UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

Form 10-K

 

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

 

For the fiscal year ended December 31, 2016

 

OR

 

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

 

Commission file number: 000-55505

 

 

 

LIFELOGGER TECHNOLOGIES CORP.

(Exact name of registrant as specified in its charter)

 

Nevada   45-5523835
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)

 

11380 Prosperity Farms Road, Suite 221E,
Palm Beach Gardens, Florida
  33410
(Address of principal executive offices)   (Zip Code)

 

(561) 515-6928

(Registrant’s telephone number, including area code)

 

Not Applicable

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

 

Securities registered under Section 12(b) of the Act: None

 

Securities registered under Section 12(g) of the Act: Common Stock, Par Value $0.001 per share

 

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

 

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

 

Indicate by check mark whether the issuer (1) 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

 

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 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]

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold as of the last business day of the registrant’s most recently completed second fiscal quarter. $2,927,723 on June 30, 2016.

 

The number of shares of the registrant’s Common Stock issued and outstanding was 2,744,830 shares as of April 17, 2017.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

None.

 

 

 

 

 

 

Table of Contents

 

      Page
       
  Part I    
       
Item 1 Business   4
       
Item 1A Risk Factors   6
       
Item 1B Unresolved Staff Comments   11
       
Item 2 Properties   11
       
Item 3 Legal Proceedings   11
       
Item 4 Mine Safety Disclosures   11
       
  Part II    
       
Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities   11
       
Item 6 Selected Financial Data   12
       
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations   12
       
Item 7A Quantitative and Qualitative Disclosures About Market Risk   14
       
Item 8 Financial Statements and Supplementary Data   14
       
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure   14
       
Item 9A Controls and Procedures   14
       
Item 9B Other Information   16
       
  Part III    
       
Item 10 Directors, Executive Officers and Corporate Governance   16
       
Item 11 Executive Compensation   18
       
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters   19
       
Item 13 Certain Relationships and Related Transactions, and Director Independence   20
       
Item 14 Principal Accounting Fees and Services   20
       
  Part IV    
       
Item 15 Exhibits, Financial Statements Schedules   20
       
  Signatures   24

 

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FORWARD-LOOKING STATEMENTS

 

This report contains forward-looking statements. The Securities and Exchange Commission encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This report and other written and oral statements that we make from time to time contain such forward-looking statements that set out anticipated results based on management’s plans and assumptions regarding future events or performance. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, future performance or results of current and anticipated sales efforts, expenses, the outcome of contingencies, such as legal proceedings, and financial results. Factors that could cause our actual results of operations and financial condition to differ materially are discussed in greater detail under Item 1A – “Risk Factors” of this report.

 

We caution that the factors described herein and other factors could cause our actual results of operations and financial condition to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

 

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PART I

 

ITEM 1. BUSINESS

 

The Company

 

Lifelogger Technologies, Inc. (“we”, “us”, the “Company”, “Lifelogger”) was incorporated in Nevada on June 4, 2012 under the name Snap Online Marketing Inc. We changed our name effective January 31, 2014.

 

The Company

 

We are a lifelogging software company that developed and hosts a proprietary cloud-based software solution accessible on iOS and Android devices that offers an enhanced media experience for consumers by augmenting videos, livestreams and photos with additional context information and providing a platform that makes it easy to find and use that data when viewing or sharing media. The first iteration of that context information is focused on geo-location, face-detection, and different options for tagging and social interaction.

 

Our Core Business

 

Lifelogging is a way of journaling one’s life using media, often through the use of wearable electronic devices. We make lifelogging accessible to the mass market by taking videos and images right from users’ smart phones, wearable camera and/or sensor solutions, and adding geographic, visual and test data designed to enhance the relevance and context of the information collected. We make it easier for users to retrieve and share their media with family and friends without having to be an expert in using advanced functions in real time, using live stream or recording, at the user’s option. We allow consumers to easily capture and live stream videos with geographic coordinates and automatic face detection and to tag special moments while recording. The video playback features an interactive map and ability to skip to in-video frames with faces detected and added tags. Search features allow users the ability to retrieve videos beyond the basic title and description, including location, face or in-line video tags. Sharing videos on popular social channels like Facebook and Twitter using links makes it easy to manage large media files.

 

Our vision is to seamlessly integrate with a wide range of wearable cameras and mobile devices. To realize this vision, our plan is to integrate with selected leading camera manufacturers. We refer to this integrated eco-system as the LifeLogger Platform. In addition, our LifeLogger Platform can be configured for use on a “white-label” license basis by device manufacturers and leading companies in our selected industries. The LifeLogger video cloud storage solution and iOS and Android applications are architected for scalability with high availability designed for use with widely available third party cloud based data providers.

 

Software Development Milestones

 

Following the launch of our private beta version of the LifeLogger Platform in August 2015 to users who expressed interest for exclusive testing with their iOS and Android devices, we launched an open public version during the first quarter of 2016. This release has the primary value proposition built in with geo-coordinates, face detection, playback with interactive map, social engagement features that enable easy sharing and ability to “like” other postings. Among the uses of our platform are the ability to share a video of a customer’s vacation in Europe with others that is integrated with an interactive map showing the viewer where the video is taking place, allowing the viewer to seamlessly switch to the map view and even show additional views of those locations and other media taken by other people nearby. The end result is designed to provide an enhanced media experience much richer than just sharing the video alone.

 

We maintain the operation of this platform and are seeking potential distributors, joint venture and strategic alliance partners and additional sources of financing to enable us to pursue continued marketing and future development and commercialization activities to increase engagement and make improvements to the user interface and experience.

 

Our Vision

 

Our mission is to connect people with the media that matters to them. To accomplish this, we envision collecting as much data as possible about the captured device agnostic media allowing users to get videos from their iOS or Android device, or other wearable camera and/or sensor solutions. In addition to the data we might collect to augment the video, our plan is to anonymously collect viewing data and evaluate habits to determine what is most relevant to our customers as we intersect those patterns with the customer’s connected social media networks. Between the data we are capable of adding to users’ media and data that is publicly available (e.g. street views, mapping, other people’s videos), users are able to access other media that’s relevant to their photos and/or video. We believe that the end result is a much richer experience for our users and a data network that facilitates finding media that is relevant to our customers.

 

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The Idea of Lifelogging

 

Lifelogging is a way of journaling one’s life using media. We make lifelogging accessible to the mass market by taking videos and images right from users’ smart phones, wearable camera and/or sensor solutions, and adding geographic, visual and test data designed to enhance the relevance and context of the information collected. We make it easier for users to retrieve and share their media with family and friends without having to be an expert in using advanced functions in real time, using live stream or recording, at the user’s option. We allow users to easily capture and live stream videos with geographic coordinates and automatic face detection and to tag special moments while recording. The video playback features an interactive map and ability to skip to in-video frames with faces detected and added tags. Search features allow users the ability to retrieve videos beyond the basic title and description, including location, face or in-line video tags, by region or date. Sharing videos on popular social channels like Facebook, Twitter and YouTube using links makes it easy to manage large media files.

 

Operational Resources

 

We rely on third party product development and software engineering and consulting providers for the development and support of our LifeLogger Platform on an as-needed basis. Our operations are guided by Andrés Espineira, B.S., M.M., an entrepreneur with a strong background in product strategy, marketing and software development who joined our company in November 2015 as our Chief Marketing Officer.

 

We completed a prototype of our integrated Lifelogger wearable video camera for testing in 2014 and continue to market this product to potential distributors and joint venture and strategic alliance partners. We will evaluate opportunities from these marketing efforts to determine the extent of our future development and marketing of this device.

 

Sales and Marketing

 

We plan to develop a new marketing strategy in 2017 following finalization of an agreement with a distributor, joint venture or strategic alliance partner and securing additional sources of financing. These strategies may include the following:

 

  Search engine optimization to improve rankings to drive organic growth. Use traffic and rankings from benchmark service providers to improve Lifelogger’s rankings by strategically redirecting traffic.
     
  Development of a data-driven understanding of user growth and customer engagement.
     
  Focus on a vertical to drive tailored engagement. We have chosen to focus on travel among the general population, where we observe a sweet spot of increased capture, sharing and preservation.
     
  Optimize platform to drive new user signups through a rich media sharing experience. Nothing sells a service better thank customers, and nothing is more compelling than their own photos and videos.

 

Principal Suppliers

 

We believe we will have adequate access to a qualified development team for the LifeLogger Platform.

 

Competition

 

We will initially license our platform exclusively via the Internet. Our competition includes other Internet based sellers of lifelogger services. Some of our competitors may have significantly greater financial, marketing and other resources than we do. Our competitors may undertake more far-reaching marketing campaigns, including print and television advertisements, and adopt more aggressive pricing policies that may allow them to build larger customer and distribution bases than ours. Our competitor’s services may be equal or superior to our proposed platform or that achieve greater market acceptance than ours.

 

Government Regulation

 

Our LifeLogger Platform business operates in a regulated environment under various federal and state consumer protection and other laws, rules and regulations, including the federal Gramm-Leach-Bliley Act and the federal Telemarketing and Consumer Fraud and Abuse Prevention Act. Some of the more significant regulations that we will become subject are described below.

 

Our LifeLogger Platform is subject to a number of U.S. federal and state, and foreign laws and regulations that affect companies conducting business on the Internet. Many of these laws and regulations are still evolving and being tested in courts, and could be interpreted in ways that could harm our business. These may involve user privacy, rights of publicity, data protection, content, intellectual property, distribution, electronic contracts and other communications, competition, protection of minors, consumer protection, taxation and online payment services. In particular, we will become subject to federal, state, and foreign laws regarding privacy and protection of user data. Foreign data protection, privacy, and other laws and regulations can be more restrictive than those in the United States. U.S. federal and state and foreign laws and regulations are constantly evolving and can be subject to significant change. In addition, the application and interpretation of these laws and regulations are often uncertain, particularly in the new and rapidly-evolving industry in which we intend to operate, and may be interpreted and applied inconsistently from country to country and inconsistently with our current policies and practices. There are also a number of legislative proposals pending before the U.S. Congress, various state legislative bodies, and foreign governments concerning data protection which could affect us. For example, the European Commission is currently considering a data protection regulation that may include operational requirements for companies that receive personal data that are different than those currently in place in the European Union, and that may also include significant penalties for non-compliance.

 

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We believe we are in substantial compliance with all governmental regulations applicable to our business. We will employ a number of external resources to assist us in complying with our regulatory obligations. These external resources will include outside technology providers and consultants. As we expand our business, we will be required to raise additional capital to cover the expected increase in costs to hire and train additional internal and external resources to ensure we remain in substantial compliance with our governmental obligations.

 

Patents and Trademarks

 

We own the trademark for “LL Life Logger,” “LifeLogger,” and “What’s Your Story”. These trademarks are registered in the United States and a trademark for “Life Logger” has been registered in the European Union.

 

Employees

 

As of April 17, 2017, we have no full-time employees. However, we have a consulting contract with our Chief Executive Officer to provide services to us on a full-time basis and Andres Espiniera who provides services to us on a part-time basis. In addition, we contract with third-party software developers as needed for software development.

 

Our Corporate History and Recent Developments

 

We were incorporated in Nevada on June 4, 2012 under the name Snap Online Marketing Inc. We changed our name effective January 31, 2014 when we embarked on the development and commercialization of innovative lifelogging solutions enabling the recording, secure online storage, organizing, retrieving, appreciation and selective sharing of personal information, data, photos, videos and other activities with friends and the public at large. Prior to January 31, 2014, we were engaged in providing web based marketing services.

 

On June 30, 2016, we c ompleted the acquisition of certain assets of Pixorial, Inc. (“Pixorial”) pursuant to the terms of the Amended and Restated Asset Purchase Agreement entered into among us, Pixorial and Andres Espiniera dated June 20, 2016 (the “Amended Agreement”). Pursuant to the terms of the Amended Agreement, we acquired the trademark “What’s Your Story” and Pixorial’s customer list (the “Pixorial Asset Acquisition”). Under the terms of the Amended Agreement, we agreed to issue 86,673 shares of our unregistered common stock to the existing shareholders and certain creditors of Pixorial. In addition, we amended the exercise price of Mr. Espineira’s November 10, 2015 stock option award to acquire 200,000 shares of our common stock to $3.00 per share. The shares of our common stock to be issued to Pixorial’s shareholders and creditors are subject to a lock-up agreement whereby one-third the number received by each may be sold beginning as of each of the first three anniversaries of the closing of the Pixorial Asset Acquisition.

 

We amended our amended and restated articles of incorporation to increase our authorized capital stock from 125,000,000 shares to 500,000,000 shares, of which 495,000,000 shares will be common stock and 5,000,000 will be preferred stock and also effected a 1 for 30 reverse split of our common stock outstanding. This corporate action was approved by FINRA on March 24, 2017 and became effective as of March 27, 2017.

 

ITEM 1A. RISK FACTORS

 

Risks Related to our Business

 

We lack an operating history. There is no assurance our future operations will result in profitable revenues. If we cannot generate sufficient revenues to operate profitably, our business will fail.

 

We were incorporated on June 4, 2012. For the year ended December 31, 2016, we realized no revenues and incurred $1,497,849 in operating costs for the year ended December 31, 2016. We have not generated any revenue from our planned Lifelogging Platform business. As of December 31, 2016, we had accumulated deficit of $4,594,037. We have a limited operating history upon which an evaluation of our future success or failure can be made. Based upon current plans, do not know when we expect to begin generating revenues from our planned Lifelogging Platform business. Furthermore, our revenues may not be sufficient to cover our operating costs. We cannot guarantee that we will be successful in generating significant revenues in the future. Failure to achieve a sustainable sales level will cause us to go out of business.

 

Our auditors have issued a going concern opinion because there is substantial uncertainty that we will continue operations in which case you could lose your investment.

 

Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an ongoing business for the next twelve months. The financial statements do not include any adjustments that might result from the uncertainty about our ability to continue in business. As such we may have to cease operations and you could lose your investment.

 

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Significant Capital Requirements; Possible Additional Financing.

 

Our capital requirements will be significant. We are dependent on raising additional capital in order to fund our operations. Such financing may include the issuance of additional securities and/or the incurrence of debt financing. There can be no assurance that any additional financing will be available to us on acceptable terms or at all. Any additional equity financing will dilute the interests of our then existing shareholders.

 

Lifelogging services generally, and our services in particular, may not achieve widespread acceptance which could require us to modify our sales and marketing efforts and could limit our ability to successfully grow our business.

 

The market for lifelogging software remains immature and is rapidly changing. In addition, the services we plan to sell are still being developed and will be new to the market. Our ability to sell these services and generate revenue in the future depends on the acceptance by customers, third-party resellers and end users of life logging software and services generally and our services in particular. The adoption of lifelogging software could be hindered by the costs to use the services. Accordingly, in order to achieve commercial acceptance, we may have to educate prospective customers about the uses and benefits of life blogging in general and our services in particular. We may also need to modify or increase our planned sales and marketing efforts or adopt new marketing strategies to achieve such education. If these efforts fail, prove excessively costly or unmanageable, or if life logging generally does not continue to achieve commercial acceptance, our business would be harmed.

 

We may have difficulty managing growth in our business.

 

Because of our small size, growth in accordance with our business plans, if achieved, will place a significant strain on our financial, technical, operational and management resources. As we expand our activities and increase our service lines, there will be additional demands on our financial, technical and management resources. The failure to continue to upgrade our technical, administrative, operating and financial control systems or the occurrence of unexpected expansion difficulties, including the recruitment and retention of experienced personnel, talent and consultants, could have a material adverse effect on our business, financial condition and results of operations and our ability to timely execute our business plan.

 

Our business, financial condition and results of operations may be adversely affected by unfavorable economic and market conditions .

 

Changes in global economic conditions could adversely affect the profitability of our business. Economic conditions worldwide have from time to time contributed to slowdowns in the technology industry, as well as in the specific segments and markets in which we operate, resulting in reduced demand and increased price competition for our services. Our operating results in one or more geographic regions may also be affected by uncertain or changing economic conditions within that region, such as the challenges that are currently affecting economic conditions in the United States and abroad. If economic and market conditions in the United States or other potential key markets, remain unfavorable or persist, spread or deteriorate further, we may experience an adverse impact on our business, financial condition and results of operation. In addition, the current or future tightening of credit in financial markets could result in a decrease in demand for our services.

 

Our ability to keep pace with technological developments is uncertain .

 

Our failure to respond in a timely and effective manner to new and evolving technologies could harm our business, financial condition and operating results. The idea of lifelogging is an evolving social network trend characterized by rapidly changing technology, evolving industry standards, changes in consumer needs and new service introductions. Our business, financial condition and operating results will depend, in part, on our ability to develop the technical expertise to address these rapid changes and to use leading technologies effectively. We may experience difficulties that could delay or prevent the successful development, introduction or implementation of new features or services to our proposed lifelogging services.

 

Any defects in, or other problems with, our services could harm our business and result in claims against us.

 

Complex software service platforms such as ours may contain errors, defects and bugs (collectively, “errors”). During the development of LifeLogger Platform, we may discover errors. As a result, our planned services may take longer than expected to develop. In addition, we may discover that remedies for errors may be technologically unfeasible. Delivery of services with undetected errors or reliability, quality or compatibility problems could damage our reputation. The existence of errors or reliability, quality or compatibility problems could also cause interruptions, delays or cessations of sales. We could, as well, be required to expend significant capital and other resources to remedy these problems. In addition, customers whose businesses are disrupted by these errors or reliability, quality or compatibility problems could bring claims against us; the defense of which, even if successful, would likely be time consuming and costly. Furthermore, if any such defense were not successful, we might be obligated to pay substantial damages that could materially and adversely affect our operating results.

 

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Our business, financial condition and results of operations could be adversely affected if we fail to provide adequate security to protect our prospective customers and our systems .

 

Online security breaches could adversely affect our business, financial condition and results of operations. Any well-publicized compromise of security could deter use of the internet in general or use of the internet to store, retrieve and share confidential or personal information or downloading sensitive materials. In offering lifelogging services, we may increasingly rely on technology acquired from third parties to develop and produce our LifeLogger Platform. Advances in computer capabilities, new discoveries in the field of cryptography or other developments could compromise or breach the algorithms that we plan to use to protect the data of our potential customers. If third parties are able to penetrate our planned network security or otherwise misappropriate confidential information, we could be subject to liability, which could result in litigation. In addition, experienced programmers or “hackers” may attempt to misappropriate proprietary information or cause interruptions in our services that could require us to expend significant capital and resources to protect against or remediate these problems.

 

We may not be able to protect and enforce our intellectual property rights .

 

The LifeLogger Platform has been created using proprietary technology being developed, in part, by third party contractors and the proprietary technology of the vendors who supply them with components. Although we will seek contractual indemnification rights and have certain common law rights of indemnification, neither we nor our third party contractors have any registered patents on our Lifelogger Platform. Our inability or failure to protect or enforce trademarks and other proprietary rights could materially adversely affect our business. Our actions to establish, protect and enforce our trademarks and other proprietary rights may not prevent imitation of our services or brands or control piracy by others or prevent others from claiming violations of their trademarks and other proprietary rights by us. There are factors outside of our control that pose a threat to our intellectual property rights. For example, effective intellectual property protection may not be available in every country in which our proposed services are distributed or made available through the internet.

 

Further, although management does not believe that our LifeLogger Platform will infringe on the intellectual rights of others, there is no assurance that we will not be the target of infringement or other claims. Such claims, even if not true, could result in significant legal and other costs and may be a distraction to our management or interrupt our proposed business.

 

If we do not diversify, continue to innovate and provide products or services that are useful to consumers and which generate significant traffic to our websites, we may not remain competitive or generate revenue .

 

Internet-based social networking is characterized by significant competition, evolving industry standards and frequent product or service enhancements. Our competitors are constantly developing innovations in internet social networking. We must continually invest in improving our customers’ experiences and in providing products and services that people expect in a high social networking experience, including services responsive to their needs and preferences and services that continue to attract, retain and expand our customer base.

 

We may need to change the manner in which we conduct our business, or incur greater operating expenses, if government regulation of the Internet or other areas of our business changes or if consumer attitudes toward use of the Internet, mobile devices, and lifelogging change.

 

The adoption or modification of laws or regulations relating to the Internet or other areas of our business could limit or otherwise adversely affect the manner in which we currently conduct our business. In addition, the growth and development of the market for lifelogging may lead to more stringent consumer protection laws, which may impose additional burdens on us. If we are required to comply with new regulations or legislation or new interpretations of existing regulations or legislation, this compliance could cause us to incur additional expenses or alter our business model.

 

The manner in which Internet and other legislation may be interpreted and enforced cannot be precisely determined and may subject either us or our customers to potential liability, which in turn could have an adverse effect on our business, results of operations and financial condition. The adoption of any laws or regulations that adversely affect the popularity or growth in use of the Internet could decrease the demand for our LifeLogger Platform and increase our cost of doing business.

 

In addition, if consumer attitudes toward use of the Internet, mobile devices and lifelogging change and If we are unable to interact with consumers because of changes in their attitude toward use of these technologies, our potential future service revenues, customer acquisition and retention and operating results may be affected adversely.

 

As an “emerging growth company” under the Jumpstart Our Business Startups Act (the “JOBS Act”), we are permitted to rely on exemptions from certain disclosure requirements.

 

We qualify as an “emerging growth company” under the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:

 

  have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
     
  comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);
     
  submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and
     
  disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation.

 

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In addition, Section 102 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

 

We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

 

Until such time, however, we cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

 

We are highly dependent on the services provided by Stewart Garner, our Chief Executive Officer, Chief Financial Officer and sole director.

 

We are highly dependent upon the services of Stewart Garner, our Chief Executive Officer, Chief Financial Officer and sole director. We have not obtained “key-man” life insurance policies insuring the life of Mr. Garner. If the services of Mr. Garner become unavailable to us, for any reason, our business could be adversely affected.

 

If we are unable to attract and retain key personnel, our business could be harmed.

 

If Mr. Garner were to leave, we could face substantial difficulty in hiring qualified successors and could experience a loss in productivity while any successor obtains the necessary training and experience. Our employment relationships are generally at-will. We cannot assure that one or more key employees will not leave in the future. We intend to continue to hire additional highly qualified personnel, including engineers and operational personnel, but may not be able to attract, assimilate or retain qualified personnel in the future. Any failure to attract, integrate, motivate and retain these employees could harm our business.

 

We may have difficulty managing growth in our business.

 

Because of our small size, growth in accordance with our business plans, if achieved, will place a significant strain on our financial, technical, operational and management resources. As we expand our lifelogging business activities and increase the size of our operations, we plan to utilize computer systems and technology to minimize our labor costs. Despite these efforts, there will be additional demands on our financial, technical and management resources. The failure to implement administrative, operating and financial control systems and software or the occurrence of unexpected expansion difficulties, including the recruitment and retention of experienced personnel, talent and consultants, could have a material adverse effect on our business, financial condition and results of operations and our ability to timely execute our business plan.

 

Management can exercise voting control over corporate decisions.

 

Stewart Garner, our Chief Executive Officer and sole member of our Board of Directors owns 1,000 shares of our Series A Preferred Stock. Each share of Series A Preferred Stock entitles the holder to 50,000 votes on all matters submitted to a vote of the Company’s stockholders. In the event that such votes do not total at least 51% of all votes, then the votes cast by the holders of the Series A Preferred Stock shall be equal to 51% of all votes cast at any meeting of the Company’s stockholders or any issue put to the stockholders for voting. As a result of the ownership of the Series A Preferred Stock, Mr. Garner exercises control in determining the outcome of all corporate transactions or other matters, including the election of directors, mergers, consolidations, the sale of all or substantially all of our assets, and also the power to prevent or cause a change in control. The interests of Mr. Garner may differ from the interests of the other stockholders and thus result in corporate decisions that are adverse to other stockholders.

 

RISK FACTORS RELATING TO OUR SECURITIES

 

There currently is only a minimal public market for our common stock. Failure to develop or maintain a trading market could negatively affect the value of our common stock and make it difficult or impossible for you to sell your shares.

 

There currently is only a minimal public market for shares of our common stock and an active market may never develop. Our common stock is quoted on the OTCQB tier of the OTC Markets Group, Inc. under the symbol “LOGG”. We may not ever be able to satisfy the listing requirements for our common stock to be listed on any stock exchange, including the trading platforms of NASDAQ Stock Market which are often more widely-traded and liquid markets. Some, but not all, of the factors which may delay or prevent the listing of our common stock on a more widely-traded and liquid market include the following: our stockholders’ equity may be insufficient; the market value of our outstanding securities may be too low; our net income from operations may be too low; our common stock may not be sufficiently widely held; we may not be able to secure market makers for our common stock; and we may fail to meet the rules and requirements mandated by, any of the several exchanges and markets to have our common stock listed.

 

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We cannot assure you that our common stock will become liquid or that it will be listed on a securities exchange.

 

Until our common stock is listed on a national securities exchange such as the New York Stock Exchange or the Nasdaq Stock Market, we expect our common stock to remain eligible for quotation on the OTCQB, or on another over-the-counter quotation system. In those venues, however, an investor may find it difficult to obtain accurate quotations as to the market value of our common stock. In addition, if we fail to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling our common stock, which may further affect the liquidity of our common stock. This would also make it more difficult for us to raise capital.

 

The application of the “penny stock” rules could adversely affect the market price of our common stock and increase your transaction costs to sell those shares.

 

The SEC has adopted rule 3a51-1 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, Rule 15g-9 requires:

 

  that a broker or dealer approve a person’s account for transactions in penny stocks, and
     
  the broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

 

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:

 

  obtain financial information and investment experience objectives of the person, and
     
  make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

 

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form:

 

  sets forth the basis on which the broker or dealer made the suitability determination and
     
  that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

 

Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.

 

The application of Rule 144 creates some investment risk to potential investors; for example, existing shareholders may be able to rely on Rule 144 to sell some of their holdings, driving down the price of the shares you purchased.

 

Rule 144 enables a person who has beneficially owned restricted shares of our common stock for at least six months to sell their securities provided that: (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the three months preceding a sale, (ii) we are subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale and (iii) if the sale occurs prior to satisfaction of a one-year holding period, we provide current information at the time of sale.

 

Persons who have beneficially owned restricted shares of our common stock for at least six months but who are our affiliates at the time of, or at any time during the three months preceding a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of either of the following:

 

  1% of the total number of securities of the same class then outstanding (848,671 shares of common stock as of April 7, 2016); or
     
  the average weekly trading volume of such securities during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale;

 

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provided, in each case, that we are subject to the Exchange Act periodic reporting requirements for at least three months before the sale. Such sales by affiliates must also comply with the manner of sale, current public information and notice provisions of Rule 144.

 

We do not pay dividends on our common stock.

 

We have not paid any dividends on our common stock and do not anticipate paying dividends in the foreseeable future. We plan to retain earnings, if any, to finance the development and expansion of our business.

 

GENERAL RISK STATEMENT

 

Based on all of the foregoing, we believe it is possible for future revenue, expenses and operating results to vary significantly from quarter to quarter and year to year. As a result, quarter-to-quarter and year-to-year comparisons of operating results are not necessarily meaningful or indicative of future performance. Furthermore, we believe that it is possible that in any given quarter or fiscal year our operating results could differ from the expectations of public market analysts or investors.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 2. PROPERTIES

 

Our executive offices are located in a shared executive office suite at 11380 Prosperity Farms Road, Suite 221E, Palm Beach Gardens, Florida 33410 on a month to month basis. In addition, we maintain office space provided by Mr. Garner, our Chief Executive Officer, Chief Financial Officer and sole director, in Ontario, Canada under the terms of his consulting agreement with our company.

 

ITEM 3. LEGAL PROCEEDINGS

 

We are not presently a party to any material litigation, nor to the knowledge of management is any litigation threatened against us that may materially affect us.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

PART II

 

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES

 

Our common stock is quoted on the OTCQB and has traded under the symbol “LOGG” since February 2014. Trading of our common stock is limited and sporadic. There can be no assurance that a liquid market for our common stock will ever develop.

 

The following table reflects the high and low closing sales information for our common stock for each fiscal quarter during the fiscal years ended December 31, 2016 and 2015. This information was obtained from the OTCQB and reflects inter-dealer prices without retail mark-up, markdown or commission and may not necessarily represent actual transactions.

 

Quarter Ended   High     Low  
Fiscal Year 2016                
December 31, 2016   $ 2.22     $ 0.3090  
September 30, 2016   $ 2.97     $ 1.95  
June 30, 2016   $ 5.97     $ 1.71  
March 31, 2016   $ 8.97     $ 1.95  
                 
Fiscal Year 2015                
December 31, 2015   $ 23.70     $ 9.90  
September 30, 2015   $ 17.70     $ 4.29  
June 30, 2015   $ 16.86     $ 6.00  
March 31, 2015   $ 6.615     $ 2.35  

 

As of April 17, 2017, there were approximately 7 record holders, an unknown number of additional holders whose stock is held in “street name” and 2,744,830 shares of common stock issued and outstanding.

 

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We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future.

 

Recent Sales of Unregistered Securities

 

None.

 

ITEM 6. SELECTED FINANCIAL DATA

 

Not applicable to a smaller reporting company.

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

We define our accounting periods as follows:

 

  “fiscal 2015” – January 1, 2015 through December 31, 2015
     
  “fiscal 2016” – January 1, 2016 through December 31, 2016

 

The Company

 

We are a lifelogging software company that developed and hosts a proprietary cloud-based software solution accessible on iOS and Android devices that offers an enhanced media experience for consumers by augmenting videos, livestreams and photos with additional context information and providing a platform that makes it easy to find and use that data when viewing or sharing media. The first iteration of that context information is focused on geo-location, face-detection, and different options for tagging and social interaction.

 

Following the launch of our private beta version of the LifeLogger Platform in August 2015 to users who expressed interest for exclusive testing with their iOS and Android devices, we launched an open public version during the first quarter of 2016. This release has the primary value proposition built in with geo-coordinates, face detection, playback with interactive map, social engagement features that enable easy sharing and ability to “like” other postings. Among the uses of our platform are the ability to share a video of a customer’s vacation in Europe with others that is integrated with an interactive map showing the viewer where the video is taking place, allowing the viewer to seamlessly switch to the map view and even show additional views of those locations and other media taken by other people nearby. The end result is designed to provide an enhanced media experience much richer than just sharing the video alone.

 

We maintain the operation of this platform and are seeking potential distributors, joint venture and strategic alliance partners and additional sources of financing to enable us to pursue continued marketing and future development and commercialization activities to increase engagement and make improvements to the user interface and experience.

 

We completed a prototype of our integrated Lifelogger wearable video camera for testing in 2014 and continue to market this product to potential distributors and joint venture and strategic alliance partners. We will evaluate opportunities from these marketing efforts to determine the extent of our future development and marketing of this device.

 

Recent Developments

 

On June 30, 2016, we c ompleted the acquisition of certain assets of Pixorial, Inc. (“Pixorial”) pursuant to the terms of the Amended and Restated Asset Purchase Agreement entered into among us, Pixorial and Andres Espiniera dated June 20, 2016 (the “Amended Agreement”). Pursuant to the terms of the Amended Agreement, we acquired the trademark “What’s Your Story” and Pixorial’s customer list (the “Pixorial Asset Acquisition”). Under the terms of the Amended Agreement, we agreed to issue 86,673 shares of our unregistered common stock to the existing shareholders and certain creditors of Pixorial. In addition, we amended the exercise price of Mr. Espineira’s November 10, 2015 stock option award to acquire 200,000 shares of our common stock to $3.00 per share. The shares of our common stock to be issued to Pixorial’s shareholders and creditors are subject to a lock-up agreement whereby one-third the number received by each may be sold beginning as of each of the first three anniversaries of the closing of the Pixorial Asset Acquisition.

 

We amended our amended and restated articles of incorporation to increase our authorized capital stock from 125,000,000 shares to 500,000,000 shares, of which 495,000,000 shares will be common stock and 5,000,000 will be preferred stock and also effected a 1 for 30 reverse split of our common stock outstanding. This corporate action was approved by FINRA on March 24, 2017 and became effective as of March 27, 2017.

 

RESULTS OF OPERATIONS

 

The following comparative analysis on results of operations was based primarily on the comparative audited financial statements, footnotes and related information for the periods identified below and should be read in conjunction with the financial statements and the notes to those statements that are included elsewhere in this report.

 

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Revenue

 

The company currently has no revenues in fiscal 2016 nor 2015. The Company currently cannot predict when the Company will become revenue producing.

 

Operating Expenses

 

Total operating expenses for fiscal 2016 increased by $288,133 compared to fiscal 2015 mainly as a result of an increase in option expenses to a consultant, partially offset by decreases in research and development and in other consulting.

 

Other Income (Expenses)

 

Other expenses for fiscal 2016 increased by $1,890,579 compared to fiscal 2015 as a result of impairment of intangible assets related to our acquisition of certain assets from Pixorial, change in fair value of derivative warrants and notes, loss on extinguishment of debt, commitment fee expense and interest expense. We expect further increases in our interest expense due to increased borrowing.

 

The net loss for fiscal 2016 was $3,265,250, an increase of $2,178,712 compared to fiscal 2015, as a result of an increases in operating expenses and other expenses discussed above.

 

Liquidity and Capital Resources

 

Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. As of December 31, 2016 our working capital deficit amounted to $1,233,699 an increase of $826,937 as compared to $406,762 as of December 31, 2015. This increase is primarily a result of a decrease in cash and accounts receivable and increases in accounts payable and notes payable and derivative liabilities.

 

Net cash used in operating activities was $865,543 during fiscal 2016 compared to $836,716 in fiscal 2015. The increase in cash used in operating activities is primarily attributable to our net loss and derivative liabilities, partially offset by an increase in options issued for consulting services, interest expense, original issue discount on new financing, commitment fee expense for new debt financing, changes in derivative liabilities, extinguishment of debt and impairment of intangible assets.

 

Net cash used in investing activities during fiscal 2016 was $0 compared to $332 in fiscal 2015. The decrease was a result of no purchases of capital assets during fiscal 2016 as compared to fiscal 2015.

 

Net cash provided by financing activities during fiscal 2016 was $834,885 compared to $730,000 in fiscal 2015. The increase was primarily a result of the proceeds from note payable.

 

Capital Resources

 

We currently have limited cash resources on hand and our projected operating expenses and working capital needs exceed our income and cash resources. We have curtailed our future development and marketing plans until we are able to enter into an agreement with a potential distributor, joint venture or strategic alliance partner or source of additional financing to provide us with sufficient cash to continue these activities. As a result, capital raising has been and continues to be essential for our continued operations, sales and marketing efforts and further development of our LifeLogger platform. We potentially will have to issue additional debt or equity, or enter into a strategic arrangement with a third party to carry out some aspects of our business plan. There can be no assurance that additional capital will be available to us. Other than the agreements discussed below, we currently have no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources. Since we have no other such arrangements or plans currently in effect, our inability to raise funds for the above purposes will have a severe negative impact on our ability to remain a viable company.

 

Current and Future Financings

 

Current Indebtedness

 

Following is an analysis of convertible debt issued to Old Main Capital and SBI Investments at December 31, 2016:

 

    December 31, 2016  
Contractual balance   $

1,143,089

 
Less unamortized discount     (134,628 )
         
Convertible debt   $

1,008,461

 

 

The above amount does not include accrued interest to December 31, 2016 of $16,080.

 

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Going Concern Consideration

 

We have been in the development stage since our inception on June 4, 2012 and continue to incur significant losses. We had an accumulated deficit of $4,594,037 as of December 31, 2016 and $865,543 in cash was used in operating activities. This raises substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent our ability to raise additional capital and generate additional revenues and profits from our business plan.

 

In the opinion of our independent registered public accounting firm for our fiscal year end December 31, 2016, our auditor included a statement that as a result of our deficit accumulated during the development stage at December 31, 2016, our net loss and net cash used in operating activities for the reporting period then ended, there is a substantial doubt as our ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Inflation

 

In the opinion of management, inflation has not and will not have a material effect on our operations in the immediate future. Management will continue to monitor inflation and evaluate the possible future effects of inflation on our business and operations.

 

Off-Balance Sheet Arrangements

 

Under SEC regulations, we are required to disclose our off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, such as changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. As of December 31, 2016, we have no off-balance sheet arrangements.

 

CRITICAL ACCOUNTING POLICIES

 

Our significant accounting policies are disclosed in Note 2 of our Financial Statements included elsewhere in this Annual Report on Form 10-K.

 

ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

See Financial Statements and Financial Statement Schedules appearing on pages F-1 through F -26 of this annual report on Form 10-K.

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.

 

ITEM 9A. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed by us in reports that we file under the Exchange Act is recorded, processed, summarized and reported as specified in the SEC’s rules and forms and that such information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Management, with the participation of our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2016. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were not effective as of December 31, 2016 for the reasons discussed below.

 

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Management’s Annual Report on Internal Control over Financial Reporting

 

Management is responsible for the preparation of our financial statements and related information. Management uses its best judgment to ensure that the financial statements present fairly, in material respects, our financial position and results of operations in conformity with generally accepted accounting principles.

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in the Exchange Act. These internal controls are designed to provide reasonable assurance that the reported financial information is presented fairly, that disclosures are adequate and that the judgments inherent in the preparation of financial statements are reasonable. There are inherent limitations in the effectiveness of any system of internal controls including the possibility of human error and overriding of controls. Consequently, an ineffective internal control system can only provide reasonable, not absolute, assurance with respect to reporting financial information.

 

Our internal control over financial reporting includes policies and procedures that: (i) pertain to maintaining records that, in reasonable detail, accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements in accordance with generally accepted accounting principles and that the receipts and expenditures of company assets are made in accordance with our management and directors authorization; and (iii) provide reasonable assurance regarding the prevention of or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.

 

Under the supervision of management, including our Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and subsequent guidance prepared by the Commission specifically for smaller public companies. Based on that evaluation, our management concluded that our internal control over financial reporting was not effective as of December 31, 2016 because it identified the following material weakness and significant deficiencies:

 

  Material Weakness – The Company did not maintain effective controls over certain aspects of the financial reporting process because we (i) lacked a sufficient complement of personnel with a level of accounting expertise and an adequate supervisory review structure that is commensurate with our financial reporting requirements and (ii) we lacked controls over the accounting for derivative liability treatment related to a note payable not previously reported at September 30, 2015 that caused us to restate our financial statements for the period ended September 30, 2015.
     
  Significant Deficiencies – Inadequate segregation of duties.

 

A material weakness is a deficiency or a combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim consolidated financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the Company’s financial reporting.

 

We expect to be materially dependent upon third parties to provide us with accounting consulting services related to derivative liability treatment and for other accounting services for the foreseeable future. We believe this will be sufficient to remediate the material weaknesses related to our accounting for derivative liability treatment discussed above. Until such time as we have a chief financial officer with the requisite expertise in U.S. GAAP, there are no assurances that the material weaknesses and significant deficiencies in our disclosure controls and procedures will not result in errors in our financial statements which could lead to a restatement of those financial statements.

 

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.

 

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the company’s registered public accounting firm pursuant to SEC rules that permit us to provide only management’s report on internal control over financial reporting in this annual report on Form 10-K.

 

Changes in Internal Controls over Financial Reporting

 

There have been no changes in our internal control over financial reporting during the quarter ended December 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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ITEM 9B. OTHER INFORMATION

 

On April 7, 2017, the Company entered into a Securities Purchase Agreement with two investors (the “Investors”) whereby it agreed to and issued to each of the investors (each an “Investor” and collectively, the “Investors”) a 10% Convertible Promissory Note in the principal amount of up to $75,000 (each, the “April 2017 Note” and collectively, the “April 2017 Notes”) payable in tranches as follows: $19,166.66 consisting of $17,250 (less $1,250 for The Investor’s legal fees) paid to the Company in cash, and less original issue discount of $1,917. This amount will be paid within a reasonable amount of time after the full execution of the Note and transactional documents related to the April 2017 Notes. Each Investor may pay such additional amounts of the consideration and at such dates as mutually agreed upon by the Company and The Investor. The maturity date for each tranche funded shall be twelve (12) months from the effective date of each payment (each a “Maturity Date”) or such earlier date as the April 2017 Notes is required or permitted to be repaid as provided hereunder, and is the date upon which the principal sum of each respective tranche, as well as any accrued and unpaid interest and other fees relating to that respective tranche, shall be due and payable. Each Investor has the right to convert all or any part of the outstanding and unpaid principal and interest into shares of the Company’s common stock. The terms of the Convertible Note are as follows:

 

  1. Each Investor has the right from and after a 180 day delay from the Date of Issuance, and until any time until the April 2017 Note is fully paid, to convert any outstanding and unpaid principal portion of the Note, and accrued interest, into fully paid and non–assessable shares of Common (par value $.001 per share). Bi–weekly amortization payments are due after 6 months.
     
  2. The Convertible Notes are convertible at a fixed rate of $0.07 with no reset provisions.
     
  3. Beneficial ownership is limited to 9.99%.
     
  4. The Company may redeem the April 2017 Notes for 150% of the redemption amount and accrued interest at any time upon ten days written notice to each of the Investors.
     
  5. In the event of default each of the April 2017 Notes bear interest at 24% per annum.

 

Participation in Future Financing. Subject to any existing obligations of the Company, from the date hereof until the date that is the 12-month anniversary of the date each of the April 2017 Notes, upon any issuance by the Company or any of its subsidiaries of its Common Stock or other securities convertible into Common Stock, other than any issuance that is through a public underwritten offering or to an investor or a group of investors that already own Common Stock or securities of the Company, Each of the Investors shall have the right to participate in the subsequent Financing in an amount up to 100% of such Each of the Investors’ pro rata portion as defined below in the April 2017 Notes on the same terms, conditions and price provided for in the Subsequent Financing, subject to any existing obligations of the Company with respect to participation rights.

 

PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Set forth below are the names and ages of our directors and executive officers and their principal occupations at present and for at least the past five years.

 

Name   Age   Positions and Offices to be Held
         
Stewart Garner   50   Chief Executive Officer, Chief Financial Officer and Director

 

Our director is appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board. All officers and directors listed above will remain in office until the next annual meeting of our stockholders, and until their successors have been duly elected and qualified. There are no agreements with respect to the election of Directors. Our Board of Directors appoints officers annually and each Executive Officer serves at the discretion of our Board of Directors.

 

Stewart Garner . Mr. Garner has served as our Chief Executive Officer, Chief Executive Officer and sole director since December 2013. Mr. Garner has over 20 years in finance and business development in both the private and public sectors. Since 2007, Mr. Garner has been the founder and sole officer and director of 2128112 Ontario, Inc., an entity which invests in and develops real estate projects and invests in and consults with public and private entities. Recently, Mr. Garner, has been focused on real estate with the acquisition and development of properties on a consulting basis.

 

As the Chief Executive Officer and Chief Financial Officer of our company, Mr. Garner brings our board his considerable experience in the strategic planning and growth of companies and qualifies him to continue to serve as a director or our company.

 

Key Employees

 

We employ certain individuals who, while not executive officers, make significant contributions to our business and operations and hold various positions within our company.

 

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Andrés Espineira, B.S., M.M., has served as our Chief Marketing Officer since November 2015. Mr. Espineira is an entrepreneur with a strong background in product strategy, marketing and software development. Mr. Espineira began his career in 1988 at Oracle Corporation where he honed his technical skills. Mr. Espineira has always thrived in the early stages of the technology adoption curve. In 1995, he played a leading role in shaping Netscape’s electronic commerce product strategy with the first shopping applications in the market. Later in 1999 at OpenGrid (a Motorola backed startup) he helped define products for the then-nascent wireless ecommerce and location-based industry. After a short-lived early retirement and a sail across the Atlantic Ocean with his father, Mr. Espineira founded Pixorial in 2007 with a simple, yet ambitious mission: to unleash video’s social power and make video memories from any source easy to discover, share and transform. Mr. Espineira has a B.S. in Electrical Engineering from Stanford University (1988) and a Master of Management from the Kellogg School of Business at Northwestern University (1995).

 

Committees of our Board of Directors

 

Our securities are not quoted on an exchange that has requirements that a majority of our Board members be independent and we are not currently otherwise subject to any law, rule or regulation requiring that all or any portion of our Board of Directors include “independent” directors, nor are we required to establish or maintain an Audit Committee or other committee of our Board of Directors.

 

The Board does not have standing audit, compensation or nominating committees. The Board does not believe these committees are necessary based on the size of our company, the current levels of compensation to corporate officers and the beneficial ownership by one shareholder of more than 58.9 % of our outstanding common stock. The Board will consider establishing audit, compensation and nominating committees at the appropriate time.

 

The entire Board of Directors participates in the consideration of compensation issues and of director nominees. Candidates for director nominees are reviewed in the context of the current composition of the Board and the Company’s operating requirements and the long-term interests of its stockholders. In conducting this assessment, the Board of Directors considers skills, diversity, age, and such other factors as it deems appropriate given the current needs of the Board and the Company, to maintain a balance of knowledge, experience and capability.

 

The Board’s process for identifying and evaluating nominees for director, including nominees recommended by stockholders, will involve compiling names of potentially eligible candidates, conducting background and reference checks, conducting interviews with the candidate and others (as schedules permit), meeting to consider and approve the final candidates and, as appropriate, preparing an analysis with regard to particular recommended candidates.

 

Through their own business activities and experiences each of directors have come to understand that in today’s business environment, development of useful products and identification of undervalued real estate, along with other related efforts, are the keys to building our company. The directors will seek out individuals with relevant experience to operate and build our current and proposed business activities.

 

Director Compensation

 

Our directors do not receive any compensation as directors and there is no other compensation being considered at this time.

 

Board Oversight in Risk Management

 

Our Chief Executive Officer, who is our principal executive officer, also serves as Chairman of the Board of Directors, and we do not have a lead director. In the context of risk oversight, we believe that our selection of one person to serve in both positions provides the Board with additional perspective which combines the operational experience of a member of management with the oversight focus of a member of the Board. The business and operations of our Company are managed by our Board as a whole, including oversight of various risks, such as operational and liquidity risks, that our Company faces. Because our Board includes a member of our management, this individual is responsible for both the day-to-day management of the risks we face as well as the responsibility for the oversight of risk management.

 

Compliance with Section 16(a) of the Securities Exchange Act

 

Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially own more than 10% of our common stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Executive officers, directors and greater than 10% beneficial shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.

 

Based solely upon our review of copies of such forms received by us, we believe that, during the fiscal year ended December 31, 2016, the following persons did not timely file Forms 3, Forms 4 and Forms 5 reporting beneficial ownership of our securities and/or changes therein: Mr. Garner filed a Form 3 and Form 4 late and Old Main Capital, LLC did not file a Form 3 or a Form 4.

 

- 17

 

 

ITEM 11. EXECUTIVE COMPENSATION

 

The following table sets forth certain compensation information for: (i) our principal executive officer or other individual serving in a similar capacity during fiscal 2015 and 2016; (ii) our two most highly compensated executive officers other than our principal executive officers who were serving as executive officers at December 31, 2016 and 2015 whose compensation exceed $100,000; and (iii) up to two additional individuals for whom disclosure would have been required but for the fact that the individual was not serving as an executive officer at December 31, 2016. Compensation information is shown for the fiscal years ended December 31, 2016 and 2015:

 

2016 SUMMARY COMPENSATION TABLE

 

Name and principal position   Year     Salary     Bonus     Stock Awards     Option Awards     Non-Equity Incentive Plan Compensation     Nonqualified Deferred Compensation Earnings     All Other Compensation (1)     Total  
                                                       
Stewart Garner,     2016     $ 84,000     $ 0     $ 0     $ 0       0       0     $ 17,723     $ 101,723  
Chief Executive Officer and Chief Financial Officer     2015     $ 84,000     $ 16,000       0       0       0       0     $ 16,477     $ 116,477  

 

  (1) Other compensation consists of an allowance for car, insurance and cell phone expenses.

 

Employment Agreements with Executive Officers

 

Stewart Garner . Effective as of January 1, 2014, we orally agreed to retain Stewart Garner on a consulting basis whereby he agreed to serve as our Chief Executive Officer and a Director. The consulting agreement provides for a base payment of $84,000 per year, a discretionary bonus, a monthly automobile allowance of $1,000 and automobile insurance, medical insurance, cellular phone allowance and reimbursement of business expenses, which includes the use of Mr. Garner’s home office. The consulting agreement is subject to termination by the Company for cause and also in the event of Mr. Garner’s death or disability. In the event of a termination of the agreement for cause or due to death or disability, Mr. Garner would be entitled to his base salary and benefits for the balance of the then existing term.

 

Outstanding Equity Awards at 2016 Fiscal Year-End

 

The following tables set forth, for each person listed in the Summary Compensation Table set forth above, as of December 31, 2016:

 

With respect to each option award -

 

  the number of shares of our common stock issuable upon exercise of outstanding options that have been earned, separately identified by those exercisable and unexercisable;
     
  the number of shares of our common stock issuable upon exercise of outstanding options that have not been earned;
     
  the exercise price of such option; and
     
  the expiration date of such option; and
     
  with respect to each stock award -
     
  the number of shares of our common stock that have been earned but have not vested;
     
  the market value of the shares of our common stock that have been earned but have not vested;
     
  the total number of shares of our common stock awarded under any equity incentive plan that have not vested and have not been earned; and
     
  the aggregate market or pay-out value of our common stock awarded under any equity incentive plan that have not vested and have not been earned.

 

- 18

 

 

OUTSTANDING EQUITY AWARDS AT 2016 FISCAL YEAR-END

 

OPTION AWARDS   STOCK AWARDS  
Name   Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
    Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
    Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
    Option
Exercise
Price
($)
    Option
Expiration
Date
    Number
of Shares
or Units
of Stock
That
Have Not
Vested
(#)
    Market
Value of
Shares or
Units of
Stock
That
Have Not
Vested
($)
    Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
(#)
    Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
(#)
 
Stewart Garner     -     -       -       -       -       -       -       -       -  

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following tables set forth certain information, as of April 17, 2017 with respect to the beneficial ownership of our outstanding common stock and preferred stock by (i) any holder of more than 5%, (ii) each of our named executive officers and directors, and (iii) our directors and executive officers as a group.

 

Unless otherwise indicated, the business address of each person listed is in care of Lifelogger Technologies Corp., 11380 Prosperity Farms Road, Suite 221E, Palm Beach Gardens, Florida 33410. The information provided herein is based upon a list of our shareholders and our records with respect to the ownership of common stock. The percentages in the table have been calculated on the basis of treating as outstanding for a particular person, all shares of our common stock outstanding on that date and all shares of our common stock issuable to that holder in the event of exercise of outstanding options, warrants, rights or conversion privileges owned by that person at that date which are exercisable within 60 days of that date. Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our common stock owned by them, except to the extent that power may be shared with a spouse.

 

Capital Stock

 

Name and Address of Beneficial Owner   Common Stock Beneficial Ownership     Percent of Class (2)     Series A Preferred Beneficial Ownership     Percent of Class (3)  
Named Executive Officers and Directors:                                
Stewart Garner (1)     -       -       1,000       100.0 %
All executive officers and directors as a group (one person)     -       -       1,000       100.0 %
                                 
Other 5% Stockholders:                                
Old Main Capital, LLC (2)     291,585       9.9 %     -       -  

 

* Less than 1%.

 

  (1) Each share of Series A Preferred Stock entitles the holder to 50,000 votes on all matters submitted to a vote of the Company’s stockholders. In the event that such votes do not total at least 51% of all votes, then the votes cast by the holders of the Series A Preferred Stock shall be equal to 51% of all votes cast at any meeting of the Company’s stockholders or any issue put to the stockholders for voting. The holders of the Series A Preferred Stock do not have any conversion rights.
     
  (2) Includes up to 291,585 shares which may be acquired pursuant to promissory notes convertible at variable prices into our common stock in the aggregate principal amount of $489,406 as of April 15, 2017.

 

- 19

 

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

 

Related Party Transactions

 

Related parties with whom the Company had transactions are:

 

Related Parties   Relationship
     
Stewart Garner   Chief Executive Officer, Chief Financial Officer and director

 

Advances from CEO

 

From time to time, Stewart Garner, the Company’s Chief Executive Officer, Chief Financial Officer and sole director, provides advances to the Company for its working capital purposes. Those advances bore no interest and were due on demand. The Company owed Mr. Garner $2,310 at December 31, 2015 and $0 at December 31, 2016.

 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

 

The following table shows the fees that were billed for the audit and other services provided by SRCO Professional Corporation for the fiscal year ended December 31, 2016 and Anton and Chia, LLP and Li and Company, PC for the fiscal years ended December 31, 2016 and 2015.

 

    2016     2015  
             
Audit Fees   $ 21,670     $ 20,545  
Audit-Related Fees     0       5,500  
Tax Fees     1,300       895  
All Other Fees             -  
Total   $ 22,970     $ 26,940  

 

Audit Fees — This category includes the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the independent registered public accounting firm in connection with engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.

 

Audit-Related Fees — This category consists of assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence with the Securities and Exchange Commission and other accounting consulting.

 

Tax Fees — This category consists of professional services rendered by our independent registered public accounting firm for tax compliance and tax advice. The services for the fees disclosed under this category include tax returns preparation and technical tax advice.

 

All Other Fees — This category consists of fees for other miscellaneous items.

 

Our Board of Directors has adopted a procedure for pre-approval of all fees charged by our independent registered public accounting firm. Under the procedure, the Board approves the engagement letter with respect to audit, tax and review services. Other fees are subject to pre-approval by the Board, or, in the period between meetings, by a designated member of Board. Any such approval by the designated member is disclosed to the entire Board at the next meeting.

 

PART IV

 

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

(a) 1. Financial Statements
     
    The financial statements and Report of Independent Registered Public Accounting Firm are listed in the “Index to Financial Statements and Schedules” on page F-1 and included on pages F-2 through F-26.
     
  2. Financial Statement Schedules
     
    All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission (the “Commission”) are either not required under the related instructions, are not applicable (and therefore have been omitted), or the required disclosures are contained in the financial statements included herein.
     
  3. Exhibits (including those incorporated by reference).

 

- 20

 

 

Exhibit No.

  Description
     
3.1(a)   Articles of Incorporation filed with the Nevada Secretary of State on June 13, 2012 (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 filed with the SEC on February 4, 2013).
     
3.1(b)   Amended and Restated Articles of Incorporation filed with the Nevada Secretary of State on January 6, 2014 (incorporated by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K filed on February 4, 2014).
     
3.1(c)   Certificate of Designation of Series A Preferred Stock filed with the Nevada Secretary of State on December 28, 2016 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on February 22, 2017).
     
3.2   Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 filed on February 4, 2013).
     
4.1   Subscription Agreement (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-1 filed with the SEC on February 4, 2013).
     
4.2   Promissory Note dated as of July 20, 2015, between Lifelogger Technologies Corp. and Glamis Capital SA (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 27, 2015).
     
4.3   Promissory Note dated as of September 8, 2015 between Lifelogger Technologies Corp. and Old Main Capital, LLC (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 18, 2015).
     
4.4   Common Stock Purchase Warrant dated as of September 8, 2015 between Lifelogger Technologies Corp. and Old Main Capital, LLC (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on September 18, 2015).
     
4.5   10% Convertible Promissory Note in the original principal amount of $296,153 dated March 9, 2016 between Lifelogger Technologies Corp. and Old Main Capital, LLC (incorporated by reference to Exhibit 4.5 to the Company’s Amendment No. 1 to Quarterly Report on Form 10-Q/A filed with the SEC on March 16, 2016).
     
4.6   Amendment No. 1 dated March 9, 2016 to Convertible Promissory Note dated September 8, 2015 between Lifelogger Technologies Corp. and Old Main Capital, LLC (incorporated by reference to Exhibit 4.6 to the Company’s Amendment No. 1 to Quarterly Report on Form 10-Q/A filed with the SEC on March 16, 2016).
     
4.7   8% Convertible Promissory Note in the principal amount of $250,000 dated March 9, 2016 between Lifelogger Technologies Corp. and Old Main Capital, LLC (incorporated by reference to Exhibit 4.7 to the Company’s Amendment No. 1 to Quarterly Report on Form 10-Q/A filed with the SEC on March 16, 2016).
     
4.8   10% Convertible Promissory Note in the principal amount of $87,912 dated June 9, 2016 between Lifelogger Technologies Corp. and Old Main Capital, LLC (incorporated by reference to Exhibit 4.7 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 15, 2016).
     
4.9   Amendment dated June 9, 2016 to $296,153 Principal Amount Convertible Promissory Note dated March 9, 2016 issued by Lifelogger Technologies Corp. to Old Main Capital, LLC (incorporated by reference to Exhibit 4.8 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 15, 2016).
     
4.10   Amendment dated June 9, 2016 to $250,000 Principal Amount Convertible Promissory Note dated March 9, 2016 issued by Lifelogger Technologies Corp. to Old Main Capital, LLC (incorporated by reference to Exhibit 4.9 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 15, 2016).
     
4.11   Promissory Note dated June 30, 2016, by and between Lifelogger Technologies Corp. and SBI Investments LLC, 2014-1 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 7, 2016).
     
4.12   Series A Common Stock Purchase Warrant dated June 30, 2016, by and between Lifelogger Technologies Corp. and SBI Investments LLC, 2014-1 (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on July 7, 2016).
     
4.13   Series B Common Stock Purchase Warrant dated June 30, 2016, by and between Lifelogger Technologies Corp. and SBI Investments LLC, 2014-1 (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed with the SEC on July 7, 2016).
     
4.14*   10% Convertible Promissory Note dated April 7, 2017 issued by Lifelogger Technologies Corp. to Old Main Capital, LLC.
     
4.15*   10% Convertible Promissory Note dated April 7, 2017 issued by Lifelogger Technologies Corp. to SBI Investments LLC, 2014-1.
     
10.1   Product Development Agreement dated as of January 7, 2014 between Matrico Holdings, Ltd. and Lifelogger Technologies Corp. (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 12, 2014).
     
10.2   Addendum to Product Development Agreement effective as of June 1, 2014 between Matrico Holdings, Ltd. and Lifelogger Technologies Corp. (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 12, 2014).
     
10.3   Securities Purchase Agreement dated as of September 24, 2014 between Lifelogger Technologies Corp. and Glamis Capital S.A. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 26, 2014).
     
10.4   Securities Purchase Agreement dated as of December 8, 2014 between Lifelogger Technologies Corp. and Glamis Capital S.A. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 9, 2014).
     
10.5   Securities Purchase Agreement dated as of May 7, 2015 between Lifelogger Technologies Corp. and SSID Limited (incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 14, 2015)

 

   
   

 

Exhibit No.

  Description
     
10.6   Securities Purchase Agreement dated as of July 20, 2015 between Lifelogger Technologies Corp. and Glamis Capital SA (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 27, 2015).
     
10.7   Securities Purchase Agreement dated as of September 8, 2015 between Lifelogger Technologies Corp. and Old Main Capital, LLC (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 27, 2015).
     
10.8   Asset Purchase Agreement dated November 10, 2015 entered into among Lifelogger Technologies, Inc., Pixorial, Inc. and Andres Espineira (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 16, 2015).
     
10.9+   Consulting Agreement dated as of November 10, 2015 between Lifelogger Technologies Corp. and Andres Espineira (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on November 16, 2015).
     
10.10+   Stock Option Agreement dated as of November 10, 2015 between Lifelogger Technologies Corp. and Andres Espineira (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on November 16, 2015).
     
10.11   Amendment dated November 12, 2015 to Promissory Note and Securities Purchase Agreement dated as of July 20, 2015, between Lifelogger Technologies Corp. and Glamis Capital SA (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on November 16, 2015).
     
10.12   Securities Purchase Agreement dated March 9, 2016 between Lifelogger Technologies Corp. and Old Main Capital, LLC (incorporated by reference to Exhibit 10.14 to the Company’s Amendment No. 1 to Quarterly Report on Form 10-Q/A filed with the SEC on March 16, 2016).
     
10.13   First Amendment to Asset Purchase Agreement entered into on March 30, 2016 between Lifelogger Technologies Corp. and Pixorial, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 5, 2016).
     
10.14   Debt Settlement Agreement dated March 1, 2016 entered into between Lifelogger Technologies Corp. and Glamis Capital SA (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 7, 2016).
     
10.15   Amendment No. 2 to Asset Purchase Agreement entered into as of May 3, 2016 by Lifelogger Technologies Corp. and Pixorial, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 5, 2016).
     
10.16   Stock Redemption Agreement between Lifelogger Technologies Corp. and Consumer Electronics Ventures Corp. dated May 5 May, 2016 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 18, 2016).
     
10.17   Amended and Restated Asset Purchase Agreement dated as of June 20, 2016 between Lifelogger Technologies Corp., Pixorial, Inc. and Andres Espiniera (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A (Amendment No. 1) filed with the SEC on June 21, 2016).
     
10.18   Securities Purchase Agreement dated June 30, 2016, by and between Lifelogger Technologies Corp. and SBI Investments LLC, 2014-1 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 7, 2016).
     
10.19   Investment Agreement dated as of February 21, 2017 between Lifelogger Technologies Corp. and Stewart Garner (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 22, 2017).
     
10.20*   Securities Purchase Agreement between Lifelogger Technologies Corp. and Old Main Capital, LLC dated as of April 7, 2017.
     
10.21*   Securities Purchase Agreement between Lifelogger Technologies Corp. and SBI Investments LLC, 2014-1 dated as of April 7, 2017.
     
31.1*   Section 302 Certificate of Principal Executive Officer.
     
31.2*   Section 302 Certificate of Principal Financial Officer.
     
32.1*   Section 906 Certificate of Principal Executive Officer and Principal Financial Officer.
     
101.INS*   XBRL Instance Document
     
101.SCH*   XBRL Taxonomy Extension Schema Document
     
101.CAL*   XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF*   XBRL Taxonomy Extension Definition Linkbase Document
     
101.LAB*   XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE*   XBRL Taxonomy Extension Presentation Linkbase Document

 

* Filed herewith.

 

+ Management contract or compensatory plan or arrangement.

 

- 21

 

 

SIGNATURES

 

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

 

  LIFELOGGER TECHNOLOGIES CORP.
     
Date: April 17, 2017 By: /s/ Stewart Garner
   

Stewart Garner

Chief Executive Officer and Chief Financial Officer

 

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

 

Signature   Title   Date
         
/s/ Stewart Garner   Chief Executive Officer, Chief Financial Officer and Director   April 17, 2017
Stewart Garner   (principal executive officer and principal financial and accounting officer)    

 

- 22

 

 

LIFELOGGER TECHNOLGIES CORP.

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

 

    Page
     
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS   F-1
     
FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED DECEMBER 31, 2016 AND DECEMBER 31, 2015:    
     
Balance Sheets   F-3
     
Statements of Operations and Comprehensive Loss   F-4
     
Statements of Stockholders’ Deficiency   F-5
     
Statements of Cash Flows   F-6
     
Notes to Financial Statements   F-7 - F-26

 

- 23

 

 

  SRCO Professional Corporation
  Chartered Professional Accountants
  Licensed Public Accountants
  Park Place Corporate Centre
  15 Wertheim Court, Suite 409
  Richmond Hill, ON L4B 3H7
  Tel: 905 882 9500 & 416 671 7292
  Fax: 905 882 9580

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of

LifeLogger Technologies Corp.

 

We have audited the accompanying balance sheet of LifeLogger Technologies Corp. (the “Company”) as of December 31, 2016, and the related statements of operations, stockholders’ deficiency, and cash flows for the year then ended. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of the Company for the year ended December 31, 2015 were audited by other auditors, whose report dated April 7, 2016, expressed an unqualified opinion on those financial statements and also included an explanatory paragraph that raised substantial doubt about the Company’s ability to continue as a going concern.

 

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

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2016, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

 

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

 

  /s/ SRCO Professional Corporation
   
  CHARTERED PROFESSIONAL ACCOUNTANTS
Richmond Hill, Canada Authorized to practise public accounting by the
April 17, 2017 Chartered Professional Accountants of Ontario

 

F- 1
 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders

LifeLogger Technologies Corp.

 

We have audited the accompanying balance sheet of LifeLogger Technologies Corp. (the “Company”) as of December 31, 2015, and the related statements of operations, changes in stockholders’ equity (deficit) and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

 

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

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2015, and the results of its operations, changes in stockholders’ equity (deficit) and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

 

The financial statements have been prepared assuming that the Company will continue as a going concern. As shown in Note 3 to the financial statements, the Company has incurred an accumulated deficit of $1,328,787 as of December 31, 2015. This raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to this matter are described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ Anton & Chia, LLP  
Newport Beach, CA  
April 7, 2016  

 

F- 2
 

 

LIFELOGGER TECHNOLOGIES CORP.

BALANCE SHEETS

 

    December 31, 2016     December 31, 2015  
             
ASSETS                
                 
Current Assets:                
Cash   $ 101,041     $ 131,699  
Prepaid expenses     1,250       10,319  
Deferred financing costs     3,360       3,453  
Total current assets     105,651       145,471  
                 
Non-Current Assets                
Furniture and fixtures     9,578       9,578  
Accumulated depreciation     (2,737 )     (1,368 )
Furniture and fixtures, net     6,841       8,210  
                 
Total Assets     112,492       153,681  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY                
                 
Current Liabilities:                
Accounts payable and accrued expenses (Note 4)     89,934       118,737  
Due to related party     -       2,310  
Note payable (Note 5)     -       135,000  
Convertible notes payable, net of unamortized discount of $134,628 and (2015 - $283,763) (Note 5)     1,008,461       189,921  
Derivative liability - notes and warrants (Note 6)     240,955       106,265  
                 
Total current liabilities     1,339,350       552,233  
                 
Total liabilities     1,339,350       552,233  
                 
Stockholders’ Deficiency:                
                 
Preferred stock par value $0.001: 5,000,000 shares authorized; None issued or outstanding     -       -  
Common stock par value $0.001: 495,000,000 shares authorized; 2,063,151 and 2,747,683 shares issued and outstanding, respectively     2,063       2,748  
Additional paid-in capital     3,365,116       927,487  
Accumulated deficit     (4,594,037 )     (1,328,787 )
                 
Total stockholders’ deficiency     (1,226,858 )     (398,552 )
                 
Total Liabilities and Stockholders’ Deficiency     112,492       153,681  

 

See accompanying notes to the financial statements.

 

F- 3
 

 

LIFELOGGER TECHNOLOGIES CORP.

STATEMENTS OF OPERATIONS

 

    For the Year  
    Ended     Ended  
    December 31, 2016     December 31, 2015  
             
Revenue   $ -     $ -  
                 
Cost of revenue     -       -  
                 
Gross margin     -       -  
                 
Operating Expenses:                
Research and development     280,600       458,373  
Advertising and promotions     15,351       12,710  
Consulting -related parties (Note 9)     101,723       116,477  

Consulting – other

    276,908       334,463  
Option expense - consulting - other     632,356       113,882  
General and administrative     190,911       173,811  
                 
Total operating expenses     1,497,849       1,209,716  
                 
Loss from operations     (1,497,849 )     (1,209,716 )
                 
Other income (expenses)                
Impairment of intangible assets (Note 11)     (195,015 )     -  
Change in fair value of derivative-warrants and notes (Note 6)     60,639       116,397  
Change in fair value of derivative-notes (Note 6)     (251,095 )     95,695  
Loss on extinguishment of debt (Note 5)     (682,067 )     -  
Commitment fee expense     (250,000 )     -  
Interest expense     (449,863 )     (88,914 )
                 
Total other (expenses) income     (1,767,401 )     123,178  
                 
Loss before income tax provision     (3,265,250 )     (1,086,538 )
                 
Income tax provision     -       -  
                 
Net Loss   $ (3,265,250 )   $ (1,086,538 )
                 
Net Loss Per Common Share:                
- Basic and Diluted   $ (1.51 )   $ (0.39 )
                 
Weighted Average Common Shares Outstanding:                
- Basic and Diluted     2,162,038       2,770,483  

 

See accompanying notes to the financial statements.

 

F- 4
 

 

LIFELOGGER TECHNOLOGIES CORP.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIENCY

FOR THE YEARS ENDED DECEMBER 31, 2016 AND DECEMBER 31, 2015

 

          Additional           Total  
    Common stock par value $0.001     Paid-in     Accumulated     Stockholders'  
    Number of Shares (a)     Amount     Capital     Deficit     Equity (Deficit)  
                               
Balance, December 31, 2014     2,728,056       2,728       556,649       (242,249 )     317,128  
                                         
Common stock issued for services (Note 10)     8,000       8       106,968       -       106,976  
Common stock issued for cash (Note 10)     11,628       12       149,988       -       150,000  
Options granted for consultant (Note 8)     -       -       113,882       -       113,882  
Net loss     -       -       -       (1,086,538 )     (1,086,538 )
                                         
Balance, December 31, 2015     2,747,683     $ 2,748     $ 927,487     $ (1,328,787 )   $ (398,552 )
                                         
Common stock issued on conversion of note payable (Note 5)     60,276       60       497,218       -       497,278  
Options granted for consultant (Note 8)     -       -       632,356       -       632,356  
Common stock issued for intangible assets (Note 11)     86,673       86       194,929       -       195,015  
Common stock issued on conversion of convertible notes payable (Note 5)     501,852       502       1,111,793       -       1,112,295  
Shares redeemed (Note 11)     (1,333,333 )     (1,333 )     1,333       -       -  
Net loss     -       -       -       (3,265,250 )     (3,265,250 )
                                         
Balance, December 31, 2016     2,063,151     $ 2,063     $ 3,365,116     $ (4,594,037 )   $ (1,226,858 )

 

(a) Common shares are after reverse stock split of 30:1 as explained in Note 1

 

See accompanying notes to the financial statements.

 

F- 5
 

 

LIFELOGGER TECHNOLOGIES CORP.

STATEMENTS OF CASH FLOWS

 

    For the year ended  
    December 31, 2016     December 31, 2015  
             
Operating Activities:                
Net loss   $ (3,265,250 )   $ (1,086,538 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation expenses     1,369       1,368  
Shares issued for consulting services     -       106,976  
Options issued - consulting     632,356       113,882  
Interest expense     449,863       58,278  
Interest expense recognized through amortization of deferred financing costs     7,092       1,547  
Commitment fee expense     250,000       -  
Change in fair value of derivative liabilities-notes     251,095       (95,695 )
Change in fair value of derivative liabilities-warrants     (60,639 )     (116,397 )
Extinguishment of debt     682,067       -  
Impairment of intangible asset     195,015          
Changes in Operating Assets and Liabilities:                
Accounts receivable     -       93,021  
Prepaid expenses     9,069       3,927  
Accounts payable and accrued expenses     (15,270 )     80,605  
Accounts payable - related party     (2,310 )     2,310  
                 
Net Cash Used in Operating Activities     (865,543 )     (836,716 )
                 
                 
Investing Activities:                
Purchase of Capital Assets     -       (332 )
                 
Net Cash used in by Investing Activities     -       (332 )
                 
Financing Activities:                
Proceeds from note payable     841,885       580,000  
Payment of deferred financing costs     (7,000 )     -  
Proceeds from issuance of common stock     -       150,000  
                 
Net Cash Provided by Financing Activities     834,885       730,000  
                 
Net Change in Cash     (30,658 )     (107,048 )
                 
Cash - Beginning of Reporting Period     131,699       238,747  
                 
Cash - End of Reporting Period   $ 101,041     $ 131,699  
                 
Supplemental Disclosure of Cash Flow Information:                
                 
Interest paid   $ -     $ -  
                 
Income Tax Paid   $ -     $ -  
                 
Issuance of common stocks for settlement of notes payable and accrued interest   $ 497,278     $ -  
                 
Note payable issued for financing cost   $ 250,000     $ -  
                 
Acquisition of intangible assets   $ 195,015     $ -  
                 
Issuance of common stocks for settlement of convertible notes payable   $ 1,112,295     $ -  

 

See accompanying notes to the financial statements.

 

F- 6
 

 

LIFELOGGER TECHNOLOGIES CORP.

December 31, 2016 and 2015

Notes to the Financial Statements

 

Note 1 - Organization and Operations

 

LifeLogger Technologies Corp. (the “Company”) was incorporated under the laws of the State of Nevada on June 4, 2012 under the name Snap Online Marketing Inc. The Company changed its name effective as of January 31, 2014 and is a lifelogging software company that developed and hosts a proprietary cloud-based software solution accessible on iOS and Android devices that offers an enhanced media experience for consumers by augmenting videos, livestreams and photos with additional context information and providing a platform that makes it easy to find and use that data when viewing or sharing media.

 

Effective as of March 27, 2017, the Company amended its Articles of Incorporation to increase its authorized capital stock from 125,000,000 to 500,000,000 shares, of which 495,000,000 will be common stock and 5,000,000 will be preferred stock, of which, 1,000 preferred shares have been previously designated as Series A Preferred Stock (the “Series A Preferred Stock”) and effected a 1 for 30 reverse stock split of its issued and outstanding shares of common stock. All per share amounts and number of shares in the financial statements and related notes have been retroactively restated to reflect the reverse stock split.

 

Note 2 - Summary of Significant Accounting Policies

 

Basis of Presentation

 

The financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), applied on a consistent basis, and are expressed in United States dollars (“USD”).

 

Use of Estimates

 

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 the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Areas involving significant estimates and assumptions include: deferred income tax assets and related valuation allowance, accruals and valuation of derivatives, convertible promissory notes, stock options, and assumptions used in the going concern assessment. Actual results could differ from those estimates. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the period in which they become known.

 

Fair Value of Financial Instruments

 

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 

Level 1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
   
Level 2 Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
   
Level 3 Pricing inputs that are generally observable inputs and not corroborated by market data.

 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

 

F- 7
 

 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability including certain market assumptions and pertinent information available to management.

 

The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses, accounts payable and accrued expenses approximate their fair value because of the short maturity of those instruments.

 

Valuation of Derivatives

 

The Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.” The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date. The change in fair value is recorded in the statement of operations as other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date. the Company analyzed the derivative financial instruments in accordance with ASC 815. The objective is to provide guidance for determining whether an equity-linked financial instrument is indexed to an entity’s own stock. This determination is needed for a scope exception which would enable a derivative instrument to be accounted for under the accrual method. The classification of a non-derivative instrument that falls within the scope of ASC 815-40-05 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” also hinges on whether the instrument is indexed to an entity’s own stock. A non-derivative instrument that is not indexed to an entity’s own stock cannot be classified as equity and must be accounted for as a liability. There is a two-step approach in determining whether an instrument or embedded feature is indexed to an entity’s own stock. First, the instrument’s contingent exercise provisions, if any, must be evaluated, followed by an evaluation of the instrument’s settlement provisions. The Company utilized multinomial lattice models that value the derivative liability based on a probability weighted discounted cash flow model. The Company utilized the fair value standard set forth by the Financial Accounting Standards Board, defined as the amount at which the assets (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale.

 

The derivative liabilities result in a reduction of the initial carrying amount (as unamortized discount) of the Convertible Notes. This derivative liability is marked-to-market each quarter with the change in fair value recorded in the statement of operations. Unamortized discount is amortized to interest expense using the effective interest method over the life of the Convertible Note.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with an original maturity of 90 days or less to be cash and cash equivalents.

 

Furniture and Fixtures

 

Furniture and fixtures are recorded at cost less depreciation. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is computed by the straight-line method (after taking into account their respective estimated residual values) over the estimated useful lives of the respective assets as follows:

 

   

Estimated

Useful Life
(Years)

 
Furniture and fixture     7  

 

Upon sale or retirement, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations.

 

Related Parties

 

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.

 

F- 8
 

 

Commitments and contingencies

 

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, is disclosed.

 

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.

 

Stock-Based Compensation

 

The Company accounts for stock-based compensation awards issued in accordance with the provision of ASC 718, which requires that all stock-based compensation issued to acquire goods or services, including grants of employee stock options, be recognized in the statement of operations based on their fair values, net of estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Compensation expense related to stock-based awards is recognized over the requisite service period, which is generally the vesting period.

 

There were 200,000 options outstanding as of December 31, 2016.

 

Research and Development

 

The Company follows paragraph 730-10-25-1 of the FASB Accounting Standards Codification (formerly Statement of Financial Accounting Standards No. 2 “Accounting for Research and Development Costs” ) and paragraph 730-20-25-11 of the FASB Accounting Standards Codification (formerly Statement of Financial Accounting Standards No. 68 “Research and Development Arrangements” ) for research and development costs. Research and development costs are charged to expense as incurred. Research and development costs consist primarily of remuneration for research and development staff, depreciation and maintenance expenses of research and development equipment, material and testing costs for research and development as well as research and development arrangements with unrelated third party research and development institutions.

 

Deferred Tax Assets and Income Tax Provision

 

The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized.

 

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. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.

 

Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

 

F- 9
 

 

Earnings per Share

 

Earnings Per Share (“EPS”) is the amount of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings or loss per share. EPS is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Pursuant to ASC Paragraphs 260-10-45-10 through 260-10-45-16 Basic EPS shall be computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Income available to common stockholders shall be computed by deducting both the dividends declared in the period on preferred stock (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned) from income from continuing operations (if that amount appears in the statements of operations) is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants.

 

Diluted earnings per share exclude all potentially dilutive shares if their effect is anti-dilutive. There were no potentially dilutive shares outstanding as at December 31, 2016 and 2015 .

 

Subsequent Events

 

The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.

 

Recently issued accounting pronouncements

 

In January 2017, an accounting pronouncement was issued by the Financial Accounting Standards Board (“FASB”) to simplify the accounting for goodwill impairment. This guidance eliminates the requirement that an entity calculates the implied fair value of goodwill when measuring an impairment charge. Instead, an entity would record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. This pronouncement is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The adoption is required to be applied on a prospective basis. The adoption of this pronouncement did not have a material impact on the financial position and/or results of operations.

 

The Company adopted the accounting pronouncement issued by the Financial Accounting Standards Board (“FASB”) to update guidance on how companies account for certain aspects of share-based payments to employees. This pronouncement is effective for fiscal years beginning after December 15, 2016, and interim periods within those years, with early adoption permitted. This guidance requires all income tax effects of awards to be recognized in the statements of operations when the awards vest or are settled and changes the presentation of excess tax benefits on the statement of cash flows. The Company adopted these provisions on a prospective basis. In addition, this pronouncement changes guidance on: (a) accounting for forfeitures of share-based awards and (b) employers’ accounting for an employee’s use of shares to satisfy the employer’s statutory income tax withholding obligation. The adoption of this pronouncement did not have a material impact on the financial position and/or results of operations.

 

In March 2016, the Company adopted the accounting pronouncement issued by the FASB to update guidance on how companies account for certain aspects of share-based payments to employees. This pronouncement is effective for fiscal years beginning after December 15, 2016, and interim periods within those years, with early adoption permitted. This guidance requires all income tax effects of awards to be recognized in the statements of operations when the awards vest or are settled and changes the presentation of excess tax benefits on the statement of cash flows. The Company adopted these provisions on a prospective basis. In addition, this pronouncement changes guidance on: (a) accounting for forfeitures of share-based awards and (b) employers’ accounting for an employee’s use of shares to satisfy the employer’s statutory income tax withholding obligation. The adoption of this pronouncement did not have a material impact on the Company’s financial position and/or results of operations.

 

In February 2016, an accounting pronouncement was issued by the FASB to replace existing lease accounting guidance. This pronouncement is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet for most leases. Expenses associated with leases will continue to be recognized in a manner similar to current accounting guidance. This pronouncement is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. The adoption is required to be applied on a modified retrospective basis for each prior reporting period presented. The Company has not yet determined the effect that the adoption of this pronouncement may have on the financial position and/or results of operations.

 

F- 10
 

 

On January 1, 2016, the Company adopted the accounting pronouncement issued by the FASB which eliminates the requirement that an acquirer in a business combination account for measurement-period adjustments retrospectively. Instead, an acquirer will recognize a measurement-period adjustment during the period in which it determines the amount of the adjustment. The adoption of this pronouncement did not have a material impact on the financial position and/or results of operations.

 

On January 1, 2016, the Company adopted the accounting pronouncement issued by the FASB to update the guidance related to the presentation of debt issuance costs. This guidance requires debt issuance costs, related to a recognized debt liability, be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability rather than being presented as an asset. The Company adopted this pronouncement on a retrospective basis, and the adoption did not have a material impact on the financial position and/or results of operations.

 

In November 2015, an accounting pronouncement was issued by the FASB to simplify the presentation of deferred income taxes within the balance sheet. This pronouncement eliminates the requirement that deferred tax assets and liabilities are presented as current or noncurrent based on the nature of the underlying assets and liabilities. Instead, the pronouncement requires all deferred tax assets and liabilities, including valuation allowances, be classified as noncurrent. This pronouncement is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. The Company intends to adopt this pronouncement on January 1, 2017, and the adoption will not have a material impact on the financial position and/or results of operations.

 

Note 3 - Going Concern

 

The financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

 

As reflected in the financial statements, the Company had an accumulated deficit of $4,594,037 at December 31, 2016 ($1,328,787 as of December 31, 2015), a net loss of $3,265,250 and net cash used of $865,543 in operating activities for the year ended December 31, 2016. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

The Company is attempting to further implement its business plan and generate sufficient revenue; however, its cash position may not be sufficient to support its daily operations. While the Company believes in the viability of its strategy to further implement its business plan and generate sufficient revenue and in its ability to raise additional funds by way of a public or private offering, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon its ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.

 

The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as a going concern.

 

Note 4 - Accounts Payable and Accrued Liabilities

 

   

As at December 31, 2016

($)

    As at December 31, 2015 ($)  
Trade accounts payable   $ 51,587     $ 89,648  
Accrued interest on note payable     -       5,405  
Accrued interest on convertible notes payable     16,079       23,684  
Other payable     22,268       -  
    $ 89,934     $ 118,737  

 

Trade accounts payable include $8,065 (2015: $8,214) due to an executive of the Company. The payable balance arose primarily due to consulting charges. The payable is unsecured, non-interest bearing and due on demand.

 

F- 11
 

 

Note 5 – Note Payable and Convertible Notes Payable

 

a. Note Payable

 

On July 20, 2015 the Company entered into a securities purchase agreement (the “SPA”) with Glamis Capital SA (“Glamis”), whereby Glamis agreed to invest $200,000 (the “Purchase Price”) in the Company in exchange for the Note (as defined below). Pursuant to the SPA, the Company issued a promissory note to Glamis on July 20, 2015 (the “Issuance Date”) in the original principal amount of $200,000, which bears interest at 10% per annum (the “Note”).

 

The Purchase Price for the Note was funded as follows: (1) $70,000 on the Issuance Date and $65,000 on August 24, 2015. The principal from each funding date, coupled with the accrued and unpaid interest relating to that principal amount, is due and payable one year from the respective funding date (each a “Maturity Date”). Any amount of principal or interest that is due under the Note, which is not paid by the respective Maturity Date, will bear interest at 14% per annum until it is paid. The Note can be prepaid by the Company at any time while the Note is outstanding. In the event that the Company closes a future financing of at least $1,000,000 while the Note is outstanding, the Company would become obligated to pay all amounts outstanding under the Note within a reasonable time after such closing.

 

On November 12, 2015, the Company amended the SPA it entered into with Glamis to limit the amount Glamis is obligated to advance to the Company under the Glamis Note to $135,000 and amend the Note to reflect a principal balance of $135,000 after giving effect to an August 24, 2015 payment by Glamis to the Company of $65,000 under the Note. No further advances will be made by Glamis to the Company under the Note.

 

On March 1, 2016, the Company finalized a settlement of debt owed to Glamis Capital SA through a conversion into common stock of the Company. The total debt of $135,000 plus accrued and unpaid interest of $7,403 for a total of $142,403 was converted into 60,276 common stock par value $.001 based on an average of the previous 20 days close price of the common stock of the company discounted by 25% for a price of $2.3625 per share. The loss on extinguishment of this debt was determined to be $354,876, which is included in other expenses, based on the date of the debt settlement agreement of February 24, 2016 and the closing stock price on that date to be $8.25.

 

b. Convertible Notes Payable

 

The movement in convertible notes payable is as follows:

 

    Original amount     Discount     Guaranteed interest accrued     Net settlement     Ending balance  
Outstanding, December 31, 2015   $ -     $ -     $ -     $ -       189,921  
Conversion on opening balance (i)   -       -       -       -       (189,921 )
Issued: March 9, 2016 (ii)   250,000       -       10,000       -       260,000  
Issued: March 9, 2016 (iii)   296,153       -       14,808       (92,180)       218,781  
Issued: June 9, 2016 (iv)   87,912       (27,389 )     4,396       -       64,919  
Issued: June 30, 2016 (v)   550,000       (107,239 )     22,000       -       464,761  
Outstanding, December 31, 2016   $ 1,184,065     $ (134,628 )   $ 51,204     $ (92,180 )     1,008,461  

 

(i) Old Main Capital, LLC – September 2015:

 

On September 14, 2015 (the “Issuance Date”), the Company closed on the transactions contemplated by the securities purchase agreement (the “SPA”) with Old Main Capital, LLC (“Old Main”), whereby Old Main agreed to invest $450,000 (the “Purchase Price”) in the Company’s -share capital in exchange for the Note (as defined below) and Warrants (as defined below). Pursuant to the SPA, the Company issued a promissory note to Old Main, in the original principal amount of $473,864, which bears interest at 10% per annum (the “September 2015 Note”). The Purchase Price will be paid as follows: (1) $250,000 funded in cash to the Company on the Issuance Date, (2) the remaining $200,000 within 30 days after the Issuance Date. The principal from each funding date, coupled with the accrued and unpaid interest relating to that principal amount, is due and payable on September 8, 2016 (the “Maturity Date”). Any amount of principal or interest that is due under the September 2015 Note, which is not paid by the Maturity Date, will bear interest at the rate of 24% per annum until it is paid.

 

F- 12
 

 

Beginning 6 months after the Issuance Date, the Company is required to make bi-weekly amortization payments (one payment every 2 weeks), consisting of 1/12 th of the outstanding principal and interest, until the September 2015 Note is on longer outstanding (each a “Bi-Weekly Payment”). Such Bi-Weekly Payments may be made in cash, or in the Company’s common stock (“Common Stock”) if certain equity conditions are satisfied. Such equity conditions include but are not limited to an average daily dollar volume of the Common Stock greater than $25,000 for the 20 trading days prior to a Bi-Weekly Payment. If the equity conditions are satisfied, and the Company decide to make a Bi-Weekly payment in Common Stock, then the shares of Common Stock to be delivered shall be calculated as follows: the amount of the Bi-Weekly Payment divided by the Base Conversion Price (as defined below). The Base Conversion Price shall equal the lower of (i) the closing price of the Common Stock on September 8, 2015, or (ii) 70% of the average of the lowest VWAP of the Common Stock for the 15 trading days immediately prior to the date of the Bi-Weekly Payment. Additionally, Old Main has the right at any time to convert amounts owed under the September 2015 Note into Common Stock at the closing price of the Common Stock on September 8, 2015. If an event of default under the September 2015 Note occurs, Old Main has the right to convert amounts owed under the September 2015 Note into Common Stock at 52% multiplied by the lowest VWAP of the Common Stock for the 15 trading days immediately prior to the applicable conversion date.

 

The September 2015 Note can be prepaid by the Company at any time while the September 2015 Note is outstanding, at a prepayment price of 125% multiplied by the outstanding principal and interest of the September 2015 Note, subject to Old Main’s discretionary acceptance. If an event of default occurs under the September 2015 Note, which is not cured within 10 business days, Old Main has the option to require the Company’s redemption of the September 2015 Note in cash at a redemption price of 130% multiplied by the outstanding principal and interest of the September 2015 Note. The September 2015 Note contains representations, warranties, events of default, beneficial ownership limitations, and other provisions that are customary of similar instruments.

 

Effective on March 9, 2016, the September 2015 Note was amended whereby the conversion price in effect on any Conversion Date shall be equal to the lesser of the (i) closing price of the Common Stock on September 8, 2015 (“Fixed Conversion Price”), or (ii) 60% of the lowest traded price of the Common Stock for the 15 consecutive trading days ending on the trading day that is immediately prior to the applicable Conversion Date. All such determinations will be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the Common Stock during such measuring period. This amendment triggered an extinguishment of the debt since the change in the fair value of the embedded derivative exceeded 10% of the carrying value of the debt. The Company booked a $144,205 loss on extinguishment based on the amendment.

 

The Company has converted $473,684 of principal and $28,033 of interest for 283,645 shares ranging in price per share of $1.17 to $2.55. This loan has been completely settled by July 2016.

 

(ii) Equity Line of Credit

 

On March 9, 2016, the Company issued an 8% convertible promissory note in the principal amount of $250,000 to Old Main as a commitment fee for entering into a term sheet whereby Old Main agreed to provide the Company with up to $5,000,000 in financing over a 24 month period through the purchase of the Company’s common stock. The proposed equity line will be subject to certain conditions, including, but not limited to, the Company’s filing of a Registration Statement covering the resale of the securities issued to Old Main and the Company’s continued compliance with the disclosure requirements under the Securities Exchange Act of 1934, as amended. Old Main’s commitment to provide funding under the equity line of credit is subject to the Company entering into a definitive and binding agreement related to the proposed equity line of credit and as of September 30, 2016 the Company have not entered into any such agreement.

 

The terms and conditions of the $250,000 note are substantially identical to the March 2016 Note below except the interest rate which is 8% per annum, half of which is guaranteed and the total amount of interest due on the Note for a period of six months is deemed earned as of the date the note was issued. All interest payments will be payable in cash, or subject to certain equity conditions i n cash or common stock in the Company’s discretion. Accrued and unpaid interest shall be due on payable on each conversion date and on the date the note matures, or as otherwise provided for in the note.

 

Beginning six months after the date of the note, the Company is required to begin to make bi-weekly amortization payments (for the avoidance of doubt, bi-weekly shall mean every two weeks), in cash to Old Main until the note is repaid in full. Each bi-weekly payment shall consist of at least 1/12 th of the total outstanding amount under the note as of the amortization payment date, including the principal, accrued and unpaid interest (prorated through the entire pay-off period pursuant to this paragraph), and any applicable penalties. The Company may make a bi-weekly payment to Old Main in the Company’s common stock, in the event that the equity conditions provided for in the note are satisfied. The maturity date of the note is March 9, 2017. Subsequent to year end, the note had been converted into equity shares. Refer to Note 12 for further details.

 

F- 13
 

 

The Company amended this convertible note on June 9, 2016 to remove the equity condition limitations, removed the amortization payment requirements, to permit voluntary conversions in common stock and revised the conversion price to mean the lesser of (a) the closing price of the Company’s common stock on March 9, 2016 or (b) 60% of the lowest VWAP price of the Company’s common stock for the 15 consecutive trading days ending on the trading day that is immediately prior to any applicable conversion date.   This amendment was treated as an extinguishment of debt and a resultant loss on extinguishment of debt of $94,030 was realized, and recorded in other expenses.

 

As at December 31, 2016 the Company owes $250,000 in principal and the accrued interest is 16,274, which consists of the guaranteed interest accrued of $10,000 included in the convertible notes balance and the remainder of $6,274 is recorded in accounts payable and accrued liabilities, Note 4.

 

(iii) Securities Purchase Agreement and Convertible Notes Issued to Old Main Capital, LLC

 

On March 9, 2016 (the “Issuance Date”) the Company closed on the transaction contemplated by the securities purchase agreement (the “SPA”) the Company entered into with Old Main Capital, LLC (“Old Main”), whereby Old Main agreed to purchase from the Company a convertible promissory note (the “March 2016 Note”) in the original principal amount of $296,153 for $269,500, net of an original issuance discount of $26,653 (the “Purchase Price”), included in interest expenses. The March 2016 Note bears interest at the rate of 10% per annum, of which there is a guaranteed interest for a period of six (6) months as of the Issuance date. The Purchase Price paid were as follows: (i) $84,500 was paid in cash to the Company on March 12, 2016 (ii) $100,000 was paid in cash to the Company on April 6, 2016 (iii) $85,000 May 6, 2016. The principal from each funding date and the accrued and unpaid interest relating to that principal amount is due and payable on March 9, 2017 (the “Maturity Date”). Any amount of principal or interest that is due under the March 2016 Note which is not paid by the Maturity Date will bear interest at the rate of 24% per annum until it is paid and subject to further increase as discussed below.

 

Beginning 6 months after the Issuance Date, the Company are required to make bi-weekly amortization payments (one payment every 2 weeks), consisting of 1/12 th of the outstanding principal and interest, until the March 2016 Note is no longer outstanding (each a “Bi-Weekly Payment”). Such Bi-Weekly Payments may be made in cash, or in the Company’s common stock (“Common Stock”) if certain equity conditions are satisfied. Such equity conditions include but are not limited to an average daily dollar volume of the Common Stock greater than $30,000 for the 20 trading days prior to a Bi-Weekly Payment. If the equity conditions are satisfied, and the Company decide to make a Bi-Weekly payment in Common Stock, then the shares of Common Stock to be delivered shall be calculated as follows: the amount of the Bi-Weekly Payment divided by the Base Conversion Price (as defined below). The Base Conversion Price shall equal the lower of (i) the closing price of the Common Stock on March 9, 2016, or (ii) 70% of the lowest VWAP of the Common Stock for the 15 trading days immediately prior to the date of the Bi-Weekly Payment.

 

The March 2016 Note can be prepaid by the Company at any time while the March 2016 Note is outstanding, at a prepayment price of 125% multiplied by the outstanding principal and interest of the March 2016 Note, subject to Old Main’s discretionary acceptance. If an event of default occurs under the March 2016 Note, which is not cured within three business days, then upon Old Main’s provision of notice to the Company of the occurrence of such event of default, the Company shall within three business days of such default notice, pay the total amount outstanding under the March 2016 Note in cash (including principal, accrued and unpaid interest, applicable penalties (including default multipliers). In the event that the Company does not pay the total amount outstanding within three (3) business days of such default notice, then the total amount outstanding under the March 2016 Note (post-default amount) at that time shall increase by 50%, and on the fourth business day after such default notice (the “Second Amortization Payment Date”), the Company shall begin to make weekly amortization payments (for the avoidance of doubt, weekly shall mean every week) (each a “Weekly Payment”), in (1) cash to Old Main or (2) Common Stock at a price per share equal to the lesser of (i) the closing price of the Company’s common stock on March 9, 2016 or (ii) 52% of the lowest VWAP of the Common Stock for the 15 consecutive Trading Days ending on the Trading Day that is immediately prior to the applicable conversion date. Each Weekly Payment shall consist of the greater of (i) $10,000 of value under the March 2016 Note or (ii) 1/24 th of the total outstanding amount under this March 2016 Note as of the Second Amortization Payment Date, including the principal, accrued and unpaid interest (prorated through the entire pay-off period), and any applicable penalties. As at December 31, 2016, there were no prepayments made on the Note. During the year, $52,480 of the principal balance had been converted into equity shares. Refer to Note 12 for further details.

 

On June 9, 2016 the Company amended the March 2016 Note whereby the Company revised the note to remove the equity condition limitations, removed the amortization payment requirements and to permit voluntary conversions in common stock. The Company also revised the conversion price to mean the lesser of (a) the closing price of the Company’s common stock on March 9, 2016 or (b) 60% of the lowest VWAP price of the Company’s common stock for the 15 consecutive trading days ending on the trading day that is immediately prior to any applicable conversion date. The amendment was accounted for using the extinguishment of debt method. The Company recorded an $88,956 loss on extinguishment of debt, which is included in other expenses.

 

F- 14
 

 

As at December 31, 2016 the Company owes $203,973 in principal and the accrued interest is $24,098, which consists of the guaranteed interest accrued of $14,808 included in the convertible notes balance and the remainder of $9,290 is recorded in accounts payable and accrued liabilities, Note 4.

 

(iv) Securities Purchase Agreement and Convertible Notes Issued to Old Main Capital, LLC

 

On June 9, 2016 (the “Issuance Date”), the Company closed on the transaction contemplated by the securities purchase agreement (the “SPA”) the Company entered into with Old Main Capital, LLC (“Old Main”), whereby Old Main agreed to purchase from the Company a convertible promissory note (the “Note”) in the original principal amount of $87,912 for $80,000, net of an original issuance discount of $7,912 (the “Purchase Price”). The Note bears interest at the rate of 10% per annum, of which there is a guaranteed interest for a period of six (6) months as of the Issuance date. The Purchase Price was paid on June 9, 2016 in cash. The principal from the funding date and the accrued and unpaid interest relating to that principal amount is due and payable on June 9, 2017 (the “Maturity Date”). Any amount of principal or interest that is due under the Note which is not paid by the Maturity Date will bear interest at the rate of 24% per annum until it is paid and subject to further increase as discussed below. The conversion price is the lesser of (a) the closing price of our common stock on June 9, 2016 or (b) 60% of the lowest VWAP price of the Company’s common stock for the 15 consecutive trading days ending on the trading day that is immediately prior to any applicable conversion date.

 

As at December 31, 2016 the Company owes $87,912 in principal and the accrued interest is $4,913, which consists of the guaranteed interest accrued of $4,396 included in the convertible notes balance and the remainder of $518 is recorded in accounts payable and accrued liabilities, Note 4.

 

(v) Securities Purchase Agreement and Convertible Note Issued to SBI Investments LLC, 2014-1

 

On June 30, 2016 (the “Issuance Date”) the Company closed on the transaction contemplated by the securities purchase agreement (the “SPA”) the Company entered into with SBI Investments LLC, 2014-1 (“SBI”), whereby SBI agreed to purchase from the Company a convertible promissory note (the “Note”) in the original principal amount of $550,000 for $500,000 net of an original issuance discount of $50,000 (the “Purchase Price”). The Note bears interest at the rate of 8% per annum, half of which is guaranteed and the total amount of interest due on the Note for a period of six months is deemed earned as of the date the note was issued. The Purchase Price was paid on June 30, 2016 in cash. The principal from the funding date and the accrued and unpaid interest relating to that principal amount is due and payable on June 30, 2017 (the “Maturity Date”). Any amount of principal or interest that is due under the Note which is not paid by the Maturity Date will bear interest at the rate of 24% per annum until it is paid and subject to further increase as discussed below. The conversion price is the lesser of (a) the closing price of the Company’s common stock on June 30, 2016 ($2.40 per share) or (b) 60% of the lowest VWAP price of the Company’s common stock for the 20 consecutive trading days ending on the trading day that is immediately prior to any applicable conversion date. This convertible debt has been accounted for as a derivative liability and is included in the Note 6 derivative liability calculations below.

 

Beginning 6 months after the Issuance Date, the Company are required to make bi-weekly amortization payments (one payment every 2 weeks), consisting of 1/12 th of the outstanding principal and interest, until the Note is no longer outstanding (each a “Bi-Weekly Payment”). Such Bi-Weekly Payments may be made in cash, or in the Company’s common stock (“Common Stock”) if certain equity conditions are satisfied. Such equity conditions include but are not limited to an average daily dollar volume of the Common Stock greater than $25,000 for the 20 trading days prior to a Bi-Weekly Payment. If the equity conditions are satisfied, and the Company decide to make a Bi-Weekly payment in Common Stock, then the shares of Common Stock to be delivered shall be calculated as follows: the amount of the Bi-Weekly Payment divided by the Base Conversion Price (as defined below). The Base Conversion Price shall equal the lower of (i) the closing price of the Common Stock on June 30, 2016, $2.40 per share, or (ii) 60% of the lowest VWAP of the Common Stock for the 20 trading days immediately prior to the date of the Bi-Weekly Payment.

 

The Note can be prepaid by the Company at any time while the Note is outstanding, at a prepayment price of 125% multiplied by the outstanding principal and interest of the Note, subject to SBI’s discretionary acceptance. If an event of default occurs under the Note, which is not cured within three business days, then upon SBI’s provision of notice to the Company of the occurrence of such event of default, the Company shall within three business days of such default notice, pay the total amount outstanding under the Note in cash (including principal, accrued and unpaid interest, applicable penalties (including default multipliers). In the event that the Company does not pay the total amount outstanding within three (3) business days of such default notice, the company will pay interest at 24%.

 

As at December 31, 2016 the Company owes $550,000 in principal and the accrued interest is $22,000, which consists of the guaranteed interest accrued of $22,000 included in the convertible notes balance and a nil balance is recorded in accounts payable and accrued liabilities, Note 4.

 

F- 15
 

 

c . Warrants

 

In conjunction with the issuance of the September 2015 Note, the Company simultaneously issued 28,333 common stock purchase warrants to Old Main (the “Warrants”). The Warrants may be exercised by Old Main at any time in the 5-year period following the issuance. The exercise price for each share of the Common Stock is equal to the closing price of the Common Stock on September 8, 2015, $7.88 per share.

 

On June 9, 2016 and June 30, 2016, the Company entered (either a new issuance or amendment to the March 9, 2016 issuance which requires derivative treatment on June 9, 2016) into convertible derivative notes with Old Main Capital, LLC and SBI Investments LLC – Sea Otter Global Ventures LLC (referred to as the “the Holders”), in the initial amount of $250,000 (Old Main Capital Commitment Fee Note), $296,153 (Old Main Capital Bridge Note), $87,912 (Old Main Capital Note), and $550,000 (SBI Investments LLC – Sea Otter Global Vent (with Original Issue Discounts and deferred financing costs). The notes bear an interest rate of 8% or 10% per annum and matures in 1 year or less under the convertible note agreements, the lender has the right to convert all or any part of the outstanding and unpaid principal and interest into shares of the Company’s common stock. In addition, the Company issued the SBI–Sea Otter Holder a warrant to acquire 8,334 shares of the Company’s common stock. The terms of the Convertible Note are as follows:

 

  1. The Holders have the right from and after a 180 day delay from the Date of Issuance, and until any time until the Note is fully paid, to convert any outstanding and unpaid principal portion of the Note, and accrued interest, into fully paid and non–assessable shares of Common (par value $.001 per share). Bi–weekly amortization payments are due after 6 months.
     
  2. The Convertible Notes are convertible at a fixed rate of $2.34 or $2.25 with no reset provisions. The June 9, 2016 notes convert at the lower of the fixed rate or this variable rate.
     
  3. Beneficial ownership is limited to 9.99%.
     
  4. The Company may redeem the Notes for 125% or 150% of the redemption amount and accrued interest. The Company may upon certain equity conditions redeemed certain notes at the lessor of fixed conversion price and 60% of 15 Trading day low VWAP.
     
  5. In the event of default the Note bears interest at 24% per annum and converts at 60% of 15 trading day low VWAP (default or fundamental transaction) – a derivative feature.

 

The June 9 th amendments triggered an extinguishment of the debt since the change in the fair value of the embedded derivative exceeded 10% of the carrying value of the debt. The Company booked a $182,986 loss on extinguishment based on the amendments.

 

The terms of the SBI Warrants are as follows:

 

1. The Warrants have a 3 year term.
   
2. The 2 issuances of 4,167 Warrants each may be exercised at a conversion price of the lesser of: (i) $2.46 or $2.88, or (ii) any lower price of equity linked instruments issued by the Company while the warrant is issued and outstanding (full ratchet reset). This anti–dilution protections provides a full reset upon the issuance of lower price securities by the Company and is available to SBI during the initial 180 days that the Warrant is outstanding. 
   
3. Beneficial ownership is limited to 4.99% initially and upon Holder request to 9.99%.

 

On June 9, 2016, the amended Old Main notes (Bridge Note and Commitment Fee) provided the holder with a variable rate conversion feature. This feature taints all warrants/notes and ongoing derivative treatment is required until the note is paid or converted in full.

 

  1. The Company may redeem the Notes for 125% or 150% of the redemption amount and accrued interest. The Company may upon certain equity conditions redeemed certain notes at the lessor of fixed conversion price and 60% of 15 Trading day low VWAP.
     
  2. In the event of default the Note bears interest at 24% per annum and converts at 60% of 15 trading day low VWAP (default or fundamental transaction) – a derivative feature.

 

This note is a derivative because it contains an embedded conversion feature that resets the conversion price upon a fundamental transaction event. The Company recorded a debt discount based on the original issue discount, the embedded derivative, and the derivative warrant issued. The debt discount is being amortized over the term of the convertible debt.

 

F- 16
 

 

Note 6 – Derivative Liability

 

In connection with the sale of debt or equity instruments, the Company may sell options or warrants to purchase the Company’s common stock. In certain circumstances, these options or warrants may be classified as derivative liabilities, rather than as equity. Additionally, the debt or equity instruments may contain embedded derivative instruments, such as embedded derivative features which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative instrument liability.

 

The Company’s derivative instrument liabilities are re-valued at the end of each reporting period, with changes in the fair value of the derivative liability recorded as charges or credits to income in the period in which the changes occur. For options, warrants and bifurcated embedded derivative features that are accounted for as derivative instrument liabilities, the Company estimates fair value using either quoted market prices of financial instruments with similar characteristics or other valuation techniques. The valuation techniques require assumptions related to the remaining term of the instruments and risk-free rates of return, the Company’s current common stock price and expected dividend yield, and the expected volatility of the Company’s common stock price over the life of the instrument.

 

The following table summarizes the warrant derivative liabilities and convertible notes activity for the period ending December 31, 2016:

 

Description   Derivative Liabilities  
Fair value at December 31, 2015   $ 106,265  
Change due to Issuances     371,562  
Change due to debt extinguishment     91,070  
Change due to Exercise/Conversion     (518,398 )
Change in Fair Value     190,456  
Fair value at December 31, 2016   $ 240,955  

 

For the year ended December 31, 2016, net derivative expense was $190,456 (2015 – net derivative income was $212,092).

 

The lattice methodology was used to value the embedded derivatives within the convertible note and the warrants issued, with the following assumptions.

 

Assumptions   December 31, 2016     December 31, 2015  
Dividend yield     0.00 %   0.00 %
Risk-free rate for term     0.51-1.47 %   0.49-1.76 %
Volatility     120.4-142.8 %   128.42-146.65 %
Maturity dates     .19-3.69 years     . 69-4.69 years  

Stock Price (pre-split)

    0.0151     0.9495  

 

During the period ended March 31, 2016, the Company amended the derivative notes on March 9, 2016. The amendment included revising the “Alternate Conversion Price to mean 60% of the lowest traded price of the common stock for the 15 consecutive trading days prior to the conversion date. The derivative liability increased by $91,070 due to the amendment which was booked as an additional debt discount.

 

During the quarter ended September 30, 2015, the Company issued 28,333 warrants to an investor as part of their Securities Purchase Agreement in which the investor acquired a Convertible Note. The warrants have an exercise price of $7.88 and a five-year term. The warrants are treated as derivative liabilities since the holder has anti-dilution protections that will re-price the warrant upon the issuance of lower priced equity linked instruments by the Company for the period of 180 days after issuance. The fair value of the derivative liability related to these warrants at issuance was valued at $169,270 and was booked as a debt discount to the Convertible Note and booked as a derivative liability on the balance sheet. The embedded conversion feature of the Convertible Note is treated as a derivative liability since the conversion price is reset upon a fundamental transaction event. The fair value of the derivative liability related to the embedded conversion feature was valued at $92,659 and was booked as a debt discount, included in interest expense(up to the amount of the note, with the excess expensed as interest expense).

 

F- 17
 

 

Note 7 – Fair Value of Financial Instruments.

 

The Company’s financial instruments consist of cash and cash equivalents, accounts payable and accrued expenses, derivative liabilities and convertible debt. The estimated fair value of cash, accounts payable and accrued liabilities approximate their carrying amounts due to the short-term nature of these instruments.

 

The Company utilizes various types of financing to fund its business needs, including convertible debt with warrants attached. The Company reviews its warrants and conversion features of securities issued as to whether they are freestanding or contain an embedded derivative and, if so, whether they are classified as a liability at each reporting period until the amount is settled and reclassified into equity with changes in fair value recognized in current earnings. At December 31, 2016, the Company had convertible debt and warrants to purchase common stock. The fair value of the warrants and the embedded conversion feature of the convertible debt is classified as a liability. Some of these units have embedded conversion features that are treated as a discount on the notes. Such financial instruments are initially recorded at fair value and amortized to interest expense over the life of the debt using the effective interest method.

 

Inputs used in the valuation to derive fair value are classified based on a fair value hierarchy which distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:

 

Level one - Quoted market prices in active markets for identical assets or liabilities;

 

Level two - Inputs other than level one inputs that are either directly or indirectly observable; and

 

Level three - Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

 

Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter. The Company’s derivative liability is measured at fair value on a recurring basis. The Company classifies the fair value of these convertible notes and warrants derivative liability under level three. The Company’s settlement payable is measured at fair value on a recurring basis based on the most recent settlement offer. The Company classifies the fair value of the settlement payable under level three. The Company’s rescission liability is measured at fair value on a recurring basis based on the most recent stock price. The Company classifies the fair value of the rescission liability under level one.

 

Based on ASC Topic 815 and related guidance, the Company concluded the common stock purchase warrants are required to be accounted for as derivatives as of the issue date due to a reset feature on the exercise price. At the date of issuance warrant derivative liabilities were measured at fair value using either quoted market prices of financial instruments with similar characteristics or other valuation techniques. The Company records the fair value of these derivatives on its balance sheet at fair value with changes in the values of these derivatives reflected in the statements of operations as “Gain (loss) on derivative liabilities.” These derivative instruments are not designated as hedging instruments under ASC 815-10 and are disclosed on the balance sheet under Derivative Liabilities.

 

The following table presents liabilities that are measured and recognized at fair value as of December 31, 2016 on a recurring and non-recurring basis:

 

Description   Level 1     Level 2       Level 3     Gains (Losses)  
Derivatives   $ -     $ -     $ 240,955     $ (190,456 )
Fair Value at December 31, 2016   $ -     $ -     $ 240,955     $ (190,456 )

 

F- 18
 

 

Note 8 – Stock Options:

 

The following is a summary of stock option activity:

 

                Weighted        
          Weighted     Average        
          Average     Remaining     Aggregate  
    Options     Exercise     Contractual     Intrinsic  
    Outstanding     Price     Life     Value  
Outstanding, December 31, 2015     200,000                          
Granted     -     $ 3.00                  
Forfeited     -                          
Exercised     -                          
Outstanding, December 31, 2016     200,000     $ 3.00       9.84     $ -  
Exercisable, December 31, 2016     -     $ -       -     $ -  

 

The exercise price for options outstanding and exercisable at December 31, 2016 is as follows:

 

Outstanding     Exercisable  
Number of     Exercise     Number of     Exercise  
Options     Price     Options     Price  
  200,000     $ 3.00       -     $ -  
  200,000               -          

 

For options granted during 2015 where the exercise price was equal to the stock price at the date of the grant, the weighted-average fair value of such options was $5.70 and the weighted-average exercise price of such options was $6.00. No options were granted during 2015 where the exercise price was greater than the stock price at the date of grant or where the exercise price was less than the stock price at the date of grant. During 2016 the company reduced the exercise price to $3.00.

 

The fair value of the stock options is being amortized to stock option expense over the vesting period. The Company recorded stock option expense of $632,356, included in operating expenses, during December 31, 2016 and $113,882 during the year ended December 31, 2015. At December 31, 2016, the unamortized stock option expense was $392,218 which will be amortized to expense through December 2018.

 

The assumptions used in calculating the fair value of options granted using the Black-Scholes option- pricing model for options granted are as follows:

 

    2016     2015  
Risk-free interest rate     1.5 %     1.5 %
Expected life of the options     5.5 to 6.5 years       5.5 to 6.5 years  
Expected volatility     150 %     150 %
Expected dividend yield     0 %     0 %

 

F- 19
 

 

As at December 31, 2016, the Company had the following warrant securities outstanding:

 

    Common Stock Warrants  
December 31, 2015     28,333  
Less: Exercised     -  
Less: Expired     -  
Add: Issued     8,334  
December 31, 2016     36,667  
         
Warrants (Note 6)     28,333  
Exercise Price   $ 7.88  
Expiration Date     September 8, 2015 to September 8, 2020    
Warrants (Note 5)     8,334  
Exercise Price       **    
Expiration Date     June 30, 2016 to June 30, 2019  

 

 

** Lessor of: $2.46 or $2.88 or any price of equity linked instruments issued by the Company while the warrant is issued and outstanding

 

During the year ended December 31, 2016, nil warrants expired unexercised.

 

Note 9 – Related Party Transactions

 

Related Parties

 

Related parties with whom the Company had transactions are:

 

Related Parties   Relationship
     
Stew Garner   Chairman, CEO, CFO and director

 

Consulting services from Officer

 

Consulting services provided by the officer for the year ended December 31, 2016 and 2015

 

    December 31, 2016     December 31, 2015  
             
President, Chief Executive Officer and Chief Financial Officer   $ 101,723     $ 116,477  

 

F- 20
 

 

Note 10 - Stockholders’ Deficiency

 

Shares Authorized

 

The Company’s authorized capital stock consists of 495,000,000 shares of common stock, par value $0.001 per share and 5,000,000 shares of preferred stock, par value $0.001 per share.

 

On December 28, 2016, the Company filed a certificate of designation, preferences and rights of Series A Preferred Stock (the “Certificate of Designation”) with the Secretary of State of the State of Nevada to designate 1,000 shares of its previously authorized preferred stock as Series A Preferred Stock. The holders of shares of Series A Preferred Stock that are not entitled to dividends or distributions have the following voting rights:

 

  Each share of Series A Preferred Stock entitles the holder to 50,000 votes on all matters submitted to a vote of the Company’s stockholders. In the event that such votes do not total at least 51% of all votes, then the votes cast by the holders of the Series A Preferred Stock shall be equal to 51% of all votes cast at any meeting of the Company’s stockholders or any issue put to the stockholders for voting.
     
  Except as otherwise provided in the Certificate of Designation, the holders of Series A Preferred Stock, the holders of Company common stock and the holders of shares of any other Company capital stock having general voting rights and shall vote together as one class on all matters submitted to a vote of the Company’s stockholders.
     
  The holders of the Series A Preferred Stock do not have any conversion rights.

 

Effective as of February 22, 2017, the Company amended its Articles of Incorporation to increase its authorized capital stock from 125,000,000 to 500,000,000 shares, of which 495,000,000 will be common stock and 5,000,000 will be preferred stock, of which, 1,000 shares have been previously designated as Series A Preferred Stock (the “Series A Preferred Stock”) and effected a 1 for 30 reverse stock split of its issued and outstanding shares of common stock. All per share amounts and number of shares in the financial statements and related notes have been retroactively restated to reflect the reverse stock split.

 

Common Stock

 

Common Shares Issued Cash

 

On May 12, 2015 the Company sold 11,628 shares of its common stock at $12.90 per share for $150,000 in cash.

 

No common shares were issued for cash during year ended December 31, 2016.

 

Common Shares Issued for Non- Cash

 

On January 28, 2015, the Company entered into a consulting agreement (“Consulting Agreement”) with a third party (the “Consultant”) for software development consulting services. Pursuant to the Consulting Agreement, the Consultant agrees to provide consulting services for six months in exchange for 1,333 shares of common stock of the Company per month.

 

For the year ended December 31, 2015 the Company recorded $106,976, which were valued at the close price of the Company’s common stock on the last day of each month from February – July for each 1,333 shares issued or 8,000 shares in aggregate issued to the Consultant.

 

On March 1, 2016 $142,403 of Note Payable debt and accrued interest was converted to 60,276 shares of common stock at a conversion price of $2.24625 per share.

 

On March 14, 2016 $42,177 of Old Main debt was converted to 20,943 shares of common stock at a conversion price of $2.0139 per share.

 

On April 6, 2016 $25,000 of Old Main debt was converted to 9,850 shares of common stock at a conversion price of $2.538 per share.

 

On April 14, 2016 $25,000 of Old Main debt was converted to 11,574 shares of common stock at a conversion price of $2.16 per share.

 

On April 19, 2016 $35,000 of Old Main debt was converted to 16,204 shares of common stock at a conversion price of $2.16 per share.

 

F- 21
 

 

On April 25, 2016 $50,000 of Old Main debt was converted to 23,148 shares of common stock at a conversion price of $2.16 per share.

 

On April 27, 2016 $30,000 of Old Main debt was converted to 15,291 shares of common stock at a conversion price of $1.962 per share.

 

On April 29, 2016 $35,000 of Old Main debt was converted to 19,444 shares of common stock at a conversion price of $1.80 per share.

 

On May 2, 2016 $36,397 of Old Main debt and interest were converted to 20,220 shares of common stock at a conversion price of $1.80 per share.

 

On May 4, 2016 $40,000 of Old Main debt was converted to 24,691 shares of common stock at a conversion price of $1.62 per share.

 

On May 11, 2016 $40,000 of Old Main debt was converted to 24,691 shares of common stock at a conversion price of $1.62 per share.

 

On May 16, 2016 $30,000 of Old Main debt was converted to 18,519 shares of common stock at a conversion price of $1.62 per share.

 

Effective May 17, 2016, the Company redeemed 1,333,333 shares of its common stock held by Consumer Electronics Ventures Corp. (“Consumer Electronics”), its former majority shareholder. The Company did not pay any cash compensation to Consumer Electronics for the redemption which was made in consideration of the intended increase in value of the remaining shares of common stock held by Consumer Electronics.

 

On May 20, 2016 $30,000 of Old Main debt was converted to 18,519 shares of common stock at a conversion price of $1.62 per share.

 

On May 26, 2016 $30,000 of Old Main debt was converted to 20,450 shares of common stock at a conversion price of $1.467 per share.

 

On June 6, 2016 $25,000 of Old Main debt was converted to 17,147 shares of common stock at a conversion price of $1.458 per share.

 

On June 14, 2016 $15,000 of Old Main debt was converted to 11,721 shares of common stock at a conversion price of $1.2798 per share.

 

On June 30, 2016 the Asset Purchase Agreement for certain assets of Pixorial Inc. (Pixorial) was closed whereby the Company issued an aggregate of 86,673 shares of the Company’s unregistered common stock in consideration for these assets valued at $2.25 per share, or an aggregate of $195,015. See Note 11 – Acquisition of Assets.

 

On July 29, 2016 $13,143 of Old Main debt was converted to 11,234shares of common stock at a conversion price of $1.17 per share.

 

On September 22, 2016 $10,000 of March 2016 Note debt was converted to 8,206 shares of common stock at a conversion price of $1.218 per share.