Attached files

file filename
EX-31.2 - CERTIFICATION - Bravatek Solutions, Inc.ecry_ex312.htm
EX-32.2 - CERTIFICATION - Bravatek Solutions, Inc.ecry_ex322.htm
EX-32.1 - CERTIFICATION - Bravatek Solutions, Inc.ecry_ex321.htm
EX-31.1 - CERTIFICATION - Bravatek Solutions, Inc.ecry_ex311.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q/A

(Amendment No. 1)

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2015

 

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

 

For the transition period from ___________ to ______________

 

Commission File Number: 000-53489

 

Ecrypt Technologies, Inc.

(Exact name of registrant as specified in its charter)

 

Colorado

32-0201472

(State or other jurisdiction of incorporation)

(IRS Employer Identification Number)

 

2028 E Ben White Blvd, #240-2835

Austin, TX 78741

(Address of principal executive offices)

   

1.866.204.6703

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  x Yes ¨ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

¨

Smaller reporting company

x

(Do not check if a 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 x No

 

As of August 24, 2015, the Company had 266,920,913 issued and outstanding and issuable shares of common stock (including 91,920,238 shares of issuable common stock).

 

  

EXPLANATORY NOTE 

 

The purpose of this Amendment No. 1 to the registrant's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015, filed with the Securities and Exchange Commission on August 24, 2015 (the "Quarterly Report"), is to furnish Exhibit 101 to the Quarterly Report and to make certain changes noted below. Exhibit 101 provides the financial statements and related notes from the Quarterly Report formatted in XBRL (Extensible Business Reporting Language).

 

No other changes have been made to the Quarterly Report except as noted below. This Amendment No. 1 to the Quarterly Reports speaks as of the original filing date of the Quarterly Report, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in the original Quarterly Report except that (1) the cover page has been updated to reflect that the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months, (2) a portion of the current convertible notes payable net discount has been recategorized to long term convertible notes payable net of discount and (3) a typographical error has been corrected (a duplicate label " Total Current Assets" in the Condensed Balance Sheets has been updated to state "Total Long Term Assets").

  

 
 
 

 

PART I-FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS.

 

The financial statements of Ecrypt Technologies, Inc. (the "Company" or “Ecrypt”), a Colorado corporation, included herein were prepared, without audit, pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”). Because certain information and notes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America were condensed or omitted pursuant to such rules and regulations, these financial statements should be read in conjunction with the financial statements and notes thereto included in the audited financial statements of the Company in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2015, and all amendments thereto.

 

ECRYPT TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

FINANCIAL STATEMENTS

PERIOD ENDED JUNE 30, 2015

 

INDEX TO FINANCIAL STATEMENTS:

 

Page

 

 

 

 

 

Balance Sheets

 

 

3

 

 

 

 

 

 

Statements of Operations

 

 

4

 

 

 

 

 

 

Statements of Cash Flows

 

 

5

 

 

 

 

 

 

Notes to Unaudited Financial Statements

 

6 – 21

 

 

 
2
 

 

ECRYPT TECHNOLOGIES, INC.

CONDENSED BALANCE SHEETS

 

 

 

June 30,

 

 

March 31,

 

 

 

2015

 

 

2015

 

 

 

(Unaudited)

 

 

 

 

ASSETS

CURRENT ASSETS

 

 

 

 

 

 

Cash

 

$ 4,377

 

 

$ 203,072

 

Accounts receivable

 

 

373,418

 

 

 

-

 

Prepaid expenses

 

 

33,301

 

 

 

40,105

 

Note receivable

 

 

-

 

 

 

59,204

 

TOTAL CURRENT ASSETS

 

 

411,096

 

 

 

302,381

 

 

 

 

 

 

 

 

 

 

LONG TERM ASSETS

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

47,760

 

 

 

6,340

 

Intangible assets, net

 

 

52,094

 

 

 

57,110

 

TOTAL LONG TERM ASSETS

 

 

99,854

 

 

 

63,450

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$ 510,950

 

 

$ 365,831

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$ 223,467

 

 

$ 157,249

 

Accounts payable-related party

 

 

-

 

 

 

13,200

 

Accrued interest

 

 

111,299

 

 

 

82,956

 

Accrued interest on loan-related party

 

 

9,973

 

 

 

267,960

 

Notes payable-related party

 

 

403,000

 

 

 

558,500

 

Notes payable

 

 

493,379

 

 

 

430,788

 

Convertible notes payable net of discount

 

 

189,230

 

 

 

166,568

 

TOTAL CURRENT LIABILITIES

 

 

1,430,348

 

 

 

1,677,221

 

 

 

 

 

 

 

 

 

 

LONG TERM LIABILITIES

 

 

 

 

 

 

 

 

Notes Payable

 

 

28,611

 

 

 

-

 

Convertible notes payable net of discount

 

 

 103,701

 

 

 

-

 

Derivative liabilities

 

 

1,209,245

 

 

 

824,763

 

TOTAL LONG TERM LIABILITIES

 

 

1,341,557

 

 

 

824,763

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

2,771,905

 

 

 

2,501,984

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

Preferred stock (10,000,000 Shares Authorized; Par Value $.0001 5,000,000 and 5,000,000 shares issued and outstanding as at June 30, 2015 and March 31, 2015)

 

 

500

 

 

 

500

 

Preferred stock Series B (350,000 Shares Authorized; Par Value $.0001, 0 shares issued and outstanding at June 30, 2015 and March 31, 2015)

 

 

-

 

 

 

-

 

Preferred stock Series C (1,000,000 Shares Authorized; Par Value $.0001, 0 shares issued and outstanding at June 30, 2015 and March 31, 2015)

 

 

-

 

 

 

-

 

Common stock (500,000,000 Shares Authorized; No Par Value;190,629,319 and 135,979,802 shares issued and outstanding as at June 30, 2015 and March 31, 2015)

 

 

2,544,941

 

 

 

2,072,814

 

Additional paid in capital

 

 

6,691,824

 

 

 

8,150,332

 

Stock subscription payable (63,496,413 and 1,373,120 issuable as at June 30, 2015 and March 31, 2015)

 

 

819,333

 

 

 

55,480

 

Accumulated deficit

 

 

(12,317,553 )

 

 

(12,415,279 )

TOTAL STOCKHOLDERS' DEFICIT

 

 

(2,260,955 )

 

 

(2,136,153 )
 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

 

$ 510,950

 

 

$ 365,831

 

 

The accompanying notes are an integral part of these condensed financial statements

 

 
3
 

  

ECRYPT TECHNOLOGIES, INC.

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

For the Three Months Ended

June 30,

 

 

For the Three Months Ended

June 30,

 

 

 

2015

 

 

2014

 

REVENUES

 

 

 

 

 

 

Sales

 

$ 186,837

 

 

$ -

 

Cost of services

 

 

(18,439 )

 

 

-

 

GROSS PROFIT

 

 

168,398

 

 

 

-

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

Amortization and depreciation

 

 

6,875

 

 

 

935

 

Advertisement and promotion

 

 

30,951

 

 

 

4,577

 

General and administrative

 

 

143,565

 

 

 

196,317

 

Research and development

 

 

236,643

 

 

 

-

 

Professional fees

 

 

68,438

 

 

 

29,215

 

TOTAL OPERATING EXPENSES

 

 

486,472

 

 

 

231,044

 

 

 

 

 

 

 

 

 

 

OPERATING LOSS

 

 

(318,074 )

 

 

(231,044 )
 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSES)

 

 

 

 

 

 

 

 

Interest expense

 

 

(55,347 )

 

 

(16,519 )

Interest expense related party

 

 

(9,973 )

 

 

(17,658 )

Gain on derivative liabilities

 

 

638,983

 

 

 

-

 

Amortization of debt discount

 

 

(157,863 )

 

 

-

 

TOTAL OTHER EXPENSES

 

 

415,800

 

 

 

(34,177 )
 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

$ 97,726

 

 

$ (265,221 )
 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

 

188,138,661

 

 

 

135,920,110

 

Basic and diluted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) per share

 

 

 

 

 

 

 

 

Basic and diluted

 

$ 0.00

 

 

$ (0.00 )

 

The accompanying notes are an integral part of these condensed financial statements

 

 
4
 

 

ECRYPT TECHNOLOGIES, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(UNDAUDITED)

 

 

 

For the Three Months Ended

June 30,

 

 

For the Three Months Ended

June 30,

 

 

 

2015

 

 

2014

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net Income (Loss)

 

$ 97,726

 

 

$ (265,221 )

Adjustments for non-cash items:

 

 

 

 

 

 

 

 

Amortization and depreciation

 

 

6,875

 

 

 

935

 

Stock issued for compensation

 

 

27,349

 

 

 

150,417

 

Stock issued for services

 

 

8,797

 

 

 

-

 

Gain on derivative liability

 

 

(638,983 )

 

 

-

 

Amortization of debt discount

 

 

157,863

 

 

 

-

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(191,055 )

 

 

-

 

Prepaid expenses

 

 

25,130

 

 

 

-

 

Accounts payable and accrued liabilities

 

 

66,218

 

 

 

21,796

 

Accrued interest

 

 

30,217

 

 

 

16,521

 

Accrued interest on loan-related party

 

 

9,973

 

 

 

17,656

 

Accounts payable-related party

 

 

(13,200 )

 

 

(13,200 )

NET CASH USED IN OPERATING ACTIVITIES

 

 

(413,090 )

 

 

(71,096 )
 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Computer equipment

 

 

(279 )

 

 

-

 

Property and equipment

 

 

(134,161 )

 

 

-

 

NET CASH USED IN INVESTING ACTIVITIES

 

 

(134,440 )

 

 

-

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Proceeds from notes payable

 

 

-

 

 

 

85,000

 

Proceeds used in related party asset transfer

 

 

(65,839 )

 

 

-

 

Proceeds from convertible debt

 

 

411,674

 

 

 

-

 

Proceeds from loan-related party

 

 

3,000

 

 

 

-

 

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

 

348,835

 

 

 

85,000

 

 

 

 

 

 

 

 

 

 

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

 

 

(198,695 )

 

 

13,904

 

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS

 

 

 

 

 

 

 

 

Beginning of period

 

 

203,072

 

 

 

15,504

 

 

 

 

 

 

 

 

 

 

End of period

 

$ 4,377

 

 

$ 29,408

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Shares issued in settlement of interest on convertible debt

 

$ 459,834

 

 

$ -

 

Original issue discounts

 

$ 460,326

 

 

$ -

 

Common stock issued to satisfy common stock payable

 

$ 3,496

 

 

$ 8,812

 

Initial value of the derivative liabilities

 

$ 1,054,726

 

 

$ -

 

Asset and intangibles purchased with common stock

 

$ 740,000

 

 

$ -

 

 

The accompanying notes are an integral part of these condensed financial statements

 

 
5
 

 

ECRYPT TECHNOLOGIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

 

1. Nature of Operations

 

Ecrypt Technologies, Inc., a Colorado corporation (“the Company”), was incorporated on April 19, 2007. The Company’s business operations are oriented around the marketing and distribution of proprietary and allied security, defense and information security software, hardware and services, and telecom services Products include software, hardware and services, and span a diverse variety of industries including, but not limited to, email security, user authentication, robotics, telecommunications and cyber breach protection.

 

2. Significant Accounting Policies

 

Basis of Presentation

 

The condensed consolidated unaudited interim financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The condensed consolidated financial statements and notes are presented as permitted on Form 10-Q and do not contain information included in the Company's annual statements and notes. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed consolidated financial statements be read in conjunction with the March 31, 2015 audited consolidated financial statements and the accompanying notes thereto. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the Company's consolidated condensed financial statements and accompanying notes. Actual results could differ materially from those estimates.

 

These condensed consolidated unaudited financial statements reflect all adjustments, including normal recurring adjustments which, in the opinion of management, are necessary to present fairly the operations and cash flows for the periods presented.

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

 

Such estimates and assumptions impact both assets and liabilities, including but not limited to: net realizable value of accounts receivable, estimated useful lives and potential impairment of property and equipment, the valuation of intangible assets, estimate of fair value of share based payments and derivative liabilities, estimates of fair value of warrants issued and recorded as debt discount, estimates of tax liabilities and estimates of the probability and potential magnitude of contingent liabilities.

 

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future non-conforming events. Accordingly, actual results could differ significantly from estimates.

 

Property and Equipment

 

Property and equipment is stated at cost, less accumulated depreciation and is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

 

Depreciation of property and equipment is provided utilizing the straight-line method over the estimated useful lives, ranging from 5-7 years of the respective assets. Expenditures for maintenance and repairs are charged to expense as incurred.

 

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

 

 
6
 

 

ECRYPT TECHNOLOGIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

 

Software Development Costs

 

Costs for software developed for internal use are accounted for through the capitalization of those costs incurred in connection with developing or obtaining internal-use software. Capitalized costs for internal-use software are included in intangible assets in the consolidated balance sheet. Capitalized software development costs are amortized over three years.

 

Costs incurred during the preliminary project along with post-implementation stages of internal use computer software development and costs incurred to maintain existing product offerings are expensed as incurred. The capitalization and ongoing assessment of recoverability of development costs require considerable judgment by management with respect to certain external factors, including, but not limited to, technological and economic feasibility and estimated economic life. At June 30, 2015, the Company had $60,362 in capitalized software development of which $60,362 was capitalized as of January 31, 2015. Capitalized software amortizing over the software's estimated economic life. For the three months ended June 30, 2015, amortization expense for capitalized software development was $3,252.

 

Long-Lived Assets

 

The Company reviews long-lived assets and certain identifiable intangibles held and used for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In evaluating the fair value and future benefits of its intangible assets, management performs an analysis of the anticipated undiscounted future net cash flow of the individual assets over the remaining amortization period. The Company recognizes an impairment loss if the carrying value of the asset exceeds the expected future cash flows.

 

Uncertainty as a Going Concern

 

The accompanying financial statements have been prepared assuming thatthe Companywill continue as a going concern.The Companyhas suffered recurring losses from operations since inception (April 19, 2007) up to June 30, 2015 of $12,317,553 which raises substantial doubt about its ability to continue as a going concern.

 

The Company's ability to continue as a going concern is dependent upon its ability to generate profitable operations in the future and/or obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has plans to seek additional capital through a private placement and public offering of its common stock. These plans, if successful, will mitigate the factors which raise substantial doubt aboutthe Company's ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

 

Fair Value of Financial Instruments

 

The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.

 

The following are the hierarchical levels of inputs to measure fair value:

 

 

·

Level 1 - Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities.

 

 

 

 

·

Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

 

 

 

 

·

Level 3 - Unobservable inputs reflecting the Company's assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

 

 
7
 

 

ECRYPT TECHNOLOGIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

 

The carrying amounts of the Company's financial assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable & accrued expenses, certain notes payable and notes payable - related party, approximate their fair values because of the short maturity of these instruments.

 

The Company accounts for its derivative liabilities, at fair value, on a recurring basis under level 2.

 

Embedded Conversion Features

 

The Company evaluates embedded conversion features within convertible debt under ASC 815 "Derivatives and Hedging" to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 "Debt with Conversion and Other Options" for consideration of any beneficial conversion feature.

 

Derivative Financial Instruments

 

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of it financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income.

 

For option-based simple derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

 

Beneficial Conversion Feature

 

For conventional convertible debt where the rate of conversion is below market value, the Company records a "beneficial conversion feature" ("BCF") and related debt discount.

 

When the Company records a BCF, the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument (offset to additional paid in capital) and amortized to interest expense over the life of the debt.

 

Debt Issue Costs and Debt Discount

 

The Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.

 

Original Issue Discount

 

For certain convertible debt issued, the Company may provide the debt holder with an original issue discount. The original issue discount would be recorded to debt discount, reducing the face amount of the note and is amortized to interest expense over the life of the debt.

 

Revenue Recognition

 

Product revenue and miscellaneous income are recognized as earned.

 

The Company recognizes revenue and gains when earned and related costs of sales and expenses when incurred. The Company recognizes revenue in accordance with Accounting Standards Codification Section 605-10-599, Revenue Recognition, Overall, SEC Materials ("Section 605-10-599"). Section 605-10-599 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and determinable; and (4) collectability is reasonably assured. Cost of products sold consists of the cost of the purchased goods and labor related to the corresponding sales transaction. When a right of return exists, the Company defers revenues until the right of return expires. The Company recognizes revenue from services at the time the services are completed.

 

 
8
 

 

ECRYPT TECHNOLOGIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

 

Stock-Based Compensation

 

The Company accounts for share based payments in accordance with ASC 718, Compensation - Stock Compensation, which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on the grant date fair value of the award. In accordance with ASC 718-10-30-9, Measurement Objective – Fair Value at Grant Date, the Company estimates the fair value of the award using a valuation technique. For this purpose, the Company uses the Black-Scholes option pricing model. The Company believes this model provides the best estimate of fair value due to its ability to incorporate inputs that change over time, such as volatility and interest rates, and to allow for actual exercise behavior of option holders.

 

Compensation cost is recognized over the requisite service period which is generally equal to the vesting period. Upon exercise, shares issued will be newly issued shares from authorized common stock.

 

ASC 505, "Compensation-Stock Compensation", establishes standards for the accounting for transactions in which an entity exchanges its equity instruments to non-employees for goods or services. Under this transition method, stock compensation expense includes compensation expense for all stock-based compensation awards granted on or after January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of ASC 505.

 

Related Parties

 

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

 

Pursuant to Section 850-10-20 the related parties include a. affiliates of the Company; b. Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

 

The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

 

Foreign Currency Translation

 

The measurement currency of the Company is the U.S. dollar. Transactions in foreign currencies are translated at the exchange rate in effect at the transaction date. Monetary assets and liabilities denominated in other than the measurement currency are translated at the exchange rates in effect at the balance sheet date. The resulting exchange gains and losses are recognized in earnings.

 

 
9
 

 

ECRYPT TECHNOLOGIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

 

Net Earnings (Loss) per Share

 

Basic and diluted net loss per share information is presented under the requirements of ASC Topic 260, Earnings per Share. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period, less shares subject to repurchase. Diluted net loss per share reflects the potential dilution of securities by adding other common stock equivalents, including stock options, shares subject to repurchase, options, warrants and convertible notes in the weighted-average number of common shares outstanding for a period, if dilutive.

 

As the Company has incurred losses for the three months ended June 30, 2015 and 2014, the potentially dilutive shares are anti-dilutive and are thus not added into the loss per share calculations. As of June 30, 2015 and 2014, there were 188,138,661 and 135,920,110 weighted average shares outstanding, respectively. As of June 30, 2015 and 2014, there were 88,262,488 and 0 anti-dilutive shares related to convertible notes based on their terms and conditions with none related to warrants and options, respectively.

 

3. Recent Accounting Pronouncements

 

The Company has adopted all recently issued accounting pronouncements. The adoption of the accounting pronouncements, including those not yet effective, is not anticipated to have a material effect on the financial position or results of operations of the Company.

 

4. Stockholders Deficit

 

Authorized:

 

500,000,000 Common shares with no par value; 254,125,732 Common shares issued and outstanding and issuable, with 91,920,238 of such shares issuable as of June 30, 2015;

 

10,000,000 Preferred shares with $0.0001 par value; 5,000,000 Preferred shares issued and outstanding as of June 30, 2015.

 

Series A Convertible Preferred Stock. 5,000,000 shares of preferred stock were designated as Series A Convertible Preferred Stock. Each share of Series A Convertible Preferred Stock is convertible at the election of the holder into 100 shares of common stock, subject to a 4.9% beneficial ownership limitation, but has no voting rights until converted into common stock. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the outstanding shares of Series A Convertible Preferred Stock shall be entitled to be paid out of the assets of the Corporation available for distribution to its shareholders, whether from capital, surplus funds or earnings, and before any payment is made in respect of the shares of Common Stock, an amount equal to $2.50 per share of Series A Convertible Preferred Stock, subject to adjustment for stock dividends, combinations, splits, recapitalizations and the like with respect to the Series A Convertible Preferred Stock, plus any and all accrued but unpaid dividends. The holders of Series A Convertible Preferred Stock are entitled to dividends when declared by the board of directors.

 

Series B Preferred Stock. 350,000 shares of preferred stock were designated as Series B Preferred Stock subsequent to June 30, 2015. Each share of Series B Preferred Stock is convertible at the election of the holder into 100 shares of common stock, subject to a 4.9% beneficial ownership limitation, but has no voting rights until converted into common stock. The holders of the Series B Preferred Stock do not have any rights to dividends or any liquidation preferences.

 

Series C Preferred Stock. 1,000,000 shares of preferred stock were designated as Series C Preferred Stock subsequent to June 30, 2015. Each share of Series C Preferred Stock is convertible at the election of the holder into 100 shares of common stock, and entitles the holder thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the Company. The holders of the Series C Preferred Stock do not have any rights to dividends or any liquidation preferences.

 

During the period ended June 30, 2015, the Company effected the following stock transactions:

 

On June 2, 2015, the Company entered into an Asset Purchase Agreement with Dependable Critical Infrastructure, Inc. f/k/a DTREDS Consolidated Inc., a Delaware corporation ("DCI"), and Viking Telecom Services, LLC, a Minnesota limited liability company ("Viking"). Pursuant to the Agreement, the parties agreed that the Company would purchase assets of DCI relating to Viking which DCI had acquired from Viking (general intangibles, including contract rights, office furniture totaling $7,392, IBM server, 2011 Chevrolet Silverado 2500 Diesel truck for $35,608, and accounts receivable after January 1, 2015 totaling $182,363), in consideration of the Company (1) assuming limited liabilities associated with Viking (loan payment for Chevrolet truck in the amount of $668 per month with a principal balance of $36,202, loan payment to Joshua Claybaugh of $5,000 per month for 11 months totaling $55,000), (2) issuing the owners of DCI a total of 62,236,075 shares of Company common stock valued at $740,000, and (3) paying DCI $200,000, which was paid on June 19, 2015, and an initial deposit of $59,204. Due to the related party nature of the transaction, the assets were recorded at historical cost and $865,043 of the total purchase price was recorded as additional paid in capital.
  
 
10
 

 

ECRYPT TECHNOLOGIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

 

During the period ended June 30, 2015, the Company issued 28,065,726 shares of common stock for debt conversions with a value of $459,834.

 

During the period ended June 30, 2015, the Company issued 1,260,338 shares of common stock for compensation valued at $27,349. The per share price of the shares was $0.02.

 

During the period ended June 30, 2015, the Company issued 358,099 shares of common stock in exchange for legal services valued at $12,293, of which $3,496 was in stock subscriptions payable and $8,797 in expenses.

 

5. Stock options

 

On February 16, 2012, the Company granted a non-qualified stock option to its director as compensation for his services. The director is entitled to purchase a total of three hundred thousand (300,000) shares of restricted common stock for a price equal to $0.30 per share (Exercise Price), exercisable over a ten-year period thereafter. The option shall be vested during the 12 month period. As to the total number of Shares with respect to which the Option is granted, the Option shall be exercisable as follows: (i) 25% of the Option in the aggregate may be exercised upon the mutual execution of this Agreement (ii) 50% of the Option in the aggregate may be exercised on or after the four month anniversary of the Grant Date; (iii) 75% of the Option in the aggregate may be exercised on or after the eight month anniversary of the Grant Date; and (iv) 100% of the Option in the aggregate may be exercised on or after the twelve month anniversary of the Grant Date (the twelve month period commencing on the Grant Date and ending on the twelve month anniversary of the Grant Date being referred to as the "Vesting Period"). As of June 30, 2015, the director has not exercised any rights. The total fair value of these options at the date of grant was estimated to be $180,000 and was determined using the Black-Scholes option pricing model with an expected life of 10 years, a risk free interest rate of 1.99%, a dividend yield of 0% and expected volatility of 419%. This $180,000 was recorded as stock based compensation expense through March 31, 2014 based on three hundred thousand (300,000) options vested.

 

 

 

Number of Options

 

 

Weighted-Average Exercise Price per share

 

 

Weighted- Average Remaining Life (Years)

 

Outstanding at as at 3/31/15

 

 

300,000

 

 

$ 0.30

 

 

 

8.88

 

Granted

 

 

-

 

 

$ -

 

 

 

-

 

Exercised

 

 

-

 

 

NA

 

 

NA

 

Cancelled

 

 

-

 

 

NA

 

 

NA

 

Outstanding as at 6/30/15

 

 

300,000

 

 

$ 0.30

 

 

 

8.63

 

Exercisable at 6/30/15

 

 

300,000

 

 

$ 0.30

 

 

 

 

 

 

On March 27, 2015 the Company granted a non-qualified cashless stock warrant to its officer as compensation for his services. The officer is entitled to purchase a total of thirty million (30,000,000) shares of restricted common stock for a price equal to $0.03 per share (Exercise Price), exercisable over a five-year period thereafter.

 

 
11
 

 

ECRYPT TECHNOLOGIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

 

As of June 30, 2015, the officer has not exercised any rights. The total fair value of these options at the date of grant was estimated to be $813,827 and was determined using the Black-Scholes option pricing model with an expected life of 5 years, a risk free interest rate of 1.42%, a dividend yield of 0% and expected volatility of 207.12%. $813,827 was recorded as stock based compensation expense through March 31, 2015 based on a total of thirty million (30,000,000) shares vested.

 

 

 

Number of Warrants

 

 

Weighted-Average Exercise Price per share

 

 

Weighted- Average Remaining Life (Years)

 

Outstanding at as at 3/31/15

 

 

30,000,000

 

 

$ 0.03

 

 

 

5.00

 

Granted

 

 

-

 

 

$ -

 

 

 

-

 

Exercised

 

 

-

 

 

$ NA

 

 

NA

 

Cancelled

 

 

-

 

 

$ NA

 

 

NA

 

Outstanding as at 6/30/15

 

 

30,000,000

 

 

$ 0.03

 

 

 

4.75

 

Exercisable at 6/30/15

 

 

30,000,000

 

 

$ 0.03

 

 

 

 

 

 

During the year ended March 31, 2015, the Company entered into a private placement subscription agreement that offers a total of 1,470,000 units for a value of $147,000, or $0.10 per unit. Each unit consists of one (1) share of the Company's common stock, and one-half (1/2) common stock purchase Warrant. One full warrant entitles the holder to purchase one (1) share of the Corporation's common stock at a price of $0.15 per share at any time within a 12 month period from the date of closing from July 2015.

 

As of June 30, 2015, the warrant holders have not exercised any rights. The total fair value of these options at the date of grant was estimated to be $89,432 and was determined using the Black-Scholes option pricing model with an expected life of 1 year, a risk free interest rate of .25%, a dividend yield of 0% and expected volatility in a range of 185.10% to 207.49%. $89,432 was not recorded as expense through June 30, 2015 since the warrants were issued in a private placement in exchange for cash.

 

 

 

Number of Warrants

 

 

Weighted-Average Exercise Price per share

 

 

Weighted- Average Remaining Life (Years)

 

Outstanding at as at 3/31/15

 

 

735,000

 

 

$ 0.15

 

 

 

0.50

 

Granted

 

 

-

 

 

$ -

 

 

 

-

 

Exercised

 

 

-

 

 

$ NA

 

 

NA

 

Cancelled

 

 

-

 

 

$ NA

 

 

NA

 

Outstanding as at 6/30/15

 

 

735,000

 

 

$ 0.15

 

 

 

0.25

 

Exercisable at 6/30/15

 

 

735,000

 

 

$ 0.15

 

 

 

 

 

 

In conjunction with the convertible note issued by the Company and the three promissory notes issued to the Company for the three additional tranches of funding to the Company, the Company issued four warrants for a total number of shares equal to $123,750 ($41,250 for the first warrant corresponding to funding on February 6, 2015, and $27,500 for the other three warrants corresponding to the future tranches of funding to the Company) divided by the conversion market price in the convertible note. The warrants have an exercise price of $0.10, subject to adjustment, and expire on January 3, 2020. Each of the warrants are only exercisable after the corresponding tranche of funding to the Company has been paid. Therefore, the first warrant is currently exercisable, but the other three warrants are not.

 

 
12
 

 

ECRYPT TECHNOLOGIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

 

The total fair value of these warrants at the date of grant was estimated to be $41,250 and was determined using the Black-Scholes option pricing model with an expected life of 5 years, a risk free interest rate of 1.28%, a dividend yield of 0% and expected volatility of 191.21%. $41,250 was recorded as derivative expense as of the date of issuance and as of June 30, 2015 a derivative liability of $14,667 is reflected on the balance sheet.

 

 

 

Number of Warrants

 

 

Weighted-Average Exercise Price per share

 

 

Weighted- Average Remaining Life (Years)

 

Outstanding at as at 3/31/15

 

 

916,667

 

 

$ 0.10

 

 

 

0.50

 

Granted

 

 

-

 

 

$ -

 

 

 

-

 

Exercised

 

 

-

 

 

$ NA

 

 

NA

 

Cancelled

 

 

-

 

 

$ NA

 

 

NA

 

Outstanding as at 6/30/15

 

 

916,667

 

 

$ 0.10

 

 

 

0.25

 

Exercisable at 6/30/15

 

 

916,667

 

 

$ 0.10

 

 

 

 

 

 

6. Loan-Related Party

 

As of June 30, 2015 and March 31, 2015, the balance of loans due to a related party was $403,000 and $558,500, respectively.

 

The Company issued on May 18, 2010, a $215,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually and matured on November 30, 2014. On February 16, 2015, the Company secured a note payable extension through April 1, 2015, with no change in original terms of the agreement.As of June 15, 2015, the note is now payable on demand as part of the Settlement Agreement and is considered current.

 

The Company issued on April 29, 2011, a $15,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually and matured on November 30, 2014. On February 16, 2015, the Company secured a note payable extension through April 1, 2015, with no change in original terms of the agreement.As of June 15, 2015, the note is now payable on demand as part of the Settlement Agreement and is considered current.

 

The Company issued on May 9, 2011, a $36,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually and matured on November 30, 2014. On February 16, 2015, the Company secured a note payable extension through April 1, 2015, with no change in original terms of the agreement.As of June 15, 2015, the note is now payable on demand as part of the Settlement Agreement and is considered current.

 

The Company issued on June 24, 2011, a $100,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually and matured on November 30, 2014. On February 16, 2015, the Company secured a note payable extension through April 1, 2015 with no change in original terms of the agreement.As of June 15, 2015, the note is now payable on demand as part of the Settlement Agreement and is considered current.

 

 
13
 

 

ECRYPT TECHNOLOGIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

 

The Company issued on July 7, 2011, a $40,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually and matured on November 30, 2014. On February 16, 2015, the Company secured a note payable extension through April 1, 2015, with no change in original terms of the agreement. As of June 15, 2015, the note is now payable on demand as part of the Settlement Agreement and is considered current.

 

The Company issued on August 5, 2011, a $24,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually and matured on November 30, 2014. On February 16, 2015, the Company secured a note payable extension through April 1, 2015, with no change in original terms of the agreement.As of June 15, 2015, the note is now payable on demand as part of the Settlement Agreement and is considered current.

 

The Company issued on September 2, 2011, a $20,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually and matured on November 30, 2014. On February 16, 2015, the Company secured a note payable extension through April 1, 2015, with no change in original terms of the agreement.As of June 15, 2015, the note is now payable on demand as part of the Settlement Agreement and is considered current.

 

The Company issued on September 30, 2011, a $20,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually and matured on November 30, 2014. On February 16, 2015, the Company secured a note payable extension through April 1, 2015, with no change in original terms of the agreement.As of June 15, 2015, the note is now payable on demand as part of the Settlement Agreement and is considered current.

 

The Company issued on October 19, 2011, a $25,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually and matured on November 30, 2014. On February 16, 2015, the Company secured a note payable extension through April 1, 2015, with no change in original terms of the agreement.As of June 15, 2015, the note is now payable on demand as part of the Settlement Agreement and is considered current.

 

The Company issued on December 6, 2011, a $20,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually and matured on November 30, 2014. On February 16, 2015, the Company secured a note payable extension through April 1, 2015, with no change in original terms of the agreement.As of June 15, 2015, the note is now payable on demand as part of the Settlement Agreement and is considered current.

 

The Company issued on January 11, 2012, a $38,000 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually and matured on November 30, 2014. On February 16, 2015, the Company secured a note payable extension through April 1, 2015, with no change in original terms of the agreement.As of June 15, 2015, the note is now payable on demand as part of the Settlement Agreement and is considered current.

 

The Company issued on June 27, 2013, a $5,500 unsecured note payable to a shareholder. The note bears interest at 10%, compounded annually and will mature on June 27, 2015.

 

On June 15, 2015, Companyentered into a Settlement Agreement and Partial Waiver and Release (the "Settlement Agreement") with a Nevada corporation, lender and preferred shareholder of the Company ("Global"). Global owned 2,377,500 shares of the Company's 5,000,000 issued and outstanding shares of Series A Convertible Preferred Stock (the "Global Preferred Stock"), and is the holder of outstanding promissory notes in the original principal amount of $558,500, with accrued interest thereon due to Global of approximately $267,960 (the "Global Notes") as of March 31, 2015. Pursuant to the Settlement Agreement, Global agreed to (1) waive interest due under the Global Notes and waive $158,500 of principal due under the Global Notes, such that only $400,000 of principal and interest would be considered outstanding as of the settlement agreement date, and (2) immediately return all of the Global Preferred Stock to the Company for cancellation, in consideration for the Company issuing 21,397,500 shares of common stock to Global. On or about July 14, 2015, Globalreturned its 2,377,500 shares of Series A Convertible Preferred Stock to the Company's transfer agent for cancellation pursuant to its settlement agreement with the Company, and after that cancellation, there were only 2,622,500 shares of Series A Convertible Preferred Stock issued and outstanding. As of July 31, 2015, the 21,397,500 common shares had not been issued. All notes listed above are now payable on demand as part of the Settlement Agreement.

 

Interest expense for the three months ended June 30, 2015, and 2014, was $9,973 and $17,658, respectively.

 

The Company issued on June 27, 2015, a $3,000 unsecured note payable to the Company’s CEO. The note bears no interest and has no maturity date. Imputed interest would be immaterial and is not computed.

 

 
14
 

 

ECRYPT TECHNOLOGIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

 

7. Notes Payable

 

As of June 30, 2015 and March 31, 2015, the balance of loans due to third parties was $521,990 and $430,788, respectively.

 

The Company issued on December 18, 2012, a $49,980 unsecured note payable to a third party. The note bears interest at 10%, compounded annually and matured on December 18, 2014. On February 16, 2015, the Company secured a note payable extension through April 1, 2015, with no change in original terms of the agreement.The note payable was again extended on August 6, 2015, through January 1, 2016, with no change in original terms of the agreement.

 

The Company issued on February 26, 2013, a $49,980 unsecured note payable to a third party. The note bears interest at 10%, compounded annually and matures on February 26, 2015. On February 16, 2015, the Company secured a note payable extension through April 1, 2015, with no change in original terms of the agreement.The note payable was again extended on August 6, 2015, through January 1, 2016, with no change in original terms of the agreement.

 

The Company issued on April 18, 2013, a $46,500 unsecured note payable to a third party. The note bears interest at 10%, compounded annually and matures on April 18, 2015. On February 16, 2015, the Company secured a note payable extension through April 1, 2015, with no change in original terms of the agreement.The note payable was again extended on August 6, 2015, through January 1, 2016, with no change in original terms of the agreement.

 

The Company issued on May 7, 2013, a $3,500 unsecured note payable to a third party. The note bears interest at 10%, compounded annually and matures on May 7, 2015. On February 16, 2015, the Company secured a note payable extension through April 1, 2015, with no change in original terms of the agreement.The note payable was again extended on August 6, 2015 through January 1, 2016, with no change in original terms of the agreement.

 

The Company issued on May 30, 2013, a $50,000 unsecured note payable to a third party. The note bears interest at 10%, compounded annually and matures on May 30, 2015. On February 16, 2015, the Company secured a note payable extension through April 1, 2015, with no change in original terms of the agreement.The note payable was again extended on August 6, 2015, through January 1, 2016 with no change in original terms of the agreement.

 

The Company issued on July 12, 2013, a $50,000 unsecured note payable to a third party. The note bears interest at 10%, compounded annually and matures on July 12, 2014. On February 16, 2015, the Company secured a note payable extension through April 1, 2015, with no change in original terms of the agreement.The note payable was again extended on August 6, 2015, through January 1, 2016, with no change in original terms of the agreement.

 

The Company issued on August 2, 2013, a $50,000 unsecured note payable to a third party. The note bears interest at 10%, compounded annually, matures in one year on August 2, 2014. On February 16, 2015, the Company secured a note payable extension through April 1, 2015, with no change in original terms of the agreement.The note payable was again extended on August 6, 2015, through January 1, 2016, with no change in original terms of the agreement.

 

The Company issued on September 12, 2013, a $30,000 unsecured note payable to a third party. The note bears interest at 10%, compounded annually, matures in one year on September 12, 2014. Of the $30,000 outstanding balance, $14,172 was forgiven on December 15, 2014, with a remaining principal balance outstanding of $15,828. On February 16, 2015, the Company secured a note payable extension through April 1, 2015, with no change in original terms of the agreement.The note payable was again extended on August 6, 2015 through January 1, 2016, with no change in original terms of the agreement.

 

The Company issued on September 27, 2013, a $50,000 unsecured note payable to a third party. The note bears interest at 10%, compounded annually, matures in one year on September 27, 2014. On February 16, 2015, the Company secured a note payable extension through April 1, 2015, with no change in original terms of the agreement.The note payable was again extended on August 6, 2015, through January 1, 2016, with no change in original terms of the agreement.

 

 
15
 

 

ECRYPT TECHNOLOGIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

 

The Company issued on January 10, 2014, a $30,000 unsecured note payable to a third party. The note bears interest at 10%, compounded annually, matures in one year on January 10, 2015. On February 16, 2015, the Company secured a note payable extension through April 1, 2015, with no change in original terms of the agreement.The note payable was again extended on August 6, 2015 through January 1, 2016 with no change in original terms of the agreement.

 

The Company issued on February 5, 2014, a $50,000 unsecured note payable to a third party. The note bears interest at 10%, compounded annually, matures in one year on February 5, 2015. On February 16, 2015, the Company secured a note payable extension through April 1, 2015, with no change in original terms of the agreement.The note payable was again extended on August 6, 2015 through January 1, 2016, with no change in original terms of the agreement.

 

The Company issued on April 23, 2014, a $40,000 unsecured note payable to a third party. The note bears interest at 10%, compounded annually, matures in one year on April 23, 2015. On August 6, 2015, the Company secured a note payable extension through January 1, 2016, with no change in original terms of the agreement.

 

The Company issued on June 16, 2014, a $45,000 unsecured note payable to a third party. The note bears interest at 10%, compounded annually, matures in one year on June 30, 2015. On August 6, 2015, the Company secured a note payable extension through January 1, 2016, with no change in original terms of the agreement.

 

On June 2, 2015, as part of theAsset Purchase Agreement with DCI, the Company assumed limited liabilities associated with Viking (loan payment for Chevrolet truck in the amount of $668 per month with a principal balance of $36,202, and a loan payment to Joshua Claybaugh of $5,000 per month for 11 months for a total of $55,000).

 

Interest expense for the three months ended June 30, 2015, and 2014, was $10,740 and $16,519, respectively.

 

8. Convertible Debt and Derivative Liabilities

 

The Company has received subscriptions receivable totaling $300,000 through the issuances of two 8% convertible promissory notes. The outstanding balance of these notes are convertible into a variable number of the Company's common stock. Based on a conversion ratio of 68% of the lowest closing bid prices for 20 days prior to conversion. The outstanding balance of this note is convertible into a variable number of the Company's common stock. Therefore the Company accounted for these Notes under ASC Topic 815-15 "Embedded Derivative." The derivative component of the obligation are initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts have being amortized to interest expense over the respective term of the related note.

 

The Company has extinguished debt totaling $500,000 through the issuances of two 8% and one 10% convertible promissory notes. The outstanding balances of these notes are convertible into a variable number of the Company's common stock. Based on a conversion ratio of 68% of the lowest closing bid prices for 20 days prior to conversion Therefore the Company accounted for these Notes under ASC Topic 815-15 "Embedded Derivative." The derivative component of the obligation are initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts have being amortized to interest expense over the respective term of the related note.

 

Amortization of the discounts for the year ended June 30, 2015 totaled $196,709, which was charged to expense.

 

The Company valued the derivative liabilities at June 30, 2015, at $1,209,245. The Company used the Black Scholes Option Model with a risk-free interest rates from .06% to 1.64%, volatility from 205,48% to 290.55%, trading prices from $.016 to $.041 per share and conversion prices from $.007 to $.100 per share.

 

On December 19, 2014, the Company issued a convertible back end note, with a face value of $156,000 and stated interest of 8% to a third party investor. The note is convertible at any time following the funding of the note,convertible into a variable number of the Company's common stock, based on a conversion ratio of 68% of the lowest closing bid prices for 20 days prior to conversion. The note was funded on June 18, 2015.

 

On December 19, 2014, the Company issued a convertible back end note, with a face value of $156,000 and stated interest of 8% to a third party investor. The note is convertible at any time following the funding of the note,convertible into a variable number of the Company's common stock, based on a conversion ratio of 68% of the lowest closing bid prices for 20 days prior to conversion. The note was funded on June 18, 2015.

 

 
16
 

 

ECRYPT TECHNOLOGIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

 

On December 19, 2014, the Company issued a convertible note payable, with a face value of $156,000 and stated interest of 8% to a third party investor. The outstanding balance of this note is convertible into a variable number of the Company's common stock, based on a conversion ratio of 67% of the lowest closing bid prices for 20 days prior to conversion. On June 30, 2015, the investor converted a total of $31,500 of the face value and $1,874 of accrued interest, into 6,668,226 shares of common stock.

 

On January 11, 2015, the Companyentered intoa securities purchase agreement providing for the purchase of two convertible promissory notes in the aggregate principal amount of $52,000 each. One of the notes was funded on January 13, 2015, with the Company receiving $47,500 of net proceeds after payment of legal and origination expenses. The note bears interest at the rate of 8% per annum, is due and payable on January 9, 2015, and may be converted at any time after funding into shares of Company common stock at a conversion price equal to 67% of the lowest closing bid price on the OTCQB during the 15 prior trading days. The second note, which has not been funded, has the same interest and conversion terms as the first note, but may be offset by a secured promissory note issued to the Company for $50,000, due on September 9, 2015, and accruing interest at the rate of 8% per annum.

 

On January 19, 2015, the Company issued a convertible promissory note in the face amount of $100,000, which bears interest at the rate of 12% per annum, is due and payable on July 16, 2015, and may be converted at any time after funding into shares of Company common stock at a conversion price equal to the lesser of (a) 55% of the lowest trading price during the 20 days preceding the execution of the note, or (b) 55% of the of the lowest traded price during the 20 trading days preceding conversion. The note was funded on January 28, 2015, with the Company receiving $93,000 of net proceeds after payment of legal and origination expenses.

 

On January 21, 2015, the Company issued a convertible promissory note in the face amount of $400,000, of which the Company is to assume $40,000 in original interest discount ("OID"), which together with any unpaid accrued interest is due two years after any funding of the note.The note is to be funded at the note holders discretion, and the initial tranche was funded on January 21, 2015, when the Company received cash in the amount of $50,000, and received an additional $25,000 on April 28, 2015. The note is pre-payable for 90 days without interest, and incurs a one-time interest charge of 12% thereafter. The note balance funded (plus a pro rata portion of the OID together with any unpaid accrued interest) is convertible into shares of Company common stock at a conversion price equal to the lesser of $0.08 or 60% of the lowest traded price during the 25 prior trading days.

 

On February 3, 2015, the Company issued a collateralized secured convertible promissory for a 10% convertible promissory note with an aggregate principal amount of $252,500, of which the company is to assume an original issue discount of $22,500 (the "OID") and legal fees and other expenses totaling $5,000, which together with any unpaid accrued interest is due on November 3, 2015. The note is to be issued in tranches with an initial tranche of $87,500, of which the company received $75,000 on February 6, 2015, with the remaining $5,000 being used for legal and other expenses and the Company assuming $7,500 of the OID. This convertible note together with any unpaid accrued interest is convertible into shares of Company common stock at a conversion price equal to the 60% of the average of the lowest three closing bid prices during the 20 prior trading days. The remaining three tranches, which have not yet been funded, of $55,000 under the note will consist of $50,000 in principal and $5,000 of the OID, and may be offset by three $50,000 promissory notes issued in favor of the Company, accruing interest at 8% per annum and maturing on November 3, 2015. In conjunction with the convertible note issued by the Company and the three promissory notes issued to the Company for the three additional tranches of funding to the Company, the Company issued four warrants for a total number of shares equal to $123,750 ($41,250 for the first warrant corresponding to funding on February 6, 2015, and $27,500 for the other three warrants corresponding to the future tranches of funding to the Company) divided by the conversion market price in the convertible note. The warrants have an exercise price of $0.10, subject to adjustment, and expire on January 3, 2020. Each of the warrants is only exercisable after the corresponding tranche of funding to the Company has been paid. Therefore, the first warrant is currently exercisable, but the other three warrants are not.

 

On February 10, 2015, the Company entered into an equity purchase agreement with a third party investor dated February 6, 2015, whereby the third party agreed to purchase up to $1,800,000 of the Company's common stock, to be registered in a Form S-1 registration statement. The agreement will have a one-year term unless sooner terminated because $1,800,000 of the Company's common stock has already been sold to the investor. During the term, the Company will have the right to deliver up to two put notices per month requiring it to purchase up to a maximum of $75,000 of shares for a specific amount. The purchase price for the shares covered by the put notice shall be equal to 75% of the lowest closing bid price for the ten trading days immediately preceding clearing of the estimated put shares (defined below). The Company will deliver to the investor, simultaneously with delivery of a put notice, a number of shares equal to 120% of the investment amount divided by the closing price of the Company's common stock on the day preceding the put notice date. The actual number of shares purchased by the investor for the investment amount shall then be calculated by dividing the investment amount by the put purchase price. Any excess estimated put shares shall then be returned to the Company.The number of Shares sold to the investor at any time shall not exceed the number of such shares that, when aggregated with all other shares of common stock of the Company then beneficially owned by the investor, would result in the investor owning more than 9.99% of all of the Company's common stock then outstanding. Finally, as part of the equity purchase agreement, the investor is prohibited from executing any short sales of the Company's common stock during the term of the equity purchase agreement.

 

 
17
 

 

ECRYPT TECHNOLOGIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

 

On December 19, 2014, the Company issued a convertible back end note, with a face value of $156,000 and stated interest of 8% to a third party investor. The note is convertible at any time following the funding of the note,convertible into a variable number of the Company's common stock, based on a conversion ratio of 68% of the lowest closing bid prices for 20 days prior to conversion. The note was funded on June 18, 2015.

 

On December 19, 2014, the Company issued a convertible back end note, with a face value of $156,000 and stated interest of 8% to a third party investor. The note is convertible at any time following the funding of the note,convertible into a variable number of the Company's common stock, based on a conversion ratio of 68% of the lowest closing bid prices for 20 days prior to conversion. The note was funded on June 18, 2015.

 

On December 19, 2014, the Company issued a convertible note payable, with a face value of $156,000 and stated interest of 8% to a third party investor. The outstanding balance of this note is convertible into a variable number of the Company's common stock, based on a conversion ratio of 67% of the lowest closing bid prices for 20 days prior to conversion. On June 30, 2015, the investor converted a total of $31,500 of the face value and $1,874 of accrued interest, into 6,668,226 shares of common stock.

 

Interest expense for the three months ended June 30, 2015, and 2014, was $19,477 and $0, respectively. The Company also recorded interest expense related to the amortization or incremental costs for the three months ended June 30, 2015, and 2014, was $25,130 and $0, respectively.

 

9. Fair Value Measurement

 

The company uses the Black-Sholes model to calculate the fair value of the derivative liability.

 

Our financial assets and (liabilities) carried at fair value measured on a recurring basis as of June 30, 2015 and June 30, 2014 consisted of the following:

 

 

 

 

 

 

Fair Value Measurements Using

 

Description

 

Total Fair Value at June 30, 2015

 

 

Quoted Prices in Active Markets (Level 1)

 

 

Significant Other Observable Inputs (Level 2)

 

 

Significant Unobservable Inputs (Level 3)

 

Derivative liability

 

$ 1,209,245

 

 

$ -

 

 

$ 1,209,245

 

 

$ -

 

 

 

 

 

 

 

Fair Value Measurements Using

 

Description

 

Total Fair Value at March 31, 2015

 

 

Quoted Prices in Active Markets (Level 1)

 

 

Significant Other Observable Inputs

(Level 2)

 

 

Significant Unobservable Inputs (Level 3)

 

Derivative liability

 

$ 824,763

 

 

$ -

 

 

$ 824,763

 

 

$ -

 

 

 
18
 

 

ECRYPT TECHNOLOGIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

 

10. Property and Equipment

 

Property and equipment consists of the following as of June 30, 2015 and March 31, 2015. Depreciation expense was $1,859 and $935 for the three months ended June 30, 2015 and 2014, respectively.

 

 

 

June 30,

2015

 

 

June 30,

2014

 

Computer Equipment

 

$ 26,036

 

 

$ 25,757

 

Equipment

 

 

48,055

 

 

 

40,663

 

Vehicle

 

 

35,608

 

 

 

-

 

Less: Accumulated Depreciation

 

 

(61,939 )

 

 

(60,080 )

Net Property and Equipment

 

$ 47,760

 

 

$ 6,340

 

 

11. Intangibles

 

Intangibles assets consists of the following as of June 30, 2015 and March 31, 2015. Amortization expense was $5,016 and $0 for the three months ended June 30, 2015 and 2014, respectively.

 

 

 

June 30,

2015

 

 

March 31,

2015

 

Software Development Costs

 

$ 60,362

 

 

$ 60,362

 

Less: Accumulated Depreciation

 

 

(8,268 )

 

 

(3,252 )

Net Property and Equipment

 

$ 52,094

 

 

$ 57,110

 

 

The Company’s future estimated amortization for the above intangible assets are as follows:

 

Year

 

Amortization

 

2016

 

$ 15,159

 

2017

 

 

20,121

 

2018

 

 

16,814

 

2019

 

 

-

 

2020

 

 

-

 

Total

 

$ 52,094

 

 

 
19
 

 

ECRYPT TECHNOLOGIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

 

12. Subsequent Events

 

The Company has evaluated subsequent events from June 30, 2015 through the date of this report, and determined there are no other items to disclose other than those disclosed below:

 

On July 9, 2015, the Company issued a total of 30,184,528 shares of common stock and 264,503 shares of Series B Preferred Stock to the owners of DCI, which shares of Series B Preferred Stock convert into 26,450,300 shares of common stock (ignoring the 4.9% conversion limitation in the Series B designation of rights), satisfying the Company’s obligation to issue shares to the owners of DCI pursuant to the Company’s Asset Purchase Agreement with DCI.

 

On or about July 14, 2015, Global returned its 2,377,500 shares of Series A Convertible Preferred Stock to the Company's transfer agent for cancellation pursuant to its settlement agreement with the Company, and after that cancellation, there were only 2,622,500 shares of Series A Convertible Preferred Stock issued and outstanding.

 

On July 20, 2015, the Company entered into a Settlement Agreement (the "Micro-Tech Settlement Agreement") with Micro-Tech Industries, Ltd., lender and preferred shareholder of the Company ("Micro-Tech"). Micro-Tech owns 839,500 shares of the Company's 2,622,500 issued and outstanding shares of Series A Convertible Preferred Stock (the "Micro-Tech Preferred Stock"). Pursuant to the Micro-Tech Settlement Agreement, Micro-Tech agreed to immediately return all of the Micro-Tech Preferred Stock to the Company for cancellation in consideration for the Company issuing 7,975,250 shares of common stock to Micro-Tech.As of July 31, 2015, the 839,500 preferred shares had not been cancelled and the common shares were not issued.

 

On July 20, 2015, the Company entered into a Settlement Agreement (the "Whonon Settlement Agreement") with Whonon Trading S. A., lender and preferred shareholder of the Company ("Whonon"). Whonon owns 1,783,000 shares of the Company's 2,622,500 issued and outstanding shares of Series A Convertible Preferred Stock (the "Whonon Preferred Stock"). Pursuant to the Whonon Settlement Agreement, Whonon agreed to immediately return all of the Whonon Preferred Stock to the Company for cancellation in consideration for the Company issuing 16,938,500 shares of common stock to Whonon.As of July 31, 2015, the preferred shares had not been cancelled and the common shares were not issued.

 

On July 20, 2015, the Company's CEO returned 22,376,836 shares of common stock to the Company for cancellation in exchange for the issuance of 223,768 shares of Series C Preferred Stock.

 

On July 20, 2015, a related party shareholder returned 9,600,000 shares of common stock to the Company for cancellation in exchange for the issuance of 96,000 shares of Series C Preferred Stock.

 

 
20
 

 

ECRYPT TECHNOLOGIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

 

On July 23, the Company granted a non-qualified stock option to two of its directors as compensation for their services. The directors are entitled to purchase a total of seven hundred and fifty thousand (750,000) shares each of restricted common stock for a price equal to $0.01 per share (Exercise Price), exercisable over a ten-year period thereafter. The option shall be vested during the 12 month period. As to the total number of Shares with respect to which the Option is granted, the Option shall be exercisable as follows: (i) 25% of the Option in the aggregate may be exercised upon the mutual execution of this Agreement (ii) 50% of the Option in the aggregate may be exercised on or after the four month anniversary of the Grant Date; (iii) 75% of the Option in the aggregate may be exercised on or after the eight month anniversary of the Grant Date; and (iv) 100% of the Option in the aggregate may be exercised on or after the twelve month anniversary of the Grant Date (the twelve month period commencing on the Grant Date and ending on the twelve month anniversary of the Grant Date being referred to as the "Vesting Period"). As of August 15, 2015, the director has not exercised any rights. The total fair value of these options at the date of grant was estimated to be $15,750 and was determined using the Black-Scholes option pricing model with an expected life of 10 years, a risk free interest rate of 2.28%, a dividend yield of 0% and expected volatility of 230.55%. This $15,750 was recorded as stock based compensation expense based on 1.5 million (1,500,000) options vested.

 

On August 7, 2015, the Company issued 2,000,000 shares of common stock to Justin Keener d/b/a JMJ Financial (“JMJ”) in partial satisfaction of its obligations under, and the holder’s election to convert a $10,800 portion of, the Company’s convertible promissory note issued to JMJ on January 21, 2015.

 

On August 7, 2015, the Company issued 649,833 shares of common stock to LG Capital Funding LLC (“LG”) in partial satisfaction of its obligations under, and the holder’s election to convert a$4,180 portion of, the Company’s convertible promissory note issued to LG on January 11, 2015.

 

On August 7, 2015, the Company issued 3,249,481 shares of common stock to Union Capital, LLC (“Union”) in partial satisfaction of its obligations under, and the holder’s election to convert a $16,085 portion of, the Company’s convertible promissory note issued to Union on December 19, 2014.

 

On August 13, 2015, the Company issued 13,176,725 shares of common stock to Typenex Co-Investments, LLC (“Typenex”) in partial satisfaction of its obligations under, and the holder’s election to convert a $67,636 portion of, the Company’s convertible promissory note issued to Typenex on February 3, 2015.

 

On August 13, 2015, the Company issued 782,228 shares of common stock to Adar Bays LLC (“Adar Bays”) in partial satisfaction of its obligations under, and the holder’s election to convert a $5,000 portion of, the Company’s convertible promissory note issued to Adar Bays on December 19, 2014.

  

 
21
 

 

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

SPECIAL NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS

 

Certain statements in this report, including statements in the following discussion, are what are known as "forward looking statements", which are basically statements about the future. For that reason, these statements involve risk and uncertainty since no one can accurately predict the future. Words such as "plans," "intends," "will," "hopes," "seeks," "anticipates," "expects "and the like often identify such forward looking statements, but are not the only indication that a statement is a forward looking statement. Such forward looking statements include statements concerning our plans and objectives with respect to the present and future operations of the Company, and statements which express or imply that such present and future operations will or may produce revenues, income or profits. Numerous factors and future events could cause the Company to change such plans and objectives or fail to successfully implement such plans or achieve such objectives, or cause such present and future operations to fail to produce revenues, income or profits. Therefore, the reader is advised that the following discussion should be considered in light of the discussion of risks and other factors contained in this report on Form 10-Q and in the Company's other filings with the Securities and Exchange Commission. No statements contained in the following discussion should be construed as a guarantee or assurance of future performance or future results.

 

Overview & Plan of Operation

 

Ecrypt Technologies, Inc., a Colorado corporation, was incorporated in the State of Colorado, on April 19, 2007. The Company provides security, defense, and information security solutions, which assist corporate entities, governments and individuals in protecting their organizations and/or critical infrastructures against error, and physical and cyber attack. The Company’s business operations are oriented around the marketing and distribution of proprietary and allied security, defense and information security software, hardware and services.

 

Currently, the Company’s primary business operations are focused on expanding its strategic marketing program of allied products and services of which the Company is designated as the exclusive, or non-exclusive, marketing and distribution agent within the USA and abroad.

 

Additionally, the Company has developed and plans to continue selling an enterprise-level secure email software appliance named Ecrypt One. Ecrypt One is an email server with integrated security technology. It was designed to protect email and attachments in transit and at rest. It incorporates multiple security technologies and techniques, such as encryption, role based access controls, server rules that enforce security, and multi-factor authentication. It was designed to assist organizations and governments to meet and maintain compliance with information security regulations such as HIPAA.

 

The Company filed a patent application for multiple processes in Ecrypt One, with a request for non-publication, on April 22, 2014.

 

On June 2, 2015 the Company completed a strategic acquisition of some of the assets of Viking Telecom Services. The Company continues to provide Viking Telecom services under the Viking Telecom brand. Services provided by Viking include cellular tower mapping and audits, ground audits, civil equipment installation, cellular site decommissioning, 3G/4G installations, project/construction management, battery installation and maintenance, plowing/snow removal, shelter and compound preventative maintenance, site clean up, and other related services.

 

In addition to the foregoing, in an effort to advance the business operations of the Company, over the next twelve (12) months the Company plans to undertake the following actions in the order in which they are listed:

 

1.

Continue distribution on Ecrypt One Software packages;

2.

Continue fulfilling Viking Telecom services backlog;

3.

Continue distribution of allied products and services;

4.

Continue developing strategic marketing alliance program;

5.

Continue development and testing of additional Ecrypt One features and capabilities;

 

The foregoing business actions are goals of the Company. There is no assurance that the Company will be able to complete any, or all, of the foregoing actions.

 

 
22
 

 

Results of Operations

 

The following discussion and analysis provides information that we believe is relevant to an assessment and understanding of our results of operation and financial condition for the three months ended June 30, 2015, as compared to the three months ended June 30, 2014. The following discussion should be read in conjunction with the Financial Statements and related Notes appearing elsewhere in this Quarterly Report on Form 10-Q.

 

Our financial statements are stated in US Dollars and are prepared in accordance with generally accepted accounting principles of the United States (“GAAP”).

 

Results of Operations for Ecrypt Technologies, Inc. for the Three Months Ended June 30, 2015 Compared to the Three Months Ended June 30, 2014.

 

Revenue

 

During the three months ended June 30, 2015, the Company had revenues of $186,837 as compared to revenues of $0 during the three months ended June 30, 2014, an increase of $186,837, or approximately 100%. The increase in revenue experienced by the Company was primarily attributable to the fact that the Company discontinued sales ofOne on OneandEcrypt Meon June 30, 2014 and launching Ecrypt One in the current quarter. During the three months ended June 30, 2015, the Company recorded $18,439 in costs of services related to Ecrypt One, there were not costs of services in the three months ended June 30, 2014, an increase of $18,439, or approximately 100%.

 

Operating Expenses

 

During the three months ended June 30, 2015, the Company had operating expenses of $486,472 as compared to operating expenses of $231,044 during the three months ended June 30, 2014, an increase of $255,428 or approximately 190%. The increase in operating expenses experienced by the Company was primarily attributable to an increase in amortization and depreciation expenses, an increase in general and administrative expenses, an increase in research and development, and an increase in professional fees.

 

Net Loss

 

The Company had net income of $97,726 for the three months ended June 30, 2015, as compared to a net loss of $(265,221) for the three months ended June 30, 2014, a change of $362,947 or approximately 227%. The change in net income (loss) experienced by the Company was primarily attributable to the fact that the Company had revenue and a gain on derivative, which was offset by the amortization of debt discount and research and development during the three months ended June 30, 2015.

 

Liquidity and Capital Resources

 

Currently, we have limited operating capital. The Company anticipates that it will require approximately $5,000,000 of working capital to complete all of its desired business activity during the next twelve months. The Company has earned limited revenue from its business operations. Our current capital and our other existing resources will be sufficient only to provide a limited amount of working capital, and, to date, the revenues generated from our business operations have not been sufficient to fund our operations or planned growth. As noted above, we will likely require additional capital to continue tooperate our business, and to further expand our business. We may be unable to obtain the additional capital required. Our inability to generate capital or raise additional funds when required will have a negative impact on our operations, business development and financial results.

 

During the past twelve months, we primarily funded our business operations with the proceeds from convertible note financing. During the next twelve months, we plan to seek to generate the necessary capital to fund our business operations and complete our desired business activity through sales of Viking Telecom services, Ecrypt Onesoftware, and strategic marketing affiliate products and services.If we are unable to generate the necessary capital through the sales of these products, we may conduct a private placement offering to seek to raise the necessary working capital to fund our business operations, or continue to rely on related party loans to fund our business operations.

 

The following discussion outlines the state of our liquidity and capital resources for the period ended June 30, 2015, compared to the fiscal year ended March 31, 2015:

 

 
23
 

 

Total Current Assets & Total Assets

 

Our unaudited balance sheet reflects that: i) as of June 30, 2015, we have total current assets of $411,096 as compared to total current assets of $302,381 at March 31, 2015, an increase of $108,715, or approximately 36%; and ii) as of June 30, 2015, we have total assets of $510,950, compared to total assets of $365,831 as of March 31, 2015, an increase of $145,119, or approximately 140%. The increase in the Company’s total current assets and total assets from June 30, 2015 to March 31, 2015, was primarily attributable to the fact that the Company obtained more cash via loans from third parties during the period ended June 30, 2014.

 

Cash: As of June 30, 2015, our unaudited balance sheet reflects that we have cash of $4,377 as compared to $203,072 at March 31, 2015, a decrease of $198,695, or approximately 98%. The increase in the Company’s fixed assets from June 30, 2015 to March 31, 2015, and increase which was primarily attributable to the Asset Purchase agreement with DCI during the period ended June 30, 2015.

 

Total Current Liabilities

 

Our unaudited balance sheet reflects that: i) as of June 30, 2015, we have total current liabilities of $1,534,049 as compared to total current liabilities of $1,677,221 at March 31, 2015, an decrease of $143,172 or approximately 9%; and ii) as of June 30, 2015, we have total liabilities of $2,771,905 as compared to total liabilities of $2,501,984 at March 31, 2015, an increase of $269,921 or approximately 11%. The increase in the Company’s total current liabilities from June 30, 2015 to March 31, 2015, was primarily attributable to the fact that the Company the conversion of loans which was offset from received loans from a third party. The increase in the Company’s total liabilities from June 30, 2015 to March 31, 2015, was primarily attributable to the fact of the increase in derivative valuations.

 

Cash Flow for the Company for the Three Month Period Ended June 30, 2015 as Compared to the Three Month Period Ended June 30, 2015

 

Operating Activities During the three month period ended June 30, 2015, the net cash used by the Company in operating activities was $(413,090) as compared to net cash used in operating activities of $(71,096) during the three month period ended June 30, 2014, a change of $(341,994) or approximately 581%. The increase in our net cash used in operating activities was primarily attributable to net income adjusted by a decrease in amortization and depreciation, an increase in gain on derivative liability, an increase in accounts receivable, a decrease in accounts payable and accrued liabilities, and a decrease in accounts payable due to a related party.

 

Investing Activities During three month period ended June 30, 2015, the net cash used by the Company in investing activities was $134,440, as compared to net cash used in investing activities of $ nil during the three month period ended June 30, 2014, a change of $134,440. The change in net cash used by investing activities was primarily attributable to the fact that the Company purchased assets per the Asset Purchase Agreement.

 

Financing Activities During the three month period ended June 30, 2015, the net cash provided by financing activities was $348,835 as compared to net cash provided by financing activities of $85,000 during the three month period ended June 30, 2013, an increase of $263,835, or approximately 410%. The change in net cash provided by financing activities was primarily attributable to the fact that the Company received less cash via loans from third and related parties.

 

Subsequent Events

 

On July 9, 2015, the Company issued a total of 30,184,528 shares of common stock and 264,503 shares of Series B Preferred Stock to the owners of DCI, which shares of Series B Preferred Stock convert into 26,450,300 shares of common stock (ignoring the 4.9% conversion limitation in the Series B designation of rights), satisfying the Company’s obligation to issue shares to the owners of DCI pursuant to the Company’s Asset Purchase Agreement with DCI.

 

On or about July 14, 2015, Global Capital Corporation (“Global”) returned 2,377,500 shares of Series A Convertible Preferred Stock to the Company's transfer agent for cancellation pursuant to its settlement agreement with the Company, and after that cancellation, there were only 2,622,500 shares of Series A Convertible Preferred Stock issued and outstanding.

 

 
24
 

 

On July 20, 2015, the Company entered intoa Settlement Agreement (the "Micro-Tech Settlement Agreement") with Micro-Tech Industries, Ltd., lender and preferred shareholder of the Company ("Micro-Tech"). Micro-Tech owns 839,500 shares of the Company's 2,622,500 issued and outstanding shares of Series A Convertible Preferred Stock (the "Micro-Tech Preferred Stock"). Pursuant to the Micro-Tech Settlement Agreement, Micro-Tech agreed to immediately return all of the Micro-Tech Preferred Stock to the Company for cancellation in consideration for the Company issuing 7,975,250 shares of common stock to Micro-Tech.As of July 31, 2015, the 839,500 preferred shares had not been cancelled and the common shares were not issued.

 

On July 20, 2015, the Companyentered intoa Settlement Agreement (the "Whonon Settlement Agreement") with Whonon Trading S. A., lender and preferred shareholder of the Company ("Whonon"). Whonon owns 1,783,000 shares of the Company's 2,622,500 issued and outstanding shares of Series A Convertible Preferred Stock (the "Whonon Preferred Stock"). Pursuant to the Whonon Settlement Agreement, Whonon agreed to immediately return all of the Whonon Preferred Stock to the Company for cancellation in consideration for the Company issuing 16,938,500 shares of common stock to Whonon.As of July 31, 2015, the preferred shares had not been cancelled and the common shares were not issued.

 

On July 20, 2015, the Company's CEO returned 22,376,836 shares of common stock to the Company for cancellation in exchange for the issuance of 223,768 shares of Series C Preferred Stock.

 

On July 20, 2015, a related party shareholder returned 9,600,000 shares of common stock to the Company for cancellation in exchange for the issuance of 96,000 shares of Series C Preferred Stock.

 

On July 23, the Company granted a non-qualified stock option to two of its directors as compensation for their services. The directors are entitled to purchase a total of seven hundred and fifty thousand (750,000) shares each of restricted common stock for a price equal to $0.01 per share (Exercise Price), exercisable over a ten-year period thereafter. The option shall be vested during the 12 month period. As to the total number of Shares with respect to which the Option is granted, the Option shall be exercisable as follows: (i) 25% of the Option in the aggregate may be exercised upon the mutual execution of this Agreement (ii) 50% of the Option in the aggregate may be exercised on or after the four month anniversary of the Grant Date; (iii) 75% of the Option in the aggregate may be exercised on or after the eight month anniversary of the Grant Date; and (iv) 100% of the Option in the aggregate may be exercised on or after the twelve month anniversary of the Grant Date (the twelve month period commencing on the Grant Date and ending on the twelve month anniversary of the Grant Date being referred to as the "Vesting Period"). As of August 15, 2015, the director has not exercised any rights. The total fair value of these options at the date of grant was estimated to be $15,750 and was determined using the Black-Scholes option pricing model with an expected life of 10 years, a risk free interest rate of 2.28%, a dividend yield of 0% and expected volatility of 230.55%. This $15,750 was recorded as stock based compensation expense based on 1.5 million (1,500,000) options vested.

 

On August 7, 2015, the Company issued 2,000,000 shares of common stock to Justin Keener d/b/a JMJ Financial (“JMJ”) in partial satisfaction of its obligations under, and the holder’s election to convert a $10,800 portion of, the Company’s convertible promissory note issued to JMJ on January 21, 2015.

 

On August 7, 2015, the Company issued 649,833 shares of common stock to LG Capital Funding LLC (“LG”) in partial satisfaction of its obligations under, and the holder’s election to convert a$4,180portion of, the Company’s convertible promissory note issued to LG on January 11, 2015.

 

On August 7, 2015, the Company issued 3,249,481 shares of common stock to Union Capital, LLC (“Union”) in partial satisfaction of its obligations under, and the holder’s election to convert a $16,085portion of, the Company’s convertible promissory note issued to Union on December 19, 2014.

 

On August 13, 2015, the Company issued 13,176,725 shares of common stock to Typenex Co-Investments, LLC (“Typenex”) in partial satisfaction of its obligations under, and the holder’s election to convert a $67,636portion of, the Company’s convertible promissory note issued to Typenex on February 3, 2015.

 

 
25
 

 

On August 13, 2015, the Company issued 782,228 shares of common stock to Adar Bays LLC (“Adar Bays”) in partial satisfaction of its obligations under, and the holder’s election to convert a $5,000 portion of, the Company’s convertible promissory note issued to Adar Bays on December 19, 2014.

 

Critical Accounting Policies

 

Our financial statements are based on the application of accounting principles generally accepted in the United States ("GAAP"). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue, and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

 

Our significant accounting policies are summarized in Note 2 of our financial statements are included in the Company's Current Report on Form 10-K filed on August 5, 2015. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause an effect on our results of operations, financial position or liquidity for the periods presented in this report.

 

Revenue Recognition

 

Product revenue and miscellaneous income are recognized as earned.

 

The Company recognizes revenue and gains when earned and related costs of sales and expenses when incurred. The Company recognizes revenue in accordance with Accounting Standards Codification Section 605-10-599, Revenue Recognition, Overall, SEC Materials ("Section 605-10-599"). Section 605-10-599 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and determinable; and (4) collectability is reasonably assured. Cost of products sold consists of the cost of the purchased goods and labor related to the corresponding sales transaction. When a right of return exists, the Company defers revenues until the right of return expires. The Company recognizes revenue from services at the time the services are completed.

 

Off Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Recent Accounting Pronouncements

 

Management has considered all recent accounting pronouncements issued since the last audit of our consolidated financial statements. The Company's management believes that these recent pronouncements will not have a material effect on the Company's consolidated financial statements.

 

 
26
 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Not Applicable.

 

ITEM 4. CONTROLS AND PROCEDURES.

 

Disclosure Controls and Procedures

 

The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean the company's controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to principal executive and principal financial officers to allow timely decisions regarding disclosure.

 

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are not designed to provide reasonable assurance of achieving the objectives of timely alerting them to material information required to be included in our periodic SEC reports and of ensuring that such information is recorded, processed, summarized and reported within the time periods specified. Our chief executive officer and chief financial officer also concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report to provide reasonable assurance of the achievement of these objectives. Based on that evaluation, our management has concluded that, as of June 30, 2015, the Company's internal control over financial reporting contained a material weakness due to a failure by the Company to properly value a stock transaction issued by the Company, and as a result of such material weakness, our internal controls over financial reporting were not effective as of June 30, 2015. To remediate the weakness in our internal controls over financial reporting, we intend to: i) reconcile stock issuance transactions against the agreements underlying such stock issuance transactions to ensure that equity issuances are properly accounted for; and ii) implement a review board to review the stock issuance transactions to ensure that they are properly valued and accounted for.

 

Changes in Internal Control over Financial Reporting

 

There was no change in the Company's internal control over financial reporting during the period ended June 30, 2014, that has materially affected, or is likely to materially affect, the Company's internal control over financial reporting.

 

 
27
 

 

PART II-OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

The Company is not a party to any significant pending legal proceedings other than as disclosed below, and no other such proceedings are known to be contemplated. No director, officer or affiliate of the Company, and no owner of record or beneficial owner of more than 5.0% of the securities of the Company, or any associate of any such director, officer or security holder is a party adverse to the Company or has a material interest adverse to the Company in reference to pending litigation.

 

On or about April 13, 2015, the Company was served with a lawsuit filed by George Sharp against the Company and numerous other defendants, with a cause of action against the Company for its alleged participation in sending “spam” emails to Mr. Sharp. The Company did not participate in sending any emails to Mr. Sharp, retained California litigation counsel, and filed a demurrer in California. On or about June 3, 2015, the Company and Mr. Sharp entered into a settlement agreement, and the case against the Company was subsequently dismissed with prejudice.

 

On July 16, 2015, the Company’s independent certifying accounting firm, Sadler Gibb & Associates, LLC, notified the Company during a phone call that a consultant, Jay Lake, to the Company’s outside accountant, One Blue Mountain, was subject to a PCAOB order barring Mr. Lake from being an associated person of a registered public accounting firm. Pursuant to Section 105(c)(7) of the Sarbanes-Oxley Act of 2002, it is unlawful for a person subject to such an association bar to willfully associate with an issuer in an accountancy or a financial management capacity without the consent of the PCAOB or the Securities and Exchange Commission, and for an issuer to permit such person to associate with the issuer if the issuer knew or should have known in the exercise of reasonable care of the association bar. On July 17, 2015, we transitioned to using another outside accountant in lieu of One Blue Mountain, and on July 22, 2015, formally terminated One Blue Mountain. On July 21, 2015, the Company reported the matter to the Securities and Exchange Commission.

 

ITEM 1A. RISK FACTORS.

 

Not Applicable.

 

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

 

As previously disclosed on Form 8-K filed on June 9, 2015, on June 2, 2015, the Companyentered intoan Asset Purchase Agreement (the “Agreement”) with Dependable Critical Instructure, Inc. f/k/a DTREDS Consolidated Inc., a Delaware corporation (“DCI”), and Viking Telecom Services, LLC, a Minnesota limited liability company (“Viking”). Pursuant to the Agreement, the parties agreed that the Company would purchase assets of DCI relating to Viking which DCI had acquired from Viking (general intangibles, including contract rights, office furniture, IBM server, 2011 Chevrolet Silverado 2500 Diesel truck, and accounts receivable after January 1, 2015), in consideration of the Company (1) assuming limited liabilities associated with Viking (loan payment for Chevrolet truck in the amount of $668 per month, loan payment to Joshua Claybaugh of $5,000 per month for 11 months), (2) issuing the owners of DCI a total of 62,236,075 shares of Company common stock, and (3) paying DCI $200,000 as soon as reasonably possible after closing of the acquisition. The Company’s CEO, Dr. Cellucci, is the CEO and Chairman of DCI, and a minority owner of DCI. On July 9, 2015, the Company issued 30,184,496 shares of common stock to five of the six owners of DCI pursuant to the Company's acquisition of assets from DCI described herein, and on July 17, 2015, the Company issued an additional 32 shares of common stock and 264,503 shares of Series B Preferred Stock to the remaining owner of DCI. Due to the related party nature of the purchase, the transaction was recorded using historical cost.

 

As previously disclosed on Form 8-K filed on July 23, 2015, on July 20, 2015, the Company entered into a Settlement Agreement (the "Micro-Tech Settlement Agreement") with Micro-Tech Industries, Ltd., lender and preferred shareholder of the Company ("Micro-Tech"). Micro-Tech owns 839,500 shares of the Company's 2,622,500 issued and outstanding shares of Series A Convertible Preferred Stock (the "Micro-Tech Preferred Stock"). On or about July 14, 2015, Global Capital Partners, LLC, returned 2,377,500 shares of Series A Convertible Preferred Stock to the Company's transfer agent for cancellation pursuant to its settlement agreement with the Company previously reported in the Company's Current Report on Form 8-K filed on June 16, 2015, and after that cancellation, there were only 2,622,500 shares of Series A Convertible Preferred Stock issued and outstanding. Pursuant to the Micro-Tech Settlement Agreement, Micro-Tech agreed to immediately return all of the Micro-Tech Preferred Stock to the Company for cancellation in consideration for the Company issuing 7,975,250 shares of common stock to Micro-Tech.

 

 
28
 

 

As previously disclosed on Form 8-K filed on July 23, 2015, on July 20, 2015, the Company entered into a Settlement Agreement (the "Whonon Settlement Agreement") with Whonon Trading S. A., lender and preferred shareholder of the Company ("Whonon"). Whonon owns 1,783,000 shares of the Company's 2,622,500 issued and outstanding shares of Series A Convertible Preferred Stock (the "Whonon Preferred Stock"). Pursuant to the Whonon Settlement Agreement, Whonon agreed to immediately return all of the Whonon Preferred Stock to the Company for cancellation in consideration for the Company issuing 16,938,500 shares of common stock to Whonon.

 

As previously disclosed on Form 8-K filed on August 17, 2015, on August 7, 2015, the Company issued 2,000,000 shares of common stock to Justin Keener d/b/a JMJ Financial (“JMJ”) in partial satisfaction of its obligations under, and the holder’s election to convert a $10,800 portion of, the Company’s convertible promissory note issued to JMJ on January 21, 2015.

 

As previously disclosed on Form 8-K filed on August 17, 2015, on August 7, 2015, the Company issued 649,833 shares of common stock to LG Capital Funding LLC (“LG”) in partial satisfaction of its obligations under, and the holder’s election to convert a $4,179.73 portion of, the Company’s convertible promissory note issued to LG on January 11, 2015.

 

As previously disclosed on Form 8-K filed on August 17, 2015, on August 7, 2015, the Company issued 3,249,481 shares of common stock to Union Capital, LLC (“Union”) in partial satisfaction of its obligations under, and the holder’s election to convert a $ 16,084.93 portion of, the Company’s convertible promissory note issued to Union on December 19, 2014.

 

As previously disclosed on Form 8-K filed on August 17, 2015, on August 13, 2015, the Company issued 13,176,725 shares of common stock to Typenex Co-Investments, LLC (“Typenex”) in partial satisfaction of its obligations under, and the holder’s election to convert a $67,636.13 portion of, the Company’s convertible promissory note issued to Typenex on February 3, 2015.

 

As previously disclosed on Form 8-K filed on August 17, 2015, on August 13, 2015, the Company issued 782,228 shares of common stock to Adar Bays LLC (“Adar Bays”) in partial satisfaction of its obligations under, and the holder’s election to convert a $5,000 portion of, the Company’s convertible promissory note issued to Adar Bays on December 19, 2014.

 

The issuances of these shares were made in reliance on the exemption from registration provided by Sections 3(a)(9) and 4(a)(2) of the Securities Act as the common stock was issued in exchange for debt securities of the Company held by each shareholder, there was no additional consideration for the exchange, there was no remuneration for the solicitation of the exchange, there was no general solicitation, and the transactions did not involve a public offering.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

None.

 

ITEM 5. OTHER INFORMATION.

 

None.

 

 
29
 

 

ITEM 6. EXHIBITS.

 

Number

Description

3.1

Articles of Incorporation (incorporated by reference to our General Form for Registration of Securities on Form 10 filed on November 10, 2008)

 

3.2

Bylaws (incorporated by reference to our General Form for Registration of Securities on Form 10 filed on November 10, 2008)

 

3.3

Articles of Amendment to Articles of Incorporation (incorporated by reference to our Current Report on Form 8-K filed on April 1, 2014)

 

3.4

Certificate of Designation of Series B Preferred Stock (incorporated by reference to our Current Report on Form 8-K filed on July 23, 2015)

 

3.5

Certificate of Designation of Series C Preferred Stock (incorporated by reference to our Current Report on Form 8-K filed on July 23, 2015)

 

10.1

Commodity Classification Document (incorporated by reference to our General Form for Registration of Securities on Form 10 filed on November 10, 2008)

 

10.2

Director Agreement and Restricted Shares Agreement dated February 15, 2011, with Curt Weldon (incorporated by reference to our Current Report on Form 8-K filed on February 9, 2011)

 

10.3

Director Agreement and Restricted Shares Agreement dated February 15, 2011, with Jay Cohen (incorporated by reference to our Current Report on Form 8-K filed on February 15, 2011)

 

10.4

Stock Compensation Program (incorporated by reference to our Current Report on Form 8-K filed on April 20, 2011)

 

10.5

Director Agreement and Nonqualified Stock Option Agreement dated February 16, 2012, with Thomas Trkla (incorporated by reference to our Current Report on Form 8-K filed on February 22, 2012)

 

10.6

Director Agreement and Restricted Shares Agreement dated July 8, 2011, with Eric Mettala (incorporated by reference to our Current Report on Form 8-K filed on July 11, 2011)

 

10.7

Director Agreement and Restricted Shares Agreement dated March 27, 2014, with Thomas Cellucci (incorporated by reference to our Current Report on Form 8-K filed on April 1, 2014)

 

10.8

Employment Agreement and Restricted Shares Agreement dated June 16, 2014, with Thomas Cellucci (incorporated by reference to our Current Report on Form 8-K filed on June 18, 2014)

 

10.9

Amendments to Employment Agreement and Restricted Shares Agreement with Thomas Cellucci

 

10.10

Asset Purchase Agreement with Dependable Critical Infrastructure, Inc. dated June 2, 2015 (incorporated by reference to our Form 8-K filed on June 9, 2015)

 

10.11

Settlement Agreement with Global Capital Corporation dated June 10, 2015 (incorporated by reference to our Form 8-K filed on June 16, 2015)

 

10.12

Settlement Agreement with Micro-Tech Industries, Ltd., dated July 20, 2015 (incorporated by reference to our Form 8-K filed on July 23, 2015)

 

 
30
 

 

10.13

Settlement Agreement with Whonon Trading S.A., dated July 20, 2015 (incorporated by reference to our Form 8-K filed on July 23, 2015)

 

14.1

Code of Ethics (incorporated by reference to our Annual Report on Form 10-K filed July 13, 2010)

 

31.1

Certification of Principal Executive Officer required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

31.2

Certification of Principal Financial Officer required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

32.1

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C. 63

 

32.2

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C. 63

 

101.INS**

XBRL Instance Document

 

101.SCH**

XBRL Taxonomy Extension Schema Document

 

101.CAL**

XBRL Taxonomy Extension Calculation Linkbase Document

 

101.DEF**

XBRL Taxonomy Extension Definition Linkbase Document

 

101.LAB**

XBRL Taxonomy Extension Label Linkbase Document

 

101.PRE**

XBRL Taxonomy Extension Presentation Linkbase Document

 

* Filed Herewith

 

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

 
31
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

ECRYPT TECHNOLOGIES, INC.

 

       
Date: August 25, 2015 By: /s/ Thomas A. Cellucci

 

 

 

Thomas A. Cellucci, Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

32