As filed with the Securities
and Exchange Commission on September 19, 2013
Registration No. [
]
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
SANWIRE
CORPORATION
(Exact name of registrant as specified in its charter)
Nevada
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4899
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94-3342064
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(State or jurisdiction of incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification No.)
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9710 E. 55
th
Pl.
Tulsa, OK 74146
(800) 243-1254
(Address and telephone number of principal executive offices and principal place of business)
President Stock Transfer
515 West Pender Street, Suite 217
Vancouver, BC, V6B 6H5
(604) 876-5526
(Name, address and telephone number of agent for service)
Copies to:
Mark C. Lee
GREENBERG TRAURIG, LLP
1201 K Street, Suite 1100
Sacramento, California 95814
Telephone: (916) 442-1111
Facsimile: (916) 448-1709
Approximate date of
proposed sale to the public:
From time to time after
the effective date of this registration statement.
If any of the securities being registered
on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the
following box. [ ]
If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering. [ ]
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated filer [ ]
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Accelerated filer [ ]
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Non-accelerated filer [ ]
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Smaller reporting company [X]
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(Do not check if a smaller reporting company)
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CALCULATION OF REGISTRATION
FEE
Title of each class of
securities to be registered
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Amount of Shares
to be
Registered
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Proposed
maximum
offering price
per share
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Proposed
maximum
aggregate
offering price
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Amount of
Registration
Fee
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Common Stock
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5,761,000
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(1)
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$
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0.30
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(2)
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$
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1,728,300
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$
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235.74
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Common Stock
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1,890,000
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(3)
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$
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0.30
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(2)
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$
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567,000
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$
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77.34
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Total
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7,651,000
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$
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2,295,300
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$
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313.08
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(1)
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Represents shares issued and issuable pursuant to the Common Stock Purchase Agreement, between the Company and Hanover Holdings I, LLC, a New York limited liability company (“Hanover”), dated August 28, 2013 (the “Purchase Agreement”).
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(2)
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Calculated in accordance with Rule 457(c) of the Securities Act, based upon the average high and low prices reported on the OTCQB on September 16, 2013.
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(3)
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Represents 1,890,000 shares of the Company’s Common Stock issuable upon conversion of the Senior Convertible Note, issued by the Company in favor of Hanover, dated July 31, 2013 (the “Convertible Note”), in the principal amount of $405,000.
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In the event of
stock splits, stock dividends, or similar transactions involving the Registrant’s common stock, the number of shares
registered shall, unless otherwise expressly provided, automatically be deemed to cover the additional securities to be
offered or issued pursuant to Rule 416 promulgated under the Securities Act of 1933, as amended (the “Securities
Act”).
We hereby amend this
registration statement on such date or dates as may be necessary to delay its effective date until we shall file a further amendment
which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until the registration statement shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
SUBJECT TO COMPLETION, DATED September 19, 2013
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PROSPECTUS
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7,651,000 SHARES OF COMMON STOCK
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SANWIRE CORPORATION
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This prospectus relates
to the resale of up to 7,651,000 shares of our common stock, which may be offered by the selling stockholder, Hanover Holdings
I, LLC, a New York limited liability company, or Hanover. The shares of common stock being offered by the selling stockholder are
issuable (i) upon conversion of a senior convertible note in the principal amount of $405,000, or the Convertible Note, that we
issued to Hanover on July 31, 2013 and (ii) pursuant to a common stock purchase agreement dated as of August 28, 2013 between us
and Hanover, or the Purchase Agreement.
We are not selling any
securities under this prospectus and will not receive any of the proceeds from the resale of shares of our common stock by the
selling stockholder under this prospectus, however, we have received gross proceeds of $300,000 from the sale of the Convertible
Note to Hanover and we may receive gross proceeds of up to $7,500,000 from sales of our common stock to Hanover under the Purchase
Agreement.
Hanover may offer all
or part of the shares for resale from time to time through public or private transactions, at either prevailing market prices or
at privately negotiated prices. We provide more information about how Hanover may sell its shares of common stock in the section
titled “Plan of Distribution” on page 38. We will pay the expenses incurred in connection with the offering described
in this prospectus, with the exception of brokerage expenses, fees, discounts and commissions, which will be paid by the selling
stockholder. In addition, we have agreed to issue 454,408 shares of our common stock to Hanover as an initial commitment fee for
entering into the Purchase Agreement and we may issue additional commitment shares to Hanover under certain circumstances described
in this Prospectus. With respect to the shares of common stock that have been and may be issued pursuant to the Purchase Agreement,
Hanover is an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act of 1933, as amended, or the
Securities Act, and with respect to any other shares of common stock, Hanover may be deemed to be an “underwriter”
within the meaning of Section 2(a)(11) of the Securities Act.
Our common stock is quoted
on the OTCQB Marketplace operated by OTC Markets Group Inc., or the OTCQB, under the symbol “SNWR”. The last reported
sale price of our common stock on the OTCQB on September 16, 2013 was $0.30 per share.
Investing in our common
stock involves a high degree of risk. Please see the sections entitled “Risk Factors” on page 17 of this prospectus
and “Part I—Item 1A Risk Factors” in Amendment No. 1 on Form 10-K/A to our Annual Report on Form 10-K for the
year ended December 31, 2012.
Neither the Securities
and Exchange Commission nor any state securities commission has approved or disapproved of these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus
is September __, 2013.
The information in this Prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission becomes effective. This Prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted or would be unlawful prior to registration or qualification under the securities laws of any such state.
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TABLE OF CONTENTS
PART I - INFORMATION REQUIRED IN PROSPECTUS
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Page
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PROSPECTUS SUMMARY
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8
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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
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17
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RISK FACTORS
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17
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USE OF PROCEEDS
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27
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DETERMINATION OF OFFERING PRICE
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28
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SELLING STOCKHOLDER
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28
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PLAN OF DISTRIBUTION
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35
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DESCRIPTION OF SECURITIES TO BE REGISTERED
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55
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INTERESTS OF NAMED EXPERTS AND COUNSEL
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57
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INFORMATION WITH RESPECT TO THE REGISTRANT
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57
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PROPERTIES
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57
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LEGAL PROCEEDINGS
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57
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MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
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58
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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59
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DIRECTORS AND EXECUTIVE OFFICERS
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65
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EXECUTIVE COMPENSATION
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67
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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72
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS AND DIRECTOR INDEPENDENCE
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72
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DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
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74
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WHERE YOU CAN FIND MORE INFORMATION
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75
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FINANCIAL STATEMENTS
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75
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PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
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OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
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117
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INDEMNIFICATION OF DIRECTORS AND OFFICERS
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117
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RECENT SALES OF UNREGISTERED SECURITIES
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119
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EXHIBIT INDEX
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122
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UNDERTAKINGS
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123
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SIGNATURES
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126
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Glossary of Terms
Backhaul:
The segment
of a Wi-Fi network which comprises the intermediate links between the head end of the network and access points.
CLEC (Competitive Local Exchange
Carrier):
The local or regional carrier in most rural communities.
Explosion Proof (XP) enclosure:
An enclosure that can withstand an explosion of gases within it and prevent the explosion of gases surrounding it due to sparks,
flashes or the explosion of the container itself, and maintain an external temperature which will not ignite the surrounding gases.
Head End:
The originating
point in a communications system to provide a telecommunication service, and access to a gateway.
Internet Protocol (IP):
A
communications protocol used to send and receive data across the Internet using Internet Protocol.
Intrinsic Safety (IS):
A device
or an instrument which will not produce any spark or thermal effects under normal or abnormal conditions that will ignite a specified
gas mixture.
iPMine-M8 Model 810T
:
The
Company’s current handheld texting device.
iPMine-M8 Model 925V
:
The
Company’s future/planned handheld voice-over-IP/texting device.
iPMine-ZAP (Zone Access Point):
The Company’s wireless/wireline access point.
iPMine-VU:
The Company’s
enterprise management software that tracks, monitors, and displays the location of miners and/or equipment against a backdrop of
a mine’s map.
Last Mile:
The euphemism used
to describe the end of the wired signal capability.
Leaky Feeder:
An analog-based
communication system. A typical system consists of a coaxial cable, spliced in pre-determined locations/distances, that acts as
the medium to transport and “leaks” signals (radio waves).
LTE:
Long Term Evolution
Mesh Networking:
A type of networking
where each node (access point) must not only capture and disseminate its own data, but also serve as a
relay
for other nodes,
that is, it must collaborate to propagate the data in the network.
MINER Act:
The US Mine
Improvement and New Emergency Response Act of 2006.
Mine Safety and Health Administration
(MSHA):
A division of the US Department of Labor, MSHA is the US federal agency that approves electronic devices (explosion
proof or intrinsic safety approval) for use in underground coal mines.
MPLS:
An industry term that refers
to MultiProtocol Label Switching.
Node:
Also known as an
access point or a router. We refer to these nodes as iPMine-ZAPs.
Non-LOS (Line of Sight):
The
description often used to describe the ability of a wireless signal to transmit in an interrupted or non-interupted status do to
obstructions.
PPL09:
MSHA’s guidelines
to implement a wireless communication system in underground coal mines in the US per the MINER Act of 2006.
QoS (Quality of Service):
A level
of service often referred to as five 9’s of reliability.
RF (Radio Frequency):
The band
of transmission for an electronic signal.
RFiD Tags:
Radio Frequency
IDentification tags. A small radio that transmits a unique code associated with a device or a person (in this case a miner).
Saas:
An industry term that refers
to Software as a Service.
TVWS (TV White Space):
The TV
frequencies available for use today that do not have line of sight limitations.
Voice over Internet Protocol (VoIP):
A methodology and group of technologies for the delivery of voice communications and multimedia sessions over Internet Protocol
(IP) networks, such as the Internet. Other terms commonly associated with VoIP are IP telephony, Internet telephony, voice over
broadband (VoBB), broadband telephony, IP communications, and broadband phone service.
Wi-Fi:
A popular technology
that allows an electronic device to exchange data or connect to the internet wirelessly using radio waves.
Wireline Backhaul:
Wired
connection Backhaul network; typically fiber optic.
ZigBee:
A specification
for a suite of high level communication protocols used to create personal area networks built from small, low-power digital radios.
ZigBee is based on an IEEE 802.15 standard. Though low-powered, ZigBee devices often transmit data over longer distances by passing
data through intermediate devices to reach more distant ones, creating a mesh network; i.e., a network with no centralized control
or high-power transmitter/receiver able to reach all of the networked devices.
You should rely only on the information contained
in this Prospectus. We have not authorized anyone to provide you with different information. We are not making an offer of these
securities in any state where the offer is not permitted.
PROSPECTUS SUMMARY
You should read the
following summary together with the more detailed information and the financial statements appearing elsewhere in this Prospectus.
This Prospectus contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially
from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Risk
Factors” and elsewhere in this Prospectus. Unless the context indicates or suggests otherwise, references to “we,”
“our,” “us,” the “Company,” or the “Registrant” refer to Sanwire Corporation, a
Nevada corporation.
Our Business
Corporate Information
Sanwire was incorporated
in the State of Nevada on February 10, 1997. The Company was formerly named Clear Water Mining, Inc. (February 10 1997 through
March 11, 1999), E-Casino Gaming Corporation (March 2, 1999 through June 21, 1999), E-Vegas.com Inc. (June 22, 1999 through July
20, 2000), 1st Genx.com Inc. (July 21, 2000 through October 18, 2001), Oasis Information Systems, Inc. (October 19, 2001 through
January 27, 2005), 777 Sports Entertainment, Corp. (January 28, 2005 through September 26, 2008) and NT Mining Corporation (September
28, 2008 through March 8, 2013). The Company operates from its offices at 9710 E. 55th Pl., Tulsa, OK
74146. Our telephone number is (800) 243-1254.
Sanwire aims to be a
global provider of wireless communication services and data solutions; delivering efficient and reliable communications to our
customers. Sanwire’s goal is to operate a number of vertically integrated portfolio of wireless subsidiaries that are synergistic,
diverse, and operate independently with their own revenue stream and customer base. We strive, however, to have our subsidiaries
to cross sell to each other with respect to products and services, and share customer base. Sanwire plans to grow organically and
through complementary acquisitions in the wireless sectors. Currently, Sanwire owns and operates two vertically integrated wholly-owned
subsidiaries:
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·
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iPTerra Technologies, Inc., a Nevada corporation, designs and develops
wireless and/or wireline communication solutions for hazardous environments including underground mines. iPTerra’s flagship
product, the iPMine system, is a real-time 2-way wireless/fiber mine-safety system for the global mining industry. iPMine tracks,
monitors, and communicates with miners and equipment underground and above ground. Our strategy is to acquire customers in the
U.S. underground coal mining industry and evaluate opportunities in other international mine-safety markets.
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·
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Aeronetworks LLC, an Oklahoma limited liability company, provides
advanced telecommunications and broadband services to rural communities and Native American tribes with focus on public safety,
education and healthcare sectors. Aero delivers 4G/LTE, TV White Space, and advanced wireless technologies.
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The Company changed its
business focus during 2007 and in 2008 and completed the changeover to mining exploration and development, which was the concept
utilized when the Company was incorporated. In order to complete the transformation, the Company completed a reverse stock split
during 2008, settled the majority of its liabilities through a share exchange for debt and acquired a privately held Canadian mining
corporation with a single mining asset, former Gold Producer "The Bullmoose Mine", located in the Northwest Territory
of Canada. In 2009 and 2010, the company completed a limited program on the mining properties in Canada, sufficient to maintain
the lease and mineral claims in good standing.
In 2011, the
Company settled litigation it had initiated to assert its interest in the Bullmoose Mine (“Bullmoose”). Under the
settlement, the Company’s acquisition of Bullmoose will be rescinded. More particularly, the 120,000 shares issued by
the company as consideration for the acquisition will be cancelled and $75,000 of the $85,000 paid as part consideration for
the acquisition, will be returned to the Company. The closing date was set for June 30, 2012. Until that date and afterwards,
if the settlement does not close, the Company continues to retain title to Bullmoose.
On January 2, 2013, the
Company signed an exclusive licensing and distribution agreement (the “Licensing Agreement”) to sell and market the
iPMine communication and mine-safety system for underground mines for the European continent. The terms of the agreement includes
exclusivity for the European market for a 5-year term renewable with an additional 5-year term and first right of refusal option
to acquire 100% of the iPMine intellectual property. The Company issued 300,000 common shares of the Company at a fair value of
$300 to the licensor.
On January 14, 2013,
the Company signed a purchase agreement to acquire 100% ownership in newly created iPTerra Technologies, Inc. for cash consideration
of $5,500, which shall be paid to a seller within a 12-month period from a closing date. The iPMine system will operate under iPTerra
Technologies, Inc.
On March 22, 2013, the
Company exercised its option under the recently executed Licensing Agreement to acquire 100% ownership of the iPMine communication
and mine-safety system. The iPMine system will operate under the Company’s wholly owned subsidiary, iPTerra Technologies,
Inc. The Company acquired 100% of the iPMine intellectual property for a total consideration of $10,000,000 comprised of 20,000,000
common shares with a fair value of $0.001 per share for total of $20,000 and the assumption of $9,980,000 in debt (the “Debt”)
in favor to two companies controlled by Naiel Kanno (the “Debt Holders”). On May 10, 2013, the Company and the Debt
Holders entered into an agreement to convert the Debt into a non-interest bearing convertible promissory note repayable in eighteen
months with the conversion price of $1.00 per common share at the option of the Debt Holders.
On May 29, 2013, the
Company completed the acquisition of Aeronetworks LLC (“Aero”), a company based in Tulsa, Oklahoma. In consideration
for the acquisition, the Company (i) issued Two Million and Four Hundred Thousand (2,400,000) shares of its common stock, (ii)
issued Three Million (3,000,000) warrants to purchase its common stock in three blocks consisting of One Million (1,000,000) warrants
each, expiring in 2014, 2015, and 2017 at an exercise price of $0.50, $0.75, and $1.00 respectively, (iii) granted future earn-out
performance bonus shares based on revenue growth, and (iv) granted a three-year extension to the management agreement for Aero’s
management team. Aero provides advanced telecommunications and broadband services to rural communities and Native American tribes
with a focus on public safety, education and healthcare sectors.
Recent Developments
Senior Convertible
Note Financing with Hanover Holdings I, LLC
Note Purchase Agreement
and Convertible Note
On July 31, 2013, we entered into a note purchase agreement with Hanover, which we refer to as the Note
Purchase Agreement. The Note Purchase Agreement provides that, upon the terms and subject to the conditions set forth
in the Note Purchase Agreement, Hanover will purchase from us the Convertible Note with an initial principal amount of $405,000
for a purchase price of $300,000, representing an approximately 25.93% original issue discount. We issued the Convertible Note
to Hanover on July 31, 2013.
$75,000 of the outstanding principal amount of the Convertible Note (together with any accrued and unpaid
interest with respect to such portion of the principal amount) will be automatically extinguished (without any cash payment
by us) if (i) the registration statement of which this prospectus is a part is declared effective by the SEC on or prior to
the earlier of (A) the 75
th
calendar day after July 31, 2013 and (B) the fifth business day after the date we
are notified by the Securities and Exchange Commission, or the Commission, that the registration statement will not be
reviewed or will not be subject to further review, and this prospectus is available for use by Hanover for the resale by
Hanover of all of the shares of our common stock issued or issuable upon conversion of the Convertible Note and (ii) no event
of default under the Convertible Note or an event that with the passage of time or giving of notice would constitute an event
of default under the Convertible Note has occurred on or prior to such date.
The Convertible Note
matures on January 27, 2014 and, in addition to the approximately 25.93% original issue discount, accrues interest at the rate
of 8.0% per year. The Convertible Note is convertible at any time, in whole or in part, at Hanover’s option into shares of
our common stock at a fixed conversion price of $0.2325 per share, subject to adjustment pursuant to the “full ratchet”
and standard anti-dilution provisions contained in the Convertible Note. This conversion price represents a discount of 25% from
the closing price of our common stock of $0.31 on July 24, 2013, which was the lowest closing price of our common stock during
the five-trading-day period immediately prior to the date we issued the Convertible Note to Hanover. At no time will Hanover be
entitled to convert any portion of the Convertible Note to the extent that after such conversion, Hanover (together with its affiliates)
would beneficially own more than 4.99% of our common stock (as calculated pursuant to Section 13(d) of the Securities Exchange
Act of 1934, as amended, or the Exchange Act, and the rules and regulations thereunder).
The
Convertible Note includes customary event of default provisions, and provides for a default interest rate of 18%. Upon the occurrence
of an event of default, Hanover may require us to pay in cash the “Event of Default Redemption Price” which is defined
in the Convertible Note to mean the greater of (i) the product of (A) the amount to be redeemed multiplied by (B) 125% (or 100%
if an insolvency related event of default) and (ii) the product of (X) the conversion price in effect at that time multiplied by
(Y) the product of (1) 125% (or 100% if an insolvency related event of default) multiplied by (2) the greatest closing sale price
of our common stock on any trading day during the period commencing on the date immediately preceding such event of default and
ending on the date we make the entire payment required to be made under this provision.
We have the right at
any time to redeem all, but not less than all, of the total outstanding amount then remaining under the Convertible Note in cash
at a price equal to 120% of the total amount of the Convertible Note then outstanding.
The Note Purchase Agreement
contains customary representations, warranties and covenants by, among and for the benefit of the parties. We also agreed to pay
up to $10,000 of reasonable attorneys' fees and expenses incurred by Hanover in connection with the transaction. The Note Purchase
Agreement also provides for indemnification of Hanover and its affiliates in the event that Hanover incurs losses, liabilities,
obligations, claims, contingencies, damages, costs and expenses related to a breach by us of any of our representations, warranties
or covenants under the Note Purchase Agreement.
The issuance of the Convertible
Note to Hanover under the Note Purchase Agreement was exempt from the registration requirements of the Securities Act pursuant
to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and
Rule 506 of Regulation D promulgated under the Securities Act.
Note Registration
Rights Agreement
In
connection with the execution of the Note Purchase Agreement, on July 31, 2013, Hanover and we also entered into a registration
rights agreement, which we refer to as the Note Registration Rights Agreement. Pursuant to the Note Registration Rights Agreement,
we agreed to file the registration statement of which this prospectus is a part with the Commission to register for resale 1,890,000
shares of our common stock into which the Convertible Note may be converted, on or prior to September 3, 2013, and have it declared
effective at the earlier of (i) the 75
th
calendar day after July 31, 2013 and (ii) the fifth business day after
the date we are notified by the Commission that the registration statement will not be reviewed or will not be subject to further
review. Prior to September 3, 2013, we and Hanover agreed to extend the filing deadline to September 20, 2013.
We have agreed to file
with the Commission one or more additional registration statements to cover all of the securities required to be registered under
the Note Registration Rights Agreement that are not covered by this prospectus, in each case, as soon as practicable, but in no
event later than the applicable filing deadline for such additional registration statements as provided in the Note Registration
Rights Agreement.
We also agreed, among
other things, to indemnify Hanover from certain liabilities and fees and expenses of Hanover incident to our obligations under
the Note Registration Rights Agreement, including certain liabilities under the Securities Act. Hanover has agreed to indemnify
and hold harmless us and each of our directors, officers and persons who control us against certain liabilities that may be based
upon written information furnished by Hanover to us for inclusion in the registration statement of which this prospectus is a part,
including certain liabilities under the Securities Act.
Equity Enhancement
Program with Hanover Holdings I, LLC
Common Stock Purchase
Agreement
On August 28, 2013, which
we refer to as the Closing Date, we entered into the Purchase Agreement with Hanover. The Purchase Agreement provides
that, upon the terms and subject to the conditions set forth therein, Hanover is committed to purchase up to $7,500,000, which
we refer to as the Total Commitment, worth of our common stock, which we refer to as the Shares, over the 36-month term of the
Purchase Agreement.
From time to time over
the term of the Purchase Agreement, commencing on the trading day immediately following the date on which the registration statement
of which this prospectus is a part is declared effective by the Commission, we may, in our sole discretion, provide Hanover with
either “regular” draw down notices or, if certain conditions are satisfied, “fixed” draw down notices,
each referred to as a Draw Down Notice, in each case to purchase a specified dollar amount of Shares, which we refer to as the
Draw Down Amount, with each draw down subject to the limitations discussed below. The maximum amount of Shares requested to be
purchased pursuant to any single “regular” Draw Down Notice, each a Regular Draw Down Notice, cannot exceed 300% of
the average daily trading volume of the Company’s common stock for the 20 trading days immediately preceding the date of
the Regular Draw Down Notice, which we refer to as the Maximum Regular Draw Down Amount. The maximum amount of Shares requested
to be purchased pursuant to any single “fixed” Draw Down Notice, each a Fixed Draw Down Notice, cannot exceed 200%
of the average daily trading volume of the Company’s common stock for the 20 trading days immediately preceding the date
of the Fixed Draw Down Notice, which we refer to as the Maximum Fixed Draw Down Amount. Each purchase pursuant to a draw down will
reduce, on a dollar-for-dollar basis, the Total Commitment under the Purchase Agreement.
We
may, in our sole discretion, provide Hanover with Regular Draw Down Notices to purchase a specified Draw Down Amount, up to the
Maximum Regular Draw Down Amount, over a 10 consecutive trading day period commencing on the trading day specified in the applicable
Regular Draw Down Notice, which we refer to as the Pricing Period. Once presented with a Regular Draw Down Notice, Hanover is required
to purchase a pro rata portion of the applicable Draw Down Amount on each trading day during the applicable Pricing Period on which
the daily volume weighted average price for our common stock, or VWAP, equals or exceeds an applicable floor price, or Floor Price,
equal to the product of (i) 0.70 and (ii) the VWAP over the 10 trading days immediately preceding the date the Regular Draw Down
Notice is delivered, subject to adjustment for any stock splits, stock combinations, stock dividends, recapitalizations and other
similar transactions. If the VWAP falls below the applicable Floor Price on any trading day during the applicable Pricing Period,
the Purchase Agreement provides that Hanover will not purchase the pro rata portion of the applicable Draw Down Amount allocated
to that trading day. The per share purchase price for the Shares subject to a Regular Draw Down Notice will be equal to 90%
of the arithmetic average of the three lowest daily VWAPs that equal or exceed the applicable Floor Price during the applicable
Pricing Period, except that if the VWAP does not equal or exceed the applicable Floor Price for at least three trading days during
the applicable Pricing Period, then the per share purchase price will be equal to 90% of the arithmetic average of all VWAPs that
equal or exceed the applicable Floor Price during such Pricing Period.
We may, in our sole discretion,
on any trading day on which both of the equity conditions described below are satisfied, provide Hanover with a Fixed Draw Down
Notice to purchase a specified Draw Down Amount, up to the Maximum Fixed Draw Down Amount, on the applicable settlement date, which
will occur within one trading day following the date the Fixed Draw Down Notice is delivered. The per share purchase price for
the Shares subject to a Fixed Draw Down Notice, or the Fixed Purchase Price, will be equal to 75% of the lower of (i) the lowest
trade price of a share of our common stock on the date the Fixed Draw Down Notice is delivered, which we refer to as the Draw Down
Exercise Date, and (ii) the arithmetic average of the three lowest daily VWAPs during the 10 consecutive trading days ending on
the trading day immediately preceding the applicable Draw Down Exercise Date. We may deliver a Fixed Draw Down Notice only if both
of the following equity conditions have been satisfied as of the applicable Draw Down Exercise Date:
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·
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on each trading day during the period beginning 30 trading days prior
to the applicable Draw Down Exercise Date and ending on and including the applicable Draw Down Exercise Date, the lowest trade
price of a share of our common stock must be greater than $0.20, subject to adjustment for any stock splits, stock combinations,
stock dividends, recapitalizations and other similar transactions, which we refer to as the Fixed Floor Price; and
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·
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on each trading day during the period beginning 30 trading days prior
to the applicable Draw Down Exercise Date and ending on and including the applicable Draw Down Exercise Date, the trade price of
a share of our common stock must not have declined more than 20% from an intraday high to an intraday low during such trading day.
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We are prohibited
from issuing a Draw Down Notice if (i) the amount requested in such Draw Down Notice exceeds the Maximum Regular Draw Down Amount,
in the case of a Regular Draw Down Notice, or exceeds the Maximum Fixed Draw Down Amount, in the case of a Fixed Draw Down Notice,
(ii) the sale of Shares pursuant to such Draw Down Notice would cause us to issue or sell or Hanover to acquire or purchase an
aggregate dollar value of Shares that would exceed the Total Commitment, or (iii) the sale of Shares pursuant to the Draw Down
Notice would cause us to sell or Hanover to purchase an aggregate number of shares of our common stock which would result in beneficial
ownership by Hanover of more than 4.99% of our common stock (as calculated pursuant to Section 13(d) of the Exchange Act, and
the rules and regulations thereunder). With respect to a draw down pursuant to a Regular Draw Down Notice, we cannot make
more than one draw down (whether pursuant to a Fixed Draw Down Notice or a Regular Draw Down Notice) in any Pricing Period and
must allow 24 hours to elapse between the completion of the settlement of any one draw down pursuant to a Regular Draw Down Notice
and the delivery of any Fixed Draw Down Notice or Regular Draw Down Notice for any other draw down. With respect to a draw down
pursuant to a Fixed Draw Down Notice, we must allow 15 trading days to elapse between the completion of the settlement of any
one draw down pursuant to a Fixed Draw Down Notice and the delivery of any Fixed Draw Down Notice or Regular Draw Down Notice
for any other draw down.
The Purchase Agreement
contains customary representations, warranties and covenants by, among and for the benefit of the parties. The Purchase Agreement
may be terminated at any time by the mutual written consent of the parties. Unless earlier terminated, the Purchase Agreement
will terminate automatically on the earliest to occur of (i) the first day of the month next following the 36-month anniversary
of the date on which the registration statement of which this prospectus is a part is declared effective by the Commission, (ii)
the date on which Hanover purchases the Total Commitment worth of common stock under the Purchase Agreement and (iii) the date
on which our common stock ceases to be listed or quoted on an eligible trading market under the Purchase Agreement. Under certain
circumstances set forth in the Purchase Agreement, we and Hanover each may terminate the Purchase Agreement on one trading day’s
prior written notice to the other, without fee, penalty or cost.
We have agreed to pay to Hanover a commitment fee for entering
into the Purchase Agreement equal to $150,000 (or 2.0% of the Total Commitment under the Purchase Agreement) in the form
of 454,408 shares of our common stock, which we refer to as the Initial Commitment Shares, calculated using a per share price
of $0.3301, representing the lowest daily volume weighted average price of a share of our common stock during the three-trading
day period immediately preceding the Closing Date. In addition, as soon as practicable following the effective date of the
registration statement of which this prospectus is a part, we are required to issue to Hanover additional shares of our common
stock, which we refer to as the Additional Commitment Shares, equal to the greater of (i) zero and (ii) the difference of
(a) the quotient of (x) $150,000 divided by (y) the greater of (1) the lowest trade price of a share of our common stock during
the period beginning two trading days immediately preceding the effective date of the registration statement of which this prospectus
is a part and ending on such effective date and (2) $0.15, less (ii) 454,408, provided that in no event will we issue more than
an aggregate of 545,592 shares of our common stock, subject to adjustment for any stock splits, stock combinations, stock dividends,
recapitalizations and other similar transactions, as Additional Commitment Shares. The Initial Commitment Shares, together with
545,592 Additional Commitment Shares, are being registered for resale in the registration statement of which this prospectus is
a part. We sometimes in this prospectus refer to the Initial Commitment Shares and the Additional Commitment Shares, collectively,
as the Commitment Shares.
We also agreed to
pay up to $20,000 of reasonable attorneys' fees and expenses (exclusive of disbursements and out-of-pocket expenses) incurred
by Hanover in connection with the preparation, negotiation, execution and delivery of the Purchase Agreement and related
transaction documentation. Further, if we issue a Draw Down Notice and fail to deliver the shares to Hanover on the
applicable settlement date, we agreed to pay Hanover, in addition to all
other remedies available to Hanover under the Purchase Agreement, an amount in cash equal to 2.0% of the purchase price of
such shares for each 30-day period the shares are not delivered, plus accrued interest.
The Purchase Agreement
also provides for indemnification of Hanover and its affiliates in the event that Hanover incurs losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses related to a breach by us of any of our representations and warranties under
the Purchase Agreement or the other related transaction documents or any action instituted against Hanover or its affiliates due
to the transactions contemplated by the Purchase Agreement or other transaction documents, subject to certain limitations.
Registration
Rights Agreement
In
connection with the execution of the Purchase Agreement, on the Closing Date, we and Hanover also entered into a registration
rights agreement dated as of the Closing Date, which we refer to as the Registration Rights Agreement. Pursuant to the Registration
Rights Agreement, we agreed to file the registration statement of which this prospectus is a part with the Commission to register
for resale 7,651,000 shares of our common stock, which includes the 454,408 Initial Commitment Shares and 545,592 Additional Commitment
Shares, on or prior to September 3, 2013, which we refer to as the Filing Deadline, and have it declared effective at the earlier
of (A) the 75
th
calendar day after the earlier of (1) the Filing Deadline and (2) the date on which the registration
statement of which this prospectus is a part is filed with the Commission and (B) the fifth business day after the date the Company
is notified by the Commission that the registration statement will not be reviewed or will not be subject to further review, which
we refer to as the Effectiveness Deadline. Prior to September 3, 2013, we and Hanover agreed to extend the Filing Deadline
to September 20, 2013. The effectiveness of the registration statement of which this prospectus is a part is a condition precedent
to our ability to sell common stock to Hanover under the Purchase Agreement.
We have agreed to file
with the Commission one or more additional registration statements to cover all of the securities required to be registered under
the Registration Rights Agreement that are not covered by this prospectus, in each case, as soon as practicable, but in no event
later than the applicable filing deadline for such additional registration statements as provided in the Registration Rights Agreement.
We also agreed, among
other things, to indemnify Hanover from certain liabilities and fees and expenses of Hanover incident to our obligations under
the Registration Rights Agreement, including certain liabilities under the Securities Act. Hanover has agreed to indemnify and
hold harmless us and each of our directors, officers and persons who control us against certain liabilities that may be based upon
written information furnished by Hanover to us for inclusion in the registration statement of which this prospectus is a part,
including certain liabilities under the Securities Act.
Recent Issuances
The table below sets forth shares of
our common stock that have been recently issued in exchange for certain services or rights.
Date
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Issuance of Shares
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January 3, 2013
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The Company issued 300,000 shares of common stock with a fair value of $300 pursuant to the License Agreement.
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March 22, 2013
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The Company exercised its option under the License Agreement to acquire 100% ownership of the iPMine communication and mine safety system. As consideration, the Company issued 20,000,000 shares of common stock with a fair value of $20,000.
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March 27, 2013
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The Company issued 20,000,000 shares of common stock with a fair value of $20,000 to settle debt of $20,000. The shares were issued to Senso Investments (15,000,00 shares for $15,000 fair value) and, Northwest Management Anstalt (5,000,00 shares for $5,000 fair value).
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May 17, 2013
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The Company
issued 200,000 shares of common stock with a fair value of $58,000 to J R Vetter Consulting, Inc., a company controlled
by J R Roland Vetter, the Chief Financial Officer of the Company as compensation under this consultant
agreement
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May 17, 2013
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The Company issued 200,000 shares of common stock with a fair value of $58,000 to Biarritz Productions, of which $7,150 was expensed as consulting fees for the pro-rate portion of services rendered to June 30, 2013.
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May 17, 2013
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The Company issued 275,000 shares of common stock with a fair value of $79,750 to Lloyd Donner, of which $9,832 was expensed as consulting fees for the pro-rate portion of services rendered to June 30, 2013
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May 29, 2013
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The Company issued 2,400,000 shares of common stock with a fair value of $600,000 to acquire Aero.
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May 29, 2013
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The Company issued 300,000 shares of common stock with a fair value of $75,000 to the management team of Aero, which consists of Richard Bjorklund, James Bradley and Samuel Sibala.
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June 1, 2013
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The Company issued 50,000 shares of common stock with a fair value of $12,500 to Les Matthews, a consultant.
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June 3, 2013
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The Company issued 50,000 shares of common stock with a fair value of $13,500 to George Naylor and John Sisk, both of whom are members of IpTerra’s advisory board.
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June 12, 2013
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The Company issued 500,000 of common stock with a fair value of $170,000 to C Dillow & Co., of which $18,580 was expensed as consulting fees for the pro-rate portion of services rendered to June 30, 2013
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June 12, 2013
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The Company issued 250,000 shares of common stock with a fair value of $92,500 to Core Consulting, of which $9,604 was expensed as consulting fees for the pro-rate portion of services rendered to June 30, 2013.
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June 27, 2013
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The Company issued 500,000 shares of common stock with a fair value of $170,000 to Rovert Consulting, of which $3,716 was expensed as consulting fees for the pro-rate portion of services rendered to June 30, 2013.
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June 28, 2013
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The Company issued 96,000 shares of common stock with a fair value of $45,120 to Gross Capital which was recorded as deferred compensation which will be expensed on the vesting date of July 1, 2013.
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June 1, 2013
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The Company issued 250,000 share purchase warrants at an exercise price of $0.50 per share expiring on May 31, 2014 to Les Matthews, a consultant.
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Transfer Agent
Our transfer agent is
President Stock Transfer, and is located at 515 West Pender Street, Suite 217, Vancouver, BC, V6B 6H5. The agent’s telephone
number is (604) 876-5526.
The Offering
As of September 2, 2013, there were 46,553,147 shares of
our common stock outstanding, of which 22,953,147 shares were held by non-affiliates. Although the Purchase Agreement provides
that we may sell up to $7,500,000 of our common stock to Hanover, only 7,651,000 shares of our common stock are being offered under
this prospectus, which represents (i) 1,890,000 shares of common stock that may be issued to Hanover upon conversion of the Convertible
Note, (ii) 454,408 shares of common stock that we agreed to issue to Hanover as Initial Commitment Shares, (iii) a maximum of
545,592
shares of common stock that we may be required to issue to Hanover as Additional Commitment Shares and (iv) 4,761,000 shares
of common stock that we may issue to Hanover as Shares pursuant to draw downs under the Purchase Agreement. If all of the 7,651,000
shares offered under this prospectus were issued and outstanding as of September 2, 2013, such shares would represent approximately
14.1% of the total number of shares of our common stock outstanding and 25.0% of the total number of outstanding shares of our
common stock held by non-affiliates, in each case as of September 2, 2013.
At an assumed purchase price of
$0.30 (equal to the closing price of our common stock of $0.30 on September 16, 2013), and assuming the sale by us to Hanover
of all of the 4,761,000 Shares, or approximately 10.2% of our issued and outstanding common stock, being registered hereunder
pursuant to draw downs under the Purchase Agreement, we would receive only approximately $1,428,300 in gross proceeds.
Furthermore, we may receive substantially less than $1,428,300 in gross proceeds from the financing due to our share price,
discount to market and other factors relating to our common stock. If we elect to issue and sell more than the 4,761,000
Shares offered under this prospectus to Hanover, which we have the right, but not the obligation, to do, we must first
register for resale under the Securities Act any such additional Shares, which could cause additional substantial dilution to
our stockholders. Based on the above assumptions, we would be required to register an additional approximately 20,239,000
shares of our common stock to obtain the balance of $6,071,700 of the Total Commitment that would be available to us under
the Purchase Agreement. We currently have authorized and available for issuance 750,000,000 shares of our common stock
pursuant to our charter. The number of shares of our common stock ultimately offered for resale by Hanover is dependent upon
a number of factors, including the extent to which Hanover converts the Convertible Note into shares of our common stock and
the number of Shares we ultimately issue and sell to Hanover under the Purchase Agreement.
The Total Commitment of $7,500,000 was determined based on
numerous factors, including our estimated operating expenses for the next three years. While it is difficult to estimate the likelihood
that we will need the full Total Commitment, we presently believe that we may need the full Total Commitment under the Purchase
Agreement.
Common stock offered by Selling Stockholder
|
7,651,000 shares of common stock, consisting
of:
·
1,890,000 shares of common stock that we may issue to Hanover upon conversion of the Convertible
Note;
·
454,408 shares of common stock that we issued to Hanover as Initial Commitment Shares;
·
a maximum of 545,592 shares of common stock that we may be required to issue to Hanover as
Additional Commitment Shares; and
·
4,761,000 shares of common stock that we may issue to Hanover as Shares pursuant to draw downs
under the Purchase Agreement.
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|
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Common stock outstanding before the offering
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46,553,147 shares of common stock.
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Common stock outstanding after the offering
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54,204,147 shares of common stock.
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Use of proceeds
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We will not receive any proceeds from the sale of shares by the selling stockholder. However, we have received gross proceeds of $300,000 from the sale of the Convertible Note to Hanover and we may receive gross proceeds of up to $7,500,000 from the sale of Shares to Hanover pursuant to the Purchase Agreement. The net proceeds received from the sale of the Convertible Note to Hanover and from the sale of Shares pursuant to the Purchase Agreement will be used for general corporate and working capital purposes and acquisitions or assets, businesses or operations or for other purposes that our Board of Directors, in its good faith deem to be in the best interest of the company and its stockholders.
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OTCQB Trading Symbol
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SNWR
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Risk Factors
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The common stock offered hereby involves a high degree of risk and should not be purchased by investors who cannot afford the loss of their entire investment. See “Risk Factors”.
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SUMMARY OF FINANCIAL
INFORMATION
The
following selected financial information is derived from the Company’s Consolidated Financial Statements appearing
elsewhere in this Prospectus and should be read in conjunction with the Company’s Consolidated Financial Statements,
including the notes thereto, appearing elsewhere in this Prospectus.
Summary of Statements of Operations
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Year Ended December 31, 2012
|
Six Months Ended June 30, 2013 (unaudited)
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Total Revenue
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$0
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$117,800
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Net loss
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$(464,429)
|
$(10,619,869)
|
Net loss per common share (basic and diluted)
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$(0.46)
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$(0.44)
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Weighted average common shares
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1,004,540
|
24,028,385
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Statement
of Financial Position
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As At
December 31, 2012
|
As At
June 30, 2013
(unaudited)
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Cash
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$1,094
|
$2,413
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Total current assets
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$1,094
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$113,833
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Total assets
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$1,094
|
$1,497,175
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Total current liabilities
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$1,373,129
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$1,719,661
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Stockholders’ deficit
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$(1,372,035)
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$(8,011,131)
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Total liabilities and stockholders’ deficit
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$1,094
|
$1,497,175
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DISCLOSURE REGARDING
FORWARD-LOOKING STATEMENTS
Except for statements
of historical facts, this Prospectus contains forward-looking statements involving risks and uncertainties. The words “anticipate,”
“believe,” “estimate,” “expect,” “future,” “intend,” “plan”
or the negative of these terms and similar expressions or variations thereof are intended to forward looking statements. Such statements
reflect the current view of the Registrant with respect to future events and are subject to risks, uncertainties, assumptions and
other factors (including the risks contained in the section of this registration statement on Form S-1 entitled “Risk Factors”)
relating to the Registrant’s industry, the Registrant’s operations and results of operations and any businesses that
may be acquired by the Registrant. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions
prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.
Although the Registrant
believes that the expectations reflected in the forward looking statements are reasonable, the Registrant cannot guarantee future
results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of
the United States, the Registrant does not intend to update any of the forward-looking statements to conform these statements to
actual results. The following discussion should be read in conjunction with the Registrant’s financial statements and the
related notes included in this registration statement on Form S-1.
RISK FACTORS
You should carefully
consider the risks described below together with all of the other information included in our public filings before making an investment
decision with regard to our securities. The statements contained in or incorporated into this registration statement on Form S-1
that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual
results to differ materially from those set forth in or implied by forward-looking statements. While the risks described below
are the ones we believe are most important for you to consider, these risks are not the only ones that we face. If any of the following
events described in these risk factors actually occurs, our business, financial condition or results of operations could be harmed.
In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.
Risks Relating to our
Business and Industry
We have a history
of losses which may continue, which may negatively impact our ability to achieve our business objectives.
We cannot be assured
that we can achieve or sustain profitability on a quarterly or annual basis in the future. Our operations are subject to the risks
and competition inherent in the establishment of a business enterprise. There can be no assurance that future operations will be
profitable. We may not achieve our business objectives and the failure to achieve such goals would have an adverse impact on us.
If we are unable
to obtain additional funding our business operations will be harmed and if we do obtain additional financing our then existing
shareholders may suffer substantial dilution.
We will require additional
funds to expand our business activities, and to take advantage of any available business opportunities. Historically, we have financed
our expenditures primarily with proceeds from the sale of debt and equity securities. The proceeds from our operations are currently
insufficient to fully meet our obligations or enable us to carry out our business plan, so we will have to raise additional funds.
Obtaining additional financing will be subject to market conditions, industry trends, investor sentiment and investor acceptance
of our business plan and management. These factors may make the timing, amount, terms and conditions of additional financing unattractive
or unavailable to us. If we are not successful in achieving financing in the amount necessary to further our operations, implementation
of our business plan may fail or be delayed and any such failure or delay may have a material adverse effect on our company, stock
price and business.
Funding from our
Purchase Agreement with Hanover may be limited or insufficient to fund our operations or to implement our strategy.
Under our Purchase Agreement
with Hanover, upon effectiveness of the registration statement of which this prospectus is a part, and subject to other conditions,
we may direct Hanover to purchase up to $7,500,000 of our shares of common stock over a 36-month period. Although the Purchase
Agreement provides that we may sell up to $7,500,000 of our common stock to Hanover, only 7,651,000 shares of our common stock
are being offered under this prospectus, which represents (i) 1,890,000 shares of common stock that may be issued to Hanover upon
conversion of the Convertible Note, (ii) 454,408 shares of common stock that we have agreed to issue to Hanover as Initial Commitment
Shares, (iii) a maximum of 545,592 shares of common stock that we may be required to issue to Hanover as Additional Commitment
Shares and (iv) 4,761,000 shares of common stock that we may issue to Hanover as Shares pursuant to draw downs under the Purchase
Agreement.
At an assumed purchase
price of $0.30 (equal to the closing price of our common stock of $0.30 on September 16, 2013), and assuming the sale by us to
Hanover of all of the 4,761,000 Shares, or approximately 10.2% of our issued and outstanding common stock, being registered hereunder
pursuant to draw downs under the Purchase Agreement, we would receive only approximately $1,428,300 in gross proceeds. Furthermore,
we may receive substantially less than $1,428,300 in gross proceeds from the financing due to our share price, discount to market
and other factors relating to our common stock. If we elect to issue and sell more than the 4,761,000 Shares offered under this
prospectus to Hanover, which we have the right, but not the obligation, to do, we must first register for resale under the Securities
Act any such additional Shares, which could cause additional substantial dilution to our stockholders. Based on the above assumptions,
we would be required to register an additional approximately 20,239,000 shares of our common stock to obtain the balance of $6,071,700
of the Total Commitment that would be available to us under the Purchase Agreement. We currently have authorized and available
for issuance 750,000,000 shares of our common stock pursuant to our charter. Depending on the price at which Shares are ultimately
sold, we may have to increase the number of our authorized shares in order to issue Shares to Hanover.
There can be no assurance
that we will be able to receive all or any of the Total Commitment from Hanover because the Purchase Agreement contains certain
limitations, restrictions, requirements, conditions and other provisions that could limit our ability to cause Hanover to buy common
stock from us. For instance, we are prohibited from issuing a Draw Down Notice if the amount requested in such Draw Down Notice
exceeds the Maximum Regular Draw Down Amount, in the case of a Regular Draw Down Notice, or exceeds the Maximum Fixed Draw Down
Amount, in the case of a Fixed Draw Down Notice, or the sale of Shares pursuant to the Draw Down Notice would cause us to sell
or Hanover to purchase an aggregate number of shares of the Company’s common stock which would result in beneficial ownership
by Hanover of more than 4.99% of our common stock (as calculated pursuant to Section 13(d) of the Exchange Act and the rules and
regulations thereunder). Since Hanover is the beneficial owner of 4.80% of our common stock as of September 2, 2013 (including
the Initial Commitment Shares and the shares of our common stock issuable upon conversion of the Convertible Note), Hanover may
not be able to issue a Draw Down Notice until Hanover’s beneficial ownership percentage is reduced, either through the sale
of the shares of common stock held by Hanover, or through a reduction of the principal under the Convertible Note. Hanover is not
obligated to reduce its beneficial ownership percentage through the sale of shares of our common stock.
Moreover, there are limitations
with respect to the frequency with which we may provide Draw Down Notices to Hanover under the Purchase Agreement. Also, as discussed
above, there must be an effective registration statement covering the resale of any Shares to be issued pursuant to any draw down
under the Purchase Agreement, and the registration statement of which this prospectus is a part covers the resale of only 4,761,000
Shares that may be issuable pursuant to draw downs under the Purchase Agreement. These registration statements may be subject to
review and comment by the staff of the Commission, and will require the consent of our independent registered public accounting
firm. Therefore, the timing of effectiveness of these registration statements cannot be assured.
The extent to which
we rely on Hanover as a source of funding will depend on a number of factors, including the amount of working capital needed,
the prevailing market price of our common stock and the extent to which we are able to secure working capital from other sources.
If obtaining sufficient funding from Hanover were to prove unavailable or prohibitively dilutive, we would need to secure another
source of funding. Even if we sell all $7,500,000 of common stock under the Purchase Agreement with Hanover, we will still need
additional capital to fully implement our current business, operating plans and development plans.
Our independent
auditors have expressed substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain
future financing.
In their report dated
April 16, 2013, our independent auditors stated that our financial statements for the fiscal year ended December 31, 2012 were
prepared assuming that we would continue as a going concern. Our ability to continue as a going concern is an issue raised as a
result of recurring losses from operations. We continue to experience net operating losses. Our ability to continue as a going
concern is subject to our ability to obtain necessary funding from outside sources, including obtaining additional funding from
the sale of our securities. Our continued net operating losses increase the difficulty in meeting such goals and there can be no
assurances that such methods will prove successful.
Because we have
a limited history of revenues from our operations, our business may fail and investors may lose all of their investment in our
Company.
We have a limited history
of positive earnings and there can be no assurance that we will continue to operate profitably. If our business plan is not successful
and we are not able to continue operating profitably, then our stock may become worthless and investors may lose all of their investment
in our company.
We recognize that if
we are unable to generate significant revenues from the sale of our products in the future, we will not be able to continue to
earn profits or continue operations. There is very little history upon which to base any assumption as to the likelihood that we
will prove successful in the long term, and we can provide no assurance that we will generate sufficient revenues or continue to
achieve profitability. If we are unsuccessful in addressing these risks, our business will fail and investors may lose all of their
investment in our company.
We may be unable
to compete effectively with other companies in our market who offer, or may in the future offer, competing technologies.
We compete in a rapidly
evolving and highly competitive sector of the wireless communications industry. Our competitors have also identified the potential
market opportunity offered by us, and we therefore face intense competition in this portion of our market. We also face competition
from companies that offer partial or alternative solutions addressing limited aspects of the challenges facing broadband providers.
Our competitors may announce
new products, services or enhancements that better meet the needs of customers or changing industry requirements, or may offer
alternative methods to achieve customer objectives. New competitors have entered and may continue to enter the market. The entry
of new competitors into our market and acquisitions of our existing competitors by companies with significant resources and established
relationships with our potential customers could result in increased competition and harm to our business. Increased competition
may cause price reductions, reduced gross margins and loss of market share, any of which could have a material adverse effect on
our business, financial condition or result of operations.
Industry consolidation
may lead to increased competition and may harm our operating results.
Our market may be subject
to industry consolidation, as companies attempt to maintain or strengthen their positions in an evolving industry, are unable to
continue their operations or are acquired. For example, some of our current and potential competitors have made, or have been reported
as considering making, acquisitions or have announced new strategic alliances designed to position them with the ability to provide
many of the same services that we provide, to both the service provider and enterprise markets. We believe that industry consolidation
may result in stronger competitors that are better able to compete as sole-source vendors for customers. This could lead to more
variability in our operating results and could have a material adverse effect on our financial condition or results of operations.
Our products may
not continue to comply with the regulations governing their sale, which may harm our business.
Some of our products
must comply with various regulations and standards defined by the [Federal Communications Commission (“FCC”), and the
U.S. Mine Safety and Health Administration (“MSHA”). Products sold internationally may be required to comply with local
regulations or standards established by communications authorities in various countries, as well as those of certain international
bodies. Although we believe our products are currently in compliance with domestic regulations such as MSHA, there can be no assurance
that we will be able to obtain international approvals in the future. Further, the cost of complying with the evolving standards
and regulations, or the failure to obtain timely domestic or foreign regulatory approvals or certification such that we may not
be able to sell our products where these standards or regulations apply, may adversely affect our results of operations and financial
condition.
If our products
do not interoperate with our customers’ networks, installations may be delayed or cancelled, which could harm our business.
Some of our products
must interface with existing networks, each of which may have different specifications, utilize multiple protocol standards and
incorporate products from other vendors. Many of our customers’ networks contain multiple generations of products that have
been added over time as these networks have grown and evolved. Our products may be required to interoperate with many or all of
the products within these networks as well as future products in order to meet our customers’ requirements. If we find errors
in the existing software or defects in the hardware used in our customers’ networks, we may have to modify our software or
hardware to fix or overcome these errors so that our products will interoperate with the existing software and hardware. Such issues
may affect our ability to obtain product acceptance from other customers. Implementation of product corrections involving interoperability
issues could increase our costs and adversely affect our results of operations.
We must continue
to update and improve our products and develop new products in order to compete and to keep pace with improvements in communications
technology.
The markets for our products
are characterized by rapidly changing technology, evolving industry standards, and continuing improvements in the communications
service offerings of common service providers. If technologies or standards applicable to our products, or common service provider
offerings based on our products, become obsolete or fail to gain widespread commercial acceptance, our existing products or products
under development may become obsolete or unmarketable. Moreover, the introduction of products embodying new technologies, the emergence
of new industry standards, or changes in common service provider offerings could adversely affect our ability to sell our products.
To meet the requirements of these new delivery systems and to maintain our market position, we may have to develop new products
or modify existing products.
Our ability to adapt
will be a significant factor in establishing a competitive position and our prospects for growth. We cannot assure that we will
be able to respond effectively to changes in technology, industry standards, common service provider offerings or new product announcements
by our competitors. We also cannot assure that we will be able to successfully develop and market new products or product enhancements,
or that these products or enhancements will achieve market acceptance. Any failure by us to continue to anticipate or respond in
a cost-effective and timely manner to changes in technology, industry standards, common service provider offerings, or new product
announcements by our competitors, or any significant delays in product development or introduction, could have a material adverse
effect on our ability to competitively market our products and on our revenues, results of operations and financial condition.
We need to increase
the functionality of our products and offer additional features and value-added services in order to maintain or increase our profitability.
The market in which we
operate is highly competitive and unless we continue to enhance the functionality of our products and add additional features,
our competitiveness may be harmed and the average sale prices for our products may decrease. Decreases in sale prices generally
result from the introduction by competitors of competing products. We may also need to reduce our per unit manufacturing costs
at a rate equal to or greater than the rate at which selling prices decline. If we are unable to reduce costs or offer increased
functionally and features, our profitability may be adversely affected.
We integrate various
third-party solutions into our products and may integrate or offer additional third-party solutions in the future. If we lose the
right to use such solutions, our sales could be disrupted and we would have to spend additional capital to replace such components.
We integrate various
third-party solutions into our products and may integrate or offer additional third-party solutions in the future. Sales of our
products could be disrupted if such third-party solutions were either no longer available to us or no longer offered to us on commercially
reasonable terms. In either case, we would be required to spend additional capital to either redesign our products to function
with alternate third-party solutions or develop substitute components ourselves. We might, as a result, be forced to
limit the features available in our current or future product offerings, which could have a material adverse effect on our business.
Our products are
highly technical and any undetected software or hardware errors in our products could have a material adverse effect on our operating
results.
Our products are complex
and are incorporated into broadband networks, which are a major source of revenue for service providers and support critical
applications for subscribers and enterprises. Due to the highly technical nature of our products and variations among customers’
network environments, we may not detect product defects until our products have been fully deployed in our customers’ networks.
Regardless of whether warranty coverage exists for a product, we may be required to dedicate significant technical resources to
repair any defects. If we encounter significant product problems, we could experience, among other things, loss of major customers,
cancellation of product orders, increased costs, delay in recognizing revenues and damage to our reputation. We could also face
claims for product liability, tort or breach of warranty. Defending a lawsuit, regardless of its merit, is costly and may divert
management’s attention. In addition, if our business liability insurance is inadequate or future coverage is unavailable
on acceptable terms or at all, our financial condition could be harmed.
We may expand our
business or enhance our technology through acquisitions that could result in diversion of resources and extra expenses. This could
disrupt our business and adversely affect our financial condition.
Part of our strategy
is to selectively pursue partnerships and acquisitions. The negotiation of acquisitions, investments or joint ventures,
as well as the integration of acquired or jointly developed businesses or technologies, could divert our management’s time
and resources. Acquired businesses, technologies or joint ventures may not be successfully integrated with our products and operations
and we may not realize the intended benefits of these acquisitions. We may also incur future losses from any acquisition, investment
or joint venture. In addition, acquisitions could result in:
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substantial cash expenditures;
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potentially dilutive issuances of equity securities;
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the incurrence of debt and contingent liabilities;
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a decrease in our profit margins; and
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amortization of intangibles and potential impairment of goodwill.
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If acquisitions disrupt
our operations or result in significant expenditures or liabilities, our business, operating results or financial conditions may
suffer.
If we fail to attract
and retain skilled employees, we may not be able to timely develop, sell or support our products.
Our success depends,
in large part, on the contribution of our research and development, sales and marketing and managerial personnel. If our business
continues to grow, we will need to hire additional qualified research and development, sales and marketing and managerial personnel
to succeed. The process of hiring, training and successfully integrating qualified personnel into our operation is a lengthy and
expensive one. The market for qualified personnel is very competitive because of the limited number of people available with the
necessary technical skills, sales skills and understanding of our products and technology. Our failure to hire and retain qualified
personnel could cause our revenues to decline and impair our ability to meet our research and development and sales objectives.
If we are unable
to successfully protect the intellectual property embodied in our technology, our business could be harmed significantly.
Know-how relating to
the operational aspects of our business activities is an important aspect of our intellectual property. To protect our know-how,
we customarily require our employees, distributors, resellers, software testers and contractors to execute confidentiality agreements
or agree to confidentiality undertakings when their relationship with us begins. Typically, our employment contracts for management
and senior members of our staff also include the following clauses: assignment of intellectual property rights for all inventions
developed by employees and non-disclosure of all confidential information. We cannot provide any assurance that the terms of these
agreements are being observed and will be observed in the future. Because our product designs and software are stored electronically
and thus are highly portable, we attempt to reduce the portability of our designs and software by physically protecting our servers
through the use of closed networks, which prevent external access to our servers. We cannot be certain, however, that such protection
will adequately deter individuals or groups from wrongfully accessing our technology. Monitoring unauthorized use of intellectual
property is difficult and some foreign laws do not protect proprietary rights to the same extent as the laws of the United States.
We cannot be certain that the steps we have taken to protect our proprietary information will be sufficient. In addition, to protect
our intellectual property, we may become involved in litigation, which could result in substantial expenses, divert the attention
of management, cause significant delays, materially disrupt the conduct of our business or adversely affect our revenue, financial
condition and results of operations.
The failure to protect
our intellectual property and technology may weaken our competitive position and may adversely affect our revenues.
We may be subject
to claims of intellectual property infringement by third parties that, regardless of merit, could result in litigation and our
business, operating results or financial condition could be materially adversely affected.
There can be no assurance
that we will not receive communications from third parties asserting that our products and other intellectual property infringe,
or may infringe their proprietary rights. We are not currently subject to any proceedings for infringement of patents or other
intellectual property rights and are not aware of any parties that intend to pursue such claims against us. Any such claim, regardless
of merit, could result in litigation, which could result in substantial expenses, divert the attention of management, cause significant
delays and materially disrupt the conduct of our business. As a consequence of such claims, we could be required to pay substantial
damage awards, develop non-infringing technology, enter into royalty-bearing licensing agreements, stop selling our products or
re-brand our products. If it appears necessary, we may seek to license intellectual property that we are alleged to infringe. Such
licensing agreements may not be available on terms acceptable to us or at all. Litigation is inherently uncertain and any adverse
decision could result in a loss of our proprietary rights, subject us to significant liabilities, require us to seek licenses from
others and otherwise negatively affect our business. In the event of a successful claim of infringement against us and our failure
or inability to develop non-infringing technology or license the infringed or similar technology, our business, operating results
or financial condition could be materially adversely affected.
Risks related to the mining industry
could negatively effect on our profitability.
The mining industry is generally subject
to a number of risks and hazards including environmental hazards, industrial accidents, labor disputes, unusual or unexpected geological
conditions, pressures, cave-ins, changes in the regulatory environment and natural phenomena such as inclement weather conditions,
floods, blizzards and earthquakes. Any of these events may cause our customers in the mining industry to cancel order for our products
or curtail planned acquisitions of our products. This could have a material adverse effect upon our financial performance and results
of operations, which could negatively impact any investment you make in our shares.
Our customers in the mining industry
may not be able to locate commercially viable reserves.
Mineral exploration and
development involve a high degree of risk and few properties that are explored are ultimately developed into producing mines.
If our customers’ future mineral exploration and development activities do not result in any discoveries of proven or
probable reserves, they may be forced to return our products or may not provide prompt payment for our products, which could
have a material adverse effect upon our financial performance and results of operations.
Enforcement of remedies or contracts
against Native American tribes could be difficult.
Governing and Native American Law
.
Federally recognized Native American tribes are independent governments, subordinate to the United States, with sovereign powers,
except as those powers may have been limited by treaty or by the United States Congress. Native American tribes maintain their
own governmental systems and often their own judicial systems. Native American tribes have the right to tax persons and enterprises
conducting business on Native American lands, and also have the right to require licenses and to impose other forms of regulation
and regulatory fees on persons and businesses operating on their lands.
Native American tribes, as sovereign
nations, are generally subject only to federal regulation. Although Congress may regulate Native American tribes, states do not
have the authority to regulate Native American tribes unless such authority has been specifically granted by Congress. In the absence
of a specific grant of authority by Congress, states may regulate activities taking place on Native American lands only if the
tribe has a specific agreement or compact with the state. In the absence of a conflicting federal or properly authorized state
law, Native American law governs.
Sovereign Immunity; Applicable Courts
.
Native
American tribes generally enjoy sovereign immunity from suit similar to that of the individual states and the United States. In
order to sue a Native American tribe (or an agency or instrumentality of a Native American tribe), the tribe must have effectively
waived its sovereign immunity with respect to the matter in dispute. We may not be able to enter into contracts with favorable
provisions, such as a waiver of each tribe’s sovereign immunity with regard to disputes arising under our contracts. If such
provisions are not included in our contracts with Native American tribes, we may not be able to enforce any remedies for non-performance
or breach of such contracts.
If a Native American tribe has effectively
waived its sovereign immunity, there exists an issue as to the forum in which a lawsuit can be brought against the tribe. Federal
courts are courts of limited jurisdiction and generally do not have jurisdiction to hear civil cases relating to Native Americans.
In addition, contractual provisions that purport to grant jurisdiction to a federal court are not effective. Federal courts may
have jurisdiction if a federal question is raised by the suit, which is unlikely in a typical contract dispute. Diversity of citizenship,
another common basis for federal court jurisdiction, is not generally present in a suit against a tribe, because a Native American
tribe is not considered a citizen of any state. Accordingly, in most commercial disputes with tribes, the jurisdiction of the federal
courts may be difficult or impossible to obtain.
Risks Relating to our
Common Stock and our Status as a Public Company
We are required
to incur significant costs and require significant management resources to evaluate our internal control over financial reporting
as required under Section 404 of the Sarbanes-Oxley Act, and any failure to comply or any adverse result from such evaluation may
have an adverse effect on our stock price.
As a smaller reporting
company as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, we are required to evaluate our internal
control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”). Section 404
requires us to include an internal control report with the Annual Report on Form 10-K. This report must include management’s
assessment of the effectiveness of our internal control over financial reporting as of the end of the fiscal year. This report
must also include disclosure of any material weaknesses in internal control over financial reporting that we have identified.
Failure to comply, or any adverse results from such evaluation could result in a loss of investor confidence in our financial
reports and have an adverse effect on the trading price of our equity securities. Management believes that its internal controls
and procedures are currently not effective to detect the inappropriate application of U.S. GAAP rules. Management realize there
are deficiencies in the design or operation of our internal control that adversely affect our internal controls which management
considers to be material weaknesses including those described below:
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i)
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We have not achieved the optimal level of segregation of duties relative to key financial reporting functions.
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ii)
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We have insufficient quantity of dedicated resources and experienced personnel involved in reviewing and designing internal controls. As a result, a material misstatement of the interim and annual financial statements could occur and not be prevented or detected on a timely basis.
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iii)
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We did not perform an entity level risk assessment to evaluate the implication of relevant risks on financial reporting, including the impact of potential fraud related risks and the risks related to non- routine transactions, if any, on our internal control over financial reporting. Lack of an entity-level risk assessment constituted an internal control design deficiency which resulted in more than a remote likelihood that a material error would not have been prevented or detected, and constituted a material weakness.
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iv)
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We did not have an audit committee or an independent audit committee financial expert. While not being legally obligated to have an audit committee or independent audit committee financial expert, it is the management’s view that to have an audit committee, comprised of independent board members, and an independent audit committee financial expert is an important entity-level control over our financial statements.
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Achieving continued compliance
with Section 404 may require us to incur significant costs and expend significant time and management resources. We cannot assure
you that we will be able to fully comply with Section 404 or that we and our independent registered public accounting firm would
be able to conclude that our internal control over financial reporting is effective at fiscal year-end. As a result, investors
could lose confidence in our reported financial information, which could have an adverse effect on the trading price of our securities,
as well as subject us to civil or criminal investigations and penalties. In addition, our independent registered public accounting
firm may not agree with our management’s assessment or conclude that our internal control over financial reporting is operating
effectively.
A limited public
trading market exists for our common stock, which makes it more difficult for our stockholders to sell their common stock in the
public markets.
Our common stock is currently
traded under the symbol “SNWR” and currently trades at a low volume, based on quotations on the OTCQB, meaning that
the number of persons interested in purchasing our common stock at or near bid prices at any given time may be relatively small
or non-existent. This situation is attributable to a number of factors, including the fact that we are a small company which is
still relatively unknown to stock analysts, stock brokers, institutional investors, and others in the investment community that
generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and
would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our stock until such time
as we became more viable. Additionally, many brokerage firms may not be willing to effect transactions in the securities. As a
consequence, there may be periods of several days or more when trading activity in our stock is minimal or non-existent, as compared
to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without
an adverse effect on share price. We cannot give you any assurance that a broader or more active public trading market for our
common stock will develop or be sustained, or that trading levels will be sustained.
In the past, securities
class action litigation has often been brought against a company following periods of volatility in the market price of its securities.
Due to the volatility of our common stock price, we may be the target of securities litigation in the future. Securities litigation
could result in substantial costs and divert management’s attention and resources.
Shareholders should also
be aware that, according to SEC Release No. 34-29093, the market for “penny stock,” such as our common stock, has suffered
in recent years from patterns of fraud and abuse. Such patterns include (1) control of the market for the security by one or a
few broker-dealers that are often related to the promoter or issuer; (2) manipulation of prices through prearranged matching of
purchases and sales and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and
unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by
selling broker-dealers; and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have
been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor
losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect
to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive
within the confines of practical limitations to prevent the described patterns from being established with respect to our securities.
The occurrence of these patterns or practices could increase the future volatility of our share price.
To date, we have
not paid any cash dividends and no cash dividends will be paid in the foreseeable future.
We do not anticipate
paying cash dividends on our common stock in the foreseeable future and we may not have sufficient funds legally available to pay
dividends. Even if the funds are legally available for distribution, we may nevertheless decide not to pay any dividends. We presently
intend to retain all earnings for our operations.
Our stock is categorized
as a penny stock. Trading of our stock may be restricted by the SEC’s penny stock regulations which may limit a shareholder’s
ability to buy and sell our stock.
Our stock is categorized
as a “penny stock”. The SEC has adopted Rule 15g-9 which generally defines “penny stock” to be any equity
security that has a market price (as defined) less than $4.00 per share or an exercise price of less than $5.00 per share, subject
to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements
on broker-dealers who sell to persons other than established customers and accredited investors. The penny stock rules require
a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure
document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny
stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation
of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny
stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information,
must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing
before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny
stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure
requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject
to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities.
We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.
FINRA sales practice
requirements may also limit a shareholder’s ability to buy and sell our stock.
In addition to the “penny
stock” rules described above, the Financial Industry Regulatory Authority (“FINRA”) has adopted rules that require
that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment
is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers
must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives
and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low
priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers
to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse
effect on the market for our shares.
The elimination
of monetary liability against our directors, officers and employees under Nevada law and the existence of indemnification rights
to our directors, officers and employees may result in substantial expenditures by our company and may discourage lawsuits against
our directors, officers and employees.
Our Articles of Incorporation
contain a provision permitting us to eliminate the personal liability of our directors to our company and stockholders for damages
for breach of fiduciary duty as a director or officer to the extent provided by Nevada law. We may also have contractual indemnification
obligations under our employment agreements with our officers. The foregoing indemnification obligations could result in the Company
incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which we may
be unable to recoup. These provisions and resultant costs may also discourage our company from bringing a lawsuit against directors
and officers for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our stockholders
against our directors and officers even though such actions, if successful, might otherwise benefit our company and stockholders.
If we issue additional
shares in the future, whether in connection with a financing or in exchange for services or rights, it will result in the dilution
of our existing stockholders.
Our articles of incorporation
authorize the issuance of up to 750,000,000 shares of common stock with a par value of $0.00001 per share. Our Board of Directors
may choose to issue some or all of such shares to acquire one or more companies or properties, to fund our overhead and general
operating requirements and in exchange for services rendered to the Company. Such issuances may not require the approval of our
stockholders. We have previously issued shares of our common stock in exchange for services provided to the Company. Any future
issuances may reduce the book value per share and may contribute to a reduction in the market price of the outstanding shares of
our common stock. If we issue any such additional shares in the future, such issuance will reduce the proportionate ownership and
voting power of all current stockholders.
The sale or issuance
of our common stock to Hanover at a discount may cause substantial dilution and the resale of the shares of common stock by Hanover
into the public market, or the perception that such sales may occur, could cause the price of our common stock to fall.
Under the Purchase Agreement
with Hanover, upon effectiveness of the registration statement of which this prospectus is a part, and subject to other conditions,
we may direct Hanover to purchase up to $7,500,000 of our shares of common stock over a 36-month period. We are registering an
aggregate of 7,651,000 shares of common stock in the registration statement of which this prospectus is a part pursuant to the
Registration Rights Agreement. Notwithstanding Hanover’s beneficial ownership limitation set forth in the Purchase Agreement,
if all of the 7,651,000 shares offered under this prospectus were issued and outstanding as of September 2, 2013, such shares would
represent approximately 14.1% of the total number of shares of our common stock outstanding and 25.0% of the total number of outstanding
shares of our common stock held by non-affiliates, in each case as of September 2, 2013. The number of shares ultimately offered
for sale by Hanover under this prospectus is dependent upon a number of factors, including the extent to which Hanover converts
the Convertible Note into shares of our common stock and the number of Shares we ultimately issue and sell to Hanover under the
Purchase Agreement. Because the actual purchase price for the Shares that we may sell to Hanover will fluctuate based on the market
price of our common stock during the term of the Purchase Agreement, we are not able to determine at this time the exact number
of shares of our common stock that we will issue under the Purchase Agreement and, therefore, the exact number of shares we will
ultimately register for resale under the Securities Act.
Specifically, because
the per share purchase price for the Shares subject to a Regular Draw Down Notice will be equal to 90% of the arithmetic average
of the VWAPs over a certain number of trading days during the applicable Pricing Period as set forth in the Purchase Agreement,
Hanover will pay less than the then-prevailing market price for the Shares subject to a Regular Draw Down Notice, and the actual
purchase price for the Shares that we may sell to Hanover pursuant to a Regular Draw Down Notice will fluctuate based on the VWAP
of our common stock during the term of the Purchase Agreement. Similarly, because the per share purchase price for the Shares subject
to a Fixed Draw Down Notice will be equal to 75% of the lower of (i) the lowest trade price of a share of our common stock on the
applicable Draw Down Exercise Date, and (ii) the arithmetic average of the three lowest daily VWAPs during the 10 consecutive trading
days ending on the trading day immediately preceding the applicable Draw Down Exercise Date, Hanover will pay less than the then-prevailing
market price for the Shares subject to a Fixed Draw Down Notice, and the actual purchase price for the Shares that we may sell
to Hanover pursuant to a Fixed Draw Down Notice will fluctuate based on the market price of our common stock during the term of
the Purchase Agreement. As a result of this discount, Hanover may have a financial incentive to sell our common stock immediately
to realize the profit equal to the difference between the purchase price and the market price. If Hanover sells the common stock,
the market price of our common stock could decrease. If the market price of our common stock decreases, Hanover may have a further
incentive to sell the common stock that it holds. These sales may have a further impact on the market price of our common stock.
Moreover, there
is an inverse relationship between the market price of our common stock and the number of shares of our common stock that may
be sold pursuant to the Purchase Agreement. That is, the lower the market price, the more shares of our common stock that may
be sold under the Purchase Agreement. Accordingly, if the market price of our common stock decreases (whether such decrease is
due to sales by Hanover in the market or otherwise) and, in turn, the purchase price of our common stock sold to Hanover under
the Purchase Agreement decreases, this could allow Hanover to receive greater numbers of shares of our common stock pursuant to
draw downs under the Purchase Agreement. Although the number of shares of our common stock that our existing stockholders own
will not decrease, the common stock owned by our existing stockholders will represent a smaller percentage of our total outstanding
shares after any such sales to Hanover. Depending on market liquidity at the time, the sale of a substantial number of shares
of our common stock to Hanover at a discount to the then-prevailing market price for our common stock under the Purchase Agreement,
and the resale of such shares by Hanover into the public market, or the perception that such sales may occur, could cause the
trading price of our common stock to decline, result in substantial dilution to existing stockholders and make it more difficult
for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect
sales.
For a tabular disclosure
of the number of securities and percentage ownership to be issued assuming we sell all the securities on the registration statement
and assuming sales to Hanover at various discounts to our current market price, please see “Equity Enhancement Program With
Hanover” on page 32 of this prospectus.
You may experience
immediate and substantial dilution in the net tangible book value per share of the common stock you purchase.
The price per share of
our common stock being offered pursuant to this prospectus may be substantially higher than the net tangible book value per share
of our common stock. Therefore, if you purchase shares of common stock in this offering at the current market value, you may suffer
immediate and substantial dilution in the pro forma net tangible book value per share of common stock. See the section entitled
“Dilution” elsewhere in this prospectus for a more detailed discussion of the dilution you may incur if you purchase
shares in this offering.
We may use the
net proceeds from sales of our common stock to Hanover pursuant to the Purchase Agreement in ways with which you may disagree.
We intend to use the
net proceeds from sales of our common stock to Hanover pursuant to the Purchase Agreement for working capital and general corporate
purposes. As of the date of this prospectus, we cannot specify with certainty all of the particular uses of the proceeds from sales
of common stock to Hanover pursuant to the Purchase Agreement. Accordingly, we will have significant discretion in the
use of the net proceeds of sales of common stock to Hanover pursuant to the Purchase Agreement. It is possible that
we may allocate the proceeds differently than investors in this offering desire or that we will fail to maximize our return on
these proceeds. We may, subsequent to this offering, modify our intended use of the proceeds from sales of common stock
to Hanover pursuant to the Purchase Agreement to pursue strategic opportunities that may arise, such as potential acquisition opportunities. You
will be relying on the judgment of our management with regard to the use of the net proceeds from the sales of common stock to
Hanover pursuant to the Purchase Agreement, and you will not have the opportunity, as part of your investment decision, to assess
whether the proceeds are being used appropriately. Any failure to apply the proceeds from sales of common stock to Hanover
pursuant to the Purchase Agreement effectively could have a material adverse effect on our business and cause a decline in the
market price of our common stock.
USE OF PROCEEDS
Selling Stockholder may
sell all of the common stock offered by this Prospectus from time-to-time. We will not receive any proceeds from the sale of those
shares of common stock. We may, however, receive aggregate gross proceeds of $7,500,000 if all shares of common stock in this offering
are sold to Selling Stockholder pursuant to the Purchase Agreement. Any such proceeds we receive will be used for working capital
and general corporate matters.
The exact purchase price
at which we will sell the Purchase Shares pursuant to the Purchase Agreement is dependent upon the market price for our common
stock, therefore, it is likely that the number of shares offered in this registration statement will be insufficient to allow
us to receive the full amount of proceeds under the Purchase Agreement.
At an assumed purchase
price of $0.30 (equal to the closing price of our common stock of $0.30 on September 16, 2013), and assuming the sale by us to
Hanover of all of the 4,761,000 Shares, or approximately 10.2% of our issued and outstanding common stock, being registered hereunder
pursuant to draw downs under the Purchase Agreement, we would receive only approximately $1,428,300 in gross proceeds. Furthermore,
we may receive substantially less than $1,428,300 in gross proceeds from the financing due to our share price, discount to market
and other factors relating to our common stock. If we elect to issue and sell more than the 4,761,000 Shares offered under this
prospectus to Hanover, which we have the right, but not the obligation, to do, we must first register for resale under the Securities
Act any such additional Shares, which could cause additional substantial dilution to our stockholders. Based on the above assumptions,
we would be required to register an additional approximately 20,239,000 shares of our common stock to obtain the balance of $6,071,700
of the Total Commitment that would be available to us under the Purchase Agreement.
DETERMINATION
OF OFFERING PRICE
There currently is a
limited public market for our common stock. Selling Stockholder will determine at what price it may sell the offered shares, and
such sales may be made at prevailing market prices or at privately negotiated prices. See “Plan of Distribution” below
for more information.
SELLING STOCKHOLDER
This prospectus relates
to the possible resale from time to time by the selling stockholder of any or all of the shares of common stock that have been
or may be issued by us to Hanover under the Purchase Agreement and upon conversion of the Convertible Note. For additional information
regarding the issuance of common stock covered by this prospectus, see “Summary—Recent Developments” and “Equity
Enhancement Program With Hanover” above. We are registering the shares of common stock pursuant to the provisions of the
Note Registration Rights Agreement we entered into with Hanover on July 31, 2013 and the Registration Rights Agreement we entered
into with Hanover on August 28, 2013, in order to permit the selling stockholder to offer the shares for resale from time to time.
Except for the transactions contemplated by the Convertible Note, the Note Purchase Agreement, the Note Registration Rights Agreement,
the Purchase Agreement and the Registration Rights Agreement, Hanover has not had any material relationship with us within the
past three years.
The table below presents
information regarding the selling stockholder and the shares of common stock that it may offer from time to time under this prospectus.
This table is prepared based on information supplied to us by the selling stockholder, and reflects holdings as of September 2,
2013. As used in this prospectus, the term “selling stockholder” means Hanover. The number of shares in the column
“Maximum Number of Shares of Common Stock to be Offered Pursuant to this Prospectus” represents all of the shares of
common stock that the selling stockholder may offer under this prospectus. The selling stockholder may sell some, all or none of
its shares in this offering. We do not know how long the selling stockholder will hold the shares before selling them, and we currently
have no agreements, arrangements or understandings with the selling stockholder regarding the sale of any of the shares.
Beneficial ownership
is determined in accordance with Rule 13d-3(d) promulgated by the SEC under the Exchange Act, and includes shares of common stock
with respect to which the selling stockholder has voting and investment power. The percentage of shares of common stock beneficially
owned by the selling stockholder prior to the offering shown in the table below is based on an aggregate of 46,553,147 shares of
our common stock outstanding on September 2, 2013. Because the purchase price of the shares of common stock issuable under the
Purchase Agreement is determined on each settlement date, and because the principal amount under the Convertible Note may be reduced
under certain circumstances (thereby resulting in fewer shares being issued to Hanover upon conversion of the Convertible Note),
the number of shares that may actually be sold by the Company under the Purchase Agreement and the number of shares that may actually
be issued to Hanover upon conversion of the Convertible Note may be fewer than the number of shares being offered by this prospectus.
The fourth column assumes the sale of all of the shares offered by the selling stockholder pursuant to this prospectus.
Name of Selling Stockholder
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Number of Shares of Common Stock Owned Prior to Offering
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Maximum Number of Shares of Common Stock to be Offered Pursuant to this Prospectus(3)
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Number of Shares of Common Stock Owned After Offering
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Number(1)
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Percent(2)
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Number(4)
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Percent(2)
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Hanover Holdings I, LLC (5)
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2,344,408
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4.8%
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7,651,000
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-0-
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*
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* Represents beneficial ownership
of less than one percent of the outstanding shares of our common stock.
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(1)
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This number represents (i) 1,890,000 shares of common stock underlying the Convertible Note we
issued to Hanover on July 31, 2013 and (ii) the 454,408 shares of common stock we have agreed to issue to Hanover as Initial Commitment
Shares in consideration for entering into the Purchase Agreement with us. In accordance with Rule 13d-3(d) under the Exchange Act,
we have excluded from the number of shares beneficially owned prior to the offering (i) up to 545,592 shares that may be issued
to Hanover as Additional Commitment Shares under the terms of the Purchase Agreement, because the issuance of such shares is dependent
on, among other things, the registration statement of which this prospectus is a part becoming effective and (ii) all of the shares
that Hanover may be required to purchase pursuant to draw downs under the Purchase Agreement, because the issuance of such shares
is solely at our discretion and is subject to certain conditions, the satisfaction of all of which are outside of Hanover’s
control, including the registration statement of which this prospectus is a part becoming and remaining effective. Furthermore,
the maximum amount of each put of common stock to Hanover under the Purchase Agreement is subject to certain agreed upon threshold
limitations set forth in the Purchase Agreement. Also, under the terms of the Purchase Agreement, we may not issue shares of our
common stock to Hanover to the extent that Hanover or any of its affiliates would, at any time, beneficially own more than 4.99%
of our outstanding common stock.
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(2)
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Applicable percentage ownership is based on 2,344,408 shares of our common stock beneficially owned
by Hanover as of September 2, 2013, and 46,553,147
shares of our common stock outstanding as of September
2, 2013.
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(3)
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At an assumed average purchase price of $0.30, which is equal to the closing sale price of our common stock
on September 16, 2013, we would be required to issue a total of 25,000,000 shares of our common stock (or 19,239,000 shares in
addition to those currently being registered hereby) to obtain the entire $7,500,000 Total Commitment under the Purchase Agreement.
At an assumed average purchase price of $0.075, which is equal to 25% of the closing sale price of our common stock of $0.30 on
September 16, 2013, we would be required to issue a total of 100,000,000 shares of our common stock (or 94,239,000 shares in addition
to those currently being registered hereby) to obtain the entire $7,500,000 Total Commitment under the Purchase Agreement. At an
assumed average purchase price of $0.15, which is equal to 50% of the closing sale price of our common stock of $0.30 on September
16, 2013, we would be required to issue a total of 50,000,000 shares of our common stock (or 44,239,000 shares in addition to those
currently being registered hereby) to obtain the entire $7,500,000 Total Commitment under the Purchase Agreement. At an assumed
average purchase price of $0.225, which is equal to 75% of the closing sale price of our common stock of $0.30 on September 16,
2013, we would be required to issue a total of 33,333,333 shares of our common stock (or 27,572,333 shares in addition to those
currently being registered hereby) to obtain the entire $7,500,000 Total Commitment under the Purchase Agreement. Please see the
section titled “Equity Enhancement Program With Hanover” elsewhere in this prospectus for a more detailed discussion
of the number of shares we may be required to issue at various prices and the percentage of our outstanding shares that such shares
would represent.
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(4)
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Assumes the sale of all shares being offered pursuant to this prospectus.
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(5)
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The business address of Hanover is c/o Magna Group, 5 Hanover Square, New York, New York
10004. Hanover’s principal business is that of a private investment firm. We have been advised that Hanover is not a
member of the Financial Industry Regulatory Authority, or FINRA, or an independent broker-dealer, and that neither Hanover
nor any of its affiliates
is an affiliate or an associated person of any FINRA member or independent broker-dealer. We have been further advised that Joshua
Sason is the Chief Executive Officer of Hanover and owns all of the membership interests in Hanover, and that Mr. Sason has sole
power to vote or to direct the vote and sole power to dispose or to direct the disposition of all securities owned directly by
Hanover.
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EQUITY ENHANCEMENT PROGRAM WITH
HANOVER
Common Stock Purchase Agreement
On August 28, 2013, we
entered into the Purchase Agreement with Hanover. The Purchase Agreement provides that, upon the terms and subject to
the conditions set forth therein, Hanover is committed to purchase up to $7,500,000 worth of our common stock over the 36-month
term of the Purchase Agreement.
From time to time over
the term of the Purchase Agreement, commencing on the trading day immediately following the date on which the registration statement
of which this prospectus is a part is declared effective by the Commission, we may, in our sole discretion, provide Hanover with
either Regular Draw Down Notices or, if certain conditions are satisfied, Fixed Draw Down Notices, in each case to purchase a specified
dollar amount of Shares, with each draw down subject to the limitations discussed below. The maximum amount of Shares requested
to be purchased pursuant to any single Regular Draw Down Notice cannot exceed the Maximum Regular Draw Down Amount. The maximum
amount of Shares requested to be purchased pursuant to any single Fixed Draw Down Notice cannot exceed the Maximum Fixed Draw Down
Amount. Each purchase pursuant to a draw down will reduce, on a dollar-for-dollar basis, the Total Commitment under the Purchase
Agreement.
We
may, in our sole discretion, provide Hanover with Regular Draw Down Notices to purchase a specified Draw Down Amount, up to the
Maximum Regular Draw Down Amount, over a 10 consecutive trading day period commencing on the trading day specified in the applicable
Regular Draw Down Notice. Once presented with a Regular Draw Down Notice, Hanover is required to purchase a pro rata portion of
the applicable Draw Down Amount on each trading day during the applicable Pricing Period on which the daily VWAP equals or exceeds
the Floor Price for such draw down. If the VWAP falls below the applicable Floor Price on any trading day during the applicable
Pricing Period, the Purchase Agreement provides that Hanover will not purchase the pro rata portion of the applicable Draw Down
Amount allocated to that trading day. The per share purchase price for the Shares subject to a Regular Draw Down Notice will
be equal to 90% of the arithmetic average of the three lowest daily VWAPs that equal or exceed the applicable Floor Price during
the applicable Pricing Period, except that if the VWAP does not equal or exceed the applicable Floor Price for at least three trading
days during the applicable Pricing Period, then the per share purchase price will be equal to 90% of the arithmetic average of
all VWAPs that equal or exceed the applicable Floor Price during such Pricing Period.
We may, in our sole discretion,
on any trading day on which both of the equity conditions described below are satisfied, provide Hanover with a Fixed Draw Down
Notice to purchase a specified Draw Down Amount, up to the Maximum Fixed Draw Down Amount, on the applicable settlement date, which
will occur within two trading days following the date the Fixed Draw Down Notice is delivered. The Fixed Purchase Price will be
equal to 75% of the lower of (i) the lowest trade price of a share of our common stock on the Draw Down Exercise Date and (ii)
the arithmetic average of the three lowest daily VWAPs during the 10 consecutive trading days ending on the trading day immediately
preceding the applicable Draw Down Exercise Date. We may deliver a Fixed Draw Down Notice only if both of the following equity
conditions have been satisfied as of the applicable Draw Down Exercise Date:
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·
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on each trading day during the period beginning 30 trading days prior
to the applicable Draw Down Exercise Date and ending on and including the applicable Draw Down Exercise Date, the lowest trade
price of a share of our common stock must be greater than the Fixed Floor Price; and
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·
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on each trading day during the period beginning 30 trading days prior
to the applicable Draw Down Exercise Date and ending on and including the applicable Draw Down Exercise Date, the trade price of
a share of our common stock must not have declined more than 20% from an intraday high to an intraday low during such trading day.
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We are prohibited
from issuing a Draw Down Notice if (i) the amount requested in such Draw Down Notice exceeds the Maximum Regular Draw Down Amount,
in the case of a Regular Draw Down Notice, or exceeds the Maximum Fixed Draw Down Amount, in the case of a Fixed Draw Down Notice,
(ii) the sale of Shares pursuant to such Draw Down Notice would cause us to issue or sell or Hanover to acquire or purchase an
aggregate dollar value of Shares that would exceed the Total Commitment, or (iii) the sale of Shares pursuant to the Draw Down
Notice would cause us to sell or Hanover to purchase an aggregate number of shares of our common stock which would result in beneficial
ownership by Hanover of more than 4.99% of our common stock (as calculated pursuant to Section 13(d) of the Exchange Act and the
rules and regulations thereunder). Furthermore, with respect to a draw down pursuant to a Regular Draw Down Notice, we cannot
make more than one draw down (whether pursuant to a Fixed Draw Down Notice or a Regular Draw Down Notice) in any Pricing Period
and must allow 24 hours to elapse between the completion of the settlement of any one draw down pursuant to a Regular Draw Down
Notice and the delivery of any Fixed Draw Down Notice or Regular Draw Down Notice for any other draw down. With respect to a draw
down pursuant to a Fixed Draw Down Notice, we must allow 15 trading days to elapse between the completion of the settlement of
any one draw down pursuant to a Fixed Draw Down Notice and the delivery of any Fixed Draw Down Notice or Regular Draw Down Notice
for any other draw down.
As of September 2, 2013,
there were 46,553,147 shares of our common stock outstanding, of which 22,953,147 shares were held by non-affiliates. Although
the Purchase Agreement provides that we may sell up to $7,500,000 of our common stock to Hanover, only 7,651,000 shares of our
common stock are being offered under this prospectus, which represents (i) 1,890,000 shares of common stock that may be issued
to Hanover upon conversion of the Convertible Note, (ii) 454,408 shares of common stock that we have agreed to issue to Hanover
as Initial Commitment Shares, (iii) a maximum of 545,592 shares of common stock that we may be required to issue to Hanover as
Additional Commitment Shares and (iv) 4,761,000 shares of common stock that we may issue to Hanover as Shares pursuant to draw
downs under the Purchase Agreement. If all of the 7,651,000 shares offered under this prospectus were issued and outstanding as
of September 2, 2013, such shares would represent approximately 14.1% of the total number of shares of our common stock outstanding
and 25.0% of the total number of outstanding shares of our common stock held by non-affiliates, in each case as of September 2,
2013.
At an assumed purchase price of $0.30 (equal
to the closing price of our common stock of $0.30 on September 16, 2013), and assuming the sale by us to Hanover of all of the
4,761,000 Shares, or approximately 10.2% of our issued and outstanding common stock, being registered hereunder pursuant to draw
downs under the Purchase Agreement, we would receive only approximately $1,428,300 in gross proceeds. Furthermore, we may receive
substantially less than $1,428,300 in gross proceeds from the financing due to our share price, discount to market and other factors
relating to our common stock. If we elect to issue and sell more than the 4,761,000 Shares offered under this prospectus to Hanover,
which we have the right, but not the obligation, to do, we must first register for resale under the Securities Act any such additional
Shares, which could cause additional substantial dilution to our stockholders. Based on the above assumptions, we would be required
to register an additional approximately 20,239,000 shares of our common stock to obtain the balance of $6,071,700 of the Total
Commitment that would be available to us under the Purchase Agreement. We currently have authorized and available for issuance
750,000,000 shares of our common stock pursuant to our charter.
The number of shares
of our common stock ultimately offered for resale by Hanover is dependent upon a number of factors, including the extent to which
Hanover converts the Convertible Note into shares of our common stock and the number of Shares we ultimately issue and sell to
Hanover under the Purchase Agreement. The following table sets forth the amount of proceeds we would receive from Hanover from
the sale of Shares under the Purchase Agreement that are registered in this offering at varying purchase prices (without accounting
for certain fees and expenses):
Assumed Average
Purchase Price(1)
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Number of Registered
Shares to be Issued if
Full Purchase
|
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Percentage of Currently Outstanding
Shares(2)
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Proceeds from the Sale of Shares to
Hanover Under the
Purchase Agreement
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$0.075 (3)
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100,000,000
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|
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214.8%
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$7,500,000
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$0.15 (4)
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50,000,000
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107.4%
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$7,500,000
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$0.225 (5)
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33,333,333
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71.6%
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$7,500,000
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$0.30 (6)
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25,000,000
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53.7%
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$7,500,000
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$0.375 (7)
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20,000,000
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42.9%
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$7,500,000
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$0.45 (8)
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|
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16,666,666
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35.8%
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$7,500,000
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(1)
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Under the Purchase Agreement, with respect to a Regular Draw Down Notice, if the VWAP falls below the applicable Floor Price on any trading day during the applicable Pricing Period, the Purchase Agreement provides that Hanover will not purchase the pro rata portion of the applicable Draw Down Amount allocated to that trading day. We may not sell shares to Hanover pursuant to a Fixed Draw Down Notice for a Fixed Purchase Price less than the Fixed Floor Price due to certain equity conditions that must be satisfied in order for us to be eligible to deliver a Fixed Draw Down Notice.
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(2)
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The denominator is based on 46,553,147 shares outstanding as of September 2, 2013, adjusted to include the 454,408 Initial Commitment Shares that we are required to issue to Hanover as consideration for its commitment to purchase our common stock pursuant to the Purchase Agreement. The numerator is based on the number of Shares issuable to Hanover under the Purchase Agreement at the corresponding assumed average purchase price set forth in the adjacent column.
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(3)
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Assumed average purchase price is equal to 25% of the closing sale price of our common stock of $0.30 on September 16, 2013.
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(4)
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Assumed average purchase price is equal to 50% of the closing sale price of our common stock of $0.30 on September 16, 2013.
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(5)
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Assumed average purchase price is equal to 75% of the closing sale price of our common stock of $0.30 on September 16, 2013.
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(6)
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Represents the closing sale price of our common stock on September 16, 2013.
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(7)
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Assumed average purchase price is equal to 125% of the closing sale price of our common stock of $0.30 on September 16, 2013.
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(8)
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Assumed average purchase price is equal to 150% of the closing sale price of our common stock of $0.30 on September 16, 2013.
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Hanover has agreed that
during the term of the Purchase Agreement, neither Hanover nor any of its affiliates will, directly or indirectly, engage in any
short sales involving our securities or grant any option to purchase, or acquire any right to dispose of or otherwise dispose for
value of, any shares of our common stock or any securities convertible into or exercisable or exchangeable for any shares of our
common stock, or enter into any swap, hedge or other similar agreement that transfers, in whole or in part, the economic risk of
ownership of any shares of our common stock. Hanover will not be prohibited from selling any of the shares of our common stock
that it owns or that it is obligated to purchase under a pending Draw Down Notice.
The Purchase Agreement
contains customary representations, warranties and covenants by, among and for the benefit of the parties. Before Hanover is obligated
to purchase any Shares pursuant to a Draw Down Notice, certain conditions specified in the Purchase Agreement, none of which are
in Hanover's control, must be satisfied, including the following:
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·
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Each of our representations and warranties in the Purchase Agreement
must be true and correct in all material respects.
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·
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We must have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required to be performed, satisfied or complied with by us.
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·
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The registration statement of which this prospectus forms a part
must be effective under the Securities Act.
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·
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We must not have knowledge of any event that could reasonably be
expected to have the effect of causing the suspension of the effectiveness of the registration statement of which this prospectus
forms a part or the prohibition or suspension of the use of this prospectus.
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·
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We must have filed with the Commission all required prospectus supplements
relating to this prospectus and all periodic reports and filings required to be filed by us under the Exchange Act.
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·
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Trading in our common stock must not have been suspended by the Commission,
the OTCQB or the Financial Industry Regulatory Authority, or FINRA, there must not have been imposed, and we must not have received
any notice of, any suspension of electronic trading or settlement services by The Depository Trust Company, and trading in securities
generally on the OTCQB must not have been suspended or limited.
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·
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We must have complied with all applicable federal, state and local
governmental laws, rules, regulations and ordinances in connection with the execution, delivery and performance of the Purchase
Agreement and the Registration Rights Agreement.
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·
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No statute, regulation, order, decree, writ, ruling or injunction
by any court or governmental authority of competent jurisdiction shall have been enacted, entered, promulgated, threatened or endorsed
which prohibits the consummation of or which would materially modify or delay any of the transactions contemplated by the Purchase
Agreement and the Registration Rights Agreement.
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·
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No action, suit or proceeding before any arbitrator or any court
or governmental authority shall have been commenced or threatened, and no inquiry or investigation by any governmental authority
shall have been commenced or threatened seeking to restrain, prevent or change the transactions contemplated by the Purchase Agreement
or the Registration Rights Agreement, or seeking material damages in connection with such transaction.
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·
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The absence of any condition, occurrence, state of facts or event
having, or insofar as reasonably can be foreseen would likely have, any effect on our business, operations, properties or financial
condition that is material and adverse to us.
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There is no guarantee
that we will be able to meet the foregoing conditions or any of the other conditions in the Purchase Agreement or that we will
be able to draw down any portion of the Total Commitment available under the Purchase Agreement with Hanover.
The obligations of Hanover
under the Purchase Agreement to purchase shares of our common stock may not be transferred to any other party, and none of the
terms or conditions contained in the Purchase Agreement may now be amended or waived by the parties. The registration statement
of which this prospectus is a part will not cover sales by Hanover’s transferees, notwithstanding Hanover’s right to
assign its rights under the Registration Rights Agreement to its affiliates.
The Purchase Agreement
may be terminated at any time by the mutual written consent of the parties. Unless earlier terminated, the Purchase Agreement will
terminate automatically on the earliest to occur of (i) the first day of the month next following the 36-month anniversary of the
effective date of the Registration Statement of which this prospectus is a part, (ii) the date on which Hanover purchases the Total
Commitment worth of common stock under the Purchase Agreement and (iii) the date on which our common stock ceases to be listed
or quoted on an eligible trading market under the Purchase Agreement. We may terminate the Purchase Agreement on one trading day’s
prior written notice to Hanover, subject to certain conditions, without fee, penalty or cost. Hanover may terminate the Purchase
Agreement effective upon one trading day’s prior written notice to us under certain circumstances, including the following:
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·
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The existence of any condition, occurrence, state of facts or event
having, or insofar as reasonably can be foreseen would likely have, any effect on our business, operations, properties or financial
condition that is material and adverse to us.
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·
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We enter into an agreement providing for certain types of financing
transactions that are similar to the equity enhancement program with Hanover.
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·
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Certain transactions involving a change in control of the company
or the sale of all or substantially all of our assets have occurred.
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·
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We are in breach or default in any material respect under any of
the provisions of the Purchase Agreement or the Registration Rights Agreement, and, if such breach or default is capable of being
cured, such breach or default is not cured within 10 trading days after notice of such breach or default is delivered to us.
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·
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While Hanover holds any shares issued under the Purchase Agreement,
the effectiveness of the registration statement that includes this prospectus is suspended or the use of this Prospectus is suspended
or prohibited, and such suspension or prohibition continues for a period of 20 consecutive trading days or for more than an aggregate
of 60 trading days in any 365-day period, subject to certain exceptions.
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·
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Trading in our common stock is suspended and such suspension continues
for a period of five consecutive trading days or for more than an aggregate of 20 trading days in any 365-day period.
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·
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We have filed for and/or are subject to any bankruptcy, insolvency,
reorganization or liquidation proceedings.
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The Purchase Agreement
provides that no termination of the Purchase Agreement will limit, alter, modify, change or otherwise affect any of the parties'
rights or obligations with respect to any pending Draw Down Notice, and that the parties must fully perform their respective obligations
with respect to any such pending Draw Down Notice under the Purchase Agreement, provided all of the conditions to the settlement
thereof are timely satisfied.
We have agreed to pay
to Hanover a commitment fee for entering into the Purchase Agreement equal to $150,000 (or 2.0% of the Total Commitment under
the Purchase Agreement) in the form of 454,408 Initial Commitment Shares, calculated using a per share price of $0.3301, representing
the lowest daily volume weighted average price of a share of our common stock during the three-trading day period immediately preceding
the Closing Date. In addition, as soon as practicable following the effective date of the registration statement of which
this prospectus is a part, we are required to issue to Hanover a number of Additional Commitment Shares equal to the greater
of (i) zero and (ii) the difference of (a) the quotient of (x) $150,000 divided by (y) the greater of (1) the lowest trade price
of a share of our common stock during the period beginning two trading days immediately preceding the effective date of the registration
statement of which this prospectus is a part and ending on such effective date and (2) $0.15, less (ii) 454,408, provided that
in no event will we issue more than an aggregate of 545,592 shares of our common stock, subject to adjustment for any stock splits,
stock combinations, stock dividends, recapitalizations and other similar transactions, as Additional Commitment Shares. The Commitment
Shares are being registered for resale in the registration statement of which this prospectus is a part.
We also agreed to pay
up to $20,000 of reasonable attorneys' fees and expenses (exclusive of disbursements and out-of-pocket expenses) incurred by Hanover
in connection with the preparation, negotiation, execution and delivery of the Purchase Agreement and related transaction documentation.
Further, if we issue a Draw Down Notice and fail to deliver the shares to Hanover on the applicable settlement date, we agreed to pay Hanover, in addition to all other remedies available to Hanover under the Purchase
Agreement, an amount in cash equal to 2.0% of the purchase price of such shares for each 30-day period the shares are not delivered,
plus accrued interest.
The Purchase Agreement
also provides for indemnification of Hanover and its affiliates in the event that Hanover incurs losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses related to a breach by us of any of our representations and warranties under
the Purchase Agreement or the other related transaction documents or any action instituted against Hanover or its affiliates due
to the transactions contemplated by the Purchase Agreement or other transaction documents, subject to certain limitations.
The issuances of the
Commitment Shares and the sale of the Shares to Hanover under the Purchase Agreement are exempt from registration under the Securities
Act pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) of and Regulation
D under the Securities Act.
Registration Rights
Agreement
In
connection with the execution of the Purchase Agreement, on the Closing Date, we and Hanover also entered into
the Registration Rights Agreement. Pursuant to the Registration Rights Agreement, we agreed to file the registration
statement of which this prospectus is a part with the Commission on or prior to the Filing Deadline, which has been extended
to September 20, 2013,to register for resale 7,651,000 shares of our common stock, which includes the 454,408 Initial Commitment
Shares and 545,592 Additional Commitment Shares, and have it declared effective prior to the Effectiveness Deadline. The effectiveness of the registration statement of which this prospectus is a
part is a condition precedent to our ability to sell common stock to Hanover under the Purchase Agreement.
We have agreed to file
with the Commission one or more additional registration statements to cover all of the securities required to be registered under
the Registration Rights Agreement that are not covered by this prospectus, in each case, as soon as practicable, but in no event
later than the applicable filing deadline for such additional registration statements as provided in the Registration Rights Agreement.
We also agreed, among
other things, to indemnify Hanover from certain liabilities and fees and expenses of Hanover incident to our obligations under
the Registration Rights Agreement, including certain liabilities under the Securities Act. Hanover has agreed to indemnify and
hold harmless us and each of our directors, officers and persons who control us against certain liabilities that may be based upon
written information furnished by Hanover to us for inclusion in the registration statement of which this prospectus is a part,
including certain liabilities under the Securities Act.
As discussed above, the
obligations of Hanover under the Purchase Agreement to purchase shares of our common stock may not be transferred to any other
party. Hanover may not assign its rights under the Registration Rights Agreement other than to an affiliate of Hanover. The registration
statement of which this prospectus is a part will not cover sales by Hanover’s transferees, notwithstanding Hanover’s
right to assign its rights under the Registration Rights Agreement to its affiliates. None of the terms or conditions contained
in the Registration Rights Agreement may now be amended or waived by the parties.
The foregoing description
of the Purchase Agreement and the Registration Rights Agreement does not purport to be complete and is qualified in its entirety
by reference to the full text of the Purchase Agreement and Registration Rights Agreement, copies of which have been filed or incorporated
by reference as exhibits to the registration statement of which this prospectus is a part.
PLAN OF DISTRIBUTION
We are registering shares
of common stock that have been or may be issued by us from time to time to Hanover under the Purchase Agreement and upon conversion
of the Convertible Note to permit the resale of these shares of common stock after the issuance thereof by the selling stockholder
from time to time after the date of this prospectus. We will not receive any of the proceeds from the sale by the selling stockholder
of the shares of common stock. We will bear all fees and expenses incident to our obligation to register the shares of common stock.
The selling
stockholder may decide not to sell any shares of common stock. The selling stockholder may sell all or a portion of the
shares of common stock beneficially owned by it and offered hereby from time to time directly or through one or more
underwriters, broker-dealers or agents, who may receive compensation in the form of discounts, concessions or commissions
from the selling stockholder and/or the purchasers of the shares of common stock for whom they may act as agent. In effecting
sales, broker-dealers that are engaged by the selling stockholder may arrange for other broker-dealers to participate. With
respect to the shares of common stock that have been and may be issued pursuant to the Purchase Agreement, Hanover is an
“underwriter” within the meaning of Section 2(a)(11) of the Securities Act, and with respect to any other shares
of common stock, Hanover may be deemed to be an “underwriter” within the meaning of Section 2(a)(11) of the
Securities Act. Any brokers, dealers or agents who participate in the distribution of the shares of common stock by the
selling stockholder may also be deemed to be “underwriters,” and any profits on the sale of the shares of common
stock by them and any discounts, commissions or concessions received by any such brokers, dealers or agents may be deemed to
be underwriting discounts and commissions under the Securities Act. Hanover has advised us that it will use an unaffiliated
broker-dealer to effectuate all resales of our common stock. To our knowledge, Hanover has not entered into any agreement,
arrangement or understanding with any particular broker-dealer or market maker with respect to the shares of common stock
offered hereby, nor do we know the identity of the broker-dealers or market makers that may participate in the resale of the
shares. Because Hanover is (with respect to shares of common stock issued under the Purchase Agreement) and may be deemed to
be (with respect to any other shares of common stock), and any other selling stockholder, broker, dealer or agent may be
deemed to be, an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act, Hanover will
(and any other selling stockholder, broker, dealer or agent may) be subject to the prospectus delivery requirements of the
Securities Act and may be subject to certain statutory liabilities of the Securities Act (including, without limitation,
Sections 11, 12 and 17 thereof) and Rule 10b-5 under the Exchange Act.
The selling stockholder
will act independently of us in making decisions with respect to the timing, manner and size of each sale. The shares of common
stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying
prices determined at the time of sale, or at negotiated prices. These sales may be effected in transactions, which may involve
crosses or block transactions, pursuant to one or more of the following methods:
·
on any national securities exchange or quotation service on which the securities may be listed
or quoted at the time of sale;
·
in the over-the-counter market in accordance with the rules of NASDAQ;
·
in transactions otherwise than on these exchanges or systems or in the over-the-counter market;
·
through the writing or settlement of options, whether such options are listed on an options
exchange or otherwise;
·
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
·
block trades in which the broker-dealer will attempt to sell the shares as agent but may position
and resell a portion of the block as principal to facilitate the transaction;
·
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
·
an exchange distribution in accordance with the rules of the applicable exchange;
·
privately negotiated transactions;
·
broker-dealers may agree with the selling stockholder to sell a specified number of such shares
at a stipulated price per share;
·
a combination of any such methods of sale; and
·
any other method permitted pursuant to applicable law.
In addition, the selling
stockholder may transfer the shares of common stock by other means not described in this prospectus.
Any broker-dealer participating
in such transactions as agent may receive commissions from the selling stockholder (and, if they act as agent for the purchaser
of such shares, from such purchaser). Hanover has informed us that each such broker-dealer will receive commissions from Hanover
which will not exceed customary brokerage commissions. Broker-dealers may agree with the selling stockholder to sell a specified
number of shares at a stipulated price per share, and, to the extent such a broker-dealer is unable to do so acting as agent for
the selling stockholder, to purchase as principal any unsold shares at the price required to fulfill the broker-dealer commitment
to the selling stockholder. Broker-dealers who acquire shares as principal may thereafter resell such shares from time to time
in one or more transactions (which may involve crosses and block transactions and which may involve sales to and through other
broker-dealers, including transactions of the nature described above and pursuant to the one or more of the methods described above)
at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated
prices, and in connection with such resales may pay to or receive from the purchasers of such shares commissions computed as described
above. To the extent required under the Securities Act, an amendment to this prospectus or a supplemental prospectus will be filed,
disclosing:
·
the name of any such broker-dealers;
·
the number of shares involved;
·
the price at which such shares are to be sold;
·
the commission paid or discounts or concessions allowed to such broker-dealers, where applicable;
·
that such broker-dealers did not conduct any investigation to verify the information set out
or incorporated by reference in this prospectus, as supplemented; and
·
other facts material to the transaction.
Hanover has informed
us that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute
the common stock.
Under the securities
laws of some states, the shares of common stock may be sold in such states only through registered or licensed brokers or dealers.
In addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified for
sale in such state or an exemption from registration or qualification is available and is complied with.
There can be no assurance
that the selling stockholder will sell any or all of the shares of common stock registered pursuant to the registration statement,
of which this prospectus forms a part.
Underwriters and purchasers
that are deemed underwriters under the Securities Act may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock, including the entry of stabilizing bids or syndicate covering transactions or the imposition of penalty
bids. The selling stockholder and any other person participating in the sale or distribution of the shares of common stock will
be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder (including, without limitation,
Regulation M of the Exchange Act), which may restrict certain activities of, and limit the timing of purchases and sales of any
of the shares of common stock by, the selling stockholder and any other participating person. To the extent applicable, Regulation
M may also restrict the ability of any person engaged in the distribution of the shares of common stock to engage in market-making
and certain other activities with respect to the shares of common stock. In addition, the anti-manipulation rules under the Exchange
Act may apply to sales of the shares of common stock in the market. All of the foregoing may affect the marketability of the shares
of common stock and the ability of any person or entity to engage in market-making activities with respect to the shares of common
stock.
We have agreed to
pay all expenses of the registration of the shares of common stock pursuant to the registration rights agreement, estimated
to be $26,854.82 in total, including, without limitation, Securities and Exchange Commission filing fees and expenses of
compliance with state securities or “Blue Sky” laws; provided, however, Hanover will pay all selling commissions,
concessions and discounts, and other amounts payable to underwriters, dealers or agents, if any, as well as transfer taxes
and certain other expenses associated with the sale of the shares of common stock. We have agreed to indemnify Hanover and
certain other persons against certain liabilities in connection with the offering of shares of common stock offered hereby,
including liabilities arising under the Securities Act or, if such indemnity is unavailable, to contribute amounts required
to be paid in respect of such liabilities. Hanover has agreed to indemnify us against liabilities under the Securities Act
that may arise from any written information furnished to us by Hanover specifically for use in this prospectus or, if such
indemnity is unavailable, to contribute amounts required to be paid in respect of such liabilities.
At any time a particular
offer of the shares of common stock is made by the selling stockholder, a revised prospectus or prospectus supplement, if required,
will be distributed. Such prospectus supplement or post-effective amendment will be filed with the Commission to reflect the disclosure
of any required additional information with respect to the distribution of the shares of common stock. We may suspend the sale
of shares by the selling stockholder pursuant to this prospectus for certain periods of time for certain reasons, including if
the prospectus is required to be supplemented or amended to include additional material information.
DESCRIPTION OF BUSINESS
Unless the context indicates or suggests
otherwise, references to “we,” “our,” “us,” the “Company,” “Sanwire”
or the “Registrant” refer to Sanwire Corporation, a Nevada corporation and its wholly owned subsidiaries.
Overview
Sanwire was incorporated in the State
of Nevada on February 10, 1997. The Company was formerly named Clear Water Mining, Inc. (February 10 1997 through March 11, 1999),
E-Casino Gaming Corporation (March 2, 1999 through June 21, 1999), E-Vegas.com Inc. (June 22, 1999 through July 20, 2000), 1st
Genx.com Inc. (July 21, 2000 through October 18, 2001), Oasis Information Systems, Inc. (October 19, 2001 through January 27, 2005),
777 Sports Entertainment, Corp. (January 28, 2005 through September 26, 2008) and NT Mining Corporation (September 28, 2008 through
March 8, 2013).
Sanwire aims to be a
global provider of wireless communication services, and data solutions; delivering efficient and reliable communications to our
customers. Sanwire’s goal is to operate a number of vertically integrated portfolio of wireless subsidiaries that are synergistic,
yet offer diversity. Because our philosophy is to acquire wireless companies under Sanwire’s umbrella that can operate independently
with their individual revenue and customer models, each of our subsidiaries must be able to cross sell to other Sanwire subsidiaries,
with respect to both products and customers.
Sanwire plans to grow
organically and through complementary acquisitions in the wireless sector. Currently, Sanwire owns and operates two vertically
integrated wholly-owned subsidiaries:
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·
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iPTerra Technologies, Inc., a Nevada corporation, designs and develops
wireless and/or wireline communication solutions for hazardous environments including underground mines. iPTerra’s flagship
product, the iPMine system, is a real-time 2-way wireless/fiber mine-safety system for the global mining industry. iPMine tracks,
monitors, and communicates with miners and equipment underground and above ground. Our strategy is to acquire customers in the
U.S. underground coal mining industry and evaluate opportunities in other international mine-safety markets.
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·
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Aeronetworks LLC, an Oklahoma limited liability company, provides
advanced telecommunications and broadband services to rural communities and Native American tribes with focus on public safety,
education and healthcare sectors. Aero delivers 4G/LTE, TV White Space, and advanced wireless technologies.
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Background
The Registrant was organized
under the laws of the State of Nevada on February 10, 1997 under the name Clear Water Mining, Inc. with a focus on mining operations.
The Company changed its
business focus during 2007 and in 2008 and completed the changeover to mining exploration and development, which was the concept
utilized when the Company was incorporated. In order to complete the transformation, the Company completed a reverse stock split
during 2008, settled the majority of its liabilities through a share exchange for debt and acquired a privately held Canadian mining
corporation with a single mining asset, former Gold Producer "The Bullmoose Mine", located in the Northwest Territory
of Canada. In 2009 and 2010, the company completed a limited program on the mining properties in Canada, sufficient to maintain
the lease and mineral claims in good standing.
In 2011, the
Company settled litigation it had initiated to assert its interest in the Bullmoose Mine (“Bullmoose”). Under the
settlement, the Company’s acquisition of Bullmoose will be rescinded. More particularly, the 120,000 shares issued by
the company as consideration for the acquisition will be cancelled and $75,000 of the $85,000 paid as part consideration for
the acquisition, will be returned to the Company. The closing date was set for June 30, 2012. Until that date and afterwards,
if the settlement does not close, the Company continues to retain title to Bullmoose.
Technology Intellectual
Property
On January 2, 2013, the
Company signed an exclusive licensing and distribution agreement (the “License Agreement”) to sell and market the iPMine
communication and mine safety system for underground mines for the European continent. The terms of the agreement includes exclusivity
for the European market for a five year term renewable with an additional five year term and first right of refusal to acquire
100% of the iPMine intellectual property. The Company issued 300,000 shares of common stock with a fair value of $300 to the
licensor.
On January 14, 2013,
the Company acquired 100% ownership of newly created iPTerra. for $5,500, which is to be paid to the seller within a one year period
from the closing date. The iPMine system will operate under iPTerra.
On March 22, 2013, the
Company exercised its option under the License Agreement to acquire 100% ownership of the iPMine communication and mine safety
system. The Company acquired 100% of the iPMine intellectual property for total consideration of $10,000,000, comprised of 20,000,000
shares of common stock with a fair value of $20,000 and the assumption of $9,980,000 in debt owing to two companies controlled
by a director of the Company (the director also became the President and Chief Executive Officer of the Company on April 17, 2013).
The debt was non-interest bearing, due on demand, and secured by the iPMine technology. On May 10, 2013, the Company entered into
an agreement to convert the debt into non-interest bearing convertible promissory notes.
Acquisition of Aeronetworks LLC
On May 28, 2013,
the Company completed the acquisition of Tulsa, Oklahoma-based Aeronetworks LLC (“Aero”) and its wholly-owned
subsidiary Birchtree LLC. The Company has broadened its business plan to include wireless application in the mining
sector through the acquisition of iPMine, which is operated under its subsidiary, iPTerra, and Aero plays a role in the
design and deployment of the underground network. iPTerra is a designer, developer, manufacturer and marketer of a real-time
2-way wireless and/or wireline communications, and mine safety solution for the global mining and industrial industry.
Aero provides advanced telecommunications and broadband services to rural communities and Native American tribes with focus
on the public safety, education and healthcare sectors.
On May 28, 2013
the Company completed a stock purchase agreement with all the shareholders of Aero. The Company acquired 100% of the issued
and outstanding shares of Aero and Birchtree LLC by issuing 2,400,000 shares of common stock and 3,000,000 share purchase
warrants in three 1,000,000 share tranches expiring in 2014, 2015, and 2017 at an exercise price per share of $0.50, $0.75,
and $1.00, respectively. The Company also agreed to issue future earn-out performance bonus shares based on revenue growth
and entered into a three year agreement with Aero’s management team.
Strategy
iPTerra Technologies,
Inc.
iPMine, iPTerra’s
flagship product, is a real-time 2-way wireless system that tracks, monitors, and communicates with miners and equipment underground
and above ground. The location information of the miners and equipment is collected and displayed live in real time on one or
more viewing monitoring stations against a background of the mine’s terrain map. We believe iPMine can be deployed in any
mine size.
Our go-to-market strategy
is to create and maintain a reputation as the market leader in underground communications and mine-safety solutions. To leverage
rapid growth, we believe it is imperative to pursue an aggressive multi-channel sales strategy that includes direct and reseller
sales teams. Our market strategy is multi-fold and spans a number of regions with different goals.
iPMine can operate in
a purely wireless environment, based on the Wi-Fi/802.11x standards, or a combination of wireless and fiber. With this approach,
the iPMine system is more flexible and adaptable to underground terrain.
Aeronetworks
Aero provides advanced
telecommunications and broadband services to rural communities and Native American tribes with focus on public safety,
education and healthcare sectors. Aero’s philosophy is to create a three-way partnership among Aero, the rural community
management and its inhabitants/subscriber to Aero’s products and services.
Aero expanded its operations by opening
a new office facility in Santa Fe, New Mexico. This office expansion comes as a result of Aero’s planned growth in the New
Mexico area and the need for a local presence. Rural New Mexico communities have long lagged behind in development of advanced
communication capabilities and Aero sees this as an opportunity to capitalize. The New Mexico office will emphasize cultivating
new relationships with the local business community. Aero will not only gain better relationships with several different agencies
and communities in the area, but also leverage the company’s core strengths in order to improve communication services especially
in rural areas. Aero will develop New Mexico partnerships to bring broadband, cellular and emergency 911 services to Pueblos and
other rural communities in the state that lack access to these vital services.
Aero’s management team has many
years of experience, working in private equity, mergers and acquisitions, partnerships with Native Tribes. Team members have prior
work experience with Level 3, Cox, Sprint/Nextel, Bell Labs, Lucent Technologies, Walt Disney, nine professional sports organizations
and have founded Internet Service Providers, as well as private equity-funded health care companies and private equity firms. Additionally
the team has successfully obtained and implemented USDA Community Connect grants in several states bringing broadband services
to rural communities.
Our mission isto focus on two principal
business opportunities in the State of New Mexico. The first phase of these projects will be to partner with rural communities
and Pueblos to obtain USDA Community Connect grants to bring broadband and telecom services to these underserved areas. Phase two
will be to start a new Wireless Internet Service Provider in Grants, New Mexico. Grants is a city with a population of 10,000,
it is currently served by Cibola Wireless which has 450 local subscribers, and Comcast Cable whose subscriber count is unknown.
Cibola has operated this network since 1998. It serves all of its subscribers from a DS-3 (45 mpbs). All of the network is old
first generation wireless equipment (FSK).
Aero’s products and services have
or will have the following characteristics:
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Designed for sustainability;
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Dual use and multi-use to benefit emergency first responders as well as the community at large,
including medical facilities, schools, government facilities, etc.;
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Subscription service pricing designed to meet client’s operating budget needs;
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Revenue sharing option based on investment in the network construction; and
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Benefits to community economic development, schools, critical community facilities, and emergency
first responder organizations throughout a community or network.
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Products and Services
Current Products and Services
iPTerra Technologies, Inc.
iPMine is a real-time
2-way wireless system that tracks, monitors, and communicates with miners and equipment underground and above ground. The location
information of the miners and equipment is collected and displayed live in real time on one or more viewing monitoring stations
against a background of the mine’s terrain map. We believe iPMine can be deployed in any mine size.
iPMine utilizes the Internet
Protocol technology and Wi-Fi/802.11x wireless mesh network standards to create an in-mine communication network backbone. Our
standards-based solution provides us the ability:
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Ø
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to introduce new features in a much faster timeframe
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lower components pricing; pass savings to customers
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Ø
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Internet Protocol; instant and secured access to the system from
anywhere in the world
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Ø
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can support any standard Wi-Fi device or IP-based application.
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Our solution utilizes
mesh wireless networking technologies that creates multiple paths to increase system availability in case of a node failure. The
data of a failed node is re-routed between nodes which provides continuous network connections.
iPMine consists of three components:
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1)
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iPMine-M8: Tracking and Communication Device
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This is a portable, fully-functional
communications device that miners carry or can be attached to equipment. The iPMine-M8 sends its signals to the iPMine-ZAP (Zone
Access Points) units, which use signal strength to calculate the position of miners or equipment. The iPMine-M8 is based on the
802.11x standards and compliant with domestic and international mine-safety standards. The iPMine-M8 model 810T text-based model
has a multi-line LCD with soft function keys, for easy usability and convenience. The iPMine-M8 Model 810T handheld texting device
received Intrinsic Safety and Part 23 approvals for use in underground coal mines from MSHA; approval no. 23-A080014-0 dated August
21, 2008. Due to the recent acquisition of the iPMine intellectual property by Sanwire, Sanwire has filed an application with MSHA
to re-approve the iPMine-M8 Model 810T device under the iPTerra’s name (MSHA application PAR# 0102247).
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2)
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iPMine-ZAP: Zone Access Point
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These are wireless access points (with a fiber
option), placed throughout a mining terrain, that receive signals from the iPMine-M8 devices and provide an ad-hoc link to the
back-end enterprise servers running the iPMine-VU enterprise application software. The iPMine-ZAPs physical locations create zones
or areas that act as different regions throughout the mine. When a miner/equipment moves from one region to another, the signals
are received by the various iPMine-ZAPs, establishing an in-mine wireless communications network. The iPMine-ZAP Model IM6-XP72
received Intrinsic Safety and Part 23 approvals for use in underground coal mines from MSHA; approval no. 23-A120006-0 dated December
21, 2012. This approval was issued to Immersive Technologies, LLC, a partner and product supplier to us.
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3)
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iPMine-VU: Display, Messaging, and Administration Enterprise Software
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The iPMine-VU enterprise application software
allows control room operators/administrators create multiple mining areas and zones (e.g. active, inactive, restricted, etc.) and
monitor these zones, while concurrently tracking miners/equipment as they move around. The re al-time, 2-way messaging ensures
dependable communication such as SOS notifications, alerts, or messages to miners when they enter restricted zones. Operators and
administrators can also assign security privileges based on job function, and view historical movement and communications information.
The iPMine-VU enterprise application software uses innovative technologies to track, monitor, and interact with miners and equipment.
iPMine-VU supports multi-processing and multi-threading utilizing Microsoft’s Windows environment. iPMine-VU does not require
any government approval.
Aeronetworks – Products and Services
Aero provides advanced
telecommunications and broadband services to rural communities and Native American tribes with focus on public safety, education
and healthcare sectors. Aero’s philosophy is to create a three-way partnership among Aero, the rural community management
and its inhabitants/subscriber to Aero’s products and services. Aero’s operations consist of three strategic business
segments:
1.
BOTT Consulting
and Project Management
The BOTT (Build-Operate-Train-Transfer)
business segment includes all consulting, project management, network construction and network operations contracts, where the
client becomes a service provider and owner. We believe tribes and communities are aware that their success in these projects is
a function of skills and knowledge yet to be achieved.
Their primary caution
comes from experience where certain contractors or vendors have abandoned them after installation is complete. BOTT is defined
as:
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1)
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Build is the capital intensive part of the defined project requiring
technical specification, contract oversight and phased (if necessary) construction.
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2)
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Operate is the start-up and ongoing management of the project so
that the community is served, the tribe and the customers receive superior service and the project is viewed as successful.
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3)
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Training begins as the operating environment is stabilized. Sufficient
training of local and regional workers takes place so that they are able to be assimilated into the ongoing operation or replace
workers during normal attrition.
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4)
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Transfer is the process whereby the tribal entity or the community
gathers adequate confidence to assume managerial and administrative duties adequate to continue on-going operations. Such transfer
may take place over several years and is conducted cautiously so as not to disrupt superior service to the customer.
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BOTT Consulting Services
Overview
Aero offers a suite of
consulting, marketing, and project management services which are customized to our clients’ goals and objectives. In some
cases, Aero may simply provide sales and marketing services for a newly deployed tower site and market coverage. In many cases,
Aero is the general contractor for a startup network provider, and is a strategic partner with the new service provider, establishing
business plans, building the network and the service provider organization, and then training the staff, and transferring the operations
to the client. We believe these multiyear projects generate incremental revenue for Aero, leverage the depth of the Aero management
team, and enable Aero to provide its services multifold to diverse regional clients.
Aero offers a number
of planning services to prospective startup and rural service providers with the goal of growing a client’s broadband service
revenues and profitability. The Build-Operate-Train-Transfer ala carte contract services include the following type of professional
services;
·
Business plans, including capital expenditures and operating expenditures;
·
Establishing CLEC (Competitive Local Exchange Carrier) licensing;
·
Market and competitive analysis;
·
Project funding including private investment and federal/state loans and grants;
·
Service definition, network design and product selection;
·
Project management, procurement, construction and installation;
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Network and services testing and certification;
·
RF (Radio Frequency) engineering, licensed engineering services;
·
Network operations center and business operations support systems;
·
Sales and marketing campaigns;
·
Network operations, service installations, customer support;
·
Call center services; and
·
New technology assessment including intellectual property development.
Obtaining funding for
a client company is a critical milestone for expanding any telecom business. From time to time, Aero may assist a client in developing
the business plan justification and/or application to secure capital for network infra-structure build-out from a variety of sources
including government grants and loans. Aero’s goal is to partner with clients and build a sustainable broadband business.
2.
Network and
Infra-structure Services and Technologies
In some markets, Aero
operates as the Network Service Provider either through wholesale agreements, Aero infrastructure, or Virtual Network Operator
(VNO) agreements.
Aero provides service
infrastructure to broadband service providers and private networks. In most rural markets, Aero offers quad play services including;
Internet Access, VoIP (Voice over IP), IP Television, and 4G/LTE mobile services for business and residential customers. Aero
offers the following broadband services:
·
Ethernet Services: Industry leading Ethernet transport services including VPN, QOS, encryption,
management for mission critical applications with bandwidths from 10 Mbps to 1 Gbps.
·
Broadband Access: Economical last mile access solutions via fiber, microwave, and Ethernet
over copper technologies and satellite.
·
Internet Access: Dedicated and shared Internet access services based on company and community
needs.
·
Fixed Wireless Access: WiFi, WiMAX, and TV White Space access.
·
Cellular Service: 3G and 4G/LTE cellular services.
·
Cloud Based Services including; VoIP and VoIP-PBX services, video conferencing, telemedicine,
distance education, and ala carte IPTV.
·
Broadband Satellite Service: In many remote areas of the US and the World satellite service
is the only readily available Broadband service. Aero, through its partners, provides services for communities and mobile industry
needs.
Aero strives to adopt
the most advanced communications technology in its service offerings. We believe our competitive advantage in the market is most
often achieved by using the best high performance technologies. The following are some examples of leading edge technologies, which
Aero uses in the access network, the transport network, and the service cloud. Summary of our advanced wireless technologies, transport
technologies, and service layer cloud offerings:
TV White Space Access
Point Radio
: TV White Space (TVWS) Access Points bond together unused analog TV channels, which in rural markets often providing
over 50MHz of bandwidth. Spectrum use is licensed with the FCC, making TVWS very attractive for rural WISP operations. Non-LOS
(Line of Sight) coverage is achieved using channels in the TV White Space spectrum ranging from 470 – 698 MHz.
3G/4G LTE/WiFi Multiband
SDN Radio
: Mobile service providers are rapidly deploying advanced small cell deployment to offload voice and data traffic
from macro cell sites as well as provide new services to the enterprise. We believe Software Defined Network (SDN) Radios should
result in capital expenditures and operating expenditures savings along with higher traffic capacity.
High Capacity Satellite
Technology
: The latest modulation technique used for satellite links more than doubles the capacity per Hz using a 5 bit per
Hz modulation method.
MPLS Transport
:
With the adoption of MPLS (MultiProtocol Label Switching) Transport with LTE (Long Term Evolution) networks, now all the traffic
from cell towers can be backhauled to the core network nodes using MPLS of Ethernet.
Unified VoIP Cloud
Technology
: Using unified communication software in the Cloud, a global Voice over IP communication system can be built based
on the SIP protocol.
Adaptive IP Video
Conferencing
: Dynamic IP Video Conferencing is being rapidly adopted for distance learning, business conferences, and telemedicine
applications.
3.
Customized
Solutions
The third business segment
is Aero Customized Solutions targeted at industry specific service needs and opportunities; including public safety, telemedicine,
and distance learning:
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Public Safety Services: Public-private networks serving towns
and communities with unique public safety features including priority-calling, crime alerts, public safety alerting, cell-broadcast,
video surveillance technologies, and other applications derived from U.S. military, U.S. National Security Agency, and government
programs.
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Telemedicine Services: Complete telemedicine solution for rural medical
clinics, which connects rural clinics with host medical hospitals for patient care, medical diagnostics, and doctor consultation.
The solution consists of the rural clinical medical equipment, broadband communications, and host medical hospital support systems
for records management, secure/private communications, and billing management. Portable solutions and equipment are available for
emergency responders, ambulance services, and other mobile medical care personnel.
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Distance Learning Services: Complete distance learning and education
systems for schools, colleges, and communities. The distance learning solutions leverage cloud based media storage, streaming video
content delivery over broadband networks, and unified IP video communications conference for real time education and on-demand
self paced study.
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Products and Services in Development
iPTerra Technologies,
Inc.
iPTerra’s product
development cycle is largely dictated by funding, market conditions and feedback from our customers and partners. To that end,
iPTerra has identified the following features to be developed at a later stage:
Ø
Fully functional iPMine-M8 Model 925V voice handheld device;
Ø
Built-in gas detection in our iPMine-M8 Model 810T handheld devices;
Ø
Expanded voice and streaming video;
Ø
Expanded HR/Crew management;
Ø
Location-based services (LBS) alerts; and
Ø
Rescue management & dispatch.
We believe the barriers
to entry include:
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Ø
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Long product approval process by MSHA’s certification body.
The iPMine product fully meets MSHA’s requirements for deployment in underground coal mines;
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|
Ø
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Extensive testing in an underground coal mine. The iPMine system
was deployed and installed as a pilot project at the Mt. Laurel underground coal mine located in Logan, West Virginia (Mingo county);
and
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Long research and development cycle. Several years in product development
has been invested to create the iPMine intellectual property.
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Aeronetworks
Aero’s product
and services development cycle is driven by market opportunities and our ability to take market share from small local service
providers. With the goal of growing our service and solution revenues, Aero has identified the following services and industry
vertical solutions to develop future offerings:
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TV White Space Fixed Wireless services;
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IPTV Video Broadcast and Video on Demand services;
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Public Safety Networks services for schools, university campus, and
cities;
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Event Center Broadband services for facility, vendors, and public
use;
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Private Network for ATM (Automated Teller Machine) and financial
transactions;
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Mobile Broadband service for traveling venues including circus, music
festivals; and
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Unified Hotel VoIP and Facilities Management services.
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Revenues and Customers
iPTerra Technologies
For near-term revenue
growth, iPTerra will focus on selling its iPMine product to underground coal mines in the United States, which are mandated by
the MINERS Act of 2006 to purchase and deploy a system like iPMine. In addition, we believe there’s a growing need for our
products in other underground metal and non-metal mining opportunities. As the product installs mature, we believe there are other
opportunities in other harsh environments which are not mining related, such as chemical plants, refineries, etc.
iPTerra’s revenue
generation model is to sell through direct and indirect sales channels. We offer an integrated system to our customers that include:
·
Handheld devices, zone access points, and enterprise software
·
Installation services;
·
System training targeted to different levels: management, supervisors, and miners;
·
On-going support and system updates;
·
Optional enterprise computer system; if requested by the client.
Aeronetworks
Aero’s primary
customer base resides in the rural community and tribal nations throughout the U.S. We believe as projects in these venues develop,
by their nature, they begin to overlap into neighboring cities and towns. Such an overlap creates potential additional customers
and potential recurring revenue. As the chart shows the, Creek Nation project is a good example of that overlap.
Adding
to what we believe are the vast opportunities in the Native American and rural communities, Aero is in discussion with the Assiniboine
and Sioux Tribes in northern Montana to provide telecommunications products and service to tribe members, srounding areas and
businesses. The tribal geography is directly in the path of the vast Bakken Oil Reserve (as the map below shows).
We believe the tribal
government along with Aero are in a unique position to benefit and profit from the continued growth and development of the Bakken.
A recent study by the Montana World Trade Center found that, “high oil prices coupled with an evolution of drilling technology
and a greater understanding of the underlying geology have enable independent oil companies to rapidly increase Bakken production.
Using these new technologies, the Bakken is now pumping more oil than Alaska and it will soon surpass Texas to become the country's
largest oil production center. The Bakken, the largest oil formation in the Western Hemisphere, encompasses some 25,000 square
miles of North Dakota, Montana, Saskatchewan, and Manitoba. Already, oil production activities in western North Dakota and eastern
Montanan have overwhelmed the area's ability to provide the services and products needed to support and expand operations there.”
As Aero brings the benefit
of broadband and wireless to the benefit of the tribal community, some of its tribal clients have already declared their intent
to become their own telecom with the assistance of Aero. We believe additional benefits from such service establishment is that
enterprise and oil field demand for service, signal, communications and infratructure will be met by the alliance of Aero and the
Assiniboine and Sioux Tribes.
Intellectual Property
Our success depends in
part upon our ability to protect our core technology and intellectual property. To establish and protect our proprietary rights,
we will rely on a combination of patents, patent applications, trademarks, copyrights, trade secrets, including know-how, license
agreements, confidentiality procedures, non-disclosure agreements with third parties, employee disclosure and invention assignment
agreements, and other contractual rights.
We own 100% of the iPMine
intellectual property. The Company does not have a patent for the iPMine intellectual property and has not applied for a patent
application. The Company will evaluate a patent filing in the future.
Aero has identified several
services and technologies which are proprietary, and potentially patentable. Based on their value and importance to our business
and the industry, Aero will file copyrights, trademarks, and patents and licensing agreements to fully protect Aero intellectual
property.
Manufacturing and Suppliers
iPTerra Technologies
Our products
are currently designed for low-volume automated assembly and manufacturing in North America. Our North American contract manufacturers
and original design manufacturers typically obtain some or all required material from overseas markets. Our products must be manufactured
with our specific bill of materials (BOM) to meet MSHA approval standards and requirements. Our manufacturers typically insert
parts onto the printed circuit board, with most parts automatically inserted by machine, solder the circuit board, and test the
completed assemblies. Final packaging is sometimes performed by the contract manufacturer. For the North American and many other
markets, packaging is often performed at manufacturing facilities in North America, allowing us to tailor the packaging and its
contents for our customers prior to shipping. We, sometimes, perform component sourcing or ask our contract manufacturers to source
our components and get their volume discount pricing. Wherever our products are built, we perform our own quality testing and install
specific micro code to enable the products to work with our end-to-end system.
We usually
use one primary manufacturer for a given design. We sometimes maintain back-up production tooling at a second manufacturer for
our products. Our manufacturers are normally adequate to meet reasonable and properly planned production needs; but a fire, natural
calamity, strike, financial problem, or other significant event at an assembler's facility could adversely affect our shipments
and revenues.
Our products
include off-the-shelf parts, most of which are available from multiple sources with varying lead times. However, most of our products
include a sole-sourced wireless chipset as the most critical component of the product. For our handheld devices, we purchase our
wireless chipsets from Digi International. For our Zone Access Points, we have multiple vendors that our complete unit supplier
purchases the wireless chipsets. Serious problems at any of our wireless chipset manufacturers would probably impact our ability
to deliver our products in a timely fashion.
We
cannot assure that our chipset suppliers will, in the future, continue to sell or support our required chipset. Although most
chipset suppliers would provide us with enough notice of their decision to discontinue a certain product line, we would
require development time to include replacement chipset into our products and we
may be
required to get our
products re-approved by MSHA; albeit rapid approval process referred to as a Revised Approval Modification Program (RAMP) up
process.
We are also
subject to price fluctuations in our cost of goods. Our costs may increase if component shortages develop, lead-times stretch out,
or fuel costs continue to rise.
We retain contract manufacturers
to manufacture, and control the quality of our products. We will, at all times, request from manufacturers to ship our products
to a designated facility for us to install specific micro code and perform a series of final quality test process. We utilize contract
manufacturers located in North America only. Our relationships with contract manufacturers allow us to conserve working capital,
reduce manufacturing costs and minimize delivery lead times while maintaining high product quality and the ability to scale quickly
to handle increased order volume. We make substantially all of our purchases from our contract manufacturers on a purchase order
basis. We expect that it would take approximately three to six months to transition manufacturing, and quality assurance to new
providers. We, at all times, ship our products directly to our customers.
We rely on third party components
and technology to build and operate our products, and we rely on our contract manufacturers to obtain the components, subassemblies
and products necessary for the manufacture of our products. While components and supplies are generally available from a variety
of sources, we and our contract manufacturers currently depend on a single or limited number of suppliers for several components
for our products. We and our contract manufacturers rely on purchase orders rather than long-term contracts with these suppliers.
For our handheld devices, they incorporate components from Digi International and we do not have a second source for their chipsets.
We do not stockpile chipsets to
cover the time it would take to re-engineer our products to replace the Digi International chipsets for our handheld devices. If
we need to seek a suitable second source for these chipsets, there can be no assurance that we would be able to successfully source
our chipsets on suitable terms, if at all. In any event, our use of chipsets from multiple sources may require us to significantly
modify our designs and manufacturing processes to accommodate these different chipsets.
Aeronetworks
Aero does not manufacture product directly
or through third party sources. Original Equipment Manufacturer (OEM) or private labeled opportunities may arise in the future
at which time Aero will evaluate the potential benefit for the company.
Distribution and Marketing
iPTerra Technologies
Our iPMine go-to-market
strategy is to create and maintain a reputation as the market leader in underground communications and mine-safety solutions. We
plan to pursue an aggressive multi-channel sales strategy that includes direct sales force and indirect sales force.
Direct sales efforts
consist of direct contact with customers who will purchase the iPMine system directly from us. Indirect sales efforts might consist
of a combination of product resellers and strategic partnerships with key coal industry product and service providers to resell
the iPMine system. Under the indirect sales model, we will provide an incentive to the indirect sales channel to place our products
at end-users operations. Such incentives include, but are not limited to, volume product discounting.
From a marketing perspective,
we anticipate participating in coal industry trade shows, conferences, advertise in coal journals and publications, and promote
our website.
Aeronetworks
Aero markets to specifically
targeted tribal entities and rural communities. Aero conducts research using mapping data, relationships with federal, state and
regional officials and direct contact with tribal officials to determine areas of need. Additionally, Aero maintains relationships
with contractors, engineers, industry professionals and subject matter experts to identify and target opportunities.
We believe, based on
our experience, that tribal entities are cautious about vendors and providers because many past providers have simply been interested
in selling goods and failed to provide support, on-going maintenance or service. Some tribes, in the past, had invoked sovereign
status and failed to compensate their providers for equipment or services rendered. Aero strives to developed regional relationships
with entities and individuals that will manage Aero’s business contacts.
Markets
iPTerra Technologies
As a result of the January
2006 two deadly accidents in underground coal mines, the U.S. government enacted the MINERS Act of 2006 mandating every underground
coal mine to implement and deploy a mine-safety system such as the iPMine product. The U.S. federal enforcement agency, MSHA, has
set stringent requirements for mine-safety solution providers that they must meet. The
barriers to entry
are significant
and they include:
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Long product approval process by MSHA’s certification body.
The iPMine product fully meets MSHA’s requirements for deployment in underground coal mines;
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Extensive testing in an underground coal mine. The iPMine system
was deployed and installed as a pilot project at the Mt. Laurel underground coal mine located in Logan, West Virginia (Mingo county);
and
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Long research and development cycle. Several years in product development
has been invested to create the iPMine intellectual property.
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Underground Coal Mines
U.S. Market: Short-Term
(commences in 2013)
: sell the iPMine solution and services to the U.S. underground coal mining industry. This market will
generate near-term revenues for Sanwire since all underground coal mines are mandated by a federal law to deploy a wireless mine-safety
system. Once a system is deployed, it provides an attractive growth opportunity because underground coal mines are continually
growing on daily/weekly basis. As the coal mine expands, additional Sanwire equipment and services will be required to continue
to meet the federal mandate. Sanwire will work with early adopters/customers to ensure system stability, and implement new features
as requested by the mine operators to increase iPMine’s product depth. With over 500 underground coal mines in the U.S.,
this market provides an excellent foundation to establish a base client as references for other opportunities.
Chinese Market:
Mid-Term (commences in early 2015)
: sell the iPMine solution and services to Chinese underground coal mines. With over
12,000 coal mines in China (
source: MINING.com February 9, 2013 article
), China is the world’s largest coal producer,
and coal production is by far the largest in China. Most of these mines are small. In recent years, the Chinese central government
mandated all small mines to either sell to larger operations, or combine several small operations to create a medium-large operation.
We estimate there are approximately 5,000 medium and large underground coal mines in China; this is iPTerra’s addressable
market. Our strategy is to work with government agencies and reputable local partners to penetrate the Chinese market.
Other International
Markets: Long-Term
(commences in early 2016)
: sell the iPMine solution and services to other international
markets such as India, Australia, Russia, South Africa, Indonesia, and selected countries in Latin America. There are other markets
that Sanwire will explore based on opportunities and those include Turkey, Poland, Mongolia, and Kazakhstan.
Underground Non-Coal
Mines
With no modifications
to the current iPMine solution, Sanwire can deploy the system in underground non-coal mines such gold or silver mines. This presents
iPTerra with a sizable opportunity.
Non-Mining Opportunities
With minimal modifications
to the current iPMine solution, Sanwire can explore market entry into other harsh environments such as oil refineries and chemical
plants. Sanwire believes there’s a great opportunity to deploy a safety and communication system into these markets, where
they have similar needs as the underground mining operations in that to track, monitor, and communicate with their work force and
outside contractors that work on-site.
Aeronetworks
Aero focuses on core
areas of service to open client and customer contract opportunities. The three areas of core service are: (1) distance learning
and remote education, (2) tele-medicine and remote health care, and (3) public safety, security, early warning and disaster preparation.
These service areas can be seen in varying degrees of need by the community or the tribal government but are the easiest issues
to focus on and for the potential customer to relate to. Broadband service is the common denominator by which the service can be
delivered to the community.
From the onset of Aero’s
discussion with a community or a tribe, Aero’s effort is to keep the message simple so that the customer can digest the information.
Aero understands that the community or the tribe may be inundated with service offerings and thus become overwhelmed. Aero seeks
the highest category of need as defined by the community or the tribe and focus on solving that issue first.
1.
Distance
Learning
Distance Learning requires
preparation by Aero and the education providers on-site and the originating institution to coordinate the level of course, the
number of students and teachers and the sustained service level agreement to deliver uninterrupted programs and classes. For students
enrolled in online universities, classes can be completed using computer labs located throughout campuses. There are advantages
and disadvantages of both distance and online classes:
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Distance classes are generally taught in the traditional setting
– students and instructor in the classroom. The cohort involves students from other universities linked together. Some instruction
may be delivered via telecom.
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Online classrooms, or virtual classrooms, allow students 24/7 access
to individual classrooms to complete their studies. Students generally work from home and are assigned an individual academic mentor,
with whom they meet weekly for guidance until completion.
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Cost of attendance varies at each university. Some schools charge
by the credit while others charge by the semester. Financial aid assistance is offered at each of our partner universities with
some awarding scholarships for students displaying financial need and/or ethnicity.
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Distance education classes generally start and end on certain dates,
whereas online classes can be started monthly, allowing students to begin when it is convenient.
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2.
Tele-Medicine
Tele-Medicine for rural
communities is a critical need nationwide. The lack of medical help in smaller towns and remote areas is a common need and one
which has been given targeted grant backing by the federal government. Aero strives to bring telemedicine to tribes on various
broadband backbone installations.
The provision of broadband
allows the local and regional leadership prioritize which public sector entities receive enhanced service, state of the art equipment,
legacy conversion and jobs growth. Aero receives the long term benefit of becoming a member of the community, sales of enhanced
service to enterprise customers, residual retail revenue and wholesale pricing nationwide.
3.
Public Safety
Public-private networks
serving towns and communities with unique public safety features including priority-calling, crime alerts, public safety alerting,
cell-broadcast, video surveillance technologies, and other applications derived from U.S. military, U.S. National Security Agency,
and government programs.
Industry
iPTerra Technologies
iPTerra’s overall
industry penetration will be in harsh environments; providing wireless communications (voice and text), monitoring, tracking, and
safety solutions. Harsh environments can be underground mines, oil refineries, chemical plants, or other installations where there’s
a great deal of challenging environmental factors to operate. To generate revenue in the near term, our initial go-to-market strategy
will focus on underground coal mines in the U.S.
The mine accidents of
2006 in the U.S., as well as the passage of the MINER Act of 2006 by Congress, have highlighted the need for improved safety capabilities
in the nation’s underground coal mines. These safety capabilities include not only improved breathing apparatuses and emergency
shelters, but also the systems necessary for mine operators and mine rescue teams to communicate with and locate miners in both
every day and emergency situations. We believe this underground coal market in the U.S. will generate revenues in the near term
for us since all underground coal mines are mandated by a federal law to deploy a wireless mine-safety system, such as the iPMine.
Once a system is deployed, it provides an attractive growth opportunity because underground coal mines are continually growing
on weekly/monthly basis. With over 500 underground coal mines in the U.S., this market provides a solid foundation to establish
a base client as references for other opportunities.
With no modifications
to the current iPMine solution, we can deploy the iPMine system in underground non-coal mines such gold or silver mines. This presents
a sizable opportunity for us.
With minimal modifications
to the current iPMine solution, we can explore market entry into other harsh environments such as oil refineries and chemical plants.
We believe there’s a great opportunity to deploy a safety and communication system into these markets, where they have similar
needs as the underground mining operations in that to track, monitor, and communicate with their work force and outside contractors
that work on-site.
Aeronetworks
The telecom industry
is highly competitive with several service providers in most markets except for the most rural markets. To remain competitive,
carriers must reinvest in the infrastructure adopting the newest telecom technologies. The life cycle of many telecom networks
may be as small as a decade or less. For example in the cellular industry, service providers have migrated their networks from
2G, to 3G, and currently to 4G/LTE. Because of the competition, and the competitive need, most telecoms are well capitalized public
companies.
A huge change in the
US telecom industry is the FCC (Federal Communications Commission) policy and laws which are ending the federal subsidies for telephone
service in rural markets. The government and FCC regulators plan to stimulate broadband networks throughout the US, by creating
federal subsidies for broadband service.
Because of these important
policy and regulatory changes, Aero is well positioned to capitalize on the new broadband subsidies. Most traditional service providers
with POTS (Plain old Telephone Service) face a large drop in revenue with the removal of telephone cost subsidies.
The telecom industry
of the future will use IP for all its services. Many networks today are converging on quad play services which are all Internet
Protocol based. Voice, video, data, and mobile services will all be IP. Voice over LTE may be the last non IP protocol, but once
it hits the cell tower its converted to IP.
Competition
iPTerra Technologies
Competition in mine-safety
and communication is diverse, and fall into two categories: analog-based and digital-based solutions (the iPMine system is digital).
Analog Solutions
The analog-based solution
utilizes very old “Leaky Feeder” technology. A typical system consists of a coaxial cable, spliced in pre-determined
locations/distances, that acts as the medium to transport and “leaks” signals, walkie-talkie radio handsets to communicate,
and amplifiers to boost signals. There are numerous disadvantages of this type of technology, including poor voice quality, limited
data capability, service interruptions, difficulty of repair, and limited range.
Digital Solutions
Digital-based solutions
can be further broken down to 1-way and 2-way communication (the iPMine system is a digital 2-way communication system).
Solutions based on 1-way
communication are basically a tag scanner without any messaging capability. A typical system consists of RFiD tags that are attached
to miners’ hardhats, a cable technology (either fiber or coaxial), tag readers clamped on the cable, tag reader amplifiers
(not always) to increase the tag scanning distance, and a software management system. The disadvantages of this type of solution
include limited miner to control center interaction, inaccurate and limited information regarding miner locations, and inability
to communicate during accidents.
Solutions based on 2-way
communication consist of a network of wireless nodes/access points, handheld devices (text messaging or voice), and software management
system. The wireless nodes are further categorized as standards-based (Wi-Fi/802.11x, or ZigBee/802.15.4), or proprietary. The
iPMine system is a 2-way communication system utilizing the Wi-Fi/802.11x standards.
The main disadvantage
of a ZigBee-based network is the low data rate, typically less than 100 kbps. With such a low data rate, it would be very challenging
for a network to service 100+ devices simultaneously sending and receiving large amount of data/packets. The disadvantages of a
proprietary-based network include slower availability of new products, prohibitive costs, and slower product development.
The Wi-Fi/802.11x
wireless technology platform offers a superior experience compared to other wireless technologies. The data speed is much
faster than other wireless networks. Because they are widely used in many areas, the cost has become very attractive,
networks have become faster, and a myriad of diagnostic tools and applications are readily available.
iPMine Competitive
Advantages
iPMine can operate in
a purely wireless environment, based on the Wi-Fi/802.11x standards, or a combination of wireless and fiber. With this approach,
the iPMine system is more flexible and adaptable to underground terrain. We believe iPMine has a number of competitive advantages
that makes it a premium solution, including:
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Sanwire is the owner and developer of the iPMine intellectual properties
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Design own devices, firmware, and software from the ground up
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Work with customers to enhance and build additional features in an
expeditious way
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Provide faster customer support, knowledge of our products
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Introduce new features faster
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Technology based on 802.11x standards provides off-the-shelf components
at a lower cost; pass savings to customers
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Internet Protocol; instant and secured access to the system worldwide
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One system that supports data, messages, videos, and voice devices;
no need to deploy multiple systems
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Instant interaction between control center and underground operation
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Make decisions with the most accurate and up-to-date information
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Dynamic operational map/layout management
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Upload any map; divide map into areas with multi viewing stations
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Miners’ movement super-imposed on actual map
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Audit trail playback of miners’ movement
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Select specific date/time
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View in graphical presentation
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Look at specific events and confirm specific events
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iPMine Competitive
Disadvantages
Cost
. The iPMine
system is more expensive than analog systems and 1-way digital solutions. However, we believe it is priced competitively with other
2-way digital solutions.
Expertise
. Because
the iPMine system employs a true wireless environment, it requires network design knowledge to make the system perform optimally.
Smaller size customers may lack such in-house expertise.
Aeronetworks
AT&T, Verizon, Sprint,
US Cellular and other “mega” telecoms could be considered our competition. In general, they possess the capacity and
depth to enter any market they wish. However, the past decade has shown that these large companies are not interested in rural
and tribal markets by their lake of presence there and by the fact that if they happen to serve one of these communities, they
do so in a degraded manner. The large companies have, for the past decade, been encouraged by the federal government to use the
Universal Services Fee funds to build-out rural America.
The fact that so
little build-out actually took place resulted in the federal government redefining the use of the Universal Services Fee
Funds to encourage smaller entrepreneurs like Aero to focus on the rural and tribal build-out. Grants that underwrite the
capital expenditures required in the rural settings now are making it possible for tribes and rural communities to partner
with Aero to become their own telecoms as well as internet and wireless providers.
Aero attempts to work
with Competitive Local Exchange Carriers when feasible. Many small and regional carriers face cloud based service challenges and
the inability to access adequate credit to provide full service. Aero fills that gap and creates win-win situations for the tribe
and the rural community.
Government Regulation
iPTerra Technologies
All electronic devices
deployed in an underground coal mine must receive MSHA’s approval and certification in accordance with Communication Equipment
and Signaling Devices per 30 CFR Part 23. The standard application procedure applies to all applications submitted for approval
or extension of approval of mine communication equipment, signaling devices, or systems pursuant to Part 23 of Title 30 of the
Code of Federal Regulations (30 CFR Part 23). Once a device is approved and receives Part 23 approval, an applicant may make changes
to the original design and re-submits for a new approval under a process known as RAMP (Revised Approval Modification Program).
The iPMine-M8 Model 810T
handheld texting device received Intrinsic Safety and Part 23 approvals for use in underground coal mines from MSHA; approval no.
23-A080014-0 dated August 21, 2008. Due to the recent acquisition of the iPMine intellectual property by Sanwire, Sanwire has filed
an application with MSHA to re-approve the iPMine-M8 Model 810T device under the iPTerra’s name (MSHA application PAR# 0102247).
The iPMine-ZAP (Zone Access Point) received Intrinsic Safety and Part 23 approvals for use in underground coal mines by the U.S.
Department of Labor’s Mine Safety and Health Administration (“MSHA”); approval no. 23-A120006-0 dated December
21, 2012. This approval was issued to Immersive Technologies, LLC, a partner and product supplier to us. For product installation
in underground coal mines, we rely on certified installers.
Future new products developed
in-house or by our partners, must undergo a rigorous MSHA approval process that takes months to obtain product certification. There
are no guarantees that any of iPMine’s future products will receive MSHA approval. For existing MSHA-approved products, any
changes/updates are done through a process called a RAMP which is an expedited version of the full blown new product approval process.
The MINER Act of 2006
The Mine Improvement
and New Emergency Response Act of 2006, also known as the MINER Act, was signed by President George W. Bush on June 15, 2006. This
legislation, the most significant mine safety legislation in 30 years, amends the Mine Safety and Health Act of 1977 and contains
a number of provisions to improve safety and health in U.S. mines. In summary, the MINER Act mandates every underground coal mine
in the U.S. to deploy and install a wireless communications, monitoring, and tracking system like the iPMine system.
Aeronetworks
Aero is
subject to federal, state and local regulation. We have various regulatory authorizations for our regulated
service offerings. At the federal level, the FCC generally exercises jurisdiction over facilities and services of
common carriers, such as Aero, to the extent those facilities are used to provide, originate or terminate interstate or
international telecommunications services. State regulatory commissions generally exercise jurisdiction over
common carriers’ facilities and services to the extent those facilities are used to provide, originate or terminate
intrastate telecommunications services. In particular, state regulatory agencies have substantial oversight over
the provision by incumbent telephone companies of interconnection and non-discriminatory network access to competitive
providers. In addition, local governments often regulate the public rights-of-way necessary to install and operate
networks, and may require service providers to obtain licenses or franchises regulating their use of
public rights-of-way. Municipalities and other local government agencies also may regulate other limited aspects
of our business, by requiring us to obtain cable franchises, construction permits and to abide by building codes.
We believe
that competition in our service areas will continue to increase in the future as a result of the Telecommunications Act
of 1996 (the “1996 Act” or the “Telecommunications Act”) and actions taken by the FCC and state regulatory
authorities, and through increased deployment of various types of technology, although the ultimate form and degree of competition
cannot be predicted at this time. Competition may lead to loss of revenues and profitability as a result of loss of
customers; reduced usage of our network by our customers who may use alternative providers for voice and data services; and reductions
in prices for our services which may be necessary to meet competition.
Some legislation
and regulations are, or could in the future be, the subject of judicial proceedings, legislative hearings and administrative proposals
or challenges which could change the manner in which the entire industry operates. Neither the outcome of any of these
developments, nor their potential impact on us, can be predicted at this time. Regulation can change rapidly in the
telecommunications industry, and such changes may have an adverse effect on us.
Employees
Because of the nature
of our businesses, we rely on a core group of management consultants and retain the services of outside professionals and contractors
to deliver services to us. Sanwire’s core management consultants totals seven. Every individual that provides services to
Sanwire, full time or part time, must execute an appropriate non-disclosure and/or a consulting agreement. We believe our relations
with our staff are good. None of our staff members are subject to collective bargaining agreements.
One of the most significant
strengths of Sanwire is its team. The team’s extensive knowledge in building world-class organizations and the development
of leading-edge wireless technology provides Sanwire with the necessary vision and dedication.
DESCRIPTION OF SECURITIES
TO BE REGISTERED
General
The following summary
includes a description of material provisions of our capital stock.
Authorized and Outstanding
Securities
The Company is authorized
to issue 750,000,000 shares of common stock, par value $0.00001 per share. As of September 2, 2013, there were issued and outstanding
46,553,147 shares of our common stock.
Common Stock
The holders of our common
stock are entitled to one vote for each share on all matters to be voted on by the shareholders. Holders of common stock do not
have cumulative voting rights. Holders of common stock are entitled to share ratably in dividends, if any, as may be declared from
time to time by the board of directors in its discretion from funds legally available therefore. In the event of a liquidation,
dissolution or winding up of the Company, the holders of common stock are entitled to share pro rata all assets remaining after
payment in full of all liabilities. Holders of common stock have no preemptive rights to purchase the Company’s common stock.
There are no conversion or redemption rights or sinking fund provisions with respect to the common stock.
Dividends
Dividends, if any, will
be contingent upon our revenues and earnings, if any, capital requirements and financial conditions. The payment of dividends,
if any, will be within the discretion of our board of directors. We intend to retain earnings, if any, for use in its business
operations and accordingly, the board of directors does not anticipate declaring any dividends in the foreseeable future.
Convertible Notes
We issued the Convertible
Note to Hanover on July 31, 2013 in the initial principal amount of $405,000 for a purchase price of $300,000, representing an
approximately 25.93% original issue discount. We are registering the shares of common stock underlying the Convertible Note. For
a complete description of the Convertible Note, reference is made to the section entitled “Prospectus Summary” above,
which is incorporated herein by reference.
Registration Rights
Note Registration
Rights Agreement
In
connection with the execution of the Note Purchase Agreement, on July 31, 2013, Hanover and we also entered into a registration
rights agreement, which we refer to as the Note Registration Rights Agreement. Pursuant to the Note Registration Rights Agreement,
we agreed to file the registration statement of which this prospectus is a part with the Commission to register for resale 1,890,000
shares of our common stock into which the Convertible Note may be converted, on or prior to September 3, 2013, and have it declared
effective at the earlier of (i) the 75
th
calendar day after July 31, 2013 and (ii) the fifth business day after
the date we are notified by the Commission that the registration statement will not be reviewed or will not be subject to further
review. Prior to September 3, 2013, we and Hanover agreed to extend the filing deadline to September 20, 2013.
We have agreed to file
with the Commission one or more additional registration statements to cover all of the securities required to be registered under
the Note Registration Rights Agreement that are not covered by this prospectus, in each case, as soon as practicable, but in no
event later than the applicable filing deadline for such additional registration statements as provided in the Note Registration
Rights Agreement.
We also agreed, among
other things, to indemnify Hanover from certain liabilities and fees and expenses of Hanover incident to our obligations under
the Note Registration Rights Agreement, including certain liabilities under the Securities Act. Hanover has agreed to indemnify
and hold harmless us and each of our directors, officers and persons who control us against certain liabilities that may be based
upon written information furnished by Hanover to us for inclusion in the registration statement of which this prospectus is a part,
including certain liabilities under the Securities Act.
Registration Rights
Agreement
In connection
with the execution of the Purchase Agreement, on the Closing Date, we and Hanover also entered into a registration
rights agreement dated as of the Closing Date, which we refer to as the Registration Rights Agreement. Pursuant to the
Registration Rights Agreement, we agreed to file the registration statement of which this prospectus is a part with the
Commission to register for resale 7,651,000 shares of our common stock, which includes the 454,408 Initial Commitment Shares
and 545,592 Additional Commitment Shares, on or prior to September 3, 2013, which we refer to as the Filing Deadline, and
have it declared effective at the earlier of (A) the 75
th
calendar day after the earlier of (1) the Filing
Deadline and (2) the date on which the registration statement of which this prospectus is a part is filed with the Commission
and (B) the fifth business day after the date the Company is notified by the Commission that the registration statement will
not be reviewed or will not be subject to further review, which we refer to as the Effectiveness Deadline. Prior to
September 3, 2013, we and Hanover agreed to extend the filing deadline to September 20, 2013. The effectiveness of the
registration statement of which this prospectus is a part is a condition precedent to our ability to sell common stock to
Hanover under the Purchase Agreement.
We have agreed to file
with the Commission one or more additional registration statements to cover all of the securities required to be registered under
the Registration Rights Agreement that are not covered by this prospectus, in each case, as soon as practicable, but in no event
later than the applicable filing deadline for such additional registration statements as provided in the Registration Rights Agreement.
We also agreed, among
other things, to indemnify Hanover from certain liabilities and fees and expenses of Hanover incident to our obligations under
the Registration Rights Agreement, including certain liabilities under the Securities Act. Hanover has agreed to indemnify and
hold harmless us and each of our directors, officers and persons who control us against certain liabilities that may be based upon
written information furnished by Hanover to us for inclusion in the registration statement of which this prospectus is a part,
including certain liabilities under the Securities Act.
Filings
We are obligated to file
a registration statement with respect to the Registrable Securities. Upon becoming effective, we shall use commercially reasonable
efforts to maintain the continuous effectiveness of such registration statement during the period the Rights Agreement is in effect.
We will also take such action, if any, as is necessary to obtain an exemption for or to qualify the Registrable Securities under
applicable state securities or “Blue Sky” laws;
provided
,
however
, that the Company shall not be required
in connection therewith or as a condition thereto to qualify to do business in any jurisdiction where it would not otherwise be
required to qualify or to consent to service of process in any such jurisdiction.
Expenses of Registration
Rights
We will pay all reasonable
expenses incurred in connection with the registrations described above. However, we will not be responsible for selling commissions,
concessions and discounts, and other amounts payable to underwriters, dealers or agents, if any, as well as transfer taxes and
certain other expenses associated with the sale of the shares of common stock.
INTERESTS OF NAMED
EXPERTS AND COUNSEL
No expert or counsel
named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity
of the securities being registered or upon other legal matters in connection with the registration or offering of the common stock
was employed on a contingency basis, or had, or is to receive, in connection with the offering, a substantial interest, direct
or indirect, in the registrant or any of its parents or subsidiaries. Nor was any such person connected with the registrant or
any of its parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer, or employee.
The financial statements
included in this prospectus and in the registration statement have been audited by MaloneBailey, LLP, and are included in reliance
upon such report given upon the authority of said firm as experts in auditing and accounting.
The validity of the issuance
of the common stock hereby will be passed upon for us by Greenberg Traurig, LLP.
PROPERTIES
Our corporate
headquarters are located at 9710 E. 55th Pl., Tulsa OK 74146.
The Company does not own or lease any manufacturing/storage
facilities.
LEGAL PROCEEDINGS
Bullmoose Mine
On October 22, 2010,
the Company initiated a claim in the Supreme Court of British Columbia against a former officer of the Company and certain other
companies controlled directly or indirectly by the former officer (collectively the “Defendant”), to assert its interest
in Bullmoose. On October 14, 2008, the Company had acquired Bullmoose. However, on or about August 10, 2010, the Company and its
directors and officers other than the Defendant discovered that the Defendant had apparently taken steps to sell the Company’s
interest in Bullmoose to a third party in which that Defendant had a significant interest.
On or about December
15, 2010, the Company entered into a settlement agreement under which the Company’s acquisition of Bullmoose will be rescinded
(the “Settlement Agreement”). More particularly, the 120,000 shares issued by the Company as consideration for the
acquisition will be cancelled and $75,000 of the $85,000 as part consideration for the acquisition, will be returned to the Company.
The Company continues to retain title to Bullmoose as of March 31, 2013.
On July 3, 2012, all
parties to the Settlement Agreement, except those responsible to return the $75,000 to the Company, tendered signed settlement
documents. As a result, the Company cancelled the 120,000 shares and commenced an action in the Supreme Court of British Columbia
to recover the $75,000. The Company takes the position that until this sum is paid, it continues to hold title to the mineral properties
through its ownership of all issued Bullmoose shares.
Cease Trade Order
On July 12, 2013, the British Columbia Securities
Commission (“BCSC”) issued a cease trade order to the Company for its alleged failure to file a preliminary prospectus
and prospectus in British Columbia in connection with certain share distributions that were made by the Company and failure to
file a Form 45-106F1 Report of Exemption Distribution. Under the cease trade order, the BCSC has directed us to cease issuing
any new securities until the Company complies with the filing requirements in British Columbia, Canada. We have engaged a British
Columbia securities attorney to assist us with making the requisite filings and we believe that we will be able to comply with
the BCSC within the next thirty (30) days, after which we believe the cease trade order will be removed.
We know of no other material,
active or pending legal proceedings against our Company, nor are we involved as a plaintiff in any other material proceeding or
pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial
shareholder, is an adverse party or has a material interest adverse to our interest.
MARKET FOR COMMON EQUITY
AND RELATED SHAREHOLDER MATTERS
Market Information
Our common stock is traded on the OTCQB under
the symbol “SNWR”. The closing bid price for our stock as of September 16, 2013 was $0.30.
The following is the range of high and low
bid prices for our common stock for the periods indicated. The quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commissions and may not represent actual transactions.
Fiscal 2013
|
|
|
High
|
|
|
Low
|
|
First Quarter (March 31, 2013)
|
|
$
|
1.00
|
|
$
|
0.05
|
|
Second Quarter (June 30, 2013)
|
|
$
|
0.54
|
|
$
|
0.18
|
|
Third Quarter (through September 16, 2013)
|
|
$
|
0.54
|
|
$
|
0.25
|
|
|
|
|
|
|
|
|
|
Fiscal 2012
|
|
|
High
|
|
|
Low
|
|
First Quarter (March 31, 2012)
|
|
$
|
0.35
|
|
$
|
0.08
|
|
Second Quarter (June 30, 2012)
|
|
$
|
0.40
|
|
$
|
0.08
|
|
Third Quarter (September 30, 2012)
|
|
$
|
0.25
|
|
$
|
0.06
|
|
Fourth Quarter (December 31, 2012)
|
|
$
|
0.44
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
Fiscal 2011
|
|
|
High
|
|
|
Low
|
|
First Quarter (March 31, 2011)
|
|
$
|
1.75
|
|
$
|
0.75
|
|
Second Quarter (June 30, 2011)
|
|
$
|
1.45
|
|
$
|
0.57
|
|
Third Quarter (September 30, 2011)
|
|
$
|
0.90
|
|
$
|
0.05
|
|
Fourth Quarter (December 31, 2011)
|
|
$
|
0.50
|
|
$
|
0.02
|
|
Stockholders
As of September 2, 2013,
there were 46,553,147 shares of our common stock issued and outstanding held by 178 stockholders of record (not including street
name holders).
Dividends
We have not paid dividends
to date and do not anticipate paying any dividends in the foreseeable future. Our Board of Directors intends to follow a policy
of retaining earnings, if any, to finance our growth. The declaration and payment of dividends in the future will be determined
by our Board of Directors in light of conditions then existing, including our earnings, financial condition, capital requirements
and other factors.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion
and analysis of the results of operations and financial condition for the period for the fiscal years ended December 31, 2012 and
2011 and for the six months ended June 30, 2013, should be read in conjunction with the financial statements and related notes
and the other financial information that are included elsewhere in this Prospectus. This discussion includes forward-looking statements
based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions.
Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a
result of a number of factors, including those set forth under the Risk Factors, Cautionary Notice Regarding Forward-Looking Statements
and Business sections in this registration statement on Form S-1. We use words such as “anticipate,” “estimate,”
“plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,”
“intend,” “may,” “will,” “should,” “could,” and similar expressions
to identify forward-looking statements.
The following discussion
should be read in conjunction with our consolidated financial statements and notes thereto included elsewhere in this Report. Forward
looking statements are statements not based on historical information and which relate to future operations, strategies, financial
results or other developments. Forward-looking statements are based upon estimates, forecasts, and assumptions that are inherently
subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control
and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can
affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements
made by us, or on our behalf. We disclaim any obligation to update forward-looking statements.
Background
Sanwire was organized
under the laws of the State of Nevada on February 10, 1997 under the name Clear Water Mining, Inc. with a focus on mining operations.
Sanwire aims to be a
global provider of wireless communication services and data solutions; delivering efficient and reliable communications to our
customers. Sanwire’s goal is to operate a number of vertically integrated portfolio of wireless subsidiaries that are synergistic,
diverse, and operate independently with their own revenue stream and customer base. We strive, however, to have our subsidiaries
to cross sell to each other with respect to products and services, and share customer base. Sanwire plans to grow organically and
through complementary acquisitions in the wireless sectors. Currently, Sanwire owns and operates two vertically integrated wholly-owned
subsidiaries:
|
·
|
iPTerra Technologies, Inc., a Nevada corporation, designs and develops
wireless and/or wireline communication solutions for hazardous environments including underground mines. iPTerra’s flagship
product, the iPMine system, is a real-time 2-way wireless/fiber mine-safety system for the global mining industry. iPMine tracks,
monitors, and communicates with miners and equipment underground and above ground. Our strategy is to acquire customers in the
U.S. underground coal mining industry and evaluate opportunities in other international mine-safety markets.
|
|
·
|
Aeronetworks LLC, an Oklahoma limited liability company, provides
advanced telecommunications and broadband services to rural communities and Native American tribes with focus on public safety,
education and healthcare sectors. Aero delivers 4G/LTE, TV White Space, and advanced wireless technologies.
|
The Company changed its
business focus during 2007 and in 2008 and completed the changeover to mining exploration and development, which was the concept
utilized when the Company was incorporated. In order to complete the transformation, the Company completed a reverse stock split
during 2008, settled the majority of its liabilities through a share exchange for debt and acquired a privately held Canadian mining
corporation with a single mining asset, former Gold Producer "The Bullmoose Mine", located in the Northwest Territory
of Canada. In 2009 and 2010, the company completed a limited program on the mining properties in Canada, sufficient to maintain
the lease and mineral claims in good standing.
In 2011, the Company
settled litigation it had initiated to assert its interest in the Bullmoose Mine (“Bullmoose”). Under the settlement,
the Company’s acquisition of Bullmoose will be rescinded. More particularly, the 120,000 shares issued by the company as
consideration for the acquisition will be cancelled and $75,000 of the $85,000 paid as part consideration for the acquisition,
will be returned to the Company. The closing date was set for June 30, 2012. Until that date and afterwards, if the settlement
does not close, the Company continues to retain title to Bullmoose.
On January 2, 2013, the
Company signed an exclusive licensing and distribution agreement (the “Licensing Agreement”) to sell and market the
iPMine communication and mine-safety system for underground mines for the European continent. The terms of the agreement includes
exclusivity for the European market for a 5-year term renewable with an additional 5-year term and first right of refusal option
to acquire 100% of the iPMine intellectual property. The Company issued 300,000 common shares of the Company at a fair value of
$300 to the licensor.
On January 14, 2013,
the Company signed a purchase agreement to acquire 100% ownership in newly created iPTerra Technologies, Inc. for cash consideration
of $5,500, which shall be paid to a seller within a 12-month period from a closing date. The iPMine system will operate under iPTerra
Technologies, Inc.
On March 22, 2013, the
Company exercised its option under the recently executed Licensing Agreement to acquire 100% ownership of the iPMine communication
and mine-safety system. The iPMine system will operate under the Company’s wholly owned subsidiary, iPTerra Technologies,
Inc. The Company acquired 100% of the iPMine intellectual property for a total consideration of $10,000,000 comprised of 20,000,000
common shares with a fair value of $0.001 per share for total of $20,000 and the assumption of $9,980,000 in debt (the “Debt”)
in favor to two companies controlled by Naiel Kanno (the “Debt Holders”). On May 10, 2013, the Company and the Debt
Holders entered into an agreement to convert the Debt into a non-interest bearing convertible promissory note repayable in eighteen
months with the conversion price of $1.00 per common share at the option of the Debt Holders.
On April 30, 2013, the
Company announced the appointment of Mr. Naiel Kanno as its new President and Chief Executive Officer replacing Mr. Carman Parente.
Mr. Kanno continues to hold a seat on the Company’s board of directors.
On April 30, 2013, the
Company announced the appointment of Mr. Carman Parente as Chairman of the board. Mr. Parente continues to hold a seat on the Company’s
board of directors.
On May 1, 2013, Mr. J
Roland Vetter assumed the position of the Company’s Chief Financial Officer. Mr. Vetter continues to hold a seat on the Company’s
board of directors.
On May 29, 2013,
the Company completed the acquisition of Aeronetworks LLC (“Aero”) and its wholly-owned subsidiary Birchtree LLC,
a company based in Tulsa, Oklahoma. In consideration for the acquisition, the Company (i) issued Two Million and Four
Hundred Thousand (2,400,000) shares of its common stock, (ii) issued Three Million (3,000,000) warrants to purchase its
common stock in three blocks consisting of One Million (1,000,000) warrants each, expiring in 2014, 2015, and 2017 at an
exercise price of $0.50, $0.75, and $1.00 respectively, (iii) granted future earn-out performance bonus shares based on
revenue growth, and (iv) granted a three-year extension to the management agreement for Aero’s management team. Aero
provides advanced telecommunications and broadband services to rural communities and Native American tribes with a focus on
public safety, education and healthcare sectors.
Critical Accounting
Policies
The preparation of
consolidated financial statements in conformity with United States generally accepted accounting principles requires
management of our Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting periods.
The discussion and analysis
of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States of America. We believe certain critical accounting policies
affect our more significant judgments and estimates used in the preparation of the financial statements.
Intangible
Assets
Intangible assets are stated at cost
less accumulated amortization. The Company’s intangible asset is the iPMine technology which is being amortized straight-line
over 10 years.
Long-lived
Assets
In accordance with ASC 360, “Property,
Plant and Equipment”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances
indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited
to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors;
accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset;
current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with
the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before
the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value,
which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual
disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount
is not recoverable and exceeds fair value.
Goodwill
Goodwill represents the excess
of the acquisition price over the fair value of identifiable net assets acquired. Goodwill is allocated at the date of the business
combination. Goodwill is not amortized, but is tested for impairment annually, during the fourth quarter, or more frequently if
events or changes in circumstances indicate the asset may be impaired. These events and circumstances may include a significant
change in legal factors or in the business climate, a significant decline in the Company’s share price, an adverse action
of assessment by a regulator, unanticipated competition, a loss of key personnel, significant disposal activity and the testing
of recoverability for a significant asset group.
The Company consists of a single
reporting unit. The impairment test is carried out in two steps. In the first step, the carrying amount of the reporting unit including
goodwill is compared with its fair value. The estimated fair value is determined utilizing a market-based approach, based on the
quoted market price of the Company’s stock in an active market, adjusted by an appropriate control premium. When the carrying
amount of a reporting unit exceeds its fair value, goodwill of the reporting unit is considered to be impaired and the second step
is necessary.
In the second step of the goodwill
impairment test, the implied fair value of the reporting unit’s goodwill is compared with its carrying amount to measure
the amount of the impairment loss, if any. The implied fair value of goodwill is determined in the same manner as the value of
goodwill is determined in a business combination using the fair value of the reporting unit as if it were the acquisition price.
When the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of the goodwill, an impairment loss
is recognized in an amount equal to the excess and is presented as a separate line item in the consolidated statements of operations.
Establishing an implied fair value of goodwill requires the Company to make estimates for key inputs into complex valuation models
and to apply significant judgment in the selection of estimates, assumptions and methodologies required to complete the analysis.
Areas of judgment include, but are not limited to, development of multi-year business cash flow forecasts, the selection of discount
rates and the identification and valuation of unrecorded assets.
Accounts
Receivable
The Company recognizes allowances
for doubtful accounts to ensure accounts receivable are not overstated due to the inability or unwillingness of its customers to
make required payments. The allowance is based on the age of receivable and the specific identification of receivables the Company
considers at risk.
Revenue Recognition
The Company earns revenue from
the provision of advanced telecommunications and broadband services. The Company recognizes revenue in accordance with ASC 605,
“Revenue Recognition”. Revenue is recognized when the price is fixed or determinable, persuasive evidence of an arrangement
exists, the service has been performed, and collectability is reasonably assured.
Stock-based compensation
The Company records stock-based
compensation in accordance with ASC 718, “Compensation – Stock Compensation”, using the fair value method. All
transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for
based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably
measurable.
The Company uses the Black-Scholes
option pricing model to calculate the fair value of stock-based awards. This model is affected by the Company’s stock price
as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to the
Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise
behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the consolidated
statement of operations over the requisite service period.
Results of Operations
Comparison of the
Six Months Ended June 30, 2013 to the Six Months Ended June 30, 2012
Revenue
–
Sanwire has generated revenue of $117,800 (2012 - $nil) and gross profit of $5,130 (2012 - $nil) through its subsidiary, Aero.
Expenses
- Total expenses were $
10,619,869
for the six month period ended June 30, 2013. Expenses had increased for the current six month period as compared to the six month
period ended June 30,
2012 – $159,591.
The increase in costs over this six month period
is due to the increase in management/consulting fees and
interest expense
. The costs can be
subdivided into the following categories:
1.
|
General and administrative expenses
: $
470,628
in general and administrative expenses was incurred for the six month period ended June 30, 2013 as compared to $
87,523
for the six month period ended June 30, 2012, an increase of $
383,147, mainly
due to the
write-down of intangible asset of $9,970,020 and the
increase in management/consulting and administrative services and addition of expenses incurred by Aero.
|
|
2.
|
Interest expense
:
The Company incurred
interest expense
of $29,138
for the six month period ended June 30, 2013 as compared to $
36,098
for the six month period ended June 30, 2012.
|
|
3.
|
Technology Intellectual Property
|
|
Cost
$
|
Accumulated amortization
$
|
Write-down
$
|
June 30,
2013
Net carrying value
$
|
December 31,
2012
Net carrying value
$
|
|
|
|
|
|
|
iPMine technology
|
10,000,300
|
832
|
9,970,020
|
29,448
|
–
|
On January 2, 2013, the Company
signed an exclusive licensing and distribution agreement (the “License Agreement”) to sell and market the iPMine communication
and mine safety system for underground mines for the European continent. The terms of the agreement includes exclusivity for the
European market for a five year term renewable with an additional five year term and first right of refusal to acquire 100% of
the iPMine intellectual property. The Company issued 300,000 shares of common stock with a fair value of $300 to the licensor.
On January 14, 2013, the Company
acquired 100% ownership of newly created iPTerra. for $5,500, which is to be paid to the seller within a one year period from the
closing date. The iPMine system will operate under iPTerra.
On March 22, 2013, the Company
exercised its option under the License Agreement to acquire 100% ownership of the iPMine communication and mine safety system.
The Company acquired 100% of the iPMine intellectual property for total consideration of $10,000,000 comprised of 20,000,000 shares
of common stock with a fair value of $20,000 and the assumption of $9,980,000 in debt owing to two companies controlled by a director
of the Company (the director also became the President and Chief Executive Officer of the Company on April 17, 2013). The debt
was non-interest bearing, due on demand, and secured by the iPMine technology. On May 10, 2013, the Company entered into an agreement
to convert the debt into non-interest bearing convertible promissory notes.
On March 31, 2013, the Company recognized
a write down of $9,970,020 due to the uncertainty of expected future cash flows.
Comparison of the
Fiscal Years ended December 31, 2012 and December 31, 2011
Revenue
–
Sanwire has not generated any revenues from inception through December 31, 2012.
Expenses
–
Total expenses in the amount of $239,786 were recorded for the year ended December 31, 2012, as compared to expenses of
$209,426 for the year ended December 31, 2011. The increase in expenses for the year ended December 31, 2012, as
compared to the year ended December 31, 2011, is primarily attributable to the increase in general and administrative
expenses. The costs can be subdivided into the following categories.
|
1.
|
General and administrative expenses
: $221,786 in general and administrative expenses was incurred for the year ended December 31, 2012 as compared to $173,426 for the year ended December 31, 2011, an increase of $48,360, which was primarily due to an increase in legal fees and management fees offset by reduction in consulting, accounting, administration and promotional services.
|
|
2.
|
Royalty expenses
: $18,000 in royalty expenses was incurred for the year ended December 31, 2012 as compared to $36,000 for the year ended December 31, 2011. The decrease was due to the cancellation of the agreement under which the royalty expenses were paid.
|
|
|
|
|
|
We plan to carefully
control our expenses and overall costs. We do not have any employees and engage personnel through outside consulting contracts
or agreements or other such arrangements.
Liquidity and Capital
Resources
During the six month period ended June 30,
2013, Sanwire satisfied its working capital needs by carefully managing its cash flow and deferring payments to its services vendors.
As June 30, 2013, the Company had cash on hand in the amount of $2,413 (December 31, 2012 - $1,094) and current liabilities
of $1,719,661 (December 31, 2012 - $1,373,130). As of June 30, 2013, Sanwire has $581,294 in accounts payable $132,339 in
accrued liabilities, $673,624 in loans payable, $332,404 to related parties and an additional $7,788,645 in convertible debt
payable to related parties. Given the current financial situation of Sanwire, management does not expect that the current level
of cash on hand will be sufficient to fund its operation for the next twelve month period.
To achieve our goals and objectives for the
next 12 months, we plan to manage our operating expenses, negotiate with creditors to defer payments, or convert debt into equity.
In addition management is actively seeking long term funding and seeking investors to invest in the company; refer to Note 14 -
Subsequent Events.
Cash Used in Operating Activities
Operating activities
for the six months ended June 30, 2013 and 2012 used cash of $36,793 and $
28,392,
respectively, which reflect our recurring operating losses. Our net losses of $
10,619,869
and
$159,591 for the six months ended June 30, 2013 and 2012, respectively, were the primary reasons for our negative operating cash
flow in both years.
Cash Used in Investing Activities
Net cash flows from investing activities for the six month
ended June 30, 2013 was $3,930 (2012 - $nil). For the six months ended June 30, 2013, we used $5,000 for loan advanced and
$766 for the purchase of a computer, and received $9,696 cash upon acquisition of Aero in investing activities.
Cash from Financing Activities
Net cash flows
provided by financing activities for the six month ended June 30, 2013 was $34,182
mainly
from
proceeds from notes payable and
related party loans. Net cash flows provided by financing activities
for the six months ended June 30, 2012 was $34,451.
We are currently seeking
both short-term funding to finance current operations as well as significant amounts of long term capital to execute our business
plan. We project that to keep operations at our current level, approximately $1,500,000 in short term funding will be required
over the next twelve (12) months to cover our anticipated monthly expenses and modest growth plans. In order to successfully execute
our business plan including the planned development and marketing of our current products, an additional $2,500,000 will be required
in long term financing.
Our current cash requirements
are significant due to planned development and marketing of our current products, and we may be unable to continue generating positive
revenues. In order to execute on our business strategy, we will require additional working capital commensurate with the operational
needs of planned marketing, development and production efforts. We anticipate that we will be able to raise sufficient amounts
of working capital through debt or equity offerings as may be required to meet short-term obligations. However, changes in operating
plans, increased expenses, acquisitions, or other events, may cause us to seek additional equity or debt financing in the future.
We expect to incur additional marketing, development and production expenses.
We have generated a limited
history of revenue and therefore we may not be able to produce adequate cash flows to support our existing operations. Moreover,
the historical and existing capital structure is not adequate to fund our planned growth. We intend to finance our operations in
part by issuing additional common stock, warrants and through bridge financing. There can be no assurance that we will be successful
in procuring the financing we are seeking. Future cash flows are subject to a number of variables, including the level of production,
economic conditions and maintaining cost controls. There can be no assurance that operations and other capital resources will provide
cash in sufficient amounts to maintain planned or future levels of capital expenditures.
To meet future objectives,
we will need to meet revenue targets and sell additional equity and debt securities, which most likely will result in dilution
to current stockholders. We may also seek additional loans where the incurrence of indebtedness would result in increased debt
service obligations and could require the Company to agree to operating and financial covenants that would restrict our operations.
Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds
on terms favorable to us, or at all, could limit our ability to expand business operations and could harm our overall business
prospects. In addition, we cannot be assured of profitability in the future.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
As previously disclosed
on a Current Report on Form 8-K filed with the SEC on April 12, 2013, James Stafford Chartered Accountants was dismissed as our
independent accountant on November 15, 2012. On November 21, 2013, we engaged Malone Bailey LLP as our new independent registered
public accounting firm. In connection with the foregoing change in accountants, there were no disagreements (as that term is used
in Item 304(a)(1)(iv) of Regulation S-K) or reportable events (as described in Item 304(a)(1)(v) of Regulation S-K).
As previously disclosed
on a Current Report on Form 8-K filed with the SEC on June 27, 2013, Malone Bailey LLP was dismissed as our independent accountant
on June 5, 2013. On June 24, 2013, we engaged Saturna Group Chartered Accountants LLP as our new independent registered public
accounting firm. In connection with the foregoing change in accountants, there were no disagreements (as that term is used in Item
304(a)(1)(iv) of Regulation S-K) or reportable events (as described in Item 304(a)(1)(v) of Regulation S-K).
QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, the Company
is not required to provide this disclosure.
DIRECTORS AND EXECUTIVE
OFFICERS
The following table sets forth the names and
ages of our current directors and executive officers, the principal offices and positions held by each person:
Name
|
Age
|
Position
|
Date Appointed
|
|
Naiel Kanno
|
56
|
President, CEO, and Director
|
January 18, 2013
|
|
J Roland Vetter
|
62
|
Chief Financial Officer, Treasurer and Director
|
January 21, 2013
|
|
Carman Parente
|
60
|
Chairman and Director
|
May 16, 2011
|
|
Mr. Carman Parente
With over 25 years of
entrepreneurship, Mr. Carman Parente is a seasoned business and financial consultant with knowledge and experience in public markets,
finance and funding. In May 2011, Mr. Parente joined the Sanwire team as its President, CEO, CFO, Director and Treasurer and is
now currently the Chairman and Director. Since March 2008, he is also the President of Carbon Products Industries Inc., a company
specializing in energy management and conservation solutions. Since November 9, 2010, Mr. Parente has also been the President,
CEO and Director of Five Nines Ventures, a mineral resource exploration company. In 2005, Mr. Parente founded and became President
of Natural Health Industries Inc. a private company that grows organic culinary herbs for local distribution. In 2007, Mr. Parente
founded and became the President of Natural Health Solutions Inc., a private company that manufactures and distributes natural
health supplements and nutraceuticals. Except for Sanwire, none of the aforementioned companies are a parent, subsidiary or affiliate
of the Company.
Mr. Parente holds a Diploma
of Technology in Operations Management from British Columbia Institute of Technology as well as his C.I.M. Designation, Canadian
Institute of Management, Ottawa. We believe that Mr. Parente’s entrepreneurial business experience will be a valuable resource
as we seek to expand our business.
Naiel P. Kanno
With over 22 years of
success in developing and guiding leading-edge technology companies, Mr. Kanno brings knowledge and skills in management, marketing,
engineering, and enterprise application sales with a focus in the telecommunications and wireless sectors. He is an entrepreneur
and trusted executive with proven ability to identify and recognize opportunities and market trends. He’s is a strategist
with diverse management, financial, and operational experience at executive level.
From, October 2005
until September 2012 when he joined the Sanwire team, Mr. Kanno was the President, CEO, a major shareholder, and investor of
iPackets International, Inc., a provider of mine-safety solutions. From 2000 to 2004, he was the President, CEO, a major
shareholder and investor of L3 Technology, Inc., a provider of wireless solutions. From 1988 to 1999, he was the founder,
President and CEO of EXL Information Corp., a provider of billing and customer care software solutions to competitive local
exchange carriers, inter-exchange carriers, and long distance providers. He sold EXL to Los Angeles-based OAN Services, a
premium provider of specialized billing services and clearinghouse. OAN was a former division of EDS. He also had a
successful tenure at Boston-based Prime Computer, Inc., which included technical positions. Mr. Kanno has been a director of
Kanno Group Holdings, Ltd. since July 15, 1996 and a director of Kanno Group Holdings II, Ltd. since August 1, 2000. Except
for Sanwire, none of the aforementioned companies are a parent, subsidiary or affiliate of the Company. Mr. Kanno holds a
B.Sc. degree in Computer Science from Simon Fraser University, Burnaby, British Columbia, Canada. Mr. Kanno’s broad
business experience with developing technology companies is expected to provide our Board with helpful insight as to its
growth potential and objectives.
J. Roland Vetter
As an executive with
a significant background in growing start-up companies, Mr. Roland Vetter specializes in technology, manufacturing and mining,
with the skill to highlight opportunities and find innovative solutions to successfully grow such companies. Mr. Vetter has diverse
financial and operational ability at an executive level, including specialist expertise in completing due diligence, business plans
and fund-raising. Historically, Mr. Vetter has had hands on expertise in assimilating and rationalizing operations as well as implementing
projects, mergers, acquisitions and disposals. Mr. Vetter has been responsible for risk management, internal controls, Corporate-governance
and in optimizing funding structures including corporate tax planning. Mr. Vetter is a Member of the Canadian and the South African
Institute of Chartered Accountants. He holds a Bachelor of Commerce and a Bachelor of Accounting degree from the University of
the Witwatersrand, South Africa. Mr. Vetter was the former Group Financial Director Services for the Zimco Group, a producer of
industrial and base minerals, and a former Chairman of the Anglo American Audit Liaison Committee. He worked for 12 years for Zimco
(part of Anglo American Corporation), comprised twelve distinct operations involved in manufacturing and mining with an annual
turnover in excess of $300 million. The Zimco Group is not a parent, subsidiary or affiliate of the Company. Mr. Vetter has been
a director of J R Vetter Consulting, Inc. since January 1, 2013 and a director of Conventus Energy Inc. since April 21, 2008. Since
immigrating to Canada in 1998, Roland Vetter has been actively involved in venture capital and has consulted to start up companies
in both the technology and mining sectors. We believe that with Mr. Vetter’s extensive background in finance, financial services
and accounting will be critical to our success.
Terms of Office
Our directors are appointed
for a one-year term to hold office until the next annual general meeting of our stockholders or until removed from office in accordance
with our bylaws and the provisions of the Nevada Revised Statutes. Our directors hold office after the expiration of his or her
term until his or her successor is elected and qualified or until he or she resigns or is removed in accordance with our bylaws
and the provisions of the Nevada Revised Statutes.
Our officers are appointed
by the Company’s Board and hold office until removed by the Board.
Significant Employees
We have no significant
employees other than our officers and our directors.
Involvement in Certain
Legal Proceedings
No director, executive
officer, significant employee or control person of ours has been involved in any legal proceeding listed in Item 401(f) of Regulation
S-K in the past 10 years.
Section 16(a) Beneficial
Ownership Reporting Compliance
Section 16(a) of the
Exchange Act requires our directors, executive officers, and stockholders holding more than 10% of our outstanding common stock
to file with the SEC initial reports of ownership and reports of changes in beneficial ownership of our common stock. Executive
officers, directors, and persons who own more than 10% of our common stock are required by SEC regulations to furnish us with copies
of all Section 16(a) reports they file.
Based solely upon a review
of Forms 3, 4, and 5 that have been filed with the SEC during our most recent fiscal year, none of our executive officers and directors,
and persons who own more than 10% of our Common Stock have filed the reports required pursuant to Section 16(a) of the Exchange
Act.
Family Relationships
There are no arrangements,
understandings, or family relationships pursuant to which our executive officers were selected.
EXECUTIVE COMPENSATION
Summary of Compensation of Executive Officers
The following table summarizes the compensation
paid to our executive officers during the last three complete fiscal years. No other officer or director received annual compensation
in excess of $8,000 during the last three complete fiscal years.
SUMMARY COMPENSATION TABLE
|
Name and Principal Position
|
Year
|
Salary ($)
|
Bonus ($)
|
Stock Award
($)
|
Option Award
($)
|
Non-Equity Incentive Plan
($)
|
Nonquali-fied Deferred Comp.
($)
|
All Other
Comp.
($)
|
Total
($)
|
Jordan S. Wangh (1)
Director
|
2012
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
2011
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
2010
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
36,000
|
36,000
|
Richard A. Fesiuk (2)
Director
|
2012
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
2011
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
2010
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
12,000
|
12,000
|
Carman Parente (3)
CFO, Treasurer and Director
|
2012
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
39,000
|
39,000
|
2011
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
33,600
|
33,600
|
2010
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Notes:
|
|
(1)
|
Mr. Jordan S. Wangh was a director as of December 31, 2011. Mr. Wangh or entities controlled by him were paid or accrued management fees during the fiscal years ended December 31, 2010 and 2009. Mr. Wangh resigned as President and CEO on May 16, 2011.
|
|
(2)
|
Mr. Richard A. Fesiuk was a director as of December 31, 2011. Mr. Fesiuk or entities controlled by him were paid or accrued management fees during the fiscal years ended December 31, 2010 and 2009. Mr. Fesiuk resigned as Treasurer and CFO on May 16, 2011.
|
|
(3)
|
Mr. Carman Parente was appointed to the office of President, CEO, CFO, treasurer and director on May 16, 2011. Mr. Parent resigned as president and CEO on April 30, 2013. Mr. Parente or entities controlled by him were paid or accrued management fees during the fiscal years ended December 31, 2011 and December 31, 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
None of our executive
officers or directors received, nor are there any arrangements to pay out stock awards, option awards, non-equity incentive plan
compensation, or non-qualified deferred compensation. Certain of our executive officers and directors have arrangements to receive
performance bonuses as described below.
In connection with the
acquisition of Aero, the Company agreed to issue future earn-out performance bonus shares of our common stock based on revenue
growth with Aero’s management team, including James Bradley, Richard Bjorklund and Samuel Sibala (the “PBS Recipients”).
The performance bonus shares pool is based solely on the internal revenue growth of Aero’s business, excluding any revenues
from acquisitions, and is determined as follows:
|
a)
|
Using the gross revenue amount for the year ended December 31, 2012,
as outlined in Aero’s financial statements as the base (the “Base”);
|
|
b)
|
Subtract the Base from the December 31, 2013 audited year end revenue
amount (the “Performance Bonus Year“). The balance is a dollar amount that gets converted to common stock at a rate
of $1.00 for one share; and
|
|
c)
|
Repeat steps (a) and (b) for three (3) successive years, whereby
the Performance Bonus Year becomes the Base for the second year calculation.
|
To receive the performance
bonus shares, each PBS Recipient must be under a valid consulting agreement with the Company at the time of each Performance Bonus
Year. The PBS Recipients will inform the Company on the desired Performance Bonus Shares pool individual allocation and will be
paid immediately after the completion of the Company’s consolidated audited financial statements for the relevant year.
Potential Payments
Upon Termination or Change-in-Control
As of the date of this
Registration Statement on Form S-1, we have no compensatory plan or arrangement with respect to any officer that results or will
result in the payment of compensation in any form from a change in control of our Company or a change in such officer's responsibilities
following a change in control. The Company has entered into consulting agreements with several of its officers that provide for
a three (3) month termination fee as further described in the section below.
Employment Agreements
Naiel Kanno
On April 17, 2013, the
Company entered into a consulting agreement with Naiel Kanno in connection with his service as President, Chief Executive Officer
and Director of the Company, for a term commencing on May 1, 2013 and continuing for a three (3) year period. Mr. Kanno is entitled
to receive $15,000 per month for the first year of the agreement, $18,000 for the second year of the agreement and $20,000 for
the third year of the agreement. Mr. Kanno is entitled to (i) convert all or any part of his consulting fees into fully paid shares
of common stock of the Company at a conversion price of $0.01 per share, (ii) receive performance bonus shares as established by
the Company’s compensation committee, and (iii) participate in the Company’s share option plan.
The Company has the right
to terminate the consulting agreement upon breach of the agreement and for cause, such as an act sufficient at law to result in
the termination of the agreement, any act involving fraud, embezzlement, dishonesty, securities law violation or other gross misconduct,
breach of good faith, moral turpitude, or gross negligence. Any such termination terminates the right of the consultant to receive
further compensation, bonus, severance or benefits under the agreement. The Company may also terminate the agreement upon three
(3) months’ notice if the consultant incurs a condition that prevents him from carrying out essential job functions for a
period of three (3) months. If Mr. Kanno is terminated for any other reason, he is entitled to three (3) month termination fee.
Pursuant to the consulting
agreement, Mr. Kanno is subject to certain confidentiality requirements and a non-competition provision which will survive for
twelve (12) months after any termination of the agreement.
J Roland Vetter
On April 17, 2013, the
Company entered into a consulting agreement with J Roland Vetter in connection with his service as Chief Financial Officer and
Director of the Company, for a term commencing on May 1, 2013 and continuing for a three (3) year period. Mr. Vetter is entitled
to receive $5,000 per month for the first year of the agreement, $8,000 for the second year of the agreement and $10,000 for the
third year of the agreement. Mr. Vetter is entitled to (i) convert all or any part of his consulting fees into fully paid shares
of common stock of the Company at a conversion price of $0.01 per share, (ii) receive performance bonus shares as established by
the Company’s compensation committee, and (iii) participate in the Company’s share option plan.
The Company has the right
to terminate the consulting agreement upon breach of the agreement and for cause, such as an act sufficient at law to result in
the termination of the agreement, any act involving fraud, embezzlement, dishonesty, securities law violation or other gross misconduct,
breach of good faith, moral turpitude, or gross negligence. Any such termination terminates the right of the consultant to receive
further compensation, bonus, severance or benefits under the agreement. The Company may also terminate the agreement upon three
(3) months’ notice if the consultant incurs a condition that prevents him from carrying out essential job functions for a
period of three (3) months. If Mr. Vetter is terminated for any other reason, he is entitled to three (3) month termination fee.
Pursuant to the consulting
agreement, Mr. Vetter is subject to certain confidentiality requirements and a non-competition provision which will survive for
twelve (12) months after any termination of the agreement.
Carman Parente
On April 17, 2013, the
Company entered into a consulting agreement with Carman Parente in connection with his service as Chairman of the Board and Director
of the Company, for a term commencing on May 1, 2013 and continuing for a three (3) year period. Mr. Parente is entitled to receive
$10,000 per month for the first year of the agreement, $12,000 for the second year of the agreement and $15,000 for the third year
of the agreement. Mr. Parente is entitled to (i) convert all or any part of his consulting fees into fully paid shares of common
stock of the Company at a conversion price of $0.01 per share, (ii) receive performance bonus shares as established by the Company’s
compensation committee, and (iii) participate in the Company’s share option plan.
The Company has the right
to terminate the consulting agreement upon breach of the agreement and for cause, such as an act sufficient at law to result in
the termination of the agreement, any act involving fraud, embezzlement, dishonesty, securities law violation or other gross misconduct,
breach of good faith, moral turpitude, or gross negligence. Any such termination terminates the right of the consultant to receive
further compensation, bonus, severance or benefits under the agreement. The Company may also terminate the agreement upon three
(3) months’ notice if the consultant incurs a condition that prevents him from carrying out essential job functions for a
period of three (3) months. If Mr. Parente is terminated for any other reason, he is entitled to three (3) month termination fee.
Pursuant to the consulting
agreement, Mr. Parente is subject to certain confidentiality requirements and a non-competition provision which will survive for
twelve (12) months after any termination of the agreement.
Richard Bjorklund
On May 28, 2013, the
Company entered into a consulting agreement with Richard Bjorklund in connection with his service as President of Aero, for a
term commencing on June 1, 2013 and continuing for a three (3) year period. Mr. Bjorklund is entitled to receive $10,000 per month
for the first year of the agreement, $12,000 for the second year of the agreement and $15,000 for the third year of the agreement.
Mr. Bjorklund is entitled to (i) convert all or any part of his consulting fees into fully paid shares of common stock of the
Company at a conversion price of $1.00 per share, (ii) receive performance bonus shares as established by the Company’s
compensation committee, and (iii) participate in the Company’s share option plan.
The Company has the right
to terminate the consulting agreement upon breach of the agreement and for cause, such as an act sufficient at law to result in
the termination of the agreement, any act involving fraud, embezzlement, dishonesty, securities law violation or other gross misconduct,
breach of good faith, moral turpitude, or gross negligence. Any such termination terminates the right of the consultant to receive
further compensation, bonus, severance or benefits under the agreement. The Company may also terminate the agreement upon three
(3) months’ notice if the consultant incurs a condition that prevents him from carrying out essential job functions for a
period of three (3) months. If Mr. Bjorklund is terminated for any other reason, he is entitled to three (3) month termination
fee.
Pursuant to the consulting
agreement, Mr. Bjorklund is subject to certain confidentiality requirements and a non-competition provision which will survive
for twelve (12) months after any termination of the agreement.
James Bradley
On May 28, 2013, the
Company entered into a consulting agreement with James Bradley in connection with his service as Senior Vice President of Engineering
of Aero, for a term commencing on June 1, 2013 and continuing for a three (3) year period. Mr. Bradley is entitled to receive $10,000
per month for the first year of the agreement, $12,000 for the second year of the agreement and $15,000 for the third year of the
agreement. Mr. Bradley is entitled to (i) convert all or any part of his consulting fees into fully paid shares of common stock
of the Company at a conversion price of $1.00 per share, (ii) receive performance bonus shares as established by the Company’s
compensation committee, and (iii) participate in the Company’s share option plan.
The Company has the right
to terminate the consulting agreement upon breach of the agreement and for cause, such as an act sufficient at law to result in
the termination of the agreement, any act involving fraud, embezzlement, dishonesty, securities law violation or other gross misconduct,
breach of good faith, moral turpitude, or gross negligence. Any such termination terminates the right of the consultant to receive
further compensation, bonus, severance or benefits under the agreement. The Company may also terminate the agreement upon three
(3) months’ notice if the consultant incurs a condition that prevents him from carrying out essential job functions for a
period of three (3) months. If Mr. Bradley is terminated for any other reason, he is entitled to three (3) month termination fee.
Pursuant to the consulting
agreement, Mr. Bradley is subject to certain confidentiality requirements and a non-competition provision which will survive for
twelve (12) months after any termination of the agreement.
Samuel Sibala
On May 28, 2013, the
Company entered into a consulting agreement with Samuel Sibala in connection with his service as Chief of Business Development
of Aero, for a term commencing on June 1, 2013 and continuing for a three (3) year period. Mr. Sibala is entitled to receive $10,000
per month for the first year of the agreement, $12,000 for the second year of the agreement and $15,000 for the third year of the
agreement. Mr. Sibala is entitled to (i) convert all or any part of his consulting fees into fully paid shares of common stock
of the Company at a conversion price of $1.00 per share, (ii) receive performance bonus shares as established by the Company’s
compensation committee, and (iii) participate in the Company’s share option plan.
The Company has
the right to terminate the consulting agreement upon breach of the agreement and for cause, such as an act sufficient at law
to result in the termination of the agreement, any act involving fraud, embezzlement, dishonesty, securities law violation or
other gross misconduct, breach of good faith, moral turpitude, or gross negligence. Any such termination terminates the right
of the consultant to receive further compensation, bonus, severance or benefits under the agreement. The Company may also
terminate the agreement upon three (3) months’ notice if the consultant incurs a condition that prevents him from
carrying out essential job functions for a period of three (3) months. If Mr. Sibala is terminated for any other reason, he
is entitled to three (3) month termination fee.
Pursuant to the consulting
agreement, Mr. Sibala is subject to certain confidentiality requirements and a non-competition provision which will survive for
twelve (12) months after any termination of the agreement.
Compensation of Directors
for Year Ended December 31, 2012
We have no standard arrangement
to compensate directors for their services in their capacity as directors. Directors are not paid for meetings attended. However,
we intend to review and consider future proposals regarding board compensation. All travel and lodging expenses associated with
corporate matters are reimbursed by us, if and when incurred.
Compensation Committee
Interlocks and Insider Participation
No interlocking relationship
exists between our Board of Directors and the Board of Directors or compensation committee of any other company, nor has any interlocking
relationship existed in the past.
Set forth below is a
summary of the compensation paid to each person that served as a director in the year ended December 31, 2012.
DIRECTOR COMPENSATION
|
|
Name
|
Fees Earned Or Paid in Cash
($)
|
Stock Award
($)
|
Option Award
($)
|
Non-Equity Incentive Plan Compensation
($)
|
Nonqualified Deferred Compensation Earnings
($)
|
All Other
Compensation
($) (2)
|
Total
($)
|
|
Jordan S. Wangh
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
|
Richard A. Fesiuk
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
|
Carman Parente (1)
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
39,000
|
39,000
|
|
|
|
|
|
(1)
|
Mr. Carman Parente was appointed to serve as a director on May 16, 2011.
|
|
|
(2)
|
The amounts listed under the Column entitled “All Other Compensation” in the “Director Compensation” table relate to management fees earned during the period reported by the officers, or entities controlled by the officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option Plans — Outstanding
Equity Awards at Fiscal Year End
None.
Pension Table
None.
Retirement Plans
We do not offer any annuity, pension, or retirement
benefits to be paid to any of our officers, directors, or employees in the event of retirement. There are also no compensatory
plans or arrangements with respect to any individual named above which results or will result from the resignation, retirement,
or any other termination of employment with our company, or from a change in the control of our Company.
Compensation Committee
We do not have a separate Compensation Committee.
Instead, our Board of Directors reviews and approves executive compensation policies and practices, reviews salaries and bonuses
for other officers, administers the Company’s stock option plans and other benefit plans, if any, and considers other matters.
Risk Management Considerations
We believe that our compensation policies
and practices for our employees, including our executive officers, do not create risks that are reasonably likely to have a material
adverse effect on our Company.
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information,
to the best knowledge of the Company as of September 2, 2013 with respect to each director and officer and management as a group
and any holder owning more than 5% of the outstanding common stock
Name and Address
|
Position
|
Class of Shares
|
Number of Shares
|
Percentage
Note (1)
|
Naiel Kanno (2)
5900 Muir Drive
Richmond, BC V6V 2Y2
|
Director (from January 18, 2013)
|
Common
|
20,300,000
|
43.60 %
|
J Roland Vetter (3)
189 Talisman Ave,
Vancouver BC V5Y 2L6 Canada
|
Director
|
Common
|
200,000
|
0.43%
|
|
(1)
|
The above percentages are based on 46,553,147 shares of common stock outstanding as of September 2, 2013.
|
|
(2)
|
4,700,000 shares are held by Kanno Group Holding Ltd., a BC Canadian Company located at 5900 Muir Drive, Richmond, BC V6V 2Y2, and a further 15,300,000 shares are held by Kanno Group Holdings II Ltd., a BC Canadian Company located at 5900 Muir Drive, Richmond, BC V6V 2Y2, both of which are owned by Naiel Kanno, who also holds 300,000 shares directly, for a total of 20,300,000.
|
|
(3)
|
200,000 shares are held by J R Vetter Consulting, Inc., a BC Canadian Company controlled by J Roland Vetter and located at 189 Talisman Ave., Vancouver BC, V5Y 2L6 Canada
.
|
|
|
|
|
|
|
|
|
Change in Control
There are no arrangements known to us, including
any pledge by any person of our securities or any of our parent entities, the operation of which may at a subsequent date result
in a change in control.
CERTAIN RELATIONSHIPS
AND RELATED PARTY TRANSACTIONS
AND DIRECTOR INDEPENDENCE
Unless otherwise indicated below, amounts due to related parties
are non-interest bearing, unsecured and due on demand.
During the six months
ended June 30, 2013, the Company incurred consulting fees of $55,000 (2012 - $nil) to Naiel P Kanno, the President and Chief Executive
Officer of the Company.
During the six months
ended June 30, 2013, the Company incurred consulting fees of $68,000 (2012 - $nil) to J Roland Vetter, the Chief Financial Officer
of the Company.
During the six months
ended June 30, 2013, the Company incurred consulting fees of $20,000 (2012 - $nil) to Carman Parente, the Chairman of the Board
of the Company.
During the six months
ended June 30, 2013, the Company incurred consulting fees of $10,000 (2012 - $nil) to Naiel P Kanno, the President and Chief Executive
Officer of the Company.
During the six months
ended June 30, 2013, the Company incurred management fees of $nil (2012 - $15,900) to a company controlled by Richard Fesiuk, the
former Chief Executive Officer of the Company.
As at June 30, 2013,
the amount of $94,517 (December 31, 2012 - $nil) is owed to Naiel P Kanno, the President and Chief Executive Officer of the Company,
and Kanno Group Holdings Ltd, a company controlled by Mr. Kanno, which is non-interest bearing, unsecured, and due on demand.
As at June 30, 2013,
the amount of $10,000 (December 31, 2012 - $nil) is owed to J Roland Vetter, the Chief Financial Officer of the Company, which
is non-interest bearing, unsecured, and due on demand.
As at June 30, 2013,
the amount of $121,757 (December 31, 2012 - $106,557) is owed to Carman Parente, the Chairman of the Board of the Company and companies
controlled by the Chairman, which is non-interest bearing, unsecured, and due on demand.
As at June 30, 2013,
the amount of $22,948 (December 31, 2012 - $22,948) is owed to Richard Fesiuk, a former director and Atrypa Gold Corp. a company
controlled by a former director of the Company, which is non-interest bearing, unsecured, and due on demand.
As at June 30, 2013,
the amount of $44,717 (December 31, 2012 - $44,717) is owed to Richard Fesiuk, a former director and Atrypa Gold Corp., a company
controlled by a former director of the Company, which is non-interest bearing, unsecured, and due on demand.
As at June 30, 2013, the amount of $38,465
(December 31, 2012 - $nil) is owed to Richard Bjorklund, the President of Aero, which is non-interest bearing, unsecured, and due
on demand.
On January 2, 2013, Mr. Naiel Kanno, our Chief
Executive Officer, President and director, was granted 300,000 shares of our common stock. Mr. Kanno also acquired 4,700,000 shares
of our common stock through Kanno Group Holding Ltd., and a further 15,300,000 shares of our common stock through Kanno Group Holdings
II Ltd., both companies are controlled by Mr. Kanno. In consideration for these shares of common stock, Mr. Kanno and his two companies
signed an exclusive licensing and distribution agreement (the “License Agreement”) to sell and market the iPMine communication
and mine safety system for underground mines for the European continent. The terms of the agreement includes exclusivity for the
European market for a five year term renewable with an additional five year term and first right of refusal to acquire 100% of
the iPMine intellectual property. The Company issued 300,000 shares of common stock with a fair value of $300 to the licensor.
On March 22, 2013, the Company exercised its
option under the License Agreement to acquire 100% ownership of the iPMine communication and mine safety system. The Company acquired
100% of the iPMine intellectual property for total consideration of $10,000,000 comprised of 20,000,000 shares of common stock
with a fair value of $20,000 and the assumption of $9,980,000 in debt owing to two companies controlled by Mr. Naiel Kanno, who
is our Chief Executive Officer, President and director. The debt was non-interest bearing, due on demand, and secured by the iPMine
technology. On May 10, 2013, the Company entered into an agreement to convert the debt into non-interest bearing convertible promissory
notes.
Review, Approval or Ratification of Transactions
with Related Persons
Although we have not
adopted a Code of Ethics, we rely on our board to review related party transactions on an ongoing basis to prevent conflicts of
interest. Our board reviews a transaction in light of the affiliations of the director, officer or employee and the affiliations
of such person’s immediate family. Transactions are presented to our board for approval before they are entered into or,
if this is not possible, for ratification after the transaction has occurred. If our board finds that a conflict of interest exists,
then it will determine the appropriate remedial action, if any. Our board approves or ratifies a transaction if it determines that
the transaction is consistent with our best interests.
Director Independence
During fiscal 2012, we
did not have any independent director on our board. We evaluate independence by the standards for director independence established
by applicable laws, rules, and listing standards including, without limitation, the standards for independent directors established
by The New York Stock Exchange, Inc., The NASDAQ National Market, and the Securities and Exchange Commission.
Subject to some exceptions,
these standards generally provide that a director will not be independent if (a) the director is, or in the past three years has
been, an employee of ours; (b) a member of the director’s immediate family is, or in the past three years has been, an executive
officer of ours; (c) the director or a member of the director’s immediate family has received more than $120,000 per year
in direct compensation from us other than for service as a director (or for a family member, as a non-executive employee); (d)
the director or a member of the director’s immediate family is, or in the past three years has been, employed in a professional
capacity by our independent public accountants, or has worked for such firm in any capacity on our audit; (e) the director or a
member of the director’s immediate family is, or in the past three years has been, employed as an executive officer of a
company where one of our executive officers serves on the compensation committee; or (f) the director or a member of the director’s
immediate family is an executive officer of a company that makes payments to, or receives payments from, us in an amount which,
in any twelve-month period during the past three years, exceeds the greater of $1,000,000 or two percent of that other company’s
consolidated gross revenues.
DISCLOSURE OF COMMISSION
POSITION OF
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Sections 78.7502 and
78.751 of the Nevada Revised Statutes authorizes a court to award, or a corporation’s board of directors to grant indemnity
to directors and officers in terms sufficiently broad to permit indemnification, including reimbursement of expenses incurred,
under certain circumstances for liabilities arising under the Securities Act of 1933, as amended. In addition, the registrant’s
Bylaws provide that the registrant has the authority to indemnify the registrant’s directors and officers and may indemnify
the registrant’s employees and agents (other than officers and directors) against liabilities to the fullest extent permitted
by Nevada law. The registrant is also empowered under the registrant’s Bylaws to purchase insurance on behalf of any person
whom the registrant is required or permitted to indemnify.
Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to
the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
WHERE YOU CAN FIND
MORE INFORMATION
We have filed a registration
statement on Form S-1, together with all amendments and exhibits, with the SEC. This Prospectus, which forms a part of that registration
statement, does not contain all information included in the registration statement. Certain information is omitted and you should
refer to the registration statement and its exhibits. With respect to references made in this Prospectus to any of our contracts
or other documents, the references are not necessarily complete and you should refer to the exhibits attached to the registration
statement for copies of the actual contracts or documents. You may read and copy any document that we file at the Commission’s
Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information
on the operation of the public reference rooms. Our filings and the registration statement can also be reviewed by accessing the
SEC’s website at http://www.sec.gov.
FINANCIAL STATEMENTS
Our interim
unaudited consoildated financial statements as of and for the six months ended June 30, 2013, and audited consolidated
financial statements for the fiscal years ended December 31, 2012 and 2011 are included herewith.
SANWIRE CORPORATION
(formerly NT Mining Corporation)
Consolidated balance sheets
(Expressed in U.S. dollars)
|
(Restatement – Note 13)
June 30,
2013
$
|
December 31,
2012
$
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
Cash
|
2,413
|
1,094
|
Accounts receivable
|
82,800
|
–
|
Loans receivable (Note 6)
|
28,620
|
–
|
|
|
|
Total current assets
|
113,833
|
1,094
|
|
|
|
Technology intellectual property (Note 4)
|
29,448
|
–
|
Property and equipment (Note 5)
|
1,682
|
–
|
Goodwill
|
1,352,212
|
–
|
|
|
|
Total assets
|
1,497,175
|
1,094
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
581,294
|
455,083
|
Accrued liabilities
|
132,339
|
113,201
|
Loans payable (Note 7)
|
673,624
|
630,624
|
Due to related parties (Note 9)
|
332,404
|
174,222
|
|
|
|
Total current liabilities
|
1,719,661
|
1,373,130
|
|
|
|
Convertible debt, net of unamortized discount of $$2,191,355 (Note 8)
|
7,788,645
|
–
|
|
|
|
Total liabilities
|
9,508,306
|
1,373,130
|
|
|
|
Nature of operations and continuance of business (Note 1)
|
|
|
Commitments (Note 12)
|
|
|
Subsequent events (Note 14)
|
|
|
|
|
|
Stockholders’ equity (deficit)
|
|
|
|
|
|
Common stock
Authorized: 750,000,000 shares, par value $0.00001
Issued and outstanding: 46,273,147 (December 31, 2012 –
1,151,937) shares
|
463
|
12
|
|
|
|
Additional paid-in capital
|
13,954,997
|
9,408,186
|
|
|
|
Shares issuable (Note 10)
|
60,000
|
60,000
|
|
|
|
Deferred compensation (Note 10)
|
(566,488)
|
–
|
|
|
|
Accumulated other comprehensive loss
|
(5,776)
|
(5,776)
|
|
|
|
Deficit
|
(21,454,327)
|
(10,834,458)
|
|
|
|
Total stockholders’ equity (deficit)
|
(8,011,131)
|
(1,372,036)
|
|
|
|
Total liabilities and stockholders’ equity (deficit)
|
1,497,175
|
1,094
|
SANWIRE CORPORATION
(formerly NT Mining Corporation)
Consolidated statements of operations
(Expressed in U.S. dollars)
(unaudited)
|
|
(Restated – Note 13)
Three Months Ended
June 30,
2013
$
|
|
Three Months Ended
June 30,
2012
$
|
|
(Restated – Note 13)
Six Months Ended
June 30,
2013
$
|
|
Six Months Ended
June 30,
2012
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
117,800
|
|
|
|
—
|
|
|
|
117,800
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
112,670
|
|
|
|
—
|
|
|
|
112,670
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
5,130
|
|
|
|
—
|
|
|
|
5,130
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets
|
|
|
757
|
|
|
|
—
|
|
|
|
832
|
|
|
|
—
|
|
Depreciation of property and equipment
|
|
|
329
|
|
|
|
—
|
|
|
|
329
|
|
|
|
—
|
|
General and administrative (Note 9)
|
|
|
439,290
|
|
|
|
67,057
|
|
|
|
470,628
|
|
|
|
87,523
|
|
Royalties
|
|
|
—
|
|
|
|
36,000
|
|
|
|
—
|
|
|
|
36,000
|
|
Write-down of intangible assets
|
|
|
—
|
|
|
|
—
|
|
|
|
9,970,020
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
440,376
|
|
|
|
103,057
|
|
|
|
10,441,809
|
|
|
|
123,523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before other income (expense)
|
|
|
(435,246
|
)
|
|
|
(103,057
|
)
|
|
|
(10,436,679
|
)
|
|
|
(123,523
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion of discount on convertible debt
|
|
|
(196,602
|
)
|
|
|
—
|
|
|
|
(196,602
|
)
|
|
|
—
|
|
Interest expense
|
|
|
(14,478
|
)
|
|
|
(18,014
|
)
|
|
|
(29,138
|
)
|
|
|
(36,068
|
)
|
Write-off of accounts payable
|
|
|
42,550
|
|
|
|
—
|
|
|
|
42,550
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
(168,530
|
)
|
|
|
(18,014
|
)
|
|
|
(183,190
|
))
|
|
|
(36,068
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
|
(603,776
|
)
|
|
|
(121,071
|
)
|
|
|
(10,619,869
|
)
|
|
|
(159,591
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share, basic and diluted
|
|
|
(0.01
|
)
|
|
|
(0.13
|
)
|
|
|
(0.44
|
)
|
|
|
(0.17
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding
|
|
|
43,066,576
|
|
|
|
951,937
|
|
|
|
24,028,385
|
|
|
|
951,937
|
|
SANWIRE CORPORATION
(formerly NT Mining Corporation)
Consolidated statements of stockholder’s equity (deficit)
(expressed in U.S. dollars)
(unaudited)
|
Common Stock
|
Additional paid-in capital
$
|
Shares
issuable
$
|
Deferred compensation
$
|
Accumulated other comprehensive loss
$
|
Deficit
$
|
Total
stockholders’
equity (deficit)
$
|
Number
|
Amount
$
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2012
|
1,151,937
|
12
|
9,408,187
|
60,000
|
–
|
(5,776)
|
(10,834,458)
|
(1,372,035)
|
|
|
|
|
|
|
|
|
|
Shares issued to acquire technology intellectual property
|
20,300,000
|
203
|
20,097
|
–
|
–
|
–
|
–
|
20,300
|
|
|
|
|
|
|
|
|
|
Shares issued to settle debt
|
20,000,000
|
200
|
19,800
|
–
|
–
|
–
|
–
|
20,000
|
|
|
|
|
|
|
|
|
|
Shares issued for services
|
2,421,000
|
24
|
774,346
|
–
|
(566,488)
|
–
|
–
|
207,882
|
|
|
|
|
|
|
|
|
|
Shares issued to acquire Aeronetworks LLC
|
2,400,000
|
24
|
599,976
|
–
|
–
|
–
|
–
|
600,000
|
|
|
|
|
|
|
|
|
|
Share purchase warrants issued to acquire Aeronetworks LLC
|
–
|
–
|
699,750
|
–
|
–
|
–
|
–
|
699,750
|
|
|
|
|
|
|
|
|
|
Share purchase warrants issued for services
|
–
|
–
|
44,884
|
–
|
–
|
–
|
–
|
44,884
|
|
|
|
|
|
|
|
|
|
Gain on extinguishment of related party debt
|
–
|
–
|
2,387,957
|
–
|
–
|
–
|
–
|
2,387,957
|
|
|
|
|
|
|
|
|
|
Adjustment for reverse stock split
|
210
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
–
|
–
|
–
|
–
|
–
|
–
|
(10,619,869)
|
(10,619,869)
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2013
|
46,273,147
|
463
|
13,954,997
|
60,000
|
(566,488)
|
(5,776)
|
(21,454,327)
|
(8,011,131)
|
|
|
|
|
|
|
|
|
|
SANWIRE CORPORATION
(formerly NT Mining Corporation)
Consolidated statements of cash flows
(Expressed in U.S. dollars)
(unaudited)
|
|
Six Months Ended
June 30,
2013
$
|
|
Six Months Ended
June 30,
2012
$
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
|
(10,619,869
|
)
|
|
|
(159,591
|
)
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Accretion of discount on convertible debt
|
|
|
196,602
|
|
|
|
—
|
|
Amortization of intangible asset
|
|
|
832
|
|
|
|
—
|
|
Depreciation of property and equipment
|
|
|
329
|
|
|
|
6,730
|
|
Stock-based compensation
|
|
|
252,752
|
|
|
|
—
|
|
Write-down of intangible assets
|
|
|
9,970,020
|
|
|
|
—
|
|
Write off of accounts payable
|
|
|
(42,550
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(82,800
|
)
|
|
|
41
|
|
Prepaid expenses and deposits
|
|
|
—
|
|
|
|
(1,000
|
)
|
Accounts payable
|
|
|
154,760
|
|
|
|
125,428
|
|
Accrued liabilities
|
|
|
19,138
|
|
|
|
—
|
|
Due to related parties
|
|
|
113,993
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(36,793
|
)
|
|
|
(28,392
|
)
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable advances
|
|
|
(5,000
|
)
|
|
|
—
|
|
Purchase of property and equipment
|
|
|
(766
|
)
|
|
|
—
|
|
Cash acquired on purchase of subsidiary
|
|
|
9,696
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities
|
|
|
3,930
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from notes payable
|
|
|
22,012
|
|
|
|
—
|
|
Proceeds from related parties
|
|
|
12,170
|
|
|
|
34,451
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
34,182
|
|
|
|
34,451
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
—
|
|
|
|
(1,122
|
)
|
|
|
|
|
|
|
|
|
|
Change in cash
|
|
|
1,319
|
|
|
|
4,937
|
|
|
|
|
|
|
|
|
|
|
Cash, beginning of period
|
|
|
1,094
|
|
|
|
1,136
|
|
|
|
|
|
|
|
|
|
|
Cash, end of period
|
|
|
2,413
|
|
|
|
6,073
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares and warrants issued for the acquisition of Aeronetworks LLC
|
|
|
1,299,765
|
|
|
|
—
|
|
Technology intellectual property acquired with convertible debt and share issuance
|
|
|
10,000,300
|
|
|
|
—
|
|
Gain on extinguishment of related party debt recorded as additional paid-in capital
|
|
|
2,387,957
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
|
—
|
|
|
|
—
|
|
Income taxes paid
|
|
|
—
|
|
|
|
—
|
|
SANWIRE CORPORATION
(FORMERLY
NT MINING CORPORATION)
Notes to
the consolidated financial statements
June 30, 2013
(Expressed
in U.S. Dollars)
(unaudited)
|
1.
|
Nature of Operations and Continuance of Business
|
Sanwire Corporation (formerly NT
Mining Corporation) (the “Company”) was incorporated in the State of Nevada on February 10, 1997. The Company’s
subsidiary, Bullmoose Mines Ltd. owns mineral lease #2775 plus 4 mineral claims located in the South Mackenzie Mining District,
Northwest Territories, Canada.
On March 22, 2013, the Company
exercised its option under a license agreement to acquire 100% ownership of the iPMine communication and mine safety system. Refer
to Note 4. On May 28, 2013, the Company completed the
acquisition of Tulsa, Oklahoma-based Aeronetworks LLC (“Aero”). Refer to Note 3.
The Company has broadened its business plan to include wireless application in
the mining sector through the acquisition of iPMine, which is operated under its subsidiary, iPTerra Technologies, Inc. (“iPTerra”),
and Aero plays a role in the design and deployment of the underground network. iPTerra is a designer, developer, manufacturer and
marketer of a real-time 2-way wireless and/or wireline communications, and mine safety solution for the global mining and industrial
industry. Aero provides advanced telecommunications and broadband services to rural communities and Native American tribes with
focus on the public safety, education and healthcare sectors
Upon the acquisition of Aero, th
e
Company is no longer a development stage company as defined by Financial Accounting Standards Board Accounting Standards Codification
(“ASC”) 915, “Development Stage Entities”.
These consolidated financial statements
have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities
in the normal course of business. The continuation of the Company as a going concern is dependent upon the continued financial
support from its shareholders, the ability of management to raise additional equity capital through private and public offerings
of its common stock, and the attainment of profitable operations. As at June 30, 2013, the Company has a working capital deficit
of $1,605,828 and has an accumulated deficit of $21,454,327 since inception. These factors raise substantial doubt regarding the
Company’s ability to continue as a going concern. 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.
|
Summary of Significant Accounting Policies
|
|
(a)
|
Basis of Presentation and Principles of Consolidation
|
These consolidated financial
statements and related notes are presented in accordance with accounting principles generally accepted in the United States.
These consolidated financial statements are expressed in US dollars. These consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries, Bullmoose Mines Ltd., iPTerra Technologies, Inc., Aeronetworks LLC and Birchtree, LLC. All inter-company balances and transactions have been eliminated.
SANWIRE CORPORATION
(FORMERLY
NT MINING CORPORATION)
Notes to
the consolidated financial statements
June 30, 2013
(Expressed
in U.S. Dollars)
(unaudited)
|
2
.
|
Summary of Significant Accounting Policies (Continued)
|
|
(b)
|
Interim Financial Statements
|
|
|
These interim unaudited consolidated financial statements have been prepared on the same basis
as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring
adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods
shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for
any future period.
|
The preparation of financial statements
in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period.
The Company
regularly evaluates estimates and assumptions related to allowance for doubtful accounts, the estimated useful lives and recoverability
of long-lived assets, fair value of convertible debt, stock-based compensation, and deferred income tax asset valuation allowances.
The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes
to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of
assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results
experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material
differences between the estimates and the actual results, future results of operations will be affected
.
|
(d)
|
Cash and Cash Equivalents
|
The Company considers all highly
liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.
The Company recognizes allowances
for doubtful accounts to ensure accounts receivable are not overstated due to the inability or unwillingness of its customers to
make required payments. The allowance is based on the age of receivable and the specific identification of receivables the Company
considers at risk.
|
(f)
|
Property and Equipment
|
|
|
Property and equipment are stated at cost. The Company depreciates the cost of property and equipment
over their estimated useful lives at the following annual rates:
|
|
Computer equipment
|
55% declining balance
|
Intangible assets are stated at cost
less accumulated amortization. The Company’s intangible asset is the iPMine technology which is being amortized straight-line
over 10 years.
SANWIRE CORPORATION
(FORMERLY
NT MINING CORPORATION)
Notes to
the consolidated financial statements
June 30, 2013
(Expressed
in U.S. Dollars)
(unaudited)
2. Summary of Significant Accounting
Policies
(continued)
In accordance with ASC 360, “Property,
Plant and Equipment”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances
indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited
to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors;
accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset;
current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with
the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before
the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value,
which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual
disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount
is not recoverable and exceeds fair value.
Goodwill represents the excess
of the acquisition price over the fair value of identifiable net assets acquired. Goodwill is allocated at the date of the business
combination. Goodwill is not amortized, but is tested for impairment annually, during the fourth quarter, or more frequently if
events or changes in circumstances indicate the asset may be impaired. These events and circumstances may include a significant
change in legal factors or in the business climate, a significant decline in the Company’s share price, an adverse action
of assessment by a regulator, unanticipated competition, a loss of key personnel, significant disposal activity and the testing
of recoverability for a significant asset group.
The Company consists of a single
reporting unit. The impairment test is carried out in two steps. In the first step, the carrying amount of the reporting unit including
goodwill is compared with its fair value. The estimated fair value is determined utilizing a market-based approach, based on the
quoted market price of the Company’s stock in an active market, adjusted by an appropriate control premium. When the carrying
amount of a reporting unit exceeds its fair value, goodwill of the reporting unit is considered to be impaired and the second step
is necessary.
In the second step of the goodwill
impairment test, the implied fair value of the reporting unit’s goodwill is compared with its carrying amount to measure
the amount of the impairment loss, if any. The implied fair value of goodwill is determined in the same manner as the value of
goodwill is determined in a business combination using the fair value of the reporting unit as if it were the acquisition price.
When the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of the goodwill, an impairment loss
is recognized in an amount equal to the excess and is presented as a separate line item in the consolidated statements of operations.
Establishing an implied fair value of goodwill requires the Company to make estimates for key inputs into complex valuation models
and to apply significant judgment in the selection of estimates, assumptions and methodologies required to complete the analysis.
Areas of judgment include, but are not limited to, development of multi-year business cash flow forecasts, the selection of discount
rates and the identification and valuation of unrecorded assets.
SANWIRE CORPORATION
(FORMERLY
NT MINING CORPORATION)
Notes to
the consolidated financial statements
June 30, 2013
(Expressed
in U.S. Dollars)
(unaudited)
2. Summary of Significant Accounting Policies
(continued)
|
(j)
|
Foreign Currency Translation
|
Transactions in foreign currencies
are translated into the currency of measurement at the exchange rates in effect on the transaction date. Monetary balance sheet
items expressed in foreign currencies are translated into U.S. dollars at the exchange rates in effect at the balance sheet date.
The resulting exchange gains and losses are recognized in income.
The Company’s integrated
foreign subsidiaries are financially or operationally dependent on the Company. The Company uses the temporal method to translate
the accounts of its integrated operations into U.S. dollars. Monetary assets and liabilities are translated at the exchange rates
in effect at the balance sheet date. Non-monetary assets and liabilities are translated at historical rates. Revenues and expenses
are translated at average rates for the period, except for amortization, which is translated on the same basis as the related asset.
The resulting exchange gains or losses are recognized in income.
The Company accounts for income
taxes using the asset and liability method in accordance with ASC 740, “Accounting for Income Taxes”. The asset and
liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary
differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry
forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect
when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount
that is believed more likely than not to be realized.
The Company earns revenue from
the provision of advanced telecommunications and broadband services. The Company recognizes revenue in accordance with ASC 605,
“Revenue Recognition”. Revenue is recognized when the price is fixed or determinable, persuasive evidence of an arrangement
exists, the service has been performed, and collectability is reasonably assured.
|
(m)
|
Financial Instruments and Fair Value Measures
|
ASC 820, “Fair Value Measurements
and Disclosures” requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs
when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding
the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon
the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that
may be used to measure fair value:
Level 1
Level 1 applies to assets or liabilities
for which there are quoted prices in active markets for identical assets or liabilities.
SANWIRE CORPORATION
(FORMERLY
NT MINING CORPORATION)
Notes to
the consolidated financial statements
June 30, 2013
(Expressed
in U.S. Dollars)
(unaudited)
2. Summary of Significant Accounting
Policies
(continued)
Level 2
Level 2 applies to assets or liabilities
for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar
assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume
or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can
be derived principally from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities
for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value
of the assets or liabilities.
The Company’s financial instruments
consist principally of cash, accounts receivable, accounts payable, accrued liabilities, loans payable, convertible debt, and amounts
due to related parties. Pursuant to ASC 820, the fair value of cash is determined based on “Level 1” inputs, which
consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate
their current fair values because of their nature and respective maturity dates or durations.
|
(n)
|
Stock-based Compensation
|
The Company records stock-based
compensation in accordance with ASC 718, “Compensation – Stock Compensation”, using the fair value method. All
transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for
based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably
measurable.
The Company uses the Black-Scholes
option pricing model to calculate the fair value of stock-based awards. This model is affected by the Company’s stock price
as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to the
Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise
behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the consolidated
statement of operations over the requisite service period.
The
Company computes 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 income statement. Basic EPS is computed by dividing
the loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during
the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock
method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the
period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants.
SANWIRE CORPORATION
(FORMERLY
NT MINING CORPORATION)
Notes to
the consolidated financial statements
June 30, 2013
(Expressed
in U.S. Dollars)
(unaudited)
2. Summary of Significant Accounting
Policies
(continued)
Diluted
EPS excludes all dilutive potential shares if their effect is anti dilutive. As at June 30, 2013, the Company
had
13,230,000
dilutive potential shares outstanding.
ASC 220,
“Comprehensive Income,” establishes standards for the reporting and display of comprehensive loss and its components
in the financial statements. As at June 30, 2013 and 2012, the Company had no items that represent a comprehensive loss and, therefore,
has not included a schedule of comprehensive loss in the consolidated financial statements.
|
(q)
|
Recent Accounting Pronouncements
|
The Company has implemented all
new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are
any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results
of operations.
|
3.
|
Acquisition of Aeronetworks LLC
|
On May 28, 2013 the Company
completed a stock purchase agreement with all the shareholders of
Aeronetworks LLC
(“Aero”). The Company acquired 100% of the issued and
outstanding shares of Aero and its wholly-owned subsidiary Birchtree, LLC by issuing 2,400,000 shares of common stock and
3,000,000 share purchase warrants in three 1,000,000 blocks expiring in 2014, 2015, and 2017 at an exercise price of $0.50,
$0.75, and $1.00 respectively. The Company also agreed to issue future earn-out performance bonus shares based on revenue
growth and extended a three year agreement to Aero’s management team. Refer to Note 11(f).
As a result, the Company issued
2,400,000 shares of common stock with a fair value of $600,000, and 3,000,000 share purchase warrants with a fair value of $699,765
to the shareholders of Aero. The Company determined the fair value of the share purchase warrants using the Black-Scholes option
pricing model with the following weighted average assumptions: risk-free interest rate of 0.63%, expected life of 2.9 years, expected
volatility of 256%, and no expected dividends.
|
|
$
|
|
|
|
Fair value of shares issued
|
|
600,000
|
Fair value of share purchase warrants issued
|
|
699,765
|
|
|
|
Total purchase price
|
|
1,299,765
|
SANWIRE CORPORATION
(FORMERLY
NT MINING CORPORATION)
Notes to
the consolidated financial statements
June 30, 2013
(Expressed
in U.S. Dollars)
(unaudited)
|
3.
|
Acquisition of Aeronetworks LLC
(continued)
|
At the date of acquisition,
the fair values of the assets and liabilities of Aero consisted of the following
|
|
$
|
|
|
|
Cash
|
|
9,696
|
Loans receivable
|
|
23,620
|
Property and equipment
|
|
1,245
|
Goodwill
|
|
1,352,212
|
Accounts payable
|
|
(34,001)
|
Loans payable
|
|
(20,988)
|
Due to related parties
|
|
(32,019)
|
|
|
|
Total purchase price
|
|
1,299,765
|
|
4.
|
Technology Intellectual Property
|
|
Cost
$
|
Accumulated amortization
$
|
Write-down
$
|
June 30,
2013
Net carrying value
$
|
December 31,
2012
Net carrying value
$
|
|
|
|
|
|
|
iPMine technology
|
10,000,300
|
832
|
9,970,020
|
29,448
|
–
|
On January 2, 2013, the Company
signed an exclusive licensing and distribution agreement (the “License Agreement”) to sell and market the iPMine communication
and mine safety system for underground mines for the European continent. The terms of the agreement includes exclusivity for the
European market for a five year term renewable with an additional five year term and first right of refusal to acquire 100% of
the iPMine intellectual property. The Company issued 300,000 shares of common stock with a fair value of $300 to the licensor.
On January 14, 2013, the Company
acquired 100% ownership of newly created iPTerra. for $5,500, which is to be paid to the seller within a one year period from the
closing date. The iPMine system will operate under iPTerra.
On March 22, 2013, the Company
exercised its option under the License Agreement to acquire 100% ownership of the iPMine communication and mine safety system.
The Company acquired 100% of the iPMine intellectual property for total consideration of $10,000,000 comprised of 20,000,000 shares
of common stock with a fair value of $20,000 and the assumption of $9,980,000 in debt owing to two companies controlled by a director
of the Company (the director also became the President and Chief Executive Officer of the Company on April 17, 2013). The debt
was non-interest bearing, due on demand, and secured by the iPMine technology. On May 10, 2013, the Company entered into an agreement
to convert the debt into non-interest bearing convertible promissory notes. Refer to Note 8.
On March 31, 2013, the Company recognized
a write down of $9,970,020 due to the uncertainty of expected future cash flows.
SANWIRE CORPORATION
(FORMERLY
NT MINING CORPORATION)
Notes to
the consolidated financial statements
June 30, 2013
(Expressed
in U.S. Dollars)
(unaudited)
5. Property and Equipment
|
Cost
$
|
Accumulated depreciation
$
|
June 30,
2013
Net carrying value
$
|
December 31,
2012
Net carrying value
$
|
|
|
|
|
|
Computer equipment
|
2,011
|
329
|
1,682
|
–
|
As at June 30, 2013, the Company
has loans receivable totaling $28,620, which are non-interest bearing, unsecured, and due on demand.
|
(a)
|
As at June 30, 2013, the amount of $150,000 (December 31, 2012 - $150,000) is owed to a non-related
party which bears interest at 10% per annum, unsecured, and due on demand. As at June 30, 2013, the Company has accrued interest
of $25,431 (December 31, 2012 - $37,931) which is included in accrued liabilities.
|
|
(b)
|
As at June 30, 2013, the amount of $480,624 (December 31, 2012 - $480,624) is owed to a non-related
party, which bears interest at 12% per annum, due on demand, and secured by the assets of the Company. As at June 30, 2013, the
Company has accrued interest of $96,808 (December 31, 2012 - $75,270) which is included in accrued liabilities.
|
|
(c)
|
As at June 30, 2013, the amount of $28,000 (December 31, 2012 – $nil) is owed to a non-related
party, which is non-interest bearing, unsecured, and due on demand.
|
|
(d)
|
As at June 30, 2013, the amount of $15,000 (December 31, 2012 - $nil) is owed to a non-related
party which is non-interest bearing, unsecured, and due on demand.
|
On May 10, 2013, the Company amended the loans payable
issued to two companies controlled by the President of the Company for the $9,980,000 debt that arose from the purchase of the
iPMine system. Refer to Note 4. As per the amended agreements the terms of the notes were changed from being due on demand to being
due eighteen months from the date of the amended agreements, as well, the amended agreements added a conversion feature to the
notes whereby any unpaid amount of principal can be converted at any time at the holder’s option into shares of the Company’s
common stock at a price of $1.00 per share. The Company determined that there was no embedded beneficial conversion feature.
In accordance with ASC 470-60,
“Debt - Troubled Debt Restructurings by Debtors”, the Company determined that the creditor did not grant a concession
as the only modifications to the debt was the extension of the maturity date and the addition of a conversion option. The modification
was then analyzed under ASC 470-50, “Debt - Modifications and Extinguishments” and the Company determined that the
present value of the cash flows of the new debt instrument differs by 10% or more from the present value of the remaining cash
flows under the original debt. As a result, the debt instruments have substantially different terms and the original debt is considered
extinguished. The Company recorded a gain on extinguishment of debt of $2,387,957 and which was recorded as additional paid-in
capital. During the period ended June 30, 2013, the Company recorded accretion expense of $196,602, increasing the carrying value
to $7,788,645 as at June 30, 2013.
SANWIRE CORPORATION
(FORMERLY
NT MINING CORPORATION)
Notes to
the consolidated financial statements
June 30, 2013
(Expressed
in U.S. Dollars)
(unaudited)
|
9.
|
Related Party Transactions
|
|
(a)
|
During the six months ended June 30, 2013, the Company incurred consulting
fees of $55,000 (2012 - $nil) to the President of the Company.
|
|
(b)
|
During the six months ended June 30, 2013, the Company incurred consulting
fees of $68,000 (2012 - $nil) to the Chief Financial Officer of the Company.
|
|
(c)
|
During the six months ended June 30, 2013, the Company incurred consulting
fees of $20,000 (2012 - $nil) to the Chairman of the Board of the Company.
|
|
(d)
|
During the six months ended June 30, 2013, the Company incurred consulting
fees of $10,000 (2012 - $nil) to the President of Aero.
|
|
(e)
|
During the six months ended June 30, 2013, the Company incurred management
fees of $nil (2012 - $15,900) to a company controlled by the former Chief Executive Officer of the Company.
|
|
(f)
|
As at June 30, 2013, the amount of $94,517 (December 31, 2012 - $nil)
is owed to the President and a company controlled by the President of the Company, which is non-interest bearing, unsecured, and
due on demand.
|
|
(g)
|
As at June 30, 2013, the amount of $10,000 (December 31, 2012 - $nil)
is owed to the Chief Financial Officer of the Company, which is non-interest bearing, unsecured, and due on demand.
|
|
(h)
|
As at June 30, 2013, the amount of $121,757 (December 31, 2012 -
$106,557) is owed to the Chairman of the Board of the Company and companies controlled by the Chairman, which is non-interest bearing,
unsecured, and due on demand.
|
|
(i)
|
As at June 30, 2013, the amount of $22,948 (December 31, 2012 - $22,948)
is owed to a former director and a company controlled by a former director of the Company, which is non-interest bearing, unsecured,
and due on demand.
|
|
(j)
|
As at June 30, 2013, the amount of $44,717 (December 31, 2012 - $44,717)
is owed to a former director and a company controlled by a former director of the Company, which is non-interest bearing, unsecured,
and due on demand.
|
|
(k)
|
As at June 30, 2013, the amount of $38,465 (December 31, 2012 - $nil)
is owed to the President of Aero, which is non-interest bearing, unsecured, and due on demand.
|
SANWIRE CORPORATION
(FORMERLY
NT MINING CORPORATION)
Notes to
the consolidated financial statements
June 30, 2013
(Expressed
in U.S. Dollars)
(unaudited)
|
(a)
|
On January 3, 2013, the Company issued 300,000 shares of common stock
with a fair value of $300 pursuant to the License Agreement. Refer to Note 4.
|
|
(b)
|
On March 8, 2013, the Company effected a 1 for 50 reverse split of
the issued and outstanding shares of common stock. All share amounts have been retroactively restated for all periods presented.
The Company also increased the number of authorized shares of common stock from 500,000,000 shares to 750,000,000 shares with no
change in par value.
|
|
(c)
|
On March 22, 2013, the Company issued 20,000,000 shares of common
stock with a fair value of $20,000 pursuant to the acquisition of intellectual property. Refer to Note 4.
|
|
(d)
|
On March 27, 2013, the Company issued 20,000,000 shares of common
stock with a fair value of $20,000 to settle debt of $20,000.
|
|
(e)
|
On May 17, 2013, the Company issued 200,000 shares of common stock
with a fair value of $58,000 to the Chief Financial Officer of the Company. Refer to Note 12(a).
|
|
(f)
|
On May 17, 2013, the Company issued 200,000 shares of common stock
with a fair value of $58,000 to a consultant, of which $7,150 was expensed as consulting fees for the pro-rate portion of services
rendered to June 30, 2013. The remaining $50,850 was recorded as deferred compensation and will be expensed pro-rata over the remaining
term of the agreement ending on May 15, 2014. Refer to Note 12(d).
|
|
(g)
|
On May 17, 2013, the Company issued 275,000 shares of common stock
with a fair value of $79,750 to a consultant, of which $9,832 was expensed as consulting fees for the pro-rate portion of services
rendered to June 30, 2013. The remaining $69,918 was recorded as deferred compensation and will be expensed pro-rata over the remaining
term of the agreement ending on May 15, 2014. Refer to Note 12(e).
|
|
(h)
|
On May 29, 2013, the Company issued 2,400,000 shares of common stock
with a fair value of $600,000 to acquire Aero. Refer to Note 3.
|
|
(i)
|
On May 29, 2013, the Company issued 300,000 shares of common stock
with a fair value of $75,000 to the management team of Aero. Refer to Note 12(f).
|
|
(j)
|
On June 1, 2013, the Company issued 50,000 shares of common stock
with a fair value of $12,500 to a consultant. Refer to Note 12(h).
|
|
(k)
|
On June 3, 2013, the Company issued 50,000 shares of common stock
with a fair value of $13,500 to two consultants. Refer to Note 12(g).
|
|
(l)
|
On June 12, 2013, the Company issued 500,000 of common stock with
a fair value of $170,000 to a consultant, of which $18,580 was expensed as consulting fees for the pro-rate portion of services
rendered to June 30, 2013. The remaining $151,420 was recorded as deferred compensation and will be expensed pro-rata over the
remaining term of the agreement ending on December 11, 2013.
|
SANWIRE CORPORATION
(FORMERLY
NT MINING CORPORATION)
Notes to
the consolidated financial statements
June 30, 2013
(Expressed
in U.S. Dollars)
(unaudited)
10. Common Stock
(continued)
|
(m)
|
On
June 12, 2013, the Company
issued 250,000 shares of
common stock with a fair
value of $92,500 to a consultant,
of which $9,604 was expensed
as consulting fees for the
pro-rate portion of services
rendered to June 30, 2013.
The remaining $82,896 was
recorded as deferred compensation
and will be expensed pro-rata
over the remaining term
of the agreement ending
on December 11, 2013.
|
|
(n)
|
On
June 27, 2013, the Company
issued 500,000 shares of
common stock with a fair
value of $170,000 to a consultant,
of which $3,716 was expensed
as consulting fees for the
pro-rate portion of services
rendered to June 30, 2013.
The remaining $166,284 was
recorded as deferred compensation
and will be expensed pro-rata
over the remaining term
of the agreement ending
on December 27, 2013.
|
|
(o)
|
On
June 28, 2013, the Company
issued 96,000 shares of common
stock with a fair value of
$45,120 to a consultant which
was recorded as deferred
compensation which will be
expensed on the vesting date
of July 1, 2013. Refer to
Note 13(a).
|
|
(p)
|
As
at June 30, 2013, the Company
has share subscriptions
proceeds of $60,000 which
were received in 2010.
|
|
11.
|
Share
Purchase Warrants
|
On
June 1, 2013, the Company issued 250,000 share purchase warrants at an exercise price of $0.50 per share expiring on May 31, 2014
to a consultant. The fair value of $44,884 was determined using the Black-Scholes option pricing model using the following assumptions:
risk-free interest rate of 0.14%, expected life of 1 year, expected volatility of 254%, and no expected dividends.
The
Company also issued share purchase warrants as part of the acquisition of Aero. Refer to Note 3.
The
following table summarizes the continuity of share purchase warrants:
|
Number
of
warrants
|
Weighted
average exercise price
$
|
|
|
|
Balance, December 31,
2012
|
–
|
–
|
|
|
|
Issued
|
3,250,000
|
0.73
|
|
|
|
Balance,
June 30, 2013
|
3,250,000
|
0.73
|
As at June 30, 2013,
the following share purchase warrants were outstanding:
Number
of warrants
|
Exercise
price
$
|
Expiry
date
|
|
|
|
250,000
|
0.50
|
May
31, 2014
|
1,000,000
|
0.50
|
December
31, 2014
|
1,000,000
|
0.75
|
December
31, 2015
|
1,000,000
|
1.00
|
December
31, 2016
|
|
|
|
3,250,000
|
|
|
SANWIRE CORPORATION
(FORMERLY
NT MINING CORPORATION)
Notes to
the consolidated financial statements
June 30, 2013
(Expressed
in U.S. Dollars)
(unaudited)
12. Commitments
|
(a)
|
On April 17, 2013, the Company entered into an agreement with a consultant
to become the Chief Financial Officer and director of the Company. Commending May 1, 2013, the Company is to pay the Chief Financial
Officer $5,000 per month for the first year, $8,000 per month for the second year, and $10,000 per month for the third year. The
Chief Financial Officer has the right to convert all or part of the consulting fee or outstanding accrued amount plus interest
into shares of common stock of the Company at $1.00 per share Upon execution of the agreement, the Company issued 200,000 shares
of common stock (refer to Note 10(e)) and must pay $10,000 signing bonus prior to the end of the first year of the agreement. The
signing bonus bears interest at 1% per month until it is paid in full.
|
|
(b)
|
On April 17, 2013, the Company entered into an agreement with a director
to become the President and Chief Executive Officer of the Company (the “President”). Commending May 1, 2013, the Company
is to pay the President $15,000 per month for the first year, $18,000 per month for the second year, and $20,000 per month for
the third year. The President has the right to convert all or part of the consulting fee or outstanding accrued amount plus interest
into shares of common stock of the Company at $0.01 per share The Company must pay the President a $25,000 signing bonus prior
to the end of the first year of the agreement. The signing bonus bears interest at 1% per month until it is paid in full.
|
|
(c)
|
On April 17, 2013, the Company entered into an agreement with a director
to become the Chairman of the Board of Directors of the Company (the “Chairman”). Commending May 1, 2013, the Company
is to pay the Chairman $10,000 per month for the first year, $12,000 per month for the second year, and $15,000 per month for the
third year. The Chairman has the right to convert all or part of the consulting fee or outstanding accrued amount plus interest
into shares of common stock of the Company at $0.01 per share The Company must pay a $10,000 signing bonus prior to the end of
the first year of the agreement. The signing bonus bears interest at 1% per month until it is paid in full.
|
|
(d)
|
On May 15, 2013, the Company entered into an agreement with a consultant
whereby the Company issued 200,000 shares of common stock for services to be provided over a period of one year. Refer to Note
10(f). The Company will pay a finder’s fee of 10% on any financing brought to the Company by the consultant.
|
|
(e)
|
On May 15, 2013, the Company entered into an agreement with a consultant
whereby the Company issued 275,000 shares of common stock for services to be provided over a period of one year. Refer to Note
10(g). The Company will pay a finder’s fee of 10% on any financing brought to the Company by the consultant.
|
|
(f)
|
On May 28, 2013, as part of the acquisition of Aero, the Company
agreed to issue performance bonus shares to the former shareholders of Aero based on Aero’s revenue growth over a three year
period. The increase in gross revenue over the previous year is converted to shares of common stock of the Company at $1.00 per
share.
|
SANWIRE CORPORATION
(FORMERLY
NT MINING CORPORATION)
Notes to
the consolidated financial statements
June 30, 2013
(Expressed
in U.S. Dollars)
(unaudited)
12. Commitments
(continued)
The Company will
also pay finders’ fee shares to the former shareholders of Aero if they introduce an acquisition target to the Company. The
finders’ fee shares will be calculated as a percentage of the Company’s valuation purchase price of each acquisition
target as follows: (i) 1.5% for the first $2,000,000 and (ii) 0.75% on the balance.
In addition, commencing
June 1, 2013, the Company is to pay consulting fees to three members of Aero’s management team. Each member is to be paid
$10,000 per month for the first year, $12,000 per month for the second year, and $15,000 per month for the third year. Any unpaid
amounts bear interest at 1% per month. The members have the right to convert all or part of the consulting fee or outstanding accrued
amount plus interest into shares of common stock of the Company at $1.00 per share. Upon execution of the agreement, the Company
issued 100,000 shares of common stock to each of the three individuals as a signing bonus (issued). Refer to Note 10(i).
|
(g)
|
On June 1, 2013, the Company entered into an agreement with two consultants
whereby the Company issued a total of 50,000 shares of common stock (refer to Note 10(k) and is to pay a total of $1,000 per month
for a period of six months. The agreement can be extended for an additional six month term at the option of the Company for a total
of $1,500 per month. The Company will pay a commission of 10% of any iPMine sales and a 5% finder’s fee for any financing
brought to the Company by the consultants.
|
|
(h)
|
On June 1, 2013, the Company entered into an agreement with a consultant
whereby the Company is to pay the consultant $5,000 per month with either party able to terminate the agreement on two months written
notice to the other party. Upon execution of the agreement, the Company issued 50,000 shares of common stock and 250,000 share
purchase warrants exercisable at $0.50 per share expiring on May 31, 2014. Refer to Notes 10(i) and Note 11.
|
|
(i)
|
On June 1, 2013, the Company entered into an agreement with a consultant
whereby the Company is to pay the consultant $15,000 per quarter over a period of one year. The Company will pay a finder’s
fee of 10% on any financing brought to the Company by the consultant.
|
SANWIRE CORPORATION
(FORMERLY
NT MINING CORPORATION)
Notes to
the consolidated financial statements
June 30, 2013
(Expressed
in U.S. Dollars)
(unaudited)
13. Restatement
The Company has
restated its financial statements as at June 30, 2013 and for the three and six months then ended. These financial statements have
been restated to reflect a write-down of the technology intellectual property (and corresponding adjustment to amortization) and
adjustment to the fair value of shares issued for the technology intellectual property. The Company also corrected the accounting
for the modification of related party debt. These restatements resulted in an increase in net loss per share from $0.04 to $0.44
for the six months ended June 30, 2013 and a decrease from $0.02 to $0.01 for the three months ended June 30, 2013.
Balance sheet
|
As at June 30, 2013
|
|
As reported
$
|
Adjustment
$
|
As restated
$
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
Cash
|
2,413
|
–
|
2,413
|
Accounts receivable
|
82,800
|
–
|
82,800
|
Loans receivable
|
28,620
|
–
|
28,620
|
|
|
|
|
Total current assets
|
113,833
|
–
|
113,833
|
|
|
|
|
Technology intellectual property
|
9,774,862
|
(9,745,414)
|
29,448
|
Property and equipment
|
1,682
|
–
|
1,682
|
Goodwill
|
1,352,212
|
–
|
1,352,212
|
|
|
|
|
Total assets
|
11,242,589
|
(9,745,414)
|
1,497,175
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
Accounts payable
|
581,294
|
–
|
581,294
|
Accrued liabilities
|
132,339
|
–
|
132,339
|
Loans payable
|
673,624
|
–
|
673,624
|
Due to related parties
|
332,404
|
–
|
332,404
|
|
|
|
|
Total current liabilities
|
1,719,661
|
–
|
1,719,661
|
|
|
|
|
Convertible debt, net of unamortized discount
|
8,03
8,096
|
(249,451)
|
7,788,645
|
|
|
|
|
Total
liabilities
|
9,757,757
|
(249,451)
|
9,508,306
|
|
|
|
|
Stockholders’
equity (deficit)
|
|
|
|
|
|
|
|
Common
stock
|
463
|
–
|
463
|
Additional
paid-in capital
|
13,711,742
|
243,255
|
13,954,997
|
Shares
to be issued
|
60,000
|
–
|
60,000
|
Deferred
compensation
|
(566,488)
|
–
|
(566,488)
|
Accumulated
other comprehensive loss
|
(5,776)
|
–
|
(5,776)
|
Deficit
accumulated during the exploration stage
|
(11,715,109)
|
(9,739,218)
|
(21,454,327)
|
|
|
|
|
Total
stockholders’ equity (deficit)
|
1,484,832
|
(9,495,963)
|
(8,011,131)
|
|
|
|
|
Total liabilities and stockholders’ equity (deficit)
|
11,242,589
|
(9,745,414)
|
1,497,175
|
SANWIRE CORPORATION
(FORMERLY
NT MINING CORPORATION)
Notes to
the consolidated financial statements
June 30, 2013
(Expressed
in U.S. Dollars)
(unaudited)
13. Restatement
(continued)
Income statement
|
Six months ended June 30, 2013
|
|
As reported
$
|
Adjustment
$
|
As restated
$
|
|
|
|
|
Revenue
|
117,800
|
–
|
117,800
|
|
|
|
|
Cost of sales
|
112,670
|
–
|
112,670
|
|
|
|
|
Gross profit
|
5,130
|
–
|
5,130
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
Amortization of intangible assets
|
250,638
|
(249,806)
|
832
|
Depreciation of property and equipment
|
329
|
–
|
329
|
General and administrative
|
470,628
|
–
|
470,628
|
Write-down of intangible asset
|
–
|
9,970,020
|
9,970,020
|
|
|
|
|
Total expenses
|
721,595
|
9,720,214
|
10,441,809
|
|
|
|
|
Loss before other income (expense)
|
(716,465)
|
(9,720,214)
|
(10,436,679)
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
Accretion of discount on convertible debt
|
(177,598)
|
(19,004)
|
(196,602)
|
Interest expense
|
(29,138)
|
–
|
(29,138)
|
Write-off of accounts payable
|
42,550
|
–
|
42,550
|
|
|
(19,004)
|
(183,190)
|
Total other income (expense)
|
(164,186)
|
(19,004)
|
(183,190)
|
|
|
|
|
Net loss and comprehensive loss for the period
|
(880,651)
|
(9,739,218)
|
(10,619,869)
|
|
Three months ended June 30, 2013
|
|
As reported
$
|
Adjustment
$
|
As restated
$
|
|
|
|
|
Revenue
|
117,800
|
–
|
117,800
|
|
|
|
|
Cost of sales
|
112,670
|
–
|
112,670
|
|
|
|
|
Gross profit
|
5,130
|
–
|
5,130
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
Amortization of intangible assets
|
250,638
|
(249,881)
|
757
|
Depreciation of property and equipment
|
329
|
–
|
329
|
General and administrative
|
439,290
|
–
|
439,290
|
|
|
|
|
Total expenses
|
690,257
|
(249,881)
|
440,376
|
|
|
|
|
Loss before other income (expense)
|
(685,127)
|
249,881
|
(435,246)
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
Accretion of discount on convertible debt
|
(177,598)
|
(19,004)
|
(196,602)
|
Interest expense
|
(14,478)
|
–
|
(14,478)
|
Write-off of accounts payable
|
42,550
|
–
|
42,550
|
|
|
|
|
Total other income (expense)
|
(149,526)
|
(19,004)
|
(168,530)
|
|
|
|
|
Net loss and comprehensive loss for the period
|
(834,653)
|
230,877
|
(603,776)
|
SANWIRE CORPORATION
(FORMERLY
NT MINING CORPORATION)
Notes to
the consolidated financial statements
June 30, 2013
(Expressed
in U.S. Dollars)
(unaudited)
14. Subsequent
Events
|
(a)
|
On July 1, 2013, the Company entered into
a consulting agreement with an investor relations firm whereby the Company is to pay the consultant $5,500 per month until December
31, 2013 and issue 96,000 shares of common stock (issued June 28, 2013 and recorded as deferred compensation as at June 30, 2013).
Refer to Note 10(l).
|
|
|
|
|
(b)
|
The
United
States
Department
of
Agriculture,
Rural
Utilities
Services
Community
Connect
grant
program
offers
Native
American
tribes
and
rural
communities
an
opportunity
to
apply
for
grant
funding
to
implement
and
deploy
broadband
infrastructure
projects.
Part
of
the
grant
program
is
for
the
grant
recipients
to
show
a 15%
matching
fund
of
the
total
cost
of
the
project
internally
by
the
grant
recipients
or
from
a non-affiliated
third
party
(the
“Matching
Funds).
The
Company
may
introduce
grant
recipients
to
an
investor
who
wishes
to
provide
the
matching
funds
through
a letter
of
credit.
On
July
2,
2013,
the
Company
issued
400,000
shares
of
common
stock
to
an
investor
who
has
agreed
to
provide
a letter
of
credit
facility
to
grant
recipients
pursuant
to
an
agreement
dated
July
1,
2013.
|
|
(c)
|
On July 31, 2013, the Company issued a convertible
note with a principal value of $405,000 for proceeds of $300,000. The note bears interest at a rate of 8% per annum and matures
on January 27, 2014. The note is convertible ninety days after issuance, at the holder’s option, into shares of common stock
of the Company at $0.2325 per share. Under terms of the note, the principal amount of $405,000 will be reduced to the purchase
price of $300,000 if the Company meets all of their filing obligations. If the Company files a registration statement covering
the resale of all of the shares issued or issuable upon conversion of the convertible note with the Securities and Exchange Commission
(“SEC”) on or before September 3, 2013, $30,000 of the outstanding principal amount, together with any accrued and
unpaid interest with respect to such portion of the principal amount, will be extinguished. If the registration statement is declared
effective by the SEC by October 14, 2013 then a further $75,000 of the outstanding principal amount, together with any accrued
and unpaid interest with respect to such portion of the principal amount, will be extinguished. The Company has the right at any
time to redeem all, but not less than all, of the total outstanding amount then remaining under the convertible note in cash at
a price equal to 120% of the total amount of the convertible note then outstanding. In the event of default, the note has a default
interest rate of 18% per annum and customary event default provisions.
|
|
(d)
|
On August 28, 2013, the Company entered
into an agreement with an investor who has committed to purchase up to $7,500,000 (the “Total Commitment”) of the Company’s
shares of common stock over a three year period following the effectiveness of a registration statement the Company has agreed
to file with the U.S. Securities and Exchange Commission. The Company, in its sole discretion, can provide the investor with either
“regular” draw down notices or, if certain conditions are satisfied, “fixed” draw down notices (each, a
“Draw Down Notice”). In each case to purchase a specified dollar amount of shares (the “Draw Down Amount”),
with each draw down subject to the limitations discussed below. The maximum amount of shares requested to be purchased pursuant
to any single Regular Draw Down Notice cannot exceed 300% of the average daily trading volume of the Company’s common stock
for the 20 trading days immediately preceding the date of the Regular Draw Down Notice (the “Maximum Regular Draw Down Amount”).
The maximum amount of shares requested to be purchased pursuant to any single Fixed Draw Down Notice cannot exceed 200% of the
average daily trading volume of the Company’s common stock for the 20 trading days immediately preceding the date of the
Fixed Draw Down Notice (“Maximum Fixed Draw Down Amount”).
|
When the Company
provides the investor with “regular” draw down notices to purchase a specified Draw Down Amount, this is up to the
Maximum Regular Draw Down Amount, based over a 10 consecutive trading day period commencing on the trading day specified in the
applicable Regular Draw Down Notice (the “Pricing Period”). Once presented with a Regular Draw Down Notice, the investor
is required to purchase a pro rata portion of the applicable Draw Down Amount on each trading day during the applicable Pricing
Period on which the daily volume weighted average price for the Company’s common stock (the “VWAP”) equals or
exceeds an applicable floor price equal to the product of (i) 0.70 and (ii) the VWAP over the 10 trading days immediately preceding
the date the Regular Draw Down Notice is delivered, subject to adjustment
(the “Floor Price”). If the VWAP falls below the applicable Floor Price on any trading day during the applicable Pricing
Period, the Purchase Agreement provides that the Investor will not be required to purchase the pro rata portion of the applicable
Draw Down Amount allocated to that trading day. The per share purchase price for the shares subject to a Regular Draw Down Notice
shall be equal to 90% of the arithmetic average of the three lowest VWAPs that equal or exceed the applicable Floor Price during
the applicable Pricing Period; provided, however, that if the VWAP does not equal or exceed the applicable Floor Price for at least
three trading days during the applicable Pricing Period, then the per share purchase price shall be equal to 90% of the arithmetic
average of all VWAPs that equal or exceed the applicable Floor Price during such Pricing Period.
SANWIRE CORPORATION
(FORMERLY
NT MINING CORPORATION)
Notes to
the consolidated financial statements
June 30, 2013
(Expressed
in U.S. Dollars)
(unaudited)
14. Subsequent
Events
(continued)
When the Company
provides the investor with a “fixed” draw down notice to purchase a specified Draw Down Amount, up to the Maximum
Fixed Draw Down Amount, on the applicable settlement date, which will occur within one trading day following the date the Fixed
Draw Down Notice is delivered. The per share purchase price for the shares subject to a Fixed Draw Down Notice (the “Fixed
Purchase Price”) shall be equal to 75% of the lower of (i) the lowest trade price of a share of the Company’s common
stock on the date the Fixed Draw Down Notice is delivered (the “Draw Down Exercise Date”) and (ii) the arithmetic
average of the three lowest daily VWAPs during the 10 consecutive trading days ending on the trading day immediately preceding
the applicable Draw Down Exercise Date. The Company may deliver a Fixed Draw Down Notice only if both of the following equity
conditions shall have been satisfied as of the applicable Draw Down Exercise Date: (i) on each trading day during the period beginning
30 trading days prior to the applicable Draw Down Exercise Date and ending on and including the applicable Draw Down Exercise
Date, the lowest trade price of a share of the Company’s common stock shall have been greater than $0.20, subject to adjustment;
and (ii) on each trading day during the period beginning 30 trading days prior to the applicable Draw Down Exercise Date and ending
on and including the applicable Draw Down Exercise Date, the trade price of a share of the Company’s common stock shall
not have declined more than 20% from an intraday high to an intraday low during such trading day.
The Company is
prohibited from issuing a Draw Down Notice if (i) the amount requested in such Draw Down Notice exceeds the Maximum Regular Draw
Down Amount, in the case of a Regular Draw Down Notice, or exceeds the Maximum Fixed Draw Down Amount, in the case of a Fixed Draw
Down Notice, (ii) the sale of shares pursuant to such Draw Down Notice would cause the Company to issue or sell or the investor
to acquire or purchase an aggregate dollar value of shares that would exceed the Total Commitment, or (iii) the sale of shares
pursuant to the Draw Down Notice would cause the Company to sell or the Investor to purchase an aggregate number of shares of the
Company’s common stock which would result in beneficial ownership by the investor of more than 4.99% of the Company’s
common stock (as calculated pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder). With respect to a draw down pursuant to a Regular Draw Down Notice, the Company cannot make more than one draw down
(whether pursuant to a Fixed Draw Down Notice or a Regular Draw Down Notice) in any Pricing Period and must allow 24 hours to elapse
between the completion of the settlement of any one draw down pursuant to a Regular Draw Down Notice and the delivery of any Fixed
Draw Down Notice or Regular Draw Down Notice for any other draw down. With respect to a draw down pursuant to a Fixed Draw Down
Notice, the Company must allow 15 trading days to elapse between the completion of the settlement of any one draw
down pursuant to a Fixed Draw Down Notice and the delivery of any Fixed Draw Down Notice or Regular Draw Down Notice for any other
draw down.
SANWIRE CORPORATION
(FORMERLY
NT MINING CORPORATION)
Notes to
the consolidated financial statements
June 30, 2013
(Expressed
in U.S. Dollars)
(unaudited)
14. Subsequent
Events
(continued)
The Company
agreed to pay the investor a commitment fee equal to $150,000 (or 2% of the Total Commitment under the agreement) in the form
of 454,408 shares of common stock (the “Initial Commitment Shares”). In addition, as soon as practicable following
the effective date of the initial registration statement, the Company is required to issue to the investor additional shares of
common stock (the “Additional Commitment Shares” and, collectively with the Initial Commitment Shares, the “Commitment
Shares”) equal to the greater of (i) zero and (ii) the difference of (a) the quotient of (x) $150,000 divided by (y)
the greater of (1) the lowest trade price of a share of the Company’s common stock during the period beginning two trading
days immediately preceding the effective date of the initial Registration Statement and ending on such effective date and (2)
$0.15, less (ii) 454,408, provided that in no event will the Company issue more than an aggregate of 545,592 shares of common
stock, subject to adjustment, as Additional Commitment Shares. The Company also agreed to pay up to $20,000 of reasonable legal
and expenses incurred by the investor in connection with this agreement.
Re
port
of Independent Registered Public Accounting Firm
To
the Board of Directors and Stockholders of
Sanwire
Corporation
(formerly
NT Mining Corporation)
(An
Exploration Stage Company)
Vancouver,
British Columbia, Canada
We have
audit
ed the accompanying consolidated balance sheets of
Sanwire Corporation
and its subsidiary (An Exploration Stage
Company) (collectively, the “Company”) as of December, 31 2012 and 2011 and the related consolidated statements of
operations, stockholders’ equity(deficit), and cash flows for each of the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as, evaluating the overall financial statement presentation. We believe our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of
Sanwire Corporation
and
its subsidiary as of December 31, 2012 and 2011 and the results of their operations and their cash flows for the years then ended
in conformity with accounting principles generally accepted in the United States.
The accompanying consolidated financial statements
have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial
statements, the Company suffered losses from operations and has a working capital deficit, which raises substantial doubt about
its ability to continue as a going concern unless it is able to generate sufficient cash flows to meet its obligations and sustain
its operations. Management’s plans regarding those matters are also described in Note 1. The financial statements do not
include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of this uncertainty.
/s/ MALONEBAILEY, LLP
www.malonebailey.com
Houston, Texas
April 16, 2013
SANWIRE CORPORATION (FORMERLY, NT MINING CORPORATION)
(An Exploration Stage Company)
Consolidated Balance Sheets
(Expressed
in U.S. Dollars)
.
|
|
December 31, 2012
|
|
December 31, 2011
|
|
|
$
|
|
$
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
1,094
|
|
|
|
1,136
|
|
Accounts receivable
|
|
|
—
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,094
|
|
|
|
1,177
|
|
|
|
|
|
|
|
|
|
|
Mineral property interests (Note 4)
|
|
|
—
|
|
|
|
78,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,094
|
|
|
|
79,177
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities (Note 5)
|
|
|
530,352
|
|
|
|
317,783
|
|
Debenture payable (Note 7)
|
|
|
480,624
|
|
|
|
469,785
|
|
Note payable to related party (Note 6)
|
|
|
187,931
|
|
|
|
172,973
|
|
Due to related parties (Note 9)
|
|
|
174,222
|
|
|
|
113,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,373,129
|
|
|
|
1,073,784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Deficiency
|
|
|
|
|
|
|
|
|
Capital stock (Note 8)
|
|
|
|
|
|
|
|
|
Authorized - 750,000,000 common shares, $0.00001 par value
|
|
|
|
|
|
|
|
|
Issued and outstanding
|
|
|
|
|
|
|
|
|
December 31, 2012 – 1,151,937 common shares, $0.00001 par value
|
|
|
|
|
|
|
|
|
December 31, 2011 – 951,937 common shares, $0.00001 par value
|
|
|
12
|
|
|
|
10
|
|
Shares to be issued
|
|
|
60,000
|
|
|
|
60,000
|
|
Additional paid-in capital
|
|
|
9,408,187
|
|
|
|
9,321,188
|
|
Accumulated other comprehensive loss
|
|
|
(5,776
|
)
|
|
|
(5,776
|
)
|
Deficit, accumulated during the exploration stage
|
|
|
(10,834,458
|
)
|
|
|
(10,370,029
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,372,035
|
)
|
|
|
(994,607
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
1,094
|
|
|
|
79,177
|
|
Nature and Continuance of Operations
(Note 1),
Commitments
and Contingencies
(Note 11) and
Subsequent Event
(Note 14)
On behalf of the Board:
“
Carman Parente
”
Director
Carman Parente
The accompanying notes are an integral part
of these consolidated financial statements.
SANWIRE CORPORATION (FORMERLY, NT
MINING CORPORATION)
(An Exploration Stage Company)
Consolidated Statements of Operations
and Other Comprehensive Income (Loss)
(Expressed
in U.S. Dollars)
|
|
For the year ended December 31, 2012
|
|
For the year ended December 31, 2011
|
|
For the period from the date of inception on February 10, 1997 to December 31, 2012
(Unaudited)
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
221,786
|
|
|
|
173,426
|
|
|
|
689,106
|
|
Exploration and field expense
|
|
|
—
|
|
|
|
—
|
|
|
|
43,518
|
|
Royalty expense
|
|
|
18,000
|
|
|
|
36,000
|
|
|
|
126,000
|
|
Loss on settlement of accounts payable (Note 8)
|
|
|
77,000
|
|
|
|
—
|
|
|
|
77,000
|
|
Write-down of amounts receivable
|
|
|
—
|
|
|
|
—
|
|
|
|
4,985
|
|
Write-down of furniture, fixtures and office equipment
|
|
|
191
|
|
|
|
—
|
|
|
|
5,356
|
|
Write-down of intangible asset (Note 4)
|
|
|
78,000
|
|
|
|
—
|
|
|
|
2,671,199
|
|
Write-off of accounts payable (Notes 4 and 5)
|
|
|
—
|
|
|
|
(90,000
|
)
|
|
|
(90,000
|
)
|
Depreciation of furniture, fixtures and office equipment
|
|
|
—
|
|
|
|
—
|
|
|
|
4,923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss before other items
|
|
|
(394,977
|
)
|
|
|
(299,426
|
)
|
|
|
(3,532,087
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other items
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense (Notes 6 and 7)
|
|
|
(69,452
|
)
|
|
|
(70,315
|
)
|
|
|
(264,259
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss before discontinued operations
|
|
|
(464,429
|
)
|
|
|
(189,741
|
)
|
|
|
(3,796,346
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
(7,038,112
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
|
(464,429
|
)
|
|
|
(189,741
|
)
|
|
|
(10,834,458
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per common share
|
|
|
(0.46
|
)
|
|
|
(0.20
|
)
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding
|
|
|
1,004,540
|
|
|
|
957,142
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
|
(464,429
|
)
|
|
|
(189,741
|
)
|
|
|
(10,834,458
|
)
|
Foreign exchange translation
|
|
|
—
|
|
|
|
248
|
|
|
|
(5,776
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss for the period
|
|
|
(464,429
|
)
|
|
|
(189,493
|
)
|
|
|
(10,840,234
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
SANWIRE CORPORATION (FORMERLY, NT
MINING CORPORATION)
(An Exploration Stage Company)
Consolidated Statements of Changes
in Stockholders’ Deficiency
Inception to December 31, 2012
(Expressed
in U.S. Dollars)
|
|
Preferred share issued
|
|
Amount
|
|
Common shares
issued
|
|
Amount
|
|
Shares to
be issued
|
|
Additional paid-in
capital
|
|
Deficit, accumulated during the exploration stage
|
|
Accumulated other
comprehensive
income (loss)
|
|
Stockholders’ deficiency
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
Balances, December 31, 2004 (Unaudited)
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,013,753
|
|
|
|
(6,088,963
|
)
|
|
|
—
|
|
|
|
(75,210
|
)
|
Shares returned for lease
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Shares issued for services
|
|
|
—
|
|
|
|
—
|
|
|
|
17
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,030
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,030
|
|
Shares issued to settle debt
|
|
|
—
|
|
|
|
—
|
|
|
|
76
|
|
|
|
—
|
|
|
|
—
|
|
|
|
67,759
|
|
|
|
—
|
|
|
|
—
|
|
|
|
67,759
|
|
Shares sold for cash
|
|
|
—
|
|
|
|
—
|
|
|
|
200
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,000
|
|
Net loss for the year
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(420,703
|
)
|
|
|
—
|
|
|
|
(420,703
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2005 (Unaudited)
|
|
|
—
|
|
|
|
—
|
|
|
|
294
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,099,542
|
|
|
|
(6,509,666
|
)
|
|
|
—
|
|
|
|
(410,124
|
)
|
Shares issued to settle debt
|
|
|
—
|
|
|
|
—
|
|
|
|
7
|
|
|
|
—
|
|
|
|
—
|
|
|
|
18,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
18,500
|
|
Shares issued for services
|
|
|
—
|
|
|
|
—
|
|
|
|
17
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,975
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,975
|
|
Net loss for the year
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(528,446
|
)
|
|
|
—
|
|
|
|
(528,446
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2006 (Unaudited)
|
|
|
—
|
|
|
|
—
|
|
|
|
318
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,127,017
|
|
|
|
(7,038,112
|
)
|
|
|
—
|
|
|
|
(911,095
|
)
|
Shares issued to settle debt
|
|
|
—
|
|
|
|
—
|
|
|
|
1,504
|
|
|
|
—
|
|
|
|
—
|
|
|
|
485,805
|
|
|
|
—
|
|
|
|
—
|
|
|
|
485,805
|
|
Net loss for the year
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(16,508
|
)
|
|
|
—
|
|
|
|
(16,508
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2007 (Unaudited)
|
|
|
—
|
|
|
|
—
|
|
|
|
1,822
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,612,822
|
|
|
|
(7,054,620
|
)
|
|
|
—
|
|
|
|
(441,798
|
)
|
Shares issued to settle debt
|
|
|
—
|
|
|
|
—
|
|
|
|
808,435
|
|
|
|
9
|
|
|
|
—
|
|
|
|
332,867
|
|
|
|
—
|
|
|
|
—
|
|
|
|
332,876
|
|
Shares issued to acquire
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bullmoose Mines Ltd.
|
|
|
—
|
|
|
|
—
|
|
|
|
120,000
|
|
|
|
1
|
|
|
|
—
|
|
|
|
2,999
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,000
|
|
Shares sold for cash
|
|
|
—
|
|
|
|
—
|
|
|
|
11,200
|
|
|
|
—
|
|
|
|
—
|
|
|
|
154,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
154,000
|
|
Net loss for the year
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(57,829
|
)
|
|
|
|
|
|
|
(57,829
|
)
|
Foreign exchange translation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(72
|
)
|
|
|
(72
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2008 (Unaudited)
|
|
|
—
|
|
|
|
—
|
|
|
|
941,457
|
|
|
|
10
|
|
|
|
—
|
|
|
|
7,102,688
|
|
|
|
(7,112,449
|
)
|
|
|
(72
|
)
|
|
|
(9,823
|
)
|
Shares issued to round out
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
Shares issued for cash
|
|
|
—
|
|
|
|
—
|
|
|
|
400
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,500
|
|
Shares issued for cash
|
|
|
—
|
|
|
|
—
|
|
|
|
4,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
25,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
25,000
|
|
Net loss for the year
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(202,692
|
)
|
|
|
—
|
|
|
|
(202,692
|
)
|
Foreign exchange translation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
72
|
|
|
|
72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2009 (Unaudited)
|
|
|
—
|
|
|
|
—
|
|
|
|
945,857
|
|
|
|
10
|
|
|
|
—
|
|
|
|
7,133,188
|
|
|
|
(7,315,141
|
)
|
|
|
—
|
|
|
|
(181,943
|
)
|
Shares issued for cash
|
|
|
—
|
|
|
|
—
|
|
|
|
6,080
|
|
|
|
—
|
|
|
|
—
|
|
|
|
38,000
|
|
|
|
|
|
|
|
|
|
|
|
38,000
|
|
Shares to be issued for cash
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
60,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
60,000
|
|
Shares issued for mineral property
|
|
|
—
|
|
|
|
—
|
|
|
|
100,000
|
|
|
|
1
|
|
|
|
—
|
|
|
|
2,149,999
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,150,000
|
|
Net loss for the year
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,865,147
|
)
|
|
|
—
|
|
|
|
(2,865,147
|
)
|
Foreign exchange translation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(6,024
|
)
|
|
|
(6,024
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2010 (Unaudited)
|
|
|
—
|
|
|
|
—
|
|
|
|
1,051,937
|
|
|
|
11
|
|
|
|
60,000
|
|
|
|
9,321,187
|
|
|
|
(10,180,288
|
)
|
|
|
(6,024
|
)
|
|
|
(805,114
|
)
|
Shares cancelled
|
|
|
—
|
|
|
|
—
|
|
|
|
(100,000
|
)
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net loss for the year
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(189,741
|
)
|
|
|
—
|
|
|
|
(189,741
|
)
|
Foreign exchange translation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
248
|
|
|
|
248
|
|
Balances, December 31, 2011
|
|
|
—
|
|
|
|
—
|
|
|
|
951,937
|
|
|
|
10
|
|
|
|
60,000
|
|
|
|
9,321,188
|
|
|
|
(10,370,029
|
)
|
|
|
(5,776
|
)
|
|
|
(994,607
|
)
|
Shares issued for debt
|
|
|
—
|
|
|
|
—
|
|
|
|
200,000
|
|
|
|
2
|
|
|
|
—
|
|
|
|
86,998
|
|
|
|
—
|
|
|
|
—
|
|
|
|
87,000
|
|
Preferred shares issued for debt
|
|
|
50,000
|
|
|
|
50
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
434,950
|
|
|
|
—
|
|
|
|
—
|
|
|
|
435,000
|
|
Cancellation of preferred shares issued for debt
|
|
|
(50,000
|
)
|
|
|
(50
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(434,950
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(435,000
|
)
|
Net loss for the period
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(464,429
|
)
|
Balances, December 31, 2012
|
|
|
—
|
|
|
|
—
|
|
|
|
1,151,937
|
|
|
|
12
|
|
|
|
60,000
|
|
|
|
9,408,187
|
|
|
|
(10,834,458
|
)
|
|
|
(5,776
|
)
|
|
|
(1,372,035
|
)
|
The accompanying notes are an integral
part of these consolidated financial statements.
SANWIRE CORPORATION (FORMERLY, NT
MINING CORPORATION)
(An Exploration Stage Company)
Consolidated Statements of Cash Flows
(Expressed
in U.S. Dollars)
|
|
For the
year
ended
December 31,
2012
|
|
For the
year
ended
December 31,
2011
|
|
For the period from the date of inception on February 10, 1997 to December 31, 2012
(Unaudited)
|
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
Cash flows used in operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
|
(464,429
|
)
|
|
|
(189,741
|
)
|
|
|
(10,834,458
|
)
|
Adjustments to reconcile loss to net cash used by operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
—
|
|
|
|
—
|
|
|
|
4,923
|
|
Amortization of debt discount (Note 7)
|
|
|
10,839
|
|
|
|
23,145
|
|
|
|
132,854
|
|
Accrued interest expense (Notes 5 and 6)
|
|
|
58,234
|
|
|
|
46,995
|
|
|
|
123,244
|
|
Loss on settlement of accounts payable
|
|
|
77,000
|
|
|
|
—
|
|
|
|
77,000
|
|
Write-down of accounts receivable
|
|
|
41
|
|
|
|
—
|
|
|
|
5,026
|
|
Write-down of furniture, fixture and office equipment
|
|
|
—
|
|
|
|
—
|
|
|
|
5,165
|
|
Write-down of mineral property (Note 4)
|
|
|
78,000
|
|
|
|
—
|
|
|
|
2,671,199
|
|
Write-off of accounts payable (Note 5)
|
|
|
—
|
|
|
|
(90,000
|
)
|
|
|
(90,000
|
)
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in accounts receivable
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,026
|
)
|
(Increase) decrease in prepaid expense
|
|
|
—
|
|
|
|
—
|
|
|
|
26
|
|
Accrued interest expense (Notes 5 and 6)
|
|
|
58,234
|
|
|
|
46,995
|
|
|
|
123,244
|
|
Increase (decrease) in accounts payable and accrued liabilities
|
|
|
179,294
|
|
|
|
155,579
|
|
|
|
417,784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(61,021
|
)
|
|
|
(54,022
|
)
|
|
|
(7,492,263
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows used in investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of furniture, fixtures, and office equipment
|
|
|
—
|
|
|
|
—
|
|
|
|
(15,763
|
)
|
Cash acquisition of mineral property (Note 4)
|
|
|
—
|
|
|
|
—
|
|
|
|
(21,835
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(37,598
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for cash
|
|
|
—
|
|
|
|
—
|
|
|
|
7,171,198
|
|
Subscription received in advance (Note 8)
|
|
|
—
|
|
|
|
—
|
|
|
|
60,000
|
|
Note payable issued for cash (Note 6)
|
|
|
—
|
|
|
|
—
|
|
|
|
150,000
|
|
Increase (decrease) in due to related parties (Note 9)
|
|
|
60,979
|
|
|
|
53,954
|
|
|
|
155,533
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,979
|
|
|
|
53,954
|
|
|
|
7,536,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
—
|
|
|
|
248
|
|
|
|
(5,776
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
(42
|
)
|
|
|
180
|
|
|
|
1,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
1,136
|
|
|
|
956
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
|
1,094
|
|
|
|
1,136
|
|
|
|
1,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures with
Respect to Cash Flows
(Note 12)
The accompanying notes are an integral part
of these consolidated financial statements.
NOTE 1 –
NATURE AND CONTINUANCE OF OPERATIONS
Sanwire Corporation (formerly, NT
Mining Corporation) (“the Company”) was incorporated in the state of Nevada on February 10, 1997. Its wholly owned
subsidiary, Bullmoose Mines Ltd. (“BML”), was incorporated in the Northwest Territories, Canada on February 29, 2000.
On October 14, 2008, the Company acquired BML (Note 3).
The Company was formerly named Clear
Water Mining, Inc. (to March 11, 1999), E-Casino Gaming Corporation (to June 21, 1999), E-Vegas.com Inc. (to July 20, 2000), 1st
Genx.com Inc. (to October 18, 2001), Oasis Information Systems, Inc. (to January 27, 2005), 777 Sports Entertainment, Corp. (to
September 26, 2008) and NT Mining Corporation (to March 8, 2013). On December 15, 2007, the Company’s former president passed
away and the Company then discontinued its business operations.
BML owns Mineral Lease #2775 plus
4 mineral claims located in the South MacKenzie Mining District, Northwest Territories, Canada (the “Bullmoose Gold Mine
Property”). According to a geological report issued May 6, 2008, from 1985 until shutdown in January 1987, approximately
54,000 tons of ore were mined and milled to produce approximately 20,001 ounces of gold by a former owner of the Bullmoose Gold
Mine Property.
As part of the acquisition of BML,
the Company is obligated to pay annual royalties of $36,000 and to pay down a debenture liability as disclosed in Note 7. Since
the Company continues to retain title to Bullmoose Gold Mine Property as at December 31, 2012, these obligations continue to be
reflected in the consolidated financial statements of the Company.
On or about December 15, 2010, the
Company entered into an agreement to settle litigation related to the ownership of BML and to rescind its acquisition of BML (the
“Settlement Agreement”). More particularly, the 120,000 common shares issued by the Company in consideration for the
acquisition will be cancelled and $75,000 of the $85,000 paid as part consideration for the acquisition will be returned to the
Company. The closing date was set for June 30, 2012 (the “Closing Date”). As at December 31, 2012, the Company retains
title to BML.
On the Closing Date (July 3, 2012, the first
business day after June 30, 2012) all parties to the Settlement Agreement, except those responsible to return the $75,000 to the
Company tendered signed settlement documents. As a result, the Company cancelled the 120,000 common shares and commenced an action
to recover the $75,000. The Company takes the position that until this sum is paid, it continues to hold title to Bullmoose Gold
Mine Property through its ownership of all issued shares of BML
(Notes 3, 4, 7, 8, 11 and 14).
The Company is an exploration stage enterprise,
as defined in
Accounting Standards Codification
(the “Codification” or “ASC”)
915-10, “
Development Stage Entities
”. The Company is devoting all of its present efforts in securing and establishing
a new business, and its planned principle operations have not commenced, and, accordingly, no revenue has been derived during the
organization period.
The consolidated financial statements as
at December 31, 2012 and for the year then ended have been prepared on a going concern basis, which contemplates the realization
of assets and the settlement of liabilities and commitments in the normal course of business. The Company has a loss of $464,429
for the year ended December 31, 2012 (2011 – $189,741) and has a working capital deficit of $1,372,035 at December 31, 2012
(2011 – $1,072,607).
The Company was subject
to a cease trade order, which was pronounced by the British Columbia Securities Commission on August 18, 2009, by reason of the
Company’s failure to file financial statements in British Columbia. The order was rescinded on December 27, 2012.
These factors raise substantial doubt as
to the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might
be necessary should the Company be unable to continue as a going concern.
Effective February 2, 2005, the Company
affected a one (1) for three hundred (300) reverse stock split. Effective September 11, 2008, the Company affected a one (1) for
two thousand (2,000) reverse stock split. Effective March 15, 2010, the Company affected a two (2) for one (1) forward stock split.
Effective March 8, 2013, the Company
affected a one (1) for fifty (50) reverse stock split. All share and warrant amounts presented in the consolidated financial statements
and in the notes thereto have been adjusted to reflect the reverse and forward stock splits (Note 8).
Management cannot provide assurance
that the Company will ultimately achieve profitable operations, become cash flow positive, or raise additional debt and/or equity
capital. Based on its prior demonstrated ability to raise capital, management believes that the Company’s capital resources
should be adequate to continue operating and maintaining its business strategy during the fiscal year ending 2012. However, if
the Company is unable to raise additional capital in the near future, due to the Company’s liquidity problems, management
expects that the Company will need to curtail operations, liquidate assets, seek additional capital on less favorable terms and/or
pursue other remedial measures. These consolidated financial statements do not include any adjustments related to the recoverability
and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable
to continue as a going concern.
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The following is a summary of significant
accounting policies used in the preparation of these consolidated financial statements.
Principles of Consolidation
The accompanying consolidated financial
statements include the accounts of the Company and its wholly owned subsidiary BML from the date of its acquisition on October
14, 2008. All significant intercompany balances and transactions have been eliminated in consolidation.
Basis
of Presentation
These consolidated financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”)
applicable for an exploration stage company for financial information and are expressed in U.S. dollars.
Reclassifications
Certain prior year amounts have been reclassified to conform
to the current year presentation.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments
with original maturities of three months or less.
Foreign Currency Translation
The Company’s functional and
reporting currency is U.S. dollars. The consolidated financial statements of the Company are translated to U.S. dollars in accordance
with ASC 830, “
Foreign Currency Matters
.” Monetary assets and liabilities denominated in foreign currencies
are translated using the exchange rate prevailing at the balance sheet date. Gains and losses arising on translation or settlement
of foreign currency denominated transactions or balances are included in the determination of income. The Company has not, to the
date of these consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
Use of Estimates
The preparation
of financial statements in conformity with
U.S. GAAP
requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results
could differ from those estimates.
Long-Lived Assets
Long-lived assets, including mining
property, are evaluated for impairment whenever events or conditions indicate that the carrying value of an asset may not be recoverable.
If the sum of the expected undiscounted cash flows is less than the carrying value of the related asset or group of assets, a loss
is recognized for the difference between the fair value and carrying value of the asset or group of assets.
Income Taxes
Deferred income taxes are reported
for timing differences between items of income or expense reported in the consolidated financial statements and those reported
for income tax purposes in accordance with ASC 740, “
Income Taxes
”, which requires the use of the asset/liability
method of accounting for income taxes. Deferred income taxes and tax benefits are recognized for the future tax consequences attributable
to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases,
and for tax loss and credit carry forwards.
Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management,
it is not more likely than not that some portion or all of the deferred tax assets will be realized.
Comprehensive Income (Loss)
ASC 220, “
Comprehensive Income
”,
establishes standards for the reporting and disclosure of comprehensive income (loss) and its components in the financial statements.
As at December 31, 2012, the Company has items that represent a comprehensive loss and, therefore, has included a schedule of comprehensive
loss in the consolidated financial statements.
Basic and Diluted Net Income (Loss)
per Share
The Company computes net income (loss)
per share in accordance with ASC 260, “
Earnings per Share
”. ASC 260 requires presentation of both basic and
diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income
(loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the
period. Diluted EPS gives effect to all potentially dilutive common shares outstanding during the period using the treasury stock
method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the
period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted
EPS excludes all potentially dilutive shares if their effect is anti-dilutive.
Recently Issued Accounting Pronouncements
In February 2013, the FASB issued
Accounting Standards Update (“ASU”) 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
Income , an amendment to FASB ASC Topic 220. The update requires disclosure of amounts reclassified out of accumulated other comprehensive
income by component. In addition, an entity is required to present either on the face of the statement of operations or in the
notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income
but only if the amount reclassified is required to be reclassified to net income in its entirety in the same reporting period.
For amounts not reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that
provide additional detail about those amounts. This ASU is effective prospectively for the Company fiscal years, and interim periods
within those years beginning after December 15, 2012. The Company will comply with the disclosure requirements of this ASU for
the quarter ending March 31, 2013. The Company does not expect the impact of adopting this ASU to be material to the Company’s
financial position, results of operations or cash flows.
NOTE 3 – ACQUISITION OF BULLMOOSE
MINES LTD.
In accordance with ASC 805, “
Business
Combinations
”, acquisitions are accounted for under the purchase method of accounting. Under the purchase method of accounting,
assets acquired and liabilities assumed are recorded at their estimated fair values. Goodwill is recorded to the extent the purchase
price consideration, including certain acquisition and closing costs, exceeds the fair value of the net identifiable assets acquired
at the date of the acquisition.
On October 14, 2008, the Company acquired
BML in exchange for $12,000 cash, 120,000 shares of the Company common stock valued at $3,000 (Notes 8 and 11), a debenture in
the face amount of $480,624 valued at fair value of $359,371 (Note 7) or for total consideration of $374,371.
The purchase price allocation has been determined as follows:
Assets purchased:
|
|
$
|
Cash and cash equivalents
|
|
165
|
Prepaid expenses
|
|
26
|
Mineral property interests
|
|
421,199
|
|
|
|
Total assets acquired
|
|
421,390
|
|
|
|
Liabilities assumed:
|
|
|
Accounts payable
|
|
47,019
|
|
|
|
Net assets acquired
|
|
374,371
|
|
|
|
Purchase price
|
|
374,371
|
The related share purchase agreement
also provides for payment of future royalties to the seller of BML equivalent to 6% of the Net Smelter Returns, as defined, from
Bullmoose Gold Mine Property, with minimum royalty payments of $36,000 payable each year in advance on May 1. The seller of BML
was Hughes Maritime Corp. (“HMC”), owner of approximately 12.61% of the issued and outstanding common stock of the
Company at December 31, 2012.
During the year ended December 31,
2010, the Company filed a lawsuit against HMC related to its interest in BML. The Company has entered into the Settlement Agreement
to settle litigation related to the ownership of BML and to rescind its acquisition of BML. More particularly, the 120,000 common
shares issued by the Company in consideration for the acquisition will be cancelled and $75,000 of the $85,000 paid as part consideration
for the acquisition will be returned to the Company.
On the Closing Date (July 3, 2012, the first
business day after June 30, 2012) all parties to the Settlement Agreement, except those responsible to return the $75,000 to the
Company tendered signed settlement documents. As a result, the Company cancelled the 120,000 common shares and commenced an action
to recover the $75,000. The Company takes the position that until this sum is paid, it continues to hold title to Bullmoose Gold
Mine Property through its ownership of all issued shares of BML
(Notes 1, 4, 7, 8, 11 and 14)
.
NOTE 4 – MINERAL PROPERTY INTERESTS
Bullmoose Gold Mine Property
On October 14, 2008, the Company acquired
BML for total consideration of $374,371. BML owns Mineral Lease #2775 plus 4 mineral claims located in the South MacKenzie Mining
District, Northwest Territories, Canada.
During the year ended December 31,
2010, the Company filed a lawsuit against HMC related to its interest in BML. The Company has entered into the Settlement Agreement
underwhich the Company would rescind its acquisition of BML in exchange for the return of the 120,000 common shares previously
issued to HMC and $75,000 of the $85,000 the Company had paid in consideration for the acquisition (Notes 1, 3, 7, 8, 11 and 14).
During the year ended December 31,
2012, the Company has recorded a provision for mineral property write-down of $78,000 (2011 – $Nil) to a carrying value
of $Nil related to the Bullmoose Gold Mine Property (Note 12), as the Company believes that the mineral property has no commercial
value.
Valentine Gold Claim
On June 22, 2010, the Company enter
into a mineral property option agreement with Mill Bay Ventures Inc. (“Mill Bay”) in which the Company could acquire
100% interest in certain mineral property interest located in Vancouver, British Columbia, Canada (the “Valentine Gold Claim”).
In order to exercise the option agreement
and to earn its interest in the Valentine Gold Claim, the Company shall:
|
|
i.
Issue 100,000 common shares to Mill Bay within 21 business days of approval of the agreement
(issued) (Notes 8 and 12);
|
|
|
ii.
Issue 30,000 common shares to Mill Bay on the 1
st
anniversary date of the signing
of the agreement;
|
|
|
iii. Make cash payment of $10,000 on the
execution date
(paid);
|
|
|
iv.
Make $90,000 within 21 business days of approval of the agreement;
|
|
|
v.
Incur $25,000 expenditure on or before June 30, 2011;
|
|
|
vi.
Incur
$500,000 within one year from July 1, 2011; and
|
vii.
Incur $750,000 within one year from July 1, 2012.
The Company has given up the interest
in the Valentine Gold Claim and has cancelled the 100,000 common shares issued (Notes 8 and 12).
During the year ended December 31,
2011, the Company recorded a write-off of accounts payable of $90,000 related to the Valentine Gold Claim (Notes 5 and 12).
NOTE 5 – ACCOUNTS PAYABLE
AND ACCRUED LIABILITIES
Included in accounts payable and accrued
liabilities is accrued interest of $75,270 related to debenture payable (2011 – $52,485) (Note 7).
Accounts payable and accrued liabilities
are non-interest bearing, unsecured and have settlement dates within one year.
During
the year ended December 31, 2012, the Company recorded a write-off of accounts payable in the amount of $Nil related to the Valentine
Gold Claim (2011
–
$90,000) (Notes 4 and 12).
During
the year ended December 31, 2012, the Company recorded a loss on settlement of accounts payable in the amount of $77,000. (2011
–
$Nil) (Note 8).
NOTE 6 –
NOTE PAYABLE TO RELATED PARTY
|
|
December 31, 2012
|
|
December 31, 2011
|
|
|
$
|
|
$
|
|
|
|
|
|
On June 20, 2010, the Company accepted a loan from a company owned by a family member of a director of the Company in the amount of $150,000 bearing interest at a rate of 10% per annum (Note 9). The loan is unsecured and is due on demand. During the year ended December 31, 2012, the Company accrued interest expense of $15,000 (2010 – $15,000, 2010 – $7,973) related to the note payable. The balance as at December 31, 2012 consists of principal of $150,000 (2011 – $150,000) and accrued interest of $37,931 (2011 – $22,973).
|
|
187,931
|
|
172,973
|
NOTE 7 – DEBENTURE PAYABLE
Debenture payable at December 31,
2012 consists of:
|
|
$
|
Amount due October 14, 2009
|
|
120,624
|
Amount due October 14, 2010
|
|
120,000
|
Amount due October 14, 2011
|
|
120,000
|
Amount due October 14, 2012
|
|
120,000
|
|
|
|
Total face amount
|
|
480,624
|
Initial present value discount of $121,253
|
|
-
|
less accumulated amortization of $121,253
|
|
-
|
|
|
|
Net value as at December 31, 2012
|
|
480,624
|
Current portion
|
|
480,624
|
|
|
|
Non-current portion
|
|
-
|
On October 14, 2008, the Company recorded
the debenture at the $359,371 present value (discounted at a 12% annual interest rate) of the $480,624 total payments due and amortized
the $121,253 debt discount as interest expense using the interest method over the four year term of the debenture.
During
the year ended December 31, 2012, the Company recorded interest expense of $10,839 (2011
–
$23,145) related to amortization of the discount. As at December 31, 2012, the present value of the debenture is $480,624 (2011
–
$469,785).
The Company did not meet the repayment
schedule as noted above. Interest is accrued on the overdue principal amounts at 12% per annum from the due dates. During the
year ended December 31, 2012, the Company accrued interest expense of $75,270 (2011 – $31,995) (Note 5).
The debenture is secured by the assets
of the Company, including the issued and outstanding shares of BML, which were sold to the Company, and the Bullmoose Gold Mine
Property.
The debenture is convertible at the
option of the holders into Units of the Company at a conversion rate of $25 per Unit; each Unit consists of one share of the Company
common stock and one warrant exercisable into one share of the Company common stock at a price of $30 per share at any time from
the exercise of the Conversion Option to two years thereafter. There were no beneficial conversion features related to the Conversion
Option.
During the year ended December 31,
2010, the Company filed a lawsuit against HMC to protect its interest in BML. The Company is in the process of settling the lawsuit
by rescinding the October 14, 2008 agreement under which the Company acquired BML. More particularly, 120,000 common shares issued
by the Company in consideration for the acquisition will be cancelled and $75,000 of the $85,000 paid as part consideration for
the acquisition will be returned to the Company. In addition, as part of the rescission, the debenture obligation of the Company
to the seller of BML, will be released on closing.
On the Closing Date (July 3, 2012, the first
business day after June 30, 2012) all parties to the Settlement Agreement, except those responsible to return the $75,000 to the
Company tendered signed settlement documents. As a result, the Company cancelled the 120,000 common shares and commenced an action
to recover the $75,000. The Company takes the position that until this sum is paid, it continues to hold title to Bullmoose Gold
Mine Property through its ownership of all issued shares of BML
(Notes 1, 3, 4, 8, 11 and 14).
NOTE 8 – CAPITAL STOCK
Effective February 2, 2005, the Company
affected a one (1) for three hundred (300) reverse stock split. Effective September 11, 2008, the Company affected a one (1) for
two thousand (2,000) reverse stock split. Effective March 15, 2010, the Company affected a two (2) for one (1) forward stock split.
Effective March 8, 2013, the Company
affected a one (1) for fifty (50) reverse stock split. (Note 14). All share and warrant amounts presented in the consolidated financial
statements and in the notes thereto have been adjusted to reflect the reverse and forward stock splits.
Authorized
Authorized capital stock consists
of 750,000,000 common shares with par value of $0.00001 per share. (Note 14)
Share Issuance
|
i.
|
On August 16, 2011, the Company cancelled 100,000 common shares
issued on June 22, 2010 in relation to the Valentine Gold Claim (Notes 4 and 12).
|
|
ii.
|
On September 29, 2012, the Company issued 50,000 preferred shares at a fair value of $435,000 to settle debt of $50,000 on
September 29, 2012 and subsequently cancelled all of 50,000 preferred shares in December, 2012 restoring the $50,000 of debt.
|
iii. On September 27,
2012, the Company issued 200,000 common shares at a fair value of $87,000 to settle debt in the amount of $10,000. The Company
recognized loss of $77,000 on settlement of debt during the year-end December 31, 2012.
Shares to Be Issued
During the year ended December 31,
2010, the Company received $60,000 for the purchase of 4,000 common shares in the Company. These shares were yet to be issued by
the Company as at December 31, 2012.
NOTE 9 – DUE TO RELATED PARTIES
AND RELATED PARTY TRANSACTIONS
Amounts due to related parties are non-interest bearing,
unsecured and due on demand.
As at December 31, 2012, the amount
due to related parties includes $23,080 (2011 – $23,080) payable to a company controlled by a director of the Company for
exploration and field expenses paid on behalf of the Company.
As at December 31, 2012, the amount
due to related parties includes $21,637 (2011 – $11,625) payable to a director of the Company related to unpaid consulting
fees.
As at December 31, 2012, the amount
due to related parties includes $2,948 (2011 – $2,948) payable to, a company controlled by a director of the Company related
unpaid management fees.
As at December 31, 2012, the amount
due to related parties includes $20,000 (2011 – $20,000) payable to a director of the Company related to unpaid management
fees.
As
at December 31, 2012, the amount due to related parties include $100 (2011
–
$100) payable to a company controlled by the Chief Executive Officer of the Company related to expenses paid on behalf of the Company.
As
at December 31, 2012, the amount due to related parties include $75,041 (2011
–
$33,600) payable to a company controlled by the Chief Executive Officer of the Company related to unpaid management fees.
As
at December 31, 2012, the amount due to related parties include $31,412 (2011
–
$21,890) payable to the Chief Executive Officer of the Company related to expenses paid on behalf of the Company.
During the year ended December 31,
2012, the Company paid or accrued management fees of $10,000 (2011 – $Nil) to a company controlled by the director of the
Company.
During the year ended December 31, 2012, the Company paid
or accrued management fees of $55,980 (2011 – $33,600) to a company controlled by the Chief Executive Officer of the Company.
During the year ended 31 December
2010, the Company accepted a loan from a company owned by a family member of a director of the Company in the amount of $150,000
bearing interest at a rate of 10% per annum (Note 6).
NOTE
10 - INCOME TAXES
The Company has losses carried
forward for income tax purposes to December 31, 2012. There are no current or deferred tax expenses for the year ended December
31, 2012 due to the Company’s loss position. The Company has fully reserved for any benefits of these losses. The deferred
tax consequences of temporary differences in reporting items for financial statement and income tax purposes are recognized, as
appropriate. Realization of the future tax benefits related to the deferred tax assets is dependent on many factors, including
the Company’s ability to generate taxable income within the net operating loss carryforward period. Management has considered
these factors in reaching its conclusion as to the valuation allowance for financial reporting purposes.
The composition of the Company’s
deferred tax assets as at December 31, 2012 and 2011 are as follows:
|
|
As at December 31, 2012
|
|
As at December 31, 2011
|
|
|
$
|
|
$
|
|
|
|
|
|
Net income tax operating loss carry-forward
|
|
10,679,267
|
|
10,370,029
|
|
|
|
|
|
Statutory federal income tax rate
|
|
34%
|
|
34%
|
Effective income tax rate
|
|
0%
|
|
0%
|
|
|
|
|
|
Deferred tax assets
|
|
3,630,951
|
|
3,525,810
|
Less: Valuation allowance
|
|
(3,630,951)
|
|
(3,525,810)
|
|
|
|
|
|
Net deferred tax asset
|
|
-
|
|
-
|
The potential income tax benefit
of these losses has been offset by a full valuation allowance.
As at December 31, 2012, the Company
has an unused net operating loss carry-forward balance of approximately $10,679,267 that is available to offset future taxable
income. This unused net operating loss carry-forward balance expires between 2017 and 2032.
NOTE 11 – COMMITMENTS AND
CONTINGENCIES
On October 14, 2008, the Company and
HMC entered into a share purchase agreement in which the Company acquired 100% of the issued and outstanding shares of BML in exchange
of $15,000 on execution, by $12,000 in cash and 120,000 shares of the Company’s common stock valued at $3,000 (Notes 3, 8
and 14) (the “Share Purchase Agreement”). Under the Share Purchase Agreement, the Company assumed the liabilities of
BML totalling $535,126 to be paid over four years from the sale of the shares. HMC could repossess BML shares if the Company failed
to pay for the liabilities assumed.
On June 23, 2010, the Company acted
to its detriment and made an $85,000 payment to HMC under the Share Purchase Agreement, implying the understanding that it was
and would remain in good standing and HMC thereby waived any such default and is estopped from claiming otherwise.
On or about August 10, 2010, HMC purportedly
sold the BML shares it previously had sold to the Company to Maple Management Investments Ltd. (“Maple”) in exchange
for cash and shares of Maple.
On October 22, 2010, the Company has
filed a lawsuit against HMC, Maple, a former officer of the Company and certain other companies controlled directly or indirectly
by the former officer (the “Claim”) in which the Company seeks a declaration that the Company is the legal and beneficial
owner of all issued and outstanding shares of BML.
On November 17, 2010, HMC, a former
officer of the Company and certain other companies controlled directly or indirectly by the former officer filed a counter claim
against the Company and one of its directors (the “Counterclaim”). The Counterclaim alleges that the Company owes HMC,
the sum of $32,765 under a service contract entered into in 2006. HMC also alleges that the Company defaulted on the Share Purchase
Agreement. The Company entered into the Settlement Agreement, the particulars of which are set out in Note 4. As a result, no accrual
has been recorded related to the alleged amounts due to HMC.
On the Closing Date (July 3, 2012,
the first business day after June 30 2012) all parties to the Settlement Agreement, except those responsible to return the $75,000
to the Company, tendered signed Settlement documents. As a result, the Company cancelled the 120,000 shares and commenced an action
in the Supreme Court of British Columbia to recover the $75,000. The Company takes the position that until this sum is paid, it
continues to hold title to the mineral properties through its ownership of all issued Bullmoose shares (Notes 1, 3, 4, 7, 8 and
14).
As at December 31, 2012, the Company
was still the owner of BML until the settlement closes.
NOTE 12 – SUPPLEMENTAL DISCLOSURES
WITH RESPECT TO CASH FLOWS
|
For the
year
ended
December 31,
2012
|
For the
year
ended
December 31,
2011
|
For the
period from
the date of inception on
February 10, 1997
to December 31,
2012
(Unaudited)
|
|
|
$
|
|
$
|
$
|
|
|
|
|
|
|
Cash paid during the year for interest
|
|
-
|
|
174
|
12,480
|
Cash paid during the year for income taxes
|
|
-
|
|
-
|
-
|
|
|
|
|
Non-cash investing and financing activities
|
|
|
|
Common shares issued on acquisition of BML
|
|
-
|
|
-
|
421,390
|
Common shares issued on acquisition of Valentine Gold Claim
|
|
-
|
|
-
|
2,150,000
|
Common shares issued for debt
|
|
87,000
|
|
-
|
419,876
|
During the year ended December 31,
2012, the Company recorded a provision for mineral property write-down of $78,000 related to the Bullmoose Gold Mine Property.
During
the year ended December 31, 2011, the Company recorded write-off of accounts payable in the amount of $90,000 (2010
–
$Nil, 2009
–
$Nil) related to the Valentine
Gold Claim (Notes 4 and 5).
On August 16, 2011, the Company cancelled
100,000 common shares issued on June 22, 2010 in relation to the Valentine Gold Claim. This amount is recorded as an increase in
additional paid-in capital (Notes 4 and 8).
NOTE 13 – FINANCIAL INSTRUMENTS
The carrying values of cash and cash
equivalents, accounts payable, debenture payable, note payable and due to related parties approximate fair values due to the short
term maturity of these financial instruments.
Credit Risk
Financial instruments that potentially subject the Company
to credit risk consist of cash and cash equivalents. The Company deposits cash and cash equivalents with high credit quality financial
institutions as determined by rating agencies. As a result, credit risk is considered insignificant.
Currency Risk
The Company’s major expenses
and payables are in United States dollars and are expected to continue to incur in United States dollars. Fluctuations in the exchange
rate between the United States dollar and other currency may have a material effect on the Company’s business, financial
condition and results of operations. The Company does not actively hedge against foreign currency fluctuations.
Interest Rate Risk
The Company has non-interest paying
cash balances and interest-bearing debt with interest rates fixed at 10% to 12% (Notes 6 and 7). It is management’s
opinion that the Company is not exposed to significant interest rate risk arising from these financial instruments.
Liquidity Risk
Liquidity risk is the risk that an entity
will encounter difficulty in meeting obligations associated with its financial liabilities. The Company manages liquidity risk
by continuously monitoring actual and projected cash flows and matching the maturity profile of financial assets and liabilities.
As at December 31, 2012, the Company had a working capital deficit of $1,372,035 (2011 – $1,072,607). The Company plans to
improve its financial condition by obtaining new financing through loans. There is no assurance that the Company will be successful
in accomplishing this objective.
NOTE 14 – SUBSEQUENT EVENTS
The following event occurred during
the period from the year ended December 31, 2012 to the date the consolidated financial statements were available to be issued
on April 16, 2013:
i.
On January 2, 2013, the Company signed an exclusive licensing and distribution agreement
to sell and market the iPMine communication and mine-safety system for underground mines for the European continent. The terms
of the agreement includes exclusivity for the European market for a 5-year term renewable for an additional 5-year term and first
right of refusal to acquire the entire iPMine intellectual property. The Company issued 300,000 common shares (i.e. post-the reverse
stock split) of the Company to the licensor.
ii.
On January 10, 2013, the Board of Directors of the Company approved the followings:
1.
One (1) for fifty (50) reverse split of the issued and outstanding shares of Sanwire common
stock;
2.
To amend the Company’s Article of Incorporation to change the name of the Company
to “Sanwire Corporation,” and
3.
To amend the Company's Articles of Incorporation to increase the number of authorized shares
of Common Stock, par value $.00001 per share, of the Company from 500,000,000 shares to 750,000,000 shares after the Reverse Split.
The actions became effective
on or about March 8, 2013.
iii.
On January 14, 2013, the Company signed a purchase agreement to acquire all of the ownership
in iPTerra Technologies, Inc. for cash consideration of $5,500, which shall be paid to a seller within a 12 month period from a
closing date.
iv.
On
March 22, 2013, the Company issued 20,000,000 shares after the Reverse Split to the Company controlled by Naiel Kanno as payment
for fulfillment of the Company’s exercise of the option agreement that is part of the Licensing and Distribution Agreement
dated January 16, 2013.
v.
On
March 26, 2013, the Company exercised its option under the recently executed License and Distribution Agreement for 100% ownership
of the iPMine communications and mine-safety system. The iPMine system will continue to operate under the Company’s wholly
owned subsidiary, iPTerra Technologies, Inc.
vi.
On March 27, 2013, the Company issued 20,000,000
shares after the Reverse Split to converted $20,000 debt owing to a third party by the Company.
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.
Other Expenses of Issuance and Distribution
The following table sets forth the costs and
expenses payable by us in connection with the issuance and distribution of the securities being registered hereunder. No expenses
will be borne by Selling Stockholder. All of the amounts shown are estimates, except for the SEC registration fee.
SEC registration fee
|
$
|
354.82
|
|
Accounting fees and expenses
|
$
|
1,500.00
|
|
Legal fees and expenses
|
$
|
25,000.00
|
|
Total
|
$
|
26,854.82
|
|
Item 14.
Indemnification of Directors and Officers
Nevada Law
Section 78.7502 of the
Nevada Revised Statutes permits a corporation to indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except
an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys’ fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding
if he:
|
(a)
|
is not liable pursuant to Nevada Revised Statute 78.138, or
|
|
(b)
|
acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
|
In addition, Section
78.7502 permits a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against
expenses, including amounts paid in settlement and attorneys’ fees actually and reasonably incurred by him in connection
with the defense or settlement of the action or suit if he:
|
(a)
|
is not liable pursuant to Nevada Revised Statute 78.138; or
|
|
(b)
|
acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation.
|
To the extent that a
director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action,
suit or proceeding referred to above, or in defense of any claim, issue or matter, the corporation is required to indemnify him
against expenses, including attorneys’ fees, actually and reasonably incurred by him in connection with the defense
Section 78.751 of the
Nevada Revised Statutes provides that such indemnification may also include payment by the Company of expenses incurred in defending
a civil or criminal action or proceeding in advance of the final disposition of such action or proceeding upon receipt of an undertaking
by the person indemnified to repay such payment if he shall be ultimately found not to be entitled to indemnification under Section
78.751. Indemnification may be provided even though the person to be indemnified is no longer a director, officer, employee or
agent of the Company or such other entities.
Section 78.752 of the
Nevada Revised Statutes allows a corporation to purchase and maintain insurance or make other financial arrangements on behalf
of any person who is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise
for any liability asserted against him and liability and expenses incurred by him in his capacity as a director, officer, employee
or agent, or arising out of his status as such, whether or not the corporation has the authority to indemnify him against such
liability and expenses.
Other financial arrangements
made by the corporation pursuant to Section 78.752 may include the following:
|
(a)
|
the creation of a trust fund;
|
|
(b)
|
the establishment of a program of self-insurance;
|
|
(c)
|
the securing of its obligation of indemnification by granting a security interest or other lien on any assets of the corporation; and
|
|
(d)
|
the establishment of a letter of credit, guaranty or surety
|
No financial arrangement
made pursuant to Section 78.752 may provide protection for a person adjudged by a court of competent jurisdiction, after exhaustion
of all appeals, to be liable for intentional misconduct, fraud or a knowing violation of law, except with respect to the advancement
of expenses or indemnification ordered by a court.
Any discretionary indemnification pursuant
to NRS 78.7502, unless ordered by a court or advanced pursuant to an undertaking to repay the amount if it is determined by a court
that the indemnified party is not entitled to be indemnified by the corporation, may be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances.
The determination must be made:
|
(a)
|
by the stockholders;
|
|
(b)
|
by the board of directors by majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding;
|
|
(c)
|
if a majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding so orders, by independent legal counsel in a written opinion, or
|
|
(d)
|
if a quorum consisting of directors who were not parties to the action, suit or proceeding cannot be obtained, by independent legal counsel in a written opinion.
|
Charter Provisions and Other Arrangements
of the Registrant
Pursuant to the provisions
of Nevada Revised Statutes, the Registrant has adopted the following indemnification provisions in its Bylaws for its directors
and officers:
Every person who was
or is a party or is a threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or a person of whom he is the legal representative is or was a director
or officer of the corporation or is or was serving at the request of the corporation or for its benefit as a director or officer
of another corporation, or as its representative in a partnership, joint venture, trust or other enterprise, shall be indemnified
and held harmless to the fullest extent legally permissible under General Corporation Law of the State of Nevada time to time against
all expenses, liability and loss (including attorney's fees, judgments, fines and amounts paid or to be paid in settlement) reasonably
incurred or suffered by him in connection therewith. The expenses of officers and directors incurred in defending a civil or criminal
action, suit or proceeding must be paid by the corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it
is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the corporation. Such
right of indemnification shall be a contract right which may be enforced in any manner desired by such person. Such right of indemnification
shall not be exclusive of any other right which such directors, officers or representatives may have or hereafter acquire and,
without limiting the generality of such statement, they shall be entitled to their respective rights of indemnification under any
bylaw, agreement, vote of stockholders, provision of law or otherwise, as well as their rights under this Article.
The Board of Directors
may cause the corporation to purchase and maintain insurance on behalf of any person who is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, or as it's
representative in a partnership, joint venture, trust or other enterprise against any liability asserted against such person and
incurred in any such capacity or arising out of such status, whether or not the corporation would have the power to indemnify such
person.
The Board of Directors
may from time to time adopt further Bylaws with respect to indemnification and amend the Bylaws to provide at all times the fullest
indemnification permitted by the General Corporation Law of the State of Nevada.
Item 15. Recent Sales of Unregistered Securities
On June 22, 2010, the Company issued 100,000
common shares in relation to the acquisition of a mineral property option agreement pursuant to which the Company had the rights
to certain mineral property interest located in Vancouver, British Columbia, Canada, which shares were later cancelled on August
15, 2011. The issuance of these shares of common stock were exempt from the registration requirements of the Securities Act, pursuant
to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and
Rule 506 of Regulation D promulgated under the Securities Act (“Regulation D”).
On September 29, 2012, the Company issued 50,000 preferred shares at a fair value of $435,000 to settle debt of $50,000 on September 29, 2012 and subsequently cancelled all of 50,000 preferred shares in December, 2012 restoring the $50,000 of debt. The issuance of these shares of preferred stock were exempt from the registration requirements of the Securities Act, pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and Regulation D.
|
On September 27, 2012, the Company issued
200,000 common shares at a fair value of $87,000 to settle debt in the amount of $10,000. The Company recognized loss of $77,000
on settlement of debt during the year-end December 31, 2012. The issuance of these shares of common stock were exempt from the
registration requirements of the Securities Act, pursuant to the exemption for transactions by an issuer not involving any public
offering under Section 4(a)(2) of the Securities Act and Regulation D.
On January 3, 2013, the Company issued
300,000 shares of common stock with a fair value of $300 pursuant to the License Agreement. The issuance of these shares of
common stock were exempt from the registration requirements of the Securities Act, pursuant to the exemption for transactions by
an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and Regulation D.
On March 22, 2013, the Company exercised
its option under the License Agreement to acquire 100% ownership of the iPMine communication and mine safety system. As consideration,
the Company issued 20,000,000 shares of common stock with a fair value of $20,000. The issuance of these shares of common stock
were exempt from the registration requirements of the Securities Act, pursuant to the exemption for transactions by an issuer not
involving any public offering under Section 4(a)(2) of the Securities Act and Regulation D.
On March 27, 2013, the Company issued
20,000,000 shares of common stock with a fair value of $20,000 to settle debt of $20,000. The shares were issued to Senso Investments
(15,000,00 shares for $15,000 fair value) and, Northwest Management Anstalt (5,000,00 shares for $5,000 fair value).
The issuance of these shares of common stock were exempt from the registration requirements of the Securities Act, pursuant
to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and
Regulation D.
On May 17, 2013, the Company
issued 200,000 shares of common stock with a fair value of $58,000 to J R Vetter Consulting, Inc., a company controlled by J R Roland Vetter, the Chief Financial Officer of the Company as compensation under this
consultant agreement. The issuance of these shares of common stock were exempt from the registration requirements of the
Securities Act, pursuant to the exemption for transactions by an issuer not involving any public offering under Section
4(a)(2) of the Securities Act and Regulation D.
On May 17, 2013, the Company issued
200,000 shares of common stock with a fair value of $58,000 to Biarritz Productions, of which $7,150 was expensed as consulting
fees for the pro-rate portion of services rendered to June 30, 2013. The issuance of these shares of common stock were exempt from
the registration requirements of the Securities Act, pursuant to the exemption for transactions by an issuer not involving any
public offering under Section 4(a)(2) of the Securities Act and Regulation D.
On May 17, 2013, the Company issued
275,000 shares of common stock with a fair value of $79,750 to Lloyd Donner, of which $9,832 was expensed as consulting fees for
the pro-rate portion of services rendered to June 30, 2013. The issuance of these shares of common stock were exempt from the registration
requirements of the Securities Act, pursuant to the exemption for transactions by an issuer not involving any public offering under
Section 4(a)(2) of the Securities Act and Regulation D.
On May 29, 2013, the Company issued
2,400,000 shares of common stock with a fair value of $600,000 to acquire Aero. The issuance of these shares of common stock were
exempt from the registration requirements of the Securities Act, pursuant to the exemption for transactions by an issuer not involving
any public offering under Section 4(a)(2) of the Securities Act and Regulation D.
On May 29, 2013, the Company issued
300,000 shares of common stock with a fair value of $75,000 to the management team of Aero, which consists of Richard Bjorklund,
James Bradley and Samuel Sibala. The issuance of these shares of common stock were exempt from the registration requirements of
the Securities Act, pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2)
of the Securities Act and Regulation D.
On June 1, 2013, the Company issued
50,000 shares of common stock with a fair value of $12,500 to Les Matthews, a consultant. The issuance of these shares of common
stock were exempt from the registration requirements of the Securities Act, pursuant to the exemption for transactions by an issuer
not involving any public offering under Section 4(a)(2) of the Securities Act and Regulation D.
On June 3, 2013, the Company issued
50,000 shares of common stock with a fair value of $13,500 to George Naylor and John Sisk, both of whom are consultant. The issuance
of these shares of common stock were exempt from the registration requirements of the Securities Act, pursuant to the exemption
for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and Regulation D.
On June 12, 2013, the Company issued
500,000 of common stock with a fair value of $170,000 to C Dillow & Co., of which $18,580 was expensed as consulting fees for
the pro-rate portion of services rendered to June 30, 2013. The issuance of these shares of common stock were exempt from the registration
requirements of the Securities Act, pursuant to the exemption for transactions by an issuer not involving any public offering under
Section 4(a)(2) of the Securities Act and Regulation D.
On June 12, 2013, the Company issued
250,000 shares of common stock with a fair value of $92,500 to Core Consulting, of which $9,604 was expensed as consulting fees
for the pro-rate portion of services rendered to June 30, 2013. The remaining $82,896 was recorded as deferred compensation and
will be expensed pro-rata over the remaining term of the agreement ending on December 11, 2013. The issuance of these shares of
common stock were exempt from the registration requirements of the Securities Act, pursuant to the exemption for transactions by
an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and Regulation D.
On June 27, 2013, the Company issued
500,000 shares of common stock with a fair value of $170,000 to Rovert Consulting, of which $3,716 was expensed as consulting fees
for the pro-rate portion of services rendered to June 30, 2013. The remaining $166,284 was recorded as deferred compensation and
will be expensed pro-rata over the remaining term of the agreement ending on December 27, 2013. The issuance of these shares of
common stock were exempt from the registration requirements of the Securities Act, pursuant to the exemption for transactions by
an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and Regulation D.
On June 28, 2013, the Company issued
96,000 shares of common stock with a fair value of $45,120 to Gross Capital which was recorded as deferred compensation which will
be expensed on the vesting date of July 1, 2013. The issuance of these shares of common stock were exempt from the registration
requirements of the Securities Act, pursuant to the exemption for transactions by an issuer not involving any public offering under
Section 4(a)(2) of the Securities Act and Regulation D.
On June 1, 2013, the Company issued 250,000
share purchase warrants at an exercise price of $0.50 per share expiring on May 31, 2014 to Les Matthews, a consultant. The issuance
of the share purchase warrants was exempt from the registration requirements of the Securities Act, pursuant to the exemption for
transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation
D promulgated under the Securities Act (“Regulation D”).
On July 31, 2013, we entered into the Note
Purchase Agreement with Hanover. The Note Purchase Agreement provides that, upon the terms and subject to the conditions
set forth therein, Hanover shall purchase from us a senior convertible note with an initial principal amount of $405,000 (the “Convertible
Note”) for a purchase price of $300,000 (an approximately 25.93% original issue discount). The issuance of the Convertible
Note to Hanover under the Note Purchase Agreement was exempt from the registration requirements of the Securities Act, pursuant
to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and
Regulation D under the Securities Act. The Company made this determination based on the representations of Hanover that
Hanover is an “accredited investor” within the meaning of Rule 501 of Regulation D and has access to information about
the Company and its investment.
On August 28, 2013, we entered into the
Purchase Agreement with Hanover. The Purchase Agreement provides that, upon the terms and subject to the
conditions set forth therein, Hanover is committed to purchase up to $7,500,000 worth of our common stock over the 36-month
term of the Purchase Agreement. The issuances of the Commitment Shares and the sale of the Shares to Hanover under the
Purchase Agreement are exempt from registration under the Securities Act pursuant to the exemption for transactions by an
issuer not involving any public offering under Section 4(a)(2) of and Regulation D under the Securities Act.
I
tem 16.
Exhibit Index
The following exhibits are included as part of this registration statement by reference:
(b) Exhibits
|
|
|
Incorporated by reference
|
Exhibit
|
Exhibit Description
|
Filed herewith
|
Form
|
Period ending
|
Exhibit
|
Filing date
|
2.1
|
Purchase
Agreement between the Company and Naiel P. Kanno, dated January 14, 2013
|
|
10-Q/A
|
|
2.1
|
9/10/2013
|
2.2
|
Purchase
Agreement by and among the Company, Richard Bjorklund, James Bradley and Samuel Sibala, dated May 28, 2013
|
|
10-Q/A
|
|
2.2
|
9/10/2013
|
3.1
|
Articles
of Incorporation, as amended
|
|
10-Q/A
|
|
3.1
|
9/10/2013
|
3.2
|
By-Laws
|
|
10-SB
|
|
3.2
|
11/19/1999
|
5.1
|
Opinion
of Greenberg Traurig, LLP
|
X
|
|
|
|
|
10.1
|
Note
Purchase Agreement by and between Hanover Holdings I, LLC and the Company, dated as of July 31, 2013
|
|
8-K
|
|
10.1
|
8/5/2013
|
10.2
|
Senior
Convertible Note, dated July 31, 2013
|
|
8-K
|
|
10.2
|
8/5/2013
|
10.3
|
Registration
Rights Agreement by and between Hanover Holdings I, LLC and the Company, dated as of July 31, 2013
|
|
8-K
|
|
10.3
|
8/5/2013
|
10.4
|
Common
Stock Purchase Agreement by and between Hanover Holdings I, LLC and the Company, dated as of August 28, 2013
|
|
8-K
|
|
10.1
|
9/4/2013
|
10.5
|
Registration
Rights Agreement by and between Hanover Holdings I, LLC and the Company, dated as of August 28, 2013
|
|
8-K
|
|
10.2
|
9/4/2013
|
10.6
|
Exclusive
License and Distribution Agreement between Naiel Kanno and NT Mining Corporation, dated January 2, 2013
|
|
10-Q/A
|
|
10.6
|
9/10/2013
|
10.7
|
Consulting
Agreement with Naiel Kanno, dated April 17, 2013
|
|
10-Q/A
|
|
10.7
|
9/10/2013
|
10.8
|
Consulting
Agreement with J Roland Vetter, dated April 17, 2013
|
|
10-Q/A
|
|
10.8
|
9/10/2013
|
10.9
|
Consulting
Agreement with Carman Parente, dated April 17, 2013
|
|
10-Q/A
|
|
10.9
|
9/10/2013
|
10.10
|
Convertible
Promissory Note by the Company in favor of Kanno Group Holdings, Ltd. in the amount of $2,345,300, dated May 10, 2013
|
|
10-Q/A
|
|
10.10
|
9/10/2013
|
10.11
|
Convertible
Promissory Note by the Company in favor of Kanno Group Holdings II, Ltd. in the amount of $7,634,700, dated May 10, 2013
|
|
10-Q/A
|
|
10.11
|
9/10/2013
|
10.12
|
Consulting
Agreement with Richard Bjorklund, dated May 28, 2013
|
|
10-Q/A
|
|
10.12
|
9/10/2013
|
10.13
|
Consulting
Agreement with James Bradley, dated May 28, 2013
|
|
10-Q/A
|
|
10.13
|
9/10/2013
|
10.14
|
Consulting
Agreement with Samuel Sibala, dated May 28, 2013
|
|
10-Q/A
|
|
10.14
|
9/10/2013
|
10.15
|
Community
Connect Grant Contractor Agreement, between Aeronetworks LLC and Oso Vista Ranch Project, dated June 17, 2013
|
|
10-Q/A
|
|
10.15
|
9/10/2013
|
10.16
|
Commercial
Lease and Deposit Receipt, by and among Richard Bjorklund & Sam Siabala (d/b/a Aero Networks) and JCI, LLC, dated April
19, 2013
|
|
10-Q/A
|
|
10.16
|
9/10/2013
|
21
|
List
of Subsidiaries
|
X
|
|
|
|
|
23.1
|
Consent
of Malone Bailey LLP
|
X
|
|
|
|
|
23.2
|
Consent
of Greenberg Traurig, LLP (filed as part of Exhibit 5.1)
|
X
|
|
|
|
|
24
|
Power
of Attorney
|
X
|
|
|
|
|
101.INS*
|
XBRL
Instance Document
|
|
|
|
|
|
101.SCH*
|
XBRL
Taxonomy Extension Schema Document
|
|
|
|
|
|
101.CAL*
|
XBRL
Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
|
101.LAB*
|
XBRL
Taxonomy Extension Label Linkbase Document
|
|
|
|
|
|
101.PRE*
|
XBRL
Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
101.DEF*
|
XBRL
Taxonomy Extension Definition Linkbase Definition
|
|
|
|
|
|
* In accordance with Regulation S-T,
the XBRL-related information on Exhibit No. 101 to this Registration Statement on Form S-1 shall be deemed “furnished”
herewith and not “filed.”
Item 17.
Undertakings
The undersigned registrant hereby undertakes
to:
(a)
Rule 415 Offering
:
1.
To file, during any period in which offers or sales are being made, a post-effective
amendment to this registration statement:
i. To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
ii.
To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) (§ 230.424 of this chapter) if, in the aggregate, the changes in volume and price represent no more than 20% change
in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration
statement.
iii.
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
Provided, however, that:
(A)
Paragraphs (a)(1)(i) and (a)(1)(ii) of this section do not apply if the registration statement is on Form S-8 (§ 239.16b of
this chapter), and the information required to be included in a post-effective amendment by those paragraphs is contained in reports
filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange
Act of 1934 (15 U.S.C. 78m or 78o(d)) that are incorporated by reference in the registration statement; and
(B)
Paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do not apply if the registration statement is on Form S-3 (§
239.13 of this chapter) or Form F-3 (§ 239.33 of this chapter) and the information required to be included in a post-effective
amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to section
13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or
is contained in a form of prospectus filed pursuant to Rule 424(b) (§ 230.424(b) of this chapter) that is part of the registration
statement.
(C)
Provided further, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the registration statement is for an offering
of asset-backed securities on Form S-1 (§ 239.11 of this chapter) or Form S-3 (§ 239.13 of this chapter), and the information
required to be included in a post-effective amendment is provided pursuant to Item 1100(c) of Regulation AB (§ 229.1100(c))
.
2.
That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
3.
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at
the termination of the offering.
4.
If the registrant is a foreign private issuer, to file a post-effective amendment to the registration statement to include any
financial statements required by “Item 8.A. of Form 20–F (17 CFR 249.220f)” at the start of any delayed offering
or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a)(3) of the Act need
not be furnished, provided that the registrant includes in the prospectus, by means of a post-effective amendment, financial statements
required pursuant to this paragraph (a)(4) and other information necessary to ensure that all other information in the prospectus
is at least as current as the date of those financial statements. Notwithstanding the foregoing, with respect to registration statements
on Form F–3 (§239.33 of this chapter), a post-effective amendment need not be filed to include financial statements
and information required by Section 10(a)(3) of the Act or §210.3 –19 of this chapter if such financial statements and
information are contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to section 13
or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Form F–3.
5. That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:
i. If the registrant is relying on Rule
430B (§230.430B of this chapter):
(A)
Each prospectus filed by the registrant pursuant to Rule 424(b)(3) (§230.424(b)(3) of this chapter) shall be deemed to be
part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement;
and
(B)
Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) (§230.424(b)(2), (b)(5), or (b)(7) of this
chapter) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i),
(vii), or (x) (§230.415(a)(1)(i), (vii), or (x) of this chapter) for the purpose of providing the information required by
section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the
earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities
in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that
is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to
the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement
or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference
into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of
contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or
prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or
ii.
If the registrant is subject to Rule 430C (§230.430C of this chapter), each prospectus filed pursuant to Rule 424(b) as part
of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses
filed in reliance on Rule 430A (§230.430A of this chapter), shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement
or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference
into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such document immediately prior to such date of first use.
6.
That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial
distribution of the securities:
The
undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration
statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or
sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser
and will be considered to offer or sell such securities to such purchaser:
i.
Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to
Rule 424 (§230.424 of this chapter);
ii.
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred
to by the undersigned registrant;
iii.
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned
registrant or its securities provided by or on behalf of the undersigned registrant; and
iv. Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
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SANWIRE CORPORATION
|
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a Nevada corporation
|
|
|
Dated:
September 19, 2013
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/s/ Naiel Kanno
|
|
By: Naiel Kanno
|
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Its: President, Chief Executive Officer, and Director
|
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(Principal Executive Officer)
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Dated: September 19, 2013
|
/s/ J Roland Vetter
_____________________________________________
|
|
By: J Roland Vetter
|
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Its: Chief Financial Officer and Treasurer
|
|
(Principal Financial Officer and Principal Accounting Officer)
|
126
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