Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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.
The accompanying notes are an integral part of these consolidated financial statements
The accompanying notes are an integral part of these consolidated financial statements
The accompanying notes are an integral part of these consolidated financial statements
The accompanying notes are an integral part of these consolidated financial statements
Effective January 12, 2017, Passive Security Scan, Inc. ("PSSI") was incorporated in the state of Utah as subsidiary controlled by the Company. The Company transferred to PSSI its exclusive world-wide license to the defense, detection and protection security products previously acquired by the Company. The Company currently owns 76.28% of PSSI with 23.72% acquired by four individuals and entities. The Company plans to continue the development of the technology and conduct all sales and marketing activities in PSSI.
We have identified the conversion features of certain of our convertible notes payable as derivatives. We estimate the fair value of the derivatives using the Black-Scholes pricing model. We estimate the fair value of the derivative liabilities at the inception of the financial instruments, at the date of conversions to equity and at each reporting date, recording a derivative liability, debt discount, and a gain or loss on change in derivative liabilities as applicable. These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price volatility and variable conversion prices based on market prices as defined in the respective agreements. These inputs are subject to significant changes from period to period and to management's judgment; therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material.
The Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.
Convertible notes payable – related parties are currently in default and consisted of the following at April 30:
Notes payable – related parties in default and consisted of the following at April 30:
Effective June 12, 2017, the Company issued 1,309,380 shares of Series A preferred stock to EMAC for consideration totaling $130,938: convertible note payable of $25,000; three notes payable totaling $34,426; accrued interest payable of $18,718; payables – related parties of $22,794 and prepayment of services of $30,000 for the months of May 2017 through January2017. The accrued interest payable included interest on the $25,000 convertible note payable compounded at 6% per annum retroactive to January 1, 2012, as negotiated between the parties.
Effective June 12, 2017, the Company issued 442,444 shares of Series A preferred stock to a related party lender in payment of Company indebtedness totaling $44,244: convertible note payable of $32,050; accrued interest payable of $4,694 and repayment of accounts payable of $7,500.
Effective June 12, 2017, the Company issued 152,000 shares of Series A preferred stock to a related party in repayment of accrued services of $15,200.
NOTE 5 – CONVERTIBLE DEBT PAYABLE
Convertible notes payable consisted of the following at:
|
|
April 30,
2018
|
|
|
April 30,
2017
|
|
Note payable, amended April 30, 2016, with interest at 6% per annum, convertible into common stock of the Company at $0.05 per share 90 days from demand
|
|
$
|
11,000
|
|
|
$
|
11,000
|
|
|
|
|
|
|
|
|
|
|
Note payable, amended April 30, 2016, with interest at 6% per annum, convertible into common stock of the Company at $0.05 per share 90 days from demand
|
|
|
9,000
|
|
|
|
9,000
|
|
|
|
|
|
|
|
|
|
|
Note payable, amended April 30, 2016, with interest at 6% per annum, convertible into common stock of the Company at $0.05 per share 90 days from demand
|
|
|
91,150
|
|
|
|
91,150
|
|
|
|
|
|
|
|
|
|
|
Note payable, amended April 30, 2016, with interest at 6% per annum, convertible into common stock of the Company at $0.05 per share 90 days from demand
|
|
|
14,500
|
|
|
|
14,500
|
|
|
|
|
|
|
|
|
|
|
Note payable, amended April 30, 2016, with interest at 6% per annum, convertible into common stock of the Company at $0.05 per share 90 days from demand
|
|
|
20,000
|
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
Note payable, with interest at 6% per annum, convertible into common stock of the Company at $0.05 per share
|
|
|
17,000
|
|
|
|
17,000
|
|
|
|
|
|
|
|
|
|
|
Note payable to institutional investor, with interest at 15% per annum, convertible into common stock of the Company at a defined conversion price, in default
|
|
|
233,825
|
|
|
|
183,825
|
|
|
|
|
|
|
|
|
|
|
Note payable, with interest at 6% per annum, convertible into common stock of the Company at $0.05 per share
|
|
|
53,650
|
|
|
|
53,650
|
|
|
|
|
|
|
|
|
|
|
Note payable to institutional investor, with interest at 15% per annum, convertible into common stock of the Company at a defined conversion price, in default
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
Note payable to institutional investor, with interest at 15% per annum, convertible into common stock of the Company at a defined conversion price, in default
|
|
|
15,000
|
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
Note payable to institutional investor, with interest at 15% per annum, convertible into common stock of the Company at a defined conversion price, in default
|
|
|
34,337
|
|
|
|
34,337
|
|
|
|
|
|
|
|
|
|
|
Note payable to institutional investor, with interest at 15% per annum, convertible into common stock of the Company at a defined conversion price, in default
|
|
|
50,000
|
|
|
|
50,000
|
|
Note payable, with interest at 6% per annum, convertible into common stock of the Company at $0.10 per share
|
|
|
23,750
|
|
|
|
23,750
|
|
|
|
|
|
|
|
|
|
|
Note payable to institutional investor, with interest at 12% per annum, convertible into common stock of the Company at a defined conversion price
|
|
|
12,500
|
|
|
|
12,500
|
|
|
|
|
|
|
|
|
|
|
Note payable to institutional investor, with interest at 8% per annum, convertible into common stock of the Company at a defined conversion price
|
|
|
13,664
|
|
|
|
10,931
|
|
|
|
|
|
|
|
|
|
|
Note payable, with interest at 6% per annum, convertible into common stock of the Company at $0.035 per share
|
|
|
4,190
|
|
|
|
4,190
|
|
|
|
|
|
|
|
|
|
|
Note payable, with interest at 6% per annum, convertible into common stock of the Company at $0.035 per share
|
|
|
17,350
|
|
|
|
17,350
|
|
|
|
|
|
|
|
|
|
|
Note payable to institutional investor, with interest at 8% per annum, convertible after 180 days into common stock of the Company at a defined conversion price
|
|
|
32,610
|
|
|
|
37,000
|
|
|
|
|
|
|
|
|
|
|
Note payable to institutional investor, with interest at 8% per annum, convertible into common stock of the Company at a defined conversion price
|
|
|
22,500
|
|
|
|
18,000
|
|
|
|
|
|
|
|
|
|
|
Note payable to institutional investor, with interest at 2% per annum, convertible into common stock of the Company at a defined conversion price
|
|
|
56,500
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
Note payable, with interest at 15% per annum, convertible into common stock of the Company at a defined conversion price
|
|
|
25,000
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
Note payable to institutional investor, with interest at 2% per annum, convertible into common stock of the Company at a defined conversion price
|
|
|
15,000
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
Note payable to institutional investor, with interest at 2% per annum, convertible into common stock of the Company at a defined conversion price
|
|
|
2,500
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
Note payable to institutional investor, with interest at 2% per annum, convertible into common stock of the Company at a defined conversion price
|
|
|
3,000
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
Note payable, with interest at 6% per annum, convertible into common stock of the Company at $0.10 per share
|
|
|
1,000
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
Note payable, with interest at 15% per annum, convertible into common stock of the Company at $0.25 per share or 60% of the lowest 10 day trading prices
|
|
|
5,000
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
Note payable to institutional investor, with interest at 15% per annum, convertible into common stock of the Company at a defined conversion price
|
|
|
2,500
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
Note payable, with interest at 6% per annum, convertible into common stock of the PSSI and exchangeable for the Company stock at a defined conversion price
|
|
|
20,000
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
816,526
|
|
|
|
675,590
|
|
|
|
|
|
|
|
|
|
|
Less discount
|
|
|
--
|
|
|
|
(38,411
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
816,526
|
|
|
$
|
594,772
|
|
On April 30, 2016, the convertible notes payable with principal balances of $11,000, $9,000, $141,150, $14,500 and $20,000 were amended to establish a conversion price of $0.05 per share, interest at 6% retroactive to the original issuance date of the notes, and a conversion date of 90 days from demand of the lender. The amendments were determined to be extinguishments of the prior debt and the issuance of new debt in accordance with ASC 470-50,
Debt – Modifications and Extinguishments
, resulting in a loss on extinguishment of debt totaling $33,237. In addition, the Company recorded a debt discount and a beneficial conversion feature totaling $195,650 at the inception of the new debt. On June 9, 2016, the Company issued 822 shares of its common stock in the conversion of $50,000 principal of the $141,150 note and accrued interest payable of $11,644.
On March 10, 2016, the Company entered into a convertible promissory note for $17,000, which bears interest at an annual rate of 6% and is convertible into shares of the Company's common stock at $0.05 per share. The Company recorded a debt discount and a beneficial conversion feature of $17,000 at the inception of the note.
The Company subsequently entered into Amendments #1 through #4 to the July 2016 SPA, receiving net proceeds of $10,000 on August 1, 2016, $15,000 on March 15, 2017, $34,337 on March 20, 2017 and $50,000 on April 28, 2017. The amendments are subject to the terms and conditions of the July 2016 SPA and the July 2016 Note. At the inception of the convertible note, the Company, recorded total debt discount of $99,337, a derivative liability of $2,836,791 related to the conversion feature, and a loss on derivative liability of $2,737,454.
On July 31, 2016, the Company entered into a convertible promissory note for $53,650, which has no defined maturity date. The note bears interest at an annual rate of 6% and is payable only on conversion into shares of the Company's common stock at $0.10 per share.
On August 1, 2016, the Company entered into a convertible promissory note for $23,750, which has no defined maturity date. The note bears interest at an annual rate of 6% and is payable only on conversion into shares of the Company's common stock at $0.10 per share.
On August 3, 2016, the Company entered into a convertible promissory note with an institutional investor for $25,000, which bears interest at an annual rate of 12% and matures on February 4, 2017. The note holder has the right, after a period of 180 days of the note, to convert the note and accrued interest into shares of the common stock of the Company at a discounted price per share equal to 50% to 65% of the market price of the Company's common stock, depending upon the stock's liquidity as determined by the note holder's broker. At the inception of the convertible note, the Company paid debt issuance costs of $2,500, recorded a debt discount of $22,500, and recorded a derivative liability of $64,942 related to the conversion feature, and a loss on derivative liability of $42,442. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the life of the convertible note. On March 20, 2017, the lender converted $12,500 principal into 1,000,000 shares of the Company's common stock. The note is currently in default.
On August 3, 2016, the Company entered into a convertible promissory note with an institutional investor for $37,000, which bears interest at an annual rate of 8% and matures on August 3, 2017. The investor has the right, after the first six months of the note, to convert the note and accrued interest in whole or in part into shares of the common stock of the Company at a price per share equal to 55% (representing a discount rate of 45%) of the lowest bid price of the Company's common stock during the 30 trading days immediately ending on the last trading date prior to the conversion date. At the inception of the convertible note to institutional investor, the Company paid debt issuance costs of $25,500, including 100 shares of its common stock valued at $24,000, and recorded a debt discount of $37,000, including an original issue discount of $5,000, a derivative liability of $173,227 related to the conversion feature, and a loss on derivative liability of $166,727. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the life of the convertible note. In a series of conversions during February through April 2017, the lender converted total principal of $26,069 into a total of 58,344 shares of the Company's common stock.
On November 1, 2016, the Company entered into a convertible promissory note for $4,190, which has no defined maturity date. The note bears interest at an annual rate of 6% and is payable only on conversion into shares of the Company's common stock at $0.10 per share.
On December 15, 2016, the Company entered into a convertible promissory note with an institutional investor for $37,000, which bears interest at an annual rate of 8% and matures on September 30, 2017. The investor has the right, commencing on the 180
th
day of the note, to convert the note and accrued interest in whole or in part into shares of the common stock of the Company at a price per share equal to 58% (representing a discount rate of 42%) of the average of the lowest three trading price of the Company's common stock during the 15 trading days prior to the conversion date. At the inception of the convertible note to institutional investor, the Company recorded a debt discount of $35,000, a derivative liability of $96,039 related to the conversion feature, and a loss on derivative liability of $61,039. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the life of the convertible note. On May 18, 2017 the Note was sold to Jabro Funding from Power Up lending Group for $40,700.
On January 31, 2017, the Company entered into a convertible promissory note for $17,350, which has no defined maturity date. The note bears interest at an annual rate of 6% and is payable only on conversion into shares of the Company's common stock at $0.035 per share.
On March 20, 2017, the Company entered into a convertible promissory note with an institutional investor for $18,000, which bears interest at an annual rate of 8% and matures on March 20, 2018. The investor has the right, after the first six months of the note, to convert the note and accrued interest in whole or in part into shares of the common stock of the Company at a price per share equal to 55% (representing a discount rate of 45%) of the lowest bid price of the Company's common stock during the 20 trading days immediately ending on the last trading date prior to the conversion date. At the inception of the convertible note to institutional investor, the Company recorded a debt discount of $18,000, including an original issue discount of $2,000, a derivative liability of $1,285,720 related to the conversion feature, and a loss on derivative liability of $1,269,720. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the life of the convertible note.
On November 24, 2015, the Company entered into a convertible promissory note with an institutional investor for $55,500, bearing interest at an annual rate of 8% and maturing on November 24, 2016. At the inception of the convertible note, the Company recorded debt issuance costs of $3,000 in prepaid expenses, a debt discount of $55,500, including an original issue discount of $7,000, a derivative liability of $167,776 related to the conversion feature, and a loss on derivative liability of $119,276. Interest expense for the amortization of the debt discount was calculated on a straight-line basis over the life of the convertible note. The investor had the right, after the first 180 days of the note, to convert the note and accrued interest in whole or in part into shares of the common stock of the Company at a price per share equal to 55% (representing a discount rate of 45%) of the lowest sale price of the Company's common stock during the twenty consecutive trading days immediately preceding the date of the conversion notice. The note was paid in full through conversion of $15,125 into a total of 217 shares of the Company's common stock in June 2016 and a cash payment of $40,375 in July 2017.
On February 4, 2016, the Company entered into a convertible promissory note with an institutional investor for $41,000 maturing on February 4, 2017. A one-time interest charge of 12% was payable in the event the Company did not repay the note during the first 120 days. At the inception of the convertible note, the Company recorded debt issuance costs of $2,500 in prepaid expenses, a debt discount of $41,000, including an original issue discount of $3,500, a derivative liability of $78,034 related to the conversion feature, and a loss on derivative liability of $40,534. Interest expense for the amortization of the debt discount was calculated on a straight-line basis over the life of the convertible note.
The Company also issued warrants to the investor to purchase 46 shares of the Company's common stock at $0.60 per share (see Note 7).
The investor had the right, after the first 180 days of the note, to convert the note and accrued interest in whole or in part into shares of the common stock of the Company at a price per share equal to 60% (representing a discount rate of 40%) of the lowest bid price of the Company's common stock during the 60 consecutive trading days immediately preceding the date of the conversion notice. The note was paid in full with a cash payment in July 2017.
On September 20, 2016, the Company entered into a convertible promissory note with an institutional investor for $35,000, bearing interest at an annual rate of 9% and maturing on June 20, 2017. At the inception of the convertible note to institutional investor, the Company recorded debt issuance costs comprised of an obligation to issue 73 shares of its common stock valued at $14,311, and recorded a debt discount of $35,000, a derivative liability of $42,432 related to the conversion feature, and a loss on derivative liability of $21,743. Interest expense for the amortization of the debt discount was calculated on a straight-line basis over the life of the convertible note. The investor had the right, commencing on the 180
th
day of the note, to convert the note and accrued interest in whole or in part into shares of the common stock of the Company at a price per share equal to 72.5% (representing a discount rate of 27.5%) of the lowest trading price of the Company's common stock during the 15 trading days prior to the conversion date. The note principal was increased by a penalty of $12,250 and the total principal of $48,200 was paid in March 2017.
On October 27, 2016, the Company entered into a convertible promissory note with an institutional investor for $40,000, bearing interest at an annual rate of 9% and maturing on July 7, 2017. At the inception of the convertible note to institutional investor, the Company recorded a debt discount of $40,000, a derivative liability of $47,939 related to the conversion feature, and a loss on derivative liability of $7,939. Interest expense for the amortization of the debt discount was calculated on a straight-line basis over the life of the convertible note. The investor had the right, commencing on the 180
th
day of the note, to convert the note and accrued interest in whole or in part into shares of the common stock of the Company at a price per share equal to 72.5% (representing a discount rate of 27.5%) of the lowest trading price of the Company's common stock during the 15 trading days prior to the conversion date. The note principal was increased by a penalty of $8,200 and the total principal of $47,250 was paid in March 2017.
On May 25, 2017, the Company entered into a Convertible Promissory Note with an institutional investor for $56,500, with net proceeds to the Company of $52,000. The note bears interest at an annual rate of 2%, matures on May 25, 2018 and is convertible into common shares of the Company after twelve months at a variable conversion price equal to 55% multiplied by the lowest one-day trading price of the Company's common stock during the twenty trading days prior to the conversion date. At the inception of the convertible note, the Company paid debt issuance costs of $4,500, recorded a debt discount of $47,500 and a loss on note issuance of $50,959. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the life of the convertible note.
On July 17, 2017, the Company entered into a Convertible Promissory Note amendment with an institutional investor for $ $25,000. The note bears interest at an annual rate of 15%, as part of the note that is in default. The note is convertible into common shares of the Company at a variable conversion price equal to 60% multiplied by the lowest one-day trading price of the Company's common stock during the twenty one trading days prior to the conversion date. At the inception of the convertible note, the recorded a debt discount of $22,920.
On July 24, 2017, the Company entered into a Convertible Promissory Note with an institutional investor for $15,000. The note bears interest at an annual rate of 2%, matures on May 25, 2018 and is convertible into common shares of the Company after twelve months at a variable conversion price equal to 55% multiplied by the lowest one-day trading price of the Company's common stock during the twenty trading days prior to the conversion date. At the inception of the convertible note, the Company recorded a debt discount of $15,000and a loss on note issuance of $11,717. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the life of the convertible note.
On July 24, 2017, the Company entered into a Funding Agreement with RAB Investments AG, a current lender and stockholder located in Zug, Switzerland, which is intended to provide necessary funding towards the initial production of our Offender Alert Passive Scan. The Funding Agreement calls for RAB to fund a minimum of $50,000 to a maximum of $150,000 on a "best efforts basis," with a first tranche of $25,000 to be completed during August 2017. In exchange for the funds, DTIC will issue convertible notes that may be converted into common stock of the Company at a discount of 25%, based on the 10-day average trading value of Company shares at the time of the initial conversion. The notes may be converted at any time, in whole or partially, but all conversions must be at the same rate as the initial conversion. No funding has been provided as of the date of this filing and there is no assurance that funds will be provided.
On September 11, 2017, the Company entered into a Convertible Promissory Note with an institutional investor for $5,000. The note bears interest at an annual rate of 15% and is convertible into common shares of the Company after twelve months at a variable conversion price equal to 55% multiplied by the lowest one-day trading price of the Company's common stock during the twenty trading days prior to the conversion date. At the inception of the convertible note, the Company recorded a debt discount of $5,000, and recorded a derivative liability of $23,828 related to the conversion feature, and a loss on note issuance of $18,828. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the life of the convertible note.
On September 28, 2017, the Company entered into a Convertible Promissory Note with an institutional investor for $2,500. The note bears interest at an annual rate of 12%, matures on May 25, 2018 and is convertible into common shares of the Company after twelve months at a variable conversion price equal to 60% multiplied by the lowest one-day trading price of the Company's common stock during the twenty one trading days prior to the conversion date. At the inception of the convertible note, the Company recorded a debt discount of $2,500 and a loss on note issuance of $4,875. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the life of the convertible note.
On December 12, 2017, the Company entered into a Convertible Promissory Note with an institutional investor for $3,000. The note bears interest at an annual rate of 2%, matures on May 25, 2018 and is convertible into common shares of the Company after twelve months at a variable conversion price equal to 55% multiplied by the lowest one-day trading price of the Company's common stock during the twenty one trading days prior to the conversion date.
On January 31, 2018, the Company entered into a Convertible Promissory Note with an institutional investor for $5,500. The note bears interest at an annual rate of 6%, matures on August 1, 2018 and is convertible into common shares of the Company at $0.01 per share. During the period ended January 31, 2018 the Company was advanced $2,500 of the note.
On February 16, 2018, the Company's subsidiary entered into a Convertible Promissory Note with an individual for $20,000. The note bears interest at an annual rate of 6%, matures on August 1, 2018 and is convertible into common shares of the subsidiary after six months form the date of the note at a 50% discount to the 10day trading average. The shares of the subsidiary maybe exchanged for the Company shares if the subsidiary's shares are not trading. The note may only be exchangeable for shares and not repaid in cash.
Pursuant to a Securities Purchase Agreement dated July 18, 2016 (the "July 2016 SPA", the Company entered into a Senior Secured Convertible Promissory Note (the "July 2016 Note") with Firstfire Global Opportunities Fund, LLC ("Firstfire) for $189,000. The July 2016 Note was in default with respect to the maturity date, and the Company was in default on certain terms of the July 2016 SPA, including calculation of exercise prices on Firstfire debt conversions and limitations on the Company entering into subsequent "Variable Rate Transactions." On August 9, 2017, the Company and Firstfire entered into a Waiver and Settlement Agreement whereby the Company will issue an additional 8,667 shares of its common stock to Firstfire to cure the deficiency of shares previously issued in the debt conversions. Further, Firstfire agreed to waive any default with respect to the subsequent variable rate transactions. As of January 31, 2018 the shares had not been issued. On April 30, 2018 the Company accrued an additional $50,000 in principal against the note per the default clause of the note.
During the year ended April 30, 2018, the Company issued a total of 121,040 shares of its common stock in the conversion of $18,890 in convertible notes principal and in accrued interest payable and fees.
During the year ended April 30, 2017, the Company issued a total of 105,472 shares of its common stock in the conversion of $176,349 convertible notes principal and $13,519 accrued interest payable.
As of April 30, 2018, and April 30, 2017, the convertible debt outstanding, net of discount, was $816,526 and $594,772, respectively.
During the years ended April 30, 2018 and 2017, we had the following activity in our derivative liabilities:
Balance at April 30, 2016
|
|
$
|
2,081,931
|
|
|
|
|
|
|
Issuance of convertible notes
|
|
|
262,525
|
|
Loss on derivative liability
|
|
|
412,372
|
|
Conversion of debt to shares of common stock and repayment of debt
|
|
|
(1,933,376
|
)
|
|
|
|
|
|
Balance at April 30, 2017
|
|
|
823,452
|
|
|
|
|
|
|
Issuance of convertible notes
|
|
|
200,379
|
|
Loss on derivative liability
|
|
|
2,326,136
|
|
Conversion of debt to shares of common stock and repayment of debt
|
|
|
(140,393
|
)
|
|
|
|
|
|
Balance at April 30, 2018
|
|
$
|
3,248,160
|
|
The estimated fair value of the derivative liabilities at April 30, 2018 was calculated using the Black-Scholes pricing model with the following assumptions:
Risk-free interest rate
|
0.80 – 1.070
|
%
|
Expected life in years
|
0.25 - 0.89
|
|
Dividend yield
|
0
|
%
|
Expected volatility
|
514.17% - 687.46
|
%
|
Accrued interest and fees payable were $61,491 and $74,181 at April 30, 2018 and 2017, respectively.
NOTE 6 - EQUITY
Preferred Stock
The Company has 20,000,000 shares of $0.0001 par value preferred stock authorized and has designated a Series A and a Series B preferred stock. Each share of the Series A preferred stock is convertible into ten common shares and carries voting rights on the basis of 100 votes per share. Each share of the Series B preferred stock is convertible into ten common shares and carries no voting rights.
Effective June 12, 2017, the Company issued 1,309,380 shares of Series A preferred stock to EMAC for consideration totaling $130,938: convertible note payable of $25,000; three notes payable totaling $34,426; accrued interest payable of $18,718; payables – related parties of $22,794 and prepayment of services of $30,000 for the months of May 2017 through January2017. The accrued interest payable included interest on the $25,000 convertible note payable compounded at 6% per annum retroactive to January 1, 2012, as negotiated between the parties.
Effective June 12, 2017, the Company issued 442,444 shares of Series A preferred stock to a related party lender in payment of Company indebtedness totaling $44,244: convertible note payable of $32,050; accrued interest payable of $4,694 and repayment of accounts payable of $7,500.
Effective June 12, 2017, the Company issued 152,000 shares of Series A preferred stock to a related party in repayment of accrued services of $15,200.
Effective December 14, 2017, the Company issued 20,000 shares of Series B preferred stock to Controlled Capture Systems, LLC to extend the exclusive rights to the Passive Security Scan to March 15, 2018.
During the year ended April 30, 2018 the Company issued 1,750,824 series A preferred shares to a related party with a value of $175,182 for the retirement of convertible debt of $57,050, notes payable of $34,426, interest of $23,487 and payables of $37,719, accounts payable of $7,500 and prepaid of $15,000.
During the year ended April 30, 2018 the Company issued 152,000 shares of series A preferred to a related party for $15,200 in accounts payable.
As of April 30, 2018 the Company had 3,277,369 Series A and 520,000 Series B preferred share issued and outstanding.
The Company has 200,000,000 shares of $0.0001 par value common stock authorized.
On January 19, 2018 the Board of Directors, with the approval of a majority of the shareholders, passed a resolution to effect a reverse split of the Company's outstanding common stock on a 1 share for 1,500 shares (1:1500) basis. The reverse split was effective on March 20, 2018. The number of shares in the financials are reflective of the reverse split.
During the year ended April 30, 2017, the Company issued a total of 111383 shares of its common stock: 2,220 shares for services valued at $591,880; 105,472 shares in the conversion of $176,349 convertible notes principal and $13,519 accrued interest payable (net of derivative liabilities, debt discounts, and gain/loss on extinguishment of debt); 374 shares in payment of payables – related party of $56,100; 2,751 shares in payment of accounts payable and accrued expenses of $373,686 (including 2,667 shares for the acquisition of the license agreement ; 367 shares valued at $80,000 for debt issuance costs; and 200 shares for settlement of warrants. During the year ending April 30, 2018 11,016 shares were returned to the Company and redistributed during the year.
During the years ended April 30, 2018, the Company issued 121,040 shares of its common stock in the conversion of debt and interest of $18,889.
During the year ended April 30, 2018 the Company issued 47,500 shares of common stock for service for $62.999 .
NOTE 7 – STOCK OPTIONS AND WARRANTS
On July 18, 2016, the Company issued warrants to a lender to purchase 167 shares of the Company's common stock at an exercise price of $0.60 per share. The warrants vested upon grant and expire on July 17, 2018. The Company estimated the grant date fair value of the warrants at $14,365 using the Black-Scholes option-pricing model and charged the amount to debt discount.
On June 14, 2016, the Company issued warrants to a consultant to purchase 33 shares of the Company's common stock at an exercise price of $0.50 per share. The warrants vested upon grant and expired on June 14, 2017. The Company estimated the grant date fair value of the warrants at $9,056 using the Black-Scholes option-pricing model and charged the amount to general and administrative expenses.
The following assumptions were used in estimating the value of the warrants issued June and July 2017:
Risk-free interest rate
|
.55 - .68
|
%
|
Expected life in years
|
1.0 - 2.0
|
|
Dividend yield
|
0
|
%
|
Expected volatility
|
137.99 – 351.37
|
%
|
On April 30, 2016, the Company issued options to a consultant to purchase a total of 667 shares of the Company's common stock. The options vested upon grant, expire on May 31, 2018, with 166 options exercisable at $1.25 per share, 166 options exercisable at $1.50 per share, 166 options exercisable at $1.75 per share and 167,000 options exercisable at $2.00 per share. The Company estimated the grant date fair value of the options at $117,221 using the Black-Scholes option-pricing model and charged the amount to professional fees.
On February 4, 2016, the Company issued warrants to a lender to purchase 46 shares of the Company's common stock at $0.60 per share. The warrants vested upon grant and were to expire on February 4, 2021. The Company estimated the grant date fair value of the warrants at $18,403 using the Black-Scholes option pricing model and charged the amount to interest expense.
The Company and the warrant holder ("Holder") entered into a Warrant Settlement Agreement on August 9, 2016 whereby the Holder exercised 46 shares in exchange for a cash payment by the Company of $50,000, recorded as a reduction of additional paid-in capital, and the issuance by the Company of 200 of its common shares, recorded at par value of $30.
A summary of the Company's stock options and warrants as of April 30, 2018, and changes during the two years then ended is as follows:
|
|
Shares
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted Average
Remaining
Contract Term
(Years)
|
|
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at April 30, 2016
|
|
|
712
|
|
|
$
|
1.559
|
|
|
|
|
|
|
|
Granted
|
|
|
200
|
|
|
$
|
0.583
|
|
|
|
2.26
|
|
|
|
|
Exercised
|
|
|
(46
|
)
|
|
$
|
-
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding and exercisable at April 30, 2017
|
|
|
866
|
|
|
$
|
1.385
|
|
|
|
1.07
|
|
|
$
|
-
|
|
Granted
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
Exercised
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
Forfeited or expired
|
|
|
(33
|
)
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding and exercisable at April 30, 2018
|
|
|
833
|
|
|
$
|
1.50
|
|
|
|
.06
|
|
|
$
|
83
|
|
The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on our closing stock price of $1.60as of April 30, 2018, which would have been received by the holders of in-the-money options had the option holders exercised their options as of that date.
NOTE 8 – INCOME TAX
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by the valuation allowances when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Net deferred tax assets consist of the following components at April 30:
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
Net operating loss
|
|
$
|
1,314,776
|
|
|
$
|
1,485,300
|
|
Less: Valuation allowance
|
|
|
(1,314,776
|
)
|
|
|
(1,485,300
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
At April 30, 2018, the Company had net operating loss carry forwards of approximately $6,260,838 that may be offset against future taxable income through 2037. No tax benefit has been reported in the accompanying consolidated financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.
The Company's tax years with in the United States remain open for review back to 2015.
The Company's policy is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.
Due to the change in ownership provisions of U.S. federal and Canada and British Columbia income tax laws, operating loss carryforwards are potentially subject to annual limitations. As a result of the change in ownership of the Company, $1,502,000 of net operating loss carryforwards have been deemed to have been forfeit. The net operating loss balance above reflects the forfeiture of this carryforward.
Based on the recent change in corporation tax rates the Company calculated the deferred tax asset for the year ended April 30, 2018 at 21% compared to a rate of 35% for the same period ended April 30, 2017.
NOTE 9 – COMMITMENTS AND CONTINGENCIES
The Company has the following commitments as of April 30, 2018:
a)
|
Administration Agreement with EMAC Handel's AG, renewed effective May 1, 2014 for a period of three years. Monthly fee for administration services of $5,000, office rent of $250 and office supplies of $125. Extraordinary expenses are invoiced by EMAC on a quarterly basis. The fee may be paid in cash and or with common stock.
|
b)
|
Service Agreement signed April 25, 2016 with Merrill W. Moses, President, Director and CEO, for services of $7,500 per month beginning May 2016 and the issuance of 233 restricted common shares of the Company. The fees may be paid in cash and or with common stock.
|
c)
|
Service Agreement signed May 20, 2016 with Charles C. Hooper, Director, for services of $5,000 per month beginning May 2016 and the issuance of 233 restricted common shares of the Company. The fees may be paid in cash and or with common stock.
|
d)
|
Administration and Management Agreement of PSSI signed January 12, 2017 with RAB Investments AG, for general fees of $5,000 per month, office rent of $250 and telephone of $125 beginning January 2017, the issuance of 2,000 common shares of PSSI and a 12% royalty calculated on defines sales revenues payable within 10 days after the monthly sales. On January 12, 2017 the agreement was cancelled with RAB and assigned to EMAC Handel.
|
e)
|
Service Agreement of PSSI signed January 12, 2017 with Merrill W. Moses, President, Director and CEO, for services of $2,500 per month beginning February 2017 and the issuance of 333 common shares of PSSI.
|
f)
|
Business Development and Consulting Agreement of PSSI signed January 15, 2017 with WSMG Advisors, Inc., for finder's fees of 10% of funding raised for PSSI and the issuance of 1,000 common shares of PSSI.
|
NOTE 10 – SUBSEQUENT EVENTS
On May 22, 2018 the Company signed an agreement with an investor for a loan of $25,000. The note is convertible 180 days after the date of the note to shares of the Company's common stock at $0.75 per share or a 25% discount to the 10 day trading average prior to conversion; whichever is lower. The total amount of the loan must be converted on the date of conversion. The note has an annual interest rate of 6%.
On July 6, 2018 the Company signed an investment agreement with a third party. Under the terms of the agreement the Company receive $250,000 through the Company attorney's trust account. On July 12, 2018 the $250,000 less wire and legal payment of $10,045. In addition the note holder will receive a royalty of 5% up to $250,000 and then a royalty of 3.5% for two years thereafter. The note holder will receive 150,000 shares of the Company's common stock plus 100,000 warrants to purchase common shares within three years at $2.50 per share.
Subsequent to April 30, 2018, the Company issued 224,062 shares of its common stock in the conversion of debt of $137,668.
On May 30, 2018 the Company and Control Capture Systems, LLC amended their license agreement as follows:
|
●
|
Royalty payments of 5% of gross sale from the license agreement will be calculated and paid quarterly with a minimum of $12,500 paid each quarter.
|
|
●
|
All payment will be in US dollars or stock of the Company and or its subsidiary. The value of the stock will be a discount to market of 25% of the average trading price for the 10 days prior to conversion. The number of shares received by Control Capture prior to any reverse split are anti-dilutive.
|
|
●
|
Invoices for parts and materials will be billed separate of the license fees noted above.
|
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