RESTATEMENT FOR THE THREE AND SIX-MONTHS ENDED JUNE 30, 2015

6 Months Ended

Jun. 30, 2016

Accounting Changes and Error Corrections [Abstract]

RESTATEMENT FOR THE THREE AND SIX-MONTHS ENDED JUNE 30, 2015

NOTE 14 – RESTATEMENT FOR THE THREE AND SIX-MONTHS ENDED JUNE 30, 2015

During the preparation of its consolidated financial statements for the year ended December 31, 2015, the Company determined that for the three and six-months ended June 30, 2015 it had previously (1) used incorrect valuations for the fair value of intangible assets acquired; (2) capitalized internal use software, which should have been expensed in accordance with US GAAP; (3) used incorrect valuations for derivative liabilities; (4) used incorrect valuations for stock options issued for compensation; (5) recorded certain costs related to the issuance of its convertible and other notes payable incorrectly as general and administrative expenses; and (6) classified certain expenses and named certain accounts incorrectly. The Company has adjusted those intangible assets, derivative liabilities and compensation related to stock options using correct valuations. In addition and in accordance with US GAAP, the Company has now capitalized the costs related to the issuance of its convertible and other notes payable as debt issuance costs as a reduction of the debt principal and expensed the previously capitalized internal use software costs. The following summarizes the adjustments made to the Company’s previously reported amounts for the three and six months June 30, 2015. 

Condensed Consolidated Statements of Operations:

	Three Months Ended June 30, 2015
	As Reported			Reclassifications			As Reclassified			Adjustments			As Restated
Revenue	$	11,046		$	-		$	11,046		$	-		$	11,046
Operating Expenses:
Depreciation and amortization		11,469			-			11,469	(1)		32,549			44,018
Research and development		853			-			853			-			853
General and administrative		570,622			(67,918	)		502,704	(4),(5)		(46,344	)		456,360
Total operating expenses		582,944			(67,918	)		515,026			(13,795	)		501,231
Loss from operations		(571,898	)		67,918			(503,980	)		13,795			(490,185	)
Derivative expense		(3,680,374	)		-			(3,680,374	)(3)		815,021			(2,865,353	)
Interest expense		(11,741	)		(67,918	)		(79,659	)(3)		45,685			(33,974	)
Translation loss		(26,259	)		-			(26,259	)		-			(26,259	)
Net loss	$	(4,290,272	)	$	-		$	(4,290,272	)	$	874,501		$	(3,415,771	)
Net loss per share: Basic and Diluted	$	(0.03	)	$	-		$	(0.03	)	$	0.01		$	(0.02	)

	Six Months Ended June 30, 2015
	As Reported			Reclassifications			As Reclassified			Adjustments			As Restated
Revenue	$	11,046		$	-		$	11,046		$	-		$	11,046
Operating Expenses:
Depreciation and amortization		22,740			-			22,740	(1)		32,549			55,289
Research and development		24,853			-			24,853	(2)		200,000			224,853
General and administrative		1,043,459			(67,918	)		975,541	(4),(5)		(46,344	)		929,197
Total operating expenses		1,091,052			(67,918	)		1,023,134			186,205			1,209,339
Loss from operations		(1,080,006	)		67,918			(1,012,088	)		(186,205	)		(1,198,293	)
Derivative expense		(3,680,374	)		-			(3,680,374	)(3)		815,021			(2,865,353	)
Interest expense		(13,496	)		(67,918	)		(81,414	)(3)		45,685			(35,729	)
Translation loss		(26,259	)		-			(26,259	)		-			(26,259	)
Net loss	$	(4,800,135	)	$	-		$	(4,800,135	)	$	674,501		$	(4,125,634	)
Net loss per share: Basic and Diluted	$	(0.03	)	$	-		$	(0.03	)	$	0.01		$	(0.02	)

(1) Fair Value of Intangible Assets In Connection with Business Acquisition. During the three months ended June 30, 2015, the Company accounted for the acquisition of Multipay as a business combination using the acquisition method of accounting utilizing an incorrect valuation. The adjustment to reflect the correct valuation, including the purchase price allocation of assets acquired, resulted in an increase of $166,689 to Goodwill, $200,986 to Intangible Assets (net of $32,549 additional amortization) and $370,125 to Contingent Purchase Consideration as of June 30, 2015. In addition, certain previously reported contingent assets and liabilities of $149,848 were eliminated.

(2) Intangible Assets—Capitalized Software. The Company determined that previously capitalized software should have been expensed in accordance with US GAAP. Accordingly, a reduction of $200,000 to Intangible Assets and an increase to Research and Development Expenses is made as of and for the six months ended June 30, 2015.

(3) Derivative Liability. The fair value of the derivative liabilities related to convertible and other notes payable have now been estimated based on the Monte Carlo Simulation Model because it considers the effect of the down round feature (probability of a triggering capital raise) along with the other assumptions associated with the Black-Scholes option pricing model. The previously used methodology by the Company incorrectly did not take into consideration the probability of a financing at a price that would trigger the instruments down round provision. The adjusted fair value of the Company’s derivatives associated with its Convertible and other Notes Payable resulted in a decrease of $907,123 to the Derivative Liability as of June 30, 2015. For the three and six months ended June 30, 2015, the Company’s derivative expense is reduced by $815,021. In addition, the finalized fair value analysis of the Company’s derivatives associated with its Convertible and other Notes Payable required a reduction to the previously recorded Debt Discount and interest expense by $45,685 for the three and six months ended June 30, 2015.

(4) Stock-Based Compensation. The adjusted fair value of the Company’s stock-based compensation resulted in an increase to general and administrative expenses of $13,656 for the three and six months ended June 30, 2015. 

(5) Debt Issuance Costs. The capitalization of debt issuance costs as a reduction of the debt principal resulted in a reduction to convertible notes payable of $60,000 and a corresponding decrease to general and administrative for the three and six months ended June 30, 2015. The decrease to General and Administrative expenses, after considering the increase of $13,656 related to stock-based compensation in (4) above and the capitalization of debt issuance costs of $60,000 is $46,344 for the three and six months ended June 30, 2015. 

(6) Reclassifications. During the preparation of its consolidated financial statements for the year ended December 31, 2015, the Company changed or renamed the classification/description of certain accounts and related amounts. Accordingly, certain of the previously stated classifications/descriptions and related amounts required adjustment for the three and six months ended June 30, 2015. The reclassifications and description changes relate to General and Administrative and Interest expenses associated with the recording of the Debt Discount amortization.