Transactions incurred with the former CFO’s or a company controlled by a former CFO:
|
|
|
|
|
|
|
|
|
Management
fees
|
|
$
|
—
|
|
|
$
|
7,110
|
|
General
and administrative
|
|
|
—
|
|
|
|
69,410
|
|
|
|
$
|
—
|
|
|
$
|
76,520
|
|
(c)
Transactions incurred with the Chairman of the Company
|
|
|
|
|
|
|
|
|
Management
fees
(1)
|
|
$
|
9,000
|
|
|
$
|
30,000
|
|
Management
fees – Stock-based compensation
|
|
|
22,168
|
|
|
|
57,750
|
|
|
|
$
|
31,168
|
|
|
$
|
87,750
|
|
(d)
Transactions incurred with a Director of the Company
|
|
|
|
|
|
|
|
|
Management
fees – Stock-based compensation
|
|
$
|
8,868
|
|
|
$
|
23,100
|
|
General
and administrative – Interest on convertible promissory note
|
|
|
18,338
|
|
|
|
3,000
|
|
|
|
$
|
27,206
|
|
|
$
|
26,100
|
|
(e)
Transactions incurred with a shareholder of the Company
|
|
|
|
|
|
|
|
|
Investor
relations and promotion
|
|
$
|
107,078
|
|
|
$
|
—
|
|
|
|
$
|
107,078
|
|
|
$
|
—
|
|
Related
party balances, as at
|
|
|
December
31,
2017
|
|
|
|
March
31, 2017
|
|
(f)
Amounts owed to the former CFO (existing shareholder):
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
20,080
|
|
|
$
|
18,346
|
|
|
|
|
|
|
|
|
|
|
(g)
Amounts owed to companies controlled by the CEO:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
374,229
|
|
|
|
275,687
|
|
Promissory note
– June 2, 2017
(2)
|
|
|
25,000
|
|
|
|
25,000
|
|
Promissory
note – July 11, 2017
(3)
|
|
|
19,885
|
|
|
|
18,798
|
|
|
|
$
|
418,184
|
|
|
$
|
319,485
|
|
(h)
Amounts owed to the Chairman of the Company (accounts payable)
|
|
$
|
18,000
|
|
|
$
|
9,000
|
|
|
|
|
|
|
|
|
|
|
(i)
Amounts prepaid to a company controlled by the CEO
|
|
|
|
|
|
|
|
|
Prepaid
interest on promissory notes
|
|
$
|
—
|
|
|
$
|
2,461
|
|
|
|
|
|
|
|
|
|
|
(j)
Amounts owed to a Director of the Company
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
1,122
|
|
|
$
|
—
|
|
Convertible
promissory note November 21, 2017 (Note 6
(1)
))
|
|
|
—
|
|
|
|
20,000
|
|
Convertible
promissory note January 27, 2018 (Note 6
(2)
))
|
|
|
—
|
|
|
|
50,000
|
|
Convertible
promissory note January 30, 2018 (Note 6
(3)
))
|
|
|
—
|
|
|
|
75,000
|
|
Promissory
note – September 17, 2017
(4)
|
|
|
100,000
|
|
|
|
—
|
|
Promissory
note – November 7, 2017
(5)
|
|
|
50,000
|
|
|
|
—
|
|
Promissory
note – December 5, 2017
(6)
|
|
|
100,000
|
|
|
|
—
|
|
|
|
$
|
251,122
|
|
|
$
|
145,000
|
|
(k)
Amounts prepaid to a Director of the Company
|
|
|
|
|
|
|
|
|
Prepaid
interest on convertible promissory notes
|
|
$
|
—
|
|
|
$
|
13,178
|
|
|
|
|
|
|
|
|
|
|
(l)
Amounts owed to a shareholder of the Company
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
64,091
|
|
|
$
|
17,358
|
|
MOBETIZE
CORP.
Notes
to Consolidated Financial Statements
December
31, 2017
(Unaudited)
|
(1)
|
On
July 1, 2016, the Company entered into an agreement with the Company’s Chairman
whereby he would provide services to the Company at a monthly rate of $1,000 for a period
of two years ending on June 30, 2018.
|
|
(2)
|
The
promissory note maturing on June 2, 2017, was issued with a twelve-month term, comprises
$25,000 principal, and bears interest at 12% per annum. The principal balance included
prepaid interest of $3,000.
|
|
(3)
|
The
promissory note maturing on July 11, 2017, was issued with a twelve-month term, comprises
$19,885 (CAD $25,000) principal, and bears interest at 12% per annum. The principal balance
included prepaid interest of $2,386 (CAD $3,000).
|
|
(4)
|
The
promissory note maturing on March 17, 2018, was issued with a 6-month term, comprises
$100,000 principal, and bears interest at 12% per annum.
|
|
(5)
|
The
promissory note maturing on November 7, 2018, was issued with a 12-month term, comprises
$50,000 principal, and bears interest at 12% per annum.
|
|
(6)
|
The
promissory note maturing on December 5, 2018, was issued with a 12-month term, comprises
$100,000 principal, and bears interest at 12% per annum.
|
8.
Common Stock and Preferred Stock
|
a)
|
Issuance
of Common Stock:
|
On
July 11, 2017, the Company completed a consolidation of the issued and outstanding common shares on a one for one hundred (1/100)
basis, and amended the Company’s Articles of Incorporation to decrease the number of authorized shares of common stock from
525,000,000 shares with a par value $0.001 per share to 250,000,000 shares with a par value of $0.001 per share. All share and
per share amounts have been retroactively restated to reflect the share consolidation.
|
b)
|
Authorization
and Issuance of Series A Preferred Shares:
|
•
The Company has designated 10,000,000 of its authorized preferred shares (see below) as Series A Preferred Shares (“Series
A Preferred Shares”). The Series A Preferred Shares have the same rights and privileges as the common stock, with the exception
that the Series A Preferred Share holder has 10 votes per Series A Preferred Share versus one vote per share of common stock and
does not have the right to sell the shares for a period of two years from the date of issue.
•
Effective April 7, 2017, the Company amended its Articles of Incorporation to decrease the number of authorized preferred shares
from 250,000,000 shares with a par value $0.001 per share to 75,000,000 with a par value $0.001 per share. There were no changes
in the number of designated or outstanding Series A Preferred Shares or Series B Preferred Shares.
|
c)
|
Authorization
and Issuance of Series B Preferred Shares:
|
•
The Company has designated 25,000,000 of its authorized preferred shares as Series B Preferred Shares (“Series B Preferred
Shares”). The Series B Preferred Shares have the same rights and privileges as the common stock, with the exception that
the Series B Preferred Shares have an anti-dilution provision and the Series B Preferred Share holder does not have the right
to convert Series B Preferred Shares into shares of common stock for a period of two years from the date of issue.
•
On April 21, 2017, the Company issued 160,000 Series B Preferred Shares pursuant to the conversion of $40,000 in convertible promissory
notes at a conversion price of $0.25 per share (Note 6
(1)
).
•
On April 27, 2017, the Company issued 19,568 Series B Preferred Shares with a fair value of $1.00 per share to a consultant of
the Company to settle $4,892 in amounts owing for services provided, resulting in a loss on settlement of debt of $14,676.
•
On May 29, 2017, the Company issued 15,000 Series B Preferred Shares with a fair value of $1.00 per share to a vendor pursuant
to the settlement of $15,000 in accounts payable.
•
On August 3, 2017, the Company issued 400,000 Series B Preferred Shares pursuant to the conversion of $200,000 in convertible
promissory notes at a conversion price of $0.50 per share (Note 6
(2)
and 6
(3)
).
MOBETIZE
CORP.
Notes
to Consolidated Financial Statements
December
31, 2017
(Unaudited)
9.
Share Purchase Warrants
The
following table summarizes the continuity of share purchase warrants:
|
|
Number
of warrants
|
|
Weighted
average exercise price
$
|
Balance,
March 31, 2017 and December 31, 2017
|
|
|
26,364
|
|
|
|
104
|
|
As
at December 31, 2017, the following share purchase warrants were outstanding:
Number
of warrants
outstanding
|
|
Exercise
price
$
|
|
Expiry
date
|
|
6,944
|
|
|
|
100
|
|
|
June
24, 2018
|
|
3,866
|
|
|
|
125
|
|
|
December 10, 2018
|
|
15,554
|
|
|
|
100
|
|
|
September
1, 2018
|
|
26,364
|
|
|
|
|
|
|
|
10.
Stock Options
The
Company has adopted a Stock Option Plan (“Stock Option Plan”) which permits the Company to issue stock options for
up to 3,000,000 common shares of the Company to directors, officers, employees and consultants of the Company with a maximum term
of 5 years, exercise prices equal to the minimum fair market value per common share on the date of grant, and a vesting schedule
determined by the Board of Directors at the time of granting the options.
The
following table summarizes the continuity of stock options:
|
|
Number
of stock options
|
|
Weighted
average exercise price
$
|
Balance,
March 31, 2016
|
|
|
23,812
|
|
|
|
60
|
|
Expired
|
|
|
(2,885
|
)
|
|
|
60
|
|
Cancelled
|
|
|
(727
|
)
|
|
|
60
|
|
Outstanding,
March 31, 2017 and December 31, 2017
|
|
|
20,200
|
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
Exercisable,
December 31, 2017
|
|
|
18,575
|
|
|
|
60
|
|
MOBETIZE
CORP.
Notes
to Consolidated Financial Statements
December
31, 2017
(Unaudited)
As
at December 31, 2017, the following share purchase options were outstanding:
Number
of options outstanding
|
|
Number
of options vested
|
|
Exercise
price
$
|
|
Expiry
date
|
|
20,200
|
|
|
|
18,575
|
|
|
|
60
|
|
|
September
30, 2020
|
During
the nine months ended December 31, 2017, $41,606 (2016 - $167,033) in stock-based compensation expense was recorded and allocated
amongst general and administrative, consulting fees, management fees (related party), and research and development expenses. The
intrinsic value of the options was $nil at December 31, 2017, and March 31, 2017.
11.
Concentration of Risk
Revenues
are currently generated through licensing, professional services, and payment processing services provided by Mobetize to our
existing customers. During the nine months ended December 31, 2017, the Company had revenues from five customers (2016 –five
customers) with 56% (2016 – 56%) of revenues generated from the Company’s largest customer. At December 31, 2017,
the Company’s accounts receivable is concentrated and due from four customers (March 31, 2017 – five customers) with
84% (March 31, 2017 – 61%) of accounts receivable due from the Company’s largest customer.
12.
Commitments and Claims
|
a)
|
The
Company has an obligation under a rental lease for its office. As of December 31, 2017,
the remaining term of the lease is 15 months with monthly payments of $4,995. The Company’s
lease includes a renewal option.
|
|
b)
|
The
Company received a Citation and Notice of Assessment dated October 14, 2016 (“Citation”),
that Stephen J. Fowler (“Fowler”), a former director and chief financial
officer, had initiated a complaint with the State of Washington Department of Labor and
Industries for amounts allegedly due to him for unpaid wages. The Citation declared that
Fowler is owed $45,000 in wages in addition to an assessed interest of $3,368.74, and
a penalty of $4,500. On November 8, 2016, the Company entered an appeal alleging that
the calculation of amounts due to Fowler was incorrect and that Fowler had improperly
obtained shares of its common stock which it intends to recover. The Company received
a response from the Department of Labor and Industries dated November 18, 2016, in which
it was advised that Fowler’s claim had been transferred to the Office of the Attorney
General and that a hearing on the matter would be held by the Office of Administrative
Hearings. A hearing date has been set for June 11, 2018.
|
MOBETIZE
CORP.
Notes
to Consolidated Financial Statements
December
31, 2017
(Unaudited)
|
c)
|
The
Company received a Notice of Civil Claim dated April 26, 2017, filed in British Columbia
Supreme Court by Fowler, naming the Company and its three present directors as defendants.
Fowler asserts claims against the Company for unpaid expenses, and breach of contract.
He also asserts that his shareholdings in the Company have been diluted due to certain
actions of its current director, making claims including breach of contract, breach of
fiduciary duty, misrepresentation and conspiracy. The Company and its directors believe
that Fowler’s claims are without merit and are intent on vigorously defending against
this action. Further, the Company has advanced counterclaims against Fowler, including
a claim that that while Fowler was an officer and director of the Company, that he caused
it to issue shares to himself to which he was not entitled. The Company’s counterclaims
also assert claims against Fowler of fraudulent or negligent misrepresentation, breach
of fiduciary duty, negligence and unjust enrichment. On June 23, 2017, the Company filed
its response to Fowler’s claims and its own counterclaims against Fowler. No further
steps in this action have been taken, and no trial date has been set.
|
|
d)
|
The
Company received a Complaint dated May 12, 2017, filed in the Second Judicial District
Court of the State of Nevada (Washoe County) by Fowler naming the Company and its three
present directors as defendants. The Washoe County action concerns substantially the
same facts and seeks substantially the same relief as Fowler’s British Columbia
action. On June 23, 2017, the Company filed a Motion to Dismiss, or in the Alternative,
Application for Preliminary Injunction to either dismiss or enjoin the Complaint. On
October 31, 2017, the court held a hearing on the Motion. The court stayed the Washoe
County action pending resolution of the British Columbia action. No trial date has been
set.
|
|
e)
|
The
Company received a Complaint dated May 3, 2017, filed in the Eighth Judicial District
Court of the State of Nevada (Clark County) by Cary Fields (“Fields”) naming
the Company and its three present directors as defendants, to obtain a preliminary injunction
to enjoin a consolidation of the Company’s common stock, and seek damages for breach
of fiduciary duty, conversion, and unjust enrichment. On May 18, 2017, after due consideration,
the court denied Fields’ application for injunctive relief. The court did not rule
on the question of Fields’ alleged damages. On August 4, 2017, the Company and
its three directors received an Amended Complaint seeking damages for breach of fiduciary
duty, conversion, and unjust enrichment. On November 17, 2017, the Company filed Defendants’
Motion for Judgment on the Pleadings. The court held hearings on the Motion on December
19, 2017 and January 9, 2018 and denied the Motion. A trial date has been set for October
8, 2018.
|
13.
Segment Information
The
Company has a single operating segment being the provision of Fintech Solutions and Services to businesses located in Canada and
the United States of America (“USA”). Revenues are generated in Canada and the USA while all assets are located in
Canada. During the nine months ended December 31, 2017, the Company generated revenue of $177,138 (CDN$228,094) in Canada and
$156,723 in the USA. The costs incurred to generate this revenue are expensed as research and development. At December 31, 2017,
the Company’s long-lived assets are located in Canada.
14.
Subsequent Events
The
Company evaluated its December 31, 2017, consolidated financial statements for subsequent events through the date the consolidated
financial statements were issued. The Company is not aware of any subsequent events which would require recognition or disclosure
in the consolidated financial statements.