Form 10-Q IFAN FINANCIAL, INC. For: Feb 29

May 26, 2016 4:47 PM EDT

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended February 29, 2016

 

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934

 

For the transition period from ______ to _______

 

Commission File Number: 333-178788

 

 

IFAN Financial, Inc.

(Name of small business issuer in its charter)

 

Nevada   33-1222494
(State of incorporation)   (I.R.S. Employer Identification No.)

 

3517 Camino Del Rio South, Suite 407,

San Diego, CA, 92108

(Address of principal executive offices)

 

Phone: (619) 537-9998

(Registrant’s telephone number)

 

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. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [  ] (Do not check if a smaller reporting company) Smaller reporting company [X]

 

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

 

As of May 9, 2016, there were 91,646,245 shares of the registrant’s $0.001 par value common stock issued and outstanding.

 

 

 

   
 

 

IFAN Financial, Inc.

 

TABLE OF CONTENTS

 

    Page
PART I. FINANCIAL INFORMATION  
     
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS 4
     
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 18
     
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 20
     
ITEM 4. CONTROLS AND PROCEDURES 20
     
PART II. OTHER INFORMATION  
     
ITEM 1. LEGAL PROCEEDINGS 21
     
ITEM 1A. RISK FACTORS 21
     
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 21
     
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 21
     
ITEM 4. MINE SAFETY DISCLOSURES 21
     
ITEM 5. OTHER INFORMATION 21
     
ITEM 6. EXHIBITS 22

 

 2 
   

 

Special Note Regarding Forward-Looking Statements

 

Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of IFAN Financial, Inc. (the “Company”), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

 

*Please note that throughout this Quarterly Report, and unless otherwise noted, the words “we,”“IFAN,” “our,” “us,” the “Company,” refers to IFAN Financial, Inc.

 

 3 
   

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

 

IFAN Financial, Inc.

 

As of and for the three and six months ended February 29, 2016

(Unaudited)

 

Financial Statement Index  
   
Consolidated Balance Sheets (unaudited) 5
   
Consolidated Statements of Operations (unaudited) 6
   
Consolidated Statements of Cash Flows (unaudited) 7
   
Notes to the Consolidated Financial Statements (unaudited) 8

 

 4 
   

 

IFAN Financial, Inc.

 

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

   February 29, 2016   August 31, 2015 
CURRENT ASSETS          
Cash  $46,245   $137,846 
Accounts receivable   36    - 
Prepaid expense   -    8,761 
TOTAL CURRENT ASSETS   46,281    146,607 
           
Fixed assets, net   -    2,002 
Software assets, net   4,178,730    4,766,764 
Note receivable   100,000    100,000 
Other assets   8,307    5,315 
TOTAL ASSETS  $4,333,318   $5,020,688 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
           
CURRENT LIABILITIES          
Accounts payable and accrued liabilities  $120,480   $55,015 
Accrued liabilities in dispute - Mobicash   379,135    379,135 
Due to related party   400,853    282,436 
Notes payable, net of discount of $21,846 and $79,121, respectively   533,154    475,879 
Convertible notes payable, net of discount of $249,658 and $0, respectively   125,342    - 
Derivative liabilities   411,137    - 
Common stock payable   254,550    254,550 
TOTAL CURRENT LIABILITIES   2,224,651    1,447,015 
           
Convertible note payable, net of discount of $65,195 and $0, respectively   805    - 
TOTAL LIABILITIES   2,225,456      
           
Commitments and contingencies          
           
STOCKHOLDERS’ EQUITY          
Preferred stock, $0.001 par value, 10,000,000 shares authorized, 961,858 issued and outstanding   962    962 
Common stock, $0.001 par value, 800,000,000 shares authorized, 89,646,245 and 84,486,774 shares issued and outstanding, respectively   89,646    84,487 
Additional paid-in capital   6,414,224    5,948,213 
Accumulated deficit   (4,396,970)   (2,459,989)
TOTAL STOCKHOLDERS’ EQUITY   2,107,862    3,573,673 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $4,333,318   $5,020,688 

 

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

 

 5 
   

 

IFAN Financial, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

   Three months ended February 29, 2016   Three months ended February 28, 2015   Six months ended February 29, 2016   Six months ended February 28, 2015 
REVENUE                    
                     
Revenues  $36   $-   $36   $- 
                     
EXPENSES                    
                     
Research and development   1,000    73,263    115,624    175,417 
Selling, general, and administrative   393,518    1,145,434    1,013,324    1,146,647 
Software amortization   294,017    -    588,034    - 
Amortization of license agreement   -    7,000    -    15,000 
Impairment expense   -    -    -    164,521 
Total operating expenses   688,535    1,225,697    1,716,982    1,501,585 
                     
Change in fair value of derivative liabilities   (424,588)   -    (78,003)   - 
Interest expense   233,738    -    301,066    - 
Interest income   (1,530)   -    (3,028)   - 
                     
NET LOSS  $(496,119)  $(1,225,697)  $(1,936,981)  $(1,501,585)
                     
Basic and Diluted Net Loss Per Common Share  $(0.01)  $(0.02)  $(0.02)  $(0.02)
                     
Weighted average number of common shares outstanding – basic and diluted   89,629,761    81,332,109    88,223,218    80,642,274 

 

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

 

 6 
   

 

IFAN Financial, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   Six months   Six months 
   ended   ended 
   February 29, 2016   February 28, 2015 
CASH FLOWS FROM OPERATING ACTIVITIES          
Net loss  $(1,936,981)  $(1,501,585)
Adjustments to reconcile net income loss to net cash used in operating activities:          
Stock-based compensation   471,170    990,029 
Depreciation expense   2,002    1,980 
Amortization of software   588,034    - 
Amortization of license agreement   -    15,000 
Impairment expense   -    164,521 
Change in fair value of derivative liabilities   (78,003)   - 
Amortization of debt discount   179,771    - 
Change in operating assets and liabilities:          
Accounts receivable   (36)   - 
Prepaid expense   8,761    - 
Other assets   (2,992)   29,325 
Accounts payable and accrued expenses   192,265    7,715 
NET CASH USED IN OPERATING ACTIVITIES   (576,009)   (293,015)
          
CASH FLOWS FROM INVESTING ACTIVITIES          
Payment for license   -    (10,000)
NET CASH USED IN INVESTING ACTIVITIES   -    (10,000)
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Proceeds from sale of common stock   -    286,600 
Proceeds from convertible notes payable   401,500    - 
Proceeds from related party advances   128,225    31,120 
Payments of related party loans   (45,317)     
NET CASH PROVIDED BY FINANCING ACTIVITIES   484,408    317,720 
           
NET INCREASE (DECREASE) IN CASH   (91,601)   14,705 
           
CASH, BEGINNING OF PERIOD   137,846    - 
           
CASH, END OF PERIOD  $46,245   $14,705 
           
Cash paid for:          
Interest  $-   $- 
Income taxes  $-   $- 
           
NONCASH FINANCING AND INVESTING ACTIVITIES:          
Original issue discount due to embedded derivative liabilities on convertible debt  $489,140   $- 
Preferred stock issued for acquisition of Mobicash  $-   $4,330,060 
Common stock issued to IPIN  $-   $164,521 
Reclassification of prepaid expense to license agreement, net  $-   $10,000 

 

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

 

 7 
   

 

IFAN Financial, Inc.

Notes to the consolidated financial statements

(Unaudited)

 

NOTE 1 – NATURE OF BUSINESS

 

The Company was incorporated in the State of Nevada on June 11, 2010 and established a fiscal year-end of August 31. The initial business plan was to develop and distribute an organic clothing line designed for children.

 

On April 2014, the Company abandoned the business plan as an organic children’s clothing company. In June 2014, the Company signed an agreement with MobiCash America, Inc. to develop technology solutions in the mobile payment and social media markets. The Company acquired MobiCash America on October 3, 2014 which consisted primarily of proprietary software code.

 

The Company and its wholly owned subsidiaries, iPIN Technologies, Inc. and Mobicash America, Inc., design, develop and distribute software that enhances and enable payments. Based in San Diego, the Company has a growing portfolio of solutions including a mobile optimized FDIC insured platform with the ability to facilitate on-demand payments, autopay, proximity payments and marketing, and a proprietary linked debit card. Our Platform additionally has ‘white label’ enterprise capabilities allowing for more opportunities. We will additionally deploy a prepaid card program and facilitate off-platform merchant services we call IFAN FinTech. We are positioned to transact nearly all merchant payment needs including mobile, e-commerce, merchant processing, split-funding, ACH, and EMV.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, MobiCash America, Inc. and iPIN Technologies, Inc. Intercompany balances are eliminated upon consolidation.

 

Use of Estimates and Assumptions

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. Actual results could differ from those estimates.

 

Basic and Diluted Net Loss per Share

 

Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive. Because the Company incurred a net loss during the quarters ended February 29, 2016 and 2015, respectively, diluted loss excludes all potential common shares from diluted loss per share. At February 28, 2016 and 2015, the Company had the following potentially issuable shares:

 

   Three months ended February 29, 2016   Three months ended February 28, 2015   Six months ended February 29, 2016   Six months ended February 28, 2015 
Convertible preferred stock   673,300,600    673,300,600    673,300,600    673,300,600 
Convertible debt   10,068,251    -    10,068,251    - 
Warrants   750,000    925,926    750,000    925,926 
Total   684,118,851    674,226,526    684,118,851    674,226,526 

 

 8 
   

 

Cash and Cash Equivalents

 

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.

 

Fixed Assets

 

Computers and equipment are stated at cost and depreciated using the straight-line method over the two-year estimated useful lives of the assets.

 

Software

 

The estimated useful life of software costs capitalized is four years.

 

Derivative Liabilities

 

The Company follows Financial Accounting Standards Board, Derivatives and Hedging ASC 815-40, which limits the extent to which the conversion or exercise price of an instrument can be adjusted for subsequent transactions. The Company utilizes a two-step process to determine whether an instrument is indexed to its stock: (a) evaluate the instrument’s contingent exercise provisions, if any and (b) evaluate the instrument’s settlement provisions. If it is determined the instrument is not indexed to the Company’s stock, the instrument is recognized as a derivative at issuance and is measured at fair value at each reporting period and the change is recorded in earnings.

 

Stock-Based Compensation

 

The Company measures stock-based compensation cost at the grant date based on the fair value of the award and recognizes it as expense, over the vesting or service period, as applicable, of the stock award using the straight-line method.

 

Income Taxes

 

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for significant deferred tax assets when it is more likely than not, that such asset will not be recovered through future operations.

 

Fair Value Measurements

 

As defined in FASB ASC Topic No. 820 – 10, fair value is the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC Topic No. 820 – 10 requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value measurements. The statement requires fair value measurements be classified and disclosed in one of the following categories:

 

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
   
Level 2:

Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes those derivative instruments that the Company values using observable market data. Substantially all of these inputs are observable in the marketplace throughout the term of the derivative instruments, can be derived from observable data, or supported by observable levels at which transactions are executed in the marketplace.

   
Level 3: Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e. supported by little or no market activity). The Company’s valuation models are primarily industry standard models. Level 3 instruments include derivative warrant instruments. The Company does not have sufficient corroborating evidence to support classifying these assets and liabilities as Level 1 or Level 2.

 

 9 
   

 

As required by FASB ASC Topic No. 820 – 10, financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.

 

Subsequent Events

 

The Company has evaluated all transactions from February 29, 2016 through the financial statement issuance date for disclosure consideration.

 

Recently Issued Accounting Pronouncements

 

There were various accounting standards and interpretations issued recently, none of which are expected to a have a material impact on the Company´s consolidated financial position, results of operations or cash flows.

 

NOTE 3 – GOING CONCERN

 

The Company’s consolidated financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

 

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its operating expenses and seeking equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

 

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

NOTE 4 – ACQUISITION OF MOBICASH

 

On October 3, 2014, the Company acquired Mobicash America, Inc. (“Mobicash” d/b/a “Quidme”), a company incorporated under the laws of the State of California, through a Share Exchange Agreement whereby the Company issued 61,858 shares of Series A convertible preferred stock convertible into common stock at a conversion ratio of 700 common shares for 1 Series A preferred stock (the “Conversion Ratio”) to the shareholders of Mobicash. The Company determined that the fair value of the Series A convertible preferred stock was $4,330,060 on October 3, 2014.

 

 10 
   

 

The acquisition was accounted for as a business combination. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed at their respective fair values at the date of acquisition. The amounts related to the acquisition were allocated to the assets acquired and the liabilities assumed on the date of acquisition as follows:

 

   October 3, 2014  
Total consideration paid  $4,330,060 
      
Software assets   4,704,264 
Fixed assets   4,774 
Total assets acquired   4,709,038 
      
Accounts payable and accrued liabilities   373,978 
Note payable   5,000 
Total liabilities assumed   378,978 

 

The Company evaluated the investment in the software assets acquired in the Mobicash acquisition for recoverability at February 29, 2016 and concluded that no impairment was necessary.

 

NOTE 5 – NOTE RECEIVABLE

 

During July 2015, the Company purchased a $100,000 convertible promissory note from a third party (the “Investee”). The note bears interest at 6% per annum. All unpaid interest and principal shall be due and payable to the Company on or after May 29, 2017. In the event the Investee issues or sells shares of its equity securities to investors on or before May 29, 2017 with total proceeds of not less than $2,000,000 (excluding the conversion of notes), then the Company’s $100,000 note receivable and any unpaid accrued interest shall automatically convert into such equity securities of the Investee at a conversion price as defined in the convertible promissory note agreement. During the six months ended February 29, 2016, the Company recorded interest income of $3,028 on this note receivable.

 

NOTE 6 – INVESTMENT

 

During the year ended August 31, 2014, the Company received 1,000,000 shares of common stock in IPIN Debit Network, Inc., which the Company recorded as an investment of $164,521. During the six months ended February 29, 2015, the Company fully impaired this investment.

 

NOTE 7 – FIXED ASSETS

 

The Company’s fixed assets consist of used computer equipment acquired in connection with the acquisition of Mobicash and have a remaining estimated useful life of one year. Property and equipment consist of the following:

 

   February 29, 2016   August 31, 2015 
Computer and Equipment  $4,774   $4,774 
Less accumulated depreciation   (4,774)   (2,772)
Total  $-   $2,002 

 

The Company recorded depreciation expense of $2,002 and $1,980 during the six months ending February 29, 2016 and February 28, 2015, respectively.

 

NOTE 8 – SOFTWARE ASSETS

 

Software assets consist of the following:

 

   February 29, 2016   August 31, 2015 
Software assets  $4,766,764   $4,766,764 
Less accumulated amortization   (588,034)   - 
Total  $4,178,730   $4,766,764 

 

The Company recorded software amortization expense of $588,034 and $0 during the six months ending February 29, 2016 and February 28, 2015, respectively.

 

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NOTE 9 – NOTES PAYABLE

 

The Company has a $5,000 note payable to an individual due in November 2015. The note bears interest at 10% per annum and is past due.

 

Secured Promissory Note Agreement

 

On May 28, 2015, the Company and SBI Investments, LLC (“SBII”), completed a financing transaction that consisted of a Securities Purchase Agreement (the “SPA”), Two Secured Promissory Notes (the “Notes”), Stock Pledge Agreement (the “Pledge”), and Warrant Agreement, pursuant to which SBII agreed to loan the Company an aggregate of $550,000. The first note for $275,000 was issued by the Company on May 28, 2015 pursuant to the SPA and is due and payable on May 28, 2016 and accrues interest at 10% per annum payable at three, six and nine months from the issuance date. The second note for $275,000 was issued on July 15, 2015 and payable on May 28, 2016, and accrues interest at 10% per annum payable at three, six and nine months from the issuance date. Pursuant to the Pledge, the Company’s CEO and CFO pledged 11,000,000 shares in the aggregate of their restricted common stock to guarantee payment of the Notes issued pursuant to the SPA.

 

In connection with the issuance of the $550,000 of notes payable, the Company received cash proceeds of $482,500 and recorded a debt discount of $67,500 for the difference between the face value of the note and the cash proceeds. The Company also issued the lender 500,000 warrants in connection with the issuance of this debt with an exercise price of $0.50 per share and a term of 3 years. The Company determined the relative fair value of the warrants as of their issuance date using the following inputs; 3-year term; 141% - 145% volatility; 1% risk free rate; $0 dividends and determined the fair value was $27,636, which the Company recorded as debt discount.

 

During the six months ended February 29, 2016, the Company recorded debt discount amortization of $57,275.

 

NOTE 10 – CONVERTIBLE NOTES PAYABLE

 

October 2015 Notes

 

During October 2015, the Company entered into an agreement with a third party whereby the Company received net cash proceeds of $243,500 in exchange for issuing two notes including a $165,000 convertible note payable bearing interest at 8% and a $110,000 convertible note payable bearing interest at 8% each due one year from the date of issuance. The notes payable are convertible at a rate of 80% of the average of the lowest 3 trading prices during the 20 trading day period ending on the last complete trading day prior to the conversion. Also, if at any time when the notes are issued and outstanding, the borrower issues or sells any share of common stock for no consideration or for consideration per share which is less than the conversion price in effect on the date of such issuance. The conversion price will be reduced to the amount of the consideration per share received by the borrower in such dilutive issuance.

 

The number of shares of common stock to be issued upon conversion shall be determined by dividing the conversion amount by the applicable conversion price. The conversion amount means the principal amount of the convertible note and, at the lender´s option, accrued and unpaid interest, default interest, and any other amounts owed to the lender pursuant to the terms of these convertible notes.

 

The conversion price of the convertible notes is based on a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under FASB ASC Topic No. 815 - 40. The fair value of the conversion feature on the convertible notes was recognized as a derivative instrument at issuance and is measured at fair value at each reporting period.

 

As the fair value of the derivative liabilities exceeded the carrying value of the convertible notes payable, the Company recorded a $275,000 original issue discount on the convertible notes. See Note 11.

 

The Company also issued the lender 250,000 warrants in connection with the issuance of the convertible notes. See Note 12.

 

 12 
   

 

December 2015 Note

 

During December 2015, the Company entered into an agreement with a third party whereby the Company received net cash proceeds of $98,000 in exchange for issuing a $100,000 convertible note payable bearing interest at 12% due 9 months from the date of issuance. The note payable is convertible at a conversion price: the lower of: A) a 43% discount to the lowest trading price during the previous twenty (20) trading days to the date of a Conversion Notice; or B) a 43% discount to the lowest trading price during the previous twenty (20) trading days before the date that this note was executed. At any time after the Prepayment Date, including prior to, upon, or after the Maturity Date the note is convertible.

 

The number of shares of common stock to be issued upon conversion shall be determined by dividing the conversion amount by the applicable conversion price. The conversion amount means the principal amount of the convertible note and, at the lender´s option, accrued and unpaid interest, default interest, and any other amounts owed to the lender pursuant to the terms of these convertible notes.

 

The conversion price of the convertible notes is based on a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under FASB ASC Topic No. 815 - 40. The fair value of the conversion feature on the convertible notes was recognized as a derivative instrument at issuance and is measured at fair value at each reporting period.

 

The Company recorded the fair value of the derivative of $94,349 as an original issue discount on the convertible notes. See Note 11.

 

February 2016 Note

 

During February 2016, the Company entered into an agreement with a third party whereby the Company received net cash proceeds of $60,000 in exchange for a $66,000 promissory note bearing interest at 12% due one year from the date of issuance. The note payable is convertible at the lesser of $0.093 or 60% of the lowest trade price in the 25 trading days previous to the conversion.

 

The number of shares of common stock to be issued upon conversion shall be determined by dividing the conversion amount by the applicable conversion price. The conversion amount means the principal amount of the convertible note and, at the lender´s option, accrued and unpaid interest, default interest, and any other amounts owed to the lender pursuant to the terms of these convertible notes.

 

The conversion price of the convertible notes is based on a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under FASB ASC Topic No. 815 - 40. The fair value of the conversion feature on the convertible notes was recognized as a derivative instrument at issuance and is measured at fair value at each reporting period.

 

As the fair value of the derivative liabilities exceeded the carrying value of the convertible note payable, the Company recorded a $66,000 original issue discount on the convertible notes. See Note 11.

 

See detail summary below for carrying value of convertible notes payable as of February 29, 2016.

 

Face value of debt upon issuance of convertible notes  $441,000 
Less: Original issue discount   (437,349)
Carrying value at issuance   3,651 
Amortization of debt discount   122,496 
Carrying value at February 29, 2016   126,147 
Less short-term portion   (125,342)
Long-term convertible notes  $805 

 

NOTE 11 – EMBEDEDDED DERIVATIVE LIABILTIES

 

The Company determined that the convertible notes contain an embedded derivative instrument as the conversion price is based on a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under FASB ASC Topic No. 815 - 40. The fair value of the convertible notes were recognized as derivative instruments at issuance and is measured at fair value at each reporting period. The Company determined that the valuation of the derivative liabilities was $411,137 as of February 29, 2016 on the convertible notes.

 

 13 
   

 

The Company determined the fair values of the embedded derivatives on the grant dates using a black scholes model with the following assumptions:

 

Convertible notes payable - stock price on the issuance dates of $0.09-$0.12 per share, term of 0.75-2 years, expected volatility of 148%-180%, discount rate of 0.85%-1.33%, expected dividends of 0%.
   
Convertible notes payable - stock price on the February 29, 2016 of $0.07 per share, term of 0.67-1.95 years, expected volatility of 157%-180%, and a discount rate of 0.91%, expected dividends of 0%..

 

Activity for embedded derivative instruments during the six months ended February 29, 2016 was as follows:

 

       Initial valuation         
       of embedded   Decrease     
       derivative   in     
       instruments   fair value of     
   Balance at   issued during   derivative   Balance at 
   August 31, 2015   the period   liabilities   February 29, 2016 
Convertible notes  $-   $489,140   $(78,003)  $411,137 

 

NOTE 12 – EQUITY

 

Common stock

 

FY 2016

 

During the six months ended February 29, 2016, the Company issued 5,159,471 shares of common stock for services. The Company recorded stock-based compensation expense of $471,170 based on the grant date fair value of the common stock of the Company on the issuance dates.

 

FY 2015

 

During the six months ended February 28, 2015, the Company received $36,600 of cash proceeds pursuant to subscription agreements with third parties to purchase common stock of the Company for $0.25 per share.

 

During the six months ended February 28, 2015, the Company has issued 128,200 shares of common stock pursuant to these subscription agreements. As of February 28, 2015, the Company has recorded a common stock payable of $4,550 as the Company has an obligation to issue the remaining 18,000 shares of common stock pursuant to the subscription agreements.

 

During the six months ended February 28, 2015, the Company received $250,000 of cash proceeds pursuant to a subscription agreement with an investor to purchase common stock of the Company for $0.27 per share and an equal number of warrants. As of February 28, 2015, the Company has recorded a common stock payable of $250,000 related to its obligation to issue 925,926 shares of the Company’s common stock. See Warrants below.

 

During the six months ended February 28, 2015, the Company issued 2,023,000 shares of common stock for services. The Company recorded stock-based compensation expense of $990,029 based on the grant date fair value of the common stock of the Company.

 

During the six months ended February 28, 2015, the Company issued 1,000,000 shares of the Company’s common stock valued at $164,521 to IPIN which were recorded as common stock payable at August 31, 2014. The 1,000,000 shares were issued in January 2015.

 

 14 
   

 

Equity line of Credit

 

During May 2015, the Company entered into a second Securities Purchase Agreement (the “Equity Line Agreement”) with SBII, pursuant to which the Company may issue and sell to SBII $2,000,000 of the Company’s common stock (the “Shares”) subject to a registration rights agreement. The aggregate maximum amount of all purchases that SBII shall be obligated to make under the Equity Line Agreement shall not exceed $2,000,000. The purchase price for the Shares to be paid by SBII shall be eighty percent (80%) of the average of the three (3) lowest closing daily prices of the Company’s common stock during the five (5) consecutive trading days prior to the date of the draw down notice from the Company to SBII or eighty five percent (85%) of the price on the fifth trading day of the draw down pricing period.

 

The Company did not sell any shares pursuant to the Equity Line Agreement during the six months ended February 29, 2016.

 

Preferred stock

 

During the six months ended February 28, 2015, the Company issued 61,858 shares of Series A preferred stock convertible into common stock of the Company as consideration for the acquisition of Mobicash. See Note 4.

 

Warrants

 

Pursuant to the issuance of convertible notes during the six months ended February 29, 2016, the Company issued warrants to the lender to purchase 250,000 shares of the Company’s common stock with a $0.12 per share exercise price. The warrants expire in October 2018. The Company determined the fair value of the warrants as of their measurement date using the following inputs; 3-year term; 160% volatility; 0.9% risk free rate; $0 dividends and determined the fair value was approximately $12,220. The intrinsic value of these warrants as of February 29, 2016 was $0.

 

   Number
of Warrants
   Weighted
Average
Exercise
Price
   Aggregate
Intrinsic
Value
   Weighted
average
remaining
contractual
life (years)
 
Outstanding at August 31, 2015   1,425,926   $0.82   $-    1.70 
Granted   250,000    0.12         - 
Exercised   -    -           
Expired   (925,926)   1.00           
Outstanding and exercisable at February 29, 2016   750,000   $0.37   $-    2.43 

 

NOTE 13 – FAIR VALUE MEASUREMENTS

 

The following table sets forth, by level within the fair value hierarchy, the Company’s derivative liabilities that were accounted for at fair value on a recurring basis:

 

   Quoted Prices             
   In Active   Significant         
   Markets for   Other   Significant     
   Identical   Observable   Unobservable     
   Assets   Inputs   Inputs   Total 
Description  (Level 1)   (Level 2)   (Level 3)   Carrying Value 
As of August 31, 2015  $-   $-   $-   $- 
As of February 29, 2016  $-   $-   $411,137   $411,137 

 

 15 
   

 

The following table sets forth a reconciliation of changes in the fair value of financial assets classified as Level 3 in the fair value hierarchy:

 

   Significant Unobservable Inputs (Level 3) 
   Six months Ended February 29, 2016 
Beginning balance  $- 
Additions   489,140 
Change in fair value of derivative liabilities   (78,003)
Ending balance  $411,137 

 

NOTE 14 – RELATED PARTY TRANSACTIONS

 

As of February 29, 2016 and August 31, 2015, the Company had related party notes payable of $400,853 and $282,436, respectively, related to advances provided to the Company that are non-interest bearing with no specific repayment terms. As of February 29, 2016, there were loans payable to two officers for $238,932 and $161,921, respectively. As of August 31, 2015, there were loans payable to two officers for $176,248 and $106,188, respectively.

 

NOTE 15 – COMMITMENTS AND CONTINGENCIES

 

In September 2015, the Company began legal proceedings against certain former officers, owners and shareholders of Mobicash, in connection with the acquisition of Mobicash by the Company. It is the Company’s contention that the officers and owners of Mobicash misrepresented the state of the Mobicash assets and products, as well as participated in manipulative and inappropriate accounting procedures. The former management has claimed approximately $379,000 of compensation and other expenses that were not disclosed to the Company as of the date of acquisition. Accordingly, the Company has recorded these claims in the accompanying financial statements as a contingency pending resolution of the dispute. Following is a summary of the claims recorded as accrued liabilities by the Company in the consolidated balance sheet. The status has not changed as of February 29, 2016, and it is not possible at this time to predict the timing or outcome of this dispute.

 

   February 29, 2016   August 31, 2015 
         
Accounts payable and accrued liabilities  $110,463   $110,463 
Accrued salaries and payroll taxes   233,163    233,163 
Advances   35,509    35,509 
Total  $379,135   $379,135 

 

The Company also assumed a $5,000 note payable in connection with the acquisition of Mobicash, which the Company recorded as short-term notes payable. See Note 9.

 

NOTE 16 – SUBSEQUENT EVENTS

 

Convertible Notes

 

On May 2, 2016, the Company and a lender replaced its existing $275,000 promissory note originally issued during May 2015 with a $275,000 convertible note. The $275,000 convertible note is due on May 28, 2016 and has an interest rate of 8% per annum (the interest rate increases to 22% per annum in the event the convertible note is not repaid by the maturity date). Also, the amended convertible note is convertible at the lower of A) a 43% discount to the lowest trading price during the 20 trading days prior to the conversion or B) a 43% discount to the lowest trading price for the common stock during the 20 days prior to the execution of the convertible note. The conversion price of the convertible note also contains down-round protection.

 

On May 2, 2016, the Company and a lender replaced its existing $275,000 promissory note originally issued during July 2015 with a $275,000 convertible note. The $275,000 convertible note is due on May 13, 2016 and has an interest rate of 8% per annum the interest rate increases to 22% per annum in the event the convertible note is not repaid by the maturity date). Also, the amended convertible note is convertible at the lower of A) a 43% discount to the lowest trading price during the 20 trading days prior to the conversion or B) a 43% discount to the lowest trading price for the common stock during the 20 days prior to the execution of the convertible note. The conversion price of the convertible note also contains down-round protection. This note is in default.

 

 16 
   

 

The conversion price of the convertible notes is based on a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under FASB ASC Topic No. 815 - 40. The fair value of the conversion feature on the convertible notes will be recognized as derivative instruments at issuance and measured at fair value at each reporting period.

 

Common stock

 

During April 2015, the Company issued 2,000,000 shares of common stock to executives of the Company for compensation valued at $140,000.

 

During April 2015, the Company granted 500,000 shares of common stock to a director of the Company valued at $35,000.

 

 17 
   

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION

 

FORWARD-LOOKING STATEMENTS

 

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements. You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements. Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

 

RESULTS OF OPERATIONS

 

Results for the Quarter Ended February 29, 2016 Compared to the Quarter Ended February 28, 2015

 

Revenues:

 

The Company’s revenues were $36 for the quarter ended February 29, 2016 compared to $0 in 2015.

 

Expenses:

 

General and administrative expenses for the quarters ended February 29, 2016 and 2015 were $393,518 and $1,145,434, respectively. General and administrative expenses consisted primarily of stock-based compensation, consulting fees, professional fees, management fees, office expenses and preparing reports and SEC filings relating to being a public company. The decrease was primarily due to the Company reducing stock-based compensation. The Company incurred $1,000 and $73,263 of research and development expense during the quarters ended February 29, 2016 and 2015, respectively. The decrease was due to the Company reducing operations to conserve cash. During the quarter ended February 29, 2016, the Company recorded software amortization expenses of $294,017 and $0 respectively. The Company also recorded interest expense of $233,738 and a change in fair value of derivative liabilities of $424,588 during the quarter ended February 29, 2016.

 

Net Loss:

 

Net loss for the quarter ended February 29, 2016 was $496,119 compared with a net loss of $1,225,697 for the quarter ended February 28, 2015. The decreased net loss is largely related to lower general and administrative expenses.

 

Results for the Six Months Ended February 29, 2016 Compared to the Six Months Ended February 28, 2015

 

Revenues:

 

The Company’s revenues were $36 for the six months ended February 29, 2016 compared to $0 in 2015.

 

Expenses:

 

General and administrative expenses for the six months ended February 29, 2016 and 2015 were $1,013,324 and $1,146,647, respectively. General and administrative expenses consisted primarily of stock-based compensation, consulting fees, professional fees, management fees, office expenses and preparing reports and SEC filings relating to being a public company. The decrease was primarily attributable to decreased stock-based compensation offset by increased corporate activity as a result of the acquisition of Mobicash. The Company incurred $115,624 and $175,417 of research and development expense during the six months ended February 29, 2016 and 2015, respectively. During the six months ended February 29, 2016, the Company recorded software amortization expenses of $588,034 and $0 respectively. The Company also recorded interest expense of $301,066 and a change in fair value of derivative liabilities of $78,003 during the six months ended February 29, 2016.

 

 18 
   

 

Net Loss:

 

Net loss for the six months ended February 29, 2016 was $1,936,981 compared with a net loss of $1,501,585 for the quarter ended February 28, 2015. The increased net loss is largely related to amortization of software and interest expense.

 

Impact of Inflation

 

We believe that the rate of inflation has had a negligible effect on our operations.

 

Liquidity and Capital Resources

 

Working Capital

 

   February 29, 2016   August 31, 2015 
   $   $ 
Current Assets   46,281    146,607 
Current Liabilities   2,224,651    1,447,015 
Working Capital Deficit   (2,178,370)   (1,300,408)

 

The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. Since its inception, the Company has been funded by related parties through capital investment and borrowing funds.

 

As of February 29, 2016, total current assets were $46,281.

 

As of February 29, 2016, total current liabilities were $2,224,651, which consisted of notes payable, convertible notes payable, accrued expenses and accounts payable, related party payables, common stock payable and derivative liabilities. We had a working capital deficit of $2,178,370 as of February 29, 2016.

 

Cash Flows

 

   Six Months Ended 
   February 29, 2016   February 29, 2015 
         
Cash flows used in operating activities  $(576,009)  $(293,015)
Cash flows used in investing activities   -    (10,000)
Cash Flows provided by financing activities   484,408    317,720 
Net increase (decrease) in cash during period  $(91,601)  $14,705 

 

Cash flows from Operating Activities

 

During the six months ended February 29, 2016, cash used in operating activities was $576,009 compared to $293,015 for the six months ended February 28, 2015. The increase was primarily due to more operating expenses incurred by the Company as a result of increased corporate activity following the acquisition of Mobicash.

 

Cash flows from Investing Activities

 

During the six months ended February 29, 2016, cash used in investing activities was $0 compared to $10,000 for the payment of a license during the six months ended February 29, 2015.

 

 19 
   

 

Cash flows from Financing Activities

 

During the six months ended February 29, 2016, cash provided by financing activities was $484,408 compared to $317,720 for the six months ended February 28, 2015. The increase was primarily due to issuing more debt instruments.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management carried out an evaluation under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”). Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were not effective as of November 30, 2015 due to the material weaknesses resulting from the Board of Directors not currently having any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K, and controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Please refer to our Annual Report on Form 10-K as filed with the SEC on December 15, 2015, for a complete discussion relating to the foregoing evaluation of Disclosures and Procedures.

 

Changes in Internal Control over Financial Reporting

 

Our management has also evaluated our internal control over financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of our last evaluation.

 

The Company is not required by current SEC rules to include, and does not include, an auditor’s attestation report. The Company’s registered public accounting firm has not attested to Management’s reports on the Company’s internal control over financial reporting.

 

 20 
   

 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

In September of 2015, the Company began legal proceedings against certain former officers, owners and shareholders of Mobicash, in connection with the acquisition of Mobicash by the Company. It is not possible at this time to predict the timing or outcome of this dispute. It is the Company’s contention that the officers and owners of Mobicash misrepresented the state of the Mobicash assets and products, as well as participated in manipulative and inappropriate accounting procedures. The former management claimed approximately $379,000 of compensation and other expenses that was not disclosed to the Company as of the date of acquisition. The Company does not believe it owes these liabilities. However, as of February 29, 2016, the Company has recorded these obligations as a contingency.

 

Other than the foregoing, as of the date of this report we know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

 

ITEM 1A. RISK FACTORS

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

In addition to the other information set forth in this Report, you should carefully consider the factors discussed in Part I, Item 1A., “Risk Factors” in our Annual Report on Form 10-K, for the fiscal year ended August 31, 2015. The information set forth in these Reports could materially affect the Company’s business, financial position and results of operations. There are no material changes from the risk factors set forth in Part I, Item 1A, “Risk Factors,” of our Annual Report on Forms 10-K for the fiscal year ended August 31, 2015.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Quarterly Issuances:

 

During the six months ended February 29, 2016, the Company issued 750,000 shares of common stock for stock-based compensation.

 

We claim an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuance did not involve a public offering, the recipient took the securities for investment and not resale, the recipient took securities in exchange for other securities already held in the Company, we took appropriate measures to restrict transfer, and the recipient had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuance and the Company paid no underwriting discounts or commissions

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not Applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

 21 
   

 

ITEM 6. EXHIBITS

 

Exhibit
Number
  Description of Exhibit   Filing Date
2.01   Share Exchange Agreement by and between the Company and Mobicash America, Inc., dated June 6, 2014   Filed with the SEC on October 6, 2014 as part of our Current Report on Form 8-K.
3.1   Articles of Incorporation   Filed with the SEC on December 27, 2011 as part of our Registration of Securities on Form S-1.
3.1(a)   Amended and Restated Articles of Incorporation   Filed with the SEC on May 12, 2014 as part of our Current Report on Form 8-K.
3.2   Bylaws   Filed with the SEC on December 27, 2011 as part of our Registration of Securities on Form S-1.
3.3   Certificate of Designation   Filed with the SEC on May 12, 2014 as part of our Current Report on Form 8-K.
4.01   2015 Equity Compensation Plan.   Filed with the SEC on February 5, 2015 as part of our Form S-8 Registration.
4.02   Form of Registration Rights Agreement.   Filed with the SEC on June 2, 2015 as part of our Current Report on Form 8-K.
10.01   License Agreement by and between the Company and IPIN Debit Network Inc., dated May 15, 2014   Filed with the SEC on May 21, 2014, as part of our Current Report on Form 8-K.
10.02   Share Exchange Agreement by and between the Company and Mobicash America, Inc. D/B/A Quidme, dated June 6, 2014   Filed with the SEC on July 21, 2014, as part of our Quarterly Report on Form 10-Q.
10.03   Amended Share Exchange Agreement by and between the Company and Mobicash America, Inc. D/B/A Quidme, dated October 3, 2014   Filed with the SEC on October 6, 2014, as part of our Current Report on Form 8-K.
10.04   Form of Subscription Agreement   Filed with the SEC on December 2, 2014, as part of our Current Report on Form 8-K.
10.05   Form of Warrant Agreement   Filed with the SEC on December 2, 2014, as part of our Current Report on Form 8-K.
10.06   Form of Secured Promissory Note.   Filed with the SEC on June 2, 2015, as part of our Current Report on Form 8-K.
10.07   Form of Stock Pledge Agreement.   Filed with the SEC on June 2, 2015, as part of our Current Report on Form 8-K.
10.08   Form of Warrant Agreement.   Filed with the SEC on June 2, 2015, as part of our Current Report on Form 8-K..
10.09   Form of Equity Line of Credit.   Filed with the SEC on June 2, 2015, as part of our Current Report on Form 8-K..
16.01   Responsive Letter from Anton & Chia, LLP   Filed with the SEC on October 15, 2014 as part of our Amended Current Report on Form 8-K/A.
16.02   Responsive Letter from Kyle L. Tingle.   Filed with the SEC on May 1, 2015, as part of our Amended Current Report on Form 8-K/A.
21.01   List of Subsidiaries   Filed with the SEC on October 6, 2014, as part of our Current Report on Form 8-K.
31.01   Certification of Principal Executive Officer Pursuant to Rule 13a-14   Filed herewith.
31.02   Certification of Principal Financial Officer Pursuant to Rule 13a-14   Filed herewith.
32.01   Certification of CEO and CFO Pursuant to Section 906 of the Sarbanes-Oxley Act   Filed herewith.
32.02   Certification of CFO Pursuant to Section 906 of the Sarbanes-Oxley Act   Filed herewith.
101.INS*   XBRL Instance Document   Furnished herewith.
101.SCH*   XBRL Taxonomy Extension Schema Document   Furnished herewith.
101.CAL*   XBRL Taxonomy Extension Calculation Linkbase Document   Furnished herewith.
101.LAB*   XBRL Taxonomy Extension Labels Linkbase Document   Furnished herewith.
101.PRE*   XBRL Taxonomy Extension Presentation Linkbase Document   Furnished herewith.
101.DEF*   XBRL Taxonomy Extension Definition Linkbase Document   Furnished herewith.

 

 

*Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

 

 22 
   

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    IFAN Financial, Inc.
     
Dated: May 26, 2016   /s/ J. Christopher Mizer
    J. Christopher Mizer
    Its: President and Chief Executive Officer
     
Dated: May 26, 2016   /s/ Steve Scholl
    Steve Scholl
    Its: Chief Financial Officer, Treasurer and Secretary

 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.

 

Dated: May 26, 2016   /s/ J. Christopher Mizer
    By: J. Christopher Mizer
    Its: Director
     
Dated: May 26, 2016   /s/ Steve Scholl
    By: Steve Scholl
    Its: Director
     
Dated: May 26, 2016   /s/ John C. De Puy
    By: John C. De Puy
    Its: Director
     
Dated: May 26, 2016   /s/ Jason Aplin
    By: Jason Aplin
    Its: Director

 

 23 
   

 

 

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER PURSUANT TO RULE 13a-14

 

I, J. Christopher Mizer, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of IFAN Financial, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

  Date: May 26, 2016
   
  /s/ J. Christopher Mizer
  By: J. Christopher Mizer
  Its: Principal Executive Officer

 

 
   

 

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 13a-14

 

I, Steve Scholl, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of IFAN Financial, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

  Date: May 26, 2016
   
  /s/ Steve Scholl
  By: Steve Scholl
  Its: Principal Financial Officer


 

 
   

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of IFAN Financial, Inc. (the “Company”) on Form 10-Q for the period ending February 29, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, J. Christopher Mizer, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:

 

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

/s/ J. Christopher Mizer  
By: J. Christopher Mizer  
Principal Executive Officer  
   
Dated: May 26, 2016  

 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

 

 
   

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of IFAN Financial, Inc. (the “Company”) on Form 10-Q for the period ending February 29, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steve Scholl, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:

 

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

/s/ Steve Scholl  
By: Steve Scholl  
Principal Financial Officer  
   
Dated: May 26, 2016  

 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

 

 
   

v3.4.0.3
Document and Entity Information - shares
6 Months Ended
Feb. 29, 2016
May. 09, 2016
Document And Entity Information    
Entity Registrant Name IFAN Financial, Inc.  
Entity Central Index Key 0001538123  
Document Type 10-Q  
Document Period End Date Feb. 29, 2016  
Amendment Flag false  
Current Fiscal Year End Date --08-31  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   91,646,245
Trading Symbol IFAN  
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2016  
v3.4.0.3
Consolidated Balance Sheets (Unaudited) - USD ($)
Feb. 29, 2016
Aug. 31, 2015
CURRENT ASSETS    
Cash $ 46,245 $ 137,846
Accounts receivable $ 36
Prepaid expense $ 8,761
TOTAL CURRENT ASSETS $ 46,281 146,607
Fixed assets, net 2,002
Software assets, net $ 4,178,730 4,766,764
Note receivable 100,000 100,000
Other assets 8,307 5,315
TOTAL ASSETS 4,333,318 5,020,688
CURRENT LIABILITIES    
Accounts payable and accrued liabilities 120,480 55,015
Accrued liabilities in dispute - Mobicash 379,135 379,135
Due to related party 400,853 282,436
Notes payable, net of discount of $21,846 and $79,121, respectively 533,154 $ 475,879
Convertible notes payable, net of discount of $249,658 and $0, respectively 125,342
Derivative liabilities 411,137
Common stock payable 254,550 $ 254,550
TOTAL CURRENT LIABILITIES 2,224,651 $ 1,447,015
Convertible note payable, net of discount of $65,195 and $0, respectively 805
TOTAL LIABILITIES $ 2,225,456
Commitments and contingencies
STOCKHOLDERS' EQUITY    
Preferred stock, $0.001 par value, 10,000,000 shares authorized, 961,858 issued and outstanding $ 962 $ 962
Common stock, $0.001 par value, 800,000,000 shares authorized, 89,646,245 and 84,486,774 shares issued and outstanding, respectively 89,646 84,487
Additional paid-in capital 6,414,224 5,948,213
Accumulated deficit (4,396,970) (2,459,989)
TOTAL STOCKHOLDERS' EQUITY 2,107,862 3,573,673
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,333,318 $ 5,020,688
v3.4.0.3
Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)
Feb. 29, 2016
Aug. 31, 2015
Statement of Financial Position [Abstract]    
Notes payable discount net $ 21,846 $ 79,121
Convertible notes payable discount net current 249,658 0
Convertible notes payable discount net noncurrent $ 65,195 $ 0
Preferred stock par value $ 0.001 $ 0.001
Preferred stock shares authorized 10,000,000 10,000,000
Preferred stock shares issued 961,858 961,858
Preferred stock shares outstanding 961,858 961,858
Common stock par value $ 0.001 $ 0.001
Common stock shares authorized 800,000,000 800,000,000
Common stock shares issued 89,646,245 84,486,774
Common stock shares outstanding 89,646,245 84,486,774
v3.4.0.3
Consolidated Statements of Operations (Unaudited) - USD ($)
3 Months Ended 6 Months Ended
Feb. 29, 2016
Feb. 28, 2015
Feb. 29, 2016
Feb. 28, 2015
REVENUE        
Revenues $ 36 $ 36
EXPENSES        
Research and development 1,000 $ 73,263 115,624 $ 175,417
Selling, general, and administrative 393,518 $ 1,145,434 1,013,324 $ 1,146,647
Software amortization $ 294,017 $ 588,034
Amortization of license agreement $ 7,000 $ 15,000
Impairment expense 164,521
Total operating expenses $ 688,535 $ 1,225,697 $ 1,716,982 $ 1,501,585
Change in fair value of derivative liabilities (424,588) (78,003)
Interest expense 233,738 301,066
Interest income (1,530) (3,028)
NET LOSS $ (496,119) $ (1,225,697) $ (1,936,981) $ (1,501,585)
Basic and Diluted Net Loss Per Common Share $ (0.01) $ (0.02) $ (0.02) $ (0.02)
Weighted average number of common shares outstanding - basic and diluted 89,629,761 81,332,109 88,223,218 80,642,274
v3.4.0.3
Consolidated Statements of Cash Flows (Unaudited) - USD ($)
6 Months Ended
Feb. 29, 2016
Feb. 28, 2015
CASH FLOWS FROM OPERATING ACTIVITIES    
Net loss $ (1,936,981) $ (1,501,585)
Adjustments to reconcile net income loss to net cash used in operating activities:    
Stock-based compensation 471,170 990,029
Depreciation expense 2,002 $ 1,980
Amortization of software $ 588,034
Amortization of license agreement $ 15,000
Impairment expense $ 164,521
Change in fair value of derivative liabilities $ (78,003)
Amortization of debt discount 179,771
Change in operating assets and liabilities:    
Accounts receivable (36)
Prepaid expense 8,761
Other assets (2,992) $ 29,325
Accounts payable and accrued expenses 192,265 7,715
NET CASH USED IN OPERATING ACTIVITIES $ (576,009) (293,015)
CASH FLOWS FROM INVESTING ACTIVITIES    
Payment for license (10,000)
NET CASH USED IN INVESTING ACTIVITIES (10,000)
CASH FLOWS FROM FINANCING ACTIVITIES    
Proceeds from sale of common stock $ 286,600
Proceeds from convertible notes payable $ 401,500
Proceeds from related party advances 128,225 $ 31,120
Payments of related party loans (45,317)  
NET CASH PROVIDED BY FINANCING ACTIVITIES 484,408 317,720
NET INCREASE (DECREASE) IN CASH (91,601) $ 14,705
CASH, BEGINNING OF PERIOD 137,846
CASH, END OF PERIOD $ 46,245 $ 14,705
Interest
Income taxes
NONCASH FINANCING AND INVESTING ACTIVITIES:    
Original issue discount due to embedded derivative liabilities on convertible debt $ 489,140
Preferred stock issued for acquisition of Mobicash $ 4,330,060
Common stock issued to IPIN 164,521
Reclassification of prepaid expense to license agreement, net $ 10,000
v3.4.0.3
Nature of Business
6 Months Ended
Feb. 29, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Nature of Business

NOTE 1 – NATURE OF BUSINESS

 

The Company was incorporated in the State of Nevada on June 11, 2010 and established a fiscal year-end of August 31. The initial business plan was to develop and distribute an organic clothing line designed for children.

 

On April 2014, the Company abandoned the business plan as an organic children’s clothing company. In June 2014, the Company signed an agreement with MobiCash America, Inc. to develop technology solutions in the mobile payment and social media markets. The Company acquired MobiCash America on October 3, 2014 which consisted primarily of proprietary software code.

 

The Company and its wholly owned subsidiaries, iPIN Technologies, Inc. and Mobicash America, Inc., design, develop and distribute software that enhances and enable payments. Based in San Diego, the Company has a growing portfolio of solutions including a mobile optimized FDIC insured platform with the ability to facilitate on-demand payments, autopay, proximity payments and marketing, and a proprietary linked debit card. Our Platform additionally has ‘white label’ enterprise capabilities allowing for more opportunities. We will additionally deploy a prepaid card program and facilitate off Platform merchant services we call IFAN FinTech. We are positioned to transact nearly all merchant payment needs including mobile, e-commerce, merchant processing, split-funding, ACH, and EMV.

v3.4.0.3
Summary of Significant Accounting Policies
6 Months Ended
Feb. 29, 2016
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, MobiCash America, Inc. and iPIN Technologies, Inc. Intercompany balances are eliminated upon consolidation.

 

Use of Estimates and Assumptions

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. Actual results could differ from those estimates.

 

Basic and Diluted Net Loss per Share

 

Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive. Because the Company incurred a net loss during the quarters ended February 29, 2016 and 2015, respectively, diluted loss excludes all potential common shares from diluted loss per share. At February 28, 2016 and 2015, the Company had the following potentially issuable shares:

 

    Three months ended February 29, 2016     Three months ended February 28, 2015     Six months ended February 29, 2016     Six months ended February 28, 2015  
Convertible preferred stock     673,300,600       673,300,600       673,300,600       673,300,600  
Convertible debt     10,068,251       -       10,068,251       -  
Warrants     750,000       925,926       750,000       925,926  
Total     684,118,851       674,226,526       684,118,851       674,226,526  

  

Cash and Cash Equivalents

 

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.

 

Fixed Assets

 

Computers and equipment are stated at cost and depreciated using the straight-line method over the two-year estimated useful lives of the assets.

 

Software

 

The estimated useful life of software costs capitalized is four years.

 

Derivative Liabilities

 

The Company follows Financial Accounting Standards Board, Derivatives and Hedging ASC 815-40, which limits the extent to which the conversion or exercise price of an instrument can be adjusted for subsequent transactions. The Company utilizes a two-step process to determine whether an instrument is indexed to its stock: (a) evaluate the instrument’s contingent exercise provisions, if any and (b) evaluate the instrument’s settlement provisions. If it is determined the instrument is not indexed to the Company’s stock, the instrument is recognized as a derivative at issuance and is measured at fair value at each reporting period and the change is recorded in earnings.

 

Stock-Based Compensation

 

The Company measures stock-based compensation cost at the grant date based on the fair value of the award and recognizes it as expense, over the vesting or service period, as applicable, of the stock award using the straight-line method.

 

Income Taxes

 

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for significant deferred tax assets when it is more likely than not, that such asset will not be recovered through future operations.

 

Fair Value Measurements

 

As defined in FASB ASC Topic No. 820 – 10, fair value is the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC Topic No. 820 – 10 requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value measurements. The statement requires fair value measurements be classified and disclosed in one of the following categories:

 

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
   
Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes those derivative instruments that the Company values using observable market data. Substantially all of these inputs are observable in the marketplace throughout the term of the derivative instruments, can be derived from observable data, or supported by observable levels at which transactions are executed in the marketplace.
   
Level 3: Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e. supported by little or no market activity). The Company’s valuation models are primarily industry standard models. Level 3 instruments include derivative warrant instruments. The Company does not have sufficient corroborating evidence to support classifying these assets and liabilities as Level 1 or Level 2.

  

As required by FASB ASC Topic No. 820 – 10, financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.

 

Subsequent Events

 

The Company has evaluated all transactions from February 29, 2016 through the financial statement issuance date for disclosure consideration.

 

Recently Issued Accounting Pronouncements

 

There were various accounting standards and interpretations issued recently, none of which are expected to a have a material impact on the Company´s consolidated financial position, results of operations or cash flows.

v3.4.0.3
Going Concern
6 Months Ended
Feb. 29, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Going Concern

NOTE 3 – GOING CONCERN

 

The Company’s consolidated financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

 

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its operating expenses and seeking equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

 

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

v3.4.0.3
Acquisition of Mobicash
6 Months Ended
Feb. 29, 2016
Business Combinations [Abstract]  
Acquisition of Mobicash

NOTE 4 – ACQUISITION OF MOBICASH

 

On October 3, 2014, the Company acquired Mobicash America, Inc. (“Mobicash” d/b/a “Quidme”), a company incorporated under the laws of the State of California, through a Share Exchange Agreement whereby the Company issued 61,858 shares of Series A convertible preferred stock convertible into common stock at a conversion ratio of 700 common shares for 1 Series A preferred stock (the “Conversion Ratio”) to the shareholders of Mobicash. The Company determined that the fair value of the Series A convertible preferred stock was $4,330,060 on October 3, 2014.

 

The acquisition was accounted for as a business combination. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed at their respective fair values at the date of acquisition. The amounts related to the acquisition were allocated to the assets acquired and the liabilities assumed on the date of acquisition as follows:

 

    October 3, 2014  
Total consideration paid   $ 4,330,060  
         
Software assets     4,704,264  
Fixed assets     4,774  
Total assets acquired     4,709,038  
         
Accounts payable and accrued liabilities     373,978  
Note payable     5,000  
Total liabilities assumed     378,978  

 

The Company evaluated the investment in the software assets acquired in the Mobicash acquisition for recoverability at February 29, 2016 and concluded that no impairment was necessary.

v3.4.0.3
Note Receivable
6 Months Ended
Feb. 29, 2016
Receivables [Abstract]  
Note Receivable

NOTE 5 – NOTE RECEIVABLE

 

During July 2015, the Company purchased a $100,000 convertible promissory note from a third party (the “Investee”). The note bears interest at 6% per annum. All unpaid interest and principal shall be due and payable to the Company on or after May 29, 2017. In the event the Investee issues or sells shares of its equity securities to investors on or before May 29, 2017 with total proceeds of not less than $2,000,000 (excluding the conversion of notes), then the Company’s $100,000 note receivable and any unpaid accrued interest shall automatically convert into such equity securities of the Investee at a conversion price as defined in the convertible promissory note agreement. During the six months ended February 29, 2016, the Company recorded interest income of $3,028 on this note receivable.

 

v3.4.0.3
Investment
6 Months Ended
Feb. 29, 2016
Investments in and Advances to Affiliates, Schedule of Investments [Abstract]  
Investment

NOTE 6 – INVESTMENT

 

During the year ended August 31, 2014, the Company received 1,000,000 shares of common stock in IPIN Debit Network, Inc., which the Company recorded as an investment of $164,521. During the six months ended February 29, 2015, the Company fully impaired this investment.

 

v3.4.0.3
Fixed Assets
6 Months Ended
Feb. 29, 2016
Property, Plant and Equipment [Abstract]  
Fixed Assets

NOTE 7 – FIXED ASSETS

 

The Company’s fixed assets consist of used computer equipment acquired in connection with the acquisition of Mobicash and have a remaining estimated useful life of one year. Property and equipment consist of the following:

 

    February 29, 2016     August 31, 2015  
Computer and Equipment   $ 4,774     $ 4,774  
Less accumulated depreciation     (4,774 )     (2,772 )
Total   $ -     $ 2,002  

 

The Company recorded depreciation expense of $2,002 and $1,980 during the six months ending February 29, 2016 and February 28, 2015, respectively.

v3.4.0.3
Software Assets
6 Months Ended
Feb. 29, 2016
Goodwill and Intangible Assets Disclosure [Abstract]  
Software Assets

NOTE 8 – SOFTWARE ASSETS

 

Software assets consist of the following:

 

    February 29, 2016     August 31, 2015  
Software assets   $ 4,766,764     $ 4,766,764  
Less accumulated amortization     (588,034 )     -  
Total   $ 4,178,730     $ 4,766,764  

 

The Company recorded software amortization expense of $588,034 and $0 during the six months ending February 29, 2016 and February 28, 2015, respectively.

v3.4.0.3
Notes Payable
6 Months Ended
Feb. 29, 2016
Debt Disclosure [Abstract]  
Notes Payable

NOTE 9 – NOTES PAYABLE

 

The Company has a $5,000 note payable to an individual due in November 2015. The note bears interest at 10% per annum and is past due.

 

Secured Promissory Note Agreement

 

On May 28, 2015, the Company and SBI Investments, LLC (“SBII”), completed a financing transaction that consisted of a Securities Purchase Agreement (the “SPA”), Two Secured Promissory Notes (the “Notes”), Stock Pledge Agreement (the “Pledge”), and Warrant Agreement, pursuant to which SBII agreed to loan the Company an aggregate of $550,000. The first note for $275,000 was issued by the Company on May 28, 2015 pursuant to the SPA and is due and payable on May 28, 2016 and accrues interest at 10% per annum payable at three, six and nine months from the issuance date. The second note for $275,000 was issued on July 15, 2015 and payable on May 28, 2016, and accrues interest at 10% per annum payable at three, six and nine months from the issuance date. Pursuant to the Pledge, the Company’s CEO and CFO pledged 11,000,000 shares in the aggregate of their restricted common stock to guarantee payment of the Notes issued pursuant to the SPA.

 

In connection with the issuance of the $550,000 of notes payable, the Company received cash proceeds of $482,500 and recorded a debt discount of $67,500 for the difference between the face value of the note and the cash proceeds. The Company also issued the lender 500,000 warrants in connection with the issuance of this debt with an exercise price of $0.50 per share and a term of 3 years. The Company determined the relative fair value of the warrants as of their issuance date using the following inputs; 3-year term; 141% - 145% volatility; 1% risk free rate; $0 dividends and determined the fair value was $27,636, which the Company recorded as debt discount.

 

During the six months ended February 29, 2016, the Company recorded debt discount amortization of $57,275.

v3.4.0.3
Convertible Notes Payable
6 Months Ended
Feb. 29, 2016
Debt Disclosure [Abstract]  
Convertible Notes Payable

NOTE 10 – CONVERTIBLE NOTES PAYABLE

 

October 2015 Notes

 

During October 2015, the Company entered into an agreement with a third party whereby the Company received net cash proceeds of $243,500 in exchange for issuing two notes including a $165,000 convertible note payable bearing interest at 8% and a $110,000 convertible note payable bearing interest at 8% each due one year from the date of issuance. The notes payable are convertible at a rate of 80% of the average of the lowest 3 trading prices during the 20 trading day period ending on the last complete trading day prior to the conversion. Also, if at any time when the notes are issued and outstanding, the borrower issues or sells any share of common stock for no consideration or for consideration per share which is less than the conversion price in effect on the date of such issuance. The conversion price will be reduced to the amount of the consideration per share received by the borrower in such dilutive issuance.

 

The number of shares of common stock to be issued upon conversion shall be determined by dividing the conversion amount by the applicable conversion price. The conversion amount means the principal amount of the convertible note and, at the lender´s option, accrued and unpaid interest, default interest, and any other amounts owed to the lender pursuant to the terms of these convertible notes.

 

The conversion price of the convertible notes is based on a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under FASB ASC Topic No. 815 - 40. The fair value of the conversion feature on the convertible notes was recognized as a derivative instrument at issuance and is measured at fair value at each reporting period.

 

As the fair value of the derivative liabilities exceeded the carrying value of the convertible notes payable, the Company recorded a $275,000 original issue discount on the convertible notes. See Note 11.

 

The Company also issued the lender 250,000 warrants in connection with the issuance of the convertible notes. See Note 12.

 

December 2015 Note

 

During December 2015, the Company entered into an agreement with a third party whereby the Company received net cash proceeds of $98,000 in exchange for issuing a $100,000 convertible note payable bearing interest at 12% due 9 months from the date of issuance. The note payable is convertible at a conversion price: the lower of: A) a 43% discount to the lowest trading price during the previous twenty (20) trading days to the date of a Conversion Notice; or B) a 43% discount to the lowest trading price during the previous twenty (20) trading days before the date that this note was executed. At any time after the Prepayment Date, including prior to, upon, or after the Maturity Date the note is convertible.

 

The number of shares of common stock to be issued upon conversion shall be determined by dividing the conversion amount by the applicable conversion price. The conversion amount means the principal amount of the convertible note and, at the lender´s option, accrued and unpaid interest, default interest, and any other amounts owed to the lender pursuant to the terms of these convertible notes.

 

The conversion price of the convertible notes is based on a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under FASB ASC Topic No. 815 - 40. The fair value of the conversion feature on the convertible notes was recognized as a derivative instrument at issuance and is measured at fair value at each reporting period.

 

The Company recorded the fair value of the derivative of $94,349 as an original issue discount on the convertible notes. See Note 11.

 

February 2016 Note

 

During February 2016, the Company entered into an agreement with a third party whereby the Company received net cash proceeds of $60,000 in exchange for a $66,000 promissory note bearing interest at 12% due one year from the date of issuance. The note payable is convertible at the lesser of $0.093 or 60% of the lowest trade price in the 25 trading days previous to the conversion.

 

The number of shares of common stock to be issued upon conversion shall be determined by dividing the conversion amount by the applicable conversion price. The conversion amount means the principal amount of the convertible note and, at the lender´s option, accrued and unpaid interest, default interest, and any other amounts owed to the lender pursuant to the terms of these convertible notes.

 

The conversion price of the convertible notes is based on a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under FASB ASC Topic No. 815 - 40. The fair value of the conversion feature on the convertible notes was recognized as a derivative instrument at issuance and is measured at fair value at each reporting period.

 

As the fair value of the derivative liabilities exceeded the carrying value of the convertible note payable, the Company recorded a $66,000 original issue discount on the convertible notes. See Note 11.

 

See detail summary below for carrying value of convertible notes payable as of February 29, 2016.

 

Face value of debt upon issuance of convertible notes   $ 441,000  
Less: Original issue discount     (437,349 )
Carrying value at issuance     3,651  
Amortization of debt discount     122,496  
Carrying value at February 29, 2016     126,147  
Less short-term portion     (125,342 )
Long-term convertible notes   $ 805  

 

v3.4.0.3
Embededded Derivative Liabilities
6 Months Ended
Feb. 29, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Embededded Derivative Liabilities

NOTE 11 – EMBEDEDDED DERIVATIVE LIABILTIES

 

The Company determined that the convertible notes contain an embedded derivative instrument as the conversion price is based on a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under FASB ASC Topic No. 815 - 40. The fair value of the convertible notes were recognized as derivative instruments at issuance and is measured at fair value at each reporting period. The Company determined that the valuation of the derivative liabilities was $411,137 as of February 29, 2016 on the convertible notes.

  

The Company determined the fair values of the embedded derivatives on the grant dates using a black scholes model with the following assumptions:

 

Convertible notes payable - stock price on the issuance dates of $0.09-$0.12 per share, term of 0.75-2 years, expected volatility of 148%-180%, discount rate of 0.85%-1.33%, expected dividends of 0%.
   
Convertible notes payable - stock price on the February 29, 2016 of $0.07 per share, term of 0.67-1.95 years, expected volatility of 157%-180%, and a discount rate of 0.91%, expected dividends of 0%..

 

Activity for embedded derivative instruments during the six months ended February 29, 2016 was as follows:

 

          Initial valuation              
          of embedded     Decrease        
          derivative     in        
          instruments     fair value of        
    Balance at     issued during     derivative     Balance at  
    August 31, 2015     the period     liabilities     February 29, 2016  
Convertible notes   $ -     $ 489,140     $ (78,003 )   $ 411,137  
v3.4.0.3
Equity
6 Months Ended
Feb. 29, 2016
Equity [Abstract]  
Equity

NOTE 12 – EQUITY

 

Common stock

 

FY 2016

 

During the six months ended February 29, 2016, the Company issued 5,159,471 shares of common stock for services. The Company recorded stock-based compensation expense of $471,170 based on the grant date fair value of the common stock of the Company on the issuance dates.

 

FY 2015

 

During the six months ended February 28, 2015, the Company received $36,600 of cash proceeds pursuant to subscription agreements with third parties to purchase common stock of the Company for $0.25 per share.

 

During the six months ended February 28, 2015, the Company has issued 128,200 shares of common stock pursuant to these subscription agreements. As of February 28, 2015, the Company has recorded a common stock payable of $4,550 as the Company has an obligation to issue the remaining 18,000 shares of common stock pursuant to the subscription agreements.

 

During the six months ended February 28, 2015, the Company received $250,000 of cash proceeds pursuant to a subscription agreement with an investor to purchase common stock of the Company for $0.27 per share and an equal number of warrants. As of February 28, 2015, the Company has recorded a common stock payable of $250,000 related to its obligation to issue 925,926 shares of the Company’s common stock. See Warrants below.

 

During the six months ended February 28, 2015, the Company issued 2,023,000 shares of common stock for services. The Company recorded stock-based compensation expense of $990,029 based on the grant date fair value of the common stock of the Company.

 

During the six months ended February 28, 2015, the Company issued 1,000,000 shares of the Company’s common stock valued at $164,521 to IPIN which were recorded as common stock payable at August 31, 2014. The 1,000,000 shares were issued in January 2015.

  

Equity line of Credit

 

During May 2015, the Company entered into a second Securities Purchase Agreement (the “Equity Line Agreement”) with SBII, pursuant to which the Company may issue and sell to SBII $2,000,000 of the Company’s common stock (the “Shares”) subject to a registration rights agreement. The aggregate maximum amount of all purchases that SBII shall be obligated to make under the Equity Line Agreement shall not exceed $2,000,000. The purchase price for the Shares to be paid by SBII shall be eighty percent (80%) of the average of the three (3) lowest closing daily prices of the Company’s common stock during the five (5) consecutive trading days prior to the date of the draw down notice from the Company to SBII or eighty five percent (85%) of the price on the fifth trading day of the draw down pricing period.

 

The Company did not sell any shares pursuant to the Equity Line Agreement during the six months ended February 29, 2016.

 

Preferred stock

 

During the six months ended February 28, 2015, the Company issued 61,858 shares of Series A preferred stock convertible into common stock of the Company as consideration for the acquisition of Mobicash. See Note 4.

 

Warrants

 

Pursuant to the issuance of convertible notes during the six months ended February 29, 2016, the Company issued warrants to the lender to purchase 250,000 shares of the Company’s common stock with a $0.12 per share exercise price. The warrants expire in October 2018. The Company determined the fair value of the warrants as of their measurement date using the following inputs; 3-year term; 160% volatility; 0.9% risk free rate; $0 dividends and determined the fair value was approximately $12,220. The intrinsic value of these warrants as of February 29, 2016 was $0.

 

    Number
of Warrants
    Weighted
Average
Exercise
Price
    Aggregate
Intrinsic
Value
    Weighted
average
remaining
contractual
life (years)
 
Outstanding at August 31, 2015     1,425,926     $ 0.82     $ -       1.70  
Granted     250,000       0.12               -  
Exercised     -       -                  
Expired     (925,926 )     1.00                  
Outstanding and exercisable at February 29, 2016     750,000     $ 0.37     $ -       2.43  

 

 

v3.4.0.3
Fair Value Measurements
6 Months Ended
Feb. 29, 2016
Fair Value Disclosures [Abstract]  
Fair Value Measurements

NOTE 13 – FAIR VALUE MEASUREMENTS

 

The following table sets forth, by level within the fair value hierarchy, the Company’s derivative liabilities that were accounted for at fair value on a recurring basis:

 

    Quoted Prices                    
    In Active     Significant              
    Markets for     Other     Significant        
    Identical     Observable     Unobservable        
    Assets     Inputs     Inputs     Total  
Description   (Level 1)     (Level 2)     (Level 3)     Carrying Value  
As of August 31, 2015   $ -     $ -     $ -     $ -  
As of February 29, 2016   $ -     $ -     $ 411,137     $ 411,137  

 

The following table sets forth a reconciliation of changes in the fair value of financial assets classified as Level 3 in the fair value hierarchy:

 

    Significant Unobservable Inputs (Level 3)  
    Six months Ended February 29, 2016  
Beginning balance   $ -  
Additions     489,140  
Change in fair value of derivative liabilities     (78,003 )
Ending balance   $ 411,137  

 

v3.4.0.3
Related Party Transactions
6 Months Ended
Feb. 29, 2016
Related Party Transactions [Abstract]  
Related Party Transactions

NOTE 14 – RELATED PARTY TRANSACTIONS

 

As of February 29, 2016 and August 31, 2015, the Company had related party notes payable of $400,853 and $282,436, respectively, related to advances provided to the Company that are non-interest bearing with no specific repayment terms. As of February 29, 2016, there were loans payable to two officers for $238,932 and $161,921, respectively. As of August 31, 2015, there were loans payable to two officers for $176,248 and $106,188, respectively.

v3.4.0.3
Commitments and Contingencies
6 Months Ended
Feb. 29, 2016
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

NOTE 15 – COMMITMENTS AND CONTINGENCIES

 

In September 2015, the Company began legal proceedings against certain former officers, owners and shareholders of Mobicash, in connection with the acquisition of Mobicash by the Company. It is the Company’s contention that the officers and owners of Mobicash misrepresented the state of the Mobicash assets and products, as well as participated in manipulative and inappropriate accounting procedures. The former management has claimed approximately $379,000 of compensation and other expenses that were not disclosed to the Company as of the date of acquisition. Accordingly, the Company has recorded these claims in the accompanying financial statements as a contingency pending resolution of the dispute. Following is a summary of the claims recorded as accrued liabilities by the Company in the consolidated balance sheet. The status has not changed as of February 29, 2016, and it is not possible at this time to predict the timing or outcome of this dispute.

 

    February 29, 2016     August 31, 2015  
             
Accounts payable and accrued liabilities   $ 110,463     $ 110,463  
Accrued salaries and payroll taxes     233,163       233,163  
Advances     35,509       35,509  
Total   $ 379,135     $ 379,135  

 

The Company also assumed a $5,000 note payable in connection with the acquisition of Mobicash, which the Company recorded as short-term notes payable. See Note 9.

v3.4.0.3
Subsequent Events
6 Months Ended
Feb. 29, 2016
Subsequent Events [Abstract]  
Subsequent Events

NOTE 16 – SUBSEQUENT EVENTS

 

Convertible Notes

 

On May 2, 2016, the Company and a lender replaced its existing $275,000 promissory note originally issued during May 2015 with a $275,000 convertible note. The $275,000 convertible note is due on May 28, 2016 and has an interest rate of 8% per annum (the interest rate increases to 22% per annum in the event the convertible note is not repaid by the maturity date). Also, the amended convertible note is convertible at the lower of A) a 43% discount to the lowest trading price during the 20 trading days prior to the conversion or B) a 43% discount to the lowest trading price for the common stock during the 20 days prior to the execution of the convertible note. The conversion price of the convertible note also contains down-round protection.

 

On May 2, 2016, the Company and a lender replaced its existing $275,000 promissory note originally issued during July 2015 with a $275,000 convertible note. The $275,000 convertible note is due on May 13, 2016 and has an interest rate of 8% per annum the interest rate increases to 22% per annum in the event the convertible note is not repaid by the maturity date). Also, the amended convertible note is convertible at the lower of A) a 43% discount to the lowest trading price during the 20 trading days prior to the conversion or B) a 43% discount to the lowest trading price for the common stock during the 20 days prior to the execution of the convertible note. The conversion price of the convertible note also contains down-round protection. This note is in default.

 

The conversion price of the convertible notes is based on a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under FASB ASC Topic No. 815 - 40. The fair value of the conversion feature on the convertible notes will be recognized as derivative instruments at issuance and measured at fair value at each reporting period.

 

Common stock

 

During April 2015, the Company issued 2,000,000 shares of common stock to executives of the Company for compensation valued at $140,000.

 

During April 2015, the Company granted 500,000 shares of common stock to a director of the Company valued at $35,000.

v3.4.0.3
Summary of Significant Accounting Policies (Policies)
6 Months Ended
Feb. 29, 2016
Accounting Policies [Abstract]  
Basis of Presentation

Basis of Presentation

 

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, MobiCash America, Inc. and iPIN Technologies, Inc. Intercompany balances are eliminated upon consolidation.

Use of Estimates and Assumptions

Use of Estimates and Assumptions

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. Actual results could differ from those estimates.

Basic and Diluted Net Loss Per Share

Basic and Diluted Net Loss per Share

 

Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive. Because the Company incurred a net loss during the quarters ended February 29, 2016 and 2015, respectively, diluted loss excludes all potential common shares from diluted loss per share. At February 28, 2016 and 2015, the Company had the following potentially issuable shares:

 

    Three months ended February 29, 2016     Three months ended February 28, 2015     Six months ended February 29, 2016     Six months ended February 28, 2015  
Convertible preferred stock     673,300,600       673,300,600       673,300,600       673,300,600  
Convertible debt     10,068,251       -       10,068,251       -  
Warrants     750,000       925,926       750,000       925,926  
Total     684,118,851       674,226,526       684,118,851       674,226,526  

 

Cash and Cash Equivalents

Cash and Cash Equivalents

 

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.

Fixed Assets

Fixed Assets

 

Computers and equipment are stated at cost and depreciated using the straight-line method over the two-year estimated useful lives of the assets.

Software

Software

 

The estimated useful life of software costs capitalized is four years.

Derivative Liabilities

Derivative Liabilities

 

The Company follows Financial Accounting Standards Board, Derivatives and Hedging ASC 815-40, which limits the extent to which the conversion or exercise price of an instrument can be adjusted for subsequent transactions. The Company utilizes a two-step process to determine whether an instrument is indexed to its stock: (a) evaluate the instrument’s contingent exercise provisions, if any and (b) evaluate the instrument’s settlement provisions. If it is determined the instrument is not indexed to the Company’s stock, the instrument is recognized as a derivative at issuance and is measured at fair value at each reporting period and the change is recorded in earnings.

Stock-Based Compensation

Stock-Based Compensation

 

The Company measures stock-based compensation cost at the grant date based on the fair value of the award and recognizes it as expense, over the vesting or service period, as applicable, of the stock award using the straight-line method.

Income Taxes

Income Taxes

 

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for significant deferred tax assets when it is more likely than not, that such asset will not be recovered through future operations.

Fair Value Measurements

Fair Value Measurements

 

As defined in FASB ASC Topic No. 820 – 10, fair value is the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC Topic No. 820 – 10 requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value measurements. The statement requires fair value measurements be classified and disclosed in one of the following categories:

 

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
   
Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes those derivative instruments that the Company values using observable market data. Substantially all of these inputs are observable in the marketplace throughout the term of the derivative instruments, can be derived from observable data, or supported by observable levels at which transactions are executed in the marketplace.

 

Level 3: Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e. supported by little or no market activity). The Company’s valuation models are primarily industry standard models. Level 3 instruments include derivative warrant instruments. The Company does not have sufficient corroborating evidence to support classifying these assets and liabilities as Level 1 or Level 2.

 

As required by FASB ASC Topic No. 820 – 10, financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.

Subsequent Events

Subsequent Events

 

The Company has evaluated all transactions from February 29, 2016 through the financial statement issuance date for disclosure consideration.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

 

There were various accounting standards and interpretations issued recently, none of which are expected to a have a material impact on the Company´s consolidated financial position, results of operations or cash flows.

v3.4.0.3
Summary of Significant Accounting Policies (Tables)
6 Months Ended
Feb. 29, 2016
Accounting Policies [Abstract]  
Summary of Securities Excluded from Diluted Loss per Share

At February 28, 2016 and 2015, the Company had the following potentially issuable shares:

 

    Three months ended February 29, 2016     Three months ended February 28, 2015     Six months ended February 29, 2016     Six months ended February 28, 2015  
Convertible preferred stock     673,300,600       673,300,600       673,300,600       673,300,600  
Convertible debt     10,068,251       -       10,068,251       -  
Warrants     750,000       925,926       750,000       925,926  
Total     684,118,851       674,226,526       684,118,851       674,226,526  
v3.4.0.3
Acquisition of Mobicash (Tables)
6 Months Ended
Feb. 29, 2016
Business Combinations [Abstract]  
Schedule of Acquisition of Assets and Liabilities Assumed

The amounts related to the acquisition were allocated to the assets acquired and the liabilities assumed on the date of acquisition as follows:

 

    October 3, 2014  
Total consideration paid   $ 4,330,060  
         
Software assets     4,704,264  
Fixed assets     4,774  
Total assets acquired     4,709,038  
         
Accounts payable and accrued liabilities     373,978  
Note payable     5,000  
Total liabilities assumed     378,978  

v3.4.0.3
Fixed Assets (Tables)
6 Months Ended
Feb. 29, 2016
Property, Plant and Equipment [Abstract]  
Schedule of Property and Equipment

Property and equipment consist of the following:

 

    February 29, 2016     August 31, 2015  
Computer and Equipment   $ 4,774     $ 4,774  
Less accumulated depreciation     (4,774 )     (2,772 )
Total   $ -     $ 2,002  
v3.4.0.3
Software Assets (Tables)
6 Months Ended
Feb. 29, 2016
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of Software Assets

Software assets consist of the following:

 

    February 29, 2016     August 31, 2015  
Software assets   $ 4,766,764     $ 4,766,764  
Less accumulated amortization     (588,034 )     -  
Total   $ 4,178,730     $ 4,766,764  
v3.4.0.3
Convertible Notes Payable (Tables)
6 Months Ended
Feb. 29, 2016
Debt Disclosure [Abstract]  
Summary of Carrying Value of Convertible Notes Payable

See detail summary below for carrying value of convertible notes payable as of February 29, 2016.

 

Face value of debt upon issuance of convertible notes   $ 441,000  
Less: Original issue discount     (437,349 )
Carrying value at issuance     3,651  
Amortization of debt discount     122,496  
Carrying value at February 29, 2016     126,147  
Less short-term portion     (125,342 )
Long-term convertible notes   $ 805  

 

v3.4.0.3
Embedded Derivative Liabilities (Tables)
6 Months Ended
Feb. 29, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Schedule of Embedded Derivative Instruments

Activity for embedded derivative instruments during the six months ended February 29, 2016 was as follows:

 

          Initial valuation              
          of embedded     Decrease        
          derivative     in        
          instruments     fair value of        
    Balance at     issued during     derivative     Balance at  
    August 31, 2015     the period     liabilities     February 29, 2016  
Convertible notes   $ -     $ 489,140     $ (78,003 )   $ 411,137  
v3.4.0.3
Equity (Tables)
6 Months Ended
Feb. 29, 2016
Equity [Abstract]  
Schedule of Warrants

The intrinsic value of these warrants as of February 29, 2016 was $0.

 

 

    Number
of Warrants
    Weighted
Average
Exercise
Price
    Aggregate
Intrinsic
Value
    Weighted
average
remaining
contractual
life (years)
 
Outstanding at August 31, 2015     1,425,926     $ 0.82     $ -       1.70  
Granted     250,000       0.12               -  
Exercised     -       -                  
Expired     (925,926 )     1.00                  
Outstanding and exercisable at February 29, 2016     750,000     $ 0.37     $ -       2.43  

 

v3.4.0.3
Fair Value Measurements (Tables)
6 Months Ended
Feb. 29, 2016
Fair Value Disclosures [Abstract]  
Schedule of Fair Value Recurring Basis

The following table sets forth, by level within the fair value hierarchy, the Company’s derivative liabilities that were accounted for at fair value on a recurring basis:

 

    Quoted Prices                    
    In Active     Significant              
    Markets for     Other     Significant        
    Identical     Observable     Unobservable        
    Assets     Inputs     Inputs     Total  
Description   (Level 1)     (Level 2)     (Level 3)     Carrying Value  
As of August 31, 2015   $ -     $ -     $ -     $ -  
As of February 29, 2016   $ -     $ -     $ 411,137     $ 411,137  

 

Schedule of Fair Value of Financial Assets

The following table sets forth a reconciliation of changes in the fair value of financial assets classified as Level 3 in the fair value hierarchy:

 

    Significant Unobservable Inputs (Level 3)  
    Six months Ended February 29, 2016  
Beginning balance   $ -  
Additions     489,140  
Change in fair value of derivative liabilities     (78,003 )
Ending balance   $ 411,137  

 

v3.4.0.3
Commitments and Contingencies (Tables)
6 Months Ended
Feb. 29, 2016
Commitments and Contingencies Disclosure [Abstract]  
Schedule of Accrued Liabilities

Following is a summary of the claims recorded as accrued liabilities by the Company in the consolidated balance sheet. The status has not changed as of February 29, 2016, and it is not possible at this time to predict the timing or outcome of this dispute.

 

    February 29, 2016     August 31, 2015  
             
Accounts payable and accrued liabilities   $ 110,463     $ 110,463  
Accrued salaries and payroll taxes     233,163       233,163  
Advances     35,509       35,509  
Total   $ 379,135     $ 379,135
v3.4.0.3
Summary of Significant Accounting Policies (Details Narrative)
6 Months Ended
Feb. 29, 2016
Accounting Policies [Abstract]  
Computers and equipment estimated useful live 2 years
Estimated useful life of software costs capitalized 4 years
v3.4.0.3
Summary of Significant Accounting Policies - Summary of Securities Excluded from Diluted Loss per Share (Details) - shares
3 Months Ended 6 Months Ended
Feb. 29, 2016
Feb. 28, 2015
Feb. 29, 2016
Feb. 28, 2015
Total 684,118,851 674,226,526 684,118,851 674,226,526
Convertible Preferred Stock [Member]        
Total 673,300,600 673,300,600 673,300,600 673,300,600
Convertible Debt [Member]        
Total 10,068,251 10,068,251
Warrant [Member]        
Total 750,000 925,926 750,000 925,926
v3.4.0.3
Acquisition of Mobicash (Details Narrative) - Series A Preferred Stock [Member] - USD ($)
Oct. 03, 2014
Feb. 28, 2015
Issuance of preferred stock convertible into common stock shares   61,858
Mobicash America, Inc [Member] | Share Exchange Agreement [Member]    
Issuance of preferred stock convertible into common stock shares 61,858  
Preferred stock conversion into common stock at conversion ratio 700 common shares for 1 Series A preferred stock  
Fair value of preferred stock $ 4,330,060  
v3.4.0.3
Acquisition of Mobicash - Schedule of Acquisition of Assets and Liabilities Assumed (Details)
Oct. 03, 2014
USD ($)
Business Combinations [Abstract]  
Total consideration $ 4,330,060
Software assets 4,704,264
Fixed assets 4,774
Total assets acquired 4,709,038
Accounts payable and accrued liabilities 373,978
Note payable 5,000
Total liabilities assumed $ 378,978
v3.4.0.3
Note Receivable (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended 6 Months Ended
Jul. 31, 2015
Feb. 29, 2016
Feb. 28, 2015
Feb. 29, 2016
Feb. 28, 2015
Interest income   $ 1,530 $ 3,028
Convertible Debt [Member]          
Purchase of convertible promissory note from a third party $ 100,000        
Debt instruments interest rate 6.00%        
Debt maturity date May 29, 2017        
Convertible Debt [Member] | May 29, 2017 [Member]          
Proceeds from notes payable $ 2,000,000        
Investment and unpaid accrued interest shall automatically convert into such equity securities $ 100,000        
v3.4.0.3
Investment (Details Narrative) - IPIN Debit Network, Inc [Member]
3 Months Ended
Aug. 31, 2014
USD ($)
shares
Number of shares received | shares 1,000,000
Investment | $ $ 164,521
v3.4.0.3
Fixed Assets (Details Narrative) - USD ($)
6 Months Ended
Feb. 29, 2016
Feb. 28, 2015
Fixed assets remaining estimated useful life 2 years  
Computer Equipment [Member]    
Fixed assets remaining estimated useful life 1 year  
Depreciation expense $ 2,002 $ 1,980
v3.4.0.3
Fixed Assets - Schedule of Property and Equipment (Details) - USD ($)
Feb. 29, 2016
Aug. 31, 2015
Property, Plant and Equipment [Abstract]    
Computer and Equipment $ 4,774 $ 4,774
Less accumulated depreciation $ (4,774) (2,772)
Total $ 2,002
v3.4.0.3
Software Assets (Details Narrative) - USD ($)
3 Months Ended 6 Months Ended
Feb. 29, 2016
Feb. 28, 2015
Feb. 29, 2016
Feb. 28, 2015
Goodwill and Intangible Assets Disclosure [Abstract]        
Software amortization expense $ 294,017 $ 588,034
v3.4.0.3
Software Assets - Schedule of Software Assets (Details) - USD ($)
Feb. 29, 2016
Aug. 31, 2015
Goodwill and Intangible Assets Disclosure [Abstract]    
Software assets $ 4,766,764 $ 4,766,764
Less accumulated amortization (588,034)
Total $ 4,178,730 $ 4,766,764
v3.4.0.3
Notes Payable (Details Narrative) - USD ($)
6 Months Ended
Jul. 15, 2015
May. 28, 2015
Feb. 29, 2016
Feb. 28, 2015
Aug. 31, 2015
Note payable to related party     $ 400,853   $ 282,436
Debt discount     21,846   $ 79,121
Amortization of debt discount     179,771  
Secured Promissory Note Agreement [Member}          
Note payable     550,000    
Proceeds from note payable     482,500    
Debt discount     $ 67,500    
Number of warrants issued in connection with debt     500,000    
Warrants exercise price per share     $ 0.50    
Warrants term     3 years    
Fair value assumption term     3 years    
Fair value assumption risk free rate     1.00%    
Fair value assumption dividend     $ 0    
Fair value of warrants     $ 27,636    
Amortization of debt discount     $ 57,275    
Secured Promissory Note Agreement [Member} | Minimum [Member]          
Fair value assumption volatility rate     141.00%    
Secured Promissory Note Agreement [Member} | Maximum [Member]          
Fair value assumption volatility rate     145.00%    
Secured Promissory Note Agreement [Member} | Restricted Stock [Member] | CEO and CFO [Member]          
Number of restricted common stock shares issued to guarantee payment of notes issued   11,000,000      
individual [Member}          
Note payable to related party     $ 5,000    
Note payable due date     Nov. 30, 2015    
Note payable bears interest rate     10.00%    
SBI Investments, LLC [Member} | Secured Promissory Note Agreement [Member}          
Note payable due date May 28, 2016        
Note payable bears interest rate 10.00% 10.00%      
Promissory note face amount   $ 550,000      
Number of note issued during the period $ 275,000        
SBI Investments, LLC [Member} | First Promissory Note Agreement [Member}          
Note payable due date   May 28, 2016      
Note payable bears interest rate   10.00%      
Number of note issued during the period   $ 275,000      
v3.4.0.3
Convertible Notes Payable (Details Narrative) - USD ($)
1 Months Ended 6 Months Ended
Oct. 31, 2015
Feb. 29, 2016
Feb. 28, 2015
Feb. 09, 2016
Proceeds from convertible notes payable   $ 401,500  
December 2015 Note [Member]        
Proceeds from convertible notes payable   98,000    
Convertible note payable face value   $ 100,000    
Convertible note payable interest rate   12.00%    
Note payable convertible rate   43.00%    
Original issue discount on convertible notes   $ 94,349    
February 2016 [Member]        
Proceeds from convertible notes payable   $ 60,000    
Convertible note payable face value       $ 66,000
Convertible note payable interest rate       12.00%
Note payable convertible rate   60.00%    
Convertible notes payable lesser price per share   $ 0.093    
Original issue discount on convertible notes       $ 66,000
Third Party [Member]        
Proceeds from convertible notes payable $ 243,500      
Convertible note payable face value $ 165,000      
Convertible note payable interest rate 8.00%      
Convertible note payable $ 110,000      
Convertible note payable due term 1 year      
Note payable convertible rate 80.00%      
Convertible note payable trading day period 20 days      
Original issue discount on convertible notes $ 275,000      
Lender [Member]        
Number of warrants issued during period   250,000    
v3.4.0.3
Convertible Notes Payable - Summary of Carrying Value of Convertible Notes Payable (Details) - USD ($)
6 Months Ended
Feb. 29, 2016
Feb. 28, 2015
Face value of debt upon issuance of convertible notes $ 401,500
Less short-term portion 125,342  
Long-term convertible notes 805  
Convertible Notes Payable [Member]    
Face value of debt upon issuance of convertible notes 441,000  
Less: Original issue discount (437,349)  
Carrying value at issuance 3,651  
Amortization of debt discount 122,496  
Carrying value at February 29, 2016 126,147  
Less short-term portion (125,342)  
Long-term convertible notes $ 805  
v3.4.0.3
Embedded Derivative Liabilities (Details Narrative)
6 Months Ended
Feb. 29, 2016
USD ($)
$ / shares
Convertible Notes Payable [Member]  
Increase in fair value of derivative liabilities | $ $ 411,137
Fair value of embedded derivative expected dividends 0.00%
Convertible Notes Payable [Member] | Minimum [Member]  
Stock price $ 0.09
Fair value of embedded derivative term 9 months
Fair value of embedded derivative expected volatility 148.00%
Fair value of embedded derivative discount rate 0.85%
Convertible Notes Payable [Member] | Maximum [Member]  
Stock price $ 0.12
Fair value of embedded derivative term 2 years
Fair value of embedded derivative expected volatility 180.00%
Fair value of embedded derivative discount rate 1.33%
Convertible Notes Payable One [Member]  
Stock price $ 0.07
Fair value of embedded derivative discount rate 0.91%
Fair value of embedded derivative expected dividends 0.00%
Convertible Notes Payable One [Member] | Minimum [Member]  
Fair value of embedded derivative term 8 months 1 day
Fair value of embedded derivative expected volatility 157.00%
Convertible Notes Payable One [Member] | Maximum [Member]  
Fair value of embedded derivative term 1 year 11 months 12 days
Fair value of embedded derivative expected volatility 180.00%
v3.4.0.3
Embedded Derivative Liabilities - Schedule of Embedded Derivative Instruments (Details) - Convertible Notes [Member]
6 Months Ended
Feb. 29, 2016
USD ($)
Balance
Initial valuation of embedded derivative instruments issued during the period $ 489,140
Decrease in fair value of derivative liabilities (78,003)
Balance $ 411,137
v3.4.0.3
Equity (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended 6 Months Ended
May. 31, 2015
Feb. 29, 2016
Feb. 29, 2016
Feb. 28, 2015
Aug. 31, 2015
Jan. 31, 2015
Proceeds from issuence of comon stock     $ 286,600    
Common stock issued   89,646,245 89,646,245   84,486,774  
Common stock value   $ 89,646 $ 89,646   $ 84,487  
Number of common stock shares issued for services     5,159,471      
Stock-based compensation     $ 471,170 $ 990,029    
Warrant [Member]            
Number of warrants issued to purchase of common stock shares   250,000        
Warrants exercise price per share   $ 0.12 $ 0.12      
Warrants expire date   Oct. 31, 2018        
Fair value assumption term   3 years        
Fair value assumption volatility rate   160.00%        
Fair value assumption risk free rate   0.90%        
Fair value assumption dividend   $ 0        
Fair value of warrants   $ 12,220        
Aggregate intrinsic value, granted   $ 0      
Series A Preferred Stock [Member]            
Issuance of preferred stock convertible into common stock shares       61,858    
IPIN [Member]            
Common stock issued       1,000,000   1,000,000
Common stock value       $ 164,521    
Subscription Agreement With Third Parties [Member]            
Proceeds from issuence of comon stock       $ 36,600    
Common stock price per share       $ 0.25    
Subscription Agreements [Member]            
Common stock payable       $ 4,550    
Obligation to issue remaining common stock       18,000    
Number of stock issued for subscription agreements       128,200    
Subscription Agreement With An Investor [Member]            
Proceeds from issuence of comon stock       $ 250,000    
Common stock price per share       $ 0.27    
Common stock payable       $ 250,000    
Obligation to issue remaining common stock       925,926    
Srevices [Member]            
Number of common stock shares issued for services       2,023,000    
Stock-based compensation       $ 990,029    
Equity Line Agreement-[Member] | SBI Investments, LLC [Member}            
Line of credit face amount $ 2,000,000          
Maximum brorrowing amount $ 2,000,000          
Percentage of average prices of common stock 80.00%          
Percentage of price on fifth trading day of draw down pricing period 85.00%          
v3.4.0.3
Equity - Schedule of Warrants (Details) - Warrant [Member] - $ / shares
3 Months Ended 6 Months Ended
Feb. 29, 2016
Feb. 29, 2016
Number of Warrants, Outstanding Beginning Balance   1,425,926
Number of Warrants, Granted   250,000
Number of Warrants, Exercised  
Number of Warrants, Expired   (925,926)
Number of Warrants, Outstanding and exercisable Ending Balance 750,000 750,000
Weighted Average Exercise Price, Outstanding Beginning Balance   $ 0.82
Weighted Average Exercise Price, Granted   $ 0.12
Weighted Average Exercise Price, Exercised  
Weighted Average Exercise Price, Expired   $ 1.00
Weighted Average Exercise Price, Outstanding and exercisable Ending Balance $ 0.37 $ 0.37
Aggregate Intrinsic Value, Outstanding Beginning Balance  
Aggregate Intrinsic Value, Granted $ 0
Aggregate Intrinsic Value, Outstanding and exercisable Ending Balance
Weighted average remaining contractual life (years), Outstanding Beginning Balance   1 year 8 months 12 days
Weighted average remaining contractual life (years), Granted   0 years
Weighted average remaining contractual life (years), Outstanding and exercisable Ending Balance   2 years 5 months 5 days
v3.4.0.3
Fair Value Measurements - Schedule of Fair Value Recurring Basis (Details) - USD ($)
Feb. 29, 2016
Aug. 31, 2015
Liabilities fair value disclosure recurring $ 411,137
Level 1 [Member]    
Liabilities fair value disclosure recurring
Level 2 [Member]    
Liabilities fair value disclosure recurring
Level 3 [Member]    
Liabilities fair value disclosure recurring $ 411,137
v3.4.0.3
Fair Value Measurements - Schedule of Fair Value of Financial Assets (Details)
6 Months Ended
Feb. 29, 2016
USD ($)
Fair Value Disclosures [Abstract]  
Beginning balance
Additions $ 489,140
Change in fair value of derivative liabilities (78,003)
Ending balance $ 411,137
v3.4.0.3
Related Party Transactions (Details Narrative) - USD ($)
Feb. 29, 2016
Aug. 31, 2015
Note payable related party $ 400,853 $ 282,436
Officers One [Member]    
Loans payable 238,932 176,248
Officers Two [Member]    
Loans payable $ 161,921 $ 106,188
v3.4.0.3
Commitments and Contingencies (Details Narrative)
6 Months Ended
Feb. 29, 2016
USD ($)
Commitments and Contingencies Disclosure [Abstract]  
Compensation and other expenses $ 379,000
Note payable $ 5,000
v3.4.0.3
Commitments and Contingencies - Schedule of Accrued Liabilities (Details) - USD ($)
Feb. 29, 2016
Aug. 31, 2015
Commitments and Contingencies Disclosure [Abstract]    
Accounts payable and accrued liabilities $ 110,463 $ 110,463
Accrued salaries and payroll taxes 233,163 233,163
Advances 35,509 35,509
Total $ 379,135 $ 379,135
v3.4.0.3
Subsequent Events (Details Narrative) - USD ($)
1 Months Ended 6 Months Ended
May. 02, 2016
Apr. 30, 2015
Feb. 29, 2016
Feb. 28, 2015
Proceeds from convertible note     $ 401,500
Subsequent Event [Member] | Executives [Member]        
Number of shares issued for compensation   2,000,000    
Number of shares issued for compensation, value   $ 140,000    
Subsequent Event [Member] | Director [Member]        
Number of shares issued for compensation   500,000    
Number of shares issued for compensation, value   $ 35,000    
Subsequent Event [Member] | Convertible Notes Payable One [Member]        
Proceeds from notes payable $ 275,000      
Proceeds from convertible note $ 275,000      
Debt instruments interest rate 8.00%      
Debt instruments maturity date May 28, 2016      
Percentage of convertible rate lowest trading price 43.00%      
Percentage of conversion price discount 43.00%      
Subsequent Event [Member] | Convertible Notes Payable One [Member] | Maximum [Member]        
Debt instruments interest rate 22.00%      
Subsequent Event [Member] | Convertible Notes Payable Two [Member]        
Proceeds from notes payable $ 275,000      
Proceeds from convertible note $ 275,000      
Debt instruments interest rate 8.00%      
Debt instruments maturity date May 13, 2016      
Percentage of convertible rate lowest trading price 22.00%      
Percentage of conversion price discount 43.00%      
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