ZOOMPASS HOLDINGS, INC. (formerly known as UVIC, INC.)
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
(Expressed in US dollars)
|
|
|
|
|
|
For the
three
months
ended
|
|
|
|
|
Note
|
|
|
March 31, 2017
|
|
|
Cash flow from operating activities
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
$
|
(635,168
|
)
|
|
Non-cash items:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
|
|
4,810
|
|
|
Share-based payment expense
|
|
|
8
|
|
|
|
91,948
|
|
|
Foreign exchange loss
|
|
|
|
|
|
|
12,774
|
|
|
Changes in non-cash operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
|
|
|
|
(114,858
|
)
|
|
Deposits
|
|
|
|
|
|
|
(601,931
|
)
|
|
Inventories
|
|
|
|
|
|
|
21,109
|
|
|
Prepaids and other current assets
|
|
|
|
|
|
|
(8,608
|
)
|
|
Accounts payable and accrued liabilities
|
|
|
|
|
|
|
18,968
|
|
|
Advances to related parties
|
|
|
9
|
|
|
|
50,000
|
|
|
Client funds
|
|
|
|
|
|
|
659,374
|
|
|
Net cash used in operating activities
|
|
|
|
|
|
|
(501,582
|
)
|
|
Cash flow from investing activities
|
|
|
|
|
|
|
|
|
|
Additions to intangibles
|
|
|
5
|
|
|
|
(20,000
|
)
|
|
Net cash used in investing activities
|
|
|
|
|
|
|
(20,000
|
)
|
|
Cash flow from financing activities
|
|
|
|
|
|
|
|
|
|
Issuance of common stock through the exercise of warrants
|
|
|
7
|
|
|
|
194,198
|
|
|
Net cash provided by financing activities
|
|
|
|
|
|
|
194,198
|
|
|
Effect of exchange rate changes on cash not held in U.S. dollars
|
|
|
|
|
|
|
(1,900
|
)
|
|
Decrease in cash and cash equivalents
|
|
|
|
|
|
|
(329,284
|
)
|
|
Cash and cash equivalents, beginning of period
|
|
|
|
|
|
|
422,385
|
|
|
Cash and cash equivalents, end of period
|
|
|
|
|
|
$
|
93,101
|
|
See accompanying notes to the unaudited interim condensed consolidated financial statements
ZOOMPASS HOLDINGS, INC. (FORMERLY UVIC Inc.)
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
NOTE 1 — NATURE OF OPERATIONS AND GOING CONCERN
Zoompas Holdings, Inc. formerly known as UVIC. Inc. ("Zoompass Holdings," or the "Company") was incorporated under the laws of the State of Nevada on August 21, 2013. Effective August 22, 2016, the Company entered into an Agreement for the Exchange of Stock (the "Agreement") with Zoompass, Inc., an Ontario, Canada corporation ("Zoompass"). Pursuant to the Agreement, the Company agreed to issue 8,050,784 shares of its restricted common stock to Zoompass' shareholders ("Zoompass' shareholders") in exchange for all the shares of Zoompass Inc. owned by the Zoompass Inc.'s Shareholders. At the Closing Date, Rob Lee, a significant shareholder of the Company agreed to cancel 7,000,000 shares of the Company's common stock, which shares constituted the control shares of the Company. Other than this one significant shareholder, shareholders of the Company held 2,670,000 shares. As a result of the Agreement, Zoompass is now a wholly owned subsidiary of the Company. The Company has amended its Articles of Incorporation to change its name to Zoompass Holdings, Inc. and the appropriate forms were filed with FINRA and the SEC to change its name, address and symbol and complete a 3.5-1 forward split, which was consented to by the majority of shareholders on September 7, 2016 and approved in February 2017, for shareholders of record on September 7, 2016.
All share figures have been retroactively stated to reflect the stock split approved by shareholders, unless otherwise indicated. Additionally, the Company's shareholders consented to an increase of the shares authorized to 500,000,000 and a revision of the par value to $0.0001.
As the former Zoompass shareholders ended up owning the majority of the Company, the transaction does not constitute a business combination and was deemed to be a recapitalization of the Company with Zoompass being the accounting acquirer, accordingly the accounting and disclosure information is that of Zoompass going forward.
Zoompass Inc., was incorporated under the laws of Ontario on June 8, 2016. On June 28, 2016, pursuant to an agreement with a shareholder of Zoompass, certain net assets were acquired by Zoompass in exchange for shares of Zoompass (note 3). The net assets primarily consisted of a virtual payment platform, certain customer contracts, cash held in trust and customer deposits as well as the associated client funds. As Zoompass Inc. was incorporated in June 2016, comparative information for the three months ended March 31, 2016 has not been presented.
There is no certainty that the Company will be successful in generating sufficient cash flow from operations or achieving and maintaining profitable operations in the future to enable it to meet its obligations as they come due and consequently continue as a going concern. The Company will require additional financing this year to fund its operations and it is currently working on securing this funding through corporate collaborations, public or private equity offerings or debt financings. Sales of additional equity securities by the Company would result in the dilution of the interests of existing shareholders. There can be no assurance that financing will be available when required.
The Company expects the forgoing, or a combination thereof, to meet the Company's anticipated cash requirements for the next 12 months; however, these conditions raise substantial doubt about the Company's ability to continue as a going concern.
ZOOMPASS HOLDINGS, INC. (FORMERLY UVIC Inc.)
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
These unaudited interim condensed consolidated financial statements have been prepared on the basis that the Company will continue as a going concern, which presumes that it will be able to realize its assets and discharge its liabilities in the normal course of business as they come due. These unaudited interim condensed consolidated financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and consolidated statement of balance sheets classifications that would be necessary if the Company were unable to realize its assets and settle its liabilities as a going concern in the normal course of operations. Such adjustments could be material.
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS
SIGNIFICANT ACCOUNTING POLICIES
These unaudited condensed consolidated interim financial statements have been prepared on the same basis as the annual audited financial statements and should be read in conjunction with those annual audited financial statements filed on Form 10-K for the year ended December 31, 2016. In the opinion of management, these unaudited condensed consolidated interim financial statements reflect adjustments, necessary to present fairly the Company's financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.
The Company's significant accounting policies have not changed from the year ended December 31, 2016.
NEWLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Newly Adopted Accounting Standards
In August 2014, the FASB issued a new financial accounting standard on going concern, ASU No. 2014-15, "Presentation of Financial Statements – Going Concern (Sub-Topic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern." The standard provides guidance about management's responsibility to evaluate whether there is a substantial doubt about the organization's ability to continue as a going concern. The amendments in this Update apply to all companies. They become effective in the annual period ending after December 15, 2016, with early application permitted. There was no impact on the unaudited interim condensed consolidated balance sheets or the unaudited interim condensed consolidated statements of operations and comprehensive loss from the adoption of this standard.
Recently issued accounting pronouncements
In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)". The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The accounting standard is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017. Early adoption is not permitted. The impact on the unaudited interim condensed consolidated financial statements of adopting ASU 2014-09 will be assessed by management.
In November 2015, the FASB issued ASU No. 2015-17, "Balance Sheet Classification of Deferred Taxes," which requires that deferred tax liabilities and assets be classified on our Consolidated Balance Sheets as noncurrent based on an analysis of each taxpaying component within a jurisdiction. ASU No. 2015-17 is effective for the fiscal year commencing after December 15, 2017. The Company does not anticipate that the adoption of ASU No. 2015-17 will have a material effect on the consolidated balance sheet or the consolidated results of operations.
ZOOMPASS HOLDINGS, INC. (FORMERLY UVIC Inc.)
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 740): Recognition and Measurement of Financial Assets and Financial Liabilities. This ASU is effective for annual and interim reporting periods beginning after December 15, 2017. ASU 2016-01 enhances the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The Company is currently assessing the impact of ASU 2016-01.
In February 2016, the FASB issued ASU 2016-02, Leases. This update requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The new guidance will also require additional disclosure about the amount, timing and uncertainty of cash flows arising from leases. The provisions of this update are effective for annual and interim periods beginning after December 15, 2018. The Company is still assessing the impact that the adoption of ASU 2016-02 will have on the consolidated balance sheet and the consolidated results of operations.
NOTE 3 – ACQUISTION AND REVERSE TAKEOVER TRANSACTION
Acquisition
Zoompass Inc.
Pursuant to an agreement dated June 28, 2016, certain net assets were acquired by Zoompass in exchange for 8,060,913 shares of Zoompass. The net assets primarily consisted of a virtual payment platform, certain customer contracts, cash held in trust and deposits and the associated customer liabilities.
Based on an examination of the net assets acquired, the acquisition of the net assets was determined to be a business as defined under
ASC 805.
The value attributed to the shares given in exchange for the net assets was determined to be C$1.50 based on recent financings. The following table sets forth the preliminary allocation of the purchase price to the net assets acquired, based on preliminary estimates of fair value. The Company's assessment of fair value is substantially complete in respect of cash and cash equivalents, customer deposits and cash in trust, other current assets, accounts payable and customer liabilities. Final valuations for the remaining items are not yet complete due to the inherent complexity associated with the valuations. The below is a preliminary purchase price allocation and therefore subject to adjustment on the completion of the valuation process and analysis of resulting tax effects, if any.
|
Consideration
|
|
|
|
|
Common shares issued
|
|
$
|
9,239,110
|
|
|
|
|
|
|
|
|
Net assets acquired
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
208,723
|
|
|
Customer deposits and cash in trust
|
|
|
1,843,296
|
|
|
Accounts receivable
|
|
|
46,641
|
|
|
Prepaids
|
|
|
29,573
|
|
|
Furniture and computer equipment
|
|
|
65,651
|
|
|
Intangibles
|
|
|
8,753,337
|
|
|
Accounts payable
|
|
|
(31,019
|
)
|
|
Customer liabilities
|
|
|
(1,677,092
|
)
|
|
Total net assets acquired
|
|
$
|
9,239,110
|
|
Agreement with Zoompass Inc.
Effective August 22, 2016, UVIC, Inc. ("UVIC") entered into an Agreement for the Exchange of Stock (the "Agreement") with Zoompass, Inc., an Ontario, Canada corporation. Pursuant to the Agreement, the Company agreed to issue 8,060,913 shares of its restricted common stock to Zoompass' shareholders ("Zoompass' shareholders") in exchange for all the shares of Zoompass Inc. owned by the Zoompass' Shareholders. At the Closing Date, Rob Lee, a significant shareholder, of UVIC agreed to cancel 7,000,000 shares of UVIC's common stock, which shares constituted the control shares of the Company. Other than this one significant shareholder, shareholders of the Company held 2,670,000 shares. As a result of the Agreement, Zoompass is now a wholly owned subsidiary of the Company.
As the former Zoompass shareholders ended up owning the majority of the Company, Zoompass is deemed to be the accounting acquirer. As UVIC was the accounting acquiree the net assets acquired are reflected in the statement of equity.
As at the effective date of the reverse takeover UVIC Inc. had $nil in net assets.
Proforma information has not been presented as there was no operating activity in Zoompass Inc. from the date of incorporation to the date of the acquisition of assets, accordingly the results presented reflect all results of Zoompass during the period as well as that of the consolidated entity.
ZOOMPASS HOLDINGS, INC. (FORMERLY UVIC Inc.)
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
NOTE 4 - EQUIPMENT
|
Cost
|
|
Computer
equipment
|
|
|
Furniture
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
|
$
|
61,670
|
|
|
$
|
2,333
|
|
|
$
|
64,003
|
|
|
Foreign exchange and other
|
|
|
541
|
|
|
|
21
|
|
|
|
562
|
|
|
Balance at March 31, 2017
|
|
$
|
62,211
|
|
|
$
|
2,354
|
|
|
$
|
64,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
Computer
equipment
|
|
|
Furniture
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
|
$
|
(9,250
|
)
|
|
$
|
(234
|
)
|
|
$
|
(9,484
|
)
|
|
Depreciation
|
|
|
(4,691
|
)
|
|
|
(119
|
)
|
|
|
(4,810
|
)
|
|
Foreign exchange and other
|
|
|
(56
|
)
|
|
|
(1
|
)
|
|
|
(57
|
)
|
|
Balance at March 31, 2017
|
|
$
|
(13,997
|
)
|
|
$
|
(354
|
)
|
|
$
|
(14,351
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
|
$
|
52,420
|
|
|
$
|
2,099
|
|
|
$
|
54,519
|
|
|
Balance at March 31, 2017
|
|
$
|
48,214
|
|
|
$
|
2,000
|
|
|
$
|
50,214
|
|
NOTE 5 – INTANGIBLE ASSETS
|
Cost
|
|
Acquired
intangible
assets
|
|
|
Payment
platform
|
|
|
Total
|
|
|
Balance at December 31, 2016
|
|
$
|
8,527,349
|
|
|
$
|
100,000
|
|
|
$
|
8,627,349
|
|
|
Foreign exchange
|
|
|
75,333
|
|
|
|
-
|
|
|
|
75,333
|
|
|
Balance at March 31, 2017
|
|
$
|
8,602,682
|
|
|
$
|
100,000
|
|
|
$
|
8,702,682
|
|
The Company has capitalized $100,000 in costs related to improvements made on the acquired payment platform to further develop it for alternative business plans. When the Company has completed the development of these improvements, they will be put into service and amortized over their expected life.
As at December 31, 2016, the Company had additions of $20,000 recorded in Accounts payable and accrued liabilities.
ZOOMPASS HOLDINGS, INC. (FORMERLY UVIC Inc.)
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
NOTE 6 – FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company has exposure to liquidity risk and foreign currency risk. The Company's risk management objective is to preserve and redeploy the existing treasury as appropriate, ultimately to protect shareholder value. Risk management strategies, as discussed below, are designed and implemented to ensure the Company's risks and the related exposure are consistent with the business objectives and risk tolerance.
Liquidity Risk: Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The Company manages its liquidity by ensuring that there is sufficient capital to meet short and long-term business requirements, after taking into account cash requirements from operations and the Company's holdings of cash and cash equivalents. The Company also strives to maintain sufficient financial liquidity at all times in order to participate in investment opportunities as they arise, as well as to withstand sudden adverse changes in economic circumstances.
Management forecasts cash flows for its current and subsequent fiscal years to predict future financing requirements. Future requirements may be met through a combination of credit and access to capital markets. The Company's cash requirements are dependent on the level of operating activity, a large portion of which is discretionary. Should management decide to increase its operating activity, more funds than what is currently in place would be required. It is not possible to predict whether financing efforts will be successful or sufficient in the future. At March 31, 2017, the Company had $93,101 (December 31, 2016, $422,385), in cash and cash equivalents.
Additionally, the Company has commitments as detailed in note 10.
Currency risk: The Company's expenditures are incurred in Canadian and US dollars. The results of the Company's operations are subject to currency transaction risk. The Company mitigates foreign exchange risk through forecasting its foreign currency denominated expenditures and maintaining an appropriate balance of cash in each currency to meet the expenditures. As the Company's reporting currency is the US dollar, fluctuations in US dollar will affect the results of the Company.
Credit risk:
Credit risk is the risk of loss associated with a counterparty's inability to fulfill its payment obligations. As at March 31, 2017 and December 31, 2016, the Company's credit risk is primarily attributable to cash and cash equivalents, cash in trust and customer deposits, and accounts receivable. At March 31, 2017 and December 31, 2016, the Company's cash and cash equivalents, cash held in trust and customer deposits was held with reputable Canadian chartered banks. At March 31, 2017, the Company had an allowance for doubtful accounts of $16,531 (December 31, 2016, - $16,396) as a result of a review of collectability of the amount outstanding and the duration of time it was outstanding.
Interest rate risk:
Interest rate risk is the risk borne by an interest-bearing asset or liability as a result of fluctuations in interest rates. Financial assets and financial liabilities with variable interest rates expose the Company to cash flow interest rate risk. The Company's does not have significant interest rate risk.
Fair values: The carrying amounts reported in the consolidated balance sheet for cash and cash equivalents, cash held in trust and customer deposits, accounts receivables, accounts payable and client funds approximate fair value because of the short period of time between the origination of such instruments and their expected realization.
ZOOMPASS HOLDINGS, INC. (FORMERLY UVIC Inc.)
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
NOTE 7 – COMMON STOCK AND WARRANTS
Common stock
The Company is authorized to issue 500,000,000 common stock with a par value of $0.0001.
During March 2017 the Company issued 520,211 shares in the common stock of the Company through the exercise of warrants.
Warrants
The Company had the following warrants outstanding at March 31, 2017
|
Grant date
|
Warrants
|
Weighted Average
Exercise Price (C$)
|
Expiry
|
|
November 23, 2016
|
600,000
|
0.50
|
October 31, 2017
|
|
November 23, 2016
(1)
|
-
|
0.50
|
March 31, 2017
|
|
|
600,000
|
|
|
(1)
On November 30, 2016, the warrants expiry was amended from November 30, 2016 to March 31, 2017.
NOTE 8– SHARE-BASED PAYMENTS
The components of share-based payments expense and the black-scholes valuation assumptions are detailed in the table below.
|
Date of
grant
|
Contractual
life
|
|
Number
|
|
|
Exercise
price (C$)
|
|
|
Share-
based
payment
expense
|
|
|
Share
price (C$)
|
|
|
Risk-free
rate
|
|
|
Volatility
|
|
Dividend
yield
|
|
Expected life
(years)
|
|
|
Option grant
|
December 1, 2016
|
December 1, 2021
|
|
|
917,500
|
|
|
$
|
1.50
|
|
|
|
66,569
|
|
|
$
|
1.50
|
|
|
|
1
|
%
|
|
|
108
|
%
|
Nil
|
|
|
5.00
|
|
|
Deferred stock unit grant
|
December 1, 2016
|
December 1, 2021
|
|
|
272,500
|
|
|
$
|
1.50
|
|
|
|
25,379
|
|
|
$
|
1.50
|
|
|
|
1
|
%
|
|
|
108
|
%
|
Nil
|
|
|
5.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
91,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at March 31, 2017, the Company had the following stock options and deferred stock units outstanding.
|
Award
|
|
Fair
Value
|
|
|
Contractual
Life
(years)
|
|
|
Units
|
|
|
Number
of units
vested
|
|
|
Weighted
Average
Exercise
Price (C$)
|
|
Remaining
Expiry
Date
|
|
Options
|
|
$
|
493,080
|
|
|
|
4.67
|
|
|
|
562,500
|
|
|
|
562,500
|
|
|
|
0.50
|
|
December 1, 2021
|
|
Deferred stock units
|
|
|
210,961
|
|
|
|
4.67
|
|
|
|
187,500
|
|
|
|
187,500
|
|
|
|
-
|
|
December 1, 2021
|
|
Options
|
|
|
798,517
|
|
|
|
4.67
|
|
|
|
917,500
|
|
|
|
60,329
|
|
|
|
0.50
|
|
December 1, 2021
|
|
Deferred stock units
|
|
|
304,405
|
|
|
|
4.67
|
|
|
|
272,500
|
|
|
|
17,918
|
|
|
|
-
|
|
December 1, 2021
|
|
|
|
$
|
1,806,963
|
|
|
|
4.67
|
|
|
|
1,940,000
|
|
|
|
828,247
|
|
|
|
|
|
|
ZOOMPASS HOLDINGS, INC. (FORMERLY UVIC Inc.)
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
NOTE 9– RELATED PARTY TRANSACTIONS AND BALANCES
During 2016, the Company paid an advance on behalf of certain shareholders in the amount of $250,000. These shareholders also serve as directors and officers of the Company. $120,000 was returned by December 31, 2016, and $50,000 was returned during the period ended March 31, 2017. The $80,000 is reflected in prepaids and other current assets as at March 31, 2017 (December 31, 2016 - $130,000).
The total amount owing to the same shareholders, in relation to the services they provide to the Company in their capacity as Officers at March 31, 2017 was $211,205 (December 31, 2016 - $186,818) which includes expense reimbursements. This amount is reflected in accounts payable and is further described below.
As at March 31, 2017, the Company had an amount owing to an entity owned and controlled by the Chief Executive Officer of the Company of $156,769 (December 31, 2016 - $127,073). The amount owing relates to services provided by the Chief Executive Officer and expense reimbursements.
As at December 31, 2016, the Company had an amount owing to an entity owned and controlled by the Secretary of the Company of $54,436 (December 31, 2016 - $59,745). The amount owing relates to services provided by the Secretary and expense reimbursements.
As at March 31, 2017, the Company had an amount owing to the President of the Company of $26,086 (December 31, 2016 - $28,092) for salary.
As at March 31, 2017, the Company had an amount owing to an entity owned and controlled by the Chief Financial Officer of the Company of $25,470 (December 31, 2016 - $31,653). The amount owing relates to services provided by the Chief Financial Officer.
A total of $79,735 was recognized during the period ended March 31, 2017, for share-based payments expense to directors and officers of the Company.
As at March 31, 2017 and December 31, 2016, the amounts owing to officers of the Company are recorded in accounts payable and accrued liabilities.
NOTE 10 – COMMITMENTS AND CONTINGENCIES
The Company is currently using leased office space under a contract which runs to October 31, 2020. The amount due under this contract is as follows:
|
|
|
$
|
|
|
|
2017
|
|
|
101,948
|
|
|
2018
|
|
|
135,931
|
|
|
2019
|
|
|
135,931
|
|
|
2020
|
|
|
113,276
|
|
|
|
|
|
487,086
|
|
ZOOMPASS HOLDINGS, INC. (FORMERLY UVIC Inc.)
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US dollars)
Contingencies
From time to time, the Company may be involved in a variety of claims, suits, investigations and other proceedings arising in the ordinary course of our business, collections claims, breach of contract claims, labor and employment claims, tax and other matters. Although claims, suits, investigations and proceedings are inherently uncertain and their results cannot be predicted with certainty, the Company believes that the resolution of current pending matters will not have a material adverse effect on its business, balance sheet, results of operations or cash flow. Regardless of the outcome, litigation can have an adverse impact on the Company because of legal costs, diversion of management resources and other factors.
The Company's trademark application has been opposed in the US based on the most recent application. The trademark had been previously acquired through a US registration obtained on the basis of its Canadian registration.
The same party has challenged the Company's trademark in Canada, the Company has filed its affidavit evidence in response and is awaiting a final decision. The Company is confident that the Company's registration will be maintained.
NOTE 11 – SUBSEQUENT EVENTS
Subsequent to March 31, 2017, in April and May of 2017, the Company completed several private placements which have raised approximately C$652,998 in gross proceeds through the issuance of 320,796 non-registered shares in the common stock of the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Forward-looking Statements
This Quarterly Report on Form 10-Q contains statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended as "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements included or incorporated by reference in this Quarterly Report on Form 10-Q, other than statements of historical fact, that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements appear in a number of places, including, but not limited to in this "Management's Discussion and Analysis of Financial Condition and Results of Operations." These statements represent our reasonable judgment of the future based on various factors and using numerous assumptions and are subject to known and unknown risks, uncertainties and other factors that could cause our actual results and financial position to differ materially from those contemplated by the statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts, and use words such as "anticipate," "believe," "estimate," "expect," "forecast," "may," "will", "should," "plan," "project" and other words of similar meaning. In particular, these include, but are not limited to, statements relating to the following:
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projected operating or financial results, including anticipated cash flows used in operations;
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expectations regarding capital expenditures; and
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●
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assumptions relating to our liquidity position, including our ability to obtain additional financing, if required.
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Any or all of our forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and other factors including, among others:
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●
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the loss of key management personnel on whom the Company depends;
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●
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our ability to operate our business efficiently, manage capital expenditures and costs (including general and administrative expenses) and obtain financing if required.
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●
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our expectations with respect to our acquisition activity.
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In addition, there may be other factors that could cause our actual results to be materially different from the results referenced in the forward-looking statements, some of which are included in this Quarterly Report on Form 10-Q, including in this "Management's Discussion and Analysis of Financial Condition and Results of Operations." Many of these factors will be important in determining our actual future results. Consequently, no forward-looking statement can be guaranteed. Our actual future results may vary materially from those expressed or implied in any forward-looking statements. All forward- looking statements contained in this Quarterly Report on Form 10-Q are qualified in their entirety by this cautionary statement. Forward-looking statements speak only as of the date they are made, and the Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q, except as otherwise required by applicable law.
This discussion and analysis should be read in conjunction with the accompanying consolidated interim financial statements and related notes for the period ended March 31, 2017 as filed with the Securities and Exchange Commission and included in this Form 10-Q and the financial statements and management discussion and analysis for the period ended December 31, 2016.
The discussion and analysis of the financial condition and results of operations are based upon the financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-going basis management reviews our estimates and assumptions. The estimates were based on historical experience and other assumptions that management believes to be reasonable under the circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions.
As detailed in this 10-Q, the historic accounts are that of Zoompass Inc., a Company incorporated in June 2016. As a result there is no comparative information for the three months ended March 31, 2016.
Nature of Operations
Zoompas Holdings, Inc. formerly known as UVIC. Inc. ("Zoompass Holdings," or the "Company") was incorporated under the laws of the State of Nevada on August 21, 2013. Effective August 22, 2016, the Company entered into an Agreement for the Exchange of Stock (the "Agreement") with Zoompass, Inc., an Ontario, Canada corporation ("Zoompass"). Pursuant to the Agreement, the Company agreed to issue 8,050,784 shares of its restricted common stock to Zoompass' shareholders ("Zoompass' shareholders") in exchange for all the shares of Zoompass Inc. owned by the Zoompass Inc.'s Shareholders. At the Closing Date, Rob Lee, a significant shareholder of the Company agreed to cancel 7,000,000 shares of the Company's common stock, which shares constituted the control shares of the Company. Other than this one significant shareholder, shareholders of the Company held 2,670,000 shares. As a result of the Agreement, Zoompass is now a wholly owned subsidiary of the Company. The Company has amended its Articles of Incorporation to change its name to Zoompass Holdings, Inc. and the appropriate forms were filed with FINRA and the SEC to change its name, address and symbol and complete a 3.5-1 forward split, which was consented to by the majority of shareholders on September 7, 2016 and approved in February 2017, for shareholders of record on September 7, 2016.
All share figures have been retroactively stated to reflect the stock split approved by shareholders, unless otherwise indicated. Additionally, the Company's shareholders consented to an increase of the shares authorized to 500,000,000 and a revision of the par value to $0.0001.
As the former Zoompass shareholders ended up owning the majority of the Company, the transaction does not constitute a business combination and was deemed to be a recapitalization of the Company with Zoompass being the accounting acquirer, accordingly the accounting and disclosure information is that of Zoompass going forward.
Zoompass Inc., was incorporated under the laws of Ontario on June 8, 2016. On June 28, 2016, pursuant to an agreement with a shareholder of Zoompass, certain net assets were acquired by Zoompass in exchange for shares of Zoompass (note 3). The net assets primarily consisted of a virtual payment platform, certain customer contracts, cash held in trust and customer deposits as well as the associated client funds.
There is no certainty that the Company will be successful in generating sufficient cash flow from operations or achieving and maintaining profitable operations in the future to enable it to meet its obligations as they come due and consequently continue as a going concern. The Company will require additional financing this year to fund its operations and it is currently working on securing this funding through corporate collaborations, public or private equity offerings or debt financings. Sales of additional equity securities by the Company would result in the dilution of the interests of existing shareholders. There can be no assurance that financing will be available when required.
The Company expects the forgoing, or a combination thereof, to meet the Company's anticipated cash requirements for the next 12 months; however, these conditions raise substantial doubt about the Company's ability to continue as a going concern.
Financial information in this filing have been prepared on the basis that the Company will continue as a going concern, which presumes that it will be able to realize its assets and discharge its liabilities in the normal course of business as they come due. These unaudited interim condensed consolidated financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and consolidated statement of balance sheet classifications that would be necessary if the Company were unable to realize its assets and settle its liabilities as a going concern in the normal course of operations. Such adjustments could be material.
Significant Accounting Policies and Estimates
The discussion and analysis of the financial condition and results of operations are based upon the condensed consolidated interim financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-going basis management reviews our estimates and assumptions. The estimates were based on historical experience and other assumptions that management believes to be reasonable under the circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions, but management does not believe such differences will materially affect our financial position or results of operations.
From the inception of Zoompass Inc. to March 31, 2017 the Company, inclusive of the results of Zoompass Holdings, Inc., from August 22, 2016, has generated net losses. The Company may incur an additional operating loss for the three month period ended June 30, 2017, until such time that its additional pipeline of new revenue streams are launched.
The Company has launched its mobility products and solutions program consisting of new and certified customer pre-owned phones and tablets, branded accessories and endless aisle program availability.
In connection with the launch of the mobility products and solutions programs the Company entered into several agreements more fully described below.
AGREEMENT WITH SYNNEX
The Company has entered into to a sales agent agreement with SYNNEX Canada Limited. ("SYNNEX Canada"). SYNNEX Canada Limited, is a wholly-owned subsidiary of SYNNEX Corporation a leading distributor of technology products to resellers and system builders across Canada. It is expected that the agreement will propel the existing mobility strategy within Synnex to increase their reach within North America through national retail and wholesale channels, as well as value added resellers. The agreement should benefit Zoompass by giving direct access to those channels for cross-selling opportunities. Through this partnership, Synnex will gain access to Zoompass' expertise and established relationships with original equipment manufacturers and mobile virtual network operations and other channels opportunities.
AGREEMENT WITH SKY
The Company has agreed to a marketing partnership with SKY Devices LLC ("SKY") to provide international brand exposure into expanding markets and key retailers. "SKY is a fast growing mobile manufacturer developing smartphones with premium quality modern designs and robust performance". This partnership is in line with our strategy of being a unique integrated fintech company by bridging mobility with a global mobile money platform.
AGREEMENT WITH U-VEND GROUP
Zoompass has entered into an agreement with U-Vend Group to fit U-Vend Group vending solutions with mobility products and provide North American brand exposure into key markets and retailers. U-Vend Group owns and operates kiosks and has partnered with numerous national consumer product companies to deliver new and innovative customer retail experiences in automated "frictionless" settings. The Company is well positioned to sell U-Vend Group solutions within Canada, USA and Mexico by leveraging its existing relationships and network within the national retailer, airport and mall channels. The offering will leverage a "Grab and Go" model where consumers can use their credit card in a vending machine to purchase mobility devices and products.
AGREEMENT WITH STARLINK GROUP LLC
The Company has agreed to a marketing partnership with Starlink Group LLC ("STARLINK") to provide international brand exposure into expanding markets and key retailers. STARKLINK is a wholesale distributor qualified in marketing cellphones and electorinc equipment offering a variety of models and brands. This partnership is in line with Zoompass' strategy of being a unique integrated fintech company by bridging mobility with a global mobile money platform.
The Company has entered into a Lender Referral Agreement with a third party to provide financing allowing the Company to launch is virtual financing program. Enabled by the Zoompass Mobile Money Platform, the program provides complete turnkey financing options for retail customers within locations across North America.
The program allows for real time credit approval and allows the Company to leverage its card products to provide greater credit to the consumer with residual approved funds issued through prepaid cards.
GIANT TIGER PROGRAM
The Company through its alliance with Home Trust, launched of an onsite credit program with retail chain Giant Tiger. Giant Tiger was founded in 1961 and is Canadian owned and operated. The privately held, franchise based company, has over 200 stores in eight provinces, with many more opening, and employs over 7,000 team members. This program combines Zoompass' core competencies with its ability to facilitate the offering of credit facilities through its partners. The success of the launch hinged on the ability to offer "on-the-spot" quick credit approval for customers. This was accomplished utilizing Zoompass' mobile money platform in conjunction with Home Trust's credit and adjudication facilities. In total, consumers are on-boarded in under 5 minutes and are approved in under 20 seconds.
The Company launched its new reloadable prepaid card during December of 2016. The Company shipped 15,000 prepaid cards to select retail locations in December 2016 and is currently in the process of delivering another 50,000 cards to retail locations.
Results of operations for the period ended March 31, 2017
Revenue and cost of sales
The Company's revenue consists of various fees associated with its prepaid debit card program. For the period ended March 31, 2017, the Company generated gross card revenue of $245,481 and commissions and agent fees of $(26,843). Additionally, the Company recognized revenue from the sale of mobility products of $36,045. The Company recorded processing and card fees of $189,554 and cost of goods sold related to mobility products of $27,470.
General and administrative and other expenses
The Company incurred salaries and full-time consultant expenses of $395,896 for the period ended March 31, 2017.
Rent for the period ended March 31, 2017, was $35,203 and is related to the Company's corporate office.
For the period ended March 31, 2017, the Company incurred share-based payment expense of $91,948. The share-based payment expense relates to certain options and deferred stock units that were granted in December, 2016 and vests over a period of 36 months from the date of grant.
The Company recognized depreciation expense of $4,810 and relates to the depreciation of computer equipment and furniture acquired. As the Company, is currently enhancing the payment platform acquired to support its additional pipeline of revenue streams, costs incurred to enhance the platform are capitalized and are not being depreciated.
The Company incurred $38,532 in professional fees related to the costs of lawyers and reporting accountants.
Telecommunication expense is comprised of telephone and internet expenses. Included in telecommunication expense is the costs related to regular and ongoing technological support. For the period ended March 31, 2017, the Company incurred telecommunication expense of $2,991.
Office and sundry expense includes office expenses such as supplies, insurance and additional costs incurred to support the corporate head office. For the period ended March 31, 2017, the Company incurred $74,381 in office and sundry expenses.
Included in filing fees and regulatory costs are costs associated with the Company's listing fees and transfer agent costs. For the period ended March 31, 2017, the Company incurred filing fees and regulatory costs of $10,605.
The Company recorded a foreign exchange loss of $12,774. The loss was primarily related to the realization and settlement of payables at exchange rates during the periods of strengthening of the US dollar relative to the Canadian dollar.
The Company incurred $5,687 in bank fees during the period ended March 31, 2017.
For the three months ended March 31, 2017, the Company incurred a net loss of $635,168 or $0.02 per share.
Liquidity and Capital Resources
As at March 31, 2017, the Company had a positive net working capital balance of $25,733 compared with $359,600 at December 31, 2016. The decrease was primarily due to a use of cash for operating and investing activities during the period.
Operations for the period ended March 31, 2017, were primarily funded through cash balances at December 31, 2016, and the cash received from the issuances of shares of the Company's common stock as a result of the exercise of warrants.
Subject to the launch of the additional pipeline of revenue streams, there is no certainty that we will be successful in generating sufficient cash flow from operations or achieving and maintaining profitable operations in the future to enable us to meet our obligations as they come due and consequently continue as a going concern. The Company may require additional funds to further develop our expanded business plan. The Company may require additional financing this year to fund our operations and is examining possible sources of funding beyond the existing cash generated from operations. Sales of additional equity securities would result in the dilution of the interests of existing stockholders. There can be no assurance that financing will be available when required. In the event that the necessary additional financing is not obtained, the Company would reduce its discretionary overhead costs substantially, or otherwise curtail operations.
The Company expects the forgoing, or a combination thereof, to meet our anticipated cash requirements for the next 12 months; however, these conditions raise substantial doubt about our ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on recoverability and reclassification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
Net Cash Used in Operating Activities
During the period ended March 31, 2017, cash used in operations was $501,582. This was primarily the result of the net loss incurred offset to some extent by changes in non-cash working capital of $24,054.
Net Cash Provided by Investing Activities
During the period ended March 31, 2017, the Company invested $20,000 during the period related to its software platform.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was $194,198 through the issuance of shares in the common stock of the Company.
Commitments
The Company is currently using leased office space under a contract which runs to October 31, 2020. The amount due under this contract is as follows:
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|
|
$
|
|
|
|
2017
|
|
|
101,948
|
|
|
2018
|
|
|
135,931
|
|
|
2019
|
|
|
135,931
|
|
|
2020
|
|
|
113,276
|
|
|
|
|
|
487,086
|
|
Financial instruments and risk factors
The Company has exposure to liquidity risk and foreign currency risk. The Company's risk management objective is to preserve and redeploy the existing treasury as appropriate, ultimately to protect shareholder value. Risk management strategies, as discussed below, are designed and implemented to ensure the Company's risks and the related exposure are consistent with the business objectives and risk tolerance.
Liquidity Risk: Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The Company manages its liquidity by ensuring that there is sufficient capital to meet short and long-term business requirements, after taking into account cash requirements from operations and the Company's holdings of cash and cash equivalents. The Company also strives to maintain sufficient financial liquidity at all times in order to participate in investment opportunities as they arise, as well as to withstand sudden adverse changes in economic circumstances.
Management forecasts cash flows for its current and subsequent fiscal years to predict future financing requirements. Future requirements may be met through a combination of credit and access to capital markets. The Company's cash requirements are dependent on the level of operating activity, a large portion of which is discretionary. Should management decide to increase its operating activity, more funds than what is currently in place would be required. It is not possible to predict whether financing efforts will be successful or sufficient in the future. At March 31, 2017, the Company had $93,101 (December 31, 2016, $422,385), in cash and cash equivalents.
Additionally, the Company has commitments as detailed in note 10 to the interim unaudited condensed consolidated financial statements.
Currency risk: The Company's expenditures are incurred in Canadian and US dollars. The results of the Company's operations are subject to currency transaction risk. The Company mitigates foreign exchange risk through forecasting its foreign currency denominated expenditures and maintaining an appropriate balance of cash in each currency to meet the expenditures. As the Company's reporting currency is the US dollar, fluctuations in US dollar will affect the results of the Company.
Credit risk:
Credit risk is the risk of loss associated with a counterparty's inability to fulfill its payment obligations. As at March 31, 2017 and December 31, 2016, the Company's credit risk is primarily attributable to cash and cash equivalents, cash in trust and customer deposits, and accounts receivable. At March 31, 2017 and December 31, 2016, the Company's cash and cash equivalents, cash held in trust and customer deposits was held with reputable Canadian chartered banks. At March 31, 2017, the Company had an allowance for doubtful accounts of $16,531 (December 31, 2016, - $16,396) as a result of a review of collectability of the amount outstanding and the duration of time it was outstanding.
Interest rate risk:
Interest rate risk is the risk borne by an interest-bearing asset or liability as a result of fluctuations in interest rates. Financial assets and financial liabilities with variable interest rates expose the Company to cash flow interest rate risk. The Company's does not have significant interest rate risk.
Fair values: The carrying amounts reported in the unaudited interim condensed consolidated balance sheet for cash and cash equivalents, cash held in trust and customer deposits, accounts receivables, accounts payable and client funds approximate fair value because of the short period of time between the origination of such instruments and their expected realization.
Related Party Transactions
During 2016, the Company paid an advance on behalf of certain shareholders in the amount of $250,000. These shareholders also serve as directors and officers of the Company. $120,000 was returned by December 31, 2016, and $50,000 was returned during the period ended March 31, 2017. The $80,000 is reflected in prepaids and other current assets as at March 31, 2017 (December 31, 2016 - $130,000).
The total amount owing to the same shareholders, in relation to the services they provide to the Company in their capacity as Officers at March 31, 2017 was $211,205 (December 31, 2016 - $186,818) which includes expense reimbursements. This amount is reflected in accounts payable and is further described below.
As at March 31, 2017, the Company had an amount owing to an entity owned and controlled by the Chief Executive Officer of the Company of $156,769 (December 31, 2016 - $127,073). The amount owing relates to services provided by the Chief Executive Officer and expense reimbursements.
As at December 31, 2016, the Company had an amount owing to an entity owned and controlled by the Secretary of the Company of $54,436 (December 31, 2016 - $59,745). The amount owing relates to services provided by the Secretary and expense reimbursements.
As at March 31, 2017, the Company had an amount owing to the President of the Company of $26,086 (December 31, 2016 - $28,092) for salary.
As at March 31, 2017, the Company had an amount owing to an entity owned and controlled by the Chief Financial Officer of the Company of $25,470 (December 31, 2016 - $31,653). The amount owing relates to services provided by the Chief Financial Officer.
A total of $79,735 was recognized during the period ended March 31, 2017, for share-based payments expense to directors and officers of the Company.
As at March 31, 2017 and December 31, 2016, the amounts owing to officers of the Company are recorded in Accounts payable and accrued liabilities.
Newly Adopted and Recently Issued Accounting Pronouncements
Newly Adopted Accounting Standards
In August 2014, the FASB issued a new financial accounting standard on going concern, ASU No. 2014-15, "Presentation of Financial Statements – Going Concern (Sub-Topic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern." The standard provides guidance about management's responsibility to evaluate whether there is a substantial doubt about the organization's ability to continue as a going concern. The amendments in this Update apply to all companies. They become effective in the annual period ending after December 15, 2016, with early application permitted. There was no impact on the unaudited interim condensed consolidated balance sheets or the unaudited interim condensed consolidated statements of operations and comprehensive loss from the adoption of this standard.
Recently issued accounting pronouncements
In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)". The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The accounting standard is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017. Early adoption is not permitted. The impact on the unaudited interim condensed consolidated financial statements of adopting ASU 2014-09 will be assessed by management.
In August 2014, the FASB issued a new financial accounting standard on going concern, ASU No. 2014-15, "Presentation of Financial Statements – Going Concern (Sub-Topic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern." The standard provides guidance about management's responsibility to evaluate whether there is a substantial doubt about the organization's ability to continue as a going concern. The amendments in this Update apply to all companies. They become effective in the annual period ending after December 15, 2016, with early application permitted. There was no impact on the unaudited interim condensed consolidated balance sheets or the unaudited interim condensed consolidated statements of operations and comprehensive loss from this standard.
In November 2015, the FASB issued ASU No. 2015-17, "Balance Sheet Classification of Deferred Taxes," which requires that deferred tax liabilities and assets be classified on our Consolidated Balance Sheets as noncurrent based on an analysis of each taxpaying component within a jurisdiction. ASU No. 2015-17 is effective for the fiscal year commencing after December 15, 2017. The Company does not anticipate that the adoption of ASU No. 2015-17 will have a material effect on the consolidated balance sheet or the consolidated results of operations.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 740): Recognition and Measurement of Financial Assets and Financial Liabilities. This ASU is effective for annual and interim reporting periods beginning after December 15, 2017. ASU 2016-01 enhances the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The Company is currently assessing the impact of ASU 2016-01.
In February 2016, the FASB issued ASU 2016-02, Leases. This update requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The new guidance will also require additional disclosure about the amount, timing and uncertainty of cash flows arising from leases. The provisions of this update are effective for annual and interim periods beginning after December 15, 2018. The Company is still assessing the impact that the adoption of ASU 2016-02 will have on the consolidated balance sheet and the consolidated results of operations.
Off Balance Sheet Arrangements
The Company has no off-balance sheet transactions.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company" (as defined by §229.10(f)(1)), the Company is not required to provide the information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
During the period ended March 31, 2017, there were no changes in our internal controls over financial reporting (as defined in Rule 13a- 15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Evaluation of Disclosure Controls and Procedures
The Company maintains "disclosure controls and procedures" as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, that are designed to ensure that information required to be disclosed by the Company in reports that are filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
As of the end of the period covered by this Quarterly Report, the Company carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(b) and 15d-15(b). Based upon this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures as of the end of the period covered by this Quarterly Report were ineffective due to a lack of
segregation of duties, due to limited administrative and financial personnel and related resources and as only one of our directors is independent
segregation of duties as well as lack of administrative and financial personnel and related resources.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.
ITEM 1A. RISK FACTORS
The Company, as a "smaller reporting company" (as defined by §229.10(f)(1)), is not required to provide the information required by this Item.
ITEM 2. RECENT UNREGISTERED SALES OF EQUITY SECURITIES
During March 2017 the Company issued 520,211 shares in the common stock of the Company through the exercise of warrants.
Subsequent to March 31, 2017, in April and May of 2017, the Company completed several private placements which have raised approximately C$652,998 in gross proceeds through the issuance of 320,796 non-registered shares in the common stock of the Company.
ITEM 3. EXHIBITS
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Exhibit No.
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Description
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31.1
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31.2
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32.1
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32.2
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101.INS
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XBRL Instance Document
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101.SCH
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XBRL Taxonomy Extension Schema Document
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase Document
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase Document
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101.LAB
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XBRL Taxonomy Extension Label Linkbase Document
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase Document
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