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EX-32.1 - CERTIFICATION - HWN, INC.f10k2017a2ex32-1_mantra.htm
EX-31.1 - CERTIFICATION - HWN, INC.f10k2017a2ex31-1_mantra.htm

 

  

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K/A

Amendment No. 2

 

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

 

For the Fiscal Year Ended May 31, 2017

 

Commission File Number 000-53461

 

MANTRA VENTURE GROUP LTD.

(Exact name of registrant as specified in its charter)

 

British Columbia   26-0592672
(State or other jurisdiction of
incorporation or organization)
  (IRS Employer
Identification No.)

 

300 Crown Oak Centre Drive        
Longwood, Florida   32750   (407) 512-9102
(Address of principal
executive office)
  (Zip Code)   (Registrant’s telephone number,
including area code)

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Title of each class   Name of each exchange on which registered
Common Stock, $0.001 par value   OTC Pink Market

 

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.00001 par value

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act.

Yes ☐        No ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

Yes ☐        No ☒

 

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. 

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 (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒        No ☐

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

  

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

 

Large accelerated filer Accelerated filer
Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company
  Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐        No ☒

 

The aggregate market value of the voting common equity held by non-affiliates as of November 30, 2016, based on the closing sales price of the Common Stock as quoted on the OTCQB was $839,046. For purposes of this computation, all officers, directors, and 5 percent beneficial owners of the registrant are deemed to be affiliates. Such determination should not be deemed an admission that such directors, officers, or 5 percent beneficial owners are, in fact, affiliates of the registrant.

 

As of September 25, 2017, there were 274,998,800 shares of registrant’s common stock outstanding. 

 

 

 

 

 

EXPLANATORY NOTE

 

Mantra Venture Group Ltd. (the “Company”) hereby amends its Annual Report on Form 10-K for the fiscal year ended May 31, 2017, as filed with the Securities and Exchange Commission (the “SEC”) on September 26, 2017, as amended by Amendment No. 1 filed with the SEC on October 3, 2017 (together, the “Form 10-K”). The Company is filing this Amendment No. 2 on Form 10-K/A (the “Amendment”) solely to revise the dates contained in the third paragraph of the electronic version of Sadler, Gibb & Associates, LLC’s Report of Independent Registered Public Accounting Firm relating to the financial statements included in the Form 10-K to cover the consolidated financial statements as of May 31, 2017 and 2016.

 

Except as described above, this Amendment does not amend any other information set forth in the Form 10-K, and the Company has not updated disclosures included therein to reflect any events that occurred subsequent to September 26, 2017.

 

1

 

 

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

MANTRA VENTURE GROUP LTD.

 

Report of Independent Registered Public Accounting Firm F-2
   
Consolidated balance sheets as of May 31, 2017 and 2016 F-3
   
Consolidated statements of operations for the years ended May 31, 2017 and 2016 F-4
   
Consolidated statements of stockholders’ equity (deficit) for the years ended May 31, 2017 and 2016 F-5
   
Consolidated statements of cash flows for the years ended May 31, 2017 and 2016 F-7
   
Notes to consolidated financial statements F-8 – F-35

 

 F-1 
 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and shareholders of Mantra Venture Group Ltd.

 

We have audited the accompanying consolidated balance sheets of Mantra Venture Group Ltd. as of May 31, 2017 and 2016, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of the years in the two year period ended May 31, 2017. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mantra Venture Group Ltd. as of May 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years in the two year period ended May 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has a history of recurring losses from, operations and accumulated losses and will require additional funding to execute its future strategic business plan. These factors raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ Sadler, Gibb & Associates, LLC

 

Salt Lake City, UT

September 25, 2017

 

 

 

 F-2 
 

 

MANTRA VENTURE GROUP LTD.

Consolidated balance sheets

(Expressed in U.S. dollars)

 

   May 31,   May 31, 
   2017   2016 
   $   $ 
       (as revised) 
ASSETS        
Current assets        
Cash   345,102    1,119 
Accounts receivable, net   1,623,200    7,358 
Prepaid expenses and deposits   132,155    4,789 
Total current assets   2,100,457    13,266 
Restricted cash       14,519 
Property and equipment, net   96,030    72,627 
Goodwill   1,503,633     
Customer lists, net   892,127     
Tradenames, net   568,600     
Other intangible assets, net       62,615 
Other assets   27,930    8,000 
Total assets   5,188,777    171,027 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
Current liabilities          
Accounts payable and accrued liabilities   2,113,355    836,982 
Due to related parties   308,008    154,560 
Loans payable   235,441    199,108 
Obligations under capital lease       8,123 
Convertible debentures (net of discount of $1,350,067 and $330,123, respectively)   2,139,791    668,921 
Derivative liability   3,760,067    978,245 
Contingent liability   1,409,411     
Total current liabilities   9,966,073    2,845,939 
Obligations under capital lease       3,308 
Total liabilities   9,966,073    2,849,247 
           
Stockholders’ deficit          
Mantra Venture Group Ltd. stockholders’ deficit Preferred stock Authorized: 20,000,000 shares, par value $0.00001 Issued and outstanding: Nil shares        
Common stock Authorized: 275,000,000 shares, par value $0.00001 Issued and outstanding: 274,998,800 (2016 – 88,559,024) shares   2,754    886 
Additional paid-in capital   15,724,447    11,163,514 
Common stock subscribed   74,742    99,742 
Accumulated deficit   (20,518,967)   (13,706,088)
Total Mantra Venture Group Ltd. stockholders’ deficit   (4,717,024)   (2,441,946)
Non-controlling interest   (60,272)   (236,274)
Total stockholders’ deficit   (4,777,296)   (2,678,220)
Total liabilities and stockholders’ deficit   5,188,777    171,027 

 

(The accompanying notes are an integral part of these consolidated financial statements)

 

 F-3 
 

 

MANTRA VENTURE GROUP LTD.

Consolidated statements of operations

(Expressed in U.S. dollars)

 

   Year Ended
May 31,
   Year Ended
May 31,
 
   2017
$
   2016
$
 
       (as revised) 
         
Revenue   1,069,917    70,298 
           
Cost of goods sold   820,503     
Gross profit   249,414    70,298 
           
Operating expenses          
Depreciation and amortization   59,869    27,908 
General and administrative   106,114    559,316 
Salaries & wages   4,845,260    335,638 
           
Total operating expenses   5,011,243    922,862 
           
Loss from operations   (4,761,829)   (852,564)
           
Other income (expense)          
(Loss) gain on settlement of debt   (33,620)   (24,000)
Loss on disposal of assets   (2,067)    
Accretion of discounts on convertible debentures   (561,137)   (461,905)
Loss on change in fair value of derivatives   (1,197,700)   (497,079)
Interest expense   (211,454)    
Impairment loss   (103,480)   (384,312)
Total other income expense   (2,109,458)   (1,367,296)
           
Net loss for the year   (6,871,287)   (2,219,860)
           
Less: net loss attributable to the non-controlling interest   58,408    43,688 
           
Net loss attributable to Mantra Venture Group Ltd.   (6,812,879)   (2,176,172)
           
Net loss per share attributable to Mantra Venture Group Ltd. common shareholders, basic and diluted   (0.06)   (0.03)
           
Weighted average number of shares outstanding used in the calculation of net loss attributable to Mantra Venture Group Ltd. per common share   117,085,052    78,327,306 

 

(The accompanying notes are an integral part of these consolidated financial statements)

 

 F-4 
 

 

MANTRA VENTURE GROUP LTD.

Consolidated statements of stockholder’s equity (deficit)

For the Years Ended May 31, 2017 and 2016

 

   Common Stock   Additional paid-in   Common
stock
   Accumulated   Non-
controlling
   Total
stockholders’ deficit
 
   Number   Amount
$
   capital
$
   subscribed
$
   deficit
$
   interest
$
   (as revised)
$
 
                             
Balance, May 31, 2015   71,516,581    715    10,462,265    74,742    (11,529,916)   (192,586)   (1,184,780)
                                    
Stock issued for cash at $0.16 per share   93,750    1    14,999                15,000 
                                    
Shares issued for services   150,000    2    29,999                30,001 
                                    
Shares issued for settlement of debt   300,000    3    47,997                48,000 
                                    
Shares issued upon conversion of convertible debt   16,498,693    165    591,828                591,993 
                                    
Subscriptions received               25,000            25,000 
                                    
Fair value of stock options granted           16,426                16,426 
                                    
Net loss for the year                   (2,176,172)   (43,688)   (2,219,860)
                                    
Balance, May 31, 2016   88,559,024    886    11,163,514    99,742    (13,706,088)   (236,274)   (2,678,220)

 

(The accompanying notes are an integral part of these consolidated financial statements)

 

 F-5 
 

 

MANTRA VENTURE GROUP LTD.

Consolidated statements of stockholder’s equity (deficit)

For the Years Ended May 31, 2017 and 2016

 

   Common Stock   Additional paid-in   Common
stock
   Accumulated   Non-
controlling
   Total
stockholders’
equity
 
   Number   Amount
$
   capital
$
   subscribed
$
   deficit
$
   interest
$
   (deficit)
$
 
                             
Balance, May 31, 2016   88,559,024    886    11,163,514    99,742    (13,706,088)   (236,274)   (2,678,220)
                                    
Stock issued for cash at $0.02 per share   2,000,000    20    29,980    (25,000)           5,000 
                                    
Shares issued for services   124,251,510    1,244    3,974,804                3,976,048 
                                    
Shares issued for settlement of debt   15,904,199    160    89,720                89,880 
                                    
Shares issued upon conversion of convertible debt   44,284,067    444    499,363                499,807 
                                    
Reclassification of derivatives previously classified as equity           (32,934)               (32,934)
                                    
Acquisition of non-controlling interest                       234,410    234,410 
                                    
Net loss for the year                   (6,812,879)   (58,408)   (6,871,287)
                                    
Balance, May 31, 2017   274,998,800    2,754    15,724,447    74,742    (20,518,967)   (60,272)   (4,777,296)

 

(The accompanying notes are an integral part of these consolidated financial statements)

 

 F-6 
 

MANTRA VENTURE GROUP LTD.

Consolidated statements of cash flows

(Expressed in U.S. dollars)

   Year Ended
May 31,
2017
$
   Year Ended
May 31,
2016
$
 
Operating activities      (as revised) 
Net loss   (6,871,287)   (2,219,860)
Adjustments to reconcile net loss to net cash used in operating activities:          
(Gain) loss on change in fair value of derivative liability   (767,569)   (195,706)
Amortization of finance costs       7,085 
Accretion of discounts on convertible debentures   561,137    461,905 
Depreciation and amortization   59,869    27,908 
Foreign exchange loss (gain)   5,035    (4,842)
Initial derivative expenses   1,965,269    692,785 
Shares issued for services   3,976,048    30,001 
Interest related to cash redemption premium on convertible notes   105,032    254,439 
Stock-based compensation on options and warrants       16,426 
Loss on disposal of assets   2,067     
Impairment loss   103,480     
Loss (gain) on settlement of debt   33,620    24,000 
Changes in operating assets and liabilities:          
Amounts receivable   212,448    18,169 
Prepaid expenses and deposits   (119,366)   121,357 
Accounts payable and accrued liabilities   175,930    260,596 
Other assets   1,107     
Due to related parties   153,448    42,367 
Net cash used in operating activities   (403,732)   (463,370)
Investing activities          
Purchase of property and equipment       (4,587)
Proceeds from the sale of property and equipment   1,500      
Cash received upon acquisition of subsidiary   115,112     
Investment in intangible assets       (12,161)
Net cash used in investing activities   116,612    (16,748)
Financing activities          
Repayment of capital lease obligations   (7,025)   (6,798)
Repayment of loan payable       (50,000)
Proceeds from notes payable   64,789    63,589 
Proceeds from issuance of convertible debentures   568,339    427,000 
Proceeds from stock subscribed   5,000    25,000 
Proceeds from issuance of common stock       15,000 
Net cash provided by financing activities   631,103    473,791 
Change in cash   343,983    (6,327)
Cash, beginning of year   1,119    7,446 
Cash, end of year   345,102    1,119 
Non-cash investing and financing activities:          
Common stock issued to relieve common stock subscribed   25,000     
Common stock issued to settle accounts payable and debt   89,880     
Common stock issued for conversion of notes payable   252,000    591,992 
Original issue discounts   64,999    42,753 
Debt issuance cost       18,000 
Original debt discount against derivative liability   1,746,783    436,755 
Accounts receivable acquired in AW Solutions Acquisition   2,040,249     
Other assets acquired in AW Solutions Acquisition   36,580     
Equipment acquired in AW Solutions Acquisition   116,143     
Customer lists acquired in AW Solutions Acquisition   901,548     
Tradenames acquired in AW Solutions Acquisition   574,605     
Accounts payable and Accrued expenses acquired in AW Solutions Acquisition   (1,308,450)    
Goodwill   1,503,634     
Non-controlling interest   (339,309)    
           
Supplemental disclosures:          
Interest paid   657    9,141 
Income taxes paid        

 

(The accompanying notes are an integral part of these consolidated financial statements)

 F-7 
 

 

MANTRA VENTURE GROUP LTD.

Notes to the consolidated financial statements

May 31, 2017

(Expressed in U.S. dollars)

 

1.Organization and Going Concern

 

Mantra Venture Group Ltd. (the “Company”) was incorporated in the State of Nevada on January 22, 2007 to acquire and commercially exploit various new energy related technologies through licenses and purchases. On December 8, 2008, the Company continued its corporate jurisdiction out of the State of Nevada and into the province of British Columbia, Canada. On April 25, 2017, the Company entered into and closed on an Asset Purchase Agreement (the “Asset Purchase Agreement”) with InterCloud Systems, Inc. (“InterCloud”). Pursuant to the terms of the Asset Purchase Agreement, the Company purchased 80.1% of the assets associated with InterCloud’s “AW Solutions” business. After the acquisition of AW Solutions, the Company provides professional, multi-service line, telecommunications infrastructure and outsource services to the wireless and wireline industry.

 

These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has yet to acquire commercially exploitable energy related technology, and is unlikely to generate earnings in the immediate or foreseeable future. The recently acquired AW Solutions business has also incurred losses and experienced cash outflows from operations during its most recent fiscal years. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of management to raise additional equity capital through private and public offerings of its common stock, and the attainment of profitable operations. As at May 31, 2017, the Company has an accumulated loss of $20,518,967, and a working capital deficit of $7,865,616. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Management requires additional funds over the next twelve months to fully implement its business plan. Management is currently seeking additional financing through the sale of equity and from borrowings from private lenders to cover its operating expenditures. There can be no certainty that these sources will provide the additional funds required for the next twelve months.

 

2.Significant Accounting Policies

 

a.Basis of Presentation/Principles of Consolidation

 

These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States. These consolidated financial statements include the accounts of the Company and its subsidiaries, Carbon Commodity Corporation, Climate ESCO Ltd., Mantra Energy Alternatives Ltd., Mantra China Inc., Mantra China Limited, Mantra Media Corp., Mantra NextGen Power Inc., Mantra Wind Inc., AW Solutions, Inc.(from the date of acquisition, April 25, 2017), Tropical Communications, Inc. (from the date of acquisition, April 25, 2017) and AW Solutions Puerto Rico, LLC.(from the date of acquisition, April 25, 2017). All the subsidiaries are wholly-owned with the exception of Climate ESCO Ltd., which is 64.55% owned, Mantra Energy Alternatives Ltd., which is 88.21% owned and AW Solutions, Inc., Tropical Communications, Inc., and AW Solutions Puerto Rico, LLC which are all 80.1% owned. All inter-company balances and transactions have been eliminated.

 

 F-8 
 

 

b.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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to allowance for doubtful accounts, the estimated useful lives and recoverability of long-lived assets, equity component of convertible debt, stock-based compensation, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

 

c.Cash and Cash Equivalents

 

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.

 

d.Accounts Receivable

 

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company records unbilled receivables for services performed but not billed. At May 31, 2017, unbilled receivables totaled $430,669, and are included in accounts receivable. Management reviews a customer’s credit history before extending credit. The Company maintains an allowance for doubtful accounts for estimated losses. Estimates of uncollectible amounts are reviewed each period, and changes are recorded in the period in which they become known. Management analyzes the collectability of accounts receivable each period. This review considers the aging of account balances, historical bad debt experience, changes in customer creditworthiness, current economic trends, customer payment activity and other relevant factors. Should any of these factors change, the estimate made by management may also change. The allowance for doubtful accounts was $267,476 at May 31, 2017.

 

e.Property and Equipment

 

Property and equipment are stated at cost. The Company depreciates the cost of property and equipment over their estimated useful lives at the following annual rates:

 

  Automotive  3-5 years straight-line basis
  Computer equipment and software  3-7 years straight-line basis
  Leasehold improvements  5 years straight-line basis
  Office equipment and furniture  5 years straight-line basis
  Research equipment  5 years straight-line basis

 

f.Goodwill

 

Goodwill was generated through the acquisition of AW Solutions in fiscal 2017 as the total consideration paid exceeded the fair value of the net assets acquired.

 

The Company tests its goodwill for impairment at least annually and whenever events or circumstances change that indicate impairment may have occurred. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant decline in the Company’s expected future cash flows; a significant adverse change in legal factors or in the business climate; unanticipated competition; and slower growth rates. Any adverse change in these factors could have a significant impact on the recoverability of goodwill and the Company’s consolidated financial results.

 

The Company tests goodwill by estimating fair value using a Discounted Cash Flow (“DCF”) model. The key assumptions used in the DCF model to determine the highest and best use of estimated future cash flows include revenue growth rates and profit margins based on internal forecasts, terminal value and an estimate of a market participant’s weighted-average cost of capital used to discount future cash flows to their present value. There were no impairment charges during the year ended May 31, 2017.

 

 F-9 
 

 

g.Intangible Assets

 

At May 31, 2017, definite-lived intangible assets primarily consist of non-compete agreements, tradenames and customer relationships which are being amortized over their estimated useful lives ranging from 1-10 years. At May 31, 2016, definite-lived intangible assets consisted of patents and were stated at cost. Intangible assets are amortized over their estimated useful lives. During the year ended May 31, 2017, the Company recorded an impairment loss related patents held of $59,060.

 

The Company periodically evaluates the reasonableness of the useful lives of these assets. Once these assets are fully amortized, they are removed from the accounts. These assets are reviewed for impairment or obsolescence when events or changes in circumstances indicate that the carrying amount may not be recoverable. If impaired, intangible assets are written down to fair value based on discounted cash flows or other valuation techniques. The Company has no intangibles with indefinite lives.

 

For long-lived assets, impairment losses are only recorded if the asset’s carrying amount is not recoverable through its undiscounted, probability-weighted future cash flows. The Company measures the impairment loss based on the difference between the carrying amount and the estimated fair value. When an impairment exists, the related assets are written down to fair value.

 

h.Long-lived Assets

 

In accordance with ASC 360, “Property, Plant and Equipment”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value, which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.

 

i.Foreign Currency Translation

 

Transactions in foreign currencies are translated into the currency of measurement at the exchange rates in effect on the transaction date. Monetary balance sheet items expressed in foreign currencies are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. The resulting exchange gains and losses are recognized in income.

 

The Company’s integrated foreign subsidiaries are financially or operationally dependent on the Company. The Company uses the temporal method to translate the accounts of its integrated operations into U.S. dollars. Monetary assets and liabilities are translated at the exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are translated at historical rates. Revenues and expenses are translated at average rates for the period, except for amortization, which is translated on the same basis as the related asset. The resulting exchange gains or losses are recognized in income.

 

 F-10 
 

 

j.Income Taxes

 

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Accounting for Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

 

The Company conducts business, and files federal and state income, franchise or net worth, tax returns in Canada, the United States, in various states within the United States and the Commonwealth of Puerto Rico. The Company determines its filing obligations in a jurisdiction in accordance with existing statutory and case law. The Company may be subject to a reassessment of federal and provincial income taxes by Canadian tax authorities for a period of three years from the date of the original notice of assessment in respect of any particular taxation year. For Canadian and U.S. income tax returns, the open taxation years range from 2010 to 2017. In certain circumstances, the U.S. federal statute of limitations can reach beyond the standard three year period. U.S. state statutes of limitations for income tax assessment vary from state to state. Tax authorities of Canada and U.S. have not audited any of the Company’s, or its subsidiaries’, income tax returns for the open taxation years noted above.

 

Significant management judgment is required in determining the provision for income taxes, and in particular, any valuation allowance recorded against the Company’s deferred tax assets. Deferred tax assets are regularly reviewed for recoverability. The Company currently has significant deferred tax assets resulting from net operating loss carryforwards and deductible temporary differences, which should reduce taxable income in future periods. The realization of these assets is dependent on generating future taxable income.

 

The Company follows the guidance set forth within ASC Topic 740, Income Taxes (“ASC Topic 740”) which prescribes a two-step process for the financial statement recognition and measurement of income tax positions taken or expected to be taken in an income tax return. The first step evaluates an income tax position in order to determine whether it is more likely than not that the position will be sustained upon examination, based on the technical merits of the position. The second step measures the benefit to be recognized in the financial statements for those income tax positions that meet the more likely than not recognition threshold. ASC Topic 740 also provides guidance on de-recognition, classification, recognition and classification of interest and penalties, accounting in interim periods, disclosure and transition. Penalties and interest, if incurred, would be recorded as a component of current income tax expense.

 

The Company received a tax notice from the Puerto Rican government requesting payment of taxes related to 2014 in the amount of $166,084 plus penalties and interest of $87,027 for a total obligation due of $253,111. This tax assessment is included in accrued expenses at May 31, 2017.

 

k.Revenue Recognition

 

The Company’s revenues are generated from applications and infrastructure services. The Company recognizes revenue on arrangements in accordance with ASC Topic 605-10, “Revenue Recognition”. The Company recognizes revenue only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed, and collectability of the resulting receivable is reasonably assured.

 

The applications and infrastructure revenues are derived from contracts to provide technical engineering services along with contracting services to commercial and governmental customers. The Company’s service contracts generally require specific tasks or services that the Company must perform under the contract. The Company recognizes revenues associated with these services upon the completion of the related task or service which is at the time the four revenue recognition criteria have been met. Direct costs incurred related to performance of the task or service are deferred and recorded as prepaid expense and are expensed when the related revenue is recognized.

 

The Company also generates revenue from service contracts with certain customers. These contracts are accounted for under the proportional performance method. Under this method, revenue is recognized in proportion to the value provided to the customer for each project as of each reporting date.

 

 F-11 
 

 

The Company records unbilled receivables for revenues earned, but not yet billed.

 

During the year ended May 31, 2016, the Company performed research and development services. The Company recognized revenue under research contracts when a contract has been executed, the contract price is fixed and determinable, delivery of services or products has occurred, and collectability of the contract price is considered reasonably assured and can be reasonably estimated. Revenue was based on direct labor hours expended at contract billing rates plus other billable direct costs.

 

l.Cost of Revenues

 

Cost of revenues includes all direct costs of providing services under our contracts, including costs for direct labor provided by employees, services by independent subcontractors, operation of capital equipment (excluding depreciation and amortization), direct materials, insurance claims and other direct costs.

 

m.Research and Development Costs

 

Research and development costs are expensed as incurred.

 

n.Stock-based Compensation

 

The Company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation”, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

 

The Company uses the Black-Scholes option pricing model to calculate the fair value of stock-based awards. This model is affected by the Company’s stock price as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the consolidated statement of operations over the requisite service period.

 

o.Loss Per Share

 

The Company computes loss per share in accordance with ASC 260, “Earnings per Share” which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing the loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As at May 31, 2017, the Company had 647,182,222 (2016 – 56,260,229) dilutive potential shares outstanding.

 

p.Comprehensive Loss

 

ASC 220, “Comprehensive Income,” establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at May 31, 2017 and 2016, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the consolidated financial statements.

 

 F-12 
 

 

q.Recent Accounting Pronouncements

 

On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which is effective for nonpublic entities for annual reporting periods, as amended, beginning after December 15, 2018. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard is effective for the Company on June 1, 2019, and early adoption is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company continues to evaluate the standard and has not yet selected a transition method.

 

In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740) – Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”), which is effective for nonpublic entities for annual reporting periods beginning after December 15, 2016. ASU 2015-17 simplifies the presentation of deferred income taxes by requiring that deferred tax liabilities and assets be classified as non-current in the statement of financial position. The Company has elected to early adopt the requirements of ASU 2015-17 and the results of such adoption are presented within these consolidated financial statements.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which is effective for nonpublic entities for annual reporting periods beginning after December 15, 2019. Under ASU 2016-02, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: 1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and 2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The Company continues to evaluate the effects of ASU 2016-02 and does not expect that the adoption will have a material effect on its consolidated financial statements and disclosures.

 

In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (“ASU 2016-08”). The amendments are intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations by amending certain existing illustrative examples and adding additional illustrative examples to assist in the application of the guidance. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606: The guidance is effective for the Company beginning June 1, 2019. The Company is currently evaluating the effects of ASU 2016-08 on its consolidated financial statements.

 

In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”). The amendments in ASU 2016-10 clarify the following two aspects of Topic 606: (a) identifying performance obligations; and (b) the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606: The guidance is effective for the Company beginning June 1, 2019. The Company is currently evaluating the effects of ASU 2016-10 on its consolidated financial statements.

 

 F-13 
 

 

In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”). The amendments in ASU 2016-12 provide clarifying guidance in certain narrow areas and add some practical expedients. Specifically, the amendments in this update (1) clarify the objective of the collectability criterion in step 1, and provides additional clarification for when to recognize revenue for a contract that fails step 1, (2) permit an entity, as an accounting policy election, to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price (3) specify that the measurement date for noncash consideration is contract inception, and clarifies that the variable consideration guidance applies only to variability resulting from reasons other than the form of the consideration, (4) provide a practical expedient that permits an entity to reflect the aggregate effect of all modifications that occur before the beginning of the earliest period presented when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations, (5) clarifies that a completed contract for purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP before the date of initial application. Further, accounting for elements of a contract that do not affect revenue under legacy GAAP are irrelevant to the assessment of whether a contract is complete. In addition, the amendments permit an entity to apply the modified retrospective transition method either to all contracts or only to contracts that are not completed contracts, and (6) clarifies that an entity that retrospectively applies the guidance in Topic 606 to each prior reporting period is not required to disclose the effect of the accounting change for the period of adoption. However, an entity is still required to disclose the effect of the changes on any prior periods retrospectively adjusted. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606. The guidance is effective for the Company beginning June 1, 2019. The Company is currently evaluating the effects of ASU 2016-12 on its consolidated financial statements.

 

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business (“ASU 2017-01”). The Amendments in this Update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting, including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2018, including interim periods within those periods. Early adoption of this standard is permitted. The Company is currently evaluating the effects of ASU 2017-01 on its consolidated financial statements.

 

In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). This standard will simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Current guidance requires that companies compute the implied fair value of goodwill under Step 2 by performing procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. This standard will require companies to perform annual or interim goodwill impairment tests by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This standard will be effective for annual periods beginning after December 15, 2020, including interim periods within that reporting period, and will be applied prospectively. Early adoption of this standard is permitted on testing dates after January 1, 2017. The Company is evaluating the effects of ASU 2017-04 on its consolidated financial statements.

 

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or result of operations.

 

r.Concentrations of Risk

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivables. The Company maintains its cash balances with high-credit-quality financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. These deposits may be withdrawn upon demand and therefore bear minimal risk.

 

The Company provides credit to customers on an uncollateralized basis after evaluating client creditworthiness. For the period from April 25, 2017 to May 31, 2017, two customers accounted for 48% and 11%, respectively, of consolidated revenues for the period from April 25, 2017 to May 31, 2017. In addition, amounts due from these customers represented 39% and 8%, respectively, of trade accounts receivable as of May 31, 2017.

 

 F-14 
 

 

The Company’s customers are primarily located within the domestic United States of America and Puerto Rico. Revenues generated within the domestic United States of America accounted for approximately 94% of consolidated revenues for the period from April 25, 2017 to May 31, 2017. Revenues generated from customers in Puerto Rico accounted for approximately 6% of consolidated revenues for the period from April 25, 2017 to May 31, 2017.

 

s.Fair Value Measurements

 

The Company measures and discloses the estimated fair value of financial assets and liabilities using the fair value hierarchy prescribed by US generally accepted accounting principles. The fair value hierarchy has three levels, which are based on reliable available inputs of observable data. The hierarchy requires the use of observable market data when available. The three-level hierarchy is defined as follows:

 

Level 1 – quoted prices for identical instruments in active markets.

 

Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which significant inputs and significant value drivers are observable in active markets; and.

 

Level 3 – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

Financial instruments consist principally of cash and cash equivalents, accounts receivable, restricted cash, accounts payable, loans payable and convertible debentures. Derivative liabilities are determined based on “Level 3” inputs, which are significant and unobservable and have the lowest priority. There were no transfers into or out of “Level 3” during the years ended May 31, 2017 and 2016. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.

 

Our financial assets and liabilities carried at fair value measured on a recurring basis as of May 31, 2017 and 2016, consisted of the following:

 

     Total fair value at
May 31,
2017
$
   Quoted prices in active markets
(Level 1)
$
   Significant other observable inputs
(Level 2)
$
   Significant unobservable inputs
(Level 3)
$
 
                   
  Description:                    
  Derivative liability (1)   3,760,067            3,760,067 

 

     Total fair value at
May 31,
2016
$
   Quoted prices in active markets
(Level 1)
$
   Significant other observable inputs
(Level 2)
$
   Significant unobservable inputs
(Level 3)
$
 
                       
  Description:                    
  Derivative liability (1)   978,245            978,245 

 

  (1) The Company has estimated the fair value of these derivatives using the Black-Scholes option pricing model, Monte-Carlo model or a Binomial Model based.

 

 F-15 
 

 

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial statement. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. See Note 10 for additional information.

 

t.Derivative Liabilities

 

The Company accounts for derivative instruments in accordance with ASC Topic 815, “Derivatives and Hedging” and all derivative instruments are reflected as either assets or liabilities at fair value in the balance sheet. The Company uses estimates of fair value to value its derivative instruments. Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between willing and able market participants. In general, the Company’s policy in estimating fair values is to first look at observable market prices for identical assets and liabilities in active markets, where available. When these are not available, other inputs are used to model fair value such as prices of similar instruments, yield curves, volatilities, prepayment speeds, default rates and credit spreads, relying first on observable data from active markets. Depending on the availability of observable inputs and prices, different valuation models could produce materially different fair value estimates. The values presented may not represent future fair values and may not be realizable. The Company categorizes its fair value estimates in accordance with ASC 820 based on the hierarchical framework associated with the three levels of price transparency utilized in measuring financial instruments at fair value as discussed above. As at May 31, 2017 and 2016, the Company had a $3,760,067 and $978,245 derivative liability, respectively.

 

u.Reclassifications

 

Certain prior period amounts have been reclassified to conform to current presentation.

 

3.Acquisition

 

On April 25, 2017, pursuant to the Asset Purchase Agreement (the “Agreement”) with InterCloud Systems, Inc. (“InterCloud”), the Company purchased, 80.1% of the assets associated with InterCloud’s “AW Solutions” business (“AWS”) including, but not limited to, fixed assets, real property, intellectual property, and accounts receivables (collectively, the “Assets”).

 

The purchase price paid by the Company for the Assets includes the assumption of certain liabilities and contracts associated with AWS, the issuance to InterCloud of a convertible promissory note in the aggregate principal amount of $2,000,000 (as described in Note 10(l)), and a potential earn-out after six months in an amount equal to the lesser of (i) three times EBITDA (as defined in the Asset Purchase Agreement) of the Business for the six-month period immediately following the closing and (ii) $1,500,000.

 

The Company has performed a valuation analysis of the fair market value of AWS’ assets and liabilities. The following table summarizes the allocation of the preliminary purchase price as of the acquisition date:

 

  Purchase Price    
  The $2,000,000 Convertible Note  $2,230,701 
  Contingent Consideration   1,409,411 
  Total Purchase Price  $3,640,112 
        
  Allocation of Purchase Price     
  Cash  $115,112 
  Accounts receivable   2,040,249 
  Other assets   36,580 
  Equipment   116,143 
  Customer lists   901,548 
  Tradenames   574,605 
  Accounts payable   (682,781)
  Accrued expenses   (625,669)
  Noncontrolling interest   (339,309)
  Goodwill   1,503,634 
  Net assets acquired  $3,640,112 

 

 F-16 
 

 

The following table summarizes our consolidated results of operations for the year’s ended May 31, 2017, as well as unaudited pro forma consolidated results of operations as though the acquisition had occurred on June 1, 2015:

 

     May 31,
2017
$
   May 31,
2016
$
 
     As Reported   Pro Forma   As Reported   Pro Forma 
                   
  Net Sales   1,069,917    10,572,122    70,298    11,965,151 
  Net Income   (6,871,287)   (11,136,000)   (2,219,860)   (3,850,958)
                       
  Earnings per common share:                    
  Basic   (0.06)   (0.10)   (0.03)   (0.05)
  Diluted   (0.06)   (0.10)   (0.03)   (0.05)

 

4.Restricted Cash

 

At May 31, 2016, restricted cash represents cash pledged as security for the Company’s credit cards. At May 31, 2017, the Company no longer pledged cash as security.

 

5.Property and Equipment

 

     May 31,
2017
$
   May 31,
2016
$
 
           
  Computers and office equipment   308,649    7,837 
  Equipment   378,505     
  Research equipment   143,129    143,129 
  Software   177,073     
  Vehicles   94,356     
  Vehicles under capital lease       72,690 
             
  Total   1,101,712    223,656 
             
  Less: impairment   (44,419)    
  Less: accumulated depreciation   (961,263)   (151,029)
             
  Equipment, Net   96,030    72,627 

 

During the year ended May 31, 2017, the Company recorded $46,018 (2016 - $25,109) of amortization expense. During the year ended May 31, 2017, the Company disposed of two vehicles under capital leases. The Company recorded a loss on disposal of $2,067.

 

 F-17 
 

 

6.Intangible Assets

 

     Cost
$
   Accumulated amortization
$
   Impairment
$
   May 31,
2017
Net carrying value
$
   May 31,
2016
Net carrying value
$
 
                       
  Customer relationship and lists   901,548    9,421        892,127     
  Trade names   574,605    6,005        568,600     
  Patents   70,789    11,729    59,060        62,615 
      1,546,942    27,155    59,060    1,460,727    62,615 

 

During the year ended May 31, 2017, the Company recorded $16,429 (2016 - $4,123) of amortization expense.

 

Estimated Future Amortization Expense:

 

     $ 
  For year ending May 31, 2018   156,405 
  For year ending May 31, 2019   156,405 
  For year ending May 31, 2020   156,405 
  For year ending May 31, 2021   156,405 
  For year ending May 31, 2022   156,405 
  For year ending May 31, 2023   156,405 
  For year ending May 31, 2024   156,405 
  For year ending May 31, 2025   156,405 
  For year ending May 31, 2026   155,487 

 

7.Related Party Transactions

 

a)During the year ended May 31, 2017, the Company incurred management fees of $112,927 (2016 - $129,799) to the former President of the Company.

 

b)During the year ended May 31, 2017, the Company incurred management fees of $68,038 (2016 - $46,616) to the spouse of the former President of the Company.

 

c)During the year ended May 31, 2017, the Company incurred research and development fees of $Nil (2016 - $28,920) to a former director of the Company.

 

d)During the year ended May 31, 2017, the Company recorded $Nil (2016 - $21,609) of management fees for the vesting of options previously granted to former officers and directors.

 

e)On May 18, 2017, the Company issued 62,125,755 shares of common stock with a fair value of $1,988,024 to a new director of the Company in exchange for services for the Company.

 

f)On May 19, 2017, the Company issued 62,125,755 shares of common stock with a fair value of $1,988,024 to a new director of the Company in exchange for services for the Company.

 

g)As at May 31, 2017 the Company owes a total of $241,327 (2016 - $136,722) to the former President of the Company and his spouse, and a company controlled by the former President of the Company which is non-interest bearing, unsecured, and due on demand.

 

h)As at May 31, 2017, the Company owes $17,305 (2016 - $17,837) to a former officer and a former director of the Company, which is non-interest bearing, unsecured, and due on demand.

 

 F-18 
 

 

i)As at May 31, 2017, the Company owes $49,376 to Intercloud, which is non-interest bearing, unsecured, and due on demand.

 

j)As at May 31, 2017, pursuant to the acquisition described in Note 3, the Company owes a contingent liability of $1,409,411 to Intercloud.

 

k)The Company subleased a portion of one of its offices located in Florida to Intercloud. Rental income charged to the Intercloud was $2,513 from April 25, thru May 31, 2017.

 

l)During the year ended May31, 2017, the Company was part of the Intercloud’s group health insurance plan. Intercloud billed the Company monthly for their portion of health insurance premiums. Total amounts billed during the year ended May 31, 2017 was $42,978.

 

m)Intercloud also allocated certain general insurance expenses to the Company. Total insurance expense allocated by the Intercloud to the Company amounted to $8,911 during the year ended May 31, 2017 which is included in selling, general and administrative on the statements of operations,

 

8.Loans Payable

 

(a)As at May 31, 2017, the amount of $46,846 (Cdn$63,300) (2016 - $48,285 (Cdn$63,300)) is owed to a non-related party which is non-interest bearing, unsecured, and due on demand.

 

(b)As at May 31, 2017, the amount of $17,500 (2016 - $17,500) is owed to a non-related party which is non-interest bearing, unsecured, and due on demand.

 

(c)As at May 31, 2017 and May 31, 2016, the amount of $0 and $15,000, respectively, is owed to a non-related party which is non-interest bearing, unsecured, and due on demand. On November 15, 2016, the Company entered into a debt settlement agreement, and amended on March 13, 2017, to settle the amount owed in exchange for 6,000,000 common shares. The shares were issued on March 8, 2017. The Company recorded the fair value of the shares of $20,400 and a loss on settlement of debt of $5,400

 

(d)As at May 31, 2017 and May 31, 2016, the amount of $0 (Cdn$0) and $14,413 (Cdn$18,895), respectively, was owed to a non-related party, which is non-interest bearing, unsecured, and due on demand. On October 3, 2016, the Company issued 4,413,181 shares of common stock upon the conversion of the note payable of $14,406 (CAD - $18,895) and $735 (CAD - $964) of accrued interest.

 

(e)As at May 31, 2017, the amounts of $7,500 and $27,382 (Cdn$37,000) (2016 - $7,500 and $28,224 (Cdn$37,000)) are owed to a non-related party which are non-interest bearing, unsecured, and due on demand.

 

(f)As at May 31, 2017, the amount of $4,490 (2016 - $4,490) is owed to a non-related party which is non-interest bearing, unsecured, and due on demand.

 

(g)During the year ended May 31, 2017, the amounts of $13,370 (Cdn$18,066) (2016 - $13,696 (Cdn$18,066) was advanced by a non-related party. The amount owing is non-interest bearing, unsecured, and due on demand.

 

(h)In March 2012, the Company received $50,000 for the subscription of 10,000,000 shares of the Company’s common stock. During the year ended May 31, 2013, the Company and the subscriber agreed that the shares would not be issued and that the subscription would be returned. The subscription has been reclassified as a non-interest bearing demand loan until the funds are refunded to the subscriber.

 

(i)On August 4, 2015, the Company borrowed $50,000 pursuant to a promissory note. The note was due on September 4, 2015. The note bears interest at 120% per annum prior September 4, 2015, and at 180% per annum after September 4, 2015. The holder of the note was also granted the rights to buy 100,000 shares of the Company’s common stock at a price of $0.15 per share until August 4, 2017. During the year ended May 31, 2016, the Company repaid the $50,000 note and $1,200 of accrued interest remains owing.

 

 F-19 
 

 

The rights issued with the note qualified for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the warrants of $9,755 resulted in a discount to the note payable of $9,755. During the year ended May 31, 2016, the Company recorded accretion of $9,755.

 

(j)As at May 31, 2017 and May 31, 2016, the amounts of $25,000 and $27,789 (Cdn$37,550) and $0, respectively, are owed to non-related parties which are non-interest bearing, unsecured, and due on demand.

 

(k)On April 12, 2017, received $12,000 pursuant to a promissory note. The note issued is unsecured, due on demand and bears interest at a rate of 10% per annum.

 

9.Obligations Under Capital Lease

 

During the year ended May 31, 2017, the Company disposed of the two vehicles under capital lease.

 

10.Convertible Debentures

 

(a)In October 2008, the Company issued three convertible debentures for total proceeds of $250,000 which bear interest at 10% per annum, are unsecured, and due one year from date of issuance. The unpaid amount of principal and accrued interest can be converted at any time at the holder’s option into 625,000 shares of the Company’s common stock at a price of $0.40 per share. The Company also issued 250,000 detachable, non-transferable share purchase warrants. Each share purchase warrant entitles the holder to purchase one additional share of the Company’s common stock for a period of two years from the date of issuance at an exercise price of $0.50 per share.

 

In accordance with ASC 470-20, “Debt with Conversion and Other Options”, the Company determined that the convertible debentures contained no embedded beneficial conversion feature as the convertible debentures were issued with a conversion price higher than the fair market value of the Company’s common shares at the time of issuance.

 

In accordance with ASC 470-20, the Company allocated the proceeds of issuance between the convertible debt and the detachable share purchase warrants based on their relative fair values. Accordingly, the Company recognized the fair value of the share purchase warrants of $45,930 as additional paid-in capital and an equivalent discount against the convertible debentures. The Company had recorded accretion expense of $45,930, increasing the carrying value of the convertible debentures to $250,000.

 

On January 19, 2012, the Company entered into a settlement agreement with one of the debenture holders to settle a $50,000 convertible debenture and $122,535 in accounts payable and accrued interest with the debt holder. Pursuant to the agreement, the debt holder agreed to reduce the debt to Cdn$100,000 on the condition that the Company pays the amount of Cdn$2,500 per month for 40 months, beginning March 1, 2012 and continuing on the first day of each month thereafter.

 

On July 18, 2012, the Company entered into a settlement agreement with the $150,000 debenture holder. Pursuant to the settlement agreement, the lender agreed to extend the due date until April 11, 2013 and the Company agreed to pay $43,890 of accrued interest within five days of the agreement (paid), pay the accruing interest on a monthly basis (paid), and pay a $10,000 premium in addition to the $150,000 principal outstanding on April 11, 2013. On April 29, 2013, the Company entered into an amended settlement agreement whereby the lender agreed to extend the due date to September 15, 2013 and the Company agreed to pay $6,836 of interest for the period from April 1 to September 15, 2013 upon execution of the agreement (paid) and granted the lender 100,000 stock options exercisable at $0.12 per share for a period of two years.

 

 F-20 
 

 

On November 15, 2013, the Company entered into a second settlement agreement amendment. Pursuant to the second amendment, on November 15, 2013, the Company agreed to pay interest of $4,438 (paid) and commencing February 1, 2014, the Company would make monthly payments of $10,000 on the outstanding principal and interest. On December 4, 2015, the holder of the convertible debenture entered into an agreement to sell and assign the remaining outstanding principal to a third party. The Company approved and is bound by the assignment and sale agreement.

 

The Company evaluated the modifications and determined that the creditor did not grant a concession. In addition, as the present value of the amended future cash flows had a difference of less than 10% of the cash flows of the original debt, it was determined that the original and new debt instruments are not substantially different. As a result, the modification was not treated as an extinguishment of the debt and no gain or loss was recognized because the fair value of the old debt and new debt remained the same. The Company recorded the fair value of $12,901 for the stock options as additional paid-in capital and a discount. During the year ended May 31, 2014, the Company repaid $40,000 of the debenture. As at May 31, 2014 the Company had accreted $12,901 of the discount bring the carrying value of the convertible debenture to $114,661. During the year ended May 31, 2015, the Company repaid $54,808 decreasing the carrying value to $59,853. At May 31, 2017, the other remaining debenture of $59,853 remained outstanding and past due. During the year ended May 31, 2017, the Company recorded an additional fee of $21,266 increasing the carrying value to $81,119.

 

At May 31, 2017, the other remaining debenture of $50,000 remained outstanding and past due.

 

(b)On August 19, 2013, the Company issued a convertible debenture for total proceeds of $10,000, which bears interest at 10% per annum, is unsecured, and due two years from date of issuance. The unpaid amount of principal and accrued interest can be converted at the holder’s option into shares of the Company’s common stock at $0.04 per share at any time after the first anniversary of the notes. The Company recognized the intrinsic value of the embedded beneficial conversion feature of $10,000 as additional paid-in capital and reduced the carrying value of the convertible debenture to $nil. The carrying value will be accreted over the term of the convertible debenture up to its face value of $10,000. As at May 31, 2017, the carrying value of the convertible promissory note was $10,000 and the note remained outstanding and in default.

 

(c)On September 11, 2013 and October 18, 2013, the Company issued two convertible debentures for total proceeds of $152,000, which bore interest at 10% per annum, were unsecured, and due two years from date of issuance. The unpaid amount of principal and accrued interest could be converted at the holders’ option into shares of the Company’s common stock at $0.04 per share at any time after the first anniversary of the notes. The Company recognized the intrinsic value of the embedded beneficial conversion feature of $152,000 as additional paid-in capital and reduced the carrying value of the convertible debenture to $nil. The carrying value was accreted over the term of the convertible debentures up to their face value of $152,000. On September 30, 2016, the Company issued 4,920,400 shares of common stock upon the conversion of the two convertible notes of $58,000 and $94,000 and $44,816 of accrued interest.

 

(d)On December 27, 2013, the Company issued three convertible debentures for total proceeds of $15,000, which bear interest at 10% per annum, are unsecured, and due two years from date of issuance. The unpaid amount of principal and accrued interest can be converted at the holder’s option into shares of the Company’s common stock at $0.04 per share at any time after the first anniversary of the notes. The Company recognized the intrinsic value of the embedded beneficial conversion features of $15,000 as additional paid-in capital and reduced the carrying value of the convertible debenture to $nil. The carrying value will be accreted over the term of the convertible debenture up to its face value of $15,000. As at May 31, 2017, the carrying value of the convertible promissory note was $15,000 and the note remained outstanding and in default. On April 1, 2017, the Company issued an aggregate of 295,800 shares of common stock upon the conversion of two of the convertible debentures, totaling $10,000, and $3,176 of accrued interest.

 

 F-21 
 

 

(e)On February 4, 2014, the Company issued a convertible debenture for total proceeds of $15,000, which bears interest at 10% per annum, is unsecured, and due two years from date of issuance. The unpaid amount of principal and accrued interest can be converted at the holder’s option into shares of the Company’s common stock at $0.04 per share at any time after the first anniversary of the notes. The Company recognized the intrinsic value of the embedded beneficial conversion feature of $15,000 as additional paid-in capital and reduced the carrying value of the convertible debenture to $nil. The carrying value will be accreted over the term of the convertible debenture up to its face value of $15,000. As at May 31, 2017, the carrying value of the convertible promissory note was $15,000 and the note remained outstanding and in default.

 

(f)On February 17, 2015, the Company issued a convertible note in the principal amount of $125,000. The note has a cash redemption premium of 130% of the principal amount in the first 90 days following the execution date, of 135% for days 90-120 following the execution date, and 140% after the 120th day. After 140 days cash redemption is only available upon approval by the holder. The note bears interest at 12% per annum and is convertible into common shares of the Company at the lower of a 42% discount to the lowest trading price during the previous 20 trading days to the date of conversion; or a 42% discount to the lowest trading price during the previous 20 trading days before the date the note was executed. On December 4, 2015, the holder of the convertible debenture entered into an agreement to sell and assign the remaining outstanding principal to a third party. The Company approved and is bound by the assignment and sale agreement.

 

The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the conversion feature of $160,244 resulted in a discount to the note payable of $125,000 and the recognition of a loss on derivatives of $35,244. During the year ended May 31, 2016, the Company issued 10,195,218 shares of common stock upon the conversion of $125,000 of principal and $7,739 of interest. During the year ended May 31, 2016, the Company recorded accretion of $125,000 and the note was fully converted.

 

(g)On June 1, 2015, the Company issued a convertible note in the principal amount of $100,000 due on demand on or after December 1, 2015. The note has a cash redemption premium of 130% of the principal amount in the first 90 days following the execution date, of 135% for days 90-120 following the execution date, and 140% after the 120th day. After 140 days cash redemption is only available upon approval by the holder. The note bears interest at 12% per annum and is convertible into common shares of the Company at the lower of a 42% discount to the lowest trading price during the previous 20 trading days to the date of conversion; or a 42% discount to the lowest trading price during the previous 20 trading days before the date the note was executed. In no event shall the conversion price be lower than $0.00001. On December 4, 2015, the holder of the convertible debenture entered into an agreement to sell and assign the remaining outstanding principal to a third party. The Company approved and is bound by the assignment and sale agreement.

 

On October 5, 2016, the holder of the convertible debentures entered into an agreement to sell and assign the remaining outstanding principal to a third party. The Company approved and is bound by the assignment and sale agreement. At May 31, 2017, $45,000 of the note had been assigned to the third party.

 

The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the conversion feature of $310,266 resulted in a discount to the note payable of $100,000 and the recognition of a loss on derivatives of $210,266. During the year ended May 31, 2016, the Company issued 6,303,475 shares of common stock upon the conversion of $45,000 of principal. During the year ended May 31, 2016, the Company recorded accretion of $100,000 and recorded the cash redemption premium of $26,250 increasing the carrying value of the note to $81,250.

 

During the year months ended May 31, 2017, the Company issued 18,440,200 shares of common stock upon the conversion of $90,000 of principal. During the year ended May 31, 2017, the Company recorded a default fee of $51,820 increasing the carrying value of the note to $43,070 and the note remained outstanding and past due.

 

 F-22 
 

 

(h)On September 8, 2015, the Company issued a convertible note in the principal amount of $326,087. During the year ended May 31, 2016, the Company received the initial tranches of $280,000 net of a $26,087 original issue discount. The note bears interest at 10% per annum and is convertible into common shares of the Company at a 65% discount to the lowest trading price during the previous 20 trading days to the date of conversion; or a 65% discount to the lowest trading price during the previous 20 trading days before the date the note was executed.

 

The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the conversion feature of $479,626 resulted in a discount to the note payable of $280,000 and the recognition of a loss on derivatives of $204,626. During the year ended May 31, 2016, the Company recorded accretion of $120,175 and recorded a default fee of $76,522 increasing the carrying value of the note to $190,696.

 

During the year ended May 31, 2017, the Company recorded accretion of $185,913 increasing the carrying value of the note to $382,608.

 

(i)On December 4, 2015, the Company issued a convertible note in the principal amount of $105,000 as an inducement to the holder of the convertible notes described in Note 9(g), to enter into an agreement to sell and assign the remaining outstanding principal to a third party. The note included a $10,000 original issue discount. The note bears interest at 10% per annum and is convertible into common shares of the Company at a 52% discount to the lowest trading price during the previous 30 trading days to the date of conversion; or a 52% discount to the lowest trading price during the previous 30 trading days before the date the note was executed. On October 5, 2016, the holder of the convertible debentures entered into an agreement to sell and assign the remaining outstanding principal to a third party. The Company approved and is bound by the assignment and sale agreement.

 

The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the conversion feature of $216,108 resulted in a discount to the note payable of $95,000 and the recognition of a loss on derivatives of $111,108. During the year ended May 31, 2016, the Company recorded accretion of $82,560 and recorded a default of fee of $26,250 increasing the carrying value of the note to $48,690.

 

During the year ended May 31, 2017, the recorded accretion of $82,560 increasing the carrying value of the note to $131,250.

 

(j)On March 10, 2016, the Company issued a convertible note in the principal amount of up to $166,666. During the year ended May 31, 2016, the Company received initial tranches of $65,000 net of a $16,666 original issue discount. The note bears interest at 10% per annum and is convertible into common shares of the Company at a 65% discount to the lowest trading price during the previous 20 trading days to the date of conversion; or a 65% discount to the lowest trading price during the previous 20 trading days before the date the note was executed.

 

The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the conversion feature of $218,785 resulted in a discount to the note payable of $81,666 and the recognition of a loss on derivatives of $158,785. During the year ended May 31, 2016, the Company recorded accretion of $20,015, and recorded a default fee of $20,417 increasing the carrying value of the note to $40,432.

 

On April 7, 2017, the Company entered into an amendment to the convertible note which allowed for the additional funding under the note of $40,000 with an original discount of $4,444. During the year ended May 31, 2017, the Company received additional tranches of $123,339. The initial fair value of the conversion feature of $245,571 resulted in a discount to the note payable of $127,783 and the recognition of a loss on derivatives of $117,788. During the year ended May 31, 2017, the Company recorded accretion of $133,721, and recorded a default fee of $31,946 increasing the carrying value of the note to $206,098.

 

 F-23 
 

 

(k)On October 11, 2016, the Company issued a convertible note in the principal amount of up to $249,999. The Company received initial tranches of $42,500 net of a $24,999 original issue discount and $2,500 of financing fees. The note bears interest at 10% per annum and is convertible into common shares of the Company at a 65% discount to the lowest trading price during the previous 20 trading days to the date of conversion; or a 65% discount to the lowest trading price during the previous 20 trading days before the date the note was executed.

 

The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the conversion feature of $121,902 resulted in a discount to the note payable of $45,000 and the recognition of a loss on derivatives of $76,902. During the year ended May 31, 2017, the Company recorded accretion of $26,943, increasing the carrying value of the note to $26,953.

 

(l)On April 27, 2017, the Company issued a convertible promissory note in the aggregate principal amount of $2,000,000. The interest on the outstanding principal due under the Unsecured Note accrues at a rate of 8% per annum. All principal and accrued interest under the Unsecured Note is due one year following the issue date of the Unsecured Note, and is convertible into shares of common stock at a conversion price equal to 75% of the lowest volume-weighted average price during the 15 trading days immediately preceding the date of conversion.

 

The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the conversion feature of $1,174,000 resulted in a discount to the note payable of $943,299. During the year ended May 31, 2017, the Company recorded accretion of $77,465 increasing the carrying value of the note to $1,134,166.

 

(m)On April 28, 2017, the Company entered into and closed on a Securities Purchase Agreement (“Purchase Agreement”) with an institutional investor (the “Lender”), pursuant to which the Company issued to the Lender a senior secured convertible promissory note in the aggregate principal amount of $440,000 (the “Secured Note”) for an aggregate purchase price of $400,000, and a warrant with a term of three years to purchase up to 27,500,000 shares of common stock of the Company at an exercise price of $0.0255 per share. The interest on the outstanding principal due under the Secured Note accrues at a rate of 8% per annum. All principal and accrued interest under the Secured Note is due on April 27, 2018 and is convertible into shares of the Company’s Common Stock at a conversion price equal to 75% of the lowest volume-weighted average price during the 15 trading days immediately preceding the conversion, subject to adjustment upon the occurrence of certain events.

 

The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 “Derivatives and Hedging”. The initial fair value of the conversion feature of $1,744,661 and the fair value of the warrants of $425,918 resulted in a discount to the note payable of $400,000 and the recognition of a loss on derivatives of $1,770,579. During the year ended May 31, 2017, the Company recorded accretion of $54,526, increasing the carrying value of the note to $54,526.

 

11.Derivative Liabilities

 

The embedded conversion option of the convertible debenture described in Note 9(f) contains a conversion feature that qualifies for embedded derivative classification. The fair value of the liability will be re-measured at the end of every reporting period and the change in fair value will be reported in the statement of operations as a gain or loss on derivative financial instruments.

 

Upon the issuance of the convertible note payable described in Note 9(f), the Company concluded that it only has sufficient shares to satisfy the conversion of some but not all of the outstanding convertible notes, warrants and options. The Company elected to reclassify contracts from equity with the earliest inception date first. As a result, none of the Company’s previously outstanding convertible instruments qualified for derivative reclassification, however, any convertible securities issued after the election, including the convertible note described in Notes 9(f) to 9(m), and the rights described in Note 7(i) would qualify for treatment as derivative liabilities. The Company reassesses the classification of the instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.

 

 F-24 
 

 

During the year ended May 31, 2017, the Company reclassified 350,000 options exercisable at $0.03 until March 16, 2017 with a fair value of $2,350, 2,000,000 warrants exercisable at $0.03 until August 29, 2018 with a fair value of $13,745, 533,333 warrants exercisable at $0.80 with a fair value of $Nil, 4,075,000 warrants exercisable at $0.37 with a fair value of $16,978 and a $59,853 note convertible at $0.40 with a fair value of $41 that qualified for treatment as derivative liabilities.

 

The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities.

 

    

May 31,

2017

  

May 31,

2016

 
           
  Balance at the beginning of year  $978,245   $353,668 
  Original discount limited to proceeds of notes   1,746,783    541,744 
  Fair value of derivative liabilities in excess of notes proceeds received   1,965,269    692,785 
  Reclassification of instruments previously classified as equity   32,934     
  Conversion of derivative liability   (195,595)   (414,246)
  Change in fair value of embedded conversion option   (767,569)   (195,706)
  Balance at the end of the year  $3,760,067   $978,245 

 

The Company uses Level 3 inputs for its valuation methodology for the embedded conversion option liabilities as their fair values were determined by using the Black-Scholes option pricing model, Monte-Carlo model or a Binomial Model based on various assumptions. Prior to May 31 2016, the Black-Scholes model was used to determine the fair value of derivative liabilities   recognized in the financial statements.  The fair value of derivatives as of May 31, 2017 were estimated using a multinomial lattice model. The Company made this change because lattice models produce more accurate derivative values due to the ability to incorporate more instrument specific assumptions into the open-form binomial model.  In addition, lattice models allow for changes in critical assumptions over the life of the option in comparison to closed-form models like Black-Scholes, which require single-value assumptions at the time of grant. The change of a valuation model is considered a change in accounting estimates.

 

Significant changes in any of these inputs in isolation would result in a significant change in the fair value measurement. As required, these are classified based on the lowest level of input that is significant to the fair value measurement. The following table shows the assumptions used in the calculations:

 

     Expected Volatility   Risk-free Interest Rate   Expected Dividend Yield   Expected Life
(in years)
 
                   
  At issuance   134-213%    0.07-0.74%           0%   0.50-2.00 
  At May 31, 2016   180-225%    0.34-0.69%    0%   0.27-1.18 
  At May 31, 2017   215-346%    0.84-1.44%    0%   0.96-2.91 

 

12.Common Stock

 

(a)As at May 31, 2016 and 2015, the Company had received proceeds of $2,080 at $0.08 per unit for subscriptions for 26,000 units. Each unit consisted of one share of common stock and one-half of one share purchase warrant. Each whole share purchase warrant is exercisable at $0.20 per common share for a period of two years or five business days after the Company’s common stock trades at least one time per day on the FINRA Over-the-Counter Bulletin Board at a price at or above $0.40 per share for seven consecutive trading days.

 

 F-25 
 

 

(b)As at May 31, 2016 and 2015 the Company’s subsidiary, Mantra Energy Alternatives Ltd., had received subscriptions for 67,000 shares of common stock at Cdn$1.00 per share for proceeds of $66,277 (Cdn$67,000), which is included in common stock subscribed, net of the non-controlling interest portion of $7,231.

 

(c)As at May 31, 2016 and 2015, the Company’s subsidiary, Climate ESCO Ltd., had received subscriptions for 210,000 shares of common stock at $0.10 per share for proceeds of $21,000, which is included in common stock subscribed, net of the non-controlling interest portion of $7,384.

 

(d)On February 2, 2016, the Company revised its authorized share capital to increase the number of authorized common shares from 100,000,000 common shares with a par value of $0.00001, to 275,000,000 common shares with a par value of $0.00001.

 

Stock transactions during the year ended May 31, 2017:

 

(a)On July 1, 2016, the Company issued 2,368,322 shares of common stock upon the conversion of $15,000 of principal of the convertible note described in Note 10(f).

 

(b)On August 15, 2016, the Company issued 2,826,456 shares of common stock upon the conversion of $10,000 of principal of the convertible note described in Note 10(f).

 

(c)On August 29, 2016, the Company issued 2,000,000 units at $0.015 per unit for proceeds of $30,000. Each unit consisted of one share of common stock and one share purchase warrant. Each share purchase warrant is exercisable at $0.03 per share of common stock for a period of two years or thirty calendar days after the Company’s common stock trades at least one time per day on the FINRA Over-the-Counter Bulletin Board at a price at or above $0.03 per share for five consecutive trading days. As at May 31, 2016, the Company had received proceeds of $25,000 at $0.015 per unit for subscriptions for 1,666,666 units which was included in common stock subscribed.

 

(d)On September 19, 2016, the Company issued 4,920,400 shares of common stock upon the conversion of the two convertible notes of $58,000 and $94,000 described in Note 10(c) and $44,816 of accrued interest.

 

(e)On September 26, 2016, the Company issued 2,780,868 shares of common stock upon the conversion of $10,000 of principal of the convertible note described in Note 10(f).

 

(f)October 3, 2016, the Company issued 4,413,181 shares of common stock upon the conversion of the note payable of $14,406 (CAD - $18,895) described in Note 8(d) and $735 (CAD - $964) of accrued interest. The Company recorded the common shares at their fair value of $39,277 which resulted in a loss on settlement of debt of $19,418.

 

(g)On December 5, 2016, the Company issued 5,393,560 shares of common stock upon the conversion of $15,075 of principal of the convertible note described in Note 10(f).

 

(h)On December 9, 2016, the Company issued 1,000,000 shares pursuant to the settlement agreement described in Note 16(h).

 

(i)On January 13, 2017, the Company issued 5,070,994 shares of common stock upon the conversion of $10,000 of principal of the convertible note described in Note 10(f).

 

(j)On December 1, 2016, the Company entered into a debt settlement agreement to settle $7,500 of amounts owed for services in exchange for 2,000,000 common shares. The Company has not yet issued the shares. The Company will record the debt settlement upon the issuance of shares.

 

(k)On March 2, 2017, the Company issued 5,954,208 shares of common stock upon the conversion of $10,837 of principal and unpaid interest of the convertible note described in Note 10(f).

 

 F-26 
 

 

(l)On March 7, 2017, the Company issued 5,954,208 shares of common stock upon the conversion of $10,063 of principal and unpaid interest of the convertible note described in Note 10(f).

 

(m)On March 13, 2017, the Company amended a debt settlement agreement, dated November 15, 2016, to settle a $15,000 loan described in Note 8(c) in exchange for 6,000,000 common shares. The shares were issued effective March 8, 2017.

 

(n)On March 15, 2017, the Company issued 6,548,937 shares of common stock upon the conversion of $11,068 of principal and unpaid interest of the convertible note described in Note 10(f).

 

(o)On April 1, 2017, the Company issued an aggregate 295,800 shares of common stock upon the conversion of $11,832 of principal and unpaid interest of two convertible notes described in Note 10(d).

 

(p)On April 7, 2017, the Company issued 2,170,314 shares of common stock upon the conversion of $3,527 of principal and unpaid interest of the convertible note described in Note 10(f).

 

(q)On May 18, 2017, the Company issued 62,125,755 shares of common stock with a fair value of $1,988,024 to a new director of the Company in exchange for services for the Company.

 

(r)On May 19, 2017, the Company issued 62,125,755 shares of common stock with a fair value of 1,988,024 to a new director of the Company in exchange for services for the Company.

 

(s)On April 10, 2017, the Company issued 4,491,018 shares of common stock upon the conversion of $15,000 in accounts payable debt, further to an agreement dated January 17, 2017.

 

Stock transactions during the year ended May 31, 2016:

 

(a)On July 1, 2015, the Company issued 150,000 common shares with a fair value of $30,000 pursuant to a consulting agreement.

 

(b)On July 20, 2015, the Company issued 93,750 common shares at $0.16 per share for proceeds of $15,000.

 

(c)On July 22, 2015, the Company issued 300,000 shares to settle $24,000 owed to a creditor. The shares had a fair value of $48,000 and the Company recorded a loss on settlement of debt of $24,000.

 

(d)On August 24, 2015, the Company issued 322,872 shares of common stock upon the conversion of $15,000 of principal of the convertible note described in Note 10(g).

 

(e)On September 21, 2015, the Company issued 676,132 shares of common stock upon the conversion of $20,000 of principal of the convertible note described in Note 10(g).

 

(f)On October 22, 2015, the Company issued 1,581,778 shares of common stock upon the conversion of $20,000 of principal of the convertible note described in Note 10(g).

 

(g)On November 9, 2015, the Company issued 3,497,506 shares of common stock upon the conversion of $44,222 of principal of the convertible note described in Note 10(g)

 

(h)On December 22, 2015, the Company issued 1,000,000 shares of common stock upon the conversion of $10,000 of principal of the convertible note described in Note 10(g)

 

(i)On January 1, 2016, the Company issued 1,000,000 shares of common stock upon the conversion of $10,000 of principal of the convertible note described in Note 10(g).

 

 F-27 
 

 

(j)On January 27, 2016, the Company issued 1,538,462 shares of common stock upon the conversion of $5,778 of principal and $4,222 of accrued interest of the convertible note described in Note 10(g).

 

(k)On February 12, 2016, the Company issued 578,468 shares of common stock upon the conversion of $3,523 of accrued interest of the convertible note described in Note 10(g).

 

(l)On February 22, 2016, the Company issued 1,724,138 shares of common stock upon the conversion of $10,000 of principal of the convertible note described in Note 10(h).

 

(m)On March 22, 2016, the Company issued 1,499,251 shares of common stock upon the conversion of $10,000 of principal of the convertible note described in Note 10(h).

 

(n)On March 29, 2016, the Company issued 2,218,017 shares of common stock upon the conversion of $15,000 of principal of the convertible note described in Note 10(h).

 

(o)On May 20, 2016, the Company issued 862,069 shares of common stock upon the conversion of $10,000 of principal of the convertible note described in Note 10(h).

 

13.Share Purchase Warrants

 

The following table summarizes the continuity of share purchase warrants:

 

     Number of
warrants
   Weighted average exercise price
$
 
           
  Balance, May 31, 2015   5,258,333    0.44 
  Issued   1,766,667    0.04 
  Balance, May 31, 2016   7,025,000    0.34 
  Issued   27,833,333    0.03 
  Expired   (650,000)   0.04 
  Balance, May 31, 2017   34,208,333    0.08 

 

As at May 31, 2017, the following share purchase warrants were outstanding:

 

  Number of warrants   Exercise
price
$
   Expiry date
           
   333,333    0.80   June 4, 2017
   200,000    0.80   July 11, 2017
   1,000,000    0.03   April 15, 2018
   666,667    0.03   May 4, 2018
   100,000    0.15   August 4, 2017
   4,075,000    0.37   April 10, 2019
   333,334    0.03   August 29, 2018
   27,500,000    0.03   April 28, 2020
             
   34,208,333         

 

 F-28 
 

 

14.Stock Options

 

The following table summarizes the continuity of the Company’s stock options:

 

     Number
of options
   Weighted
average
exercise price
$
   Weighted average remaining contractual life (years)   Aggregate
intrinsic
value
$
 
                   
  Outstanding, May 31, 2015   1,675,000    0.17           
  Granted   350,000    0.03           
  Expired   (525,000)   0.20          
  Outstanding, May 31, 2016   1,500,000    0.16           
  Expired   (1,150,000)   0.20           
  Outstanding, May 31, 2017   350,000    0.03    0.96     
  Exercisable, May 31, 2017   350,000    0.03    0.96     

 

A summary of the changes of the Company’s non-vested stock options is presented below:

 

  Non-vested stock options  Number of Options   Weighted Average
Grant Date
Fair Value
 
         $ 
  Non-vested at May 31, 2015   550,000    0.23 
             
  Granted   350,000    0.03 
  Expired   (50,000)   0.20 
  Vested   (800,000)   0.14 
  Non-vested at May 31, 2016   50,000    0.30 
  Expired   (50,000)   0.30 
  Non-vested at May 31, 2017        

 

During the year ended May 31, 2017, the Company recorded $0 (2016 - $16,426) related to the vesting of previously granted stock options. As at May 31, 2017 and 2016, there was $nil of unrecognized compensation cost related to non-vested stock option agreements.

 

Additional information regarding stock options as of May 31, 2017 is as follows:

 

 

Number of

options

  

Exercise

price

$

   Expiry date
           
   350,000    0.03   May 17, 2018
   350,000         

 

The fair values for stock options granted have been estimated using the Black-Scholes option pricing model assuming no expected dividends and the following weighted average assumptions:

 

     May 31, 2017   May 31, 2016 
           
  Risk-free interest rate       0.72%
  Expected life (in years)       2.00 
  Expected volatility       146%

 

During the year period ended May 31, 2017, the Company recorded stock-based compensation of $0 (2016 - $16,426) for stock options granted.

 

The weighted average fair value of the stock options granted for the year period ended May 31, 2016 was $0.20 per option.

 

 F-29 
 

 

15.Commitments and Contingencies

 

(a)On September 2, 2009, the Company entered into an agreement with a company to acquire a worldwide, exclusive license for the Mixed Reactant Flow-By Fuel Cell technology. The term of the agreement is for twenty years or the expiry of the last patent licensed under the agreement, whichever is later. The Company agreed to pay the licensor the following license fees:

 

an initial license fee of Cdn$10,000 payable in two installments: Cdn$5,000 upon execution of the agreement (paid) and Cdn$5,000 within thirty days of September 2, 2009 (paid);

 

a further license fee of Cdn$15,000 (paid) to be paid within ninety days of September 2, 2009; and

 

an annual license fee, payable annually on the anniversary of the date of the agreement as follows:

 

  September 1, 2010  Cdn$10,000 (paid)
  September 1, 2011  Cdn$20,000 (accrued)
  September 1, 2012  Cdn$30,000(accrued)
  September 1, 2013  Cdn$40,000 (accrued)
  September 1, 2014 and each successive anniversary  Cdn$50,000 (accrued)

 

The Company is to pay the licensor a royalty calculated as 2% of the gross revenue and 15% of any and all consideration directly or indirectly received by the Company from the grant of any sublicense rights. The Company will pay interest at a rate of 1% per month on any amounts past due. In addition, the Company is responsible for the timely payment of all future costs relating to patent expenses and any new or useful art, process, machine, manufacture or composition of matter arising out of any licensor improvements or joint improvements licensed under this agreement and identified by the licensor as potentially patentable. The Company must also invest a minimum of Cdn$250,000 in research and development directly associated with the technology. As of May 31, 2017, the licensor had cancelled the agreement due to unpaid license fees.

 

(b)On May 23, 2012, a former employee of the Company delivered a Notice of Application seeking judgment against the Company for approximately $55,000. The hearing of that Application took place on July 31, 2012, at which time the former employee obtained judgment in the approximate amount of $55,000. The Company did not defend the amount of the judgment and the amount is included in accounts payable, but claims a complete set-off on the basis that the former employee retains 1,000,000 shares of common stock of the Company as security for payment of the outstanding consulting fees owed to him. On August 31, 2012, the Company commenced a separate action against the former employee seeking a return of the 1,000,000 shares of common stock and a stay of execution of the judgment. That application is pending and has not yet been heard or determined by the court. The payment of the judgment claim of approximately $55,000 is dependent upon whether the former employee will first return the 1,000,000 shares of common stock noted above. The probable outcome of the Company’s claim for the return of the shares cannot yet be determined as the Company has not received a response from the former employee in over a year.

 

(c)On November 15, 2013, the Company entered into a second settlement agreement with the $150,000 debenture holder described in Note 10(a). Pursuant to the second amendment, on November 15, 2013, the Company agreed to make monthly payments of $10,000 on the outstanding principal and interest. Payments were made until December 2014, but have not been made after. The plaintiff was seeking relief of amounts owed along with 10% interest per annum, from the date of judgments. All amounts are recorded in these financial statements. On December 4, 2015, the holder of the convertible debenture entered into an agreement to sell and assign the remaining outstanding principal to a third party. The Company approved and is bound by the assignment and sale agreement.

 

(d)On September 3, 2015, a former prospective employee of the Company delivered a Notice of Claim seeking judgment against the Company for approximately $11,400. During the year ended May 31, 2017 the prospective employee received a judgement which is recorded in these financial statements.

 

 F-30 
 

 

(e)On March 14, 2016, the Company entered into a consulting agreement. Pursuant to the agreement, the Company will pay the consultant $10,000 per month ($20,000 paid) and issue 550,000 shares per month for a period of three months. At May 31, 2017, the Company had not issued the shares to the consultant due to non-performance.

 

(f)On July 15, 2016, the Company entered into an agreement to lease office space for $430 ($564CAD) per month until June 30, 2017.

 

(g)On September 10, 2016, the Company entered into a debt settlement agreement to settle $7,500 of amounts owed for services in exchange for 2,000,000 common shares. The Company has not yet issued the shares. The Company will record the debt settlement upon the issuance of shares.

 

(h)On August 22, 2016, the Company entered into a consulting agreement for the provision of consulting services until November 22, 2016. Pursuant to the agreement the Company will pay the consultant $5,000 per month and issue 2,000,000 shares of common stock to the consultant. On December 7, 2016, the Company entered into a settlement agreement. Pursuant to the agreement, the Company agreed to issue the consultant 1,000,000 common shares in exchange for fully releasing and discharging the Company of any and all further obligations.

 

(i)The Company leases certain of its properties under leases that expire on various dates through 2019. Some of these agreements include escalation clauses and provide for renewal options ranging from one to five years.

 

(j)Rent expense incurred under the Company’s operating leases amounted to $21,667 during the period from April 25, 2017 to May 31, 2017.

 

(k)The future minimum obligation during each year through 2019 under the leases with non-cancelable terms in excess of one year is as follows:

 

     Future 
     Minimum 
     Lease 
  Years Ending May 31,  Payments 
  2018  $147,912 
  2019   29,841 
  2020   6,854 
  Total  $184,606 

 

16.Revision of Prior Year Financial Statements

 

The Company identified an error relating to the non-recognition of the convertible note described in Note 10(i) during the year ended May 31, 2016. The effect of the error is to increase net loss by $275,295 for the year ended May 31, 2016.

 

In accordance with the guidance provided by the SEC’s Staff Accounting Bulletin 99, Materiality and Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements the Company has determined that the impact of adjustments relating to the correction of this accounting error are not material to previously issued annual audited consolidated financial statements. Accordingly, these changes are disclosed herein and will be disclosed prospectively.

 

 F-31 
 

 

As a result of the aforementioned correction of accounting errors, the relevant annual financial statements have been restated as follows:

 

Effects on financials for the Year Ended May 31, 2016:

 

     May 31, 2016 
  Consolidated Balance Sheet  As Previously Reported   Adjustment   As Revised 
  Accounts payable and accrued liabilities  $810,575   $26,407   $836,982 
  Convertible debentures   620,231    48,690    668,921 
  Derivative liability   778,047    200,198    978,245 
  Accumulated deficit   (13,430,793)   (275,295)   (13,706,088)
  Total Mantra Venture Group Ltd. stockholder’s deficit   (2,166,651)   (275,295)   (2,441,946)
  Total stockholders’ deficit   (2,402,925)   (275,295)   (2,678,220)

 

     For the Year Ended May 31, 2016 
  Consolidated Statement of Operations  As Previously Reported   Adjustment   As Revised 
               
  Loss on change in fair value of derivatives  $(401,870)  $(95,209)  $(497,079)
  Interest expense   (226,665)   (157,647)   (384,312)
  Accretion of debt discount   (439,465)   (22,440)   (461,905)
  Net loss for the period   (1,944,565)   (275,295)   (2,219,860)
  Net loss attributable to Mantra Venture Group Ltd.   (1,900,877)   (275,295)   (2,176,172)
  Net loss per share attributable to Mantra Venture Group Ltd. common shareholders, basic and diluted   (0.02)   (0.01)   (0.03)

 

     For the Year Ended May 31, 2016 
  Consolidated Statement of Cash Flows  As Previously Reported   Adjustment   As Revised 
               
  Net loss  $(1,944,565)  $(275,295)  $(2,219,860)
  Gain on change in fair value of derivative liability   (179,807)   (15,899)   (195,706)
  Initial derivative expenses   581,677    111,108    692,785 
  Interest related to cash redemption premium on convertible notes   123,188    153,690    276,878 
  Accounts payable and accrued liabilities   234,200    26,396    260,596 
  Accretion of discounts on convertible debentures   439,465    22,440    461,905 

 

17.Income Taxes

 

The Company’s pre-tax loss for the years ended May 31, 2017 and 2016 consisted of the following:

 

     Years Ended May 31, 
     2017   2016 
  Domestic  $(326,973)  $- 
  Foreign   (6,485,906)   (2,176,172)
  Pre-tax Loss  $(6,812,879)  $(2,176,172)

 

 F-32 
 

 

The provision for (benefit from) income taxes for the years ended May 31, 2017 and 2016 was as follows:

 

     Years Ended May 31, 
     2017   2016 
  Federal  $     -   $    - 
  State   -    - 
  Foreign   -    - 
  Total current  $-   $- 
             
  Deferred:          
  Federal  $-   $- 
  State   -    - 
  Total deferred   -    - 
  Total provision for (benefit from) income taxes  $-   $- 

 

The Company’s income taxes were calculated on the basis of $6,485,906 of foreign net loss and $326,973 of domestic net loss.

 

The Company’s effective tax rate for the years ended May 31, 2017 and 2016 differed from the U.S. federal statutory rate as follows:

 

     Years Ended May 31, 
     2017   2016 
     %   % 
  Federal tax benefit at statutory rate   (34.0)   (34.0)
  Permanent differences   4.8    16.3 
  State tax benefit, net of Federal benefits   -    - 
  Other   0.2    - 
  Effect of foreign income taxed in rates other than the U.S. Federal statutory rate   -    - 
  Net change in valuation allowance   29.0    17.7 
  Benefit   -    - 

 

The tax effects of temporary differences and carryforwards that gave rise to significant portions of the deferred tax assets and liabilities were as follows:

 

     Years Ended May 31, 
     2017   2016 
  Net operating loss carry forwards  $9,833,923   $4,047,230 
  Depreciation   16,189    - 
  Total assets   9,850,112    4,047,230 
             
  Less: Valuation allowance   (9,850,112)   (4,047,230)
             
  Net deferred tax liabilities  $-   $- 

 

 F-33 
 

 

As of May 31, 2017 and 2016, the Company had federal net operating loss carryforwards (“NOL’s”) of $9,850,112 and $4,047,230, respectively that will be available to reduce future taxable income, if any. These NOL’s begin to expire in 2027.

 

Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, provide for annual limitations on the utilization of net operating loss, capital loss and credit carryforwards if the Company were to undergo an ownership change, as defined in Section 382 of the Code. In general, an ownership change occurs whenever the percentage of the shares of a corporation owned, directly or indirectly, by 5-percent shareholders, as defined in Section 382 of the Code, increases by more than 50 percentage points over the lowest percentage of the shares of such corporation owned, directly or indirectly, by such 5-percent shareholders at any time over the preceding three years. In the event such ownership change occurs, the annual limitation may result in the expiration of net operating losses capital losses and credits prior to full utilization.

 

The Company has not completed a study to assess whether ownership change has occurred as a result of the Company’s acquisition of AWS and related issuance of shares (See Note 3). However, as a result of the issuance of common shares in 2017, the Company believes an ownership change under Sec. 382 may have occurred. As a result of this ownership change certain of the Company’s net operating loss, capital loss and credit carryforwards will expire prior to full utilization.

 

The Company performs an analysis each year to determine whether the expected future income will more likely than not be sufficient to realize the deferred tax assets. The Company’s recent operating results and projections of future income weighed heavily in the Company’s overall assessment. Prior to 2017, there were no provisions (or benefits) for income taxes because the Company had sustained cumulative losses since the commencement of operations.

 

The Company’s continuing practice is to recognize interest and/or penalties related to income tax matters as a component of income tax expense. As of May 31, 2017 and 2016, there was no accrued interest and penalties related to uncertain tax positions.

 

The Company is subject to U.S. federal income taxes and to income taxes in various states in the United States. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. Due to the Company’s net operating loss carryforwards all years remain open to examination by the major domestic taxing jurisdictions to which the Company is subject. In addition, all of the net operating loss and credit carryforwards that may be used in future years are still subject to adjustment.

 

18.Segment Disclosures

 

During the year ended May 31, 2016, the Company operated in one operating segment in one geographical area.

 

During the year ended May 31, 2017, the Company had two operating segments including:

 

AW Solutions which is in the business of the provision of professional, multi-service line, telecommunications infrastructure and outsource services to the wireless and wireline industry and,

 

Mantra Energy Alternatives (MEA) which consists of the rest of the Company’s operations.

 

Factors used to identify the Company’s reportable segments include the organizational structure of the Company and the financial information available for evaluation by the chief operating decision-maker in making decisions about how to allocate resources and assess performance. The Company’s operating segments have been broken out based on similar economic and other qualitative criteria. The Company operates the Mantra Energy Alternatives (MEA) reporting segment in one geographical area, Canada and the AW Solutions operating segment in two geographical areas, the United States and Puerto Rico.

 

 F-34 
 

 

Financial statement information by operating segment for the year ended May 31, 2017 is presented below:

 

     Mantra Ventures
$
   AW Solutions
$
   Total
$
 
               
  Net Sales       1,069,917    1,069,917 
  Operating loss   (4,651,298)   (110,531)   (4,761,829)
  Interest expense   211,124    330    211,454 
  Depreciation and amortization   24,329    35,540    59,869 
  Impairment loss   103,480        103,480 
  Total Assets as of May 31, 2017   4,515    5,184,262    5,188,777 

 

Geographic information for the year ended and as at May 31, 2017 is presented below:

 

     Revenues
$
   Long-Lived
Assets
$
 
           
  United States   836,809    3,080,483 
  Puerto Rico   233,108    7,837 
  Consolidated Total   1,069,917    3,088,320 

 

19.Subsequent Events

 

a)On June 6, 2017, Larry Kristof, our former President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and Manager Officer of the Company, resigned from all of his positions with the Company. Mr. Kristof will remain as the President of the Company’s Mantra Energy Alternatives subsidiary.

 

b)On June 6, 2017, the Board of Directors (the “Board”) of the Company appointed Roger M. Ponder to serve as Chief Executive Officer of the Company. The Company entered into an employment agreement with Mr. Ponder, effective as of June 6, 2017. The Ponder Agreement has a three-year term and will automatically renew for successive one-year terms unless the Company or Mr. Ponder elects to terminate the agreement by giving 60 days’ notice prior to the end of the current term. Mr. Ponder will receive a base annual salary of $220,000. His target bonus is equal to 60% of Mr. Ponder’s base salary for that fiscal year. Mr. Ponder was also granted a stock option to purchase shares of the Company’s Common Stock as determined by the Board under the Company’s Performance Incentive Plan. Mr. Ponder received a sign on bonus of 62,125,755 Common Shares issued in May 2017.

 

c)On June 6, 2017, the Board appointed Keith W. Hayter to serve as President of the Company. Mr. Hayter has served as the Chief Executive Officer and President of AW Solutions Inc. and AW Solutions Puerto Rico LLC since 2006. The Company entered into an employment agreement with a three-year term where Mr. Hayter will receive a base annual salary of $210,000, in addition, his target bonus is equal to 60%. Mr. Hayter received a sign on bonus of 62,125,755 Common Shares issued in May 2017.

 

 F-35 
 

 

ITEM 15 – EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

Exhibit #   Exhibit Description
31.1   Certification of the Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
32.1   Certifications of the Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

2

 

 

SIGNATURES

 

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

 

  MANTRA VENTURE GROUP LTD.
     
Date: October 5, 2017 By: /s/ Roger M. Ponder
    Roger M. Ponder
    Chief Executive Officer

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Name   Position   Date
         
/s/ Keith W. Hayter   Director   October 5, 2017
KEITH W. HAYTER        
         
/s/ Roger M. Ponder   Director   October 5, 2017
ROGER M. PONDER        

 

3

 

 

Exhibit Index

 

Exhibit #   Exhibit Description
31.1   Certification of the Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
32.1   Certifications of the Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

4