The Company valued the conversion feature at the issue dates, on March 28, 2016 and December 21, 2015, at $442,976 and $30,319, respectively, using the Black Scholes valuation model. On March 28, 2016 and December 21, 2015, $250,000 and $30,319, respectively, of the value assigned to the derivative liability was recognized as a debt discount on the convertible debentures. The financing costs of $17,500 were included as part of the debt discount on the March 28, 2016 note. The debt discounts were recorded as a reduction (contra-liability) to the convertible debentures and are being amortized over the life of the notes using the straight line method. For the March 28, 2016 note, the excess of fair value of the conversion option over the face value of the note of $210,476 of was expensed on the issue date of the convertible note as loss on change in fair value of derivative liability.

As of March 31, 2016, the outstanding principal balance of the notes were $750,000, the notes had accrued interest of $17,879, an unamortized debt discount of $271,521. Interest expense from debt discount amortization of $8,166 was recorded for the three months ended March 31, 2016.

8% Convertible Note – February 2016

The Company valued the conversion feature at the issue date (February 5, 2016) at $13,879 using the Black Scholes valuation model and was recognized as a debt discount on the convertible debenture.  The debt discount was recorded as a reduction (contra-liability) to the convertible debenture and is being amortized over the life of the convertible debenture. 

As of March 31, 2016, the outstanding principal balance of the note was $30,000, the note had accrued interest of $362 and an unamortized debt discount of $11,566. Interest expense and debt discount amortization of $362 and $2,313, respectively, was recorded for the three months ended March 31, 2016.

NOTE 5. DERIVATIVE LIABILITIES

The Company analyzed the conversion option for derivative accounting consideration under ASC 815, Derivatives and Hedging, and determined that the instrument should be classified as a liability since the conversion option becomes effective at issuance resulting in there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.

 

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The following table summarizes the derivative liabilities included in the balance sheet at March 31, 2016:

 

The following table summarizes the loss on derivative liability included in the statement of operations for the three months ended March 31, 2016 and 2015, respectively.

 

	Three Months Ended
	March 31,
	2016				2015
Day one loss due to derivatives on convertible notes and warrants		$	266,880			$	-
Day one loss due to derivatives on debt issue cost			17,500				-
Loss on change in fair value of the derivative			891,770				-
Net loss on derivative liability		$	1,176,150			$	-

 

NOTE 6. RELATED PARTY CONSIDERATIONS

 

Rent

Total rent expenses for the three months ended March 31, 2016 and 2015 were $4,995 and $5,175, respectively.

Customer		Three Months Ended			Three Months Ended
		March 31, 2016			March 31, 2015
Consultancy
EU      OCG UK			-%			50%
EU      Key Talk			-%			50%
Software License
EU      PWN			100%			-%

·		Increase the number of authorized shares of common stock, $0.001 par value from 100,000,000 to 500,000,000;
·		Create a class of preferred stock consisting of 10,000,000 shares, the designations and attributes of which are left for future determination by our board of directors (“Preferred Stock”);
·		Designated 808,000 shares of Preferred Stock as its Series A Convertible Preferred;
·		Effect a 1 for 6 forward stock split of the Company’s issued and outstanding common stock;

Common Stock

 

The Company has authorized 500,000,000 common shares with a par value of $0.001 per share. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.

As at March 31, 2016 and December 31, 2015 the Company had 75,310,000 and 74,910,000 shares of common stock issued and outstanding, respectively.

Warrants

The following table summarizes information relating to outstanding and exercisable warrants as of March 31, 2016:

NOTE 9.  INCENTIVE STOCK PLANS

We granted stock options, which were adopted by our board of directors on December 21, 2015, that provide equity incentives to our executive officers or directors.

During the year ended December 31, 2015 we issued options to purchase an aggregate of 8,173,686 shares of our unregistered common stock at a price of $0.04893 per share for 1/3 of the shares, $0.05873 per share for 1/3 of the shares, and $0.06852 per share for 1/3 of the shares. The options had an aggregate value totaling $71,630 and were issued to Messrs. Verweij, van Wijk and de Vries, executive officers of our company.

The outstanding options have a weighted-average remaining contract term of 4.73 years. As of March 31, 2016, all options remain unvested.

 

One-third of the options granted vest at the end of the first, second and third year after the date of the award date of December 21, 2015.  After vesting, the option generally can be exercised for the period remaining in the 5-year term from issuance date. Total compensation cost expected to be recognized for unvested options at March 31, 2016 amounted to $10,842 over a weighted average period of three months.

 

The following table summarizes information relating to outstanding and exercisable stock options as of March 31, 2016:

 

Aggregate intrinsic value is the sum of the amounts by which the quoted market price of the Company's stock exceeded the exercise price of the stock options at March 31, 2016 for those stock options for which the quoted market price was in excess of the exercise price ("in-the-money options"). As of March 31, 2016, the aggregate intrinsic value of options outstanding was $nil, as we did not have options available for exercise. As of March 31, 2016, no options to purchase shares of common stock were exercisable.

NOTE 10.  SUBSEQUENT EVENTS

On May 16, 2016, the Company issued 10% convertible promissory notes payable in the aggregate amount of $75,000 to two unrelated investors (the “May 2016 Convertible Notes”). The May 2016 Convertible Notes bear interest at the rate of 10% per annum and matures October 31, 2017. Interest is payable upon maturity at time of conversion. The holder is entitled to convert any portion of the outstanding and unpaid conversion amount in to fully paid and non-assessable shares of Common Stock. The conversion price (the “Conversion Price”) is, subject to adjustment, 80% of the volume weighted average price of the Common Stock for the ten (10) trading days immediately prior to the applicable conversion date, subject to adjustment herein but in no event: (i) lower than $6,000,000 divided by the total number of shares of Common Stock outstanding immediately prior to the conversion date; or (ii) greater than $18,000,000 divided by the total number of shares of common stock outstanding immediately prior to the conversion date. The conversion price of the May 2016 Convertible Notes is subject to proportional adjustment in the event of stock splits, stock dividends and similar corporate events. Further, the May 2016 Convertible Notes are not convertible to the extent that (a) the number of shares of our common stock beneficially owned by the holder and (b) the number of shares of our common stock issuable upon the conversion of the May 2016 Convertible Notes or otherwise would result in the beneficial ownership by holder of more than 4.99% of our then outstanding common stock. This ownership limitation can be increased or decreased to any percentage not exceeding 9.99% by the holder upon 61 days’ notice to us. The May 2016 Convertible Notes automatically convert into shares of our Common Stock at the conversion price without any action of the holder upon the occurrence of any of the following events after the date the notes were issued: (i) the completion of a public offering of the Company’s securities for gross proceeds of at least $5,000,000 pursuant to an effective registration statement under the Securities Act (a “Public Offering”); or (ii) we complete one or more financing transactions subsequent to the date of issuance and prior to the Maturity Date for gross proceeds of at least $5,000,000.

The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and associated notes appearing elsewhere in this Report on Form 10-Q. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results may differ materially from those contained in or implied by any forward-looking statements as a result of various factors, including the risks and uncertainties described under “Risk Factors.”

Accounting Periods. We define our accounting periods as follows:

●   “2015”—January 1, 2015 through December 31, 2015,

●   “first quarter of 2015”—January 1, 2015 through March 31, 2015,

●   “2016”—January 1, 2016 through December 31, 2016,

●   “first quarter of 2016”—January 1, 2016 through March 31, 2016.

Stock Split. Effective January 21, 2016, we effected a 1 for 6 forward stock split of our issued and outstanding common stock (the “Forward Stock Split”). All references to shares of our common stock in this report on Form 10-Q refers to the number of shares of common stock after giving effect to the Forward Stock Split (unless otherwise indicated).

Company Overview

Our flagship product — IDdriven — is designed to manage large volumes of users and access rights over various applications in hybrid environments (cloud and on-premise). IDdriven is a superior, next-gen hybrid cloud-based solution and the new state of the art software delivered as a service (Software as a Service or “SaaS”). It is dynamic, seamless, scalable, and flexible with the widest array of features. Its plug & play functionality enables a new, untapped small and medium-sized enterprises (SME) marketplace.

Marketing Strategy

 We use different marketing channels to reach two different categories of customer:

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Small & Medium Enterprises (SME) (<500 subscribers) – via direct web-based interaction; and

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Large companies (500+) via channel partners.

We are a cost effective SaaS solution suitable to companies in all industries of any size. SME’s will be able to download IDdriven and pay with a credit card to capitalize on the program’s simple, plug & play installation. Large companies typically use a channel partner for a more sophisticated implementation to utilize IDdriven’s advanced features not needed by SME’s.

Utilizing the relationships of our senior management with the Microsoft Product Group since 2010, we continue to build our brand within the IAM industry. We also work with our partners and customers for joint news releases and case studies. We will continue our internal marketing activities, including following editorial calendars of various trade and vertical publications, seeking speaking engagements for our CEO, and publishing industry articles.