0001213900-16-012561.txt : 20160414 0001213900-16-012561.hdr.sgml : 20160414 20160414164918 ACCESSION NUMBER: 0001213900-16-012561 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 67 CONFORMED PERIOD OF REPORT: 20160229 FILED AS OF DATE: 20160414 DATE AS OF CHANGE: 20160414 FILER: COMPANY DATA: COMPANY CONFORMED NAME: YAPPN CORP. CENTRAL INDEX KEY: 0001511735 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-DURABLE GOODS [5000] IRS NUMBER: 273848069 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-55082 FILM NUMBER: 161572237 BUSINESS ADDRESS: STREET 1: 1001 AVENUE OF THE AMERICAS, 11TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10018 BUSINESS PHONE: 888-859-4441 MAIL ADDRESS: STREET 1: 1001 AVENUE OF THE AMERICAS, 11TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10018 FORMER COMPANY: FORMER CONFORMED NAME: PLESK CORP DATE OF NAME CHANGE: 20110201 10-Q 1 f10q0216_yappncorp.htm QUARTERLY REPORT

 

 

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

FORM 10-Q

 

(Mark One)

 

☒  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal quarter ended February 29, 2016

 

☐   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

 

For the transition period from _______ to _______

 

YAPPN CORP.

(Exact name of small business issuer as specified in its charter)

 

Delaware   000-55082   27-3848069
(State of Incorporation)   (Commission File Number)   (IRS Employer Identification No.)

 

1001 Avenue of the Americas, 11th Floor

New York, NY 10018

(Address of principal executive offices) (Zip code)

 

888-859-4441

(Registrant’s telephone number, including area code)

 

Securities registered under Section 12(b) of the Exchange Act:

None

 

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $0.0001 par value per share

(Title of Class)

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒   No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒   No ☐

 

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

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐   No ☒

 

There were 26,433,163 shares outstanding of registrant’s common stock, par value $0.0001 per share, as of April 14, 2016.

 

Transitional Small Business Disclosure Format Yes ☐   No ☒

 

 

 

 

 

TABLE OF CONTENTS

 

PART I    
     
Item 1. Financial Statements 3
  Interim Condensed Consolidated Balance Sheets as of February 29, 2016 (unaudited) and May 31, 2015 4
  Interim Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended February 29, 2016 and February 28, 2015 (unaudited) 5
  Interim Condensed Consolidated Statement of Stockholders’ Deficit for the nine months ended February 29, 2016 (unaudited) and year end May 31, 2015 6
  Interim Condensed Consolidated Statements of Cash Flows for the nine months ended February 29, 2016 and February 28, 2015 (unaudited) 7
  Notes to Interim Condensed Consolidated Financial Statements (unaudited) 8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 29
Item 3. Quantitative and Qualitative Disclosures About Market Risk 41
Item 4. Controls and Procedures 41
     
PART II    
     
Item 1. Legal Proceedings 42
Item 1A. Risk Factors 42
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 42
Item 3. Defaults Upon Senior Securities 42
Item 4. Mine Safety Disclosures 42
Item 5. Other Information 42
Item 6. Exhibits 43
SIGNATURES 45

 

2

 

 

PART I

 

Item 1.

 

Interim Financial Statements and Notes to Interim Financial Statements

 

General

 

The accompanying reviewed interim financial unaudited statements have been prepared in accordance with the instructions to Form 10-Q. Therefore, they do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders' equity in conformity with generally accepted accounting principles. Except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements included in the Company's annual report on Form 10-K for the year ended May 31, 2015. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the three and nine months ended February 29, 2016 are not necessarily indicative of the results that can be expected for the year ending May 31, 2016.

 

All references to “dollars”, “$” or “US$” are to United States dollars and all references to “CAD$” are to Canadian dollars. United States dollar equivalents of Canadian dollar figures are based on the exchange rate as reported by the Bank of Canada on the applicable date.

 

3

 

 

YAPPN CORP.

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

   Note  As of
February 29,
2016
  

(audited)

As of
May 31,
2015

 
Assets           
Current assets:           
Cash     $16,623   $19,496 
Accounts receivable  3   1,431,489    1,444,009 
Subscription receivable  8   46,000    - 
Prepaid expenses      65,609    6,068 
Total current assets      1,559,721    1,469,573 
              
Equipment, net      1,349    1,250 
Intangible assets  4   4,953,105    - 
Total Assets     $6,514,175   $1,470,823 
              
Liabilities and Stockholders' Deficit             
Current liabilities:             
Accounts payable     $472,820   $340,041 
Accrued expenses      1,241,162    543,535 
Accrued development and related expenses - related party  13   66,787    468,766 
Short term loans  5   376,639    791,928 
Line of credit  6   -    2,167,025 
Deferred revenue      -    12,500 
Convertible promissory notes and debentures  7   2,495,841    3,477,825 
Total current liabilities      4,653,249    7,801,620 
              
Other liabilities:             
Long term secured debentures  6   4,550,388    - 
Convertible secured debentures  8   69,687    - 
Convertible promissory notes and debentures  7   -    312,486 
Total Liabilities      9,273,324    8,114,106 
              
Stockholders' Deficit             
Preferred stock, par value $.0001 per share, 50,000,000 shares authorized: Series 'A' Convertible, 10,000,000 shares authorized; nil shares issued and outstanding  10   -    - 
Common stock, par value $.0001 per share, 400,000,000 shares authorized 26,433,163 issued and outstanding (May 31, 2015 – 13,422,814)  9   14,735    13,423 
Common stock, par value $.0001 per share, 19,087,662 shares subscribed not issued (May 31, 2015 – 99,344)  9   2,763,638    124,567 
Additional paid-in capital      12,893,924    7,981,579 
Deficit      (18,431,446)   (14,762,852)
Total Stockholders' Deficit      (2,759,149)   (6,643,283)
Total Liabilities And Stockholders' Deficit     $6,514,175   $1,470,823 

 

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

 

4

 

 

YAPPN CORP.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE

LOSS (Unaudited)

 

      Three Months Ended February 29/28    Nine Months Ended
February 29/28
 
   Note  2016   2015   2016   2015 
                    
Revenues  3  $101,537   $528,846   $911,918   $606,821 
                        
Cost of revenue      9,134    140,183    146,068    140,389 
                        
Gross profit      92,403    388,663    765,850    466,432 
                        
Operating expenses:                       
Marketing  13   26,152    104,383    224,900    996,107 
Research and development expenses  13   109,203    100,759    301,168    597,490 
General and administrative expenses  13   497,826    300,435    1,272,484    1,020,468 
Professional fees      241,025    74,282    401,048    173,520 
Consulting      92,590    199,064    295,665    524,059 
Depreciation      102    57    300    176 
Amortization      263,940    -    483,890    - 
Stock based compensation  12   64,772    70,378    478,289    679,179 
Total operating expenses      1,295,610    849,358    3,457,744    3,990,999 
                        
Loss from operations      (1,203,207)   (460,695)   (2,691,894)   (3,524,567)
                        
Other (income) expense:                       
Interest expense      268,222    105,007    616,609    253,973 
Financing expense on issuance of convertible notes and common stock      -    362,069    632,250    942,574 
Change in fair value of derivative liabilities and convertible notes      289,881    485,051    (550,456)   (1,647,824)
Prepayment fees on variable notes      29,350    10,000    306,140    50,984 
Miscellaneous income      (11,077)   (67,224)   (27,843)   (143,780)
Total other (income) expense      576,376    894,903    976,700    (544,073)
                        
Net loss before taxes      (1,779,583)   (1,355,598)   (3,668,594)   (2,980,494)
                        
Provision for income taxes      -    -    -    - 
                        
Net loss and comprehensive loss     $(1,779,583)  $(1,355,598)  $(3,668,594)  $(2,980,494)
                        
Net loss per weighted-average shares of common stock - basic     $(0.07)  $(0.10)  $(0.19)  $(0.23)
                        
Net loss per weighted-average shares of common stock - diluted     $(0.07)  $(0.10)  $(0.19)  $(0.23)
                        
Weighted-average number of shares of common stock issued and outstanding - basic      26,433,163    13,105,881    19,269,659    12,825,886 
                        
Weighted-average number of shares of common stock issued and outstanding - diluted      26,433,163    13,105,881    19,269,659    12,825,886 

 

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

 

5

 

 

YAPPN CORP.

INTERIM CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT (UNAUDITED)

For the nine months ended February, 29 2016 and year ended May 31, 2015

 

   Common   Preferred            
   Shares Outstanding   Amount   Subscribed Shares   Subscribed Amounts   Shares Outstanding   Amount  

Additional

Paid-in Capital
   Accumulated Deficit   Total 
Balance - May 31, 2014   12,585,579    12,586    -    -    201,000    201    4,071,022    (10,138,108)   (6,054,299)
                                              
Reclassification of warrant liabilities to equity   -    -    -    -    -    -    1,851,089    -    1,851,089 
Issuance of warrants classified as equity   -    -    -    -    -    -    41,060    -    41,060 
Stock options issued   -    -    -    -    -    -    982,624    -    982,624 
Stock to be issued under prior obligations   -    -    99,344    124,567    -    -    -    -    124,567 
Beneficial conversion feature   -    -    -    -    -    -    622,636    -    622,636 
Stock issued to consultants and vendors   329,000    329    -    -    -    -    307,638    -    307,967 
Issuance of common stock on conversion of Series A Preferred stock   201,000    201    -    -    (201,000)   (201)   -    -    - 
Issuance of common stock on conversion of convertible debt   307,235    307    -    -    -    -    105,510    -    105,817 
Net loss for the year ended May 31, 2015   -    -    -    -    -    -    -    (4,624,744)   (4,624,744)
                                              
Balance -  May 31, 2015   13,422,814    13,423    99,344    124,567    -    -    7,981,579    (14,762,852)   (6,643,283)
Stock-based compensation   -    -    -    -    -         478,289    -    478,289 
Stock issued  on exercise of warrants   11,667    12    -    -    -    -    (12)   -    - 
Issuance of Common Stock for purchase technology   12,998,682    1,300    -    -    -    -    1,805,308    -    1,806,608 
Stock to be Issued for purchase of technology   -    -    18,988,318    2,639,071    -    -    -    -    2,639,071 
Issuance of  warrants classified as equity   -    -    -    -    -    -    542,760    -    542,760 
Warrants associated  with a secured convertible debenture   -    -    -    -    -    -    1,616,630         

1,616,630

 
Beneficial conversion feature   -    -    -    -    -    -    469,370         

469,370

 
Net loss for the nine months ended February 29, 2016   -    -    -    -    -    -    -    (3,668,594)   (3,668,594)
Balance - February 29, 2016   26,433,163    14,735    19,087,662    2,763,638    -    -    12,893,924    (18,431,446)   (2,759,149)

   

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

 

6

 

 

YAPPN CORP.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

  

For the nine months ended February 29/28

 
   2016   2015 
Cash Flows From Operating Activities:        
Net and comprehensive  loss  $(3,668,594)  $(2,980,494)
Adjustments to reconcile net loss to cash used in operating activities:          
Depreciation   300    176 
Amortization   483,890    - 
Stock based compensation   478,289    679,179 
Change in fair value of derivative liabilities and convertible notes   (550,456)   (1,647,824)
Financing expense on issuance of convertible promissory notes, and common stock   632,250    942,574 
Stock issuance for consulting services and licensing rights   -    175,000 
Changes in operating assets and liabilities:          
Accounts receivable   12,520    (601,821)
Prepaid expenses   (59,541)   (23,010)
Accounts payable and accrued liabilities   830,406    346,550 
Accrued development and related expenses - related party   (401,979)   115,527 
Deferred revenue   (12,500)   - 
Net Cash Used in Operating Activities   (2,255,415)   (2,994,143)
           
Cash Flows From Investing Activities:          
Expenditures on patents   (15,927)   - 
Capital expenditures   (377)   (1,593)
Net Cash Used in Investing Activities   (16,304)   (1,593)
           
Cash Flows From Financing Activities:          
Proceeds from convertible promissory notes and debentures   90,750    840,339 
(Repayments)/proceeds from line of credit, net   (1,092,025)   1,475,000 
Proceeds from secured debentures   2,096,653    - 
Proceeds from secured convertible debentures   2,040,000    - 
Repayments of short term loans   (151,791)   (358,678)
Proceeds from short term loans   168,823    264,607 
Repayment of convertible promissory notes and debentures   (883,564)   (204,093)
Net Cash Provided by Financing Activities   2,268,846    2,017,175 
           
Net decrease in cash   (2,873)   (978,561)
Cash, beginning of period   19,496    988,692 
Cash, end of period  $16,623   $10,131 
           
Supplemental Disclosure of Cash Flow Information          
           
Non Cash Investing and Financing Activities Information:          
Common stock issued for consulting services  $-   $175,000 
Common stock issued on exercise of warrants  $37,100   $- 
Common stock to be issued for consulting and other obligations  $-   $124,567 
Common stock issuance from conversions of convertible debt  $-   $105,817 
Reclassification of derivative liabilities to additional paid in capital  $-   $1,653,222 
Conversion of short term loan and  line of credit into secured debentures  $419,305   $100,000 
Common stock issued for acquisition of technology  $1,806,608   $- 
Common stock to be issued for acquisition of technology  $2,639,071   $- 
Cash paid for interest during the nine month period  $67,941   $127,626 

 

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

 

7

 

 

YAPPN CORP.

Notes to Interim Condensed Consolidated Financial Statements

February 29, 2016

(Unaudited)

 

All references to “dollars”, “$” or “US$” are to United States dollars and all references to “Canadian” are to Canadian dollars. United States dollar equivalents of Canadian dollar figures are based on the exchange rate as reported by the Bank of Canada on the applicable date.

 

1. Summary of Significant Accounting Policies

 

Basis of Presentation and Organization

 

Yappn Corp., formerly “Plesk Corp.”, (the “Company”) was incorporated under the laws of the State of Delaware on November 3, 2010. The business plan of the Company is to provide effective unique and proprietary tools and services that create dynamic solutions that enhance a brand’s messaging, media, e-commerce and support platforms. The Company has offices in the United States and Canada. In March 2013, the Company acquired a concept and technology license from Intertainment Media Inc., a Canadian company, in exchange for 7,000,000 shares of common stock of the Company. As a result of this exchange, Intertainment Media Inc. acquired, at that time, a seventy percent (70%) ownership of the Company. On September 15, 2015, the Company closed the acquisition of Ortsbo Inc.’s intellectual property. As a result of the acquisition, Intertainment Media Inc.’s ownership was reduced to 37%. The accompanying interim condensed consolidated financial statements of the Company were prepared from the accounts of the Company under the accrual basis of accounting.

 

Unaudited Interim Condensed Consolidated Financial Statements

 

The interim condensed consolidated financial statements (“interim financial statements”) of the Company as of February 29, 2016, and for the three and nine month periods ended February 29, 2016 and February 28, 2015, are unaudited. However, in the opinion of management, the interim financial statements include all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the Company’s financial position as of February 29, 2016, and the results of its operations and its cash flows for the three and nine month periods ended February 29, 2016 and February 28, 2015. These results are not necessarily indicative of the results expected for the fiscal year ending May 31, 2016. The accompanying interim financial statements and notes thereto do not reflect all disclosures required under accounting principles generally accepted in the United States. Refer to the Company’s audited consolidated financial statements as of May 31, 2015 filed with the Securities and Exchange Commission, for additional information including significant accounting policies.

 

Principles of Consolidation

 

The interim financial statements include the accounts of the Company and its wholly-owned subsidiaries, Yappn Acquisition Corp. and Yappn Canada, Inc. All inter-company balances and transactions have been eliminated on consolidation.

 

Intangible Assets

 

Intangible assets consist of acquired technology, and patents, acquired from a related party and are accordingly recorded at the cost as recorded in the records of the related party (Note 4). The Company amortizes acquired technology over its estimated useful life considered to be 5 years, on a straight-line basis. Patents are amortized commencing at the receipt of approval of the patents or acquisition of patents. Should the patent process be unsuccessful, the entire amount relating to the patent is expensed in the period this is determined. The Company continually evaluates the remaining estimated useful life of its intangible assets being amortized to determine whether events and circumstances warrant a revision to the remaining period of amortization.

 

Recent Accounting Pronouncements

 

In May 2014, the FASB issued Accounting Standards Update No. 2014-09 which was amended in August 2015 by Update No 2015-14: Revenue from Contracts with Customers. The standard outlines a five-step model for revenue recognition with the core principle being that a company should recognize revenue when it transfers control of goods or services to customers at an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. Companies can choose to apply the standard using either the full retrospective approach or a modified retrospective approach. Under the modified approach, financial statements will be prepared for the year of adoption using the new standard but prior periods presented will not be adjusted. Instead, companies will recognize a cumulative catch-up adjustment to the opening balance of retained earnings. This new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The Company has not yet made a determination as to the method of application (full retrospective or modified retrospective). It is too early to assess whether the impact of the adoption of this new guidance will have a material impact on the Company's results of operations or financial position.

 

8

 

 

On August 27, 2014 the FASB issued a new financial accounting standard on going concern, Update 2014-15, “Presentation of Financial Statements – Going Concern (subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The standard provides guidance about management’s responsibility to evaluate whether there is substantial doubt about the organization’s ability to continue as a going concern. The amendments in this update apply to all companies. They become effective in the annual period ending after December 15, 2016, with early application permitted. The Company is currently evaluating the impact of this accounting standard.

 

In November 2014, the FASB issued Accounting Standard Update (“ASU”) 2014-16, Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity. The ASU clarifies how current guidance should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. Specifically, the amendments clarify that an entity should consider all relevant terms and features, including the embedded derivatives feature being evaluated for bifurcation, in evaluating the nature of a host contract. The ASU is effective for fiscal years and interim periods beginning after December 15, 2015. The Company is currently assessing the impact, if any, of implementing this guidance on its consolidated financial position and results of operations.

 

2. Going Concern

 

The accompanying interim financial statements have been prepared assuming that the Company will continue as a going concern. The Company has experienced negative cash flows from operations since inception and has incurred a deficit of $18,431,446 through February 29, 2016.

 

As of February 29, 2016, the Company had a working capital deficit of $3,093,528. During the nine months ended February 29, 2016, net cash used in operating activities was $2,255,415. The Company expects to have similar cash needs for the next twelve months. At the present time, the Company does not have sufficient funds to fund operations over the next twelve months.

 

Implementation of our business plan will require additional debt or equity financing and there can be no assurance that additional financing can be obtained on acceptable terms. We have realized limited revenues to cover our operating costs. As such, we have incurred an operating loss since inception. This and other factors raise substantial doubt about our ability to continue as a going concern. Our continuation as a going concern is dependent on our ability to meet our obligations, to obtain additional financing as may be required and ultimately to attain profitability. Our interim financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Management plans to meet its operating cash flow requirements from financing activities until the future operating activities become sufficient to support the business to enable the Company to continue as a going concern. The Company continues to work on generating operating cash flows from the commercialization of its business. Until those cash flows are sufficient the Company will pursue other financing when deemed necessary.

 

The Company is pursuing a number of different financing opportunities in order to execute its business plan. These include, short term debt arrangements, convertible debt arrangements, common share equity financings, either through a private placement or through the public markets. During the nine months ended February 29, 2016, the Company raised $2,268,846 through various financial instruments, net of repayments.

 

There can be no assurance that the raising of future equity or debt will be successful or that the Company’s anticipated financing will be available in the future, at terms satisfactory to the Company. Failure to achieve the equity and financing at satisfactory terms and amounts could have a material adverse effect on the Company’s ability to continue as a going concern. If the Company cannot successfully raise additional capital and implement its strategic development plan, its liquidity, financial condition and business prospects will be materially and adversely affected, and the Company may have to cease operations.

 

3. Concentration of Credit Risk

 

All of the Company’s revenues are attributed to a small number of customers. One customer comprises 100% of the accounts receivable as at February 29, 2016 and 55% and 89% of the revenue recorded for the three and nine months ended February 29, 2016. The Company billed its largest customer $233,860 and $1,615,125 for the three month and nine month period ended February 29, 2016, $178,432 and $802,592 has not been recorded as accounts receivable or revenue in the Company’s financial statements as, due to the long period without payment, the Company has determined the revenue recognition criteria starting at the beginning of the Company’s second quarter has not been met. The Company and the customer continue to work together in ways to enable full and complete payment of the total billings incurred, both recognized and unrecognized as at February 29, 2016.

 

Effective February 29, 2016, Digital Widget Factory (Belize) (“DWF”) sold the technology platform, partially developed by Yappn in conjunction with DWF’s principals, to Intelligent Content Enterprises (“ICE”) in exchange for shares of ICE. As part of the transaction, DWF has ownership and rights to 24 million common shares of ICE for a large minority shareholder position of ICE. The Company is in final negotiations with DWF and anticipates executing on a final promissory note from DWF, for the value of the billings of $2,125,000 million (of which $1,431,489 is currently recorded as a receivable). The promissory note is to be secured by DWF’s ICE stock holdings in the amount of 4,250,000 shares, which at the current market value of ICE shares, significantly exceeds to the value of the promissory note.

 

9

 

  

4. Acquisition of Intellectual Property (and Reverse Split)

 

On September 15, 2015, the Company finalized its purchase of Intellectual property assets of Ortsbo, Inc. (“Ortsbo”) pursuant to an Asset Purchase Agreement executed and closed on July 15, 2015. With this closing, the Company had an obligation to issue 31,987,000 shares of common stock of Yappn. During the second quarter of fiscal 2016 from the share issuance obligations from the purchase of the Ortsbo intellectual property assets 12,998,682 shares were issued comprising 8,312,500 to Ortsbo and 4,686,182 to the former debt and minority shareholders of Ortsbo, which were valued at $1,806,608 leaving 18,988,318 shares to be issued as of February 29, 2016. As of the filing date, these aforementioned shares remain to be issued. Yappn also assumed $975,388 of debt as part of the transaction. This assumed debt was immediately subscribed as part of the secured debenture in Yappn (Note 6). The fair value for the agreed upon consideration for the acquisition of intellectual property from Ortsbo was $16,968,888, however, due to the common control of Ortsbo Inc. and the Company , the value of the intangible assets acquired from Ortsbo was recorded at the carrying value in the financial records of Ortsbo Inc. This value was $5,421,068 on September 15, 2015.

 

In connection with the terms of the Asset Purchase Agreement related to the purchase of intellectual property assets of Ortsbo, the Company committed to complete a share consolidation. On September 9, 2015, the Company amended its Certificate of Incorporation to implement a reverse stock split in the ratio of 1 share for every 10 shares of common stock. This amendment was approved and filed with the Delaware Secretary of State on September 9, 2015. FINRA declared the Company’s 1-for-10 reverse stock split ex-dividend date effective as of October 2, 2015. The reverse stock split reduced the Company’s common stock outstanding from approximately 134,344,806 shares to approximately 13,434,481 shares. The effect of this reverse stock split has been reflected in these interim financial statements.

 

5. Short Term Loans

 

On April 1, 2014, the Company entered into a short term loan for $219,480 (Canadian $240,000) with a private investor. The Company previously converted a portion of a previous loan from this lender (Canadian $350,000), from a prior fiscal year, into a convertible debenture. The loan had a maturity of July 10, 2014 with an interest rate of 1% per month. The Company repaid $118,454 (Canadian $160,280) in fiscal 2015 and $8,446 during the nine months period ended February 29, 2016 (Canadian $13,405). As at February 29, 2016, the loan had a value of $130,304 ($176,315 Canadian).

 

On January 7, 2014, the Company borrowed $253,200 (Canadian $280,000) from a private investor. The loan had a term of three months and had an interest rate of 12% per annum payable at the maturity date. A preparation fee of 10% or $25,300 (Canadian $28,000) was paid at inception. The loan was extended past its due date of April 7, 2014 and is accruing interest without penalty until payment. On June 12, 2014, the Company repaid $142,056 (Canadian $152,000) against the loan and on June 27, 2014 $90,777 (Canadian $100,000) was retired and contributed to a subscription agreement for Units that included an unsecured 6% convertible debenture, $100 par value, convertible into shares of the Company’s common stock and 166,667 issuable shares of common stock (Series C warrants) at a purchase price of $2.20 per share (Note 7). As at February 29, 2016 an amount of $20,693 ($28,000 Canadian) remains outstanding.

 

On July 17, 2014, the Company borrowed $100,915 (Canadian $110,000) from a private investor in the form of a short term loan due on December 31, 2014. This loan carries a 1% arrangement fee and an interest rate of 1% per month. During fiscal 2015 $90,145 (Canadian $105,000) was repaid on this note. The remaining balance was repaid during the nine months ended February 29, 2016.

 

On August 4, 2014, the Company borrowed $93,458 (Canadian $100,000) in the form of a bridge loan from a private investor, with combined origination fees and interest of $3,210 (Canadian $3,500), due on August 14, 2014. The Company repaid $22,768 (Canadian $25,000) of this loan on August 25, 2014. As of February 29, 2016, the value of the remaining balance of the loan was $55,428 (Canadian $75,000).

 

On May 6, 2015, the Company borrowed $150,000 ($187,000 Canadian) in the form of a bridge loan from a private investor with a financing fee of $6,000 ($7,200 Canadian). This loan was paid back on June 30, 2015.

 

On May 11, 2015, the Company received $419,463 ($500,000 Canadian) from an intended subscriber for secured debentures, which closed on July 15, 2015. The Company treated this as a short term loan where interest is accrued at 12% (same rate as the secured debenture) for each lender from the date of the loan to the date of the subscription for the convertible debenture (Note 6). 

 

On June 19, 2015, the Company received $78,265 ($96,000 Canadian) from an intended subscriber for secured debentures, which closed on July 15, 2015. The Company treated this as a short term loan where interest is accrued at 12% (same rate as the secured debenture) for each lender from the date of the loan to the date of the subscription for the convertible debenture (Note 6).

 

On July 10, 2015, the Company borrowed $250,000 in the form of a bridge loan from a private investor. This loan was paid back on July 16, 2015.

 

During the second quarter of fiscal 2016, the Company received $1,201,000 from intended subscribers of a secured debenture financing closed on December 30, 2015. The Company treated this as a short term loan where interest is accrued at 12% (same rate as the secured debenture) for each lender from the date of the loan to the date of the subscription for the convertible debenture (Note 6).

 

During the third quarter of fiscal 2016, the Company received $175,000 ($120,000 from a director) from intended subscribers in anticipation of a second closing of the convertible secured debenture financing that closed on December 30, 2015. The Company is treating this as a short term loan where interest is accrued at 12% (same rate as the previously issued secured debenture).

 

10

 

 

The following is a summary of Short Term Loans:

 

Principal amounts  April 1,
2014
Term Loan
   January 7,
2014
Term Loan
   Other Loans   Total 
Fair value at May 31, 2014  $220,159   $257,152   $-   $477,311 
Borrowing on July 17, 2014   -    -    100,915    100,915 
Borrowing on July 23, 2014   -    -    50,234    50,234 
Borrowing on August 4, 2014   -    -    93,458    93,458 
Borrowings in August 2014 (multiple dates)   -    -    125,000    125,000 
Borrowing on January 23, 2015   -    -    16,098    16,098 
Borrowing on March 30, 2015             250,000    250,000 
Borrowing on May 6, 2015   -    -    144,729    144,729 
Borrowing on May 11, 2015   -    -    419,463    419,463 
Total   -    -    1,199,897    1,199,897 
Fair value adjustments   (21,589)   (1,356)   (21,893)   (44,838)
Repayments   (46,025)   (142,506)   (436,134)   (624,665)
Conversions   -    (90,777)   (125,000)   (215,777)
Fair value at May 31, 2015  $152,545   $22,513   $616,870   $791,928 
Borrowing on June 19, 2015   -    -    78,265    78,265 
Borrowing on July 10, 2015   -    -    250,000    250,000 
Borrowing during the second quarter   -    -    1,201,000    1,201,000 
Borrowing during the third quarter   -    -    175,000    175,000 
Fair value adjustments   (13,795)   (1,820)   (29,388)   (45,003)
Conversions   -    -    (1,662,300)   (1,662,300)
Repayments   (8,446)   -    (403,805)   (412,251)
Fair value at February 29, 2016  $130,304   $20,693   $225,642   $376,639 

 

6. Line of Credit Arrangement and Secured Debentures

 

On April 7, 2014, the Company finalized its line of credit arrangement whereby the Company can borrow up to $3,000,000 from a third party lender. The loan agreement is for an initial two year term subject to the lender’s right to demand repayment of the outstanding balance. It carries an interest rate of 12% per annum and a 1% draw down fee on each draw. Pursuant to the loan agreement, the Company issued the lender warrants to purchase up to 800,000 shares of the Company’s common stock at an exercise price of $1.00. Upon the Company’s first draw down of $200,000 from the line of credit, 200,000 five year warrants vest. For each subsequent $100,000 the Company draws, 100,000 five year warrants will vest until the 800,000 warrants are vested. The Company’s shares of common stock that are issuable on the exercise of warrants were granted registration rights, allowing the shares to be sold. In addition, the Company entered into a general security agreement with the lender to which it granted the lender a first position security interest in all of its assets and in the event of default under the security agreement or the promissory note, the lender may foreclose on the assets of the Company. 

  

During fiscal 2015, the Company borrowed $1,900,155 against the line of credit and repaid $533,130 resulting in a net additional amount drawn down against the line of credit of $1,367,025 and an outstanding obligation of $2,167,025 at May 31, 2015. During fiscal 2016, the Company borrowed $150,000 against the line of credit, repaid and released a total of $1,242,025 (immediately after conversion of $2 million into a secured debenture (see below)) and converted $1,075,000 to secured debentures. The outstanding obligation was $nil at February 29, 2016.

 

Yappn closed the first tranche in the amount of $4.5 million of secured debentures. The secured debentures carry an annual interest rate of 12% payable at maturity. Maturity was initially the earlier of the date proceeds are available from a public offering or December 31, 2015. During the third fiscal quarter, the holders of the Secured Debentures (the “Holders”) agreed to extend the maturity date of the Secured Debentures from December 31, 2015 to July 15, 2020, and were provided with the right to amend the Secured Debenture such that a Holder shall have the right, at any time after the earlier of (i) six (6) months from the date of first issuance of any subsequent Debentures; and (ii) June 30, 2016, to require the Company to satisfy the outstanding obligations underlying the Secured Debenture; provided, however, that at least two thirds (66.67%) of the Holders of the principal amount of the Secured Debentures consent to a put of their Secured Debentures to the Company. This financing is supported by Yappn's secured line of credit holders through their participation as described above. Yappn executed a non-binding letter of intent with Winterberry Investments Inc. ("Winterberry"), a private company led by Mr. David Berry, pursuant to which Winterberry will facilitate and manage the financing transaction as well as to advise on Yappn's future capital programs. The Company received $2.5 million of this financing in the form of cash and cash commitments, including conversion of the short term loans obtained on May 11, 2015 and June 19, 2015 as described in Note 5. $2,000,000 of the $4.5 million financing is conversion of a portion of the Company’s existing debt that remained in the secured debenture. $925,000 was repaid out of the secured debenture, in the form of cash in the amount of $465,000 with the remainder in the form of the release of secured deposit that was applied against accounts receivable. On September 15, 2015, the Company closed the acquisition of intellectual property from Ortsbo, and as part of this closing, assumed debt and non-controlling equity interests from Ortsbo in the amount of $975,338 that was immediately subscribed to the first tranche of secured debentures. The secured debentures balance as at February 29, 2016, was $4,550,388.

 

11

 

 

7. Convertible Promissory Notes and Debentures

 

The Company has issued various convertible notes and debentures with various terms. As a result of the variability in the amount of shares of common stock to be issued in accordance with variable pricing terms or conversion price protection clauses, the Company recorded these instruments as liabilities at fair value until the point in time when price protection clauses expired. The Company has determined the convertible notes and debentures to be Level 2 fair value measurement and where applicable has used the binominal lattice pricing model to calculate the fair value as of February 29, 2016, May 31, 2015, and the commitment dates.

 

The following is a summary of the convertible promissory notes and debentures as of February 29, 2016:

 

Principal amounts:  JMJ
Financial
Notes
   Convertible
Debentures
   Other
Notes
   Total 
Total Borrowings at May 31, 2014  $80,000   $2,219,000   $92,500   $2,391,500 
Borrowing on June 27, 2014   -    250,000    -    250,000 
Borrowing on September 2, 2014   -    125,000    -    125,000 
Borrowing on September 3, 2014   50,000    -    -    50,000 
Borrowing on October 6, 2014   -    50,000    -    50,000 
Borrowing on October 22, 2014   40,000    -    -    40,000 
Borrowing on October 27, 2014   -    50,000    -    50,000 
Borrowing on December 24, 2014   -    -    75,000    75,000 
Borrowing on December 24, 2014   -    -    100,000    100,000 
Borrowing on December 29, 2014   -    -    50,000    50,000 
Borrowing on February 4, 2015   -    -    115,000    115,000 
Borrowing on February 9, 2015   -    -    90,750    90,750 
Borrowing on March 30, 2015   -    -    92,000    92,000 
Borrowing on April 15, 2015   -    -    69,000    69,000 
Borrowing on April 20, 2015   -    -    50,000    50,000 
Borrowing on April 23, 2015   -    -    60,500    60,500 
Borrowing on April 23, 2015   -    -    25,000    25,000 
Conversions   (80,000)   -    -    (80,000)
Repayments   (90,000)   -    (92,500)   (182,500)
Total Borrowings at May 31, 2015   -    2,694,000    727,250    3,421,250 
Borrowings on June 24, 2015   -    -    45,375    45,375 
Borrowings on June 29, 2015   -    -    45,375    45,375 
Repayments   -    -    (818,000)   (818,000)
Total Borrowings at February 29, 2016  $-   $2,694,000   $-   $2,694,000 
                     
Convertible notes and debt at fair value at May 31, 2014  $142,189   $2,264,140   $100,846   $2,507,175 
Convertible notes and debt at fair value at the commitment date, issued during 2015   137,071    436,887    1,020,110    1,594,068 
Change in fair value (from commitment date)   (70,223)   (755,194)   858,573    33,156 
Repayments (cash)   (103,220)   -    (135,051)   (238,271)
Conversions to common stock   (105,817)   -    -    (105,817)
Convertible notes and debt at fair value at May 31, 2015   -    1,945,833    1,844,478    3,790,311 
Convertible notes and debt at fair value at the commitment date issued during 2016   -    -    171,990    171,990 
Change in fair value   -    550,008    (1,132,904)   (582,896)
Repayments (cash)   -    -    (883,564)   (883,564)
Convertible notes and debt at fair value at February 29, 2016  $-   $2,495,841   $-   $2,495,841 
                     
Balance at May 31, 2015                    
Current   -    1,633,347    1,844,478    3,477,825 
Long term   -    312,486    -    312,486 
   $-   $1,945,833   $1,844,478   $3,790,311 
Balance at February 29, 2016                    
Current   -    2,495,841    -    2,495,841 
   $-   $2,495,841   $-   $2,495,841 

 

12

 

 

 

JSJ Investments Inc.

 

On December 24, 2014, the Company sold a Convertible Note in the principal amount of $100,000 to JSJ Investments Inc. The Convertible Note matures on June 23, 2015 and has an interest rate of 15% per annum payable at maturity. The note may be converted into common stock of the Company on or after the maturity date at a conversion price of 50% of the lowest 15 days prior to conversion or $1.00. Early payback penalties are 140% from 120-150 days and 150% up to the maturity date of the note. This Convertible Note was repaid on June 24, 2015.

 

LG Capital Funding, LLC

 

On December 24, 2014, the Company sold a Convertible Note in the principal amount of $75,000. The Convertible Note matures on December 24, 2015 and has an interest rate of 8% per annum. The note may be converted into shares of common stock of the Company at any time beginning on the 180th day of the date of the note at a conversion price of 55% of the average of 2 lowest closing bid prices from the 10 days prior to conversion. Early payback penalties are 150% and payback is eligible up to 180 days from the inception of the note. This Convertible Note was repaid on June 24, 2015.

 

Vista Capital Investments, LLC

 

On December 29, 2014, the Company sold a Convertible Note in the principal amount of $110,000, 10% original issuance discount and advanced $50,000 on closing. The Convertible Note matures on December 29, 2015 and has a one-time interest charge of 12%. The note may be converted into shares of common stock of the Company at any time beginning on the 180th day of the date of the note at a conversion price of 60% of the lowest trading price from the 25 days prior to conversion or $1.00. Early payback penalties are 125% up to 90 days and 145% after 90 days. On April 23, 2015, Company borrowed an additional $25,000 against this Convertible Note. The $50,000 drawn on December 29, 2014 was repaid on June 26, 2015. The $25,000 drawn on April 23, 2015 against this Convertible Note was repaid on October 20, 2015. There is no further balance outstanding on this note.

 

13

 

 

Typenex Co-Investments, LLC

 

On February 4, 2015, the Company sold a Convertible Note in the principal amount of $115,000 carrying a 10% original issuance discount (“OID”). The Convertible Note matures on January 4, 2016 and has an interest rate of 10% per annum. The note may be converted into common stock at an exercise price of $1.00 per share six months after the sale of the note. The Company can repay the note within the first six months at a penalty of 125% of principal amount. After six months, repayments can be made on an installment basis, either in cash (plus OID), or in shares of common stock. If installment payments are made in the form of common stock, the effective price for the stock issuance is at 70% of the average of the three lowest closing bid prices over a ten day look back period from the date the installment is due. The installments must be made on a monthly schedule if the lender does not convert at their option at the exercise price of $1.00 per share. At the funding date the Company issued 70,000 fixed price warrants at an exercise price of $1.00 per share with no price protection. The warrants were recorded at a value of $37,100 in additional paid-in capital (Note 10). The Company elected not to prepay the Typenex Co-Investment, LLC Convertible Note, and made all installment payments in the form of cash totaling $123,383 from August to January 2016 comprising principal and interest. On January 5, 2016, the Company repaid this Convertible Note in full.

 

Iconic Holdings, LLC

 

On February 9, 2015, the Company sold a Convertible Note with a face value of $220,000, carrying a 10% original issuance discount. $90,750 was advanced to the Company on closing of the note. The Convertible Note matures on February 9, 2016 and has an interest rate on the principal balance of 10%. The note may be converted into shares of common stock of the Company at any time beginning on the 180th day of the date of the note at a conversion price of 60% of the lowest average daily trading price from the 25 days prior to conversion or 10 cents, whichever is lower. The Note carries early payback penalties on principal repayment which are 115% from 1-60 days, 125% between 61 and 120 days, 130% between 121 and 180 days, and may not be paid back after 180 days without consent from the Holder. During August 2015, the Company prepaid the portion of the Convertible Note advanced in February 2015 in the principal amount of $90,750. On June 24, 2015 and June 29, 2015, Iconic Holdings LLC, provided funding of $90,750 (two advances of $45,375) to the Company under the existing Convertible Note.  On January 5, 2016, the Company repaid this Convertible Note in full.

 

Group 10 Holdings LLC

 

On March 30, 2015, the Company sold a Convertible Note for the principal amount of $92,000 with a 10% original issue discount. The Convertible Note matures on March 30, 2016 and has an interest rate of 12% per annum. The note may be converted into shares of common stock of the Company at any time beginning on the 180th day of the date of the note at a conversion price of 55% of the average of the two lowest closing bid prices with a twenty day look back period as of the date a notice of conversion is given. The debenture may be paid back any time before maturity with a prepayment penalty of 123%. On October 6, 2015, the Company repaid this Convertible Note in full.

 

14

 

 

Vis Vires Group, Inc.

 

On April 15, 2015, the Company sold a Convertible Note for the principal amount of $69,000. The Convertible Note matures on January 6, 2016 and has an interest rate of 8% per annum. The note may be converted into shares of common stock of the Company at any time beginning on the 180th day of the date of the note at a conversion price of 58% of the average of the three lowest trading prices from previous ten trading days including the date notice is given. The note may be paid back any time before maturity with a prepayment penalty of 110% if paid back within the first 30 days, 115% if paid back between 31 and 60 days, 120% if paid between 61 and 90 days, 125% if paid between 91 and 120 days, 130% if paid between 121 and 150 days, and 135% if paid back between 151 and 180 days after which it cannot be repaid. On October 13, 2015, the Company repaid this note in full.

 

Adar Bays, LLC

 

On April 20, 2015, the Company sold a Convertible Note for the principal amount of $50,000. The Convertible Note matures on April 20, 2016 and has an interest rate of 8% per annum. The note may be converted into shares of common stock of the Company at any time beginning on the 180th day of the date of the note at a conversion price of 60% of the average of the three lowest trading prices from previous fifteen trading days. The Note may be paid back any time before maturity with a prepayment penalty of 140%. On October 20, 2015, the Company repaid this Note in full.

 

Auctus Private Equity Fund, LLC

 

On April 23, 2015, the Company sold a Convertible Note for the principal amount of $60,500. The convertible note matures on January 21, 2016 and has an interest rate of 10% per annum. The note may be converted into shares of common stock of the Company at any time beginning on the 180th day of the date of the note at a conversion price of 60% of the average of the two lowest trading prices from previous twenty trading days. The note may be paid back any time before maturity with a prepayment penalty of 130%. On October 20, 2015 the Company repaid this note in full.

 

The following table summarizes the fair values by fiscal quarter for issued convertible variable notes and the inputs to determine fair value at commitment date and quarter end dates.

 

Accounting allocation of initial proceeds:   Second
Quarter
Fiscal 2015
    Third
Quarter
Fiscal 2015
    Fourth
Quarter
Fiscal 2015
    First
Quarter
Fiscal 2016
 
Gross proceeds   $ 90,000     $ 430,750     $ 296,500     $ 90,750  
Fair value of promissory notes     (137,071 )     (656,507 )     (363,604 )     (171,990 )
Fair value of equity warrant     -       (37,100 )     -       -  
Financing expense on the issuance of promissory notes   $ 47,071     $ 262,857     $ 67,104     $ 81,240  
                                 
Key inputs to determine the fair value at the commitment date:                                
Stock price   $ 0.40-1.20     $  0.50-0.70     $ 0.50-0.60     $ 0.60  
Current exercise price   $ 0.40-0.60     $ 0.20-1.00     $ 0.30     $ 0.20  
Time to expiration – days       389-436          181-365           250-366          225-230  
Risk free interest rate       .1-.11 %         .14-.26 %          .09-.27 %        .30-.27 %
Estimated volatility     150 %     150 %     150 %     150 %
Dividend     -       -       -       -  
Key inputs to determine the fair value at May 31, 2015:                                
Stock price   $ N/A     $ 0.50     $ 0.60     $ N/A  
Current exercise price   $ N/A     $   0.30-1.00     $ 0.30     $  N/A  
Time to expiration – days         N/A           115-346           212-325              N/A  
Risk free interest rate         N/A %         .07-.22 %         .06-.26 %            N/A  
Estimated volatility         N/A %     150 %     150 %      N/A %
Dividend         N/A       N/A           N/A              N/A  

 

15

 

 

Convertible Debentures with Series A and B Warrants

 

On January 29, 2014, February 27, 2014, and April 1, 2014, the Company issued 395, 305, and 469 Units for $395,000, $305,000, and $469,000 respectively, to accredited investors under subscription agreements. The Units, as defined in the subscription agreements, consist of (i) one unsecured 6% convertible promissory note, $100 par value, convertible into shares of the Company’s common stock; (ii) a warrant entitling the holder thereof to purchase 1,000 shares of common stock (individually Series A Warrant) at an exercise price of $1.50; and, (iii) a warrant entitling the holder thereof to purchase 1,000 shares of common stock (individually Series B Warrant) at an exercise price of $2.00. The purchase price for each Unit was $1,000 and resulted in a funding total of $1,069,000 in cash and the retirement of $100,000 debt obligation to a private investor (Note 5).

 

The notes mature 24 months from the issuance date and have an interest rate of 6% per annum payable in arrears on the earlier of a default date or the maturity date. The notes may be converted at any time after the original issuance date at the election of their holders to convert all or part of the outstanding and unpaid principal amount and accrued interest at a conversion price of $1.00 per share. Under the subscription agreement, the Company has granted price protection provisions that provide the holder of Series A warrants with a potential increase in the amount of common stock exchanged or a reduction in the exercise price of the instruments should the Company subsequently issue stock or securities convertible into common stock at a price lower than the stated exercise price of $1.50 for a period of twelve months from issuance. The Company determined the warrants issued to the Line of Credit lenders (Note 6) qualified as a breach of this covenant, therefore all Series A warrants were revalued to a $1.00 exercise price with the adjustment reflected as a change in the fair value. Any amount of principal or interest which is not paid when due, shall bear interest at the rate of 16% per annum from the date it is due.

 

As some of the instruments are considered derivatives and the assigned fair values were greater than the net cash proceeds from the transaction, the excess was treated as a financing expense on issuance of derivative instruments for accounting purposes and reported on the Company’s consolidated statements of operations and comprehensive loss below the operating loss as an “other expense”.

 

The convertible debentures due on January 29, and February 27, 2016 were not repaid or converted into common shares of the Company by the maturity dates. Non-repayment of the debentures triggered a penalty interest rate whereby the stated interest rate goes up to 16% from the original 6%. The Company management is diligently working with the debenture holders on amending terms. Certain debenture holders have agreed to accept an offer for additional investment and agreement to convert their debt into common shares and a repricing to previously issued warrants (Note 14).

 

16

 

 

The following table summarizes the fair values of Convertible Debentures with Series A and B Warrants and the respective inputs to determine fair values at the commitment date and the quarter end dates.

 

Accounting allocation of initial proceeds:   January 29,
2014
    February 27,
2014
    April 1,
2014
 
Gross proceeds   $ 395,000     $ 305,000     $ 469,000  
Fair value of the convertible promissory notes     (320,787 )     (247,696 )     (665,511 )
Derivative warrant liability fair value – Series A (Note 11)     (161,950 )     (125,050 )     (776,664 )
Financing expense on the issuance of instruments   $ 87,737     $ 67,746     $ 973,175  
                         
Key inputs to determine the fair value at the commitment date:                        
Stock price   $ 0.50     $ 0.50     $ 1.80  
Current exercise price – promissory notes   $ 1.00     $ 1.00     $ 1.00  
Current exercise price – Series A warrants   $ 1.50     $ 1.50     $ 1.50  
Time to expiration – days (promissory notes)     732       731       731  
Time to expiration – days (warrants)     1,826       1,826       1,826  
Risk free interest rate (promissory notes)     .32 %     .32 %     .32 %
Risk free interest rate (warrants)     1.52 %     1.51 %     1.74 %
Estimated volatility     150 %     150 %     150 %
Dividend          N/A       N/A       N/A  
Market interest rate for the Company     18 %     18 %     18 %
                         
Key inputs to determine the fair value of the promissory notes at May 31, 2015:                        
Stock price   $   N/A     $ N/A     $ N/A  
Current exercise price   $ N/A     $ N/A     $ N/A  
Time to expiration – days     243       272       306  
Risk free interest rate        N/A %          N/A %          N/A %
Estimated volatility       N/A %          N/A %          N/A %
Dividend       N/A         N/A         N/A  
Key inputs to determine the fair value of the promissory notes at February 29, 2016:                        
Stock price   $ N/A     $   N/A     $ N/A  
Current exercise price   $ N/A     $ N/A     $ N/A  
Time to expiration – days     -       -       32  
Risk free interest rate          N/A %          N/A %          N/A %
Estimated volatility          N/A %          N/A %          N/A %
Dividend          N/A            N/A            N/A  

 

Convertible Debentures with Series C or Series D Warrants

 

On April 23, 2014, the Company authorized and issued 50 Units for $50,000 to a private investor. The Units, as defined in the subscription agreement, consist of (i) one unsecured 6% convertible debenture, $100 par value convertible into shares of the Company’s common stock at a conversion price of $1.50 per share with a price protection clause on any conversion feature issued after the issuance date that mature on April 23, 2016; and (ii) a warrant entitling the holder thereof to purchase 33,333 shares of common stock (Series C Warrant) at a purchase price of $2.20 per share that expires on April 23, 2019.

 

On May 30, 2014, the Company authorized and issued 1,000 Units for $1,000,000 to Array Capital Corporation. The Units, as defined in the subscription agreement, consist of (i) one unsecured 6% convertible debenture, $100 par value convertible into shares of the Company’s common stock at a conversion price of $1.50 per share with a price protection clause on any conversion feature issued after the issuance date that matures on May 30, 2016; and (ii) a warrant entitling the holder thereof to purchase 666,667 shares of common stock (Series C Warrant) at a purchase price of $2.20 per share that expires on May 30, 2019.

 

On June 27, 2014, the Company authorized and issued two separate issues of 125 Units. This total authorized and issuance of 250 Units, at a value of $250,000, was to two independent accredited investors in exchange for $150,000 in cash and release of $90,777 (Canadian $100,000) in the loan originated on January 7, 2014 as described in Note 5. The Units, as defined in the subscription agreement, consist of (i) one unsecured 6% convertible debenture, $100 par value convertible into shares of the Company’s common stock at a conversion price of $1.50 per share with a price protection clause on any conversion feature issued after the issuance date that matures on June 27, 2016; and (ii) a warrant entitling the holder thereof to purchase 166,667 shares of common stock (Series C Warrant) at a purchase price of $2.20 per share that expires on June 27, 2019.

 

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On September 2, 2014, the Company authorized and issued three separate issues of 25, 75, and 25 Units. This total authorized and issuance of 125 Units, at a value of $125,000, was to three independent accredited investors in exchange for $125,000 in cash proceeds (Note 5). The Units, as defined in the subscription agreement, consist of (i) one unsecured 6% convertible debenture, $100 par value convertible into shares of the Company’s common stock at a conversion price of $1.50 per share with a price protection clause on any conversion feature issued after the issuance date that matures on September 2, 2016; and (ii) a warrant entitling the holder thereof to purchase 83,333 shares of common stock (Series C Warrant) at a purchase price of $2.20 per share that expires on September 2, 2019.

   

On October 6, 2014, the Company authorized and issued 50 Units for $50,000 to Subtle Disruption in exchange for the settlement of $50,000 in trade payables. The Units, as defined in the subscription agreement, consist of (i) one unsecured 6% convertible debenture, $100 par value convertible into shares of the Company’s common stock at a conversion price of $1.50 with a price protection clause on any conversion feature issued after the issuance date that matures on October 6, 2016; and (ii) a warrant entitling the holder thereof to purchase 33,333 shares of common stock (Series D Warrant) at a purchase price of $2.20 per share that expires on October 6, 2019.

 

On October 27, 2014, the Company authorized and issued 50 Units for $50,000 to IBEC Holdings Inc. The Units, as defined in the subscription agreement, consist of (i) one unsecured 6% convertible debenture, $100 par value convertible into shares of the Company’s common stock at a conversion price of $1.50 with a price protection clause on any conversion feature issued after the issuance date that matures on October 6, 2016; and (ii) a warrant entitling the holder thereof to purchase 33,333 shares of common stock (Series D Warrant) at a purchase price of $2.20 per share that expires on October 27, 2019.

 

The debentures mature 24 months from the issuance date and have an interest rate of 6% per annum payable in arrears on the earlier of a default date or the maturity date. The notes may be converted at any time after the original issuance date at the election of their holders to convert all or part of the outstanding and unpaid principal amount and accrued interest at a conversion price of $1.50 per share. The warrants may be exercised in whole or in part.

 

Due to the Company’s breach of the authorization limit of common stock on a diluted basis on August 14, 2014, the Company initially classified the above noted warrants issued since this date as financial liabilities, which would otherwise be recorded as equity instruments and classified as part of additional paid in capital. All derivatives other than stock options issuable into common stock were to be classified and accounted for as financial liabilities until the breach of the Company’s authorization limit of common stock on a diluted basis was rectified. On December 31, 2014 the Company increased its authorized share issuance limit to 400,000,000 which rectified the breach. The accounting impact of the August 14, 2014, breach only occurred under the earliest issue date sequencing approach at the date of the next issued applicable derivative, which was September 2, 2014. On December 31, 2014, all derivatives impacted by the Company’s breach of its authorized share limit were reclassified to equity from liabilities.

 

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The following table summarizes the fair values of Convertible Debentures with Series C or Series D Warrants and the respective inputs to determine fair values at the commitment date and the quarter end dates.

 

Accounting allocation of initial proceeds:   Fourth
Quarter
Fiscal 2014
    First
Quarter
Fiscal 2015
    Second
Quarter
Fiscal 2015
 
Gross proceeds   $ 1,050,000     $ 250,000     $ 225,000  
Fair value of the convertible debentures     (852,726 )     (254,167 )     (182,720 )
Fair value of liability warrants     -       -       (152,951 )
Fair value of equity warrants     (197,274 )     -       -  
Financing expense on the issuance of derivative instruments   $ -     $ 4,167     $ 110,671  
                         
Key inputs to determine the fair value at the commitment date:                        
Stock price   $  1.50-1.60     $ 2.00      $ N/A  
Current exercise price   $ 1.50     $ 1.50      $ N/A  
Time to expiration – days     731       731         N/A  
Risk free interest rate     .37 %     .45 %       N/A
Estimated volatility     150 %     150 %       N/A %
Dividend     -       -       -  
Market interest rate for the Company     18 %     18 %       N/A
Key inputs to determine the fair value of the convertible debentures at May 31, 2015:                        
Stock price   $ N/A     $ N/A     $  N/A  
Current exercise price   $ N/A     $ N/A     $  N/A  
Time to expiration – days       328-365       393         460-515  
Risk free interest rate       N/A %       N/A %       N/A %
Estimated volatility       N/A %       N/A %       N/A %
Dividend       N/A         N/A         N/A  
Market interest rate for the Company       N/A %       N/A %       N/A %
Key inputs to determine the fair value of the convertible debentures at February 29, 2016:                        
Stock price   $  N/A     $   N/A     $ N/A  
Current exercise price   $ N/A     $ N/A     $ N/A  
Time to expiration – days       54-91       119       186-241  
Risk free interest rate       N/A %         N/A %       N/A %
Estimated volatility       N/A %         N/A %       N/A %
Dividend       N/A           N/A         N/A  
Market interest rate for the Company       N/A %         N/A %       N/A %

 

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8. Convertible Secured Debentures

 

On December 30, 2015, the Company completed a secured debenture and warrant financing of $2,086,000 ($1,075,00 from directors of the Company) through the offering of units by way of private placement, with each unit consisting of (i) a 12% secured convertible debenture with a maturity date of five years from issuance convertible at $0.25 per common stock and (ii) ten (10) five year common share purchase warrants, vesting in 1/3 increments with 1/3 vested immediately, 1/3 to be vested in one year and 1/3 to be vested in two years and having an exercise price of $0.01 per share. The units were sold at $1.00 per unit. This closing includes conversion of $1,201,000 in short term loans advanced during the quarter prior to the closing of this secured debenture. Additionally, this includes $46,000 that the Company is yet to receive in cash and is currently recorded as subscription receivable. 

 

Values were allocated for this private placement between the debt, equity warrants, and the beneficial conversion feature. The valuation approach involved determining a fair value for the debt and warrants and then using the relative fair value method to allocate value to these components. Based on relative fair values, the present value method was used to determine the fair values of the debt and the binomial tree option pricing model was used to determine the fair value of the warrants. The value of the interest and principal payments of the debentures resulted in a value of $469,370 for the debentures and the binomial model resulted in a value for warrants for $1,616,630. The assumptions used for the binomial model are: Volatility 314%, expected life of five years, risk free interest rate of 1.80%, and dividend rate of 0%. Additionally, this convertible secured debenture instrument includes a beneficial conversion feature as the effective conversion price is less than the Company’s market price of common stock on the commitment date. The value of this beneficial conversion feature is $469,370. The resulting fair value of the debt is $nil, with $1,616,630 allocated to equity warrants and $469,370 to the beneficial conversion feature, both which are recorded as components of additional paid in capital.

 

The difference between the fair value and face value of the debentures is to be accreted up to face value over the term to maturity using the effective interest method. The carrying value of the debenture liability as at February 29, 2016 is $69,687, which is the amount of accretion recorded during the three month period ended February 29, 2016 included as change in fair value.

 

The following table summarizes the fair values of the components of the convertible secured debentures, including the debt, warrants, and the beneficial conversion feature.

 

Accounting allocation of initial proceeds:   December 30,
2015
 
Gross proceeds   $ 2,086,000  
Fair value of the convertible secured debt     -  
Fair value of equity warrants (Note 10)     (1,616,630 )
Beneficial conversion feature     (469,370 )

 

Convertible secured debt at fair value at the commitment date, issued during 2016    $ -  
Change in fair value (from commitment date)     69,687  
Repayments (cash)     -  
Convertible secured debenture at fair value at February 29, 2016    $ 69,687  

 

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9. Common Stock

 

On December 31, 2014, the Company’s authorized number of common shares was increased to 400,000,000.

 

During the Company’s second quarter of fiscal 2015, the Company issued 95,000 shares of common stock to consultants at a value of $95,000. During the Company’s third quarter of Fiscal 2015, the Company issued 80,000 shares of common stock to consultants at a value of $80,000. During the Company’s fourth quarter of Fiscal 2015, the Company issued 54,000 shares of common stock to consultants at a value of $52,500.

 

On May 25, 2015, the Company issued 100,000 shares of common stock with a value of $80,000 in partial settlement of an amount owing to a vendor of the Company.

 

On August 31, 2015 the Company issued 11,667 shares of common stock in the form of a cashless exercise with a previous allocation to equity of $37,100 in full settlement of warrants issued to Typenex (Note 7).

 

From April 9, 2014 through February 3, 2015, various holders of convertible preferred stock exercised their right to convert to common stock. A total of 936,000 shares of convertible preferred stock were converted into common stock (Note 10).

 

On September 15, 2015, the Company closed an agreement with Ortsbo Inc. to acquire all of its intellectual property assets. The purchased assets include US Patent No. 8,983,850 B2, US Patent No. 8,917,631 B2, US Patent No. 9,053,097 B2, and other intellectual property including Ecommerce and Customer Care know-how for a total purchase price of $16,968,888, which was paid by the assumption of $975,388 in debt and the issuance of $15,993,500 worth of Yappn restricted common shares (32 Million shares at $0.50 per share). During the second quarter, 12,998,682 shares were issued with obligations incurred to issue the remaining 18,988,318 shares when signed registration forms are all obtained by the Company. As at the filing date, the 18,988,318 remain reserved but not issued (Note 4).

 

Registration Statement

 

The Company filed a Registration Statement on Form S-1 (File No. 333-199569) (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) for up to 7,592,667 shares of Yappn Corp.’s $0.0001 par value per share common stock (the "Common Stock") issuable to certain selling stockholders upon conversion of promissory notes and/or warrants currently held by those selling stockholders, specifically (i) 1,844,000 shares of Common Stock issuable to them upon exercise of promissory notes and (ii) 4,588,000 shares of Common Stock issuable to them upon exercise of warrants. The warrants have an exercise price varying from $1.00 to $2.20 per share (subject to adjustment). The Registration Statement covering the above noted shares was declared effective under the Securities Act of 1933 on November 17, 2014. On October 5, 2015, the Company filed a continuing registration statement in part to update to this S-1 filing, and subsequently filed an amendment to this filing.

 

As part of the contractual rights of certain existing convertible debenture holders, the Company finalized its calculation of shares to be issued in association with the timing of filing its Registration Statement noted above. This resulted in a value of shares to be issued in the amount of $124,567. These shares have not been issued as of February 29, 2016.

 

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10. Preferred Stock and Warrants

 

Series A Preferred Stock

 

The Company has an authorized limit of 50,000,000 shares of preferred stock, par value $0.0001.

 

The following table reflects the preferred stock activity for the year ended May 31, 2015 and the three and nine month periods ended February 29, 2016:

 

    Preferred Stock  
Total – as of May 31, 2014     201,000  
Conversion of preferred stock into common stock     (201,000 )
Total – as of May 31, 2015 and  February 29, 2016     -  

  

The 201,000 preferred shares were exchanged into common shares on February 3, 2015 at a conversion value of $201,000. 

  

Warrants

 

Subscription Agreement with Series A Preferred Shares

 

On March 28, 2013, May 31, 2013 and June 7, 2013, the Company issued a total of 936,000 five year warrants as part of a Unit under subscription agreements that included Series A preferred shares with full ratchet anti-dilution protection provisions. The price protection provisions were effective for twelve months from date of issuance.

 

22

 

 

On November 15, 2013, the Company issued 12,000 warrants under the same full ratchet anti-dilution provisions as the other warrants, to a broker as compensation for a portion of the private placement made on May 31, 2013 for these Units.

 

Series A, B, C and D Warrants

 

On January 29, 2014, February 27, 2014, and April 1, 2014, the Company issued 395 Series A and Series B warrants, 305 Series A and Series B warrants, and 469 Series A and Series B warrants, respectively, with unsecured 6% convertible promissory notes (Note 7), as part of the defined offered Unit under the subscription agreements on those respective dates. Each Series A warrant entitles the holder thereof to purchase 1,000 shares of common stock for a purchase price of $1.00 per share after the re-pricing of the instruments took place. Each Series B warrant entitles the holder thereof to purchase 1,000 shares of common stock for a purchase price of $2.20 per share.

 

The Series A and Series B warrants permit cashless exercise beginning with the effective date unless and until a registration statement covering the resale of the shares underlying the warrants is effective with the Securities and Exchange Commission. The Series A warrants, for a period of twelve months from the original date of issuance, provide full ratchet price protection provisions and as such are treated as a derivative liability at the commitment date and until such provisions expire being January 29, 2015 February 27, 2015 and April 1, 2015, respectively. The Series B warrants do not provide any price protection provisions and therefore are treated as equity instruments at the commitment date and thereafter. Both the Series A and Series B warrants have a five year life.

 

During the fourth quarter of fiscal 2014, the Company authorized and issued Series C warrants to acquire 33,333 and 666,667 shares of common stock on April 23, 2014 and May 30, 2014, respectively, to accredited investors with unsecured 6% convertible debenture, $100 par value, convertible into shares of the Company’s common stock at a conversion price of $1.50 per share, with a one year price protection clause on any conversion feature issued after the issuance date, that matures on April 23, 2016 and May 30, 2016 respectively. The Series C warrants entitle the holder thereof to purchase shares of common stock at a purchase price of $2.20 per share and have a five year life. The Series C warrants do not provide any price protection provisions and therefore are treated as equity instruments at the commitment date and thereafter.

 

During the first quarter of fiscal 2015, the Company authorized and issued two separate issues of 125 Units on June 27, 2014. This total authorized and issuance of 250 Units, at a value of $250,000, was to two independent accredited investors in exchange for $150,000 in cash and release of $100,000 in the loan originated on January 7, 2014 as described in Note 6. The Units, as defined in the subscription agreement, consist of (i) one unsecured 6% convertible debenture, $100 par value convertible into shares of the Company’s at a common stock conversion price of $1.50 per share, with a one year price protection clause on any conversion feature issued after the issuance date, that matures on June 27, 2016; and (ii) a warrant entitling the holder thereof to purchase 166,667 shares of common stock (Series C Warrant) at a purchase price of $2.20 per share that expires on June 27, 2019.

 

During the second quarter of fiscal 2015, the Company authorized and issued Series C warrants to acquire 83,333 shares of common stock on September 2, 2014 and issued Series D warrants to acquire 33,333 and 33,333 shares of common stock on October 6, 2014, and October 27, 2014 respectively, to accredited investors. The Units, as defined in the subscription agreement, consist of (i) one unsecured 6% convertible debenture, $100 par value convertible into shares of the Company’s common stock at a conversion price of $1.50 per share, with a one year price protection clause on any conversion feature issued after the issuance date, that matures on September 2, 2016, October 6, 2016, and October 27, 2016 respectively; and (ii) a warrant entitling the holder thereof to purchase 166,667 shares of common stock (Series D Warrant) at a purchase price of $2.20 per share that expires on September 2, 2016, October 6, 2016, and October 27, 2016 respectively. The Series D warrants do not provide any price protection provisions and therefore should be treated as equity instruments at the commitment date and thereafter; however these warrants were originally recorded as liabilities as the Company breached its authorized share limit on a diluted basis, which required any additional warrants that otherwise would have been recorded as equity instruments to be recorded as liability instruments. On December 31, 2014, the Company rectified its breach of authorized share limit and the warrants were reclassified to equity.

 

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Line of Credit Arrangement

 

Pursuant to the loan agreement and promissory note entered on April 7, 2014 (Note 6), the Company issued the lender warrants to purchase up to 800,000 shares of the Company’s common stock at an exercise price of $1.00 per share.

 

The following is a summary of warrants issued, exercised and expired through February 29, 2016:

 

   Shares
Issuable
Under
Warrants
   Exercise
Price
   Expiration
Outstanding as of May 31, 2012   -    -   -
Issued on March 28, 2013   401,000   $1.00   March 28, 2018
Issued on May 31, 2013   370,000   $0.54   May 31, 2018
Exercised and expired   -    -   -
Total – as of May 31, 2013   771,000    -   -
Issued on June 7, 2013   165,000   $0.54   June 7, 2018
Issued on November 15, 2013   12,000   $1.00   November 15, 2018
Issued Series A warrants on January 29, 2014   395,000   $1.00   January 29, 2019
Issued Series B warrants on January 29, 2014   395,000   $2.00   January 29, 2019
Issued Series A warrants on February 27, 2014   305,000   $1.00   February 27, 2019
Issued Series B warrants on February 27, 2014   305,000   $2.00   February 27, 2019
Issued Series A warrants on April 1, 2014   469,000   $1.00   April 1, 2019
Issued Series B warrants on April 1, 2014   469,000   $2.00   April 1, 2019
Issued to Lender – Line of Credit   800,000   $1.00   April 7, 2019
Issued Series C warrants on April 23, 2014   33,333   $2.20   April 23, 2019
Issued Series C warrants on May 30, 2014   666,667   $2.20   May 30, 2019
Exercised and expired   -         
Total – as of May 31, 2014   4,786,000         
Issued Series C warrants on June 27, 2014   166,667   $2.20   June 27, 2019
Issued Series C warrants on September 2, 2014   83,333   $2.20   September 2, 2019
Issued Series D warrants on October 6, 2014   33,333   $2.20   October 6, 2019
Issued Series D warrants on October 27, 2014   33,333   $2.20   October 27, 2019
Issued warrants – consultants   330,000   $1.50   May 30, 2019
Issued warrants on February 4, 2015 Typenex Co-Investments, LLC   70,000   $1.00   February 4, 2020
Issued warrants – consultant on May 31, 2015   5,000   $1.00   May 31, 2017
Issued warrants – consultant on May 31, 2015   15,000   $1.50   May 31, 2017
Exercised and expired   -         
Total – as of May 31, 2015   5,522,666         
Issued warrants on September 28, 2015 – board of directors   300,000   $1.00   August 31, 2020
Issued to Lender – Line of Credit on November 5, 2015   1,700,000   $1.00   April 7, 2019
Issued warrants – consultant on November 5, 2015   100,000   $1.00   October 16, 2017
Issued warrants on December 30, 2015   20,860,000   $0.01   December 29, 2020
Exercised Warrants Typenex Co-Investments, LLC   (70,000)  $1.00    
Total – as of February 29, 2016   28,412,666         

  

The outstanding warrants at February 29, 2016 and May 31, 2015 have a weighted average exercise price of approximately $0.35 and $1.42 respectively and have an approximate weighted average remaining life of 4.6 and 3.7 years, respectively.

 

24

 

 

The price protection provisions of those warrants issued as part of the Series A Preferred Stock subscription prior to May 31, 2013, have expired and, as such, the instruments issued on March 28, 2013 are recognized as equity instruments. The price protection provisions of the Series A warrants issued as part of the January 29, 2014 and February 28, 2014 convertible debenture financing have expired, and as such, these warrants are now recognized as equity instruments. The Series B warrants, Series C warrants, and warrants associated with the Line of Credit arrangement do not provide the holder any price protection, and as there is no variability in the determination of common stock, these warrants are also reflected as equity instruments.

 

The Company issued warrants to two separate consulting firms in the amount of 200,000 and 130,000 respectively included in consulting expense on October 6, 2014 with an exercise price of $1.50 both with expiry dates of May 30, 2019.

 

The Company issued warrants to a consultant in the amount of 5,000 on May 31, 2015 at an exercise price of $1.00 and 15,000 also on May 31, 2015 with an exercise price of $1.50, both included in consulting expense and with expiry dates of May 31, 2017.

 

The Company issued 300,000 warrants on September 28, 2015 to new Board of Directors at an exercise price of $1.00 with expiry of five years from September 1, 2015. These were expensed as stock based compensation.

 

The Company issued 1,700,000 warrants to the line of credit holder included in financing expense in contemplation of taking a pari passu security position and allowing Winterberry to act as collateral agent for the secured debenture financing. These warrants were issued November 5, 2015 have an exercise price of $1.00 with expiry date of April 7, 2019.

 

The Company issued warrants to a consultant in the amount of 100,000 included in financing expense on November 5, 2015 at an exercise price of $1.00 with expiry date of October 16, 2017.

 

On December 30, 2015, the Company issued 20,860,000 warrants with secured 12% convertible secured debentures (Note 8), as part of the subscription agreements. Each warrant entitles the holder thereof to purchase shares of common stock for a purchase price of $0.01 per share for up to a maximum of 10 shares for every $1 of subscription. These shares will vest in increments of 1/3 with the first 1/3 being vested on December 29, 2016, second increment of 1/3 on December 29, 2017, and last 1/3 on December 29, 2018.

  

The following table is a summary of those warrants that are reflected in equity as at February 29, 2016:

 

   Shares
Issuable
Under
Warrants
   Equity
Value
 
Issued warrants on March 28, 2013   401,000   $917,087 
Issued warrants on May 31, 2013   370,000    543,530 
Issued warrants on June 7, 2013   165,000    211,670 
Issued warrants on November 15, 2013   12,000    3,744 
Issued Series A warrants on January 29, 2014   395,000    397,895 
Issued Series B warrants on January 29, 2014   395,000    - 
Issued Series A warrants on February 27, 2014   305,000    224,135 
Issued Series B warrants on February 27, 2014   305,000    - 
Issued Series A warrants on April 1, 2014   469,000    234,969 
Issued Series B warrants on April 1, 2014   469,000    - 
Issued to Loan Agreement - Credit Line   800,000    1,495,200 
Issued Series C warrants on April 23, 2014   33,333    9,395 
Issued Series C warrants on May 30, 2014   666,667    187,574 
Issued Series C warrants on June 27, 2014   166,667    - 
Issued Series C warrants on September 2, 2014   83,333    38,584 
Issued Series D warrants on October 6, 2014   33,333    15,567 
Issued Series D warrants on October 27, 2014   33,333    15,667 
Warrants issued to consultants   330,000    165,330 
Issued warrants on May 31, 2015   20,000    3,960 
Issued warrants on September 28, 2015   300,000    227,100 
Issued warrants on November 5, 2015   1,700,000    519,520 
Issued warrants on November 5, 2015   100,000    23,240 
Issued warrants on December 30, 2015   20,860,000    1,616,630 
Total – as of  February 29, 2016   28,412,666   $6,850,797 

  

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11. Warrant Liabilities

 

The Company has determined derivative warrant liabilities are Level 2 fair value measurement and has used the binominal lattice pricing model to calculate the fair value as at each reporting period in fiscal 2015 and prior to expiry. The binomial lattice model requires six basic data inputs: the exercise or strike price, time to expiration, the risk free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate.

 

The following is a summary of the derivative warrant liability as at February 29, 2016 and May 31, 2015:

 

   Shares Issuable Under Warrants   Derivative Warrant Value 
Balance as of June 1, 2013   771,000   $4,050,278 
Warrants issued June 7, 2013   165,000    1,146,915 
Warrants issued November 15, 2013   12,000    9,636 
Series A warrants issued on January 29, 2014   395,000    161,950 
Series A warrants issued on February 27, 2014   305,000    125,050 
Series A warrants issued on April 1, 2014   469,000    776,664 
Warrants reclassified to equity (price protection expiry)   (401,000)   (917,087)
Warrants exercised or expired   -    - 
Decrease in fair value of derivative warrant liability   -    (2,822,124)
Balance as of May 31, 2014   1,716,000    2,531,282 
Warrants reclassified to equity (price protection expiry and authorized share limit increase Notes 9 and 10)   (1,716,000)   (1,851,090)
Warrants exercised or expired   -    - 
Decrease in fair value of derivative warrant liability   -    (680,192)
Balance as of May 31, 2015 and February 29, 2016   -   $- 

   

For the nine months ended February 29, 2016 and February 28, 2015, the revaluation of the warrants at each reporting period resulted in the recognition of a gain of $nil and $1,081,984 respectively within the Company’s consolidated statements of operations and comprehensive loss and is included under the caption “Change in fair value of derivative liabilities and convertible notes”.

   

12. Employee Benefit and Incentive Plans

 

On August 14, 2014, the Board of Directors approved the adoption of the 2014 Stock Option Plan. The Company completed its first grant of stock options immediately after the plan was approved. The Company completed a second grant of stock options on March 2, 2015. The following table outlines the options granted and related disclosures:

 

   Stock
Options
   Weighted-
Average
Exercise Price
 
Outstanding (Granted all in Fiscal 2015)   1,804,500   $1.00 
Exercised   -    - 
Cancelled, forfeited or expired   114,500    - 
Outstanding at February 29, 2016   1,690,000   $1.00 
Options exercisable at February 29, 2016   1,066,667   $1.00 
Fair value of options vested as at February 29, 2016  $907,200    - 

 

On August 21, 2015, the Company amended its 2014 Stock Option Plan to increase the number of options available to 25,000,000.

 

As at February 29, 2016, vested and exercisable options do not have any intrinsic value and have a weighted-average remaining contractual term of 2.9 years. It is expected the 623,333 unvested options will ultimately vest, and each has an exercise price of $1.00 per share and a weighted average remaining term of 1.75 years. The aggregate intrinsic value of options represents the total pre-tax intrinsic value, the difference between our closing stock price as at February 29, 2016 and the option’s exercise price, for all options that are in the money. This value was $nil as at February 29, 2016.

 

As at February 29, 2016, there is $426,756 of unearned stock based compensation cost related to stock options granted that have not yet vested (623,333 options). This cost is expected to be recognized over a remaining weighted average period of 0.2 years.

 

710,000 of the stock options granted on August 14, 2014 vest 1/3 immediately, 1/3 after one year and 1/3 after two years. 15,000 options vest contingent on revenue targets, and 15,000 options have vested on April 1, 2015. The remaining options all have immediate vesting terms. 520,000 of the stock options granted on March 2, 2015 vest 1/3 immediately, 1/3 after one year and 1/3 after two years. 50,000 vest 1/2 immediately and 1/2 after one year. The remaining options all have immediate vesting terms.

 

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The estimated fair value of options granted on August 14, 2014 is measured using the binomial model using the following assumptions:

 

Total number of shares issued under options   1,047,000 
Stock price  $1.00 
Exercise price  $1.00 
Time to expiration – days (2 year options)   730 
Time to expiration – days (5 year options)   1,826 
Risk free interest rate (2 year options)   .42%
Risk free interest rate (5 year options)   1.58%
Forfeiture rate (all options)   0%
Estimated volatility (all options)   150%
Weighted-average fair value of options granted   0.90 
Dividend   - 

  

The estimated fair value of options granted on March 2, 2015 is measured using the binomial model using the following assumptions:

 

Total number of shares issued under options   757,500 
Stock price  $0.60 
Exercise price  $1.00 
Time to expiration – days (2 year options)   730 
Time to expiration – days (5 year options)   1,826 
Risk free interest rate (2 year options)   .66%
Risk free interest rate (5 year options)   1.57%
Forfeiture rate (all options)   0%
Estimated volatility (all options)   150%
Weighted-average fair value of options granted   0.50 
Dividend   - 

  

The assumptions used in the stock based compensation binomial models are consistent with the methodology used in valuing the Company’s convertible debt instruments with two year lives, and the Company’s warrants with five year lives. Due to a lack of history, the Company has assumed the expected life of the options, is the contractual life of the options.

 

13. Related Party Balances and Transactions

 

On March 28, 2013, the Company purchased the Yappn assets from Intertainment Media, Inc. in consideration for 7,000,000 shares of common stock for a controlling 70 percent interest (as of that date, 52.1% as at February 29, 2016, 32% once remaining shares are issued from acquisition of Ortsbo IP) in the Company. At that time, the Chief Executive Officer and director of the Company was David Lucatch (since resigned), who is also the Chief Executive Officer and director of Intertainment Media, Inc. and Herb Willer who was a director of the Company and is a director of Intertainment Media, Inc.

 

On March 28, 2013, as part of the assets purchased, the Company also assumed a technology services agreement with Ortsbo Inc. (“Ortsbo”), a wholly-owned subsidiary of Intertainment Media, Inc. Mr. Lucatch is also the president and a member of the Board of Directors of Ortsbo, Inc. Mr. Lucatch is also a member of the Board of Directors of Ortsbo USA, Inc. The service agreement requires the Company to pay cost plus thirty percent (30%) for actual cost incurred by Ortsbo in providing technology services. Upon closing of the acquisition of Ortsbo intellectual property on September 15, 2015, the service agreement was terminated.

 

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On October 23, 2013, the Company and Ortsbo, entered into an amendment to the Services Agreement dated March 28, 2013 for an exclusive license to use the Ortsbo property and an option to purchase a copy of the Ortsbo source code in exchange for 166,667 shares of restricted common stock of the Company. The shares of common stock were valued at the market price on the date of the agreement for a value of $133,333. On April 28, 2014, the Company exercised its right to purchase a copy of the source code for the Ortsbo property in exchange for 1,333,333 shares of restricted common stock. Since both the Company and Ortsbo are under the common control of Intertainment Media, Inc., and as Ortsbo’s carrying value for these assets was $nil, the Company reflected the acquisition value at $nil on the consolidated balance sheet. As of February 29, 2016, Ortsbo holds 1,500,000 restricted shares of common stock of the Company.

 

Services provided by Intertainment Media, Inc. personnel are invoiced on a per hour basis at a market rate per hour as determined by the type of activity and the skill set provided. Costs incurred by Intertainment Media, Inc. on behalf of the Company for third party purchases are invoiced at cost.

 

On September 15, 2015, the Company closed an agreement with Ortsbo Inc. to acquire all of its intellectual property assets. The purchased assets include US Patent No. 8,983,850 B2, US Patent No. 8,917,631 B2, US Patent No. 9,053,097 B2, and other intellectual property including Ecommerce and Customer Care know. With this closing, the Company had an obligation to issue 31,987,000 shares of common stock of Yappn. During the quarter 12,998,682 shares were issued comprising of 8,312,500 to Ortsbo Inc. and 4,686,182 to the former debt and minority shareholders of Ortsbo, which were valued at $1,806,608, leaving 18,988,318 shares to be issued at February 29, 2016 comprising 17,687,500 to Winterberry and 1,300,818 to a former holder of Ortsbo stock. As of the filing date, these aforementioned shares remain to be issued. Yappn also assumed $975,388 of debt as part of the transaction. This assumed debt was immediately subscribed as part of the secured debenture in Yappn (Note 6). The fair value for the agreed upon consideration for the acquisition of Intellectual property from Ortsbo was $16,968,888. This transaction was completed on September 15, 2015. Due to the common control of Ortsbo Inc. and Yappn Corp the value of the Intangible assets acquired from Ortsbo was recorded at the carrying value in the financial records of Ortsbo Inc. This value was $5,421,068 on September 15, 2015 (Note 4).

 

For the nine month period ended February 29, 2016, related party fees incurred and paid for general development and managerial services performed by Intertainment Media, Inc. and its subsidiary totaled $128,229 ($725,779 – nine months ending February 28, 2015). As of February 29, 2016 the related party liability balance totaled $66,787 ($468,766 – May 31, 2015).

 

Directors subscribed for $1,075,000 of the $2,086,000 convertible secured debentures issued on December 30, 2015 (note 8). A director also advanced $120,000 to the Company on a second closing of the same convertible secured debenture financing closed on December 30, 2015 (note 5).

 

14. Subsequent Events

 

The Company granted 8,775,000 stock options to employees and consultants at an exercise price of $0.25 per share, with a 5 year life vesting over three years. The Company also re-priced 1,230,000 options previously issued to employees to $0.25 per share from their original pricing of $1.00 per share.

 

The Company granted future rights to issue stock of up to 4,000,000 shares in total to Board of Directors on achievement of revenue milestones.

 

The Company received advances of $250,000 towards a tranche to be closed at a future date in a private placement of units consistent of one common stock at $0.25 per share and one common stock purchase warrant with an exercise price of $0.25 per share.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

Unless otherwise indicated, references in this Quarterly Report on Form 10-Q to “we,” “Yappn,” “us,” and “our” are to Yappn Corp., unless the context requires otherwise. The following discussion and analysis by our management of our financial condition and results of operations should be read in conjunction with our unaudited Interim Condensed interim financial statements and the accompanying related notes included in this quarterly report and our audited financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended May 31, 2015 filed with the Securities and Exchange Commission.

 

Forward Looking Statements

 

The discussion contained in this Quarterly Report on Form 10-Q (“Quarterly Report”) contains “forward-looking statements” within the meaning of Section 27A of the United States Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the United States Securities Exchange Act of 1934, as amended, or the Exchange Act. Any statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases like “anticipate,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “target,” “expects,” “management believes,” “we believe,” “we intend,” “we may,” “we will,” “we should,” “we seek,” “we plan,” the negative of those terms, and similar words or phrases. We base these forward-looking statements on our expectations, assumptions, estimates and projections about our business and the industry in which we operate as of the date of this Quarterly Report. These forward-looking statements are subject to a number of risks and uncertainties that cannot be predicted, quantified or controlled and that could cause actual results to differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. Statements in this Quarterly Report describe factors, among others, that could contribute to or cause these differences. Actual results may vary materially from those anticipated, estimated, projected or expected should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect. Because the factors discussed in this Quarterly Report could cause actual results or outcomes to differ materially from those expressed in any forward-looking statement made by us or on our behalf, you should not place undue reliance on any such forward-looking statement. New factors emerge from time to time, and it is not possible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available after the date of this Quarterly Report or the date of documents incorporated by reference herein that include forward-looking statements.

 

Management’s Discussion and Analysis of Results of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with our financial statements included herein. Further, this quarterly report on Form 10-Q should be read in conjunction with our Financial Statements and Notes to Financial Statements included in our Annual Report on Form 10-K for the year ended May 31, 2015, filed with the Securities and Exchange Commission on August 26, 2015. Our actual results could differ materially from those anticipated by the forward-looking statements due to important factors and risks including, but not limited to, those set forth under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K.

 

Business History

 

We were originally incorporated under the laws of the State of Delaware on November 3, 2010 under the name of “Plesk Corp.”  Our initial business plan was to import consumer electronics, home appliances and plastic house wares. In March 2013, we filed an amended and restated certificate of incorporation to change our name to “YAPPN Corp.” and increase our authorized capital stock to 200,000,000 shares of common stock, par value $0.0001 per share and 50,000,000 shares of preferred stock, par value $0.0001 per share.  Further, in March 2013, our Board of Directors declared a stock dividend, whereby an additional 14 shares of our common stock was issued for each one share of common stock outstanding to each holder of record on March 25, 2013.  All per share information in this report reflect the effect of such stock dividend. On December 22, 2014, our shareholders approved the increase of authorized and issued shares of common stock to 400,000,000 shares of common stock. We filed an amendment with the State of Delaware to affect this change which was accepted effective December 31, 2014.

 

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On March 28, 2013, we purchased a prospective social media platform and related group of assets known as Yappn (“Yappn”) from Intertainment Media, Inc. (“IMI”), a corporation organized under the laws of Canada, for 7,000,000 shares of our common stock, pursuant to an asset purchase agreement (the “Purchase Agreement” and the transaction, the “Asset Purchase”) by and among IMI, us, and our newly formed wholly owned subsidiary, Yappn Acquisition Sub., Inc., a Delaware corporation (“Yappn Sub”).  Mr. David Lucatch, our prior Chief Executive Officer and a current director, is the Chief Executive Officer of IMI.  IMI, as a result of this transaction has a controlling interest in our company.  Included in the purchased assets is a services agreement (the “Services Agreement”) dated March 21, 2013 by and among IMI and its wholly owned subsidiaries Ortsbo, Inc., a corporation organized under the laws of Canada (“Ortsbo Canada”), and Ortsbo USA, Inc., a Delaware corporation (“Ortsbo USA” and, collectively with Ortsbo Canada, “Ortsbo”).  Ortsbo is the owner of certain multi-language real time translation intellectual property that we believe is a significant component of the Yappn business opportunity. On July 6, 2015, Yappn entered into a definitive agreement to acquire all of the intellectual property assets of Ortsbo (see below).

  

Immediately following the Asset Purchase, under the terms of an Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations, we transferred all of our pre-Asset Purchase assets and liabilities (consisting of our former business of import consumer electronics, home appliances and plastic house wares) to our wholly owned subsidiary, Plesk Holdings, Inc., a Delaware corporation. Thereafter, pursuant to a stock purchase agreement, we transferred all of the outstanding capital stock of Plesk Holdings, Inc. to certain of our former shareholders in exchange for cancellation of an aggregate of 11,250,000 shares of our common stock held by such persons.

 

On July 15, 2015, after the approval of the Board of Directors of each company, Intertainment Media and Yappn entered into a definitive agreement to acquire all of the intellectual property assets of Ortsbo.

 

The purchased assets include US Patent No. 8,983,850 B2, US Patent No. 8,917,631 B2, US Patent No. 9,053,097 B2, and other intellectual property including Ecommerce and Customer Care know-how for a total purchase price of $17 Million, which will be paid by the assumption of $1 Million in debt and the issuance of $16 Million worth of our restricted common shares (32 Million shares at $0.50 per share). 

 

Intertainment Media received Toronto Stock Venture Exchange final approval on September 14, 2015 to proceed with the transaction. On September 14, 2015, the acquisition of Ortsbo Intellectual property by our company was closed.

 

Our principal executive offices are located at 1001 Avenue of the Americas, 11th Floor, New York, NY 10018 and our telephone number is (888) 859-4441. Our website is http://www. yappn.com (which website is expressly not incorporated into this filing).

 

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Our Business

 

Our company is a real-time multilingual company that amplifies brand and social messaging, expands online commerce and provides customer support by globalizing these experiences with its proprietary technologies, solutions and linguistic computational approach to language service and engagement in a cost effective way. Through our real-time multilingual amplification platform, we eliminate the language barrier, allowing the free flow of communications in 67 languages to support brand and individuals’ marketing objectives, commerce revenue goals and customer support objectives by making language universal for all fans and consumers.

 

Focused on delivering global reach and efficiencies without the primary need of human intervention, these services are increasingly becoming essential for companies to conduct business online, as English is no longer the language of the Internet. According to InternetWorldStats.com, as of December 2014, there were over 3 billion Internet users and over 73% engage online in a language other than English. The US Census released by the Center of Immigration Studies last October, 2014 cites that in 2013, a record 61.8 million U.S. residents spoke a language other than English at home, which means that approximately one in five U.S. residents speaks a language other than English, representing a 32% increase from 2010 and almost a 94% increase since 1990.

 

Our offerings engage through all phases of Ecommerce, online events, and content programming. Through our recently launched Windrose Global Ecommerce framework (“WGE”), we provide an end-to-end multilingual Ecommerce solution for companies of all sizes. Covering everything from pre to post sale, WGE’s proprietary suite includes all the tools for multilingual marketing (advertising), shopping (store, catalog, shopping cart and check-out) and customer support.

 

Our cloud-based platform is built from the ground up upon our company’s first-in-class technology that automatically detects an online or mobile user’s language. WGE completes the process through advanced technology to understand the meaning and interpretation of a message to seamlessly return a translation that is reflective of the meaning and spirit of the message.

 

Our WGE technology is, in managements’ opinion, a game changing solution that can help a retailer revolutionize their business quickly and cost effectively. By interfacing with a retailer’s existing Ecommerce solution, we can assist the E-tailer to greatly expand their global reach by presenting and promoting their store as well as supporting sales in multiple languages. An E-tailer no longer has to be constrained to whom they can sell to because of language.

 

We derive our revenue from a percentage of each sale and/or through professional services fees, when applicable, depending on the application and installation of its offerings. We redefine global social marketing by providing a set of stand-alone commercial tools for brands to easily implement cost effective globalization solutions as they are complementary, not competitive, to today’s top social media networks such as Twitter, Facebook, Pinterest, Instagram, Flickr and YouTube, web, mobile, video players, blogs, online broadcasting, private networks, event virtualization and Ecommerce platforms.

 

Continued expansion of our business rollout will likely require additional debt or equity financing and there can be no assurance that additional financing can be obtained on acceptable terms. We are in the early stage of commercialization, and management believes that we have insufficient revenues to cover our operating costs. As such, we have incurred an operating loss since inception. This and other factors raise substantial doubt about our ability to continue as a going concern. Our continuation as a going concern is dependent on our ability to meet our obligations, to obtain additional financing as may be required, and ultimately to attain profitability. Our independent auditors have included an explanatory paragraph, in their audit report on our financial statements for the fiscal year ended May 31, 2015 regarding concerns about our ability to continue as a going concern. Footnote 2 to the Notes to this Form 10-Q Report also discusses concerns about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Our Strategy

 

The Yappn Ecommerce business model includes a business plan that we believe allows companies to extend their reach online and become truly “international” by servicing customers in 67 languages. This advantage can improve their relationship with their consumers through the elimination of the language barrier and by offering the shopping cart and catalog in multiple languages. Out of 3 billion Internet users, only 800.6 million engage online in English, according to Internet World Stats.com. Management believes that prime markets for Ecommerce growth are in China, Eastern Europe and Latin America.

 

The Yappn tool set is comprised of three segments: Online Marketing, Ecommerce Sales, and Customer Care, to provide brands with a series of technology add-ons to complement their current social media activities and allows them to reach a global audience by instantly providing key messaging in 67 languages.

 

Online Marketing: Advertisement, Social Wall and FotoYapp, Live and Global Events, Video Capturing 

 

  Digital Advertisement will be presented in the viewer’s choice of language, regardless of their location. The WGE technology will automatically detect the language of the customers’ browser and present the ad in that language, inclusive of local promotions.

 

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  The Social Wall is an aggregation of major social media accounts for fans and consumers to interact with in 67 languages on up to 54 social media platforms.

 

  FotoYapp is a mobile app that provides brands with the ability to share media content instantly across the global social sphere, engaging customers via pictures and short burst video, deploying coupons presented as images. Customers can also use FotoYapp to draw users into their Estore from their social network pages with a unique embeddable FotoWall that resides in their web-store, thereby dramatically increasing traffic to their store. FotoYapp can currently connect to 54 different networks.

 

  A live Q&A is an interactive live stream with fans worldwide that allows them to participate and ask moderated questions in 67 languages.
     
  Engagement events such as a custom branded Twitter Q&A session which allows for real-time multilingual events to activate on a global scale for brands and individuals.
     
  Live video captioning is to broadcast a live event with real-time video closed captioning in 67 languages.
     
  Post-production video provides closed captioning in 67 languages for archive videos and feature films.  

 

Ecommerce Sales: Store, Catalog, Shopping Cart & Check-Out

 

  By interfacing with a retailer’s existing Ecommerce solution, the WGE technology helps a retailer greatly expand their global reach by presenting its store, catalog, shopping cart and check-out in up to 67 different languages instantaneously using enhanced machine-based translation.

  

Customer Care: Multilingual Chat

 

  Multilingual Chat provides companies, brands, organizations and consumers with the ability to have topical discussions in almost any language in real-time. Instant globalization allows a company to converse in a customer’s language of choice without incurring the heavy cost of a Customer Service Representative having fluency in every language that the business chooses to service in.

 

The tools are a "build once and deploy everywhere" arrangement allowing brands to embed key social media like Twitter, Facebook, YouTube, Instagram, Pinterest, Flickr and Tumblr and mobile into a total of 54 existing platforms. Yappn tools have been effectively tested and commercially deployed through a number of entertainment, sports and commercial brands and they are now available to agencies to enhance their client's domestic and global outreach plans. The programs are available on a servicing contractual basis and we have begun to receive commitments from various brands for the use of its tool sets.

 

According to eMarketer.com, China and USA are the world’s leading Ecommerce markets, combining for more than 55% of the world’s Internet retail in 2014. In 2015, worldwide web sales are expected to increase nearly 21% to $1.59 Trillion. With this view in mind, our newly launched WGE platform is focused on the Ecommerce market to enable retailers to break the language barrier that prevents them from accessing global markets. Yappn has altered this paradigm with an API (application program interface) that renders any Ecommerce site into a global site in real-time and in up to 67 languages inclusive of the shopping cart checkout. With very high fidelity experience and without any human translation or intervention, the Software as a Service (SaaS) application is focused on three distinct sales models: Partner, Direct and Channel.

 

The Partner Model is a “One to Many” sales model based on the Yappn Sales Team building relationships directly with partners with the intent of establishing contacts into the partner’s own community in addition to working with the partner themselves. This includes agencies, developer networks and software partnership communities.

 

The Direct Sales model is a “One-to-One” Model based on the Yappn Sales Team directly selling to a particular customer. This model is generally reserved for strategic and high brand value sales opportunities.

 

The Channel Sales Model is “One-to-One-to-Many” sales model based on the Yappn Sales Team building relationships directly with software and platform developers, like Shopify and other Ecommerce systems.

 

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Management will continue to develop additional revenue-centric features and tools and refine our current business plan. Each new feature set is built on a prime revenue driver for our business as it continues to work with clients and their agencies to develop new deployment tools and programs to reach an expanding global audience.

 

Digital Widget Factory

 

We have executed a three-year Master Services Agreement (MSA) and Statement of Work (SOW) with Digital Widget Factory (Belize) (“DWF”) to develop and manage a minimum of 200 multilingual Ecommerce sites which will include multilingual online marketing through traditional online services and social engagement. Contract terms allowed for pre-paid fees in association with the project of a minimum of $700,000 plus ongoing professional fees and 40% net profit on the program for the term duration.

 

The Global Content Market is an ever growing market, with Ipsos Market Research stating that 7 out of 10 online consumers in 24 countries indicate that in a month they share some type of content on social media sites, including pictures as well as articles and something recommended, such as a product, service, movie or book. Emarketer.com also points out that global ad spending will be nearly $600 billion worldwide in 2015 with the increase in digital and mobile platforms being the key growth in ad spending.

 

We will provide multilingual online marketing through traditional online services and social engagement with its proprietary patented technology to DWF by scheduling and supporting DWF’s revenue programs related to direct and network online advertising, schedule and support DWF’s affiliate and Ecommerce partnerships and also support DWF users to customize their content experience, submit original content and provides tools to incent sharing of content and encourage users to build the membership base.

 

Revenues recognized in nine month period ended February 29, 2016 from this program totaled $812,533, which were from ongoing development, programs. Starting at the beginning of the second quarter new billings have not been recorded as revenue in our financial statements. We received acknowledgment and acceptance of the services performed during the three and nine month period ended February 29, 2016, however due to the long period without payment, our management has determined the revenue recognition criteria starting in the second quarter has not been met for new billings. Our company and DWF continue to work together in ways to enable full and complete payment of the total billings incurred, both recognized and unrecognized as at February 29, 2016 (see below). Our management is focusing on developing and refining its technologies, and its relationships with commercial partners and influencers, which has delayed revenue realization in recent quarters related to e-commerce. With over 73% of the Internet surfing languages other than English, this program is designed to capture the foreign advertising market for content that is dominated in English speaking ad partners.

 

Effective February 29, 2016, DWF sold the technology platform, partially developed by us in conjunction with DWF’s principals to Intelligent Content Enterprises (“ICE”) in an all stock based transaction. As part of the transaction, DWF has ownership and rights to 24 million common shares of ICE for a large minority shareholder position of ICE. We have a draft promissory note from DWF, for the value of the billings of $2,125,000 ($1,431,489 is recorded as a receivable as at February 29, 2016), which is to be paid out over time, with the final payment expected by August 31, 2016. The promissory note is expected to be secured by DWF’s ICE holdings in the amount of 4,250,000 ICE shares, which at the current market value of ICE shares, as of this filing significantly exceeds to the value of the promissory note. Prior to the signing of the note on February 29, 2016, we received $55,428 and we have received another $208,200 subsequent to this quarter end. These amounts are recorded as recognized revenue of the oldest invoices not previously recognized as revenue, which only recognizes revenue on a basis of cash being received by us. With additional payment history and with additional elapsed time for the trading history of ICE, we believe we may be in a position to fully recognize previously unrecognized revenue prior to cash collection, as typically a secured note would provide sufficient assurances of payment to meet the collectability standard, but due to the payment history and limited trading time of ICE shares since the acquisition, management may make that assessment as part of its May 31, 2016 financial reporting.

 

The Services Agreement

 

We acquired the rights to use technology and management and development support services under the Services Agreement, dated March 21, 2013 and amended October 2013, between Intertainment Media, Inc. (“IMI”), and IMI’s wholly owned Ortsbo subsidiaries. Pursuant to the terms of the Services Agreement, Ortsbo made available to us its representational state transfer application programming interface (the “Ortsbo API”), which provides multi-language real-time translation as a cloud service. The Services Agreement also provides that Ortsbo makes its “Live and Global” product offering, which enables a cross language experience for a live, video streaming production, available to us as a service for marketing and promoting the Yappn product in the marketplace (the “Services”).  The Services do not include the “chat” technology itself and we shall be solely responsible for creating, securing or otherwise building out our website and any mobile applications to include chat functionality, user forums, user feedback, and related functionality within which the Ortsbo API can be utilized to enable multi-language use.  Under the initial agreement, no intellectual property owned by Ortsbo would be transferred to us except to the extent set forth in the Services Agreement as described in “Intellectual Property” set forth below. Subsequently, on July 6, 2015, we entered into a definitive agreement to acquire all of the intellectual property assets of Ortsbo which closed on September 15, 2015. Upon the completion of the transaction on September 15, 2015 the amended Services Agreement was terminated.

  

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In October 2013, we amended the Services Agreement.  Under the terms of the amendment to the Services Agreement, we would have the first right of refusal to purchase the Ortsbo platform and all its assets and operations for a period of two years; increasing its use of Ortsbo's technology for business to consumer social programs at a purchase price to be negotiated at the time we exercise our right. We would also have a right to purchase a copy of the source code only applicable to Yappn programs for $2,000,000 which may be paid in cash or restricted shares of our common stock at a per share price of $1.50 per share. As part of the enhancement agreement, we issued Ortsbo 166,667 shares of our restricted common stock. On April 28, 2014, we exercised our right to purchase a copy of the source code for the Ortsbo property in exchange for 1,333,333 shares of restricted common stock for a value of $2,000,000.

 

On July 6, 2015, we entered into a definitive agreement to acquire all of the intellectual property assets of Ortsbo which closed on September 15, 2015. The purchased assets include US Patent No. 8,983,850 B2, US Patent No. 8,917,631 B2, US Patent No. 9,053,097 B2, and other intellectual property including Ecommerce and Customer Care know-how for a total purchase price of US $17 Million, which will be paid by the assumption of US $1 Million in debt and the issuance of US $16 Million worth of our restricted common shares (32 Million shares at US $0.50 per share). Upon the completion of the transaction on September 15, 2015 the amended Services Agreement was terminated.

 

Competition

 

Our business relating to and arising from the development of our assets is characterized by innovation, rapid change, patented, proprietary and disruptive technologies.  We may face significant competition, including from companies that provide translation, tools to facilitate the sharing of information, that enable marketers to display advertising and that provide users with multilingual real-time translation of Ecommerce, events and proprietary social media and chat platforms.  These may include:

  

  Companies that offer full-featured products that provide a similar range of communications and related capabilities that we provide.  
     
  Companies that provide web- and mobile-based information and entertainment products and services that are designed to engage users.
     
  Companies that offer Ecommerce solutions with built in language support.
     
  Traditional and online businesses that offer corporate sponsorship opportunities and provide media for marketers to reach their audiences and/or develop tools and systems for managing and optimizing advertising campaigns.

 

Competitors, in some cases, may have access to significantly more resources than Yappn.

 

We anticipate that we will compete to attract, engage, and retain clients and users, to attract and retain marketers, to attract and retain corporate sponsorship opportunities, and to attract and retain highly talented individuals, especially software engineers, designers, and product managers.  As we introduce new features to the Yappn platform, as the platform evolves, or as other companies introduce new platforms and new features to their existing platforms, we may become subject to additional competition. We believe that our ability to quickly adapt to a changing marketplace, and our experienced management team, will enable us to compete effectively in the market.  Further, we believe that our focus on encouraging user engagement based on topics and interests, rather than on “friends” or connections, will differentiate us from much of the competition.

 

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Intellectual Property

 

We own (i) the yappn.com domain name (which website is expressly not incorporated into this filing) and (ii) the Yappn name and all trademarks, service marks, trade dress and copyrights associated with the Yappn name, logo and graphic art.  We may prepare several patent filings in the future. Upon payment of the applicable fees pursuant to the Services Agreement, we became the exclusive owner of copyright in the literary works or other works of authorship delivered by Ortsbo to us as part of the Services provided under the Services Agreement (the “Deliverables”).  All such rights shall not be subject to rescission upon termination of the Services Agreement.  Also as set forth in the Services Agreement, we shall grant to Ortsbo (i) a non-exclusive (subject to certain limitations) license to use the Deliverables for the sole purpose of developing its technology, (ii) a non-exclusive license to use, solely in connection with the provision of the Services, any intellectual property owned or developed by us or on our behalf and necessary to enable Ortsbo to provide the Services and (iii) a license to use intellectual property obtained by us from third parties and necessary to enable Ortsbo to provide the Services.  All such licenses shall expire upon termination of the Services Agreement.

 

On April 28, 2014, we purchased a copy of the source code for the Ortsbo property and all the rights associated with it.

 

On July 16, 2015, we entered into a definitive agreement to acquire all of the intellectual property assets of Ortsbo which closed on September 15, 2015. The purchased assets include US No. 8,983,850 B2, US Patent No. 8,917,631 B2, US Patent No. 9,053,097 B2, and other intellectual property including Ecommerce and Customer Care know-how (Proprietary lexicons and linguistic databases that integrate into our language services platform).

 

We continue to engage in activities to maintain and further build differentiated technologies that increase our intellectual properties.

 

Government Regulation

 

We are subject to a number of U.S. federal and state, and foreign laws and regulations that affect companies conducting business on the Internet, many of which are still evolving and being tested in courts, and could be interpreted in ways that could harm our business. These may involve user privacy, rights of publicity, data protection, content, intellectual property, distribution, electronic contracts and other communications, competition, protection of minors, consumer protection, taxation and online payment services. In particular, we are subject to federal, state, and foreign laws regarding privacy and protection of user data. Foreign data protection, privacy, and other laws and regulations are often more restrictive than those in the United States. U.S. federal and state and foreign laws and regulations are constantly evolving and can be subject to significant change. In addition, the application and interpretation of these laws and regulations are often uncertain, particularly in the new and rapidly-evolving industry in which we operate. There are also a number of legislative proposals pending before the U.S. Congress, various state legislative bodies, and foreign governments concerning data protection which could affect us.  For example, a revision to the 1995 European Union Data Protection Directive is currently being considered by legislative bodies that may include more stringent operational requirements for data processors and significant penalties for non-compliance.

 

Legal Proceedings

 

None.

 

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Registration Statement

 

We filed a Registration Statement on Form S-1 (File No. 333-199569) (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) on October 24, 2014 (amended November 7, 2014) for up to 7,592,667 shares of our $0.0001 par value per share common stock (the "Common Stock") issuable to certain selling stockholders upon conversion of promissory notes and/or warrants currently held by those selling stockholders, specifically (i) 1,844,000 shares of Common Stock issuable to them upon exercise of promissory notes and (ii) 4,588,000 shares of Common Stock issuable to them upon exercise of warrants. The warrants have an exercise prices varying from $1.00 to $2.20 per share (subject to adjustment). The Registration Statement covering the above noted securities was declared effective under the Securities Act of 1933 on November 17, 2014. On October 5, 2015, the Company filed a continuing registration statement in part to update to this S-1 filing and subsequent to the quarter end on December 2, 2015 filed an amendment to this S-1 filing, which is not, as of the date of this filing, been declared effective (Note 9 of the financial statements).

 

RESULTS OF OPERATIONS

 

Three months ended February 29, 2016 and February 28, 2015

 

Revenues

 

We are in the process of commercialization of our multi-language e-commerce and marketing businesses.  We had revenues of $101,537 and $528,846 for the three months ended February 29, 2016 and February 28, 2015, respectively. The Company billed its largest customer $233,860 for the three month period ended February 29, 2016. Our company has received acknowledgment and acceptance of the services performed, however due to the long period without payment, our management has determined the revenue recognition criteria for the has not been met for new billings. Our company and DWF are working through final discussions to complete a secured promissory note to enable full and complete payment of the total billings incurred, both recognized and unrecognized as at February 29, 2016. We did recognize $55,428 in revenue in the third quarter from DWF based on a payment received against the outstanding billings. The DWF assets were acquired by ICE effective February 29, 2016 and thus no further billings will be made to DWF. Future billings as part of consulting and language services for the program will be through ICE, and initially are expected to be lower than the average billings to DWF. Our management is focusing on developing and refining its technologies, and its relationships with commercial partners and influencers, which has delayed revenue realization in recent quarters related to e-commerce.

 

Cost of revenue

 

We incurred costs of revenues of $9,134 and $140,183, for the three months ended February 29, 2016 and February 28, 2015, respectively. These costs were directly attributable to the revenues generated in the applicable periods and resulted in a gross profit of $92,403 and $388,663, for the three months ended February 29, 2016 and February 28, 2015, respectively.

 

Total operating expenses

 

During the three months ended February 29, 2016 and February 28, 2015, our total operating expenses were $1,295,610 and $849,358, respectively.

 

For the three months ended February 29, 2016, the operating expenses consisted of marketing expense of $26,152, research and development expenses of $109,203, general and administrative expenses of $497,826, professional fees of $241,025, consulting fees of $92,590, amortization of $263,940, depreciation of $102 and stock based compensation of $64,772. For the three months ended February 28, 2015, the operating expenses consisted of marketing expense of $104,383, research and development expenses of $100,759, general and administrative expenses of $300,435, professional fees of $74,282, consulting fees of $199,064, depreciation of $57 and stock based compensation of $70,378. 

 

Our research and development costs are partially for fees to technology consultants from Intertainment Media and Ortsbo, in the prior year, with higher weighting on our own employees and third party consultants in the latter half of fiscal 2015. In the three months ended February 29, 2016 there were no research and development costs from Intertainment Media and Ortsbo. There were significant costs incurred in development of the various technologies supporting the business towards the commencement of commercialization. Many of these costs will not continue into the future, however there will continue to be maintenance and ongoing development customization to ensure our technology solutions meet required standards for our current and prospective customers.

 

Marketing expenses include costs incurred for public relations, and promotional events and related activities. During the third quarter of fiscal 2015, there were additional marketing expenses incurred on promotion of FotoYapp. A similar event did not incur in the three months ended February 29, 2016, which is the primary reason for the decrease in marketing expenses for the three months ended February 29, 2016.

 

General and administrative expenses include executive and office salaries, administrative services for accounting and finance, and general office needs. These costs have remained relatively consistent period over period as we continue to work to develop a customer base and meet the needs of investors to finance our operation. Management has made some direct employee engagements over the comparative period, while certain other costs have been reduced. Upon further significant increases in revenue, management will continue to hire, but the growth of this cost, we believe, will be far less than the impact to Net Loss.

 

Professional fees were incurred primarily for use of legal counsel related to financing arrangements for convertible secured promissory notes and for accounting and auditing services. We expect our professional fees to vary from period to period based upon our corporate needs and were relatively consistent period over period. 

 

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Consulting fees incurred primarily for consulting service costs for third party consultants. We have used a number of different outside firms to provide investor relations services, strategic position of our products, markets and customer introductions. Some of the fees of the firms providing these services in the prior period were paid with shares of common stock. Consultants were used to a lesser extent in the three months ended February 29, 2016 compared to the three months ended February 28, 2015. Although consultants are more expensive on a per hour basis, the effort required for some consultants would not support a full time engagement, but overall more services for the Company were required.

 

Amortization for the three month period ended February 29, 2016 relates to technology acquired from Ortsbo on September 15, 2015. The technology is amortized over 5 years. There is no amortization recorded in the prior period as the acquisition only relates to fiscal 2016.

 

Stock based compensation during the three months ended February 29, 2016 relates to our two previous grants of stock options. Stock based compensation is recorded using the binomial lattice model which provides a fair value based on assumptions determined to be appropriate by management. Stock based compensation is recorded over the vesting period using a graded vesting schedule which results in a higher proportion of expense recorded earlier in the vesting term than later. The current period includes the vesting impact of two grants, whereas the prior period only included the first grant. Due to the higher weighting of expense recognition in earlier years the stock based compensation impact was greater in the prior period than the current period.

 

Total other income and expenses

 

Other (income) expenses totaled $576,376 and $894,903 for the three months ended February 29, 2016 and February 28, 2015, respectively. The change of $(318,527) is primarily due to the change in the fair value of derivative financial instruments. Many of our financing instruments are either convertible into shares of our common stock or have provisions that provide an option to convert into shares of our common stock. For accounting purposes we are required to value such instruments at fair value which can fluctuate as the market price of shares of our common stock fluctuates. During the current quarter, the biggest impact was due to accretion on existing notes rather than fair value changes based on common stock price fluctuations. Accretion expense is a result of the fair value process required when financial instruments are issued and recorded in the financial statements. Over the maturity period of the underlying financial instrument, interest is accreted into the statement of operations to reflect the “time value of money”.

 

During the three months ended February 29, 2016, total other expense consisted of interest expense of $268,222, a loss resulting from the change in fair value of the derivative liabilities and convertible notes of $289,881, prepayment fees on variable Notes of $29,350 and other miscellaneous income of $(11,077).

 

During the three months ended February 28, 2015, total other expense consisted of interest expense of $105,007, financing expenses related to convertible debentures, warrants and contractual obligations totaling $362,069, an expense resulting from the change in fair value of the derivative liabilities and convertible notes of $485,051, prepayment fees on variable notes of $10,000 and other miscellaneous income of $67,224.

 

The financing expense associated with the capital raises were $nil and $362,069 for the three months ended February 29, 2016 and February 28, 2015, respectively. There were no dilutive financings raised in the period ending February 29, 2016 from convertible notes vs the comparative period in fiscal 2016 we primarily relied on secured debenture, bridge loans for financing during the three months ended February 29, 2016. The financing expenses related primarily to the raising of convertible notes with exercise prices tied to a discount to market rates for the three month period ended February 28, 2015. For accounting purposes, since certain financial instruments had convertible provisions, they were treated as derivatives liabilities and are valued using a binomial lattice fair value model upon inception and adjusted accordingly to market at the close of the period.  Based on our stock price on the date of issuance, which is the date the fair value exercise was completed, the initial financing expense was significant for the three months ended February 28, 2015. 

 

The accretion in convertible notes resulted in a loss of $289,881 for the three months ended February 29, 2016 in contrast to a larger loss of $485,051 for the three months ended February 28, 2015, a change of $(195,170). As of February 28, 2015, we record the fair value change of the derivatives instruments related to the sale of warrants and debentures previously issued. This reduction was based on both a slight increase in our share price as the market price of the common shares increased from a May 31, 2014 share price of $1.58 to a February 28, 2015 share price of $0.55 as well as an element due to elapsed time.

 

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Net loss and comprehensive loss

 

During the three months ended February 29, 2016 and February 28, 2015, we had net and comprehensive loss of $1,779,583 and $1,355,598 respectively.

 

Nine Months ended February 29, 2016 and February 28, 2015

 

Revenues

 

We are in the process of commercialization of our multi-language platform. We had revenues of $911,918 and $606,821 for the nine months ended February 29, 2016 and February 28, 2015, respectively. $812,533 of revenue for the nine month period ended related to DWF professional services. We billed DWF $802,592 for the nine month period ended February 29, 2016, that has not been recorded as revenue in our financial statements. Our company has received acknowledgment and acceptance of the services performed during the nine month period ended February 29, 2016, however due to the long period without payment, management has determined the revenue recognition criteria has not been met since the beginning of the second quarter of fiscal 2016. Our company and DWF are working through final discussions to complete a secured promissory note to enable full and complete payment of the total billings incurred, both recognized and unrecognized as at February 29, 2016. We did recognize $55,428 in revenue in the third quarter from DWF based on a payment received against the outstanding billings. Comparative period revenues resulted from the startup of the professional services related to the DWF program. The DWF assets were acquired by ICE effective February 29, 2016 and thus no further billings will be made to DWF. Future billings as part of consulting and language services for the program will be through ICE, and initially are expected to be lower than the average billings to DWF. Our management has focused on developing relationships with large commercial partners and influencers, which has delayed revenue realization from e-commerce in recent quarters.

 

Cost of revenue

 

We incurred costs of revenue of $146,068 and $140,389, for the nine months ended February 29, 2016 and February 28, 2015, respectively. These costs were directly attributable to the revenues generated in the comparative period and resulted in a gross profit of $765,850 and $466,432, for the nine months ended February 29, 2016 and February 28, 2015, respectively.

 

Total operating expenses

 

During the nine months ended February 29, 2016 and February 28, 2015, total operating expenses were $3,457,744 and $3,990,999, respectively.

 

For the nine months ended February 29, 2016, the operating expenses consisted of marketing expense of $224,900, research and development expenses of $301,168, general and administrative expenses of $1,272,484, professional fees of $401,048, consulting fees of $295,665, amortization of $483,890, depreciation of $300 and stock based compensation of $478,289. For the comparable nine months ended February 28, 2015, the operating expenses consisted of marketing expense of $996,107, research and development expenses of $597,490, general and administrative expenses of $1,020,468, professional fees of $173,520, consulting fees of $524,059, depreciation of $176 and stock based compensation of $679,179. 

 

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Our research and development costs are partially for fees to technology consultants from Intertainment Media and Ortsbo, in the prior year, with higher weighting on our own employees and third party consultants in the latter half of fiscal 2015. During the latter part of the current nine month period ended February 29, 2016, there were no research and development costs from Intertainment Media and Ortsbo. There were significant costs incurred in development of the various technologies supporting the business towards the commencement of commercialization. Many of these costs will not continue into the future, however there will continue to be maintenance and ongoing development customization to ensure our technology solutions meet required standards for our current and prospective customers.

 

General and administrative expenses include executive and office salaries, administrative services for accounting and finance, and general office needs. These costs have remained relatively consistent period over period as we continue to work to develop a customer base and meet the needs of investors to finance our operation. Management has made some direct employee engagements over the comparative period, while certain other costs have been reduced. Upon further significant increases in revenue, management will continue to hire, but the growth of this cost, we believe, will be far less than the impact to Net Loss.

 

Total other income and expenses

 

Other (income) expenses totaled $976,700 and $(544,073), for the nine months ended February 29, 2016 and February 28, 2015, respectively. The change of $1,520,773 is primarily due to the change in the fair value of derivative financial instruments. Many of our financing instruments are either convertible into our common stock or have provisions that provide an option to convert into our common stock. For accounting purposes we are required to value such instruments at fair value which can fluctuate as the market price of our common stock fluctuates. During the current nine month period, however, the biggest impact was due to accretion on existing notes rather than fair value change. Accretion expense is a result of the fair value process required when financial instruments are issued and recorded in the financial statements. Over the maturity period of the underlying financial instrument, interest is accreted into the statement of operations to reflect the “time value of money”.

 

During the nine months ended February 29, 2016, total other (income)/expense consisted of interest expense of $616,609, financing expenses related to convertible debentures, and expense warrants issued to line of credit holders and consultants totaling $632,250, a gain resulting from the change in fair value of the derivative liabilities and convertible notes of $(550,456), prepayment fees on variable notes of $306,140 and other miscellaneous income of $(27,843).

 

During the nine months ended February 28, 2015, total other (income)/expense consisted of interest expense of $253,973, financing expenses related to convertible debentures, and warrants that are considered derivative liabilities totaling $942,574, a gain resulting from the change in fair value of the derivative liabilities and convertible notes of $(1,647,824), prepayment fees on variable notes of $50,984 and other miscellaneous income of $(143,780).

 

During the nine month period ended February 29, 2016 and year ended May 31, 2015, we raised $2,268,846 and $2,742,263, respectively, in net cash from short term notes payable, line of credit, convertible notes and debentures through normal channels and private placements. For accounting purposes, since certain financial instruments had convertible provisions they are treated as derivatives liabilities and are valued using a binomial lattice fair value model upon inception and adjusted accordingly to market at the close of the period.  The financing expense associated with the capital raises and prior obligations were $632,250 and $942,574 for the nine month period ended February 29, 2016 and February 28, 2015, respectively. There was less financing raised in the nine months ending February 29, 2016 from convertible notes vs. the comparative period, instead we made more use of secured debenture financing and bridge loans.

 

For the nine month period ended February 29, 2016, the gain from fair value adjustment largely relates to accretion on various convertible notes as well as fair value change on variable notes which are a product of stock price and days to maturity. In the comparative period, there was a significant decline in the market price compared to those prices that were in effect at the time of the original issuance of these convertible instruments. The changes in market value of our common stock coupled with the other parameters used in the binomial lattice model for all instruments marked to market, resulted in a gain of $550,456 for the nine month period ended February 29, 2016 in contrast to a larger gain of $1,647,824 for the nine month period ended February 28, 2015, a change of $1,097,368.

 

Net and comprehensive loss

 

During the nine months ended February 29, 2016 and February 28, 2015, we had net and comprehensive loss of $3,668,894 and $2,980,494 respectively. 

 

Liquidity and Capital Resources

 

As of February 29, 2016, we had a cash balance of $16,623, which is a decrease of $2,873 from the ending cash balance of $19,496 as of May 31, 2015. We do not have sufficient funds to fund our expenses over the next twelve months. There can be no assurance that additional capital will be available to us. Since we have no other financial arrangements or plans currently in effect, our inability to raise funds for the above purposes will have a severe negative impact on our ability to remain a viable going concern.

 

To fund our operations, we have issued secured debentures, short term notes, and convertible debt instruments for gross cash receipts of $2,268,846 and $2,742,263 for the nine months ended February 29, 2016 and the year ended May 31, 2015, respectively.

 

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We have used this financing for funding operations and replacing short term high cost debt instruments with lower cost longer term financial instruments where the economics made sense.

 

We estimate we will need additional capital to cover our ongoing expenses and to successfully market our product offerings. This is only an estimate and may change as we receive feedback from customers and have a better understanding of the demand for our application and the ability to generate revenues from our new products. Both of these factors may change and we may not be able to raise the necessary capital and if we are able to, that it may not be at favorable rates.

 

On July 6, 2015, we entered into a definitive agreement to acquire all of the intellectual property assets of Ortsbo, which closed on September 15, 2015. The purchased assets include US Patent No. 8,983,850 B2, US Patent No. 8,917,631 B2, US Patent No. 9,053,097 B2, and other intellectual property including Ecommerce and Customer Care know-how for a total purchase price of $17 Million, which will be paid by the assumption of $1 Million in debt and the issuance of $16 Million worth of our restricted common shares (32 Million shares at $0.50 per share).

 

On July 7, 2015, the Board of Directors and the holders of a majority of the voting power approved a resolution to effectuate a 10:1 Reverse Stock Split (“Reverse Stock Split”).  Under this Reverse Stock Split each 10 shares of our Common Stock were automatically converted into 1 share of Common Stock.  To avoid the issuance of fractional shares of Common Stock, we issued an additional share to all holders of fractional shares. FINRA declared our company’s 1-for-10 reverse stock split ex-dividend date effective as of October 2, 2015.

 

On July 15, 2015, we completed a secured debt financing of $4.5 Million of 12% Secured Debentures. The Secured Debentures have a maturity date of December 31, 2015 but may be accelerated under certain conditions. $2.0 million of the $4.5 Million secured debt financing includes conversion of previously existing debt of the Company as well as assumption of debt on close at September 15, 2015 of the acquisition of Ortsbo IP. Subsequent to the end of the second fiscal quarter, the holders of the Secured Debentures (the “Holders”) agreed to extend the maturity date of the Secured Debentures from December 31, 2015 to July 15, 2020, and were provided with the right to amend the Secured Debenture such that a Holder shall have the right, at any time after the earlier of (i) six (6) months from the date of first issuance of any subsequent Debentures; and (ii) June 30, 2016, to require the Company to satisfy the outstanding obligations underlying the Secured Debenture; provided, however, that at least two thirds (66.67%) of the Holders of the principal amount of the Secured Debentures consent to a put of their Secured Debentures to our company.

 

The Company received $2.5 million of this financing in the form of cash and cash commitments, including conversion of the short term loans obtained on May 11, 2015 and June 19, 2015 as described in Note 5. $1,075,000 of the $4.5 million financing is conversion of a portion of our existing debt that remained in the secured debenture. $925,000 was repaid out of the secured debenture, in the form of cash in the amount of $465,000 with the remainder in the form of the release of secured deposit that was applied against accounts receivable. On September 15, 2015, we closed the acquisition of intellectual property from Ortsbo Inc., and as part of this closing, assumed debt and non-controlling equity interests from Ortsbo that was immediately subscribed to a second tranche of secured debentures. The secured debentures balance as at February 29, was $4,550,388.

 

On December 30, 2015, we completed a secured debenture and warrant financing of $2,086,000 through the offering of units by way of private placement, with each unit consisting of (i) a 12% secured convertible debenture with a maturity date of five years from issuance and (ii) ten (10) five year common share purchase warrants, vesting in 1/3 increments and having an exercise price of $0.01 per share. The units were sold at $1.00 per unit. This closing includes conversion of $1,201,000 in short term loans advanced during the quarter prior to the closing of this secured debenture. Additionally, this includes $46,000 that our company has yet to receive in cash. This is currently recorded as subscription receivable.

 

Going Concern Consideration

 

We incurred net losses and comprehensive losses resulting in a deficit of $18,431,446 through February 29, 2016. At February 29, 2016, we had total liabilities totaling $9,273,324 and a working capital deficit of $3,093,528. These factors raise substantial doubt as to our ability to continue as a going concern.

 

Implementation of our business plan will require additional debt or equity financing and there can be no assurance that additional financing can be obtained on acceptable terms.  We are in the development stage, and have insufficient revenues to cover our operating costs. As such, we have incurred an operating loss since inception. Our ability to continue as a going concern is dependent on its ability to raise adequate capital to fund operating losses until we are able to engage in profitable business operations. This and other factors raise substantial doubt about our ability to continue as a going concern. Our continuation as a going concern is dependent on our ability to meet our obligations, to obtain additional financing as may be required and ultimately to attain profitability. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

There can be no assurance that the raising of equity or debt will be successful or that our anticipated financing will be available in the future, at terms satisfactory us. Failure to achieve the equity and financing at satisfactory terms and amounts could have a material adverse effect on our ability to continue as a going concern. If we cannot successfully raise additional capital and implement its strategic development plan, its liquidity, financial condition and business prospects will be materially and adversely affected, and we may have to cease operations.

 

40

 

 

Off-Balance Sheet Arrangements

 

We 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 are material to investors.

 

Critical Accounting Policies

 

None.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable

 

ITEM 4. CONTROLS AND PROCEDURES

 

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures designed to ensure that information required to be disclosed by us in the reports it files or submits under the Securities Exchange Act of 1934, as amended (Exchange Act), is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports it files or submits under the Exchange Act is accumulated and communicated to management, including the principal executive officer and principal financial officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Because of inherent limitations, disclosure controls and procedures, as well as internal control over financial reporting, may not prevent or detect all inaccurate statements or omissions.

 

Our management, with the supervision and participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of February 29,2016 were effective such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

 

(b) Changes In Internal Control Over Financial Reporting

 

During the three and nine months ended February 29, 2016, there were no changes in our internal controls over financial reporting that materially affected, or is reasonably likely to have a materially affect, on our internal control over financial reporting.

 

41

 

 

PART II

 

ITEM 1. LEGAL PROCEEDINGS

 

We are subject from time to time to litigation, claims and suits arising in the ordinary course of business. As of February 29, 2016, we were not a party to any material litigation, claim or suit whose outcome could have a material effect on our unaudited consolidated financial statements.

 

ITEM 1A. RISK FACTORS

 

Not required under Regulation S-K for “smaller reporting companies”.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

There were no defaults upon senior securities during the three and nine month period ended February 29, 2016.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not Applicable.

 

ITEM 5. OTHER INFORMATION

 

There is no information with respect to which information is not otherwise called for by this form.

 

WHERE YOU CAN FIND MORE INFORMATION

 

We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (the “Commission”). Our Commission filings are available to the public over the Internet at the Commission’s website at http://www.sec.gov. The public may also read and copy any document we file with the Commission at its Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549, on official business days during the hours of 10:00 am to 3:00 pm. The public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. We maintain a website at http://www. yappn.com (Information contained on our website is not part of this report on Form 10-Q).

 

42

 

 

ITEM 6. EXHIBITS

 

Index to Exhibits

 

Exhibit No.   Description
     

2.1

 

  Asset Purchase Agreement by and among Yappn Corp., Yappn Acquisition Sub., Inc. and Intertainment Media, Inc., dated March 28, 2013 (2)
2.2   Asset Purchase Agreement between the Company, Ortsbo Inc., Intertainment Media, Inc., and Winterberry Investments Inc. dated July 6, 2015 (17)
3.1   Amended and Restated Certificate of Incorporation filed on March 14, 2013. (1)
3.2   Amended and Restated Bylaws. (1)
3.3   Amended and Restated Certificate of Designation and Preferences of Series A Convertible Preferred Stock, filed with the Secretary of State of Delaware on May 31, 2013 (3)
3.4   Amended Certificate of Incorporation filed on December 31, 2014 (18)
3.5   Amended Certificate of Incorporation filed on September 9, 2015 (18)
4.1   Convertible Promissory Note (4)
4.2   Convertible Promissory Note Issued in Favor of JMJ Financial (6)
4.3   8% Convertible Note (7)
4.4   Form of 8% Convertible Note (8)
4.5   Form of 6% Convertible Promissory Note (9) (10) (12)
4.6   Form of Promissory Note (13)
4.7   Common Stock Purchase Warrant (13)
10.1   Lock-Up Agreement by and between Yappn Corp. and Intertainment Media, Inc. (2)
10.2   Form of Warrant (2)
10.3   Form of Subscription Agreement (2)
10.4   Form of Registration Rights Agreement (2)
10.5   Form of Note Purchase Agreement (2)
10.6   Form of Note (2)
10.7   Form of First Amendment to Note Purchase Agreement (2)
10.8   Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations (2)
10.9   Stock Purchase Agreement (2)
10.10   2013 Equity Incentive Plan (2)
10.11   Bill of Sale dated March 28, 2013 (2)
10.12   Services Agreement by and between Ortsbo, Inc., Ortsbo USA, Inc. and Intertainment Media, Inc. dated March 21, 2013 (2)
10.13   Form of Indemnification Agreement (2)
10.14   Securities Purchase Agreement (4)
10.15   Amendment to Services Agreement (5)
10.16   Amendment Agreement to Convertible Promissory Note Issued in Favor of JMJ Financial (6)
10.17   Securities Purchase Agreement (7)
10.18   Securities Purchase Agreement between Yappn Corp. and GEL Properties LLC (8)
10.19   Securities Purchase Agreement between Yappn Corp. and LG Capital Funding LLC (8)
10.20   Form of Securities Purchase Agreement (9) (10) (12)
10.21   Form of Registration Rights Agreement (9) (10) (12)
10.22   Form of Series A Warrant (9) (10) (12)
10.23   Form of Series B Warrant (9) (10) (12)

 

43

 

 

Exhibit 
No.
  Description
     
10.24   Amendment Agreement to Convertible Promissory Note issued in favor of JMJ Financial (11)
10.25   Loan Agreement (13)
10.26   General Security Agreement between Yappn Corp. and Toronto Tree Top Holdings Ltd. (13)
10.27   General Security Agreement (Yappn Canada Inc.) (13)
10.28   General Security Agreement (Intertainment Media Inc.) (13)
10.29   Guaranty and Indemnity (Yappn Canada Inc.) (13)
10.30   Guaranty and Indemnity (Intertainment Media Inc.) (13)
10.31   Assignment of Monies and Debt Due Arrangement (13)
10.32   Employment Agreement between Yappn Corp. and Mr. David Lucatch dated June 1, 2014. (14)  
10.33   Form of Series C Warrant (15)
10.34   Form of Series D Warrant (15)
10.35   Amendment to the Employment Agreement between Yappn Corp. and Mr. David Lucatch dated September 2, 2014. (16) 
10.36   Form of Master Services Agreement between Yappn Corp. and Digital Widget Factory, dated November 6, 2014. (16)
10.37   Form of 12% Secured Debentures(17)
10.38   Form of Security Agreement, dated July 15, 2015 (17).
10.39   Yappn Corp 2014 Stock Option Plan Amendment One*
10.40   Form of 12% Secured Debenture (19)
10.41   Form of Common Stock Purchase Warrant (19)
14.1   Code of Ethics and Conduct (14)
31.1   Rule 13a-14(a) / 15d-14(a) Certification of Principal Executive Officer.*
31.2   Rule 13a-14(a) / 15d-14(a) Certification of Principal Financial Officer.*
32.1   Section 1350 Certifications of Principal Executive Officer *
32.2   Section 1350 Certifications of Principal Financial Officer *
101.INS   XBRL Instance Document *
101.SCH   XBRL Taxonomy Extension Schema Document *
101.CAL   XBRL Taxonomy Extension Calculation Linkbase *
101.DEF   XBRL Taxonomy Extension Definition Linkbase *
101.LAB   XBRL Taxonomy Extension Labels Linkbase *
101.PRE   XBRL Taxonomy Extension Presentation Linkbase *

 

(1) Incorporated by reference to the Company’s Current Report on Form 8-K, as filed with the SEC on March 18, 2013. 

(2) Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on April 3, 2013. 

(3) Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on June 3, 2013. 

(4) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on October 15, 2013. 

(5) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on October 29, 2013. 

(6) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on November 21, 2013. 

(7) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on December 18, 2013.  

(8) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on December 20, 2013. 

(9) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on January 30, 2014. 

(10) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on February 27, 2014. 

(11) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on March 4, 2014. 

(12) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on April 1, 2014. 

(13) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on April 11, 2014. 

(14) Incorporated by reference to the Company’s Annual Report on Form 10-K, filed with the SEC on August 29, 2014. 

(15) Incorporated by reference to the Company’s Registration Statement on Form S-1 filed with the SEC on October 24, 2014. 

(16)  Incorporated by reference to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on January 13, 2015. 

(17)  Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on July 6, 2015. 

(18)  Incorporated by reference to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on October 15, 2015. 

(19)  Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on January 6, 2016.

 

*   Filed herewith.

 

44

 

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 14th day of April 2016.

 

  YAPPN CORP.
     
  By: /s/ Ed Karthaus
    Ed Kaurthaus
    Chief Executive Officer
     
  By: /s/ Craig McCannell
    Craig McCannell
    Chief Financial Officer
    (Principal Financial Officer)

 

 

45

 

 

EX-31.1 2 f10q0216ex31i_yappncorp.htm CERTIFICATION

Exhibit 31.1

Certification of CEO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 and 906 of the Sarbanes-Oxley Act of 2002.

 

I, Edward Karthaus, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Yappn Corp.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

 

4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the Issuer’s internal control over financial reporting that occurred during the Registrant’s fiscal quarter ending February 29, 2016 that has materially affected, or is reasonably likely to materially affect, the Issuer’s internal control over financial reporting.

 

5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditor and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 
   
Dated: April 14, 2016 /s/ Edward Karthaus
    Edward Karthaus , Chief Executive Officer

 

EX-31.2 3 f10q0216ex31ii_yappncorp.htm CERTIFICATION

Exhibit 31.2

 

Certification of CFO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 and 906 of the Sarbanes-Oxley Act of 2002.

 

I, Craig McCannell, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Yappn Corp.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

 

4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the Issuer’s internal control over financial reporting that occurred during the Registrant’s fiscal quarter ending February 29, 2016 that has materially affected, or is reasonably likely to materially affect, the Issuer’s internal control over financial reporting.

 

5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditor and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 
   
Dated: April 14, 2016   /s/ Craig McCannell
    Craig McCannell, Chief Financial Officer (Principal Accounting Officer)

 

EX-32.1 4 f10q0216ex32i_yappncorp.htm CERTIFICATION

Exhibit 32.1

 

CERTIFICATIONS PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

 

 

In connection with the quarterly report of Yappn Corp. (the "Company") on Form 10-Q for the period ending February 29, 2016, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Edward Karthaus , Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

 
   
Dated: April 14, 2016 By:  /s/ Edward Karthaus
    Edward Karthaus , Chief Executive Officer

 

EX-32.2 5 f10q0216ex32ii_yappncorp.htm CERTIFICATION

Exhibit 32.2

 

CERTIFICATIONS PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

 

 

In connection with the quarterly report of Yappn Corp. (the "Company") on Form 10-Q for the period ending February 29, 2016, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Craig McCannell, Chief Financial Officer (Principal Accounting Officer) of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

 
   
Dated: April 14, 2016 By:  /s/ Craig McCannell
    Craig McCannell, Chief Financial Officer (Principal Accounting Officer)

 

 

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Summary of Significant Accounting Policies</b></p><p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-align: start; text-transform: none; white-space: normal; widows: 1; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-indent: 0.5in;">&#160;</p><p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-align: start; text-indent: 0px; text-transform: none; white-space: normal; widows: 1; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px;"><i>Basis of Presentation and Organization</i></p><p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-align: start; text-transform: none; white-space: normal; widows: 1; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-indent: 0.5in;"><i>&#160;</i></p><p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: 1; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify;"></p><p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: 1; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify;">Yappn Corp., formerly &#8220;Plesk Corp.&#8221;, (the &#8220;Company&#8221;) was incorporated under the laws of the State of Delaware on November 3, 2010. The business plan of the Company is to provide effective unique and proprietary tools and services that create dynamic solutions that enhance a brand&#8217;s messaging, media, e-commerce and support platforms. The Company has offices in the United States and Canada. In March 2013, the Company acquired a concept and technology license from Intertainment Media Inc., a Canadian company, in exchange for 7,000,000 shares of common stock of the Company. As a result of this exchange, Intertainment Media Inc. acquired, at that time, a seventy percent (70%) ownership of the Company. On September 15, 2015, the Company closed the acquisition of Ortsbo Inc.&#8217;s intellectual property. As a result of the acquisition, Intertainment Media Inc.&#8217;s ownership was reduced to 37%. 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However, in the opinion of management, the interim financial statements include all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the Company&#8217;s financial position as of February 29, 2016, and the results of its operations and its cash flows for the three and nine month periods ended February 29, 2016 and February 28, 2015. These results are not necessarily indicative of the results expected for the fiscal year ending May 31, 2016. The accompanying interim financial statements and notes thereto do not reflect all disclosures required under accounting principles generally accepted in the United States. Refer to the Company&#8217;s audited consolidated financial statements as of May 31, 2015 filed with the Securities and Exchange Commission, for additional information including significant accounting policies.</p><p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-transform: none; white-space: normal; widows: 1; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;">&#160;</p><p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: 1; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify;"><i>Principles of Consolidation</i></p><p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-transform: none; white-space: normal; widows: 1; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;">&#160;</p><p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: 1; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify;">The interim financial statements include the accounts of the Company and its wholly-owned subsidiaries, Yappn Acquisition Corp. and Yappn Canada, Inc. 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The Company amortizes acquired technology over its estimated useful life considered to be 5 years, on a straight-line basis. Patents are amortized commencing at the receipt of approval of the patents or acquisition of patents. Should the patent process be unsuccessful, the entire amount relating to the patent is expensed in the period this is determined. The Company continually evaluates the remaining estimated useful life of its intangible assets being amortized to determine whether events and circumstances warrant a revision to the remaining period of amortization.</p><p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-transform: none; white-space: normal; widows: 1; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;">&#160;</p><p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: 1; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify;"><i>Recent Accounting Pronouncements</i></p><p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-transform: none; white-space: normal; widows: 1; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;">&#160;</p><p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: 1; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify;">In May 2014, the FASB issued Accounting Standards Update No. 2014-09 which was amended in August 2015 by Update No 2015-14: Revenue from Contracts with Customers. The standard outlines a five-step model for revenue recognition with the core principle being that a company should recognize revenue when it transfers control of goods or services to customers at an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. Companies can choose to apply the standard using either the full retrospective approach or a modified retrospective approach. Under the modified approach, financial statements will be prepared for the year of adoption using the new standard but prior periods presented will not be adjusted. Instead, companies will recognize a cumulative catch-up adjustment to the opening balance of retained earnings. This new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The Company has not yet made a determination as to the method of application (full retrospective or modified retrospective). It is too early to assess whether the impact of the adoption of this new guidance will have a material impact on the Company's results of operations or financial position.</p><p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-transform: none; white-space: normal; widows: 1; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;"></p><p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: 1; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify;">&#160;</p><p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: 1; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify;">On August 27, 2014 the FASB issued a new financial accounting standard on going concern, Update 2014-15, &#8220;Presentation of Financial Statements &#8211; Going Concern (subtopic 205-40): Disclosure of Uncertainties about an Entity&#8217;s Ability to Continue as a Going Concern.&#8221; The standard provides guidance about management&#8217;s responsibility to evaluate whether there is substantial doubt about the organization&#8217;s ability to continue as a going concern. The amendments in this update apply to all companies. They become effective in the annual period ending after December 15, 2016, with early application permitted. The Company is currently evaluating the impact of this accounting standard.</p><p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-transform: none; white-space: normal; widows: 1; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;">&#160;</p><p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: 1; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify;">In November 2014, the FASB issued Accounting Standard Update (&#8220;ASU&#8221;) 2014-16, Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity. The ASU clarifies how current guidance should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. Specifically, the amendments clarify that an entity should consider all relevant terms and features, including the embedded derivatives feature being evaluated for bifurcation, in evaluating the nature of a host contract. The ASU is effective for fiscal years and interim periods beginning after December 15, 2015. The Company is currently assessing the impact, if any, of implementing this guidance on its consolidated financial position and results of operations.</p> <p style="text-align: justify; font: 10pt times new roman, times, serif; margin: 0px;"><b>2. Going Concern</b></p> <p style="text-align: justify; font: 10pt times new roman, times, serif; margin: 0px; text-indent: 0.5in;">&#160;</p> <p style="text-align: justify; font: 10pt times new roman, times, serif; margin: 0px;">The accompanying interim financial statements have been prepared assuming that the Company will continue as a going concern. The Company has experienced negative cash flows from operations since inception and has incurred a deficit of $18,431,446 through February 29, 2016.</p> <p style="text-align: justify; font: 10pt times new roman, times, serif; margin: 0px; text-indent: 0.5in;">&#160;</p> <p style="text-align: justify; font: 10pt times new roman, times, serif; margin: 0px;">As of February 29, 2016, the Company had a working capital deficit of $3,093,528. During the nine months ended February 29, 2016, net cash used in operating activities was $2,255,415. The Company expects to have similar cash needs for the next twelve months. At the present time, the Company does not have sufficient funds to fund operations over the next twelve months.</p> <p style="text-align: justify; font: 10pt times new roman, times, serif; margin: 0px; text-indent: 0.5in;">&#160;</p> <p style="text-align: justify; font: 10pt times new roman, times, serif; margin: 0px;">Implementation of our business plan will require additional debt or equity financing and there can be no assurance that additional financing can be obtained on acceptable terms. We have realized limited revenues to cover our operating costs. As such, we have incurred an operating loss since inception. This and other factors raise substantial doubt about our ability to continue as a going concern. Our continuation as a going concern is dependent on our ability to meet our obligations, to obtain additional financing as may be required and ultimately to attain profitability. Our interim financial statements do not include any adjustments that might result from the outcome of this uncertainty.</p> <p style="text-align: justify; font: 10pt times new roman, times, serif; margin: 0px; text-indent: 0.5in;">&#160;</p> <p style="text-align: justify; font: 10pt times new roman, times, serif; margin: 0px;">Management plans to meet its operating cash flow requirements from financing activities until the future operating activities become sufficient to support the business to enable the Company to continue as a going concern. The Company continues to work on generating operating cash flows from the commercialization of its business. Until those cash flows are sufficient the Company will pursue other financing when deemed necessary.</p> <p style="text-align: justify; font: 10pt times new roman, times, serif; margin: 0px; text-indent: 0.5in;">&#160;</p> <p style="text-align: justify; font: 10pt times new roman, times, serif; margin: 0px;"></p> <p style="text-align: justify; font: 10pt times new roman, times, serif; margin: 0px;">The Company is pursuing a number of different financing opportunities in order to execute its business plan. These include, short term debt arrangements, convertible debt arrangements, common share equity financings, either through a private placement or through the public markets. During the nine months ended February 29, 2016, the Company raised $2,268,846 through various financial instruments, net of repayments.</p> <p style="text-align: justify; font: 10pt times new roman, times, serif; margin: 0px;"></p> <p style="text-align: justify; font: 10pt times new roman, times, serif; margin: 0px; text-indent: 0.5in;">&#160;</p> <p style="text-align: justify; font: 10pt times new roman, times, serif; margin: 0px;">There can be no assurance that the raising of future equity or debt will be successful or that the Company&#8217;s anticipated financing will be available in the future, at terms satisfactory to the Company. Failure to achieve the equity and financing at satisfactory terms and amounts could have a material adverse effect on the Company&#8217;s ability to continue as a going concern. If the Company cannot successfully raise additional capital and implement its strategic development plan, its liquidity, financial condition and business prospects will be materially and adversely affected, and the Company may have to cease operations.</p> <p style="text-align: justify; font: 10pt times new roman, times, serif; margin: 0px;"><b>3. Concentration of Credit Risk </b></p> <p style="text-align: justify; font: 10pt times new roman, times, serif; margin: 0px; text-indent: 0.5in;">&#160;</p> <p style="text-align: justify; font: 10pt times new roman, times, serif; margin: 0px;">All of the Company&#8217;s revenues are attributed to a small number of customers. One customer comprises 100% of the accounts receivable as at February 29, 2016 and 55% and 89% of the revenue recorded for the three and nine months ended February 29, 2016. The Company billed its largest customer $233,860 and $1,615,125 for the three month and nine month period ended February 29, 2016, $178,432 and $802,592 has not been recorded as accounts receivable or revenue in the Company&#8217;s financial statements as, due to the long period without payment, the Company has determined the revenue recognition criteria starting at the beginning of the Company&#8217;s second quarter has not been met. The Company and the customer continue to work together in ways to enable full and complete payment of the total billings incurred, both recognized and unrecognized as at February 29, 2016.</p> <p style="text-align: justify; font: 10pt times new roman, times, serif; margin: 0px;">&#160;</p> <p style="text-align: justify; font: 10pt times new roman, times, serif; margin: 0px;"></p> <p style="text-align: justify; font: 10pt times new roman, times, serif; margin: 0px;">Effective February 29, 2016, Digital Widget Factory (Belize) (&#8220;DWF&#8221;) sold the technology platform, partially developed by Yappn in conjunction with DWF&#8217;s principals, to Intelligent Content Enterprises (&#8220;ICE&#8221;) in exchange for shares of ICE. As part of the transaction, DWF has ownership and rights to 24 million common shares of ICE for a large minority shareholder position of ICE. The Company is in final negotiations with DWF and anticipates executing on a final promissory note from DWF, for the value of the billings of $2,125,000 million (of which $1,431,489 is currently recorded as a receivable). The promissory note is to be secured by DWF&#8217;s ICE stock holdings in the amount of 4,250,000 shares, which at the current market value of ICE shares, significantly exceeds to the value of the promissory note.</p> <div><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; widows: 1; font-stretch: normal; -webkit-text-stroke-width: 0px;"><b>4. Acquisition of Intellectual Property (and Reverse Split)</b></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0.5in; letter-spacing: normal; word-spacing: 0px; white-space: normal; widows: 1; font-stretch: normal; -webkit-text-stroke-width: 0px;">&#160;</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; widows: 1; font-stretch: normal; -webkit-text-stroke-width: 0px;"></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; widows: 1; font-stretch: normal; -webkit-text-stroke-width: 0px;">On September 15, 2015, the Company finalized its purchase of Intellectual property assets of Ortsbo, Inc. (&#8220;Ortsbo&#8221;) pursuant to an Asset Purchase Agreement executed and closed on July 15, 2015. With this closing, the Company had an obligation to issue 31,987,000 shares of common stock of Yappn. During the second quarter of fiscal 2016 from the share issuance obligations from the purchase of the Ortsbo intellectual property assets 12,998,682 shares were issued comprising 8,312,500 to Ortsbo and 4,686,182 to the former debt and minority shareholders of Ortsbo, which were valued at $1,806,608 leaving 18,988,318 shares to be issued as of February 29, 2016. As of the filing date, these aforementioned shares remain to be issued. Yappn also assumed $975,388 of debt as part of the transaction. This assumed debt was immediately subscribed as part of the secured debenture in Yappn (Note 6). The fair value for the agreed upon consideration for the acquisition of intellectual property from Ortsbo was $16,968,888, however, due to the common control of Ortsbo Inc. and the Company , the value of the intangible assets acquired from Ortsbo was recorded at the carrying value in the financial records of Ortsbo Inc. This value was $5,421,068 on September 15, 2015.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0.5in; letter-spacing: normal; word-spacing: 0px; white-space: normal; widows: 1; font-stretch: normal; -webkit-text-stroke-width: 0px;">&#160;</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; widows: 1; font-stretch: normal; -webkit-text-stroke-width: 0px;">In connection with the terms of the Asset Purchase Agreement related to the purchase of intellectual property assets of Ortsbo, the Company committed to complete a share consolidation. On September 9, 2015, the Company amended its Certificate of Incorporation to implement a reverse stock split in the ratio of 1 share for every 10 shares of common stock. This amendment was approved and filed with the Delaware Secretary of State on September 9, 2015. FINRA declared the Company&#8217;s 1-for-10 reverse stock split ex-dividend date effective as of October 2, 2015. The reverse stock split reduced the Company&#8217;s common stock outstanding from approximately 134,344,806 shares to approximately 13,434,481 shares.&#160;The effect of this reverse stock split has been reflected in these interim financial statements.</p></div> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify;"><b>5. Short Term Loans</b></p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;"><b>&#160;</b></p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify;">On April 1, 2014, the Company entered into a short term loan for $219,480 (Canadian $240,000) with a private investor. The Company previously converted a portion of a previous loan from this lender (Canadian $350,000), from a prior fiscal year, into a convertible debenture. The loan had a maturity of July 10, 2014 with an interest rate of 1% per month. The Company repaid $118,454 (Canadian $160,280) in fiscal 2015 and $8,446 during the nine months period ended February 29, 2016 (Canadian $13,405). As at February 29, 2016, the loan had a value of $130,304 ($176,315 Canadian).</p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;"><b>&#160;</b></p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify;">On January 7, 2014, the Company borrowed $253,200 (Canadian $280,000) from a private investor. The loan had a term of three months and had an interest rate of 12% per annum payable at the maturity date. A preparation fee of 10% or $25,300 (Canadian $28,000) was paid at inception. The loan was extended past its due date of April 7, 2014 and is accruing interest without penalty until payment. On June 12, 2014, the Company repaid $142,056 (Canadian $152,000) against the loan and on June 27, 2014 $90,777 (Canadian $100,000) was retired and contributed to a subscription agreement for Units that included an unsecured 6% convertible debenture, $100 par value, convertible into shares of the Company&#8217;s common stock and 166,667 issuable shares of common stock (Series C warrants) at a purchase price of $2.20 per share (Note 7). As at February 29, 2016 an amount of $20,693 ($28,000 Canadian) remains outstanding.</p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;">&#160;</p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify;">On July 17, 2014, the Company borrowed $100,915 (Canadian $110,000) from a private investor in the form of a short term loan due on December 31, 2014. This loan carries a 1% arrangement fee and an interest rate of 1% per month. During fiscal 2015 $90,145 (Canadian $105,000) was repaid on this note. The remaining balance was repaid during the nine months ended February 29, 2016.</p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;">&#160;</p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify;">On August 4, 2014, the Company borrowed $93,458 (Canadian $100,000) in the form of a bridge loan from a private investor, with combined origination fees and interest of $3,210 (Canadian $3,500), due on August 14, 2014. The Company repaid $22,768 (Canadian $25,000) of this loan on August 25, 2014. As of February 29, 2016, the value of the remaining balance of the loan was $55,428 (Canadian $75,000).</p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify;"></p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify;">On May 6, 2015, the Company borrowed $150,000 ($187,000 Canadian) in the form of a bridge loan from a private investor with a financing fee of $6,000 ($7,200 Canadian). This loan was paid back on June 30, 2015.</p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;">&#160;</p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify;">On May 11, 2015, the Company received $419,463 ($500,000 Canadian) from an intended subscriber for secured debentures, which closed on July 15, 2015. The Company treated this as a short term loan where interest is accrued at 12% (same rate as the secured debenture) for each lender from the date of the loan to the date of the subscription for the convertible debenture (Note 6).&#160;</p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;">&#160;</p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify;">On June 19, 2015, the Company received $78,265 ($96,000 Canadian) from an intended subscriber for secured debentures, which closed on July 15, 2015. The Company treated this as a short term loan where interest is accrued at 12% (same rate as the secured debenture) for each lender from the date of the loan to the date of the subscription for the convertible debenture (Note 6).</p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;">&#160;</p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify;">On July 10, 2015, the Company borrowed $250,000 in the form of a bridge loan from a private investor. This loan was paid back on July 16, 2015.</p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;">&#160;</p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify;">During the second quarter of fiscal 2016, the Company received $1,201,000 from intended subscribers of a secured debenture financing closed on December 30, 2015. The Company treated this as a short term loan where interest is accrued at 12% (same rate as the secured debenture) for each lender from the date of the loan to the date of the subscription for the convertible debenture (Note 6).</p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;">&#160;</p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify;">During the third quarter of fiscal 2016, the Company received $175,000 ($120,000 from a director) from intended subscribers in anticipation of a second closing of the convertible secured debenture financing that closed on December 30, 2015. The Company is treating this as a short term loan where interest is accrued at 12% (same rate as the previously issued secured debenture).</p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify;"></p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;">&#160;</p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify;">The following is a summary of Short Term Loans:</p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;">&#160;</p> <table style="width: 1567px; text-transform: none; text-indent: 0px; letter-spacing: normal; font-family: 'times new roman', times, serif; word-spacing: 0px; border-collapse: collapse; -webkit-text-stroke-width: 0px;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;">Principal amounts</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-bottom: 1.5pt;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">April 1,<br />2014<br />Term Loan</td> <td style="padding-bottom: 1.5pt; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-bottom: 1.5pt;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">January 7,<br />2014<br />Term Loan</td> <td style="padding-bottom: 1.5pt; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-bottom: 1.5pt;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">Other Loans</td> <td style="padding-bottom: 1.5pt; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-bottom: 1.5pt;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: center; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid;" colspan="2">Total</td> <td style="padding-bottom: 1.5pt; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td> </tr> <tr style="vertical-align: bottom; background-color: #cceeff;"> <td style="width: 815px; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-bottom: 1.5pt;">Fair value at May 31, 2014</td> <td style="width: 16px; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-bottom: 1.5pt;">&#160;</td> <td style="width: 16px; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">$</td> <td style="width: 142px; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">220,159</td> <td style="width: 16px; padding-bottom: 1.5pt; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="width: 16px; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-bottom: 1.5pt;">&#160;</td> <td style="width: 16px; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">$</td> <td style="width: 142px; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">257,152</td> <td style="width: 16px; padding-bottom: 1.5pt; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="width: 15px; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-bottom: 1.5pt;">&#160;</td> <td style="width: 15px; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">$</td> <td style="width: 141px; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">-</td> <td style="width: 15px; padding-bottom: 1.5pt; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="width: 15px; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-bottom: 1.5pt;">&#160;</td> <td style="width: 15px; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">$</td> <td style="width: 141px; border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">477,311</td> <td style="width: 15px; padding-bottom: 1.5pt; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-left: 10pt;">Borrowing on July 17, 2014</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">-</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="font-style: normal; font-variant: normal; 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padding-bottom: 1.5pt;">&#160;</td> <td style="border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">-</td> <td style="padding-bottom: 1.5pt; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-bottom: 1.5pt;">&#160;</td> <td style="border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">419,463</td> <td style="padding-bottom: 1.5pt; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-bottom: 1.5pt;">&#160;</td> <td style="border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">419,463</td> <td style="padding-bottom: 1.5pt; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-bottom: 1.5pt; padding-left: 20pt;">Total</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-bottom: 1.5pt;">&#160;</td> <td style="border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">-</td> <td style="padding-bottom: 1.5pt; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-bottom: 1.5pt;">&#160;</td> <td style="border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">-</td> <td style="padding-bottom: 1.5pt; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-bottom: 1.5pt;">&#160;</td> <td style="border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">1,199,897</td> <td style="padding-bottom: 1.5pt; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-bottom: 1.5pt;">&#160;</td> <td style="border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">1,199,897</td> <td style="padding-bottom: 1.5pt; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> </tr> <tr style="vertical-align: bottom; background-color: #cceeff;"> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-left: 10pt;">Fair value adjustments</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">(21,589</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">)</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">(1,356</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">)</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">(21,893</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">)</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">(44,838</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">)</td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-left: 10pt;">Repayments</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">(46,025</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">)</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">(142,506</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">)</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">(436,134</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">)</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">(624,665</td> <td style="font-style: normal; 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border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">-</td> <td style="padding-bottom: 1.5pt; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-bottom: 1.5pt;">&#160;</td> <td style="border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">(90,777</td> <td style="padding-bottom: 1.5pt; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">)</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-bottom: 1.5pt;">&#160;</td> <td style="border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">(125,000</td> <td style="padding-bottom: 1.5pt; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">)</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-bottom: 1.5pt;">&#160;</td> <td style="border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="border-bottom-color: black; 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border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">$</td> <td style="border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">152,545</td> <td style="padding-bottom: 1.5pt; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-bottom: 1.5pt;">&#160;</td> <td style="border-bottom-color: black; 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font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">1.00</td> <td style="padding-bottom: 4pt; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: justify; padding-bottom: 4pt;">Fair value of options vested as at February 29, 2016</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-bottom: 4pt;">&#160;</td> <td style="border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">$</td> <td style="border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">907,200</td> <td style="padding-bottom: 4pt; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-bottom: 4pt;">&#160;</td> <td style="border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="border-bottom-color: black; border-bottom-width: 4pt; border-bottom-style: double; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">-</td> <td style="padding-bottom: 4pt; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> </tr> </table> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;">&#160;</p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify;">On August 21, 2015, the Company amended its 2014 Stock Option Plan to increase the number of options available to 25,000,000.</p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;">&#160;</p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify;">As at February 29, 2016, vested and exercisable options do not have any intrinsic value and have a weighted-average remaining contractual term of 2.9 years. It is expected the 623,333 unvested options will ultimately vest, and each has an exercise price of $1.00 per share and a weighted average remaining term of 1.75 years. The aggregate intrinsic value of options represents the total pre-tax intrinsic value, the difference between our closing stock price as at February 29, 2016 and the option&#8217;s exercise price, for all options that are in the money. 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This cost is expected to be recognized over a remaining weighted average period of 0.2 years.</p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;">&#160;</p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify;">710,000 of the stock options granted on August 14, 2014 vest 1/3 immediately, 1/3 after one year and 1/3 after two years. 15,000 options vest contingent on revenue targets, and 15,000 options have vested on April 1, 2015. The remaining options all have immediate vesting terms. 520,000 of the stock options granted on March 2, 2015 vest 1/3 immediately, 1/3 after one year and 1/3 after two years. 50,000 vest 1/2 immediately and 1/2 after one year. 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font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">150</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">%</td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: justify;">Weighted-average fair value of options granted</td> <td style="font-style: normal; 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font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;">&#160;&#160;</p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify;">The estimated fair value of options granted on March 2, 2015 is measured using the binomial model using the following assumptions:</p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-transform: none; white-space: normal; widows: auto; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;">&#160;</p> <table style="width: 1567px; text-transform: none; text-indent: 0px; letter-spacing: normal; font-family: 'times new roman', times, serif; word-spacing: 0px; border-collapse: collapse; -webkit-text-stroke-width: 0px;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom; background-color: #cceeff;"> <td style="width: 1379px; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: justify;">Total number of shares issued under options</td> <td style="width: 16px; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td> <td style="width: 16px; 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font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">$</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">0.60</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> </tr> <tr style="vertical-align: bottom; background-color: #cceeff;"> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: justify;">Exercise price</td> <td style="font-style: normal; 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text-align: justify;">Time to expiration &#8211; days (2 year options)</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">730</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> </tr> <tr style="vertical-align: bottom; background-color: #cceeff;"> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: justify;">Time to expiration &#8211; days (5 year options)</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">1,826</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: justify;">Risk free interest rate (2 year options)</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">.66</td> <td style="font-style: normal; font-variant: normal; 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font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">0</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">%</td> </tr> <tr style="vertical-align: bottom; background-color: #cceeff;"> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: justify;">Estimated volatility (all options)</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">150</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">%</td> </tr> <tr style="vertical-align: bottom; background-color: white;"> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: justify;">Weighted-average fair value of options granted</td> <td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td> <td style="font-style: normal; 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(&#8220;Ortsbo&#8221;), a wholly-owned subsidiary of Intertainment Media, Inc. Mr. Lucatch is also the president and a member of the Board of Directors of Ortsbo, Inc. Mr. Lucatch is also a member of the Board of Directors of Ortsbo USA, Inc. The service agreement requires the Company to pay cost plus thirty percent (30%) for actual cost incurred by Ortsbo in providing technology services. Upon closing of the acquisition of Ortsbo intellectual property on September 15, 2015, the service agreement was terminated.</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; widows: 1; font-stretch: normal; -webkit-text-stroke-width: 0px;"></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0.5in; letter-spacing: normal; word-spacing: 0px; white-space: normal; widows: 1; font-stretch: normal; -webkit-text-stroke-width: 0px;">&#160;</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; widows: 1; font-stretch: normal; -webkit-text-stroke-width: 0px;">On October 23, 2013, the Company and Ortsbo, entered into an amendment to the Services Agreement dated March 28, 2013 for an exclusive license to use the Ortsbo property and an option to purchase a copy of the Ortsbo source code in exchange for 166,667 shares of restricted common stock of the Company. The shares of common stock were valued at the market price on the date of the agreement for a value of $133,333. On April 28, 2014, the Company exercised its right to purchase a copy of the source code for the Ortsbo property in exchange for 1,333,333 shares of restricted common stock. Since both the Company and Ortsbo are under the common control of Intertainment Media, Inc., and as Ortsbo&#8217;s carrying value for these assets was $nil, the Company reflected the acquisition value at $nil on the consolidated balance sheet. 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The purchased assets include US Patent No. 8,983,850 B2, US Patent No. 8,917,631 B2, US Patent No. 9,053,097 B2, and other intellectual property including Ecommerce and Customer Care know. With this closing, the Company had an obligation to issue 31,987,000 shares of common stock of Yappn. During the quarter 12,998,682 shares were issued comprising of 8,312,500 to Ortsbo Inc. and 4,686,182 to the former debt and minority shareholders of Ortsbo, which were valued at $1,806,608, leaving 18,988,318 shares to be issued at February 29, 2016 comprising 17,687,500 to Winterberry and 1,300,818 to a former holder of Ortsbo stock. As of the filing date, these aforementioned shares remain to be issued. Yappn also assumed $975,388 of debt as part of the transaction. This assumed debt was immediately subscribed as part of the secured debenture in Yappn (Note 6). The fair value for the agreed upon consideration for the acquisition of Intellectual property from Ortsbo was $16,968,888. This transaction was completed on September 15, 2015. Due to the common control of Ortsbo Inc. and Yappn Corp the value of the Intangible assets acquired from Ortsbo was recorded at the carrying value in the financial records of Ortsbo Inc. 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As of February 29, 2016 the related party liability balance totaled $66,787 ($468,766 &#8211; May 31, 2015).</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; widows: 1; font-stretch: normal; -webkit-text-stroke-width: 0px;">&#160;</p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; widows: 1; font-stretch: normal; -webkit-text-stroke-width: 0px;">Directors subscribed for $1,075,000 of the $2,086,000 convertible secured debentures issued on December 30, 2015 (note 8). 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The business plan of the Company is to provide effective unique and proprietary tools and services that create dynamic solutions that enhance a brand&#8217;s messaging, media, e-commerce and support platforms. The Company has offices in the United States and Canada. In March 2013, the Company acquired a concept and technology license from Intertainment Media Inc., a Canadian company, in exchange for 7,000,000 shares of common stock of the Company. As a result of this exchange, Intertainment Media Inc. acquired, at that time, a seventy percent (70%) ownership of the Company. On September 15, 2015, the Company closed the acquisition of Ortsbo Inc.&#8217;s intellectual property. As a result of the acquisition, Intertainment Media Inc.&#8217;s ownership was reduced to 37%. 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However, in the opinion of management, the interim financial statements include all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the Company&#8217;s financial position as of February 29, 2016, and the results of its operations and its cash flows for the three and nine month periods ended February 29, 2016 and February 28, 2015. These results are not necessarily indicative of the results expected for the fiscal year ending May 31, 2016. The accompanying interim financial statements and notes thereto do not reflect all disclosures required under accounting principles generally accepted in the United States. Refer to the Company&#8217;s audited consolidated financial statements as of May 31, 2015 filed with the Securities and Exchange Commission, for additional information including significant accounting policies.</p> <p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: 1; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify;"><i>Principles of Consolidation</i></p><p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-transform: none; white-space: normal; widows: 1; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify; text-indent: 0.5in;">&#160;</p><p style="color: #000000; font-family: 'times new roman', times, serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: auto; text-indent: 0px; text-transform: none; white-space: normal; widows: 1; word-spacing: 0px; -webkit-text-stroke-width: 0px; font-stretch: normal; margin: 0px; text-align: justify;">The interim financial statements include the accounts of the Company and its wholly-owned subsidiaries, Yappn Acquisition Corp. and Yappn Canada, Inc. 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The Company amortizes acquired technology over its estimated useful life considered to be 5 years, on a straight-line basis. Patents are amortized commencing at the receipt of approval of the patents or acquisition of patents. Should the patent process be unsuccessful, the entire amount relating to the patent is expensed in the period this is determined. 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The standard outlines a five-step model for revenue recognition with the core principle being that a company should recognize revenue when it transfers control of goods or services to customers at an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. Companies can choose to apply the standard using either the full retrospective approach or a modified retrospective approach. Under the modified approach, financial statements will be prepared for the year of adoption using the new standard but prior periods presented will not be adjusted. Instead, companies will recognize a cumulative catch-up adjustment to the opening balance of retained earnings. This new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The Company has not yet made a determination as to the method of application (full retrospective or modified retrospective). 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The amendments in this update apply to all companies. They become effective in the annual period ending after December 15, 2016, with early application permitted. 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font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">2,391,500</td><td style="width: 15px; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-left: 10pt;">Borrowing on June 27, 2014</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">-</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">250,000</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">-</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">250,000</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-left: 10pt;">Borrowing on September 2, 2014</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">-</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">125,000</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">-</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">125,000</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-left: 10pt;">Borrowing on September 3, 2014</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">50,000</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">-</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">-</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">50,000</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-left: 10pt;">Borrowing on October 6, 2014</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">-</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">50,000</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">-</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">50,000</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td></tr><tr style="vertical-align: bottom; background-color: white;"><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-left: 10pt;">Borrowing on October 22, 2014</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">40,000</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">-</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">-</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">40,000</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td></tr><tr style="vertical-align: bottom; background-color: #cceeff;"><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-left: 10pt;">Borrowing on October 27, 2014</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">-</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">50,000</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">-</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; 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font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">-</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; 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line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">-</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">50,000</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; 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font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">-</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; 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font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">-</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">-</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">90,750</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; 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font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">-</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; 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font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">-</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; 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line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">(755,194</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">)</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">858,573</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; 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font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; padding-bottom: 1.5pt;">&#160;</td><td style="border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="border-bottom-color: black; border-bottom-width: 1.5pt; border-bottom-style: solid; font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">1,945,833</td><td style="padding-bottom: 1.5pt; font-style: normal; font-variant: normal; 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font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">-</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: left;">&#160;</td><td style="font-style: normal; font-variant: normal; font-weight: normal; font-stretch: normal; font-size: 10pt; line-height: normal; font-family: 'times new roman', times, serif; text-align: right;">-</td><td style="font-style: normal; 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Document and Entity Information - shares
9 Months Ended
Feb. 29, 2016
Apr. 14, 2016
Document and Entity Information [Abstract]    
Entity Registrant Name YAPPN CORP.  
Entity Central Index Key 0001511735  
Amendment Flag false  
Current Fiscal Year End Date --05-31  
Document Type 10-Q  
Document Period End Date Feb. 29, 2016  
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2016  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   26,433,163
XML 13 R2.htm IDEA: XBRL DOCUMENT v3.3.1.900
Interim Condensed Consolidated Balance Sheets (Unaudited)
Feb. 29, 2016
USD ($)
May. 31, 2015
USD ($)
Current assets:    
Cash $ 16,623 $ 19,496
Accounts receivable 1,431,489 $ 1,444,009
Subscription receivable 46,000
Prepaid expenses 65,609 $ 6,068
Total current assets 1,559,721 1,469,573
Equipment, net 1,349 $ 1,250
Intangible assets 4,953,105
Total Assets 6,514,175 $ 1,470,823
Current liabilities:    
Accounts payable 472,820 340,041
Accrued expenses 1,241,162 543,535
Accrued development and related expenses - related party 66,787 468,766
Short term loans $ 376,639 791,928
Line of credit 2,167,025
Deferred revenue 12,500
Convertible promissory notes and debentures $ 2,495,841 3,477,825
Total current liabilities 4,653,249 $ 7,801,620
Other liabilities:    
Long term secured debentures 4,550,388
Convertible secured debentures $ 69,687
Convertible promissory notes and debentures $ 312,486
Total Liabilities $ 9,273,324 $ 8,114,106
Stockholders' Deficit    
Preferred stock, par value $.0001 per share, 50,000,000 shares authorized: Series 'A' Convertible, 10,000,000 shares authorized; nil shares issued and outstanding
Common stock, par value $.0001 per share, 400,000,000 shares authorized 26,433,163 issued and outstanding (May 31, 2015 - 13,422,814) $ 14,735 $ 13,423
Common stock, par value $.0001 per share, 19,087,662 shares subscribed not issued (May 31, 2015 - 99,344) 2,763,638 124,567
Additional paid-in capital 12,893,924 7,981,579
Deficit (18,431,446) (14,762,852)
Total Stockholders' Deficit (2,759,149) (6,643,283)
Total Liabilities And Stockholders' Deficit $ 6,514,175 $ 1,470,823
XML 14 R3.htm IDEA: XBRL DOCUMENT v3.3.1.900
Interim Condensed Consolidated Balance Sheets (Parenthetical) (Unaudited) - $ / shares
Feb. 29, 2016
May. 31, 2015
Preferred stock, par value $ 0.0001 $ 0.0001
Preferred stock, shares authorized 50,000,000 50,000,000
Common stock, par value $ 0.0001 $ 0.0001
Common stock, shares authorized 400,000,000 400,000,000
Common stock, shares issued 26,433,163 13,422,814
Common stock, shares outstanding 26,433,163 13,422,814
Common stock, par value of shares subscribed not issued $ 0.0001 $ 0.0001
Common Stock, shares subscribed not issued 19,087,662 99,344
Series A Convertible preferred stock [Member]    
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
XML 15 R4.htm IDEA: XBRL DOCUMENT v3.3.1.900
Interim Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($)
3 Months Ended 9 Months Ended
Feb. 29, 2016
Feb. 28, 2015
Feb. 29, 2016
Feb. 28, 2015
Income Statement [Abstract]        
Revenues $ 101,537 $ 528,846 $ 911,918 $ 606,821
Cost of revenue 9,134 140,183 146,068 140,389
Gross profit 92,403 388,663 765,850 466,432
Operating expenses:        
Marketing 26,152 104,383 224,900 996,107
Research and development expenses 109,203 100,759 301,168 597,490
General and administrative expenses 497,826 300,435 1,272,484 1,020,468
Professional fees 241,025 74,282 401,048 173,520
Consulting 92,590 199,064 295,665 524,059
Depreciation 102 $ 57 300 $ 176
Amortization 263,940 483,890
Stock based compensation 64,772 $ 70,378 478,289 $ 679,179
Total operating expenses 1,295,610 849,358 3,457,744 3,990,999
Loss from operations (1,203,207) (460,695) (2,691,894) (3,524,567)
Other (income) expense:        
Interest expense $ 268,222 105,007 616,609 253,973
Financing expense on issuance of convertible notes and common stock 362,069 632,250 942,574
Change in fair value of derivative liabilities and convertible notes $ 289,881 485,051 (550,456) (1,647,824)
Prepayment fees on variable notes 29,350 10,000 306,140 50,984
Miscellaneous income (11,077) (67,224) (27,843) (143,780)
Total other (income) expense 576,376 894,903 976,700 (544,073)
Net loss before taxes $ (1,779,583) $ (1,355,598) $ (3,668,594) $ (2,980,494)
Provision for income taxes
Net loss and comprehensive loss $ (1,779,583) $ (1,355,598) $ (3,668,594) $ (2,980,494)
Net loss per weighted-average shares of common stock - basic $ (0.07) $ (0.10) $ (0.19) $ (0.23)
Net loss per weighted-average shares of common stock - diluted $ (0.07) $ (0.10) $ (0.19) $ (0.23)
Weighted-average number of shares of common stock issued and outstanding - basic 26,433,163 13,105,881 19,269,659 12,825,886
Weighted-average number of shares of common stock issued and outstanding - diluted 26,433,163 13,105,881 19,269,659 12,825,886
XML 16 R5.htm IDEA: XBRL DOCUMENT v3.3.1.900
Interim Condensed Consolidated Statement of Stockholders' Deficit (Unaudited) - USD ($)
Total
Common Stock
Common Stock Subscribed
Preferred Stock
Additional Paid-in Capital
Accumulated Deficit
Balance at May. 31, 2014 $ (6,054,299) $ 12,586 $ 201 $ 4,071,022 $ (10,138,108)
Balance, Shares at May. 31, 2014   12,585,579 201,000    
Reclassification of warrant liabilities to equity 1,851,089 1,851,089
Issuance of warrants classified as equity 41,060 41,060
Stock options issued 982,624 $ 982,624  
Stock to be issued under prior obligations 124,567 $ 124,567  
Stock to be issued under prior obligations, shares   99,344      
Stock issued to consultants and vendors 307,967 $ 329 $ 307,638  
Stock issued to consultants and vendors, shares   329,000      
Issuance of common stock on conversion of Series A Preferred stock   $ 201 $ (201)  
Issuance of common stock on conversion of Series A Preferred stock, shares   201,000 (201,000)    
Issuance of common stock on conversion of convertible debt 105,817 $ 307,235 $ 105,510  
Issuance of common stock on conversion of convertible debt, shares   307      
Beneficial conversion feature 622,636 $ 622,636
Net loss (4,624,744)   $ (4,624,744)
Ending Balance at May. 31, 2015 (6,643,283) $ 13,423 $ 124,567 $ 7,981,579 $ (14,762,852)
Ending Balance, Shares at May. 31, 2015   13,422,814 99,344    
Stock-based compensation $ 478,289 478,289
Stock issued on exercise of warrants $ 12 (12)
Stock issued on exercise of warrants, shares   11,667        
Issuance of Common Stock for purchase technology $ 1,806,608 $ 1,300 $ 1,805,308
Issuance of Common Stock for purchase technology, shares   12,998,682      
Stock to be Issued for purchase of technology 2,639,071 $ 2,639,071
Stock to be Issued for purchase of technology, shares   18,988,318      
Issuance of warrants classified as equity 542,760 $ 542,760
Warrants associated with a secured convertible debenture 1,616,630       1,616,630  
Beneficial conversion feature 469,370       $ 469,370  
Net loss (3,668,594) $ (3,668,594)
Ending Balance at Feb. 29, 2016 $ (2,759,149) $ 14,735 $ 2,763,638 $ 12,893,924 $ (18,431,446)
Ending Balance, Shares at Feb. 29, 2016   26,433,163 19,087,662    
XML 17 R6.htm IDEA: XBRL DOCUMENT v3.3.1.900
Interim Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
9 Months Ended
Feb. 29, 2016
Feb. 28, 2015
Cash Flows From Operating Activities:    
Net and comprehensive loss $ (3,668,594) $ (2,980,494)
Adjustments to reconcile net loss to cash used in operating activities:    
Depreciation 300 $ 176
Amortization 483,890
Stock based compensation 478,289 $ 679,179
Change in fair value of derivative liabilities and convertible notes (550,456) (1,647,824)
Financing expense on issuance of convertible promissory notes, and common stock $ 632,250 942,574
Stock issuance for consulting services and licensing rights 175,000
Changes in operating assets and liabilities:    
Accounts receivable $ 12,520 (601,821)
Prepaid expenses (59,541) (23,010)
Accounts payable and accrued liabilities 830,406 346,550
Accrued development and related expenses - related party (401,979) $ 115,527
Deferred revenue (12,500)
Net Cash Used in Operating Activities (2,255,415) $ (2,994,143)
Cash Flows From Investing Activities:    
Expenditures on patents (15,927)
Capital expenditures (377) $ (1,593)
Net Cash Used in Investing Activities (16,304) (1,593)
Cash Flows From Financing Activities:    
Proceeds from convertible promissory notes and debentures 90,750 840,339
(Repayments)/proceeds from line of credit, net (1,092,025) $ 1,475,000
Proceeds from secured debentures 2,096,653
Proceeds from secured convertible debentures 2,040,000
Repayments of short term loans (151,791) $ (358,678)
Proceeds from short term loans 168,823 264,607
Repayment of convertible promissory notes and debentures (883,564) (204,093)
Net Cash Provided by Financing Activities 2,268,846 2,017,175
Net decrease in cash (2,873) (978,561)
Cash, beginning of period 19,496 988,692
Cash, end of period $ 16,623 10,131
Non Cash Investing and Financing Activities Information:    
Common stock issued for consulting services $ 175,000
Common stock issued on exercise of warrants $ 37,100
Common stock to be issued for consulting and other obligations $ 124,567
Common stock issuance from conversions of convertible debt 105,817
Reclassification of derivative liabilities to additional paid in capital 1,653,222
Conversion of short term loan and line of credit into secured debentures $ 419,305 $ 100,000
Common stock issued for acquisition of technology 1,806,608
Common stock to be issued for acquisition of technology 2,639,071
Cash paid for interest during the nine month period $ 67,941 $ 127,626
XML 18 R7.htm IDEA: XBRL DOCUMENT v3.3.1.900
Summary of Significant Accounting Policies
9 Months Ended
Feb. 29, 2016
Summary of Significant Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

1. Summary of Significant Accounting Policies

 

Basis of Presentation and Organization

 

Yappn Corp., formerly “Plesk Corp.”, (the “Company”) was incorporated under the laws of the State of Delaware on November 3, 2010. The business plan of the Company is to provide effective unique and proprietary tools and services that create dynamic solutions that enhance a brand’s messaging, media, e-commerce and support platforms. The Company has offices in the United States and Canada. In March 2013, the Company acquired a concept and technology license from Intertainment Media Inc., a Canadian company, in exchange for 7,000,000 shares of common stock of the Company. As a result of this exchange, Intertainment Media Inc. acquired, at that time, a seventy percent (70%) ownership of the Company. On September 15, 2015, the Company closed the acquisition of Ortsbo Inc.’s intellectual property. As a result of the acquisition, Intertainment Media Inc.’s ownership was reduced to 37%. The accompanying interim condensed consolidated financial statements of the Company were prepared from the accounts of the Company under the accrual basis of accounting.

 

Unaudited Interim Condensed Consolidated Financial Statements

 

The interim condensed consolidated financial statements (“interim financial statements”) of the Company as of February 29, 2016, and for the three and nine month periods ended February 29, 2016 and February 28, 2015, are unaudited. However, in the opinion of management, the interim financial statements include all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the Company’s financial position as of February 29, 2016, and the results of its operations and its cash flows for the three and nine month periods ended February 29, 2016 and February 28, 2015. These results are not necessarily indicative of the results expected for the fiscal year ending May 31, 2016. The accompanying interim financial statements and notes thereto do not reflect all disclosures required under accounting principles generally accepted in the United States. Refer to the Company’s audited consolidated financial statements as of May 31, 2015 filed with the Securities and Exchange Commission, for additional information including significant accounting policies.

 

Principles of Consolidation

 

The interim financial statements include the accounts of the Company and its wholly-owned subsidiaries, Yappn Acquisition Corp. and Yappn Canada, Inc. All inter-company balances and transactions have been eliminated on consolidation.

 

Intangible Assets

 

Intangible assets consist of acquired technology, and patents, acquired from a related party and are accordingly recorded at the cost as recorded in the records of the related party (Note 4). The Company amortizes acquired technology over its estimated useful life considered to be 5 years, on a straight-line basis. Patents are amortized commencing at the receipt of approval of the patents or acquisition of patents. Should the patent process be unsuccessful, the entire amount relating to the patent is expensed in the period this is determined. The Company continually evaluates the remaining estimated useful life of its intangible assets being amortized to determine whether events and circumstances warrant a revision to the remaining period of amortization.

 

Recent Accounting Pronouncements

 

In May 2014, the FASB issued Accounting Standards Update No. 2014-09 which was amended in August 2015 by Update No 2015-14: Revenue from Contracts with Customers. The standard outlines a five-step model for revenue recognition with the core principle being that a company should recognize revenue when it transfers control of goods or services to customers at an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. Companies can choose to apply the standard using either the full retrospective approach or a modified retrospective approach. Under the modified approach, financial statements will be prepared for the year of adoption using the new standard but prior periods presented will not be adjusted. Instead, companies will recognize a cumulative catch-up adjustment to the opening balance of retained earnings. This new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The Company has not yet made a determination as to the method of application (full retrospective or modified retrospective). It is too early to assess whether the impact of the adoption of this new guidance will have a material impact on the Company's results of operations or financial position.

 

On August 27, 2014 the FASB issued a new financial accounting standard on going concern, Update 2014-15, “Presentation of Financial Statements – Going Concern (subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The standard provides guidance about management’s responsibility to evaluate whether there is substantial doubt about the organization’s ability to continue as a going concern. The amendments in this update apply to all companies. They become effective in the annual period ending after December 15, 2016, with early application permitted. The Company is currently evaluating the impact of this accounting standard.

 

In November 2014, the FASB issued Accounting Standard Update (“ASU”) 2014-16, Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity. The ASU clarifies how current guidance should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. Specifically, the amendments clarify that an entity should consider all relevant terms and features, including the embedded derivatives feature being evaluated for bifurcation, in evaluating the nature of a host contract. The ASU is effective for fiscal years and interim periods beginning after December 15, 2015. The Company is currently assessing the impact, if any, of implementing this guidance on its consolidated financial position and results of operations.

XML 19 R8.htm IDEA: XBRL DOCUMENT v3.3.1.900
Going Concern
9 Months Ended
Feb. 29, 2016
Going Concern [Abstract]  
Going Concern

2. Going Concern

 

The accompanying interim financial statements have been prepared assuming that the Company will continue as a going concern. The Company has experienced negative cash flows from operations since inception and has incurred a deficit of $18,431,446 through February 29, 2016.

 

As of February 29, 2016, the Company had a working capital deficit of $3,093,528. During the nine months ended February 29, 2016, net cash used in operating activities was $2,255,415. The Company expects to have similar cash needs for the next twelve months. At the present time, the Company does not have sufficient funds to fund operations over the next twelve months.

 

Implementation of our business plan will require additional debt or equity financing and there can be no assurance that additional financing can be obtained on acceptable terms. We have realized limited revenues to cover our operating costs. As such, we have incurred an operating loss since inception. This and other factors raise substantial doubt about our ability to continue as a going concern. Our continuation as a going concern is dependent on our ability to meet our obligations, to obtain additional financing as may be required and ultimately to attain profitability. Our interim financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Management plans to meet its operating cash flow requirements from financing activities until the future operating activities become sufficient to support the business to enable the Company to continue as a going concern. The Company continues to work on generating operating cash flows from the commercialization of its business. Until those cash flows are sufficient the Company will pursue other financing when deemed necessary.

 

The Company is pursuing a number of different financing opportunities in order to execute its business plan. These include, short term debt arrangements, convertible debt arrangements, common share equity financings, either through a private placement or through the public markets. During the nine months ended February 29, 2016, the Company raised $2,268,846 through various financial instruments, net of repayments.

 

There can be no assurance that the raising of future equity or debt will be successful or that the Company’s anticipated financing will be available in the future, at terms satisfactory to the Company. Failure to achieve the equity and financing at satisfactory terms and amounts could have a material adverse effect on the Company’s ability to continue as a going concern. If the Company cannot successfully raise additional capital and implement its strategic development plan, its liquidity, financial condition and business prospects will be materially and adversely affected, and the Company may have to cease operations.

XML 20 R9.htm IDEA: XBRL DOCUMENT v3.3.1.900
Concentration of Credit Risk
9 Months Ended
Feb. 29, 2016
Concentration of Credit Risk [Abstract]  
Concentration of Credit Risk

3. Concentration of Credit Risk

 

All of the Company’s revenues are attributed to a small number of customers. One customer comprises 100% of the accounts receivable as at February 29, 2016 and 55% and 89% of the revenue recorded for the three and nine months ended February 29, 2016. The Company billed its largest customer $233,860 and $1,615,125 for the three month and nine month period ended February 29, 2016, $178,432 and $802,592 has not been recorded as accounts receivable or revenue in the Company’s financial statements as, due to the long period without payment, the Company has determined the revenue recognition criteria starting at the beginning of the Company’s second quarter has not been met. The Company and the customer continue to work together in ways to enable full and complete payment of the total billings incurred, both recognized and unrecognized as at February 29, 2016.

 

Effective February 29, 2016, Digital Widget Factory (Belize) (“DWF”) sold the technology platform, partially developed by Yappn in conjunction with DWF’s principals, to Intelligent Content Enterprises (“ICE”) in exchange for shares of ICE. As part of the transaction, DWF has ownership and rights to 24 million common shares of ICE for a large minority shareholder position of ICE. The Company is in final negotiations with DWF and anticipates executing on a final promissory note from DWF, for the value of the billings of $2,125,000 million (of which $1,431,489 is currently recorded as a receivable). The promissory note is to be secured by DWF’s ICE stock holdings in the amount of 4,250,000 shares, which at the current market value of ICE shares, significantly exceeds to the value of the promissory note.

XML 21 R10.htm IDEA: XBRL DOCUMENT v3.3.1.900
Acquisition of Intellectual Property (and Reverse Split)
9 Months Ended
Feb. 29, 2016
Acquisition of Intellectual Property (and Reverse Split) [Abstract]  
Acquisition of Intellectual Property (and Reverse Split)

4. Acquisition of Intellectual Property (and Reverse Split)

 

On September 15, 2015, the Company finalized its purchase of Intellectual property assets of Ortsbo, Inc. (“Ortsbo”) pursuant to an Asset Purchase Agreement executed and closed on July 15, 2015. With this closing, the Company had an obligation to issue 31,987,000 shares of common stock of Yappn. During the second quarter of fiscal 2016 from the share issuance obligations from the purchase of the Ortsbo intellectual property assets 12,998,682 shares were issued comprising 8,312,500 to Ortsbo and 4,686,182 to the former debt and minority shareholders of Ortsbo, which were valued at $1,806,608 leaving 18,988,318 shares to be issued as of February 29, 2016. As of the filing date, these aforementioned shares remain to be issued. Yappn also assumed $975,388 of debt as part of the transaction. This assumed debt was immediately subscribed as part of the secured debenture in Yappn (Note 6). The fair value for the agreed upon consideration for the acquisition of intellectual property from Ortsbo was $16,968,888, however, due to the common control of Ortsbo Inc. and the Company , the value of the intangible assets acquired from Ortsbo was recorded at the carrying value in the financial records of Ortsbo Inc. This value was $5,421,068 on September 15, 2015.

 

In connection with the terms of the Asset Purchase Agreement related to the purchase of intellectual property assets of Ortsbo, the Company committed to complete a share consolidation. On September 9, 2015, the Company amended its Certificate of Incorporation to implement a reverse stock split in the ratio of 1 share for every 10 shares of common stock. This amendment was approved and filed with the Delaware Secretary of State on September 9, 2015. FINRA declared the Company’s 1-for-10 reverse stock split ex-dividend date effective as of October 2, 2015. The reverse stock split reduced the Company’s common stock outstanding from approximately 134,344,806 shares to approximately 13,434,481 shares. The effect of this reverse stock split has been reflected in these interim financial statements.

XML 22 R11.htm IDEA: XBRL DOCUMENT v3.3.1.900
Short Term Loans
9 Months Ended
Feb. 29, 2016
Convertible Promissory Notes and Debentures/Convertible Secured Debentures [Abstract]  
Short Term Loans

5. Short Term Loans

 

On April 1, 2014, the Company entered into a short term loan for $219,480 (Canadian $240,000) with a private investor. The Company previously converted a portion of a previous loan from this lender (Canadian $350,000), from a prior fiscal year, into a convertible debenture. The loan had a maturity of July 10, 2014 with an interest rate of 1% per month. The Company repaid $118,454 (Canadian $160,280) in fiscal 2015 and $8,446 during the nine months period ended February 29, 2016 (Canadian $13,405). As at February 29, 2016, the loan had a value of $130,304 ($176,315 Canadian).

 

On January 7, 2014, the Company borrowed $253,200 (Canadian $280,000) from a private investor. The loan had a term of three months and had an interest rate of 12% per annum payable at the maturity date. A preparation fee of 10% or $25,300 (Canadian $28,000) was paid at inception. The loan was extended past its due date of April 7, 2014 and is accruing interest without penalty until payment. On June 12, 2014, the Company repaid $142,056 (Canadian $152,000) against the loan and on June 27, 2014 $90,777 (Canadian $100,000) was retired and contributed to a subscription agreement for Units that included an unsecured 6% convertible debenture, $100 par value, convertible into shares of the Company’s common stock and 166,667 issuable shares of common stock (Series C warrants) at a purchase price of $2.20 per share (Note 7). As at February 29, 2016 an amount of $20,693 ($28,000 Canadian) remains outstanding.

 

On July 17, 2014, the Company borrowed $100,915 (Canadian $110,000) from a private investor in the form of a short term loan due on December 31, 2014. This loan carries a 1% arrangement fee and an interest rate of 1% per month. During fiscal 2015 $90,145 (Canadian $105,000) was repaid on this note. The remaining balance was repaid during the nine months ended February 29, 2016.

 

On August 4, 2014, the Company borrowed $93,458 (Canadian $100,000) in the form of a bridge loan from a private investor, with combined origination fees and interest of $3,210 (Canadian $3,500), due on August 14, 2014. The Company repaid $22,768 (Canadian $25,000) of this loan on August 25, 2014. As of February 29, 2016, the value of the remaining balance of the loan was $55,428 (Canadian $75,000).

On May 6, 2015, the Company borrowed $150,000 ($187,000 Canadian) in the form of a bridge loan from a private investor with a financing fee of $6,000 ($7,200 Canadian). This loan was paid back on June 30, 2015.

 

On May 11, 2015, the Company received $419,463 ($500,000 Canadian) from an intended subscriber for secured debentures, which closed on July 15, 2015. The Company treated this as a short term loan where interest is accrued at 12% (same rate as the secured debenture) for each lender from the date of the loan to the date of the subscription for the convertible debenture (Note 6). 

 

On June 19, 2015, the Company received $78,265 ($96,000 Canadian) from an intended subscriber for secured debentures, which closed on July 15, 2015. The Company treated this as a short term loan where interest is accrued at 12% (same rate as the secured debenture) for each lender from the date of the loan to the date of the subscription for the convertible debenture (Note 6).

 

On July 10, 2015, the Company borrowed $250,000 in the form of a bridge loan from a private investor. This loan was paid back on July 16, 2015.

 

During the second quarter of fiscal 2016, the Company received $1,201,000 from intended subscribers of a secured debenture financing closed on December 30, 2015. The Company treated this as a short term loan where interest is accrued at 12% (same rate as the secured debenture) for each lender from the date of the loan to the date of the subscription for the convertible debenture (Note 6).

 

During the third quarter of fiscal 2016, the Company received $175,000 ($120,000 from a director) from intended subscribers in anticipation of a second closing of the convertible secured debenture financing that closed on December 30, 2015. The Company is treating this as a short term loan where interest is accrued at 12% (same rate as the previously issued secured debenture).

 

The following is a summary of Short Term Loans:

 

Principal amounts   April 1,
2014
Term Loan
    January 7,
2014
Term Loan
    Other Loans     Total  
Fair value at May 31, 2014   $ 220,159     $ 257,152     $ -     $ 477,311  
Borrowing on July 17, 2014     -       -       100,915       100,915  
Borrowing on July 23, 2014     -       -       50,234       50,234  
Borrowing on August 4, 2014     -       -       93,458       93,458  
Borrowings in August 2014 (multiple dates)     -       -       125,000       125,000  
Borrowing on January 23, 2015     -       -       16,098       16,098  
Borrowing on March 30, 2015                     250,000       250,000  
Borrowing on May 6, 2015     -       -       144,729       144,729  
Borrowing on May 11, 2015     -       -       419,463       419,463  
Total     -       -       1,199,897       1,199,897  
Fair value adjustments     (21,589 )     (1,356 )     (21,893 )     (44,838 )
Repayments     (46,025 )     (142,506 )     (436,134 )     (624,665 )
Conversions     -       (90,777 )     (125,000 )     (215,777 )
Fair value at May 31, 2015   $ 152,545     $ 22,513     $ 616,870     $ 791,928  
Borrowing on June 19, 2015     -       -       78,265       78,265  
Borrowing on July 10, 2015     -       -       250,000       250,000  
Borrowing during the second quarter     -       -       1,201,000       1,201,000  
Borrowing during the third quarter     -       -       175,000       175,000  
Fair value adjustments     (13,795 )     (1,820 )     (29,388 )     (45,003 )
Conversions     -       -       (1,662,300 )     (1,662,300 )
Repayments     (8,446 )     -       (403,805 )     (412,251 )
Fair value at February 29, 2016   $ 130,304     $ 20,693     $ 225,642     $ 376,639  
 
XML 23 R12.htm IDEA: XBRL DOCUMENT v3.3.1.900
Line of Credit Arrangement and Secured Debentures
9 Months Ended
Feb. 29, 2016
Line of Credit Arrangement and Secured Debentures [Abstract]  
Line of Credit Arrangement and Secured Debentures

6. Line of Credit Arrangement and Secured Debentures

 

On April 7, 2014, the Company finalized its line of credit arrangement whereby the Company can borrow up to $3,000,000 from a third party lender. The loan agreement is for an initial two year term subject to the lender’s right to demand repayment of the outstanding balance. It carries an interest rate of 12% per annum and a 1% draw down fee on each draw. Pursuant to the loan agreement, the Company issued the lender warrants to purchase up to 800,000 shares of the Company’s common stock at an exercise price of $1.00. Upon the Company’s first draw down of $200,000 from the line of credit, 200,000 five year warrants vest. For each subsequent $100,000 the Company draws, 100,000 five year warrants will vest until the 800,000 warrants are vested. The Company’s shares of common stock that are issuable on the exercise of warrants were granted registration rights, allowing the shares to be sold. In addition, the Company entered into a general security agreement with the lender to which it granted the lender a first position security interest in all of its assets and in the event of default under the security agreement or the promissory note, the lender may foreclose on the assets of the Company. 

  

During fiscal 2015, the Company borrowed $1,900,155 against the line of credit and repaid $533,130 resulting in a net additional amount drawn down against the line of credit of $1,367,025 and an outstanding obligation of $2,167,025 at May 31, 2015. During fiscal 2016, the Company borrowed $150,000 against the line of credit, repaid and released a total of $1,242,025 (immediately after conversion of $2 million into a secured debenture (see below)) and converted $1,075,000 to secured debentures. The outstanding obligation was $nil at February 29, 2016.

 

Yappn closed the first tranche in the amount of $4.5 million of secured debentures. The secured debentures carry an annual interest rate of 12% payable at maturity. Maturity was initially the earlier of the date proceeds are available from a public offering or December 31, 2015. During the third fiscal quarter, the holders of the Secured Debentures (the “Holders”) agreed to extend the maturity date of the Secured Debentures from December 31, 2015 to July 15, 2020, and were provided with the right to amend the Secured Debenture such that a Holder shall have the right, at any time after the earlier of (i) six (6) months from the date of first issuance of any subsequent Debentures; and (ii) June 30, 2016, to require the Company to satisfy the outstanding obligations underlying the Secured Debenture; provided, however, that at least two thirds (66.67%) of the Holders of the principal amount of the Secured Debentures consent to a put of their Secured Debentures to the Company. This financing is supported by Yappn's secured line of credit holders through their participation as described above. Yappn executed a non-binding letter of intent with Winterberry Investments Inc. ("Winterberry"), a private company led by Mr. David Berry, pursuant to which Winterberry will facilitate and manage the financing transaction as well as to advise on Yappn's future capital programs. The Company received $2.5 million of this financing in the form of cash and cash commitments, including conversion of the short term loans obtained on May 11, 2015 and June 19, 2015 as described in Note 5. $2,000,000 of the $4.5 million financing is conversion of a portion of the Company’s existing debt that remained in the secured debenture. $925,000 was repaid out of the secured debenture, in the form of cash in the amount of $465,000 with the remainder in the form of the release of secured deposit that was applied against accounts receivable. On September 15, 2015, the Company closed the acquisition of intellectual property from Ortsbo, and as part of this closing, assumed debt and non-controlling equity interests from Ortsbo in the amount of $975,338 that was immediately subscribed to the first tranche of secured debentures. The secured debentures balance as at February 29, 2016, was $4,550,388.

XML 24 R13.htm IDEA: XBRL DOCUMENT v3.3.1.900
Convertible Promissory Notes and Debentures
9 Months Ended
Feb. 29, 2016
Convertible Promissory Notes and Debentures/Convertible Secured Debentures [Abstract]  
Convertible Promissory Notes and Debentures

7. Convertible Promissory Notes and Debentures

 

The Company has issued various convertible notes and debentures with various terms. As a result of the variability in the amount of shares of common stock to be issued in accordance with variable pricing terms or conversion price protection clauses, the Company recorded these instruments as liabilities at fair value until the point in time when price protection clauses expired. The Company has determined the convertible notes and debentures to be Level 2 fair value measurement and where applicable has used the binominal lattice pricing model to calculate the fair value as of February 29, 2016, May 31, 2015, and the commitment dates.

 

The following is a summary of the convertible promissory notes and debentures as of February 29, 2016:

 

Principal amounts:   JMJ
Financial
Notes
    Convertible
Debentures
    Other
Notes
    Total  
Total Borrowings at May 31, 2014   $ 80,000     $ 2,219,000     $ 92,500     $ 2,391,500  
Borrowing on June 27, 2014     -       250,000       -       250,000  
Borrowing on September 2, 2014     -       125,000       -       125,000  
Borrowing on September 3, 2014     50,000       -       -       50,000  
Borrowing on October 6, 2014     -       50,000       -       50,000  
Borrowing on October 22, 2014     40,000       -       -       40,000  
Borrowing on October 27, 2014     -       50,000       -       50,000  
Borrowing on December 24, 2014     -       -       75,000       75,000  
Borrowing on December 24, 2014     -       -       100,000       100,000  
Borrowing on December 29, 2014     -       -       50,000       50,000  
Borrowing on February 4, 2015     -       -       115,000       115,000  
Borrowing on February 9, 2015     -       -       90,750       90,750  
Borrowing on March 30, 2015     -       -       92,000       92,000  
Borrowing on April 15, 2015     -       -       69,000       69,000  
Borrowing on April 20, 2015     -       -       50,000       50,000  
Borrowing on April 23, 2015     -       -       60,500       60,500  
Borrowing on April 23, 2015     -       -       25,000       25,000  
Conversions     (80,000 )     -       -       (80,000 )
Repayments     (90,000 )     -       (92,500 )     (182,500 )
Total Borrowings at May 31, 2015     -       2,694,000       727,250       3,421,250  
Borrowings on June 24, 2015     -       -       45,375       45,375  
Borrowings on June 29, 2015     -       -       45,375       45,375  
Repayments     -       -       (818,000 )     (818,000 )
Total Borrowings at February 29, 2016   $ -     $ 2,694,000     $ -     $ 2,694,000  
                                 
Convertible notes and debt at fair value at May 31, 2014   $ 142,189     $ 2,264,140     $ 100,846     $ 2,507,175  
Convertible notes and debt at fair value at the commitment date, issued during 2015     137,071       436,887       1,020,110       1,594,068  
Change in fair value (from commitment date)     (70,223 )     (755,194 )     858,573       33,156  
Repayments (cash)     (103,220 )     -       (135,051 )     (238,271 )
Conversions to common stock     (105,817 )     -       -       (105,817 )
Convertible notes and debt at fair value at May 31, 2015     -       1,945,833       1,844,478       3,790,311  
Convertible notes and debt at fair value at the commitment date issued during 2016     -       -       171,990       171,990  
Change in fair value     -       550,008       (1,132,904 )     (582,896 )
Repayments (cash)     -       -       (883,564 )     (883,564 )
Convertible notes and debt at fair value at February 29, 2016   $ -     $ 2,495,841     $ -     $ 2,495,841  
                                 
Balance at May 31, 2015                                
Current     -       1,633,347       1,844,478       3,477,825  
Long term     -       312,486       -       312,486  
    $ -     $ 1,945,833     $ 1,844,478     $ 3,790,311  
Balance at February 29, 2016                                
Current     -       2,495,841       -       2,495,841  
    $ -     $ 2,495,841     $ -     $ 2,495,841  

 

JSJ Investments Inc.

 

On December 24, 2014, the Company sold a Convertible Note in the principal amount of $100,000 to JSJ Investments Inc. The Convertible Note matures on June 23, 2015 and has an interest rate of 15% per annum payable at maturity. The note may be converted into common stock of the Company on or after the maturity date at a conversion price of 50% of the lowest 15 days prior to conversion or $1.00. Early payback penalties are 140% from 120-150 days and 150% up to the maturity date of the note. This Convertible Note was repaid on June 24, 2015.

 

LG Capital Funding, LLC

 

On December 24, 2014, the Company sold a Convertible Note in the principal amount of $75,000. The Convertible Note matures on December 24, 2015 and has an interest rate of 8% per annum. The note may be converted into shares of common stock of the Company at any time beginning on the 180th day of the date of the note at a conversion price of 55% of the average of 2 lowest closing bid prices from the 10 days prior to conversion. Early payback penalties are 150% and payback is eligible up to 180 days from the inception of the note. This Convertible Note was repaid on June 24, 2015.

 

Vista Capital Investments, LLC

 

On December 29, 2014, the Company sold a Convertible Note in the principal amount of $110,000, 10% original issuance discount and advanced $50,000 on closing. The Convertible Note matures on December 29, 2015 and has a one-time interest charge of 12%. The note may be converted into shares of common stock of the Company at any time beginning on the 180th day of the date of the note at a conversion price of 60% of the lowest trading price from the 25 days prior to conversion or $1.00. Early payback penalties are 125% up to 90 days and 145% after 90 days. On April 23, 2015, Company borrowed an additional $25,000 against this Convertible Note. The $50,000 drawn on December 29, 2014 was repaid on June 26, 2015. The $25,000 drawn on April 23, 2015 against this Convertible Note was repaid on October 20, 2015. There is no further balance outstanding on this note. 

 

Typenex Co-Investments, LLC

 

On February 4, 2015, the Company sold a Convertible Note in the principal amount of $115,000 carrying a 10% original issuance discount (“OID”). The Convertible Note matures on January 4, 2016 and has an interest rate of 10% per annum. The note may be converted into common stock at an exercise price of $1.00 per share six months after the sale of the note. The Company can repay the note within the first six months at a penalty of 125% of principal amount. After six months, repayments can be made on an installment basis, either in cash (plus OID), or in shares of common stock. If installment payments are made in the form of common stock, the effective price for the stock issuance is at 70% of the average of the three lowest closing bid prices over a ten day look back period from the date the installment is due. The installments must be made on a monthly schedule if the lender does not convert at their option at the exercise price of $1.00 per share. At the funding date the Company issued 70,000 fixed price warrants at an exercise price of $1.00 per share with no price protection. The warrants were recorded at a value of $37,100 in additional paid-in capital (Note 10). The Company elected not to prepay the Typenex Co-Investment, LLC Convertible Note, and made all installment payments in the form of cash totaling $123,383 from August to January 2016 comprising principal and interest. On January 5, 2016, the Company repaid this Convertible Note in full.

 

Iconic Holdings, LLC

 

On February 9, 2015, the Company sold a Convertible Note with a face value of $220,000, carrying a 10% original issuance discount. $90,750 was advanced to the Company on closing of the note. The Convertible Note matures on February 9, 2016 and has an interest rate on the principal balance of 10%. The note may be converted into shares of common stock of the Company at any time beginning on the 180th day of the date of the note at a conversion price of 60% of the lowest average daily trading price from the 25 days prior to conversion or 10 cents, whichever is lower. The Note carries early payback penalties on principal repayment which are 115% from 1-60 days, 125% between 61 and 120 days, 130% between 121 and 180 days, and may not be paid back after 180 days without consent from the Holder. During August 2015, the Company prepaid the portion of the Convertible Note advanced in February 2015 in the principal amount of $90,750. On June 24, 2015 and June 29, 2015, Iconic Holdings LLC, provided funding of $90,750 (two advances of $45,375) to the Company under the existing Convertible Note.  On January 5, 2016, the Company repaid this Convertible Note in full.

 

Group 10 Holdings LLC

 

On March 30, 2015, the Company sold a Convertible Note for the principal amount of $92,000 with a 10% original issue discount. The Convertible Note matures on March 30, 2016 and has an interest rate of 12% per annum. The note may be converted into shares of common stock of the Company at any time beginning on the 180th day of the date of the note at a conversion price of 55% of the average of the two lowest closing bid prices with a twenty day look back period as of the date a notice of conversion is given. The debenture may be paid back any time before maturity with a prepayment penalty of 123%. On October 6, 2015, the Company repaid this Convertible Note in full.

  

Vis Vires Group, Inc.

 

On April 15, 2015, the Company sold a Convertible Note for the principal amount of $69,000. The Convertible Note matures on January 6, 2016 and has an interest rate of 8% per annum. The note may be converted into shares of common stock of the Company at any time beginning on the 180th day of the date of the note at a conversion price of 58% of the average of the three lowest trading prices from previous ten trading days including the date notice is given. The note may be paid back any time before maturity with a prepayment penalty of 110% if paid back within the first 30 days, 115% if paid back between 31 and 60 days, 120% if paid between 61 and 90 days, 125% if paid between 91 and 120 days, 130% if paid between 121 and 150 days, and 135% if paid back between 151 and 180 days after which it cannot be repaid. On October 13, 2015, the Company repaid this note in full.

 

Adar Bays, LLC

 

On April 20, 2015, the Company sold a Convertible Note for the principal amount of $50,000. The Convertible Note matures on April 20, 2016 and has an interest rate of 8% per annum. The note may be converted into shares of common stock of the Company at any time beginning on the 180th day of the date of the note at a conversion price of 60% of the average of the three lowest trading prices from previous fifteen trading days. The Note may be paid back any time before maturity with a prepayment penalty of 140%. On October 20, 2015, the Company repaid this Note in full.

 

Auctus Private Equity Fund, LLC

 

On April 23, 2015, the Company sold a Convertible Note for the principal amount of $60,500. The convertible note matures on January 21, 2016 and has an interest rate of 10% per annum. The note may be converted into shares of common stock of the Company at any time beginning on the 180th day of the date of the note at a conversion price of 60% of the average of the two lowest trading prices from previous twenty trading days. The note may be paid back any time before maturity with a prepayment penalty of 130%. On October 20, 2015 the Company repaid this note in full.

 

The following table summarizes the fair values by fiscal quarter for issued convertible variable notes and the inputs to determine fair value at commitment date and quarter end dates.

 

Accounting allocation of initial proceeds:   Second
Quarter
Fiscal 2015
    Third
Quarter
Fiscal 2015
    Fourth
Quarter
Fiscal 2015
    First
Quarter
Fiscal 2016
 
Gross proceeds   $ 90,000     $ 430,750     $ 296,500     $ 90,750  
Fair value of promissory notes     (137,071 )     (656,507 )     (363,604 )     (171,990 )
Fair value of equity warrant     -       (37,100 )     -       -  
Financing expense on the issuance of promissory notes   $ 47,071     $ 262,857     $ 67,104     $ 81,240  
                                 
Key inputs to determine the fair value at the commitment date:                                
Stock price   $ 0.40-1.20     $  0.50-0.70     $ 0.50-0.60     $ 0.60  
Current exercise price   $ 0.40-0.60     $ 0.20-1.00     $ 0.30     $ 0.20  
Time to expiration – days       389-436          181-365           250-366          225-230  
Risk free interest rate       .1-.11 %         .14-.26 %          .09-.27 %        .30-.27 %
Estimated volatility     150 %     150 %     150 %     150 %
Dividend     -       -       -       -  
Key inputs to determine the fair value at May 31, 2015:                                
Stock price   $ N/A     $ 0.50     $ 0.60     $ N/A  
Current exercise price   $ N/A     $   0.30-1.00     $ 0.30     $  N/A  
Time to expiration – days         N/A           115-346           212-325              N/A  
Risk free interest rate         N/A %         .07-.22 %         .06-.26 %            N/A  
Estimated volatility         N/A %     150 %     150 %      N/A %
Dividend         N/A       N/A           N/A              N/A  

 

Convertible Debentures with Series A and B Warrants

 

On January 29, 2014, February 27, 2014, and April 1, 2014, the Company issued 395, 305, and 469 Units for $395,000, $305,000, and $469,000 respectively, to accredited investors under subscription agreements. The Units, as defined in the subscription agreements, consist of (i) one unsecured 6% convertible promissory note, $100 par value, convertible into shares of the Company’s common stock; (ii) a warrant entitling the holder thereof to purchase 1,000 shares of common stock (individually Series A Warrant) at an exercise price of $1.50; and, (iii) a warrant entitling the holder thereof to purchase 1,000 shares of common stock (individually Series B Warrant) at an exercise price of $2.00. The purchase price for each Unit was $1,000 and resulted in a funding total of $1,069,000 in cash and the retirement of $100,000 debt obligation to a private investor (Note 5).

 

The notes mature 24 months from the issuance date and have an interest rate of 6% per annum payable in arrears on the earlier of a default date or the maturity date. The notes may be converted at any time after the original issuance date at the election of their holders to convert all or part of the outstanding and unpaid principal amount and accrued interest at a conversion price of $1.00 per share. Under the subscription agreement, the Company has granted price protection provisions that provide the holder of Series A warrants with a potential increase in the amount of common stock exchanged or a reduction in the exercise price of the instruments should the Company subsequently issue stock or securities convertible into common stock at a price lower than the stated exercise price of $1.50 for a period of twelve months from issuance. The Company determined the warrants issued to the Line of Credit lenders (Note 6) qualified as a breach of this covenant, therefore all Series A warrants were revalued to a $1.00 exercise price with the adjustment reflected as a change in the fair value. Any amount of principal or interest which is not paid when due, shall bear interest at the rate of 16% per annum from the date it is due.

 

As some of the instruments are considered derivatives and the assigned fair values were greater than the net cash proceeds from the transaction, the excess was treated as a financing expense on issuance of derivative instruments for accounting purposes and reported on the Company’s consolidated statements of operations and comprehensive loss below the operating loss as an “other expense”.

 

The convertible debentures due on January 29, and February 27, 2016 were not repaid or converted into common shares of the Company by the maturity dates. Non-repayment of the debentures triggered a penalty interest rate whereby the stated interest rate goes up to 16% from the original 6%. The Company management is diligently working with the debenture holders on amending terms. Certain debenture holders have agreed to accept an offer for additional investment and agreement to convert their debt into common shares and a repricing to previously issued warrants (Note 14).

 

The following table summarizes the fair values of Convertible Debentures with Series A and B Warrants and the respective inputs to determine fair values at the commitment date and the quarter end dates.

 

Accounting allocation of initial proceeds:   January 29,
2014
    February 27,
2014
    April 1,
2014
 
Gross proceeds   $ 395,000     $ 305,000     $ 469,000  
Fair value of the convertible promissory notes     (320,787 )     (247,696 )     (665,511 )
Derivative warrant liability fair value – Series A (Note 11)     (161,950 )     (125,050 )     (776,664 )
Financing expense on the issuance of instruments   $ 87,737     $ 67,746     $ 973,175  
                         
Key inputs to determine the fair value at the commitment date:                        
Stock price   $ 0.50     $ 0.50     $ 1.80  
Current exercise price – promissory notes   $ 1.00     $ 1.00     $ 1.00  
Current exercise price – Series A warrants   $ 1.50     $ 1.50     $ 1.50  
Time to expiration – days (promissory notes)     732       731       731  
Time to expiration – days (warrants)     1,826       1,826       1,826  
Risk free interest rate (promissory notes)     .32 %     .32 %     .32 %
Risk free interest rate (warrants)     1.52 %     1.51 %     1.74 %
Estimated volatility     150 %     150 %     150 %
Dividend          N/A       N/A       N/A  
Market interest rate for the Company     18 %     18 %     18 %
                         
Key inputs to determine the fair value of the promissory notes at May 31, 2015:                        
Stock price   $   N/A     $ N/A     $ N/A  
Current exercise price   $ N/A     $ N/A     $ N/A  
Time to expiration – days     243       272       306  
Risk free interest rate        N/A %          N/A %          N/A %
Estimated volatility       N/A %          N/A %          N/A %
Dividend       N/A         N/A         N/A  
Key inputs to determine the fair value of the promissory notes at February 29, 2016:                        
Stock price   $ N/A     $   N/A     $ N/A  
Current exercise price   $ N/A     $ N/A     $ N/A  
Time to expiration – days     -       -       32  
Risk free interest rate          N/A %          N/A %          N/A %
Estimated volatility          N/A %          N/A %          N/A %
Dividend          N/A            N/A            N/A  

 

Convertible Debentures with Series C or Series D Warrants

 

On April 23, 2014, the Company authorized and issued 50 Units for $50,000 to a private investor. The Units, as defined in the subscription agreement, consist of (i) one unsecured 6% convertible debenture, $100 par value convertible into shares of the Company’s common stock at a conversion price of $1.50 per share with a price protection clause on any conversion feature issued after the issuance date that mature on April 23, 2016; and (ii) a warrant entitling the holder thereof to purchase 33,333 shares of common stock (Series C Warrant) at a purchase price of $2.20 per share that expires on April 23, 2019.

 

On May 30, 2014, the Company authorized and issued 1,000 Units for $1,000,000 to Array Capital Corporation. The Units, as defined in the subscription agreement, consist of (i) one unsecured 6% convertible debenture, $100 par value convertible into shares of the Company’s common stock at a conversion price of $1.50 per share with a price protection clause on any conversion feature issued after the issuance date that matures on May 30, 2016; and (ii) a warrant entitling the holder thereof to purchase 666,667 shares of common stock (Series C Warrant) at a purchase price of $2.20 per share that expires on May 30, 2019.

 

On June 27, 2014, the Company authorized and issued two separate issues of 125 Units. This total authorized and issuance of 250 Units, at a value of $250,000, was to two independent accredited investors in exchange for $150,000 in cash and release of $90,777 (Canadian $100,000) in the loan originated on January 7, 2014 as described in Note 5. The Units, as defined in the subscription agreement, consist of (i) one unsecured 6% convertible debenture, $100 par value convertible into shares of the Company’s common stock at a conversion price of $1.50 per share with a price protection clause on any conversion feature issued after the issuance date that matures on June 27, 2016; and (ii) a warrant entitling the holder thereof to purchase 166,667 shares of common stock (Series C Warrant) at a purchase price of $2.20 per share that expires on June 27, 2019.

On September 2, 2014, the Company authorized and issued three separate issues of 25, 75, and 25 Units. This total authorized and issuance of 125 Units, at a value of $125,000, was to three independent accredited investors in exchange for $125,000 in cash proceeds (Note 5). The Units, as defined in the subscription agreement, consist of (i) one unsecured 6% convertible debenture, $100 par value convertible into shares of the Company’s common stock at a conversion price of $1.50 per share with a price protection clause on any conversion feature issued after the issuance date that matures on September 2, 2016; and (ii) a warrant entitling the holder thereof to purchase 83,333 shares of common stock (Series C Warrant) at a purchase price of $2.20 per share that expires on September 2, 2019.

   

On October 6, 2014, the Company authorized and issued 50 Units for $50,000 to Subtle Disruption in exchange for the settlement of $50,000 in trade payables. The Units, as defined in the subscription agreement, consist of (i) one unsecured 6% convertible debenture, $100 par value convertible into shares of the Company’s common stock at a conversion price of $1.50 with a price protection clause on any conversion feature issued after the issuance date that matures on October 6, 2016; and (ii) a warrant entitling the holder thereof to purchase 33,333 shares of common stock (Series D Warrant) at a purchase price of $2.20 per share that expires on October 6, 2019.

 

On October 27, 2014, the Company authorized and issued 50 Units for $50,000 to IBEC Holdings Inc. The Units, as defined in the subscription agreement, consist of (i) one unsecured 6% convertible debenture, $100 par value convertible into shares of the Company’s common stock at a conversion price of $1.50 with a price protection clause on any conversion feature issued after the issuance date that matures on October 6, 2016; and (ii) a warrant entitling the holder thereof to purchase 33,333 shares of common stock (Series D Warrant) at a purchase price of $2.20 per share that expires on October 27, 2019.

 

The debentures mature 24 months from the issuance date and have an interest rate of 6% per annum payable in arrears on the earlier of a default date or the maturity date. The notes may be converted at any time after the original issuance date at the election of their holders to convert all or part of the outstanding and unpaid principal amount and accrued interest at a conversion price of $1.50 per share. The warrants may be exercised in whole or in part.

 

Due to the Company’s breach of the authorization limit of common stock on a diluted basis on August 14, 2014, the Company initially classified the above noted warrants issued since this date as financial liabilities, which would otherwise be recorded as equity instruments and classified as part of additional paid in capital. All derivatives other than stock options issuable into common stock were to be classified and accounted for as financial liabilities until the breach of the Company’s authorization limit of common stock on a diluted basis was rectified. On December 31, 2014 the Company increased its authorized share issuance limit to 400,000,000 which rectified the breach. The accounting impact of the August 14, 2014, breach only occurred under the earliest issue date sequencing approach at the date of the next issued applicable derivative, which was September 2, 2014. On December 31, 2014, all derivatives impacted by the Company’s breach of its authorized share limit were reclassified to equity from liabilities.

 

The following table summarizes the fair values of Convertible Debentures with Series C or Series D Warrants and the respective inputs to determine fair values at the commitment date and the quarter end dates.

 

Accounting allocation of initial proceeds:   Fourth
Quarter
Fiscal 2014
    First
Quarter
Fiscal 2015
    Second
Quarter
Fiscal 2015
 
Gross proceeds   $ 1,050,000     $ 250,000     $ 225,000  
Fair value of the convertible debentures     (852,726 )     (254,167 )     (182,720 )
Fair value of liability warrants     -       -       (152,951 )
Fair value of equity warrants     (197,274 )     -       -  
Financing expense on the issuance of derivative instruments   $ -     $ 4,167     $ 110,671  
                         
Key inputs to determine the fair value at the commitment date:                        
Stock price   $  1.50-1.60     $ 2.00      $ N/A  
Current exercise price   $ 1.50     $ 1.50      $ N/A  
Time to expiration – days     731       731         N/A  
Risk free interest rate     .37 %     .45 %       N/A
Estimated volatility     150 %     150 %       N/A %
Dividend     -       -       -  
Market interest rate for the Company     18 %     18 %       N/A
Key inputs to determine the fair value of the convertible debentures at May 31, 2015:                        
Stock price   $ N/A     $ N/A     $  N/A  
Current exercise price   $ N/A     $ N/A     $  N/A  
Time to expiration – days       328-365       393         460-515  
Risk free interest rate       N/A %       N/A %       N/A %
Estimated volatility       N/A %       N/A %       N/A %
Dividend       N/A         N/A         N/A  
Market interest rate for the Company       N/A %       N/A %       N/A %
Key inputs to determine the fair value of the convertible debentures at February 29, 2016:                        
Stock price   $  N/A     $   N/A     $ N/A  
Current exercise price   $ N/A     $ N/A     $ N/A  
Time to expiration – days       54-91       119       186-241  
Risk free interest rate       N/A %         N/A %       N/A %
Estimated volatility       N/A %         N/A %       N/A %
Dividend       N/A           N/A         N/A  
Market interest rate for the Company       N/A %         N/A %       N/A %

 

XML 25 R14.htm IDEA: XBRL DOCUMENT v3.3.1.900
Convertible Secured Debentures
9 Months Ended
Feb. 29, 2016
Convertible Promissory Notes and Debentures/Convertible Secured Debentures [Abstract]  
Convertible Secured Debentures

8. Convertible Secured Debentures

 

On December 30, 2015, the Company completed a secured debenture and warrant financing of $2,086,000 ($1,075,00 from directors of the Company) through the offering of units by way of private placement, with each unit consisting of (i) a 12% secured convertible debenture with a maturity date of five years from issuance convertible at $0.25 per common stock and (ii) ten (10) five year common share purchase warrants, vesting in 1/3 increments with 1/3 vested immediately, 1/3 to be vested in one year and 1/3 to be vested in two years and having an exercise price of $0.01 per share. The units were sold at $1.00 per unit. This closing includes conversion of $1,201,000 in short term loans advanced during the quarter prior to the closing of this secured debenture. Additionally, this includes $46,000 that the Company is yet to receive in cash and is currently recorded as subscription receivable. 

 

Values were allocated for this private placement between the debt, equity warrants, and the beneficial conversion feature. The valuation approach involved determining a fair value for the debt and warrants and then using the relative fair value method to allocate value to these components. Based on relative fair values, the present value method was used to determine the fair values of the debt and the binomial tree option pricing model was used to determine the fair value of the warrants. The value of the interest and principal payments of the debentures resulted in a value of $469,370 for the debentures and the binomial model resulted in a value for warrants for $1,616,630. The assumptions used for the binomial model are: Volatility 314%, expected life of five years, risk free interest rate of 1.80%, and dividend rate of 0%. Additionally, this convertible secured debenture instrument includes a beneficial conversion feature as the effective conversion price is less than the Company’s market price of common stock on the commitment date. The value of this beneficial conversion feature is $469,370. The resulting fair value of the debt is $nil, with $1,616,630 allocated to equity warrants and $469,370 to the beneficial conversion feature, both which are recorded as components of additional paid in capital.

 

The difference between the fair value and face value of the debentures is to be accreted up to face value over the term to maturity using the effective interest method. The carrying value of the debenture liability as at February 29, 2016 is $69,687, which is the amount of accretion recorded during the three month period ended February 29, 2016 included as change in fair value.

 

The following table summarizes the fair values of the components of the convertible secured debentures, including the debt, warrants, and the beneficial conversion feature.

 

Accounting allocation of initial proceeds: December 30,
2015
 
Gross proceeds $2,086,000 
Fair value of the convertible secured debt  - 
Fair value of equity warrants (Note 10)  (1,616,630)
Beneficial conversion feature  (469,370)

 

Convertible secured debt at fair value at the commitment date, issued during 2016  $- 
Change in fair value (from commitment date)  69,687 
Repayments (cash)  - 
Convertible secured debenture at fair value at February 29, 2016  $69,687 
XML 26 R15.htm IDEA: XBRL DOCUMENT v3.3.1.900
Common Stock
9 Months Ended
Feb. 29, 2016
Common Stock [Abstract]  
Common Stock

9. Common Stock

 

On December 31, 2014, the Company’s authorized number of common shares was increased to 400,000,000.

 

During the Company’s second quarter of fiscal 2015, the Company issued 95,000 shares of common stock to consultants at a value of $95,000. During the Company’s third quarter of Fiscal 2015, the Company issued 80,000 shares of common stock to consultants at a value of $80,000. During the Company’s fourth quarter of Fiscal 2015, the Company issued 54,000 shares of common stock to consultants at a value of $52,500.

 

On May 25, 2015, the Company issued 100,000 shares of common stock with a value of $80,000 in partial settlement of an amount owing to a vendor of the Company.

 

On August 31, 2015 the Company issued 11,667 shares of common stock in the form of a cashless exercise with a previous allocation to equity of $37,100 in full settlement of warrants issued to Typenex (Note 7).

 

From April 9, 2014 through February 3, 2015, various holders of convertible preferred stock exercised their right to convert to common stock. A total of 936,000 shares of convertible preferred stock were converted into common stock (Note 10).

 

On September 15, 2015, the Company closed an agreement with Ortsbo Inc. to acquire all of its intellectual property assets. The purchased assets include US Patent No. 8,983,850 B2, US Patent No. 8,917,631 B2, US Patent No. 9,053,097 B2, and other intellectual property including Ecommerce and Customer Care know-how for a total purchase price of $16,968,888, which was paid by the assumption of $975,388 in debt and the issuance of $15,993,500 worth of Yappn restricted common shares (32 Million shares at $0.50 per share). During the second quarter, 12,998,682 shares were issued with obligations incurred to issue the remaining 18,988,318 shares when signed registration forms are all obtained by the Company. As at the filing date, the 18,988,318 remain reserved but not issued (Note 4).

 

Registration Statement

 

The Company filed a Registration Statement on Form S-1 (File No. 333-199569) (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) for up to 7,592,667 shares of Yappn Corp.’s $0.0001 par value per share common stock (the "Common Stock") issuable to certain selling stockholders upon conversion of promissory notes and/or warrants currently held by those selling stockholders, specifically (i) 1,844,000 shares of Common Stock issuable to them upon exercise of promissory notes and (ii) 4,588,000 shares of Common Stock issuable to them upon exercise of warrants. The warrants have an exercise price varying from $1.00 to $2.20 per share (subject to adjustment). The Registration Statement covering the above noted shares was declared effective under the Securities Act of 1933 on November 17, 2014. On October 5, 2015, the Company filed a continuing registration statement in part to update to this S-1 filing, and subsequently filed an amendment to this filing.

 

As part of the contractual rights of certain existing convertible debenture holders, the Company finalized its calculation of shares to be issued in association with the timing of filing its Registration Statement noted above. This resulted in a value of shares to be issued in the amount of $124,567. These shares have not been issued as of February 29, 2016.

XML 27 R16.htm IDEA: XBRL DOCUMENT v3.3.1.900
Preferred Stock and Warrants
9 Months Ended
Feb. 29, 2016
Preferred Stock and Warrants [Abstract]  
Preferred Stock and Warrants

10. Preferred Stock and Warrants

 

Series A Preferred Stock

 

The Company has an authorized limit of 50,000,000 shares of preferred stock, par value $0.0001.

 

The following table reflects the preferred stock activity for the year ended May 31, 2015 and the three and nine month periods ended February 29, 2016:

 

  Preferred Stock 
Total – as of May 31, 2014  201,000 
Conversion of preferred stock into common stock  (201,000)
Total – as of May 31, 2015 and  February 29, 2016  - 

  

The 201,000 preferred shares were exchanged into common shares on February 3, 2015 at a conversion value of $201,000. 

  

Warrants

 

Subscription Agreement with Series A Preferred Shares

 

On March 28, 2013, May 31, 2013 and June 7, 2013, the Company issued a total of 936,000 five year warrants as part of a Unit under subscription agreements that included Series A preferred shares with full ratchet anti-dilution protection provisions. The price protection provisions were effective for twelve months from date of issuance.

 

On November 15, 2013, the Company issued 12,000 warrants under the same full ratchet anti-dilution provisions as the other warrants, to a broker as compensation for a portion of the private placement made on May 31, 2013 for these Units.

 

Series A, B, C and D Warrants

 

On January 29, 2014, February 27, 2014, and April 1, 2014, the Company issued 395 Series A and Series B warrants, 305 Series A and Series B warrants, and 469 Series A and Series B warrants, respectively, with unsecured 6% convertible promissory notes (Note 7), as part of the defined offered Unit under the subscription agreements on those respective dates. Each Series A warrant entitles the holder thereof to purchase 1,000 shares of common stock for a purchase price of $1.00 per share after the re-pricing of the instruments took place. Each Series B warrant entitles the holder thereof to purchase 1,000 shares of common stock for a purchase price of $2.20 per share.

 

The Series A and Series B warrants permit cashless exercise beginning with the effective date unless and until a registration statement covering the resale of the shares underlying the warrants is effective with the Securities and Exchange Commission. The Series A warrants, for a period of twelve months from the original date of issuance, provide full ratchet price protection provisions and as such are treated as a derivative liability at the commitment date and until such provisions expire being January 29, 2015 February 27, 2015 and April 1, 2015, respectively. The Series B warrants do not provide any price protection provisions and therefore are treated as equity instruments at the commitment date and thereafter. Both the Series A and Series B warrants have a five year life.

 

During the fourth quarter of fiscal 2014, the Company authorized and issued Series C warrants to acquire 33,333 and 666,667 shares of common stock on April 23, 2014 and May 30, 2014, respectively, to accredited investors with unsecured 6% convertible debenture, $100 par value, convertible into shares of the Company’s common stock at a conversion price of $1.50 per share, with a one year price protection clause on any conversion feature issued after the issuance date, that matures on April 23, 2016 and May 30, 2016 respectively. The Series C warrants entitle the holder thereof to purchase shares of common stock at a purchase price of $2.20 per share and have a five year life. The Series C warrants do not provide any price protection provisions and therefore are treated as equity instruments at the commitment date and thereafter.

 

During the first quarter of fiscal 2015, the Company authorized and issued two separate issues of 125 Units on June 27, 2014. This total authorized and issuance of 250 Units, at a value of $250,000, was to two independent accredited investors in exchange for $150,000 in cash and release of $100,000 in the loan originated on January 7, 2014 as described in Note 6. The Units, as defined in the subscription agreement, consist of (i) one unsecured 6% convertible debenture, $100 par value convertible into shares of the Company’s at a common stock conversion price of $1.50 per share, with a one year price protection clause on any conversion feature issued after the issuance date, that matures on June 27, 2016; and (ii) a warrant entitling the holder thereof to purchase 166,667 shares of common stock (Series C Warrant) at a purchase price of $2.20 per share that expires on June 27, 2019.

 

During the second quarter of fiscal 2015, the Company authorized and issued Series C warrants to acquire 83,333 shares of common stock on September 2, 2014 and issued Series D warrants to acquire 33,333 and 33,333 shares of common stock on October 6, 2014, and October 27, 2014 respectively, to accredited investors. The Units, as defined in the subscription agreement, consist of (i) one unsecured 6% convertible debenture, $100 par value convertible into shares of the Company’s common stock at a conversion price of $1.50 per share, with a one year price protection clause on any conversion feature issued after the issuance date, that matures on September 2, 2016, October 6, 2016, and October 27, 2016 respectively; and (ii) a warrant entitling the holder thereof to purchase 166,667 shares of common stock (Series D Warrant) at a purchase price of $2.20 per share that expires on September 2, 2016, October 6, 2016, and October 27, 2016 respectively. The Series D warrants do not provide any price protection provisions and therefore should be treated as equity instruments at the commitment date and thereafter; however these warrants were originally recorded as liabilities as the Company breached its authorized share limit on a diluted basis, which required any additional warrants that otherwise would have been recorded as equity instruments to be recorded as liability instruments. On December 31, 2014, the Company rectified its breach of authorized share limit and the warrants were reclassified to equity.

 

Line of Credit Arrangement

 

Pursuant to the loan agreement and promissory note entered on April 7, 2014 (Note 6), the Company issued the lender warrants to purchase up to 800,000 shares of the Company’s common stock at an exercise price of $1.00 per share.

 

The following is a summary of warrants issued, exercised and expired through February 29, 2016:

 

  Shares
Issuable
Under
Warrants
  Exercise
Price
  Expiration
Outstanding as of May 31, 2012  -   -  -
Issued on March 28, 2013  401,000  $1.00  March 28, 2018
Issued on May 31, 2013  370,000  $0.54  May 31, 2018
Exercised and expired  -   -  -
Total – as of May 31, 2013  771,000   -  -
Issued on June 7, 2013  165,000  $0.54  June 7, 2018
Issued on November 15, 2013  12,000  $1.00  November 15, 2018
Issued Series A warrants on January 29, 2014  395,000  $1.00  January 29, 2019
Issued Series B warrants on January 29, 2014  395,000  $2.00  January 29, 2019
Issued Series A warrants on February 27, 2014  305,000  $1.00  February 27, 2019
Issued Series B warrants on February 27, 2014  305,000  $2.00  February 27, 2019
Issued Series A warrants on April 1, 2014  469,000  $1.00  April 1, 2019
Issued Series B warrants on April 1, 2014  469,000  $2.00  April 1, 2019
Issued to Lender – Line of Credit  800,000  $1.00  April 7, 2019
Issued Series C warrants on April 23, 2014  33,333  $2.20  April 23, 2019
Issued Series C warrants on May 30, 2014  666,667  $2.20  May 30, 2019
Exercised and expired  -       
Total – as of May 31, 2014  4,786,000       
Issued Series C warrants on June 27, 2014  166,667  $2.20  June 27, 2019
Issued Series C warrants on September 2, 2014  83,333  $2.20  September 2, 2019
Issued Series D warrants on October 6, 2014  33,333  $2.20  October 6, 2019
Issued Series D warrants on October 27, 2014  33,333  $2.20  October 27, 2019
Issued warrants – consultants  330,000  $1.50  May 30, 2019
Issued warrants on February 4, 2015 Typenex Co-Investments, LLC  70,000  $1.00  February 4, 2020
Issued warrants – consultant on May 31, 2015  5,000  $1.00  May 31, 2017
Issued warrants – consultant on May 31, 2015  15,000  $1.50  May 31, 2017
Exercised and expired  -       
Total – as of May 31, 2015  5,522,666       
Issued warrants on September 28, 2015 – board of directors  300,000  $1.00  August 31, 2020
Issued to Lender – Line of Credit on November 5, 2015  1,700,000  $1.00  April 7, 2019
Issued warrants – consultant on November 5, 2015  100,000  $1.00  October 16, 2017
Issued warrants on December 30, 2015  20,860,000  $0.01  December 29, 2020
Exercised Warrants Typenex Co-Investments, LLC  (70,000) $1.00   
Total – as of February 29, 2016  28,412,666       

  

The outstanding warrants at February 29, 2016 and May 31, 2015 have a weighted average exercise price of approximately $0.35 and $1.42 respectively and have an approximate weighted average remaining life of 4.6 and 3.7 years, respectively.

 

The price protection provisions of those warrants issued as part of the Series A Preferred Stock subscription prior to May 31, 2013, have expired and, as such, the instruments issued on March 28, 2013 are recognized as equity instruments. The price protection provisions of the Series A warrants issued as part of the January 29, 2014 and February 28, 2014 convertible debenture financing have expired, and as such, these warrants are now recognized as equity instruments. The Series B warrants, Series C warrants, and warrants associated with the Line of Credit arrangement do not provide the holder any price protection, and as there is no variability in the determination of common stock, these warrants are also reflected as equity instruments.

 

The Company issued warrants to two separate consulting firms in the amount of 200,000 and 130,000 respectively included in consulting expense on October 6, 2014 with an exercise price of $1.50 both with expiry dates of May 30, 2019.

 

The Company issued warrants to a consultant in the amount of 5,000 on May 31, 2015 at an exercise price of $1.00 and 15,000 also on May 31, 2015 with an exercise price of $1.50, both included in consulting expense and with expiry dates of May 31, 2017.

 

The Company issued 300,000 warrants on September 28, 2015 to new Board of Directors at an exercise price of $1.00 with expiry of five years from September 1, 2015. These were expensed as stock based compensation.

 

The Company issued 1,700,000 warrants to the line of credit holder included in financing expense in contemplation of taking a pari passu security position and allowing Winterberry to act as collateral agent for the secured debenture financing. These warrants were issued November 5, 2015 have an exercise price of $1.00 with expiry date of April 7, 2019.

 

The Company issued warrants to a consultant in the amount of 100,000 included in financing expense on November 5, 2015 at an exercise price of $1.00 with expiry date of October 16, 2017.

 

On December 30, 2015, the Company issued 20,860,000 warrants with secured 12% convertible secured debentures (Note 8), as part of the subscription agreements. Each warrant entitles the holder thereof to purchase shares of common stock for a purchase price of $0.01 per share for up to a maximum of 10 shares for every $1 of subscription. These shares will vest in increments of 1/3 with the first 1/3 being vested on December 29, 2016, second increment of 1/3 on December 29, 2017, and last 1/3 on December 29, 2018.

  

The following table is a summary of those warrants that are reflected in equity as at February 29, 2016:

 

  Shares
Issuable
Under
Warrants
  Equity
Value
 
Issued warrants on March 28, 2013  401,000  $917,087 
Issued warrants on May 31, 2013  370,000   543,530 
Issued warrants on June 7, 2013  165,000   211,670 
Issued warrants on November 15, 2013  12,000   3,744 
Issued Series A warrants on January 29, 2014  395,000   397,895 
Issued Series B warrants on January 29, 2014  395,000   - 
Issued Series A warrants on February 27, 2014  305,000   224,135 
Issued Series B warrants on February 27, 2014  305,000   - 
Issued Series A warrants on April 1, 2014  469,000   234,969 
Issued Series B warrants on April 1, 2014  469,000   - 
Issued to Loan Agreement - Credit Line  800,000   1,495,200 
Issued Series C warrants on April 23, 2014  33,333   9,395 
Issued Series C warrants on May 30, 2014  666,667   187,574 
Issued Series C warrants on June 27, 2014  166,667   - 
Issued Series C warrants on September 2, 2014  83,333   38,584 
Issued Series D warrants on October 6, 2014  33,333   15,567 
Issued Series D warrants on October 27, 2014  33,333   15,667 
Warrants issued to consultants  330,000   165,330 
Issued warrants on May 31, 2015  20,000   3,960 
Issued warrants on September 28, 2015  300,000   227,100 
Issued warrants on November 5, 2015  1,700,000   519,520 
Issued warrants on November 5, 2015  100,000   23,240 
Issued warrants on December 30, 2015  20,860,000   1,616,630 
Total – as of  February 29, 2016  28,412,666  $6,850,797 
XML 28 R17.htm IDEA: XBRL DOCUMENT v3.3.1.900
Warrant Liabilities
9 Months Ended
Feb. 29, 2016
Warrant Liabilities [Abstract]  
Warrant Liabilities

11. Warrant Liabilities

 

The Company has determined derivative warrant liabilities are Level 2 fair value measurement and has used the binominal lattice pricing model to calculate the fair value as at each reporting period in fiscal 2015 and prior to expiry. The binomial lattice model requires six basic data inputs: the exercise or strike price, time to expiration, the risk free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate.

 

The following is a summary of the derivative warrant liability as at February 29, 2016 and May 31, 2015:

 

  Shares Issuable Under Warrants  Derivative Warrant Value 
Balance as of June 1, 2013  771,000  $4,050,278 
Warrants issued June 7, 2013  165,000   1,146,915 
Warrants issued November 15, 2013  12,000   9,636 
Series A warrants issued on January 29, 2014  395,000   161,950 
Series A warrants issued on February 27, 2014  305,000   125,050 
Series A warrants issued on April 1, 2014  469,000   776,664 
Warrants reclassified to equity (price protection expiry)  (401,000)  (917,087)
Warrants exercised or expired  -   - 
Decrease in fair value of derivative warrant liability  -   (2,822,124)
Balance as of May 31, 2014  1,716,000   2,531,282 
Warrants reclassified to equity (price protection expiry and authorized share limit increase Notes 9 and 10)  (1,716,000)  (1,851,090)
Warrants exercised or expired  -   - 
Decrease in fair value of derivative warrant liability  -   (680,192)
Balance as of May 31, 2015 and February 29, 2016  -  $- 

   

For the nine months ended February 29, 2016 and February 28, 2015, the revaluation of the warrants at each reporting period resulted in the recognition of a gain of $nil and $1,081,984 respectively within the Company’s consolidated statements of operations and comprehensive loss and is included under the caption “Change in fair value of derivative liabilities and convertible notes”.

XML 29 R18.htm IDEA: XBRL DOCUMENT v3.3.1.900
Employee Benefit and Incentive Plans
9 Months Ended
Feb. 29, 2016
Employee Benefit and Incentive Plans [Abstract]  
Employee Benefit and Incentive Plans

12. Employee Benefit and Incentive Plans

 

On August 14, 2014, the Board of Directors approved the adoption of the 2014 Stock Option Plan. The Company completed its first grant of stock options immediately after the plan was approved. The Company completed a second grant of stock options on March 2, 2015. The following table outlines the options granted and related disclosures:

 

    Stock
Options
    Weighted- 
Average
Exercise Price
 
Outstanding (Granted all in Fiscal 2015)     1,804,500     $ 1.00  
Exercised     -       -  
Cancelled, forfeited or expired     114,500       -  
Outstanding at February 29, 2016     1,690,000     $ 1.00  
Options exercisable at February 29, 2016     1,066,667     $ 1.00  
Fair value of options vested as at February 29, 2016   $ 907,200       -  

 

On August 21, 2015, the Company amended its 2014 Stock Option Plan to increase the number of options available to 25,000,000.

 

As at February 29, 2016, vested and exercisable options do not have any intrinsic value and have a weighted-average remaining contractual term of 2.9 years. It is expected the 623,333 unvested options will ultimately vest, and each has an exercise price of $1.00 per share and a weighted average remaining term of 1.75 years. The aggregate intrinsic value of options represents the total pre-tax intrinsic value, the difference between our closing stock price as at February 29, 2016 and the option’s exercise price, for all options that are in the money. This value was $nil as at February 29, 2016.

 

As at February 29, 2016, there is $426,756 of unearned stock based compensation cost related to stock options granted that have not yet vested (623,333 options). This cost is expected to be recognized over a remaining weighted average period of 0.2 years.

 

710,000 of the stock options granted on August 14, 2014 vest 1/3 immediately, 1/3 after one year and 1/3 after two years. 15,000 options vest contingent on revenue targets, and 15,000 options have vested on April 1, 2015. The remaining options all have immediate vesting terms. 520,000 of the stock options granted on March 2, 2015 vest 1/3 immediately, 1/3 after one year and 1/3 after two years. 50,000 vest 1/2 immediately and 1/2 after one year. The remaining options all have immediate vesting terms.

 

The estimated fair value of options granted on August 14, 2014 is measured using the binomial model using the following assumptions:

 

Total number of shares issued under options     1,047,000  
Stock price   $ 1.00  
Exercise price   $ 1.00  
Time to expiration – days (2 year options)     730  
Time to expiration – days (5 year options)     1,826  
Risk free interest rate (2 year options)     .42 %
Risk free interest rate (5 year options)     1.58 %
Forfeiture rate (all options)     0 %
Estimated volatility (all options)     150 %
Weighted-average fair value of options granted     0.90  
Dividend     -  

  

The estimated fair value of options granted on March 2, 2015 is measured using the binomial model using the following assumptions:

 

Total number of shares issued under options     757,500  
Stock price   $ 0.60  
Exercise price   $ 1.00  
Time to expiration – days (2 year options)     730  
Time to expiration – days (5 year options)     1,826  
Risk free interest rate (2 year options)     .66 %
Risk free interest rate (5 year options)     1.57 %
Forfeiture rate (all options)     0 %
Estimated volatility (all options)     150 %
Weighted-average fair value of options granted     0.50  
Dividend     -  

  

The assumptions used in the stock based compensation binomial models are consistent with the methodology used in valuing the Company’s convertible debt instruments with two year lives, and the Company’s warrants with five year lives. Due to a lack of history, the Company has assumed the expected life of the options, is the contractual life of the options.

XML 30 R19.htm IDEA: XBRL DOCUMENT v3.3.1.900
Related Party Balances and Transactions
9 Months Ended
Feb. 29, 2016
Related Party Balances and Transactions [Abstract]  
Related Party Balances and Transactions

13. Related Party Balances and Transactions

 

On March 28, 2013, the Company purchased the Yappn assets from Intertainment Media, Inc. in consideration for 7,000,000 shares of common stock for a controlling 70 percent interest (as of that date, 52.1% as at February 29, 2016, 32% once remaining shares are issued from acquisition of Ortsbo IP) in the Company. At that time, the Chief Executive Officer and director of the Company was David Lucatch (since resigned), who is also the Chief Executive Officer and director of Intertainment Media, Inc. and Herb Willer who was a director of the Company and is a director of Intertainment Media, Inc.

 

On March 28, 2013, as part of the assets purchased, the Company also assumed a technology services agreement with Ortsbo Inc. (“Ortsbo”), a wholly-owned subsidiary of Intertainment Media, Inc. Mr. Lucatch is also the president and a member of the Board of Directors of Ortsbo, Inc. Mr. Lucatch is also a member of the Board of Directors of Ortsbo USA, Inc. The service agreement requires the Company to pay cost plus thirty percent (30%) for actual cost incurred by Ortsbo in providing technology services. Upon closing of the acquisition of Ortsbo intellectual property on September 15, 2015, the service agreement was terminated.

 

On October 23, 2013, the Company and Ortsbo, entered into an amendment to the Services Agreement dated March 28, 2013 for an exclusive license to use the Ortsbo property and an option to purchase a copy of the Ortsbo source code in exchange for 166,667 shares of restricted common stock of the Company. The shares of common stock were valued at the market price on the date of the agreement for a value of $133,333. On April 28, 2014, the Company exercised its right to purchase a copy of the source code for the Ortsbo property in exchange for 1,333,333 shares of restricted common stock. Since both the Company and Ortsbo are under the common control of Intertainment Media, Inc., and as Ortsbo’s carrying value for these assets was $nil, the Company reflected the acquisition value at $nil on the consolidated balance sheet. As of February 29, 2016, Ortsbo holds 1,500,000 restricted shares of common stock of the Company.

 

Services provided by Intertainment Media, Inc. personnel are invoiced on a per hour basis at a market rate per hour as determined by the type of activity and the skill set provided. Costs incurred by Intertainment Media, Inc. on behalf of the Company for third party purchases are invoiced at cost.

 

On September 15, 2015, the Company closed an agreement with Ortsbo Inc. to acquire all of its intellectual property assets. The purchased assets include US Patent No. 8,983,850 B2, US Patent No. 8,917,631 B2, US Patent No. 9,053,097 B2, and other intellectual property including Ecommerce and Customer Care know. With this closing, the Company had an obligation to issue 31,987,000 shares of common stock of Yappn. During the quarter 12,998,682 shares were issued comprising of 8,312,500 to Ortsbo Inc. and 4,686,182 to the former debt and minority shareholders of Ortsbo, which were valued at $1,806,608, leaving 18,988,318 shares to be issued at February 29, 2016 comprising 17,687,500 to Winterberry and 1,300,818 to a former holder of Ortsbo stock. As of the filing date, these aforementioned shares remain to be issued. Yappn also assumed $975,388 of debt as part of the transaction. This assumed debt was immediately subscribed as part of the secured debenture in Yappn (Note 6). The fair value for the agreed upon consideration for the acquisition of Intellectual property from Ortsbo was $16,968,888. This transaction was completed on September 15, 2015. Due to the common control of Ortsbo Inc. and Yappn Corp the value of the Intangible assets acquired from Ortsbo was recorded at the carrying value in the financial records of Ortsbo Inc. This value was $5,421,068 on September 15, 2015 (Note 4).

 

For the nine month period ended February 29, 2016, related party fees incurred and paid for general development and managerial services performed by Intertainment Media, Inc. and its subsidiary totaled $128,229 ($725,779 – nine months ending February 28, 2015). As of February 29, 2016 the related party liability balance totaled $66,787 ($468,766 – May 31, 2015).

 

Directors subscribed for $1,075,000 of the $2,086,000 convertible secured debentures issued on December 30, 2015 (note 8). A director also advanced $120,000 to the Company on a second closing of the same convertible secured debenture financing closed on December 30, 2015 (note 5).

XML 31 R20.htm IDEA: XBRL DOCUMENT v3.3.1.900
Subsequent Events
9 Months Ended
Feb. 29, 2016
Subsequent Events [Abstract]  
Subsequent Events

14. Subsequent Events

 

The Company granted 8,775,000 stock options to employees and consultants at an exercise price of $0.25 per share, with a 5 year life vesting over three years. The Company also re-priced 1,230,000 options previously issued to employees to $0.25 per share from their original pricing of $1.00 per share.

 

The Company granted future rights to issue stock of up to 4,000,000 shares in total to Board of Directors on achievement of revenue milestones.

 

The Company received advances of $250,000 towards a tranche to be closed at a future date in a private placement of units consistent of one common stock at $0.25 per share and one common stock purchase warrant with an exercise price of $0.25 per share.

XML 32 R21.htm IDEA: XBRL DOCUMENT v3.3.1.900
Summary of Significant Accounting Policies (Policies)
9 Months Ended
Feb. 29, 2016
Summary of Significant Accounting Policies [Abstract]  
Basis of Presentation and Organization

Basis of Presentation and Organization

 

Yappn Corp., formerly “Plesk Corp.”, (the “Company”) was incorporated under the laws of the State of Delaware on November 3, 2010. The business plan of the Company is to provide effective unique and proprietary tools and services that create dynamic solutions that enhance a brand’s messaging, media, e-commerce and support platforms. The Company has offices in the United States and Canada. In March 2013, the Company acquired a concept and technology license from Intertainment Media Inc., a Canadian company, in exchange for 7,000,000 shares of common stock of the Company. As a result of this exchange, Intertainment Media Inc. acquired, at that time, a seventy percent (70%) ownership of the Company. On September 15, 2015, the Company closed the acquisition of Ortsbo Inc.’s intellectual property. As a result of the acquisition, Intertainment Media Inc.’s ownership was reduced to 37%. The accompanying interim condensed consolidated financial statements of the Company were prepared from the accounts of the Company under the accrual basis of accounting.

Unaudited Interim Condensed Consolidated Financial Statements

Unaudited Interim Condensed Consolidated Financial Statements

 

The interim condensed consolidated financial statements (“interim financial statements”) of the Company as of February 29, 2016, and for the three and nine month periods ended February 29, 2016 and February 28, 2015, are unaudited. However, in the opinion of management, the interim financial statements include all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the Company’s financial position as of February 29, 2016, and the results of its operations and its cash flows for the three and nine month periods ended February 29, 2016 and February 28, 2015. These results are not necessarily indicative of the results expected for the fiscal year ending May 31, 2016. The accompanying interim financial statements and notes thereto do not reflect all disclosures required under accounting principles generally accepted in the United States. Refer to the Company’s audited consolidated financial statements as of May 31, 2015 filed with the Securities and Exchange Commission, for additional information including significant accounting policies.

Principles of Consolidation

Principles of Consolidation

 

The interim financial statements include the accounts of the Company and its wholly-owned subsidiaries, Yappn Acquisition Corp. and Yappn Canada, Inc. All inter-company balances and transactions have been eliminated on consolidation.

Intangible Assets

Intangible Assets

 

Intangible assets consist of acquired technology, and patents, acquired from a related party and are accordingly recorded at the cost as recorded in the records of the related party (Note 4). The Company amortizes acquired technology over its estimated useful life considered to be 5 years, on a straight-line basis. Patents are amortized commencing at the receipt of approval of the patents or acquisition of patents. Should the patent process be unsuccessful, the entire amount relating to the patent is expensed in the period this is determined. The Company continually evaluates the remaining estimated useful life of its intangible assets being amortized to determine whether events and circumstances warrant a revision to the remaining period of amortization.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

 

In May 2014, the FASB issued Accounting Standards Update No. 2014-09 which was amended in August 2015 by Update No 2015-14: Revenue from Contracts with Customers. The standard outlines a five-step model for revenue recognition with the core principle being that a company should recognize revenue when it transfers control of goods or services to customers at an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. Companies can choose to apply the standard using either the full retrospective approach or a modified retrospective approach. Under the modified approach, financial statements will be prepared for the year of adoption using the new standard but prior periods presented will not be adjusted. Instead, companies will recognize a cumulative catch-up adjustment to the opening balance of retained earnings. This new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The Company has not yet made a determination as to the method of application (full retrospective or modified retrospective). It is too early to assess whether the impact of the adoption of this new guidance will have a material impact on the Company's results of operations or financial position.

 

On August 27, 2014 the FASB issued a new financial accounting standard on going concern, Update 2014-15, “Presentation of Financial Statements – Going Concern (subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The standard provides guidance about management’s responsibility to evaluate whether there is substantial doubt about the organization’s ability to continue as a going concern. The amendments in this update apply to all companies. They become effective in the annual period ending after December 15, 2016, with early application permitted. The Company is currently evaluating the impact of this accounting standard.

 

In November 2014, the FASB issued Accounting Standard Update (“ASU”) 2014-16, Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity. The ASU clarifies how current guidance should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. Specifically, the amendments clarify that an entity should consider all relevant terms and features, including the embedded derivatives feature being evaluated for bifurcation, in evaluating the nature of a host contract. The ASU is effective for fiscal years and interim periods beginning after December 15, 2015. The Company is currently assessing the impact, if any, of implementing this guidance on its consolidated financial position and results of operations.

XML 33 R22.htm IDEA: XBRL DOCUMENT v3.3.1.900
Short Term Loans (Tables)
9 Months Ended
Feb. 29, 2016
Convertible Promissory Notes and Debentures/Convertible Secured Debentures [Abstract]  
Summary of short term loans

 

Principal amounts   April 1,
2014
Term Loan
    January 7,
2014
Term Loan
    Other Loans     Total  
Fair value at May 31, 2014   $ 220,159     $ 257,152     $ -     $ 477,311  
Borrowing on July 17, 2014     -       -       100,915       100,915  
Borrowing on July 23, 2014     -       -       50,234       50,234  
Borrowing on August 4, 2014     -       -       93,458       93,458  
Borrowings in August 2014 (multiple dates)     -       -       125,000       125,000  
Borrowing on January 23, 2015     -       -       16,098       16,098  
Borrowing on March 30, 2015                     250,000       250,000  
Borrowing on May 6, 2015     -       -       144,729       144,729  
Borrowing on May 11, 2015     -       -       419,463       419,463  
Total     -       -       1,199,897       1,199,897  
Fair value adjustments     (21,589 )     (1,356 )     (21,893 )     (44,838 )
Repayments     (46,025 )     (142,506 )     (436,134 )     (624,665 )
Conversions     -       (90,777 )     (125,000 )     (215,777 )
Fair value at May 31, 2015   $ 152,545     $ 22,513     $ 616,870     $ 791,928  
Borrowing on June 19, 2015     -       -       78,265       78,265  
Borrowing on July 10, 2015     -       -       250,000       250,000  
Borrowing during the second quarter     -       -       1,201,000       1,201,000  
Borrowing during the third quarter     -       -       175,000       175,000  
Fair value adjustments     (13,795 )     (1,820 )     (29,388 )     (45,003 )
Conversions     -       -       (1,662,300 )     (1,662,300 )
Repayments     (8,446 )     -       (403,805 )     (412,251 )
Fair value at February 29, 2016   $ 130,304     $ 20,693     $ 225,642     $ 376,639  
XML 34 R23.htm IDEA: XBRL DOCUMENT v3.3.1.900
Convertible Promissory Notes and Debentures (Tables)
9 Months Ended
Feb. 29, 2016
Short-term Debt [Line Items]  
Summary of convertible notes and debentures

 

Principal amounts: JMJ 
Financial 
Notes
  Convertible
Debentures
  Other 
Notes
  Total 
Total Borrowings at May 31, 2014 $80,000  $2,219,000  $92,500  $2,391,500 
Borrowing on June 27, 2014  -   250,000   -   250,000 
Borrowing on September 2, 2014  -   125,000   -   125,000 
Borrowing on September 3, 2014  50,000   -   -   50,000 
Borrowing on October 6, 2014  -   50,000   -   50,000 
Borrowing on October 22, 2014  40,000   -   -   40,000 
Borrowing on October 27, 2014  -   50,000   -   50,000 
Borrowing on December 24, 2014  -   -   75,000   75,000 
Borrowing on December 24, 2014  -   -   100,000   100,000 
Borrowing on December 29, 2014  -   -   50,000   50,000 
Borrowing on February 4, 2015  -   -   115,000   115,000 
Borrowing on February 9, 2015  -   -   90,750   90,750 
Borrowing on March 30, 2015  -   -   92,000   92,000 
Borrowing on April 15, 2015  -   -   69,000   69,000 
Borrowing on April 20, 2015  -   -   50,000   50,000 
Borrowing on April 23, 2015  -   -   60,500   60,500 
Borrowing on April 23, 2015  -   -   25,000   25,000 
Conversions  (80,000)  -   -   (80,000)
Repayments  (90,000)  -   (92,500)  (182,500)
Total Borrowings at May 31, 2015  -   2,694,000   727,250   3,421,250 
Borrowings on June 24, 2015  -   -   45,375   45,375 
Borrowings on June 29, 2015  -   -   45,375   45,375 
Repayments  -   -   (818,000)  (818,000)
Total Borrowings at February 29, 2016 $-  $2,694,000  $-  $2,694,000 
                 
Convertible notes and debt at fair value at May 31, 2014 $142,189  $2,264,140  $100,846  $2,507,175 
Convertible notes and debt at fair value at the commitment date, issued during 2015  137,071   436,887   1,020,110   1,594,068 
Change in fair value (from commitment date)  (70,223)  (755,194)  858,573   33,156 
Repayments (cash)  (103,220)  -   (135,051)  (238,271)
Conversions to common stock  (105,817)  -   -   (105,817)
Convertible notes and debt at fair value at May 31, 2015  -   1,945,833   1,844,478   3,790,311 
Convertible notes and debt at fair value at the commitment date issued during 2016  -   -   171,990   171,990 
Change in fair value  -   550,008   (1,132,904)  (582,896)
Repayments (cash)  -   -   (883,564)  (883,564)
Convertible notes and debt at fair value at February 29, 2016 $-  $2,495,841  $-  $2,495,841 
                 
Balance at May 31, 2015                
Current  -   1,633,347   1,844,478   3,477,825 
Long term  -   312,486   -   312,486 
  $-  $1,945,833  $1,844,478  $3,790,311 
Balance at February 29, 2016                
Current  -   2,495,841   -   2,495,841 
  $-  $2,495,841  $-  $2,495,841 
 
JMJ Financial [Member]  
Short-term Debt [Line Items]  
Condensed consolidated statements of operations and comprehensive income (loss)

 

Accounting allocation of initial proceeds: Second
Quarter
Fiscal 2015
  Third
Quarter
Fiscal 2015
  Fourth
Quarter
Fiscal 2015
  First
Quarter
Fiscal 2016
 
Gross proceeds $90,000  $430,750  $296,500  $90,750 
Fair value of promissory notes  (137,071)  (656,507)  (363,604)  (171,990)
Fair value of equity warrant  -   (37,100)  -   - 
Financing expense on the issuance of promissory notes $47,071  $262,857  $67,104  $81,240 
                 
Key inputs to determine the fair value at the commitment date:                
Stock price $0.40-1.20  $ 0.50-0.70  $0.50-0.60  $0.60 
Current exercise price $0.40-0.60  $0.20-1.00  $0.30  $0.20 
Time to expiration – days    389-436      181-365       250-366      225-230 
Risk free interest rate    .1-.11%      .14-.26%       .09-.27%     .30-.27%
Estimated volatility  150%  150%  150%  150%
Dividend  -   -   -   - 
Key inputs to determine the fair value at May 31, 2015:                
Stock price $N/A  $0.50  $0.60  $N/A 
Current exercise price $N/A  $  0.30-1.00  $0.30  $ N/A 
Time to expiration – days      N/A       115-346       212-325          N/A 
Risk free interest rate      N/A%      .07-.22%      .06-.26%         N/A 
Estimated volatility      N/A%  150%  150%   N/A%
Dividend      N/A   N/A       N/A          N/A 
 
Convertible Debentures with Series A and B Warrants [Member]  
Short-term Debt [Line Items]  
Condensed consolidated statements of operations and comprehensive income (loss)

 

Accounting allocation of initial proceeds: January 29,
2014
  February 27,
2014
  April 1,
2014
 
Gross proceeds $395,000  $305,000  $469,000 
Fair value of the convertible promissory notes  (320,787)  (247,696)  (665,511)
Derivative warrant liability fair value – Series A (Note 11)  (161,950)  (125,050)  (776,664)
Financing expense on the issuance of instruments $87,737  $67,746  $973,175 
             
Key inputs to determine the fair value at the commitment date:            
Stock price $0.50  $0.50  $1.80 
Current exercise price – promissory notes $1.00  $1.00  $1.00 
Current exercise price – Series A warrants $1.50  $1.50  $1.50 
Time to expiration – days (promissory notes)  732   731   731 
Time to expiration – days (warrants)  1,826   1,826   1,826 
Risk free interest rate (promissory notes)  .32%  .32%  .32%
Risk free interest rate (warrants)  1.52%  1.51%  1.74%
Estimated volatility  150%  150%  150%
Dividend       N/A   N/A   N/A 
Market interest rate for the Company  18%  18%  18%
             
Key inputs to determine the fair value of the promissory notes at May 31, 2015:            
Stock price $  N/A  $N/A  $N/A 
Current exercise price $N/A  $N/A  $N/A 
Time to expiration – days  243   272   306 
Risk free interest rate     N/A%       N/A%       N/A%
Estimated volatility    N/A%       N/A%       N/A%
Dividend    N/A     N/A     N/A 
Key inputs to determine the fair value of the promissory notes at February 29, 2016:            
Stock price $N/A  $  N/A  $N/A 
Current exercise price $N/A  $N/A  $N/A 
Time to expiration – days  -   -   32 
Risk free interest rate       N/A%       N/A%       N/A%
Estimated volatility       N/A%       N/A%       N/A%
Dividend       N/A        N/A        N/A 
 
Convertible Debentures with Series C or Series D Warrants [Member]  
Short-term Debt [Line Items]  
Condensed consolidated statements of operations and comprehensive income (loss)

 

Accounting allocation of initial proceeds: Fourth
Quarter
Fiscal 2014
  First
Quarter
Fiscal 2015
  Second
Quarter
Fiscal 2015
 
Gross proceeds $1,050,000  $250,000  $225,000 
Fair value of the convertible debentures  (852,726)  (254,167)  (182,720)
Fair value of liability warrants  -   -   (152,951)
Fair value of equity warrants  (197,274)  -   - 
Financing expense on the issuance of derivative instruments $-  $4,167  $110,671 
             
Key inputs to determine the fair value at the commitment date:            
Stock price $ 1.50-1.60  $2.00   $N/A 
Current exercise price $1.50  $1.50   $N/A 
Time to expiration – days  731   731     N/A 
Risk free interest rate  .37%  .45%    N/A
Estimated volatility  150%  150%    N/A%
Dividend  -   -   - 
Market interest rate for the Company  18%  18%    N/A
Key inputs to determine the fair value of the convertible debentures at May 31, 2015:            
Stock price $N/A  $N/A  $ N/A 
Current exercise price $N/A  $N/A  $ N/A 
Time to expiration – days    328-365   393     460-515 
Risk free interest rate    N/A%    N/A%    N/A%
Estimated volatility    N/A%    N/A%    N/A%
Dividend    N/A     N/A     N/A 
Market interest rate for the Company    N/A%    N/A%    N/A%
Key inputs to determine the fair value of the convertible debentures at February 29, 2016:            
Stock price $ N/A  $  N/A  $N/A 
Current exercise price $N/A  $N/A  $N/A 
Time to expiration – days    54-91   119   186-241 
Risk free interest rate    N/A%      N/A%    N/A%
Estimated volatility    N/A%      N/A%    N/A%
Dividend    N/A       N/A     N/A 
Market interest rate for the Company    N/A%      N/A%    N/A%
 
XML 35 R24.htm IDEA: XBRL DOCUMENT v3.3.1.900
Convertible Secured Debentures (Tables)
9 Months Ended
Feb. 29, 2016
Convertible Promissory Notes and Debentures/Convertible Secured Debentures [Abstract]  
Summary of fair values of the components of convertible secured debentures

Accounting allocation of initial proceeds: December 30,
2015
 
Gross proceeds $2,086,000 
Fair value of the convertible secured debt  - 
Fair value of equity warrants (Note 10)  (1,616,630)
Beneficial conversion feature  (469,370)

 

Convertible secured debt at fair value at the commitment date, issued during 2016  $- 
Change in fair value (from commitment date)  69,687 
Repayments (cash)  - 
Convertible secured debenture at fair value at February 29, 2016  $69,687 
XML 36 R25.htm IDEA: XBRL DOCUMENT v3.3.1.900
Preferred Stock and Warrants (Tables)
9 Months Ended
Feb. 29, 2016
Preferred Stock and Warrants [Abstract]  
Schedule of preferred stock activity

  Preferred Stock 
Total – as of May 31, 2014  201,000 
Conversion of preferred stock into common stock  (201,000)
Total – as of May 31, 2015 and  February 29, 2016  - 
Schedule of warrants

  Shares
Issuable
Under
Warrants
  Exercise
Price
  Expiration
Outstanding as of May 31, 2012  -   -  -
Issued on March 28, 2013  401,000  $1.00  March 28, 2018
Issued on May 31, 2013  370,000  $0.54  May 31, 2018
Exercised and expired  -   -  -
Total – as of May 31, 2013  771,000   -  -
Issued on June 7, 2013  165,000  $0.54  June 7, 2018
Issued on November 15, 2013  12,000  $1.00  November 15, 2018
Issued Series A warrants on January 29, 2014  395,000  $1.00  January 29, 2019
Issued Series B warrants on January 29, 2014  395,000  $2.00  January 29, 2019
Issued Series A warrants on February 27, 2014  305,000  $1.00  February 27, 2019
Issued Series B warrants on February 27, 2014  305,000  $2.00  February 27, 2019
Issued Series A warrants on April 1, 2014  469,000  $1.00  April 1, 2019
Issued Series B warrants on April 1, 2014  469,000  $2.00  April 1, 2019
Issued to Lender – Line of Credit  800,000  $1.00  April 7, 2019
Issued Series C warrants on April 23, 2014  33,333  $2.20  April 23, 2019
Issued Series C warrants on May 30, 2014  666,667  $2.20  May 30, 2019
Exercised and expired  -       
Total – as of May 31, 2014  4,786,000       
Issued Series C warrants on June 27, 2014  166,667  $2.20  June 27, 2019
Issued Series C warrants on September 2, 2014  83,333  $2.20  September 2, 2019
Issued Series D warrants on October 6, 2014  33,333  $2.20  October 6, 2019
Issued Series D warrants on October 27, 2014  33,333  $2.20  October 27, 2019
Issued warrants – consultants  330,000  $1.50  May 30, 2019
Issued warrants on February 4, 2015 Typenex Co-Investments, LLC  70,000  $1.00  February 4, 2020
Issued warrants – consultant on May 31, 2015  5,000  $1.00  May 31, 2017
Issued warrants – consultant on May 31, 2015  15,000  $1.50  May 31, 2017
Exercised and expired  -       
Total – as of May 31, 2015  5,522,666       
Issued warrants on September 28, 2015 – board of directors  300,000  $1.00  August 31, 2020
Issued to Lender – Line of Credit on November 5, 2015  1,700,000  $1.00  April 7, 2019
Issued warrants – consultant on November 5, 2015  100,000  $1.00  October 16, 2017
Issued warrants on December 30, 2015  20,860,000  $0.01  December 29, 2020
Exercised Warrants Typenex Co-Investments, LLC  (70,000) $1.00   
Total – as of February 29, 2016  28,412,666       

Schedule of warrants and reflection in equity

  Shares
Issuable
Under
Warrants
  Equity
Value
 
Issued warrants on March 28, 2013  401,000  $917,087 
Issued warrants on May 31, 2013  370,000   543,530 
Issued warrants on June 7, 2013  165,000   211,670 
Issued warrants on November 15, 2013  12,000   3,744 
Issued Series A warrants on January 29, 2014  395,000   397,895 
Issued Series B warrants on January 29, 2014  395,000   - 
Issued Series A warrants on February 27, 2014  305,000   224,135 
Issued Series B warrants on February 27, 2014  305,000   - 
Issued Series A warrants on April 1, 2014  469,000   234,969 
Issued Series B warrants on April 1, 2014  469,000   - 
Issued to Loan Agreement - Credit Line  800,000   1,495,200 
Issued Series C warrants on April 23, 2014  33,333   9,395 
Issued Series C warrants on May 30, 2014  666,667   187,574 
Issued Series C warrants on June 27, 2014  166,667   - 
Issued Series C warrants on September 2, 2014  83,333   38,584 
Issued Series D warrants on October 6, 2014  33,333   15,567 
Issued Series D warrants on October 27, 2014  33,333   15,667 
Warrants issued to consultants  330,000   165,330 
Issued warrants on May 31, 2015  20,000   3,960 
Issued warrants on September 28, 2015  300,000   227,100 
Issued warrants on November 5, 2015  1,700,000   519,520 
Issued warrants on November 5, 2015  100,000   23,240 
Issued warrants on December 30, 2015  20,860,000   1,616,630 
Total – as of  February 29, 2016  28,412,666  $6,850,797 
XML 37 R26.htm IDEA: XBRL DOCUMENT v3.3.1.900
Warrant Liabilities (Tables)
9 Months Ended
Feb. 29, 2016
Warrant [Member]  
Schedule of derivative liabilities at fair value
  Shares Issuable Under Warrants  Derivative Warrant Value 
Balance as of June 1, 2013  771,000  $4,050,278 
Warrants issued June 7, 2013  165,000   1,146,915 
Warrants issued November 15, 2013  12,000   9,636 
Series A warrants issued on January 29, 2014  395,000   161,950 
Series A warrants issued on February 27, 2014  305,000   125,050 
Series A warrants issued on April 1, 2014  469,000   776,664 
Warrants reclassified to equity (price protection expiry)  (401,000)  (917,087)
Warrants exercised or expired  -   - 
Decrease in fair value of derivative warrant liability  -   (2,822,124)
Balance as of May 31, 2014  1,716,000   2,531,282 
Warrants reclassified to equity (price protection expiry and authorized share limit increase Notes 9 and 10)  (1,716,000)  (1,851,090)
Warrants exercised or expired  -   - 
Decrease in fair value of derivative warrant liability  -   (680,192)
Balance as of May 31, 2015 and February 29, 2016  -  $-
XML 38 R27.htm IDEA: XBRL DOCUMENT v3.3.1.900
Employee Benefit and Incentive Plans (Tables)
9 Months Ended
Feb. 29, 2016
Employee Benefit and Incentive Plans [Abstract]  
Schedule of the options granted and related disclosures
  Stock
Options
  Weighted- 
Average
Exercise Price
 
Outstanding (Granted all in Fiscal 2015)  1,804,500  $1.00 
Exercised  -   - 
Cancelled, forfeited or expired  114,500   - 
Outstanding at February 29, 2016  1,690,000  $1.00 
Options exercisable at February 29, 2016  1,066,667  $1.00 
Fair value of options vested as at February 29, 2016 $907,200   - 
Schedule of estimated fair value of options granted
Total number of shares issued under options  1,047,000 
Stock price $1.00 
Exercise price $1.00 
Time to expiration – days (2 year options)  730 
Time to expiration – days (5 year options)  1,826 
Risk free interest rate (2 year options)  .42%
Risk free interest rate (5 year options)  1.58%
Forfeiture rate (all options)  0%
Estimated volatility (all options)  150%
Weighted-average fair value of options granted  0.90 
Dividend  - 

 

Total number of shares issued under options  757,500 
Stock price $0.60 
Exercise price $1.00 
Time to expiration – days (2 year options)  730 
Time to expiration – days (5 year options)  1,826 
Risk free interest rate (2 year options)  .66%
Risk free interest rate (5 year options)  1.57%
Forfeiture rate (all options)  0%
Estimated volatility (all options)  150%
Weighted-average fair value of options granted  0.50 
Dividend  - 
XML 39 R28.htm IDEA: XBRL DOCUMENT v3.3.1.900
Summary of Significant Accounting Policies (Details) - shares
9 Months Ended
Feb. 29, 2016
Sep. 15, 2015
Mar. 28, 2013
Subsidiary or Equity Method Investee [Line Items]      
Intangible assets estimated useful life 5 years    
Intertainment Media Inc [Member]      
Subsidiary or Equity Method Investee [Line Items]      
Exchange of common stock shares     7,000,000
Ownership percentage of Company     70.00%
Ownership percentage reduced   37.00%  
XML 40 R29.htm IDEA: XBRL DOCUMENT v3.3.1.900
Going Concern (Details) - USD ($)
9 Months Ended
Feb. 29, 2016
Feb. 28, 2015
May. 31, 2015
Going Concern (Textual)      
Deficit $ (18,431,446)   $ (14,762,852)
Working capital deficit 3,093,528    
Net cash used in operating activities (2,255,415) $ (2,994,143)  
Amount raised through various financial instruments $ 2,268,846    
XML 41 R30.htm IDEA: XBRL DOCUMENT v3.3.1.900
Concentration of Credit Risk (Details)
3 Months Ended 9 Months Ended
Feb. 29, 2016
USD ($)
Feb. 29, 2016
USD ($)
Customer
shares
Concentration of Credit Risk (Textual)    
Stock issued during period, value   $ 1,431,489
Intelligent Content Enterprises [Member]    
Concentration of Credit Risk (Textual)    
Sale of stock, number of shares issued in transaction | shares   24,000,000
Stock issued during period, value   $ 2,125,000
Dwf [Member]    
Concentration of Credit Risk (Textual)    
Sale of stock, number of shares issued in transaction | shares   4,250,000
Sales Revenue, Net [Member]    
Concentration of Credit Risk (Textual)    
Percentage of revenues 55.00% 89.00%
Revenues $ 233,860 $ 1,615,125
Accounts Receivable [Member]    
Concentration of Credit Risk (Textual)    
Number of customer | Customer   1
Percentage of revenues   100.00%
Revenues $ 178,432 $ 802,592
XML 42 R31.htm IDEA: XBRL DOCUMENT v3.3.1.900
Acquisition of Intellectual Property (and Reverse Split) (Details) - USD ($)
9 Months Ended
Sep. 15, 2015
Sep. 09, 2015
Feb. 29, 2016
Business Acquisition [Line Items]      
Reverse stock Split   1-for-10 reverse stock split  
Retroactive impact of reverse stock split   Reverse stock split reduced the Company's common stock outstanding from approximately 134,344,806 shares to approximately 13,434,481 shares.  
Changes to number of common shares, reverse stock split - shares   13,434,481  
Former Debt [Member]      
Business Acquisition [Line Items]      
Number of shares issued during acquisitions, shares     4,686,182
Ortsbo Inc [Member]      
Business Acquisition [Line Items]      
Issuance of common stock shares 31,987,000    
Stock issued during period acquisitions value     $ 1,806,608
Number of shares issued during acquisitions, shares     8,312,500
Number of shares to be issued during acquisitions, shares     18,988,318
Business acquisition equity interest issued, number of shares 12,998,682    
Secured debt $ 975,388    
Value of the intangible assets acquired 5,421,068    
Fair value for acquisition of Intellectual property $ 16,968,888    
XML 43 R32.htm IDEA: XBRL DOCUMENT v3.3.1.900
Short Term Loans (Details)
9 Months Ended 12 Months Ended
Feb. 29, 2016
USD ($)
Feb. 28, 2015
USD ($)
May. 31, 2015
USD ($)
Nov. 30, 2015
USD ($)
Apr. 01, 2014
USD ($)
Apr. 01, 2014
CAD
Short-term Debt [Line Items]            
Short-term debt, fair value $ 791,928 $ 477,311 $ 477,311      
Borrowing 376,639   791,928 $ 1,201,000 $ 219,480 CAD 240,000
Fair value adjustments (45,003)   (44,838)      
Repayments 151,791 358,678 (624,665)      
Conversions (1,662,300)   (215,777)      
Short-term debt, fair value 376,639   791,928      
July 17, 2014 [Member]            
Short-term Debt [Line Items]            
Borrowing     100,915      
July 23, 2014 [Member]            
Short-term Debt [Line Items]            
Borrowing     50,234      
August 4, 2014 [Member]            
Short-term Debt [Line Items]            
Borrowing     93,458      
August 2014 (multiple dates) [Member]            
Short-term Debt [Line Items]            
Borrowing     125,000      
January 23, 2015 [Member]            
Short-term Debt [Line Items]            
Borrowing     16,098      
March 30, 2015 [Member]            
Short-term Debt [Line Items]            
Borrowing     250,000      
May 6, 2015 [Member]            
Short-term Debt [Line Items]            
Borrowing     144,729      
May 11, 2015 [Member]            
Short-term Debt [Line Items]            
Borrowing     419,463      
June 19, 2015 [Member]            
Short-term Debt [Line Items]            
Borrowing 78,265          
July 10, 2015 (Member)            
Short-term Debt [Line Items]            
Borrowing 250,000          
Borrowing during the second quarter [Member]            
Short-term Debt [Line Items]            
Borrowing 1,201,000          
April 1, 2014 Term Loan (Member)            
Short-term Debt [Line Items]            
Short-term debt, fair value $ 152,545 220,159 $ 220,159      
Borrowing        
Fair value adjustments $ (13,795)   $ (21,589)      
Repayments $ (8,446)   $ (46,025)      
Conversions        
Short-term debt, fair value $ 130,304   $ 152,545      
April 1, 2014 Term Loan (Member) | June 19, 2015 [Member]            
Short-term Debt [Line Items]            
Borrowing          
April 1, 2014 Term Loan (Member) | July 10, 2015 (Member)            
Short-term Debt [Line Items]            
Borrowing          
April 1, 2014 Term Loan (Member) | Borrowing during the third quarter [Member]            
Short-term Debt [Line Items]            
Borrowing          
January 7, 2014 Term Loan [Member]            
Short-term Debt [Line Items]            
Short-term debt, fair value $ 22,513 $ 257,152 $ 257,152      
Borrowing        
Fair value adjustments $ (1,820)   $ (1,356)      
Repayments   (142,506)      
Conversions   (90,777)      
Short-term debt, fair value $ 20,693   $ 22,513      
January 7, 2014 Term Loan [Member] | June 19, 2015 [Member]            
Short-term Debt [Line Items]            
Borrowing          
January 7, 2014 Term Loan [Member] | July 10, 2015 (Member)            
Short-term Debt [Line Items]            
Borrowing          
January 7, 2014 Term Loan [Member] | Borrowing during the third quarter [Member]            
Short-term Debt [Line Items]            
Borrowing          
Other Loans [Member]            
Short-term Debt [Line Items]            
Short-term debt, fair value $ 616,870      
Borrowing     $ 1,199,897      
Fair value adjustments (29,388)   (21,893)      
Repayments (403,805)   (436,134)      
Conversions (1,662,300)   (125,000)      
Short-term debt, fair value 225,642   616,870      
Other Loans [Member] | January 23, 2015 [Member]            
Short-term Debt [Line Items]            
Borrowing     16,098      
Other Loans [Member] | March 30, 2015 [Member]            
Short-term Debt [Line Items]            
Borrowing     250,000      
Other Loans [Member] | May 6, 2015 [Member]            
Short-term Debt [Line Items]            
Borrowing     144,729      
Other Loans [Member] | May 11, 2015 [Member]            
Short-term Debt [Line Items]            
Borrowing     $ 419,463      
Other Loans [Member] | June 19, 2015 [Member]            
Short-term Debt [Line Items]            
Borrowing 78,265          
Other Loans [Member] | July 10, 2015 (Member)            
Short-term Debt [Line Items]            
Borrowing 250,000          
Other Loans [Member] | Borrowing during the second quarter [Member]            
Short-term Debt [Line Items]            
Borrowing 1,201,000          
Other Loans [Member] | Borrowing during the third quarter [Member]            
Short-term Debt [Line Items]            
Borrowing $ 175,000          
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.3.1.900
Short Term Loans (Details Textual)
1 Months Ended 9 Months Ended 12 Months Ended
May. 06, 2015
USD ($)
Aug. 25, 2014
USD ($)
Aug. 25, 2014
CAD
Aug. 04, 2014
USD ($)
Jul. 17, 2014
USD ($)
Jun. 12, 2014
USD ($)
Jun. 12, 2014
CAD
Apr. 01, 2014
USD ($)
Jan. 07, 2014
USD ($)
Jun. 27, 2014
USD ($)
Jun. 27, 2014
CAD
Feb. 29, 2016
USD ($)
Feb. 29, 2016
CAD
May. 31, 2015
USD ($)
May. 31, 2015
CAD
Feb. 29, 2016
CAD
Nov. 30, 2015
USD ($)
Jul. 10, 2015
USD ($)
Jun. 19, 2015
USD ($)
Jun. 19, 2015
CAD
May. 11, 2015
USD ($)
May. 11, 2015
CAD
May. 06, 2015
CAD
Aug. 04, 2014
CAD
Jul. 17, 2014
CAD
Apr. 01, 2014
CAD
Jan. 07, 2014
CAD
Short-term Debt [Line Items]                                                      
Short term loans               $ 219,480       $ 376,639   $ 791,928     $ 1,201,000                 CAD 240,000  
Previously converted a portion of a previous loan from lender | CAD                               CAD 350,000                      
Debt instrument, maturity date Jun. 30, 2015     Aug. 14, 2014 Dec. 31, 2014     Jul. 10, 2014 Apr. 07, 2014     Dec. 31, 2015 Dec. 31, 2015                            
Interest rate percent         1.00%     1.00% 12.00%     12.00%   6.00%   12.00% 12.00%               1.00% 1.00% 12.00%
Repayment of principle   $ 22,768 CAD 25,000     $ 142,056 CAD 152,000         $ 8,446 CAD 13,405 $ 118,454 CAD 160,280                        
Short term loans, outstanding                       $ 20,693 CAD 28,000                            
Preparation fee $ 6,000     $ 3,210                                     CAD 7,200 CAD 3,500      
Debt Instrument, Convertible, Description                       subscription agreement for Units that included an unsecured 6% convertible debenture, $100 par value, convertible into shares of the Company's common stock and 166,667 issuable shares of common stock (Series C warrants) at a purchase price of $2.20 per share (Note 7). As at February 29, 2016 an amount of $20,693 ($28,000 Canadian) remains outstanding subscription agreement for Units that included an unsecured 6% convertible debenture, $100 par value, convertible into shares of the Company's common stock and 166,667 issuable shares of common stock (Series C warrants) at a purchase price of $2.20 per share (Note 7). As at February 29, 2016 an amount of $20,693 ($28,000 Canadian) remains outstanding                            
Debt instrument, Fee description         This loan carries a 1% arrangement fee and an interest rate of 1% per month.       A preparation fee of 10% or $25,300 (Canadian $28,000) was paid at inception.                                    
Private Investor [Member]                                                      
Short-term Debt [Line Items]                                                      
Short term loans $ 150,000     $ 93,458 $ 100,915       $ 253,200     $ 175,000           $ 250,000         CAD 187,000 CAD 100,000 CAD 110,000   CAD 280,000
Interest rate percent                       12.00%       12.00%                      
Repayment of principle                   $ 90,777 CAD 100,000                                
Director [Member]                                                      
Short-term Debt [Line Items]                                                      
Short term loans | $                       $ 120,000                              
April 1, 2014 Term Loan [Member]                                                      
Short-term Debt [Line Items]                                                      
Previously converted a portion of a previous loan from lender                       130,304       CAD 176,315                      
July 17, 2014 [Member]                                                      
Short-term Debt [Line Items]                                                      
Short term loans, outstanding                           $ 90,145 CAD 105,000,000                        
August 4, 2014 [Member]                                                      
Short-term Debt [Line Items]                                                      
Short term loans, outstanding                       $ 55,428 CAD 75,000                            
May 11, 2015 [Member]                                                      
Short-term Debt [Line Items]                                                      
Short term loans                                         $ 419,463 CAD 500,000          
June 19, 2015 [Member]                                                      
Short-term Debt [Line Items]                                                      
Short term loans                                     $ 78,265 CAD 96,000              
Interest rate percent                                     12.00% 12.00%              
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.3.1.900
Line of Credit Arrangement and Secured Debentures (Details) - USD ($)
1 Months Ended 9 Months Ended 12 Months Ended
May. 06, 2015
Aug. 04, 2014
Jul. 17, 2014
Apr. 07, 2014
Apr. 01, 2014
Jan. 07, 2014
Jun. 19, 2015
Feb. 29, 2016
May. 31, 2015
Sep. 15, 2015
Line of Credit Arrangement and Secured Debentures (Textual)                    
Line of credit maximum borrowing capacity       $ 3,000,000            
Line of credit facility, interest rate at end       12.00%            
Interest rate during period       1.00%            
Additional amount withdrawn under line of credit       $ 100,000         $ 1,367,025  
Term of warrants on additional amount borrowed under line of credit       5 years            
Warrants issued on additional amount borrowed under line of credit       100,000         200,000  
Line of credit       $ 200,000       $ 2,167,025  
Secured debentures               $ 1,075,000  
Cash received               2,500,000    
Amount of debt conversion             $ 2,000,000 2,000,000    
Existing debt             $ 4,500,000      
Secured debt repayment               925,000    
Cash repayment               465,000    
Line of credit facility agreement term       2 years            
Warrants expiration, Term       5 years            
Line of credit borrowed               150,000 $ 1,900,155  
Repayment of line of credit               $ 1,242,025 $ 533,130  
Annual interest rate               12.00%    
Debt instrument, maturity date Jun. 30, 2015 Aug. 14, 2014 Dec. 31, 2014   Jul. 10, 2014 Apr. 07, 2014   Dec. 31, 2015    
First Tranche of Secured Debentures [Member]                    
Line of Credit Arrangement and Secured Debentures (Textual)                    
Secured debentures               $ 4,500,000    
Maturity date description               Extend the maturity date of the Secured Debentures from December 31, 2015 to July 15, 2020.    
Secured debentures payment terms               At any time after the earlier of (i) six (6) months from the date of first issuance of any subsequent Debentures; and (ii) June 30, 2016, to require the Company to satisfy the outstanding obligations underlying the Secured Debenture; provided, however, that at least two thirds (66.67%) of the Holders of the principal amount of the Secured Debentures consent to a put of their Secured Debentures to the Company.    
Ortsbo [Member]                    
Line of Credit Arrangement and Secured Debentures (Textual)                    
Secured debentures               $ 4,550,388    
Ortsbo [Member] | First Tranche of Secured Debentures [Member]                    
Line of Credit Arrangement and Secured Debentures (Textual)                    
Assumed debt                   $ 975,338
Warrant [Member]                    
Line of Credit Arrangement and Secured Debentures (Textual)                    
Warrants exercise price per share       $ 1.00            
Warrants issued       800,000            
XML 46 R35.htm IDEA: XBRL DOCUMENT v3.3.1.900
Convertible Promissory Notes and Debentures (Details) - USD ($)
9 Months Ended 12 Months Ended
Feb. 29, 2016
May. 31, 2015
Short-term Debt [Line Items]    
Conversions   $ (80,000)
Repayments $ (818,000) (182,500)
Convertible notes and debt at fair value 3,790,311 2,507,175
Convertible notes and debt at fair value at the commitment date 171,990 1,594,068
Change in fair value (582,896) 33,156
Repayments (cash) (883,564) (238,271)
Convertible notes and debt at fair value 2,495,841 3,790,311
Current $ 2,495,841 3,477,825
Long term 312,486
Total convertible promissory notes and debentures $ 2,495,841 3,790,311
JMJ Financial [Member]    
Short-term Debt [Line Items]    
Conversions   (80,000)
Repayments (90,000)
Convertible notes and debt at fair value 142,189
Convertible notes and debt at fair value at the commitment date 137,071
Change in fair value (70,223)
Repayments (cash) (103,220)
Conversions to common stock   $ (105,817)
Convertible notes and debt at fair value
Current
Long term  
Total convertible promissory notes and debentures
Convertible Debentures [Member]    
Short-term Debt [Line Items]    
Conversions  
Repayments
Convertible notes and debt at fair value $ 1,945,833 $ 2,264,140
Convertible notes and debt at fair value at the commitment date 436,887
Change in fair value $ 550,008 $ (755,194)
Repayments (cash)
Conversions to common stock  
Convertible notes and debt at fair value $ 2,495,841 $ 1,945,833
Current 2,495,841 1,633,347
Long term   312,486
Total convertible promissory notes and debentures 2,495,841 $ 1,945,833
Other Notes [Member]    
Short-term Debt [Line Items]    
Conversions  
Repayments (818,000) $ (92,500)
Convertible notes and debt at fair value 1,844,478 100,846
Convertible notes and debt at fair value at the commitment date 171,990 1,020,110
Change in fair value (1,132,904) 858,573
Repayments (cash) $ (883,564) $ (135,051)
Conversions to common stock  
Convertible notes and debt at fair value $ 1,844,478
Current $ 1,844,478
Long term  
Total convertible promissory notes and debentures $ 1,844,478
Total Borrowings at May 31, 2014 [Member]    
Short-term Debt [Line Items]    
Borrowings   2,391,500
Total Borrowings at May 31, 2014 [Member] | JMJ Financial [Member]    
Short-term Debt [Line Items]    
Borrowings   80,000
Total Borrowings at May 31, 2014 [Member] | Convertible Debentures [Member]    
Short-term Debt [Line Items]    
Borrowings   2,219,000
Total Borrowings at May 31, 2014 [Member] | Other Notes [Member]    
Short-term Debt [Line Items]    
Borrowings   92,500
Borrowing on June 27, 2014 [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 250,000
Borrowing on June 27, 2014 [Member] | JMJ Financial [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on June 27, 2014 [Member] | Convertible Debentures [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 250,000
Borrowing on June 27, 2014 [Member] | Other Notes [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on September 2, 2014 [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 125,000
Borrowing on September 2, 2014 [Member] | JMJ Financial [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on September 2, 2014 [Member] | Convertible Debentures [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 125,000
Borrowing on September 2, 2014 [Member] | Other Notes [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on September 3, 2014 [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 50,000
Borrowing on September 3, 2014 [Member] | JMJ Financial [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 50,000
Borrowing on September 3, 2014 [Member] | Convertible Debentures [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on September 3, 2014 [Member] | Other Notes [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on October 6, 2014 [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 50,000
Borrowing on October 6, 2014 [Member] | JMJ Financial [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on October 6, 2014 [Member] | Convertible Debentures [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 50,000
Borrowing on October 6, 2014 [Member] | Other Notes [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on October 22, 2014 [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 40,000
Borrowing on October 22, 2014 [Member] | JMJ Financial [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 40,000
Borrowing on October 22, 2014 [Member] | Convertible Debentures [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on October 22, 2014 [Member] | Other Notes [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on October 27, 2014 [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 50,000
Borrowing on October 27, 2014 [Member] | JMJ Financial [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on October 27, 2014 [Member] | Convertible Debentures [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 50,000
Borrowing on October 27, 2014 [Member] | Other Notes [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on December 24, 2014 [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 75,000
Borrowing on December 24, 2014 [Member] | JMJ Financial [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on December 24, 2014 [Member] | Convertible Debentures [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on December 24, 2014 [Member] | Other Notes [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 75,000
Borrowing on December 24, 2014 [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 100,000
Borrowing on December 24, 2014 [Member] | JMJ Financial [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on December 24, 2014 [Member] | Convertible Debentures [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on December 24, 2014 [Member] | Other Notes [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 100,000
Borrowing on December 29, 2014 [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 50,000
Borrowing on December 29, 2014 [Member] | JMJ Financial [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on December 29, 2014 [Member] | Convertible Debentures [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on December 29, 2014 [Member] | Other Notes [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 50,000
Borrowing on February 4, 2015 [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 115,000
Borrowing on February 4, 2015 [Member] | JMJ Financial [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on February 4, 2015 [Member] | Convertible Debentures [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on February 4, 2015 [Member] | Other Notes [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 115,000
Borrowing on February 9, 2015 [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 90,750
Borrowing on February 9, 2015 [Member] | JMJ Financial [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on February 9, 2015 [Member] | Convertible Debentures [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on February 9, 2015 [Member] | Other Notes [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 90,750
Borrowing on March 30, 2015 [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 92,000
Borrowing on March 30, 2015 [Member] | JMJ Financial [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on March 30, 2015 [Member] | Convertible Debentures [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on March 30, 2015 [Member] | Other Notes [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 92,000
Borrowing on April 15, 2015 [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 69,000
Borrowing on April 15, 2015 [Member] | JMJ Financial [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on April 15, 2015 [Member] | Convertible Debentures [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on April 15, 2015 [Member] | Other Notes [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 69,000
Borrowing on April 20, 2015 [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 50,000
Borrowing on April 20, 2015 [Member] | JMJ Financial [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on April 20, 2015 [Member] | Convertible Debentures [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on April 20, 2015 [Member] | Other Notes [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 50,000
Borrowing on April 23, 2015 [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 60,500
Borrowing on April 23, 2015 [Member] | JMJ Financial [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on April 23, 2015 [Member] | Convertible Debentures [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on April 23, 2015 [Member] | Other Notes [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 60,500
Borrowing on April 23, 2015 [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 25,000
Borrowing on April 23, 2015 [Member] | JMJ Financial [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on April 23, 2015 [Member] | Convertible Debentures [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowing on April 23, 2015 [Member] | Other Notes [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 25,000
Total Borrowings at May 31, 2015 [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 3,421,250
Total Borrowings at May 31, 2015 [Member] | JMJ Financial [Member]    
Short-term Debt [Line Items]    
Borrowings  
Total Borrowings at May 31, 2015 [Member] | Convertible Debentures [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 2,694,000
Total Borrowings at May 31, 2015 [Member] | Other Notes [Member]    
Short-term Debt [Line Items]    
Borrowings   $ 727,250
Borrowings on June 24, 2015 [Member]    
Short-term Debt [Line Items]    
Borrowings $ 45,375  
Borrowings on June 24, 2015 [Member] | JMJ Financial [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowings on June 24, 2015 [Member] | Convertible Debentures [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowings on June 24, 2015 [Member] | Other Notes [Member]    
Short-term Debt [Line Items]    
Borrowings $ 45,375  
Borrowings on June 29, 2015 [Member]    
Short-term Debt [Line Items]    
Borrowings $ 45,375  
Borrowings on June 29, 2015 [Member] | JMJ Financial [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowings on June 29, 2015 [Member] | Convertible Debentures [Member]    
Short-term Debt [Line Items]    
Borrowings  
Borrowings on June 29, 2015 [Member] | Other Notes [Member]    
Short-term Debt [Line Items]    
Borrowings $ 45,375  
Total Borrowings at February 29, 2016 [Member]    
Short-term Debt [Line Items]    
Borrowings $ 2,694,000  
Total Borrowings at February 29, 2016 [Member] | JMJ Financial [Member]    
Short-term Debt [Line Items]    
Borrowings  
Total Borrowings at February 29, 2016 [Member] | Convertible Debentures [Member]    
Short-term Debt [Line Items]    
Borrowings $ 2,694,000  
Total Borrowings at February 29, 2016 [Member] | Other Notes [Member]    
Short-term Debt [Line Items]    
Borrowings  
XML 47 R36.htm IDEA: XBRL DOCUMENT v3.3.1.900
Convertible Promissory Notes and Debentures (Details 1) - USD ($)
1 Months Ended 3 Months Ended 9 Months Ended
Mar. 01, 2015
Aug. 14, 2014
Apr. 01, 2014
Feb. 27, 2014
Jan. 29, 2014
Feb. 29, 2016
May. 31, 2015
Feb. 28, 2015
Nov. 30, 2014
Aug. 31, 2014
May. 31, 2014
Feb. 29, 2016
Feb. 28, 2015
Mar. 02, 2015
May. 31, 2013
Summary of Derivative Instruments Impact on Results of Operations [Abstract]                              
Gross proceeds           $ 2,495,841 $ 3,790,311         $ 2,495,841      
Fair value of promissory notes           $ 2,495,841 $ 3,790,311       $ 2,507,175 $ 2,495,841      
Stock price   $ 1.00                       $ 0.60  
Dividend                          
Warrant [Member]                              
Summary of Derivative Instruments Impact on Results of Operations [Abstract]                              
Fair value derivative liability warrant           $ 1,283,113     2,531,282 $ 1,283,113   $ 4,050,278
Convertible Debentures with Series A and B Warrants [Member]                              
Summary of Derivative Instruments Impact on Results of Operations [Abstract]                              
Gross proceeds     $ 469,000 $ 305,000 $ 395,000                    
Fair value of promissory notes     (665,511) (247,696) (320,787)                    
Fair value derivative liability warrant     (776,664) (125,050) (161,950)                    
Financing expense on the issuance of promissory notes     $ 973,175 $ 67,746 $ 87,737                    
Convertible Debentures with Series C or Series D Warrants [Member]                              
Summary of Derivative Instruments Impact on Results of Operations [Abstract]                              
Gross proceeds                 $ 225,000 $ 250,000 1,050,000        
Fair value of promissory notes                 (182,720) $ (254,167) $ (852,726)        
Fair value derivative liability warrant                 $ (152,951)        
Fair value of equity warrants                 $ (197,274)        
Financing expense on the issuance of promissory notes                 $ 110,671 $ 4,167        
Fair value at commitment date [Member] | Convertible Debentures with Series A and B Warrants [Member]                              
Summary of Derivative Instruments Impact on Results of Operations [Abstract]                              
Stock price     $ 1.80 $ 0.50 $ 0.50                    
Estimated volatility (all options)     150.00% 150.00% 150.00%                    
Dividend                        
Market interest rate for the Company     18.00% 18.00% 18.00%                    
Fair value at commitment date [Member] | Convertible Debentures with Series A and B Warrants [Member] | Warrant [Member]                              
Summary of Derivative Instruments Impact on Results of Operations [Abstract]                              
Time to expiration - days     1826 days 1826 days 1826 days                    
Risk free interest rate     1.74% 1.51% 1.52%                    
Fair value at commitment date [Member] | Convertible Debentures with Series A and B Warrants [Member] | Series A warrants [Member]                              
Summary of Derivative Instruments Impact on Results of Operations [Abstract]                              
Current exercise price     $ 1.50 $ 1.50 $ 1.50                    
Fair value at commitment date [Member] | Convertible Debentures with Series A and B Warrants [Member] | Convertible Promissory Note [Member]                              
Summary of Derivative Instruments Impact on Results of Operations [Abstract]                              
Current exercise price     $ 1.00 $ 1.00 $ 1.00                    
Time to expiration - days     731 days 731 days 732 days                    
Risk free interest rate     0.32% 0.32% 0.32%                    
Fair value at commitment date [Member] | Convertible Debentures with Series C or Series D Warrants [Member]                              
Summary of Derivative Instruments Impact on Results of Operations [Abstract]                              
Stock price                 $ 2.00          
Current exercise price                 $ 1.50 $ 1.50        
Time to expiration - days                   731 days 731 days        
Risk free interest rate                 0.45% 0.37%        
Estimated volatility (all options)                 150.00% 150.00%        
Dividend                        
Market interest rate for the Company                 18.00% 18.00%        
Fair value at commitment date [Member] | Maximum [Member] | Convertible Debentures with Series C or Series D Warrants [Member]                              
Summary of Derivative Instruments Impact on Results of Operations [Abstract]                              
Stock price                     $ 1.60        
Fair value at commitment date [Member] | Minimum [Member] | Convertible Debentures with Series C or Series D Warrants [Member]                              
Summary of Derivative Instruments Impact on Results of Operations [Abstract]                              
Stock price                     $ 1.50        
Fair value of promissory notes at May 31, 2015 [Member] | Convertible Debentures with Series A and B Warrants [Member]                              
Summary of Derivative Instruments Impact on Results of Operations [Abstract]                              
Stock price                        
Current exercise price                        
Time to expiration - days     306 days 272 days 243 days                    
Risk free interest rate                        
Estimated volatility (all options)                        
Dividend                        
Fair value of promissory notes at May 31, 2015 [Member] | Convertible Debentures with Series C or Series D Warrants [Member]                              
Summary of Derivative Instruments Impact on Results of Operations [Abstract]                              
Stock price                        
Current exercise price                        
Time to expiration - days                   393 days          
Risk free interest rate                      
Estimated volatility (all options)                      
Dividend                      
Market interest rate for the Company                      
Fair value of promissory notes at May 31, 2015 [Member] | Maximum [Member] | Convertible Debentures with Series C or Series D Warrants [Member]                              
Summary of Derivative Instruments Impact on Results of Operations [Abstract]                              
Time to expiration - days                 515 days   365 days        
Fair value of promissory notes at May 31, 2015 [Member] | Minimum [Member] | Convertible Debentures with Series C or Series D Warrants [Member]                              
Summary of Derivative Instruments Impact on Results of Operations [Abstract]                              
Time to expiration - days                 460 days   328 days        
Fair value of promissory notes at February 29 2016 [Member] | Convertible Debentures with Series A and B Warrants [Member]                              
Summary of Derivative Instruments Impact on Results of Operations [Abstract]                              
Stock price                  
Current exercise price                  
Time to expiration - days     32 days                        
Risk free interest rate                        
Estimated volatility (all options)                        
Dividend                        
Fair value of promissory notes at February 29 2016 [Member] | Convertible Debentures with Series C or Series D Warrants [Member]                              
Summary of Derivative Instruments Impact on Results of Operations [Abstract]                              
Time to expiration - days                   119 days          
Risk free interest rate                      
Estimated volatility (all options)                      
Dividend                      
Market interest rate for the Company                      
Fair value of promissory notes at February 29 2016 [Member] | Maximum [Member] | Convertible Debentures with Series C or Series D Warrants [Member]                              
Summary of Derivative Instruments Impact on Results of Operations [Abstract]                              
Time to expiration - days                 241 days   91 days        
Fair value of promissory notes at February 29 2016 [Member] | Minimum [Member] | Convertible Debentures with Series C or Series D Warrants [Member]                              
Summary of Derivative Instruments Impact on Results of Operations [Abstract]                              
Time to expiration - days                 186 days   54 days        
JMJ Financial [Member]                              
Summary of Derivative Instruments Impact on Results of Operations [Abstract]                              
Gross proceeds           $ 90,750 $ 296,500 430,750 $ 90,000     $ 90,750 $ 430,750    
Fair value of promissory notes           $ (171,990) $ (363,604) (656,507) $ (137,071)     $ (171,990) (656,507)    
Fair value of equity warrants           (37,100)     (37,100)    
Financing expense on the issuance of promissory notes           $ 81,240 $ 67,104 $ 262,857 $ 47,071     $ 81,240 $ 262,857    
JMJ Financial [Member] | Fair value at commitment date [Member]                              
Summary of Derivative Instruments Impact on Results of Operations [Abstract]                              
Stock price           $ 0.60           $ 0.60      
Current exercise price           $ 0.20 $ 0.30         $ 0.20      
Estimated volatility (all options)           150.00% 150.00% 150.00% 150.00%          
Dividend                      
JMJ Financial [Member] | Fair value at commitment date [Member] | Maximum [Member]                              
Summary of Derivative Instruments Impact on Results of Operations [Abstract]                              
Stock price             $ 0.60 $ 0.70 $ 1.20       $ 0.70    
Current exercise price               $ 1.00 $ 0.60       1.00    
Time to expiration - days             366 days 365 days 436 days     230 days      
Risk free interest rate             0.27% 0.26% 0.11%     0.30%      
JMJ Financial [Member] | Fair value at commitment date [Member] | Minimum [Member]                              
Summary of Derivative Instruments Impact on Results of Operations [Abstract]                              
Stock price             $ 0.50 $ 0.50 $ 0.40       0.50    
Current exercise price               $ 0.20 $ 0.40       0.20    
Time to expiration - days             250 days 181 days 389 days     225 days      
Risk free interest rate             0.09% 0.14% 0.10%     0.27%      
JMJ Financial [Member] | Fair value of promissory notes at May 31, 2015 [Member]                              
Summary of Derivative Instruments Impact on Results of Operations [Abstract]                              
Stock price           $ 0.60 $ 0.50     0.50    
Current exercise price           $ 0.30            
Risk free interest rate                          
Estimated volatility (all options)             150.00% 150.00%          
Dividend                      
JMJ Financial [Member] | Fair value of promissory notes at May 31, 2015 [Member] | Maximum [Member]                              
Summary of Derivative Instruments Impact on Results of Operations [Abstract]                              
Current exercise price               $ 1.00         1.00    
Time to expiration - days             325 days 346 days              
Risk free interest rate             0.26% 0.22%              
JMJ Financial [Member] | Fair value of promissory notes at May 31, 2015 [Member] | Minimum [Member]                              
Summary of Derivative Instruments Impact on Results of Operations [Abstract]                              
Current exercise price               $ 0.30         $ 0.30    
Time to expiration - days             212 days 115 days              
Risk free interest rate             0.06% 0.07%              
JMJ Financial [Member] | Fair value of promissory notes at February 29 2016 [Member]                              
Summary of Derivative Instruments Impact on Results of Operations [Abstract]                              
Dividend                            
XML 48 R37.htm IDEA: XBRL DOCUMENT v3.3.1.900
Convertible Promissory Notes and Debentures (Details Textual)
1 Months Ended 6 Months Ended 9 Months Ended 12 Months Ended
May. 06, 2015
Feb. 09, 2015
USD ($)
Feb. 04, 2015
USD ($)
Oct. 06, 2014
USD ($)
$ / shares
shares
Sep. 02, 2014
USD ($)
$ / shares
shares
Aug. 25, 2014
USD ($)
Aug. 25, 2014
CAD
Aug. 04, 2014
Jul. 17, 2014
Jun. 27, 2014
USD ($)
$ / shares
shares
Jun. 27, 2014
CAD
shares
Jun. 12, 2014
USD ($)
Jun. 12, 2014
CAD
May. 30, 2014
USD ($)
$ / shares
shares
Apr. 23, 2014
USD ($)
$ / shares
shares
Apr. 01, 2014
USD ($)
$ / shares
shares
Jan. 07, 2014
Oct. 20, 2015
USD ($)
Jun. 26, 2015
USD ($)
Jun. 19, 2015
USD ($)
Apr. 23, 2015
USD ($)
Apr. 20, 2015
USD ($)
Apr. 15, 2015
USD ($)
Mar. 30, 2015
USD ($)
Dec. 31, 2014
shares
Dec. 29, 2014
USD ($)
Dec. 24, 2014
USD ($)
Oct. 27, 2014
USD ($)
$ / shares
shares
Feb. 27, 2014
USD ($)
$ / shares
shares
Jan. 29, 2014
USD ($)
$ / shares
shares
Jan. 31, 2016
USD ($)
Feb. 29, 2016
USD ($)
$ / shares
Feb. 29, 2016
CAD
Feb. 28, 2015
USD ($)
May. 31, 2015
USD ($)
May. 31, 2015
CAD
Mar. 02, 2015
$ / shares
Aug. 14, 2014
$ / shares
Apr. 16, 2014
USD ($)
Feb. 21, 2014
USD ($)
Convertible Promissory Notes and Debentures (Textual)                                                                                
Principal amount of convertible promissory note                                                               $ 2,495,841     $ 3,790,311          
Debt instrument, maturity date Jun. 30, 2015             Aug. 14, 2014 Dec. 31, 2014             Jul. 10, 2014 Apr. 07, 2014                             Dec. 31, 2015 Dec. 31, 2015              
Current stock price | $ / shares                                                                         $ 0.60 $ 1.00    
Notes mature period                               24 months 3 months                       24 months 24 months                    
Amount of debt conversion                                       $ 2,000,000                             (105,817)          
Common stock issued on exercise of warrants                                                               $ 542,760   41,060          
Repayments of debt           $ 22,768 CAD 25,000         $ 142,056 CAD 152,000                                     8,446 CAD 13,405   $ 118,454 CAD 160,280        
Proceeds from convertible note                                                               90,750   $ 840,339            
Borrowings on June 24, 2015 [Member]                                                                                
Convertible Promissory Notes and Debentures (Textual)                                                                                
Borrowings                                                               45,375                
Borrowings on June 29, 2015 [Member]                                                                                
Convertible Promissory Notes and Debentures (Textual)                                                                                
Borrowings                                                               $ 45,375                
Accredited investors [Member]                                                                                
Convertible Promissory Notes and Debentures (Textual)                                                                                
Amount of debt conversion                   $ 90,777 CAD 100,000                                                          
Series C warrants [Member]                                                                                
Convertible Promissory Notes and Debentures (Textual)                                                                                
Interest rate on convertible promissory note                           6.00% 6.00%                                                  
Debt instrument, maturity date                   Jun. 27, 2019 Jun. 27, 2019     May 30, 2016 Apr. 23, 2016                                                  
Conversion price | $ / shares                           $ 1.50 $ 1.50                                                  
Series D Warrants [Member]                                                                                
Convertible Promissory Notes and Debentures (Textual)                                                                                
Interest rate on convertible promissory note       6.00%                                               6.00%                        
Conversion price | $ / shares       $ 1.50                                               $ 1.50                        
Convertible Promissory Note [Member]                                                                                
Convertible Promissory Notes and Debentures (Textual)                                                                                
Principal amount of convertible promissory note                               $ 469,000                         $ 305,000 $ 395,000                    
Interest rate on convertible promissory note       6.00% 6.00%         6.00%       6.00% 6.00% 6.00%                       6.00% 6.00% 6.00%   6.00%                
Debt instrument, maturity date       Oct. 06, 2016 Sep. 02, 2016         Jun. 27, 2016 Jun. 27, 2016     May 30, 2016 Apr. 23, 2016                         Oct. 06, 2016                        
Interest rate on convertible promissory note for future if not paid                                                                     16.00% 16.00%        
Convertible promissory notes, Unit | shares         125         250       1,000 50 469                         305 395                    
Convertible promissory notes         $ 125,000         $ 250,000       $ 1,000,000 $ 50,000                                                  
Convertible promissory note par value | $ / shares       $ 100 $ 100         $ 100       $ 100 $ 100 $ 100                       $ 100 $ 100 $ 100                    
Purchase price | $ / shares                               $ 1,000                         $ 1,000 $ 1,000                    
Funding total, cash                               $ 1,069,000                         $ 1,069,000 $ 1,069,000                    
Notes mature period                                                                     24 months 24 months        
Conversion price | $ / shares       $ 1.50 $ 1.50         $ 1.50       $ 1.5 $ 1.5                         $ 1.50       $ 1.00                
Additional borrowings                                                                             $ 40,000 $ 40,000
Amount of debt conversion                   $ 150,000                                                            
Funding total, retirement obligation                               $ 100,000                         $ 100,000 $ 100,000                    
Convertible Promissory Note [Member] | JSJ Investment Inc [Member]                                                                                
Convertible Promissory Notes and Debentures (Textual)                                                                                
Principal amount of convertible promissory note                                                     $ 100,000                          
Interest rate on convertible promissory note                                                     15.00%                          
Debt instrument, maturity date                                                     Jun. 23, 2015                          
Convertible promissory note, term of conversion feature description                                                     The note may be converted into common stock of the Company on or after the maturity date at a conversion price of 50% of the lowest 15 days prior to conversion or $1.00. Early payback penalties are 140% from 120-150 days and 150% up to the maturity date of the note. This Convertible Note was repaid on June 24, 2015.                          
Convertible Promissory Note [Member] | LG Capital Funding, LLC [Member]                                                                                
Convertible Promissory Notes and Debentures (Textual)                                                                                
Principal amount of convertible promissory note                                                     $ 75,000                          
Interest rate on convertible promissory note                                                     8.00%                          
Debt instrument, maturity date                                                     Dec. 24, 2015                          
Convertible promissory note, term of conversion feature description                                                     The note may be converted into shares of common stock of the Company at any time beginning on the 180th day of the date of the note at a conversion price of 55% of the average of 2 lowest closing bid prices from the 10 days prior to conversion. Early payback penalties are 150% and payback is eligible up to 180 days from the inception of the note. This Convertible Note was repaid on June 24, 2015.                          
Convertible Promissory Note [Member] | Vista Capital Investments, LLC [Member]                                                                                
Convertible Promissory Notes and Debentures (Textual)                                                                                
Principal amount of convertible promissory note                                                   $ 110,000                            
Discount on principal amount                                                   $ 50,000                            
Interest rate on convertible promissory note                                                   12.00%                            
Debt instrument, maturity date                                                   Dec. 29, 2015                            
Interest rate on convertible promissory note for future if not paid                                                   10.00%                            
Convertible promissory note, term of conversion feature description                                                   The note may be converted into shares of common stock of the Company at any time beginning on the 180th day of the date of the note at a conversion price of 60% of the lowest trading price from the 25 days prior to conversion or $1.00. Early payback penalties are 125% up to 90 days and 145% after 90 days.                            
Additional borrowings                                         $ 25,000                                      
Repayments of debt                                   $ 25,000 $ 50,000                                          
Convertible Promissory Note [Member] | Typenex Co-Investments, LLC [Member]                                                                                
Convertible Promissory Notes and Debentures (Textual)                                                                                
Principal amount of convertible promissory note     $ 115,000                                                                          
Interest rate on convertible promissory note     10.00%                                                                          
Debt instrument, maturity date     Jan. 04, 2016                                                                          
Convertible promissory note, description     The Company can repay the Note within the first six months at a penalty of 125% of principal amount. After six months, repayments can be made on an installment basis, either in cash (plus OID), or in shares of common stock. If installment payments are made in the form of common stock, the effective price for the stock issuance is at 70% of the average of the three lowest closing bid prices over a ten day look back period from the date the installment is due. The installments must be made on a monthly schedule if the lender does not convert at their option at the exercise price of $1.00 per share. At the funding date the Company issued 70,000 fixed price warrants at an exercise price of $1.00 per share                                                                          
Interest rate on convertible promissory note for future if not paid     10.00%                                                                          
Installment payment                                                             $ 123,383                  
Convertible Promissory Note [Member] | Iconic Holdings, LLC [Member]                                                                                
Convertible Promissory Notes and Debentures (Textual)                                                                                
Principal amount of convertible promissory note   $ 220,000                                                                            
Discount on principal amount   $ 90,750                                                                            
Interest rate on convertible promissory note   10.00%                                                                            
Debt instrument, maturity date   Feb. 09, 2016                                                                            
Convertible promissory note, description   The note may be converted into shares of common stock of the Company at any time beginning on the 180th day of the date of the note at a conversion price of 60% of the lowest average daily trading price from the 25 days prior to conversion or 10 cents, whichever is lower. The Note carries early payback penalties on principal repayment which are 115% from 1-60 days, 125% between 61 and 120 days, 130% between 121 and 180 days, and may not be paid back after 180 days without consent from the Holder.                                                                            
Interest rate on convertible promissory note for future if not paid   10.00%                                                                            
Convertible Promissory Note [Member] | Group 10 Holdings LLC [Member]                                                                                
Convertible Promissory Notes and Debentures (Textual)                                                                                
Principal amount of convertible promissory note                                               $ 92,000                                
Interest rate, description                                               The debenture may be paid back any time before maturity with a prepayment penalty of 123%.                                
Interest rate on convertible promissory note                                               10.00%                                
Debt instrument, maturity date                                               Mar. 30, 2016                                
Interest rate on convertible promissory note for future if not paid                                               12.00%                                
Convertible promissory note, term of conversion feature description                                               The note may be converted into shares of common stock of the Company at any time beginning on the 180th day                                
Convertible note description                                               conversion price of 55% of the average of the two lowest closing bid prices with a twenty day look back period as of the date a notice of conversion is given.                                
Convertible Promissory Note [Member] | Vis Vires Group, Inc [Member]                                                                                
Convertible Promissory Notes and Debentures (Textual)                                                                                
Principal amount of convertible promissory note                                             $ 69,000                                  
Interest rate on convertible promissory note                                             8.00%                                  
Debt instrument, maturity date                                             Jan. 06, 2016                                  
Convertible promissory note, description                                             The Note may be paid back any time before maturity with a prepayment penalty of 110% if paid back within the first 30 days, 115% if paid back between 31 and 60 days, 120% if paid between 61 and 90 days, 125% if paid between 91 and 120 days, 130% if paid between 121 and 150 days, and 135% if paid back between 151 and 180 days after which it cannot be repaid.                                  
Convertible promissory note, term of conversion feature description                                             The note may be converted into shares of common stock of the Company at any time beginning on the 180th day.                                  
Convertible note description                                             Conversion price of 58% of the average of the three lowest trading prices from previous ten trading days including the date notice is given.                                  
Convertible Promissory Note [Member] | Adar Bays, LLC [Member]                                                                                
Convertible Promissory Notes and Debentures (Textual)                                                                                
Principal amount of convertible promissory note                                           $ 50,000                                    
Interest rate on convertible promissory note                                           8.00%                                    
Debt instrument, maturity date                                           Apr. 20, 2016                                    
Convertible note description                                           Conversion price of 60% of the average of the three lowest trading prices from previous fifteen trading days.                                    
Derivative preferred stock liability, description                                           The Note may be paid back any time before maturity with a prepayment penalty of 140%.                                    
Convertible Promissory Note [Member] | Auctus Private Equity Fund, LLC [Member]                                                                                
Convertible Promissory Notes and Debentures (Textual)                                                                                
Principal amount of convertible promissory note                                         $ 60,500                                      
Interest rate, description                                         The Note may be paid back any time before maturity with a prepayment penalty of 130%.                                      
Interest rate on convertible promissory note                                         10.00%                                      
Debt instrument, maturity date                                         Jan. 21, 2016                                      
Convertible note description                                         Conversion price of 60% of the average of the two lowest trading prices from previous twenty trading days.                                      
Convertible Promissory Note [Member] | Series A Warrants [Member]                                                                                
Convertible Promissory Notes and Debentures (Textual)                                                                                
Current stock price | $ / shares                               $ 1.15                         $ 1.15 $ 1.15                    
Common stock to warrant holder | shares                               1,000                         1,000 1,000                    
Convertible Promissory Note [Member] | Series B Warrants [Member]                                                                                
Convertible Promissory Notes and Debentures (Textual)                                                                                
Current stock price | $ / shares                               $ 2.00                         $ 2.00 $ 2.00                    
Common stock to warrant holder | shares                               1,000                         1,000 1,000                    
Convertible Promissory Note [Member] | Series C warrants [Member]                                                                                
Convertible Promissory Notes and Debentures (Textual)                                                                                
Debt instrument, maturity date         Sep. 02, 2019         Jun. 27, 2019 Jun. 27, 2019     May 30, 2019 Apr. 23, 2019                                                  
Current stock price | $ / shares         $ 2.20         $ 2.20       $ 2.20 $ 2.20                                                  
Common stock to warrant holder | shares         83,333         166,667 166,667     666,667 33,333                                                  
Amount of debt conversion, Shares | shares                                                 400,000,000                              
Convertible Promissory Note [Member] | Series D Warrants [Member]                                                                                
Convertible Promissory Notes and Debentures (Textual)                                                                                
Debt instrument, maturity date       Oct. 06, 2019                                               Oct. 27, 2019                        
Current stock price | $ / shares       $ 2.20                                               $ 2.20                        
Common stock to warrant holder | shares       33,333                                               33,333                        
Convertible Promissory Note [Member] | Issuance of unit one [Member]                                                                                
Convertible Promissory Notes and Debentures (Textual)                                                                                
Convertible promissory notes, Unit | shares       50 25         125                                   50                        
Convertible promissory notes       $ 5,000                                               $ 50,000                        
Settlement of trade payables       $ 50,000                                                                        
Convertible Promissory Note [Member] | Issuance of unit two [Member]                                                                                
Convertible Promissory Notes and Debentures (Textual)                                                                                
Convertible promissory notes, Unit | shares         75         125                                                            
Convertible Promissory Note [Member] | Issuance of unit three [Member]                                                                                
Convertible Promissory Notes and Debentures (Textual)                                                                                
Convertible promissory notes, Unit | shares         25                                                                      
Convertible Debentures with Series A and B Warrants [Member]                                                                                
Convertible Promissory Notes and Debentures (Textual)                                                                                
Principal amount of convertible promissory note                               $ 469,000                         $ 305,000 $ 395,000                    
Debentures payment terms                                                               Non-repayment of the debentures triggered a penalty interest rate whereby the stated interest rate goes up to 16% from the original 6%. Non-repayment of the debentures triggered a penalty interest rate whereby the stated interest rate goes up to 16% from the original 6%.              
XML 49 R38.htm IDEA: XBRL DOCUMENT v3.3.1.900
Convertible Secured Debentures (Details) - USD ($)
1 Months Ended 9 Months Ended
Dec. 30, 2015
Feb. 29, 2016
Debt Instrument [Line Items]    
Gross proceeds  
Convertible notes and debt at fair value   $ 3,790,311
Repayments (cash)   925,000
Convertible notes and debt at fair value   $ 2,495,841
Convertible secured debentures [Member]    
Debt Instrument [Line Items]    
Gross proceeds $ 2,086,000  
Fair value of the convertible secured debt  
Fair value of equity warrants (Note 10) $ (1,616,630)  
Beneficial conversion feature $ (469,370)  
Convertible notes and debt at fair value  
Change in fair value (from commitment date) $ 69,687  
Repayments (cash)  
Convertible notes and debt at fair value $ 69,687  
XML 50 R39.htm IDEA: XBRL DOCUMENT v3.3.1.900
Convertible Secured Debentures (Details Textual)
1 Months Ended 9 Months Ended
Mar. 01, 2015
Aug. 14, 2014
Dec. 30, 2015
USD ($)
Feb. 29, 2016
USD ($)
Nov. 30, 2015
USD ($)
May. 31, 2015
USD ($)
May. 31, 2014
USD ($)
Apr. 01, 2014
USD ($)
Apr. 01, 2014
CAD
Short-term Debt [Line Items]                  
Gross proceeds from private placement                
Short term loans advanced       $ 376,639 $ 1,201,000 $ 791,928   $ 219,480 CAD 240,000
Subscription receivable       46,000        
Dividend rate              
Carrying value of the debenture liability       2,495,841   $ 3,790,311 $ 2,507,175    
Warrants associated with a secured convertible debenture       1,616,630          
Convertible secured debentures [Member]                  
Short-term Debt [Line Items]                  
Gross proceeds from private placement     $ 2,086,000            
Convertible secured debentures, description     (i) a 12% secured convertible debenture with a maturity date of five years from issuance convertible at $0.25 per common stock and (ii) ten (10) five year common share purchase warrants, vesting in 1/3 increments with 1/3 vested immediately, 1/3 to be vested in one year and 1/3 to be vested in two years and having an exercise price of $0.01 per share. The units were sold at $1.00 per unit.            
Short term loans advanced     $ 1,201,000            
Subscription receivable     46,000            
Interest and principal payments debentures     469,370            
Value for warrants by binomial model     $ 1,616,630            
Volatility rate     314.00%            
Expected life     5 years            
Risk free interest rate     1.80%            
Dividend rate     0.00%            
Carrying value of the debenture liability     $ 69,687 69,687        
Beneficial conversion feature     469,370            
Additional Paid-in Capital                  
Short-term Debt [Line Items]                  
Beneficial conversion feature       469,370          
Warrants associated with a secured convertible debenture       1,616,630          
Director [Member]                  
Short-term Debt [Line Items]                  
Short term loans advanced       $ 120,000          
Director [Member] | Convertible secured debentures [Member]                  
Short-term Debt [Line Items]                  
Gross proceeds from private placement     $ 1,075,000            
XML 51 R40.htm IDEA: XBRL DOCUMENT v3.3.1.900
Common Stock (Details) - USD ($)
1 Months Ended 3 Months Ended 9 Months Ended 10 Months Ended
Sep. 15, 2015
May. 25, 2015
Aug. 31, 2015
May. 31, 2015
Feb. 28, 2015
Nov. 30, 2014
Feb. 29, 2016
Feb. 03, 2015
Dec. 31, 2014
Common Stock (Textual)                  
Common Stock, shares subscribed       99,344     19,087,662    
Common stock, par value       $ 0.0001     $ 0.0001    
Common stock, shares authorized       400,000,000     400,000,000    
Common stock issuance description             (i) 1,844,000 shares of Common Stock issuable to them upon exercise of promissory notes and (ii) 4,588,000 shares of Common Stock issuable to them upon exercise of warrants.    
Common stock, par value $.0001 per share, 19,087,662 shares subscribed not issued (May 31, 2015 - 99,344)       $ (124,567)     $ (2,763,638)    
Consultant [Member]                  
Common Stock (Textual)                  
Issuance of common stock to consultants       $ 52,500 $ 80,000 $ 95,000      
Issuance of common stock to consultants, shares       54,000 80,000 95,000      
Minimum [Member]                  
Common Stock (Textual)                  
Warrants exercise price             $ 1.00    
Maximum [Member]                  
Common Stock (Textual)                  
Warrants exercise price             $ 2.20    
Ortsbo Inc [Member]                  
Common Stock (Textual)                  
Total purchase price of intellectual property assets $ 16,968,888                
Payments for purchase of intellectual property assets $ 975,388                
Restricted share issued to purchase intellectual property assets, shares 31,987,000                
Restricted share issued to purchase intellectual property assets, value $ 15,993,500                
Shares issued, price per share $ 0.50                
Business acquisition equity interest issued, number of shares 12,998,682                
Number of shares reserved but not issued             18,988,318    
Common Stock [Member]                  
Common Stock (Textual)                  
Number of convertible preferred stock converted               936,000  
Common stock, shares authorized                 400,000,000
Common stock issued for settlement of debt   $ 80,000              
Common stock issued for settlement of debt, shares   100,000              
Common stock issued on cashless exercise of equity     $ 37,100            
Common stock issued on cashless exercise of equity, shares     11,667            
XML 52 R41.htm IDEA: XBRL DOCUMENT v3.3.1.900
Preferred Stock and Warrants (Details) - Preferred Stock [Member] - shares
9 Months Ended 12 Months Ended
Feb. 29, 2016
May. 31, 2015
Beginning Balance, Number of shares 201,000 201,000
Conversion of preferred stock into common stock (201,000) (201,000)
Ending Balance, Number of shares 201,000
XML 53 R42.htm IDEA: XBRL DOCUMENT v3.3.1.900
Preferred Stock and Warrants (Details 1) - $ / shares
1 Months Ended 9 Months Ended 12 Months Ended
Nov. 05, 2015
Feb. 04, 2015
Oct. 06, 2014
Sep. 02, 2014
Jun. 27, 2014
May. 30, 2014
Apr. 23, 2014
Apr. 01, 2014
Jun. 07, 2013
Dec. 30, 2015
Sep. 28, 2015
Oct. 27, 2014
Feb. 27, 2014
Jan. 29, 2014
Nov. 15, 2013
May. 31, 2013
Mar. 28, 2013
Feb. 29, 2016
May. 31, 2015
May. 31, 2014
Apr. 07, 2014
Beginning balance, Outstanding                 771,000                 5,522,666 4,786,000 771,000  
Exercised and expired                                      
Exercised Warrants, shares                                   (70,000)      
Exercised Warrants                                   $ 1.00      
Ending balance, Outstanding                               771,000   28,412,666 5,522,666 4,786,000  
Line of Credit [Member]                                          
Issued                                       800,000  
Exercise Price                                       $ 1.00  
Expiration                                       Apr. 07, 2019  
Series A warrants [Member]                                          
Beginning balance, Outstanding                                   11,690,000 11,690,000    
Issued               469,000         305,000 395,000              
Ending balance, Outstanding                                     11,690,000 11,690,000  
Exercise Price               $ 1.00         $ 1.00 $ 1.00              
Expiration               Apr. 01, 2019         Feb. 27, 2019 Jan. 29, 2019              
Series B warrants [Member]                                          
Issued               469,000         305,000 395,000              
Exercise Price               $ 2.00         $ 2.00 $ 2.00              
Expiration               Apr. 01, 2019         Feb. 27, 2019 Jan. 29, 2019              
Series C warrants [Member]                                          
Issued       83,333 166,667 666,667 33,333                            
Exercise Price       $ 2.20 $ 2.20 $ 2.20 $ 2.20                            
Expiration       Sep. 02, 2019 Jun. 27, 2019 May 30, 2019 Apr. 23, 2019                            
Series D warrants [Member]                                          
Issued     33,333                 33,333                  
Exercise Price     $ 2.20                 $ 2.20                  
Expiration     Oct. 06, 2019                 Oct. 27, 2019                  
Warrant [Member]                                          
Issued 1,700,000 70,000             165,000 20,860,000 300,000       12,000 370,000 401,000   20,000    
Exercised and expired                                        
Exercise Price   $ 1.00             $ 0.54 $ 0.01         $ 1.00 $ 0.54 $ 1.00 $ 0.35 $ 1.42   $ 1.00
Expiration   Feb. 04, 2020             Jun. 07, 2018 Dec. 29, 2020         Nov. 15, 2018 May 31, 2018 Mar. 28, 2018        
Warrant [Member] | Consultant [Member]                                          
Issued                                     330,000    
Exercise Price                                     $ 1.50    
Expiration                                     May 30, 2019    
Warrant [Member] | Consultant One [Member]                                          
Issued                                     5,000    
Exercise Price                                     $ 1.00    
Expiration                                     May 31, 2017    
Warrant [Member] | Board of Directors [Member]                                          
Issued                     300,000                    
Exercise Price                     $ 1.00                    
Expiration                     Aug. 31, 2020                    
Warrant [Member] | Consultant Two [Member]                                          
Issued 100,000                                   15,000    
Exercise Price $ 1.00                                   $ 1.50    
Expiration Oct. 16, 2017                                   May 31, 2017    
Warrant [Member] | Line of Credit [Member]                                          
Issued 1,700,000                                        
Exercise Price $ 1.00                                        
Expiration Apr. 07, 2019                                        
XML 54 R43.htm IDEA: XBRL DOCUMENT v3.3.1.900
Preferred Stock and Warrants (Details 2) - USD ($)
1 Months Ended 9 Months Ended 12 Months Ended
Nov. 05, 2015
Oct. 06, 2014
Sep. 02, 2014
Jun. 27, 2014
May. 30, 2014
Apr. 23, 2014
Apr. 01, 2014
Jun. 07, 2013
Dec. 30, 2015
Sep. 28, 2015
Oct. 27, 2014
Feb. 27, 2014
Jan. 29, 2014
Nov. 15, 2013
May. 31, 2013
Mar. 28, 2013
Feb. 29, 2016
May. 31, 2015
May. 31, 2014
Feb. 04, 2015
Issued to Loan Agreement - Credit Line                                 28,412,666   800,000  
Issued to Loan Agreement - Credit Line, Equity Value                                 $ 6,850,797   $ 1,495,200  
Warrant [Member]                                        
Issued 1,700,000             165,000 20,860,000 300,000       12,000 370,000 401,000   20,000   70,000
Equity Value $ 519,520             $ 211,670 $ 1,616,630 $ 227,100       $ 3,744 $ 543,530 $ 917,087   $ 3,960    
Warrant [Member] | Consultant [Member]                                        
Issued                                   330,000    
Equity Value                                   $ 165,330    
Series A warrants [Member]                                        
Issued             469,000         305,000 395,000              
Equity Value             $ 234,969         $ 224,135 $ 397,895              
Series B warrants [Member]                                        
Issued             469,000         305,000 395,000              
Equity Value                                  
Series C warrants [Member]                                        
Issued     83,333 166,667 666,667 33,333                            
Equity Value     $ 38,584 $ 187,574 $ 9,395                            
Series D warrants [Member]                                        
Issued   33,333                 33,333                  
Equity Value   $ 15,567                 $ 15,667                  
Warrant One [Member]                                        
Issued 100,000                                      
Equity Value $ 23,240                                      
XML 55 R44.htm IDEA: XBRL DOCUMENT v3.3.1.900
Preferred Stock and Warrants (Details Textual) - USD ($)
1 Months Ended 9 Months Ended 10 Months Ended 12 Months Ended
Nov. 05, 2015
Feb. 04, 2015
Oct. 06, 2014
Sep. 02, 2014
Jun. 27, 2014
May. 30, 2014
Apr. 23, 2014
Apr. 01, 2014
Jun. 07, 2013
Dec. 30, 2015
Oct. 27, 2014
Feb. 27, 2014
Jan. 29, 2014
Nov. 15, 2013
May. 31, 2013
Mar. 28, 2013
Feb. 29, 2016
Feb. 03, 2015
May. 31, 2015
May. 31, 2014
Nov. 30, 2015
Sep. 28, 2015
Jul. 17, 2014
Apr. 07, 2014
Jan. 07, 2014
Preferred Stock and Warrants (Textual)                                                  
Preferred stock, shares authorized                                 50,000,000   50,000,000            
Preferred stock, par value                                 $ 0.0001   $ 0.0001            
Exercised and expired                                              
Interest rate percent               1.00%                 12.00%   6.00%   12.00%   1.00%   12.00%
Line of Credit Holder [Member]                                                  
Preferred Stock and Warrants (Textual)                                                  
Warrants issued to purchase common stock 1,700,000                                                
Warrants exercise price $ 1.00                                                
Expiration Apr. 07, 2019                                                
Minimum [Member]                                                  
Preferred Stock and Warrants (Textual)                                                  
Warrants exercise price                                 $ 1.00                
Maximum [Member]                                                  
Preferred Stock and Warrants (Textual)                                                  
Warrants exercise price                                 $ 2.20                
Convertible Notes Payable [Member]                                                  
Preferred Stock and Warrants (Textual)                                                  
Interest rate on convertible promissory note     6.00% 6.00% 6.00% 6.00% 6.00% 6.00%     6.00% 6.00% 6.00%       6.00%                
Conversion price     $ 1.50 $ 1.50 $ 1.50 $ 1.5 $ 1.5       $ 1.50           $ 1.00                
Convertible debenture par value         $ 100                       $ 1,000                
Convertible promissory notes, Unit       125 250 1,000 50 469       305 395                        
Convertible promissory notes       $ 125,000 $ 250,000 $ 1,000,000 $ 50,000                                    
Maturity date of convertible promissory note     Oct. 06, 2016 Sep. 02, 2016 Jun. 27, 2016 May 30, 2016 Apr. 23, 2016       Oct. 27, 2016                            
Warrants exercise price     $ 0.15                                            
Exchange of shares for cash         $ 150,000                                        
Exchange of shares for loan         $ 100,000                                        
Line of Credit [Member]                                                  
Preferred Stock and Warrants (Textual)                                                  
Warrants issued to purchase common stock                                       800,000          
Warrants exercise price                                       $ 1.00          
Expiration                                       Apr. 07, 2019          
Series A Preferred Stock [Member]                                                  
Preferred Stock and Warrants (Textual)                                                  
Term of warrant                 5 years           5 years 5 years                  
Preferred Stock [Member]                                                  
Preferred Stock and Warrants (Textual)                                                  
Conversion into common stock, Units                                   201,000              
Conversion into common stock, Value                                   $ 201,000              
Warrant [Member]                                                  
Preferred Stock and Warrants (Textual)                                                  
Term of warrant                 5 years           5 years 5 years                  
Weighted average remaining life of warrant                                 4 years 7 months 6 days   3 years 8 months 12 days            
Number of warrants issued under subscription agreements                 936,000           936,000 936,000                  
Warrants issued to purchase common stock 1,700,000 70,000             165,000 20,860,000       12,000 370,000 401,000     20,000     300,000      
Warrants exercise price   $ 1.00             $ 0.54 $ 0.01       $ 1.00 $ 0.54 $ 1.00 $ 0.35   $ 1.42         $ 1.00  
Expiration   Feb. 04, 2020             Jun. 07, 2018 Dec. 29, 2020       Nov. 15, 2018 May 31, 2018 Mar. 28, 2018                  
Exercised and expired                                                
Interest rate percent                   12.00%                              
Warrants, description                   Each warrant entitles the holder thereof to purchase shares of common stock for a purchase price of $0.01 per share for up to a maximum of 10 shares for every $1 of subscription. These shares will vest in increments of 1/3 with the first 1/3 being vested on December 29, 2016, second increment of 1/3 on December 29, 2017, and last 1/3 on December 29, 2018.                              
Warrant [Member] | Consulting Firms One [Member]                                                  
Preferred Stock and Warrants (Textual)                                                  
Warrants issued to purchase common stock     200,000                                            
Warrants exercise price     $ 1.50                                            
Expiration     May 30, 2019                                            
Warrant [Member] | Consulting Firms Two [Member]                                                  
Preferred Stock and Warrants (Textual)                                                  
Warrants issued to purchase common stock 100,000   130,000                                            
Warrants exercise price $ 1.00   $ 1.50                                            
Expiration Oct. 16, 2017   May 30, 2019                                            
Warrant [Member] | Board of Directors [Member]                                                  
Preferred Stock and Warrants (Textual)                                                  
Warrants issued to purchase common stock                                           300,000      
Warrants exercise price                                           $ 1.00      
Warrant [Member] | Consultant [Member]                                                  
Preferred Stock and Warrants (Textual)                                                  
Warrants issued to purchase common stock                                     330,000            
Warrants exercise price                                     $ 1.50            
Expiration                                     May 30, 2019            
Warrant [Member] | Consultant One [Member]                                                  
Preferred Stock and Warrants (Textual)                                                  
Warrants issued to purchase common stock                                     5,000            
Warrants exercise price                                     $ 1.00            
Expiration                                     May 31, 2017            
Warrant [Member] | Consultant Two [Member]                                                  
Preferred Stock and Warrants (Textual)                                                  
Warrants issued to purchase common stock 100,000                                   15,000            
Warrants exercise price $ 1.00                                   $ 1.50            
Expiration Oct. 16, 2017                                   May 31, 2017            
Warrant [Member] | Line of Credit [Member]                                                  
Preferred Stock and Warrants (Textual)                                                  
Warrants issued to purchase common stock 1,700,000                                                
Warrants exercise price $ 1.00                                                
Expiration Apr. 07, 2019                                                
Series A warrants [Member]                                                  
Preferred Stock and Warrants (Textual)                                                  
Term of warrant                                     5 years            
Warrant to purchase of common stock               1,000       1,000 1,000                        
Warrants issued to purchase common stock               469,000       305,000 395,000                        
Warrants exercise price               $ 1.00       $ 1.00 $ 1.00                        
Expiration               Apr. 01, 2019       Feb. 27, 2019 Jan. 29, 2019                        
Series B warrants [Member]                                                  
Preferred Stock and Warrants (Textual)                                                  
Term of warrant                                     5 years            
Warrant to purchase of common stock               1,000       1,000 1,000                        
Warrants issued to purchase common stock               469,000       305,000 395,000                        
Warrants exercise price               $ 2.00       $ 2.00 $ 2.00                        
Expiration               Apr. 01, 2019       Feb. 27, 2019 Jan. 29, 2019                        
Series C warrants [Member]                                                  
Preferred Stock and Warrants (Textual)                                                  
Term of warrant           5 years 5 years                                    
Interest rate on convertible promissory note           6.00% 6.00%                                    
Conversion price           $ 1.50 $ 1.50                                    
Convertible debenture par value           $ 100 $ 100                                    
Maturity date of convertible promissory note         Jun. 27, 2019 May 30, 2016 Apr. 23, 2016                                    
Warrants issued to purchase common stock       83,333 166,667 666,667 33,333                                    
Warrants exercise price       $ 2.20 $ 2.20 $ 2.20 $ 2.20                                    
Expiration       Sep. 02, 2019 Jun. 27, 2019 May 30, 2019 Apr. 23, 2019                                    
Series C warrants [Member] | Convertible Notes Payable [Member]                                                  
Preferred Stock and Warrants (Textual)                                                  
Maturity date of convertible promissory note       Sep. 02, 2019 Jun. 27, 2019 May 30, 2019 Apr. 23, 2019                                    
Series D warrants [Member]                                                  
Preferred Stock and Warrants (Textual)                                                  
Interest rate on convertible promissory note     6.00%               6.00%                            
Conversion price     $ 1.50               $ 1.50                            
Convertible debenture par value     $ 100               $ 100                            
Maturity date of convertible promissory note     Oct. 06, 2016               Oct. 27, 2016                            
Warrants issued to purchase common stock     33,333               33,333                            
Warrants exercise price     $ 2.20               $ 2.20                            
Expiration     Oct. 06, 2019               Oct. 27, 2019                            
Series D warrants [Member] | Convertible Notes Payable [Member]                                                  
Preferred Stock and Warrants (Textual)                                                  
Maturity date of convertible promissory note     Oct. 06, 2019               Oct. 27, 2019                            
Issuance of unit one [Member] | Convertible Notes Payable [Member]                                                  
Preferred Stock and Warrants (Textual)                                                  
Convertible promissory notes, Unit     50 25 125           50                            
Convertible promissory notes     $ 5,000               $ 50,000                            
Issuance of unit two [Member] | Convertible Notes Payable [Member]                                                  
Preferred Stock and Warrants (Textual)                                                  
Convertible promissory notes, Unit       75 125                                        
XML 56 R45.htm IDEA: XBRL DOCUMENT v3.3.1.900
Warrant Liabilities (Details) - Shares Issuable Under Warrants [Member]
9 Months Ended 12 Months Ended
Feb. 29, 2016
USD ($)
PreferredStock
shares
May. 31, 2015
USD ($)
PreferredStock
shares
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]    
Beginning balance, Value $ 2,531,282 $ 4,050,278
Beginning balance, No of units | PreferredStock 1,716,000 771,000
Issued June 7, 2013, Value   $ 1,146,915
Issued June 7, 2013, Units | PreferredStock   165,000
Issued November 15, 2013, Value   $ 9,636
Issued November 15, 2013, Units | PreferredStock   12,000
Series A warrants issued on January 29, 2014, Value   $ 161,950
Series A warrants issued on January 29, 2014,Units | PreferredStock   395,000
Series A warrants issued on February 27, 2014, Value   $ 125,050
Series A warrants issued on February 27, 2014, Units | PreferredStock   305,000
Series A warrants issued on April 1, 2014, Value   $ 776,664
Series A warrants issued on April 1, 2014, Units | PreferredStock   469,000
Warrants reclassified to equity (price protection expiry and authorized share limit increase Notes 9 and 10) $ (1,851,090) $ (917,087)
Warrants reclassified to equity (price protection expiry and authorized share limit increase Notes 9 and 10), Units | PreferredStock (1,716,000) (401,000)
Warrants exercised or expired, Value
Warrants exercised or expired, Units | shares
Decrease in fair value of derivative warrant liability, Value $ (680,192) $ (2,822,124)
Decrease in fair value of derivative warrant liability, Units | PreferredStock
Ending balance, Value $ 2,531,282
Ending balance, No of units | PreferredStock 1,716,000
XML 57 R46.htm IDEA: XBRL DOCUMENT v3.3.1.900
Warrant Liabilities (Details Textual) - USD ($)
9 Months Ended
Feb. 29, 2016
Feb. 28, 2015
Warrant [Member]    
Warrant Liabilities [Line Items]    
Recognized gain $ 1,081,984
XML 58 R47.htm IDEA: XBRL DOCUMENT v3.3.1.900
Employee Benefit and Incentive Plans (Details)
9 Months Ended
Feb. 29, 2016
$ / shares
shares
Option Indexed to Issuer's Equity [Line Items]  
Beginning Balance, Weighted Average Exercise Price Per share $ 1.00
Ending Balance, Weighted Average Exercise Price Per share $ 1.00
Stock Options [Member]  
Option Indexed to Issuer's Equity [Line Items]  
Beginning Balance, Number of shares | shares 1,804,500
Exercises, Number of shares | shares
Cancelled, forfeited or expired, Number of shares | shares 114,500
Ending Balance, Number of shares | shares 1,690,000
Options exercisable, Number of shares | shares 1,066,667
Fair value of options vested, Number of shares | shares 907,200
Beginning Balance, Weighted Average Exercise Price Per share $ 1.00
Exercised , Weighted Average Exercise Price Per share
Cancelled, forfeited or expired, Weighted Average Exercise Price Per share
Ending Balance, Weighted Average Exercise Price Per share $ 1.00
Options exercisable, Weighted Average Exercise Price Per share $ 1.00
Fair value of options vesting, Weighted Average Exercise Price Per share
XML 59 R48.htm IDEA: XBRL DOCUMENT v3.3.1.900
Employee Benefit and Incentive Plans (Details 1) - $ / shares
Mar. 01, 2015
Aug. 14, 2014
Feb. 29, 2016
May. 31, 2015
Mar. 02, 2015
Fair value of options granted :          
Stock price   $ 1.00     $ 0.60
Exercise price   1.00 $ 1.00 $ 1.00 $ 1.00
Weighted-average fair value of options granted $ 0.50 $ 0.90      
Dividend      
Stock Options [Member]          
Fair value of options granted :          
Total number of shares issued under options   1,047,000     757,500
Two Year Option [Member]          
Fair value of options granted :          
Time to expiration - days 730 days 730 days      
Risk free interest rate 0.66% 0.42%      
All Options [Member]          
Fair value of options granted :          
Forfeiture rate (all options) 0.00% 0.00%      
Estimated volatility (all options) 150.00% 150.00%      
Five Year Option [Member]          
Fair value of options granted :          
Time to expiration - days 1826 days 1826 days      
Risk free interest rate 1.57% 1.58%      
XML 60 R49.htm IDEA: XBRL DOCUMENT v3.3.1.900
Employee Benefit and Incentive Plans (Details Textual) - USD ($)
9 Months Ended
Mar. 01, 2015
Aug. 14, 2014
Feb. 29, 2016
Aug. 21, 2015
May. 31, 2015
Mar. 02, 2015
Employee benefit and incentive plans (textual)            
Vested weighted-average remaining contractual term     2 years 10 months 24 days      
Unvested options expected shares     623,333      
Weighted Average Exercise Price Per share, Outstanding   $ 1.00 $ 1.00   $ 1.00 $ 1.00
Unvested weighted average remaining term     1 year 9 months      
Unearned stock based compensation     $ 426,756      
Weighted average period     2 months 12 days      
Increase in number of options       25,000,000    
Stock Options [Member]            
Employee benefit and incentive plans (textual)            
Weighted Average Exercise Price Per share, Outstanding     $ 1.00   $ 1.00  
Employee benefit plans non vested and vested ,description 520,000 of the stock options granted on March 2, 2015 vest 1/3 immediately, 1/3 after one year and 1/3 after two years. 50,000 vest 1/2 immediately and 1/2 after one year. 710,000 of the stock options granted on August 14, 2014 vest 1/3 immediately, 1/3 after one year and 1/3 after two years. 15,000 options vest contingent on revenue targets, and 15,000 options have vested on April 1, 2015.        
Stock options granted 520,000 710,000        
XML 61 R50.htm IDEA: XBRL DOCUMENT v3.3.1.900
Related Party Balances and Transactions (Details) - USD ($)
1 Months Ended 9 Months Ended 12 Months Ended
Sep. 15, 2015
Mar. 28, 2013
Dec. 30, 2015
Oct. 23, 2013
Feb. 29, 2016
Feb. 28, 2015
May. 31, 2015
Apr. 28, 2014
Related Party Transaction [Line Items]                
Percentage of technology services agreement   30.00%            
Ownership percentage description         As of that date, 52.1% as at February 29, 2016, 32% once remaining shares are issued from acquisition of Ortsbo IP      
Common stock issued for services, value             $ 307,967  
Related party liability         $ 66,787   $ 468,766  
Related party expenses         $ 128,229 $ 725,779    
Convertible secured debentures issued              
Former Debt [Member]                
Related Party Transaction [Line Items]                
Number of common stock shares issue         4,686,182      
Convertible secured debentures [Member]                
Related Party Transaction [Line Items]                
Convertible secured debentures issued     $ 2,086,000          
Director [Member] | Convertible secured debentures [Member]                
Related Party Transaction [Line Items]                
Convertible secured debentures issued     $ 1,075,000          
Common Stock                
Related Party Transaction [Line Items]                
Exchange of common stock shares               1,333,333
Intertainment Media Inc [Member]                
Related Party Transaction [Line Items]                
Exchange of common stock shares   7,000,000            
Ownership percentage of Company   70.00%            
Intertainment Media Inc [Member] | Common Stock                
Related Party Transaction [Line Items]                
Common stock issued for services, shares       166,667        
Common stock issued for services, value       $ 133,333        
Ortsbo Inc [Member]                
Related Party Transaction [Line Items]                
Issuance of common stock shares 31,987,000              
Business acquisition equity interest issued, number of shares 12,998,682              
Number of common stock shares issue         8,312,500      
Stock issued during period acquisitions value         $ 1,806,608      
Secured Debt $ 975,388              
Restricted share issued to purchase intellectual property assets, shares 32,000,000       1,500,000      
Value of the intangible assets acquired $ 5,421,068              
Fair value for acquisition of Intellectual property $ 16,968,888              
Ortsbo Inc [Member] | Former Holder [Member]                
Related Party Transaction [Line Items]                
Issuance of common stock shares         1,300,818      
Winterberry [Member]                
Related Party Transaction [Line Items]                
Issuance of common stock shares         17,687,500      
XML 62 R51.htm IDEA: XBRL DOCUMENT v3.3.1.900
Subsequent Events (Details)
9 Months Ended
Feb. 29, 2016
USD ($)
$ / shares
shares
Subsequent events (textual)  
Term of option vesting 2 years 10 months 24 days
Board of Directors [Member]  
Subsequent events (textual)  
Stock options granted | shares 4,000,000
Employees and Consultants [Member]  
Subsequent events (textual)  
Stock options granted | shares 8,775,000
Exercise price of granted $ 0.25
Option outstanding term 5 years
Term of option vesting 3 years
Employees [Member]  
Subsequent events (textual)  
Exercise price of granted $ 0.25
Repriced option shares | shares 1,230,000
Original exercise price $ 1.00
Private placement units[Member]  
Subsequent events (textual)  
Advance towards closure of tranche | $ $ 250,000
Common stock of warrant exercise price $ 0.25
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