10-Q 1 f10q_081414.htm FORM 10-Q f10q_081414.htm
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q

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

For the quarterly period ended June 30, 2014

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

For the transition period from ______ to _______

Commission File No. 333-181747

MOBETIZE CORP.
(Exact name of registrant as specified in its charter)

Nevada
(State or Other Jurisdiction of Incorporation or Organization)

7299
(Primary Standard Industrial Classification Number)
99-0373704
 (IRS Employer Identification Number)
 

8105 Birch Bay Square St, Suite 205, Blaine WA 98230
(Address of principal executive offices)

Issuer’s telephone number: (206) 347-4515
 
Indicate by checkmark whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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.   Yes [X ]   No[    ]
 
Indicate by check mark whether the registrant is a large accelerated filed, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
 
Large accelerated filer
  
Accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company)
Smaller reporting company
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the most practicable date:  As at August 14, 2014, there were 29,488,365 shares of the issuer's $0.001 par value common stock issued and outstanding
 
 
Page 1

 
MOBETIZE CORP.


 
Page 2

 
MOBETIZE, CORP.
Balance Sheets
June 30, 2014
(Unaudited)

   
US $
 
   
JUNE 30,
2014
   
MARCH 31,
2014
 
               
ASSETS
 
Current Assets:
               
Cash
 
$
656,861
   
$
90,537
 
Accounts receivable
   
75,528
     
78,973
 
Prepaids
   
78,750
     
105,102
 
Total Current Assets
   
811,139
     
274,612
 
                 
Investments (Note 4)
   
1,470,644
     
1,634,049
 
TOTAL ASSETS
 
$
2,281,783
   
$
1,908,661
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
                 
LIABILITIES
               
Current Liabilities:
               
Accounts payable and accrued liabilities
 
 $
77,179
   
 $
19,082
 
Accounts payable - related party (Note 5)
   
56,894
     
61,831
 
Due to related party (Note 5)
   
53,105
     
53,105
 
Total Current Liabilities
   
187,178
     
134,018
 
                 
TOTAL LIABILITIES
 
$
187,178
   
$
134,018
 
                 
STOCKHOLDERS' EQUITY
               
Common stock, $0.001 Par Value: 525,000,000 authorized and 29,488,365 and 28,364,200 common shares issued and outstanding, respectively (Note 6)
 
$
29,488
   
$
28,364
 
Share subscriptions receivable (Note 6)
   
(12,000
)
   
-
 
Share subscriptions payable (Note 6)
   
3,938
     
-
 
Additional paid-in capital
   
3,857,797
     
2,992,747
 
Accumulated other comprehensive loss
   
(163,406
)
   
-
 
Accumulated deficit
   
(1,621,213
)
   
(1,246,468
)
Total Stockholders' Equity
   
2,094,605
     
1,774,643
 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
 
$
2,281,783
   
$
1,908,661
 
 
The accompanying notes are an integral part of these financial statements.

 
Page 3

 
MOBETIZE CORP.
Statements of Operations
(Unaudited)
 
   
US$
THREE MONTHS ENDED
JUNE 30,
 
    2014     2013  
             
OPERATING REVENUES
           
Revenues
  $ 19,740     $ 2,829  
                 
OPERATING EXPENSES
               
Advertising and promotion
    41,441       5,001  
Advertising – related party
    2,638       -  
Consulting
    175,697       -  
Consulting – related party
    72,252          
General and administrative
   
10,072
      18,340  
General and administrative – related party
    28,490       -  
Management fees - related party
    44,250       73,320  
Professional fees
    19,645       27,336  
Research and development
    -       14,800  
Total Operating Expenses
    394,485       138,797  
                 
NET LOSS FROM OPERATIONS
    (374,745 )     (135,968 )
                 
OTHER INCOME/(EXPENSE)
               
Interest income
    -       4,862  
Interest expense
    -       (1,210 )
Total other income /(expense)
    -       3,652  
                 
NET LOSS
  $ (374,745 )   $ (132,316 )
                 
NET LOSS PER SHARE
               
Basic
  $ (0.01 )   $ (0.01 )
                 
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
               
Basic
    28,432,864       18,350,826  
                 
COMPREHENSIVE LOSS
               
Net loss
  $ (374,745 )   $ (132,316 )
Other comprehensive loss:
               
Unrealized loss on investments
    (163,406 )     -  
Comprehensive income (loss)
  $ (538,151 )   $ (132,316 )
 
The accompanying notes are an integral part of these financial statements.

 
Page 4

 
MOBETIZE CORP.
Statements of Cash Flow
(Unaudited)
 
     
US$
THREE MONTHS ENDED
JUNE 30,
 
     
2014
     
2013
 
                 
CASH FLOWS FROM OPERATING ACTIVITIES
               
Net loss
 
$
(374,745
)
 
$
(132,316
)
                 
Adjustments to reconcile net loss to net cash used in operating activities:
               
Shares issued for services
   
111,042
     
-
 
Interest receivable
   
-
     
(4,862
)
Changes in assets and liabilities
           
-
 
Accounts receivable
   
3,445
     
(2,829
)
Accounts payables and accrued expenses
   
59,896
     
53,978
 
Accounts payable - related party
   
-
     
-
 
Net cash used in operating activities
   
(200,362
)
   
(86,029
)
                 
CASH FLOWS FROM INVESTING ACTIVITIES
               
Software development costs
   
-
     
-
 
Net cash used in investing activities
   
-
     
-
 
                 
CASH FLOWS FROM FINANCING ACTIVITES
               
Proceeds from common stock issued and issuable
   
771,623
     
158,750
 
Proceeds from related party
   
-
     
42,919
 
Repayment to related party
   
(4,937
)
   
-
 
Net cash provided by financing activities
   
766,686
     
201,669
 
                 
NET INCREASE IN CASH
   
566,324
     
115,640
 
CASH - BEGINNING OF PERIOD
   
90,537
     
10,049
 
CASH - END OF PERIOD
 
$
656,861
   
$
125,689
 
                 
CASH PAID DURING THE PERIOD FOR:
               
Interest expense
 
$
-
   
$
-
 
Interest expense
 
$
-
   
$
-
 
                 
SUPPLEMENTAL NONCASH INFORMATION:
               
Shares issued for acquisition of software licence
 
$
     
$
1,400,000
 
 
The accompanying notes are an integral part of these financial statements.
 
 
Page 5

 
MOBETIZE CORP.
 
Notes to the Financial Statements
June 30, 2014
 (Unaudited)
 
 
1.
Nature of Operations and Continuance of Business
Mobetize, Corp. (the “Company”) was incorporated in the state of Nevada on February 23, 2012 under the name Slavia, Corp. The Company is a business whose planned principle operations are the delivery of a Mobile Financial Services to telecoms companies and their users. The Company is currently finalizing the design and development of its smartWallet suite of products. The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding to operationalize the Company’s current technology before another company develops similar products.

On September 4, 2013, the Company entered into a purchase and sale agreement with Mobetize, Inc. (“Mobetize”), a private corporation formed under the state of Nevada on March 14, 2012.  Under the terms of the agreement, the Company acquired the net assets of Mobetize in exchange for 22,003,000 common shares of the Company.  After the close of the share exchange agreement, there were 26,633,000 common shares outstanding and the former shareholders of Mobetize control approximately 84% of the total issued and outstanding common shares of the Company (including 500,000 common shares currently held by former shareholders of Mobetize in a private transaction), resulting in a reverse takeover.

On September 16, 2013, the Company issued 315,000 common shares as compensation for an on-going consulting agreement with the Company. Additionally on October 7, 2013 the Company issued 1,050,000 shares in a private placement at $0.50 per share for gross funds of $525,000. The Company paid $52,500 financing fees in relating to this share issue.

On December 15, 2013 the Company issued 15,000 common shares for prepaid marketing services with a fair value of $19,500. All these services had been received and amortized by June 30, 2014.
 
On December 31, 2013 the Company issued 1,200 common shares in payment of consultancy services received with a fair market value of $1,500.
 
On March 14, 2014 the Company issued 200,000 common shares at a deemed price of $0.20 a share to Bacarrat Overseas Ltd upon conversion of the outstanding notes payable to equity.

On March 26, 2014 the Company entered in to a debt for equity settlement agreement with the President of the Company. Under the terms of this agreement, the Company settled debts of $112,500 owed to the President of the Company in return for the issuance of 150,000 common shares.

On April 4, 2014 the Company issued 1,334 common shares in settlement of a supplier liability valued at $1,800.

On June 25, 2014 the Company closed a private placement under which it sold 1,122,831 investment units for net proceeds of $771,623. Each investment unit consisted of one common share of the Company’s stock and one half-warrant. The warrants are exercisable at $1.00 per share and are valid for two years from issue. $58,500 financing fees are payable in cash associated with this private placement and 133,000 financing warrants will be issued on the same terms as those in the investment units.

As at June 30, 2014 the Company currently has 29,488,365 common shares issued and outstanding.

 
Page 6

 
Going Concern
These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. As of June 30, 2014, the Company has an accumulated deficit of $(1,621,213). The continuation of the Company as a going concern is dependent upon the continued financial support from its management, and its ability to identify future investment opportunities and obtain the necessary debt or equity financing, and generating profitable operations from the Company’s future operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.  These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

2.
Summary of Significant Accounting Policies
 
 
a)
Basis of Presentation
 
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and are expressed in U.S. dollars.  The Company’s fiscal year end is March 31.
 
 
b)
Use of Estimates
 
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the collectability of accounts receivable, valuation of intangible assets, fair value of stock-based compensation, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
 
 
c)
Financial Statements
 
These financial statements have been prepared in the opinion of management to reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.
 
 
d)
Cash and Cash Equivalents
 
The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. As of June 30, 2014 and 2013, the Company had no cash equivalents.
 
 
e)
Notes Receivable
 
The Company evaluates the collectability of notes receivable based on the age of receivable balances and debtor credit-worthiness. If the Company determines that financial conditions of its debtors have deteriorated, an allowance for doubtful accounts may be made or the notes receivables written off if all collection attempts have failed.
 
 
Page 7

 
The Company recognizes interest income on notes receivable using the effective interest method. If the Company determines that the recoverability of any of its notes receivable is not probable, it will place the notes on nonaccrual status and will cease recording interest income. Should the Company later determine that the notes receivable balance is recoverable, it will resume the accrual of interest.
 
 
f)
Prepaid Expenses
 
The Company pays for some property related services in advance and recognizes these expenses as prepaid at the balance sheet date. Prepaid expenses are carried at fair value which is deemed to be the gross value of the pre-payment due to the short-term maturity of these payments. The Company does have certain prepaid expenses that extend beyond one-year and those are classified as non-current assets.
 
 
g)
Revenue Recognition
 
The Company recognizes revenue from licensing and professional fees to non-related parties. During the period ended June 30, 2014, the Company derived all of its revenue from three customers acquired under the asset purchase from Alligato. Revenue will be recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service has been provided, and collectability is reasonably assured.
 
 
h)
Investments
 
The Company classifies its equity investments in third parties as held for investment and recognizes the fair market value of these assets. As these investments are in public companies, the Company has used the market value at June 30, 2014 as a representation of fair market value.
 
 
i)
Intangible Assets
 
Intangible assets include all costs incurred to acquire internet network and channels. Intangible assets are recorded at cost and amortized over its useful life of three years using the straight-line method. No amortization has been taken on intangible assets, as they have not yet been put into use.
 
The Company evaluates the recoverability of long-lived assets and the related estimated remaining lives at each balance sheet date. The Company records an impairment or change in useful life whenever events or changes in circumstances indicate that the carrying amount may not be recoverable or the useful life has changed.
 
 
j)
Stock-based Compensation
 
The Company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation,” using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.
 
 
k)
Basic and Diluted Net Loss per Share
 
The Company computes net loss per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As of June 30, 2014, the Company has 1,199,914 (2013 – 272,500) potentially dilutive shares.
 
 
Page 8

 
 
l)
Comprehensive Loss
 
ASC 220, Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As of June 30, 2014 the Company has an Other Comprehensive Loss of $163,406 (2013 – nil), which is due to the revaluation to Fair Market Value of the Company’s investment in Telupay International PLC.
 
 
m)
Fair Value Measurement
 
Pursuant to ASC 820, Fair Value Measurements and Disclosures, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
 
Level 1
 
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
 
Level 2
 
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
 
Level 3
 
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
 
The Company’s financial instruments consist principally of cash, amounts receivable, investments, interest receivable, accounts payable and accrued liabilities, and amounts due to related parties.  Pursuant to ASC 820, the fair value of our cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
 
 
n)
Recent Accounting Pronouncements
 
In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in the ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP. The new amendments will require an organization to:
 
 
Page 9

 
 
Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period; and
 
 
Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.
 
The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). The amendments are effective for reporting periods beginning after December 15, 2012, for public companies. Early adoption is permitted. The adoption of ASU No. 2013-02 is not expected to have a material impact on our financial position or results of operations.
 
In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which clarifies which instruments and transactions are subject to the offsetting disclosure requirements originally established by ASU 2011-11. The new ASU addresses preparer concerns that the scope of the disclosure requirements under ASU 2011-11 was overly broad and imposed unintended costs that were not commensurate with estimated benefits to financial statement users. In choosing to narrow the scope of the offsetting disclosures, the Board determined that it could make them more operable and cost effective for preparers while still giving financial statement users sufficient information to analyze the most significant presentation differences between financial statements prepared in accordance with U.S. GAAP and those prepared under IFRSs. Like ASU 2011-11, the amendments in this update will be effective for fiscal periods beginning on, or after January 1, 2013. The adoption of ASU 2013-01 is not expected to have a material impact on our financial position or results of operations.
 
3.
Share Exchange Agreement between Mobetize, Corp. and Mobetize, Inc.
 
On September 4, 2013, the Company entered into a purchase and sale agreement with Mobetize and the shareholders of all of the issued and outstanding common shares of Mobetize.
 
Pursuant to the agreement, the Company acquired the net assets of Mobetize in exchange for 22,003,000 common shares of the Company. Following the close of the share exchange agreement, there are 26,633,000 common shares outstanding, of which the former shareholders of Mobetize will control approximately 22,503,000 common shares, or 84% of the total issued and outstanding common shares of Slavia, resulting in a change of control. The 22,503,000 common shares held by former shareholders of Mobetize is comprised of 22,003,000 from the share exchange agreement and 500,000 common shares held by the President and Director of Mobetize which was acquired in a private transaction prior to the share exchange agreement.
 
The transaction was accounted for as a reverse recapitalization transaction, as the Company qualifies as a non-operating public shell company given the fact that the Company held nominal net monetary assets, consisting primarily of cash at the time of merger transaction. As Mobetize is deemed to be the purchaser for accounting purposes under recapitalization accounting, these financial statements are presented as a continuation of Mobetize. The equity of Mobetize is presented as the equity of the combined company and the capital stock account of Mobetize is adjusted to reflect the part value of the outstanding and issued common stock of the legal acquirer (the Company) after giving effect to the number of shares issued in the purchase and sale agreement.  Shares retained by the Company are reflected as an issuance as of the acquisition date for the historical amount of the net assets of the acquired entity, which in this case is zero.
 
 
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4.
Investment
 
On December 24, 2013 the Company completed a debt for equity swap transaction, through which it converted the notes receivable and accrued interest it held from Telupay International Inc. in to 3,268,097 common shares in Telupay International Inc. As a result of this transaction, the Company owns approximately 2.02% of the outstanding share capital of Telupay International Inc. The Company recognizes the holding of these shares as an investment held for sale and values it at the fair market value of the shares.

As Telupay is a public company on the OTC market, the shares are valued at the market price. At June 30, 2014 the Telupay quoted share price was $0.45 per share compared to $0.50 per share at March 31, 2014. As a result the Company revalued the asset to reflect this new share price and a loss of $163,406 was recorded to other comprehensive loss in the period ended June 30, 2014.
 
5.
Related Party Transactions
 
 
a)
On September 28, 2012, the Company issued 665,000 common shares to settle outstanding management fees with a fair value of $66,500 to the President and a Director of the Company.
 
 
b)
Prior to the share exchange between Mobetize Corp. and Mobetize Inc., the Company settled debt of $21,000 owing to a Company controlled by a Director of the Company with the issuance of 84,000 common shares.
 
 
c)
On March 26, 2014, the Company settled debt of $112,500 owing to the President of the Company with the issuance of 150,000 common shares.
 
 
d)
During the period ended June 30, 2014, the Company incurred $26,250 (2013 - $26,250) of management fees and $750 (2013 - $750) of rent to the President of the Company.
 
 
e)
During the period ended June 30, 2014, the Company incurred $70,785 (2013 - $30,570) of development & engineering fees, $2,179 (2013 - $5,001) of advertising expenses and $7,415 (2013 - $1,652) of general & administration expenses to a company controlled by the Chief Executive Officer of the Company.
 
 
f)
During the period ended June 30, 2014, the Company incurred $18,000 (2013 - $6,000) of management fees to a company controlled by the Chief Executive Officer of the Company.
 
 
g)
As at June 30, 2014, the Company owes $53,105 for advances from related parties and $18,759 for the accrual of management, rent and other expenses  (March 31, 2014 - $53,105 and $32,932 respectively) to the President of the Company. The amounts owing are unsecured, non-interest bearing, and due on demand.
 
 
h)
As at June 30, 2014 the company owes $30,066 (March 31 2014 - $22,899) to a Company controlled by the Chief Executive Officer of the Company for development expenses, advertising expenses and general and administration expenses incurred but unpaid during the period.
 
 
i)
As at June 30, 2014 the company owes $8,069 (March 31 2014 - $6,000) to a Company controlled by the Chief Executive Officer of the Company for management fees incurred but unpaid during the period.
 
 
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6.
Common Stock
 
 
a)
On September 28, 2012, the Company issued 665,000 common shares to settle outstanding management fees with a fair value of $66,500 to the President and a Director of the Company.
 
 
b)
On July 25, 2013, the Company affected a seven-for-one forward share split. The effect of the forward stock split increased the number of issued and outstanding common shares from 3,290,000 common shares outstanding and 75,000,000 authorized to 23,030,000 common shares outstanding and 525,000,000 authorized and has been reflected on a retroactive basis.
 
 
c)
On July 12, 2013, the Chief Executive Officer of Mobetize acquired 18,900,000 post-split common shares of the Company in a private transaction for $25,000. Subsequent to the acquisition, the CEO of Mobetize returned 18,400,000 common shares for cancellation.
 
 
d)
Prior to the purchase and sale agreement, the former President and Director of the Company forgave $11,527 owing from the company, which was recorded as additional paid-in capital.
 
 
e)
Prior to the share exchange between Mobetize Corp. and Mobetize Inc., on May 31, 2013, Mobetize acquired the technology, source code and all other IP related to the assets of the Mobetize suite from Alligato Inc., as well as the customer accounts and partnership agreements relating to the Mobetize IP assets, in exchange for 4,000,000 common shares with a fair value of $1,400,000.
 
 
f)
Prior to the share exchange between Mobetize Corp. and Mobetize Inc., Mobetize closed a private placement for 796,000 common shares for cash proceeds of $199,000.
 
 
g)
Prior to the share exchange between Mobetize Corp. and Mobetize Inc., the Company issued 120,000 shares of stock for prepaid consulting services valued at $30,000. As of June 30, 2014, all services have been received and $30,000 has been amortized.
 
 
h)
Prior to the share exchange between Mobetize Corp. and Mobetize Inc., the Company issued 84,000 shares of stock as valued at $21,000 to settle debt in the amount of $21,000.
 
 
i)
On September 4, 2013, the Company issued 22,003,000 common shares of the Company, for the share exchange agreement as noted in Note 3.
 
 
j)
On September 16, 2013, the Company issued 315,000 common shares for prepaid consulting services, with a fair value of $157,500. As of June 30, 2014, $78,750 of these services has been amortized.
 
 
k)
On October 8, 2013 the Company issued 1,050,000 common shares at $0.50 each in a private placement and received $525,000 in gross cash proceeds, net of $52,500 in share issuance cost.
 
 
l)
On December 15, 2013 the Company issued 15,000 common shares for prepaid marketing services with a fair value of $19,500. As of June 30, 2014 these services have been fully amortized and additionally a further $3,938 of services have been received, for which payment is due in common shares that have yet to be issued.
 
 
m)
On December 31, 2013 the Company issued 1,200 common shares in payment of consultancy services received with a fair market value of $1,500.
 
 
n)
On March 14, 2014 the Company issued 200,000 common shares at a deemed price of $0.20 a share upon conversion of the outstanding notes payable to equity with a total value of $40,000.

 
o)
On March 26, 2014 the Company entered in to a debt for equity settlement agreement with the President of the Company. Under the terms of this agreement, the Company settled debts of $112,500 owed to the President of the Company in return for the issuance of 150,000 common shares. This transaction was valued at the prevailing market price of $1.35 per share, so the Company incurred an interest charge of $90,000 as a result of this transaction and the total transaction was valued at $202,500.

 
Page 12

 
 
p)
On April 4, 2014 the Company issued 1,334 common shares in settlement of a supplier liability valued at $1,800.

 
q)
On June 25, 2014 the Company closed a private placement under which it sold 1,122,831 investment units for net proceeds of $771,623. Each investment unit consisted of one common share of the Company’s stock and one half-warrant. The warrants are exercisable at $1.00 per share and are valid for two years from issue. $58,500 financing fees are payable in cash associated with this private placement and 133,000 financing warrants will be issued on the same terms as those in the investment units. The financing warrants were valued at $80,752 using the Black Scholes method . At June 30, 2014 $12,000 of the proceeds were in transit to the Company and have hence been recorded as share subscriptions receivable.
 
 
7.
Share Purchase Warrants
 
The following table summarizes the continuity of share purchase warrants:
 
   
Number of warrants
   
Weighted average
exercise price (US$)
 
Balance, March 31 2013
           
                 
Issued, September 3, 2013
    500,000       0.50  
                 
Balance, March 31, 2014
    500,000       0.50  
                 
Issued, June 25, 2014
    694,414       1.00  
                 
Balance, June 30, 2014
    1,194,414       0.79  
 
As at June 30, 2014, the following share purchase warrants were outstanding:

Number of
warrants
outstanding
 
Exercise
price (US$)
 
 
 
Expiry date
 
500,000
    0.50  
September 2, 2015
 
694,414
    1.00  
June 24, 2016
 
1,194,414
           
 
 
Page 13

 
 
8.
Share Options:
 
The following table summarizes the continuity of share purchase options:
 
   
Number of options
   
Weighted average
exercise price (US$)
 
Balance, March 31, 2013
           
                 
Issued, November 30, 2013
    5,500       1.00  
                 
Balance, March 31, 2014
    5,500       1.00  
                 
Issued in Period
    -       -  
                 
Balance, June 30, 2014
    5,500       1.00  
 
As at June 30, 2014, the following share purchase options were outstanding:

Number of
options
outstanding
 
Exercise
price (US$)
 
 
 
Expiry date
 
5,500
    1.00  
November 26, 2014
 
5,500
           
 
 
Page 14

 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

PRELIMINARY NOTE REGARDING FORWARD LOOKING STATEMENTS

The following discussion should be read in conjunction with our financial statements, which are included elsewhere in this Form 10-Q (the “Report”). This Report contains forward-looking statements which relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements.  Although we believe that the predictions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.  Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements.  We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

We are considered a development stage company.  Our auditors have issued a going concern opinion on the financial statements for the year ended March 31, 2014.

GENERAL
 
We were incorporated in the State of Nevada on February 23, 2012. Our business office is at 8105 Birch Bay Square St, Suite 205, Blaine WA 98230. Our telephone number is (206) 347-4515.
 
Our original business was to provide service to international students who want to study in Canada. We have not generated any revenues and our principal business activities had consisted of creating a business plan and entering into a Referral Agreement dated May 7, 2012 with Novy Mir, Ltd., an independent contractor who was to refer international students to us.
 
Our business plan was to help international students enroll in appropriate universities, institutes, colleges or schools in Canada. We also had planned to help students obtain student visas and find accommodations in the cities of study. Our service was to start from preliminary consultation and end when the client was enrolled to the program, entered to the destination country and accommodated at a desired place.
 
Unfortunately, we were not able to raise sufficient capital to fund our business development and consequently our management began considering alternative strategies, such as business combinations or acquisitions to create value for our shareholders.
 
On July 9, 2013, we entered into an asset purchase and sale agreement with Mobetize Inc. (“Priveco”), a State of Nevada corporation and formerly “Telupay Inc.”. Pursuant to the terms of the agreement, we agreed to acquire substantially all the assets of Priveco in exchange for the issuance by our company of 22,003,000 shares of our common stock to Priveco.
 
 
Page 15

 
On July 12, 2013, Ms. Shpeyzer had resigned as our President, Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer and Director.  Ms. Shpeyzer’s resignation was not the result of any disagreement with our company regarding our operations, policies, practices or otherwise.  Concurrently with Ms. Shpeyzer’s resignation, Mr. Stephen Fowler was appointed as our President, Principal Financial Officer, Principal Accounting Officer and as a director.
 
In accordance with board approval, we filed a Certificate of Change dated August 8, 2013 with the Nevada Secretary of State to give effect to a forward split of our authorized, issued and outstanding shares of common stock on a 7 new for 1 old basis, such that our authorized capital increased from 75,000,000 to 525,000,000 shares of common stock and, correspondingly, our issued and outstanding shares of common stock was increased from 3,290,000 to 23,030,000 common shares, all with a par value of $0.001.  
 
Further, effective August 13, 2013, in accordance with approval from the Financial Industry Regulatory Authority (“FINRA”), our company changed its name from “Slavia, Corp.” to “Mobetize Corp.”.  The name change and forward split became effective with the Over-the-Counter Bulletin Board at the opening of trading on August 14, 2013 under the symbol SAVID”.  Effective October 1, 2013, our stock symbol changed from “SAVID” to “MPAY” to better reflect the new name of our company. 
 
In connection with the asset purchase and sale agreement, Mr. Fowler agreed to return for cancellation 18,400,000 shares of our common stock on September 4, 2013. Concurrently, we closed the asset purchase and sale by issuing the required 22,003,000 common shares to Priveco. Also pursuant to the asset purchase and sale agreement, on September 4, 2013, Ajay Hans was appointed as a director and Principal Executive Officer of our company.
 
On September 20, 2013, Stephen Fowler had resigned as our Principal Financial Officer and Principal Accounting Officer.  Mr. Fowler’s resignation was not the result of any disagreement with our company regarding our operations, policies, practices or otherwise.  Concurrently with Mr. Fowler resignation, Mr. Chris Convey was appointed as our Chief Financial Officer.
 
On September 16, 2013, our company issued 315,000 common shares to Source Capital Group, Inc., a US investment-banking firm, as part of an on-going consulting agreement with our company. Additionally on October 7, 2013 the Company issued 1,050,000 shares in a private placement at $0.50 per share for gross funds of $525,000.
 
On December 15, 2013 our company issued 15,000 common shares for prepaid marketing services with a fair value of $19,500. All these services had been received and amortized by June 30, 2014.
 
On December 31, 2013 our company issued 1,200 common shares in payment of consultancy services received with a fair market value of $1,500.
 
On March 14, 2014 our company issued 200,000 common shares at a deemed price of $0.20 a share to Bacarrat Overseas Ltd upon conversion of the outstanding notes payable to equity.
 
On March 26, 2014 our company entered in to a debt for equity settlement agreement with the president of our company. Under the terms of this agreement, the Company settled debts of $112,500 owed to the president of our company in return for the issuance of 150,000 common shares. This transaction was valued at the prevailing market price of $1.35 per share, so our company incurred an interest charge of $90,000 as a result of this transaction.
 
On April 4, 2014 our company issued 1,334 common shares in settlement of a supplier liability valued at $1,800.
 
 
Page 16

 
On June 25, 2014 our company closed a private placement under which it sold 1,122,831 investment units for gross proceeds of $842,123. Each investment unit consisted of one common share of our company ‘s stock and one half-warrant. The warrants are exercisable at $1.00 per share and are valid for two years from issue. $58,500 financing fees are payable in cash associated with this private placement and 133,000 financing warrants will be issued on the same terms as those in the investment units.

BUSINESS OVERVIEW

Our original business was to provide service to international students who want to study in Canada. We did not generate any revenues and our principal business activities consisted of creating a business plan.  Our business plan was to help international students enrol in appropriate universities, institutes, colleges or schools in Canada. We also had planned to help students obtain student visas and find accommodations in the cities of study. Our service was to start from preliminary consultation and will end when the client is enrolled to the program, entered to the destination country and accommodated at desired place.

Unfortunately, we were not able to raise sufficient capital to fund our business development and consequently our management began considering alternative strategies, such as business combinations or acquisitions to create value for our shareholders.

As such, we purchased the all or substantially all of the business assets of Mobetize Inc. on September 4, 2013 and our new business offers us the opportunity to become a leading online and mobile commerce platform provider for telecom operators, payment service providers and banks. Initially, we are focussed on providing solutions to telcos in N America that allow them to quickly and easily offer a full suite of Mobile Financial Services (“MFS”) to their customers. Our unique ‘freemuim’ business model removes the cost barriers for telcos to adopt MFS and positions us at the leading edge of this exciting market development. Our integrated platform is an innovative product tailored to implement bill management, payments, airtime recharge, domestic money transfers, international remittances, and various other Mobile Financial Services technologies all on a mobile device.

Telecom Products and Solutions:
Adoption of the smart phone has created an unprecedented increase in the use of the mobile devices for financial transactions.  This paradigm is changing the way people receive financial services across the globe. MFS are part of a long-term strategy for telecom operators worldwide to enhance their relationship with their subscribers and increase Average Revenue Per User (“ARPU”). For telcos with predominantly prepaid customer bases, we assist them in significantly increasing their enterprise value, as we effectively convert pre-paid subscribers in to post-paid subscribers. We have commenced operations with our first products designed and ready for sale and/or implementation.

SmartWallet
Our smartWallet enables telecom companies to integrate mobile financial services with their existing custom telecom product offerings, provide customized services to their subscribers, increase ARPU and reduce customer churn.  Our secure platform is integrated with the telco’s billing system which enhances customer experience, and optimize efficiencies.  Our smartWallet is built with bank and carrier grade security in its core architecture.

Our smartWallet is specifically designed for telecom operators, mobile network operators and mobile virtual network operators. As subscribers increasingly adopt smartphones, telcos need to ensure that they are up to speed by providing customers with an efficient and convenient platform to manage their financial transactions. Our solutions empower subscribers of telecoms to make mobile payments, mobile top ups and mobile remittances globally.

 
Page 17

 
The smartWallet is a simple and convenient mobile solution for prepaid and post-paid telecom service subscribers to load money via multiple payment methods such as credit card, debit, PayPal, automated clearing house and even cash. SmartWallet integrates with all methods supported by a telco’s current billing platform.  Once an account has been loaded, subscribers can dedicate amounts for various services such as money remittances, airtime top-ups, long distance calling and any other telecom services offered by the telco.

SmartBill
Our mobile telecom account management solution (“smartBill”) is designed to integrate with a telecom’s existing electronic bill presentment and payment (“EBPP”) system, or be a standalone mobile customer self-care application directly connected to the telecom’s in-house or third party billing platform – increasing the level of convenience for both telecoms and their subscribers.

SmartBill reduces postage and production expenses, provides automated and instant delivery and access to account information and payment methods which accelerates a telecom’s cash flow and lowers their customer service costs. We understand the critical component of the business of telecoms is to provide their customers with quick and accurate answers to their billing concerns, and that on-the-go mobile access to their accounts lowers customer service calls.  The smartBill solution is the quickest, most affordable and user friendly approach to managing telecom bills and services all on one single platform.

SmartRemit
We also offer fully integrated platform (“smartRemit”) that is dedicated to providing the most convenient, efficient globally scalable and inexpensive mobile money remittance solution so telecom subscriber customers can send money to their friends and family worldwide. We are in final stages of negotiations with a partner agent network that is spread across 150 countries on five different continents with over 170,000 agent locations.

SmartRemit makes money transfers simple, removing all the barriers of traditional global remittances. Our state of the art smartRemit solution is a cost effective and easy to integrate platform that does not require telecom companies to have bank licensing requirements. smartRemit will leverage a T1 licensed global leader in money remittances to ensure all compliance and regulatory requirement are met plus provides service in up to 30 countries with over 30,000 agent locations and growing.

Our potential partner is a T1 licensed money transfer company that has ongoing relationships with prestigious banking and non-banking organizations providing presence and complementary services in many parts of the world. They are licensed to provide remittances services in 42 US states plus Mexico and Canada.

With just a tap and a few swipes on a smart phone from telecom subscribers, they can choose their beneficiaries’ currency, amount to be transferred and format of delivery such as bank account, agent location or even home delivery.

SmartCharge
SmartCharge is a fast, convenient and reliable solution enabling the transfer of small amounts of value in the form of prepaid mobile credits – the ideal low cost, high value complement to cash remittances.  SmartCharge is a global remittance platform that connects mobile operators’ systems to deliver international top-up or recharge services. 
 
 
Page 18

 
With a global reach over the five continents, smartCharge is involved with in international prepaid airtime top ups. Through our account with Fixed & Mobile Private Limited, operating as Transfer-To, a telecommunications company incorporated under the laws of Singapore, we can enable real time prepaid recharge transfers to over 250 partner mobile network operators in 90 countries, reaching 3.6 billion prepaid users.
 
Our account with Transfer-To allows us to purchase mobile minutes at wholesale prices from Transfer-To and to re-sell these minutes to our telecom-clients at retail prices.  Our account with Transfer-To is subject to none specific terms of use.
 
We support multiple payment channels enabling phone to phone, point of sale to phone and web to phone top-up transfers. Through smartCharge telecom customer subscribers can easily send airtime minutes to their relatives and friends anywhere in the world.
 
SmartPay
smartPay is a further services provided out of the smartWallet, that allows users to pay bills from merchants including utility bills, mobile phone bills, credit card bills etc. across the United States. We will partner with a provider that will be able to provide bill payments to over 14,000 merchants within the United States.
 
smartPay allows users a quick and easy way to pay their bills direct from their mobile, without the need for mailing checks or visiting banks.
 
Payment Products and Solutions:
Additionally we offer accessible, convenient and powerful for both merchants and consumers.  Our business has a global leading mobile commerce platform that enables merchant customers to offer secure and convenient non-near field communication payment solutions. With our revolutionary mobile commerce technologies, merchants are able to provide enhanced purchasing experiences to their consumers. We have commenced operations with our first products designed and ready for sale and/or implementation.
 
We have implemented revolutionary mobile commerce solutions that cater to the needs of merchants and consumers alike both online and in-store. Our mobile services platform makes it easier for consumers to perform mobile transactions through a secure, bank grade mobile interface anytime, anyplace. Our attention to detailed user experience makes payments simple, convenient and safe. Our carefully chosen features provide unparalleled quality to our customers, partners and business associates across the world.
 
Our mobile commerce solution is has the advantages of;
 
·
a custom branded wallet;
 
·
deepening customer relationships and loyalty;
 
·
launching new products and services via mobile;
 
·
attracting new customers and increase sales;
 
·
reducing customer payment-processing costs;
 
·
interoperability; and
 
·
reducing fraud and increase customers’ security.
 
With our mWallet, mPay and mPos solutions we address the needs of merchants worldwide.
 
 
Page 19

 
mPOS
With our mobile point of sale product (“mPOS”) we allow merchant customers to shift their cashiers out from behind a register and into the storefront.  Our mPOS leverages the merchant’s most valuable as­sets – their employees.  Cashiers are empowered to act as in-store sales associ­ates with a mobile device to connect with shoppers and provide them with detailed product information, real-time pricing and inventory data and provide a higher level of custom­er service.
 
The interactive and fully integrated solution offers power­ful selling tools, including cross-sells, up-sells and individual shopper history to increase average cart size. mPOS ensures a more person­alized and interactive in-store experience to drive higher conversion rates while decreasing both the number of registers needed and the time shop­pers spend in line.
 
mPay 
mPay is designed to transform the in-store customer experience using the most convenient device for payment- their mobile device.  mPay accelerates a merchant’s customer’s shopping process by turning their smartphones into a self check out device.  The customer’s mobile device is the ubiquitous point of access to converge data and metrics of online and retail shopping from both ecommerce and in-store technologies. The mPay solution allows consumers to engage and transact with merchants in-store and complete a self-checkout process. mPay is designed to transform the in-store customer experience using the most convenient device for payment- their mobile device.

mWallet
With mWallet, merchant customers can securely store credit cards, offers, and loyalty points on their phones specific to merchant brands ensuring a safe, secure and scalable platform for merchants to implement their mobile payment strategy.
 
The mWallet solution can be implemented by merchants to enable mobile shopping and ordering for their customers.  As more and more retail shopping is shifting to mobile, the mWallet solution ensures a safe, secure and scalable platform for merchants to implement their mobile payment strategy. 
 
Mobile Banking Products and Solutions:
On March 26, 2012, Telupay PLC entered into a five-year License Agreement with Baccarat Overseas, Ltd. (“Baccarat”) for the latter’s use and distribution of the mobile banking and payment software owned by Telupay PLC. A License Assignment Agreement between Priveco and Baccarat Overseas Ltd. dated August 21, 2012 assigned the license from the License Agreement to Priveco, which made up part of the asset purchase by  us.
 
Our mobile banking services (“MBS”) technology is a secure, robust method of delivering bank-grade transactions via an intuitive interface on mobile devices. Our MBS technology is not tied to proprietary bank or operator technologies, which gives it the ability to provide its service to all of the major banks, mobile operators, and agent networks worldwide. Highlights of our MBS business development include strong progress in Philippine business where three top ten banks and one of two interbank networks are now using our MBS platform, including Metrobank, Union Bank, United Coconut Planters Bank, and MegaLink, an interbank network servicing 17 national banks in the Philippines. 
 
 
Page 20

 
RESULTS OF OPERATION

Operating Revenues, Operating Expenses and Net Loss
 
   
US$
Three Months Ended
June 30,
 
     
2014
     
2013
 
Revenues
 
$
19,740
   
$
2,829
 
Operating Expenses
   
394,485
     
138,797
 
Net Loss from Operations
   
(374,745
)
   
(135,968
)
Net Income/(Loss)
   
(374,845
)
   
(132,316
)
 
Our company generated $19,740 of revenue in the three months ended June 30, 2014 compared to revenues of $2,829 during the same period in 2013. All revenues are currently generated through m-commerce services provided in line with the contracts acquired by Mobetize from Alligato Inc. Our company expects to generate further revenue in the next 12 months as Mobile Money services are deployed.
 
Our operating expenses for the three months ended June 30, 2014 and 2013 are outlined in the following table:
 
   
US$
Three Months Ended
June 30,
 
     
2014
     
2013
 
Advertising and promotion
 
$
41,441
   
$
-
 
Advertising – Related Party
   
2,638
     
5,001
 
Consulting
   
175,697
     
-
 
Consulting – Related Party
   
72,252
     
-
 
General and administrative
   
10,072
 
   
18,340
 
G&A – Related Party
   
28,490
     
-
 
Management fees – Related Party
   
44,250
     
73,320
 
Professional fees
   
19,645
     
27,336
 
Research and development
   
-
 
   
14,800
 
Total
   
394,485
     
138,797
 

For the three months ended June 30, 2014 operating costs were $394,485 compared with $138,797 for three months ended June 30, 2013. This increase was primarily attributed to increases in consulting fees of $247,949 (including $139,252 financing costs associated with our June 26 private placement), advertising and promotion costs of $39,078 and general and administrative costs of $20,223. These increases were partially offset by decrease in management fees of $(29,070), research & development costs of $(14,800) and professional fees of $(7,691).
 
During the three months ended June 30, 2014, our company recorded a net loss of $374,745 compared with net loss of $135,968 for the three months ended June 30, 2013. During the three months ended June 30, 2014 our company accrued interest receivable of $nil (2013 -  $4,862) and company incurred $nil (2013 - $1,210) of interest expense relating to debt balances.
 
 
Page 21

 
Liquidity and Capital Resources
 
   
US $
 
   
June 30, 2014
   
March 31, 2014
 
Current Assets
  $ 811,139     $ 274,612  
Current Liabilities
    187,178       134,018  
Working Capital
    623,961       140,594  
 
As at June 30, 2014, our company’s cash balance was $656,861 and total assets was $2,281,783, compared to cash balance of $90,537 and total assets of $1,908,661 as at March 31, 2014. The increase in the cash balance was attributed to sales of equity for cash and the collection of accounts receivable. The increase in total assets was primarily due to our sales of equity for cash and was partially offset by a reduction in the carrying value of our investment in Telupay International PLC of $(163,406).
 
As at June 30, 2014, our company had total liabilities of $187,178 compared with total liabilities of $134,018 as at March 31, 2014. The increase in total liabilities is attributed to an increase in account payable and accrued liabilities of $59,896, offset by a small decrease to amounts accrued under accounts payable related parties and due to related parties of $(4,937).
 
As at June 30, 2014, our company has working capital of $623,961 compared with working capital of $140,594 at March 31, 2014 with the increase in the working capital attributed to the cash raised from sales of our equity for cash.
 
Cash Flows
 
   
US$
Three Months Ended
June 30,
 
     
2014
     
2013
 
Cash flows used in Operating Activities
 
$
(200,362
)
 
$
(86,029
)
Cash flows used in Investing Activities
   
-
     
-
 
Cash flows provided by Financing Activities
   
766,686
     
201,669
 
Net Increase in Cash During Period
   
566,324
     
115,640
 

Cash flow from Operating Activities
 
During the three months ended June 30, 2014, our company used $200,362 of cash for operating activities compared to the provision of $86,029 of cash for operating activities during the three months ended June 30, 2013.  The increase in the use of cash for operating activities was attributed to the fact that our company incurred more for general and administrative costs for the period for day-to-day activities, consulting, professional fees, and research and development.
 
Cash flow from Investing Activities
 
During the three months ended June 30, 2014 and 2013, our company used $nil of cash for investing activities.
 
 
Page 22

 
Cash flow from Financing Activities
 
During the three months ended June 30, 2014, our company received $766,686 of proceeds from financing activities compared to $201,669 during the three months ended June 30, 2013. The increase in proceeds from financing activities was due to our company receiving additional share subscriptions from a private placement.
 
SUBSEQUENT DEVELOPMENTS

Effective July 9, 2014, the following people resigned in their respective offices with our company:

1.  Stephen Fowler as President and Secretary of the Company; and
2.  Chris Convey as Chief Financial Officer of the Company.

None of the resignations were the result of any disagreements with our company regarding our operations, policies, practices or otherwise.

Concurrently with the resignations, the following persons were appointed to their respective positions with our company:

1.  Stephen Fowler as Chief Financial Officer of the Company (also currently a director and the Treasurer of our company);
2.  Chris Convey as Chief Operating Officer and Corporate Secretary of the Company (our former Chief Financial Officer);
3.  Ajay Hans has as President and Chief Executive Officer of the Company (also currently a director of our company); and
4.  Malek Ladki as a director and Chairman of the Board of Directors of the Company.

Our board of directors now consists of Stephen Fowler, Ajay Hans and Malek Ladki.

PLAN OF OPERATION AND FUNDING

We expect that working capital requirements will continue to be funded through a combination of our existing funds and further issuances of securities. Our working capital requirements are expected to increase in line with the growth of our business.

Existing working capital, further advances and debt instruments, and anticipated cash flow are expected to be adequate to fund our operations over the next twelve months. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of the private placement of equity and advances from directors. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) acquisition of inventory; (ii) developmental expenses associated with a start-up business; and (iii) marketing expenses. We intend to finance these expenses with further issuances of securities, and debt issuances. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. We currently have no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources. Since we have no such arrangements or plans currently in effect, our inability to raise funds for the above purposes will have a severe negative impact on our ability to remain a viable company. Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.
 
 
Page 23

 
OFF-BALANCE SHEET ARRANGEMENTS

As of the date of this Quarterly Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

GOING CONCERN

The independent auditors' report accompanying our March 31, 2014 financial statements contained an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern.

There is significant doubt about our ability to continue as a going concern.

These financial statements included in this Quarterly Report for June 30, 2014 have been prepared on a going concern basis, which implies that our company will continue to realize its assets and discharge its liabilities in the normal course of business. As of June 30, 2014, our company has an accumulated deficit   of $(1,621,213). The continuation of our company as a going concern is dependent upon the continued financial support from its management, and its ability to identify future investment opportunities and obtain the necessary debt or equity financing, and generating profitable operations from our company’s future operations. These factors raise substantial doubt regarding our company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should our company be unable to continue as a going concern.
 
CRITITCAL ACCOUNTING POLICIES
 
Our significant accounting policies are summarized in note 2 to our financial statements. While the selection and application of any accounting policy may involve some level of subjective judgments and estimates, we believe the following accounting policies are the most critical to our financial statements, potentially involve the most subjective judgments in their selection and application, and are the most susceptible to uncertainties and changing conditions:

Use of Estimates
 
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our company regularly evaluates estimates and assumptions related to the collectability of accounts receivable, valuation of intangible assets, fair value of stock-based compensation, and deferred income tax asset valuation allowances. Our company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by our company may differ materially and adversely from our company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
 
 
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Cash and Cash Equivalents
 
Our company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. As of June 30, 2014 and 2013, our company had no cash equivalents.
 
Notes Receivable
 
Our company evaluates the collectability of notes receivable based on the age of receivable balances and debtor credit-worthiness. If our company determines that financial conditions of its debtors have deteriorated, an allowance for doubtful accounts may be made or the notes receivables written off if all collection attempts have failed.
 
Our company recognizes interest income on notes receivable using the effective interest method. If our company determines that the recoverability of any of its notes receivable is not probable, it will place the notes on nonaccrual status and will cease recording interest income. Should our company later determine that the notes receivable balance is recoverable, it will resume the accrual of interest.
 
Revenue Recognition
 
Our company recognizes revenue from licensing fees through a non-related party. During the period ended June 30, 2014, our company derived all of its revenue from three customers acquired under the asset purchase from Alligato. Revenue will be recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service has been provided, and collectability is reasonably assured.
 
Intangible Assets
 
Intangible assets include all costs incurred to acquire internet network and channels. Intangible assets are recorded at cost and amortized over its useful life of three years using the straight-line method. No amortization has been taken on intangible assets as they have not yet been put into use.
 
Our company evaluates the recoverability of long-lived assets and the related estimated remaining lives at each balance sheet date. Our company records an impairment or change in useful life whenever events or changes in circumstances indicate that the carrying amount may not be recoverable or the useful life has changed.
 
Comprehensive Loss
 
ASC 220, Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As of June 30, 2014 the Company has an Other Comprehensive Loss of $163,406 (2013 – nil), which is due to the revaluation to Fair Market Value of the Company’s investment in Telupay International PLC.
 
 
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As we are a smaller reporting company, as defined by Item 10 of Regulation S-K, we are not required to provide the information required by this item.

ITEM 4. CONTROLS AND PROCEDURES
 
Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in rules and forms adopted by the SEC, and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.

Management, with the participation of the President and the Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, the President and the Chief Financial Officer concluded that, our disclosure controls and procedures were not effective. Our disclosure controls and procedures were not effective because of the "material weaknesses" described below under "Management's report on internal control over financial reporting," which are in the process of being remediated as described below under "Management Plan to Remediate Material Weaknesses."

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting, as defined in rules promulgated under the Exchange Act, is a process designed by, or under the supervision of, our President and Chief Financial Officer and affected by our Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that:
 
·
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
 
·
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our Board of Directors; and
 
·
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements

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. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting.

However, these inherent limitations are known features of the financial reporting process, and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Further, over time control may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate.

 
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Our management assessed the effectiveness of our internal control over financial reporting as of June 30, 2014. In making its assessment, management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on its assessment, management has concluded that we had certain control deficiencies described below that constituted material weaknesses in our internal controls over financial reporting. As a result, our internal control over financial reporting was not effective as of June 30, 2014.

A "material weakness" is defined under SEC rules as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company's annual or interim financial statements will not be prevented or detected on a timely basis by the company's internal controls. As a result of management's review of the investigation issues and results, and other internal reviews and evaluations that were completed after the end of quarter related to the preparation of management's report on internal controls over financial reporting required for this quarterly report on Form 10-Q, management concluded that we had material weaknesses in our control environment and financial reporting process consisting of the following:

 
1.
lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures;
 
2.
insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements;

We do not believe the material weaknesses described above caused any meaningful or significant misreporting of our financial condition and results of operations for the quarter ended June 30, 2014. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

Management Plan to Remediate Material Weaknesses

Management believes that the material weaknesses set forth above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods. In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures:

We plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management when funds are available to us.

We believe the remediation measures described above will remediate the material weaknesses we have identified and strengthen our internal control over financial reporting. We are committed to continuing to improve our internal control processes and will continue to diligently and vigorously review our financial reporting controls and procedures. As we continue to evaluate and work to improve our internal control over financial reporting, we may determine to take additional measures to address control deficiencies or determine to modify, or in appropriate circumstances not to complete, certain of the remediation measures described above.

 
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Changes in Internal Controls over Financial Reporting

There have been no changes in our company’s internal control over financial reporting during the last quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, our company's internal control over financial reporting.
 
PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Management is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this Quarterly Report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.

ITEM 1A.   RISK FACTORS

A smaller reporting company, as defined by Item 10 of Regulation S-K, is not required to provide the information required by this item.

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

On April 4, 2014 our company issued 1,334 common shares in settlement of a supplier liability valued at $1,800. These shares were issued under a category 2 exemption.
 
On June 25, 2014 our company closed a private placement under which it sold 1,122,831 investment units for gross proceeds of approximately $842,123. Each investment unit consisted of one common share of our company’s stock and one half-warrant. The warrants are exercisable at $1.00 per share and are valid for two years from issue. $58,500 financing fees are payable in cash associated with this private placement and 133,000 financing warrants will be issued on the same terms as those in the investment units. US resident subscribers in this placement fall under category 2, 3 and 8 exemptions. Canadian resident subscribers to this placement fall under category 1 (j) and (k) exemptions.
 
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
 
None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

 
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ITEM 5. OTHER INFORMATION
 
None.
 
ITEM 6. EXHIBITS

Exhibits:

Number
Description
   
(31)
Rule 13a-14(a) / 15d-14(a) Certifications
31.1
Certification of Principal Executive Officer, pursuant to SEC Rules 13a-14(a) and 15d-14(a), adopted pursuant Section 302 of the Sarbanes Oxley Act of 2002
31.2
Certification of Principal Financial Officer, pursuant to SEC Rules 13a-14(a) and 15d-14(a), adopted pursuant Section 302 of the Sarbanes Oxley Act of 2002
(32)
Section 1350 Certifications
32.1
Certification of Principle Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2
Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 
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101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
 
 
 
 


 
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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: August 18, 2014
MOBETIZE CORP.
 
 
By: /s/ Stephen Fowler
 
 
Stephen Fowler, Chief Financial Officer
     
 
MOBETIZE CORP.
 
 
By: /s/ Ajay Hans
 
 
Ajay Hans, Chief Executive Officer
 
 
 
 
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