Filed Pursuant to Rule 424(b)(3)
Registration Statement No. 333-195903
PROSPECTUS
TELUPAY
INTERNATIONAL INC.
a Nevada corporation
33,000,000
Shares of Common Stock
This prospectus relates to the resale of up to 33,000,000
shares of our common stock that may be sold, from time to time, by the selling
stockholders (each, a “Selling Stockholder”) named in this prospectus for their
own account, consisting of 33,000,000 shares of our common stock previously
issued by us to the Selling Stockholders.
Our common stock is listed for trading on the OTCQB under the symbol “TLPY”. On June 9, 2014, the low bid price of our common stock was $0.40 per share, the high ask price of our common stock was $0.40 per share, and the closing price was $0.40 per share. We do not have any securities that are currently traded on any other exchange or quotation system.
It
is anticipated that the Selling Stockholders will offer to sell the shares of
common stock being offered in this prospectus at prevailing market prices of
our common stock on the OTCQB. Any Selling Stockholder may, in such Selling
Stockholder’s discretion, elect to sell such shares of common stock at fixed
prices, at varying prices or at negotiated prices. We will not receive any
proceeds from the resale of shares of our common stock by the Selling
Stockholders.
We
agreed to bear substantially all of the expenses in connection with the
registration and resale of the shares offered hereby (other than selling
commissions).
The purchase of the securities offered by this prospectus involves a high
degree of risk. You should invest in our shares of common stock only if you
can afford to lose your entire investment. You should carefully read and
consider the section of this prospectus entitled “Risk Factors” beginning on
page 10 before buying any shares of our common stock.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offence.
The date of this prospectus is June 25, 2014
__________
The following table of contents
has been designed to help you find important information contained in this
prospectus. We encourage you to read the entire prospectus.
TABLE
OF CONTENTS
__________
In this prospectus, unless otherwise
specified: (i) references to “the Company”, “our Company”, “we”, “us” or “our”
mean Telupay International Inc. (formerly known as “I-Level Media Group
Incorporated”) and its wholly-owned subsidiary, Telupay PLC, unless the context
otherwise requires. All financial information is stated in United States
dollars unless otherwise specified. Our financial statements are prepared in
accordance with accounting principles generally accepted in the United States
of America.
SUMMARY
The following summary highlights selected information
contained in this prospectus. This summary does not contain all the
information you should consider before investing in the securities. Before
making an investment decision, you should read the entire prospectus carefully,
including the “Risk Factors” section, the financial statements and the notes to
the financial statements.
The
Company
General
Prior to our acquisition of Telupay PLC
(“Telupay”) as described herein, we were a development stage company focused on
obtaining sufficient financing to be able to recommence operations in the
social networking, digital media and mobile communications sectors. We
acquired Telupay as a wholly owned subsidiary on September 24, 2013. As a
consequence of our Company’s acquisition of Telupay, our business is now
focused on mobile banking and payment processing.
Our principal offices are located at First Island
House, Peter Street, St. Helier, Jersey, Channel Islands. Our telephone number
is +44 (0) 1534 789999.
Plan of Operations
Our vision is to be the mobile banking and
payment solution provider of choice worldwide, delivering low-cost mobile
banking and payment solution for the mass market and we aim to become a leader
in mobile banking worldwide.
Banks around the world have progressively
expanded banking services from branch networks to self-service channels (such
as ATMs) to Internet and telephone banking. Our view is that mobile banking is
a logical continuation of this trend, leveraging automation to reduce costs and
improve customer convenience.
Our strategy for growth rests on three key
areas:
-
Sign up leading banks, mobile
operators, ATM operators and private branded networks to the Telupay
platform;
-
Attract appropriate partners to
deliver sustainable, local ecosystems (located branded and co-branded
agent networks); and
-
Develop a compelling and
customer-centric product portfolio ahead of the market.
3
Moving forward, we plan to continue to
expand our range of services in the Philippines and internationally with a
revenue model based around a variety of payment and pricing structures, ranging
from a licensing model, to revenue sharing, to revenue-per-customer and
revenue-per-service usage.
The
Offering
The Issuer:
|
Telupay International Inc.
|
The Selling Stockholders:
|
The Selling Stockholders are comprised of certain of our existing
stockholders who acquired our shares as described below. The Selling
Stockholders are named in this prospectus under “Selling Stockholders”.
|
Shares Offered by the Selling Stockholders:
|
The Selling Stockholders are offering up to an aggregate of 33,000,000
shares of our common stock comprised of 33,000,000 shares of our common stock
which were issued to them at a deemed issuance price of $0.0013 per share in
a shares for debt private placement that closed on March 31, 2012.
|
Offering Price:
|
The Selling
Stockholders may sell their shares offered under this prospectus at
prevailing market prices, privately negotiated prices or otherwise as set
forth under “Plan of Distribution” in this prospectus.
|
Terms
of the Offering:
|
The Selling Stockholders will
determine when and how they will sell the common stock offered in this
prospectus. Refer to “Plan of Distribution”.
|
Termination
of the Offering:
|
The offering will conclude when
all of the 33,000,000 shares of common stock have been sold, the shares no
longer need to be registered to be sold or we decide to terminate the
registration of shares.
|
Use of Proceeds:
|
We will not receive any proceeds from the sale of the common stock by
the Selling Stockholders.
|
Market for our Common Stock:
|
Our common stock is listed for trading on the OTCQB under the symbol “TLPY”. On June 9, 2014, the low bid price of our common stock was $0.40 per share, the high ask price of our common stock was $0.40 per share, and the closing price was $0.40 per share. We do not have any securities that are currently traded on any other exchange or quotation system.
|
Outstanding Shares of Common Stock:
|
There were 161,476,726 shares of common stock outstanding as of June 9, 2014.
|
Risk Factors:
|
See “Risk Factors” and the other information in
this prospectus for a discussion of the factors you should consider before
deciding to invest in our securities.
|
Summary
of Financial Data
The following consolidated
financial data has been derived from and should be read in conjunction with:
(i) our unaudited condensed consolidated financial statements for the nine
months ended December 31, 2013 and 2012, (ii) the audited consolidated
financial statements of Telupay PLC as at March 31, 2013, and (iii) the
unaudited pro-forma consolidated financial information as at March 31, 2013,
together with the notes to each of these financial statements; and (iv) the
section of this prospectus entitled “Management’s Discussion and Analysis or
Plan of Operations”, included elsewhere herein.
4
Balance Sheet Data
Derived from our Unaudited Condensed Consolidated Financial Statements
for the Nine Months Ended December 31, 2013
|
|
As at
December 31, 2013
|
|
|
As at
March 31, 2013
|
|
Cash
|
$
|
113,149
|
|
$
|
16,770
|
|
Working capital (deficit)
|
|
(1,899,609
|
)
|
|
(1,476,397
|
)
|
Total assets
|
|
359,583
|
|
|
273,800
|
|
Total liabilities
|
|
2,035,089
|
|
|
1,506,517
|
|
Total stockholders’
deficit
|
|
(1,675,506
|
)
|
|
(1,232,717
|
)
|
Derived from the Audited Consolidated Financial
Statements of Telupay PLC and its subsidiaries for the Year Ended March 31,
2013*
|
|
As at
March 31, 2013
|
|
|
As at
March 31, 2012
|
|
Cash
|
$
|
16,770
|
|
$
|
9,789
|
|
Working capital (deficit)
|
|
(1,476,397
|
)
|
|
(1,141,671
|
)
|
Total assets
|
|
273,800
|
|
|
335,436
|
|
Total liabilities
|
|
1,506,517
|
|
|
1,171,901
|
|
Total stockholders’ deficit
|
|
(1,232,717
|
)
|
|
(836,465
|
)
|
* Effective September 24, 2013, we
completed the acquisition of 100% of the issued and outstanding shares of
Telupay PLC (“Telupay”), an early stage company focused on the development and
initial commercialization of mobile banking and payment applications and
systems, through a merger transaction. As a result of the acquisition, Telupay
is now a wholly owned subsidiary of the Company. The information in the t able
above is derived from the audited financial statements of Telupay. Audited
balance sheet data of our Company on a consolidated basis (taking into account
the acquisition of Telupay) will be available when we file our Annual Report on
Form 10-K for our fiscal year ended March 31, 2014.
5
Statement of Operations
Data
Derived from our Unaudited Condensed Consolidated Financial Statements
for the Nine Months Ended December 31, 2013
|
|
Nine Months Ended
December 31, 2013
|
|
|
Nine Months Ended
December 31, 2012
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
62,906
|
|
$
|
43,801
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
Direct operating expense
|
|
56,135
|
|
|
2,439
|
|
Salaries and benefits
|
|
398,988
|
|
|
370,852
|
|
Share-based compensation – related parties
|
|
341,802
|
|
|
426,070
|
|
Travel
|
|
59,431
|
|
|
24,533
|
|
Professional fees
|
|
293,146
|
|
|
145,575
|
|
General and administrative expenses
|
|
100,966
|
|
|
130,114
|
|
Depreciation and amortization
|
|
51,563
|
|
|
61,487
|
|
Total operating expenses
|
|
1,302,031
|
|
|
1,161,070
|
|
Net Loss from operations
|
|
(1,239,125
|
)
|
|
(1,117,269
|
)
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
Interest income
|
|
64
|
|
|
113
|
|
Interest expense, net
|
|
(14,552
|
)
|
|
(7,372
|
)
|
Interest expense – related party
|
|
(5,250
|
)
|
|
(7,875
|
)
|
Finance cost
|
|
(7,500
|
)
|
|
(372
|
)
|
Finance cost – related party
|
|
-
|
|
|
(72
|
)
|
Other income (expense)
|
|
(22,059
|
)
|
|
-
|
|
Foreign exchange gain (loss)
|
|
9,599
|
|
|
-
|
|
|
|
|
|
|
|
|
Net loss before provision
for income tax
|
|
(1,278,823
|
)
|
|
(1,132,847
|
)
|
Provision for income taxes
|
|
-
|
|
|
(543
|
)
|
|
|
|
|
|
|
|
Net loss
|
$
|
(1,278,823
|
)
|
$
|
(1,133,390
|
)
|
6
Derived from the Audited
Financial Statements of Telupay PLC for the Year Ended March 31, 2013*
|
|
Years ended March 31,
|
|
|
|
2013
|
|
|
2012
|
|
Revenues
|
|
|
|
|
|
|
Service income
|
$
|
64,711
|
|
$
|
1,809
|
|
Operating
expenses
|
|
|
|
|
|
|
Direct operating expense
|
|
6,834
|
|
|
6,736
|
|
Salaries and benefits
|
|
423,915
|
|
|
322,045
|
|
Directors’ compensation - related parties
|
|
417,000
|
|
|
747,342
|
|
Travel
|
|
24,916
|
|
|
60,629
|
|
Professional fees
|
|
377,432
|
|
|
145,106
|
|
General and administrative expenses
|
|
161,347
|
|
|
133,254
|
|
Depreciation and amortization
|
|
77,011
|
|
|
66,253
|
|
Total operating
expenses
|
|
1,488,455
|
|
|
1,481,365
|
|
Net loss from
operations
|
|
(1,423,744
|
)
|
|
(1,479,556
|
)
|
|
|
|
|
|
|
|
Other income
(expense)
|
|
|
|
|
|
|
Interest income
|
|
117
|
|
|
146
|
|
Interest expense
|
|
(6,884
|
)
|
|
(13,299
|
)
|
Interest expense – related party
|
|
(16,145
|
)
|
|
(34,921
|
)
|
Finance costs
|
|
(7,500
|
)
|
|
-
|
|
Finance costs – related party
|
|
(3,750
|
)
|
|
(276,701
|
)
|
Net foreign exchange gain (loss)
|
|
3.373
|
|
|
8,245
|
|
Total other
income (expense)
|
|
(30,789
|
)
|
|
(316,530
|
)
|
|
|
|
|
|
|
|
Net loss before
provision for income taxes
|
|
(1,454,533
|
)
|
|
(1,796,086
|
)
|
Provision for
income taxes
|
|
543
|
|
|
-
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(1,455,076
|
)
|
$
|
(1,796,086
|
)
|
* As indicated above, effective
September 24, 2013, we completed the acquisition of 100% of the issued and
outstanding shares of Telupay. The information in the t able above is derived
from the audited financial statements of Telupay. Audited statements of
operations of our Company on a consolidated basis (taking into account the
acquisition of Telupay) will be available when we file our Annual Report on
Form 10-K for our fiscal year ended March 31, 2014.
7
Derived from the Unaudited Pro-Forma Financial
Information for the Years Ended March 31, 2013 and 2012
The following unaudited pro forma financial information in
the following two tables gives effect to the consummation of the acquisition of
Telupay by i-Level Media Group Incorporated. This information should be read
in conjunction with the interim financial statements of our Company and the
audited financial statements of Telupay included herein.
For the Year Ended March 31, 2013
|
|
Telupay
|
|
|
i-Level
|
|
|
Adjustments
|
|
|
Pro Forma
|
|
Revenues
|
$
|
64,711
|
|
$
|
-
|
|
$
|
-
|
|
$
|
64,711
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expense
|
|
6,834
|
|
|
|
|
|
|
|
|
6,834
|
|
Salaries and benefits
|
|
423,915
|
|
|
-
|
|
|
-
|
|
|
423,915
|
|
Directors’ compensation - related parties
|
|
417,000
|
|
|
48,000
|
|
|
-
|
|
|
465,000
|
|
Travel
|
|
24,916
|
|
|
-
|
|
|
-
|
|
|
24,916
|
|
Professional fees
|
|
377,432
|
|
|
189,205
|
|
|
-
|
|
|
566,637
|
|
General and administrative expenses
|
|
161,347
|
|
|
11,471
|
|
|
-
|
|
|
172,818
|
|
Depreciation and amortization
|
|
77,011
|
|
|
-
|
|
|
-
|
|
|
77,011
|
|
Total operating
expenses
|
|
1,488,455
|
|
|
248,676
|
|
|
-
|
|
|
1,737,131
|
|
Net loss from
operations
|
|
(1,423,744
|
)
|
|
(248,676
|
)
|
|
-
|
|
|
(1,672,420
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
(22,912
|
)
|
|
(39,880
|
)
|
|
-
|
|
|
(62,792
|
)
|
Finance costs
|
|
(11,250
|
)
|
|
-
|
|
|
|
|
|
(11,250
|
)
|
Foreign exchange gain
|
|
3,373
|
|
|
-
|
|
|
-
|
|
|
3,373
|
|
Total other income (expense)
|
|
(30,789
|
)
|
|
(39,880
|
)
|
|
-
|
|
|
(70,669
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss before
provision for income taxes
|
|
(1,454,533
|
)
|
|
(288,556
|
)
|
|
-
|
|
|
(1,743,089
|
)
|
Provision for income
taxes
|
|
(543
|
)
|
|
-
|
|
|
-
|
|
|
(543
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(1,455,076
|
)
|
$
|
(288,556
|
)
|
$
|
-
|
|
$
|
(1,743,632
|
)
|
8
For the year
ended March 31, 2012
|
|
Telupay
|
|
|
i-Level
|
|
|
Adjustments
|
|
|
Pro Forma
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Service income
|
$
|
1,809
|
|
$
|
-
|
|
$
|
-
|
|
$
|
1,809
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses
|
|
6,736
|
|
|
-
|
|
|
-
|
|
|
6,736
|
|
Salaries and benefits
|
|
322,045
|
|
|
-
|
|
|
-
|
|
|
322,045
|
|
Directors’ compensation
|
|
747,342
|
|
|
48,000
|
|
|
-
|
|
|
795,342
|
|
Travel
|
|
60,629
|
|
|
-
|
|
|
-
|
|
|
60,629
|
|
Professional fees
|
|
145,106
|
|
|
22,091
|
|
|
-
|
|
|
167,197
|
|
General and administrative expenses
|
|
133,254
|
|
|
6,124
|
|
|
-
|
|
|
139,378
|
|
Depreciation and amortization
|
|
66,253
|
|
|
-
|
|
|
-
|
|
|
66,253
|
|
Total operating expenses
|
|
1,481,365
|
|
|
76,215
|
|
|
-
|
|
|
1,557,580
|
|
Net loss from operations
|
|
(1,479,556
|
)
|
|
(76,215
|
)
|
|
-
|
|
|
(1,555,771
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
Forgiveness of debt
|
|
-
|
|
|
15,640
|
|
|
-
|
|
|
15,640
|
|
Interest expense, net
|
|
(48,074
|
)
|
|
(39,771
|
)
|
|
-
|
|
|
(87,845
|
)
|
Finance costs
|
|
(276,701
|
)
|
|
-
|
|
|
-
|
|
|
(276,701
|
)
|
Foreign exchange gain (loss)
|
|
8,245
|
|
|
(4,688
|
)
|
|
-
|
|
|
3,557
|
|
Total other income (expense)
|
|
(316,530
|
)
|
|
(28,819
|
)
|
|
-
|
|
|
(345,349
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(1,796,086
|
)
|
$
|
(105,034
|
)
|
$
|
-
|
|
$
|
(1,901,120
|
)
|
9
RISK
FACTORS
An investment in our common stock involves a number
of very significant risks. You should carefully consider the following risks
and uncertainties in addition to other information in this prospectus in
evaluating our company and its business before purchasing shares of our common
stock. Our business, operating results and financial condition could be
seriously harmed due to any of the following risks. The risks described below
may not be all of the risks facing our company. Additional risks not presently
known to us or that we currently consider immaterial may also impair our
business operations. You could lose all or part of your investment due to any
of these risks.
Risks Related to Our Company
We have limited operating history and lack profitable
operations.
Telupay was incorporated in Jersey, Channel Islands in
2010 and has had limited operations and revenues to date. Through its year
ended March 31, 2013, Telupay had accumulated losses of $7,799,572 and a
working capital deficit of $1,141,671. During the nine months ended December
31, 2013, we had revenues of $62,906, a net loss from operation of $1,239,125
and a working capital deficit of $1,899,609. There is no assurance that we will ever
achieve significant revenues or profitability.
If we are unable to obtain financing to execute our
plan of operations, then we will not have sufficient funds with which to carry
out our plan of operations and our business will most likely fail.
We
require additional capital to support our ongoing basic overhead and operations
estimated to be approximately $1 million for the next twelve months. We require
$3 million in additional capital to start executing our business initiatives in
each of Peru, United Kingdom/Europe, the Philippines and Indonesia over the
next twelve months. We anticipate that we will raise the required capital pursuant
to a private equity financing in the near term, but there is no guarantee that
we will be able to do so.
During
2014 we plan to seek further additional financing, but there is no guarantee
that we will be able to do so. Should we be successful in raising sufficient
financing, we can begin planning for other business initiatives such as:
completing the execution of our business plan in each of Peru, United
Kingdom/Europe, the Philippines and Indonesia and entering into a formal
partnership in Colombia similar to Peru; accelerating our business initiatives
in the United Kingdom and Europe; and fund marketing and incentive initiatives
for the new generation of products throughout the European marketplace.
We presently do not have any arrangements for financing
in place and there is no assurance that we will be able to arrange for
financing. If we are not able to arrange for financing to cover these
anticipated expenses, we will not be able to execute our plan of operations the
result that our business may fail and investors may lose a substantial portion
or all of their investment.
If our expenses are greater than anticipated, then we
will have fewer funds with which to pursue our plan of operations and our
financing requirements will be greater than anticipated.
We may find that the costs of carrying out our plan of
operations are greater than we anticipate. Increased operating costs will cause
the amount of financing that we require to increase. Investors may be more
reluctant to provide additional financing if we cannot demonstrate that we can
control our operating costs. There is no assurance that additional financing
required as a result of our operating costs being greater than anticipated will
be available to us. If we do not control our operating expenses, then we will
have fewer funds with which to carry out our plan of operations with the result
that our business may fail.
10
We may not be able to continue as a going concern if
we do not obtain financing.
Our independent accountants’ audit report states that
there is substantial doubt about our ability to continue as a going concern. We
have incurred only losses since our inception raising substantial doubt about
our ability to continue as a going concern. Our ability to continue as a going
concern is highly dependent upon obtaining financing for our planned
operations. There can be no assurance that we will be able to raise any funds,
or we are able to raise funds, that such funds will be in the amounts required
or on terms favorable to us.
We operate in a highly competitive industry and our
failure to compete effectively may adversely affect our ability to generate
revenue.
Our industry is highly competitive and subject to
rapid change. Some of our current and potential competitors for business
opportunities have greater technical, financial, marketing, sales and other
resources than we do. Such competition will potentially affect our chances of
achieving profitability and ultimately adversely affect our ability to continue
as a going concern.
We are reliant on telecommunications networks.
We are reliant on the operations of telecommunications
networks for the provision of our services to the marketplace concerned. Should
any of these relationships or agreements terminate or become strained for any
reason, that would have a negative impact on our operations and business
development plans.
As a mobile banking and payment application
business, any disruptions, failures or cyber attacks in our information
technology systems and network infrastructures, or any breach of security with
respect to personally identifiable information, could have a material adverse
effect on our business.
As a mobile banking and payment application business,
we maintain and rely extensively on information technology systems and network
infrastructures for the effective operation of our business. Techniques used to
gain unauthorized access to private networks are constantly evolving, and we
may be unable to anticipate or prevent unauthorized access to data pertaining
to our customers, which could include credit card and debit card information,
bank account details or other personally identifiable information. Our service
is vulnerable to computer viruses, phishing attacks or other attacks and
similar disruptions from unauthorized use of our systems, any of which could
lead to system interruptions, delays or shutdowns, causing loss of critical
data or the unauthorized access to personally identifiable information. If an
actual or perceived breach of security occurs of our systems, we may face civil
liability and public perception of our security measures could be diminished,
either of which would negatively affect our ability to attract or maintain
customers. We also would be required to expend significant resources to
mitigate any such breach of security and to address related matters.
Further, a disruption, infiltration or failure of our
information technology systems as a result of software or hardware
malfunctions, computer viruses, cyber-attacks, employee theft or misuse, power
disruptions, natural disasters or accidents could cause breaches of data
security and loss of critical data, which in turn could materially adversely
affect our business. In addition, our ability to integrate, expand, and update
our information technology infrastructure is important for our contemplated
growth, and any failure to do so could have an adverse effect on our business.
We depend on key management personnel.
The success of our operations and activities is
dependent to a significant extent on the efforts and abilities of our
management. We are managed by a limited number of key personnel who have
significant experience within Telupay and the wider IT or communications
sectors and who may be difficult to replace.
11
Our management team lacks experience in running a
public company in the United States.
Our officers and directions, all of whom started in
such positions upon the effective date of the Merger on September 24, 2013,
lack experience in running a public company in the United States. Such lack of
experience may result in our Company experiencing difficulty in adequately
operating and growing our business. Further, our Company may be hampered by
lack of experience in addressing the issues and considerations which are common
to growing companies. If our Company’s operating or management abilities
consistently perform below expectations, our business is unlikely to thrive.
We do not maintain a place of business in the United
States and our officers and directors reside outside of the United States, with
the result that it may be difficult for investors to enforce within the United
States any judgments obtained against us or our sole director and officer.
Although we are a Nevada corporation, we do not
currently maintain a permanent place of business within the United States. In
addition, our officers and directors reside outside the United States,
principally in the Philippines. As a result, it may be difficult for investors
to enforce within the United States any judgments obtained against us or our
officers or directors, including judgments predicated upon the civil liability
provisions of the securities laws of the United States or any state thereof.
Consequently, you may be effectively prevented from pursuing remedies under
U.S. federal securities laws against our directors and officers.
Risks Related to Doing Business in the
Philippines
The Philippines may experience economic
instability, which could increase our costs and harm our business.
The Philippines continues to experience low growth in
its gross domestic product, significant inflation, currency declines and
shortages of foreign exchange. We are exposed to the risk of cost increases due
to inflation in the Philippines, which has historically been at a much higher
rate than in the United States. These conditions could create economic
instability that could harm businesses operating in the Philippines. Currency
fluctuations in the Philippine peso relative to the U.S. dollar could increase
our expenses. All of our revenues are denominated in U.S. dollars, and a
substantial portion of our costs are incurred and paid in Philippine pesos. We
are therefore exposed to the risk of an increase in the value of the Philippine
peso relative to the U.S. dollar, which would increase our expenses. We do not
currently engage in any transactions as a hedge against risk of loss due to
foreign currency fluctuations.
Natural disasters or other catastrophic events could
negatively affect our business, financial condition and results of operations.
Natural disasters, such as hurricanes, earthquakes or
typhoons similar to the large typhoon which struck the Philippines in November
2013, could cause significant disruptions to our employee or customer base and
could adversely impact our business and our results of operations. Such events
could result in temporary work stoppages and telecommunication or other
technology outages. We may be required to suspend operations in the
Philippines, which could have a material adverse affect on our business,
financial condition and results of operations.
Terrorist attacks could adversely affect the
Philippine economy, disrupt our operations and cause our business to suffer.
The Philippines periodically experiences civil unrest
and terrorism and U.S. companies in particular may experience greater risk. We
are not insured against terrorism risks. Terrorist attacks have the potential
to directly impact our clients and the Philippine economy by making travel more
difficult, interrupting lines of communication and curtailing our ability to
deliver our services to our clients. These obstacles may increase our expenses
and harm our business.
12
Risks Related to Our Common Stock
Trading of our common stock is sporadic, and the price
of our common stock may be volatile; we caution you as to the highly illiquid
nature of an investment in our shares.
Our common stock is quoted on the OTCQB. To date,
trading in our common stock has been limited and sporadic. The price of our
common shares may increase or decrease in response to a number of events and
factors, including: current events affecting the global economic situation;
changes in financial estimates; our acquisitions and financings; quarterly
variations in our operating results; the operating and share price performance
of other companies that investors may deem comparable; and purchase or sale of
blocks of our common shares. These factors, or any of them, may materially
adversely affect the prices of our common shares regardless of our operating
performance. We caution you as to the highly illiquid nature of an investment
in our shares.
A decline in the price of our common stock could
affect our ability to raise working capital and adversely impact our
operations.
A decline in the price of our common stock could
result in a reduction in the liquidity of our common stock and a reduction in
our ability to raise capital for our operations. Because our operations to date
have been principally financed through the sale of equity securities, a decline
in the price of our common stock could have an adverse effect upon our
liquidity and our continued operations. A reduction in our ability to raise
equity capital in the future would have a material adverse effect upon our
business plan and operations, including our ability to continue our current
operations. If our stock price declines, we may not be able to raise additional
capital or generate funds from operations sufficient to meet our obligations.
We have not paid any dividends and do not foresee
paying dividends in the future.
Payment of dividends on our common stock is within the
discretion of the board of directors and will depend upon our future earnings,
our capital requirements, our financial condition and other relevant factors.
We have no plan to declare any dividends in the foreseeable future.
Our stock
is a penny stock. Trading of our stock may be restricted by the SEC’s penny
stock regulations and FINRA’s sales practice requirements, which may limit a
stockholder’s ability to buy and sell our stock.
Our common stock will be subject to the “Penny Stock”
Rules of the SEC, which will make transactions in our common stock cumbersome
and may reduce the value of an investment in our common stock.
Our common stock is quoted on the OTCQB, which is
generally considered to be a less efficient market than markets such as NASDAQ
or the national exchanges, and which may cause difficulty in conducting trades
and difficulty in obtaining future financing. Further, our securities will be
subject to the “penny stock rules” adopted pursuant to Section 15(g) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). The penny stock rules
apply generally to companies whose common stock trades at less than $5.00 per
share, subject to certain limited exemptions. Such rules require, among other
things, that brokers who trade “penny stock” to persons other than “established
customers” complete certain documentation, make suitability inquiries of
investors and provide investors with certain information concerning trading in
the security, including a risk disclosure document and quote information under
certain circumstances. Many brokers have decided not to trade “penny stock”
because of the requirements of the “penny stock rules” and, as a result, the
number of broker-dealers willing to act as market makers in such securities is
limited. In the event that we remain subject to the “penny stock rules” for any
significant period, there may develop an adverse impact on the market, if any,
for our securities. Because our securities are subject to the “penny stock
rules”, investors will find it more difficult to dispose of our securities.
Further, it is more difficult: (i) to obtain accurate quotations, (ii) to
obtain coverage for significant news events because major wire services, such
as the Dow Jones News Service, generally do not publish press releases about
such companies, and (iii) to obtain needed capital.
13
In addition to the “penny stock” rules promulgated by
the SEC, FINRA has adopted rules that require a broker-dealer to have
reasonable grounds for believing that an investment is suitable for a customer
when recommending the investment to that customer. Prior to recommending
speculative low-priced securities to their non-institutional customers,
broker-dealers must make reasonable efforts to obtain information about the
customer’s financial status, tax status, investment objectives and other
information. Under interpretations of these rules, FINRA believes that there is
a high probability that speculative low priced securities will not be suitable
for at least some customers. FINRA requirements make it more difficult for
broker-dealers to recommend that their customers buy our common stock, which
may limit your ability to buy and sell our stock and have an adverse effect on
the market for our shares.
Shares of our common stock that are
“restricted securities” as defined in Rule 144(a)(3) are subject to resale
restrictions imposed by Rule 144, including those set forth in Rule 144(i)
which apply to a “shell company.” In addition, any shares of our common stock
that are held by affiliates, including any received in a registered offering,
will be subject to the resale restrictions of Rule 144(i).
Pursuant to Rule 144 of the Securities Act, a “shell
company” is defined as a company that has: (i) no or nominal operations and
(ii) either (A) no or nominal assets, (B) assets consisting solely of cash and
cash equivalents, or (C) assets consisting of any amount of cash and cash
equivalents and nominal other assets. We were a “shell company” pursuant to
Rule 144 prior to the Merger, and as such, Rule 144(i) provides that sales of
our securities pursuant to Rule 144 are not able to be made until a period of
at least twelve months has elapsed from the date on which our Current Report on
Form 8-K providing Form 10 level disclosure was filed with the Commission
reflecting our status as a non-”shell company,” which twelve-month period will
elapse on September 30, 2014. Therefore, any restricted securities currently
outstanding or that we sell in the future or issue to consultants or employees,
in consideration for services rendered or for any other purpose, will have no
liquidity until and unless such securities are registered with the Commission
and/or until a year after the date of the filing of our Current Report on Form
8-K reflecting our status as a non-”shell company” and we have otherwise
complied with the other requirements of Rule 144. As a result, it may be harder
for us to fund our operations and pay our employees and consultants with our
securities instead of cash than if we had not been a “shell company”.
Furthermore, it will be harder for us to raise funding through the sale of debt
or equity securities unless we agree to register such securities with the
Commission, which could cause us to expend additional resources in the future.
Our previous status as a “shell company” could prevent us from raising
additional funds, engaging employees and consultants, and using our securities
to pay for any acquisitions (although none are currently planned), which could
cause the value of our securities, if any, to decline in value or become
worthless. Lastly, any shares held by affiliates, including shares received in
any registered offering, will be subject to the resale restrictions of Rule
144(i).
Please
read this prospectus carefully. You should rely only on the information
contained in this prospectus. We have not authorized anyone to provide you
with different information. You should not assume that the information
provided by the prospectus is accurate as of any date other than the date on
the front of this prospectus.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking
statements that involve risks and uncertainties, including statements regarding
our capital needs, business plans and expectations.
14
Such forward-looking
statements involve risks and uncertainties regarding the success of our
business plan, availability of funds, government regulations, operating costs,
our ability to achieve significant revenues and other factors. Forward-looking
statements are made, without limitation, in relation to operating plans,
availability of funds, operating costs and permit acquisition. Any statements
contained herein that are not statements of historical facts may be deemed to
be forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as “may”, “will”, “should”, “expect”, “plan”,
“intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or
“continue”, the negative of such terms or other comparable terminology. Actual
events or results may differ materially. In evaluating these statements, you should
consider various factors, including the risks outlined in this prospectus.
These factors may cause our actual results to differ materially from any
forward-looking statement. While these forward-looking statements, and any
assumptions upon which they are based, are made in good faith and reflect our
current judgment regarding our business plans, our actual results will almost
always vary, sometimes materially, from any estimates, predictions,
projections, assumptions or other future performance suggested herein. We do
not intend to update any of the forward-looking statements to conform these
statements to actual results, except as required by applicable law, including the
securities laws of the United States.
USE OF PROCEEDS
We will not receive any proceeds
from the sale of the shares of common stock offered through this prospectus by
the Selling Stockholders. All proceeds from the sale of the shares will be for
the account of the Selling Stockholders, as described below in the sections of
this prospectus entitled “Selling Stockholders” and “Plan of Distribution”. We
will, however, incur all costs associated with this prospectus and the
registration statement of which this prospectus forms a part.
DETERMINATION OF
OFFERING PRICE
The Selling Stockholders may sell their shares offered under this
prospectus at prevailing market prices, privately negotiated prices or
otherwise as set forth under “Plan of Distribution” in this prospectus.
SELLING STOCKHOLDERS
The Selling Stockholders named in this prospectus are offering all of the 33,000,000 shares of common stock offered through this prospectus, consisting of 33,000,000 shares of our common stock.
Such 33,000,000 shares were issued to the Selling Stockholders by the Company at a deemed issuance price of $0.0013 per share on March 31, 2012 pursuant to a shares-for-debt private placement in settlement of an aggregate of $44,000 in debt owed by the Company to the Selling Stockholders. The $44,000 in debt arose from a consulting services agreement dated February 1, 2008 by and between the Company and third party that provided management services to the Company for a period of eleven months for gross monthly fees of $4,000 per month. The contract terminated by its terms on December 31, 2008. The Company was not able to pay the $44,000 owed to the consultant, and the consultant assigned such debt to the Selling Stockholders at a purchase price of $0.10 for every dollar of debt, such that the Selling Shareholders paid the consultant an aggregate of $4,400 to purchase such $44,000 of debt. As noted above, the Company issued 33,000,000 shares to the Selling Shareholders at a deemed issued price of $0.0013 per share in a shares-for-debt private placement that closed on March 31, 2012 in settlement of such debt.
The following table sets forth
certain information regarding the ownership of our shares of common stock to be
sold by the Selling Stockholders as of the date of June 9, 2014.
Information with respect to
ownership is based upon information obtained from the Selling Stockholders.
Information with respect to “Shares Owned After this Offering” assumes the sale
of all of the shares offered by this prospectus and no other purchases or sales
of our common stock by the Selling Stockholders. Except as describd below and
to our knowledge, the Selling Stockholders own and have sole voting and
investment power over all shares or rights to these shares. Except for their
ownership of common stock or otherwise as described below, none of the Selling
Stockholders had or have any material relationship with us.
Because a Selling Stockholder may offer by this
prospectus all or some part of the common shares which it holds, no estimate
can be given as at the date hereof as to the number of common shares actually
to be offered for sale by a Selling Stockholder or as to the number of common
shares that will be held by a Selling Stockholder upon the termination of such
offering.
15
Name of Selling Stockholder
|
Shares Owned
Prior to this
Offering
(1)
|
Shares to be
Offered under this
Prospectus
(1)
|
Number of Shares Owned After
Offering and Percentage of Total of Issued and Outstanding Shares After Offering
|
Shares Owned
After Offering
|
Percentage of
Issued and
Outstanding
Shares
(2)
|
Li Yang
|
4,575,000
|
4,575,000
|
Nil
|
Nil
|
Chen Xiang
|
4,500,000
|
4,500,000
|
Nil
|
Nil
|
Cui Yu
|
4,500,000
|
4,500,000
|
Nil
|
Nil
|
Na Zhang
|
4,125,000
|
4,125,000
|
Nil
|
Nil
|
Shimin Wang
|
4,125,000
|
4,125,000
|
Nil
|
Nil
|
Xiaodu Ge
|
3,750,000
|
3,750,000
|
Nil
|
Nil
|
Jia Wang
|
3,825,000
|
3,825,000
|
Nil
|
Nil
|
Ye Bin
|
3,600,000
|
3,600,000
|
Nil
|
Nil
|
Total
|
33,000,000
|
33,000,000
|
Nil
|
Nil
|
(1)
|
Under Rule 13d-3, a beneficial
owner of a security includes any person who, directly or indirectly, through
any contract, arrangement, understanding, relationship, or otherwise has or
shares: (i) voting power, which includes the power to vote, or to direct the
voting of shares; and (ii) investment power, which includes the power to
dispose or direct the disposition of shares. Certain shares may be deemed to
be beneficially owned by more than one person (if, for example, persons share
the power to vote or the power to dispose of the shares). In addition, shares
are deemed to be beneficially owned by a person if the person has the right to
acquire the shares (for example, upon exercise of an option) within 60 days of
the date as of which the information is provided.
|
(2)
|
The applicable percentage of ownership is based on 161,476,726 shares of our common stock issued and outstanding as of June 9, 2014. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of the acquisition rights as described in note 1 above.
|
PLAN OF DISTRIBUTION
Timing
of Sales
The
Selling Stockholders may offer and sell the shares covered by this prospectus
at various times. The Selling Stockholders will act independently of us in
making decisions with respect to the timing, manner and size of each sale.
Offering
Price
The
Selling Stockholders may sell all or a portion of the shares of common stock
beneficially owned by them and offered hereby from time to time directly or
through one or more underwriters, broker-dealers or agents. If the shares of
common stock are sold through underwriters or broker-dealers, the Selling
Stockholders will be responsible for underwriting discounts or commissions or
agent’s commissions. The shares of common stock may be sold on the OTCQB or any
national securities exchange or quotation service on which the securities may
be listed or quoted at the time of sale, or in transactions otherwise than on
these exchanges or systems and in one or more transactions at fixed prices, at
prevailing market prices at the time of the sale, at varying prices determined
at the time of sale, or at negotiated prices. These sales may be effected in
transactions, which may involve crosses or block transactions.
16
Manner
of Sale
The
shares may be sold by means of one or more of the following methods:
|
1.
|
a block trade in which the
broker-dealer so engaged will attempt to sell the shares as agent, but may
position and resell a portion of the block as principal to facilitate the
transaction;
|
|
2.
|
purchases by a broker-dealer as
principal and resale by that broker-dealer for its account pursuant to this
prospectus;
|
|
3.
|
ordinary brokerage transactions in
which the broker solicits purchasers;
|
|
4.
|
through options, swaps or
derivative;
|
|
5.
|
privately negotiated transactions;
or
|
|
6.
|
in a combination of any of the
above methods.
|
The
Selling Stockholders may sell their shares directly to purchasers or may use
brokers, dealers, underwriters or agents to sell their shares. Brokers or
dealers engaged by the Selling Stockholders may arrange for other brokers or
dealers to participate. Brokers or dealers may receive commissions, discounts
or concessions from the Selling Stockholders, or, if any such broker-dealer
acts as agent for the purchaser of shares, from the purchaser in amounts to be
negotiated immediately prior to the sale. The compensation received by brokers
or dealers may, but is not expected to, exceed that which is customary for the
types of transactions involved. Broker-dealers may agree with a Selling
Stockholder to sell a specified number of shares at a stipulated price per
share, and, to the extent the broker-dealer is unable to do so acting as agent
for a Selling Stockholder, to purchase as principal any unsold shares at the
price required to fulfill the broker-dealer commitment to the Selling
Stockholder. Broker-dealers who acquire shares as principal may thereafter
resell the shares from time to time in transactions, which may involve block
transactions and sales to and through other broker-dealers, including transactions
of the nature described above, in the over-the-counter market or otherwise at
prices and on terms then prevailing at the time of sale, at prices then related
to the then-current market price or in negotiated transactions. In connection
with resales of the shares, broker-dealers may pay to commissions or receive
from commissions the purchasers of shares as described above.
If our
Selling Stockholders enter into arrangements with brokers or dealers, as
described above, we are obligated to file a post-effective amendment to the
registration statement of which this prospectus forms a part, disclosing such
arrangements, including the names of any broker dealers acting as underwriters.
The
Selling Stockholders and any broker-dealers or agents that participate with the
Selling Stockholders in the sale of the shares may be deemed to be
“underwriters” within the meaning of the Securities Act. In that event, any
commissions received by broker-dealers or agents and any profit on the resale
of the shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
Sales
Pursuant to Rule 144
Any
shares of common stock covered by this prospectus which qualify for sale
pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather
than pursuant to this prospectus.
Pursuant to Rule 144 of the Securities Act, a “shell
company” is defined as a company that has: (i) no or nominal operations and
(ii) either (A) no or nominal assets, (B) assets consisting solely of cash and
cash equivalents, or (C) assets consisting of any amount of cash and cash
equivalents and nominal other assets. We were a “shell company” pursuant to
Rule 144 prior to the Merger, and as such, Rule 144(i) provides that sales of
our securities pursuant to Rule 144 are not able to be made until a period of
at least twelve months has elapsed from the date on which our Current Report on
Form 8-K providing Form 10 level disclosure was filed with the Commission
reflecting our status as a non-”shell company,” which twelve-month period will
elapse on September 30, 2014.
17
Regulation M
We have
advised the selling security holders that the anti-manipulation rules of
Regulation M under the Exchange Act may apply to sales of shares in the market
and to the activities of the selling security holders and their affiliates.
Regulation M under the Exchange Act prohibits, with certain exceptions,
participants in a distribution from bidding for, or purchasing for an account
in which the participant has a beneficial interest, any of the securities that
are the subject of the distribution. Accordingly, the Selling Stockholder is
not permitted to cover short sales by purchasing shares while the distribution
is taking place. Regulation M also governs bids and purchases made in order to
stabilize the price of a security in connection with a distribution of the
security. In addition, we will make copies of this prospectus available to the
selling security holders for the purpose of satisfying the prospectus delivery
requirements of the Securities Act.
State
Securities Laws
Under
the securities laws of some states, the shares may be sold in such states only
through registered or licensed brokers or dealers. In addition, in some states
the shares may not be sold unless the shares have been registered or qualified
for sale in the state or an exemption from registration or qualification is
available and is complied with.
Penny
Stock Rules
The
Securities and Exchange Commission has adopted regulations which generally
define “penny stock” to be any equity security that has a market price (as
defined) of less than $5.00 per share or an exercise price of less than $5.00
per share, subject to certain exceptions. Our securities are covered by the
penny stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
“institutional accredited investors.” The term “institutional accredited
investor” refers generally to those accredited investors who are not natural
persons and fall into one of the categories of accredited investor specified in
subparagraphs (1), (2), (3), (7) or (8) of Rule 501 of Regulation D promulgated
under the Securities Act, including institutions with assets in excess of
$5,000,000.
The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document in a form required by the Securities and Exchange
Commission, and impose a waiting period of two business days before effecting
the transaction. The risk disclosure document provides information about penny
stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer quotations
for the penny stock, the compensation of the broker-dealer and its salesperson
in the transaction and monthly account statements showing the market value of
each penny stock held in the customer’s account.
The bid
and offer quotations, and the broker-dealer and salesperson compensation
information, must be given to the customer orally or in writing prior to
effecting the transaction and must be given to the customer in writing before
or with the customer’s confirmation. In addition, the penny stock rules require
that prior to a transaction in a penny stock not otherwise exempt from these
rules, the broker-dealer must make a special written determination that the
penny stock is a suitable investment for the purchaser and receive the
purchaser’s written agreement to the transaction.
18
These
disclosure requirements may have the effect of reducing the level of trading
activity in the secondary market for the stock that is subject to these penny
stock rules. Consequently, these penny stock rules may affect the ability of
broker-dealers to trade our securities. We believe that the penny stock rules
discourage investor interest in and limit the marketability of our common
stock.
Expenses
of Registration
We are
bearing all costs relating to the registration of the common stock. The Selling
Stockholders, however, will pay any commissions or other fees payable to
brokers or dealers in connection with any sale of the common stock.
DESCRIPTION OF SECURITIES TO BE REGISTERED
General
Our authorized capital stock consists of 1,500,000,000 shares of common stock at a par value of $0.001 per share. As of June 9, 2014, there were 161,476,726 shares of our common stock issued and outstanding.
As set forth above in the section
of this prospectus entitled “Selling Stockholders”, the registration statement
of which this prospectus forms a part relates to the registration of 33,000,000
shares of our common stock previously issued by us to the Selling Stockholders.
Common
Stock
Holders
of our common stock are entitled to one vote for each share on all matters
submitted to a stockholder vote. Holders of common stock do not have cumulative
voting rights. Therefore, holders of a majority of the shares of common stock
voting for the election of directors can elect all of the directors. The
holders of a majority of the stock issued and outstanding and entitled to vote
thereat, present in person or represented by proxy, shall constitute a quorum
for holding all meetings of stockholders, except as otherwise provided by
applicable law or by our Articles of Incorporation. A vote by the holders of a
majority of our outstanding shares is required to effectuate certain
fundamental corporate changes such as liquidation, merger or an amendment to
our Articles of Incorporation.
Holders
of common stock are entitled to share in all dividends that the Board of
Directors, in its discretion, declares from legally available funds. In the
event of a liquidation, dissolution or winding up, each outstanding share
entitles its holder to participate pro rata in all assets that remain after
payment of liabilities and after providing for each class of stock, if any,
having preference over the common stock. Holders of our common stock have no
pre-emptive rights, no conversion rights and there are no redemption provisions
applicable to our common stock.
Dividend Policy
We have
never declared or paid any cash dividends on our common stock. We currently
intend to retain future earnings, if any, to finance the expansion of our
business. As a result, we do not anticipate paying any cash dividends in the
foreseeable future.
Nevada
Anti-Takeover Laws
The Nevada Revised Statutes Sections 78.378
through 78.3793, under certain circumstances, place restrictions upon the
acquisition of a controlling interest in a Nevada corporation, including the
potential requirements of shareholder approval and the granting of dissenters’
rights in connection with such an acquisition. As set forth in our Articles of
Incorporation, we have elected not to be governed by these provisions.
19
DESCRIPTION OF BUSINESS
General
Prior to our acquisition of Telupay as
described below, we were a development stage company focused on obtaining
sufficient financing to be able to recommence operations in the social
networking, digital media and mobile communications sectors. We acquired
Telupay as a wholly owned subsidiary on September 24, 2013. As a consequence of
our Company’s acquisition of Telupay, our business is now focused on mobile
banking and payment processing.
Our principal offices are located at First Island
House, Peter Street, St. Helier, Jersey, Channel Islands. Our telephone number
is +44 (0) 1534 789999.
Corporate
History
Prior to Acquisition of Telupay PLC
The
Company was incorporated in the State of Nevada on August 23, 2005 under the name
“Jackson Ventures, Inc.” Our initial operations included the acquisition and
exploration of mineral resources. In 2007, we changed our primary business to
that of developing and operating a proprietary, digital media network service
in the transportation segment of the outdoor advertising market in China, and
changed our name to “i-Level Media Group Incorporated.”
On
January 29, 2007 we entered into a Share Exchange Agreement to acquire the
business of i-Level Systems, a limited liability Company incorporated on May
23, 2003 under the International Business Act of the British Virgin Islands.
i-Level Systems owned 100% of i-Level SoftComm, a wholly foreign owned
enterprise formed under the laws of the PRC on August 12, 2004. i-Level
SoftComm was a development stage company devoting substantially all of its
efforts to establishing a new business in the PRC, which involved selling
out-of-home video advertising timeslots on its network of flat-panel video
advertising display units installed in taxis. The acquisition of i-Level
Systems was completed on March 20, 2007. As control of the Company transferred
to the shareholders of i-Level Systems on March 20, 2007, this acquisition was
considered a recapitalization of i-Level Systems. The acquisition was accounted
for using reverse merger accounting rules whereby the historical operations of
i-Level Systems constituted the reported numbers prior to March 20, 2007 and
the combined operations of the Company and i-Level Systems were reported from
March 20, 2007 to December 1, 2008.
On
December 1, 2008 i-Level SoftComm ceased operations and its business was
wound-up. Also on December 1, 2008 i-Level Systems, the parent company of
i-Level SoftComm and a wholly owned subsidiary of the Company, was sold to our
former Chief Executive Officer for $1. From December 1, 2008 we deconsolidated
i-Level Systems and reported a loss from discontinued operations. Statement of
Stockholders’ Equity was retroactively restated to account for the
deconsolidation of i-Level Systems and the reversal of reverse merger
accounting. We have not had operations and have not generated any revenues
since December 1, 2008. As such, we were considered a “shell company” until the
acquisition of Telupay.
In
July 2011, we effected a consolidation of our issued and outstanding shares as
well as our authorized share capital, in each case on a one new share for every
70 old shares. As a result, our authorized share capital was reduced from
1,025,000,000 shares to 14,642,857 shares, par value 0.001 per share. On March
13, 2012, we effected an increase in our authorized share capital from
14,642,857 shares to 1,000,000,000 shares, par value $0.001 per share.
20
Acquisition of Telupay PLC
Effective September 24, 2013, we completed the
acquisition of 100% of the issued and outstanding shares of Telupay PLC
(“Telupay”), an early stage company focused on the development and initial
commercialization of mobile banking and payment applications and systems,
through a merger transaction as described below
.
Telupay is a limited
liability company incorporated under the laws of Jersey, the Channel Islands.
As a result of the acquisition, Telupay is now a wholly owned subsidiary of the
Company.
We effected the acquisition of Telupay by way of a
merger (the “Merger”) pursuant to the terms of an Amended and Restated Merger
Agreement & Plan of Merger (the “Amended and Restated Merger Agreement”)
dated August 8, 2013, among the Company, Telupay, and I-Level Telupay Merge
Corp. (“I-Level Mergeco”), a wholly owned subsidiary of the Company. The Merger
was effective on September 24, 2013, at which time I-Level Mergeco merged with
and into Telupay, pursuant to which the identity and separate corporate
existence of I-Level Mergeco ceased and Telupay became the surviving
corporation in the Merger and a wholly owned subsidiary of the Company.
Under the terms of the Amended and Restated Merger
Agreement, at closing, Telupay’s stockholders received 1.2 shares of the
Company’s common stock for every one share of Telupay common stock. With 65,410,298
shares of Telupay common stock outstanding immediately prior to the completion
of the acquisition, 78,492,357 shares of the Company’s common stock were issued
to the former Telupay stockholders. In addition, the Amended and Restated
Merger Agreement required that at closing, the Company’s pre-acquisition Chief
Executive Officer and director, Francis Chiew, tender back to the treasury of
the Company for cancellation an aggregate of 47,000,000 restricted common
shares of the Company. Taking into account the cancellation of such shares, the
78,492,357 shares of the Company issued to Telupay stockholders represent
approximately 73% of the issued and outstanding common stock of the Company
post-closing. Based on the closing market price of the Company’s common stock
of $0.70 per share on September 23, 2013, the day before the closing, the total
share consideration issued to Telupay’s stockholders had a value of
approximately $55,000,000.
The Amended and Restated Merger Agreement also
provided that all outstanding Telupay options and warrants would be exchanged
for non-transferable options and warrants of the Company, respectively, based
on the same exchange ratio of 1.2 described above. Telupay did not have any
options outstanding at closing, but did have an aggregate of 5,963,334 warrants
outstanding at closing, each exercisable for $0.50 per Telupay share. As a
result of the acquisition, such Telupay warrants have been cancelled and
exchanged for an aggregate of 7,156,000 the Company’s Warrants, each exercisable
at $0.42 per share. (Pursuant to the terms of the Amended and Restated Merger
Agreement, the exercise price of each Company exchange warrant was determined
by dividing the per share exercise price of the corresponding Telupay warrant
by the exchange ratio of 1.2).
The closing of the acquisition of Telupay represented
a change in control of the Company. For accounting purposes, this change of
control constituted a re-capitalization of the Company, and the acquisition has
been accounted for as a reverse merger whereby we, as the legal acquirer, are
treated as the acquired entity, and Telupay, as the legal subsidiary, is
treated as the acquiring company with the continuing obligations.
21
October 2013 Name Change and Forward Split
Effective October 22, 2013, we effected a name change
on the OTCQB to Telupay International Inc.
This name change was effective under Nevada corporate
law as of October 22, 2013, pursuant to Articles of Merger that were previously
filed with the Nevada Secretary of State on October 4, 2013. Pursuant to such
Articles of Merger, our Company merged with its wholly-owned subsidiary,
Telupay International Inc. The merger is in the form of a parent/subsidiary
merger, with our Company as the surviving corporation. In accordance with Section
92A.180 of the Nevada Revised Statutes, shareholder approval of the merger/name
change was not required. The Articles of Merger provided that, upon completion
of the merger effective on October 22, 2013, our Company’s Articles of
Incorporation would be amended as of such date to change the Company’s name to
“Telupay International Inc.”
Also effective October 22, 2013, we effected a forward
stock split of our authorized and issued and outstanding shares of common stock
on a one and one half new shares for one old share basis (1.5:1), as set forth
in a Certificate of Change filed with the Nevada Secretary of State.
Telupay PLC
As indicated above, we acquired Telupay as a wholly
owned subsidiary on September 24, 2013. As a consequence of our Company’s acquisition
of Telupay, our business is now focused on mobile banking and payment
processing.
Telupay was incorporated in Jersey, Channel Islands on
March 2, 2010. In 2010, Telupay further incorporated: (i) Telupay IP Limited
(Jersey, Channel Islands), a wholly owned subsidiary, to hold its intellectual
property; (ii) Telupay Solutions Limited (Jersey, Channel Islands), a further
wholly owned subsidiary, as the operations arm of the Telupay group of
companies; and (iii) Telupay (M.E) FZE (Dubai, AEC), a further wholly owned
subsidiary, which subsequently incorporated its own wholly owned subsidiary in
the Philippines, Telupay (Philippines) Inc. In 2013, Telupay incorporated
Telupay UK Limited (England) as a further wholly owned subsidiary. Telupay and
its subsidiaries were incorporated primarily to engage in software application
development, enterprise application integration, programming, wholesale sales
and distribution of customized software applications, after-sales support and
technical assistance, as well as the provision of shared services and other
related ancillary and/or support functions, services, systems and processes
relate to mobile banking and payment processing.
On December 21, 2010, Telupay entered into an
agreement with QSpan Technologies, Ltd. (“QSpan”) whereby it acquired all the
assets consisting of office equipment and intellectual mobile banking systems
(“MBS”) technology, and assumed all of its liabilities comprised of trade
payables and accrued expenses.
Telupay’s MBS technology is a secure, robust method of
delivering bank-grade transactions via an intuitive interface on mobile
devices. It is compliant with the specific requirements of each of Telupay’s
client-banks in respect of each such client’s information technology and
technical, information and security standards. Each of Telupay’s client-banks
has confirmed such compliance through the issuance of a vulnerability
assessment certificate in respect of Telupay’s MBS technology. Furthermore,
Telupay’s MBS technology is not tied to proprietary bank or operator
technologies, which gives it the ability to provide its service to all of the
major banks, mobile operators, ATM operators and private agent networks
worldwide.
The majority of the Company’s MBS currently in
commercial use is being used by four major commercial banks (Metrobank,
UnionBank, United Coconut Planters Bank (UCPB) and the Bank of Commerce) based
in the Philippines, and two ATM operators MegaLink (Philippines) and Artajasa
(Indonesia). These clients use the Company’s MBS exclusively; it is the only
mobile banking system promoted under their individual bank-brands made
available to, and being used by, their respective accountholders or customers.
Approximately 50% of the Company’s income is generated by the MBS used by the Company’s
clients under revenue-sharing arrangements based on a standard three- to
five-year contractual period, with the earliest contracted bank agreement for
MBS due for renewal by 2014 and the latest by 2017.
22
Highlights in Telupay’s business development to date
are as follows:
-
Strong progress in Philippine business: Four
top-ten banks and one of two ATM operators are now using Telupay’s
platform, including Metrobank, UnionBank, United Coconut Planters Bank
(UCPB), Bank of Commerce and MegaLink, an ATM operator servicing 14
financial and non-financial institutions in the Philippines. Megalink is
promoting the use of the Company’s MBS to its ATM bank-members without a
proprietary mobile banking system to encourage such ATM bank-members to
choose the Company’s MBS.
-
Philippine branded and/or co-branded remittance
network: Telupay is currently launching services with 1Bro (10,000 agents)
and Keisha (2,000 agents) developing a network with collectively over
12,000 agents located throughout the Philippines. The Company is in
further discussions with agent networks and major retail chains for
launching its co-branded network in 2014.
-
In March 2014, Telupay’s client CardBank deployed
Telupay’s mobile micro-finance solution in the Philippines. Telupay’s
mobile micro-finance solution will replace the manual collection system
currently in place, providing significant savings to CardBank in its
collection of loans and enabling the loan recipients to make more frequent
loan payments, make P2P remittances, purchase mobile airtime and pay
bills. The service is mandated to over 1 million existing loan recipients
over the next twelve months and is forecasted to grow to over 1.8 million
loan recipients by 2017. Telupay is in discussions with CardBank to
implement Telupay’s mobile micro-finance solution to other regions they
conduct business.
-
Telupay is currently installing its mobile
financial backbone for the Philippine’s new City Optimized Managed
Environmental Transport service (COMET) scheduled to launch in June 2014.
The fully electric, zero emission, mass transportation vehicle is planned
to replace the Philippine’s 55,000 diesel Jeepney’s expecting to service
over 2.18 billion passengers a year by 2018. The service incorporates a
fully automated pre-paid fare system using smartcards and smartphones.
Telupay’s system will provide multiple mWallets connected to the
smartcards for topping-up cards, purchasing airtime, purchasing goods and
services and conducting domestic P2P remittances.
-
Metapago - Peru: Telupay has installed its MBS
system and its ARMaS system (discussed below) with Metapago, with the goal
of providing service through thousands of agents to the 10 million plus
unbanked adults in Peru.
-
Telupay is discussing business opportunities in
Russia, Colombia, Brazil, the UK, Australia, the United States, Canada and
numerous other countries worldwide.
The international mobile banking and payments market
is growing rapidly. Although Telupay is an early commercial stage company that
was incorporated in March 2010, based on Telupay’s experience with its current
clients, we are of the view that Telupay has entered this market with a strong
foundation.
Telupay’s solutions are not “out-of-the-box”
applications that require the client to conform to Telupay’s technology--instead,
Telupay customizes its technologies and solutions for each individual client
based the client’s requirements and what the client wants to offer its
customers. In order to apply its technology to additional commercial markets,
Telupay works closely with its clients to develop new mobile and administrative
applications that the client can offer to its retail and commercial customers.
Outside of Telupay’s core mobile banking and payment solution (its MBS
technology), Telupay has developed or is developing the following applications:
23
-
ARMaS (Agent Remittance Management Service) -
ARMaS is Telupay’s administration system specifically designed for
unbanked customers conducting domestic and international remittances.
Telupay’s Peruvian client Metapago uses Telupay’s MBS solution. ARMaS is
designed as a white label solution for existing remittance companies. The
Company’s business arrangement with Metapago began in 2011. Since that
time, the government of Peru has taken approximately two years to complete
its policies, rules and regulations for e-products, which includes mobile
banking systems. Metapago is currently awaiting the Peruvian government’s
issuance of an e-license to proceed with the commercial launch of its
E-wallet product using our ARMaS system.
-
Mobile Payment System - Telupay has developed a
mobile payment system enabling SME’s to conduct Card Present Transactions
using Chip & PIN and Swipe & Signature devices using smartphones
to conduct purchase transactions in the field. Telupay’s mobile payment
system also allows Card Not Present Transactions using its mWallet
technologies to substantially reduce fees to retailers while providing a
secure, easy to use service to consumers.
-
Mobile Micro-Finance Collection Solution -
Telupay has developed a mobile micro-finance collection solution for its
client CardBank to manage the collection of micro-loans, which are
predominant in the developing world. The pilot was launched in March 2014
and the Company expects the full commercial launch of this solution by
third quarter 2014. The service also provides consumers the ability to buy
airtime, pay bills and conduct P2P domestic remittance transactions
easily, conveniently and at lower costs.
-
Telupay is assembling a class “A” senior
management team for its UK subsidiary to assist in developing its 4th
Generation technology catering to first world markets and applications.
Telupay’s 4th Generation platform will differentiate Telupay from many of
its competitors by incorporating solutions like Immediate Payments, that
will lower costs, improve services, and provide immediate settlement that
will directly compete with ACH clearing and the three-day settlement cycle
and by providing additional features like FastCash, enabling “cash-out” or
“top-up” on the go where it is most convenient that will substantially
reduce retailers’ “cash-in” handling charges. The new solutions will also
include loyalty card solutions that turn loyalty cards into payment cards.
-
TeluAd - Telupay’s mobile advertisements built
into the applications including its Java application for non-smartphones.
TeluAd enables its clients to cross-sell its products and services or sell
the advertising space to mainstream advertisers providing an additional
revenue stream.
Regulatory Environment
Telupay, in partnership with the financial
institutions it works with, conforms to ISO8583, the international messaging
standard for financial transactions, and is subject to ongoing independent
reviews.
Competition
Our industry is highly competitive and subject to rapid
change. Although there are current and potential competitors for business
opportunities with greater technical, financial, marketing, sales and other
resources, our management believes that the global market for mobile banking
and payments remains open for new players like Telupay.
24
Plan of Operations
Our vision is to be the mobile banking and payment
solution provider of choice worldwide, delivering low-cost mobile banking and
payment solutions for the mass market and we aim to become a leader in mobile
banking and payments worldwide.
Banks around the world have progressively expanded
banking services from branch networks to self-service channels (such as ATMs)
to Internet and telephone banking. Our view is that mobile banking and payments
is a logical continuation of this trend, leveraging automation to reduce costs
and improve customer convenience.
Our strategy for growth rests on three key areas:
-
Sign up leading banks, mobile operators, ATM
operators and private networks to the Telupay platform;
-
Attract appropriate partners to deliver
sustainable, local ecosystems (regional branded and co-branded agent
networks); and
-
Develop a compelling and customer-centric product
portfolio ahead of the market.
Moving forward, we plan to continue to expand our
range of services in the Philippines and internationally with a revenue model
based around a variety of payment and pricing structures, ranging from a
licensing model, to revenue sharing, to revenue-per-customer and
revenue-per-service usage.
We estimate that we will need financing in the amount
of approximately $17.8 million to cover our operating expenses and plan of
operations over the next thirty-six months, as follows:
Item
|
Estimated
Cost
|
General Operating Expenses
|
$1,600,000
|
UK Subsidiary Investment
(with a goal of arranging partnerships, joint ventures or similar commercial
agreements with UK banks, finance organizations, telecommunications
companies, retail companies, etc.)
|
$7,400.000
|
Philippines Brand Building
|
$3,600,000
|
Indonesia Brand Building
|
$3,050.000
|
South American initiatives
with Metapago
|
$2,150,000
|
TOTAL:
|
$17,800,000
|
Going Concern
Our auditors have issued a going concern opinion. This
means that there is substantial doubt that we can continue as an on-going
business for the next twelve months unless we obtain additional capital to pay
our bills. We do not have sufficient funds to maintain our operations for the
next 12 months.
Need for Additional Capital
Prior to our acquisition of Telupay, we were a “shell
company” not generating any revenues from operations. Telupay has had limited
operations and revenues to date. As noted above under “Plan of Operations”, we
estimate that we will require financing in the amount of approximately $17.8
million over the next thirty-six months to implement our plan of operations. We
have no assurance that future financing will be available to us on acceptable
terms. If financing is not available on satisfactory terms, we may be unable to
continue, develop or expand our operations. Additional equity financing could
result in additional dilution to our existing shareholders.
25
Employees
As of March 31, 2014, we had a total of 34 full-time
employees. None of our employees is subject to a collective bargaining
agreement. We experienced no work stoppages and believe that we have good
relations with our employees. We have been careful to match human resources to
business requirements. Telupay’s initial recruitment focus was on technical
development, followed by business development and account management as it
began to engage with potential partners and customers. Future programs on human
resource development include certification programs and skills enhancement
training.
Subsidiaries
As a result of the acquisition described above, we own
100% of Telupay PLC, an operating company organized under the laws of Jersey,
Channel Islands. In turn, Telupay PLC has the following wholly owned
subsidiaries: (i) Telupay Solutions Limited (Jersey, Channel Islands); (ii)
Telupay IP Limited (Jersey, Channel Islands); (iii) Telupay (ME) FZE (Dubai,
UAE); and (iv) Telupay UK Limited (England). Telupay (ME) FZE has its own
wholly owned subsidiary, Telupay (Philippines) Inc. (Philippines).
Trademarks and Copyright
We hold the following trademarks in the Philippines:
TelUPay, Making Money Mobile, TelUAd, TelUCash, TelUSafe, TelUWallet and
TelULoan. We hold a copyright in South Korea for the Mobile Enterprise Solution
that we obtained from QSpan Technologies, Ltd. We do not hold any patents.
LEGAL PROCEEDINGS
We are
not aware of any legal proceedings contemplated by any governmental authority
or any other party involving us or our properties. As of the date of this
report, no director, officer or affiliate is (i) a party adverse to us in any
legal proceeding, or (ii) has an adverse interest to us in any legal
proceedings. We are not aware of any other legal proceedings pending or that
have been threatened against us or our properties.
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
Shares of our common stock became quoted
on the OTC Bulletin Board under the symbol “JKSV” on December 22, 2006 and
subsequently as “ILVL” on February 23, 2007 in connection with our name change
to I-Level Media Group Incorporated. On October 22, 2013, in
connection with our merger and name change, our symbol changed to “TLPY”.
The market for our common stock is limited, volatile
and sporadic. The following table sets forth the high and low prices relating
to our common stock for the periods indicated, as provided by the OTCQB with
retroactive effect to a 1.5 new share for each one (1) old share pursuant to a
stock split effective October 22, 2013. These quotations reflect inter-dealer
prices without retail mark-up, mark-down, or commissions, and may not reflect
actual transactions.
26
Quarter Ended
|
High
|
Low
|
March 31, 2014
|
$0.55
|
$0.40
|
December 31, 2013
|
$0.68
|
$0.30
|
September 30, 2013
|
$0.50
|
$0.21
|
June 30, 2013
|
$0.34
|
$0.15
|
March 31, 2013
|
$0.15
|
$0.14
|
December 31, 2012
|
$0.14
|
$0.04
|
September 30, 2012
|
$0.04
|
$0.04
|
June 30, 2012
|
$0.09
|
$0.03
|
On June 9, 2014, the low bid price of our common stock was $0.40 per share, the high ask price of our common stock was $0.40 per share, and the closing price was $0.40 per share. We do not have any securities that are currently traded on any other exchange or quotation system.
The shares quoted are subject to the provisions of
Section 15(g) and Rule 15g-9 of the Exchange Act, commonly referred to as the
“penny stock rule”. The Commission generally defines penny stock to be any
equity security that has a market price less than $5.00 per share, subject to
certain exceptions. For transactions covered by these rules, broker-dealers
must make a special suitability determination for the purchase of such
securities and must have received the purchaser’s written consent to the
transaction prior to the purchase. Additionally, for any transaction involving
a penny stock, unless exempt, the rules require the delivery, prior to the
first transaction, of a risk disclosure document relating to the penny stock
market. A broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative, and current quotations for the
securities. Finally, the monthly statements must be sent disclosing recent
price information for the penny stocks held in the account and information on
the limited market in penny stocks. Consequently, these rules may restrict the
ability of broker dealers to trade and/or maintain a market in the Company’s
common stock and may affect the ability of shareholders to sell their shares.
Holders
As of June 9, 2014, we had 134 shareholders of record.
Dividend Policy
No dividends have been
declared or paid on our common stock. We have incurred recurring losses and do
not currently intend to pay any cash dividends in the foreseeable future.
Securities Authorized For
Issuance Under Compensation Plans
The following table sets forth information
as of our fiscal year ended March 31, 2014:
27
Equity
Compensation Plan Information
|
|
|
Number
of securities to be issued upon exercise of outstanding options, warrants and
rights
(a)
|
|
|
Weighted
average exercise price of outstanding options, warrants and rights
(b)
|
|
|
Number of securities remaining available for future issuance
under equity compensation plans (excluding securities reflected in column
(a))
(c)
|
|
(a)
|
Equity compensation plans approved by
security holders
|
|
N/A
|
|
$
|
N/A
|
|
|
N/A
|
|
(b)
|
Equity compensation plans not approved
by security holders
|
|
N/A
|
|
$
|
N/A
|
|
|
N/A
|
|
FINANCIAL STATEMENTS
This prospectus includes (i) our
unaudited condensed consolidated financial statements for the nine months ended
December 31, 2013 and 2012, and (ii) the audited consolidated financial
statements of Telupay PLC as at March 31, 2013 and 2012. These financial
statements have been prepared on the basis of accounting principles generally
accepted in the United States and are expressed in U.S. dollars.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The Company effected the acquisition of
Telupay by way of a merger pursuant to the terms of the Amended and Restated
Merger Agreement among the Company, Telupay, and I-Level Mergeco. The merger
was effective on September 24, 2013, at which time I-Level Mergeco merged with
and into Telupay, pursuant to which the identity and separate corporate
existence of I-Level Mergeco ceased and Telupay became the surviving
corporation in the Merger and a wholly owned subsidiary of the Company.
The closing of the acquisition of Telupay
represented a change in control of our Company. For accounting purposes, this
change of control constitutes a re-capitalization of the Company, and the
acquisition has been accounted for as a reverse merger whereby we, as the legal
acquirer, are treated as the acquired entity, and Telupay, as the legal
subsidiary, is treated as the acquiring company with the continuing
obligations.
The following discussion of our financial condition,
changes in financial condition, plan of operations and results of operations
should be read in conjunction with (i) our unaudited condensed consolidated
financial statements for the nine months ended December 31, 2013 and 2012, and
(ii) the audited consolidated financial statements of Telupay PLC as at March
31, 2013 and 2012, and (iii) the section entitled “Business”, included in this
prospectus. The discussion contains forward-looking statements that involve
risks, uncertainties and assumptions. Our actual results may differ materially
from those anticipated in these forward-looking statements as a result of many
factors, including, but not limited to, those set forth under “Risk Factors”
and elsewhere in this prospectus.
28
Results of Operations
Nine
Months Ended December 31, 2013 Compared to the Nine Months Ended December 31,
2012
|
|
Nine Months Ended
December 31, 2013
|
|
|
Nine Months Ended
December 31, 2012
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
62,906
|
|
$
|
43,801
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
Direct operating expense
|
|
56,135
|
|
|
2,439
|
|
Salaries and benefits
|
|
398,988
|
|
|
370,852
|
|
Share-based compensation – related parties
|
|
341,802
|
|
|
426,070
|
|
Travel
|
|
59,431
|
|
|
24,533
|
|
Professional fees
|
|
293,146
|
|
|
145,575
|
|
General and administrative expenses
|
|
100,966
|
|
|
130,114
|
|
Depreciation and amortization
|
|
51,563
|
|
|
61,487
|
|
Total operating expenses
|
|
1,302,031
|
|
|
1,161,070
|
|
Net Loss from operations
|
|
(1,239,125
|
)
|
|
(1,117,269
|
)
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
Interest income
|
|
64
|
|
|
113
|
|
Interest expense, net
|
|
(14,552
|
)
|
|
(7,372
|
)
|
Interest expense – related party
|
|
(5,250
|
)
|
|
(7,875
|
)
|
Finance cost
|
|
(7,500
|
)
|
|
(372
|
)
|
Finance cost – related party
|
|
-
|
|
|
(72
|
)
|
Other income (expense)
|
|
(22,059
|
)
|
|
-
|
|
Foreign exchange gain (loss)
|
|
9,599
|
|
|
-
|
|
|
|
|
|
|
|
|
Net loss before provision
for income tax
|
|
(1,278,823
|
)
|
|
(1,132,847
|
)
|
Provision for income taxes
|
|
-
|
|
|
(543
|
)
|
|
|
|
|
|
|
|
Net loss
|
$
|
(1,278,823
|
)
|
$
|
(1,133,390
|
)
|
During
2013 service income increased by $19,105 to $62,906 (2012 - $43,801). The
increase in revenue mostly pertained to growing usage of mobile banking services
for airtime load and bill payments in the Philippines.
During
2013 operating expenses increased by $140,961 to $1,302,031 (2012 -
$1,161,070). General and administrative expenses decreased by $29,148, mainly
attributable to a $15,000 annual registration expense paid in 2012. Share-based
compensation decreased by $84,268 due to the cancellation of a share-based
consulting agreement. Professional fees increased by $147,571 with the
settlement of a dispute amounting to $30,000 and expenses incurred during the
completion of the merger transaction.
During
2013 the net loss increased by $145,433 to $1,278,823 (2012 - $1,133,390). The
largest difference was a result in an increase in professional fees.
29
Year Ended March 31,
2013 compared to the Year ended March 31, 2012*
|
|
Years ended March 31,
|
|
|
|
2013
|
|
|
2012
|
|
Revenues
|
|
|
|
|
|
|
Service income
|
$
|
64,711
|
|
$
|
1,809
|
|
Operating
expenses
|
|
|
|
|
|
|
Direct operating expense
|
|
6,834
|
|
|
6,736
|
|
Salaries and benefits
|
|
423,915
|
|
|
322,045
|
|
Directors’ compensation - related parties
|
|
417,000
|
|
|
747,342
|
|
Travel
|
|
24,916
|
|
|
60,629
|
|
Professional fees
|
|
377,432
|
|
|
145,106
|
|
General and administrative expenses
|
|
161,347
|
|
|
133,254
|
|
Depreciation and amortization
|
|
77,011
|
|
|
66,253
|
|
Total operating
expenses
|
|
1,488,455
|
|
|
1,481,365
|
|
Net loss from
operations
|
|
(1,423,744
|
)
|
|
(1,479,556
|
)
|
|
|
|
|
|
|
|
Other income
(expense)
|
|
|
|
|
|
|
Interest income
|
|
117
|
|
|
146
|
|
Interest expense
|
|
(6,884
|
)
|
|
(13,299
|
)
|
Interest expense – related party
|
|
(16,145
|
)
|
|
(34,921
|
)
|
Finance costs
|
|
(7,500
|
)
|
|
-
|
|
Finance costs – related party
|
|
(3,750
|
)
|
|
(276,701
|
)
|
Net foreign exchange gain (loss)
|
|
3.373
|
|
|
8,245
|
|
Total other
income (expense)
|
|
(30,789
|
)
|
|
(316,530
|
)
|
|
|
|
|
|
|
|
Net loss before
provision for income taxes
|
|
(1,454,533
|
)
|
|
(1,796,086
|
)
|
Provision for
income taxes
|
|
543
|
|
|
-
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(1,455,076
|
)
|
$
|
(1,796,086
|
)
|
* As indicated above, effective
September 24, 2013, we completed the acquisition of 100% of the issued and
outstanding shares of Telupay. The information in the t able above is derived
from the audited financial statements of Telupay. Audited statements of
operations of our Company on a consolidated basis (taking into account the
acquisition of Telupay) will be available when we file our Annual Report on
Form 10-K for our fiscal year ended March 31, 2014.
Telupay had revenues from service income of $64,711
during the year ended March 31, 2013, as compared to $1,809 during the year
ended March 31, 2012. The increase in revenues between the periods is due to
the receipt of a license fee from a client in Peru (Metapago) and higher volume
of transactions from Unionbank.
As set forth above, Telupay’s operating expenses were
$1,488,455 during the year ended March 31, 2013, as compared to $1,481,365
during the year ended March 31, 2012, as follows:
30
-
Direct operating expense of $6,834 (consisting of
payment for mobile prepaid load sold to clients) for the year ended March
31, 2013, was substantially unchanged as compared to $6,736 for the year
ended March 31, 2012.
-
Salaries and benefits of $423,915 for the year
ended March 31, 2013, as compared to $322,045 for the year ended March 31,
2012. The reason for the increase was due to increase in personnel.
-
Directors’ compensation of $417,000 for the year
ended March 31, 2013, as compared to $747,342 for the year ended March 31,
2012. The reason for the decrease was due to lower share-based
compensation during the year.
-
Travel of $24,916 for the year ended March 31,
2013, as compared to $60,629 for the year ended March 31, 2012. The reason
for the decrease was due to less travelling of the directors during the
period.
-
Professional fees of $377,432 for the year ended
March 31, 2013, as compared to $145,106 for the year ended March 31, 2012.
The reason for the increase was due to higher legal fees regarding the
merger transaction.
-
General and administrative expenses of $161,347
for the year ended March 31, 2013, as compared to $133,254 for the year
ended March 31, 2012. The reason for the increase was due to increased activities
of the Company during the period.
-
Depreciation and amortization of $77,011 for the
year ended March 31, 2013, as compared to $66,253 for the year ended March
31, 2012. The reason for the increase was due to the acquisition of
capitalized assets during the year.
As set forth above, Telupay’s operating expenses were
$1,488,455 during the year ended March 31, 2013, which is substantially similar
to its operating expenses of $1,481,365 during the year ended March 31, 2012.
Liquidity and Capital Resources
Overview
During the nine months ended December 31, 2013, we
increased our cash position from $16,770 as of March 31, 2013 to $113,149 as of
December 31, 2013. As of December 31, 2013, we had a working capital deficiency
of $1,899,609, which included cash of $113,149, customer accounts receivable of
$8,265 and other assets of 13,523. We have accounts payable and accrued
expenses (including related party) of $880,779; notes payable (including
related party) of $1,129,061 and deferred revenue of $24,707.
Future Growth and Expansion Plans and Need for
Additional Capital
We require additional capital to support our ongoing
basic overhead and operations estimated to be approximately $1 million for the
next twelve months. We require $3 million in additional capital to start
executing our business initiatives in each of Peru, United Kingdom/Europe, the
Philippines and Indonesia over the next twelve months. We anticipate that we
will raise the required capital pursuant to a private equity financing in the near
term, but there is no guarantee that we will be able to do so.
During 2014 we plan to seek further additional
financing, but there is no guarantee that we will be able to do so. Should we
be successful in raising sufficient financing, we can begin planning for other
business initiatives such as: completing the execution of our business plan in
each of Peru, United Kingdom/Europe, the Philippines and Indonesia and entering
into a formal partnership in Colombia similar to Peru; accelerating our business
initiatives in the United Kingdom and Europe; and fund marketing and incentive
initiatives for the new generation of products throughout the European
marketplace. The following table sets forth the major sources and uses of cash
for the nine months ended December 31, 2013 and 2012:
31
|
|
2013
$
|
|
|
2012
$
|
|
Net cash used in
operating activities
|
|
(1,288,230
|
)
|
|
(782,833
|
)
|
Net cash used in
investing activities
|
|
(31,986
|
)
|
|
(16,369
|
)
|
Net cash
provided by financing activities
|
|
1,416,595
|
|
|
797,709
|
|
Net increase (decrease)
in cash
|
|
96,379
|
|
|
1,493
|
|
Cash Used in Operating Activities
During the nine months ended December 31, 2013, we
used $1,288,230 (2012 - $782,833) in operating activities. This was made up of
our net loss of $1,278,823 (2012 - $1,133,000) less adjustments for non-cash
items such as: loss on settlement of a disagreement of $30,000 (2010 - $Nil),
amortization of compensation costs of $189,189 (2012 - $Nil), amortization and
depreciation of $51,563 (2012 - $61,487), foreign currency losses of $7,172 (2012
- $50,612) and shares issued for services of $46,500 (2012 - $254,700); all
totalling $294,424 (2012 - $265,575). We used $333,830 (2012 cash increased of
$84,982) in net changes in operating assets and liabilities. The most
significant item was $307,149 used to pay down related party accounts payable
(2012 – $32,000).
Cash Used in Investing Activities
During the nine months ended December 31, 2013,
$31,986 was used in investing activities (2012 - $16,369). A total of $15,669
was used to purchase other assets and $16,317 was used to acquire furniture and
equipment.
Cash Provided by Financing Activities
During the nine months ended December 31, 2013,
$1,416,595 was received from financing activities. An amount of $1,373,854 was
received, net of $189,000 of share issuance costs pursuant to a brokered
private placement. Notes payable were repaid in the amount of $825. On December
30, 2013, the company received an advance loan from a related party amounting
to $43,566.
Off Balance Sheet Arrangements
We have not had, and at December 31, 2013, do not
have, any off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to investors.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition
and results of operations are based upon our financial statements that have
been prepared in accordance with generally accepted accounting principles in
the United States of America (“US GAAP”). This preparation requires management
to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses, and the disclosure of contingent assets and
liabilities. US GAAP provides the framework from which to make these estimates,
assumption and disclosures. We choose accounting policies within US GAAP that
management believes are appropriate to accurately and fairly report our
operating results and financial position in a consistent manner. Management
regularly assesses these policies in light of current and forecasted economic
conditions. While there are a number of significant accounting policies
affecting our financial statements, we believe the critical accounting policies
involving the most complex, difficult and subjective estimates and judgments
are: revenue recognition, stock based compensation and use of estimates as
discussed in Note 2 to the interim unaudited condensed financial statements
included in Item 1 to this Form 10Q.
32
Recently Issued Accounting Pronouncements
There have been no recently issued Accounting
Pronouncements that impact us.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
We have had no disagreements with our independent
registered public accountants with respect to accounting practices or
procedures or financial disclosure.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS
Our directors and executive
officers and their respective ages as of the date of this prospectus are as
follows:
Name
|
Age
|
Position
Held
|
Adrian Crawford Ansell
|
55
|
CEO, President and director
|
Perseverando Medalla Hernandez
|
64
|
Director
|
Adrian Ignacio Ocampo
|
37
|
Director
|
Mark Jon Keene
|
47
|
Director
|
Michael John Greenup
|
64
|
Director
|
Rosarito Deferia Carrillo
|
49
|
CFO, Secretary and Treasurer
|
The following describes the business experience of
each of our directors and executive officers, including other directorships
held in reporting companies:
Adrian Crawford Ansell
, Chief Executive Officer, President and a
Director
Mr. Ansell is a co-founder of TelUPay and has served
as its director and Chief Executive Officer since March 2010. He has also acted
as a director of each of TelUPay M.E. (FZE), TelUPay Solutions Ltd. and TelUPay
IP Ltd. since March 2010 and as a director of TelUPay (Philippines), Inc. since
January 2011. Mr. Ansell has also served as a director and Chief Executive
Officer of Qspan Technologies Ltd. (“Qspan”), a Hong Kong corporation formed to
commercialize a mobile banking platform, since May 2008. Mr. Ansell was the
primary architect responsible for the overall design of TelUPay’s mobile banking
technology.
From September 2005 to May 2008, Mr. Ansell was the
President of Beacon Pacific Capital Inc, a boutique investment-consulting firm
offering public and private companies a wide range of business and financial
services. From January 2003 to August 2005 Mr. Ansell was actively involved in
the development of HealthPricer Interactive (TSX.V: HPC.V), an online health
aggregator where he worked as Manager of Business Development. From February
1998 to January 2000, Mr. Ansell was actively involved in development of
eCharge Corporation (“eCharge”), an Internet payment technology company.
33
Mr.
Ansell invented the original concept for eCharge in 1997 and later managed its
strategic Telco partnerships across North America.
From September 1995 to February 1998, Mr. Ansell was
the Chief Executive Officer of Taddei Development and Management Group Inc., a
small real estate development company, building/renovating several small- to
mid-sized condominium projects in Vancouver, Canada. Prior to that, Mr. Ansell
worked in sales and marketing positions with Intermec Systems Corporation
(Litton Industries) from July 1994 to September 1995, Honeywell International
Inc. from September 1983 to March 1985, and Robert Shaw Controls from June 1981
to May 1983.
Mr. Ansell graduated from the University of British
Columbia with a Bachelor of Commerce Degree (1989-1994) and completed a
two-year Electronics Technology program at DeVry Institute of Technology
(1979-1980).
Perseverando Medalla Hernandez
,
Director
Mr. Hernandez is a co-founder of TelUPay and has
served as its director since June 2012. He has also acted as a director of each
of TelUPay M.E. (FZE) and TelUPay (Philippines), Inc. since March 2010 and
January 2011, respectively. Mr. Hernandez has also served as a director of
Qspan since May 2008 and served as a director of its affiliated entity, Qspan
Technologies Philippines, Inc., from June 2008 to June 2010.
Mr. Hernandez has been involved in establishing and
managing various companies ranging from engineering design, software
development and construction. From March 2006 to April 2008, Mr. Hernandez was
the President and Chief Executive Officer of X-Eye Solutions Inc, a solution
provider for the security and surveillance industry. Mr. Hernandez served as
the Chairman of Macro Machinery & Industrial Supply Inc., a mechanical
engineering design group and a manufacturer’s representative for the Philippine
market, from April 1981 to April 2006.
Mr. Hernandez graduated from the University of the
Philippines with a degree in Industrial Engineering.
34
Mark Jon Keene
,
Director
Mr. Keene is the Founding Partner of Optimus Financial
Group (“Optimus”), a private equity and private client advisory firm located in
Perth, Australia, and has served as its Managing Director since 1994.
Mr. Keene is a Chartered Accountant and accredited
SMSF Specialist Advisor (“SPAA”), a Fellow of the Taxation Institute of
Australia, and a CA accredited financial planning specialist. He has extensive
experience in the areas of SMSF specialist advice. He sits on the executive
committee of the Western Australia branch of SPAA - The Self Managed
Superannuation Fund Professional Association of Australia - as recognition of
his experience and knowledge in this area.
Adrian Ignacio Ocampo
,
Director
Mr. Ocampo has served as a director of each of Telupay
and TelUPay (Philippines), Inc. since June 2012 and November 2011, respectively.
He has also served as the Technical Operations and Core Development Senior
Manager of TelUPay (Philippines), Inc. since January 2011. Prior to his time at
Telupay, Mr. Ocampo served as a director and Vice President of Qspan from June
2008 to December 2010.
Mr. Ocampo has over six years of experience in
managing information technology companies. He was one of the founders who
helped build up Qspan, where he also handled operations and information
technology management. In 2004, he established Arowai IT Solutions, Inc., an
information technology company that specializes in customized software
development.
In addition, Mr. Ocampo served as a director and Vice
President of JCI Makati Philippines, a leadership organization in the city of
Makati, Philippines, from February 2005 to February 2007. Mr. Ocampo has
previous experience spearheading a fitness and wellness organization. He also
has experience with business process outsourcing.
Rosarito Deferia Carrillo
,
Chief Financial Officer, Secretary and
Treasurer
Ms. Carrillo has served as a director and Corporate
Secretary of TelUPay (Philippines), Inc. since September 2010. She has also
served as TelUPay (Philippines), Inc.’s Director of Operations since December
2010. She served as the Business Development Manager of Qspan Technologies
Philippines Inc. from June 2010 to October 2010. Prior to that, she served as
the Business Development Manager of Toucan Realty Corporation, a real estate
investment company, from December 2006 to April 2010, charged with strategic
planning and management.
Ms. Carrillo was the Philippine Associate
Director for the Confederation of Garment Exporters of the Philippines from
January 1996 to April 2005, where she handled industry technical development,
strategic partnership and advocacy programs supporting sectoral growth. She has
also worked, starting as the Senior Trade and Investment Specialist, and then
later as the Assistant Chief of the Softgoods Division, International
Operations, and finally as the Chief of Corporate Planning for the Center for
35
International Trade Expositions and Missions (CITEM) under the Department of
Trade and Industry from September 1988 to March 1995.
Michael John Greenup
, Director
Mr. Greenup has served as a
director of our Company since October 2013. Mr. Greenup spent 16 years working
as SHIRE Councilor and President/Mayor. Mr. Greenup also served at two public
ASX companies in both executive and non-executive positions and at two private
companies at directorship levels. In the early 1970s, Mr. Greenup started
Mclarty & Greenup, a contracting business that carried out rural pursuits
such as hay carting and restoration of old wooden rail fencing. In 1976, he
created a business from Mclarty & Greenup called Pinjarra Rural Hay, which
supplied, fed and exported live sheep to the Middle East. In 1986 he initiated
a new venture called Murry River North, a business that carried out
construction works for Aboriginal housing in remote areas of Australia. In 1998
Mr. Greenup started a business called Chaff City, a supplier and manufacturer
of animal food and feeds in the equine industry.
Today, Mr. Greenup spends a lot
of time sourcing materials in China for the mining industry and at the same
time, managing his other personal investments.
Term
of Office
Our directors are appointed
for a one-year term to hold office until the next annual general meeting of our
stockholders or until they resign or are removed from the board in accordance
with our bylaws. Our officers are appointed by our Board of Directors and hold
office until they resign or are removed from office by the Board of Directors.
Significant Employees
We have no significant employees other
than the officers and directors described above.
Family Relationships
There are no family
relationships among our directors and officers.
Involvement
in Certain Legal Proceedings
Except as disclosed in this prospectus,
during the past ten years none of the following events have occurred with
respect to any of our directors or executive officers:
|
1.
|
A petition under the
Federal bankruptcy laws or any state insolvency law was filed by or against, or
a receiver, fiscal agent or similar officer was appointed by a court for the
business or property of such person, or any partnership in which he was a
general partner at or within two years before the time of such filing, or any
corporation or business association of which he was an executive officer at or
within two years before the time of such filing;
|
|
2.
|
Such person was
convicted in a criminal proceeding or is a named subject of a pending criminal
proceeding (excluding traffic violations and other minor offenses);
|
|
3.
|
Such person was the
subject of any order, judgment, or decree, not subsequently reversed, suspended
or vacated, of any court of competent jurisdiction, permanently or temporarily
enjoining him from, or otherwise limiting, the following activities:
|
36
|
i.
|
Acting as a futures
commission merchant, introducing broker, commodity trading advisor, commodity
pool operator, floor broker, leverage transaction merchant, any other person
regulated by the Commodity Futures Trading Commission, or an associated person
of any of the foregoing, or as an investment adviser, underwriter, broker or
dealer in securities, or as an affiliated person, director or employee of any
investment company, bank, savings and loan association or insurance company, or
engaging in or continuing any conduct or practice in connection with such
activity;
|
|
ii.
|
Engaging in any type
of business practice; or
|
|
iii.
|
Engaging in any
activity in connection with the purchase or sale of any security or commodity
or in connection with any violation of Federal or State securities laws or
Federal commodities laws;
|
|
4.
|
Such person was the
subject of any order, judgment or decree, not subsequently reversed, suspended
or vacated, of any Federal or State authority barring, suspending or otherwise
limiting for more than 60 days the right of such person to engage in any
activity described in paragraph (3)(i) above, or to be associated with persons
engaged in any such activity;
|
|
5.
|
Such person was found
by a court of competent jurisdiction in a civil action or by the Commission to
have violated any Federal or State securities law, and the judgment in such
civil action or finding by the Commission has not been subsequently reversed,
suspended, or vacated;
|
|
6.
|
Such person was found
by a court of competent jurisdiction in a civil action or by the Commodity
Futures Trading Commission to have violated any Federal commodities law, and
the judgment in such civil action or finding by the Commodity Futures Trading
Commission has not been subsequently reversed, suspended or vacated;
|
|
7.
|
Such person was the
subject of, or a party to, any Federal or State judicial or administrative
order, judgment, decree, or finding, not subsequently reversed, suspended or
vacated, relating to an alleged violation of:
|
|
i.
|
Any Federal or State securities or commodities law or
regulation; or
|
|
ii.
|
Any law or regulation
respecting financial institutions or insurance companies including, but not
limited to, a temporary or permanent injunction, order of disgorgement or
restitution, civil money penalty or temporary or permanent cease-and-desist
order, or removal or prohibition order; or
|
|
iii.
|
Any law or regulation
prohibiting mail or wire fraud or fraud in connection with any business entity;
or
|
|
8.
|
Such person was the
subject of, or a party to, any sanction or order, not subsequently reversed,
suspended or vacated, of any self-regulatory organization (as defined in
Section 3(a)(26) of the Exchange Act), any registered entity (as defined in
Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange,
association, entity or organization that has disciplinary authority over its
members or persons associated with a member.
|
There are currently no legal proceedings
to which any of our directors or officers is a party adverse to us or in which
any of our directors or officers has a material interest adverse to us.
37
Code of Ethics
We have
adopted a corporate code of ethics. We believe our code of ethics is reasonably
designed to deter wrongdoing and promote honest and ethical conduct; provide
full, fair, accurate, timely and understandable disclosure in public reports;
comply with applicable laws; ensure prompt internal reporting of code
violations; and provide accountability for adherence to the code.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The table below summarizes all compensation awarded to,
earned by or paid to our executive officers by any person for all services
rendered in all capacities to them during our fiscal years ended March 31, 2013
and 2014.
Summary
Compensation Table
Name and Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-
Equity
Incentive
Plan
Compen-
sation
($)
|
Non-
qualified
Deferred
Compen-
sation
Earnings
($)
|
All
Other
Com-
pen-
sation
($)
|
Total
($)
|
Adrian Crawford
Ansell,
Chief Executive
Officer
|
2014
|
86,932
|
Nil
|
200,000
(1)
|
Nil
|
Nil
|
Nil
|
Nil
|
286,932
|
2013
|
63,750
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
63,750
|
Perseverando
Medalla Hernandez,
Managing Director
– M.E
|
2014
|
86,932
|
Nil
|
200,000
(2)
|
Nil
|
Nil
|
Nil
|
Nil
|
286,932
|
2013
|
72,375
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
72,375
|
Jose Luis Moraza
Romero-Salas,
Chairman-Plc
/CEO/President –
Philippines
(8)
|
2014
|
32,273
|
Nil
|
450,000
(3)
|
Nil
|
Nil
|
Nil
|
Nil
|
482,273
|
2013
|
64,375
|
Nil
|
267,123
(4)
|
Nil
|
Nil
|
Nil
|
Nil
|
331,498
|
Adrian Ignacio
Ocampo,
IT Director –
Philippines
|
2014
|
19,109
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
19,109
|
Rosarito Deferia
Carrillo,
Corporate
Secretary
|
2014
|
28,409
|
Nil
|
90,000
(5)
|
Nil
|
Nil
|
Nil
|
Nil
|
118,409
|
2013
|
Nil
|
Nil
|
44,877
(6)
|
Nil
|
Nil
|
Nil
|
Nil
|
44,877
|
Francis Chiew
Former President,
Chief
Executive
Officer, Chief
Financial Officer,
Secretary &
Treasurer
(7)
|
2014
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
2013
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
38
(1)
|
The Company issued shares to Mr.
Adrian Ansell as compensation for services covering ½ salary for the period
April-July 2013. The valuation of the stock awards is based on their fair
values at the date of grant in accordance with ASC 718.
|
(2)
|
The Company issued shares to Mr. Perseverando
Hernandez as compensation for services covering ½ salary for the period
April-July 2013. The valuation of the stock awards is based on their fair
values at the date of grant in accordance with ASC 718.
|
(3)
|
The Company issued shares to Mr. Romero
Salas as compensation for services rendered April-September 2013 and to
compensate for ½ salary for the period April-July 2013. The valuation of the
stock awards is based on their fair values at the date of grant in accordance
with ASC 718.
|
(4)
|
The Company issued shares to Mr.
Romero Salas as compensation for services rendered. The valuation of the stock
awards is based on their fair values at the date of grant in accordance with
ASC 718. See Note 2 (Significant Accounting Policies – Share-Based Compensation)
in the Notes to the Consolidated Financial Statements of Telupay PLC and
Subsidiaries for the years ended March 31, 2013 and 2012.
|
(5)
|
The Company issued shares to Ms.
Carrillo as compensation for services rendered for the period April-September
2013. The valuation of the stock awards is based on their fair values at the
date of grant in accordance with ASC 718.
|
(6)
|
The Company issued shares to Ms.
Carrillo as compensation for services rendered. The valuation of the stock
awards is based on their fair values at the date of grant in accordance with
ASC 718. See Note 2 (Significant Accounting Policies – Share-Based
Compensation) in the Notes to the Consolidated Financial Statements of Telupay
PLC and Subsidiaries for the years ended March 31, 2013 and 2012.
|
(7)
|
Mr. Chiew resigned as an officer and director as of September 24, 2013.
|
(8)
|
Mr. Romero-Salas resigned as an officer and director effective June 23, 2014.
|
Outstanding Equity Awards
As at March 31, 2014, there were no unexercised
options, stock that had not vested or outstanding equity incentive plan awards
with respect to our officers or directors.
Compensation of Directors
The table below summarizes all compensation awarded
to, earned by or paid to our directors during our fiscal year ended March 31,
2014. Certain of our directors served as officers of our Company, and any
compensation they received due to their services are disclosed in the table
above and are not included in the table below.
Director Compensation
Name
|
Fees
earned or
paid in
cash
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-
Equity
Incentive
Plan
Compen-
sation
($)
|
Non-
qualified
Deferred
Compen-
sation
Earnings
($)
|
All Other
Compen-
sation
($)
|
Total
($)
|
Adrian Crawford
Ansell
(1)
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
Jose Luis Moraza
Romero-Salas
(1)(4)
|
8,333
(3)
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
8,333
|
Perseverando
Medalla Hernandez
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
Adrian Ignacio
Ocampo
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
Mark Jon Keene
|
8,333
(3)
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
8,333
|
Michael John
Greenup
|
8,333
(3)
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
8,333
|
Francis Chiew
(1) (2)
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
(1)
|
See Summary Compensation
Table – Telupay above.
|
(2)
|
Mr. Chiew resigned as an officer and director as of
September 24, 2013.
|
(3)
|
Non-Executive Directors
are provided with a quarterly compensation of US$5,000 each, the amount
provided covered the period November 2013-March 2014.
|
(4)
|
Mr. Romero-Salas resigned as an officer and director effective June 23, 2014.
|
39
Executive Services Agreements
Telupay has issued executive service agreements to
three directors, namely: Adrian Crawford Ansell, Perseverando Medalla Hernandez
and Jose Luis Moraza Romero-Salas, which have been amended periodically.
Pursuant to these agreements, two executives (Mr. Ansell and Mr. Hernandez are
entitled to monthly compensation of $7,500) and one executive (Mr.
Romero-Salas) is entitled to monthly compensation of $5,000. During March 2012,
the monthly compensation to be received by each of Mr. Ansell and Mr. Hernandez
was amended to $3,750 cash and share-based compensation amounting to $3,750,
and the monthly compensation to be received by Mr. Romero-Salas was amended to
$2,500 cash and share-based compensation amounting to $2,500.
During the year ended March 31, 2013, Telupay issued
common shares to two Company executives (to Mr. Romero-Salas and Ms. Carrillo)
as compensation for services rendered during the period. The fair value of the
shares totaled $312,000. Out of the $312,000, $177,000 was recorded as
executive compensation and $135,000 was recorded as prepaid share-based
compensation as of March 31, 2013.
Mr. Romero-Salas resigned as an officer and director of our Company effective June 23, 2014.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information
concerning the number of shares of our common stock owned beneficially as of June 9, 2014 by: (i) each person (including any group) known to us to own more
than 5% of our shares of common stock; (ii) each of our directors; (iii) each
of our officers; and (iv) our officers and directors as a group. To our
knowledge, each holder listed possesses sole voting and investment power with
respect to the shares shown.
Title of class
|
Name and address of beneficial
owner
(1)
|
Amount and nature
of beneficial owner
(2)
|
Percentage of
class
(3)
|
Officers and Directors
|
|
|
Common Stock
|
Adrian
Crawford Ansell
|
10,651,325
(4)
|
6.6%
|
Common Stock
|
Jose Luis
Moraza Romero-Salas
(10)
|
7,759,079
(5)
|
4.8%
|
Common Stock
|
Perseverando
Medalla Hernandez
|
6,157,514
|
3.8%
|
Common Stock
|
Adrian
Ignacio Ocampo
|
2,331,912
|
1.4%
|
Common Stock
|
Mark Jon
Keene
|
4,984,362
(6)
|
3.1%
|
Common Stock
|
Michael John
Greenup
|
1,762,809
|
1.1%
|
Common Stock
|
Rosarito
Deferia Carrillo
|
1,297,802
|
Less than 1%
|
Common Stock
|
All
executive officers and directors as a group (7 persons)
|
34,944,801
(7)
|
21.4%
|
Persons owning more than 5% of voting securities
|
|
|
Common Stock
|
Optimus
Capital Pty Ltd.
Level 2, 41-43 Ord Street
West Perth WA,
6005, Australia
|
25,110,000
(8)
|
14.8%
|
40
Common Stock
|
David Buvac
35 Carrington Avenue
Hurstville
Sydney, NSW,
2220,
Australia
|
9,832,607
(9)
|
6.1%
|
Common Stock
|
Francis
Chiew
Block 547 Unit #03-39
Pasir Ris Street 51
Singapore 510547
|
9,000,000
|
5.6%
|
Common Stock
|
Forte
Finance
192 Old Bakery Street
Valletta VLT
08,
Malta
|
8,079,146
|
5.0%
|
(1)
|
The address of our officers and directors is
our Company’s address, which is First Island House, Peter Street, St. Helier,
Jersey, Channel Islands
|
(2)
|
Under
Rule 13d-3 of the Exchange Act a beneficial owner of a security includes any
person who, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise has or shares: (i) voting power, which
includes the power to vote or to direct the voting of shares; and (ii)
investment power, which includes the power to dispose or direct the disposition
of shares. Certain shares may be deemed to be beneficially owned by more than
one person (if, for example, persons share the power to vote or the power to
dispose of the shares). In addition, shares are deemed to be beneficially owned
by a person if the person has the right to acquire the shares (for example,
upon exercise of an option) within 60 days of the date as of which the
information is provided. In computing the percentage ownership of any person,
the amount of shares outstanding is deemed to include the amount of shares
beneficially owned by such person (and only such person) by reason of these
acquisition rights.
|
(3)
|
Based on 161,476,726 shares of our common stock issued and outstanding as of June 9, 2014.
|
(4)
|
This figure includes
9,381,543 shares of common stock held directly and 1,269,782 shares of common
stock held indirectly by Mr. Ansell’s spouse.
|
(5)
|
This figure includes
7,705,079 shares of common stock held directly and 54,000 shares of common
stock held indirectly by Mr. Romero-Salas’ spouse.
|
(6)
|
This figure includes (i)
2,232,000 shares of common stock held indirectly through Granite Creek
Investments Pty Limited, (ii) 1,090,908 shares of common stock held indirectly
through Optimus Private Equity Fund (Optimus Capital), (iii) warrants
exercisable to purchase 1,116,000 shares of common stock held indirectly
through Granite Creek Investments Pty Limited and (iv) warrants exercisable to
purchase 545,454 shares of common stock held indirectly through Optimus Private
Equity Fund (Optimus Capital).
|
(7)
|
This figure includes (i)
33,283,347 shares of common stock and (ii) warrants exercisable to purchase
1,661,454 shares of common stock.
|
(8)
|
This figure includes (i)
16,740,000 shares of common stock and (ii) warrants exercisable to purchase
8,370,000 shares of common stock.
|
(9)
|
This figure includes (i)
9,142,607 shares of common stock and (ii) warrants exercisable to purchase
690,000 shares of common stock.
|
(10)
|
Mr. Romero-Salas resigned as an officer and director of our Company effective June 23, 2014.
|
Changes in Control
We are unaware of any contract, or other
arrangement or provision, the operation of which may at a subsequent date
result in a change of control of our company.
EXPERTS
McMillan LLP, our independent
legal counsel, has provided an opinion on the validity of the shares of our
common stock that are the subject of this prospectus.
The audited consolidated
financial statements included in this prospectus have been audited by LL
Bradford & Company, Chartered Accountants, which is an independent
registered public accounting firm, to the extent and for the periods set forth
in their report appearing elsewhere in this prospectus. These financial
statements are included in reliance upon the authority of said firms as experts
in auditing and accounting.
41
INTERESTS OF NAMED EXPERTS AND COUNSEL
No expert or
counsel named in this prospectus as having prepared or certified any part of
this prospectus or having given an opinion upon the validity of the securities
being registered or upon other legal matters in connection with the
registration or offering of the common stock offered hereby was employed on a
contingency basis, or had, or is to receive, in connection with such offering,
a substantial interest, direct or indirect, in our company, nor was any such
person connected with our company as a promoter, managing or principal underwriter,
voting trustee, director, officer, or employee.
TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS, AND DIRECTOR INDEPENDENCE
Except as described below, are no transactions, during
our last two fiscal years to date, or any currently proposed transactions, in
which we were or are to be a participant where the amount involved exceeds the
lesser of $120,000 or one percent of the average of our total assets at
year-end for each of our last two fiscal years, and in which any “related
person” had or will have a direct or indirect material interest. “Related
person” includes:
|
(a)
|
any of our directors or officers;
|
|
(b)
|
any person proposed as a nominee for election as a
director;
|
|
(c)
|
any person who beneficially owns, directly or
indirectly, shares carrying more than 10% of the voting rights attached to
our outstanding shares of common stock; or
|
|
(d)
|
any child, stepchild, parent, stepparent, spouse,
sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law
or sister-in-law of any of the foregoing persons who has the same house as
any of such person.
|
Related Party Transactions
Notes payable
Telupay PLC and its subsidiaries (the “Group”) issued
short-term promissory notes totaling $316,540 and $312,864 as of March 31, 2013
and 2012, respectively, to certain directors (Mr. Ansell, Mr. Hernandez, Mr.
Romero-Salas and Mr. Schjelderup). The notes bear a flat interest at a rate of
10%, are unsecured, and matured 60 days from date of issuance. As of our year ended
March 31, 2014, the total amount of the promissory notes, being $311,730, is in
default and is due and payable.
Forte Finance
On June 1 and July 8, 2010, the Group issued two
convertible short-term promissory notes totaling $175,000 to Forte Finance,
controlled by a former director of the Group. The notes bear interest at a rate
of 6% per annum, are unsecured, and are due on demand. The notes are
convertible at the election of the holder at a rate of $0.28 per share. As of
the date of issuance, the fair value of the shares was $0.28; accordingly no
discount to the notes payable has been recorded for the conversion feature.
These notes went into default and Forte Finance made a demand on the balance
due.
42
During the year ended March 31, 2011, the Group
entered into a financial consulting agreement with Forte Finance to assist in
obtaining equity financing for Telupay. Pursuant to the agreement, Telupay
agreed to pay a commission to Forte Finance for funds originating as a result
of their efforts. For the fiscal year ended March 31, 2011, Telupay has paid
$6,160, and recorded a payable amounting to $37,350, was charged against the
gross proceeds from the issuance of Telupay’s shares.
Telupay entered into an agreement with QSpan in
exchange for common shares on Telupay. Pursuant to the agreement, Forte Finance
received 2.25 million shares of Telupay and claimed to be owed an additional
2.25 million shares.
On July 1, 2013, Telupay entered into a settlement
agreement with Forte Finance regarding these matters. Pursuant to the
agreement, Telupay agreed to convert the outstanding amounts claimed under
notes payables to 2,523,414 million shares, consultancy shares of 1.125 million
and outstanding fees in total amount of $90,000 was settled according to terms
set in the agreement.
Upon completion of the Merger transaction on September
24, 2013, Forte Finance held 5,386,097 shares of the Company’s common stock (on
a pre-October 2013 forward share split basis).
Review, Approval and Ratification of
Related Party Transactions
Our Board of Directors has responsibility for
establishing and maintaining guidelines relating to any related party
transactions between us and any of our officers or directors. Any conflict of
interest between a director or officer and us must be referred to the
non-interested directors, if any, for approval. We intend to adopt written
guidelines for the board of directors which will set forth the requirements for
review and approval of any related party transactions.
Director
Independence
The Board
of Directors has determined that Mark Jon Keene
and Michael John Greenup each qualify as independent directors under the
listing standards of the NYSE MKT Equities Exchange.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our directors and officers are
indemnified as provided by the Nevada Revised Statutes, our Articles of
Incorporation and our Bylaws.
Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is therefore unenforceable.
WHERE YOU CAN FIND MORE
INFORMATION
We have filed a registration statement on Form S-1
under the Securities Act with the SEC with respect to the shares of our common
stock offered through this prospectus. This prospectus is filed as a part of
that registration statement but does not contain all of the information
contained in the registration statement and exhibits. Statements made in the
registration statement are summaries of the material terms of the referenced
contracts, agreements or documents of our Company. You may inspect the
registration statement, exhibits and schedules filed with the SEC at the SEC’s
principal office in Washington, D.C. Copies of all or any part of the
registration statement may be obtained from the Public
Reference Section of the SEC, at 100 F Street, NE, Washington, D.C. 20549, on
official business days during the hours of 10:00 a.m. to 3:00 p.m. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the
public reference rooms. The SEC also maintains a web site at http://www.sec.gov
that contains reports, proxy statements and information regarding registrants
that file electronically with the SEC. Our registration statement and the
referenced exhibits can also be found on this site.
43
We are subject to the Exchange Act and we are required
to file annual, quarterly and current reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC’s website at http://www.sec.gov.
DEALER
PROSPECTUS DELIVERY OBLIGATION
No dealer, salesman or any other person has been
authorized to give any information or to make any representations other than
those contained in this prospectus, and, if given or made, such information or
representations may not be relied on as having been authorized by us. Neither
the delivery of this prospectus nor any sale made hereunder shall under any
circumstances create an implication that there has been no change in our affairs
since the date of this prospectus. This prospectus does not constitute any
offer to sell, or solicitation of any offer to buy, by any person in any
jurisdiction in which it is unlawful for any such person to make such an offer
or solicitation. Neither the delivery of this prospectus nor any offer,
solicitation or sale made hereunder, shall under any circumstances create any
implication that the information herein is correct as of any time subsequent to
the date of the prospectus.
INDEX TO FINANCIAL STATEMENTS
Unaudited Financial Statements of Telupay
International Inc. as at December 31, 2013
44
Audited
Financial Statements of Telupay PLC as at March 31, 2013
45
Telupay International Inc. (formerly i-Level
Media Group Incorporated)
Condensed Consolidated Balance Sheets
(Unaudited)
|
|
December
31,
2013
$
|
|
|
March
31,
2013
$
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash
|
|
113,149
|
|
|
16,770
|
|
Accounts receivable
|
|
8,265
|
|
|
8,679
|
|
Other receivables
|
|
13,523
|
|
|
4,128
|
|
Total Current Assets
|
|
134,937
|
|
|
29,577
|
|
Property and equipment, net of accumulated depreciation of $85,909 and
$81,226, respectively
|
|
33,660
|
|
|
33,950
|
|
Capitalized software development costs, net of
accumulated amortization of $101,208 and $75,997, respectively
|
|
120,181
|
|
|
155,137
|
|
Other noncurrent assets
|
|
70,805
|
|
|
55,136
|
|
Total Other Assets
|
|
190,986
|
|
|
210,273
|
|
Total Assets
|
|
359,583
|
|
|
273,800
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
Accounts payable and accruals
|
|
676,223
|
|
|
388,518
|
|
Accounts payable and accruals – related party
|
|
204,555
|
|
|
375,504
|
|
Deferred revenue (Note 8)
|
|
24,707
|
|
|
24,000
|
|
Notes payable (Note 6)
|
|
768,955
|
|
|
76,412
|
|
Notes payable – related parties (Note 5)
|
|
360,106
|
|
|
316,540
|
|
Convertible notes payable (Note 6)
|
|
-
|
|
|
150,000
|
|
Convertible notes payable – related party (Note
5)
|
|
-
|
|
|
175,000
|
|
Total Current Liabilities
|
|
2,034,546
|
|
|
1,505,974
|
|
|
|
|
|
|
|
|
Deferred Tax Liability
|
|
543
|
|
|
543
|
|
Total Liabilities
|
|
2,035,089
|
|
|
1,506,517
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit
|
|
|
|
|
|
|
Common Stock, 1,500,000,000 shares authorized,
$0.001 par value
161,476,831 and 83,818,894 issued and outstanding, respectively,
(Note 4)
|
|
161,477
|
|
|
83,819
|
|
Additional paid-in capital
|
|
7,277,752
|
|
|
6,679,717
|
|
Unamortized share-based compensation
|
|
(24,186
|
)
|
|
(183,375
|
)
|
Cumulative translation adjustments
|
|
(12,154
|
)
|
|
(13,306
|
)
|
Accumulated deficit
|
|
(9,078,395
|
)
|
|
(7,799,572
|
)
|
Total Stockholders’ Deficit
|
|
(1,675,506
|
)
|
|
(1,232,717
|
)
|
Total Liabilities and Stockholders’ Deficit
|
|
359,583
|
|
|
273,800
|
|
(See accompanying notes to consolidated financial
statements)
F-1
Telupay International Inc. (formerly i-Level Media Group Incorporated)
Condensed Consolidated Statements of
Operations
(Unaudited)
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Revenues
|
|
30,542
|
|
|
20,586
|
|
|
62,906
|
|
|
43,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expense
|
|
27,585
|
|
|
2,439
|
|
|
56,135
|
|
|
2,439
|
|
Salaries and benefits
|
|
146,113
|
|
|
114,940
|
|
|
398,988
|
|
|
370,852
|
|
Share-based compensation – related parties
|
|
211,052
|
|
|
102,870
|
|
|
341,802
|
|
|
426,070
|
|
Travel
|
|
40,997
|
|
|
497
|
|
|
59,431
|
|
|
24,533
|
|
Professional fees
|
|
167,330
|
|
|
33,312
|
|
|
293,146
|
|
|
145,575
|
|
General and administrative expenses
|
|
40,350
|
|
|
30,779
|
|
|
100,966
|
|
|
130,114
|
|
Depreciation and amortization
|
|
18,789
|
|
|
19,771
|
|
|
51,563
|
|
|
61,487
|
|
Total Operating Expenses
|
|
652,216
|
|
|
304,608
|
|
|
1,302,031
|
|
|
1,161,070
|
|
Net Loss from Operations
|
|
(621,674
|
)
|
|
(284,022
|
)
|
|
(1,239,125
|
)
|
|
(1,117,269
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
38
|
|
|
31
|
|
|
64
|
|
|
113
|
|
Interest expense, net
|
|
(10,052
|
)
|
|
(2,561
|
)
|
|
(14,552
|
)
|
|
(7,372
|
)
|
Interest expense-related party
|
|
-
|
|
|
(2,625
|
)
|
|
(5,250
|
)
|
|
(7,875
|
)
|
Finance cost
|
|
-
|
|
|
-
|
|
|
(7,500
|
)
|
|
(372
|
)
|
Finance cost - related party
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(72
|
)
|
Other income (expense)
|
|
787
|
|
|
(372
|
)
|
|
(22,059
|
)
|
|
-
|
|
Foreign exchange gain (loss)
|
|
12,754
|
|
|
(1,334
|
)
|
|
9,599
|
|
|
-
|
|
Total Other Income (Expense)
|
|
3,527
|
|
|
(6,861
|
)
|
|
(39,698
|
)
|
|
(15,578
|
)
|
Net Loss before Provision for Income Taxes
|
|
(618,147
|
)
|
|
(290,883
|
)
|
|
(1,278,823
|
)
|
|
(1,132,847
|
)
|
Provision for Income Taxes
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(543
|
)
|
Net Loss for the Period
|
|
(618,147
|
)
|
|
(290,883
|
)
|
|
(1,278,823
|
)
|
|
(1,133,390
|
)
|
(See accompanying notes to consolidated financial
statements)
F-2
Telupay International Inc. (formerly
i-Level Media Group Incorporated)
Condensed Consolidated Statements of
Comprehensive (Loss)
(Unaudited)
|
|
The Three Months Ended
|
|
|
The Nine Months Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Net Loss for the Period
|
|
(618,147
|
)
|
|
(290,883
|
)
|
|
(1,278,823
|
)
|
|
(1,133,390
|
)
|
Cumulative Translation Adjustment
Foreign currency translation
|
|
(9,496
|
)
|
|
64,045
|
|
|
12,925
|
|
|
50,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive Income (Loss)
|
|
(627,643
|
)
|
|
(226,838
|
)
|
|
(1,265,898
|
)
|
|
(1,082,778
|
)
|
(See
accompanying notes to consolidated financial statements)
F-3
Telupay International Inc. (formerly
i-Level Media Group Incorporated)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
For the Nine Months Ended
|
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
$
|
|
|
$
|
|
Operating Activities
|
|
|
|
|
|
|
Net loss
|
|
(1,278,823
|
)
|
|
(1,133,390
|
)
|
Adjustments to reconcile net loss to
cash:
|
|
|
|
|
|
|
Depreciation and amortization
|
|
51,563
|
|
|
61,487
|
|
Other expense paid in shares
|
|
30,000
|
|
|
-
|
|
Amortization of share-based
compensation costs
|
|
189,189
|
|
|
-
|
|
Foreign currency loss
|
|
7,172
|
|
|
(50,612
|
)
|
Shares issued for services
|
|
46,500
|
|
|
254,700
|
|
Changes in operating assets and
liabilities:
|
|
|
|
|
|
|
Increase in accounts receivable
|
|
414
|
|
|
3,247
|
|
Increase in other current assets
|
|
(9,396
|
)
|
|
(11,158
|
)
|
Increase (decrease) in accounts
payable and accrued expenses
|
|
(18,407
|
)
|
|
63,832
|
|
(Decrease) in accounts payable and
accrued expenses – related party
|
|
(307,149
|
)
|
|
31,707
|
|
(Decrease) in deferred revenue
|
|
707
|
|
|
(2,646
|
)
|
Net Cash Used in Operating Activities
|
|
(1,288,230
|
)
|
|
(782,833
|
)
|
Investing Activities
|
|
|
|
|
|
|
Increase in other assets
|
|
(15,669
|
)
|
|
(12,257
|
)
|
Acquisition of furniture and
equipment
|
|
(16,317
|
)
|
|
(4,112
|
)
|
Net Cash Used in Investing Activities
|
|
(31,986
|
)
|
|
(16,369
|
)
|
Financing Activities
|
|
|
|
|
|
|
Repayment of notes payable
|
|
(825
|
)
|
|
-
|
|
Proceeds from notes payable – related party
|
|
43,566
|
|
|
46,863
|
|
Proceeds from sale of common stock, net of
offering costs
|
|
1,373,854
|
|
|
750,846
|
|
Net Cash Provided by Financing Activities
|
|
1,416,595
|
|
|
797,709
|
|
Increase (Decrease) in Cash
|
|
96,379
|
|
|
(1,493
|
)
|
Cash - Beginning of Period
|
|
16,770
|
|
|
9,789
|
|
Cash - End of Period
|
|
113,149
|
|
|
8,296
|
|
Supplemental Disclosures:
|
|
|
|
|
|
|
Interest paid
|
|
-
|
|
|
-
|
|
Income taxes paid
|
|
-
|
|
|
-
|
|
Non-cash Financing and Investing
Activities:
|
|
|
|
|
|
|
Common stock
issued for conversion of notes and interest
|
|
378,512
|
|
|
|
|
Common
stock issued for other expenses
|
|
30,000
|
|
|
|
|
Common stock
issued for financing – related party
|
|
|
|
|
11,874
|
|
Common stock
issued for services
|
|
-
|
|
|
252,450
|
|
(See accompanying notes to consolidated financial
statements)
F-4
Telupay International Inc.
(formerly i-Level Media Group Incorporated)
Consolidated Statement of
Changes in Stockholders’ Deficit for the Year Ended
March 31, 2013 and the Nine
Months Ended December 31, 2013
(Unaudited)
|
|
|
|
|
|
Additional
|
|
Unamortized
|
|
Accumulated
|
|
|
|
|
|
|
|
|
Common
|
|
Paid-in
|
|
Stock Based
|
|
Comprehensive
|
|
Accumulated
|
|
|
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Compensation
|
|
Income
|
|
Deficit
|
|
Total
|
|
|
#
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2012
|
|
78,271,357
|
|
78,272
|
|
5,415,416
|
|
-
|
|
14,343
|
|
(6,344,496)
|
|
(836,465)
|
Issuance of shares for services
|
|
954,000
|
|
954
|
|
78,546
|
|
(48,375)
|
|
-
|
|
-
|
|
31,125
|
Issuance of shares for services –
related party
|
|
2,102,400
|
|
2,102
|
|
429,899
|
|
(135,000)
|
|
-
|
|
-
|
|
297,001
|
Issuance of shares for cash, net
|
|
9,123,102
|
|
9,123
|
|
737,977
|
|
-
|
|
-
|
|
-
|
|
747,100
|
Issuance of shares for financing –
related party
|
|
1,468,035
|
|
1,468
|
|
9,779
|
|
-
|
|
-
|
|
-
|
|
11,247
|
Forfeiture of shares
|
|
(8,100,000)
|
|
(8,100)
|
|
8,100
|
|
-
|
|
-
|
|
-
|
|
-
|
Translation adjustment
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(27,649)
|
|
-
|
|
(27,649)
|
Net loss for the year
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(1,455,076)
|
|
(1,455,076)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2013
|
|
83,818,894
|
|
83,819
|
|
6,679,717
|
|
(183,375)
|
|
(13,306)
|
|
(7,799,572)
|
|
(1,232,717)
|
Offering costs – related party
|
|
-
|
|
-
|
|
(4,275)
|
|
-
|
|
-
|
|
-
|
|
(4,275)
|
Issuance of shares for cash, net
|
|
20,448,000
|
|
20,448
|
|
1,220,183
|
|
-
|
|
-
|
|
-
|
|
1,240,631
|
Issuance of shares previously authorized
|
|
6,459,060
|
|
6,459
|
|
131,041
|
|
-
|
|
-
|
|
-
|
|
137,500
|
Issuance of shares for loans converted
|
|
4,542,145
|
|
4,542
|
|
373,972
|
|
-
|
|
-
|
|
-
|
|
378,514
|
Previously forfeited shares re-issued
|
|
2,025,000
|
|
2,025
|
|
(2,025)
|
|
-
|
|
-
|
|
-
|
|
-
|
Issuance of shares to settle
disagreement
|
|
360,000
|
|
360
|
|
29,640
|
|
-
|
|
-
|
|
-
|
|
30,000
|
Forfeiture of shares
|
|
(112,500)
|
|
(112)
|
|
112
|
|
-
|
|
-
|
|
-
|
|
-
|
Issuance of shares for
services
|
|
558,000
|
|
558
|
|
45,942
|
|
-
|
|
-
|
|
-
|
|
46,500
|
Recapitalization Transactions – September 24, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares acquired by Telupay International Inc.
|
|
(118,098,594)
|
|
(118,099)
|
|
(8,474,307)
|
|
-
|
|
-
|
|
-
|
|
(8,592,406)
|
Shares of Telupay International Inc.
|
|
113,878,237
|
|
113,878
|
|
8,484,544
|
|
-
|
|
-
|
|
-
|
|
8,598,422
|
Cancellation of founders shares
|
|
(70,500,000)
|
|
(70,500)
|
|
70,500
|
|
-
|
|
-
|
|
-
|
|
-
|
Shares issued to shareholders of Telupay PLC to
effect the recapitalization
|
|
118,098,586
|
|
118,099
|
|
(118,099)
|
|
-
|
|
-
|
|
-
|
|
-
|
Liabilities assumed of Telupay International Inc.
|
|
-
|
|
-
|
|
(1,159,193)
|
|
-
|
|
(6,020)
|
|
-
|
|
(1,165,213)
|
Translation adjustment
|
|
-
|
|
-
|
|
-
|
|
-
|
|
7,172
|
|
-
|
|
7,172
|
Amortization of stock based
compensation
|
|
-
|
|
-
|
|
-
|
|
159,189
|
|
-
|
|
-
|
|
159,189
|
Net loss for the period
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(1,278,823)
|
|
(1,278,823)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2013
|
|
161,476,831
|
|
161,477
|
|
7,277,752
|
|
(24,186)
|
|
(12,154)
|
|
(9,078,395)
|
|
(1,675,506)
|
(See accompanying notes to consolidated financial statements)
F-5
Telupay International Inc. (formerly
i-Level Media Group Incorporated)
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
1. Nature of Operations and
Presentation
Telupay International Inc. (the
“Company”) (formerly i-Level Media Group Incorporated) was incorporated in the
State of Nevada on August 23, 2005 as Jackson Ventures Ltd. and its initial
operations included the acquisition and exploration of mineral resources. In
March, 2007 the Company changed its name to i-Level Media Group Incorporated
(“i-Level”) and changed its business to that of developing and operating a
digital media network service. This business ceased operations on December 1,
2008 and its business was wound-up.
Effective September 24, 2013, the Company
completed the acquisition, by way of a Merger Agreement, of 100% of the issued
and outstanding shares of Telupay PLC (“Telupay”), a company incorporated in
Jersey, Channel Islands on March 2, 2010. Telupay owns the following
wholly-owned subsidiaries: (i) Telupay IP Limited (Jersey, Channel Islands), to
hold its intellectual property; (ii) Telupay Solutions Limited (Jersey, Channel
Islands) as the operations arm of the Telupay group of companies; (iii) Telupay
(M.E) FZE (Dubai, AEC), which subsequently incorporated its own subsidiary in
the Philippines, Telupay (Philippines) Inc.; and (iv) Telupay UK Limited
(England). Telupay and its subsidiaries are engaged in the mobile banking and
payment processing business primarily in the Philippines, Peru, Indonesia,
Myanmar and the United Kingdom.
As a result of the Merger Agreement, Telupay is now a
wholly-owned subsidiary of the Company. Effective October 22, 2013 the Company
changed its name to Telupay International Inc. and effectuated a forward stock split of its authorized
and issued outstanding shares of common stock on a 1.5 new shares for 1 old
basis. As a result the Company’s authorized share capital increased from
1,000,000,000 shares of common stock to 1,500,000,000 shares of common stock
and correspondingly, the Company’s issued and outstanding share capital
increased from 107,651,214 shares of common stock to 161,476,831 shares of
common stock. This forward stock split has been accounted for retroactively.
The Company, as a result of the Merger Agreement, is no longer a development
stage company and will not present accumulated from inception amounts.The closing of the acquisition of Telupay represented
a change in control of the Company. For accounting purposes, this change of
control constituted a re-capitalization of the Company, and the acquisition has
been accounted for as a reverse merger whereby the Company, as the legal
acquirer, is treated as the acquired entity, and Telupay, as the legal
subsidiary, is treated as the acquiring company with the continuing operations
and historical financial statements.
2. Summary of Significant
Accounting Policies
Basis
of Presentation
These
unaudited interim condensed consolidated financial statements and related notes
are presented in accordance with accounting principles generally accepted in
the United States, and are expressed in US dollars. As a result of the
acquisition of Telupay on September 24, 2013, the Company has changed its
fiscal year end from December 31 to March 31. These financial statements include
the accounts of the Company and its consolidated subsidiaries: Telupay PLC, Telupay IP Limited, Telupay Solutions
Limited, Telupay (M.E) FZE (Dubai, AEC), Telupay (Philippines) Inc., and
Telupay UK Limited. The statement of operations includes the accounts of
i-Level from September 24, 2013 to December 31, 2013 and the accounts of
Telupay and its subsidiaries for all historical presentations.
Use of
Estimates
The
preparation of financial statements in accordance with United States generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses in the reporting period. The Company regularly evaluates estimates and
assumptions related to 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.
Property and Equipment
Property and equipment are recorded at
cost. Expenditures for major additions and improvements are capitalized and
minor replacements, maintenance, and repairs are charged to expense as
incurred. When property and equipment are retired or otherwise disposed of, the
cost and accumulated depreciation are removed from the accounts and any
resulting gain or loss is included in the results of operations for the
respective period. Depreciation is provided over the estimated useful lives of
the related assets using the straight-line method for financial statement
purposes. The Company uses other depreciation methods (generally accelerated)
for tax purposes where appropriate. The estimated useful lives for significant
property and equipment categories are as follows:
F-6
|
Equipment
|
3-5
years
|
|
|
|
|
|
|
Furniture
|
7 years
|
|
The Company reviews the carrying value of
property, plant, and equipment for impairment whenever events and circumstances
indicate that the carrying value of an asset may not be recoverable from the
estimated future cash flows expected to result from its use and eventual
disposition. In cases where undiscounted expected future cash flows are less
than the carrying value, an impairment loss is recognized equal to an amount by
which the carrying value exceeds the fair value of assets. The factors
considered by management in performing this assessment include current
operating results, trends and prospects, the manner in which the property is
used, and the effects of obsolescence, demand, competition, and other economic
factors. Based on this assessment there were no impairments needed as of
December 31, 2013.
Capitalized Software
Development Costs
The Company capitalizes
internal software development costs subsequent to establishing technological
feasibility of a software application. Capitalized software development costs
represent the costs associated with the internal development of The Company’s
software applications. Amortization of such costs is recorded on a software
application-by-application basis, based on the greater of the proportion of
current year sales to total of current and estimated future sales for the
applications or the straight-line method over the remaining estimated useful
life of the software application. The Company continually evaluates the
recoverability of capitalized software costs and will charge to operations
amounts that are deemed unrecoverable for projects it abandons.
Revenue Recognition
Revenue is derived through enterprise
application integration, programming, wholesale sales and distribution of
customized software applications, after-sales support and technical assistance,
as well as the provision of third-party services and other related ancillary
and/or support functions, services and systems related to mobile banking, money
and payment solutions.
Products and Services
The Company’s copyrighted technologies
provide a modular, adaptable systems solution and application software designed
to operate in multi-channel gateways and connected devices, providing services
such as software development, mobile banking, mobile money and payment
services, maintenance and after-sales support (i.e. system upgrades and
updates), and customization services. The Company also provides other
services, such as consulting and programming, provides licenses on Software as
a Service (“SaaS”) basis, and receives royalties on sales on a performance
basis, such as when a client acquires a new customer using our copyrighted
products.
Sale of Products and Services
Contract revenue is at a specifically fixed price
separate from the price of software and PCS (Post-Contract Customer Support).
Upon complete delivery based on a specific SLA (Service Level Agreement) and
certificate of acceptance by the client, software revenue is recognized and billed
to the client.
Any cash payments before delivery in the form of
deposits are treated as deferred revenue until acceptance of the client is
evident to signify delivery of the product. This is the time the revenue is
recognized, such that upon delivery, such deferred revenue will be recognized
as revenue.
In the case of PCS referring to bug fixes, patches and
updates, these are treated as free support for the life of the contract.
Maintenance cost is usually as a standard free for the first year. During the
second year and succeeding years until end of the contract, maintenance cost
revenues will be recognized on a ratable basis, applying a straight-line
method. PCS product upgrades are priced separately and recognized as revenue
over the life of the contract on a ratable basis.
Based on a contractual period, the Company’s income is
generated with a client under a
revenue-sharing arrangement per
transaction basis
with fixed transaction fee(s) paid by the client or
by the client’s customers, which is generally collected and reconciled by the
client and then shared on a standard range of 50/50 revenue sharing percentage
between the Company and the client net of system transaction costs. A
reconciliation of successful transactions by the Company is done at the end of
each month and confirmed by the client. Revenue is recognized and invoiced at
this stage. The contract also allows the option for
annual customer
subscription fees
collected from the client’s customers or paid
directly by the client to the Company. A reconciliation of annual subscription
fees is done every month by the Company and confirmed by the client. Annual
subscription fees are invoiced at the end of each month, and revenue is
recognized rateably over the one-year subscription period.
F-7
Another revenue stream is
commission
from third-party providers
(i.e. airtime providers, biller
institutions, merchants) that is shared on a standard 70/30 revenue share per
transaction with the client in favor of the Company. The commissions are
collected from the third party by the client and shared with the Company. A
reconciliation of successful transactions by the Company is done at an agreed
billing period and confirmed by the client. Revenue is recognized and invoiced
at this stage.
The Company also generates revenue from
development
fees and after-sales support
to cover maintenance, upgrades and other
additional services costs. For such and all other sales of product or services,
the Company recognizes revenues based on the terms of the customer agreement.
In case of multiple elements, the contract has the specifics defining every
payment or billing milestone as agreed upon between the Company and the client.
Revenue is recognized based on a fixed price distributed every specific
milestone.
Revenue generated from
licensure and
royalty fees
is recognized rateably over the agreement period.
Loss per Share
The Company reports earnings (loss) per
share in accordance with ASC Topic 260-10, “Earnings per Share.” Basic earnings
(loss) per share are computed by dividing income (loss) available to common
shareholders by the weighted average number of common shares available. Diluted
earnings (loss) per share is computed similar to basic earnings (loss) per
share except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the potential
common shares had been issued and if the additional common shares were
dilutive. Diluted earnings (loss) per share have not been presented since the
effect of the assumed exercise or conversion of stock options, warrants, and
debt to purchase common shares, would have an anti-dilutive effect.
Long-lived assets
The Company accounts for its long-lived
assets in accordance with ASC Topic 360-10-05, “Accounting for the Impairment
or Disposal of Long-Lived Assets.” ASC Topic 360-10-05 requires that long-lived
assets be reviewed for impairment whenever events or changes in circumstances
indicate that the historical cost or carrying value of an asset may no longer
be appropriate. The Company assesses recoverability of the carrying value of
an asset by estimating the future net cash flows expected to result from the
asset, including eventual disposition. If the future net cash flows are less
than the carrying value of the asset, an impairment loss is recorded equal to
the difference between the asset’s carrying value and its fair value or
disposable value. As of December 31, 2013 and March 31, 2013, The Company
determined that none of its long-term assets were impaired.
Fair Value of Financial Instruments
The Company has financial instruments
whereby the fair value of the financial instruments could be different from
that recorded on a historical basis in the accompanying balance sheets. The
Company’s financial instruments consist of cash, receivables, accounts payable,
accrued liabilities, and notes payable. The carrying amounts of The Company’s
financial instruments approximate their fair values as of December 31, 2013 and
March 31, 2013 due to their short-term nature.
Share-Based Compensation
The Company accounts for stock-based
payments to employees in accordance with ASC 718, “Stock Compensation” (“ASC
718”). Stock-based payments to employees are currently comprised of restricted
stock grants that are recognized in the consolidated statement of operations
based on their fair values at the date of grant.
The Company accounts for stock-based
payments to non-employees in accordance with ASC 718 and Topic 505-50,
“Equity-Based Payments to Non-Employees.” Stock-based payments to non-employees
may include grants of stock, stock options and issuances of warrants that are
recognized in the consolidated statement of operations based on the value of
the vested portion of the award over the requisite service period as measured
at its then-current fair value as of each financial reporting date. The fair
value of option grants and warrant issuances will be calculated utilizing the
Black-Scholes pricing model. The amount of stock-based compensation recognized
during a period is based on the value of the portion of the awards that are
ultimately expected to vest. ASC 718 requires forfeitures to be estimated at
the time stock options are granted and warrants are issued to employees and
non-employees, and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates. The term “forfeitures” is distinct
from “cancellations” or “expirations” and represents only the unvested portion
of the surrendered stock option or warrant. The Company estimates forfeiture
rates for all unvested awards when calculating the expense for the period. In
estimating the forfeiture rate, The Company monitors both stock option and
warrant exercises as well as employee termination patterns. As of December 31,
2013 and March 31, 2013, The Company recorded stock-based compensation to
employees in the amounts of $24,189 and $16,125, respectively. As of December
31, 2013 and March 31, 2013, The Company recorded stock-based compensation to
directors in the amounts of $100,500 and
$177,000, respectively.
Foreign Currency
The Company accounts for foreign currency
in accordance with ASC Topic 830 “Foreign Currency” whereby the local currency
is the functional currency. Assets and liabilities of the Company’s foreign
locations are translated to reporting currency at the rate of exchange existing
at the balance sheet date. Income statement amounts are translated at a
weighted average monthly exchange rate for each reporting period. The
cumulative translation adjustments resulting from changes in exchange rates are
included in the consolidated balance sheet as “Other comprehensive income”, a
separate component of stockholders’ equity. Transaction gains and losses are
included in the consolidated statement of operations. As of December 31, 2013
and March 31, 2013, the Company reported ($12,154) and ($13,306), respectively,
in cumulative translation adjustment losses related to foreign currency
re-measurement.
F-8
Recent accounting pronouncements
No recent accounting pronouncements issued
by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC
did not or are not believed by management to have a material impact on the
Company’s present or future financial statements.
International Financial Reporting Standards
In November 2008, the
Securities and Exchange Commission (“SEC”) issued for comment a proposed
roadmap regarding potential use of financial statements prepared in accordance
with International Financial Reporting Standards (“IFRS”) as issued by the
International Accounting Standards Board. Under the proposed roadmap, The
Company would be required to prepare financial statements in accordance with
IFRS in fiscal year 2014, including comparative information also prepared under
IFRS for fiscal 2013 and 2012. The Company is currently assessing the potential
impact of IFRS on its financial statements and will continue to follow the
proposed roadmap for future developments.
3. Going Concern
These unaudited interim
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles applicable to a going concern, which
assumes that the Company will be able to meet its obligations and continue its
operations for its next fiscal year. Realization values may be substantially
different from carrying values as shown and these financial statements do not
give effect to adjustments that would be necessary to the carrying values and
classification of assets and liabilities should the Company be unable to
continue as a going concern. The Company has not yet achieved profitable
operations since its inception. Through December 31, 2013, the Company had
accumulated losses of $9,078,395 and a working capital deficit of $1,899,609.
Management expects to incur further losses in the development of its business,
all of which raises substantial doubt about the Company’s ability to continue
as a going concern. The Company’s ability to continue as a going concern is
dependent upon its ability to generate future profitable operations and/or to
obtain the necessary financing to meet its obligations and repay its
liabilities arising from normal business operations when they come due.
4. Acquisition of Telupay
PLC
Effective September 24, 2013, the Company
completed the acquisition of 100% of the issued and outstanding shares of
Telupay PLC (“Telupay”) pursuant to a Merger Agreement. Telupay is an early
stage company focused on the development and commercialization of mobile
banking and payment applications and systems. Telupay is a limited liability
company incorporated under the laws of the Jersey Channel Islands. Under the
terms of the Merger Agreement, Telupay’s stockholders received 1.2 shares of
i-Level common stock for every one share of Telupay common stock. With
65,610,325 (on a pre-split basis) shares of Telupay common stock outstanding,
78,732,390 (on a pre-split basis) shares of i-Level shares were issued to the
former Telupay stockholders as at September 24, 2013. In addition, the Merger
Agreement required that i-Level’s Chief Executive Officer and director tender
back to the treasury of i-Level for cancellation an aggregate of 47,000,000
(pre-split) shares of i-Level leaving 28,918,825 pre-split shares of i-Level
issued prior to the Merger Agreement. Taking into account the cancellation of
such shares, the shares of i-Level issued to Telupay stockholders represented
73% of the issued and outstanding common stock of i-Level post-closing; as a
result the Merger Agreement represented a change in control of the Company. For
accounting purposes, this change of control constitutes a re-capitalization of
the Company, and the acquisition has been accounted for as a reverse merger
whereby we, i-Level, as the legal acquirer, is treated as the acquired entity,
and Telupay, as the legal subsidiary, is treated as the acquiring company with
the continuing obligations and operations.
The Merger Agreement also provided that
all outstanding Telupay warrants would be exchanged for warrants of i-Level
based on the same exchange ratio of 1.2 to 1. As a result of the Merger
Agreement and the forward split such Telupay PLC warrants have been cancelled
and exchanged for 10,734,000 post-split warrants to acquire 10,734,000
post-split shares of the Company exercisable at $0.2777 per share expiring June
28, 2014.
5. Related Party Transactions
Notes payable – related parties
Telupay PLC issued short-term promissory
notes totaling $316,540 as of March 31, 2013 to certain directors. The notes
bear interest at 10%, are unsecured, and matured 60 days from date of issuance.
These notes are currently in default, unsecured and due on demand. These
directors have not demanded repayment.
F-9
Convertible notes payable –
related party
Telupay PLC issued two unsecured
convertible 6% demand promissory notes totaling $175,000 to a former director
of Telupay PLC. As of December 31, 2013, these convertible notes were converted
into common shares of Telupay prior to the merger.
Dispute with former director
On July 1, 2013, Telupay PLC entered into a
settlement agreement to settle notes payable and other liabilities. Pursuant to
the agreement, the Company agreed to convert outstanding amounts claimed under
notes payables to 2,523,414 Telupay PLC shares; outstanding consulting fees of
1,125,000 Telupay PLC shares and outstanding fees in total amount of $90,000
was settled according to terms set in the agreement.
Executive compensation
Telupay PLC entered into executive service
agreements with three directors.
Two directors, who are also officers, are
entitled to monthly compensation of $7,500. During 2012, the monthly
compensation was amended to $3,750 in cash and $3,750 in share-based
compensation. The third director is entitled to monthly compensation of $5,000.
During 2012, the monthly compensation was amended to $2,500 in cash and $2,500
in share-based compensation. On June 25, 2013, the Board of Directors
authorized directors’ monthly compensation to 50% paid in cash and 50% paid in
shares. On October 4, 2013 the Board of Directors approved the retroactive full
cash compensation for the Company’s three directors beginning July 2013.
Share-based compensation
Telupay Plc cancelled the contractor
agreements with one director and an officer ending the issuance of share-based
compensation effective October 31, 2013.
Due to former officer/director of i-Level
The Company’s former
officer/director was paid $4,000 per month for services rendered up to
September 24, 2013. As at December 31, 2013 a total of $106,200 was owed. This
amount is unsecured, non-interest bearing and due on demand.
6. Convertible
Notes and Note Payable
In 2010 Telupay PLC issued two 6%
promissory notes totaling $150,000 convertible at the election of the holder at
a rate of $0.30 per Telupay PLC share. On July 1, 2013 these promissory notes
plus interest were converted into Telupay PLC shares.
The Company had short-term 12%
interest bearing, unsecured notes of $332,332. As at December 31, 2013 there
was interest of $228,480 accrued. This note holder is also owed $163,331 which
is non-interest bearing, unsecured and due on demand. The total amount owing to
an unrelated party is $754,543.
7. Fair Value of Financial
Instruments
The Company adopted ASC Topic 820-10 to
measure the fair value of certain of its financial assets required to be
measured on a recurring basis. The adoption of ASC Topic 820-10 did not impact
the Company’s financial condition or results of operations. ASC Topic 820-10
establishes a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value. The hierarchy gives the
highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1 measurements) and the lowest priority to
unobservable inputs (Level 3 measurements). ASC Topic 820-10 defines
fair value as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants on
the measurement date. A fair value measurement assumes that the transaction to
sell the asset or transfer the liability occurs in the principal market for the
asset or liability. The three levels of the fair value hierarchy under ASC
Topic 820-10 are described below:
Level I
– Valuations based on quoted prices in active markets
for identical assets or liabilities that an entity has the ability to access.
Level II
– Valuations based on quoted prices for similar
assets and liabilities in active markets, quoted prices for identical assets
and liabilities in markets that are not active, or other inputs that are
observable or can be corroborated by observable data for substantially the full
term of the assets or liabilities.
Level III
– Valuations based on inputs that are supportable by
little or no market activity and that are significant to the fair value of the
asset or liability.
The following methods and
assumptions are used to estimate the fair value of each class of financial
instruments:
F-10
December 31, 2013
|
|
Level I
|
|
|
Level II
|
|
|
Level III
|
|
|
Fair Value
|
|
Capitalized software development
|
$
|
–
|
|
$
|
–
|
|
$
|
120,181
|
|
$
|
120,181
|
|
Notes payable– related party
|
|
–
|
|
|
(360,316
|
)
|
|
–
|
|
|
(360,316
|
)
|
Notes payable
|
|
–
|
|
|
(768,955
|
)
|
|
–
|
|
|
(768,955
|
)
|
Convertible notes payable
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
Total
|
$
|
–
|
|
$
|
(1,129,271
|
)
|
$
|
120,181
|
|
$
|
(1,009,090
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2013
|
|
Level I
|
|
|
Level II
|
|
|
Level III
|
|
|
Fair Value
|
|
Capitalized software development
|
$
|
–
|
|
$
|
–
|
|
$
|
155,137
|
|
$
|
155,137
|
|
Notes payable– related party
|
|
–
|
|
|
(316,540
|
)
|
|
–
|
|
|
(316,540
|
)
|
Notes payable
|
|
–
|
|
|
(76,412
|
)
|
|
–
|
|
|
(76,412
|
)
|
Convertible notes payable
|
|
–
|
|
|
(325,000
|
)
|
|
–
|
|
|
(325,000
|
)
|
Total
|
$
|
–
|
|
$
|
(717,952
|
)
|
$
|
155,137
|
|
$
|
(562,815
|
)
|
8. Commitment
On March 26, 2012, Telupay PLC entered into
a five-year License Agreement for the use and distribution of its mobile
banking and payment software. Telupay PLC received a non-refundable amount of
$30,000 for the exclusive right to distribute, use, and to provide the software
to the licensees’ clients. The amount was recorded as deferred revenue. The
agreement is renewable upon mutual agreement of both parties.
9. Subsequent Events
The
Company has evaluated all subsequent events through the date these financial
statements were issued and determined the following:
The Company received $97,861
from a related party and $100,000 from an investor, respectively, evidenced by
notes issued by the Company to these parties. These notes totaling $197,861
are, at the option of the holders: (i) convertible into 791,444 Units at $0.25
per Unit or (ii) payable in cash plus consideration of 395,722 common shares.
Each Unit, if converted, will contain one common share and one/half of one
common share purchase warrant to acquire an additional common share at $0.50
per share for a period of two years.
F-11
TELUPAY PLC AND
SUBSIDIARIES
FINANCIAL
STATEMENTS
MARCH 31, 2013 and
2012
(With Report of
Independent Registered Public Accountants Thereon)
L.L. Bradford & Company LLC
Certified Public Accountants & Consultants
F-12
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
TelUpay
PLC and Subsidiaries
We have audited
the accompanying consolidated balance sheets of TelUpay PLC and Subsidiaries the “Company”) as of March 31, 2013 and 2012, and the related statements of operations, stockholders’ deficit
and cash flows for each of the years in the periods ended March 31, 2013 and 2012. TelUpay PLC and Subsidiaries’ management is responsible for these financial statements. 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 audits to obtain reasonable
assurance about whether the 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 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 TelUpay PLC and Subsidiaries as of March 31, 2013 and 2012, and the results of its operations and its cash flows for each of the years in the periods ended March 31, 2013 and 2012
in conformity with accounting principles generally accepted
in the United States of America.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has suffered
losses from operations, which 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 3. The financial
statements do not include
any adjustments that might result from the outcome of
this uncertainty.
L.L. Bradford
& Company
Las Vegas, Nevada
September 11, 2013
702-735-5030
●
8880 West Sunset
Road, Third Floor, Las Vegas NV 89148
●
www.llbradford.com
F-13
TELUPAY PLC AND SUBSIDIARIES
|
CONSOLIDATED BALANCE SHEETS
|
|
|
March 31
|
|
|
|
2013
|
|
|
2012
|
|
ASSETS
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash
|
$
|
16,770
|
|
$
|
9,789
|
|
Accounts receivable
|
|
8,679
|
|
|
14,831
|
|
Other receivables
|
|
4,128
|
|
|
3,138
|
|
Prepaid expenses
|
|
-
|
|
|
2,472
|
|
Total Current Assets
|
|
29,577
|
|
|
30,230
|
|
|
|
|
|
|
|
|
Fixed assets, net of accumulated depreciation of
$81,226 and
|
|
33,950
|
|
|
62,446
|
|
$47,916, respectively
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
Capitalized software development costs, net of
|
|
|
|
|
|
|
accumulated amortization of $75,997 and $29,389,
respectively
|
|
155,137
|
|
|
203,562
|
|
Other noncurrent assets
|
|
55,136
|
|
|
39,108
|
|
Total Other Assets
|
|
210,273
|
|
|
242,670
|
|
TOTAL ASSETS
|
$
|
273,800
|
|
$
|
335,436
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
$
|
388,518
|
|
$
|
216,745
|
|
Accounts payable and accrued expenses– related
parties
|
|
375,504
|
|
|
287,292
|
|
Deferred revenue
|
|
24,000
|
|
|
30,000
|
|
Notes payable
|
|
76,412
|
|
|
–
|
|
Notes payable– related parties
|
|
316,540
|
|
|
312,864
|
|
Convertible notes payable
|
|
150,000
|
|
|
150,000
|
|
Convertible notes payable– related party
|
|
175,000
|
|
|
175,000
|
|
Total Current Liabilities
|
|
1,505,974
|
|
|
1,171,901
|
|
|
|
|
|
|
|
|
Deferred tax liability
|
|
543
|
|
|
–
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
1,506,517
|
|
|
1,171,901
|
|
Stockholders’ Deficit
|
|
|
|
|
|
|
Common stock, $0.015 par value, 100,000,000 shares
authorized, 46,566,052 and 43,484,087 shares issued and outstanding as of
March 31, 2013 and 2012, respectively
|
|
699,421
|
|
|
653,131
|
|
Authorized and unissued common stock, 1,361,984 and
790,575 shares as of March 31, 2013 and 2012, respectively
|
|
21,528
|
|
|
11,874
|
|
Share-based compensation
|
|
(183,375
|
)
|
|
–
|
|
Additional paid-in capital
|
|
6,042,587
|
|
|
4,828,683
|
|
Cumulative translation adjustments
|
|
(13,306
|
)
|
|
14,343
|
|
Accumulated deficit
|
|
(7,799,572
|
)
|
|
(6,344,496
|
)
|
Total Stockholders’ Deficit
|
|
(1,232,717
|
)
|
|
(836,465
|
)
|
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
$
|
273,800
|
|
$
|
335,436
|
|
See accompanying Notes to Consolidated Financial Statements.
F-14
TELUPAY PLC AND SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
Years ended March 31
|
|
|
|
2013
|
|
|
2012
|
|
REVENUES
|
|
|
|
|
|
|
Service income
|
$
|
64,711
|
|
$
|
1,809
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
Direct operating expense
|
|
6,834
|
|
|
6,736
|
|
Salaries and benefits
|
|
423,915
|
|
|
322,045
|
|
Directors’ compensation –
related parties
|
|
417,000
|
|
|
747,342
|
|
Travel
|
|
24,916
|
|
|
60,629
|
|
Professional fees
|
|
377,432
|
|
|
145,106
|
|
General and administrative expenses
|
|
161,347
|
|
|
133,254
|
|
Depreciation and amortization
|
|
77,011
|
|
|
66,253
|
|
Total Operating Expenses
|
|
1,488,455
|
|
|
1,481,365
|
|
|
|
|
|
|
|
|
Net Loss from Operations
|
|
(1,423,744
|
)
|
|
(1,479,556
|
)
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
|
Interest income
|
|
117
|
|
|
146
|
|
Interest expense
|
|
(6,884
|
)
|
|
(13,299
|
)
|
Interest expense – related party
|
|
(16,145
|
)
|
|
(34,921
|
)
|
Finance costs
|
|
(7,500
|
)
|
|
–
|
|
Finance costs – related party
|
|
(3,750
|
)
|
|
(276,701
|
)
|
Net foreign exchange gain (loss)
|
|
3,373
|
|
|
8,245
|
|
Total Other Income (Expense)
|
|
(30,789
|
)
|
|
(316,530
|
)
|
|
|
|
|
|
|
|
Net loss before provision for income taxes
|
|
(1,454,533
|
)
|
|
(1,796,086
|
)
|
|
|
|
|
|
|
|
PROVISION FOR INCOME TAXES
|
|
543
|
|
|
–
|
|
NET LOSS
|
$
|
(1,455,076
|
)
|
$
|
(1,796,086
|
)
|
Weighted average shares outstanding
|
|
48,120,244
|
|
|
41,700,788
|
|
Basic and diluted loss per share
|
$
|
(0.03
|
)
|
$
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
NET LOSS
|
$
|
(1,455,076
|
)
|
$
|
(1,796,086
|
)
|
OTHER COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
Cumulative translation adjustments
|
|
27,649
|
|
|
(4,684
|
)
|
TOTAL COMPREHENSIVE LOSS
|
$
|
(1,427,427
|
)
|
$
|
(1,800,770
|
)
|
See accompanying Notes to Consolidated Financial Statements.
F-15
TELUPAY PLC AND SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
|
|
|
Common
|
|
Stock
|
|
Additional Paid-in
|
|
Authorized and
|
|
Share–based compensation
|
|
Cumulative
|
|
Accumulated
|
|
|
|
|
Shares
|
|
Amount
|
|
Capital
|
|
unissued
|
|
|
|
Adjustment
|
|
Deficit
|
|
Total
|
Balances at March 31, 2011
|
|
40,487,391
|
$
|
608,121
|
$
|
3,575,023
|
|
–
|
|
–
|
$
|
19,027
|
$
|
(4,548,410)
|
$
|
(346,239)
|
Issuance
of common shares for services
|
|
1,724,554
|
|
25,903
|
|
577,691
|
|
–
|
|
–
|
|
–
|
|
–
|
|
603,594
|
Issuance of common shares
for cash
|
|
1,272,142
|
|
19,107
|
|
426,142
|
|
–
|
|
–
|
|
–
|
|
–
|
|
445,250
|
Offering costs - related
party
|
|
–
|
|
–
|
|
(15,000)
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(15,000)
|
Authorized but unissued –
related parties
|
|
–
|
|
–
|
|
264,827
|
|
11,874
|
|
–
|
|
–
|
|
–
|
|
276,701
|
Translation adjustment
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(4,684)
|
|
–
|
|
(4,684)
|
Net loss for the year
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(1,796,086)
|
|
(1,796,086)
|
Balances at March 31, 2012
|
|
43,484,087
|
$
|
653,131
|
$
|
4,828,683
|
$
|
11,874
|
|
–
|
$
|
14,343
|
$
|
(6,344,496)
|
$
|
(836,465)
|
Issuance of common shares
for services
|
|
530,000
|
|
7,961
|
|
71,539
|
|
–
|
|
(48,375)
|
|
–
|
|
–
|
|
31,125
|
Issuance of common shares
for services-related party
|
|
1,698,000
|
|
17,543
|
|
399,758
|
|
14,700
|
|
(135,000)
|
|
–
|
|
–
|
|
297,001
|
Issuance of common shares
for cash
|
|
5,068,390
|
|
76,127
|
|
738,043
|
|
6,080
|
|
–
|
|
–
|
|
–
|
|
820,250
|
Offering costs - related
party
|
|
–
|
|
–
|
|
(73,150)
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(73,150)
|
Issuance of common shares
for financing – related party
|
|
815,575
|
|
12,249
|
|
3,375
|
|
(11,876)
|
|
–
|
|
–
|
|
–
|
|
3,748
|
Issuance of common shares
for financing
|
|
–
|
|
–
|
|
6,749
|
|
750
|
|
–
|
|
–
|
|
–
|
|
7,499
|
Forfeiture of shares
|
|
(4,500,000)
|
|
(67,590)
|
|
67,590
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
Translation adjustment
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(27,649)
|
|
–
|
|
(27,649)
|
Net loss for the year
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(1,455,076)
|
|
(1,455,076)
|
Balances at March 31, 2013
|
|
46,566,052
|
$
|
699,421
|
$
|
6,042,587
|
$
|
21,528
|
$
|
(183,375)
|
$
|
(13,306)
|
$
|
(7,799,572)
|
$
|
(1,232,717)
|
See accompanying Notes to Consolidated Financial Statements.
F-16
TELUPAY PLC AND SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
Years ended March 31
|
|
|
|
2013
|
|
|
2012
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net loss
|
$
|
(1,455,076
|
)
|
$
|
(1,796,086
|
)
|
Adjustments for:
|
|
|
|
|
|
|
Depreciation and amortization
|
|
77,011
|
|
|
66,253
|
|
Shares issued for services
|
|
31,125
|
|
|
603,594
|
|
Shares issued for services – related party
|
|
297,001
|
|
|
–
|
|
Shares issued for financing costs
|
|
7,499
|
|
|
–
|
|
Shares issued for financing
|
|
(73,150
|
)
|
|
276,701
|
|
Shares issued for financing costs – related party
|
|
3,748
|
|
|
–
|
|
Unrealized foreign exchange gain
|
|
(27,649
|
)
|
|
(4,684
|
)
|
Decrease (increase) in:
|
|
|
|
|
|
|
Trade and other receivables
|
|
6,152
|
|
|
2,332
|
|
Prepaid and other assets
|
|
(16,028
|
)
|
|
–
|
|
Prepaid and other assets
|
|
2,472
|
|
|
(6,240
|
)
|
Other noncurrent assets
|
|
(990
|
)
|
|
–
|
|
Increase (decrease) in
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
171,773
|
|
|
99,725
|
|
Accrued expenses - related party
|
|
88,212
|
|
|
70,941
|
|
Deferred tax
|
|
543
|
|
|
–
|
|
Deferred revenue
|
|
(6,000
|
)
|
|
30,000
|
|
Net cash flows used in operating activities
|
|
(893,357
|
)
|
|
(657,464
|
)
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
Purchase of furniture and equipment
|
|
–
|
|
|
(13,793
|
)
|
Increase in capitalized software development
|
|
–
|
|
|
(192,470
|
)
|
Cash flows used in investing activities
|
|
–
|
|
|
(206,263
|
)
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
Issuance of common stock
|
|
820,250
|
|
|
430,250
|
|
Proceeds from notes payable - related party
|
|
3,676
|
|
|
312,864
|
|
Proceeds from notes payable
|
|
76,412
|
|
|
–
|
|
Cash flows provided by financing activities
|
|
900,338
|
|
|
743,114
|
|
NET INCREASE(DECREASE) IN CASH
|
|
6,981
|
|
|
(120,613
|
)
|
CASH AT BEGINNING OF YEAR
|
|
9,789
|
|
|
130,402
|
|
CASH AND AT END OF YEAR
|
$
|
16,770
|
|
$
|
9,789
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
Cash paid for income taxes
|
$
|
–
|
|
$
|
–
|
|
Cash paid for interest
|
$
|
–
|
|
$
|
–
|
|
Supplemental non-cash disclosures
|
|
|
|
|
|
|
Common stock issued for services
|
$
|
31,125
|
|
$
|
223,575
|
|
Common stock issued for services – related parties
|
$
|
297,001
|
|
$
|
–
|
|
Common stock issued for financing – related parties
|
$
|
3,748
|
|
$
|
3,750
|
|
Common stock issued authorized unissued for
financing
|
$
|
7,499
|
|
$
|
3,750
|
|
See accompanying Notes to Consolidated Financial Statements.
F-17
TELUPAY PLC AND SUBSIDIARIES
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2013 AND 2012
|
1.
|
General Business Description
|
|
TelUPay PLC Inc. (“Company”) and its subsidiaries
(collectively the “Group”) were incorporated primarily to engage in software
application development, enterprise application integration, programming,
wholesale sales and distribution of customized software applications,
after-sales support and technical assistance, as well as the provision of
shared services and other related ancillary and/or support functions, services,
systems, and processes. The Company was incorporated March 2, 2010. The
registered address of the Company is located at First Land House, Peter Street,
St. Helier, Jersey, Channel Islands.
|
|
On December 21, 2010, the Company
entered into an agreement with QSpan Technologies, Ltd. (“Qspan”) whereby it
acquired all the assets consisting of office equipment and intellectual mobile
banking technology, and assumed all of its liabilities comprised of trade
payables and accrued expenses. Pursuant to the agreement, the Company issued,
on a one-for-one basis 34,917,845 share of its common stock to the shares
holders’ of Qspan and Qspan ceased operations. As a result of the share
issuance, the Company and Qspan were under common control and therefore, the
transaction was treated as a recapitalization of Qspan. The financial statement
presentation of the Company includes the historic results of Qspan operating
activities.
|
2.
|
Significant Accounting Policies
|
|
Principles of Consolidation
The accompanying consolidated financial statements
include the financial statements of the
Company and its subsidiaries – TelUPay IP Limited, TelUPay Solutions Limited,
TelUPay (M.E.) FZE and TelUPay (Philippines) Inc. Intercompany
transactions and balances have been eliminated in consolidation.
|
|
Cash and cash equivalents
The Group considers all highly liquid temporary cash
investments with an original maturity of three months or less to be cash
equivalents. At March 31, 2013 and 2012, the Group had no cash equivalents.
|
|
Concentration of Credit and Business Risk
The Group has no significant off-balance sheet risk
such as foreign exchange contracts, option contracts or other foreign hedging
arrangements. The Group’s financial instruments that are exposed to
concentration of credit risks consist primarily of cash. The Group maintains
its cash in bank accounts which may at times, exceed federally-insured limits.
|
|
Accounts receivable
Accounts receivable is reported at the customers’
outstanding balances less any allowance for doubtful accounts. Interest is not
accrued on overdue accounts receivable.
|
|
An allowance for doubtful accounts on accounts
receivable is charged to operations in amounts sufficient to maintain the
allowance for uncollectible accounts at a level management believes is adequate
to cover any probable losses. Management determines the adequacy of the
allowance based on historical write-off percentages and information collected
from individual customers. Accounts receivable are charged off against the
allowance when collectability is determined to be permanently impaired. As of
March 31, 2013 and2012, management has deemed all receivables to be
collectible, and has not historically recorded bad debt expenses; therefore no
allowance has been recorded.
|
F-18
TELUPAY PLC AND SUBSIDIARIES
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2013 AND 2012
|
|
Fixed Assets
Property and equipment are recorded at cost.
Expenditures for major additions and improvements are capitalized and minor
replacements, maintenance, and repairs are charged to expense as incurred. When
property and equipment are retired or otherwise disposed of, the cost and
accumulated depreciation are removed from the accounts and any resulting gain
or loss is included in the results of operations for the respective period.
Depreciation is provided over the estimated useful lives of the related assets
using the straight-line method for financial statement purposes. The Group uses
other depreciation methods (generally accelerated) for tax purposes where appropriate.
The estimated useful lives for significant property and equipment categories
are as follows:
|
|
Equipment
|
3-5
years
|
|
|
Furniture
|
7 years
|
|
|
The Group reviews the carrying value of property,
plant, and equipment for impairment whenever events and circumstances indicate
that the carrying value of an asset may not be recoverable from the estimated
future cash flows expected to result from its use and eventual disposition. In
cases where undiscounted expected future cash flows are less than the carrying
value, an impairment loss is recognized equal to an amount by which the
carrying value exceeds the fair value of assets. The factors considered by
management in performing this assessment include current operating results,
trends and prospects, the manner in which the property is used, and the effects
of obsolescence, demand, competition, and other economic factors. Based on
this assessment there were no impairments needed as of March 31, 2013.
Depreciation expense as of March 31, 2013 and 2012 was $77,011 and $66,253,
respectively.
|
|
Capitalized Software Development Costs
The Group capitalizes internal software
development costs subsequent to establishing technological feasibility of a
software application. Capitalized software development costs represent the
costs associated with the internal development of the Group’s software
applications. Amortization of such costs is recorded on a software
application-by-application basis, based on the greater of the proportion of
current year sales to total of current and estimated future sales for the
applications or the straight-line method over the remaining estimated useful
life of the software application. The Group continually evaluates the
recoverability of capitalized software costs and will charge to operations
amounts that are deemed unrecoverable for projects it abandons.
|
|
Revenue
Recognition
Revenue is derived through enterprise
application integration, programming, wholesale sales and distribution of
customized software applications, after-sales support and technical assistance,
as well as the provision of third-party services and other related ancillary
and/or support functions, services and systems related to mobile banking, money
and payment solutions.
|
|
Products and Services
. The Company’s copyrighted technologies provide a
modular, adaptable systems solution and application software designed to
operate in multi-channel gateways and connected devices, providing services
such as software development, mobile banking, mobile money and payment
services, maintenance and after-sales support (i.e. system upgrades and
updates), and customization services. The Company also provides other
services, such as consulting and programming, provides licenses on a Software
as a Service (“SaaS”) basis, and receives royalties on sales on a performance
basis, such as when a client acquires a new customer using our copyrighted
products.
|
F-19
TELUPAY PLC AND SUBSIDIARIES
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2013 AND 2012
|
|
Products and Services, continued
.
Contract
revenue is at a specifically fixed price separate from the price of software
and PCS (Post-Contract Customer Support). Upon complete delivery based on a
specific SLA (Service Level Agreement) and certificate of acceptance by the client,
software revenue is recognized and billed to the client.
|
|
Any cash payments before delivery in the form of
deposits are treated as deferred revenue until acceptance of the client is
evident to signify delivery of the product. This is the time the revenue is
recognized, such that upon delivery, such deferred revenue will be recognized
as revenue.
|
|
In the case of PCS referring to bug fixes, patches and
updates, these are treated as free support for the life of the contract.
Maintenance cost is usually as a standard free for the first year. During the
second year and succeeding years until end of the contract, maintenance cost
revenues will be recognized on a ratable basis, applying a straight-line
method. PCS product upgrades are priced separately and recognized as revenue
over the life of the contract on a ratable basis.
|
|
Based on a contractual period, the Company’s income is
generated with a client under a
revenue-sharing arrangement
per
transaction basis
with fixed transaction fee(s) paid by the client or by
the client’s customers, which is generally collected and reconciled by the
client and then shared on a standard range of 50/50 revenue sharing percentage
between the Company and the client net of system transaction costs. A
reconciliation of successful transactions by the Company is done at the end of
each month and confirmed by the client. Revenue is recognized and invoiced at
this stage. The contract also allows the option for
annual customer
subscription fees
collected from the client’s customers or paid directly by
the client to the Company. A reconciliation of annual subscription fees is done
every month by the Company and confirmed by the client. Annual subscription
fees are invoiced at the end of each month, and revenue is recognized ratably
over the one-year subscription period.
|
|
Another revenue stream is
commission
from third-party providers
(i.e. airtime providers, biller institutions,
merchants) that is shared on a standard 70/30 revenue share per transaction
with the client in favor of the Company. The commissions are collected from the
third party by the client and shared with the Company. A reconciliation of
successful transactions by the Company is done at an agreed billing period and
confirmed by the client. Revenue is recognized and invoiced at this stage.
|
|
The Company also generates revenue from
development
fees and after-sales support
to cover maintenance, upgrades and other
additional services costs. For such and all other sales of product or services,
the Company recognizes revenues based on the terms of the customer
agreement. In case of multiple elements, the contract has the specifics
defining every payment or billing milestone as agreed upon between the Company
and the client. Revenue is recognized based on a fixed price distributed every
specific milestone. Revenue generated from
licensure and royalty fees
is
recognized rateably over the agreement period.
|
|
Earnings (Loss) per Share
The Group reports earnings (loss) per share in
accordance with ASC Topic 260-10, “Earnings per Share.” Basic earnings (loss)
per share are computed by dividing income (loss) available to common
shareholders by the weighted average number of common shares available. Diluted
earnings (loss) per share is computed similar to basic earnings (loss) per
share except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the potential
common shares had been issued and if the additional common shares were
dilutive. Diluted earnings (loss) per share has not been presented since the
effect of the assumed exercise or conversion of stock options, warrants, and
debt to purchase common shares, would have an anti-dilutive effect. As of March
31, 2013 and 2012, the Group had approximately 1,303,932 and 1,280,180 shares,
respectively, related to its convertible notes payable that have been excluded
from the computation of diluted net loss per share.
|
F-20
TELUPAY PLC AND SUBSIDIARIES
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2013 AND 2012
|
|
Income Taxes
The Group follows ASC subtopic 740-10 for recording
the provision for income taxes. ASC 740-10 requires the use of the asset and
liability method of accounting for income taxes. Under the asset and liability
method, deferred tax assets and liabilities are computed based upon the
difference between the financial statement and income tax basis of assets and
liabilities using the enacted marginal tax rate applicable when the related
asset or liability is expected to be realized or settled. Deferred income tax
expenses or benefits are based on the changes in the asset or liability each
period. If available evidence suggests that it is more likely than not that
some portion or all of the deferred tax assets will not be realized, a valuation
allowance is required to reduce the deferred tax assets to the amount that is
more likely than not to be realized. Future changes in such valuation allowance
are included in the provision for deferred income taxes in the period of
change.
|
|
Deferred income taxes may arise from temporary
differences resulting from income and expense items reported for financial
accounting and tax purposes in different periods. Deferred taxes are classified
as current or non-current, depending on the classification of assets and
liabilities to which they relate. Deferred taxes arising from temporary
differences that are not related to an asset or liability are classified as
current or non-current depending on the periods in which the temporary
differences are expected to reverse.
|
|
Research and development
Research and development costs are expensed as
incurred. As of March 31, 2013 and 2012, the Group did not incur any research
and development costs.
|
|
Long-lived assets
The Group accounts for its long-lived assets in
accordance with ASC Topic 360-10-05, “Accounting for the Impairment or Disposal
of Long-Lived Assets.” ASC Topic 360-10-05 requires that long-lived assets be
reviewed for impairment whenever events or changes in circumstances indicate
that the historical cost or carrying value of an asset may no longer be
appropriate. The Group assesses recoverability of the carrying value of an
asset by estimating the future net cash flows expected to result from the
asset, including eventual disposition. If the future net cash flows are less
than the carrying value of the asset, an impairment loss is recorded equal to
the difference between the asset’s carrying value and its fair value or
disposable value. As of March 31, 2013 and 2012, the Group determined that
none of its long-term assets were impaired.
|
|
Fair Value of Financial Instruments
The Group has financial instruments whereby the fair
value of the financial instruments could be different from that recorded on a
historical basis in the accompanying balance sheets. The Group’s financial
instruments consist of cash, receivables, accounts payable, accrued
liabilities, and notes payable. The carrying amounts of the Group’s financial
instruments approximate their fair values as of March 31, 2013 and 2012 due to
their short-term nature.
|
|
Use of Estimates
The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affects 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. Actual results could differ
from those estimates.
|
F-21
TELUPAY PLC AND SUBSIDIARIES
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2013 AND 2012
|
|
Share-Based Compensation
The Group accounts for stock-based payments to
employees in accordance with ASC 718, “Stock Compensation” (“ASC 718”). Stock-based
payments to employees are currently comprised of restricted stock grants that
are recognized in the consolidated statement of operations based on their fair
values at the date of grant. The Group has not granted any options to purchase
common stock that were outstanding as of March 31, 2013.
|
|
The Group accounts for stock-based payments to
employees in accordance with ASC 718, “Stock Compensation” (“ASC 718”).
Stock-based payments to employees include grants of stock, grants of stock
options and issuance of warrants that are recognized in the consolidated
statement of operations based on their fair values at the date of grant.
|
|
The Group accounts for stock-based payments to
non-employees in accordance with ASC 718 and Topic 505-50, “Equity-Based Payments
to Non-Employees.” Stock-based payments to non-employees include grants of
stock, grants of stock options and issuances of warrants that are recognized in
the consolidated statement of operations based on the value of the vested
portion of the award over the requisite service period as measured at its
then-current fair value as of each financial reporting date.
|
|
The Group calculates the fair value of option grants
and warrant issuances utilizing the Black-Scholes pricing model. The amount of
stock-based compensation recognized during a period is based on the value of
the portion of the awards that are ultimately expected to vest. ASC 718
requires forfeitures to be estimated at the time stock options are granted and
warrants are issued to employees and non-employees, and revised, if necessary,
in subsequent periods if actual forfeitures differ from those estimates. The
term “forfeitures” is distinct from “cancellations” or “expirations” and
represents only the unvested portion of the surrendered stock option or
warrant. The Group estimates forfeiture rates for all unvested awards when
calculating the expense for the period. In estimating the forfeiture rate, the
Group monitors both stock option and warrant exercises as well as employee
termination patterns. The resulting stock-based compensation expense for both
employee and non-employee awards is generally recognized on a straight-line
basis over the requisite service period of the award.
|
|
As of March 31, 2013 and 2012, the Group recorded
stock-based compensation in the amounts of $193,125 and $603,594, respectively.
|
|
Foreign Currency
The Group accounts for foreign currency in accordance
with ASC Topic 830 “Foreign Currency” whereby the local currency is the
functional currency. Assets and liabilities of the Group’s foreign locations
are translated to reporting currency at the rate of exchange existing at the
balance sheet date. Income statement amounts are translated at a weighted
average monthly exchange rate for each reporting period. The cumulative
translation adjustments resulting from changes in exchange rates are included
in the consolidated balance sheet as “Other comprehensive income”, a separate
component of stockholders’ equity. Transaction gains and losses are included in
the consolidated statement of operations. As of March 31, 2013 and 2012, the
Group reported ($13,306) and $14,343, respectively in cumulative translation
adjustments related to foreign currency re-measurement.
|
F-22
TELUPAY PLC AND SUBSIDIARIES
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2013 AND 2012
|
|
Recent accounting pronouncements
No recent accounting pronouncements issued by the FASB
(including its Emerging Issues Task Force), the AICPA, and the SEC did not or
are not believed by management to have a material impact on the Group’s present
or future financial statements
|
|
International Financial Reporting Standards:
In November 2008, the Securities and Exchange
Commission (“SEC”) issued for comment a proposed roadmap regarding potential
use of financial statements prepared in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting
Standards Board. Under the proposed roadmap, the Group would be required to
prepare financial statements in accordance with IFRS in fiscal year 2014,
including comparative information also prepared under IFRS for fiscal 2013 and
2012. The Group is currently assessing the potential impact of IFRS on its
financial statements and will continue to follow the proposed roadmap for
future developments.
|
|
Year-end
The Group has adopted March 31, as its fiscal year
end.
|
|
These financial statements have been prepared in
accordance with generally accepted accounting principles applicable to a going
concern, which assumes that the Group will be able to meet its obligations and
continue its operations for its next fiscal year. Realization values may be
substantially different from carrying values as shown and these financial
statements do not give effect to adjustments that would be necessary to the
carrying values and classification of assets and liabilities should the Group
be unable to continue as a going concern. The Group has not yet achieved
profitable operations since its inception. Through March 31, 2013, the Group
had accumulated losses of $1,232,717 and a working capital deficit of
$1,476,397. Management expects to incur further losses in the development of
its business, all of which raises substantial doubt about the Group’s ability
to continue as a going concern. The Group’s ability to continue as a going
concern is dependent upon its ability to generate future profitable operations
and/or to obtain the necessary financing to meet its obligations and repay its
liabilities arising from normal business operations when they come due.
|
4.
|
Related Party Transactions
|
|
Notes payable – related parties
The Group issued short-term promissory notes totaling
$316,540 and $312,864 as of March 31, 2013 and 2012, respectively, to certain
directors. The notes bear a flat interest at a rate of 10%, are unsecured, and
matured 60 days from date of issuance. In addition, the Group agreed to issue
25,000 and 790,575 common shares in 2013 and 2012, respectively, as additional
consideration for the notes which have been recognized as finance costs –
related party totaling $3,750 and $276,701 in 2013 and 2012, respectively.
|
|
Interest expense on the short-term debt to related
parties amounted to $16,145 and $16,132 for the year ended March 31, 2013 and
2012, respectively.
|
F-23
TELUPAY PLC AND SUBSIDIARIES
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2013 AND 2012
|
|
Convertible notes payable – related party
On June 1 and July 8, 2010, the Group issued two
convertible short-term promissory notes totaling $175,000 to Forte Finance,
controlled by a former director of the Group. The notes bear interest at a rate
of 6% per annum, are unsecured, and are due on demand. The notes are
convertible at the election of the holder at a rate of $0.28 per share. As of the
date of issuance, the fair value of the shares was $0.28; accordingly no
discount to the notes payable has been recorded for the conversion feature. As
of the date of this report, these notes are in default and Forte Finance has
made a demand on the balance due. The Group is in discussions with Forte
Finance to satisfy this obligation.
|
|
Interest expense related to the convertible note to a
related party amounted to $2,240 and $18,789 for the years ended March 31, 2013
and 2012, respectively.
|
|
Consultancy agreement
During the year
ended March 31, 2011, the Group entered into a financial consulting agreement
with Forte Finance, a company controlled by a former director of the Group, to
assist in obtaining equity financing for the Company. Pursuant to the agreement,
the Company agreed to pay a commission to Forte Finance for funds originating
as a result of their efforts. For the fiscal year ended March 31, 2011, the
Company has paid $6,160, and recorded a payable amounting to $37,350, was
charged against the gross proceeds from the issuance of the Company’s shares.
|
|
Dispute with
former director
As discussed in Note 1, the Company entered into an
agreement with QSpan in exchange for common shares on the Company. Pursuant to
the agreement, Forte Finance, controlled by a former director of the Group,
received 2.25 million shares of the Company and claims to be owed an additional
2.25 million shares. The additional 2.25 million shares have been issued to
current directors of the Company. These directors have personally entered into
an agreement with the Company to hold the Company harmless from any obligation
to issue shares resulting from the dispute and to take personal liability
within the limit of the value of the shares at the time such shares were issued
to the directors.
|
|
Executive compensation
The Group has issued executive service agreements to
three directors which have been amended periodically. Pursuant to these
agreements, two executives are entitled to monthly compensation of $7,500 and
one executive is entitled to monthly compensation of $5,000. During March 2012,
the monthly compensation to be received by two directors was amended to $3,750
and share based compensation amounting to $3,750, and the monthly compensation
to be received by one director was amended to $2,500 and share-based
compensation amounting to $2,500 As of March 31, 2013 and 2012, these
executives received compensation totaling $417,000 and $163,803, respectively.
|
|
During the year ended March 31, 2013, the Company
issued 1,168,000 common shares to two Company executives as compensation for
services rendered during the period. The fair value of the shares is totaling
$312,000. Out of the $312,000, $177,000 was recorded as executive compensation
and $135,000 was recorded as prepaid share-based compensation as of March 31,
2013.
|
F-24
TELUPAY PLC AND SUBSIDIARIES
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2013 AND 2012
|
5.
|
Capitalized software development costs
|
|
As discussed in Note 1, the Company
entered into an agreement with QSpan to acquire certain technology, which
primarily consists of a mobile banking solution computer program. For the periods ended March 31, 2013 and 2012, the
Company recognized amortization expense of $48,518 and 46,608, respectively.
|
|
Amortization expense for the remaining
estimated lives of these costs are as follows:
|
|
Year Ending March 31,
|
|
|
|
|
|
|
|
|
|
2014
|
$
|
46,608
|
|
|
|
|
|
|
|
2015
|
|
46,608
|
|
|
|
|
|
|
|
2016
|
|
44,579
|
|
|
|
|
|
|
|
2017
|
|
17,342
|
|
|
|
|
|
|
|
Total
|
$
|
155,137
|
|
6.
|
Convertible Notes and Note Payable
|
|
On August 4, and December 13, 2010 the Company issued
two promissory notes to CAT Brokerage, A.G.in the amount of $100,000 and
$50,000, respectively. The notes bear interest at a rate of 6% per annum, which
are unsecured and due on demand. The notes are convertible at the election of
the holder at a rate of $0.30 per share. As of the date of issuance, the fair
value of the shares was $0.15; accordingly no discount to the notes payable has
been recorded for the conversion feature.
|
|
Interest expense on the convertible note payable
amounted to $6,884 and $13,299 for the periods ended March 31, 2013 and 2012,
respectively.
|
|
The Group issued short-term promissory notes totaling
$76,412 as of March 31, 2013. The notes bear no interest and unsecured. In
addition, the Group agreed to issue common shares as additional consideration
for the notes which have been recognized as finance costs related party
totaling $3,750 and non-related party totaling $7,500 as of March 31, 2013. As
of March 31, 2013, shares related to these promissory notes were authorized and
unissued.
|
|
Common stock issuances
In August 2011, the Company issued 1,474,553 shares of
its common stock for services of two executives of the Company. The fair value
of the shares issued totaled $516,094 and has been recorded as executive
compensation for the year ended March 31, 2012.
|
|
In August 2011, the Company issued 250,001 shares of
its common stock for services to two individuals. The Company has recorded
compensation expense of $87,500 representing the fair value of the underlying
shares.
|
|
During the year ended March 31, 2012, the Company
issued 1,272,142 shares of its common stock for cash proceeds of $430,250 net
of offering costs to related parties of $15,000.
|
|
As of March 31, 2012, the Company authorized the
issuance of 790,575 shares of common stock to directors of the Company as
additional financing costs in connection with their short-term notes. The fair
value of the authorized shares is $276,701 and has been recorded as related
party financing costs.
|
F-25
TELUPAY PLC AND SUBSIDIARIES
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2013 AND 2012
|
|
Common stock issuances, continued
On August 10,
2012, the Company authorized the issuance of 207,500 shares to employees for
services to the Group. The fair value of the shares issued totaled $64,500.
|
|
On November 8,
2012, the Company authorized the issuance 1,168,000 shares of its common stock
for services of two executives of the Company. The fair value of the shares
amounted to $312,000.
|
|
On December 19,
2012, the Company recorded a cancellation of 4,500,000 shares of the Company’s
common stock resulting from forfeiture by Forte Finance due to the failure of
Forte Finance to pay and satisfy conditions of the Forte Agreements. Out of the
4,500,000 shares, 2,250,000 shares pertain to Forte Finance and the other
2,250,000 shares pertain to executives of the Company.
|
|
During the year
ended March 31, 2013, the Company issued 5,068,390 shares of its common stock
and authorized and unissued 400,000 shares of its common stock for cash
proceeds of $747,101 net of offering cost to related parties amounting to
$73,150.
|
|
The Group, TelUPay IP Ltd., and TelUPay Solutions Ltd.
are subject to the income tax regulations of Jersey, while TelUPay (M.E.) and
TelUPay (Philippines) Inc. are subject to the income tax regulations of
Hamriyah Free Zone Sharjah, U.A.E and the Philippines, respectively.
|
|
As of March 31, 2013 and 2012, the Group has no
provision for current income tax under the respective tax regimes of the
Company and its subsidiaries due to its taxable loss position.
|
|
Provision for deferred income tax for the year ended
March 31, 2013 amounting to $543 arose from unrealized foreign exchange gain of
TelUPay Philippines Inc.
|
9.
|
Fair Value of Financial Instruments
|
|
The Group adopted ASC Topic 820-10 to measure the fair
value of certain of its financial assets required to be measured on a recurring
basis. The adoption of ASC Topic 820-10 did not impact the Group’s financial
condition or results of operations. ASC Topic 820-10 establishes a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure
fair value.The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities (Level 1
measurements) and the lowest priority to unobservable inputs (Level 3
measurements).ASC Topic 820-10 defines fair value as the price that
would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants on the measurement date. A fair
value measurement assumes that the transaction to sell the asset or transfer
the liability occurs in the principal market for the asset or liability. The
three levels of the fair value hierarchy under ASC Topic 820-10 are described
below:
|
F-26
TELUPAY PLC AND SUBSIDIARIES
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2013 AND 2012
|
9.
|
Fair
Value of Financial Instruments, continued
|
|
Level I
–
Valuations based on quoted prices in active markets for identical assets or
liabilities that an entity has the ability to access.
|
|
Level II
–
Valuations based on quoted prices for similar assets and liabilities in active
markets, quoted prices for identical assets and liabilities in markets that are
not active, or other inputs that are observable or can be corroborated by
observable data for substantially the full term of the assets or liabilities.
|
|
Level III
–
Valuations based on inputs that are supportable by little or no market activity
and that are significant to the fair value of the asset or liability.
|
|
The following methods and assumptions are
used to estimate the fair value of each class of financial instruments:
|
|
March 31, 2013
|
|
Level I
|
|
|
Level II
|
|
|
Level III
|
|
|
Fair Value
|
|
|
Capitalized
software development
|
$
|
–
|
|
$
|
–
|
|
$
|
155,137
|
|
$
|
155,137
|
|
|
Notes payable
|
|
–
|
|
|
(392,952
|
)
|
|
–
|
|
|
(392,952
|
)
|
|
Convertible notes payable
|
|
–
|
|
|
(325,000
|
)
|
|
–
|
|
|
(325,000
|
)
|
|
Total
|
$
|
–
|
|
$
|
(717,952
|
)
|
$
|
155,137
|
|
$
|
(562,815
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2012
|
|
Level I
|
|
|
Level II
|
|
|
Level III
|
|
|
Fair Value
|
|
|
Capitalized
software development
|
$
|
–
|
|
$
|
–
|
|
$
|
203,652
|
|
$
|
203,652
|
|
|
Notes payable
|
|
–
|
|
|
(312,864
|
)
|
|
–
|
|
|
(312,864
|
)
|
|
Convertible notes payable
|
|
–
|
|
|
(325,000
|
)
|
|
–
|
|
|
(325,000
|
)
|
|
Total
|
$
|
–
|
|
$
|
(637,864
|
)
|
$
|
203,652
|
|
$
|
(434,212
|
)
|
|
Leases
On July
30, 2010, the Group entered into lease contracts with King’s Development Inc.
on its office and parking space for a period of one year, subject to renewal
for additional periods upon mutual agreement of the parties. Total rental
expense which is included in “Rent and utilities” account in the consolidated
statements of operations amounted to $41,281 and $30,147 as of March 31, 2013
and 2012, respectively.
|
|
License
Agreement
On March 26,
2012, the Group entered into a five-year License Agreement with Baccarat
Overseas, Ltd. (Baccarat) for the latter’s use and distribution of the mobile
banking and payment software owned by the Group. Upon execution of the
agreement, Baccarat paid a non-refundable amount of $30,000 for the exclusive
right to distribute, use, and to provide the software to its clients. The
amount was recorded as deferred revenue. The agreement is renewable upon
mutual agreement of both parties.
|
|
During the year
ended March 31, 2013, the Company has recorded $6,000 license fee revenue in
relation to this agreement.
|
F-27
TELUPAY PLC AND SUBSIDIARIES
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2013 AND 2012
|
|
For the period
from February 21 to June 25, 2013, total investments of $ 115,000 and PHP
1,800,000 were supported with Share Subscription Agreements signed on 26 June
2013 by a major investor.
|
|
On June 25,
2013, the Board of Directors authorized the breakdown of directors’ monthly
salaries to 50% cash pay-out and 50% shares of stock effective March 2012.
|
|
On July 01,
2013, the Company entered into a settlement agreement for notes payables and
other liabilities. Pursuant to the agreement, the Company agreed to convert the
outstanding amounts claimed under notes payables to 2,523,414 shares. The
Company also agreed to issue a further 1,125,000 consultancy shares and pay the
outstanding fees totaling $90,000 to the settled party according to terms set
in the agreement.
|
|
On August 2,
2013, majority of the shareholders approved the resolution proposed by the
directors of Telupay PLC to merge with I-Level Telupay Merge Corp, where
Telupay is the surviving corporation. The merger is deemed to be in the best
interest of Telupay.
|
|
For the period ended August
30, 2013 with cash investments totaling $1,395,000 from an investment group,
the Company authorized the issuance of 9,300,000 shares, 1,869,000 equity
interest shares and 5,580,000 warrant shares at a strike price of $ 0.50 per
full warrant with a two year term.
|
F-28
TELUPAY INTERNATIONAL INC.
33,000,000 Shares of Common Stock
PROSPECTUS
June 25, 2014
We have not authorized any dealer, salesperson or other person to give any information or represent anything not contained in or incorporated by reference into this prospectus. You must not rely on any unauthorized information. If anyone provides you with different or inconsistent information, you should not rely on it. This prospectus does not offer to sell any shares in any jurisdiction where it is unlawful. Neither the delivery of this prospectus, nor any sale made hereunder, shall create any implication that the information in this prospectus is correct after the date hereof.
__________
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