UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-K

  

þ  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2014

 

or

 

☐   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______________ to ______________

 

Commission File number: 333-105778

 

MOPALS.COM, INC.

(Exact name of registrant as specified in its charter)

 

DELAWARE		05-0554486
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

109 Atlantic Avenue, Suite 308 Toronto, Ontario, CANADA,		M6K 1X4
(Address of principal executive offices)		(Zip Code)

 

 Registrant’s telephone number, including area code: (416) 362-4888

 

Securities registered under Section 12(b) of the Exchange Act:

 

Title of each class:		Name of each exchange on which registered:
None		None

 

Securities registered under Section 12(g) of the Exchange Act:

None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 the Securities Act. Yes o   No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes þ   No o

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o   No  þ

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ   No  o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer.	o	Accelerated filer.	o
Non-accelerated filer. (Do not check if a smaller reporting company)	o	Smaller reporting company.	þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o   No þ

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter, June 30, 2014: $848,102.

Number of the registrant’s common stock outstanding as of April 15, 2015: 51,819,993

Documents incorporated by reference: None.

 

 

 

TABLE OF CONTENTS

 

PART I
ITEM 1.	BUSINESS	4
ITEM 1A	RISK FACTORS	12
ITEM 1B.	UNRESOLVED STAFF COMMENTS	12
ITEM 2.	PROPERTIES	12
ITEM 3.	LEGAL PROCEEDINGS	12
ITEM 4	MINE SAFETY DISCLOSURES	12
PART II
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	13
ITEM 6.	SELECTED FINANCIAL DATA	14
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	15
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	17
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	17
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	17
ITEM 9A	CONTROLS AND PROCEDURES	17
ITEM 9B.	OTHER INFORMATION	18
PART III
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	18
ITEM 11.	EXECUTIVE COMPENSATION	21
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	22
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	23
ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	24
PART IV
ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	25
SIGNATURES		27

 

 

FORWARD-LOOKING STATEMENTS

 

This Annual Report on Form 10-K (this “Report”) contains “forward-looking statements” within the meaning of the Section 27A of the Securities Act, and Section 21E of the Exchange Act. Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future operations, future cash needs, business plans and future financial results, and any other statements that are not historical facts.

 

From time to time, forward-looking statements also are included in our other periodic reports on Forms 10-Q and 8-K, in our press releases, in our presentations, on our website and in other materials released to the public. Any or all of the forward-looking statements included in this Report and in any other reports or public statements made by us are not guarantees of future performance and may turn out to be inaccurate. These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.

 

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

 

 

PART I

 

Item 1. Business

 

Overview

 

MoPals.com, Inc. (f/k/a MortgageBrokers.com Holdings, Inc. which was f/k/a MagnaData, Inc.) (the “Company”, “we”, “our” or “us”), a development stage company, was incorporated under the laws of Delaware on February 6, 2003. In February 2005, we filed articles of amendment with the State of Delaware changing the name of our Company from MagnaData, Inc. to MortgageBrokers.com Holdings, Inc. On March 26, 2013, we filed articles of amendment with the State of Delaware changing the name of our Company to MoPals.com, Inc.

 

Discontinued Operations of Mortgage Brokerage Business

 

Prior to March 26, 2013, the Company operated as a mortgage brokerage in Canada through its four subsidiaries: MortgageBrokers.com Inc. (an Ontario Canada provincially incorporated company that held licensure for operating as a mortgage broker in the Province of Ontario); MortgageBrokers.com Financial Group of Companies Inc. (a Canadian federally incorporated company, which held licenses for operating as a mortgage broker in the Provinces of Newfoundland, Nova Scotia, New Brunswick, Prince Edward Island, Alberta and British Columbia); MBKR Holdings Inc. (a Canadian federally incorporated company through which the Company centralized back office services in Canada); and, MBKR Franchising Inc. (a Canadian federally incorporated company, through which the Company acted as a franchisor in Canada of the MortgageBrokers.com business system).

 

As noted in prior filings and disclosures, the Company had been actively exploring restructuring options to reduce Company overhead expenses. Based upon the 2011 and 2012 year-end financial results of operations and losses of cash from operating activities, the high costs associated with driving a high-service value proposition in an eroding margin brokerage marketplace in Canada and the increasingly high costs associated with administering a publicly traded company, the Director of the Company decided to privatize and wind down the Canadian operations (the “Mortgage Brokerage Business”) through a sale to a private company under common control ( collectively, the “Mortgage Brokerage Privatization”). In an effort to reduce overhead costs, and in exchange for the provision of ongoing working capital deficit funding, in late 2010, all human resources for the Company were consolidated into a related party company who provided back office corporate services to the Company on a cost allocation basis. Over 2012, in an effort to further reduce overhead expenses and in preparation for the inevitable Mortgage Brokerage Privatization, all brokerage services including mortgage brokerage licensure, branding, mortgage agent back office operations, training and technology platforms were transitioned to the same related party company in the latter half of 2012. The Company’s subsidiaries did not renew their provincial mortgage brokerage licensure in the various jurisdictions where they operate and as at December 31, 2012, the Company’s subsidiaries had no active licenses empowering them to operate as a mortgage brokerage.

 

All business activities of the Company in the first quarter of 2013 were related to executing the Mortgage Brokerage Privatization including activities related to the contemplated Mortgage Brokerage Privatization; activities related to the administration of the publicly reporting entity; and administration of the business including management of trades payables.

 

On March 26, 2013, the Company entered into an Agreement of Sale (the “Agreement of Sale”) pursuant to which the Company transferred to MortgageBrokers.com Canada Inc., a Canadian Corporation under the control of Alex Haditaghi, the Company’s sole officer and director, and principal shareholder , all of the Company’s equity interest in the Company’s former Mortgage Brokerage Business and MortgageBrokers.com Canada Inc. agreed to assume any and all liabilities associated with the Company’s former Mortgage Broker Business, including, but not limited to all commitments, liabilities and contingent liabilities, effective immediately prior to closing of the Share Exchange. Pursuant to the Agreement of Sale, the Mr. Haditaghi forfeited all rights to any monies owed to Mr. Haditaghi by the Company associated with a shareholder loan of approximately $25,000 (the “Spin Out and Cancellation”).

  

 

Plan of Operations

 

MoPals is a development stage company which currently devotes all of its resources developing its core technology and platform, business, Sales and marketing plans, acquiring users and raising investment capital, growing the sales and Software development team.

 

In the next twelve months, the Company plans to begin the process of raising a minimum of $3 million in additional capital to help fuel its ongoing operations, continue its growth, explore new partnerships, and fully implement its business plan.  Upon completion of its financing, the Company plans to hire 14-20 additional new employees to grow its sales, marketing, and software development teams as well as to fully build out the Company's management team to include a full-time Chief Financial Officer and Chief Operating Officer.  Doing so will ensure that the Company has the necessary technical, management and financial resources to properly scale its business in 2015 and beyond.

 

Beginning in May 2015, the Company will launch its “Offer Network” and "Loyalty Platform" in the U.S. beginning with an initial launch in Phoenix, Arizona, and immediate surrounding areas.  Additionally, the Company will commence a number of strategic launches in select cities across Canada. The Company believes that if its initial launches prove to be successful, it will increase the Company's chances of receiving additional financing in the future on terms which are favorable to the Company. Our initial U.S. launch will demonstrate that the Company has traction, consumer demand and a clear source of revenue moving forward. 

 

MoPals Service, Distribution and Market

 

MoPals is building an internet and mobile brand loyalty application and service that the Company believes will bridge the gap between social media and loyalty rewards. It is management’s opinion that our service will be unique as the world’s first community-driven, crowd sourced loyalty platform. With a mobile-based, experiential and Big Data-driven platform, it is our intent to reward our members for both social and transactional behaviors. It is our plan that MoPals will use an exclusive digital currency, called ‘MoCoins™’, to foster a community where consumers are rewarded for making purchases at participating businesses, as well as engaging in a wide range of social media activities that enhance brand value.

 

Our consumer behavior incentives are centered around MoCoins™ which are earned by members for a number of online and ‘in-store’ behaviors within a consumer’s social network including rewards for promotional participation; ‘liking’, sharing or reviewing an experience at a business; referring business promotions; creating content driving polls; or referring friends to join the MoPals community. MoPals aims to be a leader in how brands inspire customer loyalty, driving online brand enhancing behavior and sales.

 

It is our aim that our technology platform will enable businesses to connect with their customers, giving businesses a cost effective means to encourage and reward brand enhancing behavior. It is our intent that our proprietary platform under development will also allow businesses to receive data associated with their consumer’s behavior from which they might target promotional offers and marketing strategies.

 

 

Following our service launch, our plan is that MoPals will generate revenue from:

 

1.

participating merchant subscriptions to receive ongoing consumer data; and

 

2.

receiving a percentage of promotion-based sales revenue from participating businesses.

 

In addition to the financial condition and results of operations of the Company, it is management’s belief that growth of our Company will also, in part, be demonstrated through the metrics of MoCoins™ issued or accrued, the number of registered members, number and types of promotional items sold, member retention via repeat engagement and the number of retail businesses who sign on to and offer promotions through the MoPals community.

 

Current Market Conditions

 

The Company believes that MoPals bridges both the ‘Social Media’ and ‘Loyalty Program’ market places.

 

Social Media

 

The Company has observed significant growth in sales and users for market dominant social media companies over the past three to five years. Facebook Inc., for example, has seen their gross revenue grow from $1.97 billion in 2010 to $7.87 billion in 2013 (Annual Financial Reports, Facebook Inc., 2010 – 2013) – approximately 300% over three years. Twitter Inc.’s gross revenue has grown from $106 million in 2011 to $665 million in 2013 (Annual Financial Reports, Twitter Inc., 2011 – 2013) - approximately 525% over two years.

 

According to emarketer.com in a June 18, 2013 on-line article, social media company sales and profits are closely linked to the number of users on the platform. The amount of global social network users was estimated at 1.73 billion people in 2013, up 18% from 2012. Social networking reaches nearly one in four people around the world. According to Emily Adler as published on businessinsider.com on January 5, 2014, social media users are highly engaged. Social media is now the top Internet activity: Americans spend an average of 37 minutes daily on social media, a higher time-spend than any other major Internet activity including email.

 

Loyalty Programs

 

The Company believes that the loyalty program industry, a generally mature market space, can be characterized by high growth rates and innovative ideas.

 

According to an article by McKinsey & Company published in Business Insider on March 21, 2014, the loyalty program industry growth rate still remains strong, even with customers already belonging to a large amount of programs. In the United States alone, loyalty memberships have been increasing by the annual compound rate of 8.7% since 2000 and the total loyalty program members in the U.S. are estimated at 2.5 billion in 2012. However, the amount of active loyalty memberships (meaning members had engaged at least once in the past 12 months) appears to be declining and was measured at 44% in 2012.

 

According to McKinsey & Company, many companies have been successfully innovating in the loyalty space. One such example is Target Corporation, which uses the data gained from their loyalty program to focus on highest-value consumers such as future moms. Another example is Sainsbury PLC, which built partnerships among many different retailers to deliver strong value to its loyalty program members. Both companies’ success in the loyalty space is attributed to their innovations.

 

 

Competitive Market Conditions

 

In industries as valuable as Social Media and Loyalty, there are many large competitors with dominant market share positions.

 

The four main competitors to MoPals are Yelp Inc., Foursquare Labs, Inc., Alliance Data Systems Corporation (Air Miles) and Aimia Inc. (Aeroplan).

 

Yelp

 

Yelp, Inc. is a multinational corporation headquartered in San Francisco, California that operates an "online urban guide" and business review site. According to Wikipedia.com, the company's website (www.yelp.com) began as an email service for exchanging local business recommendations and later introduced social networking features, discounts, and mobile applications.

 

According to financial information published on www.google.com/finance, from 2010 to 2013 Yelp saw its revenue grow from $48 Million to $233 Million - an increase of over 385% over three years. Yelp also has seen its stock price grow by 241% from $23.49 on March 25, 2013 to $81.17 on March 24, 2014. The company has a market capitalization of $5.5 billion as of March 28, 2014.

 

Foursquare

 

Foursquare is a location-based social networking website for mobile devices, such as smartphones. Users "check in" at venues using a mobile website, text messaging or a device-specific application by selecting from a list of venues the application locates nearby. Each check-in awards the user points and sometimes "badges". The user who ‘checks in’ most often to a venue becomes the "mayor," and users regularly vie for "mayorships".

 

In an article written by Sarah Frier for Bloomberg Businessweek on April 11, 2013, Foursquare received a $41 million investment from private equity fund Silver Lake Partners and venture capital firms Andreessen Horowitz, Union Square Ventures, O’Reilly AlphaTech Ventures, and Spark Capital in early April of 2014. Early investment rounds valued the company at $600 million.

 

Aimia

 

Aeroplan is a coalition loyalty program owned by Aimia Inc., a global loyalty management company. The Aeroplan program was created in July 1984 by Air Canada as an incentive program for its frequent flyer customers. There are approximately 4.6 million active members in the program. In recent years, Aeroplan has evolved into a loyalty marketing program with retail partners such as Esso, Home Hardware, Rona, Birks, Sobeys, Thrifty Foods, Nestle Canada and others.

 

According to financial information published on www.google.com/finance, from 2010 to 2013 Aimia saw its revenue decline from $1.96 billion to $1.67 billion. Despite this, Aimia has seen its stock price grow by 96% in five years from $8.66 on March 27, 2009 to $17.72 on March 24, 2014. The company has a market capitalization of $3.07 billion as of March 24, 2014.

 

Alliance Data (Air Miles)

 

Alliance Data Systems Corporation is a publicly traded provider of loyalty and marketing solutions, such as private label credit cards, coalition loyalty programs, and direct marketing services, derived from the capture and analysis of transaction-rich data.

 

 

According to financial information published on www.google.com/finance, from 2010 to 2013 Alliance Data saw its revenue grow from $2.8 billion to $4.3 billion, an increase of over 54% in three years. The company has a market capitalization of $14.92 billion as of March 24, 2014. Alliance Data has seen its stock price grow by 792% in a five year period from $36.34 on March 27, 2009 to $280.65 on March 24, 2014.

 

Strategic Market Positioning

 

The Company views the overall lack of recent innovation and customer engagement in the loyalty program industry as an opportunity to leverage the innovative strength and tools of social media in the brand loyalty market place. Company management also believe that the strength of the current market dominant competitors and the ongoing elevated degree of acquisitions in the social media and brand loyalty marketplaces may afford MoPals additional opportunities for growth.

 

The Company feels it has an advantage being a later entrant into the social media and brand loyalty markets which allows it to see what has worked for competitors in each market and how to improve upon it leveraging successes from one market into the other. The Company also feels that building a ‘Big-Data’ member platform can now be accomplished very cost effectively by outsourcing to off-shore developers.

 

MoPals Technology Platform & Service

 

MoPals’ software is planned to be multi-platform and will aim to integrate with all major social media sites, such as Facebook, Twitter, LinkedIn, Instagram, and Pinterest. Our product development approach is centered on building the most useful tools that enable users to connect, share, discover, and communicate with each other. Our services for users are free of charge to consumers and available on the internet and mobile platforms.

 

The MoPals’ proprietary software allows merchants to send customized and targeted brand promotions to our MoPals’ members using the wealth of information that is being volunteered over social media sites.

 

Our service will include:

 

	i.	Promotional offers. We will be featuring promotional offers from our national and local merchants and distributing them by email to our MoPals’ members.
	ii.	Self-Service Deals. Our merchants can use our self-service platform to create and launch deals at their discretion on our site.
	iii.	Member-Generated Polls. Our members will be able to create and generate polls and send them to their friends.
	iv.	Member-Generated Surveys. Our members will be able to create surveys and send them to their friends.
	v.	Our merchants will be able to create polls or surveys to be posted on the MoPals’ site.
	vi.	Our members can earn MoCoins™ for joining, liking a brand, purchasing a promotion, sharing their promotion and creating and responding to surveys.

 

Intellectual Property

 

We protect our core technology and intellectual property rights by relying on federal, state/provincial and common law rights, as well as contractual restrictions. We control access to our proprietary technology by entering into confidentiality agreements with our employees, contractors and third parties.

 

 

In addition to these contractual arrangements, we may also rely on a combination of trade secrets, copyrights, trademarks, service marks, trade dress, domain names and patents to protect our intellectual property. We may pursue the registration of certain copyrights, trademarks, service marks and domain names in Canada and the United States and potentially in certain locations outside these areas.

 

Regulatory Matters and Compliance

 

We are subject to a number of Canadian federal and provincial, as well as American federal and state laws and regulations affecting companies conducting business on the internet. As we expand, we may be subject to similar laws and regulations in jurisdictions outside of Canada and the United States. These laws are constantly evolving and being tested in courts and could be interpreted in a variety of ways that could harm our business. These laws and regulations may involve such areas as taxation, tariffs, privacy and protection of personal data, rights of publicity, content, intellectual property, distribution, electronic contracts and other communications, on-line sweepstakes and contests, competition, protection of minors, consumer protection, and the provision of online payment services, among other areas.

 

It is not clear how existing laws governing issues such as property ownership, sales and other taxes, libel and personal privacy apply to the internet as the vast majority of these laws were adopted prior to the advent of the internet and do not contemplate or address the unique issues raised by the internet or e-commerce.

 

We are also subject to federal, state, provincial and foreign laws regarding privacy and protection of user data. Foreign data protection, privacy, and other laws and regulations are often more restrictive than those in the United States. U.S. federal and state and foreign laws and regulations are constantly evolving and can be subject to significant change. In addition, the application and interpretation of these laws and regulations are often uncertain, particularly in the new and rapidly-evolving industry in which we operate. There are also a number of legislative proposals pending before the U.S. Congress, various state legislative bodies, and foreign governments concerning data protection which could affect us. For example, a revision to the 1995 European Union Data Protection Directive is currently being considered by legislative bodies that may include more stringent operational requirements for data processors and significant penalties for non-compliance.

 

We post our Privacy Policy and Terms of Service online, in which we describe our practices concerning the use, transmission and disclosure of user data. Any failure by us to comply with our posted privacy policy or privacy related laws and regulations could result in proceedings against us by governmental authorities or others, which could harm our business. In addition, the interpretation of data protection laws, and their application to the Internet is unclear and in a state of flux. There is a risk that these laws may be interpreted and applied in conflicting ways from state to state, province to province, country to country, or region to region, and in a manner that is not consistent with our current data protection practices. Complying with these varying international requirements could cause us to incur additional costs and change our business practices. Further, any failure by us to adequately protect our players’ privacy and data could result in a loss of player confidence in our services and ultimately in a loss of players, which could adversely affect our business.

 

Offers and/or MoCoins™ may be considered gift cards, gift certificates, stored value cards or prepaid cards and therefore governed by, among other laws, the CARD Act and state and provincial laws governing gift cards, stored value cards and coupons. Many of these laws contain provisions governing the use of gift cards, gift certificates, stored value cards or prepaid cards, including specific disclosure requirements and prohibitions or limitations on the use of expiration dates and the imposition of certain fees. If Offers and/or MoCoins™ are subject to the CARD Act, the value of the Offer and/or Miles must not expire before the later of (i) five years after the date on which the Offer and/or MoCoins™ were issued; and (ii) the Offer and/or MoCoins™’ expiration date (if any).

 

 

In addition, certain states and foreign jurisdictions have requirements for disclosure and service terms and conditions, including expiration dates and permissible fees that might apply to Mopals. Some states and foreign jurisdictions also include gift cards under their unclaimed and abandoned property laws which require companies to remit to the government the value of the unredeemed balance on the gift cards after a specified period of time (generally between one and five years) and impose certain reporting and recordkeeping obligations. We do not remit any amounts relating to unredeemed Offers and/or MoCoins™ based upon our assessment of applicable laws. The analysis of the potential application of the unclaimed and abandoned property laws to Offers and/or MoCoins™ is complex, involving an analysis of constitutional and statutory provisions and factual issues, including our relationship with customers and merchants and our role as it relates to the issuance and delivery of an Offer and/or MoCoins™.

 

Many states have passed laws requiring notification to subscribers when there is a security breach of personal data. There are also a number of legislative proposals pending before the U.S. Congress, various state legislative bodies and foreign governments concerning data protection. In addition, data protection laws in Europe and other jurisdictions outside the United States may be more restrictive, and the interpretation and application of these laws are still uncertain and in flux. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices. If so, in addition to the possibility of fines, this could result in an order requiring that we change our data practices, which could have an adverse effect on our business. Furthermore, the Digital Millennium Copyright Act has provisions that limit, but do not necessarily eliminate, our liability for linking to third-party websites that include materials that infringe copyrights or other rights, so long as we comply with the statutory requirements of this act.

 

Various laws and regulations in the United States, Canada, and abroad, such as the Bank Secrecy Act, the Dodd-Frank Act, the USA PATRIOT Act, and the Credit CARD Act impose certain anti-money laundering requirements on companies that are financial institutions or that provide financial products and services. For these purposes, financial institutions are broadly defined to include money services businesses such as money transmitters, check cashers and sellers or issuers of stored value. Examples of anti-money laundering requirements imposed on financial institutions include customer identification and verification programs, record retention policies and procedures and transaction reporting. We do not believe that we are a financial institution subject to these laws and regulations based, in part, on the characteristics of the offers and/or MoCoins™ and our role with respect to the distribution of the offers and/or MoCoins™ to customers. However, the Financial Crimes Enforcement Network, a division of the U.S. Treasury Department tasked with implementing the requirements of the Bank Secrecy Act, recently proposed amendments to the scope and requirements for parties involved in stored value or prepaid access, including a proposed expansion of the definition of financial institution to include sellers or issuers of prepaid access. In the event that this proposal is adopted as proposed, it is possible that an offer and/or the MoCoins™ could be considered a financial product and that we could be a financial institution.

 

Additionally, the Personal Information Protection and Electronic Documents Act (“PIPEDA”) (Canada) requires organizations to take reasonable steps to safeguard the personal information in their custody or control from such risks as unauthorized access, collection, use, disclosure, copying, modification, disposal or destruction. The first step in developing reasonable safeguards is to collect only the personal information that is needed for a particular purpose. If it is not needed, organizations should not collect it. But if they do, they need to take appropriate precautions.

 

In addition, because our services are accessible worldwide, certain foreign jurisdictions have claimed and others may claim that we are required to comply with their laws, including in jurisdictions where we have no local entity, employees, or infrastructure.

 

 

Accomplishments in 2014

 

The following summarizes our significant accomplishments in 2014:

 

	i.	In March 2014, the Company announced that it was recognized by the COLLOQUY editorial team in their "COLLOQUY Recognizes" program.  The program honors companies, programs and initiatives that exemplify innovative advancements in loyalty marketing by publishing the chosen initiatives in a special feature called "COLLOQUY Recognizes" in each issue of COLLOQUY magazine, published in January, March, May, July, September and November.
	ii.	The Company was able to transition from beta test versions for both Android and iOS platforms in June 2014 and released versions 1.0, 1.1 and 1.2.  The applications are available on the Android and iOS on-line application store.
	iii.	In 2014 the Company migrated its systems from MongoDB (NoSQL database) and PHP homemade framework to PostgreSQL database and Ruby on Rails.  This change provides a more stable environment for development and increased scalability.
	iv.	In November, 2014, the Company announced that professional basketball player Toronto Raptors' Greivis Vásquez had joined the board of directors of the Company.
	v.	On or about December 17, 2014, the Company executed an agreement with it’s first large merchant partner, Easton’s Group of Hotels (“Easton’s”).  Further details of this arrangement are provided below under Material Agreements.

 

Current Business Challenges

 

	i.	Management believes that the Company is largely reliant on large merchants to reach the mass consumer market place.  The Company is finding that the sales cycle associating with implementing our loyalty platform with a prospective multinational merchant to be much longer than anticipated.
	ii.	Management believes that it will have difficulty attracting users to our on-line loyalty community without more merchants.  Presently, all loyalty rewards are compensated directly from the company to its users.  The Company has struggled to engage new users due to the slow process of acquiring merchants.

 

Material Agreements

 

The following material agreements have been entered into since execution of the Exchange Agreement in March 2013:

 

i.

On December 19, 2013, the Company entered into a letter of intent with Relativity Sports, LLC (“Relativity”), a sports management company that provides professional athletes with services including contract negotiation, marketing, media relations, fan management, brand building, community involvement and personal services.  The letter of intent provides a framework whereby Relativity would provide certain services to have its athletes endorse the Company.  A definitive agreement with Relativity and endorsement agreements with select athletes will be negotiated over an exclusive period of up to sixty days.  The letter of intent provides details of the proposed terms of the contemplated definitive agreement, stock compensation to be paid by the Company to Relativity upon closing of the contemplated definitive agreements and the terms of the contemplated endorsement agreements between the Company and each Relativity athlete.  As of December 31, 2014, the Company has not entered into any definitive agreements related to the Relativity letter of intent.

 

 

	ii.	On October 9, 2014, Mopals.com, Inc. (the “Company” or “MoPals”), executed a private placement engagement agreement (the “Engagement Agreement”) with Amarok Financial, LCC (“Amarok”) and Cabrillo Broker, LLC (“Cabrillo," and together with Amarok, collectively, the “Advisor”), collectively, to undertake a private placement of common shares for gross proceeds of up to US $15 million (the "Offering"). The Offering will be made on a best-efforts, fully-marketed basis. Upon the first closing of any transaction, as defined in the Engagement Agreement, pursuant to the Offering, the Advisor will receive a fee (the “Transaction Fee”) equal to 7% of the aggregate amount of all equity and equity-linked securities placed or committed, with 5% to be paid in cash, and 2% to be paid in restricted stock to be valued at the Offering price offered to investors.  No subscriptions have been received by the end of the reporting period as Amarok, Cabrillo and the Company prepare private placement documentation.  Management expects the private placement to close in 2015.
	iii.	On or about December 17, 2014, the Company executed an agreement with it’s first large merchant partner, Easton’s Group of Hotels (“Easton’s”).  The arrangement allows the Company to deliver to Easton’s it’s big data loyalty rewards platform and providing access for Mopals to Easton’s consumer customer base.  Easton’s is the owner and operator of a portfolio of 14 hotels under the three largest hotel brands in the world.  The agreement will offer the opportunity for Easton’s guests to earn rewards at various Easton's Group Hotels and redeem rewards at Easton’s as well as other MoPals merchant partners.

  

Employees & Independent Contractors

 

As of April 15, 2015, we had fourteen (14) full-time employees and two (2) independent contractors. None of these employees are represented by collective bargaining agreements. The Company considers its relations with its employees and independent contractors to be in good standing.

 

Corporate Information

 

The Company’s corporate headquarters is located at a leased office space located at 109 Atlantic Avenue, Suite 308, Toronto, Ontario, CANADA, M6K 1X4. Our telephone number is (416) 362-4888. Our website is www.mopals.com.

 

Item 1A. Risk Factors

 

We are exempt from this reporting because we are a smaller reporting company.

 

Item 1B. Unresolved Staff Comments

 

We are exempt from this reporting because we are a smaller reporting company.

 

Item 2. Properties

 

The Company’s corporate headquarters is located at a leased office space located at 109 Atlantic Avenue, Suite 308, Toronto, Ontario, CANADA, M6K 1X4. The sub-lease is for a term of fifty (‘50’) months which commenced on March 1, 2013 and ends on April 29, 2018. The lease payment obligations are approximately $14,000 per month in 2014 and 2015.

 

Item 3. Legal Proceedings

 

We are currently not involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our company’s or our company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

 

PART II

 

Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities

 

Market Information

 

Our shares of common stock are approved for quotation on the OTC Bulletin Board under the symbol “PALS.”

 

Price Range of Common Stock

 

The following table represents the closing high and low bid information for our common stock during the last two fiscal years as reported by the OTC Bulletin Board. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. The market for our common stock is sporadic and our stock is thinly traded.

 

2014		High				Low
First Quarter		$	1.01			$	0.15
Second Quarter		$	0.98			$	0.41
Third Quarter		$	0.95			$	0.41
Fourth Quarter		$	0.93			$	0.35

 

2013		High				Low
First Quarter		$	0.48			$	0.20
Second Quarter		$	0.90			$	0.20
Third Quarter		$	0.74			$	0.39
Fourth Quarter		$	0.60			$	0.40

 

Holders

 

As of April 15, 2015, there were 120 registered beneficial shareholders of record for our outstanding common stock.

 

Dividends

 

To date, we have paid no dividends on our shares of common stock and have no present intention of paying any dividends on our shares of common stock in the foreseeable future. The payment by us of dividends on the shares of common stock in the future, if any, rests solely within the discretion of our board of directors and will depend upon, among other things, our earnings, capital requirements and financial condition, as well as other factors deemed relevant by our board of directors. Although dividends are not limited currently by any agreements, it is anticipated that future agreements, if any, with institutional lenders or others may limit our ability to pay dividends on our shares of common stock.

 

 

Securities Authorized for Issuance under Equity Compensation Plan

 

The following table summarizes those securities authorized for issuance in 2014 in accordance with an equity compensation plan including individual compensation arrangements:

 

Plan Category		Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants & Rights				Weighted Average Exercise Price of Outstanding Options, Warrants & Rights				Number of Securities remaining Available for Future Issuance under Equity Compensation Plans (excluding Securities reflected in Column (a))
		(a)				(b)				(c)
Equity Compensation Plans Approved by Security Holders			3,050,000			$	0.36				0
Equity Compensation Plans not Approved by Security Holders			0				0				0

 

On February 6, 2003 and as amended on February 14, 2003, the Company adopted the 2003 Equity Compensation Plan to attract and retain high quality personnel. The adequacy of this plan is evaluated annually by Company management. As of December 31, 2014, 2,800,000 options had been issued under this plan to the Company’s board of directors and 250,000 options to the landlord.

 

On March 1, 2005 the Company had adopted the Service Compensation Plan ("the Service Plan"), the purpose of which is to enhance the Company’s stockholder value and maximize the available capital resources of the company through allowing non-monetary transactions whereby the issuance of stock is granted for services rendered. Under the Service Plan, service providers, consultants, and strategic alliance partners who provide services to the Company may be granted common stock, options or warrants to acquire restricted stock of the Company. The total number of shares reserved for issuance under the Service Plan is 166,667, the adequacy of which is evaluated annually. On September 19, 2013, the Company issued 275,000 shares to 1014864 Ontario Limited pursuant to an advertising billboard signage lease agreement executed on September 18, 2013.

 

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

 

The following exemptions were relied upon in the issuance of unregistered securities as referenced here-under over the period covered by this Annual Report:

 

On October 30, 2014, a director of the Company delivered $223,350 to purchase 1,000,000 common shares of the company issued at $0.25 per share. As of December 31, 2014, these common shares had not been issued.

 

Section 4(2) of the Securities Act

 

The Company issued restricted shares of its common stock.  They were issued in reliance on the exemption under Section 4(2) of the Securities Act of 1933, as amended (the “Act”). These shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance shares by us did not involve a public offering.  The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered.  We did not undertake an offering in which we sold a high number of shares to a high number of investors.  In addition, this shareholder had the necessary investment intent as required by Section 4(2) since they agreed to and received share certificates bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. This restriction ensures that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for these transactions.

  

Item 6. Selected Financial Data

 

We are exempt from reporting this item as a smaller reporting company.

 

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The following is management’s discussion and analysis of the consolidated financial condition and results of operations of MoPals.com, Inc. for the fiscal years ended December 31, 2014 and 2013. The following information should be read in conjunction with the audited consolidated financial statements for the period ending December 31, 2014 and notes thereto appearing elsewhere in this Form 10K.

 

On March 26, 2013, the Company entered into an Agreement of Sale, pursuant to which the Company transferred to MortgageBrokers.com Canada Inc., a Canadian Corporation under the control of the Company Principal Shareholder, all of the Company’s equity interest in the Company’s former Mortgage Brokerage Business and MortgageBrokers.com Canada Inc. agreed to assume any and all liabilities associated with the Company’s former Mortgage Broker Business, including, but not limited to all commitments, liabilities and contingent liabilities, effective immediately prior to closing of the Share Exchange.  Pursuant to the Agreement of Sale, the Company Principal Shareholder forfeited all rights to any monies owed to the Company Principal Shareholder by the Company associated with a shareholder loan of approximately $25,000.

 

Also on March 26, 2013, the Company entered into the Exchange Agreement by and among (i) the Company, (ii) MoPals (Nevada); (iii) the Company Principal Shareholder and (iv) and the MoPals Nevada Shareholders.  Pursuant to the terms of the Exchange Agreement, the Company acquired 100% of the issued and outstanding equity securities of MoPals (Nevada) in exchange for the issuance of 50,000,000 shares of the Company’s Common Stock.

 

On March 26, 2013, articles of amendments were filed with the State of Delaware changing the name of our Company to MoPals.com, Inc. pursuant to the Spin Out and Cancellation and subsequent execution of the Exchange Agreement.

 

In March 2014, the Company announced that it received the first "COLLOQUY Recognizes" award, a new program that honors companies, programs and initiatives that exemplify the most innovative advancements and forward-thinking strategies in loyalty marketing. In addition to the Company many other multinational corporations were recognized by the awards including, Tesco, Starbucks and Bloomingdales. The Company was celebrated by COLLOQUY as, 'Loyalty Program to Watch,' bridging the gap between traditional reward incentives and the social media landscape. It distinguished that the program met the demands of the Company’s target market, Generation Y, by taking a modern approach to loyalty, resulting in a unique program that recognizes and appreciates customer loyalty by investing in its members.

 

In 2014 we migrated our systems from MongoDB (NoSQL database) and PHP homemade framework to PostgreSQL database and Ruby on Rails. This change provides a more stable environment for development and increased scalability. The decision to move from MongoDB to PostgreSQL was motivated by a need for the consistency in data, integrity in data, capability to normalize the data and ease of data control. The Company found that it would be easier to achieve this with PostgreSQL. The decision to move from PHP homemade framework to Ruby on Rails was based on a need for faster development speed (quick to market), framework consistency, stability and passionate community support. It also provided a better opportunity to find skilled developers who are familiar with Ruby development.

 

On October 9, 2014, the Company entered into an agreement with California-based Amarok Financial, LCC ("Amarok") and Cabrillo Broker, LLC ("Cabrillo"), collectively, to undertake a private placement of common shares for gross proceeds of up to US $15 million (the "Offering"). The Offering was made on best-efforts, fully-marketed basis. Proceeds from the proposed Offering will be used to fund the Company user and member acquisition, business expansion and signups, continued development of the technology platform, potential acquisition financing and general corporate working capital needs. This private placement has not yet been completed.

 

In 2014, the company entered into an agreement with Easton's Group of Hotels, Inc. ("Easton's Group"). Easton's Group owns and operates a prominent portfolio of hotels, representing 3000 rooms, 14 restaurants and 14 conference facility areas, under the three largest hotel brands in the world. Easton’s Founder and owner is also a board member and an investor in MoPals. This partnership is expected to serve as a potential revenue stream for the Company with the ability to reach millions of customers and visitors of Easton's Group Hotels. 

 

Mopals.com, Inc. is a development stage internet and mobile brand loyalty social media company.

 

Results of Operations

 

Our Company had the following comparative results from operations for the fiscal years ended December 31, 2014 and 2013:

 

1.

No reported gross revenue in 2014 or 2013.

 

2.

Operating expenses in 2014 were $2,293,734 as compared with $1,691,195 in 2013; and,

 

3.

Loss from operations of $2,058,120 in 2014 as compared to a loss of $1,638,148 in 2013.

 

Revenue Trend Analysis

 

Our development stage Company had no revenue reported in 2014 or 2013.

 

Expense Trend Analysis

 

It is too early in the operation of our Company to identify any significant expense trends other than our expenses have grown 35.6% in our second full year of operation in 2014 at $2,293,734 as compared to our first year of operations in 2013 at $1,691,195. The expense growth is related to the continued development of our Company as we bring our service to market. The two year trends are as follows:

 

●

our cost of labour associated with employees and consultants rose 64.8% to 1,355,922 in 2014 from $822,929 in 2013 as we built our organization;

 

 

●

our general and administrative expenses decreased 34.5% to $367,613 in 2014 from $561,024 in 2013 as we focused on operational expenditure reduction;

 

●

our occupancy costs increased 35.7% to $141,022 in 2014 from $103,930 in 2013. The change in occupancy costs is associated with a change in office locations to a larger office space to accommodate our growing business;

 

●

share-based compensation increased 121.4% to $418,827 in 2014 from $189,197 in 2013. This was associated with share-based compensation paid annually to a growing board of directors;

 

Since inception, the Company has incurred total operating expenses of $4,148,166.

 

Liquidity

 

At December 31, 2014, we had $143,482 in cash and $243,964 in prepaid expenses and other assets for a total of $387,446 in current assets. Comparatively, at December 31, 2013, we had $437,650 in cash and $155,830 in prepaid expenses for a total of $593,480 in current assets.

 

At December 31, 2014, we had $255,078 in accounts payable and accrued liabilities, $500,139 in employee tax deductions payable, $1,855 in accrued MoCoins™ liability, $14,924 in accrued stock-based compensation and $1,125,671 in loans from shareholders for a total of $1,897,667 in liabilities. Comparatively as of December 31, 2013, we had $68,589 in accounts payable and accrued liabilities, $112,540 employee tax deductions payable, $148 in accrued MoCoins™ liability, $14,924 in accrued stock-based compensation and $652,633 in loans from shareholders for a total of $848,834 in liabilities.

 

Management makes the following comments regarding the most significant factors affecting Company liquidity and their measured trends over the reporting period as compared to 2013:

 

a)

Cash and cash equivalents associated with continuing operations has decreased 67.2% to $143,482 in 2014 from $437,650 in 2013. This is a result of ongoing and growing operations with no revenue and limited investment capital.

 

b)

The Company has a Canadian harmonized sales tax refund accrual of $121,662 as a receivable owing to them from the Canadian federal government.

 

c)

Accounts payable and accrued liabilities grew 272% to $255,078 in 2014 as compared to $68,589 in 2013. This is associated primarily with increase in board of director fee accruals of approximately $198,000 and minor amounts associated with trades payable and insurance premium accruals.

 

d)

Employee tax deductions payable grew 344% to $500,139 in 2014 as compared to $112,540 in 2013. The Company is in arrears on the tax withholdings related to employee source deductions on salaries due to Canada Revenue Agency.

 

e)

Stock-based compensation accruals fluctuate year to year. The accrual is valued based on stock prices at the end of the period, grant prices and vesting terms for which the Company has no direct influence. Thus, it is difficult to analyze related trends. The Company anticipates that it will continue to negotiate stock-based compensation arrangements to maximize working capital resources.

 

Capital Resources

 

Our Company had no reported gross revenue in 2014, 2013 or since inception.

 

The Company decreased its total cash and cash equivalent position at the end of 2014 to $143,482 from $437,650 the previous year as a direct result of a net cash flow out of the Company from operating activities during the reporting period of $1,104,614, a net cash flow into the Company of $722,863 as a result of financing activities during the reporting period and $1,387 of cash used in investing activities. As at December 31, 2014, with no means to generate revenue and until such time as our operating expenses are augmented with revenue, the Company relies upon loans from shareholders and the purchase and sale of common stock via investor subscription agreements to fund our development stage operations. There is no guarantee that there will be a market for the Company’s common stock, an ability to raise investment capital, or an ability to procure shareholder loans in the future to fund our future operations.

 

Off-Balance Sheet Arrangements

 

None.

 

Inflation

 

We do not believe that inflation has had a material effect on our Company’s results of operations.

 

  

Significant Accounting Policies and New Pronouncements

 

The following is the most significant accounting policy that has a substantive impact on the underlying discussions and analysis:

 

Stock-based Compensation

 

The Company maintains a stock-based compensation plan under which incentive stock options to buy common stock may be granted to directors, officers and employees. Pursuant to ASC 718, the Company recognizes expense for its stock-based compensation based on the fair value of the awards that are granted. The fair values of stock options are estimated at the date of the grant using the Black-Scholes option pricing model, that require the input of highly subjective assumptions. Measured compensation cost is recognized ratably over the vesting period of the related stock-based compensation award. The amount recognized as expense is adjusted to reflect the number of stock options expected to vest. When exercised, stock options are settled through the issuance of common stock and are therefore treated as equity awards. The expected volatility of our commons stock is estimated based on the historical performance of the stock.

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

 

We are exempt from reporting this item as a smaller reporting company.

 

Item 8. Financial Statements and Supplementary Data

 

The financial statements of the Company appear at the end of this report beginning with the Index to Financial Statements on page F-1.

 

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

None.

 

Item 9A. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

As of the end of the period covered by this report, the Company’s principal executive officer and principal financial officer evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d -15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on their evaluation of the Company’s disclosure controls and procedures, the Company’s principal executive officer and principal financial officer, with the participation of the Company’s management, have concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2014, to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is(a) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (b) accumulated and communicated to management, including the Company’s principal executive officer and principal financial officer, as appropriate to allow for timely decisions regarding required disclosure.

 

Specifically, our management identified certain matters involving internal control and our operations that it considered to be material weaknesses. As defined in the Exchange Act, a material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the registrant’s annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness identified by our management as of December 31, 2014, is described below:

 

●

We did not maintain sufficient personnel with an appropriate level of technical accounting knowledge, experience and training in the application of GAAP commensurate with our complexity and our financial accounting and reporting requirements. This control deficiency is pervasive in nature. Further, there is a reasonable possibility that material misstatements of the financial statements including disclosures will not be prevented or detected on a timely basis as a result.

 

As a result of the material weakness identified above, our internal control over financial reporting was not effective as of December 31, 2014.

 

Management’s Annual Report on Internal Controls Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2014 based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, our management concluded that our internal control over financial reporting was not effective as of December 31, 2014 based on the deficiency identified above. Through the use of external consultants and the review process, management believes that the financial statements and other information presented herewith are materially correct.

 

This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm as we are a smaller reporting company and not required to provide the report.

 

Changes in Internal Control Over Financial Reporting

 

There have been no changes in the Company’s internal controls over financial reporting during our fourth quarter ended December 31, 2014, or in other factors that could significantly affect these controls, that materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

 

 

Item 9B. Other Information

 

None.

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance

 

Director and Executive Officer

 

The following table sets forth, as of April 15, 2015, the name and age of our directors and executive officer. The directors hold such office until the next annual meeting of shareholders and until their successor has been elected and qualified.

 

Name		Age		Position
Alex Haditaghi		41		President, CEO, CFO, Chief Accounting Officer and Director
Ralph Lean		67		Director, Chairman
Luce Veilleux		50		Director
Steve Gupta		54		Director
Todd A. Halpern		55		Director
Greivis Vasquez		28		Director

 

The following summarizes the occupation and business experience of our executive officer and directors:

 

Alex Haditaghi, President, Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and Director

 

Alex Haditaghi is the founder and CEO of MoPals. He has been working in the mortgage industry in Canada since 1999 and has extensive experience in both residential and commercial mortgages. He is currently the founder and chairman of Pacific Mortgage Group Inc., a company with gross revenue exceeding $57 million in 2011. Mr. Haditaghi is responsible for the business vision, expansion, capital resources, hiring the executive management team, establishing corporate policy and providing overall leadership to the organization.

 

Luce Veilleux, Director and Chair of Program Development

 

From 2004 through 2013, Ms. Veilleux served as the Senior Vice President of Retail Products, International Division at Scotiabank. Currently, she sits on the Boards of Yellow Pepper and Tafemusik, and has served on the Advisory Boards of MasterCard Latin America and the Caribbean, Fair Isaac, and IBM. She has also previously worked as the Chief Marketing Officer of Aeroplan, a division of AIMIA Inc., and Vice President of Marketing, Retail and Commercial Banking for Royal Bank of Scotland. Ms. Veilleux brings a great depth of strategic business experience from the loyalty and financial sectors.

 

Ralph E. Lean, Chairman of the Board of Directors

 

Mr. Lean was a partner at Cassels Brock & Blackwell LLP for the past twenty three years, and in May 2013 was named counsel at Heenan Blaikie Toronto. He serves on the board of several Canadian public and private companies, as well as a number of charities, foundations and civic groups such as director of Score Digital (formerly Score Media), World Film Festival of Toronto, Chairman of the Board of Right to Play Foundation, Board of Governors B’nai Brith Canada and a was previously a member of Ontario’s Teacher’s Pension Plan. Mr. Lean is also an Honorary Consul to the Kingdom of Morocco and a Distinguished visiting Professor at Ryerson University.

 

 

Todd A. Halpern, Vice Chairman of the Board of Directors

 

Mr. Halpern currently serves as the President of Halpern Enterprises, which he joined in 1979 and has served as a member of the board of directors since 2005. He is also the Board Champion of the Krembil Neuroscience Centre, the Brain Campaign, the Arthritis Campaign and the Peter Munk Cardiac Centre Campaign and is also the Chair of the Grand Cru Culinary Wine Festival

 

Steve Gupta, Director

 

Steve Gupta, President and Chief Executive Officer of the Easton’s Group of Hotels, is an outstanding developer in the hotel industry, he has been building hotels from the ground up for almost three decades. He has been the President and CEO of The Easton Group of Hotels for the past 35 years. His current portfolio contains thirteen hotels operating in the Toronto and surroundings area, Mr. Gupta is a leader in introducing upscale focused brands and new concepts to the hotel market, making an extraordinary common place for his guests. He opened Canada’s first Marriott Fairfield Inn & Suites, as well as the admired Courtyard Marriott Brampton Hotel and Conference Centre and the coveted Hilton Garden Inn and Toscana Convention Centre in Vaughan. Each of these conference centres has set new standards in the Banquet and Catering industry with its lavish banquet facilities and renowned service. In 2009, despite the questionable state of the economy, Mr Gupta persevered and opened three new Hilton Garden Inns in the GTA Area. Each of these hotels has raised the bar in the focused service hotel segment. In 2009, Mr. Gupta was awarded the Developer of the Year Award from Hilton, and the Outstanding Contribution to the Marriott Brand from Marriott. He is also the recipient of the prestigious Ernst & Young Entrepreneur of the Year Award and Royal Bank of Canada Top 25 immigrant of the year.

 

Greivis Vásquez, Director

 

Originally hailing from Venezuela, Mr. Vásquez is a widely celebrated professional NBA player, first drafted in 2010 after a U.S. college career with the University of Maryland men's basketball team. In 2014, he signed a two-year $13 million-dollar contract with the Toronto Raptors. Mr. Vásquez is the recipient of the 2010 Bob Cousy Award given by the Naismith Memorial Basketball Hall of Fame to the nation's best collegiate point guard. In February 20, 2010, Mr. Vásquez scored the 2,000th point of his collegiate career, making him the only player in ACC history to compile at least 2,000 points, 700 assists and 600 rebounds. He was named a unanimous first-team All-ACC selection on March 8, 2010, and the ACC Player of the Year on March 9, 2010. Mr. Vásquez has also won three ACC Player of the Week honors in his final season, which brought his career total to seven. Mr. Vásquez was further named a consensus second-team All-American.

 

Employment Agreements

 

The Company has no employment agreement with its founding chief executive officer and director. The Company has entered into service agreements with its five remaining independent non-employee directors.

 

Family Relationships

 

None.

 

 

Involvement in Certain Legal Proceedings

 

To the best of our knowledge, none of our directors or executive officers has, during the past ten years:

 

	i.	been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
	ii.	had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
	iii.	been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;
	iv.	been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
	v.	been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
	vi.	been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

Except as set forth in our discussion below in “Certain Relationships and Related Transactions,” none of our directors or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the Commission.

 

Promoters and Control Persons

 

None.

 

Code of Ethics

 

The Company has adopted a Code of Ethics applicable to its Chief Executive Officer and Chief Financial Officer which has been filed as an exhibit to our Annual Report on Form 10-KSB on March 31, 2005.

 

Directors and Committees

 

The Company currently has six directors and has yet to establish a nominating, audit or other committees of its board of directors. No current board member qualifies as an “audit committee financial expert.” Our Board of Directors performs the principal functions of an Audit Committee. In 2014, five (5) formal board meetings took place.

 

Shareholder Communications

 

The Company has retained an investor relations Company to communicate and respond to shareholders. Shareholders may also correspond directly to our Directors.

 

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Under Section 16(a) of the Exchange Act, our directors and certain of our officers, and persons holding more than 10 percent of our common stock are required to file forms reporting their beneficial ownership of our common stock and subsequent changes in that ownership with the United States Securities and Exchange Commission.

 

Mr. Haditaghi has yet to file a Form 5 but plans to in the very near future.

 

Item 11. Executive Compensation

 

Summary Compensation Table

 

The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers paid by us during the years ended December 31, 2014, and 2013.

 

SUMMARY COMPENSATION TABLE
Name and principal position (a)		Year (b)		Salary ($) (c)		Bonus ($) (d)		Stock Awards ($)		Option Awards ($)		Non-Equity Incentive Plan Compensation ($)		Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)			Total ($)
Alex Haditaghi, Director and CEO		2014   2013		0   0		0   0		0   0		0   0		0   0		0   0		60,000   0			60,000   0

 

Compensation of Directors & Director Agreements

 

The Company entered into agreements with its current independent board of director members in 2013 and 2014:

 

On June 27, 2013, the Company entered into an agreement with Ralph Lean to become a member of the Company’s board of directors. The director’s compensation for board services included $40,000 annually and 300,000 options, having no vestment period, which can be exercised at a strike price of $0.25 into common stock of the Company. The board member’s annual compensation increases to $50,000 per year following the first year of service to the Company. The board member will also earn 300,000 options in year’s two and three, which can be exercised, at a strike price of $0.35 and $0.40, respectively, into common stock of the Company upon being fully earned at the end of each respective service period.

 

On June 27, 2013, the Company entered into an agreement with Todd Halpern to become a member of the Company’s board of directors. The director’s compensation for board services included $30,000 annually and 300,000 options, having no vestment period, which can be exercised at a strike price of $0.25 into common stock of the Company. The board member’s annual compensation increases to $50,000 per year following the first year of service to the Company. The board member will also earn 300,000 options in year’s two and three, which can be exercised, at a strike price of $0.35 and $0.40, respectively, into common stock of the Company upon being fully earned at the end of each respective service period.

 

 

On July 3, 2013, the Company entered into an agreement with Luce Veilleux to become a member of the Company’s board of directors. The director’s compensation for board services included $30,000 annually and 300,000 options, having no vestment period, which can be exercised at a strike price of $0.25 into common stock of the Company. The board member’s annual compensation increases to $50,000 per year following the first year of service to the Company. The board member will also earn 300,000 options in year’s two and three, which can be exercised, at a strike price of $0.35 and $0.40, respectively, into common stock of the Company upon being fully earned at the end of each respective service period.

 

On November 21, 2013, the Company entered into an agreement with Steve Gupta to become a member of the Company’s board of directors. The director’s compensation for board services included $30,000 annually and 300,000 options, having no vestment period, which can be exercised at a strike price of $0.25 into common stock of the Company. The board member’s annual compensation increases to $50,000 per year following the first year of service to the Company. The board member will also earn 300,000 options in year’s two and three, which can be exercised at a strike price of $0.35 and $0.40, respectively, into common stock of the Company upon being fully earned at the end of each respective service period.

 

On November 17, 2014, the Company entered into an agreement with Greivis Vasquez to become a member of the Company’s board of directors. The director’s compensation for board services included $30,000 annually and 400,000 options, having no vestment period, which can be exercised at a strike price of $0.35 into common stock of the Company. The board member’s annual compensation increases to $40,000 per year following the first year of service to the Company. The board member will also earn 500,000 options in year’s two and three, which can be exercised at a strike price of $0.55 and $0.65, respectively, into common stock of the Company upon being fully earned at the end of each respective service period.

 

Stock Option Grants in the Past Fiscal Year

 

During 2013, 1,200,000 options for Company common stock were granted to Company directors and are outstanding. The outstanding options have no vestment period and can be exercised at a strike price of $0.25 into common stock of the Company. During 2014, 1,600,000 options for Company common stock were granted to Company directors and are outstanding having no vestment period and can be exercised at a strike price of $0.35 into common stock of the Company.

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

The following table sets forth certain information regarding our shares of common stock beneficially owned as of April 15, 2015, for (i) each stockholder known to be the beneficial owner of 5% or more of our outstanding shares of common stock, (ii) each named executive officer and director, and (iii) all executive officers and directors as a group. A person is considered to beneficially own any shares: (i) over which such person, directly or indirectly, exercises sole or shared voting or investment power, or (ii) of which such person has the right to acquire beneficial ownership at any time within 60 days through an exercise of stock options or warrants. Unless otherwise indicated, voting and investment power relating to the shares shown in the table for our directors and executive officers is exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children.

 

For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person has the right to acquire within 60 days of April 15, 2015. For purposes of computing the percentage of outstanding shares of our common stock held by each person or group of persons named above, any shares that such person or persons has the right to acquire within 60 days of April 15, 2015 is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership.

 

 

Name of Beneficial Owner and Address (1)		Amount and Nature of Beneficial Ownership of Common Stock				Percent of Common Stock (2)
5% Shareholders
8412910 Canada Inc.			41,000,000	(3)			79.93	%
8413037 Canada Inc.			4,500,000				8.77	%
Directors and Executive Officers
Alex Haditaghi			41,857,800	(4)			81.16	%
All directors and officers as a group (1 person)			41,857,800				81.16	%

 

(1)	Unless otherwise provided, the address of all beneficial owners is c/o MoPals.com, Inc., 109 Atlantic Avenue, Suite 300, Toronto, Ontario, M6X 1X4.
(2)	Based on 51,819,993 shares of common stock outstanding of April 15, 2015.
(3)	Equity interest in 8412910 Canada Inc. is wholly-owned by Alex Haditaghi, controlling shareholder Chief Executive Officer, and director of the Company.
(4)	Includes: (1) 857,800 shares of the common stock held directly by Mr. Haditaghi; and (2) Mr. Haditaghi’s beneficial ownership of 41,000,000 shares of common stock held by 8412910 Canada Inc.

 

Item 13. Certain Relationships and Related Transactions and Director Independence

 

Sale of unregistered securities

 

On October 30, 2014, a director of the company delivered $223,350 to purchase 1,000,000 common shares of the Company issued at $0.25 per share. As of December 31, 2014, these common shares had not been issued.

 

Section 4(2) of the Securities Act

 

The Company issued restricted shares of its common stock.  They were issued in reliance on the exemption under Section 4(2) of the Securities Act of 1933, as amended (the “Act”). These shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance shares by us did not involve a public offering.  The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered.  We did not undertake an offering in which we sold a high number of shares to a high number of investors.  In addition, this shareholder had the necessary investment intent as required by Section 4(2) since they agreed to and received share certificates bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. This restriction ensures that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for these transactions.

 

Advances

 

As of December 31, 2014, the controlling shareholder and Chief Executive Officer of the Company and a company controlled by this same individual had advanced $1,125,671 (as at December 31, 2013 - $652,633) to fund the working capital of the Company. The advances are unsecured, non-interest bearing and due on demand.

 

Shared Services

 

During 2013, Pacific Mortgage Group Inc. (“PMGI”), charged the Company rent of $89,576 (2012 - $21,608). PMGI and the Company are under common control.

 

 

Bonus

 

None.

 

Director Independence

 

Because our common stock is not currently listed on a national securities exchange, we have used the definition of “independence” of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the Company or any other individual having a relationship which, in the opinion of the Company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:

 

●

the director is, or at any time during the past three years was, an employee of the company;

 

●

the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);

 

●

a family member of the director is, or at any time during the past three years was, an executive officer of the company;

 

●

the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions); or

 

●

the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.

 

We currently have five independent directors. We do not have an audit committee, compensation committee or nominating committee.

 

Item 14. Principal Accounting Fees and Services

 

Audit Fees

 

For the Company's fiscal year ended December 31, 2014, we had incurred $15,000 for professional services rendered for the audit and reviews of our financial statements.

 

 For the Company's fiscal year ended December 31, 2013, we had incurred $19,000 for professional services rendered for the audit and reviews of our financial statements.

 

Audit Related Fees

 

For the Company's years ended December 31, 2014 and 2013, there were no other audit related fees.

 

Tax Fees

 

The Company has accrued no expenses in 2014 for professional services rendered for Canadian tax compliance, tax advice, and tax planning.

 

All Other Fees

 

None.

 

 

PART IV

 

Item 15.  Exhibits, Financial Statement Schedules

 

(a) The following documents are filed as part of this report:

 

(1)	Financial Statements:

 

The audited balance sheet of the Company as of December 31, 2014 and December 31, 2013, the related consolidated statements of operations, changes in stockholders’ deficiency and cash flows for the years then ended, the footnotes thereto, the report of EFP Rotenberg, LLP, independent auditors, and the report of McGovern, Hurley, Cunningham, LLP, independent auditors, are filed herewith.

 

(2)	Financial Schedules:

None.

 

Financial statement schedules have been omitted because they are either not applicable or the required information is included in the financial statements or notes hereto.

 

(3)

Exhibits:

 

The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Report.

 

(b) The following are exhibits to this Report and, if incorporated by reference, we have indicated the document previously filed with the SEC in which the exhibit was included.

 

Certain of the agreements filed as exhibits to this Report contain representations and warranties by the parties to the agreements that have been made solely for the benefit of the parties to the agreement. These representations and warranties:

 

●

may have been qualified by disclosures that were made to the other parties in connection with the negotiation of the agreements, which disclosures are not necessarily reflected in the agreements;

 

●

may apply standards of materiality that differ from those of a reasonable investor; and

 

●

were made only as of specified dates contained in the agreements and are subject to subsequent developments and changed circumstances.

 

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date that these representations and warranties were made or at any other time. Investors should not rely on them as statements of fact.

 

 

The following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K.

 

Exhibit No.		Description
3.1		Certificate of Incorporation (1)
3.2		First Amendment to Certificate of Incorporation (1)
3.3		Bylaws (1)
10.1		2003 Equity Compensation Plan (1)
14.1		Code of Ethics (2)
10.1		Share Exchange Agreement by and between MortgageBrokers.com Holdings, Inc., MoPals, Inc., Alex Haditaghi, and the MoPals Shareholders dated March 26, 2013. (3)
10.2		Agreement of Sale by and between MortgageBrokers.com Holdings, Inc., MortgageBrokers.com Canada, Inc. and Alex Haditaghi, dated March 26, 2013. (3)
10.3		Private Placement Engagement Letter, dated October 9, 2014 by and among Mopals.com, Inc., Amarok Financial, LLC and Cabrillo Broker, LLC. (4)
31.1		Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS *		XBRL Instance Document
101.SCH *		XBRL Taxonomy Schema
101.CAL *		XBRL Taxonomy Calculation Linkbase
101.DEF *		XBRL Taxonomy Definition Linkbase
101.LAB *		XBRL Taxonomy Label Linkbase
101.PRE *		XBRL Taxonomy Presentation Linkbase

 

	(1)	Filed as an exhibit on Form SB-2 with the SEC on June 2, 2003.
	(2)	Filed as an exhibit on Form 10-KSB with the SEC on March 31, 2005.
	(3)	Filed as an exhibit on Current Report to Form 8-K with the SEC on March 26, 2013.
	(4)	Filed as an exhibit on Current Report to Form 8-K with the SEC on October 14, 2014

 In accordance with SEC Release 33-8238, Exhibit 32.1 is being furnished and not filed.

 

* Furnished herewith. XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

 

	MOPALS.COM, INC.
	By:	/s/ Alex Haditaghi
		Alex Haditaghi
		President and Secretary (Principal Executive Officer)
		(Principal Financial Officer)

 

Dated: April 16, 2015

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

NAME		TITLE		DATE
/s/ Alex Haditaghi		President, Secretary and Director		April 16, 2015
Alex Haditaghi
/s/ Ralph Lean		Chairman of the Board of Directors		April 16, 2015
Ralph Lean
/s/ Luce Veilleux		Director		April 16, 2015
Luce Veilleux
/s/ Steve Gupta		Director		April 16, 2015
Steve Gupta
/s/ Todd A. Halpern		Director		April 16, 2015
Todd A. Halpern
/s/ Greivis Vasquez		Director		April 16, 2015
Greivis Vasquez

 

 

 

MOPALS.COM, INC.

AND SUBSIDIARIES

(A Development Stage Company)

 

CONSOLIDATED FINANCIAL STATEMENTS

 

DECEMBER 31, 2014 AND 2013

 

AUDITED

 

 

MOPALS.COM, INC. AND SUBSIDIARIES

 

CONSOLIDATED FINANCIAL STATEMENTS

 

DECEMBER 31, 2014 AND 2013

 

CONTENTS

 

Report of Independent Registered Public Accounting Firm		F-2
Report of Independent Registered Public Accounting Firm		F-3
Consolidated Balance Sheets		F-4
Consolidated Statements of Operations and Comprehensive Loss		F-5
Consolidated Statements of Cash Flows		F-6
Consolidated Statements of Stockholders' Deficit		F- 7 to F-8
Notes to Consolidated Financial Statements		F-9 to F-16

 

 

 

2005 Sheppard Avenue East, Suite 300 Toronto, Ontario

M2J 5B4, Canada

Phone 416-496-1234

Fax 416-496-0125

Web www.mhc-ca.com

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors
and Stockholders of
Mopals.com, Inc.

 

We have audited the accompanying consolidated balance sheet of Mopals.com, Inc. (the “Company”) (a development stage company) as of December 31, 2014, and the related consolidated statements of operations and comprehensive loss, cash flows and stockholders’ deficit for the year ended December 31, 2014. Mopals.com, Inc.’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The financial statements as of December 31, 2013 and for the cumulative period from August 7, 2012 (inception) through December 31, 2013 were audited by other auditors who expressed an opinion without reservation on those statements in their audit report dated April 15, 2014. Their report included an explanatory paragraph regarding going concern. Our opinion, in so far as it relates to the period from August 7, 2012 (inception) through December 31, 2013, is based solely on the report of other auditors.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

 

In our opinion, based on our audit and the report of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mopals.com, Inc. (a development stage company) as of December 31, 2014, and the results of its operations and its cash flows for the year ended December 31, 2014 and for the cumulative period from August 7, 2012 (inception) through December 31, 2014, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

McGOVERN, HURLEY, CUNNINGHAM, LLP

Chartered Accountants

Licensed Public Accountants

TORONTO, Canada

April 15, 2015

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and

Stockholders of Mopals.com, Inc. and Subsidiaries

 

We have audited the accompanying consolidated balance sheet of Mopals.com, Inc. and Subsidiaries as of December 31, 2013, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ deficit and cash flows for the year ended December 31, 2013 and for the period since inception (August 7, 2012) through December 31, 2013. Mopals.com, Inc. and Subsidiaries’ management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these financial statements based on our audit.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mopals.com, Inc. and Subsidiaries as of December 31, 2013, and the results of its operations and its cash flows for year ended December 31, 2013 and for the period since inception (August 7, 2012) through December 31, 2013 in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, these conditions raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.

 

EFP Rotenberg, LLP

Rochester, New York

April 15, 2014 

 

 

MOPALS.COM, INC.

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

 

		December 31,				December 31,
		2014				2013
ASSETS
Cash		$	143,482			$	437,650
Prepaid & Other Assets (Note 5)			243,964				155,830
Total Current Assets			387,446				593,480
Equipment, net (Note 6)			32,713				44,918
Total Assets		$	420,159			$	638,398
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Accounts Payable & Accrued Liabilities			255,078				68,589
Employee Tax Deductions Payable			500,139				112,540
MoCoins™ Liability			1,855				148
Share Based Accrual			14,924				14,924
Loans from Shareholder (Note 7)			1,125,671				652,633
Total Liabilities		$	1,897,667			$	848,834
Commitments and Contingencies (Note 8)
Capital Stock; par value $0.0001, 100,000,000 shares authorized, 45,804,884 shares issued and outstanding on December 31, 2014 (2013 – 45,448,993) (Note 9)			4,580				4,545
Shares Subscribed (Note 10)			1,503,775				1,530,250
Share Subscriptions Receivable (Note 10)			(1,503,775	)			(1,530,250	)
Shares to be Issued (Note 9(d))			300				200
Additional Paid In Capital			2,376,105				1,585,192
Deficit Accumulated During the Development Stage			(3,998,186	)			(1,854,432	)
Foreign Currency Translation			139,693				54,059
Total Stockholders’ Deficit		$	(1,477,508	)		$	(210,436	)
Total Liabilities and Stockholders’ Deficit		$	420,159			$	638,398

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

MOPALS.COM, INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

 

		For the Year Ended				For the Year Ended				From Inception (August 7, 2012) to
		December 31, 2014				December 31, 2013				December 31, 2014
EXPENSES
Consultants & Contractors			1,355,922				822,929				2,295,229
General & Administrative Expenses			367,613				561,024				949,609
Occupancy Costs			141,022				103,930				269,736
Share Based Compensation (Note 11)			418,827				189,197				608,024
Depreciation			10,350				14,115				25,568
Total Operating Expense			2,293,734				1,691,195				4,148,166
Loss from Operations			(2,293,734	)			(1,691,195	)			(4,148,166	)
Other Income			149,980				-				149,980
Net Loss			(2,143,754	)			(1,691,195	)			(3,998,186	)
Foreign currency translation adjustment, net of taxes			(85,634	)			(53,047	)			(139,693	)
Other Comprehensive Income			(85,634	)			(53,047	)			(139,693	)
Total Comprehensive Loss			(2,058,120	)			(1,638,148	)			(3,858,493	)
Loss per common share (Note 12):
Basic:
Net (Loss) from operations			(0.05	)			(0.04	)
Net (Loss) per common share			(0.05	)			(0.04	)
Diluted:
Net (Loss) from operations			(0.05	)			(0.04	)
Net (Loss) per common share			(0.05	)			(0.04	)
Weighted Average Number of Shares Outstanding - Basic During the Year			45,684,825				42,052,529
Weighted Average Number of Shares Outstanding - Diluted During the Year			45,684,825				42,052,529

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

MOPALS.COM, INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		For the Year Ended				For the Year Ended				From Inception (August 7, 2012) to
		December 31, 2014				December 31, 2013				December 31, 2014
Cash Flows used in Operating Activities
Net (Loss)		$	(2,143,754	)		$	(1,691,195	)		$	(3,998,186	)
Adjustments to reconcile net (loss) income to net cash from operating activities:
Depreciation			10,350				14,115				25,568
Increase in Share Compensation Accrual			-				14,924				14,924
Stock-based compensation expense			418,827				189,197				608,024
Expenses paid for with shares			-				150,046				212,521
Adjustment to par value for shares			-				36,900				36,900
Increase (Decrease) in net assets:
Increase in Prepaids & Other Assets			34,168				(123,513	)			(121,662	)
Increase in MoCoins™ liability			1,707				148				1,855
Increase in Accounts Payable & Accrued Liabilities			574,088				160,781				755,217
Net Cash Flows used in Operating Activities			(1,104,614	)			(1,248,597	)			(2,5227,314	)
Cash Flows from Financing Activities
Shares Issued			10				445				41,445
Shares to be issued			100				200				300
Additional Paid In Capital			249,715				1,209,049				1,458,764
Increase in Shareholders’ Loan			473,038				288,318				1,125,671
Net Cash Flows from Financing Activities			722,863				1,498,012				2,626,190
Cash Flows used in Investing Activities
Purchases of Equipment			(1,768	)			(3,711	)			(61,897	)
Sale of  Equipment			381				-				381
Net Cash Flows used in Investing Activities			(1,387	)			(3,711	)			(61,516	)
Net Cash Flows			(383,138	)			245,704				37,360
Effects of Exchange Rate on Cash			88,970				16,147				106,122
Cash and Cash Equivalents – Beginning of Period			437,650				175,799				-
Cash and Cash Equivalents – End of Period		$	143,482			$	437,650			$	143,482
Supplemental Cash Flow Information
Interest Paid		$	-			$	-			$	-
Income Taxes Paid			-				-				-
Shares issued for rent deposit			62,500				-				62,500-

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

MOPALS.COM, INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

  

		Common Stock								Shares to		Shares				Share Subscriptions				Additional Paid In				Accumulated Deficit during				Accumulated Other Comprehensive				Total Shareholders'
		Shares				Amount				be Issued		Subscribed				Receivable				Capital				Development				Income				Deficit
						$				$		$				$				$				$				$				$
Balance, August 7, 2012 (date of inception)
Issuance of common stock			41,000,000				41,000						-				-				-				-				-				41,000
Shares Subscribed (note 9)			9,000,000				9,000						2,250,000				-				-				-				-				2,259,000
Share Subscriptions Receivable (note 9)			(9,000,000	)			(9,000	)					-				(2,250,000	)			-				-				-				(2,259,000	)
Foreign Currency Translation Adjustment			-				-						-				-				-				1,012				-				1,012
Net Accumulated Deficit			-				-						-				-				-				-				(163,237	)			(163,237	)
Balance December 31, 2012			41,000,000			$	41,000					$	2,250,000			$	(2,250,000	)		$	-			$	(163,237	)		$	1,012			$	(121,225	)

 

		Common Stock								Shares to				Shares				Share Subscriptions				Additional Paid In				Accumulated Deficit during				Accumulated Other Comprehensive				Total Shareholders'
		Shares				Amount				be Issued				Subscribed				Receivable				Capital				Development				Income				Deficit
Balance, January 1, 2013			41,000,000			$	41,000			$	-			$	2,250,000			$	(2,250,000	)		$	-			$	(163,237	)		$	1,012		$		(121,225	)
Adjustment to par value							(36,900	)			-												36,900												-
Adjustment for opening balance of Mopals											-												(8,946	)											(8,946	)
Issuance of shares to Mopals Inc. (formerly MBKR) shareholders			1,294,993				129				-				-				-				(129	)			-				-				-
Shares Subscribed (note 9)			1,920,000				192				-				(480,000	)			-				479,808				-				-				-
Share Subscriptions Receivable (note 9)			-				-				-				-				480,000				-				-				-				480,000
Issuance of common stock			275,000				28				-				-				-				150,046				-				-				150,074
Shares Subscribed (note 9)			959,000				96				-				(239,750	)			-				239,654				-				-				-
Share Subscriptions Receivable (note 9)			-				-				-				-				239,750				-				-				-				239,750
Shares to be issued (note 9)			-				-				200				-				-				498,662				-				-				498,862
Issuance of director common stock options			-				-				-				-				-				189,197				-				-				189,197
Foreign Currency Translation Adjustment			-				-				-				-				-				-				-				53,047				53,047
Net Loss			-				-				-				-				-				-				(1,691,195	)			-				(1,691,195	)
Balance December 31, 2013			45,448,993			$	4,545			$	200			$	1,530,250			$	(1,530,250	)		$	1,585,192			$	(1,854,432	)		$	54,059			$	(210,436	)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

MOPALS.COM, INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

																														Accumulated
										Shares								Share				Additional				Accumulated				other				Total
		Common Stock								to be				Shares				Subscriptions				Paid in				Deficit during				Comprehensive				Shareholders
		Shares				Amount				Issued				Subscribed				Receivable				Capital				Development				Income				Deficit
Balance, January 1, 2014			45,448,993			$	4,545			$	200			$	1,530,250			$	(1,530,250	)		$	1,585,192			$	(1,854,432	)		$	54,059			$	(210,436	)
Issuance of shares to landlord (Note 9)			250,000				25				-				-				-				62,475				-				-				62,500
Shares subscribed (Note 9)			105,891				10				-				(26,475	)			26,475				26,465				-				-				26,475
Shares to be issued (Note 9)			-				-				100				-				-				223,250				-				-				223,350
Shares granted to employees (Note 11)			-				-				-				-				-				7,808				-				-				7,808
Issuance of stock options (Note 11)			-				-				-				-				-				470,915				-				-				470,915
Foreign currency translation			-				-				-				-				-				-				-				85,634				85,634
Net Loss							-				-				-				-				- -				(2,143,754	)			-				(2, 143,754)
Balance, December 31, 2014			45,804,884			$	4,580			$	300			$	1,503,775			$	(1,503,775	)		$	2,376,105			$	(3,998,186	)		$	139,693			$	(1,477,508	)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

MOPALS.COM, INC.

(A Development Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 and 2013

 

1.	NATURE OF OPERATIONS AND ORGANIZATION

 

Nature of Operations

 

Mopals Inc. ("Mopals" or the “Company”) was incorporated August 7, 2012 and was organized under the laws of the State of Nevada.

 

Mopals’ operations are presently conducted through the Company’s wholly owned subsidiary, Mopals Canada Inc. (an Ontario, Canada company).   The planned operations of the Company consist of becoming a social media rewards platform in Canada and the United States.

 

On March 26, 2013, (the “Closing Date”), MortgageBrokers.com Holdings, Inc. (“MBKR”) entered into a share exchange agreement (the “Exchange Agreement”) by and among (i) MBKR; (ii) MoPals, Inc., a Nevada corporation (“MoPals (Nevada)”); (iii) Alex Haditaghi (“Company Principal Shareholder”); and (iv) the shareholders of MoPals (Nevada) (“MoPals Nevada Shareholders”). Pursuant to the terms of the Exchange Agreement, MBKR acquired 100% of the issued and outstanding equity securities of MoPals (Nevada) in exchange for the issuance of 50,000,000 shares of MBKR’s common stock, par value $0.0001 per share (each a “Share” and collectively, the “Common Stock”)(the “Share Exchange”). On March 26, 2013, the Company filed articles of amendment with the State of Delaware changing the name of our Company to MoPals.com, Inc.

 

Immediately prior to and concurrent with execution of the Share Exchange, MBKR entered into a certain Agreement of Sale dated March 26, 2013 (the “Agreement of Sale”) pursuant to which the Company transferred to MortgageBrokers.com Canada Inc., a Canada Corporation, all of the Company’s equity interest in the Company’s mortgage brokerage business and MortgageBrokers.com Canada Inc. agreed to assume any and all liabilities associated with the Company’s mortgage brokers business, including, but not limited to the commitments, liabilities and contingent liabilities, effective immediately prior to closing of the Share Exchange. Pursuant to the Agreement of Sale, the MBKR Principal Shareholder forfeited all rights to any monies owed to the Company Principal Shareholder by the Company associated with a shareholder loan of approximately $25,000 (the “Spin Out and Cancellation.”)

 

2.	BASIS OF PRESENTATION

 

The Company has not earned any revenues from limited principal operations and accordingly, the Company's activities have been accounted for as those of a "Development Stage Enterprise" as set forth in ASC 915 Accounting and Reporting by Development Stage Enterprises. The disclosures required by ASC 915 include that the Company's financial statements be identified as those of a development stage company, and that the statements of operations, stockholders' deficit and cash flows disclose activity since the date of the Company's inception.

 

3.	GOING CONCERN

 

These financial statements have been prepared assuming the Company will continue on a going-concern basis. The Company has incurred losses since inception and the ability of the Company to continue as a going-concern depends upon its ability to develop profitable operations and to continue to raise adequate financing. Accumulated losses from inception to December 31, 2014 total $3,998,186.  In order for the Company to meet its liabilities as they come due and to continue its operations, the Company is solely dependent upon its ability to generate such financing. 

 

 

MOPALS.COM, INC.

(A Development Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 and 2013

 

4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The accounting policies of the Company are in accordance with accounting principles generally accepted in the United States of America. Presented below are those policies considered particularly significant:

 

Basis of Consolidation and Presentation

 

The accompanying consolidated financial statements include the accounts of the Company, and its wholly-owned subsidiaries.  All inter-company transactions and balances have been eliminated upon consolidation.

 

Method of Accounting

 

The Company maintains its books and prepares its financial statements on the accrual basis of accounting.

 

Cash and Cash Equivalents

 

The Company maintains cash and cash equivalents at financial institutions which may exceed federally insured amounts.

 

Comprehensive Income or Loss

 

The Company adopted ASC 220-10, which establishes standards for reporting and presentation of comprehensive income and its components in a full set of financial statements. Comprehensive income is presented in the statements of stockholders’ deficit, and consists of net loss and unrealized gains (loss) on available for sale marketable securities; foreign currency translation adjustments and changes in market value of future contracts that qualify as a hedge; and negative equity adjustments recognized in accordance with ASC 715-10. ASU 2011-05 requires the presentation of other comprehensive income to be in a single, continuous statement or in two separate, but consecutive statements. The Company presents in a single, continuous statement.

 

Earnings (Loss) Per Share

 

The Company accounts for earnings per share pursuant to ASC 260-10-05, Earnings per Share, which requires disclosure on the financial statements of "basic" and "diluted" earnings (loss) per share. Basic earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of common stock outstanding for the period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common stock outstanding plus common stock equivalents (if dilutive) related to stock options and warrants for each period. There were no dilutive financial instruments for the years ending December 31, 2014 and 2013.

 

Financial Instruments

 

In accordance with ASC 825-10-50, “Disclosures About Fair Value of Financial Instruments" ("SFAS No. 107"), the estimated fair value of financial instruments has been determined by the Company using available market information and valuation methodologies. Considerable judgment is required in estimating fair value. Accordingly, the estimates may not be indicative of the amounts the Company could realize in a current market exchange. As of December 31, 2014, the carrying values of accounts payable and accrued liabilities and loans from shareholder approximate the fair value attainable because of the short-term maturity of these instruments.

 

In accordance with ASC 820-10, “Defining Fair Value Measurement”, the Company adopted the standard which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements.

 

Equipment

 

Equipment is stated at cost. Depreciation is calculated using the following annual rates and methods based on the estimated useful lives of the assets:

 

	Computer Hardware	30% declining
	Computer Software	30% declining
	Furniture and Equipment	20% declining

 

 

MOPALS.COM, INC.

(A Development Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 and 2013

 

4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Stock-based Compensation

 

The Company maintains a stock-based compensation plan under which incentive stock options to buy common stock may be granted to directors, officers and employees. Pursuant to ASC 718, the Company recognizes expense for its stock-based compensation based on the fair value of the awards that are granted. The fair values of stock options are estimated at the date of the grant using the Black-Scholes option pricing model, that require the input of highly subjective assumptions. Measured compensation cost is recognized ratably over the vesting period of the related stock-based compensation award. The amount recognized as expense is adjusted to reflect the number of stock options expected to vest. When exercised, stock options are settled through the issuance of common stock and are therefore treated as equity awards. The expected volatility of our common stock is estimated based on the historical performance of the stock.

 

Income Taxes

 

The Company accounts for income taxes pursuant to ASC 740-10, “Accounting for Income Taxes.” Deferred tax assets and liabilities are recorded for differences between the financial statements and tax basis of the assets and liabilities as well as the loss carry-forward that will result in taxable or deductible amounts in the future based on enacted tax laws and rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is recorded for the amount of income tax payable or refundable for the period increased or decreased by the change in deferred tax assets and liabilities during the year.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the period in which they become known. The accounting estimate that requires management’s most significant judgment is the measurement of accrued liabilities and stock based compensation.

 

Foreign Currency Translation

 

Exchange differences arising on the translation of non-monetary items carried at fair value are included in profit or loss for the period except for the differences arising on the translation of non-monetary items in respect of which gains and losses are recognized directly in equity. Exchange differences arising from such non-monetary items are also recognized directly in equity. The Company’s functional and presentation currency is the United States Dollar.

 

Recent Accounting Pronouncements

 

The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.

 

 

MOPALS.COM, INC.

(A Development Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 and 2013

 

5.	PREPAID AND OTHER ASSETS

 

		2014				2013
Prepaid Assets		$	122,302			$	19,594
Harmonized Sales Tax			121,662				125,688
Other Assets			-				10,548
Total		$	243,964			$	155,830

 

The Harmonized Sales Tax (“HST”) is a federal - provincial harmonized sales tax that applies to the supply of most property and services in Canada. Generally, HST registrants must charge and account for the HST on taxable supplies of property and services made in Canada. The HST rate in Ontario is 13%. Registrants collect the HST on most of their sales and pay HST on most purchases they make to operate their business. They can claim an input tax credit, to recover the HST paid or payable on the purchases they use in their commercial activities.

 

6.

EQUIPMENT

 

The net book value of equipment as of December 31, 2014 was as follows:

 

		Cost				Amortization				Net Book Value
Computer hardware		$	19,961			$	7,437			$	12,524
Computer Software			27,462				13,027				14,435
Furniture & Equipment			8,620				2,866				5,754
Total		$	56,043			$	23,330			$	32,713

 

The net book value of equipment as of December 31, 2013 was as follows:

 

		Cost				Amortization				Net Book Value
Computer hardware		$	19,844			$	3,823			$	16,021
Computer Software			30,369				8,779				21,590
Furniture & Equipment			9,402				2,095				7,307
Total		$	59,615			$	14,697			$	44,918

 

Depreciation expense since August 7, 2012 (inception) amounted to $25,568 including depreciation expenses for computer hardware, computer software and furniture and equipment. Depreciation expense for the years ending December 31, 2014 and 2013 was $10,350 and $14,115, respectively.

 

7.	ADVANCES FROM SHAREHOLDER

 

As of December 31, 2014, the controlling shareholder and Chief Executive Officer of the Company had advanced $1,125,671 (2013- $652,633) to fund the working capital of the Company. The advances are unsecured, non-interest bearing and due on demand.

 

8.	COMMITMENTS & CONTINGENCIES

 

On February 10, 2014, the Company entered into a new lease agreement for office space. The schedule below outlines the expected remaining lease payments over the life of the lease.

 

2015		$	145,980
2016			146,445
2017			156,022
2018			53,071

 

In the normal course of business, the Company becomes involved in various legal actions seeking compensatory and occasionally punitive damages, including actions brought on behalf of various purported classes of claimants and claims relating to employee and third-parties.

 

MOPALS.COM, INC.

(A Development Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 and 2013

 

9.	CAPITAL STOCK

 

a) Authorized

 

100,000,000 Common Shares with a par value of $0.0001.

 

b) Issued

 

On March 27, 2013, 1,294,993 shares were issued to Mopals.com, Inc. shareholders. 1,920,000 common shares were issued against a share subscription at a price of $0.25 per share on July 2, 2013. An additional 959,000 common shares were issued against the same share subscription at $0.25 per share. The Company issued 275,000 common shares in September 2013 to an Ontario numbered corporation for services to be rendered. On February 10, 2014, 250,000 common shares were issued to the landlord as a guarantee for the lease of the premises and valued at $62,500 based on the current stock price on the date of issuance of $0.25. An additional 105,891 common shares were issued against a share subscription at a price of $0.25 per common share during the year ended December 31, 2014.

 

c) Stock Options

 

In July, 2013, options were issued to three directors who signed Directors Agreements allowing them to purchase 300,000 shares each at a strike price of $0.25 per share. These were signed on July 1, July 3, and July 6 respectively. On December 7, 2013, an additional director was hired with the same option plan. On October 25, 2014, an additional director was hired and granted stock options allowing him to purchase 400,000 common shares each at a strike price of $0.35 per share. As of December 31, 2014, none of these options had been exercised. These option plans also contain options that will occur in the second and third years of employment with Mopals, the details of the total option plans are outlined below:

 

2013 Director Agreements

 

Year		Options				Strike Price
1			1,200,000			$	0.25
2			1,200,000			$	0.35
3			1,200,000			$	0.40

 

2014 Director Agreement

Year		Options				Strike Price
1			400,000			$	0.35
2			500,000			$	0.55
3			500,000			$	0.65

 

d) Shares to be issued

 

On December 3, 2013, investors delivered a total of $498,862 to purchase 2,000,000 common shares of the Company issued at $0.25 per share. On October 30, 2014, a director of the Company delivered $223,350 to purchase 1,000,000 common shares of the Company issued at $0.25 per share. As of December 31, 2014, these common shares had not been issued.

 

10.	SHARE SUBSCRIPTIONS RECEIVABLE

 

On December 21, 2012, the Company agreed to issue 9,000,000 shares of the Company to private investors for subscriptions receivable of $2,250,000. On December 31, 2014, the balance of the subscription receivable was $1,503,775 (2013 - $1,530,520).

 

 

MOPALS.COM, INC.

(A Development Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 and 2013

 

11.	STOCK-BASED COMPENSATION

 

The Company’s Stock Option Plan is currently being established in order to enable the Company to attract and retain the services of highly qualified and experienced directors, officers, employees and consultants, and to give such persons an interest in the success of the Company and its subsidiaries. The options and awards will be granted at the discretion of the Board of Directors. The fair value of each option granted is estimated at the time of grant using the Black-Scholes option pricing model using the following weighted average assumptions:

 

2014 Options Granted

Fiscal Year ended December 31, 2014
Exercise Price		$	0.44
Risk-free interest rate			0.49	%
Expected term (years)			3.15
Expected volatility			243	%
Expected dividend yield			0	%

 

2013 Options Granted

Fiscal Year ended December 31, 2013
Exercise Price		$	0.25
Risk-free interest rate			3.00	%
Expected term (years)			3
Expected volatility			107	%
Expected dividend yield			0	%

 

During the year ended December 31, 2014, the Company granted 100,000 common shares to certain employees. These common shares vest over 12 months. These shares were valued at $16,666 based on the current stock price at the date of grant of $0.25 and an estimated forfeiture rate of 33%, of which $7,808 was accrued at December 31, 2014 and recorded as stock based compensation on the consolidated statements of operations.

 

All of the director stock options begin vesting immediately over 12 months and expire on the third anniversary of the grant date. The Company granted 1,600,000 stock options to directors in 2014 (2013 – 1,200,000) and 250,000 stock options to the landlord in 2014 (2013 – nil). The following table summarizes the stock option activities of the Company:

 

		Number of Options				Weighted Average Exercise Price
Balance, December 31, 2012			-				-
Granted			1,200,000				0.25
Balance, December 31, 2013			1,200,000				0.25
Granted			1,850,000				0.44
Balance, December 31, 2014			3,050,000				0.36

 

 

MOPALS.COM, INC.

(A Development Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 and 2013

 

11.	STOCK-BASED COMPENSATION (Continued)

 

The Company’s computation of expected volatility for the years ended December 31, 2014 and 2013 is based on the Company’s market close price over the period equal to the expected life of the options. The Company’s computation of expected life reflects actual historical exercise activity and assumptions regarding future exercise activity of unexercised, outstanding options.

 

The Company’s expected dividend yield is 0%, since there is no history of paying dividends and there are no plans to pay dividends. The Company’s risk-free interest rate is the Canadian Treasury Bond rate for the period equal to the expected term.

 

The total number of options outstanding as at December 31, 2014 was 3,050,000 (2013 – 1,200,000). The weighted average grant date fair value of the options granted during the year ended December 31, 2014, was $0.24 (2013 - $0.40).

 

As at December 31, 2014, the Company had 1,450,000 (2013 – nil) vested options. As at December 31, 2014, the number of unvested options expected to vest (including the impact of expected forfeitures) had been estimated at 1,600,000 (2013 – 1,200,000) with a weighted average contractual life of 3 years (2013 – 3 years) and exercise price of $0.35 (2013 - $0.25). As at December 31, 2014, the total fair value of future expense to be recorded in subsequent periods (assuming no forfeiture occurs) is $259,253 (2013 - $285,739). The weighted average time remaining for these options to vest is 0.67 years (2013 – 0.61 years).

 

The Company recognizes compensation expense for the fair values of stock options using the graded vesting method over the requisite service period for the entire award.

 

The following table presents information relating to stock options outstanding and exercisable at December 31, 2014.

 

Options Outstanding												Options Exercisable
Number of Shares				Weighted Average Remaining Contractual Life (Years)				Weighted Average Exercise Price				Number of Shares				Weighted Average Exercise Price				Weighted Average Remaining Contractual Life (Years)
	1,200,000				1.61			$	0.25				1,200,000			$	0.25				1.61
	1,600,000				2.68				0.35				-				0.35				2.68
	250,000				3.32				1.00				250,000				1.00				3.32
	3,050,000				2.31			$	0.36				1,450,000			$	0.38				1.90

 

The Company recorded $418,827 in employment expenses for share-based compensation expense and $59,802 as a prepaid expense related to the deposit on the leased premises for the year ended December 31, 2014 (2013 - $189,197) with the corresponding credits to Additional Paid in Capital.

 

 

MOPALS.COM, INC.

(A Development Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2014 and 2013

 

12.	LOSS PER SHARE

 

The Company calculates basic earnings per common share using net income divided by the weighted-average number of common shares outstanding. The Company calculates diluted earnings per common share in the same manner as basic, except we use the weighted-average number of diluted common shares outstanding in the denominator, when the stock options and warrants are not anti-dilutive.

 

		December 31, 2014				December 31, 2013
Weighted average number of common shares outstanding			45,684,825				42,052,529
Weighted-average number of diluted common shares outstanding			45,684,825				42,052,529

 

13.	INCOME TAXES

 

The Company accounts for income taxes in accordance with ASC 740-20, (formerly SFAS No. 109). ASC 740-20 prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates. The effects of future changes in tax laws or rates are not anticipated.

 

Under ASC 740-20 income taxes are recognized for the following: a) amount of tax payable for the current year, and b) deferred tax liabilities and assets for future tax consequences of events that have been recognized differently in the financial statements than for tax purposes.

 

As of December 31, 2014, the Company did not have any amounts recorded pertaining to uncertain tax positions. Deferred taxes as at December 31, 2014 and 2013 have not been recorded due to the fact that they are fully reserved. The Company files federal and provincial income tax returns in Canada and federal, state and local income tax returns in the U.S., as applicable.  The Company may be subject to a reassessment of federal and provincial income taxes by Canadian tax authorities for a period of three to five years from the date of the original notice of assessment in respect of any particular taxation year.  In certain circumstances, the U.S. federal statute of limitations can reach beyond the standard three year period.  U.S. state statutes of limitations for income tax assessment vary from state to state.

 

14.	RELATED PARTY TRANSACTIONS

 

During the year ended December 31, 2014, a director of the Company delivered $223,350 to purchase 1,000,000 common shares of the Company issued at $0.25 per share. These common shares have been recorded as shares to be issued.

 

See Note 7.

 

15.	COMPARATIVE FIGURES

 

Certain of the prior years comparative figures have been reclassified to conform to the current year presentation.

 

16.	SUBSEQUENT EVENT

 

Subsequent to December 31, 2014, the Company received a subscription for 100,000 common shares of the Company at $0.25 per share for gross proceeds of $25,000.

  

 

F-16