SAVI Q3 2016 10-Q

Mobetize Corp (SAVI) SEC Quarterly Report (10-Q) for Q4 2016

SAVI 2017 10-K
SAVI Q3 2016 10-Q SAVI 2017 10-K

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

Mark One

[ X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934 for the quarterly period ended December 31, 2016

[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the transition period from ______ to _______

Commission File No. 333-181747

MOBETIZE CORP.

(Exact name of registrant as specified in its charter)

Nevada

(State or Other Jurisdiction of Incorporation or Organization)

7299

99-0373704

(Primary Standard Industrial Classification Number)

(IRS Employer Identification Number)

8105 Birch Bay Square St, Suite 205, Blaine WA 98230

(Address of principal executive offices)

Issuer's telephone number: (778) 588-5563

Indicate by checkmark whether the issuer: (1) has filed all reports required to be filed by Section 13 or

15(d) of the Exchange Act during the past 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 [X ]   No [    ]

Indicate by check mark whether the registrant is a large accelerated filed, an accelerated filer, a non-

accelerated filer, or a smaller reporting company.

Large accelerated filer ☐

Accelerated filer

Non-accelerated filer ☐ (Do not check if a smaller reporting company) 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

At February 14, 2017, the number of shares outstanding of the registrant's common stock, $0.001 par

value was 23,450,233, the number of shares outstanding of registrant's Series A preferred stock, $0.001

par value was 4,565,000, and the number of shares outstanding of registrants Series B preferred stock,

$0.001 par value was 12,445,648.

1


TABLE OF CONTENTS

PART 1- FINANCIAL INFORMATION

Item1.

Financial Statements:

3

Consolidated Balance Sheets

4

Consolidated Statements of Loss and Comprehensive Loss

5

Consolidated Statements of Cash Flows

6

Notes to Consolidated Financial Statements

7

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of

16

Operations

Item 3 .

Quantitative and Qualitative Disclosures about Market Risk

22

Item 4.

Controls and Procedures

23

PART II-OTHER INFORMATION

Item 1.

Legal Proceedings and Risk Factors

24

Item 2 .

Unregistered Sales of Equity Securities and Use of Proceeds

24

Item 3.

Defaults Upon Senior Securities

25

Item 4 .

Mine Safety Disclosures

25

Item 5.

Other Information

25

Item 6.

Exhibits

26

Signatures

27

2


PART I – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

As used herein, the terms "Mobetize," "we," "our," and "us" refer to Mobetize Corp., a Nevada

corporation, and its predecessors and subsidiaries, unless otherwise indicated. In the opinion of

management, the accompanying unaudited, consolidated financial statements included in this Form

10-Q reflect all adjustments necessary for a fair presentation of the results of operations for the

periods presented. The results of operations for the periods presented are not necessarily indicative of

the results to be expected for the full year.

3


MOBETIZE, CORP.

Consolidated Balance Sheets

December 31, 2016

(Expressed in U.S. dollars)

(Unaudited)

DECEMBER 31,

MARCH 31,

2016

2016

ASSETS

Current Assets:

Cash

$

49,482      $

210,341

Accounts receivable

44,723

43,729

Prepaid expenses and deposits

45,015

53,677

Prepaid expenses and deposits – related party (Notes 5(g) and (i))

6,549

11,080

Total Current Assets

145,769

318,827

Property and equipment, net (Note 3)

9,108

11,828

TOTAL ASSETS

$

154,877      $

330,655

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

LIABILITIES

Current Liabilities:

Accounts payable and accrued liabilities

$

202,443      $

138,956

Accounts payable and accrued liabilities - related party (Note 5(e)

and (f))

208,520

75,749

Deposits due to customers

980

1,480

Promissory note – related party (Note 5(e))

43,620

50,000

Convertible debentures (Note 4 and 5(h))

340,000

275,000

Shareholder loans (Notes 5(d) and (e))

60,875

-

Total Current Liabilities

856,438

541,185

Shareholder loans

-

47,476

TOTAL LIABILITIES

$

856,438      $

588,661

STOCKHOLDERS' DEFICIENCY

Common stock, $0.001 Par Value: 525,000,000 authorized and

23,450,233 and 28,750,881 common shares issued and outstanding,

respectively (Note 6(a))

$

23,450      $

28,751

Preferred stock – Series A, $0.001 Par Value: 10,000,000 authorized

and 4,565,000 shares issues and outstanding (Note 6(b))

4,565

4,565

Preferred stock – Series B, $0.001 Par Value: 25,000,000 authorized

and 11,845,648 shares issues and outstanding (Note 6(c))

11,846

-

Share purchase warrants

676,964

676,964

Share options

924,557

757,524

Additional paid-in capital

4,737,142

4,608,487

Accumulated other comprehensive loss

(8,272)

(9,236)

Accumulated deficit

(7,071,813)

(6,325,061)

Total Stockholders' Deficiency

(701,561)

(258,006)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY

$

154,877      $

330,655

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

4


MOBETIZE CORP.

Consolidated Statements of Loss and Comprehensive Loss

For the three and nine months ended December 31, 2016 and 2015

(Expressed in U.S. dollars)

(Unaudited)

THREE MONTHS ENDED

NINE MONTHS ENDED

DECEMBER 31,

DECEMBER 31,

2016

2015

2016

2015

OPERATING REVENUES

Revenues

$

149,138 $

74,383 $

365,386 $

81,460

OPERATING EXPENSES

Depreciation

777

918

2,377

2,349

Director compensation (Note 5(c))

3,000

-

30,000

-

General and administrative

51,278

76,211

178,988

189,627

General and administrative – related party (Note

5(a) and (b))

19,747

1,811

74,053

3,973

Investor relations and promotion

15,684

22,711

65,209

29,866

Listing fees

3,467

10,629

12,821

31,820

Consulting fees

-

104,444

21,000

278,289

Management fees – related party (Note 5(a) and

(b))

29,859

30,000

98,149

90,000

Professional fees

21,015

17,986

117,720

55,996

Research and development

65,834

93,643

232,431

330,259

Research and development - related party (Note

5(a))

38,977

32,986

97,027

45,822

Sales and marketing

861

15,248

8,130

69,009

Share compensation (Note 6(a))

-

-

7,200

-

Stock-based compensation expense (Note 8)

39,594

600,753

167,033

600,753

Total Operating Expenses

290,093

1,007,340

1,112,138

1,727,763

NET LOSS

$

(140,955) $ (932,957) $    (746,752) $ (1,646,303)

NET LOSS PER SHARE

Basic and Diluted

$

(0.01) $

(0.03) $

(0.03) $

(0.05)

WEIGHTED AVERAGE NUMBER OF

COMMON SHARES OUTSTANDING

Basic and Diluted

23,450,233

33,261,154

24,638,381

31,594,441

COMPREHENSIVE LOSS

Net loss

$

(140,955) $ (932,957) $    (746,752) $ (1,646,303)

Other comprehensive loss:

Cumulative translation adjustment

1,184

1,212

964

(3,688)

Comprehensive loss

$

(139,771) $ (931,745) $    (745,788) $ (1,649,991)

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

5


MOBETIZE CORP.

Consolidated Statements of Cash Flows

For the nine months ended December 31, 2016 and 2015

(Expressed in U.S. dollars)

(Unaudited)

NINE MONTHS

ENDED DECEMBER 31,

2016

2015

CASH FLOWS FROM OPERATING ACTIVITIES

Net loss

$

(746,752)

$

(1,646,303)

Adjustments to reconcile net loss to net cash used in operating

activities:

Depreciation expense

2,377

2,349

Shares issued for services

61,200

10,753

Interest accrued on shareholder loans

2,859

-

Stock-based compensation

167,033

600,753

Changes in assets and liabilities:

Accounts receivable

(994)

(79,211)

Accounts receivable – related party

-

14,687

Prepaid expenses and deposits

8,662

18,690

Prepaid expenses and deposits – related party

1,031

-

Accounts payable and accrued liabilities

90,987

52,984

Accounts payable - related party

129,912

(30,448)

Deposits due to customers

(500)

-

Net cash used in operating activities

(284,185)

(1,055,746)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of computer equipment

-

(1,554)

Net cash used in investing activities

-

(1,554)

CASH FLOWS FROM FINANCING ACTIVITES

Proceeds from sale of common stock and warrant exercise, net of

financing costs

-

619,667

Proceeds from sale of common stock and warrant exercise, net of

financing costs - related party

-

228,240

Proceeds from related party promissory note, net of prepaid interest

44,188

-

Proceeds from convertible debenture, net of prepaid interest

65,000

-

Proceeds from shareholder loans, net of repayments

13,399

24,850

Net cash provided by financing activities

122,587

872,757

EFFECT OF EXCHANGE RATE CHANGES ON CASH

739

(2,711)

NET DECREASE IN CASH

(160,859)

(187,254)

CASH - BEGINNING OF PERIOD

210,341

312,899

CASH - END OF PERIOD

$

49,482

$

125,645

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Shares issued to settle accounts payable

$

27,500

$

-

Shares issued to settle promissory note – related party

$

46,500

$

-

SUPPLEMENTAL DISCLOSURES:

Interest paid

$

13,703

$

-

Income taxes paid

$

-

$

-

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

6


MOBETIZE CORP.

Notes to Consolidated Financial Statements

December 31, 2016

(Expressed in U.S. dollars)

(Unaudited)

1. Nature of Operations and Continuance of Business

Mobetize Corp. ("Mobetize") was incorporated in the state of Nevada  on  February 23,  2012, as

Slavia, Corp. Mobetize's name became "Mobetize Corp on August 13, 2013.

Mobetize provides Fintech solutions and services to enable and support the convergence of global

telecom and financial services providers ("Customers") through its Global Mobile B2B Fintech and

Financial Services Marketplace ("Hub"). Mobetize's activities are subject to significant risks and

uncertainties, including the need to secure additional funding to optimize Mobetize's existing

technology to effective counter competitive products.

Mobetize's unaudited consolidated financial statements are prepared in accordance with accounting

principles generally accepted in the United States. These unaudited consolidated financial statements

include the accounts of Mobetize and its wholly owned  subsidiaries,  Mobetize Canada Inc.,  and

Mobetize USA Inc. All significant intercompany transactions and balances have been eliminated.

The accompanying unaudited consolidated financial statements of Mobetize should be read in

conjunction with the financial statements and accompanying notes filed with the U.S. Securities and

Exchange Commission in Mobetize's Annual Report on Form 10-K for the fiscal year ended March

31, 2016. In the opinion of management, the accompanying financial statements reflect all

adjustments of a recurring nature considered necessary to present fairly Mobetize's financial position

and the result of its operations and its cash flows for the periods shown.

The preparation of financial statements in accordance with accounting principles generally accepted

in the United States requires management to make estimates and assumptions that affect the amounts

reported. Actual results could differ materially from those estimates. The results of operations and

cash flows for the periods shown are not necessarily indicative of the results to be expected for the

full year.

Going Concern

These unaudited consolidated financial statements have  been prepared on a going concern basis,

which implies that Mobetize will continue to realize assets and discharge liabilities in the normal

course of business. As of December 31, 2016, Mobetize has an accumulated deficit of $7,071,813, a

history of net losses and a working capital deficiency of $710,669. These factors raise substantial

doubt regarding Mobetize's ability to continue as a going concern. The continuation of Mobetizeas a

going concern is dependent upon continuing financial support from management, increasing sales,

securing debt or equity financing, cutting operating costs, launching viable products, and realizing

profitable operations. These financial statements do not include any adjustments to the recoverability

and classification of recorded asset amounts and classification of liabilities that might be necessary

should Mobetize be unable to continue as a going concern.

7


MOBETIZE CORP.

Notes to Consolidated Financial Statements

December 31, 2016

(Expressed in U.S. dollars)

(Unaudited)

2.

Recent Accounting Pronouncements

a) Recently Adopted Accounting Standards

In  June  2014,  ASU  guidance  was  issued  to  resolve  the  diversity  of  practice  relating  to  the

accounting for stock based performance awards that the performance target could be achieved

after the employee completes the required service period. The update is effective prospectively or

retrospectively for annual reporting periods beginning after December 15, 2015. The Company

adopted this ASU on April 1, 2016, prospectively.   The adoption of this ASU does not have a

material effect on Mobetize's consolidated financial statements.

In January 2015, an ASU was issued to simplify the income statement presentation requirements

in Subtopic 225-20 by eliminating the concept of extraordinary items.   Extraordinary items are

events and transactions that are distinguished by their unusual nature and by the infrequency of

their   occurrence.   Eliminating the   extraordinary classification   simplifies income   statement

presentation by altogether removing the concept of extraordinary items from consideration. This

ASU is effective for annual periods beginning after December 15, 2015, including interim periods

within those annual periods.  An entity may apply this ASU prospectively or retrospectively to all

prior periods presented in the financial statements. Early  adoption is permitted. Mobetize

adopted this ASU on April 1, 2016, prospectively.   The adoption of this ASU does not have a

material effect on Mobetize's consolidated financial statements.

b) Recent Accounting Pronouncements

In May 2014, ASU guidance was issued related to revenue from contracts with customers. The

new standard provides a five-step approach to be applied to all contracts with customers and also

requires expanded disclosures about revenue recognition. The ASU is effective for annual

reporting periods beginning after December 15,  2017, including interim periods and is to be

retrospectively applied. Early application is permitted only as of annual reporting periods

beginning after December 15, 2016, including interim reporting periods within that reporting

period. Mobetize is currently evaluating this guidance and the impact it will have on its

consolidated financial statements.

In November 2015, an ASU was issued to simplify the presentation of deferred income taxes.

The amendments in this ASU require that deferred tax liabilities and assets be classified as non-

current on the balance sheet as compared to the current requirements to separate deferred tax

liabilities and assets into current and non-current amounts. This ASU is effective for annual

periods beginning after December 15, 2016, including interim periods within those annual

periods. Earlier application is permitted.   This ASU may be applied either prospectively to all

deferred tax liabilities and assets or retrospectively to all periods presented.  Mobetize is currently

evaluating this guidance and the impact it will have on its consolidated financial statements.

8


MOBETIZE CORP.

Notes to Consolidated Financial Statements

December 31, 2016

(Expressed in U.S. dollars)

(Unaudited)

2. Recent Accounting Pronouncements – continued

b)  Recent Accounting Pronouncements

In February 2016, Topic 842, Leases was issued to replace the leases requirements in Topic 840,

Leases. The main difference between previous GAAP and Topic 842 is the recognition of lease

assets and lease liabilities by lessees for those leases classified as operating leases under previous

GAAP. A lessee should recognize in the balance sheet a liability to make lease payments (the lease

liability) and a right-of-use asset representing its right to use the underlying asset for the lease term.

For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy

election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee

makes this election, it should recognize lease expense for such leases generally on a straight-line basis

over the lease term. The accounting applied by a lessor is largely unchanged from that applied under

previous GAAP. Topic 842 will be effective for annual reporting periods beginning after December

15, 2018, including interim periods within those annual periods and is to be retrospectively applied.

Earlier application is permitted. Mobetize is currently evaluating this guidance and the impact it will

have on its consolidated financial statements.

In March 2016, an ASU was issued to reduce complexity in the accounting for employee share-based

payment transactions. One of the simplifications relates to forfeitures of awards. Under current

GAAP, an entity estimates the number of awards for which the requisite service period is expected to

be rendered and base the accruals of compensation cost on the estimated number of awards that will

vest.  This ASU permits an entity to make an entity-wide accounting policy election either to estimate

the number of forfeitures expected to occur or to account for forfeitures in compensation cost when

they occur. This ASU is effective for annual periods beginning after December 15, 2016, including

interim periods within those annual periods. Earlier application is permitted. Mobetize is currently

evaluating this guidance and the impact it will have on its consolidated financial statements.

3. Property and Equipment

Property and equipment, net consisted of the following:

December 31, 2016

March 31, 2016

Computer equipment

$

14,285    $

14,787

Furniture

1,162

1,204

Total

15,447

15,991

Less: accumulated amortization

6,339

4,163

Property and equipment, net

$

9,108    $

11,828

During the nine months ended December 31, 2016, property and equipment cost decreased by $544 as

a result of foreign currency translation adjustments.

9


MOBETIZE CORP.

Notes to Consolidated Financial Statements

December 31, 2016

(Expressed in U.S. dollars)

(Unaudited)

4. Convertible Debentures

Date of issuance

Principal

Interest

Maturity

March 2016 (1)

$

275,000

12% per annum

March, 2017

July 25, 2016 (2)

$

25,000

12% per annum

July 25, 2017

November 21, 2016 (3)

$

40,000

6% per annum

November 21, 2017

(1) March, 2016 Issuance:

§     Convertible  debentures  issued  net  of  $30,000  of  prepaid  interest,  noting  that  $3,000  of

prepaid interest was paid by Mobetize to one Convertible Debenture holder during the period

ended December 31, 2016.

§     $50,000 is owed to a Director of Mobetize (Note 5(h)), issued on March 21, 2016.

§     The conversion feature is exercisable at the option of the holder (the "Conversion Feature").

The  Conversion  Feature  enables  the  holder  to  convert any  portion  of  their  outstanding

Convertible Debenture principal balance into Series B Preferred shares at a price of Fifty

Cents ($0.50) after 180 days from issue date, but no later than the maturity date.

§     The Conversion Feature represents an embedded contingent redemption feature and is

accounted for as a derivative. The fair value of the contingent redemption feature is

immaterial and therefore not recognized at inception, or at December 31, 2016.

(2) July 25, 2016 Issuance:

§     Convertible debenture issued net of $3,000 of prepaid interest.

§     The Conversion Feature is exercisable at the option of the holder. The Conversion Feature

enables the holder to convert any portion of their outstanding Convertible Debenture

principal balance into Series B Preferred shares at a price of Fifty Cents ($0.50) after 180

days from issue date, but no later than the maturity date.

§     The Conversion Feature represents an embedded contingent redemption feature and is

accounted for as a derivative. The fair value of the contingent redemption feature is

immaterial and therefore not recognized at inception or at December 31, 2016.

(3) November 21, 2016 Issuance:

§     Convertible debenture issued net of $2,400 of prepaid interest.

§     $20,000 is owed to a Director of Mobetize (Note 5(h)), issued on November 21, 2016.

§     The  Conversion  Feature  enables  the  holder  to  convert any  portion  of  their  outstanding

Convertible Debenture principal balance into common shares at $0.25 per share after 180

days from issue date, but no later than the maturity date.

§     The Conversion Feature represents an embedded contingent redemption feature. The fair

value  of the contingent redemption  feature is immaterial and therefore not  recognized at

inception or at December 31, 2016.

10


MOBETIZE CORP.

Notes to Consolidated Financial Statements

December 31, 2016

(Expressed in U.S. dollars)

(Unaudited)

5. Related Party Transactions

Nine months ended December 31,

Transactions with related parties

2 016

2015

(a) Transactions incurred with the CEO or companies controlled by the

CEO:

Management salaries and fees

$

91,039      $

90,000

Research and development

97,027

45,822

General and administration expenses

11,843

2,979

Conversion of promissory note (1)

46,500

-

$

246,409      $

138,801

(b) Transactions incurred with the former CFO's or a company

controlled by a former CFO:

Management salaries and fees

$

7,110      $

-

General and administration expenses

62,210

994

Advances – applied to private placement (2)

-

137,000

$

69,320      $

137,994

(c) Transactions incurred with the Chairman of Mobetize

Director compensation (3)

$

30,000      $

-

December 31,

Related party balances, as at

2 016

March 31, 2016

(d) Amounts owed to companies controlled by the former CFO:

Shareholder loan (4)

$

17,837

$

5,943

(e) Amounts owed to companies controlled by the CEO:

Shareholder loan (4)

$

43,038

41,533

Management fees

82,500

30,000

Amounts payable - for services received and expenses incurred

123,020

45,749

Promissory note – June 2, 2017 (5)

25,000

-

Promissory note – July 11, 2017 (6)

18,620

-

Promissory note – February 14, 2017 (7)

-

50,000

$

292,178

$

167,282

(f)    Amounts owed to the Chairman of Mobetize

$

3,000

$

-

(g) Amounts prepaid to a company controlled by the CEO

Prepaid interest on promissory notes

$

2,450

$

5,241

(h) Amounts owed to a Director of Mobetize

Convertible debenture – March 21, 2017 (Note 4(1))

$

50,000

$

50,000

Convertible debenture – July 21, 2017 (Note 4(2))

25,000

-

Convertible debenture – November 20, 2017 (Note 4(3))

20,000

-

95,000

50,000

(i) Amounts prepaid to a Director of Mobetize

Prepaid interest on convertible debentures

$

4,099

$

5,839

(1)     The promissory note was comprised of $50,000 principal, offset by $3,500 of prepaid interest. The promissory note

was converted into 4,650,000 Series B preferred shares of Mobetize.

(2)     The advances from  the former CFO  were later used as a subscription to a private placement which included

subscriptions by the former CFO and direct family members.

(3)     On July 15, 2016 the Chairman was compensated $24,000. On July 1, 2016, Mobetize entered into an agreement with

its Chairman where the Chairman would provide services to Mobetize at a monthly rate of $1,000 for a period of two

years ending on June 30, 2018.

(4)     Shareholder loan balances are unsecured and due on demand.

(5)     The promissory note maturing on June 2, 2017, was issued with a twelve-month term, comprises $25,000 principal, and

bears interest at 12% per annum. The principal balance includes prepaid interest of $3,000, due on maturity.

(6)     The promissory note maturing on July 11, 2017, was issued with a twelve-month term, comprises $18,620 (CAD

$25,000) principal, and bears interest at 12% per annum. The principal balance includes prepaid interest of $2,234

(CAD $3,000), due on maturity.

(7)     The promissory  note  maturing  on  February  14,  2017, was  issued  with  a  twelve-month  term,  comprised  $50,000

principal, and bore interest at 12% per annum. The principal balance included prepaid interest of $6,000, due on

maturity. This promissory note was converted into 4,650,000 Series B preferred shares of Mobetize.

11


MOBETIZE CORP.

Notes to Consolidated Financial Statements

December 31, 2016

(Expressed in U.S. dollars)

(Unaudited)

6. Common Stock and Preferred Stock

a) Common Shares Issued for Services:

On  August  1,  2016,  Mobetize  settled  $7,200  in  shares  for  services  through  the  issuance  of

120,000 common shares with a fair value of $0.06 per share and a par value of $0.001 per share,

resulting in $7,080 being recorded to additional paid-in capital.

b) Authorization and Issuance of Series A Preferred Shares:

During the year ended March 31, 2016, Mobetize authorized the issuance of 250,000,000 shares

of preferred stock with a par value of $0.001 per share and designated 10,000,000 of the preferred

stock as Series A preferred shares ("Series A Preferred Shares"). The Series A Preferred Shares

have the same rights and privileges as the common shares, with the exception that the Series A

Preferred Share holder has 10 votes per Series A Preferred Share versus one vote per common

share and does not have the right to convert the shares into common shares for a period of 2 years

from the date of issue.

c) Authorization and Issuance of Series B Preferred Shares:

During the nine months ended December 31, 2016, Mobetize designated 25,000,000 shares of the

authorized preferred stock as Series B preferred shares ("Series B Preferred Shares"). The Series

B Preferred Shares have the same rights and privileges as the common shares, with the exception

that the Series B Preferred Shares have an anti-dilution provision and the Series B Preferred

Share holder does not have the right to convert Series B Preferred Shares into common shares for

a period of 2 years from the date of issue.

On June 2, 2016, Mobetize converted 4,081,481 common shares held by a company controlled by

the CEO into 4,081,481 Series B Preferred Shares, 300,000 common shares held by its Chairman

and Director into 300,000 Series B Preferred Shares, and 1,039,167 common shares held by a

Mobetize Director into 1,039,167 Series B Preferred Shares.

On July 15, 2016, Mobetize issued 200,000 Series B Preferred Shares with a fair value of $0.15

per share to settle $30,000 in services payable. $200 was recorded to Series B Preferred Shares

and $29,800 was recorded to additional paid-in capital.

On July 15, 2016, Mobetize issued 1,300,000 Series B Preferred Shares with a fair value of $0.15

per share to a company controlled by the Chairman of Mobetize to settle $24,000 in services

payable. $1,300 was recorded to Series B Preferred Shares and $22,700 was recorded to

additional paid-in capital. This transaction is considered a capital transaction, as such, the excess

fair value of the Series B Preferred shares issued has a $nil effect on additional paid-in capital.

On July 15, 2016, Mobetize issued 4,650,000 Series B Preferred Shares with a fair value of $0.15

per share to a company controlled by its CEO to settle $46,500 in an outstanding promissory note,

which included a principal of $50,000 less prepaid interest of $2,500. $4,650 was recorded to

Series B Preferred Shares and $41,850 was recorded to additional paid-in capital. This transaction

is considered a capital transaction, as such, the excess fair value of the Series B Preferred shares

issued has a $nil effect on additional paid-in capital.

12


MOBETIZE CORP.

Notes to Consolidated Financial Statements

December 31, 2016

(Expressed in U.S. dollars)

(Unaudited)

6. Common Stock and Preferred Stock - Continued

c) Authorization and Issuance of Series B Preferred Shares:

On December 1, 2016, Mobetize issued 275,000 Series B Preferred Shares with a fair value of

$0.10 per share to a consultant of Mobetize to settle $27,500 in amounts owing for services

provided. $275 was recorded to Series B Preferred Shares and $27,225 was recorded to additional

paid-in capital.

7. Share Purchase Warrants

The following table summarizes the continuity of share purchase warrants:

Weighted

average exercise

Number of

price

warrants

$

Balance, March 31, 2015

1,581,084

0.90

Issued

1,555,322

1.00

Exercised

(189,500)

0.50

Expired

(310,500)

0.50

Balance, March 31, 2016 and December 31, 2016

2,636,406

1.04

As at December 31, 2016, the following share purchase warrants were outstanding:

Number of warrants

Exercise price

outstanding

$

Expiry date

694,414

1.00

June 24, 2018

386,670

1.25

December 10, 2018

1,555,322

1.00

September 1, 2018

2,636,406

13


MOBETIZE CORP.

Notes to Consolidated Financial Statements

December 31, 2016

(Expressed in U.S. dollars)

(Unaudited)

8. Stock Options

On August 10, 2015, Mobetize's directors adopted the 2015 Stock Option Plan ("Stock Option Plan")

which permits Mobetize to issue stock options for up to 3,000,000 common shares of Mobetize to

directors, officers, employees and consultants of Mobetize with a maximum term of 5 years, and a

vesting schedule determined by the Board of Directors at the time of granting the options.

The following table summarizes the continuity of stock options:

Weighted

average exercise

Number of

price

stock options

$

Balance, March 31, 2016

2,381,262

0.60

Expired

(288,539)

0.60

Cancelled

(32,723)

0.60

Outstanding, December 31, 2016

2,060,000

0.60

Exercisable, December 31, 2016

1,469,500

0.60

As at December 31, 2016, the following share purchase options were outstanding:

Exercise

Number of options

Number of options

price

outstanding

vested

$

Expiry date

2,060,000

1,469,500

0.60

September 30, 2020

The vested options are measured using the Black Scholes method, which included a dividend yield of

nil, risk-free interest rate of 0.68%, expected volatility of 76.7%, and expected term of 5 years.

During  the  nine  months  ended  December  31,  2016,  $167,033  (2015  -  $600,753)  in  stock-based

compensation expense was recorded. The intrinsic value of the options was $nil at December 31,

2016 and March 31, 2016.

9. Concentration of Risk

Revenues are currently generated through licensing, professional services, and payment processing

services provided by Mobetize to our existing Customers. During the nine months ended December

31, 2016, Mobetize had revenues from four customers (2015 – revenues from four customers) with 56%

(2015 – 66%) of revenues generated from Mobetize's largest customer.

14


MOBETIZE CORP.

Notes to Consolidated Financial Statements

December 31, 2016

(Expressed in U.S. dollars)

(Unaudited)

10. Commitment

Mobetize has an obligation under a rental lease for its operating office. As of December 31, 2016, the

remaining term of the lease is 21 months with monthly payments of $4,995. Mobetize's lease includes

a renewal option.

11. Segment Information

Mobetize  has currently operating segments located in  Canada  and the United  States  of America

("USA"). Revenues are generated in Canada and the USA while all assets are located in Canada. The

Mobetize's chief operating decision maker reviews financial information presented on a consolidated

basis for purposes of allocating resources and evaluating financial performance.

12. Subsequent Events

Mobetize evaluated its December 31, 2016 financial statements for subsequent events through the

date the financial statements were issued. Mobetize is not aware of any subsequent events which

would require recognition or disclosure in the financial statements except as disclosed below.

Mobetize continues to seek recovery of 578,733 common shares and 101,726 share purchase warrants

issued as an overpayment to the Former CFO of Mobetize for consulting services and settlement of

expenses and liabilities.

On January 12, 2017, Mobetize entered into a Joint Venture Agreement ("Joint Venture") with CPT

Secure, Inc. ("CPT"), to further develop certain payment processing technology ("CPT IP") on a

50/50  basis.  In  connection  with  the  Joint  Venture,  Mobetize  agreed  to  issue  500,000  Series  B

Preferred Shares to CPT in consideration for the license to the CPT IP which will be contributed to

the Joint Venture. The license to the CPT IP has a term to January 11, 2019, and can be automatically

renewed for successive two year periods unless either party elects not to renew 60 days prior to

expiration.

On January 20, 2017, the holders of Convertible Debentures holding an aggregate amount of three

hundred thousand ($300,000) in convertible debt elected to convert their respective debentures at

$0.50 a share into six hundred thousand shares of Series B Preferred Shares

On January 27, 2017, Mobetize issued twelve month Convertible Debentures in the aggregate amount

of $200,000 net of $176,000 of prepaid interest to four individuals that entitles each of them to

convert any portion of the principal into Series B Preferred Shares at a price of $0.50 per share, 180

days from issue date, but no later than the maturity date.

On February 1, 2017,  dated effective December 15, 2016, the Company entered into a  Software

Application   License,   Customization   Development   and   Service   Level   Agreement with   Tata

Communications (America) Inc. to govern the global deployment of our Services for its customers.

The parties agreed to a five-year strategic partnership.

15


ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATION

This Management's Discussion and Analysis of Financial Condition and Results of Operations and other

parts of this quarterly report contain forward-looking statements that involve risks and uncertainties.

Forward-looking statements can also be identified by words such as "anticipates," "expects," "believes,"

"plans," "predicts," and similar terms. Forward-looking statements are not guarantees of future

performance and our actual results may differ significantly from the results discussed in the forward-

looking statements. Factors that might cause such differences include but are not limited to those

discussed in the subsection entitled Forward-Looking Statements and Factors That May Affect Future

Results and Financial Condition below. The following discussion should be read in conjunction with our

financial statements and notes thereto included in this report. Our fiscal year end is March 31. All

information presented herein is based on the three and nine month periods ended December 31, 2016 and

December 31, 2015.

DISCUSSION AND ANALYSIS

Mobetize is an emerging Fintech ( mobile delivery of banking and other financial services ) company that

digitizes bricks and mortar financial services to enable the convergence of global telecom and financial

services providers through its Global Mobile B2B Fintech and Financial as a Service Marketplace

("Hub").  This Hub provides among other things, a mobile financial services ("MFS") white label

technology platform, that includes an individual MFS application program interface ("API") consumption

protocol that supports services such as personal loan applications, prepaid air-time and data top ups,

international money transfers, P2P transfers, Visa ™ /MasterCard ™ programs and bill payments on

personal computers and mobile devices ("Services").  The Hub seamlessly integrates with our customers

who can then offer our services to their own customers. Over the three and nine month period ended

December 31, 2016, we entered into the following agreements:

GF Financial Group – On September 27, 2016, effective September 20, 2016, we entered into a Software

Application License, Customization Development and Service Level Agreement with GF Financial Group

to partner in offering a mobile personal lending facility with omni-channel capabilities to its customers

built on our Fintech platform. GF Financial customers will be able to apply for and be approved for

personal loans initiated from their mobile devices. A roll out of the application is planned for the first

quarter of 2017.

CPT Joint Venture – On January 12, 2017, we entered into a Joint Venture Agreement with CPT Secure

Inc. to develop payment processing technology. Mobetize agreed to issue 500,000 Series B Preferred

Shares to CPT in consideration for the license of CPT technology to the joint venture. The license has a

two year term that can be automatically renewed for successive two year periods unless either party elects

not to renew 60 days prior to expiration. The joint venture will be formed in the first quarter of 2017.

Tata Communications – On February 1, 2017, dated effective December 15, 2016, we entered into a

Software Application License, Customization Development and Service Level Agreement with Tata

Communications (America) Inc. to govern the global deployment of our Services for its customers. The

parties agreed to a five-year strategic partnership from which we expect to generate revenue from service

level support fees and the sharing of transactional income; advance our technology alliance to accelerate

new Fintech revenue sharing opportunities; and focus our research and development partnership on

Fintech product innovation. The parties expect progress with the partnership in the first quarter of 2017.

Our business plan for the coming year is to complete the development and qualification of products under

development, and to increase sales of our existing products. Meanwhile, we will continue internal

research and development efforts and collaborate with development partners to ensure the continuity of

our product pipeline as we maintain our focus on the convergence of telecom and financial services.

16


RESULTS OF OPERATIONS

US $

US $

Three Months Ended

Nine months Ended

December 31,

December 31,

2016

2015

2016

2015

Revenues

$

149,138

$

74,383  $

365,386 $

81,460

Operating Expenses

290,093

1,007,340

1,112,138

1,727,763

Net Loss

(140,955)

(932,957)

(746,752)

(1,646,303)

Revenues

Mobetize generated $365,386 of revenue in the nine months ended December 31, 2016, compared to

revenues of $81,460 during the same period in 2015, an increase of 349%.  For the three months ended

December 31, 2016, Mobetize generated $149,138 of revenue compared to $74,383 of revenue during the

same period in 2015, an increase of 100%.  Revenues are generated from licensing our Services,

providing professional services, and payment processing for our customers. The increase in revenues over

the comparative three and nine month periods can be attributed to an increase in contract development

revenue and professional service receipts in the current three and nine month periods over the

corresponding prior periods.

We expect that revenues will continue to increase in future periods as Mobetize anticipates its first

transactional revenues in the first half of the calendar year 2017.

Operating Expenses

Operating expenses for the three and nine months ended December 31, 2016 and 2015 are outlined in the

following table:

US $

US $

Three Months Ended

Nine months Ended

December 31,

December 31,

2016

2015

2016

2015

Depreciation

777

918

2,377

2,349

Director compensation

3,000

-

30,000

-

General and administrative

51,278

76,211

178,988

189,627

General and administrative – related party

19,747

1,811

74,053

3,973

Investor relations and promotion

15,684

22,711

65,209

29,866

Listing fees

3,467

10,629

12,821

31,820

Consulting fees

-

104,444

21,000

278,289

Management fees – related party

29,859

30,000

98,149

90,000

Professional fees

21,015

17,986

117,720

55,996

Research and development

65,834

93,643

232,431

330,259

Research and development - related party

38,977

32,986

97,027

45,822

Sales and marketing

861

15,248

8,130

69,009

Share compensation

-

-

7,200

-

Stock-based compensation expense

39,594

600,753

167,033

600,753

Total Operating Expenses

290,093

1,007,340

1,112,138

1,727,763

NET LOSS

$

(140,955)  $

(932,957)   $     (746,752)   $   (1,646,303)

NET LOSS PER SHARE

Basic and Diluted

$

(0.01)  $

(0.03)   $

(0.03)   $

(0.05)

For the nine months ended December 31, 2016, operating expenses were $1,112,138 compared with

17


$1,727,763 for the nine months ended December 31, 2015, a decrease of 36%. The $615,625 decrease is

primarily attributed to a $257,289 decrease in consulting fees, a $30,390 decrease in management fees

due to the departure of a former executive officer, a $97,828 decrease in research and development costs

as products under development matured to commercial application, a $60,879 decrease in sales and

marketing, and a $433,720 decrease in stock based compensation as Mobetize moves away from issuing

equity in lieu of cash compensation. The decrease in operating expenses was offset by an increase of

$30,000 in Director compensation, an increase in general and administrative expenses paid to a related

party due to the interest expense on promissory notes, a $35,343 increase in investor relations costs

related to a new investors relations contract, a $61,724 increase in professional fees most of which is

related to public company disclosure, and a $51,205 increase in research and development costs incurred

to a related party.

For the three months ended December 31, 2016, operating costs were $290,093 compared with

$1,007,340 for the three months ended December 31, 2015, a decrease of 71%. The $717,247 decrease is

primarily attributed to a $89,585 decrease consulting fees paid to a former executive officer, and a

$561,159 decrease in stock based compensation as Mobetize moves away from issuing equity in lieu of

cash compensation. The decrease in operating expenses was offset by a $17,936 increase in general and

administrative expenses paid to a related party due to interest expense on promissory notes.

We expect that operating expenses will increase over future periods as Mobetize expands its business to

focus on joint research and development activities, enhance its product pipeline, and grow its revenue

model to include transactional sales in 2017.

Net Losses

During the nine months ended December 31, 2016, Mobetize recorded a net loss of $746,752 compared

with a net loss of $1,646,303 for the nine months ended December 31, 2015, a decrease of 55%. The

$899,551 decrease in the net loss is primarily due to the $283,926 increase in revenues, and the $615,625

decrease in total operating costs.

During the three months ended December 31, 2016, Mobetize recorded a net loss of $140,955 compared

with a net loss of $932,957 for the three months ended December 31, 2015, a decrease of 85%. The

$792,002 decrease in the net loss is primarily attributed to a $74,755 increase in revenues and the

$717,247 decrease in total operating costs.

We believe that net losses will continue to diminish over future periods as revenue is expected to grow the

effect of operating efficiencies on our business are carefully monitored to ensure the most cost effective

realization of our business plan.

Liquidity and Capital Resources

US $

December 31, 2016

March 31, 2016

Current Assets

$

145,769 $

318,827

Total Assets

154,877

330,655

Current Liabilities

856,438

541,185

Total Liabilities

856,438

588,661

Working Capital Deficiency

710,669

222,358

18


Mobetize had a working capital deficit of $710,669 as of December 31, 2016, and has funded its cash

needs since inception with revenues generated from operations, debt instruments and private equity

placements. Existing working capital and anticipated cash flow are not expected to be sufficient to fund

operations over the next twelve months.

Total current assets as of December 31, 2016, were $145,769 which consisted of $49,482 in cash, $44,723

in accounts receivable, $45,015 in prepaid expenses and deposits and $6,549 in prepaid expenses to a

related party. Total assets were $154,877 which consisted of current assets, and property and equipment

of $9,108.

Total current liabilities as of December 31, 2016, were $856,438 which consisted of accounts payable of

$202,443, accounts payable to a related party of $208,520, deposits due to customers of $980, a

promissory note due to a related party of $43,620 and convertible debentures of $340,000. Total liabilities

were $856,438 which consisted entirely of current liabilities.

Stockholders' deficit as of December 31, 2016, was $701,561.

Cash Flows

US $

Nine months Ended

December 31,

2016

2015

Cash flows used in Operating Activities

(284,185)

(1,055,746)

Cash flows used in Investing Activities

-

(1,554)

Cash flows provided by Financing Activities

122,587

872,757

Effect of exchange rate changes on cash

739

(2,711)

Net Increase in Cash During Period

(160,859)

(187,254)

Cash flows used in Operating Activities

During the nine months ended December 31, 2016, Mobetize used $270,786 in operating activities as

compared to $1,055,746 of cash used in operating activities during the nine months ended December 31,

2015.  The $771,561 change in cash used in operating activities over the comparative periods, is primarily

attributed to a number of items that are book expense items which do not affect the total amount relative

to actual cash used including depreciation, share based compensation, interest accrued on shareholder

loans, and shares issued to settle a promissory note with a related party. Balance sheet accounts that

actually affect cash, but are not income statement related items that are added or deducted to arrive at net

cash used in operating activities, include accounts receivable, shareholder loans, accounts payable and the

related party promissory note.

Mobetize expects to continue to use cash flow in operating activities until such time as diminishing losses

transition to profit on the expectation that revenues will continue to increase.

Cash flows used in Investing Activities

During the nine months ended December 31, 2016, Mobetize used $nil in investing activities compared to

$1,554 in 2015. Cash used in investing activities during the nine months ended December 31, 2015 was

due to purchase of computer equipment.

Mobetize expects to use cash flow in investing activities in future periods as it will require additional

investment to increase revenue.

19


Cash flows provided by Financing Activities

During the nine months ended December 31, 2016, Mobetize realized $122,587 in proceeds provided by

financing activities compared to $872,757 during the nine months ended December 31, 2015. Proceeds

provided by financing activities during the nine months ended December 31, 2016, were primarily from

the issuance of convertible debentures in the amount of $65,000, the issuance of a promissory note to a

related party, net of prepaid interest in the amount of $44,188. Proceeds provided by financing activities

during the nine months ended December 31, 2015 consisted of proceeds from the sale of common stock

and the exercise of warrants in the amount of $619,667, proceeds from the sale of common stock and the

exercise of warrants by related parties in the amount of $228,240.

Mobetize expects to continue to realize cash flow from financing activities until such time as it can

increase revenue to the point at which it can maintain operations and fund business growth.

FINANCING

We have financed operations to date from the proceeds of private placements of common stock, the

exercise of warrants, the issuances of convertible debentures, and advances from directors and

shareholders. Our business plan does anticipate increases in operating expenses and capital expenditures

over the next twelve months in relation to: (i) product development; (ii) research and development to

enhance existing products and innovate new ones; and (iii) marketing expenses. We expect that our

working capital requirements will be funded over this period by a combination of revenue, shareholder

debt or equity private placements of our securities and if necessary, shareholder loans.

Despite our expectation, we have no agreements to obtain funds through bank loans, lines of credit or any

other sources. Since we have no financing committed, our inability to realize financing to maintain

operations and grow our business would materially restrict our business operations. Financing may not be

available upon acceptable terms, or at all. Should we be successful in securing future financing new

issuances of equity or convertible debt would dilute our current shareholders and might have rights,

preferences or privileges senior to our common or preferred stock. If financing is not available to us, such

severe limitation might cause us to consider a consolidation of existing common equity as a means to

attract financing and maintain our business.

Mobetize has adopted a stock option plan pursuant to which it can grant up to 3,000,000 options to

purchase shares of its common stock to employees, directors, officers, consultants or advisors on the

terms and conditions set forth therein. As of December 31, 2016, 2,060,000 options with an exercise price

of $0.60 had been granted, 1,469,500 of which have vested. Except for the 2015 Stock Option Plan,

Mobetize has no other defined benefit plan with any of its officers or directors.

Mobetize has no lines of credit or other bank financing arrangements in place.

Mobetize has no commitments for future capital expenditures that are material.

Mobetize has no current plans for the purchase or sale of any plant or equipment.

Mobetize has no current plans to make any changes in the number of employees.

Mobetize does not expect to pay cash dividends in the foreseeable future.

20


OFF-BALANCE SHEET ARRANGEMENTS

As of December 31, 2016, we did 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.

GOING CONCERN

The independent auditors' report accompanying our March 31, 2016, financial statements contained an

explanatory paragraph expressing substantial doubt about our ability to continue as a going concern.

These consolidated financial statements have been prepared on a going concern basis, which implies that

Mobetize will continue to realize its assets and discharge its liabilities in the normal course of business.

As of December 31, 2016, Mobetize had an accumulated deficit of $7,071,813, a history of net losses and

cash used in operating activities, and a working capital deficiency of $710,669. These factors raise

substantial doubt regarding Mobetize's ability to continue as a going concern. The continuation of

Mobetize as a going concern is dependent upon continued financial support from management, increasing

revenue, procuring additional debt or equity financing as necessary, decreasing operating costs, realizing

commercially viable products, and generating a profit. These financial statements do not include any

adjustments to the recoverability and classification of recorded asset amounts and classification of

liabilities that might be necessary should Mobetize be unable to continue as a going concern.

CRITITCAL ACCOUNTING POLICIES

Our significant accounting policies are summarized in Note 2 to our financial statements. While the

selection and application of any accounting policy may involve some level of subjective judgments and

estimates, we believe the following accounting policies are the most critical to our financial statements,

potentially involve the most subjective judgments in their selection and application, and are the most

susceptible to uncertainties and changing conditions.

Mobetize recognizes revenue from payment processing, licensing, and provision of professional services.

Revenue will be recognized only when the price is fixed and determinable, persuasive evidence of an

arrangement exists, the service has been provided, and collectability is reasonably assured.

Stock-Based Compensation

Mobetize records stock-based compensation in accordance with ASC 718, Compensation – Stock

Compensation, which requires the measurement and recognition of compensation expense based on

estimated fair values for all share-based awards made to employees and directors, including stock options.

ASC 718 requires companies to estimate the fair value of share-based awards on the date of grant using

an option-pricing model. Mobetize uses the Black-Scholes option-pricing model as its method of

determining fair value. This model is affected by Mobetize's stock price as well as assumptions regarding

a number of subjective variables. These subjective variables include, but are not limited to Mobetize's

expected stock price volatility over the term of the awards, and actual and projected employee stock

option exercise behaviors. The value of the portion of the award that is ultimately expected to vest is

recognized as an expense in the consolidated statement of loss and comprehensive loss over the requisite

service period. Options granted to consultants are valued at the fair value of the equity instruments issued,

or the fair value of the services received, whichever is more reliably measurable.

21


Embedded Conversion Features

Mobetize evaluates embedded conversion features within convertible debt under ASC 815 Derivatives

and Hedging to determine whether the embedded conversion feature(s) should be bifurcated from the host

instrument and accounted for as a derivative at fair value with changes in fair value recorded in income

(loss). If the conversion feature does not require derivative treatment under ASC 815, the instrument is

evaluated under ASC 470-20, Debt with Conversion and Other Options for consideration of any

beneficial conversion feature.

Derivative Financial Instruments

Mobetize does not use derivative instruments to hedge exposures to cash flow, market, or foreign

currency risks. Mobetize evaluates all of it financial instruments, including stock purchase warrants and

stock options, to determine if such instruments are derivatives or contain features that qualify as

embedded derivatives.

For derivative financial instruments that are accounted for as liabilities, the derivative instrument is

initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair

value reported as charges or credits to income (loss). For option-based simple derivative financial

instruments, Mobetize uses the Black-Scholes option-pricing model to value the derivative instruments at

inception and subsequent valuation dates. The classification of derivative instruments, including whether

such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting

period.

Beneficial Conversion Feature

For conventional convertible debt where the rate of conversion is below market value, Mobetize records a

Beneficial Conversion Feature and related debt discount.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required of smaller reporting companies.

22


ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act

of 1934, as amended ("Exchange Act"), are designed to ensure that information required to be disclosed

in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported

within the time periods specified in rules and forms adopted by the Securities and Exchange Commission

("Commission"), and that such information is accumulated and communicated to management, including

the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required

disclosures.

Based on that evaluation, Mobetize's management concluded, as of the end of the period covered by this

report, that our disclosure controls and procedures were not effective in recording, processing,

summarizing, and reporting information required to be disclosed, within the time periods specified in the

Commission's rules and forms, and that such information was not accumulated and communicated to

management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely

decisions regarding required disclosures.

Changes in Internal Controls over Financial Reporting

During the quarter ended December 31, 2016, there has been no change in internal control over financial

reporting that has materially affected, or is reasonably likely to materially affect our internal control over

financial reporting.

23


PART II. –- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Management is not aware of any legal proceedings contemplated by any governmental authority or any

other party involving us or our properties. As of the date of this report, no director, officer or affiliate is

(i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal

proceedings. Management is not aware of any other legal proceedings pending or that have been

threatened against us or our properties except as follows below:

Stephen J. Fowler

Mobetize received a Citation and Notice of Assessment dated October 14, 2016 ("Citation"), that Stephen

J. Fowler ("Fowler"), its former CFO, had initiated a complaint with the State of Washington Department

of Labor and Industries for amounts allegedly due to him for unpaid wages. The Citation declared that

Fowler is owed $45,000 in wages in addition to an assessed interest of $3,368.74, and a penalty of

$4,500.  On November 8, 2016, Mobetize entered an appeal alleging that the calculation of amounts due

to Fowler was incorrect and that Fowler had improperly obtained shares of its common stock which it

intends to recover. Mobetize received a response from the Department of Labor and Industries dated

November 18, 2016, in which it was advised that Fowler's claim had been transferred to the Office of the

Attorney General and that a hearing on the matter would be requested of the Office of Administrative

Hearings. A date for the hearing is yet to be assigned.

ITEM 1A.    RISK FACTORS

A smaller reporting company, as defined by Item 10 of Regulation S-K, is not required to provide the

information required by this item.

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

On November 21, 2016, our board of directors authorized the issuance of a convertible debenture to

Donald Duberstein convertible into shares of Mobetize's common stock for an aggregate amount of

$20,000, net of $2,400 in pre paid interest of 6% over a one year term convertible at the option of holder

after 180 days of issuance at a $0.25 per share pursuant to the exemptions from registration provided by

Section 4(2) and Regulation D of the Securities Act of 1933, as amended ("Securities Act").

Mobetize complied with the exemption requirements of Section 4(2) of the Securities Act based on the

following factors: (1) the issuance was an isolated private transaction by Mobetize that did not involve a

public offering; (2) the offeree had access to the kind of information which registration would disclose;

and (3) the offeree was a director of Mobetize and (4) the offeree was financially sophisticated.

Mobetize complied with the requirements of Regulation D of the Securities Act by: (i) foregoing any

general solicitation or advertising to market the securities; (ii) offering only to accredited offerees; (iii)

having  not  violated  antifraud  prohibitions  with  the  information  provided  to  the  offerees;  (iv)  being

available to answer questions by the offerees; and (v) providing restricted common shares and warrants to

the offerees.

On December 1, 2016, our board of directors authorized the issuance of 275,000 Series B Preferred

Shares to Kent Carasquero at a price of $0.10 per share to settle $27,500 due for agreed services pursuant

to the exemptions from registration provided by Section 4(2) and Regulation S of the Securities Act.

24


Mobetize complied with the exemption requirements of Section 4(2) of the Securities Act based on the

following factors: (1) the issuance was an isolated private transaction by the Company that did not

involve a public offering; (2) the offeree had access to the kind of information which registration would

disclose; and (3) the offeree was financially sophisticated.

Mobetize complied with the requirements of Regulation S of the Securities Act by having directed no

offering efforts in the United States, by offering preferred shares and only to an offeree who were outside

of the United States at the time of the offering, and ensuring that the offeree to whom the securities were

offered and authorized was a non-U.S. offerees with an address in a foreign country.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibits required to be attached by Item 601 of Regulation S-K are listed in the Index to Exhibits on

page 27 of this Form 10-Q, and are incorporated herein by this reference.

25


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this

report to be signed on its behalf by the undersigned, thereunto duly authorized.

MOBETIZE CORP.

DATE

/s/ Ajay Hans

February 14, 2017

By: Ajay Hans

Its: Chief Executive Officer and Chief Financial Officer

26


INDEX TO EXHIBITS

Exhibit No.     Exhibit Description

3.1*

Articles of Incorporation, incorporated hereto by reference to the Form S-1, filed with the Commission on

May 30, 2012.

3.1.1*

Certificate of Amendment filed on August 8, 2013 incorporated by reference to the Form 8-K filed with the

Commission on August 15, 2013.

3.1.2*

Certificate of Designation Series A Preferred filed on February 4, 2016, incorporated by reference to the

Form 8-K filed with the Commission on February 11, 2016.

3.1.3*

Certificate of Amended Designation Series A Preferred filed on May 20, 2016, incorporated by reference to

the Form 8-K filed with the Commission on June 3, 2016.

3.1.4*

Certificate of Designation Series B Preferred filed on May 23, 2016, incorporated by reference to the Form 8-

K filed with the Commission on June 3, 2016.

3.1.5*

Certificate of Amended Designation Series B Preferred filed on May 31, 2016, incorporated by reference to

the Form 8-K filed with the Commission on June 3, 2016.

3.2*

Bylaws, incorporated by reference to the Form S-1, filed with the Commission on May 30, 2012.

3.2.1*

Amended Bylaws, incorporated by reference to the Form 8-K filed with the Commission on February 11,

2016.

10.1*

Management Services Agreement between Mobetize and Alligato, Inc. dated June 1, 2013, incorporated by

reference to the Form 8-K filed with the Commission on September 16, 2013.

10.2*

Management Services Agreement between Mobetize and 053574 BC Ltd. dated June 1, 2013, incorporated

hereto by reference to the Form 8-K filed with the Commission on September 16, 2013.

10.3*

Consulting Agreement between Mobetize and Stephen Fowler dated July 15, 2013, incorporated hereto by

reference to the Form 8KA filed with the Commission on October 28, 2013.

10.4*

Assignment of Debt Agreement between Mobetize and Stephen Fowler dated April 4, 2012, incorporated by

reference to the Form 8-K/A filed with the Commission on November 22, 2013.

10.5*

License Assignment Agreement between Telepay, Inc. and Baccarat Overseas Ltd. dated August 21, 2012,

incorporated by reference to the Form 8-K filed with the Commission on September 16, 2013.

10.6*

Consulting agreement between Mobetize and Tanuki Business Consulting, Inc. dated September 23, 2013,

incorporated by reference to the Form 8-K filed with the Commission on October 1, 2013.

10.7*

Consulting Agreement between Mobetize and Hugo Cuevas-Mohr dated October 1, 2013, incorporated by

reference to the Form 8-K filed with the Commission on March 18, 2014.

10.8*

Consulting agreement between Mobetize and Institutional Marketing Services, Inc. dated November 13,

2013, incorporated by reference to the Form 8-K filed with the Commission on March 18, 2014.

10.9*

Form of Subscription Agreement with the Subscribers dated June 25, 2014, incorporated by reference to the

Form 10-K filed with the Commission on June 30, 2014.

10.10*

Management Consulting Agreement between Mobetize Corp. and Ajay Hans dated July 1, 2014, incorporated

by reference to the Form 10-K/A filed with the Commission on July 13, 2016.

10.11

Software Application License, Customization Development and Service Level Agreement dated September

20, 2016, between Mobetize and GF Financial Group (certain commercial terms have been omitted in

connection with an application pending with the Commission for confidential treatment).

10.12

Joint Venture Agreement dated January 17, 2017 between Mobetize and CPT Secure Inc.

10.13*

Software Application License, Customization Development and Service Level Agreement dated February 1,

2017, effective December 15, 2016, between Mobeitze USA Inc. and Tata Communications (America) Inc.

incorporated by reference to the Form 8-K filed with the Commission on February 6, 2017 (certain

commercial terms have been omitted in connection with an application pending with the Commission for

confidential treatment).

14 *

Code of Business Conduct and Ethics adopted by Mobetize Corp.'s Board of Directors on July 26, 2016,

incorporated by reference to the Form 10-Q filed with the Commission on August 12, 2016.

21*

Subsidiaries of Mobetize incorporated by reference to the Form 10-K/A filed with the Commission on July

13, 2016

31

Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14 of the

Exchange Act as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, attached.

32 .

Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350

as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, attached.

99*

2015 Mobetize Stock Option Plan dated August 10, 2015, incorporated by reference to the Form 8-K filed

with the Commission on August 11, 2015.

101. INS

XBRL Instance Document †

101. PRE

XBRL Taxonomy Extension Presentation Linkbase †

101. LAB

XBRL Taxonomy Extension Label Linkbase †

101. DEF

XBRL Taxonomy Extension Label Linkbase †

101. CAL

XBRL Taxonomy Extension Label Linkbase †

101. SCH

XBRL Taxonomy Extension Schema †

*

Incorporated by reference to previous filings of the Company.

Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed "furnished" and not "filed"

or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933,

or deemed "furnished" and not "filed" for purposes of Section 18 of the Securities and Exchange Act of 1934,

and otherwise is not subject to liability under these section.

27