NOTE 4: INTANGIBLE ASSETS

Communications Platform – Separation Degrees – One, Inc.

On January 1, 2016, the Company entered into a technology licensing and marketing support agreement with Separation Degrees – One, Inc. (“SDOI”) that will result in the development, licensing and management of on-going technology solutions and marketing campaigns for ESSI’s initiatives. Additionally, the Company entered into an Asset Purchase Agreement with SDOI wherein the Company acquired a proprietary messaging and customer relationship management software platform from SDOI.

Under the terms of the agreements, the Company will issue to SDOI 1,000 shares of the Company’s Series A Voting Preferred Stock. The Series A Voting Preferred Stock has the right to vote those shares of the Series A Voting Preferred Stock regarding any matter or action that is required to be submitted to the shareholders of the Company for approval. The vote of each share of the Series A Voting Preferred Stock is equal to and counted as 10 times the votes of all of the shares of the Company’s (i) common stock, and (ii) other voting preferred stock issued and outstanding on the date of each and every vote or consent of the shareholders of the Company regarding each and every matter submitted to the shareholders of the Company for approval.

The Company obtained a third party valuation in respect of the issuance of the Series A Voting Preferred stock and recorded a technology licensing and marketing expense of $35,500 in respect of the valuation report. The third party valuation report was based on the following inputs as at January 1, 2016: (1) price per share of common stock of $0.007; (2) 28,426,349 common shares outstanding; 1,000 Series A Preferred shares issued 1/1/16; (3) A 17.5% premium over the combined common share value for the voting preferences; (4) 284,291,916,349 total voting shares and 284,263,490,000 voting rights represented 99.99% of the total.

On June 1, 2016, the Company and SDOI entered into a further amendment to the terms of the aforementioned agreements, which provided for the following:

(1)

SDOI will not be issued Series A Preferred Stock initially equal to the current total authorized common shares outstanding of 650,000,000;

(2)

Invoices for advertising services billed separately from the $35,000 standard monthly fee will have the same terms as the monthly fee; i.e., the amount invoiced will be paid via the issuance of S-8 shares of ESSI Common Stock (issued at a 30% discount to the market VWAP on the date of payment due or a share price of $0.01, whichever is greater).

On October 1, 2016, monthly standard fee increased to $42,000 from $35,000.

As of January 31, 2016, 1,000 Series A Voting Preferred Stock had not yet been issued and $35,500 remained on the balance sheets as liabilities for issuance of shares. As of October 31, 2016, 1,000 Series A Voting Preferred Stock was reversed and $nil remained on the balance sheets as liabilities for issuance of shares.

Further under the terms of the aforementioned technology licensing and marketing support agreement, the Company agreed to the issuance and DWAC of $35,000 worth of S-8 shares in ESSI Common Stock (issued at a 30% discount to the market close on the date of payment due (the 1st of every month), or a share price of $0.01 whichever is greater), to SDOI for ongoing monthly project and planned technical development/maintenance, production and staging server administration, ongoing marketing services and monthly advertising management. The shares are to be issued on or before the 1st business day of each calendar month.

On January 4, 2016 the Company entered into a further agreement with SDOI for the purchase of a discrete communications software platform, including custom developed libraries, the consideration for which was the issuance of 500,000 shares of common stock. The Company recorded the fair market value of $3,500 in respect of the software platform on the date of the agreement as intangible assets on the Company’s balance sheet.

As at fiscal year end the Company evaluated the asset for impairment and determined recovery of the value of the asset was indeterminate during the present stage of the Company’s execution of its business plan. As a result, we recorded an impairment loss of $3,500 which was recognized in the profit and loss account.

As of October 31, 2016 and January 31, 2016, 500,000 shares of common stock had not yet been issued $3,500 remained on the balance sheet as liabilities for issuance of shares.

During the nine months ended October 31, 2016 the Company received invoices for advertising services from SDOI totaling $1,271,274 and further received invoices for monthly project and planned technical development/maintenance, production and staging server administration, ongoing marketing services and monthly advertising management services totaling a cumulative $322,000. The Company determined the value of the shares issuable to settle the total amounts invoiced ($1,593,274) at a 30% discount to fair market value on the settlement date and recorded a loss of $684,748 in relation to the shares issuable. During the nine months ended October 31, 2016 a total of 4,807,953 shares of common stock valued between $0.01 to 0.474 per share in relation to the aforementioned agreements with SDOI were issued. A total of $2,044,448 was recorded on the Company’s balance sheets as liability for issuance of common shares (2016 - $108,510). The allocated shares had not yet been issued as at October 31, 2016.