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 March 31, 2012
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ______________
eCrypt Technologies, Inc.
(Exact name of registrant as specified in its charter)
Colorado | 000-53489 | 32-0201472 | |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification Number) | |
4750 Table Mesa Dr. Boulder CO, 80305 | |||
(Address of principal executive offices) | |||
Registrants telephone number, including area code: 1.866.241.6868 |
Securities registered under Section 12(b) of the Act:
None
Securities registered under Section 12(g) of the Act:
Common Stock, no par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act [] Yes [X ] No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the [ ] Yes [ X ] No
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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. [X] Yes [ ] 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). [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrants 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 the definitions of large accelerated filer, accelerated filer and
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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 [X ] No
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of the last business day of the registrants most recently completed second fiscal quarter. $3,453,884.
As of June 7, 2012, the Company had 135,773,552 shares issued and outstanding.
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PART I
ITEM 1.
BUSINESS.
Overview
eCrypt Technologies, Inc., a Colorado corporation (hereinafter we, us, eCrypt, the Company, or the Registrant"), was incorporated in the State of Colorado, on April 19, 2007. The Company provides encryption services and software which secures the transmission of, storage of, and access to digital information. The Company is currently a development stage Company.
Principal Products
eCrypts primary business focus is on information security solutions which assist individuals and entities in securely transmitting, storing, and accessing information. The Companys business operations are oriented around the development and sale of encryption software and services. To date the Company has earned limited revenue. The Company believes the majority of its revenues will be derived from service subscriptions of both pre-packaged solutions and custom developed solutions for data encryption. Initially, the Companys business operations were also focused on the provision of Managed Communication Network Services (MCNS) and Information Technology (IT) consulting services. However, due to the lack of demand for these services, the Company has discontinued offering MCNS and IT consulting services as part of its business operations.
Currently, eCrypt develops and sells device-based encryption and security software and web-based encryption services for Personal Digital Assistants (PDAs), wireless handheld devices, laptop and desktop computers, pocket computers, cellular phones, smartphones, and other file storage devices. The Company has developed, and is now selling via its eCommerce website, its first product to market, eCrypt One on One, encryption software for email on BlackBerry® smartphones; as of March 31, 2012, the Company had earned limited revenue from sales of eCrypt One on One. The Company is also currently selling subscriptions to its web-based solution, eCrypt Me, a secure email, secure file storage, and secure file sharing service.
eCrypt is also developing and plans to sell device-based and web-based encryption and security software which protects email, Short Message Service (SMS), peer-to-peer (P2P), PIN-to-PIN, Instant Messaging (IM), Multimedia Message Service (MMS), and voice communications for users on such devices and mobile devices. Additionally, eCrypt is developing and plans to sell device-based secure access interfaces which allow users to conduct financial activities on mobile devices, as well as secure access User Interfaces (UIs) for mobile devices. eCrypt has the ability to customize its device-based and web-based encryption and security solutions, as well as its secure access UIs, for the purpose of securely storing, communicating and accessing information. In addition to the device-based and web-based solutions, eCrypt is also developing and plans to sell appliance-based encryption solutions for securing email and the storage of and access to files stored on servers.
Growth and Development
In furtherance of the Companys business operations, as discussed in more detail below, the Company entered into an OEM License Agreement with Certicom Corp. for the development of eCrypt One on One, and entered into and subsequently renewed a BlackBerry® ISV (Independent Software Vendor) Alliance Agreement with Research In Motion (RIM).
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Certicom OEM
Effective January 31, 2008, eCrypt entered into an OEM License Agreement (the OEM License Agreement) with Certicom Corp., a cryptography company specializing in public key infrastructure implementations, device security, anti-counterfeiting, product authentication, asset management, and fixed-mobile convergence. Pursuant to the OEM License Agreement, eCrypt was granted a worldwide, non-exclusive, non-transferable license to develop a software product which combines eCrypts software with Certicoms software, Security Builder Crypto-C for RIM, Version 3.2, as compiled within the Research in Motion Crypto API (Security Builder). Additionally, through the OEM License Agreement, eCrypt was granted a license to reproduce and use the object code of the libraries, sample code, and other items specifically designated as runtime in Security Builder for distribution purposes. Under the terms of the OEM License Agreement, eCrypt was required to pay Certicom a production fee of $1.00 per unit for each application sold by eCrypt, with an initial $10,000 production fee for the first 10,000 units having been paid upon execution of the OEM License Agreement. The term of the OEM License Agreement was three (3) years. Subsequent to the entry into the OEM License Agreement, on March 24, 2009 Certicom Corp. was acquired by RIM, and consequently all license agreements entered into with Certicom for RIM APIs were dissolved and access to RIMs Crypto APIs is now provided to BlackBerry® Alliance Members free of charge. No further fees or reporting is required.
The foregoing description of the OEM License Agreement does not purport to be complete and is qualified in its entirety by reference to the OEM License Agreement which was filed as Exhibit 10.1 to the Companys Form 10 registration statement filed with the Securities and Exchange Commission on November 11, 2008.
BlackBerry® ISV with RIM
Effective April 2, 2008, eCrypt entered into an initial BlackBerry® Alliance Program Master Alliance Agreement and joined the BlackBerry® Alliance Program with RIM, a leading designer, manufacturer, and marketer of wireless solutions for the worldwide mobile communications market. On February 3, 2010 eCrypt renewed its Membership in the BlackBerry® Alliance Program as an Associate Member for an additional one (1) year term. eCrypt is part of the BlackBerry® Independent Software Vendor (ISV) Alliance Program (the “Alliance Program”). The Alliance Program is intended to provide certain support to members who are interested in integrating marketable third party applications for BlackBerry® wireless handheld devices. As a BlackBerry® ISV Alliance Member™, eCrypt receives resources, support and tools from RIM needed to develop and sell software applications for BlackBerry® smartphone users.
On September 23, 2009, RIM launched the new BlackBerry® Alliance Program. The newest addition to the Alliance Program is a paid tiered member system with a rewards program to encourage participation. The new point system offers members points for active involvement in the program. As a members points increase the member is then rewarded with greater access to RIM tools and resources. As an Associate Member the Company is required to achieve 45 Member Points within the membership year. Points can be earned by completing various activities such as attending BlackBerry® events, submitting Case Studies, and promoting its BlackBerry® Alliance Membership.
As an Associate Member, some of the benefits realized by the Company through its participation in the Alliance Program include, but are not limited to: i) access to resources to facilitate the sale of applications and professional services to the BlackBerry® user community; ii) access to BlackBerry® Tools & SDKs (Software Development Kit (aka "devkit") is typically a set of development tools that allows for the creation of applications for a certain software package, software framework, hardware platform, computer system, video game console, operating system, or similar platform); iii) ability to participate in BlackBerry® Web Signals and BlackBerry® Push APIs (Application Programming Interface - applications designed to facilitate interaction between different software programs; An API is implemented by an application, library
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or operating system to determine their vocabularies and calling conventions, and is used to access their services); iv) access to BlackBerry® Internet Service-B Connectivity; v) free Code Signing Keys for Controlled APIs; vi) enhanced access to the Developer Issue Tracker; vii) participation in BlackBerry® Developer Forums; viii) BlackBerry® Developer Newsletter; ix) BlackBerry® Partner Newsletter; x) access to brand guidelines and the use of the BlackBerry® Alliance Associate Member logo; xi) complimentary listing in the BlackBerry® Solutions Catalog; approval for using BlackBerry® in Google® AdWords; xii) ability to produce co-branded sales and marketing collateral; xiii) ability to post online applications to the Mobile Solutions Center a RIM Internal portal for application demos and trials to various RIM channels; xiv) email support for sales related inquiries; and xv) ability to resell Technical Support Services and BlackBerry® Training Services through authorized distributors.
Research and Development
Over the next twelve (12) months, eCrypt plans to continue developing new products and existing product enhancements and strengthening strategic alliances. In particular, eCrypt plans to add features to its web-based solution, eCrypt Me, as well as commence the development of additional mobile phone apps for the service. The Company will also commence with the development of an appliance-based data encryption solution.
Production
All eCrypt solutions are currently developed under the supervision of Brad Lever, Gabriel Rosu and Kasia Zukowska, the initial founders of eCrypt (collectively referred to as the Founders). Solution testing and troubleshooting is carried out by all Founders of the Company. The solutions are then deployed for use and testing by professional and non-professional test groups, who provide feedback to the Company regarding potential problems and issues with the solutions. The Company maintains regular meetings to absorb and address the feedback received from these testing sessions.
Suppliers
eCrypts major suppliers for its recurring business needs include, but are not limited to: i) Research in Motion (RIM); ii) Rogers Wireless; iii) Sharefile; and iv) Stargate Connections Ltd.
Research in Motion - eCrypt is an Associate Member of RIMs BlackBerry® Alliance Program. As part of the BlackBerry Alliance, RIM provides the Company with resources, support and tools necessary to develop and sell innovative, market-driven applications for BlackBerry smartphone users. The term of the Alliance Program is one (1) year. Thereafter, RIM may elect to renew the relationship with eCrypt for successive one-year periods.
Rogers Wireless - Rogers Wireless provides the Company with cellular telephone and wireless data services for the Companys internal operations.
Sharefile - Sharefile provides the Company with secure FTP service, used for the purpose of securely relaying large amounts of data.
Stargate Connections Ltd. - Stargate Connections Ltd. provides the Company with co-location services, commonly referred to as server hosting services, as well as IT network maintenance and management services, and IT support.
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Distribution
The Company plans to distribute its solutions globally, in accordance with applicable import and export regulations, through a number of distribution channels. The primary method of distribution will be through the Companys eCommerce website at https://shop.ecryptinc.com. The Company will also pursue strategic distribution alliances with service providers, carrier dealers, and software vendors to distribute its solutions. The Company does not currently have any strategic distribution alliance contracts in place. To date the Company has distributed its eCrypt One on One software solely via its eCommerce website.
Customers and Marketing
Customers
To date, the Company has sold limited licenses of its encryption software to customers located globally. Based on market research conducted in May of 2010, the Company estimates that its customers are individuals and entrepreneurs in need of device-based encryption and security software for BlackBerry®smartphones. To date the Company has sold limited subscriptions to its web-based service, eCrypt Me. The Company anticipates that initially its customers for eCrypt Me will be individuals and entrepreneurs in need of affordable and versatile encryption solutions for any or a combination of PDAs, wireless handheld devices, laptop and desktop computers, pocket computers, cellular phones, smartphones, and other file storage devices. Furthermore, the Company anticipates that a majority of its customers will be small to medium sized businesses, especially those in industries affected by data security regulations such as HIPAA, as these companies traditionally use POP email to send their clients sensitive information and that sensitive information then resides with a service provider. Additionally, within larger organizations we anticipate the sale of our technology to be utilized by management, C-level personnel, human resource departments, and special project groups, where email communications must be kept confidential from internal leakage. We also anticipate sales of our products to consumers who are aware of and concerned about privacy and security risks of the internet and digital communications.
Marketing
Over the next twelve months, the Company anticipates that it will begin commencing a comprehensive marketing campaign through a variety of traditional and non-traditional media.
The Company anticipates that it will initially make efforts to market its product(s) on the internet, using the Companys website (www.ecryptinc.com), on social networking sites such as Twitter and Facebook, on online marketplaces such as the BlackBerry®App World and Apple App Store, and on technology and security related blogs such as Wired.com and Techvibes.com and SearchSecurity.com. Additionally, the Company will list its software, eCrypt One on One in Research In Motions BlackBerry® Solutions Catalogue, and explore joint marketing opportunities. Additionally the Company will seek to place advertisements in various lifestyle, technology, and business magazines. The Company will also continue to develop its relationship with RIM and engage in cooperative marketing, and also build on relationships previously established at WES (the Wireless Enterprise Smposium) with the major global wireless carriers and other BlackBerry® smartphone resellers. Furthermore, the Company will continue developing affinity programs for groups such as the Online Therapy Institute.
Competition
eCrypts encryption software, eCrypt One on One, faces direct competition from three primary development companies: i) SAMURAI by BabelSecure; ii) SecureMessage by Cworx; and iii) SecretMail by Link2. Each of the foregoing companies currently offers and sells a software product similar to our product, eCrypt One
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on One. Although there is no assurance that we will be able to successfully compete with these companies, we believe because of eCrypt One on Ones functionality and operations, these products will be able to successfully compete with our competitors.
eCrypts web-based encryption service, eCrypt Me, faces direct competition from six primary sources: i) CryptoHeaven,, ii) NeoCertified, iii) PGP, provided by Symantec Corp, iv) Voltage Security, v) Entrust, and vi) Hushmail. CryptoHeaven currently offers secure email, secure online storage, secure chat, secure web forms, and off-site backup services and NeoCertified currently offers secure email, and secure statements services, both similar to our eCrypt Me service. PGP is a popular and established encryption solution utilized in a variety of services similar to eCrypt Me. Voltage and Entrust offer security solutions for businesses similar to eCrypt Me, while Hushmail offers a secure email subscription service similar to eCrypt Me.
Although there is no assurance that we will be able to successfully compete with these organizations, we believe because of eCrypt Mes functionality, versatility, and ease of use that we will be able to successfully compete with our competitors.
Intellectual Property and Agreements
Patents
eCrypt is currently investigating whether its original processes developed in association with its encryption software, eCrypt One on One are patentable. If the Company determines that its original processes are patentable and that it is in the best interest of the Company to pursue such patents, then the Company will apply for patent protection with the United States Patent and Trademark Office.
Licenses
The research, development and commercialization of encryption software often involves alternative development and optimization routes, which are presented at various stages in the development process. The preferred routes cannot be predicted at the outset of a research and development program because they will depend upon subsequent discoveries and test results. There are numerous third-party patents in our field, and it is possible that to pursue the preferred development route of one or more of our products we will need to obtain a license to a patent, which would decrease the ultimate profitability of the applicable product. If we cannot negotiate a license, we might have to pursue a less desirable development route or terminate the program altogether.
Trade Secrets
The Company also relies on trade secrets, proprietary know-how and continuing technological innovation to develop and maintain a competitive position in our product areas. eCrypt employees and officers must sign a non-disclosure agreement before they are authorized to discuss particulars of the functionality of the Companys software products. All current employees and officers of the Company who are privy to confidential information have signed non-disclosure and non-competition agreements with the Company. Additionally, Gabriel Rosu, the Companys Chief Technology Officer, has signed a Development Consulting Agreement with the Company, pursuant to which eCrypt specifically retains ownership rights to all codes created and developed by Mr. Rosu in the scope of his engagement by the Company. The foregoing description of the Development Consulting Agreement does not purport to be complete and is qualified in its entirety by reference to the Consulting Agreement which was filed as Exhibit 10.6 to Form 8-K filed with the SEC on May 27, 2010.
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Environmental Issues
The Companys goods and services, or the production or provision thereof, do not directly impact the environment. Notwithstanding the foregoing, the Company strives to be environmentally friendly in all aspects of its operations.
Governmental Regulations
Encryption Software is classified as a dual-use good, meaning that it can be used by both the general public and the military. Export of such goods is regulated by The Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies (the Wassenaar Arrangement).
The Wassenaar Arrangement was established in order to contribute to regional and international security and stability by promoting transparency and greater responsibility in transfers of conventional arms and dual-use goods and technologies, thus preventing destabilizing accumulations. Participating States seek, through their national policies, to ensure that transfers of these items do not contribute to the development or enhancement of military capabilities which undermine these goals, and are not diverted to support such capabilities.
The Participating States of the Wassenaar Arrangement include: Argentina, Australia, Austria, Belgium, Bulgaria, Canada, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Malta, Netherlands, New Zealand, Norway, Poland, Portugal, Republic of Korea, Romania, Russian Federation, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Turkey, Ukraine, United Kingdom and United States.
In the United States, the Bureau of Industry and Security (BIS) is responsible for implementing and enforcing the Export Administration Regulations (EAR), which regulate the export and re-export of most commercial items. Encryption software is subject to the EAR and other U.S. law, and may not be exported or re-exported to certain countries (currently Cuba, Iran, North Korea, Sudan and Syria) or to persons or entities prohibited from receiving U.S. exports. Because of this, the Company has applied and has received approval for Mass Market Status Export Authorization from the BIS. Mass Market Status is given to encryption products which have been reviewed and classified by the BIS as exportable under certain rules and regulations, including the mass market encryption rules of the EAR.
On June 11, 2008 eCrypt received a Mass Market Commodity Classification for eCrypt One on One from the United States Department of Commerce; a copy of the Commodity Classification was attached as Exhibit 10.5 to the Form 10 registration statement filed by the Company with the Securities and Exchange Commission on November 11, 2008, and is hereby incorporated by reference. Because the Company has received this Commodity Classification, eCrypt is allowed to export its software to all people, except restricted parties, such as Specially Designated Nationals, Denied Parties, Denied Entities, and any other prohibited end uses and users (such as end uses/users involving the design, development, production or use of WMDs or missiles), and all countries, except embargoed destinations identified in the EAR.
With the assistance of Steptoe & Johnson, eCrypt determined that an export authorization is not required for its web-based encryption service, eCrypt Me.
Employees
The Company does not currently have any full-time employees. Kasia Zukowska has been contracted by the Company to perform administrative duties on behalf of the Company. Gabriel Rosu has been contracted by the Company to perform software development duties and serve as the Chief Technology Officer for the Company. Brad Lever currently serves as the President, Chief Executive Officer, and Chief Financial Officer, and director of the Company without wages or salaries.
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Reports to Security Holders
We are subject to the informational requirements of the Securities Exchange Act of 1934 which requires us to file reports, proxy statements and other information with the Securities and Exchange Commission. Such reports, proxy statements and other information may be inspected at public reference facilities of the SEC at 100 F Street, NE, Room 1580, Washington D.C. 20549. Copies of such material can be obtained from the Public Reference Section of the SEC at 100 F Street, NE, Room 1580, Washington, D.C. 20549 at prescribed rates. The public could obtain information on the operation of the public reference room by calling the Securities and Exchange Commission at 1-800-SEC-0330. Because we file documents electronically with the SEC, you may also obtain this information by visiting the SEC's Internet website at http://www.sec.gov.
ITEM 1A.
RISK FACTORS.
Not Applicable.
ITEM 1B.
UNRESOLVED STAFF COMMENTS.
Not Applicable.
ITEM 2.
PROPERTIES.
The Company does not currently own any real property. Currently the Company runs its business operations at 2129 - 4951 Netarts Hwy W, Tillamook OR, 97141. This space is provided to the Company free of charge by a shareholder of the Company. Such costs are immaterial to the financial statements and, accordingly have not been reflected therein. The Company anticipates that it will explore leasing opportunities for office space during the next twelve months.
The Company utilizes a Canadian-based co-location facility to host its email, service and eCommerce servers. The eCommerce server will serve as the mechanism through which the Company will distribute its software online, for both purchase and evaluation purposes.
eCrypt owns the following internet domain names: ecryptinc.com, ecryptinc.ca, ecryptinc.org, ecryptinc.net, ecryptinc.cc, ecryptinc.mobi, controliskey.com, ecrypt.me, ecrypt.it, ecrypt.info, ecrypt.us ecryptme.com, privacynowtv.com, privacynow.tv, yourprivacyisourbusiness.com.
ITEM 3.
LEGAL PROCEEDINGS.
The Company is not a party to any significant pending legal proceedings, and no such proceedings are known to be contemplated. No director, officer or affiliate of the Company, and no owner of record or beneficial owner of more than 5.0% of the securities of the Company, or any associate of any such director, officer or security holder is a party adverse to the Company or has a material interest adverse to the Company in reference to pending litigation.
ITEM 4.
MINE SAFETY DISCLOSURES.
Not Applicable.
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PART II
ITEM 5.
MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
The Companys shares are approved for trading on the OTCBB under the symbol ECRY. The following table sets forth the high and low bid prices of our common stock (USD) for the last two fiscal years and subsequent interim period, as reported by the National Quotation Bureau and represents inter dealer quotations, without retail mark-up, mark-down or commission and may not be reflective of actual transactions:
| (U.S. $) | |
|
|
|
2010 | HIGH | LOW |
Quarter Ended March 31 | $1.25 | $0.41 |
Quarter Ended June 30 | $0.68 | $0.19 |
Quarter Ended September 30 | $0.34 | $0.01 |
Quarter Ended December 31 | $0.205 | $0.0001 |
|
|
|
2011 | HIGH | LOW |
Quarter Ended March 31 | $0.23 | $0.0001 |
Quarter Ended June 30 | $0.326 | $0.12 |
Quarter Ended September 30 | $0.12 | $0 |
Quarter Ended December 31 | $1.06 | $0.145 |
|
|
|
2012 | HIGH | LOW |
Quarter Ended March 31 | $0.65 | $0.022 |
Holders
As of June 7, 2012 there were 135,773,552 shares of common stock issued and outstanding and approximately 14 shareholders of record.
Dividends
The Company has not declared or paid any cash dividends on its common stock during the fiscal years ended March 31, 2012 or 2011. There are no restrictions on the common stock that limit our ability to pay dividends if declared by the Board of Directors and the loan agreements and general security agreements covering the Companys assets do not limit its ability to pay dividends. The holders of common stock are entitled to receive dividends when and if declared by the Board of Directors, out of funds legally available therefore and to share pro-rata in any distribution to the stockholders. Generally, the Company is not able to pay dividends if after payment of the dividends, it would be unable to pay its liabilities as they become due or if the value of the Companys assets, after payment of the liabilities, is less than the aggregate of the Companys liabilities and stated capital of all classes.
ITEM 6.
SELECTED FINANCIAL DATA.
Not Applicable.
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ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
SPECIAL NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS IN THIS REPORT, INCLUDING STATEMENTS IN THE FOLLOWING DISCUSSION, ARE WHAT ARE KNOWN AS "FORWARD LOOKING STATEMENTS", WHICH ARE BASICALLY STATEMENTS ABOUT THE FUTURE. FOR THAT REASON, THESE STATEMENTS INVOLVE RISK AND UNCERTAINTY SINCE NO ONE CAN ACCURATELY PREDICT THE FUTURE. WORDS SUCH AS "PLANS," "INTENDS," "WILL," "HOPES," "SEEKS," "ANTICIPATES," "EXPECTS "AND THE LIKE OFTEN IDENTIFY SUCH FORWARD LOOKING STATEMENTS, BUT ARE NOT THE ONLY INDICATION THAT A STATEMENT IS A FORWARD LOOKING STATEMENT. SUCH FORWARD LOOKING STATEMENTS INCLUDE STATEMENTS CONCERNING OUR PLANS AND OBJECTIVES WITH RESPECT TO THE PRESENT AND FUTURE OPERATIONS OF THE COMPANY, AND STATEMENTS WHICH EXPRESS OR IMPLY THAT SUCH PRESENT AND FUTURE OPERATIONS WILL OR MAY PRODUCE REVENUES, INCOME OR PROFITS. NUMEROUS FACTORS AND FUTURE EVENTS COULD CAUSE THE COMPANY TO CHANGE SUCH PLANS AND OBJECTIVES OR FAIL TO SUCCESSFULLY IMPLEMENT SUCH PLANS OR ACHIEVE SUCH OBJECTIVES, OR CAUSE SUCH PRESENT AND FUTURE OPERATIONS TO FAIL TO PRODUCE REVENUES, INCOME OR PROFITS. THEREFORE, THE READER IS ADVISED THAT THE FOLLOWING DISCUSSION SHOULD BE CONSIDERED IN LIGHT OF THE DISCUSSION OF RISKS AND OTHER FACTORS CONTAINED IN THIS REPORT ON FORM 10-K AND IN THE COMPANY'S OTHER FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. NO STATEMENTS CONTAINED IN THE FOLLOWING DISCUSSION SHOULD BE CONSTRUED AS A GUARANTEE OR ASSURANCE OF FUTURE PERFORMANCE OR FUTURE RESULTS.
Overview & Plan of Operation
eCrypt Technologies, Inc. was incorporated in the State of Colorado on April 19, 2007. The Company provides encryption solutions which secure the transmission of, storage of, and access to digital information. Currently the Company is a developmental stage Company. Over the next twelve (12) months, eCrypt will continue developing new products and existing product enhancements and strengthening strategic alliances. In particular, eCrypt plans to launch additional mobile apps for its web-based encryption service, eCrypt Me. The Company has also commenced research for development of an appliance-based encryption solution.
In addition to the foregoing, in an effort to advance the business operations of the Company, over the next twelve (12) months the Company plans to undertake the following actions in the order in which they are listed:
1
complete development of downloadable User Interfaces for the access to eCrypt Me alternate to using a web browser;, for Android and BlackBerry smartphones.
2
commence and complete testing of these Interfaces;
3
commence distribution of the Interfaces;
4
commence and complete development of enhancements to eCrypt Me; and
5
commence and complete development of an appliance-based encryption solution.
The foregoing business actions are goals of the Company. There is no assurance that the Company will be able to complete any, or all, of the foregoing actions.
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Results of Operations
The following discussion and analysis provides information that we believe is relevant to an assessment and understanding of our results of operation and financial condition for the fiscal year ended March 31, 2012 as compared to the fiscal year ended March 31, 2011. The following discussion should be read in conjunction with the Financial Statements and related Notes appearing elsewhere in this Form 10-K.
Our financial statements are stated in US Dollars and are prepared in accordance with generally accepted accounting principles of the United States (GAAP).
Results of Operation for eCrypt Technologies, Inc. for the Fiscal Year Ended March 31, 2012 Compared to the Fiscal Year Ended March 31, 2011.
Revenue
Revenue. During the fiscal year ended March 31, 2012, the Company had revenues of $2,612 as compared to revenues of $1,795 during the fiscal year ended March 31, 2011, an increase of $817, or approximately 45.5%. The increase in revenue experienced by the Company was primarily attributable to the fact that the Company sold subscriptions to its eCrypt Me service.
Operating Expenses
Operating Expenses. During the fiscal year ended March 31, 2012, the Company had operating expenses of $653,665 as compared to operating expenses of $675,673 during the fiscal year ended March 31, 2011, a decrease of approximately $22,008 or 3.26%. The decrease in operating expenses experienced by the Company was primarily attributable to a decrease in advertising and promotion expenses experienced by the Company.
Net Loss
Net Loss. The Company had a net loss of $(696,221) for the fiscal year ended March 31, 2012 as compared to a net loss of $(693,906) for the fiscal year ended March 31, 2011, a change of $2,315 or approximately 0.334%. The change in net loss experienced by the Company was primarily attributable to a decrease in operating expenses and an increase in interest expenses experienced by the Company.
Liquidity and Capital Resources
Currently, we have limited operating capital. The Company anticipates that it will require approximately $5,000,000 of working capital to complete all of its desired business activity during the next twelve months. The Company has earned limited revenue from its business operations. Our current capital and our other existing resources will be sufficient only to provide a limited amount of working capital, and, to date, the revenues generated from our business operations have not been sufficient to fund our operations or planned growth. As noted above, we will likely require additional capital to continue to operate our business, and to further expand our business. We may be unable to obtain the additional capital required. Our inability to generate capital or raise additional funds when required will have a negative impact on our operations, business development and financial results.
During the next twelve months, we plan to seek to generate the necessary capital to fund our business operations and complete our desired business activity through sales of our software eCrypt One on One, and subscriptions to our web-based service eCrypt Me. However, as of the period ended March 31, 2012, we
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have generated limited revenue through sales of eCrypt One on One and subscriptions to eCrypt Me. If we are unable to generate the necessary capital through the sales of these products, we may conduct a private placement offering to seek to raise the necessary working capital to fund our business operations.
The following discussion outlines the state of our liquidity and capital resources for the fiscal year ended March 31, 2012, compared to the fiscal year ended March 31, 2011:
Total Current Assets & Total Assets
Our audited balance sheet reflects that: i) as of March 31, 2012, we have total current assets of $73,197, as compared to total current assets of $43,127 as of March 31, 2011, an increase of $30,070, or approximately 69.72%; and ii) as of March 31, 2012, we have total assets of $91,850, compared to total assets of $55,687 as of March 31, 2011, an increase of $36,163, or approximately 64.94%. The increase in the Companys total current assets and total assets from March 31, 2011 to March 31, 2012 was primarily attributable to an increase in the Companys cash.
Cash: As of March 31, 2012, our audited balance sheet reflects that we have cash of $73,197, as compared to $42,417 at March 31, 2011, an increase of $30,780, or approximately 72.565%. The increase in the Companys cash and short term investments from March 31, 2011 to March 31, 2012 was primarily attributable to the fact that during the period ended March 31, 2012 the Company received loans from a related and third party for operational expenses.
Total Current Liabilities & Total Liabilities
As of March 31, 2012, our audited balance sheet reflects that we have total current liabilities of $291,249 as compared to total current liabilities of $21,044 at March 31, 2011, an increase of $270,205, or approximately 1,284%. We have total liabilities of $751,787 as compared to total liabilities of $355,469 at March 31, 2011, an increase of $396,318, or approximately 111.49%. The increase in the Companys total liabilities from March 31, 2011 to March 31, 2012 was primarily attributable to the fact that the Company obtained loans from a related and third party during the period ended March 31, 2012.
Cash Flow for the Company for the Fiscal Year Ended March 31, 2012 as Compared to the Fiscal Year Months Ended March 31, 2011
Operating Activities During the fiscal year ended March 31, 2012, the net cash used by the Company in operating activities was $291,606, as compared to net cash used in operating activities of $603,839 during the fiscal year ended March 31, 2011, a change of $312,233. The decrease in net cash used in operating activities was primarily attributable to an increase in net loss and increase in stock based compensation.
Investing Activities During the fiscal year ended March 31, 2012, the net cash used by the Company in investing activities was $15,578, as compared to net cash used in investing activities of $1,000 during the fiscal year ended March 31, 2011, a change of $14,578. The change in net cash used by investing activities was primarily attributable to an increase in spending on equipment.
Financing Activities During the fiscal year ended March 31, 2012, the net cash provided by financing activities was $337,964, as compared to net cash provided by financing activities of $315,000 during the fiscal year ended March 31, 2011, an increase of $22,964, or approximately 7.29%. The change in net cash provided by financing activities was primarily attributable to the fact that during the fiscal year ended March 31, 2012, the Company obtained loans totaling $337,964.
- 13 -
Off Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements of the Company required by Article 8 of Regulation S-X are attached to this report.
- 14 -
eCRYPT TECHNOLOGIES, INC.
AUDITED FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED MARCH 31, 2012 and 2011
| Page |
Report of Independent Registered Public Accounting Firm | 16 |
Balance Sheets | 17 18 |
Statements of Operations | 19 |
Statement of Stockholders Equity (Deficit) | 20 21 |
Statements of Cash Flows | 22 23 |
Notes to Financial Statements | 24 33 |
- 15 -
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
eCrypt Technologies, Inc.
We have audited the accompanying balance sheets of eCrypt Technologies, Inc. (A Development Stage Company) as of March 31, 2012 and 2011 and the related statements of operations, stockholders equity (deficit), and cash flows for the years then ended and from inception (April 19, 2007) to March 31, 2012. eCrypt Technologies, Inc., is management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the companys internal control over the 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 audits provide 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 eCrypt Technologies, Inc. (A Development Stage Company) as of March 31, 2012 and 2011 and the results of its operations and its cash flows for the years then ended and from inception (April 19, 2007) to March 31, 2012, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations, which raise substantial doubt about its ability to continue as a going concern. Managements plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
De Joya Griffith & Company, LLC
/s/ De Joya Griffith & Company, LLC
Henderson, Nevada
June 5, 2012
2580 Anthem Village Dr., Henderson, NV 89052
Telephone (702) 563-1600 ● Facsimile (702) 920-8049
Member Firm with
Russell Bedford International
- 16 -
eCrypt Technologies, Inc. | ||||||||
(A Development Stage Company) | ||||||||
BALANCE SHEETS | ||||||||
(Audited) | ||||||||
|
|
|
|
|
| March 31, |
| March 31, |
|
|
|
|
|
| 2012 |
| 2011 |
|
|
|
|
|
|
|
|
|
| ASSETS |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| CURRENT ASSETS |
|
|
|
|
| ||
|
| Cash |
|
| $73,197 |
| $42,417 | |
|
| Prepaid expenses |
|
| - |
| 710 | |
| TOTAL CURRENT ASSETS |
|
| 73,197 |
| 43,127 | ||
|
|
|
|
|
|
|
|
|
| Property and equipment, net |
|
| 18,653 |
| 12,560 | ||
|
|
|
|
|
|
|
| |
TOTAL ASSETS |
|
| $91,850 |
| $55,687 | |||
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
| ||
| LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| CURRENT LIABILITIES |
|
|
|
|
| ||
|
| Accounts payable and accrued liabilities |
|
| $16,884 |
| $21,044 | |
|
| Accounts payable-related party |
|
| 17,317 |
| - | |
|
| Accrued interest on loan-related party |
|
| 42,048 |
| - | |
|
| Loan-related party |
|
| 215,000 |
| - | |
TOTAL CURRENT LIABILITIES |
|
| 291,249 |
| 21,044 | |||
|
|
|
|
|
|
|
| |
| LONG TERM LIABILITIES |
|
|
|
|
| ||
| Loan |
|
| $99,964 |
| - | ||
| Loan-related party |
|
| 338,000 |
| 315,000 | ||
| Accrued interest on loan |
|
| 1,065 |
| - | ||
| Accrued interest on loan-related party |
|
| 21,509 |
| 19,425 | ||
TOTAL LONG TERM LIABILITIES |
|
| 460,538 |
| 334,425 | |||
|
|
|
|
|
| |||
TOTAL LIABILITIES |
|
| 751,787 |
| 355,469 | |||
|
|
|
|
|
|
|
|
|
| STOCKHOLDERS' DEFICIT |
|
|
|
|
| ||
|
| Preferred stock (10,000,000 Shares Authorized; No Par Value |
|
|
|
|
| |
|
|
| 0 and 0 shares issued and outstanding as at March 31, 2012 and 2011) |
|
| - |
| - |
|
| Common stock (500,000,000 Shares Authorized; No Par Value; |
|
|
|
|
| |
|
|
| 135,411,052 and 134,798,552 shares issued and outstanding as at March 31, 2012 and 2011) |
|
| 815,661 |
| 703,220 |
|
|
|
|
|
|
|
| |
|
| Stock subscription payable |
|
| 178,625 |
| - | |
|
| Additional paid in capital |
|
| 45,000 |
| - | |
|
| Deficit accumulated during the development stage |
|
| (1,699,223) |
| (1,003,002) |
- 17 -
TOTAL STOCKHOLDERS' DEFICIT |
|
| (659,937) |
| (299,782) | |||
|
|
|
|
|
|
|
| |
| TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
| $91,850 |
| $55,687 | ||
|
|
|
|
|
|
|
| |
| The accompanying notes are an integral part of these financial statements. |
|
- 18 -
eCrypt Technologies, Inc. | ||||||||||
(A Development Stage Company) | ||||||||||
STATEMENTS OF OPERATIONS | ||||||||||
|
|
|
| (Audited) |
|
|
|
| ||
|
|
|
|
|
|
|
|
| ||
|
|
|
| Twelve Months Ended March 31, 2012 |
| Twelve Months Ended March 31, 2011 |
| Cumulative Amount from Inception (April 19, 2007) to March 31, 2012 | ||
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
| ||
REVENUES |
|
|
|
|
|
| ||||
| Sales |
| $2,612 |
| $1,795 |
| $96,830 | |||
|
|
|
|
|
|
|
|
| ||
OPERATING EXPENSES |
|
|
|
|
|
| ||||
| Amortization and depreciation |
| 9,485 |
| 8,496 |
| 62,477 | |||
| Advertisment and promotion |
| 13,565 |
| 308,348 |
| 351,087 | |||
| General and administrative |
| 576,979 |
| 302,863 |
| 1,076,907 | |||
| Professional fees |
| 53,636 |
| 55,966 |
| 232,150 | |||
TOTAL OPERATING EXPENSES |
| 653,665 |
| 675,673 |
| 1,722,621 | ||||
|
|
|
|
|
|
|
|
| ||
OPERATING LOSS |
| (651,053) |
| (673,878) |
| (1,625,791) | ||||
|
|
|
|
|
|
|
|
| ||
OTHER INCOME (EXPENSES) |
|
|
|
|
|
| ||||
| Interest expense |
| (45,198) |
| (20,822) |
| (77,231) | |||
| Gain on sale of fixed asset |
| - |
| - |
| 600 | |||
| Interest income |
| 30 |
| 794 |
| 3,199 | |||
| TOTAL OTHER INCOME (EXPENSES) |
| (45,168) |
| (20,028) |
| (73,432) | |||
|
|
|
|
|
|
|
|
| ||
NET LOSS |
| $(696,221) |
| $(693,906) |
| $(1,699,223) | ||||
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
| ||
Loss per share |
|
|
|
|
|
| ||||
| Basic |
| $(0.01) |
| $(0.01) |
|
| |||
|
|
|
|
|
|
|
|
| ||
WEIGHTED AVERAGE SHARES OUTSTANDING |
|
|
|
|
|
| ||||
| Basic |
|
| 135,185,164 |
| 134,540,170 |
|
| ||
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
| ||
The accompanying notes are an integral part of these financial statements. |
|
|
|
- 19 -
eCrypt Technologies, Inc. | |||||||||||||||
(A Development Stage Company) | |||||||||||||||
STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT) | |||||||||||||||
For the Period from Inception (April 19, 2007) to March 31, 2012 | |||||||||||||||
(Audited) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated Deficit |
|
|
| Preferred Shares |
| Common Shares |
| Additional Paid-in- |
| Subscriptions |
| During Development |
| Total Stockholders' | ||||
| Number |
| Amount |
| Number |
| Amount |
| capital |
| Payable |
| Stage |
| Equity (Deficit) |
Balance at April 19, 2007 (Date of Inception) | - |
| $ - |
| - |
| $ - |
| $ - |
| $ - |
| $ - |
| $ - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued | - |
| - |
| 116,015,968 |
| 55,130 |
| - |
| - |
| - |
| 55,130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period | - |
| - |
| - |
| - |
| - |
| - |
| (32,505) |
| (32,505) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - March 31, 2008 | - |
| - |
| 116,015,968 |
| 55,130 |
| - |
| - |
| (32,505) |
| 22,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock subscriptions | - |
| - |
| - |
| - |
| - |
| 4,875 |
| - |
| 4,875 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued | - |
| - |
| 17,502,248 |
| 151,572 |
| - |
| - |
| - |
| 151,572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period | - |
| - |
| - |
| - |
| - |
| - |
| (92,111) |
| (92,111) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - March 31, 2009 | - |
| - |
| 133,518,216 |
| 206,702 |
| - |
| 4,875 |
| (124,616) |
| 86,961 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock cancelled | - |
| - |
| - |
| - |
| - |
| (4,875) |
| - |
| (4,875) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock subscriptions | - |
| - |
| - |
| - |
| - |
| 400,000 |
| - |
| 400,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued | - |
| - |
| 40,455 |
| 32,768 |
| - |
| - |
| - |
| 32,768 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 20 -
Net loss for the period | - |
| - |
| - |
| - |
| - |
| - |
| (184,480) |
| (184,480) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - March 31, 2010 | - |
| - |
| 133,558,671 |
| 239,470 |
| - |
| 400,000 |
| (309,096) |
| 330,374 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for cash | - |
| - |
| 952,381 |
| 400,000 |
| - |
| (400,000) |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for compensation | - |
| - |
| 287,500 |
| 63,750 |
| - |
| - |
| - |
| 63,750.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period | - |
| - |
| - |
| - |
| - |
| - |
| (693,906) |
| (693,906.00) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - March 31, 2011 | - |
| - |
| 134,798,552 |
| 703,220 |
| - |
| - |
| (1,003,002) |
| (299,782) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for compensation | - |
| - |
| 612,500 |
| 112,441 |
| - |
| - |
| - |
| 112,441 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share subscription | - |
| - |
| - |
| - |
| - |
| 178,625 |
| - |
| 178,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock option rights to Director, Thomas Trkla | - |
| - |
| - |
| - |
| 45,000 |
| - |
| - |
| 45,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period | - |
| - |
| - |
| - |
| - |
| - |
| (696,221) |
| (696,221) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - March 31, 2012 | - |
| $ - |
| 135,411,052 |
| $ 815,661 |
| $ 45,000 |
| $ 178,625 |
| $ (1,699,223) |
| $ (659,937) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements. |
- 21 -
eCrypt Technologies, Inc. | |||||||||
(A Development Stage Company) | |||||||||
STATEMENTS OF CASH FLOWS | |||||||||
(Audited) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Twelve Months Ended |
| Twelve Months Ended |
| Cumulative Amount from Inception (April 19, 2007) to |
|
|
|
|
| March 31, 2012 |
| March 31, 2011 |
| March 31, 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
| ||
| Net Loss |
|
| $(696,221) |
| $(693,906) |
| $(1,699,223) | |
| Adjustments for non-cash items: |
|
|
|
|
|
|
| |
|
| Amortization and depreciation |
|
| 9,485 |
| 8,496 |
| 62,477 |
| Stock issued for compensation |
|
| 291,066 |
| 63,750 |
| 354,816 | |
| Stock option based compensation |
|
| 45,000 |
| - |
| 45,000 | |
| Changes in operating assets and liabilities: |
|
|
|
|
|
|
| |
|
| Accounts payable and accrued liabilities |
|
| (4,160) |
| (1,004) |
| 16,885 |
|
| Accounts payable-related party |
|
| 17,317 |
| - |
| 17,317 |
|
| Interest on loan |
|
| 1,065 |
| - |
| 1,065 |
|
| Interest on loan-related party |
|
| 44,132 |
| 19,425 |
| 72,527 |
|
| Prepaid expenses |
|
| 710 |
| (600) |
| - |
NET CASH USED IN OPERATING ACTIVITIES |
|
| (291,606) |
| (603,839) |
| (1,129,137) | ||
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
| ||
| License |
|
| - |
| - |
| (10,000) | |
| Computer equipment |
|
| - |
| - |
| (11,526) | |
| Computer software |
|
| - |
| - |
| (14,446) | |
| Equipment |
|
| (15,578) |
| (1,000) |
| (45,160) | |
NET CASH USED IN INVESTING ACTIVITIES |
|
| (15,578) |
| (1,000) |
| (81,132) | ||
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
| ||
| Common stock issuance |
|
| - |
| - |
| 206,702 | |
| Stock subscriptions |
|
| - |
| - |
| 400,000 | |
| Proceeds from convertible loan-related party |
| - |
|
|
| 23,800 | ||
| Proceeds from loan |
|
| 99,964 |
| - |
| 99,964 | |
| Proceeds from loan-related party |
|
| 238,000 |
| 315,000 |
| 553,000 | |
NET CASH PROVIDED BY FINANCING ACTIVITIES |
|
| 337,964 |
| 315,000 |
| 1,283,466 | ||
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 30,780 |
| (289,839) |
| 73,197 | ||||
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS |
|
|
|
|
|
|
| ||
Beginning of year |
|
| 42,417 |
| 332,256 |
| - | ||
|
|
|
|
|
|
|
|
|
|
End of year |
|
| $ 73,197 |
| $42,417 |
| $73,197 | ||
|
|
|
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- 22 -
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Supplemental disclosures of cash flow information: |
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| Shares issued in settlement of convertible note |
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| $- |
| $- |
| $32,768 | |
| Common stock issued to satisfy common stock payable |
| $- |
| $(400,000) |
| $(400,000) | ||
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The accompanying notes are an integral part of these financial statements.
- 23 -
eCRYPT TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2012 AND 2011
(AUDITED)
1.
Nature of Operations
eCrypt Technologies Inc., a Colorado corporation (the Company), was incorporated on April 19, 2007. The Company develops and sells encryption software which secures the transmission of, storage of, and access to digital information. Software applications range from device based (for Personal Digital Assistants (PDAs), wireless handheld devices, laptop and desktop computers, pocket computers, cellular phones, smartphones, and other file storage devices), to server-based encryption software for email servers and for file-store server.
2.
Significant Accounting Policies
Basis of Presentation
The financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles of the United States of America (US GAAP).
The Company has limited operations and in accordance with FASB ASC 915-10, Development Stage Entities, the Company is considered a development stage company.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that impact the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates.
Uncertainty as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. However, the Company has suffered recurring losses from operations since inception which raises substantial doubt about its ability to continue as a going concern.
The Companys ability to continue as a going concern is dependent upon its ability to generate profitable operations in the future and/or obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has plans to seek additional capital through a private placement and public offering of its common stock. These plans, if successful, will mitigate the factors which raise substantial doubt about the Companys ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.
Cash, Cash Equivalents and Investments
Cash equivalents consist of highly liquid investments with original maturities at the date of purchase of three months or less. Short term investments mature in less than one year from the balance sheet date.
- 24 -
eCRYPT TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2012 AND 2011
(AUDITED)
2.
Significant Accounting Policies (contd)
The Company places its cash and short-term investments with financial institutions with high credit quality investments in accordance with its investment policy designed to protect the principal investment. Therefore, the Company believes that its exposure due to concentration of credit risk is minimal and has not experienced credit losses on investments in these instruments to date.
Property and Equipment
Property and Equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight line basis over their estimated useful lives:
Computer equipment | 2 years straight line basis |
Computer software | 1 year straight line basis |
Equipment | 5 years straight line basis |
Revenue Recognition
Product revenue and miscellaneous income are recognized as earned.
Income Taxes
The Company accounts for income taxes as outlined in the Accounting Standards Codification ("ASC") 740 "Income Taxes. Under ASC Topic 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC Topic 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Stock-Based Compensation
The Company records stock based compensation in accordance with the guidance in ASC Topic 505 and 718 which requires the Company to recognize expenses related to the fair value of its employee stock option awards. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.
ASC 505, "Compensation-Stock Compensation", establishes standards for the accounting for transactions in which an entity exchanges its equity instruments to non employees for goods or services. Under this transition method, stock compensation expense includes compensation expense for all stock-based compensation awards granted on or after January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of ASC 505.
- 25 -
eCRYPT TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2012 AND 2011
(AUDITED)
2.
Significant Accounting Policies (contd)
Related Parties
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence.
Financial Instruments
The Companys financial instruments consist of cash and cash equivalents, highly liquid short-term investments, accounts payable and accrued liabilities, stockholder loans and a third party note payable. The Company does not hold or issue financial instruments for trading purposes and does not hold any derivative financial instruments.
The Companys investment policy is to achieve, in order of importance, the financial objectives of preservation of principal, liquidity and return on investment. Investments are made in U.S. obligations and bank securities provided the obligations are guaranteed or carry ratings appropriate for the policy.
The policy risks are primarily the opportunity cost of the conservative nature of the allowable investments. As the Company is currently in the development stage, the Company has chosen to avoid investments of a trade or speculative nature.
Foreign Currency Translation
The measurement currency of the Company is the U.S. dollar. Transactions in foreign currencies are translated at the exchange rate in effect at the transaction date. Monetary assets and liabilities denominated in other than the measurement currency are translated at the exchange rates in effect at the balance sheet date. The resulting exchange gains and losses are recognized in earnings.
Net Earnings (Loss) per Share
Basic and diluted net loss per share information is presented under the requirements of ASC Topic 260, Earnings per Share. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period, less shares subject to repurchase. Diluted net loss per share reflects the potential dilution of securities by adding other common stock equivalents, including stock options, shares subject to repurchase, warrants and convertible notes in the weighted-average number of common shares outstanding for a period, if dilutive. The computation of earnings (loss) per share is as follows:
- 26 -
eCRYPT TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2012 AND 2011
(AUDITED)
| 2012 |
|
| 2011 |
|
Net loss | $ (696,221) |
|
| $ (693,906) |
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Weighted-average number of shares outstanding |
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Basic | 135,185,164 |
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| 134,540,170 |
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Loss per share |
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Basic | (0.01) |
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| (0.01) |
|
3.
Recent Accounting Pronouncements
The Company has adopted all recently issued accounting pronouncements. The adoption of the accounting pronouncements, including those not yet effective, is not anticipated to have a material effect on the financial position or results of operations of the Company.
4.
Property and Equipment
The components of the Companys equipment are presented below:
|
| 2012 | 2011 | ||
| Cost | Accumulated Depreciation | Net | Accumulated Depreciation | Net |
|
|
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|
Computer equipment | $9,812 | $9,812 | $0 | $8,982 | $830 |
Computer software | 14,445 | 14,445 | $0 | 14,445 | 0 |
Equipment | 45,159 | 26,506 | $18,653 | 17,851 | 11,730 |
|
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|
| $69,416 | $50,763 | $18,653 | $41,278 | $12,560 |
Depreciation and amortization expense for the years ended March 31, 2012 and 2011 was $9,485 and $8,496, respectively.
5.
Stockholders Equity
Authorized:
500,000,000 Common shares with no par value
10,000,000 Preferred shares with no par value
During the year ended March 31, 2008, the Company effected the following stock transactions:
The Company issued a total of 116,015,968 shares of the Companys no par value common stock in exchange for cash of $55,130.
- 27 -
eCRYPT TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2012 AND 2011
(AUDITED)
During the year ended March 31, 2009 the Company effected the following stock transactions:
On October 09, 2008, the Company announced a 4:1 forward stock split on its common shares. 33,203,992 common shares were issued for 8,300,998 common shares.
On November 12, 2009, the Board of Directors of the Company consented to and approved a four-for-one forward split of the Companys 33,379,554 issued and outstanding shares of common stock. Pursuant to Rule 10b-17, the Forward Split became effective 10 days following the submission of the required notification forms to FINRA, on November 24, 2009. On the effective date, the Companys transfer agent issued and mailed to the eligible shareholders of record, three additional shares of common stock for each share of common stock held by the shareholder. The forward split resulted in the increase in the number of shares of the Companys common stock issued and outstanding to 133,518,216 while keeping the number of authorized shares the same.
During the year ended March 31, 2009 the Company issued 17,502,248 shares of the Companys no par value common stock in exchange for cash of $151,572.
During the year ended March 31, 2010, the Company effected the following stock transactions:
The Company issued a total of 40,455 shares of the Companys no par value common stock at a conversion rate of $0.81 per share in full and final settlement of a convertible debenture dated July 2, 2007. The shares were issued on March 30, 2010 for total value of $32,769. The loan consisted of principal of $23,800 and interest of $8,969. See Note 6.
During the year ended March 31, 2011, the Company effected the following stock transactions:
On April 19, 2010, the Company entered into a private placement agreement that would offer up to 952,381 units which consists of a subscription agreement and three warrants, Warrant #1 offers the holder to purchase 952,381 shares of the Corporations common stock at a price of $0.42 per share at any time within a 24 month period from the date of closing.
Warrant #2 entitles the holder to purchase a total of 714,286 shares of the Corporations common stock at a price of $0.56 per share at any time within a 24 month period from the date of closing.
Warrant #3 entitles the holder to purchase up to a total of 3,809,524 units at a price of $0.42 per unit at any time during the six month period from the date of closing of this offering. Each unit under warrant #3 consists of one share of common stock and two warrants. One warrant allows the holder to purchase up to 3,809,524 shares of common stock at a price of $0.42 any time during the period of twenty four months from the date of purchase. The other warrant allows the holder to purchase 2,857,142 shares of common stock at a price of $0.56 per share any time during the twenty four months from the date of closing of the purchase of these units under warrant 3.
On April 22, 2010, the Company issued 952,381 shares of common stock, and three (3) warrants for a total value of $400,000, per the private placement agreement explained above.
On February 9, 2011, the Company issued 250,000 shares of common stock for director compensation for a value of $52,500. The share price is valued at the adjusted closing price on the date of grant which was $0.21 per share. The compensation agreement calls for a total of 1,000,000 shares to be issued during a 12 month period.
- 28 -
eCRYPT TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2012 AND 2011
(AUDITED)
On February 15, 2011, the Company issued 37,500 shares of common stock for director compensation for a value of $11,250. The share price is valued at the adjusted closing price on the date of vesting of the shares which was $0.30 per share. The compensation agreement calls for a total of 150,000 shares to be issued during a 12 month period.
On June 23, 2011, the Company issued 250,000 shares of common stock for director compensation for a value of $50,000. The share price is valued at the adjusted closing price on the date of vesting of the shares which was $0.204 per share. The compensation agreement calls for a total of 1,000,000 shares to be issued during a 12 month period.
On June 23, 2011, the Company issued 37,500 shares of common stock for director compensation for a value of $6,941. The share price is valued at the adjusted closing price on the date of vesting of the shares which was $.01851 per share. The compensation agreement calls for a total of 150,000 shares to be issued during a 12 month period.
On July 8, 2011, the Company issued 37,500 shares of common stock for director compensation for a value of $7,875. The share price is valued at the adjusted closing price on the date of grant which was $0.21 per share. The compensation agreement calls for a total of 150,000 shares to be issued during a 12 month period.
On October 9, 2011, the Company issued 250,000 shares of common stock for director compensation for a value of $41,250. The share price is valued at the adjusted closing price on the date of vesting of the shares which was $0.165 per share. The compensation agreement calls for a total of 1,000,000 shares to be issued during a 12 month period.
On October 15, 2011, the Company issued 37,500 shares of common stock for director compensation for a value of $6,375. The share price is valued at the adjusted closing price on the date of vesting of the shares which was $.0.17 per share. The compensation agreement calls for a total of 150,000 shares to be issued during a 12 month period.
On November 8, 2011, the Company issued 37,500 shares of common stock for director compensation for a value of $21,000. The share price is valued at the adjusted closing price on the date of vesting of the shares which was $0.56 per share. The compensation agreement calls for a total of 150,000 shares to be issued during a 12 month period.
On February 9, 2012, the Company issued 250,000 shares of common stock for director compensation for a value of $117,500. The share price is valued at the adjusted closing price on the date of vesting of the shares which was $0.47 per share. The compensation agreement calls for a total of 1,000,000 shares to be issued during a 12 month period.
On February 15, 2012, the Company issued 37,500 shares of common stock for director compensation for a value of $22,875. The share price is valued at the adjusted closing price on the date of vesting of the shares which was $.0.61 per share. The compensation agreement calls for a total of 150,000 shares to be issued during a 12 month period.
On March 8, 2012, the Company issued 37,500 shares of common stock for director compensation for a value of $17,250. The share price is valued at the adjusted closing price on the date of vesting of the shares which was $0.46 per share. The compensation agreement calls for a total of 150,000 shares to be issued during a 12 month period.
- 29 -
eCRYPT TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2012 AND 2011
(AUDITED)
During the period March 31, 2012, Company had authorized the issuance of 362,500 shares for a total value of $178,625 as disclosed above. However the Company has not issued the stock and hence the said stock is reclassed as stock payable under the Statement of stockholders equity.
6. Warrants
On April 19, 2010, the Company entered into a private placement agreement that would offer up to 952,381 units which consists of a subscription agreement and three warrants, Warrant #1 offers the holder to purchase 952,381 shares of the Corporations common stock at a price of $0.42 per share at any time within a 24 month period from the date of closing.
Warrant #2 entitles the holder to purchase a total of 714,286 shares of the Corporations common stock at a price of $0.56 per share at any time within a 24 month period from the date of closing.
Warrant #3 entitles the holder to purchase up to a total of 3,809,524 units at a price of $0.42 per unit at any time during the six month period from the date of closing of this offering. Each unit under warrant #3 consists of one share of common stock and two warrants. One warrant allows the holder to purchase up to 3,809,524 shares of common stock at a price of $0.42 any time during the period of twenty four months from the date of purchase. The other warrant allows the holder to purchase 2,857,142 shares of common
stock at a price of $0.56 per share any time during the twenty four months from the date of closing of the purchase of these units under warrant 3.
On April 22, 2010, the Company issued 952,381 shares of common stock, and three (3) warrants for a total value of $400,000, per the private placement agreement explained above.
|
| Number of Warrants |
| Weighted-Average Exercise Price per share |
| Weighted- Average Remaining Life (Years) |
Outstanding at as at 4.01.2011 |
| 5,476,191 |
| $ 0.43 |
| 1.00 |
Granted |
| 0 |
| $ NA |
| NA |
Exercised |
| 0 |
| $ NA |
| NA |
Cancelled |
| 0 |
| $ NA |
| NA |
Outstanding at as at 03.31.2012 |
| 5,476,191 |
| $ 0.43 |
| 0.04 |
Exercisable at 03.31.2012 |
| 5,476,191 |
| $ 0.43 |
|
|
(1) All warrants expire on April 19, 2012.
7. Stock options
As approved by the Board of Directors, on February 16, 2012 the company granted a non-qualified stock option to its newly appointed director, Thomas Trkla as compensation for his services. The agreement calls for three hundred thousand (300,000) shares of restricted common stock for a price equal to $0.30 per share (Exercise Price), vested over a ten year period thereafter. The option shall be exercised during the 12 month period. As at March 31, 2012, the director has not exercised any right. The total fair value of these options at the date of grant was estimated to be $180,000 and was determined using the Black-Scholes option pricing model with an expected life of 10 years, a risk free interest rate of 1.99%, a dividend yield of 0% and expected volatility of 419% . Out of this $45,000 was recorded as a stock based compensation expense for current year based on seventy five thousand (75,000) options vested.
- 30 -
eCRYPT TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2012 AND 2011
(AUDITED)
|
| Number of Options |
| Weighted-Average Exercise Price per share |
| Weighted- Average Remaining Life (Years) |
Outstanding at as at 4.01.2011 |
| - |
| $ NA |
| NA |
Granted |
| 300,000 |
| $ 0.30 |
| 10 |
Exercised |
| 0 |
| $ NA |
| NA |
Cancelled |
| 0 |
| $ NA |
| NA |
Outstanding at as at 03.31.2012 |
| 300,000 |
| $ 0.30 |
| 9.88 |
Exercisable at 03.31.2012 |
| 75,000 |
| $ 0.30 |
|
|
8.
Convertible Loan-Related Party
On July 2, 2007, the Company issued a convertible debenture with a face value totaling $23,800. This loan, or any portion, is convertible at any time until paid in full at a rate of 1 common share per $0.001 of the debt converted. The loan bears interest at an annual rate of 12% percent compounded monthly. In accordance with ASC Topic 470 -20 the intrinsic value of the beneficial conversion feature has been valued at $0. Some terms were amended on September 9, 2009 but the conversion price remained the same. The conversion terms were amended on February 26, 2010 to reflect the new conversion price of $0.81 per share of common stock, and adding that interest is also convertible.
On March 15, 2010, the Company authorized the issuance of 40,455 of common shares for the share price of $0.81 per share for a convertible debenture dated July 2, 2007. The shares were issued on March 30, 2010 for $32,769 and the conversion of the debenture. The loan consisted of face value of $23,800 and interest of $8,969.
9.
Advance-Related Party
The Company issued on January 11, 2012 a $38,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually, matures in two years on January 11, 2014.
The Company issued on December 6, 2011 a $20,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually, matures in two years on December 6, 2013.
The Company issued on October 19, 2011 a $25,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually, matures in two years on October 19, 2013.
The Company issued on September 30, 2011 a $20,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually, matures in two years on September 30, 2013.
The Company issued on September 2, 2011 a $20,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually, matures in two years on September 2, 2013.
The Company issued on August 5, 2011 a $24,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually, matures in two years on August 5, 2013.
The Company issued on July 7, 2011 a $40,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually, matures in two years on July 7, 2013.
- 31 -
eCRYPT TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2012 AND 2011
(AUDITED)
The Company issued on May 9, 2011 a $36,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually, matures in two years on May 9, 2013.
The Company issued on April 29, 2011 a $15,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually, matures in two years on April 29, 2013.
The Company issued a $100,000 advance during the month of January 2011 to shareholder. The advance was unsecured, non-interest bearing and due in six months. On June 24, 2011 the loan was modified to bear interest at 10%, compounded annually, and extended to mature in two years on June 24, 2013.
The Company issued on May 18, 2010 a $215,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually, matures in two years on May 18, 2012.
Interest expense for the years ended March 31, 2012 and 2011 was $14,169 and $19,425, respectively.
10.
Note Payable
The Company issued on February 21, 2012 a $99,964.06 unsecured note payable to a third party. The note bears interest at 10%, compounded annually, matures in two years on February 21, 2014. Interest expense for the years ended March 31, 2012 and 2011 was $1,065 and $Nil respectively.
11.
Advertising Costs
The Companys policy regarding advertising is to expense advertising when incurred. The Company incurred $13,565, and $308,348 of advertising expense during the years ended March 31, 2012, and 2011, respectively.
12.
Stock Compensation Program
On April 12, 2011, subject to shareholder approval, the Board of Directors of eCrypt Technologies, Inc. (the Company) approved the adoption of the eCrypt Technologies, Inc. Stock Compensation Program (the Program) under which 13,500,000 shares have been reserved for purposes of possible future issuance of incentive stock options, non-qualified stock options, and restricted stock grants to employees, directors and certain key individuals. On April 15, 2011, pursuant to a written consent in lieu of a meeting, a majority of the Companys shareholders approved the Program. The purpose of the Program is to attract and retain key employees, consultants and other persons, and to provide such key individuals with an additional incentive to contribute to the success of the Company. In order to maintain flexibility in the award of stock benefits, the Program constitutes a single omnibus plan, but is composed of three parts. The first part is the Incentive Stock Option Plan (Incentive Option Plan) which provides grants of incentive stock options under Section 422A of the Internal Revenue Code of 1986, as amended. The second part is the Nonqualified Stock Option Plan (Nonqualified Option Plan) which provides grants of nonqualified stock options. The third part is the Restricted Shares Plan (Restricted Plan) which provides grants of restricted shares of Company common stock. The Incentive Option Plan, the Nonqualified Option Plan and the Restricted Plan respectively comprise Plan I, Plan II, and Plan III of the Program.
13.
Income Taxes
At March 31, 2012 and 2011, the Company had federal operating loss carryforwards of $1,299,407 and $939,252, respectively, which begins to expire in 2030.
- 32 -
eCRYPT TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2012 AND 2011
(AUDITED)
Components of net deferred tax assets, including a valuation allowance, are as follows at March 31, 2012 and 2011:
Deferred tax assets: |
|
|
|
|
|
|
| 2012 |
|
| 2011 |
Net operating loss carryforward |
| $ 1,299,407 |
|
| $ 939,252 |
Total deferred tax assets |
| 454,792 |
|
| 328,738 |
Less: Valuation allowance |
| (454,792) |
|
| (328,738) |
Net deferred tax assets |
| $ - |
|
| $ - |
The valuation allowance for deferred tax assets as of March 31, 2012 and 2011 was $454,792 and $328,738, respectively, which will begin to expire 2030. In assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and tax planning strategies in making this assessment. As a result, management determined it was more likely than not the deferred tax assets would not be realized as of March 31, 2012 and 2011 and maintained a full valuation allowance.
Reconciliation between the statutory rate and the effective tax rate is as follows at March 31, 2012 and 2011:
|
| 2012 |
| 2011 |
Federal statutory rate |
| (35.0)% |
| (35.0)% |
State taxes, net of federal benefit |
| (0.00)% |
| (0.00)% |
Change in valuation allowance |
| 35.0% |
| 35.0% |
Effective tax rate |
| 0.0% |
| 0.0% |
14.
Subsequent Event
The Company on May 30, 2012 issued the authorized 362,500 shares for a total value of $178,625 as disclosed in Note 5 above.
- 33 -
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
We have had no disagreements with our accountants required to be disclosed pursuant to Item 304 of Regulation S-K.
ITEM 9A. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
The Securities and Exchange Commission defines the term disclosure controls and procedures to mean the company's controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 (the Exchange Act) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commissions rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuers management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to principal executive and principal financial officers to allow timely decisions regarding disclosure.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are designed to provide reasonable assurance of achieving the objectives of timely alerting them to material information required to be included in our periodic SEC reports and of ensuring that such information is recorded, processed, summarized and reported with the time periods specified. Our chief executive officer and chief financial officer also concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report to provide reasonable assurance of the achievement of these objectives.
Internal Control Over Financial Reporting
The management of the Company is responsible for the preparation of the financial statements and related financial information appearing in this Annual Report on Form 10-K. The financial statements and notes have been prepared in conformity with accounting principles generally accepted in the United States of America. The management of the Company also is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. A company's internal control over financial reporting is defined as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
- 34 -
receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.
Management, including the Chief Executive Officer and Chief Financial Officer, does not expect that the Company's internal controls will prevent all error and all fraud. Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable, not absolute, assurance that the objectives of the control system are met and may not prevent or detect misstatements. Further, over time control may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate.
With the participation of the Chief Executive Officer and Chief Financial Officer, our management evaluated the effectiveness of the Company's internal control over financial reporting as of March 31, 2012 based upon the framework in Internal Control -Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, our management has concluded that, as of March 31, 2012, the Company's internal control over financial reporting contained a material weakness due to a failure by the Company to properly record and value stock transactions relating to stock options issued by the Company, and as a result of such material weakness, our internal controls over financial reporting were not effective as of March 31, 2012. To remediate the weakness in our internal controls over financial reporting, we intend to: i) reconcile stock issuance transactions against the agreements underlying such stock issuance transactions to ensure that equity issuances are properly accounted for; and ii) implement a review board to review the stock issuance transactions to ensure that they are properly valued and accounted for.
This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management's report in this Annual Report on Form 10-K.
There was no significant change in the Company's internal control over financial reporting during the last fiscal quarter, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
None.
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.
Directors, Executive Officers and Significant Employees
The following table sets forth, as of March 31, 2012, the respective positions and ages of our directors and executive officers of the Company. Each director has been elected to hold office until the next annual meeting of shareholders and thereafter until his successor is elected. Vacancies in the existing Board of Directors are filled by majority vote of the remaining Directors. There are no agreements or understandings for any officer or director to resign at the request of another person and no officer or director is acting on
- 35 -
behalf of or will act at the direction of any other person.
Name | Age | Position | Director or Officer Since |
|
|
|
|
Brad Lever | 37 | Director, Chief Executive Officer, Chief Financial Officer, President | April 2007 |
Gabriel Rosu | 39 | Chief Technology Officer | April 2007 |
Curt Weldon | 64 | Chairman of the Board of Directors | February 9, 2011 |
Jay M. Cohen | 65 | Director | February 15, 2011 |
Erik G. Mettala | 62 | Director | July 5, 2011 |
Thomas N. Trkla | 52 | Director | February 22, 2012 |
Biographical Information
Mr. Brad Lever Mr. Brad Lever (Mr. Lever) is 37 years old. Mr. Lever currently serves as Director of the Company, as well as the Companys Chief Executive Officer, Chief Financial Officer, President, Director of Sales and Marketing, and Director of Strategic Alliances and Investor Relations; he has served in these capacities since the Companys inception. Mr. Levers core functionalities are to coordinate team efforts, manage sales and marketing, and aid in the development of services and solutions which cater to the marketplace. In addition to the work that Mr. Lever performs with the Registrant, since 2004, Mr. Lever has worked in enterprise sales for BCE, a telecommunications company, focusing on new acquisitions and providing wireless data solutions. From 2003 to 2004, Mr. Lever was a sales executive with Sophos, Inc., a company that provides anti-virus software solutions to businesses. Mr. Brad Lever is a member of the IAPP (International Association of Privacy Professionals).
Mr. Gabriel Rosu Mr. Gabriel Rosu (Mr. Rosu) is 39 years old. Mr. Rosu is currently the Companys Chief Technology Officer (CTO), a position he has held since the Companys inception. As CTO, Mr. Rosu functions as the Companys lead software developer and eCommerce infrastructure developer. A fully trained Java Architect, Mr. Rosu is versed in software and application design and development, service-oriented architecture, and encryption frameworks. His primary role is to develop and test communications and information security concepts and solutions. In addition to the work Mr. Rosu performs with the Registrant, since March 2008, Mr. Rosu has worked with Telus, a Canadian telecommunications company, as a Frameworks Lead Architect. From 2004 through February 2008, Mr. Rosu worked with Accenture, a global management consulting, technology services and outsourcing company, as a Frameworks Lead Architect, a position in which he was responsible for deliverable planning and tracking as
- 36 -
well as resource allocation. From 2001 through 2004, Mr. Rosu was a Senior Software Engineer with Verb Exchange Inc., a digital communications company that provides new media marketing opportunities to advertisers, a position in which he served as a team leader and Java architect.
Congressman Curt Weldon Congressman Curt Weldon (Mr. Weldon) is 64 years old. Congressman Curt Weldon served in the United States Congress for 20 years. When he retired in 2007 he was Vice Chairman of both the Armed Services Committee and the Homeland Security Committee, as well as a Member of the Energy and Environment Sub-Committee. During his tenure in Congress he initiated and Chaired the US/FSU Energy Parliamentary Relationship, served as Co-Chair of the International Energy Advisory Council and Keynoted a number of International Energy Forums. Mr. Weldon organized and led over 50 bi-partisan Congressional Delegations to 75 nations including the first-ever Congressional Delegations into Libya and North Korea. Prior to his career in elective office as a Mayor, County Commissioner and Member of Congress, Mr. Weldon served as an Educator and University Professor as well as a Director with the INA/CIGNA Corporation at its Corporate Headquarters in Philadelphia. In addition to his work with the Registrant, Mr. Weldon formed and currently serves as CEO of Jenkins Hill International a firm providing International Consulting as well as facilitating International Strategic Relationships. Mr. Weldon has been honored by over 100 professional associations and international organizations.
Honorable Jay M. Cohen, Rear Admiral, USN (ret)- Hon Jay M. Cohen (Mr. Cohen) is a native of New York. He holds a joint Ocean Engineering degree from Massachusetts Institute of Technology and Woods Hole Oceanographic Institution and Master of Science in Marine Engineering and Naval Architecture from MIT. Mr. Cohen was commissioned in 1968 upon graduation from the United States Naval Academy. Mr. Cohens early Navy assignments included service on conventional and nuclear submarines. From 1985 to 1988 Cohen commanded USS HYMAN G. RICKOVER (SSN 709). Following command, he served on the U.S. Atlantic Fleet as a senior member of the Nuclear Propulsion Examining Board, responsible for certifying the safe operation of nuclear powered ships and crews. From 1991 to 1993, Mr. Cohen commanded the submarine tender USS L.Y. SPEAR (AS 36) including a deployment to the Persian Gulf in support of Operation DESERT STORM. After Spear, he reported to the Secretary of the Navy as Deputy Chief of Navy Legislative Affairs. During this assignment, Mr. Cohen was responsible for supervising all Navy Congressional liaison.
Mr. Cohen was promoted to the rank of Rear Admiral in October 1997 and reported to the Joint Staff as Deputy Director for Operations responsible to the President and Department of Defense leaders for strategic weapons release authority. In June 1999, he assumed duties as Director Navy Y2K Project Office responsible for transitioning all Navy computer systems into the new century. In June 2000, Mr. Cohen was promoted in rank and became the 20th Chief of Naval Research. He served during war as the Department of the Navy Chief Technology for the Navy and Marine Corps Science and Technology (S&T) Program (involving basic research to applied technology portfolios and contracting), Mr. Cohen coordinated investments with other U.S. and international S&T providers to rapidly meet war fighter combat needs. After a half year assignment as Chief of Naval Research, Rear Admiral Cohen retired from the Navy on February 1, 2006.
Unanimously confirmed by the US Senate, Mr. Cohen was sworn in as Under Secretary for Science & Technology at the Department of Homeland Security on August 10, 2006. Mr. Cohen resigned from his position as Under Secretary for Science & Technology at the Department of Homeland Security on January 20, 2009. Since leaving government, Rear Admiral Cohen is now a principal in The Chertoff Group, and the CEO of JayMCohen LLC, which is an independent consultant for science and technology in support of domestic and international defense, homeland security and energy issues and solutions.
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Dr. Erik G. Mettala: Dr. Erik G. Mettala serves as the Cyber Chief Scientist in Battelle Memorial Institutes National Security Global Business since April 2011, and is responsible for strategic research and development planning, and research and development for Battelles Cyber Innovation Unit. Prior to joining Battelle, he was the Chief Scientist in SPARTAs National Security Systems Sector in Columbia, MD, responsible for the strategic technology planning and research for SPARTAs intelligence, computer network operations, and information assurance business areas from April 2005 to June 2007. Dr. Mettala led McAfee Research from April 2003 to April 2005, which was acquired by SPARTA in April, 2005. As the Vice President and Director of McAfee Research in Rockville, MD, he managed the strategic technology research for McAfee, including R&D business development and laboratory efforts in Rockville, MD; Herndon, VA; Los Angeles, CA; and Santa Clara, CA. Under his direction, McAfee Research focused on high risk research addressing the needs of McAfee product lines including anti-virus, anti-spam, host-based and network-based intrusion prevention, and in cooperation with U.S. Government agencies, directed the development of solutions to many of the pressing and difficult problems in information assurance, intrusion prevention, remediation, and network security.
Mr. Thomas N. Trkla: Mr. Trkla founded Brookwood and its affiliated companies in late 1992. In his capacity as Chairman and Chief Executive Officer, he directs all aspects of Brookwood's businesses including managing Brookwood's operations, formulating and implementing Brookwood's investment and disposition strategies and evaluating, structuring and capitalizing the Company's real estate and private corporate investments.
Prior to founding Brookwood, Mr. Trkla was a senior executive with Winthrop Securities Co., Inc, a wholly-owned subsidiary of Winthrop Financial Associates, a Boston-based real estate investment and management firm, which at the time, was one of the largest privately-held real estate investment firms in the United States. Before Winthrop, Mr. Trkla was a Vice President at The Boston Company Real Estate Counsel, Inc., one of the first real estate investment advisors to large public and private tax-exempt pension plan sponsors in the U.S.
Mr. Trkla serves as director of the Massachusetts Campaign for Children, a non-profit statewide child advocacy organization, Director of the Princeton Association of New England (PANE) and is a member of the Urban Land Institute where he currently serves on the Small Scale Development Council Silver Flight.
Mr. Trkla is a frequent speaker on trends in the United States commercial real estate markets and on core, value-add and opportunistic investment strategies. In the past several years, he has spoken at the Urban Land Institute spring and fall meetings, at the 2010 Andes Investment Summit in Bogota, Colombia, the National Conference of State Tax Judges, the New York State Society of CPAs and the 2010 and 2011 Real Estate Symposia presented by Northern Trust and RSM McGladrey.
Mr. Trkla is a 1981 graduate of Princeton University and in 1984 received a Master of Management degree from the J.L. Kellogg Graduate School of Management at Northwestern University. In 2004, Mr. Trkla completed the Oxford Strategic Leadership Programme at the University of Oxford's Saïd Business School. Mr. Trkla is currently reading for his Doctor of Philosophy degree (DPhil) at Kellogg College at the University of Oxford.
Family Relationships
None.
Involvement in Certain Legal Proceedings
- 38 -
To the best of its knowledge, the Companys directors and executive officers were not involved in any legal proceedings during the last ten years as described in Item 401(f) of Regulation S-K.
Directorships
None of the Companys executive officers or directors is a director of any company with a class of equity securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities, to file reports of ownership of Form 3 and changes in ownership on Form 4 or Form 5 with the Securities and Exchange Commission. Such officers, directors and 10% stockholders are also required by SEC rules to furnish the Company with copies of all Section 16(a) forms they file. Based solely on its review of the copies of such forms received by it, the Company believes that, during the fiscal year ended March 31, 2012, all Section 16(a) filing requirements applicable to its officers, directors and 10% stockholders were satisfied.
Code of Ethics
The Company has adopted a code of ethics, as required by the rules of the SEC, a copy of the Companys code of ethics was filed as Exhibit 14.1 to Form 10-K for the fiscal year ended March 31, 2010 filed with the Securities and Exchange Commission on July 13, 2010 and is hereby incorporated by reference. The code of ethics applies to all of the Companys senior financial officers. The code of ethics, and any amendments to, or waivers from, the code of ethics, is available in print, at no charge, to any stockholder who requests such information.
ITEM 11.
EXECUTIVE COMPENSATION.
The following table sets forth, for the years indicated, all compensation paid, distributed or accrued for services, including salary and bonus amounts, rendered in all capacities by the Companys chief executive officer , chief financial officer and all other executive officers who received or are entitled to receive remuneration in excess of $100,000 during the stated periods.
- 39 -
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Non-Equity | Non-qualified |
|
|
|
|
|
|
|
| Incentive | Deferred |
|
|
|
|
|
| Stock | Option | Plan | Compensation | All other |
|
Name and |
| Salary | Bonus | Award(s) | Award(s) | Compensation | Earnings | Compensation | Total |
Principal Position | Year | ($) | ($) | ($) | ($) | (#) | ($) | ($) | ($) |
Brad Lever, CEO, President | 2012 2011 2010 2009 | $nil $nil $nil $nil | -- -- -- -- | -- -- -- -- | -- -- -- -- | -- -- -- -- | -- -- -- -- | -- -- -- -- | $nil $nil $nil $nil |
Gabriel Rosu, Chief Technology Officer | 2012 2011 2010 2009 | $95,000 $91,041 $nil $nil | -- -- -- -- | -- -- -- -- | -- -- -- -- | -- -- -- -- | -- -- -- -- | $5521.82 $5,936.10 $ 5,742 -- | $101,321.86 $96,977.10 $ 5,742 $nil |
Option Grants in Last Fiscal Year
There were no options granted to any of the named executive officers during the fiscal year ended March 31, 2012.
Equity Compensation Plan Information
As disclosed on Form 8-K filed with the Securities and Exchange Commission on April 20, 2011, on April 12, 2011, subject to shareholder approval, the Board of Directors of eCrypt Technologies, Inc. (the Company) approved the adoption of the eCrypt Technologies, Inc. Stock Compensation Program (the Program) under which 13,500,000 shares have been reserved for purposes of possible future issuance of incentive stock options, non-qualified stock options, and restricted stock grants to employees, directors and certain key individuals. On April 15, 2011, pursuant to a written consent in lieu of a meeting, a majority of the Companys shareholders approved the Program. The purpose of the Program is to attract and retain key employees, consultants and other persons, and to provide such key individuals with an additional incentive to contribute to the success of the Company. In order to maintain flexibility in the award of stock benefits, the Program constitutes a single omnibus plan, but is composed of three parts. The first part is the Incentive Stock Option Plan (Incentive Option Plan) which provides grants of incentive stock options under Section 422A of the Internal Revenue Code of 1986, as amended. The second part is the Nonqualified Stock Option Plan (Nonqualified Option Plan) which provides grants of nonqualified stock options. The third part is the Restricted Shares Plan (Restricted Plan) which provides grants of restricted shares of Company common stock. The Incentive Option Plan, the Nonqualified Option Plan and the Restricted Plan respectively comprise Plan I, Plan II, and Plan III of the Program. The foregoing description of the Program is qualified in its entirety by reference to the eCrypt Technologies, Inc. Stock Compensation Program which was filed as Exhibit 10.9 to Form 8-K filed with the Securities and Exchange Commission on April 20, 2011 and is hereby incorporated by reference.
Compensation Agreements
As disclosed on Form 8-K filed with the SEC on May 27, 2010, on May 26, 2010, the Company entered into
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a Consulting Agreement (the Consulting Agreement) with Gabriel Rosu setting forth the terms and conditions under which Mr. Rosu will continue to serve as the Chief Technology Officer of the Company. The Consulting Agreement is for a one year term effective April 15, 2010 through April 14, 2011. The Agreement was automatically extended for an additional 1 year term on April 15, 2011, and again on April 15, 2012. Pursuant to the terms and conditions of the Consulting Agreement, Mr. Rosu will serve as the Chief Technology Officer of the Company. Mr. Rosus primary duties include overseeing all product development of the Companys products, database development for the Company, and website development for the Company. As consideration for his services as the Chief Technology Officer, Mr. Rosu will receive a total of $95,000 during the term of the Consulting Agreement, broken down into monthly payments of $7,916.67. The Consulting Agreement may be terminated at any time in the Companys sole and absolute discretion. In conjunction with the entry into the Consulting Agreement, Mr. Rosu entered into a Confidentiality, Non-Solicitation and Invention Assignment Agreement as an exhibit to the Consulting Agreement for purposes of protecting the Companys intellectual property.
The foregoing description of the Consulting Agreement and the accompanying exhibits does not purport to be complete and is qualified in its entirety by reference to the complete text of the Consulting Agreement and accompanying exhibits, which was filed as Exhibit 10.6 to the Companys current report on Form 8-K with the SEC on May 27, 2010.
Director Compensation
The following table provides summary information concerning compensation awarded to, earned by, or paid to any of our directors for all services rendered to the Company in all capacities for the fiscal year ended March 31, 2012.
|
|
|
|
| Change in |
|
|
| Fees |
|
|
| Pension |
|
|
| Earned |
|
| Non-Equity | Value and |
|
|
| And |
|
| Incentive | Non-qualified |
|
|
| Paid in | Stock | Option | Plan | Compensation | All other |
|
Name and | Cash | Award(s) | Award(s) | Compensation | Earnings | Compensation | Total |
Principal Position | ($) | ($) | ($) | (#) | ($) | ($) | ($) |
|
|
|
|
|
|
|
|
Brad Lever | $nil | -- | -- | -- | -- | -- | $nil |
Curt Weldon | $nil | $208,750(1) | -- | -- | -- | -- | $208,750 |
|
|
|
|
|
|
|
|
Jay Cohen | $nil | $36,191.25(2) | -- | -- | -- | -- | $36,191.25 |
|
|
|
|
|
|
|
|
Erik Mettala | $nil | $46,125 (3) | -- | -- | -- | -- | $46,125 |
|
|
|
|
|
|
|
|
Thmas Trkla | $nil | -- | $45,000(4) | -- | -- | -- | $45,000 |
(1)
As disclosed on Form 8-K filed with the Securities and Exchange Commission on February 9, 2011, on February 9, 2011, the Board of Directors of eCrypt Technologies, Inc, appointed Curt Weldon to serve as the Chairman of the Companys Board. In conjunction with the Companys appointment of Mr. Weldon, the Company entered into a Director Agreement and a Restricted Shares Agreement which is Exhibit A to the Director Agreement, pursuant to which the Company granted Mr. Weldon 1,000,000 shares of restricted common stock of the Registrant. The foregoing description of the Director Agreement and Restricted Shares Agreement is qualified in its entirety by reference to the Director Agreement and Restricted Shares Agreement which is attached as Exhibit 10.7 to the Companys Form 8-K filed with the Securities and Exchange Commission on February 9, 2011.
(2)
As disclosed on Form 8-K filed with the Securities and Exchange Commission on February 15, 2011, on February 15, 2011, the Board of Directors of eCrypt Technologies, Inc, appointed Jay M. Cohen to serve as a director of the the Company. In conjunction with the Companys appointment of Mr. Cohen, the Company entered into a Director Agreement and a Restricted Shares Agreement which is Exhibit A to the Director Agreement, pursuant to which the Company granted Mr. Cohen 150,000 shares of restricted common stock of the Registrant. The foregoing description of the Director Agreement and Restricted Shares Agreement is qualified in its entirety by reference to the Director
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Agreement and Restricted Shares Agreement attached as Exhibit 10.8 to the Companys report on Form 8-K filed with the Securities and Exchange Commission on February 15, 2011.
(3)
As disclosed on Form 8-K filed with the Securities and Exchange Commission on July 11, 2011, on July 5, 2011, the Board of Directors of eCrypt Technologies, Inc, appointed Dr. Erik G. Mettala to serve as a director of the the Company. In conjunction with the Companys appointment of Dr. Mettala, the Company entered into a Director Agreement and a Restricted Shares Agreement which is Exhibit A to the Director Agreement, pursuant to which the Company granted Dr. Mettala 150,000 shares of restricted common stock of the Registrant. The foregoing description of the Director Agreement and Restricted Shares Agreement is qualified in its entirety by reference to the Director Agreement and Restricted Shares Agreement attached as Exhibit 10.8 to the Companys report on Form 8-K filed with the Securities and Exchange Commission on July 11, 2011.
(4)
As disclosed on Form 8-K filed with the Securities and Exchange Commission on February 22, 2012, on February 15, 2012, the Board of Directors of eCrypt Technologies, Inc, appointed Mr. Thomas N. Trkla to serve as a director of the the Company. In conjunction with the Companys appointment of Mr. Trkla, the Company entered into a Director Agreement and a Nonqualified Stock Option Agreement which is Exhibit A to the Director Agreement, pursuant to which the Company granted Mr. Trkla the option to purchase up to 300,000 shares of restricted common stock of the Registrant at the exercise price of $0.30 per Share. The foregoing description of the Director Agreement and Nonqualified Stock Option Agreement is qualified in its entirety by reference to the Director Agreement and Nonqualified Stock Option Agreement attached as Exhibit 10.8 to the Companys report on Form 8-K filed with the Securities and Exchange Commission on February 22, 2012.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
Equity Compensation Plan
As disclosed on Form 8-K filed with the Securities and Exchange Commission on April 20, 2011, on April 12, 2011, subject to shareholder approval, the Board of Directors of eCrypt Technologies, Inc. (the Company) approved the adoption of the eCrypt Technologies, Inc. Stock Compensation Program (the Program) under which 13,500,000 shares have been reserved for purposes of possible future issuance of incentive stock options, non-qualified stock options, and restricted stock grants to employees, directors and certain key individuals. On April 15, 2011, pursuant to a written consent in lieu of a meeting, a majority of the Companys shareholders approved the Program. The purpose of the Program is to attract and retain key employees, consultants and other persons, and to provide such key individuals with an additional incentive to contribute to the success of the Company. In order to maintain flexibility in the award of stock benefits, the Program constitutes a single omnibus plan, but is composed of three parts. The first part is the Incentive Stock Option Plan (Incentive Option Plan) which provides grants of incentive stock options under Section 422A of the Internal Revenue Code of 1986, as amended. The second part is the Nonqualified Stock Option Plan (Nonqualified Option Plan) which provides grants of nonqualified stock options. The third part is the Restricted Shares Plan (Restricted Plan) which provides grants of restricted shares of Company common stock. The Incentive Option Plan, the Nonqualified Option Plan and the Restricted Plan respectively comprise Plan I, Plan II, and Plan III of the Program. The foregoing description of the Program is qualified in its entirety by reference to the eCrypt Technologies, Inc. Stock Compensation Program which was filed as Exhibit 10.9 to Form 8-K filed with the Securities and Exchange Commission on April 20, 2011 and is hereby incorporated by reference. The chart below identifies information with respect to the Stock Compensation Plan:
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|
| Number of securities to be issued upon exercise of outstanding options, warrants |
| Weighted average exercise price of outstanding options, warrants |
| Number of securities remaining available for future issuances under equity compensation plans (excluding securities reflected in column) |
Plan category |
|
|
|
|
| (a) |
|
| (a) |
| (b) |
| (c) |
Equity compensation plans approved by security holders |
| 13,500,000 |
| $0.30 |
| 11.9 |
|
|
|
|
|
|
|
Equity compensation plans not approved by security holders |
| 0 |
| 0 |
| 0 |
|
|
|
|
|
|
|
Total |
| 13,500,000 |
| 0 |
| 11,900,000 |
Security Ownership of Certain Beneficial Owners
The following table sets forth, as of June 7, 2012, the ownership of each person known by the Company to be a beneficial owner of 5% or more of its common stock. Except as otherwise noted, each person listed below is a sole beneficial owner of the shares and has sole investment and voting power as to such shares. No person listed below has any options, warrants or other right to acquire additional securities of the Registrant except as may be otherwise noted.
Title of Class | Name and Address | Number of Shares Beneficially Owned | Percent of Class |
Common | Global Capital Partners, LLC PO Box 6560 Pahrump, NV 89041 | 16,040,455 | 11.814% |
Common | Kasia Zukowska 248 256 East 2nd Ave Vancouver, BC V5T 1B7 | 9,600,000 | 7.071% |
Security Ownership of Management
The following table sets forth, as of June 7, 2012, the ownership of each executive officer and director of the Company, and of all executive officers and directors of the Registrant as a group. Except as otherwise noted, each person listed below is a sole beneficial owner of the shares and has sole investment and voting power as to such shares. No person listed below has any options, warrants or other right to acquire additional securities of the Company except as may be otherwise noted.
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Title of Class | Name and Address | Number of Shares Beneficially Owned | Percent of Class |
Common | Brad Lever(1) 248 - 256 East 2nd Ave Vancouer, BC V5T 1B7 | 32,000,000 | 23.569% |
Common | Gabriel Rosu(1) 7092 Sussex Ave Burnaby, BC V5J 3V3 | 9,600,000 | 7.071% |
Common | Curt Weldon(1) 4687 West Chester Pike Newton Square, PA 19073 | 1,000,000(2) | 0.737% |
Common | Jay Cohen(1) 1111 Army Drive, Apt 406 Arlington, VA 22202 | 150,000(3) | 0.11% |
Common | Erik Mettala(1) 1204 Technology Dr Aberdeen MD 21001 | 112,500(4) | 0.11% |
Common | Thomas N. Trkla(1) 72 Cherry Hill Drive Beverly, MA 01915 | 300,000(5) | 0.22% |
Common | All Directors and Officers as a Group (5 in total) | 42,862,500 | 31.597% |
(1)
Officer or Director of the Company
(2)
On February 9, 2011, the Curt Weldon was granted 1,000,000 restricted stock shares, of which 250,000 were vested upon grant and 750,000 will vest in three, four month installments, beginning on June 9, 2011, four months after the date of grant, and ending February 9, 2012.
(3)
On February 15, 2011, Jay Cohen was granted 150,000 restricted stock shares, of which 37,500 were vested upon grant and 112,500 will vest in three, four month installments, beginning on June 15, 2011, four months after the date of grant, and ending February 15, 2012.
(4)
On July 8, 2011, Erik Mettala was granted 150,000 restricted stock shares, of which 37,500 were vested upon grant and 112,500 will vest in three, four month installments, beginning on November 8, 2011, months after the date of grant, and ending July 8, 2012.
(5)
On February 15, 2012, Mr. Trkla was granted the option to purchase up to 300,000 shares of restricted common stock of the Company at the exercise price of $0.30 per Share.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Related Transactions
During the months of October 2009 through March 2010, the Company received a $75,000 advance from a related party. The advance is non-interest bearing and due in six months. As of March 31, 2010, the advance has been paid back in full.
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During the month of January 2011, the Company received a $100,000 advance from a related party. The advance was unsecured, non-interest bearing and due in six months. On June 24, 2011 the loan was modified to bear interest at 10%, compounded annually, and extended to mature in two years on June 24, 2013.
On May 18, 2010, the Company issued a $215,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually, matures in two years on May 18, 2012.
On April 29, 2011 the Company issued $15,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually, matures in two years on April 29, 2013.
On May 9, 2011 the Company issued a $36,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually, matures in two years on May 9, 2013.
On July 7, 2011 the Company issued a $40,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually, matures in two years on July 7, 2013.
On August 5, 2011 the Company issued $24,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually, matures in two years on August 5, 2013.
On September 2, 2011 the Company issued a $20,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually, matures in two years on September 2, 2013.
On September 30, 2011 the Company issued a $20,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually, matures in two years on September 30, 2013.
On October 19, 2011 the Company issued a $25,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually, matures in two years on October 19, 2013.
On December 6, 2011 the Company issued a $20,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually, matures in two years on December 6, 2013.
On January 11, 2012 the Company issued a $38,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually, matures in two years on January 11, 2014.
Except for the foregoing, there were no material transactions, or series of similar transactions, during our Companys last fiscal year, or any currently proposed transactions, or series of similar transactions, to which our Company was or is to be a party, in which the amount involved exceeded the lesser of $120,000 or one percent of the average of the small business issuers total assets at year-end for the last three completed fiscal years and in which any director, executive officer or any security holder who is known to us to own of record or beneficially more than five percent of any class of our common stock, or any member of the immediate family of any of the foregoing persons, had an interest.
Director Independence
The NASDAQ Stock Market has instituted director independence guidelines that have been adopted by the Securities & Exchange Commission. These guidelines provide that a director is deemed independent only if the board of directors affirmatively determines that the director has no relationship with the company which, in the boards opinion, would interfere with the directors exercise of independent judgment in carrying out his or her responsibilities. Significant stock ownership will not, by itself, preclude a board finding of independence.
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For NASDAQ Stock Market listed companies, the director independence rules list six types of disqualifying relationships that preclude an independence filing. The Companys board of directors may not find independent a director who:
1.
is an employee of the company or any parent or subsidiary of the company;
2.
accepts, or who has a family member who accepts, more than $60,000 per year in payments from the company or any parent or subsidiary of the company other than (a) payments from board or committee services; (b) payments arising solely from investments in the companys securities; (c) compensation paid to a family member who is a non-executive employee of the company (d) benefits under a tax qualified retirement plan or non-discretionary compensation; or (e) loans to directors and executive officers permitted under Section 13(k) of the Exchange Act;
3.
is a family member of an individual who is employed as an executive officer by the company or any parent or subsidiary of the company;
4.
is, or has a family member who is, a partner in, or a controlling shareholder or an executive officer of, any organization to which the company made, or from which the company received, payments for property or services that exceed 5% of the recipients consolidated gross revenues for that year, or $200,000, whichever is more, other than (a) payments arising solely from investments in the companys securities or (b) payments under non-discretionary charitable contribution matching programs;
5.
is employed, or who has a family member who is employed, as an executive officer of another company whose compensation committee includes any executive officer of the listed company; or is, or has a family member who is, a current partner of the companys outside auditor, or was a partner or employee of the companys outside auditor who worked on the companys audit.
Based upon the foregoing criteria, our Board of Directors has determined that Brad Lever is not an independent director under these rules as he is also employed by the Company as its Chief Executive Officer, Chief Financial Officer, and President.
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES.
Audit Fees
(1)
The aggregate fees billed by De Joya Griffith & Company, LLC, for audit of the Company's annual and interim financial statements were $ 20,200 for the fiscal year ended March 31, 2012, and $12,500 for the fiscal year ended March 31, 2011.
Audit Related Fees
(2)
De Joya Griffith & Company, LLC did not bill the Company any amounts for assurance and related services that were related to its audit or review of the Companys financial statements during the fiscal years ended 2012 and 2011.
Tax Fees
(3)
The aggregate fees billed by De Joya Griffith & Company, LLC for tax compliance, advice and
- 46 -
planning were $0.00 for the fiscal year ended March 31, 2012 and 2011.
All Other Fees
(4)
De Joya Griffith & Company, LLC did not bill the Company for any products and services other than the foregoing during the fiscal years ended 2012 and 2011.
Audit Committees Pre-approval Policies and Procedures
(5)
The Company does not have an audit committee per se. The current board of directors functions as the audit committee.
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PART IV
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a)
Audited Financial Statements for Fiscal Years Ended March 31, 2012 and 2011.
(b)
Exhibits.
3.1 | Articles of Incorporation of eCrypt Technologies, Inc., filed as exhibit to Form 10 filed with the Securities and Exchange Commission on November 11, 2008. |
3.2 | Bylaws of eCrypt Technologies, Inc., filed as exhibit to Form 10 filed with the Securities and Exchange Commission on November 11, 2008.
|
10.1 | OEM License Agreement, dated January 31, 2008 by and between Certicom Corp. and eCrypt Technologies, Inc., filed as exhibit to Form 10 filed with the Securities and Exchange Commission on November 11, 2008. |
10.2 | BlackBerry® Alliance Program Master Alliance Agreement, dated April 2, 2008 by and between Research in Motion Limited and eCrypt Technologies, Inc., filed as exhibit to Form 10 filed with the Securities and Exchange Commission on November 11, 2008. |
10.4 | Software Development Partnership Agreement, dated April 23, 2007 by and between eCrypt Technologies, Inc. and Gabi Rosu., filed as exhibit to Form 10 filed with the Securities and Exchange Commission on November 11, 2008. |
10.5 | Commodity Classification Document., filed as exhibit to Form 10 filed with the Securities and Exchange Commission on November 11, 2008, filed as exhibit to Form 10 filed with the Securities and Exchange Commission on November 11, 2008. |
10.6 | Consulting Agreement and accompanying exhibits dated May 26, 2010 by and between eCrypt Technologies, Inc. and Gabriel Rosu, filed as Exhibit 10.6 to Form 8-K filed with the Securities and Exchange Commission on May 27, 2010. |
10.7 | Director Agreement and Restricted Shares Agreement dated February 15, 2011 by and between eCrypt Technologies, Inc. and Curt Weldon, filed as Exhibit 10.7 to Form 8-K filed with the Securities and Exchange Commission on Februay 9, 2011. |
- 48 -
10.8 | Director Agreement and Restricted Shares Agreement dated February 15, 2011 by and between eCrypt Technologies, Inc. and Jay Cohen, filed as Exhibit 10.8 to Form 8-K filed with the Securities and Exchange Commission on Februay 15, 2011. |
10.9 | eCrypt Technologies, Inc. Stock Compensation Program, filed as Exhibit 10.9 to Form 8-K filed with the Securities and Exchange Commission on April 20, 2011. |
14.1 | Code of Ethics filed as Exhibit 14.1 to Form 10-K filed with the Securities and Exchange Commission on July 13, 2010. |
31.1 | Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
31.2 | Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
32.1 | Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |
32.2 | Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |
101 | SCH XBRL Schema Document.* |
101 | INS XBRL Instance Document.* |
101 | CAL XBRL Taxonomy Extension Calculation Linkbase Document.* |
101 | LAB XBRL Taxonomy Extension Label Linkbase Document.* |
101 | PRE XBRL Taxonomy Extension Presentation Linkbase Document.* |
101 | DEF XBRL Taxonomy Extension Definition Linkbase Document.* |
* Filed Herewith
- 49 -
eCRYPT TECHNOLOGIES, INC.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
By: /S/ Brad Lever
Brad Lever, Chief Executive Officer, Chief Financial Officer, Director
Date: June 11, 2012
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.
By: /S/ Brad Lever
Brad Lever, Chief Executive Officer, Chief Financial Officer, Director
Date: June 11, 2012
By: /S/ Jay Cohen
Jay Cohen, Director
Date: June 11, 2012
By: /S/ Tom Trkla
Tom Trkla, Director
Date: June 11, 2012
- 50 -
7 M\%>(;*%=%T*>!-/T:SO)CKYCNB\%TSQB*&1\,3Y9
MN:#K4D4
Exhibit 31.1
CERTIFICATIONS
I, Brad Lever, certify that:
1. I have reviewed this Form 10-K of eCrypt Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: June 11, 2012
/s/ Brad Lever, Chief Executive Officer
Exhibit 31.2
CERTIFICATIONS
I, Brad Lever, certify that:
1. I have reviewed this Form 10-K of eCrypt Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: June 11, 2012
/s/ Brad Lever, Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of eCrypt Technologies, Inc. (the Company) on Form 10-K for the fiscal year ended March 31, 2012 (the Report), I, Brad Lever, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1) The Report fully complies with the requirement of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and
2) The information contained in the Report fairly presents, in all material respects, the Company's financial position and results of operations.
June 11, 2012
/s/ Brad Lever, Chief Executive Officer
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of eCrypt Technologies, Inc. (the Company) on Form 10-K for the fiscal year ended March 31, 2012 (the Report), I, Brad Lever, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1) The Report fully complies with the requirement of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and
2) The information contained in the Report fairly presents, in all material respects, the Company's financial position and results of operations.
June 11, 2012
/s/ Brad Lever, Chief Financial Officer
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Equity
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Mar. 31, 2012
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Stockholders' Equity Note Disclosure [Text Block] | 5. Stockholders Equity
Authorized:
500,000,000 Common shares with no par value 10,000,000 Preferred shares with no par value
During the year ended March 31, 2008, the Company effected the following stock transactions:
The Company issued a total of 116,015,968 shares of the Companys no par value common stock in exchange for cash of $55,130.
During the year ended March 31, 2009 the Company effected the following stock transactions:
On October 09, 2008, the Company announced a 4:1 forward stock split on its common shares. 33,203,992 common shares were issued for 8,300,998 common shares.
On November 12, 2009, the Board of Directors of the Company consented to and approved a four-for-one forward split of the Companys 33,379,554 issued and outstanding shares of common stock. Pursuant to Rule 10b-17, the Forward Split became effective 10 days following the submission of the required notification forms to FINRA, on November 24, 2009. On the effective date, the Companys transfer agent issued and mailed to the eligible shareholders of record, three additional shares of common stock for each share of common stock held by the shareholder. The forward split resulted in the increase in the number of shares of the Companys common stock issued and outstanding to 133,518,216 while keeping the number of authorized shares the same.
During the year ended March 31, 2009 the Company issued 17,502,248 shares of the Companys no par value common stock in exchange for cash of $151,572.
During the year ended March 31, 2010, the Company effected the following stock transactions:
The Company issued a total of 40,455 shares of the Companys no par value common stock at a conversion rate of $0.81 per share in full and final settlement of a convertible debenture dated July 2, 2007. The shares were issued on March 30, 2010 for total value of $32,769. The loan consisted of principal of $23,800 and interest of $8,969. See Note 6.
During the year ended March 31, 2011, the Company effected the following stock transactions:
On April 19, 2010, the Company entered into a private placement agreement that would offer up to 952,381 units which consists of a subscription agreement and three warrants, Warrant #1 offers the holder to purchase 952,381 shares of the Corporations common stock at a price of $0.42 per share at any time within a 24 month period from the date of closing.
Warrant #2 entitles the holder to purchase a total of 714,286 shares of the Corporations common stock at a price of $0.56 per share at any time within a 24 month period from the date of closing.
Warrant #3 entitles the holder to purchase up to a total of 3,809,524 units at a price of $0.42 per unit at any time during the six month period from the date of closing of this offering. Each unit under warrant #3 consists of one share of common stock and two warrants. One warrant allows the holder to purchase up to 3,809,524 shares of common stock at a price of $0.42 any time during the period of twenty four months from the date of purchase. The other warrant allows the holder to purchase 2,857,142 shares of common stock at a price of $0.56 per share any time during the twenty four months from the date of closing of the purchase of these units under warrant 3.
On April 22, 2010, the Company issued 952,381 shares of common stock, and three (3) warrants for a total value of $400,000, per the private placement agreement explained above.
On February 9, 2011, the Company issued 250,000 shares of common stock for director compensation for a value of $52,500. The share price is valued at the adjusted closing price on the date of grant which was $0.21 per share. The compensation agreement calls for a total of 1,000,000 shares to be issued during a 12 month period.
On February 15, 2011, the Company issued 37,500 shares of common stock for director compensation for a value of $11,250. The share price is valued at the adjusted closing price on the date of vesting of the shares which was $0.30 per share. The compensation agreement calls for a total of 150,000 shares to be issued during a 12 month period.
On June 23, 2011, the Company issued 250,000 shares of common stock for director compensation for a value of $50,000. The share price is valued at the adjusted closing price on the date of vesting of the shares which was $0.204 per share. The compensation agreement calls for a total of 1,000,000 shares to be issued during a 12 month period.
On June 23, 2011, the Company issued 37,500 shares of common stock for director compensation for a value of $6,941. The share price is valued at the adjusted closing price on the date of vesting of the shares which was $.01851 per share. The compensation agreement calls for a total of 150,000 shares to be issued during a 12 month period.
On July 8, 2011, the Company issued 37,500 shares of common stock for director compensation for a value of $7,875. The share price is valued at the adjusted closing price on the date of grant which was $0.21 per share. The compensation agreement calls for a total of 150,000 shares to be issued during a 12 month period.
On October 9, 2011, the Company issued 250,000 shares of common stock for director compensation for a value of $41,250. The share price is valued at the adjusted closing price on the date of vesting of the shares which was $0.165 per share. The compensation agreement calls for a total of 1,000,000 shares to be issued during a 12 month period.
On October 15, 2011, the Company issued 37,500 shares of common stock for director compensation for a value of $6,375. The share price is valued at the adjusted closing price on the date of vesting of the shares which was $.0.17 per share. The compensation agreement calls for a total of 150,000 shares to be issued during a 12 month period.
On November 8, 2011, the Company issued 37,500 shares of common stock for director compensation for a value of $21,000. The share price is valued at the adjusted closing price on the date of vesting of the shares which was $0.56 per share. The compensation agreement calls for a total of 150,000 shares to be issued during a 12 month period.
On February 9, 2012, the Company issued 250,000 shares of common stock for director compensation for a value of $117,500. The share price is valued at the adjusted closing price on the date of vesting of the shares which was $0.47 per share. The compensation agreement calls for a total of 1,000,000 shares to be issued during a 12 month period.
On February 15, 2012, the Company issued 37,500 shares of common stock for director compensation for a value of $22,875. The share price is valued at the adjusted closing price on the date of vesting of the shares which was $.0.61 per share. The compensation agreement calls for a total of 150,000 shares to be issued during a 12 month period.
On March 8, 2012, the Company issued 37,500 shares of common stock for director compensation for a value of $17,250. The share price is valued at the adjusted closing price on the date of vesting of the shares which was $0.46 per share. The compensation agreement calls for a total of 150,000 shares to be issued during a 12 month period.
During the period March 31, 2012, Company had authorized the issuance of 362,500 shares for a total value of $178,625 as disclosed above. However the Company has not issued the stock and hence the said stock is reclassed as stock payable under the Statement of stockholders equity.
6. Warrants
On April 19, 2010, the Company entered into a private placement agreement that would offer up to 952,381 units which consists of a subscription agreement and three warrants, Warrant #1 offers the holder to purchase 952,381 shares of the Corporations common stock at a price of $0.42 per share at any time within a 24 month period from the date of closing.
Warrant #2 entitles the holder to purchase a total of 714,286 shares of the Corporations common stock at a price of $0.56 per share at any time within a 24 month period from the date of closing.
Warrant #3 entitles the holder to purchase up to a total of 3,809,524 units at a price of $0.42 per unit at any time during the six month period from the date of closing of this offering. Each unit under warrant #3 consists of one share of common stock and two warrants. One warrant allows the holder to purchase up to 3,809,524 shares of common stock at a price of $0.42 any time during the period of twenty four months from the date of purchase. The other warrant allows the holder to purchase 2,857,142 shares of common stock at a price of $0.56 per share any time during the twenty four months from the date of closing of the purchase of these units under warrant 3.
On April 22, 2010, the Company issued 952,381 shares of common stock, and three (3) warrants for a total value of $400,000, per the private placement agreement explained above.
(1) All warrants expire on April 19, 2012.
7. Stock options
As approved by the Board of Directors, on February 16, 2012 the company granted a non-qualified stock option to its newly appointed director, Thomas Trkla as compensation for his services. The agreement calls for three hundred thousand (300,000) shares of restricted common stock for a price equal to $0.30 per share (Exercise Price), vested over a ten year period thereafter. The option shall be exercised during the 12 month period. As at March 31, 2012, the director has not exercised any right. The total fair value of these options at the date of grant was estimated to be $180,000 and was determined using the Black-Scholes option pricing model with an expected life of 10 years, a risk free interest rate of 1.99%, a dividend yield of 0% and expected volatility of 419% . Out of this $45,000 was recorded as a stock based compensation expense for current year based on seventy five thousand (75,000) options vested.
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