10-Q 1 f10q_022015.htm FORM 10-Q f10q_022015.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 December 31, 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 of  February 20, 2015, there were 29,988,355 shares of the issuer's $0.001 par value common stock issued and outstanding.
 
 
Page 1

 
MOBETIZE CORP.
 
 
 
Page 2

 
Consolidated Balance Sheets
December 31, 2014
(Unaudited)

   
US $
 
   
DECEMBER 31,
2014
   
MARCH 31,
2014
 
               
ASSETS                
Current Assets:
               
Cash
 
$
445,637
   
$
90,537
 
Accounts receivable
   
101,717
     
78,973
 
Prepaid expenses
   
67,487
     
105,102
 
Total Current Assets
   
614,841
     
274,612
 
                 
Computer equipment, net
   
6,976
     
-
 
Investments
   
267,984
     
1,634,049
 
TOTAL ASSETS
 
$
889,801
   
$
1,908,661
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
                 
LIABILITIES
               
Current Liabilities:
               
Accounts payable and accrued liabilities
 
 $
24,939
   
 $
19,082
 
Accounts payable - related party
   
39,367
     
61,831
 
Due to related party
   
53,105
     
53,105
 
Total Current Liabilities
   
117,411
     
134,018
 
                 
TOTAL LIABILITIES
 
$
117,411
   
$
134,018
 
                 
STOCKHOLDERS' EQUITY
               
Common stock, $0.001 Par Value: 525,000,000 authorized and 29,988,355 and 28,364,200 common shares issued and outstanding, respectively
 
29,988
   
28,364
 
Share subscriptions payable
   
12,444
     
-
 
Additional paid-in capital
   
4,438,929
     
2,992,747
 
Accumulated other comprehensive loss
   
(1,366,065
)
   
-
 
Accumulated deficit
   
(2,342,906
)
   
(1,246,468
)
Total Stockholders' Equity
   
772,390
     
1,774,643
 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
 
$
889,801
   
$
1,908,661
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
Page 3

 
MOBETIZE CORP.
Consolidated Statements of Operations
For the three and nine months ended December 31, 2014 and 2013
(Unaudited)
 
    US$
THREE MONTHS ENDED
DECEMBER 31,
    US$
NINE MONTHS ENDED
DECEMBER 31,
 
   
2014
   
2013
   
2014
   
2013
 
                         
OPERATING REVENUES
                       
Revenues
  $
64,913
    $
41,804
    $
87,068
    $
72,839
 
Revenues-related party
     7,126      
-
       7,126      
-
 
Total operating revenues
     72,039        41,804        94,194        72,839  
                                 
OPERATING EXPENSES
                               
Advertising and promotion
    79,252       37,128       179,132       46,419  
Advertising –related party
    3,320       1,787       5,958       11,588  
Consulting
    77,207       65,174       315,913       138,980  
Consulting-related party
    20,695       -       201,855       -  
General and administrative
    59,139       77,069       91,543       127,798  
G&A – related party
    27,722       3,407       84,342       10,162  
Management fees-related party
    57,000       43,017       157,250       130,017  
Professional fees
    16,407       29,959       66,853       79,446  
Research and development
    73,685       -       87,786       14,800  
Total operating expenses
    414,427       257,541       1,190,632       559,210  
                                 
NET LOSS FROM OPERATIONS
    (342,388 )     (215,737 )     (1,096,438 )     (486,371 )
                                 
OTHER INCOME/(EXPENSE)
                               
Interest income
    -       -       -       9,777  
Gain on disposal of note receivable
    -       1,241,100       -       1,241,100  
Interest expense
    -       (1,233 )     -       (3,656
Total other income /(expense)
    -       1,239,867       -       1,247,221  
                                 
NET INCOME (LOSS)
  $ (342,388 )   $ 1,024,130     $ (1,096,438 )   $ 760,850  
                                 
NET INCOME (LOSS) PER SHARE
                               
Basic
  $ (0.01 )   $ 0.04     $ (0.04 )   $ 0.03  
                                 
WEIGHTED AVERAGE NUMBER OF COMMON
                               
SHARES OUTSTANDING
                               
                                 
Basic
     29,606,155        27,998,000        29,532,655        20,913,650  
                                 
COMPREHENSIVE LOSS
                               
Net income (loss)
  $ (342,388 )   $ 1,024,130     $ (1,096,438 )   $ 760,850  
Other comprehensive loss:
                               
Unrealized loss on investments
    (1,071,936 )     -       (1,366,065 )     -  
   Comprehensive income(loss):
  $ (1,414,324 )   $ 1,024,130     $ (2,462,503 )   $ 760,850  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
Page 4

 
MOBETIZE CORP.
Consolidated Statements of Cash Flow
For the nine months ended December 31, 2014 and 2013
(Unaudited)
 
   
US$
NINE MONTHS ENDED
DECEMBER 31,
 
   
2014
   
2013
 
             
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net income (loss)
  $ (1,096,438 )   $ 760,850  
                 
Adjustments to reconcile net income (loss) to net cash used in  operating activities:
               
Amortization expense
    420       -  
Shares issued for services
   
255,934
      75,356  
Gain on conversion of notes receivable
    -       (1,241,100 )
Interest receivable
    -       (9,777 )
Changes in assets and liabilities
               
Accounts receivable
    (22,744 )     (7,089 )
Prepaid expenses
   
(31,691
)     -  
Accounts payables and accrued liabilities
    5,857       27,564  
Accounts payable - related party
    (22,464 )     96,513  
Net cash used in operating activities
    (911,126 )     (297,683 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES
               
Purchase of computer equipment
    (7,396 )     -  
Software development costs
    -       (138,747 )
Net cash used in investing activities
    (7,396 )     (138,747 )
                 
CASH FLOWS FROM FINANCING ACTIVITES
               
Proceeds from sale of common stock
    1,273,622       671,500  
Proceeds from short-term loan
    -       5,750  
Proceeds from related party
    -       55,753  
Repayment to related party
    -       (43,886 )
 Net cash provided by financing activities
    1,273,622       689,117  
                 
NET INCREASE IN CASH
    355,099       252,687  
CASH - BEGINNING OF PERIOD
    90,537       10,049  
CASH - END OF PERIOD
  $ 445,637     $ 262,736  
                 
CASH PAID DURING THE PERIOD FOR:
               
 Interest expense
  $ -     $ -  
Tax expense
  $ -     $ -  
                 
SUPPLEMENTAL NONCASH INFORMATION:
               
Shares issued for acquisition of software licence
  $ -     $ 1,400,000  
Shares issued to settle debt
  $ -     $ 21,000  
Non cash increase in prepaid expenses
  $ -     $ 187,500  
Settlement of note receivable for investments
  $ -     392,949  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
Page 5

 
MOBETIZE CORP.
 
Notes to the Consolidated Financial Statements
December 31, 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 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.

Going Concern
These consolidated 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 December 31, 2014, the Company has an accumulated deficit of $2,342,906 and has accumulated other comprehensive losses of $1,366,065. 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.
 
 
Page 6

 
 
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 December 31, 2014 and 2013, the Company had no cash equivalents.
 
 
e)
Accounts Receivable
 
The Company evaluates the collectability of accounts receivable based on the age of receivable balances and customer credit-worthiness. If the Company determines that financial conditions of its customers have deteriorated, an allowance for doubtful accounts may be made or the accounts receivable written off if all collection attempts have failed.
 
At December 31, 2014 33.6% of accounts receivable balance was due from Rentmoola, 5.4% from CPT Secure Inc., 4.0% from NBX Merchant Services Inc., 49.8% from SurePay Payment Services Provider LLC, and 7.2% from Alligato Inc.
 
At December 31, 2013 89.7% of accounts receivable balance was due from Rentmoola, 6.7% from CPT Secure Inc., and 3.6% from NBX Merchant Services Inc.
 
 
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  prepaid expenses that extend beyond one-year.
 
 
g)
Revenue Recognition
 
The Company recognizes revenue from licensing and professional fees to non-related parties. During the period ended December 31, 2014, the Company derived all of its revenue from two customers acquired under the asset purchase from Alligato, from an independent customer, and from Alligato itself through provision of consulting services. Revenue is 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.
 
 
Page 7

 
 
h)
Investments
 
The Company classifies its equity investments in third parties as available for sale and recognizes the fair market value of these assets. As these investments are in public companies, the Company has used the market value at December 31, 2014 as a representation of fair market value.
 
 
i)
Research and Development Costs
 
The Company incurs research and development costs during the course of its operations. The costs are expensed except in cases where development costs meet certain identifiable criteria for capitalization. Capitalized development costs are amortized over the life of the related commercial production,
 
 
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 Income (Loss) per Share
 
The Company computes net income (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 December 31, 2014, the Company has 1,562,205 (2013 –705,500) potentially dilutive shares.
 
 
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 December 31, 2014 the Company has accumulated other comprehensive loss of $1,366,065 (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:
 
 
Page 8

 
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
 
We have reviewed all new accounting pronouncements and, except as set forth below, do not expect any new pronouncements or guidance to have an impact on our results of operations or financial position: 
 
We have elected to adopt FASB Accounting Standards Update No. 2014-10, which amends Topic 915 of the FASB Accounting Standards Codification to remove the financial reporting distinction between exploration stage entities and other reporting entities from U.S. GAAP. In addition, the amendments eliminate the requirements for exploration stage entities to (1) present inception-to-date information in the statements of income, cash flows, and stockholder’s equity (deficit), (2) label the financial statements as those of a exploration stage entity, (3) disclose a description of the exploration stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a exploration stage entity that in prior years it had been in the exploration stage.  Although we do not expect this pronouncement to affect our actual results of operations or financial position, it will affect the presentation of our financial statements, in that inception-to-date information will not be presented in our statements of operations, cash flows, or stockholder’s equity (deficit).
 
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.
 
 
Page 9

 
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. 

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 available 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 December 31, 2014 the Telupay quoted share price was $0.082 per share compared to $0.41 per share at September 30, 2014. As a result the Company revalued the asset to reflect this new share price and a loss of $1,071,936 was recorded to other comprehensive loss during the three month period ended December 31, 2014. Comprehensive loss for nine months ended December 31, 2014 is $2,462,504.
 
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 three and nine months period ended December 31, 2014, the Company incurred $ 25,500 (2013 - $26,250) and $79,250 (2013 - $78,750) of management fees, $14,430 (2013 - $nil) and $55,641 (2013 - $1,500) of general and administrative expenses, and $3,321 (2013 - $nil) and $3,321 (2013 - $nil) of advertising expenses to the former President of the Company, currently serving as a Chief Financial Officer of the Company.
 
 
e)
During the three and nine months period ended December 31, 2014, the Company incurred $20,951 (2013-$nil) and $195,251 (2013 - $nil) of development & engineering fees, $nil (2013 - $nil) and $2,638 (2013- $nil) of advertising expenses, $1,559 (2013 - $nil) and $19,104 (2013- $nil) of general & administration expenses, and $1,350 (2013 - $nil) and $6,604 (2013 - $nil) of consulting expenses to a company controlled by the Chief Executive Officer of the Company.
 
 
Page 10

 
 
f)
During the three and nine months period ended December 31, 2014, the Company generated $7,126 (2013 - $nil) and $7,126 (2013 - $nil) in revenues from a company controlled by the Chief Executive Officer of the Company.
 
 
g)
During the three and nine months period ended December 31, 2014, the Company incurred $30,000 (2013 - $16,767) and $78,000 (2013 - $40,767) of management fees, $3,286 (2013 - $3,407) and $9,331 (2013 - $10,162) of general and administrative expenses, and $nil (2013 - $2,507) and $357 (2013 - $11,588) of advertising expenses to a company controlled by the Chief Executive Officer of the Company.
 
 
h)
During the three and nine months period ended December 31, 2014, the Company incurred $2,742 (2013 - $nil) and $2,742 (2013 - $nil) of general and administrative expenses to the Chief Executive Officer of the Company.
 
 
i)
As at December 31, 2014, the Company owes $53,105 for advances from related parties and $12,199 for the accrual of management and other expenses (March 31, 2014 - $59,787 and $26,250 respectively) to the former President of the Company, currently serving as the Chief Financial Officer of the Company. The amounts owing are unsecured, non-interest bearing, and due on demand.
 
 
j)
As at December 31, 2014 the company owes $13,882 (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.
 
 
k)
As at December 31, 2014 the company owes $13,286 (March 31, 2014 - $6,000) to a Company controlled by the Chief Executive Officer of the Company for management fees and other expenses incurred but unpaid during the period.
 
6.
Common Stock
 
 
a)
On August 1, 2013 the Company entered into agreement with a supplier to provide consultancy services in exchange for prepaid shares. During the nine months period ending December 31, 2014 the value of services received and expensed from prepaid stock compensation was $69,306.

 
b)
On April 4, 2014 the Company issued 1,334 common shares in exchange for services in the amount of $1,800. The shares issued were valued at $1,800 based on the quoted closing price of the Company’s common stock on the date of settlement.

 
c)
On June 25, 2014 the Company closed a private placement under which it sold 1,122,831 investment units for proceeds of $783,623, net of financing fees of $58,500 paid in cash. 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. 133,000 financing warrants were issued on the same terms as those in the investment units. The financing warrants were valued at $80,752 using the Black Scholes method, which included the dividend yield of nil, risk-free interest rate of 0.47%, expected volatility of 111.0%, and expected term of 2 years. The full value of financing warrants was expensed to stock based compensation.

 
d)
On August 18, 2014 the Company entered into agreement with a supplier to provide consultancy services in exchange for shares. During the nine months period ending December 31, 2014 the value of services received was $10,500. At December 31, 2014, $10,500 in share subscriptions payable was due for consultancy services.

 
e)
On September 1, 2014 the Company issued 250,000 share options for consulting services with a three year term, expiring on August 31, 2017. The options were valued at $201,150 using the Black Scholes method, which included the dividend yield or nil, risk-free interest rate of 0.99%, expected volatility of 111.0%, and expected term of 3 years. The options vest monthly in equal installments. There were no options exercised since the date of issue. Stock based compensation expense recorded during nine months period ending December 31, 2014 was $46,097.

 
f)
On September 8, 2014 the Company issued 9,990 common shares in exchange for services in the amount of $12,087. The shares issued were valued at $12,087 based on the quoted closing price of the Company’s common stock on the date of settlement.
 
 
g)
At December 15, 2014, the Company entered into agreement with an Advisor to provide advisory board services in exchange for shares. During the nine months period ending December 31, 2014 the value of services received was $1,944. At December 31, 2014, $1,944 in share subscriptions payable was due for advisory board services.
 
 
h)
On December 11, 2014 the Company closed a private placement under which it sold 490,000 investment units for proceeds of $490,000. Each investment unit consisted of one common share of our company’s stock and one half-warrant. The warrants are exercisable at $1.25 per share and are valid for three years from issue. No financing fees were payable in cash associated with this private placement. 60,000 financing warrants were issued on the same terms as those in the investment units. The financing warrants were valued at $33,448 using the Black Scholes method, which included the dividend yield of nil, risk-free interest rate of 1.10%, expected volatility of 96.4%, and expected term of 3 years. The full value of financing warrants was expensed to stock based compensation.
 
 
Page 11

 
 
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, September 30, 2014
    1,194,414       0.79  
Issued, December 11, 2014
    305,000       1.25  
                 
Balance, December 31, 2014
     1,499,414       0.88  
           
As of December 31, 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
 
305,000
    1.25  
December 10, 2017
 
             
1,499,414
           
 
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
    250,000       1.25  
                 
Balance, September 30, 2014
    255,500       1.24  
Issued in Period
    -       -  
Balance, December 31, 2014
    255,500       1.24  
 
As at December 31, 2014, the following share purchase options were outstanding:

Number of
options
outstanding
 
Exercise
price (US$)
 
 
 
Expiry date
 
           
5,500
    1.00  
November 26, 2014
 
250,000
    1.25  
August 31, 2017
 
             
255,500
           
 
9.
Concentration of Risk

During the three and nine months period ending December 31, 2014, revenues generated were $72,039 and  $94,194 compared to revenues of $41,804 and $72,839 during the same period in 2013. Revenues are currently generated through m-commerce services provided in line with the contracts acquired by Mobetize from Alligato Inc. and revenues generated through consulting services provided to Alligato Inc. and an independent customer.
 
During the three months ended December 31, 2014, 21.1% (2013 - 6.1%) of revenues were generated from NBX Merchant Services Inc., 52.5% (2013 – nil) from SurePay Payment Services Provider LLC, 26.4% (2013 – nil) from Alligato Inc., nil (2013 – 88.4%) from Rentmoola, and nil (2013 – 5.5%) from CPT Secure Inc.
 
During the nine months ended December 31, 2014, 19.8% (2013 – 92.2%) of revenues were generated from Rentmoola, nil (2013 - 3.7%) from CPT Secure Inc., 9.8% (2013 – 4.1%) from NBX Merchant Services Inc., 62.8% (2013 – nil) from SurePay Payment Services Provider LLC, and 7.6% (2013 – nil) from Alligato Inc.
 
10.
Subsequent Events
 
There were no subsequent events following December 31, 2014 quarter end.

 
Page 12

 

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 8150 Birch Bay Road, 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.
 
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.
 
 
Page 13

 
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 exchange for services valued at $1,800.
 
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 were paid in cash associated with this private placement and 133,000 financing warrants were issued on the same terms as those in the investment units.
 
 
Page 14

 
On September 1, 2014 the Company issued 250,000 share options for consulting services with a three year term, expiring on August 31, 2017. The options vest monthly in equal installments.

On September 8, 2014 the Company issued 9,990 common shares in exchange for services valued at $12,087.

At December 31, 2014 the Company owes $12,444 in share subscriptions payable for consultancy services.

On December 11, 2014 the Company closed a private placement under which it sold 490,000 investment units for net proceeds of $490,000. Each investment unit consisted of one common share of our company’s stock and one half-warrant. The warrants are exercisable at $1.25 per share and are valid for three years from issue. No financing fees are payable in cash associated with this private placement. 60,000 financing warrants were 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 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. Our platform is brand-able and enables telecom operators, employers and prepaid card issuers to simplify the delivery of mobile financial services.  We ensure end-to-end integration for services such as retail/online payments, air-time top ups, international remittances/money transfer, P2P transfers and Visa/Mastercard programs on mobile devices. We seamlessly integrate and white label our secure mobile money platform with our delivery partners to help increase their average revenue per customer (ARPU), decrease customer service costs, and increase loyalty to existing offerings. 
 
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.

 
Page 15

 
smartWallet:
Our smartWallet solution is provided via mobile web and web OS Apple and Android app to the desktop, iPad or mobile phone of our users.

The smartWallet is the core of our mobile financial services offerings and allows users to load funds in to their mobile wallet and access global services such as prepaid top-ups for themselves or for gifts for family members, Person 2 Person money transfers, international money transfer remittances, bill payments and bill management, with other financial services being added.

Users can load funds in to their smartWallet from their bank account (ACH or real time ACH), via credit or prepaid debit card and by Q2 2015 by electronic remote check deposit, plus cashing and cash load at Green Dot affiliated locations across the US.

smartWallet can be integrated with a billing system to allow to offer a mobile ‘my account’ as part of a mobile wallet with rich features including:

 
·
Registration - Sign in and sign up process capabilities based on current systems.
 
·
User Account Settings - Allows the user to update their information, edit/add and save different payment methods while changing password and saving account numbers to favorites for fast access.
 
·
View Balance - Subscribers are able to track their balances by viewing their real-time balance.
 
·
Add and Save Services -Create, save, and edit a list of Favorites for easy and fast access to all transactions.
 
·
Favorites - Create, save, and edit a list of Favorite contacts, remittances, airtime transactions and more for convenience and accessibility.
 
·
Stored Payment Methods - Safely store and edit a list of preferred method of payments to load the smartWallet and increase convenience and accessibility including credit cards, debit cards, and ACH.
 
smartRemit:
A fully integrated mobile platform dedicated to providing the most convenient, efficient, scalable and inexpensive global money transfer solution for your subscriber.

It allows customers to send funds person to person via multiple convenient ways; bank account deposits, pick-up at agent location, and home delivery. Users can send funds in one currency and have the beneficiary receive in another. Cash delivery options include:

 
·
Cash to cash
 
·
Cash to account
 
·
Door service
 
·
Mobile transfers

smartRemit is accessed via the smartWallet and provides users with 24/7 mobile money transfer remittance capabilities via the mobile web to initially 39 countries worldwide, with 50,000+ agent locations. We anticipate this reach to grow during the remainder of 2015 with money transfer capability to 150 countries with 170,000 payout agents and delivery to any bank accounts in over 600 Banks worldwide.

 
Page 16

 
smartCharge:
smartCharge enables real time prepaid mobile top-ups to any mobile phone and recharge transfers to over 250 partner mobile network operators in 90 countries, reaching 3.6 billion prepaid users. Subscribers can offer top-ups as a gift to any mobile phone globally.

 
smartBill:
smartBill allows users to pay bills to approximately 14,000 companies within the US, including utilities, mobile phone providers and other. A full list of the billers currently supported via smartBill is available on request or via the smartWallet application.

smartTel:
Through the integration with a billing system, users will be able to access their ‘my account’ features through the Mobetize smartTel application. This is where we will provide users the ability to access the Got Prepaid domestic top up solution.

smartCard:
Now with our agreement with DCR Strategies users will be able to request (during sign-up or at any time via the Mobetize app) a prepaid MasterCard or Visa card, which is linked to their smartWallet. Users will be able to move any cleared funds from their smartWallet on to the MasterCard, allowing them to make purchases both online and in retail locations, plus withdraw cash from ATMs and Green Dot affiliated locations across the US that includes Walmart, CVS, RiteAid, Walgreens and 7 Eleven Stores.

Users will be able to track the balance and see recent transactions via the Mobetize smartWallet and can easily move money back to the smartWallet via the Mobetize App. The smartCard MasterCard will have the same white-label branding as the smartWallet for a seamless user experience.

CRM and Reporting Tool:
Mobetize will also provide an online access to its CRM and reporting system.

The reporting system can be configured so that different levels within a customer’s team can see and access different levels of information, through user access rights and logons. The reporting tool provides real time data, at different levels of detail, allowing to track such metrics as:
 
 
·
Transactions $ values
 
·
Transaction volume-by type of transaction
 
·
Number of registered users
 
·
Number of active users
 
·
Geographic splits
 
·
Other KPIs as defined
 
 
Page 17

 
The web based CRM tool, will allow staff to provide Tier 1 customer support for the smartWallet solutions. Through this web-tool, the staff will be able to access and update customer data such as:

 
·
User information (name, address, etc.)
 
·
User transaction history
 
·
User wallet balance
 
·
Issue refunds of balances in wallet
 
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 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.
 
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-checkout 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.

 
Page 18

 
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. 
 
Latest Developments and Customers:
 
On September 3, 2014, we were selected by DCR Strategies Inc TruCash., to be the core mobile wallet and mobile financial services (MFS) provider, which will be fully integrated to the TruCash prepaid card mobile application.

We have extended our existing partnership with DCR to offer Mobetize mobile financial services and products to the many millions of existing DCR prepaid card users in North America.

On September 8, 2014 we entered into an agreement with Impact Telecom, a global provider of voice, messaging, and data services, to offer the Mobetize mobile wallet platform to deliver international money transfer, mobile airtime top-up, and bill payments to Impact Telecom¡¦s extensive customer base in the United States and Canada.

Impact Telecom customers—including Startec customers, Impact’s leading brand for international calling— will see these features available online and on their mobile devices in Q1 2015. U.S. and Canada currently remit over $100 billion annually, and most of that money is transferred utilizing traditional storefront methods. The Mobetize mobile wallet platform improves reach, convenience, and low cost to customers by digitizing these financial transactions via mobile devices.

We accelerate the migration of traditional e-commerce to mobile payment. Our smart solutions platform provides telecommunications operators and payment gateways unparalleled mobile functionality in bill management, payments, recharge, domestic money transfers, international remittances, point-of-sale functionality, and numerous other related technologies.

Our wallet platformdesigned to enable telecommunications operators to increase customer retention, maximize average revenue per user, and minimize churnprovides the market's smoothest and most cost-effective transition of existing e-commerce to mobile.

 
Page 19

 
On October 27, 2014, we entered into an agreement with SurePay Payment Services, an emerging global payment solutions provider in UAE funded by the Royal Group UAE www.royalclubuae.ae. We will enable SurePay to provide mobile wallet services such as money transfer and airtime top-up funded via the payroll from expatriate workers living in the United Arab Emirates (UAE). This follows the previously-announced memorandum of understanding signed with iWire Consulting, SurePay's integration, development and technology partner.

With more than 8 million foreign residents from 140 different countries, the international money transfer remittance market is very large in the UAE. According to the UAE Government, over US$20 billion was remitted from the UAE during 2012 and other money transfer experts have stated remittances from UAE were nearly US$30 Billion for 2013. Many expatriate workers in the UAE and consumers need better information about their finances, and desire the ease and convenience of conducting financial transactions via a mobile device. Although these workers and consumers often have insufficient access to financial services, their access to mobile phones is widespread. According to Nielsen, there is 78 percent smartphone penetration in the UAE, which is one of the highest penetration rates in the MENAP region. In fact, 81 percent of mobile owners age 16-34 now own smartphones, and penetration is rising steadily among other age groups as well.

Our smartWallet platform will enable SurePay, on a white label basis, to offer a rich mobile wallet feature set and services to employers and their expatriate workers including features such as user registration, customized account settings, balance view, and stored payment methods. According to the terms of the three-year agreement, we will initially provide SurePay's users our smartWallet platform, smartRemit international money transfer service, and our smartCharge mobile phone airtime top-up/ recharge service. Additional services, including bill payments, POS payments, prepaid cards and other services will be added to the wallet. In exchange for our services, SurePay will pay us an integration fee and receive a variable fee per transaction based on volumes and types of financial service provided. Discussions on integration have begun with several leading banks in the UAE, with service expected to commence in 2015.
 
We have now completed the production version of Mobile Web application 1.0.  This consists of smartCard, Paypal, bank ACH and credit card processing as cash-in options.  Cash-out options include smartCharge, smartBill, person-to-person transfers, and smartCard for ATM withdrawals and POS purchases. The CRM, reporting, and incident management tools have also been completed while the desktop version and Representation State Transfer (REST) APIs with all of the above features are planned to be completed by March 31, 2015.

We are now on the discovery phase for version 2.0 roll-out.  This release will cover REST APIs, Mobile Web, Desktop Web, CRM, and reporting tools as well as native applications for iOS and Android.

 
Page 20

 
On December 22, 2014 Mr. Kenneth F Douglas joined Mobetize Corp. as a strategic advisor to assist the Company's expansion of mobile financial services, partnerships, and M&A in North America and Europe.
 
Mr. Douglas is currently a Senior VP Business and Partnership Development in SEQR USA, Inc. He is responsible for building the US operations for SEQR USA, Inc. (www.seqr.com), a subsidiary of Seamless Distribution AB (www.seamless.se) based in Stockholm Sweden, a global mobile payment company providing prepaid top-up and mobile payments in 30 countries with over 3.1 billion transactions annually.

Mr. Douglas speaks regularly as an Industry Leader for Pacific Crest Securities MOSAIC group as an SME (Subject Matter Expert) for the payment industry, payments, emerging/alternative payments, mobile payments and technology.

Previously, Mr. Douglas served as Executive VP Partnerships and Alliances at Zipmark, Executive VP Partnerships and Alliances at Adility (acquired by inComm), Executive VP of Social Gaming and Commerce at Twitpay (acquired by Acculynk), and VP and General Manager of Merchant Services at Revolution Money (acquired by American Express) where he was responsible for building the RevolutionCard Network(TM) with over 700,000 accepting merchants and 300,000 card holders/members.

Currently, Mr. Douglas sits on the Advisory Board for a number of fintech companies in multiple stages of growth -- ShelfBucks, ShopMyNeighborhood(TM), EyeBuyTV, OrderIt, RedCritter, BRANDedTray, and Zipmark.
 
RESULTS OF OPERATION

Operating Revenues, Operating Expenses and Net Loss
 
   
US$
   
US$
 
   
Nine Months Ended
December 31,
   
Three Months Ended
December 31,
 
   
2014
   
2013
   
2014
   
2013
 
Revenues
  $ 94,194     $ 72,839     $ 72,039     $ 41,804  
Operating expenses
   
1,190,632
      559,210      
414,427
      257,541  
Net income/(loss) from operations
    (1,096,438 )     (486,371 )     (342,388 )     (215,737 )
Net income/(loss)
    (1,096,438 )     760,850       (342,388 )     1,024,130  
 
During the three and nine months period ending December 31, 2014, revenues generated were $72,039 and  $94,194 compared to revenues of $41,804 and $72,839 during the same period in 2013. Revenues are currently generated through m-commerce services provided in line with the contracts acquired by Mobetize from Alligato Inc. and revenues generated through consulting services provided to Alligato Inc. and an independent customer.
 
During the three months ended December 31, 2014, 21.1% (2013 - 6.1%) of revenues were generated from NBX Merchant Services Inc., 52.5% (2013 – nil) from SurePay Payment Services Provider LLC, 26.4% (2013 – nil) from Alligato Inc., nil (2013 – 88.4%) from Rentmoola, and nil (2013 – 5.5%) from CPT Secure Inc.
 
During the nine months ended December 31, 2014, 19.8% (2013 – 92.2%) of revenues were generated from Rentmoola, nil (2013 - 3.7%) from CPT Secure Inc., 9.8% (2013 – 4.1%) from NBX Merchant Services Inc., 62.8% (2013 – nil) from SurePay Payment Services Provider LLC, and 7.6% (2013 – nil) from Alligato Inc.
 
 
Page 21

 
Our operating expenses for the three and nine months ended December 31, 2014 and 2013 are outlined in the following table:
 
   
US$
   
US$
 
   
Nine Months Ended
December 31,
   
Three Months Ended
December 31,
 
   
2014
   
2013
   
2014
   
2013
 
Advertising and promotion
  $
179,132
    $ 46,419     $
79,252
    $ 37,128  
Advertising-related party
    5,958       11,588       3,320       1,787  
Consulting
   
315,913
      138,980      
77,207
      65,174  
Consulting-related party
    201,855        -       20,695       -  
General and administrative
    91,543       127,798       59,139       77,069  
General and administrative-related party
    84,342       10,162       27,722       3,407  
Management fees-related party
    157,250       130,017       57,000       43,017  
Professional fees
   
66,853
      79,446      
16,407
      29,959  
Research and development
   
87,786
      14,800      
73,685
      -  
Total
  $
1,190,632
    $ 559,210     $
414,427
    $ 257,541  

For the nine months ended December 31, 2014 operating costs were $1,190,632 compared with $559,210 for nine months ended December 31, 2013. This increase was primarily attributed to increases in advertising and promotion costs of $132,713, consulting fees of $176,933 (including $139,252 financing costs associated with our June 26 private placement and $33,448 financing costs associated with our December 11 private placement), general and administrative costs of $74,180, management fees of $27,233, and research and development costs of $72,986.
 
During the nine months ended December 31, 2014, our company recorded a net loss of $1,096,438, which was due to overall increase in operating expenses as the Company unfolded its operations compared with net income of $760,850 for the nine months ended December 31, 2013, resulting from gain on disposal of note receivable and partially offset by operating expenses. During the nine months ended December 31, 2014 our company accrued interest receivable of $nil (2013 - $nil), earned interest income of $nil (2013 - $9,777), and incurred $nil (2013 - $3,656) of interest expense relating to debt balances.
 
Liquidity and Capital Resources
 
   
US $
 
   
December 31, 2014
   
March 31, 2014
 
Current Assets
  $
614,841
    $ 274,612  
Current Liabilities
    117,411       134,018  
Working Capital
  $
497,430
    $ 140,594  

As at December 31, 2014, our company’s cash balance was $445,637 and total assets were $889,801, 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 decrease in total assets was due to a reduction in the carrying value of our investment in Telupay International PLC of $(1,366,065).
 
As at December 31, 2014, our company had total liabilities of $117,411 compared with total liabilities of $134,018 as at March 31, 2014. The decrease in total liabilities is attributed to more timely payments of vendor balances.
 
As at December 31, 2014, our company has working capital of $497,130 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.
 
 
Page 22

 
Cash Flows
 
   
US$
 
   
Nine Months Ended
December 31,
 
   
2014
   
2013
 
Cash flows used in operating activities
  $ (911,126 )   $ (297,683 )
Cash flows used in investing activities
    (7,396 )     (138,747 )
Cash flows provided by financing activities
   
1,273,622
     
689,117
 
Net Increase in Cash During Period
  $
355,100
    $ 252,687  

Cash flow used in Operating Activities
 
During the nine months ended December 31, 2014, our company used $911,126 of cash for operating activities compared to the provision of $297,683 of cash for operating activities during the nine months ended December 31, 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 used in Investing Activities
 
During the nine months ended December 31, 2014 our company used $7,396 of cash in investing activities compared to $138,747 in 2013. Cash used in investing activities during the nine months ended December 31, 2014 was due to purchase of computer equipment while cash used in investing activities during the same period in 2013 was due to investment in software development costs.
 
Cash flow from Financing Activities
 
During the nine months ended December 31, 2014, our company received $1,273,622 of proceeds from financing activities compared to $689,117 during the nine months ended December 31, 2013. The increase in proceeds from financing activities was due to our company receiving additional share subscriptions from a private placement.
 
SUBSEQUENT DEVELOPMENTS

There were no subsequent events following December 31, 2014 quarter end.

 
Page 23

 
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.

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 December 31, 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 December 31, 2014, our company has an accumulated deficit of $2,342,906 and has accumulated other comprehensive losses of $1,366,065. 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.
 
 
Page 24

 
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.
 
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 December 31, 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 December 31, 2014, our company derived its revenue from two customers acquired under the asset purchase from Alligato, from an independent customer, and from Alligato itself through provision of consulting services. Revenue is 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.
 
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.
 
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 December 31, 2014 the Company has an Other Comprehensive Loss of $1,366,065 (2013 – nil), which is due to the revaluation to Fair Market Value of the Company’s investment in Telupay International PLC.
 
 
Page 25

 

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.

 
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.

 
Page 26

 
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 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 December 31, 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 September 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.

 
Page 27

 
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.



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.


None.

 
None.


Not applicable.

 
None.
 
 
Page 28

 

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
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




 
Page 29

 
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: February 23, 2015
MOBETIZE CORP.
 
 
By: /s/ Stephen Fowler
 
 
Stephen Fowler, Chief Financial Officer
 
     
 
MOBETIZE CORP.
 
 
By: /s/ Ajay Hans
 
 
Ajay Hans, Chief Executive Officer
 

 

 
 
 
 
 
 
Page 30