Mobi724 Global Solutions Inc.

Transcription

1 Condensed Interim Consolidated Financial Statements (Unaudited) For the three-month periods ended March 31, 2017 and 2016

2 Condensed Interim Consolidated Financial Statements (Unaudited) Notice to Reader Under National Instrument , Part 4, subsection 4.3(3) (a), if an auditor has not performed a review of the interim financial statements; they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor. The accompanying unaudited condensed interim consolidated financial statements of the Company have been prepared by and are the responsibility of the Company s management. The Company s independent auditor has not performed a review of these unaudited condensed interim consolidated financial statements in accordance with standards established by the Chartered Professional Accountants of Canada for a review of interim financial statements by an entity's auditor.

3 Condensed Interim Consolidated Financial Statements (Unaudited) Table of contents: Interim Consolidated Statement of Financial Position 4 Interim Consolidated Statements of Net Loss 5 Interim Consolidated Statements of Comprehensive Loss 6 Interim Consolidated Statements of Changes in Equity 7-8 Interim Consolidated Statements of Cash Flows 9 Notes to the Condensed Interim Consolidated Financial Statements 10-28

4 Condensed Interim Consolidated Financial Position (Unaudited) March 31, 2017 and December 31, 2016 (in Canadian dollars) 4 March 31, December 31, ASSETS Current assets Cash 102,248 30,233 Trade and other receivables (Note 4) 787, ,651 Prepaid expenses 147, ,887 1,037,131 1,101,771 Non-Current assets Property and equipment 20,972 20,034 Intangible assets (Note 5) 3,122,170 3,435,992 Goodwill (Note 5) 5,930,466 5,930,466 9,073,608 9,386,492 10,110,739 10,488,263 LIABILITIES Current liabilities Bank loan 30,000 90,000 Accounts payable and accrued liabilities (Note 6) 2,211,316 2,270,351 Liability for the acquisition of Solutions Mobi724 Inc. (Notes 10) 2,880, ,372 Convertible debt (Note 7) 215, ,253 Demand debt, 10% to 25% interest 896, ,247 Contingent consideration payable (Note 3) 4,528,088 4,286,947 Current portion of long-term debt 127, ,258 10,888,912 8,560,428 Non-Current liabilities Long-term debt 72, ,137 Deferred income taxes 333, ,056 11,294,626 9,008,621 SHAREHOLDERS' EQUITY Share capital (Note 8) 25,534,644 21,197,288 Other equity accounts (Note 8) 8,984,020 8,418,275 Equity component of convertible debt (Note 8) 2,911,269 2,941,509 Deficit (38,381,797) (30,942,803) Cumulative translation account (232,023) (134,627) Total equity attributable to shareholders of the Company (1,183,887) 1,479,642 Total liabilities and shareholder equity 10,110,739 10,488,263 Going concern (Note 2) Events after the reporting period (Note 14) The accompanying notes are an integral part of these consolidated financial statements.

5 Condensed Interim Consolidated Net Loss (Unaudited) (in Canadian dollars) 5 March 31 March 31 Revenues 791, ,385 Operating expenses Share-based payments expense (Note 8) 245,942 3,306 Salaries and benefits 612, ,954 Contract labor 579, ,955 Computer software development 79,660 72,323 Travel 99,183 63,492 Professional fees 186,544 69,255 Office expense 206, ,022 Marketing and promotion 62,982 29,863 Filing fees 9,100 11,835 Loss (gain) on settlement of liabilities 134,488 (75,600) Purchases 6,882 28,542 Foreign exchange loss (gain) 176 (981) Depreciation of property and equipment 1,604 3,832 Amortization of intangible assets 313, ,677 Total operating expenses 2,539,750 1,256,475 Operating loss (1,748,232) (699,090) Net financial expenses (Note 9) 5,695, ,479 Net loss before income taxes (7,443,769) (997,569) Income tax expense 4,854 Recovery of deferred tax (9,629) (33,980) (4,775) (33,980) Net loss (7,438,994) (963,589) Loss per share (Note 12) Basic Diluted (0.05) (0.01) (0.05) (0.01) Weighted average number of outstanding common shares (Note 12) Basic and Diluted 136,861,686 99,196,720 The accompanying notes are an integral part of these consolidated financial statements.

6 Condensed Interim Consolidated Comprehensive Loss (Unaudited) (in Canadian dollars) 6 Net loss March 31 March 31 (7,438,994) (963,589) Other comprehensive income (loss) to be reclassified to profit or loss in subsequent periods Cumulative translation adjustment (97,396) 116,132 Comprehensive loss (7,536,390) (847,457) The accompanying notes are an integral part of these consolidated financial statements.

7 7 Mobi724 Global Solutions Inc. Condensed Interim Consolidated Statement of Changes in Equity (Unaudited) (in Canadian dollars) component of Cumulative Share capital Other equity convertible translation Number Share capital accounts debt Deficit adjustment Total equity Balance, December 31, ,673,275 21,197,288 8,418,275 2,941,509 (30,942,803) (134,627) 1,479,642 Net loss for the period (7,438,994) (7,438,994) Other comprehensive loss (97,396) (97,396) Comprehensive loss for the period (7,438,994) (97,396) (7,536,390) Conversion of convertible debt (Note 7) 5,133, ,043 (105,240) 327,803 Settlement of liabilities (Note 6) 1,603, , ,436 Interest expense on convertible debenture presented as equity 75,000 75,000 Share-based payments (Note 8) 245, ,942 Issuance of warrants (Note 8) 325, ,013 Exercise of share options (Note 8) 86,833 18,235 (5,210) 13,025 Issuance of private placements (Note 8) 4,608, , ,025 Shares issued for business combination (Note 3) 9,507,930 3,137,617 3,137,617 20,940,101 4,337, ,745 (30,240) 4,872,861 Balance, March 31, ,613,376 25,534,644 8,984,020 2,911,269 (38,381,797) (232,023) (1,183,887) Equity

8 8 Mobi724 Global Solutions Inc. Condensed Interim Consolidated Statement of Changes in Equity (Unaudited) (in Canadian dollars) component of Cumulative Share capital Other equity convertible translation Number Share capital accounts debt Deficit adjustment Total equity Balance, December 31, ,152,482 19,038,170 8,186, ,184 (25,907,905) (59,096) 1,487,661 Net loss for the period (963,589) (963,589) Other comprehensive loss 116, ,132 Comprehensive loss for the period (963,589) 116,132 (847,457) Conversion of convertible debt 2,854, ,223 (105,255) 628,968 Issuance of warrants (295,151) (295,151) Exercise of warrants 3,030, , ,151 Share based payment 3,306 3,306 5,885,299 1,279,374 (291,845) (105,255) 882,274 Balance, March 31, ,037,781 20,317,544 7,894, ,929 (26,871,494) 57,036 1,522,478 Equity The accompanying notes are an integral part of these consolidated financial statements.

9 9 Mobi724 Global Solutions Inc. Condensed Interim Consolidated Cash Flows (Unaudited) (in Canadian dollars) March 31 March 31 OPERATING ACTIVITIES Net loss (7,438,994) (963,589) Adjustments for items not involving cash Depreciation of property and equipment 1,604 3,832 Amortization of intangible assets 313, ,677 Share-based payments expense 245,942 3,306 Non-cash professional fees 7,038 Loss (gain) on settlement of liabilities 134,488 (75,600) Fair value adjustment on liability for the acquisition of the non-controlling interest of Mobi 5,292, ,895 Interest and accretion expense on convertible debt 94,697 99,359 Accretion expense on contingent consideration payable 241,141 Recovery of deferred taxes (9,629) (33,980) (1,117,726) (629,100) Change in non-cash working capital items 456,568 (367,992) (661,158) (997,092) INVESTING ACTIVITIES Acquisition of property and equipment (2,542) (891) Acquisition of intangibles assets (64) (2,606) (891) FINANCING ACTIVITIES Bank loan (60,000) Proceeds from long-term debt 1,692 Repayment of long-term debt (32,850) Proceeds from exercise of warrants 250,000 Proceeds from exercise of share options 13,025 Proceeds from issuance of common shares and warrants 553,000 Proceeds from demand debt 360, , , ,692 Effect of the exchange rate changes on cash (97,396) Variation in cash during the period 72,015 (474,291) Cash, beginning of the period 30, ,979 Cash, end of the period 102,248 (43,312) The accompanying notes are an integral part of these consolidated financial statements.

10 STATUTE OF INCORPORATION AND NATURE OF ACTIVITIES Mobi724 Global Solutions Inc. (the Company or Mobi724 ) was incorporated under the Business Corporations Act (Alberta) on February 8, On February 13, 2015, the Company changed its corporate name from Hybrid Paytech World Inc. to Mobi724 Global Solutions Inc. The Company s registered office and its head office is located at 257 Sherbrooke Street East, Suite 400, Montreal, Quebec H2X 1E3. The consolidated financial statements comprise the Company and its wholly-owned subsidiaries First Equity Strategy LLC ( First Equity ), incorporated in the State of Delaware, Hybrid-PayTech Asia Pacific (HK) Limited, incorporated in Hong Kong, Vault Acquiring Solutions LLC, incorporated in the state of Delaware, USA, Mobi724 Asia Inc., incorporated in the Philippines and Solutions Mobi724 Inc., incorporated under the Corporations Act (Canada) including Solutions Mobi724 Inc. s fully owned subsidiary, Mobi724 Solutions S.R.L., incorporated in Argentina, and as of January 1, 2016, I.Q. 7/24 Inc., incorporated under the Canada Business Corporations Act. The Company is a technology leader in digital incentives (such as mobile couponing and loyalty rewards) and payment solutions (including mobile payments). Mobi724 is a provider of both payment and couponing / rewards transactions for both online and offline points of sale. The Company is a technology leader in digital incentives (such as mobile couponing and loyalty rewards) and payment solutions (including mobile payments). Mobi724 is a provider of both payment and couponing / rewards transactions for both online and offline points of sale. The common shares of Mobi724 are traded under the symbol MOS on the Canadian Securities Exchange ( CSE ). 2 - BASIS OF PREPARATION AND GOING CONCERN a) Statement of compliance These condensed interim consolidated financial statements and the notes thereto have been prepared in accordance with International Accounting Standards ( IAS ) 34, Interim Financial Reporting as issued by the International Accounting Standards Board ( IASB ). They do not include all of the information required in the full annual financial statements. Certain information and footnote disclosures normally included in annual financial statements were omitted or condensed where such information is not considered material to the understanding of the Company s interim financial information. As such, they should be read in conjunction with the consolidated financial statements of the Company as at and for the year ended December 31, 2016.

11 BASIS OF PREPARATION AND GOING CONCERN (Continued) The condensed interim consolidated financial statements were authorized for issue by the Board of Directors on May 31, The preparation of financial data is based on accounting principles and methods of computation consistent with those used in the preparation of the audited annual financial statements as at December 31, Other new or amended accounting standards had no significant impact on the Company s accounting methods. b) Going concern These consolidated financial statements have been prepared on a going concern basis in compliance with IFRS. A going concern basis contemplates the realization of the carrying value of assets and the settlement of liabilities in the normal course of business as they come due, which is dependent on future events including amongst other things, attaining a satisfactory revenue level from its mobile POS technology system and e-couponing solutions, attainment of profitable operations, the generation of cash from operations and the ability to secure new financing arrangements and new capital to carry out its business plan. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but not limited to twelve months from the end of the reporting period. Management is aware, in making its assessment, of material uncertainties related to events and conditions that may cast a significant doubt upon the Company s ability to continue as a going concern as described in the following paragraphs, and accordingly, the appropriateness of the use of accounting principles applicable to a going concern. These consolidated financial statements do not reflect the adjustment to the carrying values of assets and liabilities, expenses and financial position classifications that would be necessary if the going concern assumption was not appropriate. These adjustments could be material. The Company has generated limited revenues since inception and has generated losses from continuing operations totaling $7,438,994 for the three-months ended March 31, 2017 and an accumulated deficit of $38,381,797 since the Company s inception on February 8, During the three-month period ended March 31, 2017, the Company received approximately $913,000 in additional funds from equity financing and in the form demand debt. The Company also raised additional funds subsequent to period end (Note 14). The Company can give no assurance that it will achieve profitability or be capable of sustaining profitable operations.

12 BUSINESS COMBINATIONS Acquisition of IQ 7/24 Inc. On December 22, 2015, in an effort to further its business objectives, the Company acquired 100% of the common shares of I.Q. 7/24 Inc., a company operating in Montreal, Canada (hereinafter "IQ"). As part of the agreement signed, the previous shareholders maintained control of the Company until the occurrence of certain future events. As such, the Company did not control IQ but based on the Company's representation on the Board of Directors of IQ, which was two of four members, the Company did have significant influence over the operations of IQ. The Company had invested $250,000 as at December 31, 2015 for the acquisition of shares of IQ and had acquired 100 additional shares of IQ for contingent consideration to be determined based on a formula using the results of IQ and the Company for the years ended December 31, 2017 or December 31, 2017 and December 31, The final contingent consideration paid could have been significantly higher than the estimated amount. The previous shareholders of IQ were able to elect to have their balance of purchase price paid either by shares of the Company or a combination of shares and cash. In the case of non payment by the Company, the previous shareholders of IQ maintained certain rights including the possibility of taking back ownership of IQ. Acquisition of IQ 7/24 Inc. (continued) Effective January 1, 2016, the Company and IQ cancelled the previously signed purchase agreement and cancelled the IQ shares issued to the Company. Subsequently, the two parties entered into a new agreement and the Company acquired new shares of IQ resulting in the Company acquiring control of IQ effective January 1, The assets acquired were primarily software technology and customer relationships. The acquisition was accounted for using the acquisition method of accounting. The total purchase price was estimated at $3,715,061 payable through cash already paid of $250,000 and through a contingent consideration of $3,465,061 payable using the same formula as included in the original agreement described above. The contingent consideration payable has been discounted using an effective interest rate of 22.5%. The undiscounted estimated amount payable consists of $5,720,962 payable in 2017 and $162,899 payable in Accretion interest recorded during the three-month period ended March 31, 2017 amounted to $241,141. The contingent consideration payable as at March 31, 2017 was $4,528,088.

13 BUSINESS COMBINATIONS (continued) Acquisition of IQ 7/24 Inc. (continued) $ Fair value of the consideration transferred Amount settled in cash 250,000 Fair value of contingent consideration payable 3,465,061 Total consideration transferred 3,715,061 $ Identifiable net assets acquired Accounts receivable (fair value is equal to gross contractual amount) 287,416 Prepaid expenses 54,589 Property and equipment 2,290 Software technology 975,000 Customer relationships 1,175,000 Bank overdraft (81,669) Bank debt (319,602) Due to previous IQ shareholders (180,777) Trade and other payables (342,671) Deferred revenues (5,790) Deferred income tax liability (640,000) Total identifiable net assets 923,786 Goodwill on acquisition 2,791,275 3,715,061 The IQ acquisition will allow the Company to create gains in operational efficiencies and allow for synergies between the existing E-couponing cash-generating unit and IQ's existing business. This explains the goodwill arising from the transaction. The acquired goodwill was allocated to the Digital Marketing cash-generating unit. The goodwill that arose from this business combination is not expected to be deductible for tax purposes. Subsequent to period end, the Company modified the acquisition agreement with IQ, see Note 14. Acquisition of Mobi On July 12, 2013, in an effort to further its business objectives, the Company acquired 51% of the common shares of Solutions Mobi724 Inc. ( Mobi ). On July 12, 2014, one year after the closing date, the Company was to purchase the remaining Mobi shares from the remaining Mobi shareholders at an evaluation price determined, at that time, as per the contractual agreement, and mostly based on expected future revenues of Mobi. At acquisition date, because the Company has an obligation to acquire the non-controlling interest of Mobi, the Company recorded a liability, at fair value, for the future acquisition of the remaining Mobi share. The remaining Mobi shares were acquired in 2015.

14 BUSINESS COMBINATIONS (continued) Acquisition of Mobi (continued) During the year ended December 31, 2014, the Company also entered into an amendment to the acquisition agreement that modified the terms of the obligation to acquire the non-controlling interest of Mobi. The liability is to be settled by issuing the remaining Mobi shareholders a certain number of shares of the Company that will ensure the remaining Mobi shareholders a fixed percentage ownership of the Company. During the period ended March 31, 2017, 9,507,930 shares were issued having a value of $3,137,617. The previous shareholders of Mobi are all current officers and directors of the company. Approximately 7,386,000 shares will be issued in the remaining three quarters of 2017 to settle the remaining liability. 4 - TRADE AND OTHER RECEIVABLES March 31, December 31, Trade receivables 483, ,906 Sales tax receivable 3,536 76,990 Tax credit receivable 265, ,885 Share subscription receivable 167,500 Other receivable 34,864 4, , ,651

15 15 Mobi724 Global Solutions Inc. 5 - INTANGIBLE ASSETS Licenced Customer Software EMV payment Total software relationships technology switch Patents intangibles Goodwill $ Cost Balance January 1, ,175,000 3,869,540 1,028,441 80,378 6,153,360 5,930,466 Additions, separately acquired Balance March 31, ,175,000 3,869,604 1,028,441 80,378 6,153,424 5,930,466 Accumulated amortization and impairment Balance January 1, ,000 2,272, ,646 26,689 2,717,368 Amortization 58, ,960 36,729 3, ,886 Balance March 31, ,750 2,486, ,375 30,136 3,031,254 Net Book Value March 31, ,250 1,382, ,066 50,242 3,122,170 5,930,466 Licenced Customer Software EMV payment Total software relationships technology switch Patents intangibles Goodwill Cost Balance January 1, ,894,541 1,028,441 80,378 4,003,361 3,139,191 Additions, separately acquired 275, ,341 1,338,969 Balance March 31, ,169,882 1,028,441 80,378 4,278,702 4,478,160 Accumulated amortization and impairment Balance January 1, ,412,121 36,730 14,023 1,462,874 Amortization 177,816 39,177 1, ,677 Balance March 31, ,589,937 75,907 15,707 1,681,551 Net Book Value March 31, ,579, ,534 64,671 2,597,151 4,478,160

16 16 Mobi724 Global Solutions Inc. For the three-month period ended March 31, 2017 and INTANGIBLE ASSETS (Continued) The goodwill is allocated to the cash-generating units as follows: March 31 March 31 E-couponing 3,139,191 4,478,160 Digital marketing 2,791,275-5,930,466 4,478, ACCOUNTS PAYABLE AND ACCRUED LIABILITIES March 31, December 31, Accounts payable and accrued liabilities (a) 1,300,726 1,287,100 Salaries and related benefits 342, ,710 Amounts due to former directors 279, ,626 Liability for third party garnishment resulting from assumption of judgment against former directors and other contingent liabilities (b) 288, ,915 2,211,316 2,270,351 a) During the three-month period ended March 31, 2017, the Company settled certain amounts due to suppliers resulting in a decrease of accounts payable and accrued liabilities in the amount of $378,948 (nil in the three-month period ended March 31, 2016) through the issue of share capital having a value of $513,436. This loss of $134,488 was recorded in the consolidated statement of net loss in Loss (gain) on settlement of liabilities. During the three-month period ended March 31, 2016, the Company negotiated certain accounts payable with suppliers resulting in a gain of $75,600. b) In February 2014, the Company assumed a liability in the amount of $1,000,000 for the settlement of a judgement rendered by the Quebec Superior Court issued on December 4, 2013 against two former directors and founders of the Company and the Company with respect to a garnishment issued against the Company pursuant to a judgement issued against the former directors and founders. An amount of $750,000 was paid at signing in February 2014, and the balance including interest to be paid no later than June 27, As at March 31, 2017 and 2016 an amount of $250,000 remains payable.

17 17 Mobi724 Global Solutions Inc. For the three-month period ended March 31, 2017 and CONVERTIBLE DEBT During the three-month period ended March 31, 2017, debentures, for an aggregate amount of $433,043 (capital and accrued interest), have been converted into 5,133,440 common shares. The following tables summarize the components of the convertible debt: Embedded Embedded Liability conversion warrant Total equity component option reserve reserve component Total $ Balance, January 1, ,253 2,941,509 2,941,509 3,464,762 Interest and accretion interest expense 19,697 75,000 75,000 94,697 Convertible debt converted during the period (327,803) (105,240) (105,240) (433,043) Balance, March 31, ,147 2,911,269 2,911,269 3,126,416 During the three-month period ended March 31, 2016, debentures, for an aggregate amount of $734,223 (capital and accrued interest), have been converted into 2,854,996 common shares. The following tables summarize the components of the convertible debt: Embedded Embedded Liability conversion warrant Total equity component option reserve reserve component Total $ Balance, January 1, ,036, ,487 15, ,184 2,266,570 Interest and accretion interest expense 99,359 99,359 Convertible debt converted during the period (628,968) (105,255) (105,255) (734,223) Balance, March 31, ,506, ,232 15, ,929 1,631,706

18 18 Mobi724 Global Solutions Inc. For the three-month period ended March 31, 2017 and SHAREHOLDERS' EQUITY a) Share Capital Authorized Unlimited number of common voting shares. Unlimited number of preferred shares without nominal value or par value, which may be issued in one or more series, the directors having been authorized to determine the designation rights, privileges, restrictions and conditions attached to the shares. Movements in the Company s share capital are as follows: Number of common March 31, 2017 March 31, 2016 Number of common shares Amount shares Amount Balance, beginning of period 123,673,275 21,197,288 94,152,482 19,038,170 Shares issued for private placement (1) 4,608, ,025 Shares issued for business combination (Note 3) 9,507,930 3,137,617 Shares issued for conversion of convertible debt (2) 5,133, ,043 2,854, ,223 Shares issued for exercise of warrants (3) 3,030, ,151 Shares issued for settlement of liabilities (Note 6) 1,603, ,436 Shares issued for exercise of share options 86,833 18,235 Balance, end of period 144,613,376 25,534, ,037,781 20,317,544

19 19 Mobi724 Global Solutions Inc. For the three-month period ended March 31, 2017 and SHAREHOLDERS' EQUITY (Continued) a) Share Capital Authorized (continued) (1) Shares issued as part of a private placement During the three-month period ended March 31, 2017, a total of 4,608,331 shares were issued at $0.12 per share as part of a private placement for a total cash consideration of $553,000. As part of the private placement, the investors also received a total of 4,608,331 warrants of the Company exercisable at $0.20. A total of $317,975 of the issue price was allocated to the warrants. (2) Shares issued on conversion of convertible debt During the three-month period ended March 31, 2017, 5,133,440 shares were issued in relation to the conversion of convertible debt. A total amount of $433,043 from the conversion of the debt was reclassified from liabilities and other equity accounts to share capital. During the three-month period ended March 31, 2016, 2,854,996 shares were issued in relation to the Unsecured Convertible Debenture conversion for an aggregate amount of $734,223. (3) Shares issued for exercise of warrants During the three-month period ended March 31, 2016, a total of 3,030,303 warrants were exercise for a cash consideration of $250,000 (exercise price at $0.0825). An amount of $295,151 from the exercise of the warrants was reclassified from warrant reserve to share capital. b) Share Purchase Options The Company has adopted an incentive stock option plan (the Stock Option Plan ) which provides that the Board of Directors of the Company may from time to time, at its discretion, grant to directors, officers, employees and other key personnel of the Company, options to purchase common shares, provided that the number of common shares reserved for issuance under the Stock Option Plan shall not exceed ten percent (10%) of the issued and outstanding common shares exercisable for a period of up to five (5) years. The stock options vest over a period of time approved by the Board of Directors. The price per common share, which is defined by the CSE at the date of grant, and the number of common shares, which is determined by the members of the board, may be allotted to each director, officer, employee or other key personnel of the Company and all other terms and conditions of the options granted under the Stock Option Plan.

20 20 Mobi724 Global Solutions Inc. For the three-month period ended March 31, 2017 and SHAREHOLDERS' EQUITY (Continued) March 31, 2017 March 31, 2016 Weighted Weighted Number of average Number of average options exercise price options exercise price Balance, beginning of period 6,121, ,086, Granted 4,826, Exercised (86,833) 0.15 Expired (180,000) 0.50 Balance, end of period 10,680, ,086, Exercisable options 8,512, ,437, Outstanding options as at March 31, 2017 are as follows: Weighted average Weighted Range of residual life Outstanding average Exercisable Weighted exercise prices span (in years) options exercise price options average price ,353, ,063, , , ,257, , , , to ,680, ,512, Share options outstanding at the end of the period have the following expiry date and exercise prices: Share options March 31, March 31, Expiry date Exercise price September 8, ,000 October 30, ,000 February 28, ,000 July 10, , ,000 December 4, , ,000 December 4, , ,000 December 4, , ,000 September 8, , ,000 December 9, ,167 1,005,000 January 9, ,985,000 February 7, ,500 December 9, ,200,000 2,200,000 January 23, ,000 10,680,667 7,086,000

21 21 Mobi724 Global Solutions Inc. For the three-month period ended March 31, 2017 and SHAREHOLDERS' EQUITY (Continued) b) Share Purchase Options (continued) For the period ended March 31, 2017, 86,833 share options were exercised (none in 2016). An amount of $245,942 has been expensed as share-based payment awards for the period ended March 31, 2017 ($3,306 for 2016). The offsetting credit has been recorded as option reserve. The stock based compensation expense was calculated according to the weighted average fair value of options granted based on the Black-Scholes valuation model using the assumptions shown below based on the expected number of options expected to vest. The volatility on the Company's common shares was estimated based on historical information over the expected life of the options. The fair value of each option granted was estimated on the grant date using the Black-Scholes option pricing model, using the following assumptions: For the period ended March 31, 2017 January 9, January 23, February 7, Share price Exercise price Risk-free interest rate 83% 81% 89% Expected life 3 years 4 years 3 years Expected estimated volatility 270% 241% 273% Dividend yield nil nil nil Fair value of options granted c) Other equity accounts March 31, December 31, Contributed Surplus 7,861,306 7,675,658 Option reserve 520, ,662 Warrant reserve 602, ,955 8,984,020 8,418,275

22 22 Mobi724 Global Solutions Inc. For the three-month period ended March 31, 2017 and SHAREHOLDERS' EQUITY (Continued) c) Other equity accounts (continued) Contributed surplus March 31, December 31, Balance, beginning of period 7,675,658 6,378,488 Warrant expired/cancelled during the period 95, ,620 Stock options expired or forfeited 90, ,550 Extinguished conversion option 74,000 Balance, end of period 7,861,306 7,675,658 Option reserve March 31, December 31, Balance, beginning of period 369, ,638 Stock based payments 245,942 9,574 Stock options expired or forfeited (90,000) (429,550) Stock options exercised (5,210) Balance, end of period 520, ,662

23 23 Mobi724 Global Solutions Inc. 8 - SHAREHOLDERS' EQUITY (Continued) Warrants reserve March 31, 2017 March 31, 2016 Weighted Weighted Number of average Number of average warrants Amount exercise price warrants Amount exercise price Warrants issued and outstanding Balance, beginning of the period 20,788, , ,367,845 1,018, Expired/cancelled during the period (5,331,430) (95,648) 0.08 (10,229,951) (677,776) 0.14 Issued during the period 4,710, , (3,030,303) (295,151) 0.08 Balance, end of the period 20,167, , ,107,591 45, During the three-month period ended March 31, 2017, the Company issued 102,000 broker warrants valued at $7,038.

24 INFORMATION INCLUDED IN NET LOSS Financial expenses comprises of the following: March 31 March 31 Interest and banking fees 2,510 27,658 Interest expense on long term debt 65,088 52,567 Interest and accretion expense on convertible debt 94,697 99,359 Accretion interest on contingent consideration payable 241,141 Fair value adjustment on liability for acquisition of Mobi (Note 10) 5,292, ,895 Total finance expenses 5,695, , FINANCIAL INSTRUMENTS The Company is exposed to a certain number of risks at different levels. a) Measurement categories The following table shows the carrying values of assets and liabilities for each of these categories as at March 31, 2017 and March 31 December 31 Assets Loans and receivables Cash 102,248 30,233 Trade and other receivables (excluding sales taxes and tax credit receivable) 518, ,406 Total loans and receivables 620, ,639 Liabilities Amortized cost Bank loan 30,000 90,000 Accounts payable and accrued liabilities (excluding salaries and related benefits) 1,869,267 1,855,641 Convertible debt 215, ,253 Demand debt 896, ,247 Long term debt 199, ,395 Total amortized cost 3,180,206 3,147,536 Fair Value Liability for the acquisition of Solutions Mobi724 Inc. 2,880, ,372 Contingent consideration payable 4,528,088 4,286,947 Total fair value 7,408,944 5,013,319

25 FINANCIAL INSTRUMENTS (Continued) b) Fair value The net carrying amount of the cash, trade and other receivables (excluding non-financial assets) and accounts payable and accrued liabilities (excluding non financial liabilities) is considered a reasonable approximation of fair value since all amounts are short-term in nature. The fair values of the convertible debt and demand debt are approximately equal to their carrying value due to their short-term maturity dates. The fair value of the long-term debt is not significantly different than its carrying amount and its estimated using a discounted cash flow approach, which discounts the contractual cash flows using discount rates derived from observable market interest rates of similar loans with similar risk. These debts have been categorized within Level 2 of the fair value hierarchy. The estimated fair value of the liability for the acquisition of Solutions Mobi724 Inc. Is categorized within Level 2 of the fair value hierarchy. The fair value was determined based on an estimated number of common shares to be issued to the previous shareholders of Mobi times the share price of the Company as at March 31, 2017 and The reconciliation of the liability for the acquisition of Solutions Mobi724 Inc. March 31 March 31 Opening balance 726, ,000 Partial settlement of liability (Note 8) (3,137,617) Fair value adjustment on liability (a) 5,292, ,895 Ending balance 2,880, ,895 (a) The fair value adjustment on liability increased due to the increase in the number of shares to be issued to settle the liability (Note 3) as well as the increase in the share price of the Company during the three-month period ended March 31, 2017.

26 RELATED PARTY TRANSACTIONS The following table summarizes the transactions and balances outstanding with related parties of the Company: March 31, March 31, Transactions: Rent paid to company controlled by significant shareholder 31,443 March 31, March 31, Balances outstanding: Amounts due to officers 151,073 53,246 Demand debt due to director and significant shareholder 170,000 53,108 Demand debt due to director 360,000 Amounts due to company controlled by an officer 128, , ,354 Compensation of key management personnel The remuneration of directors and other members of key management personnel during the period were as follows: March 31, March 31, Management fees, commissions and salaries 230, ,900 Share-based payments compensation 121,445 3, , ,206 Please see Note 3 for additional information on transactions with key management, directors and officers.

27 LOSS PER SHARE a) Basic Basic earnings (loss) per common share are calculated by dividing the net income attributable to the owners of the Company by the weighted average number of outstanding common shares during the period. March 31, March 31, Net loss attributable to the shareholders of the Company (7,438,994) (963,589) Weighted average number of common shares outstanding 136,861,686 99,196,720 b) Diluted For the periods ended March 31, 2017 and 2016, diluted net loss per share was calculated based on the net loss attributable to owners of the parent using the basic weighted average number of shares outstanding, since the convertible debt, all the outstanding warrants and stock options and the potential share issuance for the business acquisition have been excluded from the calculation of diluted net loss per share because they were anti-dilutive. Accordingly, diluted net loss per share for each period was the same as the basic net loss per share SEGMENTED REPORTING The Company operates and reports its results as three operating segments (two in 2015), which are the development of new internet technologies to facilitate point of sale payments, e-couponing and digital marketing, as these are monitored by the Company s chief decision maker and strategic decisions are made on the basis of segment operating results. Each of the operating segments is a reportable segment for financial reporting purposes. The segments do not earn any inter-segment revenues. The Company also operates in three (three in 2016) different geographies. The Company s financial information by reportable segment is as follows: Payment Digital March 31, 2017 solution E-couponing marketing Unallocated Consolidated Revenues from external customers 188,912 93, , ,518 Total operating expenses 1,152, , , ,482 2,539,750 Operating loss 963, ,308 85, ,482 1,748,232 Net financial expenses ,934 5,686,816 5,695,537 Net loss before income taxes 963, ,758 93,745 6,229,298 7,443,769

28 SEGMENTED REPORTING (continued) Payment Digital March 31, 2016 solution E-couponing marketing Unallocated Consolidated Revenues from external customers 24, , , ,385 Total operating expenses 231, , ,506 (72,294) 1,256,475 Operating loss (income) 206, ,543 (18,964) (72,294) 699,090 Net financial expenses 63, ,540 44, ,479 Net loss (Income) before income taxes 270, ,083 25,462 (72,294) 997,569 The Company s financial information by geographic location is as follows: March 31, March 31, Sales from external customers South America 93, ,403 Canada 508, ,470 Caribbean 188,912 24,510 All of the Company's non-current assets are located in Canada EVENTS AFTER THE REPORTING PERIOD 791, ,383 On April 21, 2017, the Company completed a private placement through the issue of 29,538,203 special warrants at a price of $0.35 per special warrant for total proceeds of $10,338,000. Each special warrant entitles the holder to one unit of the Company which consists of one common share and one-half of a common share purchase warrant. Each whole share purchase warrant will be exercisable at $0.46 for a period of two years from the date of issue. The Company may accelerate the expiry date of the warrants if the average price of the Company's common shares is equal or greater than $0.65 for a period of ten consecutive trading days. On April 28, 2017, the Company signed an addendum to the IQ acquisition agreement modifying the purchase price. Subsequent to this modification, the contingent consideration payable for the acquisition of IQ is modified to a fixed purchase price for a total of $3,100,000. The amount is payable $1,860,000 in cash and the remainder is to be paid through the issue of common shares. The entire amount is payable during the year ended December 31, 2017.