UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
Amendment No. 2
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event
reported): July 21, 2014
iWallet Corporation
(Exact name of small business issuer
as specified in its charter)
Nevada |
27-1830013 |
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
7394 Trade Street, San Diego, California 92121 |
(Address of principal executive offices) |
1-858-530-2958 |
(Issuer’s telephone number) |
Queensridge Mining Resources, Inc.,
10975 East 47th Ave., Denver, CO 80239
(Former name or former address, if changed
since last report) |
Check the appropriate box below if the Form 8-K filing is
intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction
A.2. below):
[ ] Written communications pursuant to
Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule
14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant
to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant
to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
EXPLANATORY
NOTE
This Amendment to the Current Report on Form 8-K amends the
Current Report on Form 8-K that was originally filed with the U.S. Securities and Exchange Commission on July 25, 2014 and amended
on July 31, 2014. This Amendment is being filed in response to the comments of the Securities and Exchange Commission issued August
21, 2014.
TABLE OF CONTENTS
Section 1 – Registrant’s Business and Operations
Item 1.01 Entry Into a Material Definitive
Agreement
On July 21, 2014, we entered into an Agreement and Plan of Merger
(the “Merger Agreement”) with iWallet Corporation, a private California corporation (“iWallet”), and our
subsidiary formed for the purposes of the transaction, iWallet Acquisition Corp. (the “Acquisition Sub”). Pursuant
to the Merger Agreement, iWallet merged with and into the Acquisition Sub, which resulted in iWallet becoming our wholly-owned
subsidiary (the “Acquisition”). Immediately following the Acquisition, the Acquisition Sub was merged with and into
our corporation. In connection with this subsequent subsidiary merger, we changed our corporate name to “iWallet Corporation.”
In addition, pursuant to the terms and conditions of the Merger
Agreement:
| § | The holders of all of the capital stock of iWallet issued and outstanding immediately prior to
the closing of the Acquisition exchanged their shares on a pro-rata basis for 10,000,000 newly-issued shares of our common stock. |
| § | Certain Secured Convertible Debentures previously issued by iWallet were converted to newly issued
shares of our common stock and warrants. The former iWallet debenture holders were issued a total of 3,222,120 shares of common
stock, and warrants to purchase 3,222,120 shares of common stock at a price of $0.20 per share, exercisable for two (2) years.
|
| § | Immediately upon closing of the Acquisition, we closed a private offering of Units at a price
of $0.30 per Unit, each Unit consisting of one (1) share of common stock and one (1) warrant to purchase one share of common stock
at a price of $0.60 per share, exercisable for two (2) years. A total of 6,479,002 shares of common stock and 6,479,002 warrants
were issued to subscribers in the offering. In addition, a total of 583,110 Units were issued as compensation to certain licensed
securities brokers who assisted with the offering. The offering was conducted pursuant to Rule 506 under Regulation D and was conditional
upon the closing of the Acquisition. |
| § | Following the closing of the Acquisition, our former controlling
shareholder, Philip Stromer, and several other individuals canceled and returned a total of 25,076,643 shares of common stock. |
| § | As a result, immediately following the Acquisition, there were 29,321,379 shares of our common
stock issued and outstanding. |
| § | Our sole officer and director immediately prior to the Acquisition, Jerry Chatel, resigned from
the board and from all offices. |
| § | Steven Cabouli, who was the sole director of iWallet prior to the Acquisition, was appointed
as our new sole director. |
| § | Our board appointed the following new officers and directors, each of who had served in the same
capacity as an officer of iWallet prior to the acquisition: |
- Steven Cabouli, President, Chief Executive
Officer, and Chief Financial Officer
- Orlando LaCalle, Chief Marketing Officer
| § | Concurrently with the Acquisition, our former controlling shareholder,
Philip Stromer, received a transfer of all assets and agreed to cancel and/or assume all liabilities related to our pre-acquisition
business. |
As of the date of the Merger Agreement and currently, there
are no material relationships between us or any of our affiliates and iWallet, other than with regard to the Merger Agreement.
The foregoing description of the Merger Agreement does not purport
to be complete and is qualified in its entirety by reference to the complete text of the Merger Agreement, which is filed as Exhibit
2.1 hereto and incorporated herein by reference.
Section 2 – Financial Information
Item 2.01. Completion of Acquisition or Disposition
of Assets
As used in this Current Report on Form 8-K, all references
to the “Company,” “iWallet,” “we,” “our” and “us” or similar terms,
refer to iWallet Corporation, a Nevada corporation, including its predecessors and its subsidiaries, except where the context makes
clear that the reference is only to iWallet. Information about the Company and the principal terms of the Acquisition are set forth
below.
Acquisition
The Acquisition. On July 21, 2014, in accordance with
the Merger Agreement iWallet merged with and into the Acquisition Sub, which resulted in iWallet becoming our wholly-owned subsidiary.
Immediately following the Acquisition, the Acquisition Sub was merged with and into our corporation. In exchange for all of the
issued and outstanding shares of iWallet, the shareholders of iWallet received a total of 10,000,000 shares of our common stock.
In addition, the holders of certain secured convertible debentures issued by iWallet received 3,222,120 shares of our common stock,
subscribers in a private offering made contingent upon the Acquisition received 6,479,002 shares of common stock, and brokers participating
in the private offering received 583,110 shares of common stock as compensation
There were 34,113,790 shares of our common stock outstanding
before giving effect to the stock issuances in and related to the Acquisition and the cancellation of 25,076,643 shares by Mr.
Philip Stromer and certain other shareholders. Following these events, there were 29,321,379 shares outstanding, including:
| Shares | |
Held by: |
| 10,000,000 | |
former iWallet shareholders |
| 9,037,147 | |
existing shareholders |
| 3,222,120 | |
former iWallet debenture holders |
| 6,479,002 | |
subscribers in private offering |
| 583,110 | |
brokers assisting with private offering |
| 29,321,379 | |
|
The issuance of shares of our common stock to the former
holders of iWallet’s capital stock and convertible debentures in connection with the Acquisition was not registered under
the Securities Act of 1933, as amended (the “Securities Act”), but was performed in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act and/or Regulation D promulgated under that section, which exempts transactions
by an issuer not involving any public offering. Further, our private offering Units consisting of shares and warrants, at $0.60
per Unit, was made in reliance upon Rule 506 under Regulation D.
Our Form 10-Q for the period ended March 31, 2014 reported a
total of 6,427,800 shares of common stock issued and outstanding as of May 19, 2014. Our total issued and outstanding common stock
subsequently became 29,321,379 shares following the events reported herein as follows:
(a) 6,427,800
x 5.307225
= 34,113,790 shares (5.307225 for 1 forward split effective
July 10, 2014)
(b) 34,113,790
+ 10,000,000 (shares issued to former iWallet shareholders
pursuant to Merger Agreement)
+ 3,222,120 (shares issued to former iWallet debenture holders
pursuant to Merger Agreement)
+ 6,479,002 (shares issued to subscribers in the private
offering)
+ 583,110 (shares issued as broker compensation)
= 54,398,022 shares
(c) 54,398,022
- 25,076,643 (shares held by Mr. Stromer and others
returned to treasury and cancelled)
= 29,321,379 shares
Prior to the Acquisition, there were no material relationships
between us and iWallet, or any of their respective affiliates, directors or officers, or any associates of their respective officers
or directors, other than as disclosed in this Current Report.
General Changes Resulting from the Acquisition. Following
the Acquisition, we intend to carry on the business of iWallet as our sole line of business. We have relocated our principal executive
offices to 7394 Trade Street, San Diego, California 92121. Our telephone number is now 1-858-530-2958.
Changes to the Board of Directors. Jerry Chatel resigned
as our sole officer and director. Pursuant to the terms of the Merger Agreement, the officers and directors of iWallet prior to
the Acquisition were appointed as our officers and directors.
All directors hold office for one-year terms until the election
and qualification of their successors. Officers are elected by the board of directors and serve at the discretion of the board.
Accounting Treatment; Change of Control. The Acquisition
is being accounted for as a “reverse acquisition,” as the stockholders of iWallet possess majority voting control of
the company immediately following the Acquisition and now control our board of directors. iWallet is deemed to be the accounting
acquirer in the reverse acquisition. Consequently, the assets and liabilities and the historical operations of iWallet prior to
the Merger will be reflected in the financial statements and will be recorded at the historical cost basis of iWallet. Our consolidated
financial statements after completion of the Acquisition will include the assets and liabilities of both companies, the historical
operations of iWallet, and our operations from the closing date of the Acquisition. Following the Acquisition our fiscal year-end
has been changed from June 30 to December 31. As a result of the issuance of the shares of our common stock pursuant to the Acquisition,
a change in control of the Company occurred on July 21, 2014. Except as described herein, no arrangements or understandings exist
among present or former controlling stockholders with respect to the election of members of our board of directors and, to our
knowledge, no other arrangements exist that might result in a future change of control of the Company. We will continue to be a
“small business issuer,” as defined under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
following the Acquisition.
Description of Our Company
Company Overview
We were incorporated as “Queensridge Mining Resources,
Inc.” on January 29, 2010, in the State of Nevada for the purpose of engaging in mineral exploration. On July 21, 2014, we
entered into the Merger Agreement with iWallet, whereby we acquired all of the issued and outstanding common stock of iWallet through
a subsidiary. Following the Acquisition, we merged the subsidiary with and into our corporation, and changed our name to “iWallet
Corporation” as part of that process. As a consequence of the Acquisition, we will no longer pursue the exploration and development
of our mineral property. We have assigned our mineral claim and all related assets to our former majority shareholder who has agreed
to indemnify us against any related liabilities.
As a result of entering into the Merger Agreement, we are now in
the business of designing and developing biometric locking wallets and related physical, personal security products.
Description of Business
iWallet is a designer and developer of innovative, physical, personal
security products that incorporate the latest security and communication technologies to protect against identity, personal and
financial information theft. iWallet is a registered trademark in the United States. The flagship iWallet product is a biometric
locking wallet that protects cash, credit cards and personal information with a proprietary fingerprint security system. The iWallet
features a carbon fiber or aluminum chassis and protects credit cards from being read by many types of RF devices in public spaces.
Using a free app, iWallet owners can tether the iWallet to a supported smart device. A proximity alarm sounds on both devices when
separated by about five meters. In addition, GPS tracking capabilities are expected to be available on future models.
iWallet is based in San Diego, California
and was founded in 2009. The initial version of the iWallet generated sales of over $700,000 in the first eighteen months following
it launch. With improved designs and a better manufacturing partner, iWallet is ready to re-launch the product on a larger scale.
Established sales channels include Neiman Marcus in North America, Harrods in England, Highline Peak Group in Canada, and NeedItWantItGadgets
in New Zealand . Our prospective sales channels include Dufry, Touch of Modern, Skymall, Travelsmith, Hammacher Schlemmer, and
private branding for Montblanc, Porche Design, Ducatti, Gucci, and Bugatti. . iWallet owns the trademark “iWallet”
for wallets and wallets connected to smartphones in the USA and has patents worldwide. iWallet has been licensed by Apple Inc.
as an official Accessory Developer.
Products and Technology
At this time, iWallet is preparing to re-launch
its flagship product and the iWallet 2.0. The suggested retail price will be $490. The new iWallet are expected to have the following
features:
| Ø | Sleek, compact industrial design with carbon fiber case |
| Ø | Pairs with the owner’s cellular phone via bluetooth technology |
| Ø | Patented, exclusive tamper resistant locking mechanism utilizes innovative
fingerprint biometric reader for unlocking |
| Ø | Unique latch control that only consumes power during latching hence
providing extended battery life |
| Ø | RFID blocking capability for enhanced wireless protection |
| Ø | Speaker providing audible feedback |
| Ø | GPS tracking capabilities |
Over the course of the next twelve months, iWallet intends to bring
the following additional products to market:
| Ø | An inexpensive aluminum “Best Buy” version” that
is expected to retail for less than $150 and be offered in variety of colors to choose from with etching and engraving capabilities |
| Ø | A secure passport case called the iPassport |
| Ø | A women’s iWallet version |
| Ø | A secure mobile personal safe to store pharmaceuticals in |
| Ø | A smart “padlock” with a biometric reader for gym lockers
and other personal areas that require security |
iWallet holds over twenty patents and patent
applications filed in various countries around the world. iWallet’s products are currently manufactured under contract by
a manufacturer based in Zhuhai, China, Apollo Electronics. The suppliers for our raw materials are currently Future Electronics,
Namiki Motors, Cotech Taiwan, Digital Persona, Avnet Electronics, Avnet Taiwan, and Apollo Electronics. Historically, our largest
major customer has been Neiman Marcus, which has been the source of approximately 60% of our gross revenues over the past year.
As we expand our sales and distribution channels, we expect that our customer base will diversify and that, in the future, our
revenues will not be dependent upon one or a few major customers.
We hold both utility and design patents
and patent applications. All of our current utility patents will remain in effect until September 14, 2027. The duration of our
design patents varies by country. The expiration dates of our current design patents, by country, is as follows:
Canada |
June
10, 2023 |
Europe |
December 9, 2036 |
China |
December 12, 2021 |
Japan |
May 18, 2032 |
Russia |
December 13, 2036 |
Singapore |
December 9, 2026 |
Taiwan |
December 9, 2023 |
Market and Competition Overview
iWallet’s primary target demographic will be consumers who
are in the market for high-end luxury wallets and similar accessories. iWallet does not believe that the $500 approximate retail
price to the end user will be obstacle for our initial target demographic. The carbon fiber process is labor intensive to
manufacture. High net worth individuals appreciate the advantages of carbon fiber construction and spend tens of thousands of dollars
outfitting their automobiles and other accessories. However, the more affordable aluminum version expected to retail for under
$150 will be launched in 2015 once economies of scale are achieved.
A comparison of the iWallet to the leather or canvas wallets currently
offered by several major fashion designers is below:
Brand |
Model |
Price |
Material |
Bluetooth (Anti-theft/loss) |
Fingerprint Reader |
RFID Anti-Theft |
Owner Access Only |
Cartier |
Santos de Cartier |
$380 |
Leather |
No |
No |
No |
No |
Salvatore Ferragamo |
Bifold |
$350 |
Leather |
No |
No |
No |
No |
Louis Vuitton |
Classic |
$565 |
Canvas |
No |
No |
No |
No |
Gucci |
Bifold |
$550 |
Canvas |
No |
No |
No |
No |
iWallet |
Slim |
$490 |
Carbon Fiber |
Yes |
Yes |
Yes |
Yes |
We believe the security, high technology, slim design, and carbon
fiber construction of the iWallet can position it to compete for a share of the luxury wallet market.
Employees
In addition to the named executive officers
discussed above, we also employ a Project Manager. Upon the closing of this Offering or shortly thereafter, we plan to recruit
and retain a new CEO, as well as an in-house bookkeeper. We do not have plans to add any other additional employees during 2014.
Description of Property
Our corporate headquarters are currently located in San
Diego, California. We current lease approximately 3,000 square feet of space for $2,500 per month with a lease for one year
that began on June 1, 2014.
Legal Proceedings
We are not a party to any material pending legal proceedings.
Compliance with Environmental Laws
We have not incurred and do not anticipate incurring any expenses
associated with environmental laws.
Management’s
Discussion and Analysis or Plan of Operation
THE FOLLOWING DISCUSSION SHOULD BE READ TOGETHER WITH THE INFORMATION
CONTAINED IN THE FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE IN THIS CURRENT REPORT ON FORM 8-K.
Certain statements, other than purely historical information, including
estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions
upon which those statements are based, are “forward-looking statements.” These forward-looking statements generally
are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,”
“intends,” “strategy,” “plan,” “may,” “will,” “would,”
“will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking
statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual
results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future
plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects
on a consolidated basis include those discussed in this Current Report on Form 8-K, particularly under the heading “Risk
Factors”. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance
should not be placed on such statements.
Sales, Distribution and Growth Strategy
Our plan for marketing and raising awareness for the iWallet includes
the following strategies:
| • | Sell
and market at major trade shows that attract global buyers such as the CES. |
| • | Align
iWallet with a high profile celebrity as the face for iWallet. |
| • | Optimize
website to gain greater distributor inquiry, continued media attention and wider market
accessibility through links to other major potential purchasers. |
| • | Continue
worldwide media attention, primarily from BBC Worldwide, Fox News (Fox and Friends),
Discovery Channel. |
Our established
distribution channels for the iWallet, as originally launched, include the following:
| • | Neiman
Marcus in North America |
| • | In
Canada for Centurion (black card) Amex members, who will be able to redeem points in
exchange for an iWallet through Highline Peak Group |
| • | NeedItWantItGadgets
in New Zealand |
As of July 2014, the following are current prospective sales channels:
| • | Private
branding for Montblanc, Porsche Design, Ducatti, Gucci, and Bugatti. We are currently
in partnering or licencing discussions with all of these companies. |
| • | Dufry,
a global duty free company with 1,100 locations in 45 countries |
iWallet plans to increase its consumer off take within newly gained
distribution at major regional high-end department stores, and to expand to private brand stores. Together with its distribution
partners, iWallet is targeting major national retail channels. We believe a partnership with any one leading national chain would
be transformative. iWallet intends to develop its website towards wider market accessibility through links to other major potential
purchasers. iWallet will continue to be featured in ingadget.com and gizmodo.com, where the iWallet has been dubbed “The
Fort Knox of Wallets.” iWallet will also begin limited selling efforts in key international markets using further regional
distributors in Europe, Asia, Canada, Australia, and South America. iWallet is also in discussions with distribution companies
in key opportunity geographies.
Results of Operations
Results of Operations for iWallet Corporation for the Years Ended
December 31, 2013 and December 31, 2012
During the fiscal year ended December 31, 2013, we generated sales
of $85,769. Our cost of sales was $63,585, resulting in gross profit of $22,184. Our expenses for the year ended 2013 were $253,352,
and consisted of legal and professional fees of $73,278, office and general expenses of $9,583, travel expenses of $23,475, interest
and bank fees of $2,515, amortization of intangible assets of $5,288, and a provision for loss on a contractual tooling commitment
of $139,213. We also recorded a recovery of a provision for income taxes of $4,247. Our net loss for the year ended December 31,
2013 was $226,921. By comparison, during the year ended December 31, 2012, we generated sales of $159,288. Our cost of sales was
$79,550, resulting in gross profit of $79,738. Our expenses for the year ended 2012 were $67,600, and consisted of legal and professional
fees of $41,491, office and general expenses of $9,040, travel expenses of $6,786, interest and bank fees of $3,179, amortization
of intangible assets of $3,904, and research and development expenses of $3,200. We also recorded a provision for income taxes
of $4,247. Our net income for the year ended December 31, 2013 was $7,891.
Our sales during the year ended December 31, 2013 were lower than
in the prior year due to manufacturing delays. In addition, our expenses were higher during the year ended December 31, 2013 than
in the prior year primarily due to the provision for loss on a tooling commitment. On May 26, 2011, we signed a contract with
a supplier under which we were required to pay for tooling costs in addition to our regular purchase orders (the "tooling
commitment"). Under the terms of the tooling commitment we were required to pay for 30% of the contracted tooling costs upon
execution (the "tooling commitment deposit") and the remaining 70% over the purchase of 5,000 units over a nine month
period (the "tooling commitment liability"). If 5,000 units were not purchased within those nine months, then the remaining
amount was due within thirty days. As of February 27, 2012, we had not reached the contracted level of purchases and an informal
agreement to extend the period was made; however, by December 31, 2013 we had not complied and as a result, the entire amount
would have been considered due. On August 24, 2013, we entered into a revised agreement with the supplier that extended the term
another twelve months to August 24, 2014. During 2013, it was determined that based on the actual sales levels realized in 2013,
we would likely not be able to meet the required orders to meet the 5,000 unit commitment. Accordingly, the deferred costs related
to excess units was recognized as a provision for loss on the tooling commitment in the statement of operations and comprehensive
income / (loss).
Results of Operations for iWallet
Corporation for the Three and Six Months ended June 30, 2014 and 2013.
During the three
months ended June 30, 2014, we generated sales of 22,007. Our cost of sales was $18,317, resulting in gross profit of $3,690.
Our expenses for the three months ended June 30, 2014 were $195,875, and consisted of legal and professional fees of $114,441,
subcontractor fees of $47,000, office and general expenses of $9,049, travel expenses of $1,371, interest and bank fees of $7,486,
amortization of intangible assets of $2,887, rent of $3,250, and research and development of $10,391. Our net loss for the three
months ended June 30, 2014 was $192,185. By comparison, during the three months ended June 30, 2013, we generated sales of $14,515.
Our cost of sales was $5,178, resulting in gross profit of $9,337. Our expenses for the three months ended June 30, 2013 were
$12,316, and consisted of legal and professional fees of $8,276, office and general expenses of $269, travel expenses of $27,
interest and bank fees of $509, and amortization of intangible assets of $1,848. We also recorded a provision for recovery of
income taxes of $4,247. Our net income for the three months ended June 30, 2013 was $1,268.
During the six months
ended June 30, 2014, we generated sales of 38,139. Our cost of sales was $35,253 resulting in gross profit of $2,886. Our expenses
for the six months ended June 30, 2014 were $407,279, and consisted of legal and professional fees of $220,029, subcontractor
fees of $109,100, office and general expenses of $26,404, travel expenses of $16,986, interest and bank fees of $12,952, amortization
of intangible assets of $5,775, rent of $4,500, and research and development of $11,533. Our net loss for the six months ended
June 30, 2014 was $404,393. By comparison, during the six months ended June 30, 2013, we generated sales of $32,006. Our cost
of sales was $19,681, resulting in gross profit of $12,325. Our expenses for the six months ended June 30, 2014 were $166,936,
and consisted of legal and professional fees of $16,351, office and general expenses of $2,223, travel expenses of $3,154, interest
and bank fees of $976, amortization of intangible assets of $3,632, research and development of $1,387, and a provision for a
loss on a tolling commitment of $139,213. We also recorded a provision for recovery of income taxes of $4,247. Our net loss for
the six months ended June 30, 2013 was $150,634.
Our expenses and
net loss for the three and six months ended June 30, 2014 were larger than in the same periods last year primarily due to increased
legal and professional fees related to our preparations for becoming a public company.
Over the course of
the remainder of the current fiscal year, we expect that our sales will increase significantly as we launch the iWallet 2.0 and
begin distribution of the product to various retailers and other outlets. During 2014, we also expect to make significant additional
expenditures related to the continued development and expansion of our business. Furthermore, as a public company, we will incur
significant legal, accounting and other expenses that we did not incur as a private company. As a result of these factors, to
achieve profitability we will need to, among other matters, significantly increase our customer base and our distribution channels.
We cannot assure you that we will be able to increase our revenue in this manner and achieve profitability on a consistent basis.
As we expect to continue to invest in the development of our business, this investment could outpace growth in our revenue, and
thereby impair our ability to achieve and maintain profitability.
Liquidity and Capital Resources of
iWallet Corporation
As of June 30, 2014, we had current assets
of $277,502, consisting of cash in the amount of $17,168, deposits and deferred costs of $116,407, inventory of $23,549, a loan
due from a shareholder of $114,201, and accounts receivable of $6,177. Our current liabilities as of June 30, 2014 were $992,286,
and consisted of the current portion of long term bank debt in the amount of $4,907, accounts payable of $158,561, accrued liabilities
of $41,087, amounts due to a related party of $20,421, advances from an investor of $474, convertible debentures of $663,000,
and a liability for a manufacturer tooling commitment of $103,836. Our working capital deficit as of June 30, 2014 was therefore
$714,784.
In the months prior to our reverse merger,
we engaged in a bridge financing transaction raising a total $663,000 through the sale of secured convertible promissory notes.
Concurrent with the closing of the merger, these notes converted to 3,222,120 shares of common stock and 3,222,120 warrants to
purchase shares of common stock at a price of $0.20, exercisable for two years.
Our bank indebtedness consists of a line
of credit with a limit of $35,000, secured by cash on deposit in a checking account. The line bears interest at a rate of prime
plus 1.25%. As of June 30, 2014, the balance owed was $20,445.
Immediately upon closing of our reverse
merger, we closed a private offering of Units at a price of $0.30 per Unit, each Unit consisting of one (1) share of common stock
and one (1) warrant to purchase one share of common stock at a price of $0.60 per share, exercisable for two (2) years. A total
of 6,479,002 shares of common stock and 6,479,002 warrants were issued to subscribers in the offering. The gross proceeds from
the offering, prior to the deduction of agreed selling commissions and expenses, were $1,943,701. Net of broker’s commissions
and expenses, we received net proceeds of $1,745,537.
As a result of the funds obtained through
the offering, we believe that we have sufficient capital to execute our business development plan for the current year. In order
to continue our growth and development plan over the longer term, however, we will require additional financing. Management is
currently seeking additional equity financing in order to fund the long term development of the company. There can be no assurance
that we will be successful in raising additional funding, either through increased sales and debt and/or other equity financing
arrangements. If we are not able to secure significant additional funding, the long term implementation of our business plan will
be impaired. There can be no assurance that such additional financing will be available to us on acceptable terms or at all.
Going Concern
We have experienced recurring losses from operations and had
a working capital deficiency of $714,784 as of June 30, 2014. To date, we have not been able to produce sufficient sales to become
cash flow positive and profitable on an ongoing basis. The success of our business plan during the next 12 months and beyond will
be contingent upon generating sufficient revenue to cover our costs of operations and/or upon obtaining additional financing.
For these reasons, our auditor has raised substantial doubt about our ability to continue as a going concern.
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, results or operations, liquidity, capital expenditures
or capital resources that is deemed material.
Critical Accounting Policies
In December 2001, the SEC requested that all registrants list their
most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical
accounting policy” is one which is both important to the portrayal of a company’s financial condition and results,
and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates
about the effect of matters that are inherently uncertain. As of March 31, 2014, we believe the following policies currently fit
this definition:
Intangible assets
Patents and trademarks are measured at cost. Legal fees associated
with patents and trademarks, which are expected to be issued are recorded as patents and trademarks on the balance sheets. Upon
approval by the relevant patent office, the patents and trademarks are amortized over their respective expected lives. Patent and
trademark costs associated with patents or trademarks which are not approved or are abandoned, are expensed in the period in which
such patents are not approved.
The Company is generally able to maintain patents for up to 20 years
from the effective date and the trademark registrations for as long as the trademarks remain in use and the required filings are
made to keep them in use. However, based on the Company's assessment of potential innovation or other competing technological developments
a useful life of ten years has been assessed for both the patents and the trademarks.
Software consists of costs relating to the development of the software
behind the biometric scanning and the other security programs involved in the wallets. Costs relating to the development of this
software are capitalized and amortized over its estimated useful life of ten years.
Topic 350-20, Goodwill, and 350-30, General Intangibles Other than
Goodwill, in the Accounting Standards Codification ("ASC") requires intangible assets with a finite life be tested for
impairment whenever events or circumstances indicate that the carrying amount of an asset (or asset group) may not be recoverable.
An impairment loss would be recognized when the carrying amount of an asset exceeds the estimated discounted cash flow used in
determining the fair value of the asset.
Product warranties
The Company offers a one year warranty on its products, which it
provides for based on estimated warranty costs at the time of sale and accrues for specific items at the time their existence is
known and the amounts are determinable. The Company estimates warranty costs using standard quantitative measures based on industry
warranty claim experience and evaluation of specific customer warranty issues. The Company currently estimates warranty costs as
approximately 4% of revenue.
Risk Factors
The following are certain identifiable risk factors for iWallet’s
business operations. Risk factors related to our former business operations have been excluded but can be found in prior filings
with the Securities and Exchange Commission.
Risks Related to Our Business and Industry
Our failure to raise additional capital or generate the cash
flows necessary to expand our operations and invest in our product offerings could reduce our ability to compete successfully and
adversely affect our results of operations.
We will need to raise additional funds in order to execute on our
business development plan over the long term. We may not be able obtain additional debt or equity financing on favorable terms,
if at all. If we raise additional equity financing, our security holders may experience significant dilution of their ownership
interests and the value of our common stock could decline. If we engage in debt financing, we may be required to accept terms that
restrict our ability to incur additional indebtedness and force us to maintain specified liquidity or other ratios. If we cannot
raise additional capital on acceptable terms, we may not be able to, among other things:
| § | develop and enhance our products |
| § | develop our brand and acquire new customers |
| § | continue to expand our technology development, sales and marketing
organizations |
| § | acquire complementary technologies, products or businesses |
| § | expand operations internationally |
| § | pay our debts as they come due |
| § | hire, train and retain employees |
| § | respond to competitive pressures or unanticipated working capital
requirements |
Our inability to do any of the foregoing could reduce our ability
to compete successfully and adversely affect our results of operations.
Because we have experienced net losses to date, we may never
be able to generate sufficient net revenue in the future to be profitable.
We have had net operating losses since inception and expect to continue
experiencing net losses for the immediate future. In addition, we expect to make significant future expenditures related to the
continued development and expansion of our business. Furthermore, as a public company, we will incur significant legal, accounting
and other expenses that we did not incur as a private company. As a result of these factors, to achieve profitability we will need
to, among other matters, increase our customer base and our distribution channels. We cannot assure you that we will be able to
increase our revenue in this manner and achieve profitability. As we expect to continue to invest in the development of our business,
this investment could outpace growth in our revenue, and thereby impair our ability to achieve and maintain profitability.
Because we are dependent on outside manufacturers to produce
our products, increases in manufacturing costs or component prices may negatively affect our operations
We currently rely on one manufacturer to manufacture our iWallet
products to order. We are constrained by its manufacturing capabilities and pricing, and may face production delays or escalating
costs if it is unable to manufacture a sufficient quantity of product at an affordable cost. Further, we could face production
delays if it becomes necessary to replace our existing supplier with one or more alternative suppliers. These factors could have
a material adverse effect on our business, prospects, and results of operations or financial condition. In addition, our operation
could be significantly affected by increases in the cost of high quality carbon fiber or other raw materials necessary to manufacture
our products.
Because there is an uncertain market for our products, we cannot
be certain that they will gain wide acceptance or that we will be able to generate sustained sales growth.
While we believe that our innovative security products would be
attractive to business professionals, we have only a limited operating history to determine the market acceptance for our products.
No assurance can be given that a significant market for our products and services will be developed or sustained. If our iWallet
security products do not gain wider acceptance amongst our target market, we will be unable to achieve sustained sales growth and
our business may not be viable over the longer term.
Because the preservation of our intellectual property rights
is essential to the success of our business, our failure to protect those rights could adversely affect our business.
Our intellectual property rights, including existing and future
trademarks, patents, trade secrets and copyrights, are and will continue to be valuable and important assets of our business. We
believe that our proprietary technology, as well as our other technologies and business practices, are competitive advantages and
that any duplication by competitors would harm our business. We have taken measures to protect our intellectual property, but these
measures may not be sufficient or effective. Intellectual property laws and contractual restrictions may not prevent misappropriation
of our intellectual property or deter others from developing similar technologies. In addition, others may develop technologies
that are similar or superior to our technology. Our failure to protect, or any significant impairment to the value of, our intellectual
property rights could harm our business.
Our products may contain defects, which could adversely affect
our reputation and cause us to incur significant costs.
Defects may be found in our products. Any such defects could cause
us to incur significant return and exchange costs, re-engineering costs, divert the attention of our personnel from product development
efforts, and cause significant customer relations and business reputation problems. If we deliver products with defects, our credibility
and the market acceptance and sales of our products could be harmed.
If we are unable to hire and retain key personnel, we may not
be able to implement our business plan.
Having certain key personnel is essential to the development and
marketing of the products we plan to sell and thus to the entire business itself. Consequently, the loss of any of those individuals
may have a substantial effect on our future success or failure. We may have to recruit qualified personnel with competitive compensation
packages, equity participation, and other benefits that may affect the working capital available for our operations. Management
may have to seek to obtain outside independent professionals to assist them in assessing the merits and risks of any business proposals
as well as assisting in the development and operation of many company projects. No assurance can be given that we will be able
to obtain such needed assistance on terms acceptable to us. Our failure to attract additional qualified employees or to retain
the services of key personnel could have a material adverse effect on our operating results and financial condition.
Even though we are not manufacturing the products ourselves,
if any of the products we sell infringe on the intellectual property rights of others, we may find ourselves involved in costly
litigation, which will negatively affect the financial results of our business operations.
Although we have not received notices of any alleged infringement,
we cannot be certain that our products do not infringe on issued trademarks and/or copyright rights of others. We may be subject
to legal proceedings and claims from time to time in our ordinary course of business arising out of intellectual property rights
of others. These legal proceedings can be very costly, and thus can negatively affect the results of our operations.
Because we conduct business outside of the United States, we
are subject to certain additional risks related to doing business in foreign countries.
We intend to conduct our business, in part, outside of the United
States, and our products are manufactured under contract in China. Doing business in foreign countries carries with it certain
risks that are not found in doing business in the United States. The risks of doing business in foreign countries that could result
in losses against which we are not insured include:
| § | exposure to local economic conditions; |
| § | potential adverse changes in the diplomatic relations of foreign countries
with the United States; |
| § | hostility from local populations; |
| § | the adverse effect of currency exchange controls; |
| § | restrictions on the withdrawal of foreign investment and earnings; |
| § | government policies against businesses owned by foreigners; |
| § | investment restrictions or requirements; |
| § | expropriations of property; |
| § | the potential instability of foreign governments; |
| § | the risk of insurrections; |
| § | risks of renegotiation or modification of existing agreements with
governmental authorities; |
| § | foreign exchange restrictions; |
| § | withholding and other taxes on remittances and other payments by subsidiaries;
and |
| § | Changes in taxation structure. |
Risks Related to Legal Uncertainty
Because our articles of incorporation and bylaws and Nevada law
limit the liability of our officers, directors, and others, shareholders may have no recourse for acts performed in good faith.
Under our articles of incorporation, bylaws and Nevada law, each
of our officers, directors, employees, attorneys, accountants and agents are not liable to us or the shareholders for any acts
they perform in good faith, or for any non-action or failure to act, except for acts of fraud, willful misconduct or gross negligence.
Our articles and bylaws provide that we will indemnify each of our officers, directors, employees, attorneys, accountants and agents
from any claim, loss, cost, damage liability and expense by reason of any act undertaken or omitted to be undertaken by them, unless
the act performed or omitted to be performed constitutes fraud, willful misconduct or gross negligence.
If certain legislation, including the Sarbanes-Oxley Act of 2002,
makes it more difficult for us to retain or attract officers and directors, we may be unable to hire such personnel and our business
operations may be materially negatively impacted.
The Sarbanes-Oxley Act of 2002 was enacted in response to public
concerns regarding corporate accountability in connection with recent accounting scandals. The stated goals of the Sarbanes-Oxley
Act are to increase corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly
traded companies, and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities
laws. The Sarbanes-Oxley Act generally applies to all companies that file or are required to file periodic reports with the SEC,
under the Securities Exchange Act of 1934. As a public company, we are required to comply with the Sarbanes-Oxley Act. The enactment
of the Sarbanes-Oxley Act of 2002 has resulted in a series of rules and regulations by the SEC that increase responsibilities and
liabilities of directors and executive officers. The perceived increased personal risk associated with these recent changes may
deter qualified individuals from accepting these roles. As a result, it may be more difficult for us to attract and retain qualified
persons to serve on our board of directors or as executive officers. We continue to evaluate and monitor developments with respect
to these rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
Risks
Relating to our Common Stock
If we fail to
remain current on our reporting requirements, we could be removed from quotation on the OTCQB, which would limit the ability of
broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.
Companies trading
on the OTCQB, such as us, must be reporting issuers with the Securities and Exchange Commission and must be current in their reports
in order to maintain price quotation privileges on the OTCQB tier of the electronic quotation system operated by OTC Markets, Inc.
As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers
to sell our securities and the ability of stockholders to sell their securities in the secondary market.
Because our common
stock could be deemed a low-priced “Penny” stock, it would be cumbersome for brokers and dealers to trade in our common
stock, making the market for our common stock less liquid and negatively affect the price of our stock.
We may be subject
to certain provisions of the Securities Exchange Act of 1934, commonly referred to as the “penny stock” as defined
in Rule 3a51-1. A penny stock is generally defined to be any equity security that has a market price less than $5.00 per share,
subject to certain exceptions. If our stock is deemed to be a penny stock, trading will be subject to additional sales practice
requirements of broker-dealers. These require a broker-dealer to:
| § | Deliver to the customer, and obtain a written receipt for, a disclosure document;
|
| § | Disclose certain price information about the stock; |
| § | Disclose the amount of compensation received by the broker-dealer or any
associated person of the broker-dealer; |
| § | Send monthly statements to customers with market and price information about
the penny stock; and |
| § | In some circumstances, approve the purchaser’s account under certain
standards and deliver written statements to the customer with information specified in the rules. |
Consequently, penny
stock rules may restrict the ability or willingness of broker-dealers to trade and/or maintain a market in our common stock. Also,
prospective investors may not want to get involved with the additional administrative requirements, which may have a material adverse
effect on the trading of our shares.
Because we became a public company through a reverse acquisition,
we may not be able to attract the attention of major brokerage firms.
There may be risks associated with our becoming public through a
reverse acquisition. Securities analysts of major brokerage firms may not provide coverage of our Company since there is no incentive
to brokerage firms to recommend the purchase of our common stock. No assurance can be given that brokerage firms will want to conduct
any secondary offerings on behalf of our post-merger company in the future.
Directors and Executive Officers
The following table sets forth information regarding the
members of our board of directors and our executive officers and other significant employees. All of our officers and directors
were appointed on the effective date of the Merger. All of our directors hold office until the next annual meeting of stockholders
and their successors are duly elected and qualify. Executive officers serve at the request of the board of directors.
Name
|
Age |
Office(s)
held |
Steven
Cabouli |
56 |
President,
Chief Executive Officer, Chief Financial Officer, Chairman of the Board, and Director |
Orlando
LaCalle |
50 |
Chief
Marketing Officer |
Set forth below is a brief description of the background
and business experience of each of our current executive officers and directors.
Steven Cabouli is our President, Chief Executive Officer,
Chief Financial Officer, Chairman of our Board of Directors. Mr. Cabouli founded iWallet in 2009. He has over 25 years of experience
in introducing new and unique products to the market. In the 1980s, he introduced machines for shaved ice, cooking baking, and
donuts to Argentina and sold the rights to this business to an established South American cookie manufacturer in 1987. He is also
the owner of China Mystique, Inc., a global distributor of skincare products which he co-founded in 1990. From 2003 through January
of 2014, he was the owner of Steve Cabouli Properties, a real estate company which owns several properties in San Diego, Mexico,
and Argentina. Mr. Cabouli studied Civil Engineering at the University of Buenos Aires in Argentina.
Orlando LaCalle is our Chief Marketing Officer. From
March of 2004 to October of 2009, he was a Federal Account Executive for Xerox Corporation. In that position, he managed and sold
Xerox software products to assigned accounts in his territory. Also, he negotiated perpetual license agreements with the U.S. Air
Force, N.A.S.A., the U.S. Navy, the U.S. Coast Guard and all federal law enforcement agencies including the State Attorney, the
Federal Courts and the Florida House of Representatives. From April of 200 to February of 2004, he served as Sales Director, Telecommunications
Division Sales Group, for the Latin America Division of HNC Software, Inc., where he prospected new accounts and managed and maintained
the company’s customer base in Latin America, the Caribbean and Mexico. From January 1994 to March of 2000, he was a Senior
Account Executive at Xerox Corporation. From August of 1986 through March of 1992, he served as a Personnel Specialist for the
United States Air Force.
Management is currently conducting a search for a highly
qualified individual to join our company as a new CEO. Appropriate additional disclosures will be made upon the appointment of
all new executive officers or directors.
Directors
Our bylaws authorize no less than one (1) and no more than
twelve (12) directors. We currently have one director. Pursuant to the terms of the Acquisition, Steven Cabouli, who prior to the
Merger was the sole director of iWallet, was appointed as our director.
All directors hold office for one-year terms until the election
and qualification of their successors. Officers are elected by the board of directors and serve at the discretion of the board.
There are no family relationships between or among the directors,
executive officers or persons nominated or chosen by the Company to become directors or executive officers.
Committees of the Board
We do not currently have a compensation committee, executive
committee, or stock plan committee.
Audit Committee
We do not have a separately-designated standing audit committee.
The entire Board of Directors performs the functions of an audit committee, but no written charter governs the actions of the Board
when performing the functions of what would generally be performed by an audit committee. The Board approves the selection of our
independent accountants and meets and interacts with the independent accountants to discuss issues related to financial reporting.
In addition, the Board reviews the scope and results of the audit with the independent accountants, reviews with management and
the independent accountants our annual operating results, considers the adequacy of our internal accounting procedures and considers
other auditing and accounting matters including fees to be paid to the independent auditor and the performance of the independent
auditor. Our Board of Directors, which performs the functions of an audit committee, does not have a member who would qualify as
an “audit committee financial expert” within the definition of Item 407(d)(5)(ii) of Regulation S-K.
Nomination Committee
Our Board of Directors does not maintain a nominating committee.
As a result, no written charter governs the director nomination process. Our size and the size of our Board, at this time, do not
require a separate nominating committee.
When evaluating director nominees, our directors consider
the following factors:
·
The appropriate size of our Board of Directors;
·
Our needs with respect to the particular talents and experience of
our directors;
| · | The knowledge, skills and experience of nominees, including experience
in finance, administration or public service, in light of prevailing business conditions and the knowledge, skills and experience
already possessed by other members of the Board; |
·
Experience in political affairs;
·
Experience with accounting rules and practices; and
·
The desire to balance the benefit of continuity with the periodic
injection of the fresh perspective provided by new Board members.
Our goal is to assemble a Board that brings together a variety
of perspectives and skills derived from high quality business and professional experience. In doing so, the Board will also consider
candidates with appropriate non-business backgrounds.
Other than the foregoing, there are no stated minimum criteria
for director nominees, although the Board may also consider such other factors as it may deem are in our best interests as well
as our stockholders. In addition, the Board identifies nominees by first evaluating the current members of the Board willing to
continue in service. Current members of the Board with skills and experience that are relevant to our business and who are willing
to continue in service are considered for re-nomination. If any member of the Board does not wish to continue in service or if
the Board decides not to re-nominate a member for re-election, the Board then identifies the desired skills and experience of a
new nominee in light of the criteria above. Current members of the Board are polled for suggestions as to individuals meeting the
criteria described above. The Board may also engage in research to identify qualified individuals. To date, we have not engaged
third parties to identify or evaluate or assist in identifying potential nominees, although we reserve the right in the future
to retain a third party search firm, if necessary. The Board does not typically consider shareholder nominees because it believes
that its current nomination process is sufficient to identify directors who serve our best interests.
Code of Ethics
As of March 31, 2014, we had not adopted a Code of Ethics
for Financial Executives, which would include our principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions.
Executive Compensation
Compensation Discussion and Analysis
Our executive officers are currently
paid monthly fixed cash compensation as follows:
Steven Cabouli | |
$ | 8,000 | |
Orlando LaCalle | |
$ | 4,000 | |
The compensation agreement with Mr. LaCalle
was reached on December 30, 2013 and was based on Mr. LaCalle’s fixed monthly expenses and our financial resources and ability
to pay. Mr. Cabouli is the founder and former sole shareholder of iWallet Corporation and no formal arrangement was reached with
him on any specific date. His current salary arrangement, like the arrangement with Mr. LaCalle, is based on Mr. Cabouli’s
fixed personal monthly expenses and our financial resources and ability to pay. Our current compensation system consists of paying
our key executives such basic remuneration for their time and services as is appropriate for our current resources and stage of
development. As we move forward with our business plan and further develop our business, we intend to create a formal system of
compensation designed to motivate, incentivise, and retain our key executives.
Summary Compensation Table
The table below summarizes all compensation
awarded to, earned by, or paid to each named executive officer for our last two completed fiscal years for all services rendered
to us.
SUMMARY
COMPENSATION TABLE |
Name and
principal position |
Year |
Salary
($) |
Bonus
($) |
Stock Awards
($) |
Option
Awards
($) |
Non-Equity
Incentive Plan
Compensation
($) |
Nonqualified
Deferred
Compensation
Earnings ($) |
All Other
Compensation
($) |
Total
($) |
Steven Cabouli, President, CEO, CFO |
2013
2012 |
n/a
n/a |
n/a
n/a |
n/a
n/a |
n/a
n/a |
n/a
n/a |
n/a
n/a |
n/a
n/a |
n/a
n/a |
Orlando LaCalle, Chief Marketing Officer |
2013
2012 |
n/a
n/a |
n/a
n/a |
n/a
n/a |
n/a
n/a |
n/a
n/a |
n/a
n/a |
n/a
n/a |
n/a
n/a |
Jerry Chatel, former officer |
2013
2012 |
0
n/a |
0
n/a |
0
n/a |
0
n/a |
0
n/a |
0
n/a |
0
n/a |
0
n/a |
Phillip Stromer, former officer |
2013
2012 |
0
0 |
0
0 |
0
0 |
0
0 |
0
0 |
0
0 |
0
0 |
0
0 |
Separately, the table below summarizes
all compensation awarded to, earned by, or paid to each named executive officer of iWallet Corporation for its most recently completed
fiscal year:
SUMMARY COMPENSATION TABLE |
Name and principal position | |
| Year | | |
| Salary ($) | | |
| Bonus ($) | | |
| Stock
Awards ($) | | |
| Option Awards ($) | | |
| Non-Equity Incentive
Plan Compensation ($) | | |
| Nonqualified Deferred Compensation Earnings
($) | | |
| All
Other Compensation ($) | | |
| Total ($) | |
Steven Cabouli, President, CEO, CFO | |
| 2013 | | |
| 2,058 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 2,058 | |
Orlando LaCalle, Chief Marketing Officer | |
| 2013 | | |
| 3,108 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 3,108 | |
Narrative Disclosure to the Summary
Compensation Table
Our current executive officers, Steven
Cabouli and Orlando LaCalle, were appointed in connection with the recent Acquisition and did not serve during our last two fiscal
years. Former officers Jerry Chatel and Phillip Stromer did not receive any compensation for their service as officers. We presently
do not have employment or compensation agreements with any of our named executive officers and have not established any overall
system of executive compensation or any fixed policies regarding compensation of executive officers.
Stock Option Grants
We have not granted any stock options
to the executive officers or directors since our inception.
Outstanding Equity Awards At Fiscal
Year-end Table
The table below summarizes all unexercised
options, stock that has not vested, and equity incentive plan awards for each named executive officer outstanding as of the end
of our last completed fiscal year.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END |
OPTION AWARDS |
STOCK AWARDS |
Name |
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable |
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable |
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#) |
Option
Exercise
Price
($) |
Option
Expiration
Date
|
Number
of
Shares
or Shares
of
Stock That
Have
Not
Vested
(#) |
Market
Value
of
Shares
or
Shares
of
Stock
That
Have
Not
Vested
($) |
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Shares or
Other
Rights
That Have
Not
Vested
(#) |
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Shares or
Other
Rights
That
Have Not
Vested
(#) |
Steven Cabouli, President, CEO, CFO |
- |
- |
- |
- |
- |
- |
- |
- |
- |
Orlando LaCalle, Chief Marketing Officer |
- |
- |
- |
- |
- |
- |
- |
- |
- |
Jerry Chatel, former officer |
- |
- |
- |
- |
- |
- |
- |
- |
- |
Phillip Stromer, former officer |
- |
- |
- |
- |
- |
- |
- |
- |
- |
Compensation of Directors Table
The table below summarizes all compensation
paid to our directors for our last completed fiscal year.
DIRECTOR COMPENSATION |
Name | |
Fees Earned or Paid in Cash ($) | |
Stock Awards ($) | |
Option Awards ($) | |
Non-Equity Incentive Plan Compensation ($) | |
Non-Qualified Deferred Compensation Earnings ($) | |
All Other Compensation ($) | |
Total ($) |
Steven Cabouli | |
| n/a | | |
| n/a | | |
| n/a | | |
| n/a | | |
| n/a | | |
| n/a | | |
| n/a | |
Jerry Chatel, former director | |
| -0 | | |
| -0 | | |
| -0 | | |
| -0 | | |
| -0 | | |
| -0 | | |
| -0 | |
Phillip Stromer, former director | |
| -0 | | |
| -0 | | |
| -0 | | |
| -0 | | |
| -0 | | |
| -0 | | |
| -0 | |
Narrative Disclosure to the Director
Compensation Table
We do not currently provide any compensation
to directors for their service as directors.
Employment Agreements with Current
Management
We do not currently have any employment
agreements in place with any of our executive officers.
Security Ownership of Certain Beneficial
Owners and Management
The following table sets forth the beneficial
ownership of our capital stock by each executive officer and director, by each person known by us to beneficially own more than
5% of any class of stock and by the executive officers and directors as a group. Except as otherwise indicated, all Shares are
owned directly and the percentage shown is based on 29,321,379 shares common stock issued and outstanding following the Acquisition
and the related events described herein.
Title of class |
Name and address of
beneficial owner (1) | |
Amount of beneficial ownership | |
Percent of class |
Current Executive Officers & Directors: |
Common Stock |
Steven Cabouli
PO Box 261013
San Diego, CA 92196
| |
| 8,221,230 | | |
| 28.04 | % |
Common Stock |
Orlando LaCalle P.O. Box 565577 Miami, FL 33256 | |
| 978,770 | | |
| 3.34 | % |
Total of All Current Directors and Officers: |
| | | |
| | |
Common Stock |
| |
| 9,200,000 | | |
| 31.38 | %% |
More than 5% Beneficial Owners |
Common Stock |
7806221 Canada, Inc.(2) 71 Clairton Crescent Toronto, ON M6N 2M7 | |
| 1,841,636 | | |
| 6.28 | % |
|
Donal Carroll(3) 55 North Dr. Toronto, ON M9A 4R1 | |
| 2,446,570 | | |
| 8.35 | % |
(1) |
As used in this table, "beneficial
ownership" means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment
power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security). In addition, for
purposes of this table, a person is deemed, as of any date, to have "beneficial ownership" of any security that such
person has the right to acquire within 60 days after such date.
|
(2) |
The total shares for 7806221 Canada,
Inc. include 1,714,384 shares of common stock and warrants to purchase an additional 127,252 shares of common stock at a price
of $0.20, exercisable for 2 years. Mr. Bernard Adamski is the President of 7806221 Canada, Inc., and, in that capacity, has the
authority to direct voting and investment decisions regarding its common stock.
|
(3) |
The total shares for Donal Carroll include 1,623,285 shares of common stock, warrants to purchase 156,618 shares of common stock at a price of $0.20 per share, exercisable for 2 years, and warrants to purchase 666,667 shares of common stock at a price of $0.60 per share, exercisable for 2 years |
Certain
Relationships and Related Transactions and Director Independence
With the exception of the Acquisition, and except as set forth
below, none of our directors or executive officers, nor any proposed nominee for election as a director, nor any person who beneficially
owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to all of our outstanding shares, nor
any members of the immediate family (including spouse, parents, children, siblings, and in-laws) of any of the foregoing persons
has any material interest, direct or indirect, in any transaction over the last two years or in any presently proposed transaction
which, in either case, has or will materially affect us:
1. Our balance sheets reflect
the sum of $114,201 due to a shareholder as of June 30, 2014. This obligation, which arose during the time when iWallet
Corporation was a privately held company, is due from our President and CEO, Steven Cabouli. This obligation is non-interest
bearing, unsecured and due on demand. There is no written agreement or specific terms of repayment for this obligation. We
expect that it will be settled in the near future.
Director Independence
We are not a “listed issuer” within the meaning
of Item 407 of Regulation S-K and there are no applicable listing standards for determining the independence of our directors.
Applying the definition of independence set forth in Rule 4200(a)(15) of The Nasdaq Stock Market, Inc., we do not believe that
we currently have any independent directors.
Description of Securities
Our authorized capital stock consists of 75,000,000 shares
of common stock, $0.001 par value per share. Immediately following the Acquisition and the events reported herein, there were 29,321,379
shares of our common stock issued and outstanding.
Common Stock
The holders of common stock are entitled to one vote per
share. Our certificate of incorporation does not provide for cumulative voting. The holders of common stock are entitled to receive
ratably such dividends, if any, as may be declared by the board of directors out of legally available funds. However, the current
policy of the board of directors is to retain earnings, if any, for operations and growth. Upon liquidation, dissolution or winding-up,
the holders of common stock are entitled to share ratably in all assets that are legally available for distribution. The holders
of common stock have no preemptive, subscription, redemption or conversion rights.
In the event of any merger or consolidation with or into
another company in connection with which shares of our common stock are converted into or exchangeable for shares of stock, other
securities or property (including cash), all holders of our common stock will be entitled to receive the same kind and amount of
shares of stock and other securities and property (including cash). Holders of our common stock have no pre-emptive rights, no
conversion rights and there are no redemption provisions applicable to our common stock.
Registration Rights
We have agreed to file a registration statement on Form S-1
for the re-sale of the shares of common stock issued in the private offering closed concurrently with the Acquisition, as well
as the common stock issuable upon exercise of all warrants issued in the offering. We have committed to file the registration statement
within forty-five (45) days of the closing of the Acquisition.
Options and Warrants
We do not have any options issued and outstanding In connection
with the Acquisition, we issued the following warrants to purchase common stock, all exercisable for a period of two (2) years
from the date of issue, which is July 21, 2016:
7,062,112 warrants to purchase common stock at a price of
$0.60 per share
3,222,120 warrants to purchase common stock at a price of
$0.20 per share
Market Price and Dividends
iWallet is, and has always been, a privately-held company.
There has never been a public market for the securities of iWallet has never declared or paid any cash dividends on its capital
stock. In addition, there has never been a trading market for iWallet’s common stock.
Indemnification of Directors and Officers
Our officers and directors are indemnified as provided by
the Nevada Revised Statutes and our bylaws.
Under the governing Nevada statutes, director immunity from
liability to a company or its shareholders for monetary liabilities applies automatically unless it is specifically limited by
a company's articles of incorporation. Our articles of incorporation do not contain any limiting language regarding director immunity
from liability. Excepted from this immunity are:
1. |
a willful failure to deal fairly with the company or its shareholders in connection with a matter in which the director has a material conflict of interest; |
2. |
a violation of criminal law (unless the director had reasonable cause to believe that his or her conduct was lawful or no reasonable cause to believe that his or her conduct was unlawful); |
3. |
a transaction from which the director derived an improper personal profit; and |
Our bylaws provide that we will indemnify our directors and
officers to the fullest extent not prohibited by Nevada law; provided, however, that we may modify the extent of such indemnification
by individual contracts with our directors and officers; and, provided, further, that we shall not be required to indemnify any
director or officer in connection with any proceeding (or part thereof) initiated by such person unless:
1. |
such indemnification is expressly required to be made by law; |
2. |
the proceeding was authorized by our Board of Directors; |
3. |
such indemnification is provided by us, in our sole discretion, pursuant to the powers vested us under Nevada law; or |
4. |
such indemnification is required to be made pursuant to the bylaws. |
Our bylaws provide that we will advance to any person who
was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer, of the company,
or is or was serving at the request of the company as a director or executive officer of another company, partnership, joint venture,
trust or other enterprise, prior to the final disposition of the proceeding, promptly following request therefore, all expenses
incurred by any director or officer in connection with such proceeding upon receipt of an undertaking by or on behalf of such person
to repay said amounts if it should be determined ultimately that such person is not entitled to be indemnified under our bylaws
or otherwise.
Our bylaws provide that no advance shall be made by us to
an officer of the company, except by reason of the fact that such officer is or was a director of the company in which event this
paragraph shall not apply, in any action, suit or proceeding, whether civil, criminal, administrative or investigative, if a determination
is reasonably and promptly made: (a) by the board of directors by a majority vote of a quorum consisting of directors who were
not parties to the proceeding, or (b) if such quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors
so directs, by independent legal counsel in a written opinion, that the facts known to the decision-making party at the time such
determination is made demonstrate clearly and convincingly that such person acted in bad faith or in a manner that such person
did not believe to be in or not opposed to the best interests of the company.
Trading Information
Our common stock is quoted under the symbol “QUSR”
on the OTCBB operated by the Financial Industry Regulatory Authority, Inc. (“FINRA”) and the OTCQB operated by OTC
Markets Group, Inc. Few market makers continue to participate in the OTCBB system because of high fees charged by FINRA.
Consequently, market makers that once quoted our shares on the OTCBB system may no longer be posting a quotation for our shares.
As of the date of this report, however, our shares are quoted by several market makers on the OTCQB. The criteria for listing on
either the OTCBB or OTCQB are similar and include that we remain current in our SEC reporting. Our reporting is presently current
and, since inception, we have filed our SEC reports on time. Due to our recent name change, we expect our trading symbol to change
in the near future.
The following tables set forth the range of high and low
prices for our common stock for the each of the periods indicated as reported by the OTCQB. These quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
Fiscal Year Ending June 30, 2013 |
Quarter Ended |
|
High $ |
|
Low $ |
|
June 30, 2013 |
|
|
$ |
0.0371 |
|
|
$ |
0.0371 |
|
|
March 31, 2013 |
|
|
$ |
0.0371 |
|
|
$ |
0.0371 |
|
|
December 31, 2012 |
|
|
$ |
0.0371 |
|
|
$ |
0.0371 |
|
|
September 30, 2012 |
|
|
$ |
0.0371 |
|
|
$ |
0.0371 |
|
|
Fiscal Year Ending June 30, 2012 |
|
Quarter Ended |
|
|
|
High $ |
|
|
|
Low $ |
|
|
June 30, 2012 |
|
|
$ |
0.0371 |
|
|
$ |
0.0371 |
|
|
March 31, 2012 |
|
|
|
n/a |
|
|
|
n/a |
|
|
December 31, 2011 |
|
|
|
n/a |
|
|
|
n/a |
|
|
September 30, 2011 |
|
|
|
n/a |
|
|
|
n/a |
|
The last quoted price of our common stock was
$0.037119 per share on July 23, 2014.
Penny Stock
The SEC has adopted rules that regulate broker-dealer practices
in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than
$5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that
current price and volume information with respect to transactions in such securities is provided by the exchange or system. The
penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document
prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public
offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights
and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws;
(c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance
of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e)
defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other
information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction
in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer
and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information
relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value
of each penny stock held in the customer's account.
In addition, the penny stock rules require that prior to a transaction
in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny
stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure
statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability
statement.
These disclosure requirements may have the effect of reducing the
trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.
Holders of Our Common Stock
As of July 23, 2014 we had 29,321,379 shares of our common stock
issued and outstanding, held by eighty-six (86) shareholders of record.
Transfer Agent
The transfer agent for our common stock is Empire Stock Transfer,
Inc.
Section 3 – Securities and Trading Markets
Item 3.02. Unregistered Sales of Equity Securities
| § | In connection with the Acquisition, the previous shareholders of iWallet received 10,000,000 shares of our
common stock. The 10,000,000 shares of our common stock which were issued to the former holders of common stock of iWallet on the
effective date of the Acquisition were issued in reliance on the exemption from registration afforded by Section 4(2) of the
Securities Act.
|
| § | Certain Secured Convertible Debentures previously issued by iWallet were converted to newly issued
shares of our common stock and warrants. The former iWallet debenture holders were issued a total of 3,222,120 shares of common
stock, and warrants to purchase 3,222,120 shares of common stock at a price of $0.20 per share, exercisable for two (2) years.
These shares and warrants were also issued Acquisition were issued in reliance on the exemption from registration afforded by Section 4(2)
of the Securities Act. |
| § | Immediately upon closing of the Acquisition, we closed a private offering of Units at a price
of $0.30 per Unit, each Unit consisting of one (1) share of common stock and one (1) warrant to purchase one share of common stock
at a price of $0.60 per share, exercisable for two (2) years. A total of 6,479,002 shares of common stock and 6,479,002 warrants
were issued to subscribers in the offering. In addition, a total of 583,110 Units were issued as compensation to certain licensed
securities brokers who assisted with the offering. The offering was conducted pursuant to Rule 506 under Regulation D and was conditional
upon the closing of the Acquisition. The offering was made to only to “accredited investors” as defined in Rule 501,
and we did not engage in any general solicitation or advertising. The gross proceeds from the offering, prior to the deduction
of agreed selling commissions and expenses, were $1,943,701. Net of broker’s commissions and expenses, we received net proceeds
of $1,745,537. A total of forty (40) investors subscribed in the offering. |
Section 5 – Corporate Governance and Management
Item 5.01. Changes in Control of Registrant.
Reference is made to the disclosure set forth under Item
2.01 of this Current Report on Form 8-K, which disclosure is incorporated herein by reference.
Item 5.02. Departure of Directors or Principal
Officers; Election of Directors; Appointment of Principal Officers.
At the effective time of the Acquisition, Jerry Chatel resigned
as our sole director and officer. There was no known disagreement with Mr. Chatel on any matter relating to our operations, policies,
or practices. Pursuant to the terms of the Merger Agreement, our new directors and officers are as set forth herein. Reference
is made to the disclosure set forth under Item 2.01 of this Current Report on Form 8-K, which disclosure is incorporated herein
by reference.
Item 5.03 Amendments to Articles of Incorporation
or Bylaws; Change in Fiscal Year.
On July 23, the Board of Directors authorized a change in the
Company’s fiscal year end to December 31 from June 30, effective for fiscal year 2014.
In addition, in connection with this subsequent subsidiary merger
discussed herein, we changed our corporate name to “iWallet Corporation.”
Item 5.06 Change in Shell Company Status.
As a result of the Acquisition and related transactions as
described herein, we have ceased to be a shell company as defined in Rule 12b-2. The material terms of the transaction are described
herein.
In addition, The information contained in this Current
Report is intended to provide "Form 10 information" within the meaning of Rule 144(i)(3) under the Securities Act of
1933.
Section 9 – Financial Statements and Exhibits
Item 9.01. Financial Statements and Exhibits
Financial Statements of Businesses Acquired.
In accordance with Item 9.01(a), the audited financial statements of our predecessor iWallet Corporation., a California corporation,
for the years ended December 31, 2013 and 2012, are filed with this Current Report on Form 8-K as Exhibit 99.1. The unaudited financial
statements of iWallet Corporation for the interim period ended March 31, 2014 are filed with this Current Report on Form 8-K as
Exhibit 99.2
Pro Forma Financial Information. In accordance
with Item 9.01(b), our pro forma financial combined statements are filed in this Current Report on Form 8-K as Exhibit 99.3.
(c) Exhibits.
The exhibits listed in the following Exhibit Index are filed
as part of this Current Report on Form 8-K.
(1) Incorporated by reference to Current
Report on Form 8-K/A filed July 31, 2014.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
iWallet Corporation
/s/ Steven Cabouli
Steven Cabouli
Chief Executive Officer
Date: September 3, 2014
iWallet Corporation
Unaudited Condensed Interim Financial
Statements
For six month period ended June 30,
2014
(expressed in U.S. dollars)
PART
I - FINANCIAL INFORMATION
Item
1. Financial Statements
Unaudited
Condensed Interim Financial Statements
iWallet
Corporation
Condensed
Interim Balance Sheets
June
30, 2014 and December 31, 2013
| |
| 2014 | | |
| 2013 | |
| |
| (Unaudited) | | |
| | |
Assets | |
| | | |
| | |
Current
assets | |
| | | |
| | |
Cash | |
$ | 17,168 | | |
$ | 250,718 | |
Funds
held in attorney trust (note 8) | |
| — | | |
| 39,705 | |
Accounts
receivable | |
| 6,177 | | |
| 4,575 | |
Deposits
and deferred costs (note 9) | |
| 116,407 | | |
| 23,086 | |
Inventory
(note 4) | |
| 23,549 | | |
| 20,361 | |
Due
to/from shareholder (note 7) | |
| 114,201 | | |
| 61,833 | |
| |
| 277,502 | | |
| 400,278 | |
Intangible
assets (note 5) | |
| 103,128 | | |
| 96,715 | |
| |
$ | 380,630 | | |
$ | 496,993 | |
Liabilities | |
| | | |
| | |
Current
liabilities | |
| | | |
| | |
Bank
indebtedness - current (note 6) | |
$ | 4,907 | | |
$ | 5,539 | |
Accounts
payable (notes 7& 8) | |
| 158,561 | | |
| 126,317 | |
Accrued
liabilities (note 12) | |
| 41,087 | | |
| 3,062 | |
Due
to related party (note 7) | |
| 20,421 | | |
| 37,842 | |
Advances
from investor (note 7) | |
| 474 | | |
| 69,678 | |
Convertible
debentures (note 8) | |
| 663,000 | | |
| 354,000 | |
Tooling
commitment liability (note 9) | |
| 103,836 | | |
| 105,816 | |
| |
| 992,286 | | |
| 702,254 | |
Bank
indebtedness - long-term (note 6) | |
| 15,538 | | |
| 17,540 | |
| |
| 1,007,824 | | |
| 719,794 | |
Shareholder's
(deficiency) equity | |
| | | |
| | |
Class
A common shares, par value $0.001, 200,000,000 shares authorized; 10,000 issued (December 31, 2013 - 10,000) (note
11) | |
| 10 | | |
| 10 | |
Class
B common shares, par value $0.001, 100,000,000 shares authorized; Nil issued (December 31, 2013 - Nil) (note
11) | |
| — | | |
| — | |
Preferred
shares, par value $0.001, 10,000,000 shares authorized; Nil issued (December 31, 2013 - Nil) (note
11) | |
| — | | |
| — | |
Additional
paid-in capital | |
| 1 | | |
| 1 | |
Deficit | |
| (627,205 | ) | |
| (222,812 | ) |
| |
| (627,194 | ) | |
| (222,801 | ) |
| |
$ | 380,630 | | |
$ | 496,993 | |
The
accompanying notes are an integral part of these condensed interim financial statements.
Going
Concern (note 1); Commitments and Contingencies (note 12); Subsequent Events (note 16)
iWallet Corporation
Condensed Interim Statements of Operations and Comprehensive Loss
for the three and six month periods ended June 30, 2014 and 2013
(unaudited)
| |
Three months | |
Three months | |
Six months | |
Six months |
| |
ending | |
ending | |
ending | |
ending |
| |
June
30, 2014 | |
June
30, 2013 | |
June
30, 2013 | |
June
30, 2013 |
Sales | |
$ | 22,007 | | |
$ | 14,515 | | |
$ | 38,139 | | |
$ | 32,006 | |
Cost
of sales | |
| 18,317 | | |
| 5,178 | | |
| 35,253 | | |
| 19,681 | |
Gross
(loss) profit | |
| 3,690 | | |
| 9,337 | | |
| 2,886 | | |
| 12,325 | |
Expenses | |
| | | |
| | | |
| | | |
| | |
Legal and professional
fees | |
| 114,441 | | |
| 8,276 | | |
| 220,029 | | |
| 16,351 | |
Subcontractor
fees (note 7) | |
| 47,000 | | |
| — | | |
| 109,100 | | |
| — | |
Travel | |
| 1,371 | | |
| 27 | | |
| 16,986 | | |
| 3,154 | |
Office and general
expenses | |
| 9,049 | | |
| 269 | | |
| 26,404 | | |
| 2,223 | |
Interest and bank
fees | |
| 7,486 | | |
| 509 | | |
| 12,952 | | |
| 976 | |
Rent | |
| 3,250 | | |
| — | | |
| 4,500 | | |
| — | |
Research and development | |
| 10,391 | | |
| 1,387 | | |
| 11,533 | | |
| 1387 | |
Provision for
loss on tooling commitment (note 9) | |
| — | | |
| — | | |
| — | | |
| 139,213 | |
Amortization
of intangible assets | |
| 2,887 | | |
| 1,848 | | |
| 5,775 | | |
| 3,632 | |
| |
| 195,875 | | |
| 12,316 | | |
| 407,279 | | |
| 166,936 | |
Loss
before recovery of income taxes | |
| (192,185 | ) | |
| (2,979 | ) | |
| (404,393 | ) | |
| (154,611 | ) |
Recovery
of income taxes (note 10) | |
| — | | |
| (4,247 | ) | |
| — | | |
| (4,247 | ) |
Net
and comprehensive income (loss) | |
$ | (192,185 | ) | |
$ | 1,268 | | |
$ | (404,393 | ) | |
$ | (150,364 | ) |
Net
and comprehensive loss per share basic and diluted (note 13) | |
$ | (19.22 | ) | |
$ | 0.13 | | |
$ | (40.44 | ) | |
$ | (15.04 | ) |
Weighted
average number of shares outstanding basic and diluted (note 13) | |
| 10,000 | | |
| 10,000 | | |
| 10,000 | | |
| 10,000 | |
The
accompanying notes are an integral part of these condensed interim financial statements.
iWallet
Corporation
Condensed
Interim Statements of Cash Flows
for
the six month periods ended June 30, 2014 and 2013
(unaudited)
| |
| 2014 | | |
| 2013 | |
| |
| | | |
| | |
Cash
flow from operating activities | |
| | | |
| | |
Net
and comprehensive loss for the period | |
| (404,393 | ) | |
| (150,364 | ) |
Items
not affecting cash | |
| | | |
| | |
Amortization
of intangible assets | |
| 5,775 | | |
| 3,632 | |
Provision
for loss on tooling commitment (note 9) | |
| — | | |
| 139,213 | |
Recovery
of income taxes | |
| — | | |
| (4,247 | ) |
| |
| (398,618 | ) | |
| (11,766 | ) |
Non-cash
operating items resulted from changes in: | |
| | | |
| | |
Accounts
receivable | |
| (1,602 | ) | |
| 8,520 | |
Deposits
and deferred costs | |
| (95,301 | ) | |
| —
| |
Inventory | |
| (3,188 | ) | |
| 8,684 | |
Accounts
payable | |
| 32,244 | | |
| 8,254 | |
Accrued
liabilities | |
| 38,025 | | |
| 2,180 | |
| |
| (428,440 | ) | |
| 15,872 | |
Cash
flow from investing activities | |
| | | |
| | |
Expenditures
on intangible assets | |
| (12,188 | ) | |
| (5,171 | ) |
| |
| (12,188 | ) | |
| (5,171 | ) |
Cash
flow from financing activities | |
| | | |
| | |
Funds
paid to related party | |
| (17,421 | ) | |
| (1,572 | ) |
Funds
paid to shareholder | |
| (52,368 | ) | |
| (17,687 | ) |
Receipt
of funds held in attorney trust | |
| 39,705 | | |
| — | |
Repayment
of bank indebtedness | |
| (2,634 | ) | |
| (2,724 | ) |
Advances
from investor | |
| 11,796 | | |
| — | |
Proceeds
from issuance of convertible debentures | |
| 228,000 | | |
| — | |
| |
| 207,078 | | |
| (20,883 | ) |
Decrease
in cash | |
| (233,550 | ) | |
| (11,282 | ) |
Cash,
beginning of period | |
| 250,718 | | |
| 13,462 | |
Cash,
end of period | |
$ | 17,168 | | |
$ | 2,180 | |
The
accompanying notes are an integral part of these condensed interim financial statements.
iWallet
Corporation
Notes
to Condensed Interim Financial Statements
June
30, 2014 and 2013 (unaudited)
1. Nature
of Business and Going Concern
iWallet
Corporation ("the Company") is engaged in the design, development, manufacturing and sales of bio-metric locking wallets,
which operate by scanning a user’s fingerprint to open the wallet.
The
Company was incorporated on November 18, 2009 in the State of California and is located at 7968 Arjons Drive, Suite D, San Diego,
California 92126.
The
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
("U.S. GAAP"), which contemplates continuation of the Company as a going concern.
As
of June 30, 2014, the Company has incurred a shareholder's deficiency of $627,205 (December 31, 2013 - $222,812) and has significant
losses and negative cash flows from operations. In addition as at June 30, 2014 the Company has a working capital deficiency of
$714,784 (December 31, 2013 - $301,976). 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 near future
to enable it to meet its obligations as they come due. As a result there is substantial doubt regarding the Company's ability
to continue as a going concern. The Company may require additional financing to fund its operations, which may not be available
at acceptable terms or at all. The Company plans on raising additional funds from completing financing arrangements, whether as
continued subscriptions for convertible debentures or from additional sources, in contemplation of completing a public listing
transaction as described in note 16.
The
condensed interim financial statements do not include any adjustments relating to the recoverability and classification of the
recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to
continue as a going concern. All adjustments, consisting only of normal recurring items, considered necessary for fair presentation
have been included in these condensed interim financial statements.
2. Significant
Accounting Policies
Unaudited
Condensed Interim Financial Statements
These
unaudited condensed interim financial statements have been prepared on the same basis as the annual financial statements and should
be read in conjunction with those annual financial statements for the year ended December 31, 2013. In the opinion of management,
these unaudited condensed 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.
3. Recently
Issued Accounting Standards and Recently Adopted Accounting Pronouncement
Income
Taxes (ASC Topic - 750): Presentation of an Unrecognized Tax Benefit when a Net Operating Loss Carry-forward, a Similar Tax Loss,
or a Tax Credit Carry-forward Exists" ("ASU 2013-11") was issued during July 2013. The FASB issued guidance
on how to present an unrecognized tax benefit. The guidance is effective for annual periods beginning after December 15, 2013.
Adoption of the accounting pronouncement does not have a material effect on these accompanying condensed interim financial statements.
On
May 28, 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
condensed interim financial statements of adopting ASU 2014-09 will be assessed by management.
Management
does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material
effect on the accompanying condensed interim financial statements.
4. Inventory
| |
| June
30, | | |
| December
31, | |
| |
| 2014 | | |
| 2013 | |
Raw
Material & Finished Goods | |
$ | 23,549 | | |
$ | 20,361 | |
During
the period ended June 30, 2014, the Company recorded a provision relating to obsolete inventory of $nil (2013 - $nil).
5. Intangible
Assets
June
30, 2014 | |
| | | |
| | | |
| Accumulated | | |
| Net
Book | |
| | | |
| Cost | | |
| Amortization | | |
| Value | |
| Patents | | |
$ | 68,118 | | |
$ | 12,726 | | |
$ | 55,392 | |
| Trademarks | | |
| 13,484 | | |
| 4,123 | | |
| 9,361 | |
| Software | | |
| 40,000 | | |
| 1,625 | | |
| 38,375 | |
| | | |
$ | 121,602 | | |
$ | 18,474 | | |
$ | 103,128 | |
|
December
31, 2013 | |
|
|
| |
| | | |
| Accumulated | | |
| Net
Book | |
|
|
| |
| Cost | | |
| Amortization | | |
| Value | |
|
Patents |
| |
$ | 65,930 | | |
$ | 9,375 | | |
$ | 56,555 | |
|
Trademarks |
| |
| 13,484 | | |
| 3,324 | | |
| 10,160 | |
|
Software
(i) |
| |
| 30,000 | | |
| — | | |
| 30,000 | |
|
|
| |
$ | 109,414 | | |
$ | 12,699 | | |
$ | 96,715 | |
| (i) | The
Company purchased software from an arm's length third party in December 2013 accordingly
although ready for use, the costs were not amortized as any amortization would have been
insignificant. |
| | Depreciation
for the six-month period ended June 30, 2014 is $5,775 (June 30, 2013 - $3,632). |
6. Bank
Indebtedness
The
bank indebtedness of the Company consists of a secured line of credit with a limit of $35,000 bearing interest at the annual prime
rate plus 1.25%, which as at June 30, 2014 and December 31, 2013 was 4.5%, and with monthly repayments determined as follows:
a) the
greater of:
| i) | two
percent (2%) of the outstanding principal balance outstanding on the last day of the
billing period, or |
b) accrued
interest since the date of the last payment.
On
termination of the line of credit, the amount will become due over a period determined by the creditor of between thirty-six and
eighty-four months, or over three to seven years, which at the time of the agreement was determined to be forty-eight months,
or four years.
The
line of credit is subject to various non-financial covenants that would constitute an event of default, notably: ownership change
or sale of the business; closure or failure to maintain the related checking account; insolvency or any bankruptcy proceedings;
or, any other defaults on other contracts with the creditor or with any other financial institution.
Security
for the line of credit is the cash in the checking account held with the bank.
| |
| June
30, | | |
| December
31, | |
| |
| 2014 | | |
| 2013 | |
Line
of credit | |
$ | 20,445 | | |
$ | 23,079 | |
Less: Current
portion - estimated based on (a)(i) above | |
| (4,907 | ) | |
| (5,539 | ) |
| |
$ | 15,538 | | |
$ | 17,540 | |
Principal
repayments estimated based on (a)(i) above as at June 30, 2014:
| 2014
(remaining six months) | | |
$ | 2,454 | |
| 2015 | | |
| 5,213 | |
| 2016 | | |
| 5,213 | |
| 2017 | | |
| 2,658 | |
| | | |
$ | 15,538 | |
7. Related
Party Balances
| |
| June
30, | | |
| December
31, | |
| |
| 2014 | | |
| 2013 | |
Current
assets | |
| | | |
| | |
Due
from shareholder | |
$ | 114,201 | | |
$ | 61,833 | |
Current
liabilities | |
| | | |
| | |
Accounts
payable – due to shareholder | |
$ | 24,000 | | |
$ | — | |
Due
to related party | |
$ | 20,421 | | |
$ | 37,842 | |
Advances
from investor | |
$ | 474 | | |
$ | 69,678 | |
The
above balances are non-interest bearing, unsecured and due on demand. The related party is related by virtue of the common control
and ownership by the Company's shareholder.
The
accounts payable – due to shareholder relates to compensation owing to the Company’s shareholder for services in his
capacity as Chief Executive Officer.
The
advances from investor were funds advanced for purposes of covering operating expenses of the Company and $81,000 of these advances
were formalized into a convertible debenture during the period (note 8). At December 31, 2013, the investor was also serving as
interim Chief Financial Officer ("CFO") and accordingly these transactions constitute related party transactions; however,
on January 1, 2014 the investor resigned as interim CFO.
8. Convertible
Debentures
In
December of 2013, the Company entered into a series of secured convertible debenture agreements (the "convertible debentures")
with various investors amounting to $354,000, of which $39,705 was held in attorney's trust to fund related closing costs. During
the three months ending March 31, 2014 the Company closed on an additional $83,000 of convertible debentures with the same terms,
bringing the total convertible debentures outstanding as at March 31, 2014 to $437,000. During the three months ending June 30,
2014 the Company closed on an additional $226,000 of convertible debentures with the same terms, inclusive of $81,000 of advances
from investor formalized into a convertible debenture during the period (note 7), bringing the total convertible debentures outstanding
as at June 30, 2014 to $663,000. The convertible debentures bear interest at 5% per annum calculated monthly and payable on maturity
and had an original maturity date of June 30, 2014. In addition during the period, the Company extended the maturity to August
15, 2014, including the formalization of the advances from investor in note 7 (see note 16). As at June 30, 2014, the amount of
accrued interest is $11,739 (December 31, 2013 - $200), which is included in accounts payable, and total interest expense for
the six months ended June 30, 2014 was $11,625 (2013 - $nil) and for the three months ended June 30, 2014 was 6,467 (2013 - $nil).
Each
convertible debenture contains a conversion option contingently exercisable upon the approval from the Securities and Exchange
Commission or the TSX Venture Exchange for listing of its common shares. The conversion price will be based on the price at which
the Company sells or issues common shares or units, less a discount of 30%. A unit would consist of one common stock and one share
purchase warrant entitling the holder to purchase one additional Class A common share at an exercise price of $0.20 and with a
term of 24 months. Similarly, the Company has the option to force conversion upon approval of a public listing at the same conversion
price.
Since
the conversion option is contingent upon a public listing no value has been allocated to the conversion option in accordance with
ASC 470 Debt. The terms of the convertible debenture do not permit the number of shares receivable upon conversion if a public
listing occurs to be calculated at the commitment date. During the period in which a public listing occurs, the conversion feature
would be measured and recognized as a debt discount and an adjustment to additional paid-in capital.
Subsequent
to the period end, all of the outstanding convertible debentures and accrued interest were converted into 3,222,120 common shares
and warrants to purchase an additional 3,222,120 shares of common stock of the Company at an exercise price of $0.20 and with
a term of 24 months.
9. Tooling
Commitment Deposit, Deferred Costs and Liability
On
May 26, 2011, the Company signed a contract with a supplier under which they are required to pay for tooling costs in addition
to their regular purchase orders (the "tooling commitment"). Under the terms of the tooling commitment the Company was
required to pay for 30% of the contracted tooling costs upon execution (the "tooling commitment deposit") and the remaining
70% over the purchase of 5,000 units over a nine month period (the "tooling commitment liability"). If 5,000 units were
not purchased within those nine months, then the remaining amount was due within thirty days.
As
of February 27, 2012, the Company had not reached the contracted level of purchases and an informal agreement to extend the period
was made; however, by December 31, 2012 the Company had not complied and as a result, the entire amount would have been considered
due.
On
August 24, 2013, the Company entered into a revised agreement with the supplier that extended the term another twelve months to
August 24, 2014.
The
tooling commitment deposit is included in deposits and deferred costs and is capitalized into inventory as units are purchased
based on the 5,000 unit commitment. The tooling commitment liability becomes due and is recognized into accounts payable as units
are purchased and the corresponding deferred costs are capitalized into inventory, all of which is based on the 5,000 unit commitment.
During
2013, it was determined that based on the actual sales levels realized in 2013, the 5,000 unit commitment, the Company would likely
not be able to meet the required orders. Accordingly, the deferred costs related to excess units was recognized as a provision
for loss on the tooling commitment in the condensed interim statement of operations and comprehensive (loss).
| |
| June
30, | | |
| December
31, | |
| |
| 2014 | | |
| 2013 | |
Tooling
commitment deposit | |
$ | 39,385 | | |
$ | 41,119 | |
Tooling
commitment deferred costs | |
| 98,967 | | |
| 100,947 | |
| |
| 138,352 | | |
| 142,066 | |
Provision
for loss on tooling commitment | |
| (138,352 | ) | |
| (139,213 | ) |
Tooling
commitment deposit and deferred costs | |
$ | — | | |
$ | 2,853 | |
Tooling
commitment liability | |
$ | 103,836 | | |
$ | 105,816 | |
10. Income
Taxes
The
Company calculates its income tax expense by estimating the annual effective tax rate and applying that rate to the year-to-date
ordinary income at the end of the period. The Company records a tax valuation allowance when it is more likely than
not that it will not be able to recover the value of its deferred tax assets. As of June 30, 2014 and 2013, the Company
calculated its estimated annualized effective tax rate at 0% and 0%, respectively. The Company had no income tax expense on its
$404,393 loss for the six months ended June 30, 2014. The Company recognized no income tax expense based on its $154,611
pre-tax loss for six months ended June 30, 2013.
The
Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would
more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold,
the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized
upon ultimate settlement with the relevant tax authority. The Company recognizes interest accrued on uncertain tax
positions as well as interest received from favorable tax settlements within interest expense. The Company recognizes
penalties accrued on unrecognized tax benefits within general and administrative expenses. As of June 30, 2014 and
December 31, 2013, the Company had no uncertain tax positions.
The
Company does not anticipate any significant changes to the total amounts of unrecognized tax benefits in the next twelve months.
In many cases the Company's uncertain tax positions are related to tax years that remain subject to examination by tax authorities.
The following describes the open tax years, by major tax jurisdiction, as of June 30, 2014:
Federal 2009
– present
State 2009
– present
11. Share
Capital
Authorized
200,000,000 Class
A Common shares par value $0.001
100,000,000 Class
B Common shares par value $0.001
10,000,000 Preferred
Shares par value $0.001
Issued
| |
| June
30, | | |
| December
31, | |
| |
| 2014 | | |
| 2013 | |
10,000
Class A Common shares | |
$ | 10 | | |
$ | 10 | |
12. Commitments
and Contingencies
Legal
Matters
From
time to time, the Company may be involved in a variety of claims, suits, investigations and proceedings arising from 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, financial
position, 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.
Warranty
Provisions
The
Company is also exposed to warranty contingencies associated with the iWallet and has recorded a provision for these for the period
ended June 30, 2014 of $2,763 and the year ended December 31, 2013 of $3,062, however, the actual amount of loss could be materially
different.
Lease
agreements
On
June 1, 2014 the Company entered into a new lease agreement for $2,500 per month on a month to month basis.
13. Basic
and Diluted Loss Per Share
Potential
common shares related to the convertible debentures were excluded from the computation of diluted loss per share for the period
ending June 30, 2014 because the inclusion of these shares would be anti-dilutive.
For
the periods ending June 30, 2013, no dilutive instruments existed; therefore, basic and diluted loss per share were equal.
14. Segmented
Reporting
All
of the Company's long-lived assets are located in the United States.
During
the six months ended June 30, 2014, majority of sales were domestic; however total international sales accounted for 14% (six
months ended June 30, 2013 – 44%) of total sales although no individual country was in excess of ten percent of total sales.
During the three months ended June 30, 2014, majority of the sales were domestic; however total international sales accounted
for 8% of total sales. During the three months ended June 30, 2013, the Company had sales to customers in Switzerland amounting
to 14% and Canada amounting to 10%. The remaining sales consisted of primarily domestic sales; however additional international
sales accounted for 14% of total sales.
15. Risk
Management
Concentrations
of Credit Risk
The
Company’s cash balances are maintained in bank accounts in the United States. Deposits held in banks in the United States
are insured up to $250,000 per depositor for each bank by the Federal Deposit Insurance Corporation. Actual balances at times
may exceed these limits.
The
Company performs on-going credit evaluations of its customers’ financial condition and generally does not require collateral
from its customers. For the six months ended June 30, 2014, one customer accounted for 22% and another for 14% of the Company’s
revenue. There were no significant customers during the six months ended June 30, 2013. For the three months ended June 30, 2014,
one customer accounted for 30% and another for 19% of the Company's revenue. There were
no significant customers during the three months ended June 30, 2013. As of June 30, 2014 one customer accounted for 94% of the
accounts receivable balance. As of December 31, 2013 one customer accounted for 100% of the accounts receivable balance.
Economics
Dependence
For
the period ended June 30, 2014 the Company purchased 100% (2013 - 100%) of its wallet inventory from one vendor.
The
accounts payable to this vendor is reflected in the carrying amount of the tooling commitment liability see note 9.
16. Subsequent
Events
| (a) | On
July 21, 2014, the Company was combined in an all stock, tax free merger (the “Merger”)
with a wholly-owned subsidiary of Queensridge Mining Resources Inc. ("Queensridge").
Pursuant to the Merger the Company will become a wholly-owed subsidiary of Queensridge
and the Company’s former stockholders will become the majority owners of Queensridge.
Queensridge, whose shares are currently quoted on the OTC Bulletin Board, will immediately
change its name to iWallet Corporation and will continue the business of iWallet as its
only line of business. The Merger will constitute a reverse merger whereby Queensridge
was deemed to have acquired iWallet for accounting purposes only. Upon the close of the
Merger, all convertible debentures and accrued interest were converted into common shares
of the Company and resulted in the issuance of 3,222,120 shares and warrants to purchase
3,222,120 common shares at $0.20 per share, exercisable for two years. Concurrent with
the close of the Merger transaction the Company completed a Private Placement of 6,479,002
units of the Company (“Units”) for gross proceeds of $1,943,701. Each Unit
consists of one common share and one common share purchase warrant of the Company. Each
whole common share purchase warrant is exercisable at $0.60 for a period of two years.
583,110 Units were issued as compensation to the brokers who assisted with the offering. |
| (b) | The
Company began trading in the United States on the OTCQB (OTC Markets Group) exchange
under the ticker symbol IWAL on July 25, 2014. |
UNAUDITED
PRO FORMA COMBINED FINANCIAL STATEMENTS
On
July 21, 2014, iWallet Acquisition Corp (the “Acquisition Sub”) a wholly-owned subsidiary of Queensridge Mining Resources
Inc. (“Queensridge”) that was formed specifically for the purposes of the transaction was combined in an all stock,
tax free merger (the “Merger”) with iWallet Corporation (“iWallet”). Pursuant to the Merger iWallet will
become a wholly-owned subsidiary of Queensridge and iWallet’s former stockholders will become the majority owners of Queensridge.
Queensridge, whose shares are currently quoted on the OTC Bulletin Board maintained by the Financial Industry Regulatory Authority
(“FINRA”), will immediately change its name to iWallet Corporation and will continue the business of iWallet as its
only line of business. The Merger was accounted for as a reverse merger whereby Queensridge was deemed to have acquired iWallet
for accounting purposes only.
The
effects of the Merger have been prepared using the purchase method of accounting and applying the assumptions and adjustments
described in the accompanying notes.
The
unaudited pro forma combined financial statements are provided for informational purposes only and do not purport to represent
what the actual combined results of operations or the combined financial position of the combined company would be had the Merger
occurred on the dates assumed, nor are they necessarily indicative of future combined results of operations or combined financial
position. The unaudited pro forma combined financial statements do not reflect any cost savings or other synergies that the management
of Queensridge and iWallet believe could have been achieved had the Merger been completed on the dates indicated.
The
unaudited pro forma combined statements of operations data for the periods presented give effect to the Transactions as if they
had been consummated on January 1, 2013 the beginning of the earliest period presented. The unaudited pro forma balance sheets
give effect to the Transactions as if they had occurred on December 31, 2013 and June 30, 2014, respectively. We describe the
assumptions underlying the pro forma adjustments in the accompanying notes, which should also be read in conjunction with these
unaudited pro forma financial statements. You should also read this information in conjunction with:
| · | Separate
unaudited historical financial statements of Queensridge as of and for the six month
period ended December 31, 2012 and December 31, 2013. |
| · | Separate
unaudited historical financial statements of Queensridge as of and for the three month
period ended March 31, 2014. |
| · | Separate
audited historical financial statements of Queensridge as of and for the year ended June
30, 2013. |
| · | Separate
audited historical financial statements of iWallet as of and for the year ended December
31, 2013. |
| · | Separate
unaudited historical financial statements of iWallet as of and for the three months ended
March 31, 2014. |
| · | Separate
unaudited historical financial statements of iWallet as of and for the three and six
months ended June 30, 2014. |
The
unaudited pro forma combined financial statements should be read in conjunction with the information contained in “Use of
Proceeds”, “Capitalization”, “Selected Historical Financial Data”, “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” and the financial statements and accompanying notes of each
of Queensridge and iWallet appearing elsewhere or incorporated by reference in Form 8-K.
Queensridge
Mining Resources Inc.
(To
be renamed iWallet Corporation)
Pro
Forma Combined Statement of Financial Position
Expressed
in United States Dollars
As
at June 30, 2014
(Unaudited)
| |
Queensridge
Mining Resources | |
|
iWallet
Corporation |
|
|
Note | |
Pro
Forma Adjustment | |
Pro
Forma Consolidated |
Assets | |
| | | |
| |
|
| | |
| | | |
| | |
Current
assets | |
| | | |
| |
|
| | |
| | | |
| | |
Cash | |
$ | — | | |
$ | 17,168 |
|
| (e) | |
| 1,943,701 | | |
| | |
(g) | |
| (225,000 | ) | |
$ | 1,735,869 |
|
| | |
| | | |
| | |
Accounts receivable | |
| 6,177 | | |
| — |
|
| | |
| 6,177 | | |
| | |
Deposits and deferred
costs | |
| — | | |
| 116,407 |
|
| | |
| — | | |
| 116,407 | |
Inventory | |
| — | | |
| 23,549 |
|
| | |
| — | | |
| 23,549 | |
Due
from shareholder | |
| — | | |
| 122,036 |
|
| | |
| — | | |
| 122,036 | |
Total current assets | |
| — | | |
| 285,337 |
|
| | |
| 1,718,701 | | |
| 2,004,038 | |
Intangible
assets | |
| — | | |
| 103,128 |
|
| | |
| — | | |
| 103,128 | |
Total assets | |
$ | — | | |
$ | 388,465 |
|
| | |
$ | 1,718,701 | | |
$ | 2,107,166 | |
Liabilities | |
| | | |
| |
|
| | |
| | | |
| | |
Current
liabilities | |
| | | |
| |
|
| | |
| | | |
| | |
Bank indebtness
- current | |
$ | — | | |
$ | 4,907 |
|
| | |
$ | — | | |
$ | 4,907 | |
Accounts payable | |
| 107,404 | | |
| 158,560 |
|
| (c) | |
| (107,404 | ) | |
| 158,560 | |
Accrued liabilities | |
| 3,716 | | |
| 41,087 |
|
| (c) | |
| (3,716 | ) | |
| 41,087 | |
Due to related
party | |
| — | | |
| 28,257 |
|
| | |
| — | | |
| 28,257 | |
Advances from investor | |
| — | | |
| 474 |
|
| | |
| — | | |
| 474 | |
Shareholder loans | |
| 12,590 | | |
| — |
|
| (c) | |
| (12,590 | ) | |
| — | |
Convertible debenture | |
| — | | |
| 663,000 |
|
| (a) | |
| (663,000 | ) | |
| — | |
Tooling
commitment liability | |
| — | | |
| 103,836 |
|
| | |
| — | | |
| 103,836 | |
Total current liabilities | |
| 123,710 | | |
| 1,000,121 |
|
| | |
| (786,710 | ) | |
| 337,121 | |
Notes payable -
related party | |
| 42,382 | | |
| — |
|
| (c) | |
| (42,382 | ) | |
| — | |
Bank
indebtness - long-term | |
| — | | |
| 15,538 |
|
| | |
| — | | |
| 15,538 | |
Total liabilities | |
$ | 166,092 | | |
$ | 1,015,659 |
|
| | |
$ | (829,092 | ) | |
$ | 352,659 | |
Equity (deficiency) | |
| | | |
| |
|
| | |
| | | |
| | |
Common shares | |
$ | 6,428 | | |
$ | 10 |
|
| (a) | |
$ | 3,222 | | |
| | |
| |
| | | |
| |
|
| (d) | |
| (6,428 | ) | |
| | |
| |
| | | |
| |
|
| (d) | |
| 19,027 | | |
| | |
| |
| | | |
| |
|
| (e) | |
| 6,479 | | |
| | |
| |
| | | |
| |
|
| (e) | |
| 583 | | |
$ | 29,321 | |
Additional paid-in
capital | |
| 32,372 | | |
| 1 |
|
| (a) | |
| 659,778 | | |
| | |
| |
| | | |
| |
|
| (d) | |
| (19,027 | ) | |
| | |
| |
| | | |
| |
|
| (d) | |
| (32,372 | ) | |
| | |
| |
| | | |
| |
|
| (e) | |
| 1,943,701 | | |
| | |
| |
| | | |
| |
|
| (e) | |
| (6,479 | ) | |
| | |
| |
| | | |
| |
|
| (e) | |
| (583 | ) | |
| | |
| |
| | | |
| |
|
| (g) | |
| (225,000 | ) | |
| 2,352,390 | |
Deficit | |
| (204,892 | ) | |
| (627,205 |
) |
| (c) | |
| 166,092 | | |
| | |
| |
| | | |
| |
|
| (d) | |
| 38,800 | | |
| (627,205 | ) |
(Deficiency)
equity attributable to shareholders of Queensridge Mining Resources Inc. | |
| (166,092 | ) | |
| (627,194 |
) |
| | |
| 2,547,793 | | |
| 1,754,507 | |
Total
liabilities and equity | |
$ | — | | |
$ | 388,465 |
|
| | |
$ | 1,718,701 | | |
$ | 2,107,166 | |
See accompanying
notes to the pro forma consolidated statement of financial position.
Queensridge
Mining Resources Inc.
(To
be renamed iWallet Corporation)
Pro
Forma Combined Statement of Operations and Comprehensive Loss
Expressed
in United States Dollars
For
the six month period ended June 30, 2014
(Unaudited)
| |
Queensridge
Mining Resources | |
iWallet
Corporation |
|
Note | |
Pro
Forma Adjustment | |
Pro
Forma Consolidated |
Sales | |
$ | — | | |
$ | 38,139 | |
|
| |
$ | — | | |
$ | 38,139 | |
Cost of sales | |
| — | | |
| 36,390 | |
|
| |
| — | | |
| 36,390 | |
Gross
Profit | |
| — | | |
| 1,749 | |
|
| |
| — | | |
| 1,749 | |
Expenses | |
| | | |
| | |
|
| |
| | | |
| | |
Legal and professional
fees | |
| 13,524 | | |
| 220,029 | |
|
| |
| — | | |
| 233,553 | |
Sub contractor
fees | |
| — | | |
| 109,100 | |
|
| |
| — | | |
| 109,100 | |
Office and general
expenses | |
| 799 | | |
| 25,267 | |
|
| |
| — | | |
| 26,066 | |
Travel | |
| — | | |
| 16,986 | |
|
| |
| — | | |
| 16,986 | |
Interest and bank
fees | |
| — | | |
| 12,952 | |
|
| |
| — | | |
| 12,952 | |
Rent | |
| — | | |
| 4,500 | |
|
| |
| — | | |
| 4,500 | |
Amortization of
intangible assets | |
| — | | |
| 5,775 | |
|
| |
| — | | |
| 5,775 | |
Research and development | |
| — | | |
| 11,533 | |
|
| |
| — | | |
| 11,533 | |
Interest expense | |
| 1,039 | | |
| — | |
|
| |
| — | | |
| 1,039 | |
Gain
on transfer of assets | |
| — | | |
| — | |
|
(c) | |
| 166,092 | | |
| 166,092 | |
| |
| 15,362 | | |
| 406,142 | |
|
| |
| 166,092 | | |
| 587,596 | |
Net
loss from continuing operations | |
$ | (15,362 | ) | |
$ | (404,393 | ) |
|
| |
$ | (166,092 | ) | |
$ | (587,596 | ) |
Loss from continuing
operations per common share - basic and diluted | |
$ | (0.00 | ) | |
$ | (40.44 | ) |
|
(h) | |
$ | 40.42 | | |
$ | (0.02 | ) |
Weighted average common shares - basic
and diluted | |
| 6,427,800 | | |
| 10,000 | |
|
(h) | |
| 22,883,579 | | |
| 29,321,379 | |
See accompanying
notes to the pro forma consolidated statement of financial position.
Queensridge
Mining Resources Inc.
(To be
renamed iWallet Corporation)
Pro Forma
Combined Statement of Financial Position
Expressed
in United States Dollars
As at
December 31, 2013
(Unaudited)
|
Queensridge
Mining Resources | |
iWallet
Corporation | |
Note | |
Pro
Forma Adjustment | |
Pro
Forma Consolidated |
Assets |
| | | |
| | | |
| | | |
| | |
Current
assets |
| | | |
| | | |
| | | |
| | |
Cash |
$ | 15 | | |
$ | 250,718 | | |
| (a) | | |
$ | 73,919 | |
|
| | | |
| | | |
| (a) | | |
| 5,000 | |
|
| | | |
| | | |
| (a) | | |
| 145,000 | |
|
| | | |
| | | |
| (c) | | |
| (15 | ) |
|
| | | |
| | | |
| (e) | | |
| 1,943,701 | |
|
| | | |
| | | |
| (g) | | |
| (225,000 | ) | |
$ | 2,193,338 | |
Funds held in attorney
trust |
| | | |
| 39,705 | | |
| (a) | | |
| (39,705 | ) | |
| — | |
Trade and other receivables |
| — | | |
| 4,575 | | |
| | | |
| — | | |
| 4,575 | |
Deposits and deferred
costs |
| — | | |
| 23,086 | | |
| | | |
| — | | |
| 23,086 | |
Inventory |
| — | | |
| 20,361 | | |
| | | |
| — | | |
| 20,361 | |
Due
from shareholder |
| — | | |
| 61,833 | | |
| | | |
| — | | |
| 61,833 | |
Total current assets |
| 15 | | |
| 400,278 | | |
| | | |
| 1,902,900 | | |
| 2,303,193 | |
|
| | | |
| | | |
| | | |
| | |
Intangible
assets |
| — | | |
| 96,715 | | |
| | | |
| | | |
| 96,715 | |
Total assets |
$ | 15 | | |
$ | 496,993 | | |
| | | |
$ | 1,902,900 | | |
$ | 2,399,908 | |
|
| | | |
| | | |
| | | |
| | |
Liabilities |
| | | |
| | | |
| | | |
| | |
Current
liabilities |
| | | |
| | | |
| | | |
| | |
Bank indebtness -
current |
$ | — | | |
$ | 5,539 | | |
| | | |
$ | — | | |
$ | 5,539 | |
Accounts payable |
| 96,031 | | |
| 126,317 | | |
| (a) | | |
| (39,705 | ) |
|
| | | |
| | | |
| (c) | | |
| (96,031 | ) | |
| 86,612 | |
Accrued liabilities |
| 3,186 | | |
| 3,062 | | |
| (c) | | |
| (3,186 | ) | |
| 3,062 | |
Due to related party |
| — | | |
| 37,842 | | |
| | | |
| — | | |
| 37,842 | |
Advances from investor |
| — | | |
| 69,678 | | |
| (a) | | |
| 11,322 | |
|
| | | |
| | | |
| (a) | | |
| (81,000 | ) | |
| — | |
Shareholder loans |
| 12,590 | | |
| — | | |
| (c) | | |
| (12,590 | ) | |
| — | |
Convertible debenture |
| — | | |
| 354,000 | | |
| (a) | | |
| 83,000 | |
|
| | | |
| | | |
| (a) | | |
| 81,000 | |
|
| | | |
| | | |
| (a) | | |
| 145,000 | |
|
| | | |
| | | |
| (a) | | |
| (663,000 | ) | |
| — | |
Tooling
commitment liability |
| — | | |
| 105,816 | | |
| | | |
| — | | |
| 105,816 | |
Total current liabilities |
| 111,807 | | |
| 702,254 | | |
| | | |
| (575,190 | ) | |
| 238,871 | |
|
| | | |
| | | |
| | | |
| | |
Notes payable - related
party |
| 42,382 | | |
| — | | |
| (c)
| | |
| (42,382 | ) | |
| — | |
Bank
indebtness - long-term |
| — | | |
| 17,540 | | |
| | | |
| — | | |
| 17,540 | |
Total liabilities |
$ | 154,189 | | |
$ | 719,794 | | |
| | | |
$ | (617,572 | ) | |
$ | 256,411 | |
|
| | | |
| | | |
| | | |
| | |
Equity (deficiency) |
| | | |
| | | |
| | | |
| | |
Common shares |
$ | 6,428 | | |
$ | 10 | | |
| (a) | | |
$ | 3,222 | |
|
| | | |
| | | |
| (d) | | |
| (6,428 | ) |
|
| | | |
| | | |
| (d) | | |
| 19,027 | |
|
| | | |
| | | |
| (e) | | |
| 6,479 | |
|
| | | |
| | | |
| (e) | | |
| 583 | | |
$ | 29,321 | |
Additional paid-in
capital |
| 32,372 | | |
| 1 | (a) | |
| | | |
| 659,778 | |
|
| | | |
| | | |
| (d) | | |
| 2,692,117 | |
|
| | | |
| | | |
| (d) | | |
| (32,372 | ) |
|
| | | |
| | | |
| (e) | | |
| 1,943,701 | |
|
| | | |
| | | |
| (e) | | |
| (6,479 | ) |
|
| | | |
| | | |
| (e) | | |
| (583 | ) |
|
| | | |
| | | |
| (g) | | |
| (225,000 | ) | |
| 5,063,534 | |
Deficit |
| (192,974 | ) | |
| (222,812 | )(a) | |
| | | |
| (9,081 | ) |
|
| | | |
| | | |
| (a) | | |
| (6,322 | ) |
|
| | | |
| | | |
| (c) | | |
| 154,204 | |
|
| | | |
| | | |
| (d) | | |
| 38,771 | |
|
| | | |
| | | |
| (d) | | |
| (2,711,144 | ) | |
| (2,949,359 | ) |
(Deficiency)
equity attributable to shareholders of Queensridge Mining Resources Inc. |
| (154,174 | ) | |
| (222,801 | ) | |
| | | |
| 2,520,472 | | |
| 2,143,497 | |
Total
liabilities and equity |
$ | 15 | | |
$ | 496,993 | | |
| | | |
$ | 1,902,900 | | |
$ | 2,399,908 | |
See accompanying
notes to the pro forma consolidated statement of financial position.
Queensridge
Mining Resources Inc.
(To be
renamed iWallet Corporation)
Pro Forma
Combined Statement of Operations and Comprehensive Loss
Expressed
in United States Dollars
For the
year ended December 31, 2013
(Unaudited)
|
Queensridge
Mining Resources | |
iWallet
Corporation | |
Note | |
Pro
Forma Adjustment | |
Pro
Forma Consolidated |
|
| | | |
| | | |
| | | |
| | |
Sales |
$ | — | | |
$ | 85,769 | | |
| | | |
$ | — | | |
$ | 85,769 | |
Cost of sales |
| — | | |
| 63,585 | | |
| | | |
| — | | |
| 63,585 | |
Gross
Profit |
| — | | |
| 22,184 | | |
| | | |
| | | |
| 22,184 | |
|
| | | |
| | | |
| | | |
| | |
Expenses |
| | | |
| | | |
| | | |
| | |
Provision for loss
on tooling commitment |
| — | | |
| 139,213 | | |
| | | |
| — | | |
| 139,213 | |
Legal and professional
fees |
| 44,926 | | |
| 73,278 | | |
| (a) | | |
| 2,111 | |
|
| | | |
| | | |
| (a) | | |
| 2,108 | | |
| 122,423 | |
Travel |
| — | | |
| 23,475 | | |
| (a) | | |
| 4,524 | | |
| 27,999 | |
Office and general
expenses |
| 1,491 | | |
| 9,583 | | |
| (a) | | |
| (310 | ) | |
| 10,764 | |
Amortization of intangible
assets |
| — | | |
| 5,288 | | |
| | | |
| — | | |
| 5,288 | |
Interest and bank
fees |
| 1,589 | | |
| 2,515 | | |
| | | |
| — | | |
| 4,104 | |
Agent fees |
| — | | |
| — | | |
| (a) | | |
| 6,970 | | |
| 6,970 | |
Transaction costs |
| — | | |
| — | | |
| (d) | | |
| 2,711,144 | | |
| 2,711,144 | |
Gain
on transfer of assets |
| — | | |
| — | | |
| (c) | | |
| 154,204 | | |
| 154,204 | |
|
| 48,006 | | |
| 253,352 | | |
| | | |
| 2,880,750 | | |
| 3,182,108 | |
|
| | | |
| | | |
| | | |
| | |
Loss before recovery
of income taxes |
| (48,006 | ) | |
| (231,168 | ) | |
| | | |
| (2,880,750 | ) | |
| (3,159,924 | ) |
Recovery
of income taxes |
| | | |
| (4,247 | ) | |
| | | |
| — | | |
| (4,247 | ) |
Net
loss from continuing operations |
$ | (48,006 | ) | |
$ | (226,921 | ) | |
| | | |
$ | (2,880,750 | ) | |
$ | (3,155,677 | ) |
|
| | | |
| | | |
| | | |
| | |
Loss from continuing
operations per common share - basic and diluted |
$ | (0.01 | ) | |
$ | (22.69 | ) | |
| (h) | | |
$ | 22.59 | | |
$ | (0.11 | ) |
|
| | | |
| | | |
| | | |
| | |
Weighted average common shares - basic
and diluted |
| 6,427,800 | | |
| 10,000 | | |
| (h) | | |
| 22,883,579 | | |
| 29,321,379 | |
See accompanying
notes to the pro forma consolidated statement of financial position.
Queensridge
Mining Resources Inc.
(To
be renamed iWallet Corporation)
Notes
to Pro Forma Combined Financial Statements
(Expressed
in United States Dollars)
(Unaudited)
On
July 21, 2014, Queensridge entered into a merger agreement with iWallet to complete the merger whereby all of the issued and outstanding
common stock of iWallet, a non-reporting issuer incorporated under the laws of the State of California, will be exchanged for
shares of Queensridge subject to a number of conditions, including a private placement by iWallet for gross proceeds of a $1,943,701
(the “Private Placement”). The business combination will constitute a “Reverse Merger Transaction” of
Queensridge under the policies of FINRA. The total number of Queensridge common shares issued and outstanding immediately prior
to the Transaction will be 34,113,790. Queensridge will issue an aggregate of 13,222,120 shares in return for all of the issued
and outstanding shares of iWallet. Immediately after the issuance of the 13,222,120 shares, all but 9,037,147 of the 34,113,790,
or 25,076,643, common shares will be cancelled.
The
unaudited pro forma combined financial information of Queensridge as at and for the year ended December 31, 2013 and June 30,
2014, respectively, has been prepared by management to reflect the Merger of iWallet by Queensridge as described in note 1.
The
unaudited pro forma combined financial information that follows for the year ended and as of December 31, 2013 has been derived
from the historical financial statements of Queensridge for the period ended December 31, 2013, the historical financial statements
of Queensridge for the year ended June 30, 2013, the historical financial statements of Queensridge for the period ended December
31, 2012 and the historical financial statements of iWallet for the year ended December 31, 2013, along with certain adjustments.
The
unaudited pro forma combined financial information that follows for the period ended and as of June 30, 2014 has been derived
from the historical financial statements of Queensridge for the period ended December 31, 2013, the historical financial statements
of Queensridge for the period ended March 31, 2014 and the historical financial statements of iWallet for the period ended June
30, 2014, along with certain adjustments.
The
unaudited pro forma combined statement of operations for the periods ended December 31, 2013 and June 30, 2014 have been prepared
as if the Merger occurred as of January 1, 2013.
The
pro forma adjustments are based on available information and assumptions that Queensridge believes are reasonable. Such adjustments
are estimates and are subject to change.
The
Merger will be accounted for as a reverse acquisition in accordance with the Financial Accounting Standards Board (ASC 805, Business
Combinations). Queensridge’s management has evaluated the guidance contained in ASC 805 with respect to the identification
of the acquirer in the Merger and concluded, based on a consideration of the pertinent facts and circumstances, that Queensridge
will acquire iWallet for financial accounting purposes. Accordingly, the Merger has been accounted for in the unaudited pro forma
combined financial statements as a continuation of the financial statements of iWallet, together with a deemed issuance of shares,
equivalent to the shares held by the former shareholders of Queensridge and a re-capitalization of the equity of iWallet.
| 3. | Pro
Forma Assumptions and Adjustments |
The
unaudited pro forma combined financial statements give effect to the following assumptions and adjustments:
| a) | In
December 2013, iWallet entered into a series of secured convertible debenture agreements
(the “Convertible Debentures”) with various investors amounting to $354,000,
of which $39,705 was held in attorney’s trust and later paid to fund related closing
costs. |
In
January 2014, iWallet entered into additional Convertible Debentures amounting to $83,000. In connection with the January 2014
Convertible Debentures iWallet paid $9,081 in agent, legal and professional fees.
During
the three month period ended June 30, 2014, iWallet received additional advances and incurred expenses that were paid by a shareholder
and recorded as additions to shareholder loan.
During
the three month period ended June 30, 2014, iWallet entered into $145,000 in new Convertible Debentures and converted $81,000
of advances from investors into a convertible debenture, all with the same terms and maturity as the December 2013 Convertible
Debentures.
As
the reverse merger results in a public listing, concurrent with the reverse merger, iWallet has elected to force conversion of
the aggregate $663,000 convertible debentures resulting in the issuance of 3,222,120 common shares and 3,222,120 common share
purchase warrants with an exercise price of $0.20 and a term of 24 months. The Convertible Debentures included a contingent beneficial
conversion feature and as such, is recognized once the contingency, being the public listing, is resolved. The conversion of the
Convertible Debentures results in the relative fair value of the debt component, the warrants and the beneficial conversion feature
being reclassified from liabilities to APIC.
| b) | On
July 10, 2014, Queensridge completed a 1 for 5.307 stock split of its common stock. |
| c) | Immediately
prior to the Merger, a former controlling shareholder, received a transfer of all assets
and agreed to cancel and/or assume all liabilities related to Queensridge’s pre-acquisition
business. The transfer resulted in a gain on transfer of assets of $166,092 for the six
month period ended June 30, 2014 and $154,204 for the twelve months ended December 31,
2013. |
| d) | Common
stock, APIC and the deficit of Queensbridge are eliminated. |
All
the assets and liabilities of Queensridge were assumed by the former shareholder (note 3(c)) and therefore no value was assigned
to the transaction.
| e) | Concurrently
with the Merger, iWallet intends to complete a Private Placement of a maximum of 6,479,002
units of iWallet (“Units”) for gross proceeds of $1,943,701. Each Unit consists
of one common share and one common share purchase warrant of iWallet. Each whole common
share purchase warrant is exercisable at $0.60 for a period of two years. |
| f) | The
agent of the Private Placement will receive583,110 broker warrants to acquire units at
an exercise price of $0.60 per unit for a period of two years. Each unit is comprised
of one share of common stock of iWallet and one common share purchase warrant exercisable
at $0.60 for a period of two years. |
| g) | The
agent of the Private Placement will receive cash compensation of 9% of the gross proceeds
of the financing, additionally closing costs of approximately $50,000 are expected to
be incurred, for total share issue costs of approximately $225,000. |
| h) | The
warrants outstanding as at December 31, 2013 were excluded from the computation of diluted
loss per share as the potential effect was anti-dilutive. |
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