UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

[X]	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended August 31, 2016
[  ]	Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from                  to __________
	Commission File Number:  333-148385

 

Lans Holdings Inc.

(Exact name of registrant as specified in its charter)

 

Nevada	47-4426774
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

 

801 Brickell, Miami, Florida 33133

(Address of principal executive offices)

 

305-755-7451

(Registrant’s telephone number)

(Former name, former address and former fiscal year, if changed since last report)

 

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 [X] No

 

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

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

[ ] Large accelerated filer [ ] Non-accelerated filer

[ ] Accelerated filer [X] Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

[ ] Yes [X] No

 

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 44,807,673 common shares as of October 24, 2016 .

 

 

	TABLE OF CONTENTS	Page
PART I – FINANCIAL INFORMATION
Item 1:	Financial Statements	3
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	6
Item 4:	Controls and Procedures	6
PART II – OTHER INFORMATION
Item 1:	Legal Proceedings	7
Item 1A:	Risk Factors	7
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	7
Item 3:	Defaults Upon Senior Securities	8
Item 4:	Mine Safety Disclosures	8
Item 5:	Other Information	8
Item 6:	Exhibits	9

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Our financial statements included in this Form 10-Q are as follows:

 

F-1	Balance Sheets as of August 31, 2016 and November 30, 2015 (unaudited);
F-2	Statements of Operations for the three and nine months ended August 31, 2016 and August 31, 2015 (unaudited);
F-3	Statements of Cash Flows for the nine months ended August 31, 2016 and August 31, 2015  (unaudited);
F-4	Notes to Financial Statements.

 

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended August 31, 2016 are not necessarily indicative of the results that can be expected for the full year.

 

 

LANS HOLDINGS, INC.

BALANCE SHEETS

AS OF AUGUST 31, 2016 AND NOVEMBER 30, 2015

(UNAUDITED)

 

		August 31,				November 30,
		2016				2015
ASSETS
Current Assets
Cash and cash equivalents		$	454			$	15,540
Accounts receivable			52,015				13,712
Prepaid expenses			2,602				11,216
TOTAL ASSETS		$	55,071			$	40,468
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Accounts payable and accrued expenses		$	177,463			$	64,170
Accounts payable and accrued expenses – related parties			268,763				159,965
Stock payable			—				75,000
Stock payable – related parties			—				45,000
Notes payable			289,700				289,700
Notes payable – related parties			40,991				5,000
Convertible debentures, net of unamortized discount			3,387				—
Convertible debentures – related parties, net of unamortized discount			1,607				—
Derivative liabilities			89,280				—
Total Liabilities			871,191				638,835
Commitments and Contingencies
Stockholders’ Deficit
Preferred stock, 100,000,000 shares authorized, $0.001 par value; 599,859 Series A preferred shares issued and outstanding			600				600
Common stock, 500,000,000 shares authorized, $0.001 par value; 44,807,673 and 44,433,333 shares issued and outstanding, respectively			44,808				44,433
Additional paid-in capital			2,504,131				2,264,081
Accumulated deficit			(3,365,659	)			(2,907,481	)
Total Stockholders’ Deficit			(816,120	)			(598,367	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT		$	55,071			$	40,468

 

 

See accompanying notes to these unaudited financial statements.

 

 

LANS HOLDINGS, INC.

STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED AUGUST 31, 2016 AND 2015

(UNAUDITED)

 

		For the Three Months Ended				For the Three Months Ended				For the Nine Months Ended				For the Nine Months Ended
		August 31,				August 31,				August 31,				August 31,
		2016				2015				2016				2015
REVENUES		$	129,070			$	—			$	212,832			$	—
COST OF REVENUES			79,860				—				134,980				—
GROSS PROFIT			49,210				—				77,852				—
OPERATING EXPENSES
General and administrative			230,434				160,306				480,152				207,718
Impairment of intangible asset			—				—				—				2,150,000
TOTAL OPERATING EXPENSES			230,434				160,306				480,152				2,357,718
OPERATING LOSS			(181,224	)			(160,306	)			(402,300	)			(2,357,718	)
OTHER EXPENSES
Accretion of discounts on convertible debentures			(3,504	)			—				(4,994	)			—
Change in fair value of derivatives			(6,401	)			—				(7,124	)			—
Interest expense			(16,028	)			(1,965	)			(43,760	)			(2,920	)
TOTAL OTHER EXPENSES			(25,933	)			(1,965	)			(55,878	)			(2,920	)
NET LOSS		$	(207,157	)		$	(162,271	)		$	(458,178	)		$	(2,360,638	)
Loss per common share – basic and diluted		$	(0.00	)		$	(0.00	)		$	(0.01	)		$	(0.05	)
Weighted average number of common shares outstanding – basic and diluted			44,807,673				44,433,333				44,625,313				44,433,333

 

 

See accompanying notes to these unaudited financial statements.

 

 

LANS HOLDINGS, INC.

STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED AUGUST 31, 2016 AND 2015

(UNAUDITED)

 

		For the Nine Months Ended
		August 31,				August 31,
		2016				2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(458,178	)		$	(2,360,638	)
Adjustments to reconcile net loss to net cash used in operating activities:
Accretion of discounts on convertible debentures			4,994				—
Change in fair value of derivatives			21,290				—
Stock-based compensation			120,425				90,000
Impairment of intangible asset			—				2,150,000
Change in operating assets and liabilities:
Accounts receivable			(38,303	)			—
Prepaid expenses			8,614				—
Accounts payable and accrued expenses			164,783				58,128
Accounts payable and accrued expenses – related parties			73,298				—
Net Cash Used in Operating Activities			(103,077	)			(62,510	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of intangible asset			—				(50,000	)
Net Cash Used in Investing Activities			—				(50,000	)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from related party			—				3,887
Proceeds from notes payable			—				125,000
Proceeds from notes payable – related parties			40,258				—
Payments of notes payable – related parties			(4,267	)			—
Proceeds from convertible debentures			52,000				—
Net Cash Provided by Financing Activities			87,991				128,887
Net Decrease in Cash and Cash Equivalents			(15,086	)			16,377
Cash and Cash Equivalents, Beginning of Period			15,540				—
Cash and Cash Equivalents, End of Period		$	454			$	16,377
SUPPLEMENTARY CASH FLOWS INFORMATION:
Interest paid		$	2,313			$	—
Income taxes paid		$	—			$	—
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Convertible debentures issued to settle accounts payable		$	15,990			$	—
Issuance of preferred stock for acquisition of assets		$	—			$	2,100,000

 

See accompanying notes to these unaudited financial statements.

 

 

LANS HOLDINGS, INC.

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 1 – NATURE OF BUSINESS

 

Nature of Business

 

Lans Holdings is in the business of providing secure payment and communication solutions. The Company’s aim is to make it easier for sellers to start selling, and buyers to buy with confidence. The Company intends that its solutions will be used to enable businesses to process payments more efficiently whether online or in a retail store front. The Company intends to offer white label solutions for payment service providers to enable business to consumer and business to business payments through physical POS, mobile devices, online and software integrations. The Company also intends to provide business processing outsourcing through its Fractional I.T. Services, and complaint ready hosted solutions through its Infrastructure on Demand.

 

Lans Holdings is focused to provide emerging payment "breakthrough" technology that motivates and rewards clients for adopting more secure infrastructure to support their businesses.

 

Going Concern

 

The Company has incurred losses since inception and has negative working capital. These factors create substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company generating cash from the sale of its common stock and/or obtaining debt financing and attaining future profitable operations.

 

Management’s plans include selling its equity securities and obtaining debt financing to fund its capital requirement and ongoing operations; however, there can be no assurance the Company will be successful in these efforts.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

These financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States and are expressed in US dollars. The Company’s fiscal year end is November 30.

 

Interim Financial Statements

 

The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and the rules of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the audited financial statements and notes thereto. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year end November 30, 2015 have been omitted.

 

 

Use of Estimates

 

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to long-lived assets, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

 

Financial Instruments

 

The Company’s financial instruments consist of cash, accounts receivable, prepaid expenses, accounts payable and accrued expenses, amounts due to officers, notes payable and convertible debentures. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid instruments with maturity of three months or less be cash equivalents.

 

Intangible Assets

 

Software, licenses and other rights have been capitalized in accordance with ASC 350-40 “Intangibles – Goodwill and Other – Internal-Use Software.” Amortization is calculated on a straight line basis over its estimated useful life.

 

If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, an impairment is recognized for the excess of the carrying value over the fair value of the asset.

 

Income Taxes

 

The Company utilizes the liability method of accounting for income taxes. Under the liability method deferred tax assets and liabilities are determined based on the differences between financial reporting basis and the tax basis of the assets and liabilities and are measured using enacted tax rates and laws that will be in effect, when the differences are expected to reverse. An allowance against deferred tax assets is recognized, when it is more likely than not, that such tax benefits will not be realized.

 

Any deferred tax asset is considered immaterial and has been fully offset by a valuation allowance because at this time Company believes that it is more likely than not that the future tax benefit will not be realized as the Company has no current operations.

 

Revenue Recognition

 

The Company derives revenue from subscriptions for software that provide secure payment solutions, from the provision of customized development services and from the provision of secure on demand infrastructure.

 

The Company recognizes revenue when persuasive evidence of an arrangement exists, products are fully delivered and services have been provided, the sales price is fixed or determinable and collectability is reasonably assured.

 

All of the Company’s revenues during the nine months ended August 31, 2016 resulted from four customers.

 

Stock-based Compensation

 

The Company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Based Compensation”, which requires the measurement and recognition of compensation expense based on estimated fair values for all share-based awards made to employees and directors, including stock options.

 

ASC 718 requires companies to estimate the fair value of share-based awards on the date of grant using an option-pricing model. The Company uses the Black-Scholes option-pricing model as its method of determining fair value. This model is affected by the Company’s stock price as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the statement of operations over the requisite service period.

 

Options granted to consultants are valued at the fair value of the equity instruments issued, or the fair value of the services received, whichever is more reliably measureable.

 

Loss Per Common Share

 

Basic earnings (loss) per common share is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As of August 31, 2016, the Company had 5,116,421 (2015 – nil) dilutive potential shares outstanding.

 

Subsequent Events

 

The Company has evaluated all transactions through the date the financial statements were issued for subsequent event disclosure consideration.

 

Recent Accounting Pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements.

 

In August 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-15, “Presentation of Financial Statements - Going Concern”. The Update provides US GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is currently evaluating the effects of ASU 2014-15 on its financial statements.

 

 

NOTE 3 – NOTES PAYABLE

 

a)       On November 24, 2014, the Company issued a $25,000 promissory note to a former director of the Company pursuant to the Agreement of Conveyance, Transfer and Assignment of Obligations described in Note 6(k). The promissory note is unsecured, non-interest bearing and was due within six months of the date of issuance. As of August 31, 2016, the note was not yet repaid. The Lender has agreed to extend the note period until financing is secured. This note was reclassified from note payable to related party to notes payable during the year ended November 30, 2015 as the lender is no longer a related party.

 

b)       On March 26, 2015, the Company entered into a $75,000 loan agreement with a third party. The loan is unsecured, bears interest at 7.5% per year and was due on March 31, 2016. On September 30, 2015, the Company missed a required semi-annual payment of accrued interest, resulting in the interest rate increasing to 15% per year going forward. At August 31, 2016, the Company had accrued interest of $13,192 related to this agreement. This loan is currently in default and payable on demand.

 

c)       On August 7, 2015, the Company entered into a $50,000 loan agreement with a third party. The loan is unsecured, bears interest at 8.5% per year and is due on August 7, 2016. On January 15, 2016, the Company missed a required semi-annual payment of accrued interest, resulting in the interest rate increasing to 17% per year going forward. At August 31, 2016, the Company had accrued interest of $7,475 related to this agreement. This loan is currently in default and payable on demand

 

d)       On September 25, 2015, the Company entered into a $14,700 loan agreement with a third party. The loan is unsecured, bears interest at 1.5% per month and is due on demand. At August 31, 2016, the Company had accrued interest of $454 related to this agreement.

 

e)       On October 5, 2015, the Company entered into a $25,000 loan agreement with the President of the Company. The loan is unsecured, bears interest at 8% per year compounded and payable monthly, and is due on demand. During October 2015, the Company repaid $20,000 of the loan’s principal. At August 31, 2016, the Company had accrued interest of $492 related to this agreement.

 

f)        On October 15, 2015, the Company entered into a $125,000 loan agreement with a third party. The loan is unsecured, bears interest at 7% per year and is due on October 31, 2016. On April 15, 2016, the Company missed a required semi-annual payment of accrued interest, resulting in the interest rate increasing to 14% per year going forward. At August 31, 2016, the Company had accrued interest of $11,003 related to this agreement.

 

g)       On February 12, 2016, the Company entered into a $32,258 loan agreement with a significant shareholder of the Company. The loan is unsecured, bears interest at 8% per year compounded monthly, and is due on demand. At August 31, 2016, the Company had accrued interest of $1,564 related to this agreement.

 

h)       On April 26, 2016, the Company entered into a $6,000 loan agreement with the President of the Company. The loan is unsecured, bears interest at 8% per year compounded and payable monthly. The loan is payable on the earliest of demand or from 50% of future revenue or from funding received in excess of $100,000. During the three months ended August 31, 2016, the Company repaid $2,267 of the loan’s principal. At August 31, 2016, the Company had accrued interest of $33 related to this agreement.

 

i)       On June 2, 2016, the Company received an advance of $2,000 from our President. The balance was paid off in June 2016.

 

NOTE 4 – CONVERTIBLE DEBENTURES

 

a)       On March 23, 2016, the Company issued a convertible debenture for $6,000. Pursuant to the terms of the agreement, the note is unsecured, bears interest at 8% per year, and is due one year from the date of issuance with the option of extending for an additional six months at the holder’s discretion. At the maturity date, the unpaid amount of principal can be converted at the holder’s option at a price of 50% of the ask price at the date of conversion. The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the derivative liability of $9,815 resulted in a full discount to the note payable of $6,000 and the recognition of a loss on derivatives of $3,815. At August 31, 2016, the Company had amortized $396 of the discount to this convertible debenture and had accrued interest of $212 related to this convertible debenture.

 

b)       On May 1, 2016, the Company issued a convertible debenture to a related party to settle accounts payable of $15,990. Pursuant to the terms of the agreement, the note is unsecured, bears interest at 8% per year, and is due one year from the date of issuance with the option of extending for an additional six months at the holder’s discretion. At the maturity date, the unpaid amount of principal can be converted at the holder’s option at a price of 50% of the ask price at the date of conversion. The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the derivative liability of $23,757 resulted in a full discount to the note payable of $15,990 and the recognition of a loss on derivatives of $7,767. At August 31, 2016, the Company had amortized $936 of the discount to this convertible debenture and had accrued interest of $428 related to this convertible debenture.

 

c)       On June 15, 2016, the Company issued a convertible debenture for $10,000. Pursuant to the terms of the agreement, the note is unsecured, bears interest at 8% per year, and is due on December 31, 2016. At the maturity date, the unpaid amount of principal can be converted at the holder’s option at a price of 50% of the ask price at the date of conversion. The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the derivative liability of $14,129 resulted in a full discount to the note payable of $10,000 and the recognition of a loss on derivatives of $4,129. At August 31, 2016, the Company had amortized $608 of the discount to this convertible debenture and had accrued interest of $169 related to this convertible debenture.

 

d)       On June 30, 2016, the Company issued a convertible debenture for $2,000. Pursuant to the terms of the agreement, the note is unsecured, bears interest at 8% per year, and is due on December 31, 2016. At the maturity date, the unpaid amount of principal can be converted at the holder’s option at a price of 50% of the ask price at the date of conversion. The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the derivative liability of $2,782 resulted in a full discount to the note payable of $2,000 and the recognition of a loss on derivatives of $782. At August 31, 2016, the Company had amortized $279 of the discount to this convertible debenture and had accrued interest of $27 related to this convertible debenture.

 

e)       On July 12, 2016, the Company issued a convertible debenture for $30,000. Pursuant to the terms of the agreement, the note is unsecured, bears interest at 8% per year, and is due on December 31, 2016. At the maturity date, the unpaid amount of principal can be converted at the holder’s option at a price of 50% of the ask price at the date of conversion. The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the derivative liability of $40,472 resulted in a full discount to the note payable of $30,000 and the recognition of a loss on derivatives of $10,472. At August 31, 2016, the Company had amortized $1,683 of the discount to this convertible debenture and had accrued interest of $329 related to this convertible debenture.

 

f)        On July 28, 2016, the Company issued a convertible debenture for $4,000. Pursuant to the terms of the agreement, the note is unsecured, bears interest at 8% per year, and is due six months from the date of issuance. At the maturity date, the unpaid amount of principal can be converted at the holder’s option at a price of 50% of the ask price at the date of conversion. The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the derivative liability of $5,449 resulted in a full discount to the note payable of $4,000 and the recognition of a loss on derivatives of $1,449. At August 31, 2016, the Company had amortized $202 of the discount to this convertible debenture and had accrued interest of $30 related to this convertible debenture.

 

 

Convertible Debentures consist of the following as of August 31, 2016:

Noteholder (issue date)		August 31, 2016
March 23, 2016 debenture		$	6,000
May 1, 2016 debenture			15,990
June 15, 2016 debenture			10,000
June 30, 2016 debenture			2,000
July 12, 2016 debenture			30,000
July 28, 2016 debenture			4,000
			67,990
Less: debt discount			(62,996	)
Total		$	4,994

 

NOTE 5 – DERIVATIVE LIABILITIES

 

The embedded conversion options of the Company’s convertible debentures described in Note 4 contain conversion features that are accounted for as derivative liabilities. The fair value of these liabilities will be re-measured at the end of every reporting period and the change in fair value will be reported in the statement of operations as a gain or loss on derivative financial instruments.

The Company uses Level 3 inputs for its valuation methodology for the derivative liabilities and embedded conversion option liabilities as their fair values were determined by using the Black-Scholes option pricing model based on various assumptions. The model incorporates the price of a share of the Company’s common stock (as quoted on NASDAQ), volatility, risk free rate, dividend rate and estimated life. Significant changes in any of these inputs in isolation would result in a significant change in the fair value measurement. As required, these are classified based on the lowest level of input that is significant to the fair value measurement. The following table shows the assumptions used in the calculations:

 

				Expected Volatility		Risk-free Interest Rate		Expected Dividend Yield				Expected Life (in years)
	At August 31, 2016			176% - 223%		0.36% - 0.68%			0	%		0.33-1.00

 

 

The fair value of the derivative liabilities were $89,280 and $nil at August 31, 2016 and November 30, 2015, respectively: 

 

			Derivative Values
Noteholder (issue date)			November 30, 2015				Additions				Conversions				Fair Value Increase (Decrease)				August 31, 2016
March 23, 2016 debenture		$	—			$	9,815			$	—			$	(1,846	)		$	7,969
May 1, 2016 debenture			—				23,757				—				(297	)			23,460
June 15, 2016 debenture			—				14,129				—				(1,564	)			12,565
June 30, 2016 debenture			—				2,782				—				(269	)			2,513
July 12, 2016 debenture			—				40,472				—				(2,778	)			37,694
July 28, 2016 debenture			—				5,449				—				(370	)			5,079
Total		$	—			$	96,404			$	—			$	(7,124	)		$	89,280

 

 

NOTE 6 – RELATED PARTY TRANSACTIONS

 

a)       During the nine months ended August 31, 2016, the Company incurred consulting and other business-related fees of $36,000 (2015 - $13,500) to a company whose CEO is the President of the Company.

 

b)       During the nine months ended August 31, 2016, the Company incurred consulting fees and other business related fees of $9,124 (2015 - $17,064) to a company controlled by the Chief Technology Officer of the Company.

 

c)       During the nine months ended August 31, 2016, the Company incurred consulting and other business-related fees of $9,000 (2015 - $16,000) to the Chief Revenue Officer of the Company.

 

d)       During the nine months ended August 31, 2016, the Company incurred advisory, consulting and other business-related fees of $67,700 (2015 - $nil) to an Advisory Board Member of the Company who was appointed to Chief Strategy Officer of the Company by the board of directors of the Company on May 24, 2016.

 

e)       As of August 31, 2016, the Company owed $200 (November 30, 2015 - $200) to the President of the Company, which is non-interest bearing, unsecured and due on demand.

 

f)        As of August 31, 2016, the Company owed $30,500 (November 30, 2015 - $1,000) to a company whose CEO is the President of the Company. The amount is related to consulting fees incurred during the period.

 

g)       As of August 31, 2016, the Company owed $8,000 (November 30, 2015 - $18,850) to a company controlled by the Chief Technology Officer of the Company. The amount is related to consulting fees incurred during the period. Of the amount owing at November 30, 2015, $15,000 was settled on April 12, 2016, by issuing 66,667 shares of the Company’s common stock at $0.225 per share.

 

h)       As of August 31, 2016, the Company owed $8,000 (November 30, 2015 - $17,665) to the Chief Revenue Officer of the Company. The amount is related to consulting fees incurred during the period. Of the amount owing at November 30, 2015, $15,000 was settled on April 12, 2016, by issuing 39,683 shares of the Company’s common stock at $0.378 per share.

 

i)         As of August 31, 2016, the Company owed $22,938 (November 30, 2015 – $28,938) to the Chief Strategy Officer of the Company. The amount is related to advisory and consulting fees incurred during the period. Of the amount owing at November 30, 2015, $30,000 was settled on April 12, 2016, by issuing 111,112 shares of the Company’s common stock at $0.27 per share.

 

j)        As of August 31, 2016, the Company owed $49,125 (November 30, 2015 - $nil) to a company that is a significant shareholder of the Company. The amount is related to cost of revenue incurred during the period.

 

k)       On November 21, 2014, the Company entered into an Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations with directors of the Company. Pursuant to the agreement, the Company transferred all assets and business operations associated with hexagon fishing nets to the directors of the Company. In exchange, the directors of the Company agreed to cancel 24,438,333 shares in the Company and assume and cancel all liabilities relating to the Company’s former business, including officer loans amounting to $100,814. A director of the Company retained 361,667 shares of common stock in the Company. In consideration for the cancellation of amounts due to officer and the return of the shares, the Company issued a $25,000 promissory note to the director of the Company. Refer to Note 3(a). As a result of the forgiveness of the loans and cancellation of stock, the Company recognized $75,814 as a contribution to capital.

 

 

l)         On November 21, 2014, the Company entered into a License Agreement with the Chief Executive Officer of the Company (Note 9(g)). At November 30, 2014, the Company was indebted to the Chief Executive Officer of the Company for $150,000 related to the License Agreement. The amount was due by February 19, 2015. As of August 31, 2016, the amount has not been paid by the Company.

 

NOTE 7 – CAPITAL STOCK

 

a)       On April 12, 2016, certain shareholders returned a net total of 24,438,333 shares of common stock pursuant to the Agreement of Conveyance, Transfer, and Assignment of Assets and Assumption of Obligations referred to in Note 6(k).

 

b)       On April 12, 2016, the Company issued 24,438,333 shares of common stock pursuant to the License Agreement with PayFlex Systems referred to in Note 9(g).

 

c)       On April 12, 2016, certain shareholders transferred an aggregate of 6,661,667 shares of common stock pursuant to a prior Asset Acquisition Agreement with Transaction Data USA Inc.

 

d)       On April 12, 2016, the Company issued 66,667 shares of common stock, valued at $15,000, to the Chief Technology Officer of the Company pursuant to the consultancy agreement referred to in Note 9(a).

 

e)       On April 12, 2016, the Company issued 39,683 shares of common stock, valued at $15,000, to the former Chief Operations Officer of the Company pursuant to the consultancy agreement referred to in Note 9(b).

 

f)        On April 12, 2016, the Company issued 39,683 shares of common stock, valued at $15,000, to the Chief Revenue Officer of the Company pursuant to the consultancy agreement referred to in Note 9(c).

 

g)       On April 12, 2016, the Company issued an aggregate 228,214 shares of common stock, valued at $60,000, to Advisory Board Members of the Company pursuant to the advisory board agreements referred to in Notes 9(d), 9(e) and 9(f).

 

h)       On April 14, 2016, the Company’s board of directors and a majority of the shareholders of the Company approved an amendment to the Articles of Incorporation to effectuate a one for three reverse stock split of the outstanding shares of common stock of the Company. The reverse stock split became effective on May 24, 2016. All share and per share data in these financial statements and footnotes have been retrospectively adjusted to account for this reverse stock split.

 

NOTE 8 – STOCK - BASED COMPENSATION

 

On May 23, 2016, the Company adopted an Equity Incentive Plan under which the Company can grant up to 8,333,333 common shares to its officers, directors, employees and consultants. The Equity Incentive Plan provides for the granting of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, stock units, performance shares and performance units.

 

On May 24, 2016, the Company granted 4,000,000 stock options to the Chief Strategy Officer of the Company, each of which is exercisable into one common share of the Company at a price of $0.04 per share until May 24, 2018. On the grant date the stock options were deemed to have a fair value of $0.1476 per option, totaling $590,492. The stock options will vest as follows: 2,000,000 options will vest on May 24, 2017 and 2,000,000 options will vest on May 24, 2018. As a result of these stock options vesting over a period of two years, during the nine months ended August 31, 2016, the Company recognized $120,425 in stock-based compensation.

 

The fair value of each option granted was estimated on the date of grant using the Black-Scholes option pricing model with the weighted average assumption for the nine month period ending August 31, 2016:

		2016
Expected dividend yield			0	%
Risk-free interest rate			0.92	%
Expected volatility			303	%
Expected option life (in years)			2 .00

The following table summarizes the continuity of the Company’s stock options:

				Number of Options				Weighted Average Exercise Price				Weighted-Average Remaining Contractual Term (years)				Aggregate Intrinsic Value
								$								$
Outstanding, November 30, 2015				–				–				–				–
	Granted				4,000,000				0.04
	Outstanding, August 31, 2016				4,000,000				0.04				1.73				327,200
	Exercisable, August 31, 2016				—				—				—				—

 

NOTE 9 – COMMITMENTS

 

a)       On June 25, 2015, the Company entered into a consultancy agreement with a company controlled by the Chief Technology Officer of the Company. Pursuant to the agreement, the Company will pay $1,000 a month for consulting services for a term of one year and issue 66,667 shares of the Company’s common stock, valued at $15,000, on the date of the agreement. The shares were issued on April 12, 2016.

 

b)       On August 17, 2015, the Company entered into a consultancy agreement with the former Chief Operations Officer of the Company. Pursuant to the agreement, the Company was required to pay $2,250 a month for consulting services for a term of one year and issue 39,683 shares of the Company’s common stock, valued at $15,000, on the date of the agreement. On January 6, 2016, the Chief Operations Officer of the Company resigned and was no longer considered a related party to the Company. On the same date, the consultancy agreement was terminated.

 

c)       On August 17, 2015, the Company entered into a consultancy agreement with the Chief Revenue Officer of the Company. Pursuant to the agreement, the Company will pay $1,000 a month for consulting services for a term of one year and issue 39,683 shares of the Company’s common stock, valued at $15,000, on the date of the agreement. The shares were issued on April 12, 2016.

 

d)       On August 17, 2015, the Company entered into an advisory board agreement with two Advisory Board Members of the Company for terms of one year each. Pursuant to the agreement, the Company will issue the Members 39,683 shares each of the Company’s common stock, valued at $15,000 for each member, on the date of the agreement. The shares were issued on April 12, 2016.

 

e)       On August 28, 2015, the Company entered into an advisory board agreement with an Advisory Board Member of the Company for a term of one year. Pursuant to the agreement, the Company will issue a total of 37,736 shares of the Company’s common stock, valued at $15,000, on the date of the agreement. The shares were issued on April 12, 2016.

 

f)        On September 17, 2015, the Company entered into an advisory board agreement with an Advisory Board Member of the Company. Pursuant to an amendment to the agreement dated January 1, 2016, the Company will pay $8,000 a month for advisory services until September 17, 2016, and issue a total of 111,112 shares of the Company’s common stock, valued at $30,000, on the date of the agreement. The shares were issued on April 12, 2016. On May 24, 2016, the Company’s board of directors appointed this Advisory Board Member to become the Chief Strategy Officer of the Company.

 

g)       The Company entered into the agreement on April 12, 2016 with the Chief Executive Officer of the Company. Pursuant to the agreement, the Company is required to pay $150,000 in cash for a license and issue a number of shares of the Company’s common stock necessary to give 55% of the total issued and outstanding shares of the Company to PlayFlex Systems (“PayFlex”) or its nominees. In addition, the Company is required to issue a number of shares of the Company’s common stock necessary to give 70% of the total issued and outstanding shares of the Company to PayFlex or its nominees on the anniversary of the Licensing Agreement in which the Company’s audited filed financial statements for gross annual revenues attributable to the business exceeds $5,000,000. The President of PayFlex is the Company’s Chief Executive Officer. The Company is also required to raise $200,000 for its own working capital needs within 90 days of closing the License Agreement. As of the date of these financial statements, the Company was not able to raise the funding requirement for the agreement with PayFlex.

 

h)       Pursuant to an Asset Acquisition Agreement, the Company has agreed to use its best efforts to raise an additional $325,000 for its own working capital needs and to develop the business surrounding the acquired assets. As of the date of these financial statements, the Company was not able to raise the funding requirement for the Agreement.

 

NOTE 10 – SUBSEQUENT EVENTS

 

a)       On September 17, 2016, the Company amended the advisory board agreement with the Chief Strategy Officer of the Company referred to in Note 9(f). Effective September 17, 2016, the agreement was extended for an additional six months, whereas the Company will continue to pay $8,000 a month for advisory services.

 

b)       On September 22, 2016, the Company’s the Board of Directors voted to designate a class of preferred stock entitled Series B Preferred Stock, consisting of up to 2,000,000 shares with a par value $0.001. The holders of Series B Preferred Stock will have the right to convert each share of Series B Preferred Stock into 100 shares of common stock. The holders of Series B Preferred Stock also have the right to cast 10 votes for each share of Series B Preferred Stock on all matters submitted to a vote of holders of the Company’s common stock and Series A Preferred Stock.

 

c)       On September 22, 2016, the Company entered into a Software Purchase to the Agreement with Transaction Data USA Inc. (“TDUSA”) and Melcent Techology SRL (“Melcent”). Pursuant to the agreement, the Company acquired a PSWITCH software application (the “Software”), including the invention, source code, object code, components and tools. In exchange for the Software, the Company issued to each of TDUSA and Melcent 375,000 shares of the Company’s newly created Series B Preferred Stock.

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements

 

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

 

Company Overview

 

We are in the business of providing secure payment and communication solutions. Our aim is to make it easier for sellers to sell, and buyers to buy with confidence. Our solutions are intended to enable businesses to process payments more efficiently whether online or in a retail store front. We intend to offer white label solutions for payment service providers to enable business to consumer and business to business payments through physical POS, mobile devices, online and software integrations.

 

We also provide business processing outsourcing through our Fractional I.T. services, and complaint ready hosted solutions through our Infrastructure on Demand.

 

We have only generated a small amount of revenue from our payment processor business and from our solutions outsourcing business. In order to implement our business plan, we will need to raise additional capital. We estimate that we will need approximately $375,000 in the next twelve months. These funds will be used to cover our debt obligations, overhead, consulting fees, marketing expenses and IP development, along with our general working capital needs. If we are unable to raise money, we will not be able to able to service our existing and prospective customers.

 

Results of operations for the three and nine months ended August 31, 2016 and August 31, 2015

 

We generated $129,070 in revenues during the three months ended August 31, 2016, as compared with no revenues for three months ended August 31, 2015. We generated $212,832 in revenues during the nine months ended August 31, 2016, as compared with no revenues for nine months ended August 31, 2015. All of our revenues in 2016 resulted from four customers. We expect that our client base will expand and provide more revenues for the remainder of 2016 and into 2017, provided we receive adequate financing.

 

Our cost of revenues was $79,860 resulting in gross profit of $49,210 for the three months ended August 31, 2016. Our cost of revenues was $134,980 resulting in gross profit of $77,852 for the nine months ended August 31, 2016.

 

We incurred operating expenses in the amount of $230,434 for the three months ended August 31, 2016, compared with operating expenses of $160,306 for the three months ended August 31, 2015. Our operating expenses for the three months ended August 31, 2016 mainly consisted of $110,717 in stock-based compensation, $54,860 in

 

 

development costs and $40,500 in consulting fees. Our operating expenses for the three months ended August 31, 2015 consisted mainly of $108,251 in consulting fees, $19,200 in development fees and $11,345 in professional fees.

 

We incurred operating expenses in the amount of $480,152 for the nine months ended August 31, 2016, compared with operating expenses of $2,357,718 for the nine months ended August 31, 2015. Our operating expenses for the nine months ended August 31, 2016 mainly consisted of $135,670 in development costs, $124,074 in consulting fees, $120,425 in stock-based compensation and $45,128 in professional fees. Our operating expenses for the nine months ended August 31, 2015 consisted mainly of a $2,150,000 impairment of our license agreement with TDUSA along with $113,901 in consulting fees.

 

We anticipate our operating expenses will increase as we undertake our plan of operations. The increase will be attributable to undertaking development of our payment processor and IT businesses and the professional fees associating with being a reporting company under the Securities Exchange Act of 1934.

 

We incurred other expenses of $25,933 for the three months ended August 31, 2016, as compared with $1,965 for the three months ended August 31, 2015. Our other expenses for the three months ended August 31, 2016 consisted of $11,998 in interest expense, $10,431 in the fair value of derivative liabilities and $3,504 in accretion of discounts on convertible debentures. Other expenses for the same period ended 2015 was entirely of interest expense.

 

We incurred other expenses of $55,878 for the nine months ended August 31, 2016, as compared with $2,920 for the nine months ended August 31, 2015. Our other expenses for the nine months ended August 31, 2016 consisted of $29,594 in interest expense, $21,290 in the fair value of derivative liabilities and $4,994 in accretion of discounts on convertible debentures. Other expenses for the same period ended 2015 was entirely of interest expense.

 

We incurred a net loss in the amount of $207,157 for the three months ended August 31, 2016, as compared with a net loss in the amount of $162,271 for the three months ended August 31, 2015. We incurred a net loss in the amount of $458,178 for the nine months ended August 31, 2016, as compared with a net loss in the amount of $2,360,638 for the nine months ended August 31, 2015. Our losses for each period are attributable to operating expenses together with a lack of significant revenues.

        

Liquidity and Capital Resources

 

As of August 31, 2016, we had $55,071 in current assets consisting of cash, accounts receivable and prepaid expenses. Our total current liabilities as of August 31, 2016 were $871,191. As a result, we have a working capital deficit of $816,120 as of August 31, 2016.

 

Operating activities used $103,077 in cash for the nine months ended August 31, 2016, as compared with $62,510 used for the nine months ended August 31, 2015. Our negative operating cash flow in 2016 was mainly the result of our net loss of $458,178, offset by changes in accounts payable and accrued expenses of $164,783, stock-based compensation of $120,425 and accounts payable and accrued expenses – related parties of $73,298. We primarily relied on cash from loans to fund our operations during the nine months ended August 31, 2016.

 

Investing activities used $0 in cash for the nine months ended August 31, 2016, as compared with $50,000 used for the nine months ended $50,000, related to the purchase of intangible assets.

  

Financing activities provided $87,991 in cash for the nine months ended August 31, 2016, as compared with $128,887 for the nine months ended August 31, 2015. Our positive financing cash flow in 2016 was a result of proceeds from convertible debentures and proceeds from related party notes, offset by payments on related party notes.

 

On June 2, 2016, we received an advance of $2,000 from our President. The balance was paid off in June 2016.

 

On June 15, 2016, we issued a convertible debenture for $10,000. Pursuant to the terms of the agreement, the note is unsecured, bears interest at 8% per year, and is due on December 31, 2016. At the maturity date, the unpaid amount of principal can be converted at the holder’s option at a price of 50% of the ask price at the date of conversion.

 

On June 30, 2016, we issued a convertible debenture for $2,000. Pursuant to the terms of the agreement, the note is unsecured, bears interest at 8% per year, and is due on December 31, 2016. At the maturity date, the unpaid amount

 

 

of principal can be converted at the holder’s option at a price of 50% of the ask price at the date of conversion.

 

On July 12, 2016, we issued a convertible debenture for $30,000. Pursuant to the terms of the agreement, the note is unsecured, bears interest at 8% per year, and is due on December 31, 2016. At the maturity date, the unpaid amount of principal can be converted at the holder’s option at a price of 50% of the ask price at the date of conversion.

 

On July 28, 2016, we issued a convertible debenture for $4,000. Pursuant to the terms of the agreement, the note is unsecured, bears interest at 8% per year, and is due six months from the date of issuance. At the maturity date, the unpaid amount of principal can be converted at the holder’s option at a price of 50% of the ask price at the date of conversion.

 

We received some small loans in the first nine months of 2016, but we will need approximately $375,000 in financing to implement our business plan. Thus, the success of our business plan beyond the next 12 months is contingent upon us obtaining additional financing. We intend to fund operations through debt and/or equity financing arrangements, which may be insufficient to fund our capital expenditures, working capital, or other cash requirements. We do not have any formal commitments or arrangements for the sales of stock or the advancement or loan of funds at this time. There can be no assurance that such additional financing will be available to us on acceptable terms, or at all.

 

Off Balance Sheet Arrangements

 

As of August 31, 2016, there were no off balance sheet arrangements.

 

Going Concern

 

We have negative working capital and have not yet received significant revenues from sales of our products and services. These factors have caused our accountants to express substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustment that might be necessary if we are unable to continue as a going concern.

 

Our ability to continue as a going concern is dependent on our generating cash from the sale of our common stock and/or obtaining debt financing and attaining future profitable operations. Management’s plans include selling our equity securities and obtaining debt financing to fund our capital requirement and ongoing operations; however, there can be no assurance we will be successful in these efforts.

 

Critical Accounting Policies

 

In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our accounting policies are discussed in the footnotes to our financial statements included in our annual report on Form 10-K for the year ended November 30, 2015, however we consider our critical accounting policies to be those related to revenue recognition, stock-based compensation and intangible assets.

 

Recently Issued Accounting Pronouncements

 

In August 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-15, “Presentation of Financial Statements - Going Concern”. The Update provides US GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is currently evaluating the effects of ASU 2014-15 on its financial statements.

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

A smaller reporting company is not required to provide the information required by this Item.

 

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of August 31, 2016.  This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer.  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of August 31, 2016, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.

 

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 company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that, as of August 31, 2016, our disclosure controls and procedures were not effective: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

 

Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting

 

Our Company plans to take steps to enhance and improve the design of our internal controls over financial reporting.  During the period covered by this quarterly report on Form 10-Q, we have hired a CFO, which we believe provides better segregation of duties and additional staff to monitor our disclosures, but we have otherwise been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending November 30, 2016: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during the three months ended August 31, 2016 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

 

Item 1A. Risk Factors

 

See risk factors included in the Company’s Annual Report on Form 10-K for 2015.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

The information set forth below relates to our issuances of securities without registration under the Securities Act of

 

 

1933 during the reporting period which were not previously included in a an Annual Report on Form 10-K, Quarterly Report on Form 10-Q or Current Report on Form 8-K.

 

We settled $15,000 owed to our Chief Technology Officer on April 12, 2016, by issuing 66,667 shares of our common stock at $0.225 per share.

 

We settled $15,000 owed to our Chief Revenue Officer, by issuing 39,683 shares of our common stock at $0.378 per share.

 

We settled $30,000 owed to our Chief Strategy Officer, by issuing 111,112 shares of our common stock at $0.27 per share.

 

On April 12, 2016, we issued an aggregate 228,214 shares of common stock, valued at $60,000, to Advisory Board Members pursuant to the advisory board agreements.

 

On April 12, 2016, certain shareholders returned a net total of 24,438,333 shares of common stock pursuant to an Agreement of Conveyance, Transfer, and Assignment of Assets and Assumption of Obligations. On the same day, we issued 24,438,333 shares of common stock pursuant to the License Agreement with PayFlex Systems.

 

On May 24, 2016, we granted 4,000,000 stock options to our Chief Strategy Officer, each of which is exercisable into one common share of the Company at a price of $0.04 per share until May 24, 2018. The stock options will vest as follows: 2,000,000 options will vest on May 24, 2017 and 2,000,000 options will vest on May 24, 2018.

 

On September 22, 2016, we entered into a Software Purchase Agreement (the “Agreement”) with Transaction Data USA Inc. (“TDUSA”) and Melcent Techology SRL (“Melcent”). Pursuant to the Agreement, we acquired a PSWITCH software application, including the invention, source code, object code, components and tools (the “Software”). In exchange for the Software, the Company issued to each of TDUSA and Melcent 375,000 shares of our newly created Series B Preferred Stock.

 

These securities were issued pursuant to the exemption from registration set forth in Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Rule 506 of Regulation D promulgated thereunder. The Company believes that the investor had adequate information about the Company as well as the opportunity to ask questions and receive responses from management.

 

Item 3. Defaults upon Senior Securities

 

None

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None

 

 

Item 6. Exhibits

 

Exhibit Number	Description of Exhibit
31.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief 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 Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101**	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2016 formatted in Extensible Business Reporting Language (XBRL).

**Provided herewith

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

	Lans Holdings Inc.
Date:	October 24, 2016
By:	/s/ Trevor Allen Trevor Allen
Title:	Chief Executive Officer and Director