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 such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [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 filed, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). [ ] Yes [X] No
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date. As of June 16, 2017, the number of shares of the registrants common stock outstanding was 35,013,838.
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
This Quarterly Report on Form 10-Q filed by Vgrab Communications Inc. contains forward-looking statements. These are statements regarding financial and operating performance and results and other statements that are not historical facts. The words expect, project, estimate, believe, anticipate, intend, plan, forecast, and similar expressions are intended to identify forward-looking statements. Certain important risks could cause results to differ materially from those anticipated by some of the forward-looking statements. These risks include, among other things: general economic conditions; our ability to raise enough money to continue our operations; changes in regulatory requirements that adversely affect our business; customer acceptance of our proprietary software application; and other risks and uncertainties as set forth in Part II - Item 1A - Risk Factors.
Forward-looking statements are based on a number of material factors and assumptions, including, but not limited to, the economic conditions will continue to show modest improvement in the near to medium future, no material change to competitive environment, we will be able to access sufficient qualified staff and there will be no material changes to the tax and other regulatory requirements governing us. While we consider these assumptions may be reasonable, based on information currently available to us, these assumptions may prove to be incorrect. Actual results may vary from such forward-looking information for a variety of reasons, including but not limited to risks and uncertainties disclosed in the section titled "Part II - Item 1A - Risk Factors.
We caution you not to place undue reliance on these forward-looking statements, which reflect our managements view only as of the date of this report. We are not obligated to update these statements or publicly release the results of any revisions to them to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events unless required by applicable securities laws. You should refer to, and carefully review, the information in the future documents we file with the United States Securities and Exchange Commission (the SEC).
You should read this discussion and analysis in conjunction with our interim unaudited consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and related notes for the fiscal year ended October 31, 2016, included in our Annual Report on Form 10-K. The inclusion of supplementary analytical and related information may require us to make estimates and assumptions to enable us to fairly present, in all material respects, our analysis of trends and expectations with respect to our results of operations and financial position taken as a whole. Actual results may vary from the estimates and assumptions we make.
We were incorporated on August 4, 2010, under the laws of the State of Nevada under the name SOS Link Corporation. On April 15, 2011, we changed our place of incorporation from the State of Nevada to the Province of British Columbia, Canada and concurrently changed our name to Venza Gold Corp.. The change from Nevada to British Columbia was approved by our shareholders on April 14, 2011. On January 6, 2014, we changed our name to CoreComm Solutions Inc. and on February 11, 2015, we changed our name to Vgrab Communications Inc. to reflect our current business.
On February 10, 2015, we completed an acquisition of the Vgrab software application (the Vgrab Application) pursuant to the terms of a software purchase agreement dated January 8, 2015 (the Software Purchase Agreement) between us and Hampshire Capital Limited (Hampshire). The Vgrab Application is a free mobile voucher application developed for smartphones using the Android and Apple iOS operating systems and allows users to redeem vouchers on their smartphones at a number of retailers and merchants.
Our business involves the development of mobile applications for merchant and consumer use. We are working on development of two different types of mobile applications, an application designed for consumers (the Vgrab Application) and an application designed for merchants (the Vgrab Merchant Application). In addition we are also working on development of an online platform to sell online goods (the Vmore Platform), and a new video service portal, Vmore Video, which will focus on filming and supplying HD and 360-degree short videos with an emphasis on sports and extreme sports. In addition, we provide marketing services to merchants including advertising on our website and in our newsletters.
On June 24, 2015, we formed a subsidiary, Vgrab International Ltd., (the Subsidiary, or Vgrab International) under the Labuan Companies Act 1990 in Federal Territory of Labuan, Malaysia. The main focus of the Subsidiary is to continue development of the Vgrab Applications and the Vmore Platform, and start their market penetration in Southeast Asia.
Our operating results for the three and six months ended April 30, 2017 and 2016 and the changes in the operating results between those periods are summarized in the table below.
During the three and six months ended April 30, 2017 and 2016 we did not have any revenue generating operations and we can provide no assurances that we will be able to generate enough cash flow from our operations to support our ongoing operations.
Our operating expenses for the three and six months ended April 30, 2017 and 2016 consisted of the following:
Year-to-date, our operating expenses decreased by $151,529 or 79% from $190,774 we incurred during the six-month period ended April 30, 2016 to $39,245 we incurred during the six-month period ended April 30, 2017. The most significant change in our operating expenses was associated with reduction in our software development costs of $150,000, followed by decreases in professional fees of $3,699 or 55% and accounting fees of $1,659 or 24%. These decreases were in part offset by an increase in regulatory fees of $3,244, or 43% and an increase in our general and administrative fees of $585, or 3%.
During the six-month period ended April 30, 2016, we recorded $79,167 as finders fee, being a fair value of the 500,000 common shares we issued to Rain Communications Inc., a company controlled by Mr. Ralph Biggar our shareholder, and former director and officer. The shares were issued as finders fee for introducing us to Hampshire Capital Limited, the Vendor of the Vgrab Application. The share issuance was completed pursuant to the provisions of Regulation S of the Securities Act. We did not have similar transactions during the six-month period ended April 30, 2017.
Changes in translation to reporting currency result from a difference between our functional currency, being the Canadian dollar, and reporting currency, being the United States dollar, and are caused by fluctuation in foreign exchange between the two currencies as well as different accounting treatments between various financial instruments.
The unaudited interim consolidated financial statements included in this Quarterly Report have been prepared on a going concern basis, which implies that we will continue to realize our assets and discharge our liabilities in the normal course of business. We have not generated any revenues from operations since inception, have never paid any dividends and are unlikely to pay dividends or generate significant earnings in the immediate or foreseeable future. Our continuation as a going concern depends upon the continued financial support of our shareholders, our ability to obtain necessary debt or equity financing to continue operations, and the attainment of profitable operations.
Based upon our current plans, we expect to incur operating losses in future periods. At April 30, 2017, we had a working capital deficit of $157,322 and accumulated losses of $5,615,117 since inception. These factors raise substantial doubt about our ability to continue as a going concern. We cannot assure you that we will be able to generate significant revenues in the future. These unaudited interim consolidated financial statements do not give effect to any adjustments that would be necessary should we be unable to continue as a going concern. Therefore, we may be required to realize our assets and discharge our liabilities in other than the normal course of business and at amounts different from those reflected in our financial statements.
During the six-month period ended April 30, 2017, our working capital deficit increased by $41,246, from $116,076 at October 31, 2016 to $157,322 at April 30, 2017. The increase in working capital deficit was primarily related to the decrease in our cash balances of $34,689, which was in part offset by increase in our prepaid regulatory expenses from $3,582 we recorded at October 31, 2016, to $8,164 we recorded at April 30, 2017. Our accounts payable increased by $16,807 due to lack of cash to pay outstanding payables, and were in part offset by decrease in accrued liabilities of $6,083.
During the six months ended April 30, 2017, we used $31,487 to support our operating activities. This cash was used to cover our cash operating expenses of $39,245, increase our prepaid expenses by $4,770, and to decreases our accrued liabilities by $6,074. These uses of cash were offset by increases in our accounts payable of $18,206 and by decrease to our GST recoverable of $396.
During the six months ended April 30, 2016, we used $27,031 to support our operating activities. This cash was used to cover our cash operating expenses of $190,529, increase our GST recoverable and prepaid expenses by $321 and $4,116, respectively, and to decreases to our accrued liabilities by $1,481. These uses of cash were offset by an increase in our accounts payable of $19,416, and $150,000 increase in amounts due to related parties, which were associated with the continued development of the Vgrab Applications, the Vmore Platform, and the Vgrab.com website. The development costs were paid or accrued to Hampshire Infotech under the development service agreement, which we terminated on March 31, 2016.
During the six months ended April 30, 2016, we issued 500,000 shares of our common stock to Rain Communications Inc. for introducing us to Hampshire Capital Limited, the Vendor of the Vgrab Application. The fair value of these shares was determined to be $79,167 and was recorded as finders fees. In addition, the Company accrued $245 in interest on outstanding loans. We did not have any similar transactions during the six-month period ended April 30, 2017.
During the six months ended April 30, 2017, we did not have any cash generating financing activities.
During the six months ended April 30, 2016, we received $14,027 (CAD$21,000) and $12,500 as proceeds from the loan agreements with Hampshire Avenue SDN BHD, a parent company of Hampshire Capital Limited and Hampshire Infotech. The loans bore interest at 4% per annum, were unsecured and payable on demand.
Our ability to continue the development and marketing of the Vgrab Applications, Vmore Platform, and Vmore Video is subject to our ability to obtain the necessary funding. We expect to raise funds through sales of our debt or equity securities. We have no committed sources of capital. If we are unable to raise funds as and when we need them, we may be required to curtail, or even to cease, our operations.
As of April 30, 2017, we had cash on hand of $2,366 and working capital deficit of $157,322, which raises substantial doubt about our continuation as a going concern. We plan to mitigate our losses in future years by controlling our operating expenses and actively seeking new distribution channels for our Vgrab Applications. We cannot provide assurance that we will be successful in generating additional capital to support our development. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
We have no off-balance sheet arrangements and no non-consolidated, special-purpose entities.
The preparation of financial statements in conformity with United States generally accepted accounting principles requires our management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Our management routinely makes judgments and estimates about the effects of matters that are inherently uncertain.
The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an emerging growth company, we may, under Section 7(a)(2)(B) of the Securities Act, delay adoption of new or revised accounting standards applicable to public companies until such standards would otherwise apply to private companies. We may take advantage of this extended transition period until the first to occur of the date that we (i) are no longer an "emerging growth company" or (ii) affirmatively and irrevocably opt out of this extended transition period. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards. Until the date that we are no longer an "emerging growth company," affirmatively and irrevocably opt out of the exemption provided by Securities Act Section 7(a)(2)(B), or upon issuance of a new or revised accounting standard that applies to our financial statements and that has a different effective date for public and private companies, we will disclose the date on which adoption is required for non-emerging growth companies and the date on which we will adopt the recently issued accounting standard.
Our significant accounting policies are disclosed in the notes to the audited financial statements for the year ended October 31, 2016. The following accounting policies have been determined by our management to be the most important to the portrayal of our financial condition and results of operation:
The Companys interim consolidated financial statements include the accounts of the Company and the Subsidiary. On consolidation, the Company eliminates all intercompany balances and transactions.
The Company incurs costs related to the development of its Vgrab Applications, Vmore Platform as well as its website. Costs incurred in the planning and evaluation stage of internally-developed software and website, as well as development costs where economic benefit cannot be readily determined, are expensed as incurred. Costs incurred and accumulated during the development stage, where economic benefit of the software can be readily determined, are capitalized and included as part of intangible assets on the balance sheets. Additional improvements to the web site and applications following the initial development stage are expensed as incurred. Capitalized internally-developed software and website development costs will be amortized over their expected economic life using the straight-line method.
Long lived assets, such as property, equipment and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. If circumstances require that a long lived asset or asset group be tested for possible impairment, the Company first compares the undiscounted cash flows expected to be generated by that long-lived asset or asset group to its carrying amount. If the carrying amount of the long lived asset or asset group is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying amount exceeds its fair value.
The Companys functional currency is the Canadian dollar and reporting currency is the United States dollar. The Company translates assets and liabilities to US dollars using exchange rates in effect at the reporting date, and translates revenues and expenses using average exchange rates during the period. Gains and losses arising on translation to the reporting currency are included in the other comprehensive income.
The Subsidiarys functional and reporting currency is the United States dollar.
Foreign exchange gains and losses on the settlement of foreign currency transactions or the translation of monetary balances to the functional currency at the year end exchange rate are included in foreign exchange expense.
Our financial instruments include cash, accounts payable, accrued liabilities, amounts due to related parties and loans payable. We believe the fair value of these financial instruments approximate their carrying values due to their short-term nature.
Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and trade accounts receivable.
At April 30, 2017, we had $2,366 in cash on deposit with a large chartered Canadian bank, of which $2,266 was insured. As part of our cash management process, we perform periodic evaluations of the relative credit standing of this financial institution. We have not experienced any losses in cash balances and do not believe we are exposed to any significant credit risk on our cash.
Because our largest shareholder, Hampshire Avenue SDN. BHD. (Hampshire Avenue) controls over 74% of our outstanding common stock, investors may find that corporate decisions influenced by Hampshire Avenue, and Hampshire Group in all, are inconsistent with the best interests of other stockholders.
Hampshire Capital Limited controls 65.69% of the issued and outstanding shares of our common stock and Hampshire Infotech Sdn. controls 8.55% of the issued and outstanding shares of our common stock.
Hampshire Avenue is a parent company of Hampshire Capital and Hampshire Infotech and, accordingly, beneficially controls 74.24% or our common stock (for greater clarity, Hampshire Avenue and its subsidiaries are referred to in this Form 10-Q as Hampshire Group). In accordance with our Articles of Incorporation and Bylaws, Hampshire Group is able to control who is elected to our board of directors and thus could act, or could have the power to act, as our management.
The interests of Hampshire Group may not be, at all times, the same as those of other shareholders. Hampshire Group has the ability to significantly influence the outcome of most corporate actions requiring shareholder approval, including the merger of our company with or into another company, the sale of all or substantially all of our assets and amendments to our Articles of Incorporation. This concentration of ownership with Hampshire Group may also have the effect of delaying, deferring or preventing a change in control of Vgrab which may be disadvantageous to minority shareholders.
We face intense competition.
Our business is evolving and intensely competitive, and is subject to changing technology, shifting user needs, and frequent introductions of new products and services.
We expect competition in e-commerce generally, and group buying in particular, to continue to increase. Our current and potential competitors range from large and established companies to emerging start-ups. Established companies have longer operating histories and more established relationships with customers and users, and they can use their experience and resources against us in a variety of competitive ways, including acquisitions, investing aggressively in research and development, and competing aggressively for advertisers and websites.
If our competitors are more successful than we are in developing compelling products or in attracting and retaining users, advertisers, and content providers, our potential for generating revenues and growth rates could decline.
Our success is dependent upon our ability to provide a superior mobile experience for our customers and merchants.
In order to continue to grow our mobile transactions, it is critical that our application works well with a range of mobile technologies, systems, networks and standards. Our business may be adversely affected if our customers choose not to access our offerings on their mobile devices, or use mobile devices that do not offer access to our mobile applications. Similarly, our business may suffer if our merchants choose not to advertise through our application.
We may be subject to claims that we violated intellectual property rights of others, which claims are extremely costly to defend and could require us to pay significant damages and limit our ability to operate.
Companies in the Internet and technology industries, and other patent and trademark holders seeking to profit from royalties in connection with grants of licenses, own large numbers of patents, copyrights, trademarks and trade secrets and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. We acquired the Vgrab Application from an original developer, however, there may be intellectual property rights held by others, including patents, copyrighted works and/or trademarks, which cover significant aspects of our technology. Any intellectual property claim against us, regardless of merit, could be time consuming and expensive to settle or litigate and could divert managements attention and other resources. These claims also could subject us to significant liability for damages and could result in our having to stop using technology or content found to be in violation of another partys rights. We might be required or may opt to seek a license for rights to intellectual property held by others, which may not be available on commercially reasonable terms, or at all. Even if a license is available, we could be required to pay significant royalties, which would increase our operating expenses. We may also be required to develop alternative non-infringing technology, or content, which could require significant effort and expense and make us less competitive in the relevant market. Any of these results could harm our business and financial performance.
We have a limited number of products.
We are reliant on the marketing and sale of our Vgrab Applications and Vmore Platform. If these products do not achieve sufficient market acceptance, it will be difficult for us to achieve consistent profitability.
If our software is defective, it will adversely affect our business.
Our Vgrab Application may contain undetected errors, defects or bugs. Although we have not suffered significant harm from any errors, defects or bugs to date, we may discover significant errors, defects or bugs in the future that we may not be able to correct or correct in a timely manner. It is possible that errors, defects or bugs will be found in our existing or future software products and related services with the possible results of delays in, or loss of market acceptance of, our products and services, diversion of our resources, injury to our reputation, increased service and warranty expenses and payment of damages.
We have limited brand awareness and there is no assurance that we will be able to achieve brand awareness.
We have achieved limited brand awareness with respect to our Vgrab Application. There is no assurance that we will be able to achieve brand awareness. In addition, we must develop a successful market for our products in order to complete sales. If we are not able to develop successful markets for our products, then such failure will have a material adverse effect on our business, financial condition and operating results.
We sometimes hold a significant portion of our cash in United States dollars, which could weaken our purchasing power in other currencies and limit our ability to conduct our development programs.
Currency fluctuations could affect the costs of our operations and affect our operating results and cash flows. The appreciation of Canadian dollar against the U.S. dollar can increase the costs of our operations.
If we are unable to hire and retain key personnel, we may not be able to implement our business plan and our business will fail.
Our success will largely depend on our ability to hire highly qualified personnel with experience in marketing, programming, data architecture and design. These individuals may be in high demand and we may not be able to attract the staff we need. In addition, we may not be able to afford the high salaries and fees demanded by qualified personnel, or may lose such employees after they are hired. Currently, we have not hired any key personnel. Our failure to hire key personnel when needed could have a significant negative effect on our business.
The JOBS Act will allow us to postpone the date by which we must comply with certain laws and regulations and to reduce the amount of information provided in reports filed with the SEC. We cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
We are and we will remain an "emerging growth company" until the earliest of (i) the last day of the fiscal year during which our total annual revenues equal or exceed $1 billion (subject to adjustment for inflation), (ii) the last day of the fiscal year following the fifth anniversary of our initial public offering, (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt securities, or (iv) the date on which we are deemed a "large accelerated filer" (with at least $700 million in public float) under the Exchange Act. For so long as we remain an "emerging growth company" as defined in the JOBS Act, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies" as described in further detail in the risk factors below. We cannot predict if investors will find our common stock less attractive because we will rely on some or all of these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. If we avail ourselves of certain exemptions from various reporting requirements, as is currently our plan, our reduced disclosure may make it more difficult for investors and securities analysts to evaluate us and may result in less investor confidence.
Our election not to opt out of JOBS Act extended accounting transition period may not make its financial statements easily comparable to other companies.
Pursuant to the JOBS Act, as an emerging growth company, we can elect to opt out of the extended transition period for any new or revised accounting standards that may be issued by the Public Company Accounting Oversight Board (PCAOB) or the SEC.
We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, our company, as an emerging growth company, can adopt the standard for the private company. This may make comparison of our financial statements with any other public company which is not either an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible, as possible different or revised standards may be used.
The JOBS Act will also allow our company to postpone the date by which it must comply with certain laws and regulations intended to protect investors and to reduce the amount of information provided in reports filed with the SEC.
The JOBS Act is intended to reduce the regulatory burden on emerging growth companies. We meet the definition of an emerging growth company and so long as we qualify as an emerging growth company, we will, among other things:
be exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that its independent registered public accounting firm provide an attestation report on the effectiveness of its internal control over financial reporting;
be exempt from the "say on pay provisions (requiring a non-binding shareholder vote to approve compensation of certain executive officers) and the "say on golden parachute provisions (requiring a non-binding shareholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and certain disclosure requirements of the Dodd-Frank Act relating to compensation of Chief Executive Officers;
be permitted to omit the detailed compensation discussion and analysis from proxy statements and reports filed under the Exchange Act, as amended and instead provide a reduced level of disclosure concerning executive compensation; and
be exempt from any rules that may be adopted by the PCAOB requiring mandatory audit firm rotation or a supplement to the auditors report on the financial statements.
We intend to take advantage of all of the reduced regulatory and reporting requirements that are available to the Company so long as we qualify as an emerging growth company. We have elected not to opt out of the extension of time to comply with new or revised financial accounting standards available under Section 102(b)(1) of the JOBS Act. Among other things, this means that our independent registered public accounting firm will not be required to provide an attestation report on the effectiveness of our internal control over financial reporting so long as we qualify as an emerging growth company, which may increase the risk that weaknesses or deficiencies in the internal control over financial reporting go undetected. Likewise, so long as we qualify as an emerging growth company, we may elect not to provide certain information, including certain financial information and certain information regarding compensation of executive officers, which would otherwise have been required to be provided in filings with the SEC, which may make it more difficult for investors and securities analysts to evaluate us. As a result, investor confidence in our company and the market price of our common stock may be adversely affected.
Notwithstanding the above, we are also currently a smaller reporting company, meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company and have a public float of less than $75 million and annual revenues of less than $50 million during the most recently completed fiscal year. In the event that we are still considered a smaller reporting company, at such time we cease being an emerging growth company, the disclosure we will be required to provide in our SEC filings will increase, but will still be less than it would be if we were not considered either an emerging growth company or a smaller reporting company.
Specifically, similar to emerging growth companies, smaller reporting companies are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; are not required to conduct say-on-pay and frequency votes until annual meetings occurring on or after January 21, 2013; and have certain other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two years of audited financial statements in annual reports. Decreased disclosures in our SEC filings due to our status as an emerging growth company or smaller reporting company may make it harder for investors to analyze the Companys results of operations and financial prospects.
Because our directors are not independent they can make and control corporate decisions that may be disadvantageous to other common shareholders.
Our shares of common stock are listed on OTC Markets inter-dealer quotation system, which does not have director independence requirements. For the purpose of determining director independence, we have adopted the independence requirements of Canadian National Instrument 52-110 - Audit Committees (NI 52-110) as we are an OTC reporting issuer in the province of British Columbia. NI 52-110 recommends that the Board of Directors of a public company be constituted with a majority of individuals who qualify as independent directors. An independent director is a director who has no direct or indirect material relationship with us. A material relationship is a relationship, which could, in the view of the Board of Directors, reasonably interfere with the exercise of a directors independent judgment. None of our current directors can be considered independent. Nelson Da Silva is not an independent director because of his prior position as CEO, CFO and President. Jacek (Jack) Skurtys is not an independent director because of his current position as CEO, CFO and President.
We do not expect to declare or pay dividends in the foreseeable future.
We have never paid cash dividends on our common stock and have no plans to do so in the foreseeable future. We intend to retain any earnings to develop, carry on, and expand our business.
Penny stock rules may make buying or selling our common stock difficult, and severely limit its marketability and liquidity.
Because our securities are considered a penny stock, shareholders will be more limited in their ability to sell their shares. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the Nasdaq system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or quotation system. Because our securities constitute penny stocks within the meaning of the rules, the rules apply to us and to our securities. The rules may further affect the ability of owners of shares to sell our securities in any market that might develop for them. As long as the trading price of our common shares is less than $5.00 per share, the common shares will be subject to Rule 15g-9 under the Exchange Act. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that:
contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading;
contains a description of the brokers or dealers duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of securities laws;
contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price;
contains a toll-free telephone number for inquiries on disciplinary actions;
defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and
contains such other information and is in such form, including language, type, size and format, as the SEC shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with: (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such shares; and (d) a monthly account statements showing the market value of each penny stock held in the customers account. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchasers written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitably statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our shares.
Filed with the SEC as an exhibit to our Registration Statement on Form S-1 filed on June 12, 2012.
Filed with the SEC as an exhibit to our Registration Statement on Form S-1/A2 filed on August 23, 2012.
Filed with the SEC as an exhibit to our Annual Report on Form 10-K filed on January 28, 2013
Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on January 9, 2014.
Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on February 17, 2015.
Filed with the SEC as an exhibit to our Annual Report on Form 10-K filed on February 9, 2016.
Filed with the SEC as an exhibit to our Quarterly Report on Form 10-Q filed on June 16, 2016.
Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on July 15, 2016
Filed with the SEC as an exhibit to our Current Report on Form 8-K filed on July 22, 2016.