Current Report Filing (8-k)

Share Name	Share Symbol	Market	Type
iWallet Corporation (PK)	USOTC:IWAL	OTCMarkets	Common Stock

	Price Change	% Change	Share Price	Bid Price	Offer Price	High Price	Low Price	Open Price	Shares Traded	Last Trade
	0.00	0.00%	0.017	0.017	0.017				0.00	01:00:00

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): July 21, 2014

iWallet Corporation

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

Nevada	27-1830013
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

7394 Trade Street, San Diego, California 92121

(Address of principal executive offices)

1-858-530-2958

(Issuer’s telephone number)

Queensridge Mining Resources, Inc., 10975 East 47^th Ave., Denver, CO 80239

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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TABLE OF CONTENTS

		Page
Item 1.01.	Entry into a Material Definitive Agreement	3
		4
Item 2.01.	Completion of Acquisition or Disposition of Assets

	Acquisition	4
	Description of Our Company	5
	Management’s Discussion and Analysis	7
	Risk Factors	12
	Directors and Executive Officers	15
	Executive Compensation	17
	Security Ownership of Certain Beneficial Owners and Management	18
	Certain Relationships and Related Transactions	19

Item 3.02.	Unregistered Sales of Equity Securities	22

Item 5.01.	Changes in Control of Registrant.	22

Item 5.02.	Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers	22

Item 5.03.	Amendments to Articles of Incorporation or Bylaws Change in Fiscal Year	22

Item 5.06.	Change in Shell Company Status	23

Item 9.01.	Financial Statements and Exhibits

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Section 1 – Registrant’s Business and Operations

Item 1.01 Entry Into a Material Definitive Agreement

On July 21, 2014, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with iWallet Corporation, a private California corporation (“iWallet”), and our subsidiary formed for the purposes of the transaction, iWallet Acquisition Corp. (the “Acquisition Sub”). Pursuant to the Merger Agreement, iWallet merged with and into the Acquisition Sub, which resulted in iWallet becoming our wholly-owned subsidiary (the “Acquisition”). Immediately following the Acquisition, the Acquisition Sub was merged with and into our corporation. In connection with this subsequent subsidiary merger, we changed our corporate name to “iWallet Corporation.”

In addition, pursuant to the terms and conditions of the Merger Agreement:

The holders of all of the capital stock of iWallet issued and outstanding immediately prior to the closing of the Acquisition exchanged their shares on a pro-rata basis for 10,000,000 newly-issued shares of our common stock.

Following the closing of the Acquisition, our former controlling shareholder, Philip Stromer, and several other individuals canceled and returned a total of 25,076,643 shares of common stock.

As a result, immediately following the Acquisition, there were 29,321,379 shares of our common stock issued and outstanding.

Our sole officer and director immediately prior to the Acquisition, Jerry Chatel, resigned from the board and from all offices.

Steven Cabouli, who was the sole director of iWallet prior to the Acquisition, was appointed as our new sole director.

Our board appointed the following new officers and directors, each of who had served in the same capacity as an officer of iWallet prior to the acquisition:

Steven Cabouli, President, Chief Executive Officer, and Chief Financial Officer
Orlando LaCalle, Chief Marketing Officer

Concurrently with the Acquisition, our former controlling shareholder, Philip Stromer, received a transfer of all assets and agreed to cancel and/or assume all liabilities related to our pre-acquisition business.

As of the date of the Merger Agreement and currently, there are no material relationships between us or any of our affiliates and iWallet, other than with regard to the Merger Agreement.

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The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Merger Agreement, which is filed as Exhibit 2.1 hereto and incorporated herein by reference.

Section 2 – Financial Information

Item 2.01. Completion of Acquisition or Disposition of Assets

As used in this Current Report on Form 8-K, all references to the “Company,” “iWallet,” “we,” “our” and “us” or similar terms, refer to iWallet Corporation, a Nevada corporation, including its predecessors and its subsidiaries, except where the context makes clear that the reference is only to iWallet. Information about the Company and the principal terms of the Acquisition are set forth below.

Acquisition

The Acquisition. On July 21, 2014, in accordance with the Merger Agreement iWallet merged with and into the Acquisition Sub, which resulted in iWallet becoming our wholly-owned subsidiary. Immediately following the Acquisition, the Acquisition Sub was merged with and into our corporation. In exchange for all of the issued and outstanding shares of iWallet, the shareholders of iWallet received a total of 10,000,000 shares of our common stock. In addition, the holders of certain secured convertible debentures issued by iWallet received 3,222,120 shares of our common stock, subscribers in a private offering made contingent upon the Acquisition received 6,479,002 shares of common stock, and brokers participating in the private offering received 583,110 shares of common stock as compensation

There were 34,113,790 shares of our common stock outstanding before giving effect to the stock issuances in and related to the Acquisition and the cancellation of 25,076,643 shares by Mr. Philip Stromer and certain other shareholders. Following these events, there were 29,321,379 shares outstanding, including:

	Shares		Held by:
	10,000,000		former iWallet shareholders
	9,037,147		existing shareholders
	3,222,120		former iWallet debenture holders
	6,479,002		subscribers in private offering
	583,110		brokers assisting with private offering
	29,321,379

The issuance of shares of our common stock to the former holders of iWallet’s capital stock and convertible debentures in connection with the Acquisition was not registered under the Securities Act of 1933, as amended (the “Securities Act”), but was performed in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act and/or Regulation D promulgated under that section, which exempts transactions by an issuer not involving any public offering. Further, our private offering Units consisting of shares and warrants, at $0.60 per Unit, was made in reliance upon Rule 506 under Regulation D.

Prior to the Acquisition, there were no material relationships between us and iWallet, or any of their respective affiliates, directors or officers, or any associates of their respective officers or directors, other than as disclosed in this Current Report.

General Changes Resulting from the Acquisition. Following the Acquisition, we intend to carry on the business of iWallet as our sole line of business. We have relocated our principal executive offices to 7394 Trade Street, San Diego, California 92121. Our telephone number is now 1-858-530-2958.

Changes to the Board of Directors. Jerry Chatel resigned as our sole officer and director. Pursuant to the terms of the Merger Agreement, the officers and directors of iWallet prior to the Acquisition were appointed as our officers and directors.

All directors hold office for one-year terms until the election and qualification of their successors. Officers are elected by the board of directors and serve at the discretion of the board.

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Accounting Treatment; Change of Control. The Acquisition is being accounted for as a “reverse acquisition,” as the stockholders of iWallet possess majority voting control of the company immediately following the Acquisition and now control our board of directors. iWallet is deemed to be the accounting acquirer in the reverse acquisition. Consequently, the assets and liabilities and the historical operations of iWallet prior to the Merger will be reflected in the financial statements and will be recorded at the historical cost basis of iWallet. Our consolidated financial statements after completion of the Acquisition will include the assets and liabilities of both companies, the historical operations of iWallet, and our operations from the closing date of the Acquisition. Following the Acquisition our fiscal year-end has been changed from June 30 to December 31. As a result of the issuance of the shares of our common stock pursuant to the Acquisition, a change in control of the Company occurred on July 21, 2014. Except as described herein, no arrangements or understandings exist among present or former controlling stockholders with respect to the election of members of our board of directors and, to our knowledge, no other arrangements exist that might result in a future change of control of the Company. We will continue to be a “small business issuer,” as defined under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), following the Acquisition.

Description of Our Company

Company Overview

We were incorporated as “Queensridge Mining Resources, Inc.” on January 29, 2010, in the State of Nevada for the purpose of engaging in mineral exploration. On July 21, 2014, we entered into the Merger Agreement with iWallet, whereby we acquired all of the issued and outstanding common stock of iWallet through a subsidiary. Following the Acquisition, we merged the subsidiary with and into our corporation, and changed our name to “iWallet Corporation” as part of that process. As a consequence of the Acquisition, we will no longer pursue the exploration and development of our mineral property. We have assigned our mineral claim and all related assets to our former majority shareholder who has agreed to indemnify us against any related liabilities.

As a result of entering into the Merger Agreement, we are now in the business of designing and developing biometric locking wallets and related physical, personal security products.

Description of Business

iWallet is a designer and developer of innovative, physical, personal security products that incorporate the latest security and communication technologies to protect against identity, personal and financial information theft. iWallet is a registered trademark in the United States. The flagship iWallet product is a biometric locking wallet that protects cash, credit cards and personal information with a proprietary fingerprint security system. The iWallet features a carbon fiber or aluminum chassis and protects credit cards from being read by many types of RF devices in public spaces. Using a free app, iWallet owners can tether the iWallet to a supported smart device. A proximity alarm sounds on both devices when separated by about five meters. In addition, GPS tracking capabilities are expected to be available on future models.

iWallet is based in San Diego, California and was founded in 2009. The initial version of the iWallet generated sales of over $700,000 in the first eighteen months following it launch. With improved designs and a better manufacturing partner, iWallet is ready to re-launch the product on a larger scale. Established sales channels include Neiman Marcus in North America, Harrods in England, Travelsmith.com, Highline Peak Group in Canada, Skymall, Gourji in Russiaand NeedItWantItGadgets in New Zealand. iWallet owns the trademark “iWallet” for wallets and wallets connected to smartphones in the USA and has patents worldwide. iWallet has been licensed by Apple Inc. as an official Accessory Developer.

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Products and Technology

At this time, iWallet is preparing to re-launch its flagship product and the iWallet 2.0. The suggested retail price will be $490. The new iWallet are expected to have the following features:

Sleek, compact industrial design with carbon fiber case

Pairs with the owner’s cellular phone via bluetooth technology

Patented, exclusive tamper resistant locking mechanism utilizes innovative fingerprint biometric reader for unlocking

Unique latch control that only consumes power during latching hence providing extended battery life

RFID blocking capability for enhanced wireless protection

Speaker providing audible feedback

GPS tracking capabilities

Over the course of the next twelve months, iWallet intends to bring the following additional products to market:

An inexpensive aluminum “Best Buy” version” that is expected to retail for less than $150 and be offered in variety of colors to choose from with etching and engraving capabilities

A secure passport case called the iPassport

A women’s iWallet version

A secure mobile personal safe to store pharmaceuticals in

A smart “padlock” with a biometric reader for gym lockers and other personal areas that require security

iWallet holds over twenty patents and patent applications filed in various countries around the world. iWallet’s products are currently manufactured under contract by a manufacturer based in Zhuhai, China.

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Market and Competition Overview

iWallet’s primary target demographic will be consumers who are in the market for high-end luxury wallets and similar accessories. iWallet does not believe that the $500 approximate retail price to the end user will be obstacle for our initial target demographic. The carbon fiber process is labor intensive to manufacture. High net worth individuals appreciate the advantages of carbon fiber construction and spend tens of thousands of dollars outfitting their automobiles and other accessories. However, the more affordable aluminum version expected to retail for under $150 will be launched in 2015 once economies of scale are achieved.

A comparison of the iWallet to the leather or canvas wallets currently offered by several major fashion designers is below:

Brand	Model	Price	Material	Bluetooth (Anti-theft/loss)	Fingerprint Reader	RFID Anti-Theft	Owner Access Only
Cartier	Santos de Cartier	$380	Leather	No	No	No	No
Salvatore Ferragamo	Bifold	$350	Leather	No	No	No	No
Louis Vuitton	Classic	$565	Canvas	No	No	No	No
Gucci	Bifold	$550	Canvas	No	No	No	No
iWallet	Slim	$490	Carbon Fiber	Yes	Yes	Yes	Yes

We believe the security, high technology, slim design, and carbon fiber construction of the iWallet can position it to compete for a share of the luxury wallet market.

Employees

In addition to the named executive officers discussed above, we also employ a Project Manager. Upon the closing of this Offering or shortly thereafter, we plan to recruit and retain a new CEO, as well as an in-house bookkeeper. We do not have plans to add any other additional employees during 2014.

Description of Property

Our corporate headquarters are currently located in San Diego, California. We current lease approximately 3,000 square feet of space for $2,500 per month with a lease for one year that began on June 1, 2014.

Legal Proceedings

We are not a party to any material pending legal proceedings.

Compliance with Environmental Laws

We have not incurred and do not anticipate incurring any expenses associated with environmental laws.

Management’s Discussion and Analysis or Plan of Operation

THE FOLLOWING DISCUSSION SHOULD BE READ TOGETHER WITH THE INFORMATION CONTAINED IN THE FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE IN THIS CURRENT REPORT ON FORM 8-K.

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include those discussed in this Current Report on Form 8-K, particularly under the heading “Risk Factors”. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

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Sales, Distribution and Growth Strategy

Our plan for marketing and raising awareness for the iWallet includes the following strategies:

•

Sell and market at major trade shows that attract global buyers such as the CES.

•

Align iWallet with a high profile celebrity as the face for iWallet.

•

Optimize website to gain greater distributor inquiry, continued media attention and wider market accessibility through links to other major potential purchasers.

•

Continue worldwide media attention, primarily from BBC Worldwide, Fox News (Fox and Friends), Discovery Channel.

Our established distribution channels for the iWallet, as originally launched, include the following:

•

Neiman Marcus in North America

•

Harrods in England

•

In Canada for Centurion (black card) Amex members, who will be able to redeem points in exchange for an iWallet through Highline Peak Group

•

NeedItWantItGadgets in New Zealand

As of July 2014, the following are current prospective sales channels:

•

Private branding for Montblanc, Porsche Design, Ducatti, Gucci, and Bugatti. We are currently in partnering or licencing discussions with all of these companies.

•

Dufry, a global duty free company with 1,100 locations in 45 countries

•

Touch of Modern

•

Skymall

•

Travelsmith

•

Hammacher Schlemmer

iWallet plans to increase its consumer off take within newly gained distribution at major regional high-end department stores, and to expand to private brand stores. Together with its distribution partners, iWallet is targeting major national retail channels. We believe a partnership with any one leading national chain would be transformative. iWallet intends to develop its website towards wider market accessibility through links to other major potential purchasers. iWallet will continue to be featured in ingadget.com and gizmodo.com, where the iWallet has been dubbed “The Fort Knox of Wallets.” iWallet will also begin limited selling efforts in key international markets using further regional distributors in Europe, Asia, Canada, Australia, and South America. iWallet is also in discussions with distribution companies in key opportunity geographies.

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Results of Operations

Results of Operations for iWallet Corporation for the Years Ended December 31, 2013 and December 31, 2012

During the fiscal year ended December 31, 2013, we generated sales of $85,769. Our cost of sales was $63,585, resulting in gross profit of $22,184. Our expenses for the year ended 2013 were $253,352, and consisted of legal and professional fees of $73,278, office and general expenses of $9,583, travel expenses of $23,475, interest and bank fees of $2,515, amortization of intangible assets of $5,288, and a provision for loss on a contractual tooling commitment of $139,213. We also recorded a recovery of a provision for income taxes of $4,247. Our net loss for the year ended December 31, 2013 was $226,921. By comparison, during the year ended December 31, 2012, we generated sales of $159,288. Our cost of sales was $79,550, resulting in gross profit of $79,738. Our expenses for the year ended 2012 were $67,600, and consisted of legal and professional fees of $41,491, office and general expenses of $9,040, travel expenses of $6,786, interest and bank fees of $3,179, amortization of intangible assets of $3,904, and research and development expenses of $3,200. We also recorded a provision for income taxes of $4,247. Our net income for the year ended December 31, 2013 was $7,891.

Our sales during the year ended December 31, 2013 were lower than in the prior year due to manufacturing delays. In addition, our expenses were higher during the year ended December 31, 2013 than in the prior year primarily due to the provision for loss on a tooling commitment. On May 26, 2011, we signed a contract with a supplier under which we were required to pay for tooling costs in addition to our regular purchase orders (the "tooling commitment"). Under the terms of the tooling commitment we were required to pay for 30% of the contracted tooling costs upon execution (the "tooling commitment deposit") and the remaining 70% over the purchase of 5,000 units over a nine month period (the "tooling commitment liability"). If 5,000 units were not purchased within those nine months, then the remaining amount was due within thirty days. As of February 27, 2012, we had not reached the contracted level of purchases and an informal agreement to extend the period was made; however, by December 31, 2013 we had not complied and as a result, the entire amount would have been considered due. On August 24, 2013, we entered into a revised agreement with the supplier that extended the term another twelve months to August 24, 2014. During 2013, it was determined that based on the actual sales levels realized in 2013, we would likely not be able to meet the required orders to meet the 5,000 unit commitment. Accordingly, the deferred costs related to excess units was recognized as a provision for loss on the tooling commitment in the statement of operations and comprehensive income / (loss).

Results of Operations for iWallet Corporation for the Three Months Ended March 31, 2014 and March 31, 2013

During the three months ended March 31, 2014, we generated sales of 16,132. Our cost of sales was $16,946, resulting in gross loss of $814. Our expenses for the three months ended March 31, 2014 were $211,394, and consisted of legal and professional fees of $111,558, subcontractor fees of $62,100, office and general expenses of $11,375, travel expenses of $15,615, interest and bank fees of $5,466, amortization of intangible assets of $2,888, rent of $1,250, and research and development of $1,142. Our net loss for the three months ended March 31, 2014 was $212,208. By comparison, during the three months ended March 31, 2013, we generated sales of $17,491. Our cost of sales was $13,600, resulting in gross profit of $3,891. Our expenses for the three months ended March 31, 2014 were $154,620, and consisted of legal and professional fees of $8,075, office and general expenses of $1,954, travel expenses of $3,127, interest and bank fees of $467, amortization of intangible assets of $1,784, and a provision for a loss on a tooling commitment of $139,213. We also recorded a provision for income taxes of $4,247. Our net loss for the three months ended March 31, 2013 was $146,482.

Our expenses and net loss for the three months ended March 31, 2014 were larger than in the same quarter last year primarily due to increased legal and professional fees related to our preparations for becoming a public company.

Over the course of the current fiscal year, we expect that our sales will increase significantly as we launch the iWallet 2.0 and begin distribution of the product to various retailers and other outlets. During 2014, we also expect to make significant additional expenditures related to the continued development and expansion of our business. Furthermore, as a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. As a result of these factors, to achieve profitability we will need to, among other matters, significantly increase our customer base and our distribution channels. We cannot assure you that we will be able to increase our revenue in this manner and achieve profitability on a consistent basis. As we expect to continue to invest in the development of our business, this investment could outpace growth in our revenue, and thereby impair our ability to achieve and maintain profitability.

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Liquidity and Capital Resources of iWallet Corporation

As of March 31, 2014, we had current assets of $243,397, consisting of cash in the amount of $7,500, deposits and deferred costs of $130,613, inventory of $14,816, and a loan due from a shareholder of $90,468. Our current liabilities as of March 31, 2014 were $767,914, and consisted of the current portion of long term bank debt in the amount of $5,213, accounts payable of $113,048, accrued liabilities of $2,106, amounts due to a related party of $28,257, advances from an investor of $76,474, convertible debentures of $437,000, and a liability for a manufacturer tooling commitment of $105,816. Our working capital deficit as of March 31, 2014 was therefore $524,517.

In the months prior to the Acquisition, we engaged in a bridge financing transaction raising a total $663,000 through the sale of secured convertible promissory notes. Concurrent with the closing of the Acquisition, these notes converted to 3,222,120 shares of common stock and 3,222,120 warrants to purchase shares of common stock at a price of $0.20, exercisable for two years.

Our bank indebtedness consists of a line of credit with a limit of $35,000, secured by cash on deposit in a checking account. The line bears interest at a rate of prime plus 1.25%. As of December 31, 2013, the balance owed was $23,079 and as of March 31, 2014, 21,722.

As discussed herein, immediately upon closing of the Acquisition, we closed a private offering of Units at a price of $0.30 per Unit, each Unit consisting of one (1) share of common stock and one (1) warrant to purchase one share of common stock at a price of $0.60 per share, exercisable for two (2) years. A total of 6,479,002 shares of common stock and 6,479,002 warrants were issued to subscribers in the offering. The gross proceeds from the offering, prior to the deduction of agreed selling commissions and expenses, were $1,943,701. Net of broker’s commissions and expenses, we received net proceeds of $1,745,537.

As a result of the funds obtained through the offering, we believe that we have sufficient capital to execute our business development plan for the current year. In order to continue our growth and development plan over the longer term, however, we will require additional financing. Management is currently seeking additional equity financing in order to fund the long term development of the company. There can be no assurance that we will be successful in raising additional funding, either through increased sales and debt and/or other equity financing arrangements. If we are not able to secure significant additional funding, the long term implementation of our business plan will be impaired. There can be no assurance that such additional financing will be available to us on acceptable terms or at all.

Going Concern

We have experienced recurring losses from operations and had a working capital deficiency of $524,517 as of March 31, 2014. To date, we have not been able to produce sufficient sales to become cash flow positive and profitable on an ongoing basis. The success of our business plan during the next 12 months and beyond will be contingent upon generating sufficient revenue to cover our costs of operations and/or upon obtaining additional financing. For these reasons, our auditor has raised substantial doubt about our ability to continue as a going concern.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, results or operations, liquidity, capital expenditures or capital resources that is deemed material.

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Critical Accounting Policies

In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. As of March 31, 2014, we believe the following policies currently fit this definition:

Intangible assets

Patents and trademarks are measured at cost. Legal fees associated with patents and trademarks, which are expected to be issued are recorded as patents and trademarks on the balance sheets. Upon approval by the relevant patent office, the patents and trademarks are amortized over their respective expected lives. Patent and trademark costs associated with patents or trademarks which are not approved or are abandoned, are expensed in the period in which such patents are not approved.

The Company is generally able to maintain patents for up to 20 years from the effective date and the trademark registrations for as long as the trademarks remain in use and the required filings are made to keep them in use. However, based on the Company's assessment of potential innovation or other competing technological developments a useful life of ten years has been assessed for both the patents and the trademarks.

Software consists of costs relating to the development of the software behind the biometric scanning and the other security programs involved in the wallets. Costs relating to the development of this software are capitalized and amortized over its estimated useful life of ten years.

Topic 350-20, Goodwill, and 350-30, General Intangibles Other than Goodwill, in the Accounting Standards Codification ("ASC") requires intangible assets with a finite life be tested for impairment whenever events or circumstances indicate that the carrying amount of an asset (or asset group) may not be recoverable. An impairment loss would be recognized when the carrying amount of an asset exceeds the estimated discounted cash flow used in determining the fair value of the asset.

Product warranties

The Company offers a one year warranty on its products, which it provides for based on estimated warranty costs at the time of sale and accrues for specific items at the time their existence is known and the amounts are determinable. The Company estimates warranty costs using standard quantitative measures based on industry warranty claim experience and evaluation of specific customer warranty issues. The Company currently estimates warranty costs as approximately 4% of revenue.

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Risk Factors

The following are certain identifiable risk factors for iWallet’s business operations. Risk factors related to our former business operations have been excluded but can be found in prior filings with the Securities and Exchange Commission.

Risks Related to Our Business and Industry

Our failure to raise additional capital or generate the cash flows necessary to expand our operations and invest in our product offerings could reduce our ability to compete successfully and adversely affect our results of operations.

We will need to raise additional funds in order to execute on our business development plan over the long term. We may not be able obtain additional debt or equity financing on favorable terms, if at all. If we raise additional equity financing, our security holders may experience significant dilution of their ownership interests and the value of our common stock could decline. If we engage in debt financing, we may be required to accept terms that restrict our ability to incur additional indebtedness and force us to maintain specified liquidity or other ratios. If we cannot raise additional capital on acceptable terms, we may not be able to, among other things:

develop and enhance our products

develop our brand and acquire new customers

continue to expand our technology development, sales and marketing organizations

acquire complementary technologies, products or businesses

expand operations internationally

pay our debts as they come due

hire, train and retain employees

respond to competitive pressures or unanticipated working capital requirements

Our inability to do any of the foregoing could reduce our ability to compete successfully and adversely affect our results of operations.

Because we have experienced net losses to date, we may never be able to generate sufficient net revenue in the future to be profitable.

We have had net operating losses since inception and expect to continue experiencing net losses for the immediate future. In addition, we expect to make significant future expenditures related to the continued development and expansion of our business. Furthermore, as a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. As a result of these factors, to achieve profitability we will need to, among other matters, increase our customer base and our distribution channels. We cannot assure you that we will be able to increase our revenue in this manner and achieve profitability. As we expect to continue to invest in the development of our business, this investment could outpace growth in our revenue, and thereby impair our ability to achieve and maintain profitability.

Because we are dependent on outside manufacturers to produce our products, increases in manufacturing costs or component prices may negatively affect our operations

We currently rely on one manufacturer to manufacture our iWallet products to order. We are constrained by its manufacturing capabilities and pricing, and may face production delays or escalating costs if it is unable to manufacture a sufficient quantity of product at an affordable cost. Further, we could face production delays if it becomes necessary to replace our existing supplier with one or more alternative suppliers. These factors could have a material adverse effect on our business, prospects, and results of operations or financial condition. In addition, our operation could be significantly affected by increases in the cost of high quality carbon fiber or other raw materials necessary to manufacture our products.

Because there is an uncertain market for our products, we cannot be certain that they will gain wide acceptance or that we will be able to generate sustained sales growth.

While we believe that our innovative security products would be attractive to business professionals, we have only a limited operating history to determine the market acceptance for our products. No assurance can be given that a significant market for our products and services will be developed or sustained. If our iWallet security products do not gain wider acceptance amongst our target market, we will be unable to achieve sustained sales growth and our business may not be viable over the longer term.

Because the preservation of our intellectual property rights is essential to the success of our business, our failure to protect those rights could adversely affect our business.

Our intellectual property rights, including existing and future trademarks, patents, trade secrets and copyrights, are and will continue to be valuable and important assets of our business. We believe that our proprietary technology, as well as our other technologies and business practices, are competitive advantages and that any duplication by competitors would harm our business. We have taken measures to protect our intellectual property, but these measures may not be sufficient or effective. Intellectual property laws and contractual restrictions may not prevent misappropriation of our intellectual property or deter others from developing similar technologies. In addition, others may develop technologies that are similar or superior to our technology. Our failure to protect, or any significant impairment to the value of, our intellectual property rights could harm our business.

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Our products may contain defects, which could adversely affect our reputation and cause us to incur significant costs.

Defects may be found in our products. Any such defects could cause us to incur significant return and exchange costs, re-engineering costs, divert the attention of our personnel from product development efforts, and cause significant customer relations and business reputation problems. If we deliver products with defects, our credibility and the market acceptance and sales of our products could be harmed.

If we are unable to hire and retain key personnel, we may not be able to implement our business plan.

Having certain key personnel is essential to the development and marketing of the products we plan to sell and thus to the entire business itself. Consequently, the loss of any of those individuals may have a substantial effect on our future success or failure. We may have to recruit qualified personnel with competitive compensation packages, equity participation, and other benefits that may affect the working capital available for our operations. Management may have to seek to obtain outside independent professionals to assist them in assessing the merits and risks of any business proposals as well as assisting in the development and operation of many company projects. No assurance can be given that we will be able to obtain such needed assistance on terms acceptable to us. Our failure to attract additional qualified employees or to retain the services of key personnel could have a material adverse effect on our operating results and financial condition.

Even though we are not manufacturing the products ourselves, if any of the products we sell infringe on the intellectual property rights of others, we may find ourselves involved in costly litigation, which will negatively affect the financial results of our business operations.

Although we have not received notices of any alleged infringement, we cannot be certain that our products do not infringe on issued trademarks and/or copyright rights of others. We may be subject to legal proceedings and claims from time to time in our ordinary course of business arising out of intellectual property rights of others. These legal proceedings can be very costly, and thus can negatively affect the results of our operations.

Because we conduct business outside of the United States, we are subject to certain additional risks related to doing business in foreign countries.

We intend to conduct our business, in part, outside of the United States, and our products are manufactured under contract in China. Doing business in foreign countries carries with it certain risks that are not found in doing business in the United States. The risks of doing business in foreign countries that could result in losses against which we are not insured include:

exposure to local economic conditions;

potential adverse changes in the diplomatic relations of foreign countries with the United States;

hostility from local populations;

the adverse effect of currency exchange controls;

restrictions on the withdrawal of foreign investment and earnings;

government policies against businesses owned by foreigners;

investment restrictions or requirements;

expropriations of property;

the potential instability of foreign governments;

the risk of insurrections;

risks of renegotiation or modification of existing agreements with governmental authorities;

foreign exchange restrictions;

withholding and other taxes on remittances and other payments by subsidiaries; and

Changes in taxation structure.

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Risks Related to Legal Uncertainty

Because our articles of incorporation and bylaws and Nevada law limit the liability of our officers, directors, and others, shareholders may have no recourse for acts performed in good faith.

Under our articles of incorporation, bylaws and Nevada law, each of our officers, directors, employees, attorneys, accountants and agents are not liable to us or the shareholders for any acts they perform in good faith, or for any non-action or failure to act, except for acts of fraud, willful misconduct or gross negligence. Our articles and bylaws provide that we will indemnify each of our officers, directors, employees, attorneys, accountants and agents from any claim, loss, cost, damage liability and expense by reason of any act undertaken or omitted to be undertaken by them, unless the act performed or omitted to be performed constitutes fraud, willful misconduct or gross negligence.

If certain legislation, including the Sarbanes-Oxley Act of 2002, makes it more difficult for us to retain or attract officers and directors, we may be unable to hire such personnel and our business operations may be materially negatively impacted.

The Sarbanes-Oxley Act of 2002 was enacted in response to public concerns regarding corporate accountability in connection with recent accounting scandals. The stated goals of the Sarbanes-Oxley Act are to increase corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies, and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws. The Sarbanes-Oxley Act generally applies to all companies that file or are required to file periodic reports with the SEC, under the Securities Exchange Act of 1934. As a public company, we are required to comply with the Sarbanes-Oxley Act. The enactment of the Sarbanes-Oxley Act of 2002 has resulted in a series of rules and regulations by the SEC that increase responsibilities and liabilities of directors and executive officers. The perceived increased personal risk associated with these recent changes may deter qualified individuals from accepting these roles. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers. We continue to evaluate and monitor developments with respect to these rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

Risks Relating to our Common Stock

If we fail to remain current on our reporting requirements, we could be removed from quotation on the OTCQB, which would limit the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.

Companies trading on the OTCQB, such as us, must be reporting issuers with the Securities and Exchange Commission and must be current in their reports in order to maintain price quotation privileges on the OTCQB tier of the electronic quotation system operated by OTC Markets, Inc. As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.

Because our common stock could be deemed a low-priced “Penny” stock, it would be cumbersome for brokers and dealers to trade in our common stock, making the market for our common stock less liquid and negatively affect the price of our stock.

We may be subject to certain provisions of the Securities Exchange Act of 1934, commonly referred to as the “penny stock” as defined in Rule 3a51-1. A penny stock is generally defined to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. If our stock is deemed to be a penny stock, trading will be subject to additional sales practice requirements of broker-dealers. These require a broker-dealer to:

Deliver to the customer, and obtain a written receipt for, a disclosure document;

Disclose certain price information about the stock;

Disclose the amount of compensation received by the broker-dealer or any associated person of the broker-dealer;

Send monthly statements to customers with market and price information about the penny stock; and

In some circumstances, approve the purchaser’s account under certain standards and deliver written statements to the customer with information specified in the rules.

Consequently, penny stock rules may restrict the ability or willingness of broker-dealers to trade and/or maintain a market in our common stock. Also, prospective investors may not want to get involved with the additional administrative requirements, which may have a material adverse effect on the trading of our shares.

Because we became a public company through a reverse acquisition, we may not be able to attract the attention of major brokerage firms.

There may be risks associated with our becoming public through a reverse acquisition. Securities analysts of major brokerage firms may not provide coverage of our Company since there is no incentive to brokerage firms to recommend the purchase of our common stock. No assurance can be given that brokerage firms will want to conduct any secondary offerings on behalf of our post-merger company in the future.

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Directors and Executive Officers

The following table sets forth information regarding the members of our board of directors and our executive officers and other significant employees. All of our officers and directors were appointed on the effective date of the Merger. All of our directors hold office until the next annual meeting of stockholders and their successors are duly elected and qualify. Executive officers serve at the request of the board of directors.

Name

Age

Office(s) held

Steven Cabouli

President, Chief Executive Officer, Chief Financial Officer, Chairman of the Board, and Director

Orlando LaCalle

Chief Marketing Officer

Set forth below is a brief description of the background and business experience of each of our current executive officers and directors.

Steven Cabouli is our President, Chief Executive Officer, Chief Financial Officer, Chairman of our Board of Directors. Mr. Cabouli founded iWallet in 2009. He has over 25 years of experience in introducing new and unique products to the market. In the 1980s, he introduced machines for shaved ice, cooking baking, and donuts to Argentina and sold the rights to this business to an established South American cookie manufacturer in 1987. He is also the owner of China Mystique, Inc., a global distributor of skincare products which he co-founded in 1990. From 2003 through January of 2014, he was the owner of Steve Cabouli Properties, a real estate company which owns several properties in San Diego, Mexico, and Argentina. Mr. Cabouli studied Civil Engineering at the University of Buenos Aires in Argentina.

Orlando LaCalle is our Chief Marketing Officer. From March of 2004 to October of 2009, he was a Federal Account Executive for Xerox Corporation. In that position, he managed and sold Xerox software products to assigned accounts in his territory. Also, he negotiated perpetual license agreements with the U.S. Air Force, N.A.S.A., the U.S. Navy, the U.S. Coast Guard and all federal law enforcement agencies including the State Attorney, the Federal Courts and the Florida House of Representatives. From April of 200 to February of 2004, he served as Sales Director, Telecommunications Division Sales Group, for the Latin America Division of HNC Software, Inc., where he prospected new accounts and managed and maintained the company’s customer base in Latin America, the Caribbean and Mexico. From January 1994 to March of 2000, he was a Senior Account Executive at Xerox Corporation. From August of 1986 through March of 1992, he served as a Personnel Specialist for the United States Air Force.

Management is currently conducting a search for a highly qualified individual to join our company as a new CEO. Appropriate additional disclosures will be made upon the appointment of all new executive officers or directors.

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Directors

Our bylaws authorize no less than one (1) and no more than twelve (12) directors. We currently have one director. Pursuant to the terms of the Acquisition, Steven Cabouli, who prior to the Merger was the sole director of iWallet, was appointed as our director.

All directors hold office for one-year terms until the election and qualification of their successors. Officers are elected by the board of directors and serve at the discretion of the board.

There are no family relationships between or among the directors, executive officers or persons nominated or chosen by the Company to become directors or executive officers.

Committees of the Board

We do not currently have a compensation committee, executive committee, or stock plan committee.

Audit Committee

We do not have a separately-designated standing audit committee. The entire Board of Directors performs the functions of an audit committee, but no written charter governs the actions of the Board when performing the functions of what would generally be performed by an audit committee. The Board approves the selection of our independent accountants and meets and interacts with the independent accountants to discuss issues related to financial reporting. In addition, the Board reviews the scope and results of the audit with the independent accountants, reviews with management and the independent accountants our annual operating results, considers the adequacy of our internal accounting procedures and considers other auditing and accounting matters including fees to be paid to the independent auditor and the performance of the independent auditor. Our Board of Directors, which performs the functions of an audit committee, does not have a member who would qualify as an “audit committee financial expert” within the definition of Item 407(d)(5)(ii) of Regulation S-K.

Nomination Committee

Our Board of Directors does not maintain a nominating committee. As a result, no written charter governs the director nomination process. Our size and the size of our Board, at this time, do not require a separate nominating committee.

When evaluating director nominees, our directors consider the following factors:

· The appropriate size of our Board of Directors;

· Our needs with respect to the particular talents and experience of our directors;

The knowledge, skills and experience of nominees, including experience in finance, administration or public service, in light of prevailing business conditions and the knowledge, skills and experience already possessed by other members of the Board;

· Experience in political affairs;

· Experience with accounting rules and practices; and

· The desire to balance the benefit of continuity with the periodic injection of the fresh perspective provided by new Board members.

Our goal is to assemble a Board that brings together a variety of perspectives and skills derived from high quality business and professional experience. In doing so, the Board will also consider candidates with appropriate non-business backgrounds.

Other than the foregoing, there are no stated minimum criteria for director nominees, although the Board may also consider such other factors as it may deem are in our best interests as well as our stockholders. In addition, the Board identifies nominees by first evaluating the current members of the Board willing to continue in service. Current members of the Board with skills and experience that are relevant to our business and who are willing to continue in service are considered for re-nomination. If any member of the Board does not wish to continue in service or if the Board decides not to re-nominate a member for re-election, the Board then identifies the desired skills and experience of a new nominee in light of the criteria above. Current members of the Board are polled for suggestions as to individuals meeting the criteria described above. The Board may also engage in research to identify qualified individuals. To date, we have not engaged third parties to identify or evaluate or assist in identifying potential nominees, although we reserve the right in the future to retain a third party search firm, if necessary. The Board does not typically consider shareholder nominees because it believes that its current nomination process is sufficient to identify directors who serve our best interests.

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Code of Ethics

As of March 31, 2014, we had not adopted a Code of Ethics for Financial Executives, which would include our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.

Executive Compensation

Compensation Discussion and Analysis

Our executive officers are currently paid monthly fixed cash compensation as follows:

Steven Cabouli		$	8,000
Orlando LaCalle		$	4,000

Our current compensation system consists of paying our key executives such basic remuneration for their time and services as is appropriate for our current resources and stage of development. As we move forward with our business plan and further develop our business, we intend to create a formal system of compensation designed to motivate, incentivise, and retain our key executives.

Summary Compensation Table

The table below summarizes all compensation awarded to, earned by, or paid to each named executive officer for our last two completed fiscal years for all services rendered to us.

SUMMARY COMPENSATION TABLE

Name and

principal position

Year

Salary

($)

Bonus

($)

Stock Awards

($)

Option

Awards

($)

Non-Equity

Incentive Plan

Compensation

($)

Nonqualified

Deferred

Compensation

Earnings ($)

All Other

Compensation

($)

Total

($)

Steven Cabouli, President, CEO, CFO

2013

2012

n/a

Orlando LaCalle, Chief Marketing Officer

2013

2012

n/a

Jerry Chatel, former officer

2013

2012

n/a

Phillip Stromer, former officer

2013

2012

Narrative Disclosure to the Summary Compensation Table

Our current executive officers, Steven Cabouli and Orlando LaCalle, were appointed in connection with the recent Acquisition and did not serve during our last two fiscal years. Former officers Jerry Chatel and Phillip Stromer did not receive any compensation for their service as officers. We presently do not have employment or compensation agreements with any of our named executive officers and have not established any overall system of executive compensation or any fixed policies regarding compensation of executive officers.

Stock Option Grants

We have not granted any stock options to the executive officers or directors since our inception.

Outstanding Equity Awards At Fiscal Year-end Table

The table below summarizes all unexercised options, stock that has not vested, and equity incentive plan awards for each named executive officer outstanding as of the end of our last completed fiscal year.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
OPTION AWARDS						STOCK AWARDS
Name	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable	Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)	Option Exercise Price ($)	Option Expiration Date	Number of Shares or Shares of Stock That Have Not Vested (#)	Market Value of Shares or Shares of Stock That Have Not Vested ($)	Equity Incentive Plan Awards: Number of Unearned Shares, Shares or Other Rights That Have Not Vested (#)	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Shares or Other Rights That Have Not Vested (#)
Steven Cabouli, President, CEO, CFO	-	-	-	-	-	-	-	-	-
Orlando LaCalle, Chief Marketing Officer	-	-	-	-	-	-	-	-	-
Jerry Chatel, former officer	-	-	-	-	-	-	-	-	-
Phillip Stromer, former officer	-	-	-	-	-	-	-	-	-

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Compensation of Directors Table

The table below summarizes all compensation paid to our directors for our last completed fiscal year.

DIRECTOR COMPENSATION
Name	Fees Earned or Paid in Cash ($)		Stock Awards ($)		Option Awards ($)		Non-Equity Incentive Plan Compensation ($)		Non-Qualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
Steven Cabouli		n/a		n/a		n/a		n/a		n/a		n/a		n/a
Jerry Chatel, former director		-0		-0		-0		-0		-0		-0		-0
Phillip Stromer, former director		-0		-0		-0		-0		-0		-0		-0

Narrative Disclosure to the Director Compensation Table

We do not currently provide any compensation to directors for their service as directors.

Employment Agreements with Current Management

We do not currently have any employment agreements in place with any of our executive officers.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth the beneficial ownership of our capital stock by each executive officer and director, by each person known by us to beneficially own more than 5% of any class of stock and by the executive officers and directors as a group. Except as otherwise indicated, all Shares are owned directly and the percentage shown is based on 29,321,379 shares common stock issued and outstanding following the Acquisition and the related events described herein.

Title of class	Name and address of beneficial owner ⁽¹⁾	Amount of beneficial ownership		Percent of class
Current Executive Officers & Directors:
Common Stock	Steven Cabouli PO Box 261013 San Diego, CA 92196		8,221,230		28.04	%
Common Stock	Orlando LaCalle P.O. Box 565577 Miami, FL 33256		978,770		3.34	%
Total of All Current Directors and Officers:
Common Stock			9,200,000		31.38	%%
More than 5% Beneficial Owners
Common Stock	7806221 Canada, Inc.⁽²⁾ 71 Clairton Crescent Toronto, ON M6N 2M7		1,841,636		6.28	%
	Donal Carroll⁽³⁾ 55 North Dr. Toronto, ON M9A 4R1		2,446,570		8.35	%

⁽¹⁾

As used in this table, "beneficial ownership" means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security). In addition, for purposes of this table, a person is deemed, as of any date, to have "beneficial ownership" of any security that such person has the right to acquire within 60 days after such date.

⁽²⁾

The total shares for 7806221 Canada, Inc. include 1,714,384 shares of common stock and warrants to purchase an additional 127,252 shares of common stock at a price of $0.20, exercisable for 2 years. Mr. Bernard Adamski is the President of 7806221 Canada, Inc., and, in that capacity, has the authority to direct voting and investment decisions regarding its common stock.

⁽³⁾

The total shares for Donal Carroll include 1,623,285 shares of common stock, warrants to purchase 156,618 shares of common stock at a price of $0.20 per share, exercisable for 2 years, and warrants to purchase 666,667 shares of common stock at a price of $0.60 per share, exercisable for 2 years

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Certain Relationships and Related Transactions and Director Independence

With the exception of the Acquisition, none of our directors or executive officers, nor any proposed nominee for election as a director, nor any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to all of our outstanding shares, nor any members of the immediate family (including spouse, parents, children, siblings, and in-laws) of any of the foregoing persons has any material interest, direct or indirect, in any transaction over the last two years or in any presently proposed transaction which, in either case, has or will materially affect us.

Director Independence

We are not a “listed issuer” within the meaning of Item 407 of Regulation S-K and there are no applicable listing standards for determining the independence of our directors. Applying the definition of independence set forth in Rule 4200(a)(15) of The Nasdaq Stock Market, Inc., we do not believe that we currently have any independent directors.

Description of Securities

Our authorized capital stock consists of 75,000,000 shares of common stock, $0.001 par value per share. Immediately following the Acquisition and the events reported herein, there were 29,321,379 shares of our common stock issued and outstanding.

Common Stock

The holders of common stock are entitled to one vote per share. Our certificate of incorporation does not provide for cumulative voting. The holders of common stock are entitled to receive ratably such dividends, if any, as may be declared by the board of directors out of legally available funds. However, the current policy of the board of directors is to retain earnings, if any, for operations and growth. Upon liquidation, dissolution or winding-up, the holders of common stock are entitled to share ratably in all assets that are legally available for distribution. The holders of common stock have no preemptive, subscription, redemption or conversion rights.

In the event of any merger or consolidation with or into another company in connection with which shares of our common stock are converted into or exchangeable for shares of stock, other securities or property (including cash), all holders of our common stock will be entitled to receive the same kind and amount of shares of stock and other securities and property (including cash). Holders of our common stock have no pre-emptive rights, no conversion rights and there are no redemption provisions applicable to our common stock.

Registration Rights

We have agreed to file a registration statement on Form S-1 for the re-sale of the shares of common stock issued in the private offering closed concurrently with the Acquisition, as well as the common stock issuable upon exercise of all warrants issued in the offering. We have committed to file the registration statement within forty-five (45) days of the closing of the Acquisition.

Options and Warrants

We do not have any options issued and outstanding In connection with the Acquisition, we issued the following warrants to purchase common stock, all exercisable for a period of two (2) years from the date of issue, which is July 21, 2016:

7,062,112 warrants to purchase common stock at a price of $0.60 per share

3,222,120 warrants to purchase common stock at a price of $0.20 per share

Market Price and Dividends

iWallet is, and has always been, a privately-held company. There has never been a public market for the securities of iWallet has never declared or paid any cash dividends on its capital stock. In addition, there has never been a trading market for iWallet’s common stock.

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Indemnification of Directors and Officers

Our officers and directors are indemnified as provided by the Nevada Revised Statutes and our bylaws.

Under the governing Nevada statutes, director immunity from liability to a company or its shareholders for monetary liabilities applies automatically unless it is specifically limited by a company's articles of incorporation. Our articles of incorporation do not contain any limiting language regarding director immunity from liability. Excepted from this immunity are:

1.	a willful failure to deal fairly with the company or its shareholders in connection with a matter in which the director has a material conflict of interest;

2.	a violation of criminal law (unless the director had reasonable cause to believe that his or her conduct was lawful or no reasonable cause to believe that his or her conduct was unlawful);

3.	a transaction from which the director derived an improper personal profit; and

4.	willful misconduct.

Our bylaws provide that we will indemnify our directors and officers to the fullest extent not prohibited by Nevada law; provided, however, that we may modify the extent of such indemnification by individual contracts with our directors and officers; and, provided, further, that we shall not be required to indemnify any director or officer in connection with any proceeding (or part thereof) initiated by such person unless:

1.	such indemnification is expressly required to be made by law;

2.	the proceeding was authorized by our Board of Directors;

3.	such indemnification is provided by us, in our sole discretion, pursuant to the powers vested us under Nevada law; or

4.	such indemnification is required to be made pursuant to the bylaws.

Our bylaws provide that we will advance to any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer, of the company, or is or was serving at the request of the company as a director or executive officer of another company, partnership, joint venture, trust or other enterprise, prior to the final disposition of the proceeding, promptly following request therefore, all expenses incurred by any director or officer in connection with such proceeding upon receipt of an undertaking by or on behalf of such person to repay said amounts if it should be determined ultimately that such person is not entitled to be indemnified under our bylaws or otherwise.

Our bylaws provide that no advance shall be made by us to an officer of the company, except by reason of the fact that such officer is or was a director of the company in which event this paragraph shall not apply, in any action, suit or proceeding, whether civil, criminal, administrative or investigative, if a determination is reasonably and promptly made: (a) by the board of directors by a majority vote of a quorum consisting of directors who were not parties to the proceeding, or (b) if such quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, that the facts known to the decision-making party at the time such determination is made demonstrate clearly and convincingly that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the company.

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Trading Information

Our common stock is quoted under the symbol “QUSR” on the OTCBB operated by the Financial Industry Regulatory Authority, Inc. (“FINRA”) and the OTCQB operated by OTC Markets Group, Inc. Few market makers continue to participate in the OTCBB system because of high fees charged by FINRA. Consequently, market makers that once quoted our shares on the OTCBB system may no longer be posting a quotation for our shares. As of the date of this report, however, our shares are quoted by several market makers on the OTCQB. The criteria for listing on either the OTCBB or OTCQB are similar and include that we remain current in our SEC reporting. Our reporting is presently current and, since inception, we have filed our SEC reports on time. Due to our recent name change, we expect our trading symbol to change in the near future.

The following tables set forth the range of high and low prices for our common stock for the each of the periods indicated as reported by the OTCQB. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

Fiscal Year Ending June 30, 2013
Quarter Ended		High $		Low $
	June 30, 2013	$	0.0371	$	0.0371
	March 31, 2013	$	0.0371	$	0.0371
	December 31, 2012	$	0.0371	$	0.0371
	September 30, 2012	$	0.0371	$	0.0371

Fiscal Year Ending June 30, 2012
	Quarter Ended		High $		Low $
	June 30, 2012	$	0.0371	$	0.0371
	March 31, 2012		n/a		n/a
	December 31, 2011		n/a		n/a
	September 30, 2011		n/a		n/a

The last quoted price of our common stock was $0.037119 per share on July 23, 2014.

Penny Stock

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.

The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer's account.

In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.

These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.

Holders of Our Common Stock

As of July 23, 2014 we had 29,321,379 shares of our common stock issued and outstanding, held by eighty-six (86) shareholders of record.

Transfer Agent

The transfer agent for our common stock is Empire Stock Transfer, Inc.

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Section 3 – Securities and Trading Markets

Item 3.02. Unregistered Sales of Equity Securities

In connection with the Acquisition, the previous shareholders of iWallet received 10,000,000 shares of our common stock. The 10,000,000 shares of our common stock which were issued to the former holders of common stock of iWallet on the effective date of the Acquisition were issued in reliance on the exemption from registration afforded by Section 4(2) of the Securities Act.

Certain Secured Convertible Debentures previously issued by iWallet were converted to newly issued shares of our common stock and warrants. The former iWallet debenture holders were issued a total of 3,222,120 shares of common stock, and warrants to purchase 3,222,120 shares of common stock at a price of $0.20 per share, exercisable for two (2) years. These shares and warrants were also issued Acquisition were issued in reliance on the exemption from registration afforded by Section 4(2) of the Securities Act.

Immediately upon closing of the Acquisition, we closed a private offering of Units at a price of $0.30 per Unit, each Unit consisting of one (1) share of common stock and one (1) warrant to purchase one share of common stock at a price of $0.60 per share, exercisable for two (2) years. A total of 6,479,002 shares of common stock and 6,479,002 warrants were issued to subscribers in the offering. In addition, a total of 583,110 Units were issued as compensation to certain licensed securities brokers who assisted with the offering. The offering was conducted pursuant to Rule 506 under Regulation D and was conditional upon the closing of the Acquisition. The offering was made to only to “accredited investors” as defined in Rule 501, and we did not engage in any general solicitation or advertising. The gross proceeds from the offering, prior to the deduction of agreed selling commissions and expenses, were $1,943,701. Net of broker’s commissions and expenses, we received net proceeds of $1,745,537. A total of forty (40) investors subscribed in the offering.

Section 5 – Corporate Governance and Management

Item 5.01. Changes in Control of Registrant.

Reference is made to the disclosure set forth under Item 2.01 of this Current Report on Form 8-K, which disclosure is incorporated herein by reference.

Item 5.02. Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers.

At the effective time of the Acquisition, Jerry Chatel resigned as our sole director and officer. There was no known disagreement with Mr. Chatel on any matter relating to our operations, policies, or practices. Pursuant to the terms of the Merger Agreement, our new directors and officers are as set forth herein. Reference is made to the disclosure set forth under Item 2.01 of this Current Report on Form 8-K, which disclosure is incorporated herein by reference.

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

On July 23, the Board of Directors authorized a change in the Company’s fiscal year end to December 31 from June 30, effective for fiscal year 2014.

In addition, in connection with this subsequent subsidiary merger discussed herein, we changed our corporate name to “iWallet Corporation.”

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Item 5.06 Change in Shell Company Status.

As a result of the Acquisition and related transactions as described herein, we have ceased to be a shell company as defined in Rule 12b-2. The material terms of the transaction are described herein.

In addition, The information contained in this Current Report is intended to provide "Form 10 information" within the meaning of Rule 144(i)(3) under the Securities Act of 1933.

Section 9 – Financial Statements and Exhibits

Item 9.01. Financial Statements and Exhibits

Financial Statements of Businesses Acquired. In accordance with Item 9.01(a), the audited financial statements of our predecessor iWallet Corporation., a California corporation, for the years ended December 31, 2013 and 2012, are filed with this Current Report on Form 8-K as Exhibit 99.1. The unaudited financial statements of iWallet Corporation for the interim period ended March 31, 2014 are filed with this Current Report on Form 8-K as Exhibit 99.2

Pro Forma Financial Information. In accordance with Item 9.01(b), our pro forma financial combined statements are filed in this Current Report on Form 8-K as Exhibit 99.3.

The exhibits listed in the following Exhibit Index are filed as part of this Current Report on Form 8-K.

Exhibit No.	Description
2.1	Merger Agreement
3.1	Articles of Merger
99.1	Audited financial statements of iWallet Corporation for the years ended December 31, 2013 and 2012
99.2	Unaudited financial statements of iWallet Corporation for the interim period ended March 31, 2014
99.3	Unaudited pro forma condensed combined balance sheet as of March 31, 2014; and unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2014; and unaudited pro forma condensed combined balance sheet as of December 31, 2013; and unaudited pro forma condensed combined statement of operations for the year ended December 31, 2013

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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 hereunto duly authorized.

iWallet Corporation

/s/ Steven Cabouli

Steven Cabouli

Chief Executive Officer

Date: July 25, 2014

AGREEMENT AND PLAN OF MERGER

by and among

Queensridge Mining Resources, Inc.,

iWallet Acquisition Corp.

and

iWallet Corporation

July 21, 2014

TABLE OF CONTENTS

	Page
ARTICLE I DEFINITIONS	5
Section 1.1	5
ARTICLE II THE MERGER	10
Section 2.1	10
Section 2.2	10
Section 2.3	10
Section 2.4	11
Section 2.5	11
Section 2.6	12
ARTICLE III MERGER CONSIDERATION; CONVERSION AND EXCHANGE OF SECURITIES	12
Section 3.1	12
Section 3.2	12
Section 3.3	10
Section 3.4	14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY	15
Section 4.1	15
Section 4.2	15
Section 4.3	15
Section 4.4	15
Section 4.5	16
Section 4.6	16
Section 4.7	16
Section 4.8	16
Section 4.9	17
Section 4.10	17
Section 4.11	17
Section 4.12	18
Section 4.13	18
Section 4.14	19
Section 4.15	19
Section 4.16	19
Section 4.17	19
Section 4.18	20
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION CORP.	21
Section 5.1	21

Section 5.2	21
Section 5.3	21
Section 5.4	22
Section 5.5	22
Section 5.6	22
Section 5.7	22
Section 5.8	18
Section 5.9	23
Section 5.10	23
Section 5.11	24
Section 5.12	24
Section 5.13	24
Section 5.14	24
Section 5.15	25
Section 5.16	25
Section 5.17	26
Section 5.18	26
Section 5.19	27
Section 5.20	27
Section 5.21	27
Section 5.22	28
Section 5.23	28
Section 5.24	28
Section 5.25	29
Section 5.26	29
Section 5.27	29

ARTICLE VI CONDUCT OF BUSINESSES PENDING THE MERGER	29
Section 6.1	29
Section 6.2	30
ARTICLE VII ADDITIONAL AGREEMENTS	31
Section 7.1	31
Section 7.2	32
Section 7.3	32
Section 7.4	32
Section 7.5	32
ARTICLE VIII CONDITIONS OF PARTIES’ OBLIGATIONS	33
Section 8.1	33
Section 8.2	34
ARTICLE IX INDEMNIFICATION AND RELATED MATTERS	36
Section 9.1	36
Section 9.2	36
Section 9.3	36

Section 9.4	37
Section 9.5	37
ARTICLE X TERMINATION PRIOR TO CLOSING	37
Section 10.1	37
Section 10.2	38
ARTICLE XI MISCELLANEOUS	38
Section 11.1	38
Section 11.2	39
Section 11.3	39
Section 11.4	39
Section 11.5	39
Section 11.6	40
Section 11.7	40
Section 11.8	40
Section 11.9	40
Section 11.10	40
Section 11.11	41
Section 11.12	41
Section 11.13	41
Section 11.14	41
Section 11.15	41
Section 11.16	41

LIST OF SCHEDULES AND EXHIBITS

Schedule 1	Issuances of Parent Common Stock to be made to Holders of Company Common Stock at the Effective Time
Schedule 2	Issuances of Parent Common Stock and Parent Warrants to Holders of Company Convertible Debentures at the Effective time
Exhibit A	Articles of Incorporation of Surviving Corporation
Exhibit B	By-laws of Surviving Corporation
Exhibit C	Directors of Parent Pre-Effective Time and Post-Effective Time
Exhibit D	Articles of Incorporation of Parent
Exhibit E	Bylaws of Parent
Exhibit F	Form of Parent Warrant to be issued to Holders of Company Convertible Debentures

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER is entered into as of July 21, 2014 by and among Queensridge Mining Resources, Inc., a Nevada corporation (“Parent”), iWallet Acquisition Acquisition Corp., a Nevada corporation and a wholly-owned subsidiary of Parent (“Acquisition Corp.”), and iWallet Corporation, a California corporation (the “Company”).

W I T N E S S E T H:

WHEREAS, the respective Boards of Directors of each of Parent, Acquisition Corp. and the Company have approved, and deem it advisable and in the best interests of their respective stockholders to consummate, the acquisition of the Company by Parent, which acquisition is to be effected by the merger of the Company with and into the Acquisition Corp., with the Acquisition Corp. being the surviving entity (the “Merger”), upon the terms and subject to the conditions set forth in this Agreement (as defined herein);

WHEREAS, the parties hereto intend that the Merger shall qualify as a reorganization within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the “Code”), by reason of Section 368(a)(2)(E) of the Code; and

NOW, THEREFORE, in consideration of the mutual agreements and covenants hereinafter set forth, the parties hereto agree as follows:

ARTICLE I
DEFINITIONS

Section 1.1 Definitions. Capitalized terms used in this Agreement shall have the following meanings:

“Acquisition Corp.” shall have the meaning given to such term in the preamble to this Agreement.

“Acquisition Proposal” shall have the meaning given to such term in Section 6.2 hereof.

“Action” shall mean any claim, action, suit, proceeding, investigation or order.

“Affiliate” shall mean, with respect to any Person, any Person directly or indirectly controlling, controlled by or under common control with, such Person. For the purposes of this definition, “control” (including, with correlative meaning, the terms “controlling,” “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of management and policies of such Person through the ownership of voting securities, by contract or otherwise.

“Agreement” shall mean this Agreement and Plan of Merger, including the exhibits attached hereto or referred to herein, as the same may be amended or modified from time to time in accordance with the provisions hereof.

“Balance Sheet” shall have the meaning given to such term in Section 4.5 hereof.

“Balance Sheet Date” shall have the meaning given to such term in Section 4.5 hereof.

“By-laws” shall have the meaning given to such term in Section 2.3(b) hereof.

“Certificate of Incorporation” shall have the meaning given to such term in Section 2.3(a) hereof.

“Closing” shall have the meaning given to such term in Section 2.5 hereof.

“Closing Date” shall have the meaning given to such term in Section 2.5 hereof.

“Code” shall have the meaning given to such term in the second recital to this Agreement.

“Commission” shall mean the United States Securities and Exchange Commission.

“Company” shall have the meaning given to such term in the preamble to this Agreement.

“Company Capital Stock” shall mean, collectively, the Company Common Stock and the Company Preferred Stock, if any.

“Company Common Stock” shall mean the common stock, par value $0.01, of the Company.

“Company Convertible Debentures” shall mean the 5% secured convertible debentures issued by the Company and outstanding as of the Effective Time.

“Company Material Adverse Effect” shall mean any change, effect or circumstance that is materially adverse or is reasonably likely to be materially adverse to the business, assets, liabilities, condition (financial or otherwise) or operations of the Company and its subsidiaries, taken as a whole, other than any such change, effect or circumstance relating to general economic, regulatory or political conditions, except to the extent such change, effect or circumstance disproportionately affects the Company and its subsidiaries, taken as a whole.

“Company Stock Options” shall have the meaning given to such term in Section 3.3(a) hereof.

“Contract” shall have the meaning given to such term in Section 4.4 hereof.

“Consents” shall mean any permits, filings, notices, licenses, consents, authorizations, accreditation, waivers, approvals and the like of, to, with or by any Person.

“Determination Date” shall have the meaning given to such term in Section 9.6 hereof.

“Dissenting Shares” shall have the meaning given to such term in Section 3.2(d) hereof.

“Effective Time” shall have the meaning given to such term in Section 2.2 hereof.

“Employee Benefit Plans” shall have the meaning assigned to it in Section 4.13 hereof.

“Environmental Law” shall mean the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §§ 9601 et seq.; the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §§ 11001 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq.; the Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. §§ 136 et seq. and comparable state statutes dealing with the registration, labeling and use of pesticides and herbicides; the Clean Air Act, 42 U.S.C. §§ 7401 et seq.; the Clean Water Act (Federal Water Pollution Control Act), 33 U.S.C. §§ 1251 et seq.; the Safe Drinking Water Act, 42 U.S.C. §§ 300f et seq.; and the Hazardous Materials Transportation Act, 49 U.S.C. §§ 1801 et seq., as any of the above referenced statutes have been amended as of the date hereof, all rules, regulations and policies promulgated pursuant to any of the above referenced statutes, and any other foreign, federal, state or local law, statute, ordinance, rule, regulation or policy governing environmental matters, as the same have been amended as of the date hereof.

“ERISA” shall mean the Employee Retirement Income Securities Act of 1974, as amended, and the regulations issued thereunder.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations issued thereunder.

“Fair Market Value” shall mean, with respect to a share of Common Stock on any Determination Date, the average of the daily closing prices for the 10 consecutive business days prior to such date. The closing price for each day shall be the last sales price or in case no sale takes place on such day, the average of the closing high bid and low asked prices, in either case (a) as officially quoted on the OTC Bulletin Board, the NASDAQ Stock Market or such other market on which the Common Stock is then listed for trading or quoted, or (b) if, in the reasonable judgment of the Board of Directors of Parent, the OTC Bulletin Board or the NASDAQ Stock Market is no longer the principal United States market for the Common Stock, then as quoted on the principal United States market for the Common Stock as determined by the Board of Directors of Parent, or (c) if, in the reasonable judgment of the Board of Directors of the Parent, there exists no principal United States market for the Common Stock, then as reasonably determined in good faith by the Board of Directors of Parent.

“Federal Securities Laws” means the Securities Act, the Exchange Act and the rules and regulations promulgated thereunder.

“GAAP” shall mean generally accepted accounting principles as in effect from time to time in the United States consistently applied.

“Hazardous Material” means any substance or material meeting any one or more of the following criteria: (a) it is or contains a substance designated as or meeting the characteristics of a hazardous waste, hazardous substance, hazardous material, pollutant, chemical substance or mixture, contaminant or toxic substance under any Environmental Law; (b) its presence at some quantity requires investigation, notification or remediation under any Environmental Law; (c) it contains, without limiting the foregoing, asbestos, polychlorinated biphenyls, petroleum hydrocarbons, petroleum derived substances or waste, pesticides, herbicides, crude oil or any fraction thereof, nuclear fuel, natural gas or synthetic gas; or (d) mold.

“Incentive Plans” shall have the meaning given to such term in Section 3.3(d) hereof.

“Indebtedness” shall mean any obligation of the Company that under GAAP is required to be shown on the Balance Sheet of the Company as a Liability. Any obligation secured by a Lien on, or payable out of the proceeds of production from, property of the Company shall be deemed to be Indebtedness even though such obligation is not assumed by the Company.

“Indebtedness for Borrowed Money” shall mean (a) all Indebtedness in respect of money borrowed including, without limitation, Indebtedness which represents the unpaid amount of the purchase price of any property and is incurred in lieu of borrowing money or using available funds to pay such amounts and not constituting an account payable or expense accrual incurred or assumed in the ordinary course of business of the Company, (b) all Indebtedness evidenced by a promissory note, bond or similar written obligation to pay money, or (c) all such Indebtedness guaranteed by the Company or for which the Company is otherwise contingently liable.

“Information Statement” shall have the meaning given to such term in Section 7.7 hereof.

“Intellectual Property” shall have the meaning given to such term in Section 4.12(b) hereof.

“Investment Company Act” shall mean the Investment Company Act of 1940, as amended.

“Letter of Transmittal” shall have the meaning assigned to it in Section 3.2 hereof.

“Liability” shall mean any and all liability, debt, obligation, deficiency, Tax, penalty, fine, claim, cause of action or other loss, cost or expense of any kind or nature whatsoever, whether asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, and whether due or to become due and regardless of when asserted.

“Lien” shall mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind, including, without limitation, any conditional sale or other title retention agreement, any lease in the nature thereof and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction and including any lien or charge arising by statute or other law.

“Merger” shall have the meaning given to such term in the second recital to this Agreement.

“NRS” shall mean the Nevada Revised Statutes, as amended.

“Parent” shall have the meaning given to such term in the preamble to this Agreement.

“Parent Balance Sheet” shall have the meaning assigned to such term in Section 5.13 hereof.

“Parent Balance Sheet Date” shall have the meaning assigned to it in Section 5.13 hereof.

“Parent Common Stock” shall mean the common stock, par value $0.001 per share, of Parent.

“Parent Employee Benefit Plans” shall have the meaning assigned to such term in Section 5.16 hereof.

“Parent Financial Statements” shall have the meaning assigned to such term in Section 5.10 hereof.

“Parent Material Adverse Effect” means any change, effect or circumstance that is materially adverse or is reasonably likely to be materially adverse to the business, assets, liabilities, condition (financial or otherwise) or operations of Parent and its subsidiaries, taken as a whole, other than any such change, effect or circumstance relating to general economic, regulatory or political conditions, except to the extent such change, effect or circumstance disproportionately affects Parent and its subsidiaries, taken as a whole.

“Parent SEC Documents” shall have the meaning assigned to such term in Section 5.9 hereof.

“Parent Warrants” shall mean the warrants to purchase common stock in the Parent to be issued to the holders of the Company Convertible Debentures, the form of which is shown in Exhibit F.

“Permitted Liens” shall mean (a) Liens for taxes and assessments or governmental charges or levies not at the time due or in respect of which the validity thereof shall currently be contested in good faith by appropriate proceedings; (b) Liens in respect of pledges or deposits under workmen’s compensation laws or similar legislation, carriers’, warehousemen’s, mechanics’, laborers’ and materialmens’ and similar Liens, if the obligations secured by such Liens are not then delinquent or are being contested in good faith by appropriate proceedings; and (c) Liens incidental to the conduct of the business of the Company that were not incurred in connection with the borrowing of money or the obtaining of advances or credits and which do not in the aggregate materially detract from the value of its property or materially impair the use made thereof by the Company in its business.

“Parent Stockholder Consent” shall have the meaning assigned to such term in Section 7.6 hereof.

“Person” shall mean any individual, corporation, limited liability company, partnership, joint venture, trust or other entity or organization, including any government or political subdivision or an agency or instrumentality thereof.

“Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations issued thereunder.

“Stockholder” shall mean any record holder of Company Capital Stock.

“Surviving Corporation” shall have the meaning given to such term in Section 2.1 hereof.

“Tax” or “Taxes” shall mean (a) any and all taxes, assessments, customs, duties, levies, fees, tariffs, imposts, deficiencies and other governmental charges of any kind whatsoever (including, but not limited to, taxes on or with respect to net or gross income, franchise, profits, gross receipts, capital, sales, use, ad valorem, value added, transfer, real property transfer, transfer gains, transfer taxes, inventory, capital stock, license, payroll, employment, social security, unemployment, severance, occupation, real or personal property, estimated taxes, rent, excise, occupancy, recordation, bulk transfer, intangibles, alternative minimum, doing business, withholding and stamp), together with any interest thereon, penalties, fines, damages costs, fees, additions to tax or additional amounts with respect thereto, imposed by the United States (federal, state or local) or other applicable jurisdiction; (b) any liability for the payment of any amounts described in clause (a) as a result of being a member of an affiliated, consolidated, combined, unitary or similar group or as a result of transferor or successor liability, including, without limitation, by reason of Code Section 1.1502-6; and (c) any liability for the payments of any amounts as a result of being a party to any Tax Sharing Agreement or as a result of any express or implied obligation to indemnify any other Person with respect to the payment of any amounts of the type described in either clauses (a) or (b).

“Tax Return” shall include all returns and reports (including elections, declarations, disclosures, schedules, estimates and information returns (including Form 1099 and partnership returns filed on Form 1065)) required to be supplied to a Tax authority relating to Taxes.

“Tax Sharing Agreements” shall have the meaning given to such term in Section 4.15 hereof.

ARTICLE II
THE MERGER

Section 2.1 Merger. Upon the terms and subject to the conditions of this Agreement, at the Effective Time, the Company shall be merged with and into Acquisition Corp. in accordance with applicable Nevada and California corporate law. Following the Effective Time, the separate corporate existence of the Company shall cease, and Acquisition Corp. shall continue as the corporation surviving the Merger (sometimes hereinafter referred to as the “Surviving Corporation”).

Section 2.2 Effective Time. The Parent, the Company and Acquisition Corp. shall cause a certificate of merger to be filed on the Closing Date (or on such other date as the Company and Parent may agree in writing) with the Secretary of State of the State of Nevada as provided in the NRS, and shall make all other filings or recordings required by the NRS in connection with the Merger. The Merger shall become effective at such time as the certificate of merger is duly filed in accordance with the NRS and the Secretary of State of Nevada or such later time as specified in the certificate of merger, and such time is hereinafter referred to as the “Effective Time.”

Section 2.3 Certificate of Incorporation; By-laws; Directors and Officers.

(a) The certificate of incorporation of Acquisition Corp. as in effect immediately prior to the Effective Time, a copy of which is attached as Exhibit A hereto, shall be the certificate of incorporation of the Surviving Corporation (the “Certificate of Incorporation”) from and after the Effective Time until thereafter changed or amended as provide therein or in accordance with applicable law.

(b) The by-laws of Acquisition Corp. as in effect immediately prior to the Effective Time, a copy of which is attached as Exhibit B hereto, shall be the by-laws of the Surviving Corporation (the “By-laws”) from and after the Effective Time until thereafter changed or amended as provided therein or in accordance with applicable law.

(c) One or more of the directors of the Company immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation and shall hold office from the Effective Time until their respective successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Certificate of Incorporation and By-laws. The officers of the Company immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation and shall hold office from the Effective Time until their respective successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Certificate of Incorporation and By-laws.

(d) At the Effective Time as contemplated by Section 2.2 hereof, the officers and directors of the Parent shall be as designated on Exhibit C hereto, who shall immediately take such offices or who shall take such offices upon compliance with the Federal Securities Laws, as the case may be. The appointment of new directors in accordance with the terms of this Section 2.3(d) shall be accomplished through the filling of vacancies in the Board of Directors of the Parent in compliance with the applicable provisions of the NRS and the by-laws of the Parent and without the vote (by written consent or otherwise) of the shareholders of the Parent.

Section 2.4 Effects of the Merger. The Merger shall have the effects set forth in the NRS. Without limiting the generality of the foregoing, at the Effective Time, except as otherwise provided herein, all of the property, rights, privileges, powers and franchises of the Company and Acquisition Corp. shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Acquisition Corp. shall become the debts, liabilities and duties of the Surviving Corporation. The Company acknowledges that, from and after the Effective Time, Parent shall have the absolute and unqualified right to deal with the assets and business of the Surviving Corporation as its own property without limitation on the disposition or use of such assets or the conduct of such business.

Section 2.5 Closing. The consummation of the transactions contemplated by this Agreement, including the Merger (the “Closing”), shall take place: (a) at the offices of Cane Clark LLP, 3273 E. Warm Springs Rd., Las Vegas, NV at 10:00 a.m. local time on the date on which all of the conditions to the Closing set forth in Article VIII hereof shall be fulfilled or waived in accordance with this Agreement (other than conditions that can be satisfied only at the Closing, but subject to the fulfillment or waiver of those conditions at the Closing); or (b) at such other place, time and date as the Company and Parent may agree in writing (the “Closing Date”).

Section 2.6 Tax-Free Merger. The parties hereto intend that the Merger will be treated as a tax-free reorganization under Section 368 of the Code.

ARTICLE III
MERGER CONSIDERATION; CONVERSION AND EXCHANGE OF SECURITIES

Section 3.1 Manner and Basis of Converting and Exchanging Capital Stock. At the Effective Time, by virtue of the Merger and without any action on the part of the Company, Parent or Acquisition Corp. or the holders of any outstanding shares of capital stock or other securities of the Company, Parent or Acquisition Corp.:

(a) Acquisition Corp. Stock. Each share of common stock, par value $0.001 per share, of Acquisition Corp. issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and non-assessable share of capital stock, no par value per share, of the Surviving Corporation, such that Parent shall be the holder of all of the issued and outstanding shares of capital stock of the Surviving Corporation following the Merger.

(b) Parent Common Stock To Be Issued To Company Shareholders In Exchange For Company Common Stock. All of the Shares of the Company Common Stock issued and outstanding immediately prior to the Effective Time shall be exchanged for the right to receive Parent Common Stock in the specific amounts and denominations set forth on Schedule 1 hereto.

(c) Parent Common Stock and Parent Warrants To Be Issued Upon Automatic Conversion Of Company Convertible Debentures. At the Effective Time, all issued and outstanding Company Convertible Debentures shall be automatically converted to Parent Common Stock and Parent Warrants in accord with the terms of such Company Convertible Debentures. All Company Convertible Debentures shall, at the Effective Time, be exchange for the right to receive Parent Common Stock and Parent Warrants in the specific amounts and denominations set forth on Schedule 2 hereto.

(d) Treasury Stock. Notwithstanding any provision of this Agreement to the contrary, each share of Company Capital Stock held in the treasury of the Company and each share of Company Capital Stock, if any, owned by Parent or any direct or indirect wholly-owned subsidiary of Parent immediately prior to the Effective Time shall be canceled in the Merger and shall not be converted or exchanged into the right to receive any shares of capital stock or other securities of Parent.

(e) No Fractional Securities. No fractional Parent Securities shall be issued as a result of the Merger. If a fractional Parent Security would otherwise result from the Merger, the number of securities required to be issued to such record holder shall be rounded to the nearest whole number of shares, warrants, or dollars, as applicable.

Section 3.2 Surrender and Exchange of Certificates.

(a) Letter of Transmittal. Promptly after the Effective Time, Parent shall mail, or cause to be mailed, to each record holder of certificate(s) formerly representing ownership of Company Capital Stock that was converted into the right to receive securities in the Parent pursuant to Section 3.1 hereof (i) a letter of transmittal (“Letter of Transmittal”) for delivery of such certificate(s) to Parent and (ii) instruction for use in effecting the surrender of certificate(s), in each case in form and substance mutually agreeable to the Company and Parent. Delivery shall be effected, and risk of loss and title to the issuable Parent securities shall pass, only upon delivery to the Parent (or a duly authorized agent of Parent) of certificate(s) formerly representing ownership of Company Capital Stock (or an affidavit of lost certificate and indemnification or surety bond) and a properly completed and duly executed Letter of Transmittal, as described in Section 3.2(b) hereof. Notwithstanding the foregoing, Parent shall not be required to mail, or cause to be mailed, a Letter of Transmittal to any record holder of certificate(s) formerly representing ownership of Company Capital Stock if such holder has previously agreed or consented to the exchange of certificates that are held in custody by the Company for the benefit of such holder.

(b) Exchange Procedures. Parent shall issue to each former record holder of Company Capital Stock, upon delivery to Parent (or a duly authorized agent of Parent) of (i) certificate(s) formerly representing ownership of Company Capital Stock endorsed in blank or accompanied by duly executed stock powers (or an affidavit of lost certificate and indemnification in form and substance reasonably acceptable to Parent stating that, among other things, the former record holder has lost his or her certificate(s) or that such certificate(s) have been destroyed) and (ii) a properly completed and duly executed Letter of Transmittal in form and substance reasonably satisfactory to Parent, the Parent Securities that such former record holder is entitled to receive in accordance with Section 3.1 hereof. Subject to Section 3.2(d) hereof, until the certificate(s) (or affidavit) is delivered together with the Letter of Transmittal in the manner contemplated by this Section 3.2(b), each certificate (or affidavit) previously representing ownership of Company Capital Stock shall be deemed at and after the Effective Time to represent only the right to receive Parent Securities as set forth herein and the former record holders thereof shall cease to have any other rights with respect to his or her Company Capital Stock.

(c) Termination of Exchange Process. Any Parent Securities issuable hereunder that remain unclaimed by a former record holder of Company Capital Stock at the first anniversary of the Effective Time may be deemed “abandoned property” subject to applicable abandoned property, escheat and other similar laws in the State in which the former record holder resides. None of the Company, Parent, Acquisition Corp. or the Surviving Corporation shall be liable to any person in respect of any Parent Securities delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.

(d) Dissenting Shares. Notwithstanding any provision of this Agreement to the contrary, shares of Company Capital Stock issued and outstanding immediately prior to the Effective Time and held by a Stockholder who has not voted in favor of the Merger or consented thereto in writing and who has demanded appraisal for such shares of Company Capital Stock (“Dissenting Shares”) shall not be entitled to vote for any purpose or receive dividends, shall not be converted into the right to receive Parent Securities in accordance with Section 3.1 hereof, and shall only be entitled to receive such consideration as shall be determined pursuant to the NRS; provided, however, that if, after the Effective Time, such Stockholder fails to perfect or withdraws or loses his or her right to appraisal or otherwise fails to establish the right to be paid the value of such Stockholder’s shares of Company Capital Stock under the NRS, such shares of Company Capital Stock shall be treated as if they had converted as of the Effective Time into the right to receive Parent Securities in accordance with Section 3.1 hereof, and such shares of Company Capital Stock shall no longer be Dissenting Shares. All negotiations with respect to payment for Dissenting Shares shall be handled jointly by Parent and the Company prior to the Closing and exclusively by Parent thereafter. In the event that one percent (1%) or more of the outstanding shares of the Company are Dissenting Shares, the Parent has the sole discretion to terminate this Agreement, which shall forthwith become void and of no further force and effect and the parties hereto shall be released from any and all obligations hereunder; provided, however, that nothing herein shall relieve any party hereto from liability for the breach of any of its representations, warranties, covenants or agreements set forth in this Agreement.

(e) Stock Transfer Books. At the Effective Time, the stock transfer books of the Company will be closed and there will be no further registration of transfers of shares of Company Capital Stock thereafter on the records of the Company. If, after the Effective Time, certificates formerly representing Company Capital Stock are presented to the Surviving Corporation, these certificates shall be canceled and exchanged for the Parent Securities to which the former record holder may be entitled pursuant to Section 3.1 hereof.

(f) Further Rights in Company Stock. All Parent Securities issued upon exchange of shares of Company Capital Stock in accordance with the terms hereof shall be deemed to have been issued in full satisfaction of all rights pertaining to such shares of Company Capital Stock.

Section 3.3 Company Options and Warrants

(a) As of the Effective Time, the Company warrants that no options to purchase Company Common Stock issued by the Company, shall exist, and that further, with the sole exception of the Company Convertible Debentures, no other convertible securities or other rights to purchase the Company Common Stock shall exist.

(b) The Parent shall take all corporate action necessary to reserve for issuance a sufficient number of shares of Parent Common Stock for delivery upon exercise of the Parent Warrants issuable hereunder.

Section 3.4 Parent Common Stock. Parent shall reserve a sufficient number of shares of Parent Common Stock to complete the conversion and exchange of Company Capital Stock into Parent Capital Stock contemplated by Sections 3.1 and 3.2 hereof. Parent covenants and agrees that immediately prior to the Effective Time there will be approximately 34,113,781 shares of Parent Common Stock issued and outstanding, and that no other common or preferred stock or equity securities of the Parent, or any options, warrants, rights or other agreements or instruments convertible, exchangeable or exercisable into common or preferred stock or equity securities of the Parent, shall be issued or outstanding immediately prior to the Effective Time, except as disclosed herein.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to Parent as follows:

Section 4.1 Organization. The Company (i) is duly organized, validly existing and in good standing (or its equivalent) under the laws of the State of California, (ii) has all licenses, permits, authorizations and other Consents necessary to own, lease and operate its properties and assets and to carry on its business as it is now being conducted and (iii) has all requisite corporate or other applicable power and authority to own, lease and operate its properties and assets and to carry on its business as it is now being conducted and presently proposed to be conducted, except where such failure would not have, or be reasonably likely to have, a Company Material Adverse Effect. The Company is duly qualified or authorized to conduct business and is in good standing (or its equivalent) as a foreign corporation or other entity in all jurisdictions in which the ownership or use of its assets or nature of the business conducted by it makes such qualification or authorization necessary, except where the failure to be so duly qualified, authorized and in good standing would not have a Company Material Adverse Effect.

Section 4.2 Authorization; Validity of Agreement. The Company has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by the Board of Directors of the Company and no other action (except the approval of the requisite Stockholders solely with respect to consummation of the Merger) on the part of the Company or any of its Stockholders or subsidiaries is necessary to authorize the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Company and (assuming due and valid authorization, execution and delivery hereof by Parent and Acquisition Corp.) is a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforcement is limited by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity.

Section 4.3 Capitalization. As of the Effective Date the authorized and issued capital stock of the Company shall consist of 10,000 Class A common shares. All the outstanding shares of Company Capital Stock are duly authorized, validly issued, fully paid and non-assessable. As of the Effective Time, there shall be no rights in favor of any person to purchase any Company Capital Stock, except as such rights are set forth in the Company Preferred Stock already issued and outstanding as of the Effective Date.

Section 4.4 Consents and Approvals; No Violations. Except for (a) approval of the Merger by the requisite Stockholders and (b) filing of the certificate of merger with the Secretary of State of the State of California, neither the execution, delivery or performance of this Agreement by the Company nor the consummation of the transactions contemplated hereby will (i) violate any provision of its certificate of incorporation or by-laws; (ii) violate, conflict with or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, require the consent of or result in the creation of any encumbrance upon any of the properties of the Company or any of its subsidiaries under any material note, bond, mortgage, indenture, deed of trust, license, franchise, permit, lease, contract, agreement or other instrument (collectively, “Contract”) to which the Company or any its subsidiaries or any of their respective properties may be bound; (iii) require any Consent, approval or authorization of, or notice to, or declaration, filing or registration with, any governmental entity by or with respect to the Company or any of its subsidiaries; or (iv) violate any order, writ, judgment, injunction, decree, law, statute, rule or regulation applicable to the Company or any of its subsidiaries or any of their respective properties or assets; except, in the cases of clauses (ii), (iii) and (iv), any such violations, conflicts, breaches, defaults or encumbrances, or any failure to receive any such Consent, approval or authorization, or to make any such notice, declaration, filing or registration as will not result in, or could reasonably be expected to result in, a Company Material Adverse Effect.

Section 4.5 Financial Statements. The Company has delivered or made available as of the date hereof or shall, prior to the Closing Date, deliver or make available to Parent (x) the audited comparative balance sheet of the Company for the fiscal year ended December 31, 2013 and 2012 (hereinafter, December 31, 2012 shall be referred to as the “Balance Sheet Date”), and (y) the related audited consolidated and consolidating statements of income, stockholders’ equity and cash flows of the Company for the fiscal year ended December 31, 2013 and 2012. The foregoing financial statements (including any notes thereto) (i) have been prepared based upon the books and records of the Company, (ii) have been prepared in accordance with GAAP (except as otherwise noted therein), and (iii) present fairly, in all material respects, the financial position, results of operations and cash flows of the Company as at their respective dates and for the periods then ended. To the knowledge of the Company, since the Balance Sheet Date, no fact or condition exists that has not been disclosed to Parent that has had or could reasonably be expected to have a Company Material Adverse Effect.

Section 4.6 No Undisclosed Liabilities. As of the date hereof, except (a) for Liabilities reflected on the face of the balance sheet dated December 31, 2013 (the “Balance Sheet”) and (b) Liabilities of the same type, magnitude and scope as those reflected on the Balance Sheet which have arisen since the Balance Sheet Date in the ordinary course of business, and which would not, in the aggregate, result in a Company Material Adverse Effect, the Company does not have any Liability.

Section 4.7 Litigation. There is no Action pending or, to the knowledge of the Company, threatened, involving the Company or its subsidiaries or affecting any of the officers, directors or employees of the Company or its subsidiaries with respect to the Company’s or any subsidiary’s business by or before any governmental entity or by any third party that has had or could reasonably be expected to have a Company Material Adverse Effect and neither the Company nor any of its subsidiaries have received written notice that any such Action is threatened. Neither the Company nor any of its subsidiaries is in default under any judgment, order or decree of any governmental entity applicable to its business, which default could reasonably be expected to have a Company Material Adverse Effect.

Section 4.8 No Default; Compliance with Applicable Laws. The Company is not in default or violation of any material term, condition or provision of (i) its certificate of incorporation or by-laws or (ii) to the Company’s knowledge, any law applicable to the Company or its property and assets, and the Company has not received written notice of any violation of or Liability under any of the foregoing (whether material or not).

Section 4.9 Broker’s and Finder’s Fees. To the knowledge of the Company, no Person has, or as a result of the transactions contemplated or described herein will have, any right or valid claim against the Company for any commission, fee or other compensation as a finder or broker, or in any similar capacity.

Section 4.10 Contracts.

(a) The Company is not in violation or breach of any material contract, except such violations that, in the aggregate, would not result in, or would not reasonably be expected to result in, a Company Material Adverse Effect. There does not exist any event or condition that, after notice or lapse of time or both, would constitute an event of default or breach under any material Contract on the part of the Company or, to the knowledge of the Company, any other party thereto or would permit the modification, cancellation or termination of any material Contract or result in the creation of any lien upon, or any person acquiring any right to acquire, any assets of the Company, other than any events or conditions that, in the aggregate would not result in, or would not reasonably be expected to result in, a Company Material Adverse Effect. The Company has not received in writing any claim or threat that the Company has breached any of the terms and conditions of any material Contract, other than any material Contracts the breach of which, in the aggregate, would not result in, or would not reasonably be expected to result in, a Company Material Adverse Effect.

(b) The consent of, or the delivery of notice to or filing with, any party to a material Contract is not required for the execution and delivery by the Company of this Agreement or the consummation of the transactions contemplated under the Agreement.. The Company has made available to Parent and Acquisition Corp. true and complete copies of all Contracts and other documents requested by Parent or Acquisition Corp.

Section 4.11 Tax Returns and Audits. All required federal, state and local Tax Returns of the Company have been accurately prepared and duly and timely filed, and all federal, state and local Taxes required to be paid with respect to the periods covered by such returns have been paid. The Company is not and has not been delinquent in the payment of any Tax. The Company has not had a Tax deficiency proposed or assessed against it and has not executed a waiver of any statute of limitations on the assessment or collection of any Tax. None of the Company’s federal income Tax Returns nor any state or local income or franchise Tax Returns has been audited by governmental authorities. The reserves for Taxes reflected on the Balance Sheet are and will be sufficient for the payment of all unpaid Taxes payable by the Company as of the Balance Sheet Date. Since the Balance Sheet Date, the Company has made adequate provisions on its books of account for all Taxes with respect to its business, properties and operations for such period. The Company has withheld or collected from each payment made to each of its employees the amount of all Taxes (including, but not limited to, federal, state and local income taxes, Federal Insurance Contribution Act taxes and Federal Unemployment Tax Act taxes) required to be withheld or collected therefrom, and has paid the same to the proper Tax receiving officers or authorized depositaries. There are no federal, state, local or foreign audits, actions, suits, proceedings, investigations, claims or administrative proceedings relating to Taxes or any Tax Returns of the Company now pending, and the Company has not received any notice of any proposed audits, investigations, claims or administrative proceedings relating to Taxes or any Tax Returns. The Company is not obligated to make a payment, nor is it a party to any agreement that under certain circumstances could obligate it to make a payment, that would not be deductible under Section 280G of the Code. The Company has not agreed nor is required to make any adjustments under Section 481(a) of the Code (or any similar provision of state, local and foreign law) by reason of a change in accounting method or otherwise for any Tax period for which the applicable statute of limitations has not yet expired. The Company is not a party to, is not bound by and does not have any obligation under, any Tax sharing agreement, Tax indemnification agreement or similar contract or arrangement, whether written or unwritten (collectively, “Tax Sharing Agreements”), nor does it have any potential liability or obligation to any Person as a result of, or pursuant to, any Tax Sharing Agreements.

Section 4.12 Patents and Other Intangible Assets.

(a) To the knowledge of the Company, the Company (i) owns or has the right to use, pursuant to a valid license, sublicense, agreement, or permission, free and clear of all Liens, all patents, trademarks, service marks, trade names, copyrights, licenses and rights with respect to the foregoing used in or necessary for the conduct of its business as now conducted or proposed to be conducted without infringing upon or otherwise acting adversely to the right or claimed right of any Person under or with respect to any of the foregoing.

(b) To the knowledge of the Company, the Company owns and has the right to use all trade secrets, if any, including know-how, negative know-how, formulas, patterns, programs, devices, methods, techniques, inventions, designs, processes, computer programs and technical data and all information that derives independent economic value, actual or potential, from not being generally known or known by competitors (collectively, “Intellectual Property”) required for or incident to the development, operation and sale of all products and services sold by the Company, free and clear of any right, Lien or claim of others. All Intellectual Property can and will be transferred by the Company to the Surviving Corporation as a result of the Merger and without the consent of any Person other than the Company.

Section 4.13 Employee Benefit Plans; ERISA.

(a) All “employee benefit plans” (within the meaning of Section 3(3) of the ERISA) of the Company and other employee benefit or fringe benefit arrangements, practices, contracts, policies or programs of every type, other than programs merely involving the regular payment of wages, commissions, or bonuses established, maintained or contributed to by the Company, whether written or unwritten and whether or not funded, are in material compliance with the applicable requirements of ERISA, the Code and any other applicable state, federal or foreign law.

(b) There are no pending claims or lawsuits that have been asserted or instituted against any Employee Benefit Plan, the assets of any of the trusts or funds under the Employee Benefit Plans, the plan sponsor or the plan administrator of any of the Employee Benefit Plans or against any fiduciary of an Employee Benefit Plan with respect to the operation of such plan, nor does the Company have any knowledge of any incident, transaction, occurrence or circumstance which might reasonably be expected to form the basis of any such claim or lawsuit.

(c) There is no pending or, to the knowledge of the Company, threatened investigation, or pending or possible enforcement action by the Pension Benefit Guaranty Corporation, the Department of Labor, the Internal Revenue Service or any other government agency with respect to any Employee Benefit Plan and the Company has no knowledge of any incident, transaction, occurrence or circumstance which might reasonably be expected to trigger such an investigation or enforcement action.

(d) No actual or, to the knowledge of the Company, contingent Liability exists with respect to the funding of any Employee Benefit Plan or for any other expense or obligation of any Employee Benefit Plan, except as disclosed on the Balance Sheet, and no contingent Liability exists under ERISA with respect to any “multi-employer plan,” as defined in Section 3(37) or Section 4001(a)(3) of ERISA.

(e) No events have occurred or are reasonably expected to occur with respect to any Employee Benefit Plan that would cause a material change in the costs of providing benefits under such Employee Benefit Plan or would cause a material change in the cost of providing such Employee Benefit Plan.

Section 4.14 Title to Property and Encumbrances. The Company has good and valid title to all properties and assets used in the conduct of its business (except for property held under valid and subsisting leases which are in full force and effect and which are not in default) free of all Liens except Permitted Liens and such ordinary and customary imperfections of title, restrictions and encumbrances as do not in the aggregate constitute a Company Material Adverse Effect.

Section 4.15 Condition of Properties. All facilities, machinery, equipment, fixtures and other properties owned, leased or used by the Company are in operating condition, subject to ordinary wear and tear, and are adequate and sufficient for the Company’s existing business.

Section 4.16 Insurance Coverage. There is in full force and effect one or more policies of insurance issued by insurers of recognized responsibility insuring the Company and its properties, products and business against such losses and risks, and in such amounts, as are customary for corporations of established reputation engaged in the same or similar business and similarly situated. The Company has not been refused any insurance coverage sought or applied for, and the Company has no reason to believe that it will be unable to renew its existing insurance coverage as and when the same shall expire upon terms at least as favorable to those currently in effect, other than possible increases in premiums that do not result from any act or omission of the Company. No suit, proceeding or action or, to the knowledge of the Company, threat of suit, proceeding or action has been asserted or made against the Company due to alleged bodily injury, disease, medical condition, death or property damage arising out of the function or malfunction of a product, procedure or service designed, manufactured, sold or distributed by the Company.

Section 4.17 Environmental Matters.

(a) To the knowledge of the Company, the Company has never generated, used, handled, treated, released, stored or disposed of any Hazardous Materials on any real property on which it now has or previously had any leasehold or ownership interest, except in compliance with all applicable Environmental Laws.

(b) To the knowledge of the Company, the historical and present operations of the business of the Company are in compliance with all applicable Environmental Laws, except where any non-compliance has not had and would not reasonably be expected to have a Company Material Adverse Effect.

(c) There are no material pending or, to the knowledge of the Company, threatened, demands, claims, information requests or notices of noncompliance or violation against or to the Company relating to any Environmental Law; and, to the knowledge of the Company, there are no conditions or occurrences on any of the real property used by the Company in connection with its business that would reasonably be expected to lead to any such demands, claims or notices against or to the Company, except such as have not had, and would not reasonably be expected to have, a Company Material Adverse Effect.

(d) To the knowledge of the Company, (i) the Company has not, sent or disposed of, otherwise had taken or transported, arranged for the taking or disposal of (on behalf of itself, a customer or any other party) or in any other manner participated or been involved in the taking of or disposal or release of a Hazardous Material to or at a site that is contaminated by any Hazardous Material or that, pursuant to any Environmental Law, (A) has been placed on the “National Priorities List”, the “CERCLIS” list, or any similar state or federal list, or (B) is subject to or the source of a claim, an administrative order or other request to take “removal”, “remedial”, “corrective” or any other “response” action, as defined in any Environmental Law, or to pay for the costs of any such action at the site; (ii) the Company is not involved in (and has no basis to reasonably expect to be involved in) any suit or proceeding and has not received (and has no basis to reasonably expect to receive) any written notice, request for information or other communication from any governmental authority or other third party with respect to a release or threatened release of any Hazardous Material or a violation or alleged violation of any Environmental Law, and has not received (and has no basis to reasonably expect to receive) written notice of any claims from any Person relating to property damage, natural resource damage or to personal injuries from exposure to any Hazardous Material; and (iii) the Company has timely filed every report required to be filed, acquired all necessary certificates, approvals and permits, and generated and maintained all required data, documentation and records under all Environmental Laws, in all such instances except where the failure to do so would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

Section 4.18 Disclosure. There is no fact relating to the Company that the Company has not disclosed to Parent in writing that has had or is currently having a Company Material Adverse Effect. No representation or warranty by the Company herein and no information disclosed in the exhibits hereto by the Company contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading.

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION CORP.

Parent and Acquisition Corp. hereby represent and warrant to the Company as follows:

Section 5.1 Organization. Each of Parent and Acquisition Corp. (i) is duly organized, validly existing and in good standing under the laws of its State of incorporation or organization, (ii) has all licenses, permits, authorizations and other Consents necessary to own, lease and operate its properties and assets and to carry on its business as it is now being conducted and (iii) has all requisite corporate or other applicable power and authority to own, lease and operate its properties and assets and to carry on its business as it is now being conducted and presently proposed to be conducted, in each case except where such failures would not have, or be reasonably likely to have an apparent Material Adverse Effect. Each of Parent and Acquisition Corp. is duly qualified or authorized to conduct business and is in good standing (or its equivalent) as a foreign corporation or other entity in all jurisdictions in which the ownership or use of its assets or nature of the business conducted by it makes such qualification or authorization necessary, except where the failure to be so duly qualified, authorized and in good standing would not have an apparent Material Adverse Effect.

Section 5.2 Authorization; Validity of Agreement. Each of Parent and Acquisition Corp. has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance by each of Parent and Acquisition Corp. of this Agreement and all other agreements and instruments to be executed pursuant to this Agreement, and the consummation of the transactions contemplated hereby and thereby, have been duly authorized by the Board of Directors of each of Parent and Acquisition Corp. and the stockholder of Acquisition Corp., and no other action on the part of either of Parent or Acquisition Corp. is necessary to authorize the execution and delivery of this Agreement and all other agreements and instruments to be executed pursuant to this Agreement and the consummation by either of Parent or Acquisition Corp. of the transactions contemplated hereby and thereby. This Agreement has been duly executed and delivered by the Parent and Acquisition Corp. and (assuming due and valid authorization, execution and delivery hereof by the Company) is a valid and binding obligation of each of Parent and Acquisition Corp., enforceable against each of them in accordance with its terms, except as such enforcement is limited by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity.

Section 5.3 Consents and Approvals; No Violations. Except for filing of the certificate of merger with the Secretary of State of the State of Nevada, neither the execution, delivery or performance of this Agreement by either of Parent and Acquisition Corp. nor the consummation of the transactions contemplated hereby will (i) violate any provision of the certificate of incorporation or by-laws of Parent or Acquisition Corp.; (ii) violate, conflict with or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, require the consent of or result in the creation of any Lien upon any of the properties of Parent or Acquisition Corp. under any Contract to which Parent or Acquisition Corp. or any of their properties may be bound; (iii) require any Consent, approval or authorization of, or notice to, or declaration, filing or registration with, any governmental entity by or with respect to Parent or any subsidiary of Parent, or (iv) violate any order, writ, judgment, injunction, decree, law, statute, rule or regulation applicable to any of Parent or Acquisition Corp. or any of their respective properties or assets; except, in the cases of clauses (ii), (iii) and (iv), any such violations, conflicts, breaches, defaults or encumbrances, or any failure to receive any such Consent, approval or authorization, or to make any such notice, declaration, filing or registration as will not result in, or could reasonably be expected to result in, a Parent Material Adverse Effect.

Section 5.4 Litigation. There is no Action pending or, to the knowledge of the Parent, threatened, involving Parent or Acquisition Corp. or any subsidiary of Parent or affecting the officers, directors or employees of Parent or Acquisition Corp. or any subsidiary of Parent with respect to Parent’s, Acquisition Corp.’s, or any of Parent’s subsidiaries’, businesses by or before any governmental entity or by any third party and none of Parent, Acquisition Corp. nor any subsidiary of Parent has received written notice that any such Action is threatened. None of Parent, Acquisition Corp. nor any subsidiary of Parent is in default under any judgment, order or decree of any governmental entity applicable to its business which could reasonably be expected to have a Parent Material Adverse Effect.

Section 5.5 No Default; Compliance with Applicable Laws. Neither Parent nor any of Parent’s subsidiaries is in default or violation of any material term, condition or provision of (i) their respective certificate of incorporation, by-laws or similar organizational documents or (ii) any law applicable to Parent or any of Parent’s subsidiaries or its property and assets and neither Parent nor any of Parent’s subsidiaries has received written notice of any violation of or Liability under any of the foregoing (whether material or not).

Section 5.6 Broker’s and Finder’s Fees; Broker/Dealer Ownership. No person(s), firm, corporation or other entity is entitled by reason of any act or omission of Parent or Acquisition Corp. to any broker’s or finder’s fees, commission or other similar compensation, nor, with respect to the execution, delivery and performance of this Agreement or with respect to the consummation of the transactions contemplated hereby will any such person have any right or valid claim against the Company, Parent or Acquisition Corp. to any such payment.

Section 5.7 Capitalization of Parent. As of the date hereof, the authorized capital stock of Parent consists of 75,000,000 shares of Parent Common Stock. As of the date hereof and immediately prior to the Effective Time, there are 34,113,781 shares of Parent Common Stock, par value $0.001, issued and outstanding. Other than as provided in Article III of this Agreement in connection with securities to be issued or to become issuable in connection with or as a result of the Merger, Parent has no outstanding options, warrants, rights or commitments to issue shares of Parent Common Stock or any capital stock or other securities of Parent or Acquisition Corp., and there are no outstanding securities convertible or exercisable into or exchangeable for shares of Parent Common Stock or any capital stock or other securities of Parent or Acquisition Corp. There is no voting trust, agreement or arrangement among any of the beneficial holders of Parent Common Stock affecting the nomination or election of directors or the exercise of the voting rights of Parent Common Stock. There are no registration rights or similar rights applicable to any shares of Parent Common Stock or any capital stock or other securities of Parent or Acquisition Corp. All outstanding shares of the capital stock of Parent are validly issued and outstanding, fully paid and non-assessable, and none of such shares have been issued in violation of the preemptive rights of any person. All of the shares of Parent Common Stock issued and outstanding immediately prior to the Effective Time have been issued in compliance with the Securities Act and applicable state securities laws and (i) pursuant to effective registration statements filed with the Securities and Exchange Commission and/or (ii) in reliance on valid exemptions from registration or qualification thereunder.

Section 5.8 Acquisition Corp. Acquisition Corp. is a Nevada corporation and a wholly-owned subsidiary of Parent that was formed on July 10, 2014 specifically for the purpose of the Merger and that has not conducted any business or acquired any property, and will not conduct an business or acquire any property prior to the Closing Date, except in preparation for and otherwise in connection with the transactions contemplated by this Agreement. Parent owns all of the issued and outstanding capital stock of Acquisition Corp., has no outstanding options, warrants or rights to purchase capital stock or other securities of Acquisition Corp., other than the capital stock of Acquisition Corp. owned by Parent. Except for Acquisition Corp., Parent has no subsidiaries. Acquisition Corp. has no subsidiaries.

Section 5.9 Validity of Shares. The shares of Parent Common Stock to be issued in accordance with Article III hereof, when issued and delivered in accordance with the terms hereof, shall be duly authorized, validly issued, fully paid and non-assessable.

Section 5.10 SEC Reporting and Compliance.

(a) Parent filed a registration statement on Form S-1 under the Securities Act which became effective on November 10, 2010. Since that date, Parent has timely filed with the Commission all registration statements, proxy statements, information statements and reports required to be filed by Parent pursuant to the Exchange Act (collectively, the “Parent SEC Documents”). Parent has not filed with the Commission a certificate on Form 15 pursuant to the Exchange Act.

(b) None of the Parent SEC Documents, as of their respective dates, contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements contained therein not misleading. Each of the Parent SEC Documents complied, and each Parent SEC Document to be filed with the Commission prior to the Effective Date shall comply, in all material respects, with the applicable requirements of the Securities Act and the Securities Exchange, as the case may be. Each of the financial statements (including, in each case, any related notes), contained in the Parent SEC Documents, including any Parent SEC Documents filed after the date of this Agreement until the Closing, complied, as of its respective filing date, in all material respects with all applicable accounting requirements and the published rules and regulations of the Commission with respect thereto.

(c) Nothing has occurred with respect to which Parent would be required to file, any report on Form 8-K prior to the date hereof for which Parent has failed to file such report. Prior to and until the Closing, Parent will provide to the Company copies of any and all amendments or supplements to the Parent SEC Documents filed with the Commission and all subsequent registration statements and reports filed by Parent subsequent to the filing of the Parent SEC Documents with the Commission and any and all subsequent information statements, proxy statements, reports or notices filed by the Parent with the Commission or delivered to the stockholders of Parent.

(d) Parent is not an “investment company” within the meaning of Section 3 of the Investment Company Act.

(e) The Parent Common Stock is presently eligible for quotation and trading on the OTCQB quotation system operated by OTC Markets, Inc.

(f) Between the date hereof and the Closing Date, Parent shall continue to satisfy any applicable filing requirements of the Exchange Act or the Securities Act, as the case may be, and all other requirements of applicable securities laws.

(g) To the knowledge of Parent, Parent has complied with the Securities Act, Exchange Act and all other applicable federal and state securities laws.

Section 5.11 No General Solicitation. In issuing Parent Common Stock in the Merger hereunder, neither Parent nor anyone acting on its behalf has offered to sell Parent Common Stock by any form of general solicitation or advertising.

Section 5.12 Financial Statements. The balance sheets, and statements of income, stockholders’ equity and cash flows (including any notes thereto) contained in the Parent SEC Documents (the “Parent Financial Statements”) (i) have been prepared in accordance with GAAP, (ii) are in accordance with the books and records of the Parent, and (iii) present fairly in all material respects the financial condition of the Parent at the dates therein specified and the results of its operations and changes in financial position for the periods therein specified.

Section 5.13 Absence of Undisclosed Liabilities. Neither Parent nor Acquisition Corp. has any Liability at or prior to the Closing, except (a) as disclosed in the Parent SEC Documents, (b) to the extent set forth on or reserved against in the balance sheet of Parent as of March 31, 2014 (the “Parent Balance Sheet”) or the notes to the Parent Financial Statements, (c) current Liabilities incurred and obligations under agreements entered into in the usual and ordinary course of business, consistent with past practice, since March 31, 2014 (the “Parent Balance Sheet Date”), none of which, individually or in the aggregate, constitutes a Parent Material Adverse Effect, (d) attorney’s fees and accounting fees incurred by the Parent since the Parent Balance Sheet Date, including those related to this Agreement and all of the transactions related thereto and contemplated thereby, including but not limited to preparation and filing of disclosures with the SEC, and (e) by the specific terms of any written agreement, document or arrangement attached as an exhibit to the Parent SEC Documents.

Section 5.14 Changes. Since the Parent Balance Sheet Date, except as disclosed in the Parent SEC Documents, Parent has not (a) incurred any debts, obligations or Liabilities, absolute, accrued or, to the Parent’s knowledge, contingent, whether due or to become due, except for current Liabilities incurred in the usual and ordinary course of business, (b) discharged or satisfied any Liens other than those securing, or paid any obligation or Liability other than, current liabilities shown on the Parent Balance Sheet and current Liabilities incurred since the Parent Balance Sheet Date, in each case in the usual and ordinary course of business, (c) mortgaged, pledged or subjected to Lien any of its assets, tangible or intangible, other than in the usual and ordinary course of business, (d) sold, transferred or leased any of its assets, except in the usual and ordinary course of business, (e) cancelled or compromised any debt or claim, or waived or released any right of material value, (f) suffered any physical damage, destruction or loss (whether or not covered by insurance) that could reasonably be expected to have a Parent Material Adverse Effect, (g) entered into any transaction other than in the usual and ordinary course of business, (h) encountered any labor union difficulties, (i) made or granted any wage or salary increase or made any increase in the amounts payable under any profit sharing, bonus, deferred compensation, severance pay, insurance, pension, retirement or other employee benefit plan, agreement or arrangement, other than in the ordinary course of business consistent with past practice, or entered into any employment agreement, (j) issued or sold any shares of capital stock, bonds, notes, debentures or other securities or granted any options (including employee stock options), warrants or other rights with respect thereto, (k) declared or paid any dividends on or made any other distributions with respect to, or purchased or redeemed, any of its outstanding capital stock, (l) suffered or experienced any change in, or condition affecting, the financial condition of the Parent other than changes, events or conditions in the usual and ordinary course of its business, none of which (either by itself or in conjunction with all such other changes, events and conditions) could reasonably be expected to have a Parent Material Adverse Effect, (m) made any change in the accounting principles, methods or practices followed by it or depreciation or amortization policies or rates theretofore adopted, (n) made or permitted any amendment or termination of any material Contract, agreement or license to which it is a party, (o) suffered any material loss not reflected in the Parent Balance Sheet or its statement of income for the year ended on the Parent Balance Sheet Date, (p) paid, or made any accrual or arrangement for payment of, bonuses or special compensation of any kind or any severance or termination pay to any present or former officer, director, employee, stockholder or consultant, (q) made or agreed to make any charitable contributions or incurred any non-business expenses in excess of $1,000 in the aggregate, or (r) entered into any Contract, agreement or license, or otherwise obligated itself, to do any of the foregoing.

Section 5.15 Tax Returns and Audits. All required federal, state and local Tax Returns of the Parent have been accurately prepared in all material respects and duly and timely filed, and all federal, state and local Taxes required to be paid with respect to the periods covered by such returns have been paid to the extent that the same are material and have become due, except where the failure so to file or pay could not reasonably be expected to have a Parent Material Adverse Effect. The Parent is not and has not been delinquent in the payment of any Tax. The Parent has not had a Tax deficiency assessed against it. None of the Parent’s federal income Tax Returns nor any state or local income or franchise Tax Returns has been audited by governmental authorities. The reserves for Taxes reflected on the Parent Balance Sheet are sufficient for the payment of all unpaid Taxes payable by the Parent with respect to the period ended on the Parent Balance Sheet Date. There are no federal, state, local or foreign audits, actions, suits, proceedings, investigations, claims or administrative proceedings relating to Taxes or any Tax Returns of the Parent now pending, and the Parent has not received any notice of any proposed audits, investigations, claims or administrative proceedings relating to Taxes or any Tax Returns.

Section 5.16 Employee Benefit Plans; ERISA.

(a) Except as disclosed in the Parent SEC Documents, there are no “employee benefit plans” (within the meaning of Section 3(3) of ERISA) nor any other employee benefit or fringe benefit arrangements, practices, contracts, policies or programs other than programs merely involving the regular payment of wages, commissions, or bonuses established, maintained or contributed to by the Parent, whether written or unwritten and whether or not funded. Any plans listed in the Parent SEC Documents are hereinafter referred to as the “Parent Employee Benefit Plans.”

(b) Any current and prior material documents, including all amendments thereto, with respect to each Parent Employee Benefit Plan have been made available to the Company.

(c) All Parent Employee Benefit Plans are in material compliance with the applicable requirements of ERISA, the Code and any other applicable state, federal or foreign law.

(d) There are no pending, or to the knowledge of the Parent, threatened, claims or lawsuits that have been asserted or instituted against any Parent Employee Benefit Plan, the assets of any of the trusts or funds under the Parent Employee Benefit Plans, the plan sponsor or the plan administrator of any of the Parent Employee Benefit Plans or against any fiduciary of a Parent Employee Benefit Plan with respect to the operation of such plan.

(e) There is no pending, or to the knowledge of the Parent, threatened, investigation or pending or possible enforcement action by the Pension Benefit Guaranty Corporation, the Department of Labor, the Internal Revenue Service or any other government agency with respect to any Parent Employee Benefit Plan and Parent has no knowledge of any incident, transaction, occurrence or circumstance which might reasonably be expected to trigger such an investigation or enforcement action.

(f) No actual or, to the knowledge of Parent, contingent Liability exists with respect to the funding of any Parent Employee Benefit Plan or for any other expense or obligation of any Parent Employee Benefit Plan, except as disclosed on the Parent Financial Statements or the Parent SEC Documents, and to the knowledge of the Parent, no contingent Liability exists under ERISA with respect to any “multi-employer plan,” as defined in Section 3(37) or Section 4001(a)(3) of ERISA.

Section 5.17 Interested Party Transactions. Except as disclosed in the Parent SEC Documents, no officer, director or stockholder of the Parent or any Affiliate of any such Person or the Parent has or has had, either directly or indirectly, (a) an interest in any Person that (i) furnishes or sells services or products that are furnished or sold or are proposed to be furnished or sold by the Parent or (ii) purchases from or sells or furnishes to the Parent any goods or services, or (b) a beneficial interest in any Contract to which the Parent is a party or by which it may be bound or affected.

Section 5.18 Questionable Payments. Neither the Parent, Acquisition Corp. nor to the knowledge of the Parent, any director, officer, agent, employee or other Person associated with or acting on behalf of the Parent or Acquisition Corp., has used any corporate funds for (a) unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity, (b) made any direct or indirect unlawful payments to government officials or employees from corporate funds, (c) established or maintained any unlawful or unrecorded fund of corporate monies or other assets, (d) made any false or fictitious entries on the books of record of any such corporations, or (e) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment.

Section 5.19 Obligations to or by Stockholders. Except as disclosed in the Parent SEC Documents, the Parent has no Liability or obligation or commitment to any stockholder of Parent or any Affiliate or “associate” (as such term is defined in Rule 405 under the Securities Act) of any stockholder of Parent, nor does any stockholder of Parent or any such Affiliate or associate have any Liability, obligation or commitment to the Parent.

Section 5.20 Schedule of Assets and Contracts. Except as expressly set forth in this Agreement, the Parent Balance Sheet or the notes thereto, the Parent is not a party to any Contract not made in the ordinary course of business that is material to the Parent. Parent does not own any real property. Parent is not a party to any Contract (a) with any labor union, (b) for the purchase of fixed assets or for the purchase of materials, supplies or equipment in excess of normal operating requirements, (c) for the employment of any officer, individual employee or other Person on a full-time basis or any contract with any Person for consulting services, (d) with respect to bonus, pension, profit sharing, retirement, stock purchase, stock option, deferred compensation, medical, hospitalization or life insurance or similar plan, contract or understanding with any or all of the employees of Parent or any other Person, (e) relating to or evidencing Indebtedness for Borrowed Money or subjecting any asset or property of Parent to any Lien or evidencing any Indebtedness, (f) guaranteeing of any Indebtedness, (g) under which Parent is lessee of or holds or operates any property, real or personal, owned by any other Person, (h) under which Parent is lessor or permits any Person to hold or operate any property, real or personal, owned or controlled by Parent, (i) granting any preemptive right, right of first refusal or similar right to any Person, (j) with any Affiliate of Parent or any present or former officer, director or stockholder of Parent, (k) obligating Parent to pay any royalty or similar charge for the use or exploitation of any tangible or intangible property, (1) containing a covenant not to compete or other restriction on the parent’s ability to conduct a business or engage in any other activity, (m) with respect to any distributor, dealer, manufacturer’s representative, sales agency, franchise or advertising contract or commitment, (n) regarding the registration of securities under the Securities Act, (o) characterized as a collective bargaining agreement, or (p) with any Person continuing for a period of more than three months from the Closing Date that involves an expenditure or receipt by Parent in excess of $1,000. The Parent maintains no insurance policies and insurance coverage of any kind with respect to Parent, its business, premises, properties, assets, employees and agents. Parent has furnished to the Company true and complete copies of all agreements and other documents requested by the Company.

Section 5.21 Environmental Matters.

(a) The Parent has never generated, used, handled, treated, released, stored or disposed of any Hazardous Materials on any real property on which it now has or previously had any leasehold or ownership interest, except in compliance with all applicable Environmental Laws.

(b) The historical and present operations of the business of the Parent compliance with all applicable Environmental Laws, except where any non-compliance has not had and would not reasonably be expected to have a Parent Material Adverse Effect.

(c) (i) The Parent has not, sent or disposed of, otherwise had taken or transported, arranged for the taking or disposal of (on behalf of itself, a customer or any other party) or in any other manner participated or been involved in the taking of or disposal or release of a Hazardous Material to or at a site that is contaminated by any Hazardous Material or that, pursuant to any Environmental Law, (A) has been placed on the “National Priorities List”, the “CERCLIS” list, or any similar state or federal list, or (B) is subject to or the source of a claim, an administrative order or other request to take “removal”, “remedial”, “corrective” or any other “response” action, as defined in any Environmental Law, or to pay for the costs of any such action at the site; (ii) the Parent is not involved in (and has no basis to reasonably expect to be involved in) any suit or proceeding and has not received (and has no basis to reasonably expect to receive) any written notice, request for information or other communication from any governmental authority or other third party with respect to a release or threatened release of any Hazardous Material or a violation or alleged violation of any Environmental Law, and has not received (and has no basis to reasonably expect to receive) written notice of any claims from any Person relating to property damage, natural resource damage or to personal injuries from exposure to any Hazardous Material; and (iii) the Parent has timely filed every report required to be filed, acquired all necessary certificates, approvals and permits, and generated and maintained all required data, documentation and records under all Environmental Laws, in all such instances except where the failure to do so would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.

(d) There are no material pending or, to the knowledge of Parent, threatened, demands, claims, information requests or notices of noncompliance or violation against or to the Parent relating to any Environmental Law; and, to the knowledge of Parent, there are no conditions or occurrences on any of the real property used by Parent in connection with its business that would reasonably be expected to lead to any such demands, claims or notices against or to Parent, except such as have not had, and would not reasonably be expected to have, a Parent Material Adverse Effect.

Section 5.22 Employees. Other than pursuant to ordinary arrangements of employment compensation, Parent is not under any obligation or liability to any officer, director, employee or Affiliate of Parent.

Section 5.23 Title to Property and Encumbrances. Parent has good and valid title to all properties and assets used in the conduct of its business (except for property held under valid and subsisting leases which are in full force and effect and which are not in default) free of all Liens except Permitted Liens and such ordinary and customary imperfections of title, restrictions and encumbrances as do not, individually or in the aggregate constitute a Parent Material Adverse Effect.

Section 5.24 Condition of Properties. All facilities, machinery, equipment, fixtures and other properties owned, leased or used by Parent are in operating condition, subject to ordinary wear and tear, and are adequate and sufficient for the Parent’s existing business.

Section 5.25 Insurance Coverage. Parent does not have in full force and effect any one or more policies of insurance issued by insurers of recognized responsibility insuring Parent and its properties, products and business against such losses and risks, and in such amounts, as are customary for corporations of established reputation engaged in the same or similar business and similarly situated. Parent has not been refused any insurance coverage sought or applied for, and Parent has no reason to believe that it will be unable to renew any existing insurance coverage as and when the same shall expire upon terms at least as favorable to those currently in effect, other than possible increases in premiums that do not result from any act or omission of Parent. No suit, proceeding or action or, to the best current actual knowledge of Parent, threat of suit, proceeding or action has been asserted or made against Parent due to alleged bodily injury, disease, medical condition, death or property damage arising out of the function or malfunction of a product, procedure or service designed, manufactured, sold or distributed by Parent.

Section 5.26 Disclosure. There is no fact relating to Parent or Acquisition Corp. that Parent has not disclosed to the Company in writing that has had, is having or is reasonably likely to have a Parent Material Adverse Effect. No representation or warranty by Parent or Acquisition Corp. herein and no information disclosed in the exhibits hereto by Parent or Acquisition Corp. contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading.

Section 5.27 No Liabilities. As of the Closing Date, there are no Liabilities or Indebtedness of the Parent or Acquisition Corp. of any kind whatsoever, whether recorded on the Balance Sheet of Parent or Acquisition Corp. or not, whether accrued, contingent, absolute, determined, determinable or otherwise, and there is no existing condition, situation or set of circumstances which could reasonably be expected to result in such Liability or Indebtedness. Neither the Parent nor the Acquisition Corp. is a guarantor of any Indebtedness of any other person, firm or corporation.

ARTICLE VI
CONDUCT OF BUSINESSES PENDING THE MERGER

Section 6.1 Conduct of Business by the Company Pending the Merger. Prior to the Effective Time, unless Parent or Acquisition Corp. shall otherwise agree in writing or as otherwise contemplated by this Agreement:

(i) the business of the Company shall be conducted only in the ordinary course consistent with the past practice;

(ii) the Company shall not (A) directly or indirectly redeem, purchase or otherwise acquire or agree to redeem, purchase or otherwise acquire any shares of Company Capital Stock; (B) amend its certificate of incorporation or by-laws except to effectuate the transactions contemplated in this Agreement; or (C) split, combine or reclassify the outstanding Company Capital Stock or declare, set aside or pay any dividend payable in cash, stock or property or make any distribution with respect to any such stock;

(iii) the Company shall not (A) issue any additional shares of, or options, warrants or rights of any kind to acquire any shares of, Company Capital Stock; (B) acquire or dispose of any fixed assets or acquire or dispose of any other substantial assets other than in the ordinary course of business; (C) incur additional Indebtedness or any other Liabilities or enter into any other transaction other than in the ordinary course of business; (D) enter into any Contract, agreement, commitment or arrangement with respect to any of the foregoing except this Agreement; or (E) except as contemplated by this Agreement, enter into any Contract, agreement, commitment or arrangement to dissolve, merge, consolidate or enter into any other material business combination; and

(iv) the Company shall use its reasonable best efforts to preserve intact the business of the Company, to keep available the service of its present officers and key employees, and to preserve the good will of those having business relationships with it.

Section 6.2 Conduct of Business by Parent and Acquisition Corp. Pending the Merger. Prior to the Effective Time, unless the Company shall otherwise agree in writing or as otherwise contemplated expressly permitted by this Agreement:

(i) the business of Parent and Acquisition Corp. shall be conducted only in the ordinary course consistent with past practice;

(ii) neither Parent nor Acquisition Corp. shall (A) directly or indirectly redeem, purchase or otherwise acquire or agree to redeem, purchase or otherwise acquire any shares of its capital stock; (B) amend its certificate of incorporation or by-laws; or (C) split, combine or reclassify its capital stock or declare, set aside or pay any dividend payable in cash, stock or property or make any distribution with respect to such stock; and

(iii) neither Parent nor Acquisition Corp. shall (A) issue or agree to issue any additional shares of, or options, warrants or rights of any kind to acquire shares of, its capital stock; (B) acquire or dispose of any assets other than in the ordinary course of business; (C) incur additional Indebtedness or any other Liabilities or enter into any other transaction except in the ordinary course of business; (D) enter into any Contract, agreement, commitment or arrangement with respect to any of the foregoing except this Agreement, or (E) except as contemplated by this Agreement, enter into any Contract, agreement, commitment or arrangement to dissolve, merge; consolidate or enter into any other material business contract or enter into any negotiations in connection therewith.

(iv) Parent shall use its best efforts to preserve intact the business of Parent and Acquisition Corp., to keep available the service of its present officers and key employees, and to preserve the good will of those having business relationships with Parent and Acquisition Corp. and to file all required SEC Reports under the Exchange Act;

(v) neither Parent nor Acquisition Corp. will, nor will they authorize any director or authorize or permit any officer or employee or any attorney, accountant or other representative retained by them to, make, solicit, encourage any inquiries with respect to, or engage in any negotiations concerning, any Acquisition Proposal (as defined below). Parent will promptly advise the Company in writing of any such inquiries or Acquisition Proposal (or requests for information) and the substance thereof. As used in this paragraph, “Acquisition Proposal” shall mean any proposal for a merger or other business combination involving the Parent or Acquisition Corp. or for the acquisition of a substantial equity interest in either of them or any material assets of either of them other than as contemplated by this Agreement. Parent will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any Person conducted heretofore with respect to any of the foregoing; and

(vi) neither Parent nor Acquisition Corp. will enter into any new employment agreements with any of their officers or employees or grant any increases in the compensation or benefits of their officers and employees.

ARTICLE VII
ADDITIONAL AGREEMENTS

Section 7.1 Access and Information. The Company, Parent and Acquisition Corp. shall each afford to the other and to the other’s accountants, counsel and other representatives reasonable access during normal business hours throughout the period prior to the Effective Time of all of its properties, books, contracts, commitments and records (including but not limited to Tax Returns) and during such period, each shall furnish promptly to the other all information concerning its business, properties and personnel as such other party may reasonably request, provided that no investigation pursuant to this Section 7.1 shall affect any representations or warranties made herein. Each party shall hold, and shall cause its employees and agents to hold, in confidence all such information (other than such information that (i) becomes generally available to the public other than as a result of a disclosure by such party or its directors, officers, managers, employees, agents or advisors, or (ii) becomes available to such party on a non-confidential basis from a source other than a party hereto or its advisors, provided that such source is not known by such party to be bound by a confidentiality agreement with or other obligation of secrecy to a party hereto or another party until such time as such information is otherwise publicly available; provided, however, that: (A) any such information may be disclosed to such party’s directors, officers, employees and representatives of such party’s advisors who need to know such information for the purpose of evaluating the transactions contemplated hereby (it being understood that such directors, officers, employees and representatives shall be informed by such party of the confidential nature of such information); (B) any disclosure of such information may be made as to which the party hereto furnishing such information has consented in writing; and (C) any such information may be disclosed pursuant to a judicial, administrative or governmental order or request provided, that the requested party will promptly so notify the other party so that the other party may seek a protective order or appropriate remedy and/or waive compliance with this Agreement and if such protective order or other remedy is not obtained or the other party waives compliance with this provision, the requested party will furnish only that portion of such information which is legally required and will exercise its best efforts to obtain a protective order or other reliable assurance that confidential treatment will be accorded the information furnished. If this Agreement is terminated, each party will deliver to the other all documents and other materials (including copies) obtained by such party or on its behalf from the other party as a result of this Agreement or in connection herewith, whether so obtained before or after the execution hereof.

Section 7.2 Additional Agreements. Subject to the terms and conditions herein provided, each of the parties hereto agrees to use its commercially reasonable best efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement, including using its commercially reasonable best efforts to satisfy the conditions precedent to the obligations of any of the parties hereto to obtain all necessary waivers, and to lift any injunction or other legal bar to the Merger (and, in such case, to proceed with the Merger as expeditiously as possible). In order to obtain any necessary governmental or regulatory action or non-action, waiver, Consent, extension or approval, each of Parent, Acquisition Corp. and the Company agrees to take all reasonable actions and to enter into all reasonable agreements as may be necessary to obtain timely governmental or regulatory approvals and to take such further action in connection therewith as may be necessary. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and/or directors of Parent, Acquisition Corp. and the Company shall take all such necessary action.

Section 7.3 Publicity. No party shall issue any press release or public announcement pertaining to the Merger that has not been agreed upon in advance by Parent and the Company, except as Parent reasonably determines to be necessary in order to comply with the rules of the Commission; provided that in such case Parent will use its best efforts to allow Company to review and reasonably approve any of the same prior to its release.

Section 7.4 Appointment of Directors. Immediately upon the Effective Time, Parent shall, in accordance with Section 2.3(d), require and accept the resignations of those officers and directors of Parent listed on Exhibit C hereto under the heading “Pre-Effective Time,” and shall immediately upon the Effective Time, cause the appointments of those officers and directors of Parent identified in Exhibit C hereto under the heading “Following Notice Filings”, subject to any notice and waiting period requirements of federal law. At the first annual meeting of Parent’s stockholders and thereafter, the election of members of Parent’s Board of Directors shall be accomplished in accordance with the by-laws of Parent.

Section 7.5 Stockholder Consent.

(a) So long as the Board of Directors of the Company shall not have withdrawn, modified or changed its recommendation in accordance with the provisions of Section 7.8(b) hereof, the Company, acting through its Board of Directors, shall, in accordance with Nevada law and its certificate of incorporation and by-laws, take all actions reasonably necessary to establish a record date for, duly call, give notice of, convene, and hold a stockholders meeting for the purpose of obtaining the requisite approval and adoption of this Agreement and the transactions contemplated hereby by the Stockholders, or in the alternative to obtain the written consent of a majority of the Shareholders of the Company to this merger. The Company shall notify each Stockholder, whether or not entitled to vote, of the proposed Company stockholders’ meeting or need for written consent. Such meeting notice shall state that the purpose, or one of the purposes, of the meeting is to consider the Merger and shall contain or be accompanied by a copy or summary of this Agreement. Notwithstanding the foregoing, the Board of Directors of the Company shall not be required to take all actions reasonably necessary to establish a record date for, duly call, give notice of, convene and hold a stockholders meeting for the purpose of obtaining the requisite approval and adoption of this Agreement and the transactions contemplated hereby by the Stockholders if the Company’s Board of Directors and the requisite Stockholders otherwise take all actions reasonably necessary to approve this Agreement and the transactions contemplated hereby by written consent in lieu of a meeting of the stockholders of the Company to the extent permitted by applicable law.

(b) The Board of Directors of the Company shall unanimously recommend such approval and shall use all reasonable efforts to solicit and obtain such approval; provided, however, that the Board of Directors of the Company may at any time prior to approval of the Stockholders (i) decline to make, withdraw, modify or change any recommendation or declaration regarding this Agreement or the Merger or (ii) recommend and declare advisable any other offer or proposal, to the extent the Board of Directors of the Company determines in good faith, based upon advice of legal counsel, that withdrawing, modifying, changing or declining to make its recommendation regarding this Agreement or the Merger or recommending and declaring advisable any other offer or proposal is necessary to comply with its fiduciary duties under applicable law (which declinations, withdrawal, modification or change shall not constitute a breach by the Company of this Agreement). The Company shall provide written notice to Parent promptly upon the Company taking any action referred to in the foregoing proviso.

(c) Pursuant to the NRS, at any time before the certificate of merger is filed with the Secretary of State of the State of Nevada, including any time after the Merger is authorized by the Stockholders, the Merger may be abandoned and this Agreement may be terminated in accordance with the terms hereof, without further action by the Stockholders.

ARTICLE VIII
CONDITIONS OF PARTIES’ OBLIGATIONS

Section 8.1 Company Obligations. The obligations of Parent and Acquisition Corp. under this Agreement are subject to the fulfillment by the Company at or prior to the Closing of the following conditions, any of which may be waived in whole or in part by Parent.

(a) No Errors, etc. The representations and warranties of the Company under this Agreement shall be deemed to have been made again on the Closing Date and shall then be true and correct in all material respects.

(b) Compliance with Agreement. The Company shall have performed and complied in all material respects with all agreements and conditions required by this Agreement to be performed or complied with by it on or before the Closing Date.

(c) No Company Material Adverse Effect. Since the date hereof, there shall not have been any event or circumstance that has resulted in a Company Material Adverse Effect, and no event has occurred or circumstance exists that would reasonably be expected to result in a Company Material Adverse Effect.

(d) Certificate of Officers. The Company shall have delivered to Parent and Acquisition Corp. a certificate dated the Closing Date, executed on its behalf by the Chief Executive Officer of the Company, certifying the satisfaction of the conditions specified in paragraphs (a), (b) and (c) of this Section 8.1.

(e) No Restraining Action. No Action or proceeding before any court, governmental body or agency shall have been threatened, asserted or instituted to restrain or prohibit, or to obtain substantial damages in respect of, this Agreement or the carrying out of the transactions contemplated by this Agreement.

(f) Conversion of Company Preferred Stock. The Company shall have completed the conversion of all issued and outstanding Company Preferred Stock to Company Common Stock.

(g) Supporting Documents. Parent and Acquisition Corp. shall have received the following:

(1) Copies of resolutions of the Board of Directors and the stockholders of the Company, certified by the President of the Company, authorizing and approving the Merger and the execution, delivery and performance of this Agreement and all other documents and instruments to be delivered pursuant hereto and thereto.

(2) A certificate of incumbency executed by the Secretary of the Company certifying the names, titles and signatures of the officers authorized to execute any documents referred to in this Agreement and further certifying that the certificate of incorporation and by-laws of the Company delivered to Parent and Acquisition Corp. at the time of the execution of this Agreement have been validly adopted and have not been amended or modified since the date hereof.

(3) Evidence as of a recent date of the good standing and corporate existence of the Company issued by the Secretary of State of the State of Nevada.

Section 8.2 Parent and Acquisition Corp. Obligations. The obligations of the Company under this Agreement are subject to the fulfillment by Parent and Acquisition Corp. at or prior to the Closing of the following conditions any of which may be waived in whole or in part by the Company:

(a) No Errors, etc. The representations and warranties of Parent and Acquisition Corp. under this Agreement shall be deemed to have been made again on the Closing Date and shall then be true and correct in all material respects.

(b) Compliance with Agreement. Parent and Acquisition Corp. shall have performed and complied in all material respects with all agreements and conditions required by this Agreement to be performed or complied with by them on or before the Closing Date.

(c) No Parent Material Adverse Effect. Since the date hereof, there shall not have been any event or circumstance that has resulted in a Parent Material Adverse Effect and no event has occurred or circumstance exists that would be reasonably expected to result in such a Parent Material Adverse Effect.

(d) Certificate of Officers. Parent and Acquisition Corp. shall have delivered to the Company a certificate dated the Closing Date, executed on their behalf by their respective Presidents, certifying the satisfaction of the conditions specified in paragraphs (a), (b), and (c) of this Section 8.2.

(e) Assignment. Parent shall have completed, if necessary, an assignment of all assets and liabilities of the Parent immediately prior to the Effective Time (other than its ownership interest in Acquisition Corp.) to an unrelated third party in a transaction satisfactory to the Company.

(f) Supporting Documents. The Company shall have received the following:

(1) Copies of resolutions of Parent’s and Acquisition Corp.’s respective board of directors and the sole stockholder of Acquisition Corp., certified by their respective Secretaries, authorizing and approving the Merger and the execution, delivery and performance of this Agreement and all other documents and instruments to be delivered by them pursuant hereto.

(2) A certificate of incumbency executed by the respective Secretaries of Parent and Acquisition Corp. certifying the names, titles and signatures of the officers authorized to execute the documents referred to in paragraph (1) above and further certifying that the certificates of incorporation and by-laws of Parent and Acquisition Corp. appended thereto have not been amended or modified.

(3) A certificate, dated the Closing Date, executed by the Secretary of each of the Parent and Acquisition Corp., certifying that, except for the filing of the certificate of merger with the Secretary of State of the State of Nevada: (i) all consents, authorizations, orders and approvals of, and filings and registrations with, any court, governmental body or instrumentality that are required to be obtained by Parent or Acquisition Corp. for the execution and delivery of this Agreement and the consummation of the Merger shall have been duly made or obtained; and (ii) no action or proceeding before any court, governmental body or agency has been threatened, asserted or instituted against Parent or Acquisition Corp. to restrain or prohibit, or to obtain substantial damages in respect of, this Agreement or the carrying out of the transactions contemplated by this Agreement.

(4) A certificate of Parent’s transfer agent and registrar, certifying as of the business day prior to the Closing Date, a true and complete list of the names and addresses of the record owners of all of the outstanding shares of Parent Common Stock, together with the number of shares of Parent Common Stock held by each record owner.

(5) The executed resignations of all directors and officers of Parent, with the director resignations to take effect following the notice period required by federal law, and (ii) executed releases from each such director and officer in the form and substance acceptable to the Company in its sole discretion.

(6) Evidence as of a recent date of the good standing and corporate existence of each of the Parent and Acquisition Corp. issued by the Secretary of State of their respective states of incorporation.

(7) Such additional supporting documentation and other information with respect to the transactions contemplated hereby as the Company may reasonably request.

ARTICLE IX
INDEMNIFICATION AND RELATED MATTERS

Section 9.1 Indemnification by Parent. Parent shall indemnify and hold harmless the Company and the Stockholders (collectively, the “Company Indemnified Parties”), and shall reimburse the Company Indemnified Parties for, any loss, liability, claim, damage, expense (including, but not limited to, costs of investigation and defense and reasonable attorneys’ fees) or diminution of value (collectively, “Damages”) arising from or in connection with (a) any inaccuracy, in any material respect, in any of the representations and warranties of Parent and Acquisition Corp. in this Agreement or in any certificate delivered by Parent and Acquisition Corp. to the Company pursuant to this Agreement, or any actions, omissions or statements of fact inconsistent with any such representation or warranty, (b) any failure by Parent or Acquisition Corp. to perform or comply in any material respect with any covenant or agreement in this Agreement, (c) any claim for brokerage or finder’s fees or commissions or similar payments based upon any agreement or understanding alleged to have been made by any such party with Parent or Acquisition Corp. in connection with any of the transactions contemplated by this Agreement, (d) Taxes attributable to any transaction or event occurring on or prior to the Closing, (e) any claim relating to or arising out of any Liabilities of either Parent or Acquisition Corp. on or prior to Closing or with respect to accounting fees arising thereafter, or (f) any litigation, action, claim, proceeding or investigation by any third party relating to or arising out of the business or operations of Parent, or the actions of Parent or any holder of Parent capital stock prior to the Effective Time.

Section 9.2 Survival. All representations, warranties, covenants and agreements of Parent and Acquisition Corp. contained in this Agreement or in any instrument delivered pursuant to this Agreement shall survive until twelve (12) months after the Effective Date. The representations and warranties of the Company contained in this Agreement or in any instrument delivered pursuant to this Agreement will terminate at, and have no further force and effect after, the Effective Time.

Section 9.3 Time Limitations. Neither Parent nor Acquisition Corp. shall have any liability (for indemnification or otherwise) with respect to any representation or warranty, or covenant or agreement to be performed and complied with prior to the Effective Time, unless on or before the twelve month anniversary of the Effective Time (the “Claims Deadline”), Parent is given notice of a claim with respect thereto, in accordance with Section 9.5, specifying the factual basis therefore in reasonable detail to the extent then known by the Company Indemnified Parties.

Section 9.4 Limitation on Liability. The obligations of Parent and Acquisition Corp. to the Company Indemnified Parties set forth in Section 9.1 shall be subject to the following limitations:

(a) The aggregate liability of Parent and Acquisition Corp. to the Company shall not exceed $25,000.

(b) Other than claims based on fraud or for specific performance, injunctive or other equitable relief, the Company Indemnified Parties’ sole and exclusive remedy for any and all claims for Damages pursuant to Section 9.1 hereof shall be the indemnification provided under the terms and subject to the conditions of this Article IX.

Section 9.5 Notice of Claims.

(a) If, at any time on or prior to the Claims Deadline, Company Indemnified Parties shall assert a claim for indemnification pursuant to Section 9.1, such Company Indemnified Parties shall submit to Parent a written claim stating: (i) that a Company Indemnified Party incurred or reasonably believes it may incur Damages and the amount or reasonable estimate thereof of any such Damages; and (ii) in reasonable detail, the facts alleged as the basis for such claim and the section or sections of this Agreement alleged as the basis or bases for the claim.

(b) In the event that any action, suit or proceeding is brought against any Company Indemnified Party with respect to which Parent may have liability under this Article IX, the Parent shall have the right, at its cost and expense, to defend such action, suit or proceeding in the name and on behalf of the Company Indemnified Party; provided, however, that a Company Indemnified Party shall have the right to retain its own counsel, with fees and expenses paid by Parent, if representation of the Company Indemnified Party by counsel retained by Parent would be inappropriate because of actual or potential differing interests between Parent and the Company Indemnified Party. In connection with any action, suit or proceeding subject to this Article IX, Parent and each Company Indemnified Party agree to render to each other such assistance as may reasonably be required in order to ensure proper and adequate defense of such action, suit or proceeding. Parent shall not, without the prior written consent of the applicable Company Indemnified Parties, which consent shall not be unreasonably withheld or delayed, settle or compromise any claim or demand if such settlement or compromise does not include an irrevocable and unconditional release of such Company Indemnified Parties for any liability arising out of such claim or demand.

ARTICLE X
TERMINATION PRIOR TO CLOSING

Section 10.1 Termination of Agreement. This Agreement may be terminated at any time prior to the Closing:

(a) by the mutual written consent of the Company, Acquisition Corp. and Parent;

(b) by the Company, if Parent or Acquisition Corp. (i) fails to perform in any material respect any of its agreements contained herein required to be performed by it on or prior to the Effective Time, (ii) materially breaches any of its representations, warranties or covenants contained herein, which failure or breach is not cured within thirty (30) days after the Company has notified Parent and Acquisition Corp. of its intent to terminate this Agreement pursuant to this paragraph (b);

(c) by Parent and Acquisition Corp., if the Company (i) fails to perform in any material respect any of its agreements contained herein required to be performed by it on or prior to the Closing Date, (ii) materially breaches any of its representations, warranties or covenants contained herein, which failure or breach is not cured within thirty (30) days after Parent or Acquisition Corp. has notified the Company of its intent to terminate this Agreement pursuant to this paragraph (c);

(d) by either the Company, on the one hand, or Parent and Acquisition Corp., on the other hand, if there shall be any order, writ, injunction or decree of any court or governmental or regulatory agency binding on Parent, Acquisition Corp. or the Company, which prohibits or materially restrains any of them from consummating the transactions contemplated hereby; provided that the parties hereto shall have used their best efforts to have any such order, writ, injunction or decree lifted and the same shall not have been lifted within ninety (90) days after entry, by any such court or governmental or regulatory agency;

(e) by either the Company, on the one hand, or Parent and Acquisition Corp., on the other hand, if the Closing has not occurred on or prior to July 31, 2014, for any reason other than delay or nonperformance of the party seeking such termination;

(f) by the Company if the Board of Directors of the Company determines in good faith, based upon advice of legal counsel, that termination pursuant to this Section 10.1(f) is necessary to comply with its fiduciary duties under applicable law as provided in Section 7.8 hereof.

Section 10.2 Termination of Obligations. Termination of this Agreement pursuant to Section 10.1 hereof shall terminate all obligations of the parties hereunder, except for the obligations under Article IX, Article X, and Sections 11.4, 11.7, 11.14, 11.15 and 11.16 hereof; provided, however, that termination pursuant to paragraphs (b) or (c) of Section 10.1 shall not relieve the defaulting or breaching party or parties from any liability to the other parties hereto.

ARTICLE XI
MISCELLANEOUS

Section 11.1 Amendments. Subject to applicable law, this Agreement may be amended or modified by the parties hereto by written agreement executed by each party to be bound thereby and delivered by duly authorized officers of the parties hereto at any time prior to the Effective Time; provided, however, that after the approval of the Merger by the requisite Stockholders, no amendment or modification of this Agreement shall be made that by law requires further approval from any Stockholders without such further approval.

Section 11.2 Notices. Any notice, request, instruction, other document or communications to be given hereunder by any party hereto to any other party hereto shall be in writing and shall be deemed to have been duly given (a) when delivered personally, (b) upon confirmation of delivery if by electronic mail, (c) upon receipt of a transmission confirmation (with a confirming copy delivered personally or sent by overnight courier) if sent by facsimile or like transmission, or (d) on the next business day when sent by Federal Express, United Parcel Service, U.S. Express Mail or other reputable overnight courier for guaranteed next day delivery, as follows:

If to Parent or Acquisition Corp., to:

Queensridge Mining Resources, Inc.

Attention: Jerry Chatel

10975 East 47^th Avenue

Denver, CO 80239

If to the Company, to:

iWallet Corporation

Attention: Steven Cabouli

P.O. Box 261013

San Diego, CA 92196-1013

or to such other persons or addresses as may be designated in writing by the party to receive such notice. Nothing in this Section 11.2 shall be deemed to constitute consent to the manner and address for service of process in connection with any legal proceeding (including arbitration arising in connection with this Agreement), which service shall be effected as required by applicable law.

Section 11.3 Entire Agreement. This Agreement and the exhibits attached hereto or referred to herein constitute the entire agreement of the parties hereto, and supersede all prior agreements and undertakings, both written and oral, among the parties hereto, with respect to the subject matter hereof and thereof.

Section 11.4 Expenses. Except as otherwise expressly provided herein, whether or not the Merger occurs, all expenses and fees incurred by Parent and Acquisition Corp. on one hand, and the Company on the other, shall be borne solely and entirely by the party that has incurred the same; provided, that if the Merger occurs, Parent agrees to pay, and shall cause the Surviving Corporation to pay, any unpaid fees and expenses of the Company (including fees and expenses of its counsel and other advisors) in connection with the consummation of the transactions contemplated by this Agreement.

Section 11.5 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement will nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto will negotiate in good faith to amend or modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.

Section 11.6 Successors and Assigns; Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned or delegated by any of the parties hereto without, in the case of Parent and Acquisition Corp., the prior written approval of the Company and, in the case of the Company, the prior written approval of Parent.

Section 11.7 No Third Party Beneficiaries. Except as set forth in Section 9.1 and Section 11.6, nothing herein expressed or implied shall be construed to give any person other than the parties hereto (and their successors and assigns as permitted herein) any legal or equitable rights hereunder.

Section 11.8 Counterparts; Delivery by Facsimile. This Agreement may be executed in multiple counterparts, and by the different parties hereto in separate counterparts, each of which when executed will be deemed to be an original but all of which taken together will constitute one and the same agreement. This Agreement and each other agreement or instrument entered into in connection herewith or therewith or contemplated hereby or thereby, and any amendments hereto or thereto, to the extent signed and delivered by means of a facsimile machine or by electronic mail, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any party hereto or to any such agreement or instrument, each other party hereto or thereto shall re-execute original forms thereof and deliver them to all other parties. No party hereto or to any such agreement or instrument shall raise the use of a facsimile machine or electronic mail to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine or electronic mail as a defense to the formation or enforceability of a contract and each such party forever waives any such defense.

Section 11.9 Waiver. At any time prior to the Effective Time, any party hereto may (a) extend the time for the performance of any of the obligations or other acts of the other party hereto; (b) waive any inaccuracies in the representations and breaches of the warranties of the other party contained herein or in any document delivered pursuant hereto; and (c) waive compliance by the other party with any of the agreements or conditions contained herein. Any such extension or waiver will be valid only if set forth in an instrument in writing signed by the party or parties to be bound thereby.

Section 11.10 No Constructive Waivers. No failure or delay on the part of any party hereto in the exercise of any right hereunder will impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty, agreement or covenant herein, nor will any single or partial exercise of any such right preclude other or further exercise thereof or of any other right. No waiver by any party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.

Section 11.11 Further Assurances. The parties hereto shall use their commercially reasonable efforts to do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments or documents as any other party hereto may reasonably request in order to carry out fully the intent and purposes of this Agreement and the consummation of the transactions contemplated hereby.

Section 11.12 Recitals. The recitals set forth above are incorporated herein and, by this reference, are made part of this Agreement as if fully set forth herein.

Section 11.13 Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

Section 11.14 Governing Law. This Agreement and the agreements, instruments and documents contemplated hereby shall be governed by and construed and enforced in accordance with the laws of the State of Nevada without regard to its conflicts of law principles.

Section 11.15 Dispute Resolution. The parties hereto shall initially attempt to resolve all claims, disputes or controversies arising under, out of or in connection with this Agreement by conducting good faith negotiations amongst themselves. If the parties hereto are unable to resolve the matter following good faith negotiations, the matter shall thereafter be resolved by binding arbitration and each party hereto hereby waives any right it may otherwise have to the resolution of such matter by any means other than binding arbitration pursuant to this Section 11.15. Whenever a party shall decide to institute arbitration proceedings, it shall provide written notice to that effect to the other parties hereto. The party giving such notice shall, however, refrain from instituting the arbitration proceedings for a period of sixty (60) days following such notice. During this period, the parties shall make good faith efforts to amicably resolve the claim, dispute or controversy without arbitration. Any arbitration hereunder shall be conducted in the English language under the commercial arbitration rules of the American Arbitration Association. Any such arbitration shall be conducted in Las Vegas, Nevada by a panel of three arbitrators: one arbitrator shall be appointed by each of Parent and Company; and the third shall be appointed by the American Arbitration Association. The panel of arbitrators shall have the authority to grant specific performance. Judgment upon the award so rendered may be entered in any court having jurisdiction or application may be made to such court for judicial acceptance of any award and an order of enforcement, as the case may be. In no event shall a demand for arbitration be made after the date when institution of a legal or equitable proceeding based on the claim, dispute or controversy in question would be barred under this Agreement or by the applicable statute of limitations. The prevailing party in any arbitration in accordance with this Section 11.15 shall be entitled to recover from the other party, in addition to any other remedies specified in the award, all reasonable costs, attorneys’ fees and other expenses incurred by such prevailing party to arbitrate the claim, dispute or controversy.

Section 11.16 Interpretation.

(a) When a reference is made in this Agreement to a section or article, such reference shall be to a section or article of this Agreement unless otherwise clearly indicated to the contrary.

(b) Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”

(c) The words “hereof”, “hereby”, “herein” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement, and article, section, paragraph, exhibit and schedule references are to the articles, sections, paragraphs, exhibits and schedules of this Agreement unless otherwise specified.

(d) The words “knowledge,” or “known to,” or similar terms, when used in this Agreement to qualify any representation or warranty, refer to the knowledge or awareness of certain specific facts or circumstances related to such representation or warranty of the persons in the Applicable Knowledge Group (as defined herein) which a prudent business person would have obtained after reasonable investigation or due diligence on the part of any such person. For the purposes hereof, the “Applicable Knowledge Group” with respect to the Company shall be Steven Cabouli. For the purposes hereof, the “Applicable Knowledge Group” with respect to Parent and the Acquisition Corp. shall be Jerry Chatel.

(e) The word “subsidiary” shall mean any entity of which at least a majority of the outstanding shares or other equity interests having ordinary voting power for the election of directors or comparable managers of such entity is owned, directly or indirectly by another entity or person.

(f) For purposes of this Agreement, “ordinary course of business” means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency).

(g) The plural of any defined term shall have a meaning correlative to such defined term, and words denoting any gender shall include all genders. Where a word or phrase is defined herein, each of its other grammatical forms shall have a corresponding meaning.

(h) A reference to any legislation or to any provision of any legislation shall include any modification or re-enactment thereof, any legislative provision substituted therefor and all regulations and statutory instruments issued thereunder or pursuant thereto, unless the context requires otherwise.

(i) The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

[The remainder of this page is intentionally left blank]

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed as of the date first above written by their respective officers thereunto duly authorized.

COMPANY:

iWallet Corporation.

By:		/s/ Steve Cabouli
Name:		Steven Cabouli
Title:		President &CEO


PARENT:

Queensridge Mining Resources, Inc.


By:	/s/ Jerry Chatel
Name:	Jerry Chatel
Title:	President & CEO


ACQUISITION CORP.:

iWallet Acquisition Corp.


By:	/s/ Jerry Chatel
Name:	Jerry Chatel
Title:	President & CEO

Schedule 1

Issuances of Parent Common Stock to be made to Holders of

Company Common Stock at the Effective Time

Name	Shares of Parent Common Stock
Steven Cabouli	8,221,230
Robert Moss	300,000
Orlando LaCalle	978,770
Frank Camardo	200,000
Charles Ng	100,000
Carl Rosen	100,000
Jack Chadsey	100,000

Total	10,000,000

Schedule 2

Issuances of Parent Common Stock and Parent Warrants to be made to Holders of

Company Convertible Debentures at the Effective Time

Name	Shares of Parent Common Stock	Parent Warrants
7806221 Canada Inc.	127,252	127,252
Andrew and Gloria Durkacz	48,943	48,943
Arnd Springer	53,838	53,838
Donal Carroll	156,618	156,618
Gigi Pang Che-Kwan	489,432	489,432
Mary Anne Alton	97,886	97,886
Ballentyne Holdings Limited	489,432	489,432
Pedro Quinzanos Cancino	73,415	73,415
Robert Iachetta	97,886	97,886
Stuart Adair	48,943	48,943
Thomas Keevil	48,943	48,943
Graham Wovenden	48,735	48,735
Michael Dalsin	87,722	87,722
Michael Swedak	146,204	146,204
Richard Goldstein	121,836	121,836
Anthony Durkacz	388,885	388,885
Anthony Viele	48,010	48,010
Elizabeth Burlacoff	96,021	96,021
Helmsquire Holdings Ltd.	120,026	120,026
Jesse Kaplan	120,026	120,026
GMP Securities ITF Michael B. Stein a/c 400-TZMO-F	120,026	120,026
Skip Pym	48,010	48,010
Ronaye Malette	96,021	96,021
NBCN ITF 4HE700F	48,010	48,010
Totals	3,222,120	3,222,120

Exhibit A

Articles of Incorporation of Surviving Corporation

See attached.

Exhibit B

By-Laws of Surviving Corporation

See attached.

Exhibit C

Officers and Directors of Parent

— Pre-Effective Time and Post-Effective Time—

Pre-Effective Time:

Jerry Chatel – sole officer and director

Following Notice Filings:

The following persons shall be appointed as Officers and Directors of Parent:

Name	Office(s)
Steven Cabouli	President, CEO, CFO, Chairman of the Board, and Director
Orlando LaCalle	Chief Marketing Officer

Exhibit D

Articles of Incorporation of Parent

See attached.

Exhibit E

Bylaws of Parent

See attached.

Exhibit F

Form of Parent Warrant to be issued to Holders of Company Convertible Debentures

See attached.

ROSS MILLER Secretary of State 206 North Carson Street Carson City, Nevada 89701-4299 (775) 684 5708 Website: secretaryofstate.biz

Articles of Merger (PURSUANT TO NRS 92A.200) Page 1

USE BLACK INK ONLY – DO NOT HIGHLIGHT	ABOVE SPACE IS FOR OFFICE USE ONLY

(Pursuant to Nevada Revised Statutes Chapter 92A) (excluding 92A.200(4b))

1) Name and jurisdiction of organization of each constituent entity (NRS 92A.200). If there are more than four merging entities, check box [ ] and attached an 8 ½” X 11” blank sheet containing the required information for each additional entity.

iWallet Corporation
Name of merging entity
California	Corporation
Jurisdiction	Entity type*

iWallet Acquisition Corp.
Name of surviving entity
Nevada	Corporation
Jurisdiction	Entity type*

* Corporation, non-profit corporation, limited partnership, limited-liability company or business trust.

Articles of Merger
(PURSUANT TO NRS 92A.200)
Page 2

2) Forwarding address where copies of process may be sent by the Secretary of State of Nevada (If a foreign entity is the survivor in the merger-NRS 92A.190):

Attn:

c/o:

3) (Choose one)

[X] The undersigned declars that a plan of merger has been adopted by each constituent entity (NRS 92A.200).

[ ] The undersigned declares that a plan of merger has been adopted by the parent domestic entity (NRS 92A.180).

4) Owner’s approval (NRS 92A.200)(options a,b, or c must be used, as applicable for each entity) (If there are more than four merging entities, check box [ ] and attached an 8 ½” X 11” blank sheet containing the required information for each additional entity.):

(a) Owner’s approval was not required from

Name of merging entity, if applicable

and, or:

Name of surviving entity, if applicable

Articles of Merger
(PURSUANT TO NRS 92A.200)
Page 3

(b) The plan was approved by the required consent of the owners of *:

iWallet Corporation

Name of merging entity, if applicable

and, or:

iWallet Corporation

Name of surviving entity, if applicable

* Unless otherwise provided in the certificate of trust or governing instrument of a business trust, a merger must be approved by all the trustees and beneficial owners of each business trust that is a constituent entity in the merger.

Articles of Merger
(PURSUANT TO NRS 92A.200)
Page 4

The plan of merger has been approved by the directors of the corporation and by each public officer or other person whose approval of the plan of merger is required by the articles of incorporation of the domestic corporation.

Name of merging entity, if applicable

and, or:

Name of surviving entity, if applicable

Articles of Merger
(PURSUANT TO NRS 92A.200)
Page 5

5) Amendments, If any, to the articles of certificate of the surviving entity. Provide article numbers, if avaliable. (NRS 92A.200)*:

6) Location of Plan of Merger (check a or b):

[ ] (a) The entire plan of merger is attached;

[X] (b) The entire plan of merger is on file at the registered office of the surviving corporation, limited-liability company or business trust, or at the records office address if a limited partnership, or other place of business of the surviving entity (NRS 92A.200).

7) Effective date (optional)**:

* Amended and restated articles may be attached as an exhibit or integrated into the articles of merger. Please entitle them "Restated" or "Amended and Restated," accordingly. The form to accompany restated articles prescribed by the secretary of state must accompany the amended and/or restated articles. Pursuant to NRS 92A.180 (merger of subsidiary into parent - Nevada parent owning 90% or more of subsidiary), the articles of merger may not contain amendments to the constituent documents of the surviving entity except that the name of the surviving entity may be changed.

** A merger takes effect upon filing the articles of merger or upon a later date as specified in the articles, which must not be more than 90 days after the articles are filed (NRS 92A.240).

Articles of Merger
(PURSUANT TO NRS 92A.200)
Page 6

8) Signatures - Must be signed by: An officer of each Nevada corporation; All general partners of each Nevada limited partnership; All general partners of each Nevada limited-liability limited partnership; A manager of each Nevada limited-liability company with managers or one member if there are no managers; A trustee of each Nevada business trust (NRS 92A.230)* (If there are more than four merging entities, check box [ ] and attached an 8 ½” X 11” blank sheet containing the required information for each additional entity.):

iWallet Corporation
Name of merging entity

X /s/ Steven Cabouli	President	7/21/14
Signature	Title	Date

iWallet Acquisiton Corp.
Name of surviving entity

X /s/ Jerry Chatel	President	7/21/14
Signature	Title	Date

* The articles of merger must be signed by each foreign constituent entity in the manner provided by the law governing it (NRS 92A.230). Additional signature blocks may be added to this page or as an attachment, as needed.

iWallet Corporation

Balance Sheets

December 31, 2013 and 2012

		2013			2012
Assets
Current assets
Cash	$	250,718		$	13,462
Funds held in attorney trust (note 8)		39,705			—
Accounts receivable		4,575			8,520
Deposits and deferred costs (note 9)		23,086			155,788
Inventory (note 4)		20,361			13,742
Due from shareholder (note 7)		61,833			13,052
		400,278			204,564
Intangible assets (note 5)		96,715			62,436
	$	496,993		$	267,000
Liabilities
Current liabilities
Bank indebtedness - current (note 6)	$	5,539		$	7,059
Accounts payable		126,317			55,074
Accrued liabilities (notes 8 and 12)		3,062			3,684
Due to related party (note 7)		37,842			59,779
Advances from investor (note 7)		69,678			—
Convertible debentures (note 8)		354,000			—
Tooling commitment liability (note 9)		105,816			110,685
Deferred tax liabilities - current (note 10)		—			368
		702,254			236,649
Bank indebtedness - long-term (note 6)		17,540			22,352
Deferred tax liabilities (note 10)		—			3,879
		719,794			262,880
Shareholder's (deficiency) equity
Class A common shares, par value $0.001, 200,000,000 shares authorized; 10,000 issued (2012 - 10,000) (note 11)		10			10
Class B common shares, par value $0.001, 100,000,000 shares authorized; Nil issued (2012 - Nil) (note 11)
Preferred shares, par value $0.001, 10,000,000 shares authorized; Nil issued (2012 - Nil) (note 11)
Additional paid-in capital		1			1
Retained earnings		(222,812	)		4,109
		(222,801	)		4,120
	$	496,993		$	267,000

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

iWallet Corporation

Statements of Operations and Comprehensive (Loss) Income

for the years ended December 31, 2013 and 2012

		2013			2012
Sales	$	85,769		$	159,288
Cost of sales		63,585			79,550
Gross profit		22,184			79,738
Expenses
Legal and professional fees		73,278			41,491
Office and general expenses		9,583			9,040
Travel		23,475			6,786
Interest and bank fees		2,515			3,179
Research and development		—			3,200
Provision for loss on tooling commitment (note 9)		139,213			—
Amortization of intangible assets		5,288			3,904
		253,352			67,600
(Loss) income before (recovery of) provision for income taxes		(231,168	)		12,138
(Recovery of) provision for income taxes (note 10)		(4,247	)		4,247
Net and comprehensive (loss) income for the year	$	(226,921	)	$	7,891
Net and comprehensive (loss) income per share basic and diluted (note 13)	$	(23	)	$	1
Weighted average number of shares outstanding basic and diluted (note 13)		10,000			10,000

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

iWallet Corporation

Statement of Changes in Shareholder's Deficiency

for the years ended December 31, 2013 and 2012

							Retained			Shareholder's
	Class A Common Shares				Additional		Earnings			(Deficiency)
	Shares		Amount		Paid-in Capital		(Deficit)			Equity
Balance, January 1, 2012		10,000	$	10	$	1	$	(3,782	)	$	(3,771	)
Net income		—		—		—		7,891			7,891
Balance, December 31, 2012		10,000		10		1		4,109			4,120
Net loss		—		—		—		(226,921	)		(226,921	)
		10,000	$	10	$	1	$	(222,812	)	$	(222,801	)

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

iWallet Corporation

Statements of Cash Flows

for the years ended December 31, 2013 and 2012

		2013			2012
Cash flow from operating activities
Net and comprehensive (loss) income for the year	$	(226,921	)	$	7,891
Items not affecting cash
Amortization		5,288			3,904
Provision for loss on tooling contract (note 9)		139,213			—
(Recovery of) provision for income taxes		(4,247	)		4,247
		(86,667	)		16,042
Change in cash resulted from changes in:
Accounts receivable		3,945			(8,520	)
Deposits and deferred costs		(6,512	)		(105,994	)
Inventory		(6,620	)		(13,742	)
Accounts payable		71,244			41,177
Accrued liabilities		(622	)		(903	)
Tooling commitment liability		(4,869	)		110,685
		(30,101	)		38,745
Cash flow from investing activities
Expenditures on intangible assets		(39,565	)		(20,296	)
		(39,565	)		(20,296	)
Cash flow from financing activities
Funds repaid to related party		(21,938	)		(72,655	)
Funds (repaid to) advanced by shareholder		(48,781	)		60,400
Increase in funds held in attorney trust		(39,705	)		—
Repayment of bank indebtedness		(6,332	)		(4,076	)
Advances from investor		69,678			—
Proceeds from issuance of convertible debentures		354,000			—
		306,922			(16,331	)
Increase in cash		237,256			2,118
Cash, beginning of year		13,462			11,344
Cash, end of year	$	250,718		$	13,462

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

iWallet Coporation

Notes to Financial Statements

December 31, 2013 and 2012

1. Nature of Business and Going Concern

iWallet Corporation ("the Company") is engaged in the design, development, manufacturing and sales of bio-metric locking wallets, which operate by scanning a users fingerprint to open the wallet.

The Company was incorporated on November 18, 2009 in the State of California and is located at 7968 Arjons Drive, Suite D, San Diego, California 92126.

The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"), which contemplates continuation of the Company as a going concern.

As of December 31, 2013, the Company has incurred a shareholder's deficiency of $222,801 (2012 - $(4,120)) and has significant losses and negative cash flows from operations. In addition as at December 31, 2013 the Company has a working capital deficiency of $301,976 (2012 - $32,085). There is no certainty that the Company will be successful in generating sufficient cash flow from operations or achieving and maintaining profitable operations in the near future to enable it to meet its obligations as they come due. As a result there is substantial doubt regarding the Company's ability to continue as a going concern. The Company may require additional financing to fund its operations, which may not be available at acceptable terms or at all. The Company plans on raising additional funds from completing financing arrangements, whether as continued subscriptions for convertible debentures such as those received subsequent to year end (note 16) or from additional sources, in contemplation of completing a public listing transaction.

The financial statements do not include any adjustments relating to the recoverability and classification of the recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. All adjustments, consisting only of normal recurring items, considered necessary for fair presentation have been included in these financial statements.

2. Significant Accounting Policies

Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. Significant estimates include amounts for inventory valuation, useful lives of patents, trademarks and software and the warranty provision.

Cash and cash equivalents

The Company considers cash and cash equivalents to consist of cash and highly liquid investments purchased with original maturities of generally 90 days or less at the date of purchase.

iWallet Corporation

Notes to Financial Statements

December 31, 2013 and 2012

Allowance for doubtful account

The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated credit risk by performing credit checks and actively pursuing past due accounts. An allowance for doubtful accounts is estimated and recorded based on management’s assessment of the credit history with the customer and the current relationships with them. On this basis management has determined that an allowance for doubtful accounts of $nil was appropriate as of both December 31, 2013 and 2012, respectively.

Inventory

Inventory is stated at the lower of cost or market determined using the first-in, first-out method. Inventory is periodically reviewed for use and obsolescence, and adjusted as necessary. Inventory consists of finished goods.

Intangible assets

iWallet Corporation

Notes to Financial Statements

December 31, 2013 and 2012

2. Significant Accounting Policies - continued

Fair value of financial instruments

ASC Topic 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. Included in the ASC Topic 820 framework is a three level valuation inputs hierarchy with Level 1 being inputs and transactions that can be effectively fully observed by market participants spanning to Level 3 where estimates are unobservable by market participants outside of the Company and must be estimated using assumptions developed by the Company. The Company discloses the lowest level input significant to each category of asset or liability valued within the scope of ASC Topic 820 and the valuation method as exchange, income or use. The Company uses inputs which are as observable as possible and the methods most applicable to the specific situation of each company or valued item.

The carrying amounts of cash, accounts receivable, due from shareholder, accounts payable and accrued liabilities, bank indebtedness, due to related party, advances from investor and convertible debentures approximate fair value because of their short-term nature. Per ASC Topic 820 framework these are considered Level 2 inputs where inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Interest rate risk is the risk that the value of a financial instrument might be adversely affected by a change in the interest rates. The convertible debentures has a fixed interest rate therefore the Company is exposed to interest rate risk in that they could not benefit from a decrease in market interest rates. The bank indebtedness has a variable interest rate, which results in an exposure to interest rate risk resulting from an increase in rates. In seeking to minimize the risks from interest rate fluctuations, the Company manages exposure through its normal operating and financing activities. All other liabilities are non-interest bearing.

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.

The Company reviews the terms of convertible debt, equity instruments and other financing arrangements to determine whether there are embedded derivative instruments, including embedded conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument. Also, in connection with the issuance of financing instruments, the Company may issue freestanding options or warrants to employees and non-employees in connection with consulting or other services. These options or warrants may, depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity.

Derivative financial instruments are initially measured at their fair value. 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. To the extent that the initial fair values of the freestanding and/or bifurcated derivative instrument liabilities exceed the total proceeds received an immediate charge to income is recognized in order to initially record the derivative instrument liabilities at their fair value.

The discount from the face value of the convertible debt or equity instruments resulting from allocating some or all of the proceeds to the derivative instruments, together with the stated rate of interest on the instrument, is amortized over the life of the instrument through periodic charges to income, using the effective interest method.

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period. If reclassification is required, the fair value of the derivative instrument, as of the determination date, is reclassified. Any previous charges or credits to income for changes in the fair value of the derivative instrument are not reversed. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within twelve months of the balance sheet date.

Revenue recognition

The Company derives revenue primarily from the sale of its wallets. In accordance with Staff Accounting Bulletin No. 104, revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the amount is fixed or determinable and collection is reasonably assured.

The Company also derives an insignificant amount of revenue from providing engraving of the wallets. Engraving revenues are recognized concurrent with the revenues for the related wallet.

Earnings/loss per share of common stock

Basic and diluted earnings per share have been determined by dividing the net earnings available to shareholders for the applicable period by the basic and diluted weighted average number of shares outstanding, respectively. The diluted weighted average number of shares outstanding is calculated as if all dilutive options and restricted stock grants had been exercised or vested at the later of the beginning of the reporting period or date of grant, using the treasury stock method. The dilutive effect of convertible debentures has been reflected in diluted weighted average number of shares using the if-converted method.

Loss per common share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the period. Common stock equivalents are excluded from the computation of diluted loss per share when their effect is anti-dilutive.

iWallet Corporation

Notes to Financial Statements

December 31, 2013 and 2012

2. Significant Accounting Policies - continued

Income taxes

Income taxes are computed in accordance with the provisions of ASC Topic 740, which requires, among other things, a liability approach to calculating deferred income taxes. The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in its financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The Company is required to make certain estimates and judgments about the application of tax law, the expected resolution of uncertain tax positions and other matters. In the event that uncertain tax positions are resolved for amounts different than the Company’s estimates, or the related statutes of limitations expire without the assessment of additional income taxes, the Company will be required to adjust the amounts of the related assets and liabilities in the period in which such events occur. Such adjustments may have a material impact on the Company’s income tax provision and results of operations.

Shipping and handling costs

The Company’s shipping and handling costs of $11,122 are included in cost of sales for the year ended December 31, 2013 (2012 - $5,874).

Research and development

The Company is engaged in research and development work. Research and development costs are charged as operating expense of the Company as incurred. Any recovery of costs received for research and development work is used to offset these expenditures. For the year ended December 31, 2013 the Company spent $nil (2012 - $3,200) towards research and development expenses.

Foreign currency translation

The functional currency of the Company is the U.S. dollar. All of the Company’s revenue and materials purchased from suppliers are denominated in, or linked to, the U.S. dollar. Transactions denominated in currencies other than the functional currency are converted to the functional currency on the transaction date, and any resulting assets or liabilities are further translated at each reporting date and at settlement. Gains and losses recognized upon such translations are included within foreign exchange loss in the statements of operations and comprehensive income / (loss).

Product warranties

Segment reporting

ASC 280-10, "Disclosures about Segments of an Enterprise and Related Information", establishes standards for the way that public business enterprises report information about operating segments in the Company’s financial statements. Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company only operates in one reportable segment; however, required entity-wide information is included in note 14.

3. Recently Issued Accounting Standards and Recently Adopted Accounting Pronouncement

Income Taxes (ASC Topic - 750): Presentation of an Unrecognized Tax Benefit when a Net Operating Loss Carry-forward, a Similar Tax Loss, or a Tax Credit Carry-forward Exists" ("ASU 2013-11") was issued during July 2013. FASB issued guidance on how to present an unrecognized tax benefit. The guidance is effective for annual periods beginning after December 15, 2013. Management does not believe that the adoption of the accounting pronouncement would have a material effect on these accompanying financial statements.

4. Inventory

		2013				2012
Finished goods		$	20,361			$	13,742

During the year ended December 31, 2013, the Company recorded a provision relating to obsolete inventory of $nil (2012 - $nil).

iWallet Corporation

Notes to Financial Statements

December 31, 2013 and 2012

5. Intangible Assets

2013
			Accumulated		Net Book
	Cost		Amortization		Value
Patents	$	65,930	$	9,375	$	56,555
Trademarks		13,484		3,324		10,160
Software ⁽ⁱ⁾		30,000		—		30,000
	$	109,414	$	12,699	$	96,715

⁽ⁱ⁾

The Company purchased software from an arm's length third party in December 2013 accordingly although ready for use, the costs were not amortized as any amortization would have been insignificant.

2012
					Accumulated		Net Book
			Cost		Amortization		Value
	Patents	$	59,509	$	5,278	$	54,231
	Trademarks		10,337		2,132		8,205
		$	69,846	$	7,410	$	62,436

iWallet Corporation

Notes to Financial Statements

December 31, 2013 and 2012

6. Bank Indebtedness

The bank indebtedness of the Company consists of a secured line of credit with a limit of $35,000 bearing interest at the annual prime rate plus 1.25%, which as at December 31, 2013 and 2012 was 4.5%, and with monthly repayments determined as follows:

a) the greater of:

two percent (2%) of the outstanding principal balance outstanding on the last day of the billing period, or

ii)

$100, and

b) accrued interest since the date of the last payment.

On termination of the line of credit, the amount will become due over a period determined by the creditor of between thirty-six and eighty-four months, or over three to seven years, which at the time of the agreement was determined to be forty-eight months, or four years.

The line of credit is subject to various non-financial covenants that would constitute an event of default, notably: ownership change or sale of the business; closure or failure to maintain the related chequing account; insolvency or any bankruptcy proceedings; or, any other defaults on other contracts with the creditor or with any other financial institution.

Security for the line of credit is the cash in the chequing account held with the bank.

		2013			2012
Line of credit	$	23,079		$	29,411
Less: Current portion - estimated based on (a)(i) above		(5,539	)		(7,059	)
	$	17,540		$	22,352

Principal repayments estimated based on (a)(i) above as at December 31, 2013:

2014	$	5,539
2015		5,539
2016		5,539
2017		923
	$	17,540

iWallet Coporation

Notes to Financial Statements

December 31, 2013 and 2012

7. Related Party Balances

	2013		2012
Balances
Current assets
Due from shareholder	$	61,833	$	13,052
Current liabilities
Due to related party	$	37,842	$	59,779
Advances from investor	$	69,678	$	—

The above liabilities are non-interest bearing, unsecured and due on demand. The related party is related by virtue of the common control and ownership by the Company's shareholder.

The advances from investor were funds advanced for purposes of covering operating expenses of the Company and are intended to be formalized into a convertible debenture. At this time the investor is also serving as interim Chief Financial Officer ("CFO") and accordingly these transactions constitute related party transactions.

8. Convertible Debentures

Each convertible debenture contains a conversion option contingently exercisable upon the approval from the Securities and Exchange Commission or the TSX Venture Exchange for listing of its common shares. The conversion price will be based on the price at which the Company sells or issues common shares or units, less a discount of 30%. A unit would consist of one common stock and one share purchase warrant entitling the holder to purchase one additional Class A common share at an exercise price of $0.20 and with a term of 24 months. Similarly, the Company has the option to force conversion upon approval of a public listing at the same conversion price.

Since the conversion option is contingent upon a public listing there has been no value allocated to the conversion option in accordance with ASC 470 Debt. The terms of the convertible debenture do not permit the number of shares that would be received upon conversion if a public listing occurs to be calculated at the commitment date. Upon the occurence of a public listing the conversion feature would be measured and recognized as a debt discount and corresponding adjustment to additional paid-in capital.

Subsequent to year end the Company has closed on an additional $83,000 of convertible debentures with the same terms as the above (note 16).

iWallet Corporation

Notes to Financial Statements

December 31, 2013 and 2012

9. Tooling Commitment Deposit, Deferred Costs and Liability

On May 26, 2011, the Company signed a contract with a supplier under which they are required to pay for tooling costs in addition to their regular purchase orders (the "tooling commitment"). Under the terms of the tooling commitment the Company was required to pay for 30% of the contracted tooling costs upon execution (the "tooling commitment deposit") and the remaining 70% over the purchase of 5,000 units over a nine month period (the "tooling commitment liability"). If 5,000 units were not purchased within those nine months, then the remaining amount was due within thirty days.

As of February 27, 2012, the Company had not reached the contracted level of purchases and an informal agreement to extend the period was made; however, by December 31, 2013 the Company had not complied and as a result, the entire amount would have been considered due.

On August 24, 2013, the Company entered into a revised agreement with the supplier that extended the term another twelve months to August 24, 2014.

The tooling commitment deposit is included in deposits and deferred costs and is capitalized into inventory as units are purchased based on the 5,000 unit commitment. The tooling commitment liability becomes due and is recognized into accounts payable as units are purchased and the corresponding deferred costs are capitalized into inventory, all of which is based on the 5,000 unit commitment.

During 2013, it was determined that based on the actual sales levels realized in 2013, the 5,000 unit commitment the Company would likely not be able to meet the required orders. Accordingly, the deferred costs related to excess units was recognized as a provision for loss on the tooling commitment in the statement of operations and comprehensive income / (loss).

		2013			2012
Tooling commitment deposit	$	41,119		$	45,103
Tooling commitment deferred costs		100,947			110,685
		142,066			155,788
Provision for possible loss on tooling commitment		(139,213	)		—
Tooling commitment deposit and deferred costs	$	2,853		$	155,788
Tooling commitment liability	$	105,816		$	110,685

iWallet Corporation

Notes to Financial Statements

December 31, 2013 and 2012

10. Income Taxes

	2013			2012
Components of (loss) income before income taxes consists of the following:
U.S.	$	(226,921	)	$	7,891
The provision (recovery) for income taxes consists of the following:
Current
Federal	$	—		$	—
State		—			—
		—			—
Deferred	$	(4,247	)	$	4,247

The reconciliation of the provision (recovery) for income taxes based on the combined U.S. statutory federal and state tax rate of 40.75% (Federal - 35%; State - 5.75%, net of Federal benefit) to the effective tax rates:

	2013			2012
Net loss before recovery of income taxes	$	(231,168	)	$	12,138
Statutory rate		0			0
Expected income tax recovery	$	(94,201	)	$	4,946
Non-deductible expenses		49,161			(7,835	)
Change in tax benefits not recognized		45,040			2,889
Recovery of income taxes	$	—		$	—

The components of deferred taxes are as follows:

		2013			2012
Deferred tax assets (liabilities)
Current
Accrued liabilities	$	(253	)	$	(368	)
Provision for loss on tooling commitment		56,724			—
Valuation allowance		(56,471	)		—
	$	—		$	(368	)

iWallet Corporation

Notes to Financial Statements

December 31, 2013 and 2012

10. Income Taxes - continued

		2013			2012
Non-current
Intangible assets	$	7,955		$	(9,328	)
Net operating losses		45,031			5,449
Valuation allowance		(52,986	)		—
	$	—		$	(3,879	)

The change in the gross unrecognized tax benefits of the Company is as follows:

Deferred income taxes are provided as a result of temporary differences that arise due to the differences between the income tax values and the carrying amount of assets and liabilities. Deferred income tax assets have not been recognized in respect of the following deductible temporary differences:

		2013		2012
Beginning balance	$	13,422	$	7,973
Additions related to the current year		45,031		—
Reductions related to prior years		—		5,449
Unrecognized tax benefits end of year	$	58,453	$	13,422

The Company has non-capital income tax losses that expire as follows:

2031		15,068
2033		110,515
	$	125,583

The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company recognizes interest accrued on uncertain tax positions as well as interest received from favorable tax settlements within interest expense. The Company recognizes penalties accrued on unrecognized tax benefits within general and administrative expenses. As of December 31, 2013 and 2012, the Company had no uncertain tax positions.

iWallet Corporation

Notes to Financial Statements

December 31, 2013 and 2012

The Company does not anticipate any significant changes to the total amounts of unrecognized tax benefits in the next twelve months. In many cases the Company’s uncertain tax positions are related to tax years that remain subject to examination by tax authorities. The following describes the open tax years, by major tax jurisdiction, as of December 31, 2013:

Federal	2010 to present
State	2010 to present

11. Share Capital

Authorized

200000000 Class A Common shares par value $0.001

100000000 Class B Common shares par value $0.001

10000000 Preferred Shares par value $0.001

Issued

			2013				2012
10000 Class A Common shares		$	10			$	10

12. Commitments and Contingencies

LEGAL MATTERS

From time to time, the Company may be involved in a variety of claims, suits, investigations and proceedings arising from the ordinary course of our business, collections claims, breach of contract claims, labour and employment claims, tax and other matters. Although claims, suits, investigations and proceedings are inherently uncertain and their results cannot be predicted with certainty, the Company believes that the resolution of current pending matters will not have a material adverse effect on its business, financial position, results of operations or cash flow. Regardless of the outcome, litigation can have an adverse impact on the Company because of legal costs, diversion of management resources and other factors.

WARRANTY PROVISIONS

The Company is also exposed to warranty contingencies associated with the iWallet and has recorded a provision for these for the year ended December 31, 2013 of $3,062 (2012 - $3,684), however, the actual amount of loss could be materially different.

13. Basic and Diluted (Loss) Income Per Share

Potential common shares related to the convertible debentures were excluded from the computation of diluted loss per share for the year ended December 31, 2013 because the inclusion of these shares would be anti-dilutive.

For the year ended December 31, 2012, no dilutive instruments existed; therefore, basic and diluted income per share were equal.

iWallet Corporation

Notes to Financial Statements

December 31, 2013 and 2012

14. Segmented Reporting

All of the Company's long-lived assets are located in the United States.

During 2012, the Company had sales to customers in Russia amounting to 27% of total sales. The remaining sales consist primarily of domestic sales; however, additional international sales accounted for 23% of total sales although no individual country was in excess of ten percent of total sales. During 2013, there were no sales to within any individual foreign country exceeding ten percent of total sales.

15. Risk Management

CONCENTRATIONS OF CREDIT RISK

The Company’s cash balances are maintained in bank accounts in the United States. Deposits held in banks in the United States are insured up to $250,000 per depositor for each bank by the Federal Deposit Insurance Corporation. Actual balances at times may exceed these limits.

The Company performs on-going credit evaluations of its customers’ financial condition and generally does not require collateral from its customers. One of its customers accounted for 40%, of the Company’s revenue during the year ended December 31, 2013 and 100% of its accounts receivable as of December 31, 2013. During the year ended December 31, 2012, three customers accounted for 53% of revenue and one customer accounted for 100% of accounts receivable.

ECONOMIC DEPENDENCE

For the year ended December 31, 2013, the Company purchased 100% (2012 - 100%) of its wallet inventory from one vendor.

The accounts payable to this vendor is reflected in the carrying amount of the tooling commitment liability see note 9.

16. Subsequent Event

As described in note 8, the Company has closed on an additional $83,000 of convertible debentures with the same terms as those detailed in note 8.

iWallet Corporation

Unaudited Condensed Interim Financial Statements

For three month period ended March 31, 2014

(expressed in U.S. dollars)

iWallet Corporation

Table of Contents

March 31, 2014

	Page
Unaudited Condensed Interim Financial Statements
Balance Sheets (Unaudited) as of March 31, 2014 and December 31, 2013	1
Statements of Operations and Comprehensive Loss (Unaudited) for the three-month periods ended March 31, 2014 and 2013	2
Statements of Changes in Shareholder's Deficiency (Unaudited) for the three-month periods ended March 31, 2014 and 2013 and year ended December 31, 2013	3
Statements of Cash Flows (Unaudited) for the three-month periods ended March 31, 2013 and 2014	4
Notes to Condensed Interim Financial Statements (unaudited)	5 - 14

iWallet Corporation

Condensed Interim Balance Sheets

March 31, 2014 and December 31, 2013

	March 31, 2014			December 31, 2014
	(Unaudited)

Assets
Current assets
Cash	$	7,500		$	250,718
Funds held in attorney trust (note 8)		—			39,705
Accounts receivable		—			4,575
Deposits and deferred costs (note 9)		130,613			23,086
Inventory (note 4)		14,816			20,361
Due from shareholder (note 7)		90,468			61,833

		243,397			400,278
Intangible assets (note 5)		106,017			96,715

	$	349,414		$	496,993

Liabilities
Current liabilities
Bank indebtedness - current (note 6)	$	5,213		$	5,539
Accounts payable (note 8)		113,048			126,317
Accrued liabilities (note 12)		2,106			3,062
Due to related party (note 7)		28,257			37,842
Advances from investor (note 7)		76,474			69,678
Convertible debentures (note 8)		437,000			354,000
Tooling commitment liability (note 9)		105,816			105,816

		767,914			702,254
Bank indebtedness - long-term (note 6)		16,509			17,540

		784,423			719,794

Shareholder's (deficiency) equity
Class A common shares, par value $0.001, 200,000,000 shares authorized; 10,000 issued (December 31, 2013 - 10,000) (note 11)		10			10
Class B common shares, par value $0.001, 100,000,000 shares authorized; Nil issued (December 31, 2013 - Nil) (note 11)		—			—
Preferred shares, par value $0.001, 10,000,000 shares authorized; Nil issued (December 31, 2013 - Nil) (note 11)		—			—
Additional paid-in capital		1			1
Deficit		(435,020	)		(222,812	)
		(435,009	)		(222,801	)
	$	349,414		$	496,993

Going Concern (note 1); Committments and Contingencies (note 12); Subsequent Events (note 16)

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

iWallet Corporation

Condensed Interim Statements of Operations and Comprehensive Loss

for the three month periods ended March 31, 2014 and 2013 (unaudited)

	2014			2013

Sales	$	16,132		$	17,491
Cost of sales		16,946			13,600
Gross (loss) profit		(814	)		3,891

Expenses
Legal and professional fees		111,558			8,075
Sub contractor fees		62,100			—
Travel		15,615			3,127
Office and general expenses		11,375			1,954
Interest and bank fees		5,466			467
Rent		1,250			—
Research and development		1,142			—
Provision for loss on tooling commitment (note 9)		—			139,213
Amortization of intangible assets		2,888			1,784
		211,394			154,620

Loss before (recovery of) provision for income taxes		(212,208	)		(150,729	)
(Recovery of) provision for income taxes (note 10)		—			(4,247	)

Net and comprehensive loss for the year	$	(212,208	)	$	(146,482	)
Net and comprehensive loss per share basic and diluted (note 13)	$	(21.22	)	$	(14.65	)
Weighted average number of shares outstanding basic and diluted (note 13)		10,000			10,000

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

iWallet Corporation

Condensed Statement of Changes in Shareholder's Deficiency

for the three month periods ended March 31, 2014 and 2013 and year ended December 31, 2013 (unaudited)

	Class A Common Shares				Additional		Retained Earnings			Shareholder's (Deficiency)
	Shares		Amount		Paid-in Capital		(Deficit)			Equity

Balance, January 1, 2013		10,000	$	10	$	1	$	4,109		$	4,120
Net loss		—		—		—		(146,482	)		(146,482	)

Balance, March 31, 2013		10,000		10		1		(142,373	)		(142,362	)
Net loss		—		—		—		(80,439	)		(80,439	)

Balance, December 31, 2013		10,000		10		1		(222,812	)		(222,801	)
Net loss		—		—		—		(212,208	)		(212,208	)

Balance, March 31, 2014		10,000	$	10	$	1	$	(435,020	)	$	(435,009	)

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

iWallet Corporation

Condensed Interim Statements of Cash Flows

for the three month periods ended March 31, 2014 and 2013 (unaudited)

	2014			2013

Cash flow from operating activities
Net and comprehensive loss for the period	$	(212,208	)	$	(146,482	)
Items not affecting cash
Amortization of intangible assets		2,888			1,784
Provision for loss on tooling commitment (note 9)		—			139,213
Recovery of income taxes		—			(4,247	)
		(209,320	)		(9,732	)
Non-cash operating items resulted from changes in:
Accounts receivable		4,575			8,520
Deposits and deferred costs		(107,527	)		—
Inventory		5,545			5,459
Accounts payable		(13,269	)		5,050
Accrued liabilities		(956	)		1,276
		(320,952	)		10,573

Cash flow from investing activities
Expenditures on intangible assets		(12,190	)		(3,018	)
		(12,190	)		(3,018	)

Cash flow from financing activities
Funds repaid to related party		(9,585	)		(2,777	)
Funds repaid to shareholder		(28,635	)		(11,216	)
Receipt of funds held in attorney trust		39,705			—
Repayment of bank indebtedness		(1,357	)		(1,060	)
Advances from investor		6,796			—
Proceeds from issuance of convertible debentures		83,000			—
		89,924			(15,053	)

Decrease in cash		(243,218	)		(7,498.00	)
Cash, beginning of period		250,718			13,462.00
Cash, end of period	$	7,500		$	5,964.00

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

iWallet Corporation

Notes to Condensed Interim Financial Statements

March 31, 2014 and 2013 (unaudited)

1. Nature of Business and Going Concern

iWallet Corporation ("the Company") is engaged in the design, development, manufacturing and sales of bio-metric locking wallets, which operate by scanning a users fingerprint to open the wallet.

The Company was incorporated on November 18, 2009 in the State of California and is located at 7968 Arjons Drive, Suite D, San Diego, California 92126.

As of March 31, 2014, the Company has incurred a shareholder's deficiency of $435,009 (December 31, 2013 - $222,801) and has significant losses and negative cash flows from operations. In addition as at March 31, 2014 the Company has a working capital deficiency of $524,517 (December 31, 2013 - $301,976). There is no certainty that the Company will be successful in generating sufficient cash flow from operations or achieving and maintaining profitable operations in the near future to enable it to meet its obligations as they come due. As a result there is substantial doubt regarding the Company's ability to continue as a going concern. The Company may require additional financing to fund its operations, which may not be available at acceptable terms or at all. The Company plans on raising additional funds from completing financing arrangements, whether as continued subscriptions for convertible debentures or from additional sources, in contemplation of completing a public listing transaction.

The condensed interim financial statements do not include any adjustments relating to the recoverability and classification of the recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. All adjustments, consisting only of normal recurring items, considered necessary for fair presentation have been included in these condensed interim financial statements.

2. Significant Accounting Policies

Unaudited Condensed Interim Financial Statements

These unaudited condensed interim financial statements have been prepared on the same basis as the annual financial statements and should be read in conjunction with those annual financial statements for the year ended December 31, 2013. In the opinion of management, these unaudited condensed interim financial statements reflect adjustments, necessary to present fairly the Company's financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.

iWallet Corporation

Notes to Condensed Interim Financial Statements

March 31, 2014 and 2013 (unaudited)

3. Recently Issued Accounting Standards and Recently Adopted Accounting Pronouncement

Income Taxes (ASC Topic - 750): Presentation of an Unrecognized Tax Benefit when a Net Operating Loss Carry-forward, a Similar Tax Loss, or a Tax Credit Carry-forward Exists" ("ASU 2013-11") was issued during July 2013. The FASB issued guidance on how to present an unrecognized tax benefit. The guidance is effective for annual periods beginning after December 15, 2013. Adoption of the accounting pronouncement does not have a material effect on these accompanying condensed interim financial statements.

On May 28, 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The accounting standard is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017. Early adoption is not permitted. The impact on the condensed interim financial statements of adopting ASU 2014-09 will be assessed by management.

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying condensed interim financial statements.

4. Inventory

	March 31, 2014				December 31, 2014
Finished goods	$	14,816			$	20,361

During the period ended March 31, 2014, the Company recorded a provision relating to obsolete inventory of $nil (2013 - $nil).

iWallet Corporation

Notes to Condensed Interim Financial Statements

March 31, 2014 and 2013 (unaudited)

5. Intangible Assets

					March 31, 2014

	Cost		Accumulated Amortization		Net Book Value
Patents	$	68,120	$	11,051	$	57,069
Trademarks		13,484		3,661		9,823
Software		40,000		875		39,125
	$	121,604	$	15,587	$	106,017

						December 31, 2013

		Cost		Accumulated Amortization		Net Book Value
Patents	$	65,930	$	9,375	$	56,555
Trademarks		13,484		3,324		10,160
Software (i)		30,000		—		30,000
	$	109,414	$	12,699	$	96,715

(i)

The Company purchased software from an arm's length third party in December 2013 accordingly although ready for use, the costs were not amortized as any amortization would have been insignificant.

Depreciation for the three-month period ended March 31, 2014 is $2,888 (March 31, 2013 - $1,784).

iWallet Corporation

Notes to Condensed Interim Financial Statements

March 31, 2014 and 2013 (unaudited)

6. Bank Indebtedness

The bank indebtedness of the Company consists of a secured line of credit with a limit of $35,000 bearing interest at the annual prime rate plus 1.25%, which as at March 31, 2014 and December 31, 2013 was 4.5%, and with monthly repayments determined as follows:

a) the greater of:

two percent (2%) of the outstanding principal balance outstanding on the last day of the billing period, or

ii)

$100, and

b) accrued interest since the date of the last payment.

Security for the line of credit is the cash in the chequing account held with the bank.

	March 31, 2014			December 31, 2013

Line of credit	$	21,722		$	23,079
Less: Current portion - estimated based on (a)(i) above		(5,213	)		(5,539	)
	$	16,509		$	17,540

Principal repayments estimated based on (a)(i) above as at March 31, 2014:

2014	$	3,910
2015		5,213
2016		5,213
2017		2,173
	$	16,509

iWallet Corporation

Notes to Condensed Interim Financial Statements

March 31, 2014 and 2013 (unaudited)

7. Related Party Balances

	March 31, 2014		December 31, 2013

Current assets
Due from shareholder	$	90,468	$	61,833

Current liabilities
Due to related party	$	28,257	$	37,842
Advances from investor	$	76,474	$	69,678

The above balances are non-interest bearing, unsecured and due on demand. The related party is related by virtue of the common control and ownership by the Company's shareholder.

The advances from investor were funds advanced for purposes of covering operating expenses of the Company and were intended to be formalized into a convertible debenture, which was completed subsequent to the period end (note 16). At December 31, 2013, the investor was also serving as interim Chief Financial Officer ("CFO") and accordingly these transactions constitute related party transactions; however, on January 1, 2014 the investor resigned as interim CFO.

8. Convertible Debentures

In December of 2013, the Company entered into a series of secured convertible debenture agreements (the "convertible debentures") with various investors amounting to $354,000, of which $39,705 was held in attorney's trust to fund related closing costs. During the three months ending March 31, 2014 the Company closed on an additional $83,000 of convertible debentures with the same terms, bringing the total convertible debentures outstanding as at March 31, 2014 to $437,000. The convertible debentures bear interest at 5% per annum calculated monthly and payable on maturity and had an original maturity date of June 30, 2014. Subsequent to the period end, the Company extended the maturity to August 15, 2014 and issued an additional $226,000 in convertible debentures, including the formalization of the advances from investor in note 7 (see note 16). As at March 31, 2014, the amount of accrued interest is $5,158 (December 31, 2013 - $200), which is included in accounts payable.

Since the conversion option is contingent upon a public listing no value has been allocated to the conversion option in accordance with ASC 470 Debt. The terms of the convertible debenture do not permit the number of shares receivable upon conversion if a public listing occurs to be calculated at the commitment date. Upon the occurrence of a public listing the conversion feature would be measured and recognized as a debt discount and an adjustment to additional paid-in capital.

iWallet Corporation

Notes to Condensed Interim Financial Statements

March 31, 2014 and 2013 (unaudited)

9. Tooling Commitment Deposit, Deferred Costs and Liability

As of February 27, 2012, the Company had not reached the contracted level of purchases and an informal agreement to extend the period was made; however, by December 31, 2012 the Company had not complied and as a result, the entire amount would have been considered due.

On August 24, 2013, the Company entered into a revised agreement with the supplier that extended the term another twelve months to August 24, 2014.

During 2013, it was determined that based on the actual sales levels realized in 2013, the 5,000 unit commitment, the Company would likely not be able to meet the required orders. Accordingly, the deferred costs related to excess units was recognized as a provision for loss on the tooling commitment in the condensed interim statement of operations and comprehensive (loss).

		March 31, 2013			December 31, 2014

Tooling commitment deposit	$	41,119		$	41,119
Tooling commitment deferred costs		100,947			100,947
		142,066			142,066
Provision for loss on tooling commitment		(139,213	)		(139,213	)

Tooling commitment deposit and deferred costs	$	2,853		$	2,853

Tooling commitment liability	$	105,816		$	105,816

iWallet Corporation

Notes to Condensed Interim Financial Statements

March 31, 2014 and 2013 (unaudited)

10. Income Taxes

The Company calculates its income tax expense by estimating the annual effective tax rate and applying that rate to the year-to-date ordinary income at the end of the period. The Company records a tax valuation allowance when it is more likely than not that it will not be able to recover the value of its deferred tax assets. As of March 31, 2014 and 2013, the Company calculated its estimated annualized effective tax rate at 0% and 0%, respectively. The Company had no income tax expense on its $212,208 loss for the three months ended March 31, 2014. The Company recognized no income tax expense based on its $150,729 pre-tax loss for the three months ended March 31, 2013.

The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company recognizes interest accrued on uncertain tax positions as well as interest received from favorable tax settlements within interest expense. The Company recognizes penalties accrued on unrecognized tax benefits within general and administrative expenses. As of March 31, 2014 and December 31, 2013, the Company had no uncertain tax positions.

The Company does not anticipate any significant changes to the total amounts of unrecognized tax benefits in the next twelve months. In many cases the Company's uncertain tax positions are related to tax years that remain subject to examination by tax authorities. The following describes the open tax years, by major tax jurisdiction, as of March 31, 2014:

Federal 2009 – present

State 2009 – present

iWallet Corporation

Notes to Condensed Interim Financial Statements

March 31, 2014 and 2013 (unaudited)

11. Share Capital

Authorized

200,000,000 Class A Common shares par value $0.001

100,000,000 Class B Common shares par value $0.001

10,000,000 Preferred Shares par value $0.001

Issued

				March 31, 2014		December 31, 2013

	10,000	Class A Common shares	$	10	$	10

iWallet Corporation

Notes to Condensed Interim Financial Statements

March 31, 2014 and 2013 (unaudited)

12. Commitments and Contingencies

Legal Matters

Warranty Provisions

The Company is also exposed to warranty contingencies associated with the iWallet and has recorded a provision for these for the period ended March 31, 2014 of $2,106 and the year ended December 31, 2013 of $3,062, however, the actual amount of loss could be materially different.

13. Basic and Diluted Loss Per Share

Potential common shares related to the convertible debentures were excluded from the computation of diluted loss per share for the period ending March 31, 2014 because the inclusion of these shares would be anti-dilutive.

For the period ending March 31, 2013, no dilutive instruments existed; therefore, basic and diluted loss per share were equal.

iWallet Corporation

Notes to Condensed Interim Financial Statements

March 31, 2014 and 2013 (unaudited)’

14. Segmented Reporting

All of the Company's long-lived assets are located in the United States.

During the three-month period ended March 31, 2014, the Company had sales to customers in Ireland amounting to 10% of total sales (three-month period ended March 31, 2013 - nil). The remaining sales consist primarily of domestic sales; however, additional international sales accounted for 26% (three-month period ended March 31, 2013 - 43%) of total sales although no individual country was in excess of ten percent of total sales.

15. Risk Management

Concentrations of Credit Risk

The Company performs on-going credit evaluations of its customers’ financial condition and generally does not require collateral from its customers. One customer accounted for 14% of the Company's revenue during the three-month period ended March 31, 2014. There were no significant customers during the three-month period ended March 31, 2013. As of March 31, 2014 there was no accounts receivable balance. As of December 31, 2013 one customer accounted for 100% of the accounts receivable balance.

Economics Dependence

For the period ended March 31, 2014, the Company purchased 100% (2013 - 100%) of its wallet inventory from one vendor.

The accounts payable to this vendor is reflected in the carrying amount of the tooling commitment liability see note 9.

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

On July 21, 2014, iWallet Acquisition Corp (the “Acquisition Sub”) a wholly-owned subsidiary of Queensridge Mining Resources Inc. (“Queensridge”) that was formed specifically for the purposes of the transaction was combined in an all stock, tax free merger (the “Merger”) with iWallet Corporation (“iWallet”). Pursuant to the Merger iWallet will become a wholly-owned subsidiary of Queensridge and iWallet’s former stockholders will become the majority owners of Queensridge. Queensridge, whose shares are currently quoted on the OTC Bulletin Board maintained by the Financial Industry Regulatory Authority (“FINRA”), will immediately change its name to iWallet Corporation and will continue the business of iWallet as its only line of business. The Merger was accounted for as a reverse merger whereby Queensridge was deemed to have acquired iWallet for accounting purposes only.

The effects of the Merger have been prepared using the purchase method of accounting and applying the assumptions and adjustments described in the accompanying notes.

The unaudited pro forma combined financial statements are provided for informational purposes only and do not purport to represent what the actual combined results of operations or the combined financial position of the combined company would be had the Merger occurred on the dates assumed, nor are they necessarily indicative of future combined results of operations or combined financial position. The unaudited pro forma combined financial statements do not reflect any cost savings or other synergies that the management of Queensridge and iWallet believe could have been achieved had the Merger been completed on the dates indicated.

The unaudited pro forma combined statements of operations data for the periods presented give effect to the Transactions as if they had been consummated on January 1, 2013 the beginning of the earliest period presented. The unaudited pro forma balance sheets give effect to the Transactions as if they had occurred on December 31, 2013 and March 31, 2014, respectively. We describe the assumptions underlying the pro forma adjustments in the accompanying notes, which should also be read in conjunction with these unaudited pro forma financial statements. You should also read this information in conjunction with:

Separate unaudited historical financial statements of Queensridge as of and for the six month period ended December 31, 2012 and December 31, 2013.

Separate unaudited historical financial statements of Queensridge as of and for the three month period ended March 31, 2014.

Separate audited historical financial statements of Queensridge as of and for the year ended June 30, 2013.

Separate audited historical financial statements of iWallet as of and for the year ended December 31, 2013.

Separate unaudited historical financial statements of iWallet as of and for the three months ended March 31, 2014.

The unaudited pro forma combined financial statements should be read in conjunction with the information contained in “Use of Proceeds”, “Capitalization”, “Selected Historical Financial Data”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and accompanying notes of each of Queensridge and iWallet appearing elsewhere or incorporated by reference in Form 8-K.

Queensridge Mining Resources Inc.

(To be renamed iWallet Corporation)

Pro Forma Combined Statement of Financial Position

Expressed in United States Dollars

As at March 31, 2014

(Unaudited)

	Queensridge Mining Resources			iWallet Corporation			Note		Pro Forma Adjustment			Pro Forma Consolidated
Assets
Current assets
Cash	$	—		$	7,500			(a)	$	5,000
								(a)		145,000
								(e)		1,943,701
								(g)		(225,000	)	$	1,876,201
Deposits and deferred costs		—			130,613					—			130,613
Inventory		—			14,816					—			14,816
Due from shareholder		—			90,468					—			90,468
Total current assets		—			243,397					1,868,701			2,112,098

Intangible assets		—			106,017					—			106,017
Total assets	$	—		$	349,414				$	1,868,701		$	2,218,115

Liabilities
Current liabilities
Bank indebtness - current	$	—		$	5,213				$	—		$	5,213
Accounts payable		107,404			113,048			(c)		(107,404	)		113,048
Accrued liabilities		3,716			2,106			(c)		(3,716	)		2,106
Due to related party		—			28,257					—			28,257
Advances from investor		—			76,474			(a)		4,526
								(a)		(81,000	)		—
Shareholder loans		12,590			—			(c)		(12,590	)		—
Convertible debenture		—			437,000			(a)		81,000
								(a)		145,000
								(a)		(663,000	)		—
Tooling commitment liability		—			105,816								105,816
Total current liabilities		123,710			767,914					(637,184	)		254,440

Notes payable - related party		42,382			—			(c)		(42,382	)		—
Bank indebtness - long-term		—			16,509					—			16,509
Total liabilities	$	166,092		$	784,423				$	(679,566	)	$	270,949

Equity (deficiency)
Common shares	$	6,428		$	10			(a)	$	3,222
								(d)		(6,428	)
								(d)		19,027
								(e)		6,479
								(e)		583		$	29,321
Additional paid-in capital		32,372			1			(a)		659,778
								(d)		2,692,117
								(d)		(32,372	)
								(e)		1,943,701
								(e)		(6,479	)
								(e)		(583	)
								(g)		(225,000	)		5,063,534
Deficit		(204,892	)		(435,020	)		(a)		474
								(c)		166,092
								(d)		38,800
								(d)		(2,711,144	)		(3,145,690	)
(Deficiency) equity attributable to shareholders of Queensridge Mining Resources Inc.		(166,092	)		(435,009	)				2,548,267			1,947,166
Total liabilities and equity	$	—		$	349,414				$	1,868,701		$	2,218,115

See accompanying notes to the pro forma consolidated statement of financial position.

Queensridge Mining Resources Inc.

(To be renamed iWallet Corporation)

Pro Forma Combined Statement of Operations and Comprehensive Loss

Expressed in United States Dollars

For the three month period ended March 31, 2014

(Unaudited)

	Queensridge Mining Resources			iWallet Corporation			Note		Pro Forma Adjustment			Pro Forma Consolidated

Sales	$	—		$	16,132				$	—		$	16,132
Cost of sales		—			16,946					—			16,946
Gross Profit		—			(814	)				—			(814	)

Expenses
Legal and professional fees		11,374			111,558					—			122,932
Sub contractor fees		—			62,100					—			62,100
Office and general expenses		13			11,375			(a)		(474	)		10,914
Travel		—			15,615					—			15,615
Interest and bank fees		—			5,466					—			5,466
Rent		—			1,250					—			1,250
Amortization of intangible assets		—			2,888					—			2,888
Research and development		—			1,142					—			1,142
Interest expense		530			—					—			530
Transaction costs		—			—			(d)		2,711,144			2,711,144
Gain on transfer of assets		—			—			(c)		166,092			166,092
		11,917			211,394					2,876,762			3,100,073

Net loss from continuing operations	$	(11,917	)	$	(212,208	)			$	(2,876,762	)	$	(3,100,073	)

Loss from continuing operations per common share - basic and diluted	$	(0.00	)	$	(21.22	)		(h)	$	21.12		$	(0.11	)

Weighted average common shares - basic and diluted		6,427,800			10,000			(h)		22,883,579			29,321,379

See accompanying notes to the pro forma consolidated statement of financial position.

Queensridge Mining Resources Inc.

(To be renamed iWallet Corporation)

Pro Forma Combined Statement of Financial Position

Expressed in United States Dollars

As at December 31, 2013

(Unaudited)

	Queensridge Mining Resources			iWallet Corporation			Note		Pro Forma Adjustment			Pro Forma Consolidated
Assets
Current assets
Cash	$	15		$	250,718			(a)	$	73,919
								(a)		5,000
								(a)		145,000
								(c)		(15	)
								(e)		1,943,701
								(g)		(225,000	)	$	2,193,338
Funds held in attorney trust					39,705			(a)		(39,705	)		—
Trade and other receivables		—			4,575					—			4,575
Deposits and deferred costs		—			23,086					—			23,086
Inventory		—			20,361					—			20,361
Due from shareholder		—			61,833					—			61,833
Total current assets		15			400,278					1,902,900			2,303,193

Intangible assets		—			96,715								96,715
Total assets	$	15		$	496,993				$	1,902,900		$	2,399,908

Liabilities
Current liabilities
Bank indebtness - current	$	—		$	5,539				$	—		$	5,539
Accounts payable		96,031			126,317			(a)		(39,705	)
								(c)		(96,031	)		86,612
Accrued liabilities		3,186			3,062			(c)		(3,186	)		3,062
Due to related party		—			37,842					—			37,842
Advances from investor		—			69,678			(a)		11,322
								(a)		(81,000	)		—
Shareholder loans		12,590			—			(c)		(12,590	)		—
Convertible debenture		—			354,000			(a)		83,000
								(a)		81,000
								(a)		145,000
								(a)		(663,000	)		—
Tooling commitment liability		—			105,816					—			105,816
Total current liabilities		111,807			702,254					(575,190	)		238,871

Notes payable - related party		42,382			—			(c)		(42,382	)		—
Bank indebtness - long-term		—			17,540					—			17,540
Total liabilities	$	154,189		$	719,794				$	(617,572	)	$	256,411

Equity (deficiency)
Common shares	$	6,428		$	10			(a)	$	3,222
								(d)		(6,428	)
								(d)		19,027
								(e)		6,479
								(e)		583		$	29,321
Additional paid-in capital		32,372			1	(a)				659,778
								(d)		2,692,117
								(d)		(32,372	)
								(e)		1,943,701
								(e)		(6,479	)
								(e)		(583	)
								(g)		(225,000	)		5,063,534
Deficit		(192,974	)		(222,812	)(a)				(9,081	)
								(a)		(6,322	)
								(c)		154,204
								(d)		38,771
								(d)		(2,711,144	)		(2,949,359	)
(Deficiency) equity attributable to shareholders of Queensridge Mining Resources Inc.		(154,174	)		(222,801	)				2,520,472			2,143,497
Total liabilities and equity	$	15		$	496,993				$	1,902,900		$	2,399,908

See accompanying notes to the pro forma consolidated statement of financial position.

Queensridge Mining Resources Inc.

(To be renamed iWallet Corporation)

Pro Forma Combined Statement of Operations and Comprehensive Loss

Expressed in United States Dollars

For the year ended December 31, 2013

(Unaudited)

	Queensridge Mining Resources			iWallet Corporation			Note		Pro Forma Adjustment			Pro Forma Consolidated

Sales	$	—		$	85,769				$	—		$	85,769
Cost of sales		—			63,585					—			63,585
Gross Profit		—			22,184								22,184

Expenses
Provision for loss on tooling commitment		—			139,213					—			139,213
Legal and professional fees		44,926			73,278			(a)		2,111
								(a)		2,108			122,423
Travel		—			23,475			(a)		4,524			27,999
Office and general expenses		1,491			9,583			(a)		(310	)		10,764
Amortization of intangible assets		—			5,288					—			5,288
Interest and bank fees		1,589			2,515					—			4,104
Agent fees		—			—			(a)		6,970			6,970
Transaction costs		—			—			(d)		2,711,144			2,711,144
Gain on transfer of assets		—			—			(c)		154,204			154,204
		48,006			253,352					2,880,750			3,182,108

Loss before recovery of income taxes		(48,006	)		(231,168	)				(2,880,750	)		(3,159,924	)
Recovery of income taxes					(4,247	)				—			(4,247	)
Net loss from continuing operations	$	(48,006	)	$	(226,921	)			$	(2,880,750	)	$	(3,155,677	)

Loss from continuing operations per common share - basic and diluted	$	(0.01	)	$	(22.69	)		(h)	$	22.59		$	(0.11	)

Weighted average common shares - basic and diluted		6,427,800			10,000			(h)		22,883,579			29,321,379

See accompanying notes to the pro forma consolidated statement of financial position.

Queensridge Mining Resources Inc.

(To be renamed iWallet Corporation)

Notes to Pro Forma Combined Financial Statements

(Expressed in United States Dollars)

(Unaudited)

The Transaction

On July 21, 2014, Queensridge entered into a merger agreement with iWallet to complete the merger whereby all of the issued and outstanding common stock of iWallet, a non-reporting issuer incorporated under the laws of the State of California, will be exchanged for shares of Queensridge subject to a number of conditions, including a private placement by iWallet for gross proceeds of a $1,943,701 (the “Private Placement”). The business combination will constitute a “Reverse Merger Transaction” of Queensridge under the policies of FINRA. The total number of Queensridge common shares issued and outstanding immediately prior to the Transaction will be 34,113,790. Queensridge will issue an aggregate of 13,222,120 shares in return for all of the issued and outstanding shares of iWallet. Immediately after the issuance of the 13,222,120 shares, all but 9,037,147 of the 34,113,790, or 25,076,643, common shares will be cancelled.

2. Basis of Presentation

The unaudited pro forma combined financial information of Queensridge as at and for the year ended December 31, 2013 and March 31, 2014, respectively, has been prepared by management to reflect the Merger of iWallet by Queensridge as described in note 1.

The unaudited pro forma combined financial information that follows for the year ended and as of December 31, 2013 has been derived from the historical financial statements of Queensridge for the period ended December 31, 2013, the historical financial statements of Queensridge for the year ended June 30, 2013, the historical financial statements of Queensridge for the period ended December 31, 2012 and the historical financial statements of iWallet for the year ended December 31, 2013, along with certain adjustments.

The unaudited pro forma combined financial information that follows for the year ended and as of March 31, 2014 has been derived from the historical financial statements of Queensridge for the period ended March 31, 2014 and the historical financial statements of iWallet for the year ended and as of the period ended March 31, 2014, along with certain adjustments.

The unaudited pro forma combined statement of operations for the periods ended December 31, 2013 and March 31, 2014 have been prepared as if the Merger occurred as of January 1, 2013.

The pro forma adjustments are based on available information and assumptions that Queensridge believes are reasonable. Such adjustments are estimates and are subject to change.

The Merger will be accounted for as a reverse acquisition in accordance with the Financial Accounting Standards Board (ASC 805, Business Combinations). Queensridge’s management has evaluated the guidance contained in ASC 805 with respect to the identification of the acquirer in the Merger and concluded, based on a consideration of the pertinent facts and circumstances, that Queensridge will acquire iWallet for financial accounting purposes. Accordingly, the Merger has been accounted for in the unaudited pro forma combined financial statements as a continuation of the financial statements of iWallet, together with a deemed issuance of shares, equivalent to the shares held by the former shareholders of Queensridge and a re-capitalization of the equity of iWallet. The fair value of the shares issued was determined based on the fair value of the securities issuable pursuant to the Private Placement concurrently with the Merger (see note 3(d)).

Pro Forma Assumptions and Adjustments

The unaudited pro forma combined financial statements give effect to the following assumptions and adjustments:

In December 2013, iWallet entered into a series of secured convertible debenture agreements (the “Convertible Debentures”) with various investors amounting to $354,000, of which $39,705 was held in attorney’s trust and later paid to fund related closing costs.

In January 2014, iWallet entered into additional Convertible Debentures amounting to $83,000. In connection with the January 2014 Convertible Debentures iWallet paid $9,081 in agent, legal and professional fees.

During July 2014, iWallet received additional advances and incurred expenses that were paid by a shareholder and recorded as additions to shareholder loan.

In July 2014, iWallet entered into $145,000 in new Convertible Debentures and converted $81,000 of advances from investors into a convertible debenture, all with the same terms and maturity as the December 2013 Convertible Debentures.

As the reverse merger results in a public listing, concurrent with the reverse merger, iWallet has elected to force conversion of the aggregate $663,000 convertible debentures resulting in the issuance of 3,219,096 common shares and 3,219,096 common share purchase warrants with an exercise price of $0.20 and a term of 24 months. The Convertible Debentures included a contingent beneficial conversion feature and as such, is recognized once the contingency, being the public listing, is resolved. The conversion of the Convertible Debentures results in the relative fair value of the debt component, the warrants and the beneficial conversion feature being reclassified from liabilities to APIC

On July 10, 2014, Queensridge completed a 1 for 5.307 stock split of its common stock.

Immediately prior to the Merger, a former controlling shareholder, received a transfer of all assets and agreed to cancel and/or assume all liabilities related to Queensridge’s pre-acquisition business. The transfer resulted in a gain on transfer of assets of $166,092 for the three month period ended March 31, 2014 and $154,204 for the twelve months ended December 31, 2013.

Common stock, APIC and the deficit of Queensbridge are eliminated.

The fair value of Queensridge’s business combination was based on the concurrent unit price in the Private Placement (note 3(d)). As all the assets and liabilities were assumed by a former shareholder (see note 3(c)) the preliminary purchase price of $2,711,144 has been entirely allocated as transactions costs expensed through the statement of operations for both the three month period ended March 31, 2014 and the twelve month period ended December 31, 2013.

Concurrently with the Merger, iWallet intends to complete a Private Placement of a maximum of 6,479,002 units of iWallet (“Units”) for gross proceeds of $1,943,701. Each Unit consists of one common share and one common share purchase warrant of iWallet. Each whole common share purchase warrant is exercisable at $0.60 for a period of two years.

The agent of the Private Placement will receive 583,110 broker warrants to acquire units at an exercise price of $0.60 per unit for a period of two years. Each unit is comprised of one share of common stock of iWallet and one common share purchase warrant exercisable at $0.60 for a period of two years.

The agent of the Private Placement will receive cash compensation of 9% of the gross proceeds of the financing, additionally closing costs of approximately $50,000 are expected to be incurred, for total share issue costs of approximately $225,000.

The warrants outstanding as at December 31, 2013 were excluded from the computation of diluted loss per share as the potential effect was anti-dilutive.

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IWAL iWallet Corporation (PK)