UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 20-F/A
Amendment No. 1
(Mark One)
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)
OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2013
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to
___________________
OR
[ ] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report:
Commission file number 000-32981
QWICK MEDIA INC.
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of
Registrants name into English)
The Cayman Islands
(Jurisdiction of
incorporation or organization)
8652 Commerce Court
Burnaby, British
Columbia, Canada V5A 4N6
(Address of principal executive
offices)
Ross Tocher, President
Telephone: 778.370.1715
Facsimile: 778-370-1720
8652 Commerce Court
Burnaby, British Columbia
Canada, V5A 4N6
(Name, Telephone, E-mail and/or Facsimile number and Address of Company
Contact Person)
Securities registered or to be registered pursuant to Section
12(b) of the Act.
Title of each class |
Name of each exchange on which registered |
Not Applicable |
Not Applicable
|
Securities registered or to be registered pursuant to Section
12(g) of the Act.
Common Shares Without Par Value
(Title
of Class)
Securities for which there is a reporting obligation pursuant
to Section 15(d) of the Act.
Not Applicable
(Title of Class)
Indicate the number of outstanding shares of each of the
issuers classes of capital or common stock as of the close of the period
covered by the annual report: 71,128,456 common shares as of December 31,
2013
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act.
[
] YES [X] NO
If this report is an annual or transition report, indicate by
check mark if the registrant is not required to file reports pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934.
[ ]
YES [X] NO
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X]
YES [ ] NO
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).
[X] YES [ ] NO
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of accelerated filer and large accelerated filer in Rule 12b-2 of
the Exchange Act. (Check one):
Large accelerated filer [ ] |
Accelerated filer [ ] |
Non-accelerated filer [X] |
Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this filing:
U.S. GAAP [X] |
International Financial Reporting
Standards as issued |
Other [ ] |
|
by the International Accounting
Standards Board [ ] |
|
If Other has been checked in response to the previous
question, indicate by check mark which financial statement item the registrant
has elected to follow.
[ ] Item 17
[ ] Item 18
If this is an annual report, indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).
[ ] YES [X] NO
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court.
[ ]
YES [ ] NO
Explanatory Note
The purpose of this Amendment No. 1 to Qwick Media Inc. Annual Report on Form 20-F for the year ended December 31, 2013, filed with the Securities and Exchange Commission on April 30, 2014 (the “Form 20-F”), is solely to update the section entitled “Controls and Procedures”.
No other changes have been made to the Form 20-F. This Amendment No. 1 to the Form 20-F speaks as of the original filing date of the Form 20-F, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in the original Form 20-F, other than the disclosure controls and procedures.
INTRODUCTION AND INFORMATION REGARDING FORWARD-LOOKING
STATEMENTS
This annual report on Form 20-F contains forward-looking
statements. Forward-looking statements are projections in respect of future
events or our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as may, should, intend,
expect, plan, anticipate, believe, estimate, predict, potential,
or continue, or the negative of these terms or other comparable terminology.
These statements are only predictions and involve known and unknown risks,
uncertainties and other factors, including the risks in the section entitled
Risk Factors commencing on page 7, which may cause our or our industrys
actual results, levels of activity or performance to be materially different
from any future results, levels of activity or performance expressed or implied
by these forward-looking statements. These risks and uncertainties include: a
renewed downturn in international economic conditions; any adverse occurrence
with respect to the development or marketing of our technology; any adverse
occurrence with respect to any of our licensing agreements; our ability to
successfully bring products to market; product development or other initiatives
by our competitors; fluctuations in the availability and cost of materials
required to produce our products; any adverse occurrence with respect to
distribution of our products; potential negative financial impact from claims,
lawsuits and other legal proceedings or challenges; and other factors beyond our
control.
Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity or performance. Further, any forward-looking statement speaks
only as of the date on which such statement is made, and, except as required by
applicable law, we undertake no obligation to update any forward-looking
statement to reflect events or circumstances after the date on which such
statement is made or to reflect the occurrence of unanticipated events. New
factors emerge from time to time, and it is not possible for management to
predict all of such factors and to assess in advance the impact of such factors
on our business or the extent to which any factor, or combination of factors,
may cause actual results to differ materially from those contained in any
forward-looking statement.
In this Form 20-F, unless otherwise stated, references to we,
us, our and Qwick refer to Qwick Media Inc., a Cayman Islands corporation,
and include, where applicable, our wholly-owned subsidiary, Qeyos Ad Systems
Inc. (Qeyos), a British Columbia corporation, and its wholly-owned
subsidiary, Wuxi Xun Fu Information Technology Co., Ltd. (Wuxi), a
company incorporated under the laws of the Peoples Republic of China, through
which the majority of our operations are conducted. Unless otherwise stated, $
refers to United States dollars.
PART I
ITEM
1
Identity of Directors, Senior Management and Advisers
Not applicable.
ITEM
2
Offer Statistics and Expected Timetable
Not applicable.
ITEM
3
Key Information
A. Selected
Financial Data
The following financial data summarizes selected financial data
for our company prepared in accordance with United States generally accepted
accounting principles (US GAAP) for the five fiscal years ended
December 31, 2013. The information presented below for the five year period
ended December 31, 2013 is derived from our financial statements which were
examined by our independent auditor. The information set forth below should be
read in conjunction with our audited financial statements and related notes
included in this annual report, and with the information appearing under the
heading Item 5. Operating and Financial Review and Prospects. The data is
presented in U.S. dollars.
Selected Financial Data
(Stated in
U.S. Dollars - Calculated in accordance with US GAAP)
|
Year ended
Dec. 31, 2013
(audited) |
Year ended
Dec. 31, 2012
(audited) |
Year ended
Dec. 31, 2011
(audited) |
Year ended
Dec. 31, 2010
(audited) |
Year ended
Dec. 31, 2009
(audited) |
Revenue |
$ 110,553 |
$ 146,619 |
$ 84,185 |
$ 2,718 |
$ - |
Total expenses |
2,757,381 |
3,279,571 |
3,260,144 |
1,104,915 |
351,291 |
Loss from operations and continuing
operations |
2,646,828 |
3,132,952 |
3,175,999 |
1,102,197 |
351,291 |
Net loss |
2,646,828 |
3,132,952 |
3,175,999 |
1,102,197 |
351,291 |
Basic and diluted loss per common share |
0.04 |
0.04 |
0.05 |
0.02 |
0.02 |
Total assets |
693,420 |
721,637 |
1,542,848 |
1,088,360 |
1,433 |
Total liabilities |
5,084,753 |
2,475,594 |
245,031 |
458,101 |
297,030 |
Total stockholders equity (deficiency) |
(6,419,278) |
(3,781,902) |
(730,128) |
630,259 |
(295,597) |
Capital stock |
71,128 |
71,128 |
71,128 |
56,102 |
56,102 |
Weighted average number of common shares
outstanding |
71,128,000 |
71,128,000 |
61,940,000 |
56,102,000 |
22,312,000 |
Number of common shares outstanding as at
period end |
71,128,456 |
71,128,456 |
71,128,456 |
56,102,401 |
56,102,401 |
Long-term debt |
- |
- |
- |
- |
- |
Dividends per common share |
- |
- |
- |
- |
- |
B.
Capitalization and Indebtedness
Not applicable.
C. Reasons
for the Offer and Use of Proceeds
Not applicable.
5
D. Risk
Factors
Much of the information included in this annual report includes
or is based upon estimates, projections or other forward-looking statements.
Such forward-looking statements include any projections or estimates made by our
company and our management in connection with our business operations. While
these forward-looking statements, and any assumptions upon which they are based,
are made in good faith and reflect our current judgment regarding the direction
of our business, actual results will almost always vary, sometimes materially,
from any estimates, predictions, projections, assumptions or other future
performance suggested herein. Such estimates, projections or other
forward-looking statements involve various risks and uncertainties as outlined
below. We caution the reader that important factors in some cases have affected
and, in the future, could materially affect actual results and cause actual
results to differ materially from the results expressed in any such estimates,
projections or other forward-looking statements.
Our common shares are considered speculative. You should
carefully consider the following risks and uncertainties in addition to other
information in this annual report in evaluating our company and our business
before purchasing any shares of our company. Our business, operating and
financial condition could be harmed due to any of the following risks.
Risks Relating to our Business
Our company currently does not generate significant
revenue from its operations, and as a result, we face a high risk of business
failure.
We have not generated significant revenues from our operations
to date. As of December 31, 2013, we had accumulated $11,325,957 in losses since
inception. As a result of the completion of the acquisition of the shares of
Qeyos on January 28, 2011, our business is the development of proprietary
software, know-how and hardware. Our software and hardware is planned to be used
in the digital out-of-home (DOOH) media advertising industry.
Therefore, our principal business plan is to provide our clients with
advertising opportunities through self-service, interactive digital kiosks,
interactive window displays, interactive transit displays and other interactive
out-of-home advertising displays, such as digital wall-scapes, spectaculars and
mall displays that we plan to own and operate in North American advertising
market. Our ability to generate revenues from planned advertising sales depends
largely on our ability to provide a large interactive network of digital kiosks
and digital TV screens that show our programs in high traffic locations at
trade-show exhibitions and large retail stores and shopping malls. This, in
turn, requires that we obtain specialized broadcast interactive television
(micro-broadcast) contracts or concession rights contracts in order to
operate our business. Our prior deployment of 80 locations in tire dealerships
across Canada in cooperation with Yokohama (Canada) Inc. was terminated in or
about May 2011. In addition, our pilot deployment of approximately 60 locations
in the Greater Vancouver Region for Qwick Deals was terminated in or about
November 2012. Since then the Company has been working on obtaining alternative
high traffic locations, which is on-going and inconclusive to date. As such, in
order to generate significant revenues, we will incur substantial expenses in
the development of our business. We therefore expect to incur significant losses
in the foreseeable future. We recognize that if we are unable to generate
significant revenues from our activities, our entire business may fail. There is
no history upon which to base any assumption as to the likelihood that we will
be successful in our plan of operation, and we can provide no assurance to
investors that we will generate operating revenues or achieve profitable
operations in the future.
If we are not able to effectively protect our
intellectual property, our business may suffer a material negative impact and
may fail.
The success of our company will be dependent on our ability to
protect and develop our technology; however, we have not yet obtained any
patents or trademarks other than our U.S. trade name Qwick Media. We completed
our registration of the U.S. trade-name Qwick Media, which was issued on
September 20, 2011 under number 4,029,739. In addition, on March 30 2012 we
applied under reference number 2065-100 for the Canadian trade name Qwick
Deal, and under application number 85739426 for the United States trade name,
which applications remain pending in Canada and the United States respectively.
If we are unable to secure trademark and patent protection for our intellectual
property in the future or that protection is inadequate for future products, our
business may be materially adversely affected. Further, there is no assurance
that our interactive kiosks and displays or other aspects of our business do not or will not infringe upon patents,
copyrights or other intellectual property rights held by third parties. Although
we are not aware of any such claims, we may become subject to legal proceedings
and claims from time to time relating to the intellectual property of others in
the ordinary course of our business. If we are found to have violated the
intellectual property rights of others, we may be enjoined from using such
intellectual property, and we may incur licensing fees or be forced to develop
alternatives. In addition, we may incur substantial expenses and diversion of
management time in defending against these third-party infringement claims,
regardless of their merit. Successful infringement or licensing claims against
us may result in substantial monetary liabilities, which may materially and
adversely disrupt our business.
6
We have had negative cash flows from operations and if we
are not able to obtain further financing, our business operations may
fail.
We had cash in the amount of $241,327 and a working capital
deficiency of $4,428,410 as of December 31, 2013. If our current resources are
insufficient to satisfy our cash requirements, we may seek to sell additional
equity or debt securities or obtain a credit facility. The sale of convertible
debt securities or additional equity securities could result in additional
dilution to our shareholders. The incurrence of indebtedness would result in
increased debt service obligations and could result in operating and financing
covenants that would restrict our operations and liquidity.
In addition, our ability to obtain additional capital on
acceptable terms is subject to a variety of uncertainties, including:
|
investors perception of, and
demand for, securities of alternative advertising media companies; |
|
|
|
conditions of the U.S. and other
capital markets in which we may seek to raise funds; |
|
|
|
our future results of operations,
financial condition and cash flows; |
|
|
|
economic, political and other
conditions in North America; and |
We cannot assure you that financing will be available in
amounts or on terms acceptable to us, if at all. Any failure to raise additional
funds on favorable terms could have a material adverse effect on our liquidity
and financial condition and could cause our business to fail.
Our limited operating history may not provide an adequate
basis to judge our future prospects and results of operations.
Qeyos was incorporated and began software development
operations in January 2009. Qeyos formed Wuxi as a 100% wholly owned foreign
subsidiary company to conduct further software development operations in Wuxi,
China, in April, 2011. Prior to our acquisition of Qeyos, we were a shell
company. As such, our limited operating history may not provide a meaningful
basis for readers to evaluate our business, financial performance and prospects.
It is also difficult to evaluate the viability of our plan to implement an
interactive digital media micro-broadcast network and other advertising media
dedicated to the DOOH sector because we do not have sufficient experience to
address the risks frequently encountered by early stage companies using new
forms of advertising media and entering new and rapidly evolving markets. It may
be difficult for readers to evaluate our senior management team and their
effectiveness, on an individual or collective basis, and their ability to
address future challenges to our business. Given our limited operating history,
we may not be able to:
|
preserve our position in the
interactive digital media markets in North America; |
|
|
|
manage our emerging relationships with large retailers
and micro-broadcast sponsors to secure network broadcast and media
management contracts or concession rights contracts and obtain such
contracts or concession rights contracts to operate interactive digital
media platforms in leading retail chains on commercially advantageous
terms or at all; |
|
|
|
obtain and retain advertising
clients; |
7
|
manage our emerging relationships
with third-party non-advertising content providers; |
|
|
|
secure a sufficient amount of
low-cost interactive digital kiosks and digital TV screens from our
suppliers; |
|
|
|
manage our expanding operations,
including the integration of any future acquisitions; |
|
|
|
increase and diversify our revenue sources by
successfully expanding into other complimentary advertising media
platforms and replacing third party light box displays to interactive
digital frames; |
|
|
|
respond to competitive market
conditions; |
|
|
|
maintain adequate control of our
expenses; or |
|
|
|
attract, train, motivate and
retain qualified personnel. |
If we are unsuccessful in addressing any of these risks, our
business may be materially and adversely affected.
If advertisers or the viewing public do not accept, or
lose interest in, our planned interactive digital media network, we may be
unable to generate sufficient cash flow from our operating activities and our
prospects and results of operations could be negatively affected.
The market for interactive digital media networks in North
America remains relatively new and its potential is uncertain. We compete for
advertising spending with many forms of more established advertising media, such
as television, print media, Internet and other types of out-of-home advertising.
Our success depends on the acceptance of our interactive digital media network
by advertising clients and agencies and their continuing and increased interest
in this medium as a component of their advertising strategies. Our success also
depends on the viewing public continuing to be receptive to our interactive
digital media network. Advertisers may elect not to use our services if they
believe that consumers are not receptive to our micro-broadcast network or that
our network does not provide sufficient value as an effective advertising
medium. Likewise, if consumers find some element of our network to be disruptive
or intrusive, large retailing companies may decide not to allow us to operate
the interactive digital and interactive TV screens in stores or shopping malls
or to place our programs in high traffic areas, and advertisers may view our
micro-broadcast network as a less attractive advertising medium compared to
other alternatives. In that event, advertisers may determine to decline spending
on our micro-broadcast network and interactive advertising distribution
channels.
Interactive DOOH advertising is a new concept in North America
and in the advertising industry generally. If we are not able to adequately
track consumer responses to our programs, in particular tracking the
demographics of consumers most receptive to interactive advertising, we will not
be able to provide sufficient feedback and data to existing and potential
advertising clients to help us generate demand and determine pricing. Without
improved market research, advertising clients may reduce their use of
interactive advertising and instead turn to more traditional forms of
advertising that have more established and proven analytical methods of tracking
effectiveness.
If a substantial number of advertisers lose interest in
advertising on our planned micro-broadcast digital media networks for these or
other reasons, or become unwilling to purchase advertising time slots on our
planned network, we will be unable to generate sufficient revenues and cash flow
to operate our business, and our revenues, prospects and results of operations
could be negatively affected.
We plan to derive the majority of our revenues from the
provision of advertising services. If there is a downturn in the advertising
industry, we may not be able to diversify our revenue sources and our ability to
generate revenues and our results of operations could be materially and
adversely affected.
We do not have any current plans to expand outside our existing
sector and enter into more advertising segments to diversify our revenue
sources. As a result, if there were a downturn our advertising sector for any
reason, we may not be able to diversify our revenue sources and our ability to
generate revenues and our results of operations could be materially and
adversely affected.
8
If we are unable to carry out our plan of operations as
specified in proposed contracts or obtain new contracts or concession rights
contracts on commercially advantageous terms or at all, we may be unable to
maintain or expand our micro-broadcast network coverage and our costs may
increase significantly in the future.
Our ability to generate planned revenues from advertising sales
depends largely upon our ability to provide a large interactive network of
digital kiosks and digital TV screens that show our programs in high traffic
locations of trade-show exhibitions, large retail stores and shopping malls.
This, in turn, requires that we obtain micro-broadcast contracts or concession
rights contracts to operate our business. There are no assurances that we will
be able to carry out our operations in a manner as specified in such future
contracts or that the typical terms of such contracts, ranging from three to
five years, will be capable of including any automatic renewal provisions.
We may depend on third-party program producers to provide
the non-advertising content that we include in our interactive programs. Failure
to obtain high-quality content on commercially reasonable terms could materially
reduce the attractiveness of our micro-broadcast network, harm our reputation
and cause our planned revenues to be unrealized or to decline.
We are planning for the majority of our interactive digital
kiosks and TV screens to mix advertising and non-advertising content. We do not
produce or create any of the non-advertising content included in our programs.
The advertisers will provide us with the advertising content that they do not
retain us to produce. All of the non-advertising content is provided by
third-party content providers such as various local television stations and
television production companies. For example, we have plans to include a variety
of news and entertainment content provided by third parties on our
micro-broadcast network, without charge, on the condition that their logo is
displayed throughout the duration of the provided content. Certain third-party
content providers also do not plan to charge us for their content.
There is no assurance that we will be able to secure these
contracts or obtain non-advertising content on satisfactory terms, or at all. In
addition, some of the third-party content providers that currently do not charge
us for their content may do so in the future. To make our programs more
attractive, we must continue to secure contracts with these and other
third-party content providers. If we fail to micro-broadcast networks
unattractive and may not wish to purchase advertising time slots on our network,
which would materially and adversely affect our ability to generate revenues
from our advertising time slots and cause our revenues to decline and our
business and prospects to deteriorate.
If we are unable to attract advertisers to purchase
advertising time on our micro-broadcast network, we will be unable to maintain
or increase our advertising fees, which could negatively affect our ability to
grow our profits.
The fees we charge advertising clients and agencies for time
slots on our network depend on the size and quality of our interactive network
and the demand by advertisers for advertising time on our network. We believe
advertisers will choose to advertise on our micro-broadcast network in part
based on the intended size of our network, the desirability of the locations
where we have placed our interactive kiosks and digital TV screens and the
attractiveness of our network content. If we fail to establish sufficient
critical mass, maintain or increase the number of our interactive displays,
solidify our brand name and reputation as a quality interactive digital media
provider, or obtain high-quality non-advertising content at commercially
reasonable prices, advertisers may be unwilling to purchase time on our
micro-broadcast network or to pay the levels of advertising fees we require to
grow our profits.
Including non-advertising content in our programs may be
deemed a form of broadcasting under applicable federal law. If so, we may be
required to obtain certain approvals and/or authorizations, the failure of which
may make us unable to continue to include non-advertising content in our
programs, which may cause our revenues to decline and our business and prospects
to deteriorate.
Current laws and regulations in North America may prohibit any
entities or individuals from broadcasting non-advertising content through
television networks without the prior approval of the relevant authorities.
Applicable laws and regulations do not, however, expressly classify the display
of non-advertising content through digital media networks such as ours as a form
of broadcasting. Although we believe we are in compliance with current laws and
regulations in the jurisdictions in which we operate, we cannot assure you that
the relevant authorities will reach the same conclusion.
9
If we are in fact deemed to be engaged in the broadcasting of
non-advertising content, we may be subject to monetary penalties or may be
forced to eliminate non-advertising content from the programs included in our
micro-broadcast digital TV screens, all of which could have a material and
adverse effect on our business operations. In addition, if new laws or
regulations are promulgated that characterize our business operations as
engaging in the broadcasting of non-advertising content, we would be required to
obtain additional approvals and/or authorizations. If we fail to obtain any
required approvals and/or authorizations, we may not be able to continue to
include non-advertising content in our programs and advertisers may find our
network less attractive and be unwilling to purchase advertising time slots on
our network, which may cause our revenues to decline and our business and
prospects to deteriorate.
Because we may rely on third-party agencies to help
source advertising clients, our failure to retain key third-party agencies or
attract additional agencies on favorable terms could materially and adversely
affect our revenue growth.
We plan to engage third-party agencies to assist us in sourcing
advertising clients from time to time. We do not have any long-term or exclusive
agreements with these agencies, and cannot assure that we will obtain or
continue to maintain favorable relationships with them. If we fail to obtain and
retain key third-party agencies or attract additional agencies, we may not be
able to secure or retain advertising clients or attract new advertisers or
advertising agency clients and our business and results of operations could be
materially adversely affected.
Because we may be dependent on a limited number of
customers for a significant portion of our revenues and this dependence may
continue or reoccur in the future, we may be vulnerable to the loss of major
customers or delays in payments from these customers.
Given our limited operating history and the rapid growth of our
industry, we cannot assure that we will not be dependent on a small number of
customers in the future. If we fail to sell our services to one or more key
customers in any particular period, or if a large customer purchases less of our
services or fails to purchase additional advertising time on our micro-broadcast
networks, our revenues could be unrealized or could decline and our operating
results could be adversely affected. In addition, the dependence on a small
number of customers could leave us more vulnerable to delays in payments from
these customers. If one of our larger customers is significantly delinquent with
their payments, our financial condition may be materially and adversely
affected.
If we are unable to adapt to changing advertising trends
and the technology needs of advertisers and consumers, we will not be able to
compete effectively and we will be unable to realize, increase or maintain our
revenues which may materially and adversely affect our business prospects and
revenues.
The market for interactive advertising requires us to
continuously identify new advertising trends and the technological needs of both
advertisers and consumers, which may require us to develop new formats, features
and enhancements for our micro-broadcasting advertising network. We must
be able to quickly and cost-effectively expand into additional advertising media
and platforms beyond interactive kiosks and interactive digital TV screens if
advertisers find other media and platforms, such as mobile applications, to be
more attractive and cost-effective. In addition, as the advertising industry is
highly competitive and fragmented, with many advertising agencies existing and
emerging, we must closely monitor the trends in the advertising agency
community. We must maintain strong relationships with leading advertising
agencies to make certain that we are reaching the leading advertisers and are
responsive to the needs of both the advertising agencies and the advertisers.
We currently plan to play advertisements in our network
primarily through Internet VPN broadband and wireless 3G+ networking, and
through digital players. In the future, we may be required to incur development
and acquisition costs in order to keep pace with new technology needs but we may
not have the financial resources necessary to fund and implement future
technological innovations or to replace obsolete technology. Further, we may
fail to respond to these changing technology needs. For example, if we fail to
implement such changes on our network or fail to do so in a timely manner, our
competitors or future entrants into the market who take advantage of such
initiatives could gain a competitive advantage over us.
If we cannot succeed in defining, developing and introducing
new formats, features and technologies on a timely and cost-effective basis,
advertising demand for our advertising network may decrease and we may not be
able to compete effectively or attract advertising clients, which would
have a material and adverse effect on our business prospects and revenues.
10
We face significant competition in the global advertising
industry, and if we do not compete successfully against new and existing
competitors in North America, we may not realize our plan for implementation, or
may lose, our future planned market share, and our intended profitability may be
adversely affected.
We face significant competition in our desire to enter the
global advertising industry. We will in the future need to compete for
advertising clients primarily on the basis of network size and coverage,
location, price, the quality of our programs, the range of services that we
offer and brand recognition. We will seek to compete for overall advertising
spending with other alternative advertising media companies, such as the
Internet, street furniture, billboard and public transport advertising
companies, and with traditional advertising media, such as newspapers,
television, magazines and radio. We also seek to compete for advertising dollars
spent in the passive display DOOH advertising industry. We must in the future
compete with other media platforms of advertising for which we do not have
exclusivity, including billboards, light boxes and print media. In addition, we
may also face competition from new entrants into interactive advertising in the
future.
Significant competition could reduce our planned operating
margins and profitability and result in a loss of intended market share. Some of
our existing and potential competitors may have competitive advantages, such as
significantly greater brand recognition, or financial, marketing or other
resources, and may be able to mimic and adopt our business model. In addition,
several of our competitors have significantly larger advertising networks than
we do, which gives them an ability to reach a larger number of overall potential
consumers and makes them less susceptible to downturns in particular sectors,
such as the interactive sector. Moreover, significant competition will provide
advertisers with a wider range of media and advertising service alternatives,
which could lead to lower prices and decreased revenues, gross margins and
profits. We cannot assure you that we will be able to successfully enter these
sectors or further compete against new or existing competitors.
Our plan of operations is subject to fluctuations in the
demand for interactive DOOH advertising, which is affected by, among other
things, seasonality and general economic conditions, and a decrease in the
demand for interactive DOOH advertising may make it difficult for us to sell our
advertising time slots.
Our planned operations are directly linked to the fortunes of
the DOOH advertising industry. Demand for such advertising fluctuates
significantly from period to period, is subject to seasonality due to weather
conditions, and is particularly susceptible to downturns in the economy, any of
which could lead to a reduction in the growth of the DOOH industry in North
America.
A decrease in demand for our planned advertising services
may materially and adversely affect our ability to generate revenues, our
financial condition and results of operations.
Demand for our advertising services, and the resulting
advertising spending by our clients, may fluctuate due to changes in general
economic conditions, and advertising spending typically decreases during periods
of economic downturn. Our clients may reduce the money they spend to advertise
on our network for a number of reasons, including but not limited to:
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a general decline in economic
conditions; |
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a general decline in the number
of consumers and consumer spending; |
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a decline in economic conditions
in the particular cities where our networks are located; |
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a decision to shift advertising
expenditures to other available advertising media; and |
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a decline in advertising spending
in general. |
11
A decrease in demand for advertising media in general and for
our advertising services in particular would materially and adversely affect our
ability to generate revenues from our advertising services, and our financial
condition and results of operations may be adversely affected.
If we fail to manage our growth effectively, we may not
be able to take advantage of market opportunities, execute our expansion
strategies or meet the demands of our advertising clients.
Rapid growth and expansion may place significant strain on our
management personnel, systems and resources. We must establish and continue to
expand our operations to meet the anticipated demands of advertisers for larger
and more diverse network coverage. To accommodate our growth, we anticipate that
we will need to implement a variety of new and upgraded operational and
financial systems, procedures and controls, including the improvement of our
accounting and other internal management systems, all of which require
substantial management efforts.
We also will need to continue to expand, train, manage and
motivate our workforce as well as manage our relationships with our prospective
clientele and third-party non-advertising content providers. We must add sales
and marketing offices and personnel to service relationships with new
micro-broadcast sponsors that we will aim to add as part of our network. As we
add new interactive kiosks and interactive digital TV screens and other media
platforms, we will need to incur greater maintenance costs to maintain our
equipment.
All of these endeavors will require substantial managerial
efforts and skill, as well as the incurrence of additional expenditures. We
cannot assure the reader that we will be able to manage our growth effectively,
and we may not be able to take advantage of market opportunities, execute our
expansion strategies or meet the demands of our advertising clients.
Future acquisitions may have an adverse effect on our
ability to manage our business.
We may acquire businesses, technologies, services or products
which are complementary to our core interactive digital media network business.
Future acquisitions may expose us to potential risks, including but not limited
to risks associated with:
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the integration of new
operations, services and personnel; |
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unforeseen or hidden liabilities;
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the diversion of resources from
our existing business and technology; |
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our potential inability to
generate sufficient revenue to offset new costs; |
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the expenses of acquisitions; or
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the potential loss of or harm to relationships with both
employees and advertising clients resulting from our integration of new
businesses. |
Any of the potential risks listed above could have a material
and adverse effect on our ability to manage our business, our revenues and net
income. Further, we may need to raise additional debt funding or sell additional
equity securities to make such acquisitions. The raising of additional debt
funding by us, if required, would result in increased debt service obligations
and could result in additional operating and financing covenants, or liens on
our assets, that would restrict our operations, and the sale of additional
equity securities could result in additional dilution to our shareholders.
Our quarterly and annual operating results are difficult
to predict and may fluctuate significantly from period to period in the future.
Our future plans for quarterly and annual operating results are
difficult to predict and may fluctuate significantly, if realized, from period
to period based on the seasonality of consumer spending and corresponding
advertising trends in North America. In addition, DOOH and advertising spending in
North America and China generally tends to increase during holidays and tends to
decrease during the fourth quarter. DOOH and advertising spending in North
America is also affected by certain special events and related government
measures. As a result, period-to-period comparisons of our operating results may
be unreliable as an indication of our future performance.
12
We may experience seasonality effects due to the seasonality of
DOOH and advertising spending in North America. Other factors that may cause our
operating results to fluctuate include a deterioration of economic conditions in
North America and potential changes to the regulation of the advertising
industry in North America, which are discussed elsewhere in this Form 20-F. If
our projected revenues for a particular quarter are lower than we expect, we may
be unable to reduce our operating expenses for that quarter by a corresponding
amount, which would harm our operating results for that quarter relative to our
operating results from other quarters.
We may be subject to, and may expend significant
resources in defending against, government actions and civil suits based on the
content we provide through our interactive digital media network.
Civil claims may be filed against us for fraud, defamation,
subversion, negligence, copyright or trademark infringement or other violations
due to the nature and content of the information displayed on our network. If
consumers find the content displayed on our network to be offensive, clientele
may seek to hold us responsible for any consumer claims or may terminate their
relationships with us.
In addition, if the security of our content management system
is breached and unauthorized images, text or audio sounds are displayed on our
network, viewers or the government may find these images, text or audio sounds
to be offensive, which may subject us to civil liability or government censure
despite our efforts to ensure the security of our content management system. Any
such event may also damage our reputation. If our advertising viewers do not
believe our content is reliable or accurate, our business model may become less
appealing to viewers in North America and our advertising clients may be less
willing to place advertisements on our network.
Risks Related to Regulation of Our Business and to Our
Structure
We may become a passive foreign investment company, or
PFIC, which could result in adverse United States federal income tax
consequences to U.S. investors.
Based upon the past and projected composition of our income and
valuation of our assets, including goodwill, we believe we were not a passive
foreign investment company, or PFIC, for 2013, we do not expect to be a PFIC for
2014, and we do not expect to become one in the future, although there can be no
assurance in this regard. If, however, we were a PFIC, such characterization
could result in adverse United States federal income tax consequences to you if
you are a U.S. investor. For example, if we are a PFIC, our U.S. investors will
become subject to increased tax liabilities under United States federal income
tax laws and regulations and will become subject to burdensome reporting
requirements. The determination of whether or not we are a PFIC is made on an
annual basis and will depend on the composition of our income and assets from
time to time. Specifically, we will be classified as a PFIC for United States
federal income tax purposes if either: (i) 75% or more of our gross income in a
taxable year is passive income, or (ii) the average percentage of our assets by
value in a taxable year which produce or are held for the production of passive
income (which includes cash) is at least 50%. The calculation of the value of
our assets will be based, in part, on the then market value of our common
shares, which is subject to change. We cannot assure you that we will not be a
PFIC for 2014 or any future taxable year. For more information on PFICs, see
Item 10.E Additional Information Passive Foreign Investment
Corporation.
Compliance with advertising laws and regulations may be
difficult and could be costly, and failure to comply could subject us to
government sanctions.
Advertising laws and regulations require advertisers,
advertising operators and advertising distributors, including businesses such as
ours, to ensure that the content of the advertisements they prepare or
distribute are fair and accurate and are in full compliance with applicable
laws. Violation of these laws or regulations may result in penalties, including
fines, confiscation of advertising fees, orders to cease dissemination of the
advertisements and orders to publish an advertisement correcting the misleading
information. In circumstances involving serious violations, governments may
revoke a violators license for advertising business operations.
13
As an interactive advertising service provider, we are
obligated under laws and regulations to monitor the advertising content that is
shown on our network for compliance with applicable law. In general, the
advertisements shown on our network have previously been broadcast over public
television networks and have been subjected to internal review and verification
of such networks. We are still required to independently review and verify these
advertisements for content compliance before displaying the advertisements. In
addition, if a special government review is required for certain product
advertisements before they are shown to the public, we are obligated to confirm
that such review has been performed and approval has been obtained. In addition,
for advertising content related to certain types of products and services, such
as food products, alcohol, cosmetics, pharmaceuticals and medical procedures, we
are required to confirm that the advertisers have obtained requisite government
approvals, including the advertising clients operating qualifications, proof of
quality inspection of the advertised products, government pre-approval of the
contents of the advertisement and filing with the local authorities.
We endeavor to comply with such requirements, including by
requesting relevant documents from the advertisers. However, we cannot assure
the reader that each advertisement that an advertiser or advertising agency
client provides to us and which we include in our micro-broadcast network
programs is in compliance with relevant advertising laws and regulations or that
the supporting documentation and government approvals provided to us by our
advertising clients in connection with certain advertising content are complete.
Although we review advertising content for compliance with relevant laws and
regulations, we cannot assure the reader that we will be able to properly review
the content to comply with the standards imposed on us with certainty.
If the PRC government finds that the agreements that
establish the structure for operating our business in the PRC do not comply with
PRC governmental restrictions on foreign investment we could be subject to
severe penalties.
PRC regulations currently permit 100% foreign ownership of
companies that provide software development services. Penalties for violations
include:
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revoking the business and operating licenses of our PRC
subsidiary; |
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discontinuing or restricting our PRC subsidiarys
operations; |
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imposing conditions or requirements with which we or our
PRC subsidiary may not be able to comply; |
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requiring us or our PRC subsidiary to restructure the
relevant ownership structure or operations; or |
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restricting or prohibiting our use of the proceeds of the
concurrent private placement to finance our business and operations in
China. |
The imposition of any of these penalties would result in a
material and adverse effect on our ability to conduct our business.
Risks Related to Doing Business in China
Adverse changes in the political and economic policies of
the PRC government could have a material adverse effect on the overall economic
growth of China, which could reduce the demand for our services and have a
material adverse effect on our competitive position.
Our business, financial condition, results of operations and
prospects are affected significantly by economic, political and legal
developments of China. The Chinese economy differs from the economies of most
developed countries in many respects, including:
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the amount of government involvement; |
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the level of development; |
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the growth rate; |
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the control of foreign exchange;
and |
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the allocation of resources.
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While the Chinese economy has experienced significant growth in
the past 25 years, growth has been uneven both geographically and among various
sectors of the economy. The PRC government has implemented various measures to
encourage economic growth and guide the allocation of resources. Some of these
measures may benefit the overall Chinese economy, but may also have a negative
effect on us. We cannot predict the future direction of political or economic
reforms or the effects such measures may have on our business, financial
position or results of operations. Any adverse change in the political or
economic conditions in China, including changes in the policies of the PRC
government or in laws and regulations in China, could have a material adverse
effect on the overall economic growth of China and in the interactive
advertising industry. Such developments could have a material adverse effect on
our business, lead to reduction in demand for our services and materially and
adversely affect our competitive position.
Uncertainties with respect to the PRC legal system could
limit the legal protections available to us or result in substantial costs and
the diversion of resources and management attention.
We conduct our software development business in part through
Wuxi, an indirect 100% corporate subsidiary of our company, which is subject to
PRC laws and regulations applicable to foreign investment in China and, in
particular, laws applicable to wholly-foreign owned companies. The PRC legal
system is based on written statutes. Prior court decisions may be cited for
reference but have limited precedential value. Since 1979, PRC legislation and
regulations have significantly enhanced the protections afforded to various
forms of foreign investments in China. However, since these laws and regulations
are relatively new and the PRC legal system continues to rapidly evolve, the
interpretations of many laws, regulations and rules are not always uniform and
enforcement of these laws, regulations and rules involve uncertainties, which
may limit the legal protections available to us. In addition, any litigation in
China may be protracted and result in substantial costs and the diversion of
resources and management attention.
Fluctuations in exchange rates may have a material
adverse effect on your investment.
The reporting and functional currency of our company is the
U.S. dollar. However, a substantial portion of the expected expenses of Wuxi may
be denominated in the Canadian dollar and renminbi (RMB), the official
currency of PRC. The value of these currencies against the U.S. dollar may
fluctuate and is affected by, among other things, changes in the political and
economic conditions in Canada and China. Fluctuations in exchange rates,
primarily those involving the U.S. dollar, may affect the relative purchasing
power of our working capital and our balance sheet and earnings per share in
U.S. dollars. In addition, appreciation or depreciation in the value of the
foreign currencies relative to the U.S. dollar would affect our financial
results reported in U.S. dollar terms without giving effect to any underlying
change in our business or results of operations. Fluctuations in the exchange
rate will also affect the relative value of any dividend we may issue which will
be exchanged into U.S. dollars, and earnings from, and the value of, any U.S.
dollar-denominated investments we make in the future.
Very limited hedging transactions are available in China to
reduce our exposure to exchange rate fluctuations. To date, we have not entered
into any hedging transactions in an effort to reduce our exposure to foreign
currency exchange risk. While we may decide to enter into hedging transactions
in the future, the availability and effectiveness of these hedges may be limited
so that we may not be able to successfully hedge our exposure at all. In
addition, our currency exchange losses may be magnified by PRC exchange control
regulations that restrict our ability to convert RMB into foreign currency. As a
result, fluctuations in exchange rates may have a material adverse effect on
your investment.
15
Risks Relating to our Management
Because our officers, directors and principal
shareholders control a large percentage of our common stock, such insiders have
the ability to influence matters affecting our shareholders.
Our officers and directors, in the aggregate, beneficially own
45% of the issued and outstanding common shares. As a result, they have the
ability to influence matters affecting our shareholders, including the election
of our directors, the acquisition or disposition of our assets, and the future
issuance of our shares. Because our officers, directors and principal
shareholders control such shares, investors may find it difficult to replace our
management if they disagree with the way our business is being operated. Because
the influence by these insiders could result in management making decisions that
are in the best interest of those insiders and not in the best interest of the
investors, you may lose some or all of the value of your investment in our
common shares.
Our business depends substantially on the continuing
efforts of our senior executives, and our business may be severely disrupted if
we lose their services.
Our future success heavily depends upon the continued services
of our senior executives and other key employees. In particular, we rely on the
expertise, financial assistance and experience of our chief executive officer,
Ross Tocher. We rely on the industry expertise, experience in our business
operations and sales and marketing, of our senior executives, and their working
relationships with our employees, other major shareholders, advertising clients,
micro-broadcast network sponsors and advertisers, and relevant government
authorities.
If one or more of our senior executives were unable or
unwilling to continue in their present positions, we might not be able to
replace them easily or at all. If any of our senior executives joins a
competitor or forms a competing company, we may lose clients, suppliers, key
professionals and staff members. Each of our executive officers has entered into
an employment agreement with us, which contains non-competition provisions.
However, if any dispute arises between our executive officers and us, we cannot
assure you the extent to which any of these agreements could be enforced.
As a majority of our directors and officers are residents
of countries other than the United States, investors may find it difficult to
enforce, within the United States, any judgments obtained against our company,
directors and officers.
A majority of our directors and officers are nationals and/or
residents of countries other than the United States, and all or a substantial
portion of such persons assets are located outside the United States. As a
result, it may be difficult for investors to enforce within the United States
any judgments obtained against our company, officers, and directors, including
judgments predicated upon the civil liability provisions of the securities laws
of the United States or any state thereof.
Because executive management is free to devote time to
other ventures, shareholders may not agree with their allocation of
time.
Our executive officers and directors will devote only that
portion of their time which, in their judgment and experience, is reasonably
required for the management and operation of our business. Management may have
conflicts of interest in allocating management time, services and functions
among our company and any present and future ventures which are or may be
organized by our officers or directors and/or their affiliates. Management will
not be required to direct us as their sole and exclusive function, and they may
have other business interests and engage in other activities in addition to
those relating to us. This includes rendering advice or services of any kind to
other investors and creating or managing other businesses.
16
Our board of directors may change our operating policies
and strategies without prior notice to shareholders or shareholder approval and
such changes could harm our business and results of operations, and the value of
our stock.
Our board of directors has the authority to modify or waive
certain of our current operating policies and strategies without prior notice
and without shareholder approval. We cannot predict the effect any changes to
our current operating policies and strategies would have on our business,
operating results and value of our stock. However, such changes could have a
material adverse effect on our financial position or otherwise.
Our Articles of Association contain provisions
indemnifying our officers and directors against all costs, charges and expenses
incurred by them.
Our Articles of Association contain provisions with respect to
the indemnification of our officers and directors against all costs, charges and
expenses, including an amount paid to settle an action or satisfy a judgment,
actually and reasonably incurred by them in a civil, criminal or administrative
action or proceeding to which they are made a party by reason of their being or
having been a director or officer of our company.
Risks Relating to Our Common Shares
If our business is unsuccessful, our shareholders may
lose their entire investment.
Although shareholders will not be bound by or be personally
liable for our expenses, liabilities or obligations beyond their total original
capital contributions, should we suffer a deficiency in funds with which to meet
our obligations, the shareholders as a whole may lose their entire investment in
our company.
Our common stock is illiquid and shareholders may be
unable to sell their shares.
There is currently a limited market for our common shares and
we can provide no assurance to investors that a market will develop. If a market
for our common shares does not develop, our shareholders may not be able to
resell the common shares that they have purchased and they may lose all of their
investment. Public announcements regarding our company, changes in government
regulations, conditions in our market segment and changes in earnings estimates
by analysts may cause the price of our common shares to fluctuate substantially.
In addition, the Over-the-Counter Bulletin Board is not an exchange and, because
trading of securities on the Over-the-Counter Bulletin Board is often more
sporadic than the trading of securities listed on an exchange, you may have
difficulty reselling any of the shares you purchase from our shareholders.
Investors interests in our company will be diluted and
investors may suffer dilution in their net book value per share if we issue
additional shares or raise funds through the sale of equity securities.
Our constating documents currently authorize the issuance of
400,000,000 common shares with a par value of $0.001 and 100,000,000 preferred
shares with a par value of $0.001. If we are required to issue any additional
shares or enter into private placements to raise financing through the sale of
equity securities, investors interests in our company will be diluted and
investors may suffer dilution in their net book value per share depending on the
price at which such securities are sold. If we issue any such additional shares,
such issuances also will cause a reduction in the proportionate ownership and
voting power of all other shareholders. Further, any such issuance may result in
a change in our control.
Penny stock rules will limit the ability of our
shareholders to sell their stock.
The Securities and Exchange Commission has adopted regulations
which generally define penny stock to be any equity security that has a market
price (as defined) less than $5.00 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 term accredited investor refers generally to
institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse. 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
Securities and Exchange Commission 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 customers 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 customers 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 purchasers 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.
17
The Financial Industry Regulatory Authority, or FINRA,
has adopted sales practice requirements which may also limit a shareholders
ability to buy and sell our stock.
In addition to the penny stock rules described above, 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 customers 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. 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 its shares.
We do not intend to pay dividends on any investment in
the shares of stock of our company.
We have never paid any cash dividends and currently do not
intend to pay any dividends for the foreseeable future. To the extent that we
require additional funding currently not provided for in our financing plan, our
funding sources may prohibit the payment of a dividend. Because we do not intend
to declare dividends, any gain on an investment in our company will need to come
through an increase in the stocks price. This may never happen and investors
may lose all of their investment in our company.
ITEM
4
Information on the Company
A. History
and Development
Name
Our legal and commercial name is Qwick Media Inc.. We are
governed by the corporate laws of the Cayman Islands. Our company is currently a
reporting issuer in the Province of British Columbia, Canada. We completed our
registration of the U.S. trade-name Qwick Media, which was issued on September
20, 2011 under number 4,029,739.
Principal Office
Our principal executive offices are located at 3162 Thunderbird
Crescent, Burnaby, British Columbia, Canada V5A 3G4. Our telephone number is
(778) 370-1715 and our fax number is (778) 370-1720. Our registered office in
the Cayman Islands is at 89 Nexus Way, Camana Bay, George Town, Grand Cayman,
Cayman Islands KY1-9007.
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Investor inquiries should be directed to us at the address and
telephone number of our principal executive offices set forth above. Our website
address is http://www.qwickmedia.com. The information contained on our website
is not part of this Form 20-F.
Corporate Information and Important Events
We were incorporated on October 5, 2000 under the laws of the
state of Nevada. Effective June 26, 2006, we re-domiciled from the State of
Nevada to the State of Washington. Effective July 7, 2009, we re-domiciled from
the State of Washington to the State of Wyoming for the sole purpose of
effecting a continuance to the Cayman Islands. Effective July 28, 2009, we were
issued a certificate of registration by way of continuation by the Registrar of
Companies of the Cayman Islands. As a result of this transaction, we
re-domiciled to the Cayman Islands and became a foreign private issuer.
On October 6, 2009, we received approval from FINRA for the
change in our name from Tuscany Minerals, Ltd. to Tuscany Minerals Ltd. and
the re-domiciling of our company from the State of Wyoming to the Cayman
Islands. Effective at the open of trading on October 6, 2009, our new quotation
symbol on the OTC Bulletin Board became TUSMF.
On June 22, 2010, we changed our name to Qwick Media Inc.
with the Registrar of Companies of the Cayman Islands and, on July 15, 2010, we
received approval from FINRA for that name change. The name change was approved
by our shareholders at our annual and special meeting held on June 18, 2010. On
March 15, 2011 we changed our trading symbol to QWIKF.
On January 28, 2011 we completed the acquisition of Qeyos Ad
Systems Inc. (Qeyos), pursuant to which we acquired all of the issued
and outstanding common shares of Qeyos from its shareholders in exchange for the
issuance of a total of 4,789,035 common shares, on the basis of one of our
common shares for each share of Qeyos. We issued all of such shares to five
Qeyos shareholders who are non-U.S. persons (as that term is defined in
Regulation S of the Securities Act of 1933, as amended) in an offshore
transaction relying on Regulation S and/or Section 4(2) of the Securities Act of
1933, as amended.
On the same day, we completed a private placement of 10,000,000
common shares at a price of $0.20 per share for aggregate gross proceeds of
$2,000,000. We used the net proceeds from this private placement to fund further
capital fund raising and for other general corporate purposes. On the same day,
we completed the issuance of 637,140 common shares at a deemed price of $0.20
per share in settlement of $127,428 debt outstanding.
On April 19, 2011, Qeyos incorporated Wuxi under the laws of
the PRC as a wholly-owned foreign subsidiary of Qeyos, in order to facilitate
the conduct of our operations in the PRC. Wuxi currently employees 15 people at
an aggregate cost of approximately $20,000 per month, who provide us with
software development services.
In May 2011, we completed a private placement of 3,010,000
common shares at a price of $0.20 per share for gross proceeds of $602,000, and
issued 1,378,915 common shares in settlement of outstanding debt in the amount
of $275,783.
On August 5, 2011, we issued a $1,000,000 secured convertible
debenture to R.J. Tocher Holdings Ltd., a company owned by Ross Tocher, our
President and Chief Executive Officer. The debenture has a maturity date of July
30, 2015 and bears interest at 10% per annum. Principal and accrued interest on
the debenture were to be convertible at any time into common shares at a deemed
conversion price of: (i) $0.60 per share until July 30, 2012 (expired); (ii)
$1.00 per share between July 31, 2012 and July 30, 2013; and (iii) $1.50 per
share between July 31, 2013 and the maturity date. In November 2011, we amended
the terms of the debenture to allow for the conversion of the principal amount
of the debenture, and accrued interest thereon, into Class A Shares (as defined
below) rather than common shares. Immediately upon the effectiveness of the
amendment, R.J. Tocher Holdings Ltd. determined to convert the principal amount
of the debenture, and accrued interest thereon, into an aggregate of 1,027,945
Class A Shares, at a conversion price of $1.00 per Class A Share.
19
Effective November 15, 2011, we created one series of the one
hundred million (100,000,000) preferred shares we are authorized to issue,
consisting of twenty-five million (25,000,000) shares, to be designated as Class
A Preferred Shares (each, a Class A Share). The Class A Shares carry
certain rights and restrictions that include redemption and retraction rights.
Each Class A Share may be convertible from time to time into one common share,
at the holders option, until July 31, 2015 at the following conversion prices:
(a) |
$0.60 per common share if converted at any time up to and
including July 31, 2012 (expired); |
|
|
(b) |
$1.00 per common share if converted at any time between
August 1, 2012 and July 31, 2013; and |
|
|
(c) |
$1.50 per common share if converted at any time between
August 1, 2013 and July 31, 2015. |
In connection with same, we announced the completion of a
private placement to R.J. Tocher Holdings Ltd., consisting of the issuance of
1,000,000 Class A Shares at a price of $1.00 per Class A Share for gross
proceeds of $1,000,000. The gross proceeds of this financing have been used for
general working capital purposes.
Capital Expenditures
During the three fiscal years ended December 31, 2013, 2012 and
2011, we did not undertake any capital expenditures. Our planned capital
expenditures for the next twelve months are summarized below under the heading
Liquidity and Capital Resources Anticipated Cash Requirements.
Takeover offers
We are not aware of any indication of any public takeover
offers by third parties in respect of our common shares during our last or
current financial years.
B.
Business Overview
Overview
We develop interactive proprietary software, know-how and
hardware. Our content management touch screen software is built in C#
programming language on a Windows® multi-touch platform. Technically, there are
no creative boundaries, such as limits imposed by third party software
applications, intellectual bottle-neck, platform stability and external
technical support. The software design process is standardized and documented so
new employees can be readily integrated. The software development architecture
team in Burnaby, British Columbia, Canada provides technical and creative
guidance for coders in Wuxi, China. It is the equivalent of artists working with
engineers. Due to time differences our company programs in a 24/7 environment.
This strategy leverages production outsourcing and high execution speed. We
integrate hardware into custom designed enclosures to produce the physical
product that acts as a point of service terminal for end users. The hardware
consists of a skeleton platform, chassis (outside enclosure) and integrated PC
equipment and peripherals. Hardware development is presently managed from
Burnaby, British Columbia, and outsourced to certain manufacturers in the United
States and Taiwan.
Our software and hardware is used in the DOOH advertising
industry. Therefore, our principal business is to provide our clients with
advertising opportunities through self-service interactive digital kiosks,
interactive window displays, interactive transit displays and other interactive
out-of-home advertising displays, such as digital wallscapes, spectaculars and
mall displays that we plan to operate in North American advertising markets. Our
software development business in China is conducted via Wuxi, an indirect 100%
subsidiary of our company.
Our touch-screen interactive kiosks support mobile apps and
iPhone/smart phone integration, while enabling shoppers to access relevant
information and self-service their needs through interactive directories,
wayfinding, coupons and other instant, on-demand media. We plan to be a complete
digital signage company that builds state-of-the-art interactive kiosks and
point-of-sale (POS) systems, and provides advertising content and
micro-broadcast solutions for private channel digital marketing into high
traffic, public spaces; thus, empowering advertisers to target and engage audiences where and when they shop and socialize. We
believe this makes target audiences more receptive to the advertisements to be
included in our programs and ultimately makes our programs more effective for
micro-broadcast sponsors and their advertising clients. We intend to derive
revenues principally by selling advertising time slots on our micro-broadcast
network that we intend to expand across Canada and the United States, to
advertising clients and to direct third party advertisers and advertising
agencies.
20
DOOH advertising in North America has experienced significant
growth in recent years. By focusing on interactive advertising, we aim to enable
our advertising clients to better target consumers, who we believe are an
attractive demographic for advertisers due to their higher-than-average
disposable income. We strategically place our interactive kiosks and interactive
digital TV screens in high-traffic locations of trade show exhibitions, shopping
malls, and in stores of large chain retailers, particularly in areas where there
tends to be significant waiting time.
We combine advertising content with non-advertising content,
such as news, weather, sports and comedy clips, in our interactive digital TV
screen programs. We believe this makes consumers more receptive to the
advertisements included in our programs and ultimately makes our programs more
effective for our advertising clients. Our standard programs include, for each
advertiser, six 15-second spots of advertising content during each hour of
programming and are shown for approximately 10 hours per day.
We plan to derive revenues principally by selling advertising
time slots on our network to our advertising clients, including both direct
advertisers and advertising agencies.
We believe our services provide the following significant
benefits to our network micro-broadcast network sponsors and advertisers:
|
Enhanced Consumer Experience. The content provided
in our interactive digital media network provides consumers with an
entertaining means to pass time while obtaining relevant information they
desire in real time. Our ads engage users by stimulating their curiosity
and driving their fingertips onto our touch screen that in turn logs
measurable data for evaluating the effectiveness of content engagement. It
is a measurable traffic virtual real estate. Besides reward marketing
principles, another powerful driver is pleasure through entertainment.
Celebrities and their lifestyles is a public commodity. Popular culture
news industry conditions users into repetitive consumption through
familiarity. Entertainment news is an important engagement mechanism. We
believe our digital media network enhances the consumer experience and
adds value to the interactive services or products provided by our
micro-broadcast network. |
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Incremental Revenue Opportunity. Under our
cooperative services contracts, we offer micro-broadcast sponsors a share
in revenue as a means of cost recovery in exchange for the concession
rights to play our programs in their venues. Through these contractual
arrangements, individual micro-broadcast sponsors can deploy a nationwide
interactive digital media network to provide high-quality media content to
their consumers and their affiliated marketing clientele, who desire to
convey their own advertising message to such consumers, under cooperative
marketing programs. |
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Effective Means of Managing Consumer Traffic. Some
micro-broadcast sponsors and advertisers also utilize non-advertising time
of our network to provide other information to consumers. The ability to
provide timely information to consumers allows our interactive digital
media network to aid in the management of consumer traffic. The media
broadcasting industry is driven by advertising dollars through ad
placement in TV, radio, newsprint and Internet mediums. The reason for
explosive Internet growth is the non-interruptive mechanism for delivering
user driven on-demand content with targeted ads. Traditional media does
not provide this instant freedom of interactivity and thus has appeared to
experience loss of audience to alternative interactive digital mediums
that converges content consumption through a digital format. |
|
|
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Cost-Effective Media Service. The large scale of
our planned network allows us to provide our network sponsors with a wide
range of digital media programs on a cost-effective basis which may
otherwise be costly and time consuming for each sponsor to procure
individually. |
21
We intend to build separate sales teams to focus on developing
the client base for different advertising media platforms while promoting the
broader value that the overall network and these platforms collectively provide
to our advertising clients. We believe the creation of new advertising media
platforms within the interactive advertising sector and our broadened service
offerings will provide our advertising clients with more choices in selecting
and combining different interactive advertising platforms that best suit their
advertising needs and preferences. It will also expand the reach of the
advertisements shown on our network and allow us to cross-sell different
advertising services. We believe that the strong presence that we have built
through our existing network provides us with significant opportunities to
launch new platforms and services and test new initiatives in a reliable and
cost-effective manner. Ultimately, we anticipate these efforts will increase the
revenue we can generate.
Our goal is to extend our competitive position as an
interactive digital media network provider in North America and China and to
expand into other areas of the DOOH advertising sector. Accomplishing this goal
requires the successful implementation of the following strategies:
|
We plan to broaden our service offerings through new
micro-broadcast advertising media platforms within the DOOH advertising
sector, in particular by offering a interactive digital media replacement
for traditional light box displays to passive digital frames and establish
a micro-broadcast platform, to broaden consumer reach, enhance the
effectiveness of advertisements and provide our micro-broadcast sponsors
and their advertising clients with more choices in selecting and combining
different interactive advertising platforms according to their advertising
needs and preferences; |
|
|
|
We plan to grow our leading technology into a market
position and revenues by building local sales teams in additional cities
to increase our sales of advertising time slots and utilization rate in
these cities and increase the number of interactive digital TV screens and
other interactive displays in our emerging micro- broadcast network
opportunities; |
|
|
|
We will continue to secure high quality non-advertising
content to make audiences more receptive to advertisements played on our
network and ultimately bring greater value to our business in a
cost-effective manner; |
|
|
|
We will continue to promote our brand name and the value
of interactive DOOH advertising through proactive sales and marketing
efforts to solidify and broaden our customer base and our emerging
relationships with large retail chains and content providers; and
|
|
|
|
We plan to pursue strategic relationships and
acquisitions that expand our business within the DOOH advertising
industry, although we are not currently negotiating any material
acquisitions. |
We intend to leverage our leading market position to maintain
our market leadership, enhance our mass appeal to our advertising clients and
increase our fees and revenues. To achieve this goal, we intend to:
|
Build Local Sales Teams in Major Additional Cities and
Increase our Sales and Utilization Rate of Advertising Time Slots
in these Cities. Currently, we have offices in Vancouver and Burnaby,
Canada and in Beijing, Wuxi and Shenzhen China where we maintain our
business development and sales network. We plan to build local sales teams
in several additional cities associated with key locations of
micro-broadcast sponsors to strengthen our sales efforts in these cities,
further develop relationships with local advertisers, increase our direct
sales of advertising time slots in these cities and improve our
utilization rate, or the percentage of available time slots that we sell
to advertisers. |
|
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Increase the Number of Locations Our Emerging Network.
We intend to enter into further cooperative services contracts for
concession rights to increase the number of locations that we can place or
operate interactive kiosks and interactive digital TV screens or other
displays in order to broaden the viewer reach of the advertisements shown
on our network and enhance our current position in many of the most
desirable locations. |
22
We will continue to evaluate further opportunities in the
future to obtain new opportunities that are not currently in our network. This
will help to ensure that our network continues to include the most significant
venues in North America and in China. While the rates of advertising fees that
we charge our advertising clients are not directly tied to the number of
locations in our network, we believe that expanding our network will extend our
audience reach, make our digital media network more attractive to national
advertisers and ultimately lead to higher fee rates and increased revenues.
We will continue to promote our brand name through proactive
sales and marketing efforts. We believe this will allow us to broaden our client
base as well as strengthen our relationships with micro-broadcast sponsors,
advertisers
We plan to pursue strategic relationships and acquisitions that
expand our business within the interactive advertising industry. We plan to
identify, execute and integrate acquisitions to build scale and enter into
complementary businesses and new media platforms that enhance our interactive
advertising network and reach. We plan to evaluate strategic acquisition
opportunities that we believe will further enhance our market leadership
position while also providing an attractive return on investment. When
evaluating potential acquisition targets, we will consider factors such as
market position, growth and earnings prospects and ease of integration. We are
not currently negotiating any material acquisitions.
Pricing and Customer Service
The list prices of our advertising services vary by the size of
micro-broadcast network and duration of venue in which the advertisement is
placed, the demand of advertising services for each sponsor and advertiser, as
well as by the duration of the time slot purchased and the duration of the
advertising campaign. Prices for the aggregate time slots on our network to be
purchased by each advertiser or advertising agency client are planned to be
obtained under sales contracts, perhaps at a discount to our list prices.
Our customer service team is responsible for compiling
monitoring reports to clients as evidence that their advertisements are played
on our network within one week after launching the advertising campaign. We also
provide our advertising clients with weekly reports prepared by third parties,
which verify the proper functioning of our displays and the proper dissemination
of the advertisement by conducting on-site evaluations and polls to analyze the
effectiveness of and public reaction to the advertisement. In addition, our
network sponsors and advertisers are also intended to be actively involved in
the monitoring process and our analytics back-end reporting systems can provide
our clients with reports of proof of performance certifying the playing of the
advertisements and relevant consumer engagement.
Competition
We compete primarily with several different groups of
competitors:
|
advertising companies that operate advertising networks,
such as CBSDecaux, and DOOH short of the interactive sector, such as Focus
Media, Captivate, ClearChannel and others; |
|
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|
in-house advertising companies of large retail chains
that may operate their own advertising networks; and |
|
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|
other advertising media companies, such as Internet,
street furniture displays, billboard and public transport advertising
companies, and with traditional advertising media, such as newspapers,
television, magazines and radio, some of which may advertise in the large
chain retail locations in which we have exclusive contract rights to
operate digital TV screens. |
We compete for advertising clients primarily on the basis of
network size and coverage, location, price, quality of our programs, the range
of services that we offer and our brand recognition. Many of our competitors
have a variety of competitive advantages over us, such as larger resources. Many
competitors have a longer history than us in the DOOH advertising industry and
may have a more extensive network that extends beyond the interactive sector and
offers a more diversified portfolio. This may make their network more attractive
to advertising clients and less reliant on a particular advertising sector. In addition, we may
also face competition from new entrants into the interactive advertising sector
in the future.
23
Sales and Marketing
We provide a number of services in connection with each
clients advertising campaign. We rely on our experienced sales team to assist
advertisers in structuring advertising campaigns by analyzing advertisers
target audiences and consumer products and services. We conduct market research,
consumer surveys, demographic analysis and other advertising industry research
for internal use to help our advertisers to create effective advertisements. We
actively attend various public relation events to promote our brand image and
the value of interactive digital advertising. We also market our advertising
services by displaying our name and logo on all of our interactive kiosks and
digital TV screens.
We engage third-party agencies to help source advertising
clients. Agency fees are calculated based on a pre-set percentage of revenues
generated from the clients introduced to us by the agencies.
Employees
As of April 30, 2014 we had 16 employees working in Burnaby,
British Columbia, and an additional 10 employees working in Wuxi, PRC.
Additionally, we have engaged five contractors, three of whom work in Burnaby,
British Columbia, and two of whom work in Las Vegas, Nevada.
In addition, we enter into standard confidentiality agreements
with all of our employees, including officers and managers, and contractors that
prohibit any of them from disclosing confidential information obtained during
their employment or engagement with us. Furthermore, the confidentiality
agreements include a covenant that prohibits all employees from engaging in any
activities that compete with our business within three years after the period of
their employment with us.
None of our employees is a member of a labor union and we
consider our relationship with our employees to be good.
Intellectual Property
To protect our brand and other intellectual property, we rely
on a combination of trademark and trade secret laws as well as confidentiality
agreements with our employees, sales agents, contractors and others.
We do not hold any patents or copyrights and cannot be certain
that our efforts to protect our intellectual property rights will be adequate or
that third parties will not infringe or misappropriate these rights.
Legal Proceedings
We are currently not a party to any material legal proceeding.
From time to time, however, we may be subject to various claims and legal
actions arising in the ordinary course of business.
Regulation
Advertising regulation comprises laws and rules defining the
ways in which products can be advertised in a particular region. Rules can
define a wide number of different aspects, such as placement, timing, and
content. In the United States, false advertising and health-related ads are
regulated the most. Many communities have their own rules, particularly for
outdoor advertising.
24
Self Regulation Practices - Code of Advertising Practices in
Digital Media
We are committed to delivering our advertisers message to the
consumer. This role in the arena of public discourse requires both a defense of
free speech and sensitivity to contemporary standards and concerns. We recognize
the need to balance these demands and therefore adheres to the following code of
advertising practices:
|
Establish exclusionary zones which prohibit
advertisements of all products illegal for sale to minors that are
intended to be read from or within 1000 feet of established places of
worship, primary and secondary schools or playgrounds. |
|
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|
Continue to assert the right to reject creative content
that is misleading, sexually explicit, overly suggestive, or in any way
reflects upon the character, integrity, or standing of any organization or
individual. |
|
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|
Continue our traditional commitment at both the national
and local levels to display public service messages for worthy community
causes. |
|
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|
Encourage diversity of advertised goods and services in
all markets. |
Advertising Content in General
Advertising laws and regulations set forth certain content
requirements for advertisements in North America include prohibitions on, among
other things, misleading content; or content involving obscenities,
superstition, violence, discrimination or infringement of the public interest.
Advertisements for anaesthetic, psychotropic, toxic or radioactive drugs are
also prohibited. The dissemination of tobacco advertisements via media is also
prohibited as well as the display of tobacco advertisements in any waiting
lounge, theatre, cinema, conference hall, stadium or other public area. There
are also specific restrictions and requirements regarding advertisements that
relate to matters such as patented products or processes, pharmaceuticals,
medical instruments, agrochemicals, foodstuff, alcohol and cosmetics. In
addition, all advertisements relating to pharmaceuticals, medical instruments,
agrochemicals and veterinary pharmaceuticals advertised through radio, film,
television, newspaper, magazine, out-of-home and other forms of media, together
with any other advertisements which are subject to censorship by administrative
authorities according to relevant laws and administrative regulations. We do not
believe that advertisements containing content subject to restriction or
censorship comprise a material portion of the advertisements displayed on our
micro-broadcast network.
Particular to Business in China
We operate our business in China under a legal regime
consisting of the State Council, which is the highest authority of the executive
branch of the National Peoples Congress, and several ministries and agencies
under its authority including the State Administration for Industry and Commerce
(SAIC).
Regulations on Foreign Exchange in China
Foreign exchange regulation in China is primarily governed by
the following rules: the Foreign Currency Administration Rules (1996), as
amended, or the Exchange Rules; and the Administration Rules of the Settlement,
Sale and Payment of Foreign Exchange (1996), or the Administration Rules.
Under the Exchange Rules, the RMB is convertible for current
account items, including the distribution of dividends, interest payments, trade
and service-related foreign exchange transactions. Conversion of RMB for capital
account items, such as direct investment, loan, security investment and
repatriation of investment, however, is still subject to the approval of the
SAFE.
Under the Administration Rules, foreign-invested enterprises
may only buy, sell and/or remit foreign currencies at those banks authorized to
conduct foreign exchange business after providing valid commercial documents
and, in the case of capital account item transactions, obtaining approval from
the SAFE. Capital investments by foreign-invested enterprises outside of China are also subject to
limitations, including approval by the Ministry of Commerce, the SAFE and the
State Development and Reform Commission.
25
North American Regulation
Particular to Business in the United States
Over the past decade, federal and state governments have passed
advertising laws that protect consumer privacy and ensure fair and truthful
advertising practices online. The Federal Trade Commission Act allows the
Federal Trade Commission (the FTC) to act in the interest of all
consumers to prevent deceptive and unfair acts or practices. In interpreting
Section 5 of the Act, the Commission has determined that a representation,
omission or practice is deceptive if it is likely to mislead consumers and
affect consumers behavior or decisions about the product or service. In
addition, an act or practice is unfair if the injury it causes, or is likely to
cause, is substantial, not outweighed by other benefits and not reasonably
avoidable.
The FTC Act prohibits unfair or deceptive advertising in any
medium. That is, advertising must tell the truth and not mislead consumers. A
claim can be misleading if relevant information is left out or if the claim
implies something thats not true. Sellers are responsible for claims they make
about their products and services. Third parties - such as advertising agencies
also may be liable for making or disseminating deceptive representations if they
participate in the preparation or distribution of the advertising, or know about
the deceptive claims. Advertising agencies or website designers are responsible
for reviewing the information used to substantiate ad claims. They may not
simply rely on an advertisers assurance that the claims are substantiated. In
determining whether an ad agency should be held liable, the FTC looks at the
extent of the agencys participation in the preparation of the challenged ad,
and whether the agency knew or should have known that the ad included false or
deceptive claims.
Billboards are the most common example of commercial speech
that can be regulated at the local or state level. Additionally, many of the
newer out-of-home advertising methods, such as video displays, are also within a
city or states jurisdiction.
We currently do not operate any significant outdoor advertising
business, but may in the future do so with interactive outdoor window displays.
The outdoor advertising industry in the United States is subject to governmental
regulation at the federal, state and local levels. These regulations may
include, among others, restrictions on the construction, repair, maintenance,
lighting, upgrading, height, size, spacing and location of and, in some
instances, content of advertising copy being displayed on outdoor advertising
structures. In addition, the outdoor advertising industry outside of the United
States is subject to certain foreign governmental regulation.
Domestically, in recent years, outdoor advertising has become
the subject of targeted state and municipal taxes and fees. These laws may
affect prevailing competitive conditions in our markets in a variety of ways.
Such laws may reduce our expansion opportunities, or may increase or reduce
competitive pressure from other members of the outdoor advertising industry. No
assurance can be given that existing or future laws or regulations, and the
enforcement thereof, will not materially and adversely affect the outdoor
advertising industry. However, we contest laws and regulations that we believe
unlawfully restrict our constitutional or other legal rights and may adversely
impact the growth of our outdoor advertising business.
Federal law, principally the Highway Beautification Act of 1965
(the HBA), regulates outdoor advertising on Federal Aid Primary,
Interstate and National Highway Systems roads. The HBA requires states to
effectively control outdoor advertising along these roads, and mandates a
state compliance program and state standards regarding size, spacing and
lighting. The HBA requires any state or political subdivision that compels the
removal of a lawful billboard along a Federal Aid Primary or Interstate
highway to pay just compensation to the billboard owner.
All states have passed billboard control statutes and
regulations at least as restrictive as the federal requirements, including laws
requiring the removal of illegal signs at the owners expense (and without
compensation from the state). Although we believe that the number of our
billboards that may be subject to removal as illegal is immaterial, and no state
in which we operate has banned billboards entirely, from time to time
governments have required us to remove signs and billboards legally erected in accordance with
federal, state and local permit requirements and laws. Municipal and county
governments generally also have sign controls as part of their zoning laws and
building codes.
26
Using federal funding for transportation enhancement programs,
state governments have purchased and removed billboards for beautification, and
may do so again in the future. Under the power of eminent domain, state or
municipal governments have laid claim to property and forced the removal of
billboards. Under a concept called amortization by which a governmental body
asserts that a billboard operator has earned compensation by continued operation
over time, local governments have attempted to force removal of legal but
nonconforming billboards (i.e., billboards that conformed with applicable zoning
regulations when built but which do not conform to current zoning regulations).
Although the legality of amortization is questionable, it has been upheld in
some instances. Often, municipal and county governments also have sign controls
as part of their zoning laws, with some local governments prohibiting
construction of new billboards or allowing new construction only to replace
existing structures.
We may introduce deployment of digital billboards that display
static digital advertising copy from various advertisers that change every 10 to
15 seconds. We have encountered some existing regulations that restrict or
prohibit these types of digital displays but it has not yet materially impacted
our digital deployment. Since digital billboards have only recently been
developed and introduced into the market on a large scale, however, existing
regulations that currently do not apply to them by their terms could be revised
to impose greater restrictions. These regulations may impose greater
restrictions on digital billboards due to alleged concerns over aesthetics or
driver safety.
In addition, due to their recent development, relatively few
large scale studies have been conducted regarding driver safety issues, if any,
related to digital billboards. The U.S. Department of Transportation Federal
Highway Administration is currently conducting a study on whether the presence
of digital billboards along roadways is associated with a reduction of driver
safety for the public. If the results of this study include adverse findings, it
may result in regulations at the federal or state level that impose greater
restrictions on digital billboards. For accounting purposes, the Share Exchange
was treated as a common control transaction at historical values in a manner
similar to the pooling of interests method since the chief executive officer and
controlling shareholder of our company is also the chief executive officer,
director and controlling shareholder of Qeyos Ad Systems Inc.
Plan of Operation
Our business model is predicated upon establishing
micro-broadcast networks for large chain retailers and institutions that sponsor
their networks by paying for the cost of connectivity and/or paying for or
leasing hardware, systems, and customized software development comprising such
network. As such we require working capital to fund maintenance of a sufficient
amount of inventories of hardware comprising our interactive kiosks and digital
screens that are largely produced on a just in time basis, depending on the
scope and size of our future micro-broadcast network deployments. Our practice
is to require advance deposits of up to fifty percent (50%) of purchase orders
received from micro-broadcast sponsors.
Additional financing will be required. We have not generated
significant revenues from our operations to date. As of December 31, 2013, we
had accumulated $11,325,957 in losses since inception. We require approximately
$2,000,000 per year to maintain operations at their current level, to fund the
costs attributed to wages, rents, general and administrative expenses.
C.
Organizational Structure
On July 7, 2009, we merged with and into our wholly-owned
subsidiary, Tuscany Minerals Ltd., a Wyoming company, with the surviving company
being Tuscany Minerals Ltd., the Wyoming company. As a result of this
transaction, we re-domiciled from the State of Washington to the State of
Wyoming. Our bylaws were amended in accordance with the Wyoming Business
Corporation Act. A majority of our shareholders approved the merger at our
annual and special meeting held on July 2, 2009.
27
Upon the completion of the merger of our company with and into
our Wyoming subsidiary, we filed an application for continuance with the
Registrar of Companies of the Cayman Islands on July 28, 2009 and received a
certificate of registration by way of continuation from the Registrar, dated
July 28, 2009, on July 29, 2009. In accordance with the resolutions of our
shareholders at the meeting held on July 2, 2009, a new memorandum of
association and articles of association were adopted in substitution of our
existing constating documents, effective July 28, 2009, as a result of the
issuance of the certificate of registration. As a result of the continuation,
our company became a foreign private issuer as defined in Rule 3b-4(c)
promulgated under the Securities Exchange Act of 1934.
On January 28, 2011, we completed the acquisition of Qeyos and,
as a result, Qeyos is now a wholly-owned subsidiary of our company.
On April 19, 2011, Qeyos incorporated Wuxi under the laws of
the PRC as a wholly-owned foreign subsidiary of Qeyos, in order to facilitate
the conduct of our operations in the PRC.
The following chart shows our current corporate structure:
D. Property,
Plant and Equipment
Our principal executive offices and operating headquarters are
located in Burnaby, British Columbia, where we lease approximately 2,000 square
meters of office and warehouse space. Our branch offices lease approximately 908
square meters of office space in three other locations, including Vancouver,
British Columbia and Wuxi, China.
ITEM
4A Unresolved
Staff Comments
Not applicable.
ITEM
5
Operating and Financial Review and Prospects
The information in this section is presented in accordance with
United States generally accepted accounting principles.
A. Operating
Results
The following summary should be read in conjunction with our
audited financial statements for the years ended December 31, 2013, 2012 and
2011, which are included in this annual report on Form 20-F.
28
|
|
Year Ended
December 31, 2013
(audited) |
Year Ended
December 31, 2012
(audited) |
Year Ended
December 31, 2011
(audited) |
Expenses |
|
|
|
|
Advertising and promotion |
$ |
13,402 |
89,126 |
149,372 |
Amortization |
|
43,620 |
42,918 |
26,284 |
Consulting fees |
|
32,075 |
94,880 |
277,825 |
Filing fees |
|
12,839 |
11,730 |
13,997 |
Foreign exchange |
|
84,791 |
(17,380) |
8,252 |
Interest and bank charges |
|
208,076 |
210,352 |
56,147 |
Inventory costs |
|
254,342 |
25,062 |
− |
Management fees |
|
241,701 |
256,962 |
242,326 |
Office and administrative |
|
271,134 |
403,223 |
527,438 |
Professional fees |
|
192,171 |
159,262 |
98,617 |
Rent |
|
221,568 |
203,931 |
178,706 |
Salaries, wages and benefits |
|
1,091,594 |
1,675,220 |
1,135,857 |
Software development costs |
|
− |
−
|
442,579 |
Travel |
|
90,068 |
124,285 |
102,744 |
Total expenses |
|
2,757,381 |
3,279,571 |
3,260,144 |
Net Loss |
|
2,646,828 |
3,132,952 |
3,175,999 |
Revenue
We are a development stage company and have not generated
significant revenues from our business operations since inception. Our company
does not currently own any property interests.
Expenses
Year Ended December 31, 2013 Compared to Year Ended December
31, 2012
Our operating expenses for the year ended December 31, 2013
were $2,757,381 compared to $3,279,571 for the year ended December 31, 2012. The
decrease from fiscal 2013 to fiscal 2012 was mainly attributable to decreased:
advertising and promotion expenses (fiscal 2013: $13,402; fiscal 2012: $89,126);
consulting fees (fiscal 2013: $32,075; fiscal 2012: $94,880); management fees
(fiscal 2013: $241,701; fiscal 2012: $256,962); office and administrative
expenses (fiscal 2013: $271,134; fiscal 2012: $403,223; salaries, wages and
benefits (fiscal 2013: $1,091,594; fiscal 2012: $1,675,220); and travel expenses
(fiscal 2013: $90,068; fiscal 2012: $124,285).
Year Ended December 31, 2012 Compared to Year Ended December
31, 2011
Our operating expenses for the year ended December 31, 2012
were $3,279,571 compared to $3,260,144 for the year ended December 31, 2011. The
small increase from fiscal 2011 to fiscal 2012 was mainly due to decreased
expenses attributable to: software development costs (fiscal 2012: Nil; fiscal
2011: $442,579); advertising and promotion (fiscal 2012: $89,126; fiscal 2011:
149,372); consulting fees (fiscal 2012: $94,880; fiscal 2011: $277,825); and
office and administrative expenses (fiscal 2012: $403,223; fiscal 2011: $527,
438), offset in part by increases in expenses attributable to: salaries, wages
and benefits (fiscal 2012: $1,675,220; fiscal 2011: $1,135,857); interest and
bank charges (fiscal 2012: $210,352; fiscal 2011: $56,147); management fees
(fiscal 2012: $263,447; fiscal 2011: $242,326); professional fees (fiscal 2012:
$159,262; fiscal 2011: $98,617); rent (fiscal 2012: $256,962; fiscal 2011:
$178,706); and travel expenses (fiscal 2012: $124,285; fiscal 2011: $102,744).
29
B. Liquidity
and Capital Resources
Our financial position as at December 31, 2013 and December 31,
2012 and the changes for the years then ended are as follows:
Working Capital
|
|
As at
December 31, 2013
(audited) |
|
|
As at
December 31, 2012
(audited) |
|
Current assets |
$ |
656,343 |
|
$ |
641,299 |
|
Current liabilities |
$ |
5,084,753 |
|
$ |
2,475,594 |
|
Working capital (deficit) |
$ |
(4,428,410 |
) |
$ |
(1,834,295 |
) |
Our working capital increased from a deficit of $1,834,295 at
December 31, 2012 to a deficit of $4,428,410 at December 31, 2013 as a result of
an increase in amounts due to related parties and accrued dividends payable.
Cash Flows
|
|
Year Ended
December 31,
2013 (audited) |
|
|
Year Ended
December 31, 2012
(audited) |
|
Net cash used in operating activities |
$ |
98,047 |
|
$ |
(548,465 |
) |
Net cash provided from financing activities |
$ |
- |
|
$ |
- |
|
Net cash used in investing activities |
$ |
- |
|
$ |
(36,830 |
) |
(Decrease) increase in cash during the year |
$ |
98,047 |
|
$ |
(585,295 |
) |
Cash, beginning of year |
$ |
143,280 |
|
$ |
728,575 |
|
Cash, end of year |
$ |
241,327 |
|
$ |
143,280 |
|
Operating activities provided cash of $98,047 during the year
ended December 31, 2013 as compared to using $548,465 during the year ended
December 31, 2012. This increase was primarily due to a net loss of $2,646,828
for fiscal 2013 compared to a net loss of $3,132,952 for fiscal 2012.
Additionally, $2,455,953 of cash was provided by a related party in fiscal 2013
compared to $2,243,364 in fiscal 2012.
During the year ended December 31, 2013, we did not use any
cash in investing activities, as compared to using $36,830 of cash in investing
activities during the year ended December 31, 2012. Financing activities did not
provide any cash during fiscal 2013 or during fiscal 2012.
Anticipated Cash Requirements
We anticipate that we will incur the following expenses over
the next twelve months:
1. |
$200,000 in connection with expansion of further or
alternative technology pilots in the U.S.; |
|
|
2. |
$100,000 in connection with locating, evaluating and
negotiating potential business opportunities; and |
|
|
3. |
$1,700,000 for operating
expenses. |
We require a minimum of approximately $2,000,000 to proceed
with our plan of operation over the next twelve months, exclusive of any
acquisition or development costs. This amount may also increase if we are
required to carry out due diligence investigations in regards to any prospective
investment or business opportunity or if the costs of negotiating an applicable
transaction are greater than anticipated. We have sufficient working capital to
enable us to carry out our stated plan of expanding operation over the
next twelve months. In addition, we plan to complete private placement sales of
our common stock in order to raise the funds necessary to pursue our plan of
operation and to fund our working capital in order to enable us to carry out
expansion of our operation. There is no assurance that we will be successful in
completing any private placement financings.
30
Going Concern
Due to the uncertainty of our ability to meet our current
operating and capital expenses, in their report on the annual financial
statements for the year ended December 31, 2013, our independent auditors
included an explanatory paragraph regarding concerns about our ability to
continue as a going concern. There is substantial doubt about our ability to
continue as a going concern as the continuation of our business is dependent
upon our achieving a profitable level of operation. The issuance of additional
equity securities by us could result in a significant dilution in the equity
interests of our current shareholder, and obtaining debt financing, assuming
such financing would be available, will increase our liabilities and future cash
commitments.
C.
Research and Development, Patents and Licenses etc.
During fiscal 2013 and 2012, software development costs,
comprised of salaries, wages and benefits (fiscal 2013: $1,091,594; fiscal 2012:
$1,675,220), have been charged to operations as the research and development
activities for other components of the product and processes have not been
completed. During fiscal 2011, software development costs, comprised of
salaries, wages and benefits of $1,135,857 were incurred with an additional
amount of $442,579 spent on software development activities in Wuxi for a total
of $1,578,436.
On April 15th, 2014, the Company successfully concluded its
software technology pilots in the U.S. The Company will need to conclude
definitive agreements with the potential end-users of its software previously
engaged in such pilots. If the Company is unable to complete such definitive
agreements on favourable terms, or at all, the Company will need to pursue
alternate end-users and perhaps engage in further proof of technology pilot
programs in such retailer markets. Therefore, until the Company concludes such
definitive agreements, its outlook for deriving revenue from its current product
offering could be delayed by an estimated nine months from the commencement of
its next fiscal year. Such delay could result in a reduction in enterprise value
and, as a consequence of raising additional funds through equity or convertible
debt financings, lead to increased dilution of the Companys shareholders.
In 2012, we launched 60 of our new generation of interactive
digital media kiosks in the Greater Vancouver Area, British Columbia as a proof
of technology pilot in Canada under the trade name Qwick Deals. We concluded
the pilot on or about November 30th, 2012. We believe these next
generation kiosks will equip us with capabilities to provide interactive,
measurable, location-based search services to advertisers in the future, which
we believe, is of great importance for our next era of growth, we discontinued
this initiative for the time being to repurpose available working capital to the
expansion of U.S. proof of technology pilots. We are also continually developing
related software systems that will enable us to configure and run the content on
our planned advertising network in conjunction with mobile communications
systems. Once the planned software development is concluded for Qwick Deals we
may redeploy such technology in Vancouver, British Columbia, and then plan to
expand eastward across Canada in major metropolitan cities.
D. Trend
Information
Please refer to the section entitled Business Overview for a
discussion of the most significant recent trends in our production, sales, costs
and selling prices and to this section, Operating and Financial Review and
Prospects, for a discussion of known trends, uncertainties, demands,
commitments or events that we believe are reasonably likely to have a material
effect on our net operating revenues, income from continuing operations,
profitability, liquidity or capital resources, or that would cause reported
financial information not necessarily to be indicative of future operating
results or financial condition.
31
E. Off-Balance
Sheet Arrangements
We do not have any off-balance sheet arrangements that have or
are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that are
material to investors.
F. Contractual
Obligations
We do not have any contractual obligations.
G. Safe
Harbor
Not applicable.
ITEM
6 Directors,
Senior Management and Employees
A.
Directors and Senior Management
All directors of our company hold office until the next annual
meeting of our shareholders and until such directors successor is elected and
has been qualified, or until such directors earlier death, resignation or
removal. The following table sets forth the names, positions and ages of our
executive officers and directors. Our board of directors elects officers and
their terms of office are at the discretion of our board of directors.
Name |
Position Held |
Age |
Date First Elected or
Appointed |
Ross J. Tocher |
President, Chief Executive
Officer and Director |
52 |
September 10, 2008, January
28, 2011 (1) |
Barb Welsh |
Director |
61 |
January 28, 2011 |
Brian Petersen |
Director |
47 |
January 28, 2011 |
Kevin R. Kortje |
Chief Financial Officer |
56 |
January 28, 2011 |
Gregory G. Dureault |
Senior Vice President and
General Counsel |
54 |
January 28, 2011 |
Ted Cowie |
Director |
65 |
June 25, 2013
|
(1) |
Mr. Tocher has served as our president and chief
executive officer since September 10, 2008. He has served as a director
since January 28, 2011. |
Ross J. Tocher
Mr. Tocher has held the positions of President and Chief
Executive Officer since he was appointed on September 10, 2008. Mr. Tocher has
over 30 years of experience managing investment strategies for a variety of
family holding companies with interests in different industries. He was one of
the founders of British Columbia based Pan-Canadian Mortgage Group Inc.,
specializing in commercial mortgage investment, and a co-founder of British
Columbia based Gateway Casinos Ltd. Mr. Tocher was a trustee of the Gateway
Casino Income Fund, Gateway Trust and director of Gateway G.P. Prior to January
2001, he was the President of Marsonn Packaging Ltd., a company specializing in
the repackaging of foods. He co-founded Brew King Ltd., a British Columbia
company, and manufacturer of commercial and consumer wine-making concentrates
that achieved worldwide sales as the largest non-commercial wine producer in
North America before being sold, in 1997, to Andres Wines Ltd. Previously, Mr.
Tocher was also a senior executive with the Tocher family business. Since 1998,
he has gained experience as a director of several private equity companies,
including British Columbia based Trian Equities Ltd., and he has been the
President of Knight Ventures, Ltd., an investment company, and was a founder of
InTouch Digital Media Inc. in 2008 to commence business in China.
32
Throughout 2011, Mr. Tocher was the principal founding sponsor
of the Heroes Hockey Challenge, recruiting TELUS® as presenting sponsor. Heroes
Hockey Challenge is a charitable fundraiser for the PPCLI Foundation, pairing
NHL star alumni against Canadian soldiers in a hockey match and at a gala to
raise money for families of wounded/fallen soldiers.
Barb Welsh
Ms. Welsh is the President and founder of Welsh Sales Solutions
Ltd., which she founded in 2002. Ms. Welsh has a marketing background and was
successful radio sales person in Canada for over 25 years. From 1971-78 she rose
to the top as Senior Account Manager at The Pattison Group, and from 1978-87 as
Senior Account Manager at The Rogers Group. Ms. Welsh achieved top sales person
at Western International Communications Ltd. (now Corus Entertainment Inc.)
during 1987-2002 where she sold advertising for CKNW, CFMI (Rock101), CFOX, and
CKLG along with selling the play by play for the Vancouver Canucks, BC Lions,
and the Vancouver Grizzlies. After selling traditional media for her entire
career Ms. Welsh decided to venture into new media and founded Welsh Sales
Solutions Ltd., which focuses on new media and the out-of-home video industry.
Welsh Sales Solutions Ltd. has become a leader in its emerging industry and the
companys main focus is to provide revenue for video screens and has had
exclusive contracts for many of the most successful out-of-home video networks
in Canada and the US.
Brian Petersen
Mr. Petersen is a senior investment and merchant banker with
experience in Canada, the U.S. and internationally in all areas of financial
advisory services, M&A and capital market products. He has acted for public
and private companies in various sectors with a focus towards energy and energy
service companies.
An investment banker for over 23 years, he has been involved in
over $22 billion of M&A transactions, $22 billion of equity and debt
financings, including over $5 billion of initial public offerings. He is also
experienced in cross-border M&A and financial products. He has developed an
extensive network of financial, industry and other contacts across a broad
spectrum of companies and organizations including the private equity sector. His
career includes over 16 years with RBC Capital Markets in Toronto, Calgary and
Houston and several years working for independent investment banking boutiques
in Calgary. He is currently the Managing Director of Capital Markets for Ceiba
Energy Services, a publicly traded company that provides merchant banking and
strategic financial consulting services through BK Petersen Holdings Ltd. Mr.
Petersen also has experience serving as a board member of several private and
public companies in Canada.
Mr. Petersen graduated with a bachelor of commerce in finance
from UBCs Sauder School of Business in 1989 and received his Chartered
Financial Analyst designation in 1993.
Kevin Kortje
Mr. Kortje was appointed as our chief financial officer on
January 28, 2011. Mr. Kortje is a Chartered Accountant with over 25 years
accounting, taxation and software development experience. As an entrepreneur, he
has been involved in the development of many unique software applications in
sports, gaming, lotteries, accounting, payroll, stock market analysis,
securities portfolio management, financial services and enterprise management.
He has extensive experience with electronic payment processing technologies, and
has recently been successful in pioneering the launch of a payroll cash card
program as an alternative to paper cheque payments for employees of businesses
in the temporary labor industry. Since 2002, Mr. Kortje has been the President
and founder of Middle Earth Technologies Ltd.
33
Gregory G. Dureault
Mr. Dureault holds Bachelors Degrees in Economics and Law from
the University of Saskatchewan earned in 1984. Mr. Dureault has been a member of
the British Columbia Law Society since 1985 and was a founding partner in three
Vancouver law firms - Johannesen Dureault (1985), Sangra & Mollar (1989),
ONeill & Company (1991-1997); and from 2001 to 2008 was a sole practioner
affiliated with Catalyst Corporate Finance Lawyers. In 2008, he joined Ross
Tocher to form InTouch Digital Media Inc. to begin conducting a digital media
business in China.
Ted Cowie
Mr. Cowie has over 45 years of experience as a
sales/marketing/advertising executive, going back to CFAX Victoria, CFUN
Vancouver, and CFOX Vancouver from 1969-1980. He served as the Vice President
Sales and Marketing for Westward Communications from 1980-2000. He is founder of
Genuine Advertising, a marketing company, and has been its President since 2000.
Relationships
There are no family relationships between any of the directors
or executive officers of our company.
There are no arrangements or understandings between any of the
directors and/or executive officers and any other person pursuant to which that
director and/or executive officer was selected.
B. Compensation
Executive Compensation
The following table sets forth all compensation paid or accrued
during the year ended December 31, 2013 to our directors, our Chief Executive
Officer, Chief Financial Officer and each of the other most highly compensated
executive officers whose total compensation exceeded $150,000 in such fiscal
year.
SUMMARY COMPENSATION
TABLE |
Name
and Principal Position |
Year |
Salary
($) |
Bonus
($) |
Stock
Awards ($) |
Option
Awards ($) |
Non-Equity
Incentive Plan Compensation
($) |
Change in
Pension Value and Nonqualified Deferred
Compensation Earnings ($)
|
All Other
Compensa tion ($) |
Total
($) |
Ross J. Tocher
President and Chief
Executive Officer and Director (1) |
2013 |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
Kevin Kortje
Chief Financial
Officer(2) |
2013 |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
60,000 (4) |
Nil |
Barb Welsh
Director(3)
|
2013 |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
Brian Petersen
Director(3)
|
2013 |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
6,000 (5) |
Nil |
Gregory G. Dureault
Senior Vice
President and General Counsel(3) |
2013 |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
140,000(6) |
Nil |
Ted Cowie(7)
Director |
2013 |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
(1) |
Mr. Tocher was appointed as our president and chief
executive officer effective September 10, 2008. |
(2) |
Mr. Kortje was appointed as our chief financial officer
effective January 28, 2011. |
34
(3) |
Ms. Welsh and Mr. Petersen were appointed as directors
and Mr. Dureault was appointed as an officer effective January
2011. |
(4) |
Mr. Kortje receives consulting fees of $5,000 per month,
payable quarterly. The consulting fees are paid to Mr. Kortjes personal
corporation, KII Management Inc. |
(5) |
Mr. Petersen receives consulting fees of $12,000 per
month, payable monthly. The consulting fees are paid to Petersons
corporation, B.K. Petersen Holdings Ltd. |
(6) |
Mr. Dureault received consulting fees of $15,000 per
month from January 1, 2013 to April 30th , 2013 and has
received consulting fees of $10,000 per month since May 1, 2013, payable
monthly. The consulting fees are paid to Mr. Dureaults personal
corporation, Greg Dureault Personal Law Corp. |
(7) |
Mr. Cowie was appointed as a director on June 25,
2013. |
We do not provide pension, retirement or similar benefits to
our directors or officers.
C.
Board Practices
Our directors are re-elected and our officers are re-appointed
at the annual general meeting of our shareholders. The last annual general
meeting was held on June 25, 2013 and each of our current directors and officers
will continue to hold his respective office until his successor is elected or
appointed, unless his office is earlier vacated under any of the relevant
provisions of our Articles or of the Cayman Islands Companies Law
(Revised) statute.
There are no service contracts between our company and any of
our officers, directors or employees providing for benefits upon termination of
employment.
As of the date of this annual company report, our entire board
functions as our audit committee. The audit committee reviews and approves the
scope of the audit procedures employed by our independent auditors, reviews the
results of the auditors examination, the scope of audits. The audit committee
also recommends the selection of independent auditors. We do not have a
remuneration or compensation committee.
This annual report does not include an attestation report of
our companys independent registered public accounting firm regarding internal
control over financial reporting. Managements report was not subject to
attestation by our companys independent registered public accounting firm
pursuant to rules of the SEC that permit our company to provide only
managements report in this annual report.
D. Employees
As of December 31, 2013, we had 16 employees working on
software development in Burnaby, British Columbia, and an additional 10
employees working on software development in Wuxi, PRC. Additionally, we have
engaged Mr. Tom Bowan and Mr. Jean Claude Buffington as contractors, working on
sales and marketing out of Las Vegas, Nevada.
E. Share
Ownership
As of April 25, 2014, there were 71,128,456 common shares of
our company issued and outstanding. Of the shares issued and outstanding on that
date, our directors and officers owned the following common shares:
Name and Address of Beneficial
Owner |
Position Held With the
Company |
Amount and Nature of
Beneficial Ownership |
Percentage of
Class(1) |
Ross J. Tocher 3162 Thunderbird Crescent
Burnaby, BC V6A 3G1 |
President and Chief
Executive Officer |
30,325,135(2) |
42.46% |
Kevin Kortje 3162 Thunderbird Crescent
Burnaby, BC V6A 3G1 |
Chief Financial Officer |
300,000(3) |
0.4% |
Barb Welsh 3162 Thunderbird Crescent |
Director |
300,000(3) |
0.4% |
35
Burnaby, BC V6A 3G1 |
|
|
|
Brian Petersen 3162 Thunderbird Crescent
Burnaby, BC V6A 3G1 |
Director |
675,000(3)(5) |
0.495% |
Gregory G. Dureault 3162 Thunderbird
Crescent Burnaby, BC V6A 3G1 |
Senior Vice President and
General Counsel |
300,000 (3) |
0.4% |
Ted Cowie 3162 Thunderbird Crescent
Burnaby, BC V6A 3G1 |
Director |
300,000(4) |
0.4% |
Directors and Executive Officers
as a Group (five persons) |
|
32,200,135 |
45%
|
(1) |
Percentage based on 71,128,456 shares of common stock
outstanding on April 25, 2014. |
(2) |
Includes 6,171,021 shares of common stock held by R J
Tocher Holdings Ltd., a private company wholly owned by Ross Tocher,
15,594,280 shares of common stock held by Concept Financial Inc., a
private company wholly owned by Ross Tocher, and 8,295,486 shares of
common stock held by In Touch Digital Media, a private company wholly
owned by Ross Tocher. Also includes options to acquire 300,000 common
shares at an exercise price of $0.20 per share until December 29, 2015.
Does not include 2,027,945 Class A preferred shares, which do not carry
voting rights. |
(3) |
Includes options to acquire 300,000 common shares at an
exercise price of $0.20 per share until December 29, 2015. |
(4) |
Includes options to acquire 300,000 common shares at an
exercise price of $0.60 per share until November 1, 2015. |
(5) |
Includes options to acquire 375,000 common shares of
common stock held by Brian K. Petersen Family
Trust. |
ITEM
7
Major Shareholders and Related Party Transactions
A.
Major Shareholders
As of April 25, 2014, there were 71,128,456 common shares of
our company issued and outstanding. The following table sets forth persons known
to us to be the beneficial owner of more than five (5%) of our common shares as
of April 25, 2014:
Name |
Number of Common Shares Beneficially Owned
|
Percentage (1) |
Number of
Class A Preferred Shares Beneficially Owned |
Percentage
|
Ross J. Tocher(2) 3162
Thunderbird Crescent Burnaby, BC V6A 3G1 |
30,325,135 |
42.46% |
2,027,945 |
100%
|
|
(1) |
Based on 71,128,456 common shares issued and outstanding
as of April 25, 2014. Beneficial ownership is determined in accordance
with the rules of the SEC and generally includes voting or investment
power with respect to securities. Except as otherwise indicated, we
believe that the beneficial owners of the common shares listed above,
based on information furnished by such owners, have sole investment and
voting power with respect to such shares, subject to community property
laws where applicable. |
|
|
|
|
(2) |
Includes 6,171,021 shares of common stock held by R J
Tocher Holdings Ltd., a private company wholly owned by Ross Tocher,
15,594,628 shares of common stock held by Concept Financial Inc., a
private company wholly owned by Ross Tocher, and 8,295,486 shares of
common stock held by In Touch Digital Media, a private company wholly
owned by Ross Tocher. Also includes options to acquire 300,000 common
shares at an exercise price of $0.20 per share until December 29,
2015. |
The voting rights of our major shareholder do not differ from
the voting rights of holders of our companys shares who are not major
shareholders.
As of April 25, 2014, our 71,128,456 issued and outstanding
common shares are held as follows:
Location |
Number of Shares |
Percentage of Shares |
Number of Registered
Shareholders of Record |
Canada |
71,050,456 |
99.89% |
176 |
United States |
77,000 |
0.1% |
35 |
36
Location |
Number of Shares |
Percentage of Shares |
Number of Registered
Shareholders of Record |
Australia |
1,000 |
* |
1 |
Total |
71,128,456 |
100.00% |
212 |
* Less than 1%.
There are no arrangements known to us, the operation of which
may at a subsequent date result in a change in the control of our company.
B.
Related Party Transactions
For the period beginning on January 1, 2011 until the present,
we carried out a number of transactions with related parties in the normal
course of business. These transactions were recorded at their exchange amount,
which is the amount of consideration established and agreed to by the related
parties.
The following are related party transactions and amounts owing
that are not otherwise disclosed elsewhere:
|
(a) |
We paid management fees of $240,210 (2012: $256,858) to
companies controlled by officers for the year ended December 31,
2013. |
|
|
|
|
(b) |
We recorded stock-based compensation of $3,972 (2012:
$50,004) as consulting fees paid to directors and officers for the year
ended December 31, 2013. |
|
|
|
|
(c) |
As of December 31, 2013, amounts owing to related parties
consisted of $4,534,392 (2012: $2,073,965) owed to a director and
companies controlled by a director, and $12,889 (2012: $18,815) owed to a
company controlled by an officer. The amounts owed are unsecured, non-
interest bearing and due on demand. |
|
|
|
|
(d) |
Interest expenses by the Company relating to notes
payable due to a company with a common director amounted to $Nil (2012:
$Nil) for the year ended December 31, 2013. |
|
|
|
|
(e) |
We paid a consulting fee of $6,000 to a company
controlled by a director for the year ended December 31, 2013. The
consulting services commenced October 15, 2013 for a six month renewable
term on a month to month basis at $12,000, plus applicable sales tax, in
Canadian dollars, per month for consulting services. An amount of $9,000
otherwise due was waived by the director, Mr. Brian Petersen. |
|
|
|
|
(f) |
We paid a management fee of $Nil (2011: Nil; 2010:
$63,885) to a company controlled by a former director, Mr. Steven Barley,
for the year ended December 31, 2012. The management services were on a
month to month basis at $5,000, plus applicable sales tax, in Canadian
dollars, per month for management services. |
|
|
|
|
(g) |
As of December 31, 2012, amounts owing from related
parties was $Nil. At December 31, 2011, amounts owing from related parties
consisted of $158,474 owed from a director and companies controlled by a
director, which is included in accounts receivable. At December 31, 2010,
accounts payable included $11,320 owed to a director of our company and to
a company controlled by the same director, and $5,209 owed to a company
controlled by an officer of our company. |
|
|
|
|
(h) |
Interest expensed relating to notes payable due to a
company with a common director amounted to $Nil (2011: $27,945; 2010 -
$Nil) for the year ended December 31, 2012. |
|
|
|
|
(i) |
Interest expensed relating to notes payable due to a
company with a common officer amounted to $Nil (2011: Nil; 2010: $158) for
the year ended December 31, 2012. |
37
|
(j) |
On November 15, 2011, we completed a private placement
with a company owned by our President and Chief Executive Officer,
consisting of the issuance of 1,000,000 Class A Preferred Shares at a
price of $1.00 per Class A Share for gross proceeds of
$1,000,000. |
|
|
|
|
(k) |
On November 15, 2011, we converted the principal amount
of the Debenture (as defined below), and accrued interest thereon, into an
aggregate of 1,027,945 Class A Preferred Shares, at a conversion price of
$1.00 per Class A Preferred Share. |
|
|
|
|
(l) |
On November 15, 2011, we modified the terms of the
Debenture (as defined below) to allow for the conversion of the principal
amount of the Debenture, and accrued interest thereon, into Class A
Preferred Shares rather than common shares. |
|
|
|
|
(m) |
On August 5, 2011, we closed a private placement with a
company owned by our President and Chief Executive Officer, consisting of
the issuance of a $1,000,000 secured convertible debenture (the
Debenture). The Debenture has a maturity date of July 30, 2015,
and bears interest at 10% per annum. Principal and accrued interest on the
Debenture were to be convertible at any time into common shares at a
deemed conversion price of: |
|
(i) |
$0.60 per share until July 30, 2012 (expired); |
|
|
|
|
(ii) |
$1.00 per share between July 31, 2012 and July 30, 2013;
and |
|
|
|
|
(iii) |
$1.50 per share between July 31, 2013 and the maturity
date. |
|
(n) |
On January 28, 2011, Qeyos issued 4,789,935 common shares
of Qeyos to a director of Qeyos and our company at a fair value of $0.20
per share to settle debt of $957,787. |
|
|
|
|
(o) |
On January 28, 2011, we completed the acquisition of
Qeyos, a company controlled by our president, pursuant to which we
acquired all of the issued and outstanding common shares of Qeyos from its
shareholders in exchange for the issuance of a total of 4,789,035 common
shares, on the basis of one common share for each share of
Qeyos. |
These transactions were in the normal course of operations.
Neither our company, nor any of our subsidiaries, have made any loans to or for
the benefit of any associates, major shareholders, key management personnel, or
their families or related companies.
C. Interests
of Experts and Counsel
Not applicable.
ITEM
8 Financial Information
A. Financial Statements and Other
Financial Information
Our financial statements are stated in U.S. dollars and are
prepared in accordance with US GAAP. Financial statements included with this
annual company report are listed below:
Audited Annual Financial Statements for Qwick Media Inc. as
at December 31, 2013, 2012 and 2011, and for the fiscal years ended December 31,
2013, 2012 and 2011:
|
(a) |
Independent Auditors Report of Morgan LLP dated April
25, 2014 on the Financial Statements as at December 31, 2013, 2012 and
2011; |
|
|
|
|
(b) |
Balance Sheets at December 31, 2013 and
2012; |
38
|
(c) |
Statements of Operations for the years ended December 31,
2013, 2012 and 2011, and for the period October 5, 2000 (Date of
Inception) to December 31, 2013; |
|
|
|
|
(d) |
Statements of Cash Flows for the years ended December 31,
2013, 2012 and 2011, and for the period October 5, 2000 (Date of
Inception) to December 31, 2013; |
|
|
|
|
(e) |
Statement of Shareholders Equity (Deficiency) from
October 5, 2000 (Date of Inception) to December 31, 2013; and |
|
|
|
|
(f) |
Notes to Financial Statements. |
Legal Proceedings
There are no pending legal proceedings to which we are a party
or of which any of our property is the subject. There are no legal proceedings
to which any director, officer or affiliate of our company or any associate of
any such director, officer or affiliate of our company is a party or has a
material interest adverse to us.
Dividend Distributions
Holders of our common shares are entitled to receive such
dividends as may be declared from time to time by our board, in its discretion,
out of funds legally available for that purpose. We intend to retain future
earnings, if any, for use in the operation and expansion of our business and do
not intend to pay any cash dividends in the foreseeable future.
B. Significant Changes
None.
ITEM
9 The Offer and Listing
A.
Offer and Listing Details
Our common shares were initially quoted on the OTC Bulletin
Board (the OTC-BB) under the trading symbol TUSMF in October 2001. On
March 15, 2011 we changed our trading symbol to QWIKF. Trading in our shares
on the OTC-BB has been extremely limited and sporadic. There were no trades of
our common shares on the OTC-BB from 2001 until June 2011 and the last trade was
on August 9, 2011 at a price of $0.70 per share.
Our authorized capital consists of 400,000,000 common shares
with a par value of $0.001 per share and 100,000,000 preferred shares with a par
value of $0.001 per share. Our preferred shares may be issued in one or more
series and our directors may fix the number of shares which is to comprise each
series and the designation, rights, privileges, restrictions and conditions
attaching to each series.
Holders of our common shares are entitled to vote at all
meetings of shareholders, except meetings at which only holders of a specified
class of shares are entitled to vote, receive any dividend declared by our
companys board of directors and, subject to the rights, privileges,
restrictions and conditions attaching to any other class of shares, receive the
remaining property of our company upon dissolution.
All of our common shares are issued in registered form. The
transfer of our common shares is managed by our transfer agent, Pacific Stock
Transfer Company, 4045 South Spencer Street, Suite 403, Las Vegas, NV 89119
(Telephone: 702.361.3033; Facsimile: 702.433.1979) .
B.
Plan of Distribution
Not applicable.
39
C. Markets
Since October 2001, our common shares have been quoted
exclusively on the OTC-BB. They are currently quoted under the symbol QWIKF.
Our shares are not currently listed or quoted for trading on any other market or
quotation system.
D.
Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses
of the Issue
Not applicable.
ITEM
10 Additional
Information
A. Share
Capital
Not applicable.
B.
Memorandum and Articles of Association
The information required by this item is incorporated herein by
reference from our prospectus filed on June 9, 2009.
C. Material
Contracts
There are no material contracts to which we are a party which
were entered into during the last two years immediately preceding April 25,
2014.
D. Exchange
Controls
There are no government laws, decrees or regulations in Canada
which restrict the export or import of capital or which affect the remittance of
dividends, interest or other payments to non-resident holders of our common
shares. Any remittances of dividends to United States residents and to other
non-residents are, however, subject to withholding tax. See Taxation below.
E. Taxation
Material Cayman Islands Taxation
The Cayman Islands currently levy no taxes on individuals or
corporations based upon profits, income, gains or appreciation and there is no
taxation in the nature of inheritance tax or estate duty. There are no other
taxes likely to be material to us levied by the Government of the Cayman Islands
except for stamp duties that may be applicable on instruments executed in, or
after execution brought within, the jurisdiction of the Cayman Islands. The
Cayman Islands are not party to any double tax treaties. There are no exchange
control regulations or currency restrictions in the Cayman Islands.
No stamp duties are payable on the issue or transfer of shares.
An agreement to transfer shares may be subject to stamp duty if the agreement is
executed in the Cayman Islands or, if executed outside the Cayman Islands,
subsequently brought into the Cayman Islands. The Stamp Duty Law (2007
Revision), as amended, does not provide who is liable to pay stamp duty on any document but, in
practice, the person who seeks to rely on the document in any civil court
proceedings will be required to pay stamp duty in order to have the document
admitted in evidence.
40
Material United States Federal Income Tax
Consequences
The following is a general discussion of certain possible
United States Federal foreign income tax matters under current law, generally
applicable to a U.S. Holder (as defined below) of our common shares who holds
such shares as capital assets. This discussion does not address all aspects of
United States Federal income tax matters and does not address consequences
peculiar to persons subject to special provisions of Federal income tax law,
such as those described below as excluded from the definition of a U.S. Holder.
In addition, this discussion does not cover any state, local or foreign tax
consequences. See Certain Canadian Federal Income Tax Consequences above.
The following discussion is based upon the Internal Revenue
Code of 1986, as amended (the Code), Treasury Regulations, published Internal
Revenue Service (IRS) rulings, published administrative positions of the IRS
and court decisions that are currently applicable, any or all of which could be
materially and adversely changed, possibly on a retroactive basis, at any time.
In addition, this discussion does not consider the potential effects, both
adverse and beneficial, of any recently proposed legislation which, if enacted,
could be applied, possibly on a retroactive basis, at any time. No assurance can
be given that the IRS will agree with such statements and conclusions, or will
not take, or a court will not adopt, a position contrary to any position taken
herein.
The following discussion is for general information only and
is not intended to be, nor should it be construed to be, legal, business or tax
advice to any holder or prospective holder of our common shares, and no opinion
or representation with respect to the United States Federal income tax
consequences to any such holder or prospective holder is made. Accordingly,
holders and prospective holders of common shares are urged to consult their own
tax advisors with respect to Federal, state, local, and foreign tax consequences
of purchasing, owning and disposing of our common shares.
U.S. Holders
As used herein, a U.S. Holder includes a holder of less than
10% of our common shares who is a citizen or resident of the United States, a
corporation created or organized in or under the laws of the United States or of
any political subdivision thereof, any entity which is taxable as a corporation
for United States tax purposes and any other person or entity whose ownership of
our common shares is effectively connected with the conduct of a trade or
business in the United States. A U.S. Holder does not include persons subject to
special provisions of Federal income tax law, such as tax-exempt organizations,
qualified retirement plans, financial institutions, insurance companies, real
estate investment trusts, regulated investment companies, broker-dealers,
non-resident alien individuals or foreign corporations whose ownership of our
common shares is not effectively connected with the conduct of a trade or
business in the United States and shareholders who acquired their shares through
the exercise of employee stock options or otherwise as compensation.
Distributions
The gross amount of a distribution paid to a U.S. Holder will
generally be taxable as dividend income to the U.S. Holder for United States
federal income tax purposes to the extent paid out of our current or accumulated
earnings and profits, as determined under United States federal income tax
principles. Distributions which are taxable dividends and which meet certain
requirements will be qualified dividend income and taxed to U.S. Holders at a
maximum United States federal rate of 15%. Distributions in excess of our
current and accumulated earnings and profits will be treated first as a tax-free
return of capital to the extent the U.S. Holders tax basis in the common shares
and, to the extent in excess of such tax basis, will be treated as a gain from a
sale or exchange of such shares.
Capital Gains
In general, upon a sale, exchange or other disposition of
common shares, a U.S. Holder will generally recognize a capital gain or loss for
United States federal income tax purposes in an amount equal to the difference
between the amount realized on the sale or other distribution and the U.S.
Holders adjusted tax basis in such shares. Such gain or loss will be a United States source gain or loss and will be
treated as a long-term capital gain or loss if the U.S. Holders holding period
of the shares exceeds one year. If the U.S. Holder is an individual, any capital
gain will generally be subject to United States federal income tax at
preferential rates if specified minimum holding periods are met. The
deductibility of capital losses is subject to significant limitations.
41
Foreign Tax Credit
A U.S. Holder who pays (or has had withheld from distributions)
Canadian income tax with respect to the ownership of our common shares may be
entitled, at the option of the U.S. Holder, to either a deduction or a tax
credit for such foreign tax paid or withheld. Generally, it will be more
advantageous to claim a credit because a credit reduces United States Federal
income taxes on a dollar-for-dollar basis, while a deduction merely reduces the
taxpayers income subject to tax. This election is made on a year-by-year basis
and generally applies to all foreign income taxes paid by (or withheld from) the
U.S. Holder during that year. There are significant and complex limitations
which apply to the tax credit, among which is an ownership period requirement
and the general limitation that the credit cannot exceed the proportionate share
of the U.S. Holders United States income tax liability that the U.S. Holders
foreign source income bears to his or its worldwide taxable income. In
determining the application of this limitation, the various items of income and
deduction must be classified into foreign and domestic sources. Complex rules
govern this classification process. The availability of the foreign tax credit
and the application of these complex limitations on the tax credit are fact
specific and holders and prospective holders of our common shares should consult
their own tax advisors regarding their individual circumstances.
Passive Foreign Investment
Corporation
We do not believe that we are a passive foreign investment
corporation (a PFIC). However, since PFIC status depends upon the
composition of a companys income and assets and the market value of its assets
and shares from time to time, there is no assurance that we will not be
considered a PFIC for any taxable year. If we were treated as a PFIC for any
taxable year during which a U.S. Holder held shares, certain adverse tax
consequences could apply to the U.S. Holder. If we are treated as a PFIC for any
taxable year, gains recognized by such U.S. Holder on a sale or other
disposition of shares would be allocated ratably over the U.S. Holders holding
period for the shares. The amount allocated to the taxable year of the sale or
other exchange and to any year before we became a PFIC would be taxed as
ordinary income. The amount allocated to each other taxable year would be
subject to tax at the highest rate in effect for individuals or corporations, as
applicable, and an interest charge would be imposed on the amount allocated to
such taxable year. Further, any distribution in respect of shares in excess of
125% of the average of the annual distributions on shares received by the U.S.
Holder during the preceding three years or the U.S. Holders holding period,
whichever is shorter, would be subject to taxation as described above. Certain
elections may be available to U.S. Holders that may mitigate some of the adverse
consequences resulting from PFIC status. However, regardless of whether such
elections are made, dividends paid by a PFIC will not be qualified dividend
income and will generally be taxed at the higher rates applicable to other
items of ordinary income.
U.S. Holders and prospective holders should consult their
own tax advisors regarding the potential application of the PFIC rules to their
ownership of our common shares.
F.
Dividends and Paying Agents
Not applicable.
G. Statements
by Experts
Not applicable.
H. Documents
on Display
Documents concerning our company referred to in this annual
report may be viewed by appointment during normal business hours at our
executive offices at 3162 Thunderbird Crescent, Burnaby, British Columbia,
Canada V5A 3G1.
42
I. Subsidiary
Information
Not applicable. All information regarding our subsidiaries is
called for by the body of generally accepted accounting principles used in
preparing our financial statements.
ITEM
11 Quantitative
and Qualitative Disclosures About Market Risk
Not applicable.
ITEM
12
Description of Securities Other Than Equity Securities
Not applicable.
PART II
ITEM
13
Defaults, Dividend Arrearages and Delinquencies
Not applicable.
ITEM
14
Material Modifications to the Rights of Security Holders and Use of
Proceeds
Not applicable.
ITEM
15 Controls
and Procedures
A. Disclosure Controls and Procedures
As required by paragraph (b) of Rules 13a-15 or 15d-15 under
the Exchange Act, our principal executive officer and principal financial
officer evaluated our companys disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the
period covered by this annual report on Form 20-F. Based on this evaluation,
these officers concluded that as of the end of the period covered by this Annual
Report on Form 20-F, our disclosure controls and procedures were effective to ensure that the information required to be disclosed by our company in
reports it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the rules and forms
of the Securities and Exchange Commission. These disclosure controls and
procedures include controls and procedures designed to ensure that such
information is accumulated and communicated to our companys management,
including our companys principal executive officer and principal financial
officer, to allow timely decisions regarding required disclosure.
Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues,
if any, within our company have been detected.
B. Managements Report on Internal Control Over Financial
Reporting
Our companys management is responsible for establishing and
maintaining adequate internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) of the Exchange Act) for our company. Our
companys internal control over financial reporting is designed to provide
reasonable assurance, not absolute assurance, regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles in the
United States of America. Internal control over financial reporting includes
those policies and procedures that: (i) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of our companys assets; (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles in the United States of America, and
that our companys receipts and expenditures are being made only in accordance
with authorizations of our management and directors; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of assets that could have a material effect on
our financial statements.
43
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. In addition,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions
and that the degree of compliance with the policies or procedures may
deteriorate.
Our management, including our principal executive officer and
principal financial officer, conducted an evaluation of the design and operation
of our internal control over financial reporting as of December 31, 2013 based
on the criteria set forth in Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
This evaluation included review of the documentation of controls, evaluation of
the design effectiveness of controls, testing of the operating effectiveness of
controls and a conclusion on this evaluation. Based on this evaluation, our
management concluded our internal control over financial reporting was effective
as at December 31, 2013. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues, if any, within our company have been detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty and that breakdowns can occur because of simple error or mistake.
C. Changes in Internal Control Over Financial Reporting
In our annual report on Form 20-F for the year ended December 31, 2011, we disclosed that our principal executive officer and principal financial officer had determined that our disclosure controls and procedures and internal control over financial reporting were not effective as at December 31, 2011 due to the following material weaknesses: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting, financial reporting and corporate governance.
Although we took steps to enhance and improve the design of our internal control over financial reporting, these steps were not complete as of December 31, 2011. We advised that, to remediate such weaknesses, we planned to implement the following changes during our fiscal year ending December 31, 2012: (i) address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting, financial reporting and corporate governance. However, in our annual report on Form 20-F for the year ended December 31, 2012, we advised that our principal executive officer and principal financial officer determined that our disclosure controls and procedures and internal control over financial reporting continued to be ineffective as at December 31, 2012 and we would continue to focus on them during 2013.
During the year ended December 31, 2013, we made a number of changes to our internal control over financial reporting and disclosure controls and procedures, including: (i) hiring a new, more experienced, controller who helped improve our financial reporting processes; (ii) retaining an external accounting firm to assist with the preparation of our quarterly financial statements; (iii) forming an operations review committee, which conducted a thorough review of our business, procedures and personnel under the oversight of an independent director; and (iv) appointing a chartered accountant to our board of directors.
As a result of these changes, our principal executive officer and our principal accounting officer determined that our disclosure controls and procedures and internal control over financial reporting were effective as at December 31, 2013.
ITEM
15T Controls
and Procedures
Not applicable.
ITEM
16
[Reserved]
ITEM
16A Audit
Committee Financial Expert
Our board of directors has determined that Brian Petersen
qualifies as an audit committee financial expert as defined in Item 16A(b) of
Form 20-F, and is independent as the term is defined by Nasdaq Marketplace
Rule 5605(a)(2).
ITEM
16B Code of Ethics
Code of Ethics
Effective March 15, 2004, our companys board of directors
adopted a Code of Business Conduct and Ethics that applies to, among other
persons, our companys president and secretary (being our principal executive
officer, principal financial officer and principal accounting officer), as well
as persons performing similar functions. As adopted, our Code of Business
Conduct and Ethics sets forth written standards that are designed to deter
wrongdoing and to promote:
1. |
honest and ethical conduct, including the ethical
handling of actual or apparent conflicts of interest between personal and
professional relationships; |
|
|
2. |
full, fair, accurate, timely, and understandable
disclosure in reports and documents that we file with, or submit to, the
Securities and Exchange Commission and in other public communications made
by us; |
|
|
3. |
compliance with applicable governmental laws, rules and
regulations; |
44
4. |
the prompt internal reporting of violations of the Code
of Business Conduct and Ethics to an appropriate person or persons
identified in the Code of Business Conduct and Ethics; and |
|
|
5. |
accountability for adherence to the Code of Business
Conduct and Ethics. |
Our Code of Business Conduct and Ethics requires, among other
things, that all of our companys personnel shall be accorded full access to our
president and secretary with respect to any matter which may arise relating to
the Code of Business Conduct and Ethics. Further, all of our companys personnel
are to be accorded full access to our companys board of directors if any such
matter involves an alleged breach of the Code of Business Conduct and Ethics by
our president or secretary.
In addition, our Code of Business Conduct and Ethics emphasizes
that all employees, and particularly managers and/or supervisors, have a
responsibility for maintaining financial integrity within our company,
consistent with generally accepted accounting principles, and federal,
provincial and state securities laws. Any employee who becomes aware of any
incidents involving financial or accounting manipulation or other
irregularities, whether by witnessing the incident or being told of it, must
report it to his or her immediate supervisor or to our companys President or
Secretary. If the incident involves an alleged breach of the Code of Business
Conduct and Ethics by the President or Secretary, the incident must be reported
to any member of our board of directors. Any failure to report such
inappropriate or irregular conduct of others is to be treated as a severe
disciplinary matter. It is against our company policy to retaliate against any
individual who reports in good faith the violation or potential violation of our
companys Code of Business Conduct and Ethics.
Our Code of Business Conduct and Ethics was filed with the
Securities and Exchange Commission on March 30, 2004 as Exhibit 14.1 to our
annual report on Form 10-KSB. We will provide a copy of the Code of Business
Conduct and Ethics to any person without charge, upon request. Requests can be
sent to 3172 Thunderbird Crescent, Burnaby, British Columbia, Canada V5A 3G1.
ITEM
16C Principal
Accountant Fees and Services
Audit Fees. This category includes the fees for the
audit of our financial statements and the quarterly reviews of interim financial
statements. This category also includes advice on audit and accounting matters
that arose during or as a result of the audit or the review of interim financial
statements and services in connection with Securities and Exchange Commission
filings.
Audit-Related Fees. This category includes assurance and
related services that are reasonably related to the performance of the audit or
review of the financial statements that are not reported under Audit Fees, and
describes the nature of the services comprising the fees disclosed under this
category.
Tax Fees. This category includes the fees for
professional services rendered for tax compliance, tax advice and tax planning,
and describes the nature of the services comprising the fees disclosed under
this category.
All Other Fees. This category includes products and
services provided by the principal accountant, other than the services reported
under Audit Fees, Audit-Related Fees or Tax Fees.
Our current independent public accountants provided audit and
other services during the fiscal years ended December 31, 2013 and 2012 as
follows:
|
|
2013 |
|
|
2012 |
|
|
|
($) |
|
|
($) |
|
Audit Fees |
|
30,500 |
|
|
44,000 |
|
Audit-Related Fees |
|
- |
|
|
- |
|
Tax Fees |
|
- |
|
|
- |
|
All Other Fees |
|
- |
|
|
- |
|
Total Fees |
|
30,500 |
|
|
44,000 |
|
45
We do not use Morgan LLP, Chartered Accountants, for financial
information system design and implementation. These services, which include
designing or implementing a system that aggregates source data underlying the
financial statements or generates information that is significant to our
financial statements, are provided internally or by other service providers. We
do not engage Morgan LLP, Chartered Accountants, to provide compliance
outsourcing services.
Effective May 6, 2003, the Securities and Exchange Commission
adopted rules that require that before Morgan LLP, Chartered Accountants, is
engaged by us to render any auditing or permitted non-audit related service, the
engagement be:
-
approved by our audit committee (which consists of our entire board of
directors); or
-
entered into pursuant to pre-approval policies and procedures established
by our board, provided the policies and procedures are detailed as to the
particular service, our board is informed of each service, and such policies
and procedures do not include delegation of the board of directors
responsibilities to management.
Our board of directors pre-approves all services provided by
our independent auditors. All of the above services and fees were reviewed and
approved by our board either before or after the respective services were
rendered.
Our board of directors has considered the nature and amount of
fees billed by Morgan LLP, Chartered Accountants, and believes that the
provision of services for activities unrelated to the audit is compatible with
maintaining Morgan LLPs independence.
ITEM
16D. Exemption from
the Listing Standards for Audit Committees
Not applicable.
ITEM
16E Purchases
of Equity Securities by the Company and Affiliated Purchasers
Not applicable.
ITEM
16F Change in
Registrants Certifying Accountant
Not applicable.
ITEM
16G Corporate
Governance
Not applicable.
ITEM
16H Mine Safety
Disclosure
Not applicable.
ITEM
17 Financial
Statements
Financial Statements Filed as Part of this Report:
Audited Annual Financial Statements for Qwick Media Inc. as at
December 31, 2013, 2012 and 2011:
|
(a) |
Independent Auditors Report of Morgan LLP dated April
25, 2014 on the Financial Statements as at December 31, 2013, 2012 and
2011; |
|
|
|
|
(b) |
Balance Sheets at December 31, 2013 and
2012; |
46
|
(c) |
Statements of Operations for the years ended December 31,
2013, 2012 and 2011, and for the period October 5, 2000 (Date of
Inception) to December 31, 2013; |
|
|
|
|
(d) |
Statements of Cash Flows for the years ended December 31,
2013, 2012 and 2011, and for the period October 5, 2000 (Date of
Inception) to December 31, 2013; |
|
|
|
|
(e) |
Statement of Stockholders Equity (Deficiency) from
October 5, 2000 (Date of Inception) to December 31, 2013; and |
|
|
|
|
(f) |
Notes to Financial Statements. |
47
QWICK MEDIA INC.
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2013, 2012 and 2011
(Stated in U.S. Dollars)
1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Directors and Stockholders of
Qwick Media Inc.
(A Development Stage Company)
We have audited the accompanying consolidated balance sheets of
Qwick Media Inc. (a development stage company) and subsidiaries as of December
31, 2013 and 2012, and the related consolidated statements of operations and
cash flows for each of the three years in the period ended December 31, 2013,
and for the period from October 5, 2000 (date of inception) to December 31,
2013, and stockholders (deficiency) equity for the period from October 5, 2000
(date of inception) to December 31, 2013. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these 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
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 Companys 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 that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Qwick Media Inc. and subsidiaries as of December 31, 2013 and 2012, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 2013, and for the
period from October 5, 2000 (date of inception) to December 31, 2013, in
conformity with accounting principles generally accepted in the United States of
America.
The accompanying financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in Note 1 to
the financial statements, the Company has suffered recurring losses from
operations, has negative cash flows, has a stockholders deficiency and is
dependent upon obtaining adequate financing to fulfil its development activities
and upon future profitable operations. These factors raise substantial doubt
about its ability to continue as a going concern. Managements plans in regard
to these matters are also discussed in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Vancouver, Canada |
“Morgan LLP” |
April 25, 2014 |
Chartered Accountants |
|
|
|
PO Box 10007, 1488 – 700 West Georgia Street, Vancouver, |
|
British Columbia, Canada V7Y 1A1 |
Tel: (604) 687 – 5841 Fax: (604) 687 – 0075 Email: info@morganllp.com |
2
QWICK MEDIA INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(Stated in U.S.
Dollars)
|
|
DECEMBER 31, |
|
|
|
2013 |
|
|
2012 |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
Cash |
$ |
241,327 |
|
$ |
143,280 |
|
Receivables |
|
182,262 |
|
|
152,922 |
|
Inventory |
|
230,593 |
|
|
344,208 |
|
Prepaid expenses |
|
2,161 |
|
|
889 |
|
Total Current Assets |
|
656,343 |
|
|
641,299 |
|
|
|
|
|
|
|
|
Property and
Equipment |
|
37,077 |
|
|
80,338 |
|
|
|
|
|
|
|
|
Total
Assets |
$ |
693,420 |
|
$ |
721,637 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
Accounts payable and accrued liabilities |
$ |
124,805 |
|
$ |
174,393 |
|
Due to related parties |
|
4,529,913 |
|
|
2,073,960 |
|
Accrued dividends payable |
|
430,035 |
|
|
227,241 |
|
Total Liabilities |
|
5,084,753 |
|
|
2,475,594 |
|
|
|
|
|
|
|
|
Redeemable Preferred Stock |
|
2,027,945 |
|
|
2,027,945 |
|
|
|
|
|
|
|
|
STOCKHOLDERS DEFICIENCY |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
|
|
|
|
Authorized:
400,000,000 common shares, $0.001 par
value;
100,000,000 preferred shares, $0.001 par value, and series as determined
by directors.
Issued:
71,128,456 common shares at December 31, 2013 and 2012 |
|
71,128 |
|
|
71,128 |
|
|
|
|
|
|
|
|
Additional Paid-in Capital |
|
4,835,551 |
|
|
4,826,099 |
|
|
|
|
|
|
|
|
Deficit
Accumulated During The Development Stage |
|
(11,325,957 |
) |
|
(8,679,129 |
) |
Total Stockholders Deficiency |
|
(6,419,278 |
) |
|
(3,781,902 |
) |
|
|
|
|
|
|
|
Total Liabilities and Stockholders Deficiency |
$ |
693,420 |
|
$ |
721,637 |
|
Going Concern, Commitments and Contractual Obligations (Notes 1
and 8)
The accompanying notes are an integral part of these
consolidated financial statements.
3
QWICK MEDIA INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in
U.S. Dollars)
|
|
|
|
|
|
|
|
|
|
|
PERIOD FROM |
|
|
|
|
|
|
|
|
|
|
|
|
DATE OF |
|
|
|
|
|
|
|
|
|
|
|
|
INCEPTION |
|
|
|
|
|
|
|
|
|
|
|
|
(OCTOBER 5, |
|
|
|
|
|
|
|
|
|
|
|
|
2000) TO |
|
|
|
YEARS ENDED DECEMBER 31, |
|
|
DECEMBER 31, |
|
|
|
2013 |
|
|
2012 |
|
|
2011 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
110,553 |
|
$ |
146,619 |
|
$ |
84,145 |
|
$ |
350,186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Advertising and promotion |
|
13,402 |
|
|
89,126 |
|
|
149,372 |
|
|
258,328 |
|
Amortization |
|
43,620 |
|
|
42,918 |
|
|
26,284 |
|
|
113,118 |
|
Consulting fees |
|
32,075 |
|
|
94,880 |
|
|
277,825 |
|
|
490,437 |
|
Filing fees |
|
12,839 |
|
|
11,730 |
|
|
13,997 |
|
|
55,584 |
|
Foreign exchange |
|
84,791 |
|
|
(17,380 |
) |
|
8,252 |
|
|
399,422 |
|
Interest and bank charges |
|
208,076 |
|
|
210,352 |
|
|
56,147 |
|
|
688,619 |
|
Inventory costs |
|
254,342 |
|
|
25,062 |
|
|
− |
|
|
279,404 |
|
Management fees |
|
241,701 |
|
|
256,962 |
|
|
242,326 |
|
|
1,028,782 |
|
Mineral property exploration
expenditures |
|
− |
|
|
− |
|
|
− |
|
|
8,500 |
|
Mineral property option payments |
|
− |
|
|
− |
|
|
− |
|
|
3,428 |
|
Office and administrative |
|
271,134 |
|
|
403,223 |
|
|
527,438 |
|
|
1,242,786 |
|
Oil and gas property exploration expenditures |
|
− |
|
|
− |
|
|
− |
|
|
202,686 |
|
Professional fees |
|
192,171 |
|
|
159,262 |
|
|
98,617 |
|
|
896,622 |
|
Rent |
|
221,568 |
|
|
203,931 |
|
|
178,706 |
|
|
643,092 |
|
Salaries, wages and benefits |
|
1,091,594 |
|
|
1,675,220 |
|
|
1,135,857 |
|
|
4,348,505 |
|
Software development costs |
|
− |
|
|
− |
|
|
442,579 |
|
|
638,660 |
|
Travel |
|
90,068 |
|
|
124,285 |
|
|
102,744 |
|
|
378,170 |
|
Total
Expenses |
|
2,757,381 |
|
|
3,279,571 |
|
|
3,260,144 |
|
|
11,676,143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss For
The Period |
$ |
(2,646,828 |
) |
$ |
(3,132,952 |
) |
|
(3,175,999 |
) |
$ |
(11,325,957 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic And
Diluted Loss Per Common Share |
$ |
(0.04 |
) |
$ |
(0.04 |
) |
$ |
(0.05 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Number Of Common Shares Outstanding |
|
71,128,000 |
|
|
71,128,000 |
|
|
61,940,000 |
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
4
QWICK MEDIA INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in
U.S. Dollars)
|
|
|
|
|
|
|
|
|
|
|
PERIOD FROM DATE |
|
|
|
|
|
|
|
|
|
|
|
|
OF INCEPTION |
|
|
|
|
|
|
|
|
|
|
|
|
(OCTOBER 5, 2000) TO |
|
|
|
YEARS ENDED DECEMBER 31, |
|
|
DECEMBER 31, |
|
|
|
2013 |
|
|
2012 |
|
|
2011 |
|
|
2013 |
|
Cash Flows (Used In) Provided By: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period |
$ |
(2,646,828 |
) |
$ |
(3,132,952 |
) |
$ |
(3,175,999 |
) |
$ |
(11,325,957 |
) |
Adjustments to
reconcile net loss to net cash used
in operating
activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization |
|
43,620 |
|
|
42,918 |
|
|
26,284 |
|
|
113,118 |
|
Foreign exchange on debt settlement |
|
− |
|
|
− |
|
|
− |
|
|
226,512 |
|
Stock-based
compensation |
|
9,452 |
|
|
81,178 |
|
|
195,399 |
|
|
286,029 |
|
Changes in operating
assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Receivables |
|
(29,699 |
) |
|
(49,680 |
) |
|
(330,875 |
) |
|
(460,034 |
) |
Prepaid expenses |
|
(1,271 |
) |
|
48,621 |
|
|
(49,510 |
) |
|
(2,161 |
) |
Inventory |
|
113,615 |
|
|
(47,826 |
) |
|
(179,294 |
) |
|
(230,593 |
) |
Due to related parties |
|
2,455,953 |
|
|
2,243,364 |
|
|
109,309 |
|
|
5,540,844 |
|
Accrued
dividends payable |
|
202,794 |
|
|
203,350 |
|
|
23,891 |
|
|
430,035 |
|
Accounts
payable and accrued liabilities |
|
(49,589 |
) |
|
62,562 |
|
|
74,252 |
|
|
447,423 |
|
Net cash
provided by (used in) operating activities |
|
98,047 |
|
|
(548,465 |
) |
|
(3,306,543 |
) |
|
(4,974,784 |
) |
Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary cash upon acquisition |
|
− |
|
|
− |
|
|
− |
|
|
15,465 |
|
Purchase of property and equipment |
|
− |
|
|
(36,830 |
) |
|
(59,732 |
) |
|
(138,434 |
) |
Net cash (used
in) investing activities |
|
− |
|
|
(36,830 |
) |
|
(59,732 |
) |
|
(122,969 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from share issuances |
|
− |
|
|
− |
|
|
1,217,002 |
|
|
2,678,002 |
|
Proceeds from notes payable |
|
− |
|
|
− |
|
|
1,000,000 |
|
|
1,661,078 |
|
Proceeds from preferred shares |
|
− |
|
|
− |
|
|
1,000,000 |
|
|
1,000,000 |
|
Net cash
provided by financing activities |
|
− |
|
|
− |
|
|
3,217,002 |
|
|
5,339,080 |
|
Net Increase (Decrease) In Cash |
|
98,047 |
|
|
(585,295 |
) |
|
(149,273 |
) |
|
241,327 |
|
Cash, Beginning
Of Period |
|
143,280 |
|
|
728,575 |
|
|
877,848 |
|
|
− |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, End Of
Period |
$ |
241,327 |
|
$ |
143,280 |
|
$ |
728,575 |
|
$ |
241,327 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued to settle debt |
$ |
− |
|
$ |
− |
|
$ |
403,211 |
|
$ |
984,841 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow
Information |
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid |
$ |
− |
|
$ |
− |
|
$ |
− |
|
$ |
− |
|
Income taxes paid |
$ |
− |
|
$ |
− |
|
$ |
− |
|
$ |
− |
|
The accompanying notes are an integral part of these
consolidated financial statements.
5
QWICK MEDIA INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS (DEFICIENCY) EQUITY
PERIOD FROM DATE OF INCEPTION (OCTOBER 5, 2000) TO DECEMBER 31, 2013
(Stated in U.S. Dollars)
|
|
COMMON STOCK |
|
|
|
|
|
DEFICIT |
|
|
|
|
|
|
|
|
|
NUMBER |
|
|
|
|
|
|
|
|
|
|
|
ACCUMULATED |
|
|
|
|
|
|
|
|
|
OF |
|
|
|
|
|
ADDITIONAL |
|
|
SHARE |
|
|
DURING THE |
|
|
CUMULATIVE |
|
|
|
|
|
|
COMMON |
|
|
PAR |
|
|
PAID-IN |
|
|
SUBSCRIPTIONS |
|
|
DEVELOPMENT |
|
|
TRANSLATION |
|
|
|
|
|
|
SHARES |
|
|
VALUE |
|
|
CAPITAL |
|
|
RECEIVED |
|
|
STAGE |
|
|
ADJUSTMENT |
|
|
TOTAL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, October 5, 2000 |
|
|
|
|
|
|
|
- |
|
$ |
|
|
|
- |
|
$ |
- |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 2000 - Shares issued
for cash at $0.001 |
|
6,500,000 |
|
|
6,500 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
6,500 |
|
November 2000 - Shares issued for cash at
$0.01 |
|
6,000,000 |
|
|
6,000 |
|
|
54,000 |
|
|
- |
|
|
- |
|
|
- |
|
|
60,000 |
|
December 2000 - Shares issued
for cash at $0.25 |
|
38,000 |
|
|
38 |
|
|
9,462 |
|
|
- |
|
|
- |
|
|
- |
|
|
9,500 |
|
Translation adjustment |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
660 |
|
|
660 |
|
Net loss for the period |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(7,310 |
) |
|
- |
|
|
(7,310 |
) |
Balance, December 31, 2000 |
|
12,538,000 |
|
|
12,538 |
|
|
63,462 |
|
|
- |
|
|
(7,310 |
) |
|
660 |
|
|
69,350 |
|
Translation adjustment |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(752 |
) |
|
(752 |
) |
Net
loss for the year |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(54,811 |
) |
|
- |
|
|
(54,811 |
) |
Balance, December 31, 2001 |
|
12,538,000 |
|
|
12,538 |
|
|
63,462 |
|
|
- |
|
|
(62,121 |
) |
|
(92 |
) |
|
13,787 |
|
Translation adjustment |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
16 |
|
|
16 |
|
Net loss for the year |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(24,972 |
) |
|
- |
|
|
(24,972 |
) |
Balance, December 31, 2002 |
|
12,538,000 |
|
|
12,538 |
|
|
63,462 |
|
|
- |
|
|
(87,093 |
) |
|
(76 |
) |
|
(11,169 |
) |
Translation adjustment |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(205 |
) |
|
(205 |
) |
Net
loss for the year |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(271,508 |
) |
|
- |
|
|
(271,508 |
) |
Balance, December 31, 2003 |
|
12,538,000 |
|
|
12,538 |
|
|
63,462 |
|
|
- |
|
|
(358,601 |
) |
|
(281 |
) |
|
(282,882 |
) |
Translation adjustment |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
281 |
|
|
281 |
|
Net loss for the year |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(72,049 |
) |
|
- |
|
|
(72,049 |
) |
Balance, December 31, 2004 |
|
12,538,000 |
|
|
12,538 |
|
|
63,462 |
|
|
- |
|
|
(430,650 |
) |
|
- |
|
|
(354,650 |
) |
Net loss for the year |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(49,562 |
) |
|
- |
|
|
(49,562 |
) |
Balance, December 31, 2005 |
|
12,538,000 |
|
|
12,538 |
|
|
63,462 |
|
|
- |
|
|
(480,212 |
) |
|
- |
|
|
(404,212 |
) |
Net loss for the year |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(67,488 |
) |
|
- |
|
|
(67,488 |
) |
Balance, December 31, 2006 |
|
12,538,000 |
|
|
12,538 |
|
|
63,462 |
|
|
- |
|
|
(547,700 |
) |
|
- |
|
|
(471,700 |
) |
Net loss for the year |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(74,191 |
) |
|
- |
|
|
(74,191 |
) |
Balance, December 31, 2007 |
|
12,538,000 |
|
|
12,538 |
|
|
63,462 |
|
|
- |
|
|
(621,891 |
) |
|
- |
|
|
(545,891 |
) |
Net loss for the year |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(104,412 |
) |
|
- |
|
|
(104,412 |
) |
Balance, December 31, 2008 |
|
12,538,000 |
|
|
12,538 |
|
|
63,462 |
|
|
- |
|
|
(726,303 |
) |
|
- |
|
|
(650,303 |
) |
September 2009 - Shares
issued for settling debt at $0.015 |
|
38,775,366 |
|
|
38,775 |
|
|
542,855 |
|
|
- |
|
|
- |
|
|
- |
|
|
581,630 |
|
Shares issued pursuant to share exchange
agreement (Note 1) |
|
4,789,035 |
|
|
4,789 |
|
|
953,018 |
|
|
- |
|
|
(190,387 |
) |
|
- |
|
|
767,420 |
|
Net loss for the year |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(351,291 |
) |
|
- |
|
|
(351,291 |
) |
Balance, December 31, 2009 |
|
56,102,401 |
|
|
56,102 |
|
|
1,559,335 |
|
|
- |
|
|
(1,267,981 |
) |
|
- |
|
|
347,456 |
|
Share subscriptions received |
|
- |
|
|
- |
|
|
- |
|
|
1,385,000 |
|
|
- |
|
|
- |
|
|
1,385,000 |
|
Net
loss for the year |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(1,102,197 |
) |
|
- |
|
|
(1,102,197 |
) |
Balance, December 31, 2010 |
|
56,102,401 |
|
|
56,102 |
|
|
1,559,335 |
|
|
1,385,000 |
|
|
(2,370,178 |
) |
|
- |
|
|
630,259 |
|
Shares issued for cash at $0.20 |
|
13,010,000 |
|
|
13,010 |
|
|
2,588,992 |
|
|
(1,385,000 |
) |
|
- |
|
|
- |
|
|
1,217,002 |
|
Shares issued for settling
debt at $0.20 |
|
2,016,055 |
|
|
2,016 |
|
|
401,195 |
|
|
- |
|
|
- |
|
|
- |
|
|
403,211 |
|
Stock-based compensation |
|
- |
|
|
- |
|
|
195,399 |
|
|
- |
|
|
- |
|
|
- |
|
|
195,399 |
|
Net loss for the year |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(3,175,999 |
) |
|
- |
|
|
(3,175,999 |
) |
Balance, December 31, 2011 |
|
71,128,456 |
|
|
71,128 |
|
|
4,744,921 |
|
|
- |
|
|
(5,546,177 |
) |
|
- |
|
|
(730,128 |
) |
Stock-based compensation |
|
- |
|
|
- |
|
|
81,178 |
|
|
- |
|
|
- |
|
|
- |
|
|
81,178 |
|
Net
loss for the year |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(3,132,952 |
) |
|
- |
|
|
(3,132,952 |
) |
Balance, December 31, 2012 |
|
71,128,456 |
|
|
71,128 |
|
|
4,826,099 |
|
|
- |
|
|
(8,679,129 |
) |
|
- |
|
|
(3,781,902 |
) |
Stock-based compensation |
|
- |
|
|
- |
|
|
9,452 |
|
|
- |
|
|
- |
|
|
- |
|
|
9,452 |
|
Net loss for the year |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(2,646,828 |
) |
|
- |
|
|
(2,646,828 |
) |
Balance, December 31, 2013 |
|
71,128,456 |
|
$ |
71,128 |
|
$ |
4,835,551 |
|
$ |
- |
|
$ |
(11,325,957 |
) |
$ |
- |
|
$ |
(6,419,278 |
) |
The accompanying notes are an integral part of these
consolidated financial statements.
6
QWICK MEDIA INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
(Stated in U.S. Dollars)
1. |
NATURE OF OPERATIONS AND GOING CONCERN |
|
|
|
|
a) |
Organization |
|
|
|
|
|
Qwick Media Inc. (the Company) is governed by the
corporate laws of the Cayman Islands. It is currently a reporting issuer
in the Province of British Columbia, Canada. Principal executive offices
are located in Vancouver, British Columbia, Canada. The registered office
is in the Cayman Islands. |
|
|
|
|
|
The Company was incorporated on October 5, 2000 under the
laws of the State of Nevada. Effective June 26, 2006, it re-domiciled from
the State of Nevada to the State of Washington. Effective July 7, 2009, it
re-domiciled from the State of Washington to the State of Wyoming for the
sole purpose of effecting a continuance to the Cayman Islands. Effective
July 28, 2009, the Company re-domiciled to the Cayman Islands and became a
foreign private issuer with the US Securities and Exchange Commission
(SEC). |
|
|
|
|
|
On October 6, 2009, the Company changed its name from
Tuscany Mineral, Ltd. to Tuscany Minerals Ltd.. On June 22, 2010, the
Company changed its name to Qwick Media Inc. |
|
|
|
|
|
On January 28, 2011, the Company completed the
acquisition of Qeyos Ad Systems Inc. (Qeyos), pursuant to which it
acquired all of the issued and outstanding common shares of Qeyos from its
shareholders in exchange for the issuance of a total of 4,789,035 shares
of the Companys common stock on the basis of one share of common stock
for each common share of Qeyos. As a result of the acquisition of the
Qeyos shares, the Company ceased to be a shell company and is now in the
business of developing interactive proprietary software, intellectual
property and hardware. |
|
|
|
|
|
For accounting purposes, the acquisition was accounted
for at historical carrying values in a manner similar to the pooling of
interests method since the chief executive officer and controlling
shareholder of the Company was also the chief executive officer and
controlling shareholder of Qeyos. Transfers or exchanges of equity
instruments between entities under common control are recorded at the
carrying amount of the transferring entity at the date of transfer and
fair value, goodwill or other intangible asset adjustments are not
recorded. Our consolidated financial statements and reported results of
operations reflect these carryover values, and our reported results of
operations and stockholders equity have been retroactively restated for
all periods presented to reflect the results of operations of Qeyos and
the Company as if the acquisition had occurred on September 30, 2009, the
date the Company and Qeyos commenced common control. |
|
|
|
|
|
On April 19, 2011, the Company incorporated Wuxi Xun Fu
Information Technology Co., Ltd. in China, a wholly-owned subsidiary of
the Company. |
|
|
|
|
|
For all periods presented, all significant inter-company
accounts and transactions have been eliminated in the consolidated
financial statements. |
|
|
|
|
b) |
Development Stage Activities |
|
|
|
|
|
The Company had been in the exploration stage since its
formation and had not realized any revenues during the exploration stage.
The Company had previous exploration activities in the natural gas and oil
business in 2003 and in the acquisition and exploration of mining
properties prior to 2003. As at December 31, 2010, the Company was an
inactive shell company. |
|
|
|
|
|
On January 28, 2011, the Company acquired Qeyos Ad
Systems Inc., which is in the business of developing and customizing
software and hardware for use in digital media kiosks. Accordingly, the
Company ceased to be an inactive shell company and became a development
stage company. |
7
QWICK MEDIA INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
(Stated in U.S. Dollars)
1. |
NATURE OF OPERATIONS AND GOING CONCERN (Continued) |
|
|
|
|
c) |
Going Concern |
|
|
|
|
|
The accompanying consolidated financial statements have
been prepared assuming the Company will continue as a going
concern. |
|
|
|
|
|
As shown in the accompanying consolidated financial
statements, the Company has incurred accumulated losses of $11,325,957 for
the period from October 5, 2000 (date of inception) to December 31, 2013.
The future of the Company is dependent upon its ability to obtain adequate
financing and upon future profitable operations. Management has plans to
seek additional capital financing through private placement and a public
offering of the Companys common stock and from the issuance of promissory
notes. These factors raise substantial doubt regarding the Companys
ability to continue as a going concern. The consolidated financial
statements do not include any adjustments relating to the recoverability
and classification of recorded assets, or the amounts of and
classification of liabilities that might be necessary in the event the
Company cannot continue in existence. |
2. |
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES |
|
|
|
|
The consolidated financial statements of the Company have
been prepared in accordance with generally accepted accounting principles
in the United States (GAAP), and are expressed in US dollars. These
consolidated financial statements include the accounts of the Company and
the accounts of the Companys wholly owned subsidiaries, Qeyos Ad Systems
Inc., incorporated in Canada, and Wuxi Xun Fu Information Technology Co.,
Ltd., incorporated in China. The Companys fiscal year-end is December 31.
Because a precise determination of many assets and liabilities is
dependent upon future events, the preparation of financial statements for
a period necessarily involves the use of estimates which have been made
using careful judgement. |
|
|
|
|
The consolidated financial statements have, in
managements opinion, been properly prepared within reasonable limits of
materiality and within the framework of the significant accounting
policies summarized below: |
|
|
|
|
a) |
Cash and Cash Equivalents |
|
|
|
|
|
Cash consists of cash on deposit with high quality major
financial institutions. The carrying amounts approximated fair market
value due to the liquidity of these deposits. For purposes of the balance
sheets and statements of cash flows, the Company considers all highly
liquid debt instruments purchased with maturity of three months or less to
be cash equivalents. The Company had no cash equivalents at December 31,
2013 and 2012. |
|
|
|
|
b) |
Use of Estimates and Assumptions |
|
|
|
|
|
The preparation of financial statements in conformity
with generally accepted accounting principles in the United States
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 for the reporting period.
Management evaluates estimates and judgments on an ongoing basis. Actual
results could differ from these estimates. The significant areas requiring
managements estimates and assumptions include the fair value of shares
issued to settle debt, stock based compensation, valuation of receivables
and inventory, estimated life, amortization rates and impairment of
long-lived assets, valuation allowance for income tax purposes, and fair
value measurement of financial instruments. |
8
QWICK MEDIA INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
(Stated in U.S. Dollars)
2. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
|
|
|
|
c) |
Revenue Recognition |
|
|
|
|
|
The Company recognizes revenue when all of the following
criteria are met: (1) the Company has evidence of an arrangement with a
customer; (2) the Company delivers the specified products; (3) license
agreement terms are fixed or determinable and free of contingencies or
uncertainties that may alter the agreement such that it may not be
complete and final; and (4) collection is probable. |
|
|
|
|
d) |
Software Development Costs |
|
|
|
|
|
The Company accounts for software development costs in
accordance with ASC 985-20, Software - Cost of Software to Be Sold,
Leased, whereby costs for the development of new software products and
substantial enhancements to existing software products are expensed as
incurred until technological feasibility has been established and all
research and development activities for the other components of the
product or processes have been completed, at which time any additional
costs are capitalized. |
|
|
|
|
|
To December 31, 2013, software development costs,
comprised of salaries, wages and benefits, have been charged to operations
as the research and development activities for other components of the
product and processes have not been completed. |
|
|
|
|
|
In accordance with ASC 985-705, software modification
costs, comprised of salaries, wages and benefits, to satisfy hardware
upgrades and changes in system configurations, are expensed as
incurred. |
|
|
|
|
e) |
Inventory |
|
|
|
|
|
Inventory is recorded at the lower of cost or market with
cost being determined on the weighted average method. When required, a
provision is made to reduce excess and obsolete inventory to estimated net
realizable value. The net realizable value of inventory is generally
considered to be the selling price in the ordinary course of business less
the estimated costs of completion and estimated costs to make the sale.
Inventory consists of computers, general, monitors, printers, modems, and
parts and enclosures. |
|
|
|
|
f) |
Equipment and Amortization |
|
|
|
|
|
Equipment is recorded at cost and amortized using the
declining-balance and straight-line method at rates determined to estimate
the useful lives of the assets. The annual rates used in calculating
amortization are as follows: |
|
Computer hardware |
30% straight-line |
|
Computer software |
50% declining-balance |
|
Office furniture |
20% declining-balance |
|
Equipment |
30% declining-balance |
|
Leasehold improvements |
straight-line over the term of
the lease |
9
QWICK MEDIA INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
(Stated in U.S. Dollars)
2. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
|
|
|
|
g) |
Foreign Currency Translation |
|
|
|
|
|
The Companys functional currency is the U.S. dollar.
Transactions in foreign currency are translated in accordance with ASC
Topic 830, Foreign Currency Matters, into U.S. dollars and reporting as
follows: |
|
i) |
monetary items at the exchange rate prevailing at the
balance sheet date; |
|
|
|
|
ii) |
non-monetary items at the historical exchange
rate; |
|
|
|
|
iii) |
revenue and expense at the average exchange rate in
effect during the applicable accounting
period. |
|
|
Gains and losses on foreign currency transactions are
reported in the statements of operations. |
|
|
|
|
h) |
Basic and Diluted Loss Per Share |
|
|
|
|
|
The Company computes loss per share in accordance with
ASC 260, Earnings Per Share. Under these provisions, basic loss per share
is computed using the weighted average number of common stock outstanding
during the periods. Diluted loss per share is computed using the weighted
average number of common and potentially dilutive common stock outstanding
during the period. As the Company generated net losses in the periods
presented, the basic and diluted loss per share is the same as the
exercise of options or warrants would be anti-dilutive. |
|
|
|
|
i) |
Fair Value of Financial Instruments |
|
|
|
|
|
ASC 820, Fair Value Measurements and Disclosures and ASC
825, Financial Instruments establishes a three-tier value hierarchy, which
prioritizes the inputs used in measuring fair value. The hierarchy
prioritizes the inputs into three levels based on the extent to which
inputs used in measuring fair value are observable in the
market. |
|
|
|
|
|
These tiers are: |
|
|
Level 1 defined as observable inputs such as quoted
prices in active markets; |
|
|
|
|
|
Level 2 defined as inputs other than quoted prices in
active markets that are either directly or indirectly observable; and |
|
|
|
|
|
Level 3 defined as unobservable inputs in which little
or no market data exists, therefore requiring an entity to develop its own
assumptions. |
|
|
Cash consists of cash on deposit with a high quality
major financial institution. The carrying cost approximates fair value due
to the liquidity of these deposits. The carrying amounts of other
financial assets and liabilities comprising accounts payable and accrued
liabilities, due to related parties, were a reasonable approximation of
their fair value. |
|
|
|
|
j) |
Income Taxes |
|
|
|
|
|
The Company has adopted ASC 740, Income Taxes. This
standard requires the use of an asset and liability approach for financial
accounting, and reporting on income taxes. Potential benefits of income
tax losses are not recognized in the accounts until realization is more
likely than not. If it is more likely than not that some portion or all of
a deferred tax asset will not be realized, a valuation allowance is
recognized. |
10
QWICK MEDIA INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
(Stated in U.S. Dollars)
2. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
|
|
|
|
k) |
Asset Impairment |
|
|
|
|
|
Long-lived assets are tested for recoverability whenever
events or changes in circumstances indicate the carrying amount may not be
recoverable, pursuant to guidance established in ASC 360-50, Impairment or
Disposal of Long-lived Assets. The Company determines impairment by
comparing the undiscounted future cash flows estimated to be generated by
its assets to their respective carrying amounts. If impairment is deemed
to exist, assets are written down to fair value. |
|
|
|
|
l) |
Comprehensive Loss |
|
|
|
|
|
ASC 220, Comprehensive Income establishes standards for
the reporting and display of comprehensive items in the consolidated
financial statements. As at December 31, 2013, 2012 and 2011, the Company
had no items that represent a comprehensive income or loss and, therefore,
has not included a statement of comprehensive loss in the consolidated
financial statements. |
|
|
|
|
m) |
Equity Instruments |
|
|
|
|
|
In situations where common shares are issued and the fair
value of the goods or services received is not readily determinable, the
fair value of the common shares is used to measure and record the
transaction. The fair value of the common shares issued in exchange for
the receipt of goods and services is based on the stock price as of the
earliest of: |
|
i) |
the date at which the counterpartys performance is
complete; |
|
|
|
|
ii) |
the date at which a commitment for performance by the
counterparty to earn the common shares is reached; or |
|
|
|
|
iii) |
the date at which the common shares are issued if they
are fully vested and non-forfeitable at that date. |
The Company has a stock-based
compensation plan which is described more fully in Note 6. The Company measures
the compensation cost of stock options and other stock-based awards to employees
and directors at fair value at the grant date and recognizes compensation
expense over the requisite service period for awards expected to vest. Except
for transactions with employees and directors, 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 instruments issued, whichever is more
reliably measurable. Additionally, the Company has determined that the dates
used to value the transaction are either:
|
i) |
The date at which a commitment for performance by the
counter party to earn the equity instruments is established; or |
|
|
|
|
ii) |
The date at which the counter partys performance is
complete. |
11
QWICK MEDIA INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
(Stated in U.S. Dollars)
2. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
|
|
|
|
n) |
Recent Accounting Pronouncements |
|
|
|
|
|
In November 2011, ASC guidance was issued related to
disclosures about offsetting assets and liabilities. The new standard
requires disclosures to allow investors to better compare financial
statements prepared under U.S GAAP with financial statements prepared
under IFRS. The update is effected for the Companys fiscal year beginning
January 1, 2013, and interim periods within those annual periods.
Retrospective application is required. In January 2013, ASC guidance was
issued to clarify that the disclosure requirements are limited to
derivatives, repurchase agreements, and securities lending transactions to
the extent that they are (i) offset in the financial statements or (ii)
subject to an enforceable master netting arrangement or similar agreement.
The Companys January 1, 2013 adoption of the updated guidance had no
impact on the Companys consolidated financial position, results of
operations or cash flows. |
|
|
|
|
|
In January 2013, the FASB issued ASU No. 2013-01, Balance
Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting
Assets and Liabilities, which clarifies which instruments and transactions
are subject to the offsetting disclosure requirements originally
established by ASU 2011-11. The new ASU addresses preparer concerns that
the scope of the disclosure requirements under ASU 2011-11 was overly
broad and imposed unintended costs that were not commensurate with
estimated benefits to financial statement users. In choosing to narrow the
scope of the offsetting disclosures, the Board determined that it could
make them more operable and cost effective for preparers while still
giving financial statement users sufficient information to analyze the
most significant presentation differences between financial statements
prepared in accordance with U.S. GAAP and those prepared under IFRS. Like
ASU 2011-11, the amendments in this update will be effective for fiscal
periods beginning on or after January 1, 2013. The Companys January 1,
2013 adoption of the updated guidance had no impact on the Companys
consolidated financial position, results of operations or cash
flows. |
|
|
|
|
|
In February 2013, the FASB issued ASU No. 2013-04,
Liabilities (Topic 405): Obligations Resulting from Joint and Several
Liability Arrangements for Which the Total Amount of the Obligation Is
Fixed at the Reporting Date. The amendments in ASU 2013-04 provide
guidance for the recognition, measurement, and disclosure of obligations
resulting from joint and several liability arrangements for which the
total amount of the obligation within the scope of this Update is fixed at
the reporting date, except for obligations addressed within existing
guidance in U.S. GAAP. The guidance requires an entity to measure those
obligations as the sum of the amount the reporting entity agreed to pay on
the basis of its arrangement among its co-obligors and any additional
amount the reporting entity expects to pay on behalf of its co-obligors.
The guidance in this Update also requires an entity to disclose the nature
and amount of the obligation as well as other information about those
obligations. The amendments in this standard are effective retrospectively
for fiscal years, and interim periods within those years, beginning after
December 15, 2013. The Company does not expect the adoption of the
pronouncement to have a material effect on its consolidated financial
statements. |
|
|
|
|
|
In April 2013, the FASB issued ASU No. 2013-07,
Presentation of Financial Statements (Top 205): Liquidation Basis of
Accounting. The objective of ASU No. 2013-07 is to clarify when an entity
should apply the liquidation basis of accounting and to provide principles
for the measurement of assets and liabilities under the liquidation basis
of accounting, as well as any required disclosures. The amendments in this
standard is effective prospectively for entities that determine
liquidation is imminent during annual reporting periods beginning after
December 15, 2013, and interim reporting periods therein. The Company does
not expect the adoption of the pronouncement to have a material effect on
its consolidated financial statements. |
12
QWICK MEDIA INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
(Stated in U.S. Dollars)
2. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
|
|
|
|
n) |
Recent Accounting Pronouncements (Continued) |
|
|
|
|
|
In March 2013, ASC guidance was issued related to Foreign
Currency Matters to clarify the treatment of cumulative translation
adjustments when a parent sells a part or all of its investment in a
foreign entity or no longer holds a controlling financial interest in a
subsidiary or group of assets that is a business within a foreign entity.
The updated guidance also resolves the diversity in practice for the
treatment of business combinations achieved in stages in a foreign entity.
The update is effective prospectively for the Companys fiscal year
beginning January 1, 2014. The Company does not expect the updated
guidance to have an impact on the consolidated financial position, results
of operations or cash flows. |
|
|
|
|
|
In July 2013, ASC guidance was issued related to the
presentation of an unrecognized tax benefit when a net operating loss
carryforward, a similar tax loss or a tax credit carryforward exists. The
updated guidance requires an entity to net its unrecognized tax benefits
against the deferred tax assets for net operating loss carryforwards,
similar tax losses, or tax credit carryforwards in the same jurisdiction.
A gross presentation will be required only if such carryforwards are not
available or would not be used by the entity to settle any additional
income taxes resulting from disallowance of the uncertain tax position.
The update is effective prospectively for the Companys fiscal year
beginning January 1, 2014. The Company does not expect the updated
guidance to have an impact on the consolidated financial position, results
of operations or cash flows. |
|
|
|
3. |
INVENTORY |
|
|
2013 |
|
|
2012 |
|
|
|
|
|
|
|
|
Computers |
$ |
45,382 |
|
$ |
2,765 |
|
Monitors |
|
114,126 |
|
|
31,146 |
|
Printers |
|
15,880 |
|
|
− |
|
Parts and enclosures |
|
31,426 |
|
|
291,301 |
|
General |
|
23,779 |
|
|
18,996 |
|
|
$ |
230,593 |
|
$ |
344,208 |
|
|
During the year, the Company recorded inventory
write-down in the amount of $217,719 (2012 - $Nil). |
|
|
4. |
PROPERTY AND EQUIPMENT |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
Net Book |
|
|
|
Cost |
|
|
Amortization |
|
|
Value |
|
|
|
|
|
|
|
|
|
|
|
Computer hardware |
$ |
38,713 |
|
$ |
30,524 |
|
$ |
8,189 |
|
Computer software |
|
1,324 |
|
|
1,286 |
|
|
38 |
|
Office furniture |
|
21,012 |
|
|
12,875 |
|
|
8,137 |
|
Equipment |
|
41,882 |
|
|
24,610 |
|
|
17,272 |
|
Leasehold improvements |
|
47,628 |
|
|
44,187 |
|
|
3,441 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
150,559 |
|
$ |
113,482 |
|
$ |
37,077 |
|
13
QWICK MEDIA INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
(Stated in U.S. Dollars)
4. |
PROPERTY AND EQUIPMENT (Continued) |
|
|
2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
Net Book |
|
|
|
Cost |
|
|
Amortization |
|
|
Value |
|
|
|
|
|
|
|
|
|
|
|
Computer hardware |
$ |
38,713 |
|
$ |
19,569 |
|
$ |
19,144 |
|
Computer software |
|
1,324 |
|
|
1,182 |
|
|
142 |
|
Office furniture |
|
21,012 |
|
|
6,926 |
|
|
14,086 |
|
Equipment |
|
41,882 |
|
|
13,257 |
|
|
28,625 |
|
Leasehold improvements |
|
47,628 |
|
|
29,287 |
|
|
18,341 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
150,559 |
|
$ |
70,221 |
|
$ |
80,338 |
|
5. |
RELATED PARTY TRANSACTIONS AND AMOUNTS
OWING |
|
|
|
|
For the year ended December 31, 2013, the Company carried
out a number of transactions with related parties in the normal course of
business. These transactions were recorded at their exchange amount, which
is the amount of consideration established and agreed to by the related
parties. |
|
|
|
|
The following are related party transactions and amounts
owing at December 31, 2013 that are not otherwise disclosed
elsewhere: |
|
|
|
|
a) |
The Company paid management fees of $240,210 (2012 -
$256,858; 2011 - $256,327) to companies controlled by officers for the
year ended December 31, 2013. |
|
|
|
|
b) |
The Company recorded stock-based compensation of $3,972
(2012 - $50,004; 2011 - $131,118) as consulting fees paid to directors and
officers for the year ended December 31, 2013. |
|
|
|
|
c) |
As of December 31, 2013, amounts owing to related parties
consists of $4,534,392 (2012 - $2,073,965) owed to a director and
companies controlled by a director, and $12,889 (2012 - $18,815) owed to a
company controlled by an officer. The amounts owed are unsecured,
non-interest bearing and due on demand. |
|
|
|
|
d) |
Interest expensed by the Company relating to notes
payable due to a company with a common director amounted to $Nil (2012 -
$Nil; 2011 - $27,945) for the year ended December 31, 2013. |
|
|
|
6. |
STOCK OPTIONS |
|
|
|
|
The Company adopted a Stock Option Plan under which the
Company can grant up to 6,620,230 shares of its common stock to the
officers, directors, employees and consultants. |
|
|
|
|
On January 28, 2011, the Company granted 2,400,000 stock
options to directors, officers, and employees exercisable at $0.20 per
share to December 29, 2015. The options vest 50% on the date of grant, 25%
on the first anniversary and 25% on the second anniversary. During the
year ended December 31, 2013, the Company recorded stock-based
compensation of $3,972 (2012 - $40,146; 2011 - $185,113) as consulting
expense related to these options. |
14
QWICK MEDIA INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
(Stated in U.S. Dollars)
6. |
STOCK OPTIONS (Continued) |
|
|
|
On May 1, 2011, the Company granted 300,000 stock options
to a consultant exercisable at $0.20 per share to December 29, 2015. The
options vest 50% on the date of grant, 25% on the first anniversary and
25% on the second anniversary. During the year ended December 31, 2013,
the Company recorded stock-based compensation of $2,686 (2012 - $29,993;
2011 - $21,832) as consulting expense related to these options. |
|
|
|
On July 1, 2011, the Company granted 60,000 stock options
to an employee exercisable at $0.60 per share. 50% of the options vest on
the date of grant and expire on July 30, 2013. Another 25% vest on the
first anniversary and expire on July 30, 2014. The last 25% vest on the
second anniversary and expire on July 30, 2015. During the year ended
December 31, 2013, the Company recorded stock-based compensation of $163
(2012 - $963; 2011 - $682) as consulting expense related to these
options. |
|
|
|
On November 1, 2011, the Company granted 360,000 stock
options to an employee exercisable at $0.60 per share. 50% of the options
vest on the date of grant and expire on July 30, 2013. Another 25% vest on
the first anniversary and expire on July 30, 2014. The last 25% vest on
the second anniversary and expire on July 30, 2015. During the year ended
December 31, 2013, the Company recorded stock-based compensation of $2,562
(2012 - $9,736; 2011 - $682) as consulting expense related to these
options. |
|
|
|
On March 1, 2012, the Company granted 300,000 stock
options to a consultant exercisable at $0.60 per share. 50% of the options
vest on the date of grant and expire on February 28, 2013. Another 25%
vest on the first anniversary and expire on February 28, 2014. The last
25% vest on the second anniversary and expire on February 28, 2015. During
the year ended December 31, 2013, the Company recorded stock-based
compensation of $69 (2012 - $340) as consulting expense related to these
options. |
|
|
|
The fair values of stock options granted were estimated
at the date of grant using the Black-Scholes option- pricing model and the
weighted average grant date fair value of stock options granted during the
year ended December 31, 2012 was $0.001 (2011 - $0.10). During the year
ended December 31, 2013, the Company recorded stock-based compensation of
$9,452 (2012 - $81,178; 2011 - $195,399) as consulting expense related to
the vesting of stock options. |
|
|
|
The fair value assumptions used were as
follows: |
|
|
2013 |
2012 |
2011 |
|
Expected dividend yield |
− |
0% |
0% |
|
Risk-free interest rate |
− |
0.43% |
1.92% |
|
Expected volatility |
− |
54% |
66% |
|
Expected option life (in years) |
− |
1.00 |
4.54 -5.00 |
The following table summarizes the
continuity of the Companys stock options:
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Aggregate |
|
|
|
|
Number of |
|
|
Exercise |
|
|
Contractual |
|
|
Intrinsic |
|
|
|
|
Options |
|
|
Price |
|
|
Term
(years) |
|
|
Value |
|
|
Outstanding, December 31, 2011 |
|
2,720,000 |
|
$ |
0.26 |
|
|
4.98 |
|
$ |
− |
|
|
Granted |
|
300,000 |
|
$ |
0.60 |
|
|
|
|
|
|
|
|
Expired |
|
(200,000 |
) |
$ |
0.20 |
|
|
|
|
|
|
|
|
Outstanding, December 31, 2012 |
|
2,820,000 |
|
$ |
0.30 |
|
|
2.56 |
|
$ |
− |
|
|
Expired |
|
(360,000 |
) |
$ |
0.60 |
|
|
|
|
|
|
|
|
Outstanding,
December 31, 2013 |
|
2,460,000 |
|
$ |
0.26 |
|
|
1.86 |
|
$ |
− |
|
|
Exercisable, December 31, 2013 |
|
2,385,000 |
|
$ |
0.25 |
|
|
1.88 |
|
$ |
− |
|
15
QWICK MEDIA INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
(Stated in U.S. Dollars)
6. |
STOCK OPTIONS (Continued) |
|
|
|
A summary of the status of the Companys non-vested
options and changes are presented below: |
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Average |
|
|
|
Number of |
|
|
Grant Date |
|
|
|
Options |
|
|
Fair
Value |
|
|
|
|
|
|
|
|
Non-vested at December 31,
2011 |
|
1,360,000 |
|
$ |
0.10 |
|
Granted |
|
300,000 |
|
$ |
0.001 |
|
Expired |
|
(50,000 |
) |
$ |
0.11 |
|
Vested |
|
(830,000 |
) |
$ |
0.08 |
|
Non-vested at December 31,
2012 |
|
780,000 |
|
$ |
0.08 |
|
|
|
|
|
|
|
|
Vested |
|
(705,000 |
) |
$ |
0.09 |
|
Non-vested at December 31, 2013 |
|
75,000 |
|
$ |
0.001 |
|
As at December 31, 2013, there was $8
(2012 - $9,460) in total unrecognized compensation cost related to non-vested
stock options.
As at December 31, 2013, the following
stock options were outstanding:
Number of
Options |
Exercise Price |
Expiry Date |
75,000 |
$0.60 |
February 28, 2014* |
15,000 |
$0.60 |
July 30, 2014 |
90,000 |
$0.60 |
November 30, 2014 |
75,000 |
$0.60 |
February 28, 2015 |
15,000 |
$0.60 |
July 30, 2015 |
90,000 |
$0.60 |
November 30, 2015 |
2,100,000 |
$0.20 |
December 29, 2015 |
2,460,000 |
|
*
Subsequently expired |
7. |
REDEEMABLE PREFERRED STOCK |
|
|
|
|
On November 15, 2011, the Company created one series of
the 100,000,000 preferred shares it is authorized to issue, consisting of
25,000,000 shares, to be designated as Class A Preferred Shares. The
principal terms of the Class A Preferred Shares are as follows: |
|
|
|
|
Voting rights The Class A Preferred Shares have
voting rights (one vote per share) equal to those of the Companys common
stock. |
|
|
|
|
Dividend rights The Class A Preferred Shares
carry a cumulative cash dividend of 10% per annum. The accrued dividends
payable are classified as interest expense in the statements of
operations. |
|
|
|
|
Conversion rights The holders of the Class A
Preferred Shares have the right to convert the Class A Preferred Shares,
from time to time, at the option of the holder, into one common share
until July 31, 2015 at the following conversion prices: |
|
|
|
|
i) |
$0.60 per Common Share if converted at any time up to and
including July 31, 2012; |
|
|
|
|
ii) |
$1.00 per Common Share if converted at any time between
August 1, 2012 and July 31, 2013; and |
|
|
|
|
iii) |
$1.50 per Common Share if converted at any time between
August 1, 2013 and July 31, 2015. |
16
QWICK MEDIA INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
(Stated in U.S. Dollars)
7. |
REDEEMABLE PREFERRED STOCK (Continued) |
|
|
|
|
Redemption rights At any time, the holders of
the Class A Preferred Shares may elect to have the Company redeem the
Class A Preferred Shares for an amount equal to $1.00 per share. At any
time, the Company may redeem the Class A Preferred Shares for an amount
equal to $1.00 per share. |
|
|
|
|
The Company has classified the Class A Preferred Shares
as liability because they are redeemable beyond the control of the
issuer. |
|
|
|
|
During the year ended December 31, 2011, the Company
completed a private placement with a company owned by the Company's
President and Chief Executive Officer, consisting of the issuance of
1,000,000 Class A Preferred Shares at a price of $1.00 per Class A Share
for gross proceeds of $1,000,000, and converted the principal amount of a
debenture and accrued interest thereon to the related party, into an
aggregate of 1,027,945 Class A Preferred Shares, at a conversion price of
$1.00 per Class A Preferred Share. As at December 31, 2013, the holder of
the Class A Preferred Shares had agreed to not exercise the retractable
rights, to have the Company redeem the Class A Preferred Shares, for the
next 2 years. |
|
|
|
8. |
COMMITMENTS AND CONTRACTUAL OBLIGATIONS |
|
|
|
|
The Company had no significant commitments or contractual
obligations with any parties respecting executive compensation, consulting
arrangements, or other matters other than disclosed below. Management
services provided are on a month-to-month basis. |
|
|
|
|
a) |
On October 15, 2013, the Company entered into a
consulting agreement with a director of the Company whereby the Company
will pay $12,000 per month for consulting services provided for a term of
six months. The fees will be payable as to a minimum of $6,000 in cash
payment and up to $6,000 in equity or debt of the Company. |
|
|
|
|
b) |
The Company has entered into leases for the
provision of facility space until January 31, 2014, and continued on a
month-to-month basis. The Companys future minimum lease payments for the
premise leases are as follows: |
Fiscal year ending December 31, 2014 |
$ 10,835 (CDN$11,525) |
9. |
FINANCIAL INSTRUMENTS AND RISK
MANAGEMENT |
|
|
|
The following table presents information about the
Companys financial instruments that have been measured at fair value as
of December 31, 2013, and indicates the fair value hierarchy of the
valuation inputs utilized to determine such fair
values: |
DECEMBER 31, 2013 |
FAIR |
|
|
|
|
VALUE |
|
TOTAL |
|
|
INPUT |
HELD-FOR- |
CARRYING |
FAIR |
|
LEVEL |
TRADING |
VALUE |
VALUE |
Financial assets |
|
|
|
|
Cash |
1 |
$ 241,327 |
$ 241,327 |
$ 241,327 |
DECEMBER 31, 2012 |
FAIR |
|
|
|
|
VALUE |
|
TOTAL |
|
|
INPUT |
HELD-FOR- |
CARRYING |
FAIR |
|
LEVEL |
TRADING |
VALUE |
VALUE |
Financial assets |
|
|
|
|
Cash |
1 |
$ 143,280 |
$ 143,280 |
$ 143,280 |
Due to the nature of cash, accounts
payable and redeemable preferred stock, the fair value of these instruments
approximated their carrying value.
17
QWICK MEDIA INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
(Stated in U.S. Dollars)
10. |
SEGMENTED INFORMATION |
|
|
|
The Companys business is considered as operating in one
segment being the development of software and hardware for use in digital
media kiosks. |
|
|
11. |
INCOME TAXES |
|
|
|
The provision for income taxes differs from the result
which would be obtained by applying the statutory income tax rate of 26%
(2012 - 26%) to income before income taxes. The difference results from
the following items: |
|
|
|
2013 |
|
|
2012 |
|
|
2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Computed expected (benefit) income taxes |
$ |
(675,000 |
) |
$ |
(782,000 |
) |
$ |
(768,000 |
) |
|
Increase in valuation allowance |
|
675,000 |
|
|
782,000 |
|
|
768,000 |
|
|
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
Significant components of the Companys
deferred income tax assets are as follows:
|
|
|
2013 |
|
|
2012 |
|
|
|
|
|
|
|
|
|
|
Deferred income tax asset |
$ |
2,791,000 |
|
$ |
2,116,000 |
|
|
Valuation allowance |
|
(2,791,000 |
) |
|
(2,116,000 |
) |
|
|
$ |
- |
|
$ |
- |
|
The Company has net operating losses of
approximately $10,734,000 (2012 - $8,140,000), which if unutilized, will expire
through to 2033. Future tax benefits, which may arise as a result of these
losses, have not been recognized in these consolidated financial statements and
have been offset by a valuation allowance.
The Company and its subsidiaries file
income tax returns in Canada and China. These tax returns are subject to
examination by local taxation authorities provided the tax years remain open to
audit under the relevant statutes of limitations.
18
ITEM
18 Financial
Statements
Refer to Item 17. Financial Statements.
ITEM
19
Exhibits
The following exhibits are being filed as part of this annual
company report, or are incorporated by reference where indicated:
Exhibit Number |
Description of Exhibit
|
1.1 |
Memorandum of Association (incorporated by reference from
Exhibit 3.1 to our current report on Form 8-K as filed with the SEC on
August 5, 2009) |
1.2 |
Articles of Association (incorporated by reference from
Exhibit 3.2 to our current report on Form 8-K as filed with the SEC on
August 5, 2009) |
4.1 |
Promissory Note with In Touch Digital Media Inc. dated
February 18, 2009 |
4.2 |
Promissory Note with In Touch Digital Media Inc. dated
March 31, 2009 (incorporated by reference from Exhibit 10.5 to our
registration statement on Form S-4 as filed with the SEC on April 9, 2009) |
4.3 |
Promissory Note with In Touch Digital Media Inc. dated
May 8, 2009 (incorporated by reference from Exhibit 10.9 to our quarterly
report on Form 10-Q as filed with the SEC on May 15, 2009) |
4.3 |
Form of Debt Settlement and Subscription Agreement,
effective as of September 30, 2009 (incorporated by reference from our
Annual Report on Form 20-F as filed with the SEC on April 29, 2010) |
4.4 |
Share Exchange Agreement with Qeyos Ad Systems Inc. dated
January 28, 2011 (incorporated by reference from our Annual Report on Form
20-F as filed with the SEC on February 3, 2011) |
4.6 |
Debt Settlement and Subscription Agreement dated January
28, 2011 with R. J. Tocher Holdings Ltd. (incorporated by reference from
our Annual Report on Form 20-F as filed with the SEC on February 3, 2011) |
4.7 |
Form of Private Placement Subscription Agreement
(incorporated by reference from our Annual Report on Form 20-F as filed
with the SEC on February 3, 2011) |
4.8 |
2011 Stock Option Plan (incorporated by reference from
our Annual Report on Form 20-F as filed with the SEC on February 3, 2011) |
8.1 |
Significant subsidiaries of our Company: Qeyos Ad Systems
Inc., a British Columbia corporation, all of the shares of which are owned
by our company, and Wuxi Xun Fu Information Technology Co., Ltd., a
company incorporated under the laws of the Peoples Republic of China, all
of the shares of which are owned by Qeyos. |
11.1 |
Code of Ethics (incorporated by reference from our
Registration Statement on Form 20-F, as amended, filed on March 30, 2004). |
12.1* |
Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 |
12.2* |
Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 |
13.1* |
Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 |
13.2* |
Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 |
* Filed herewith
51
SIGNATURES
The registrant hereby certifies that it meets all of the
requirements for filing on Form 20-F/A and that it has duly caused and authorized
the undersigned to sign this annual report on its behalf.
QWICK MEDIA INC.
By: /s/ Ross
J. Tocher
Ross J. Tocher,
President and Chief Executive
Officer
(Principal Executive Officer)
Date: September 19, 2014
By: /s/ Kevin
Kortje
Kevin Kortje
Chief Financial Officer
(Principal
Financial Officer
and Principal Accounting Officer)
Date: September 19, 2014
52
CERTIFICATION PURSUANT TO
SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Ross J. Tocher, certify that:
1. |
I have reviewed this annual report on Form 20-F of Qwick
Media Inc.; |
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2. |
Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this report; |
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3. |
Based on my knowledge, the financial statements, and
other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
report; |
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4. |
The registrants other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in the Exchange Act
Rule 13a-15(f) and 15d-15(f)) for the registrant and have: |
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(a) |
designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which
this report is being prepared; |
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(b) |
designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financials
statements for external purposes in accordance with generally accepted
accounting principles; |
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(c) |
evaluated the effectiveness of the registrants
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on
such evaluation; and |
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(d) |
disclosed in this report any change in the registrants
internal control over financial reporting that occurred during the
registrants fourth fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the companys internal control
over financial reporting; and |
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5. |
The registrants other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrants auditors and the audit committee
of the registrants board of directors (or persons performing the
equivalent functions): |
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(a) |
all significant deficiencies and material weaknesses in
the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrants ability to
record, process, summarize and report financial information; and |
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(b) |
any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls over financial
reporting. |
Date: September 19, 2014 |
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/s/ Ross J. Tocher
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Ross J. Tocher |
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President and Chief Executive Officer |
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(Principal Executive Officer) |
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CERTIFICATION PURSUANT TO
SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Kevin Kortje, certify that:
1. |
I have reviewed this annual report on Form 20-F of Qwick
Media Inc.; |
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2. |
Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this report; |
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|
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3. |
Based on my knowledge, the financial statements, and
other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
report; |
|
|
|
4. |
The registrants other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in the Exchange Act
Rule 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
|
|
|
(a) |
designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which
this report is being prepared; |
|
|
|
|
(b) |
designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financials
statements for external purposes in accordance with generally accepted
accounting principles; |
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|
|
|
(c) |
evaluated the effectiveness of the registrants
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on
such evaluation; and |
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(d) |
disclosed in this report any change in the registrants
internal control over financial reporting that occurred during the
registrants fourth fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the companys internal control
over financial reporting; and |
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|
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5. |
The registrants other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrants auditors and the audit committee
of the registrants board of directors (or persons performing the
equivalent functions): |
|
|
|
|
(a) |
all significant deficiencies and material weaknesses in
the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrants ability to
record, process, summarize and report financial information; and |
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|
(b) |
any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls over financial
reporting. |
Date: September 19, 2014 |
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/s/ Kevin Kortje
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Kevin Kortje |
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Chief Financial Officer |
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(Principal Financial Officer and Principal Accounting
Officer) |
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CERTIFICATIONS
The undersigned, Ross J. Tocher, hereby certifies, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:
(1) |
the annual report on Form 20-F/A of Qwick Media Inc. for
the year ended December 31, 2013 (the Report) fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and |
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(2) |
the information contained in the Report fairly presents,
in all material respects, the financial condition and results of
operations of Qwick Media Inc. |
Dated: September 19, 2014
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/s/
Ross J. Tocher |
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Ross J. Tocher |
|
President and Chief Executive Officer |
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(Principal Executive Officer)
|
A signed original of this written statement required by Section
906, or other document authenticating, acknowledging, or otherwise adopting the
signature that appears in typed form within the electronic version of this
written statement required by Section 906, has been provided to Qwick Media Inc.
and will be retained by Qwick Media Inc. and furnished to the Securities and
Exchange Commission or its staff upon request.
CERTIFICATIONS
The undersigned, Kevin Kortje, hereby certifies, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:
(1) |
the annual report on Form 20-F/A of Qwick Media Inc. for
the year ended December 31, 2013 (the Report) fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and |
|
|
(2) |
the information contained in the Report fairly presents,
in all material respects, the financial condition and results of
operations of Qwick Media Inc. |
Dated: September 19, 2014
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/s/
Kevin Kortje |
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Kevin Kortje |
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Chief Financial Officer |
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(Principal Financial Officer and |
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Principal Accounting Officer)
|
A signed original of this written statement required by Section
906, or other document authenticating, acknowledging, or otherwise adopting the
signature that appears in typed form within the electronic version of this
written statement required by Section 906, has been provided to Qwick Media Inc.
and will be retained by Qwick Media Inc. and furnished to the Securities and
Exchange Commission or its staff upon request.
Qwick Media (CE) (USOTC:QWIKF)
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