UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
(Mark One)
   [ X ]   Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

For the Fiscal Year Ended April 30, 2017

   [    ]   Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _______________ to _______________

Commission File Number:   000-54851

DEFENSE TECHNOLOGIES INTERNATIONAL CORP.
(Exact name of registrant as specified in its charter)
 
  Delaware
Not Applicable
( State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)

4730 South Fort Apache Road, Suite 300, Las Vegas, Nevada 89147
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code:     (800) 520-9485

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes [   ]   No [ X ]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.         Yes [   ]   No [ X ]

Indicate by check mark whether the registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.       Yes [ X ]   No [   ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.      [   ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer
[   ]
  Accelerated filer
[   ]
Non-accelerated filer
[   ]
Smaller reporting company
[X]
(Do not check if a smaller reporting company) 
   

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

The aggregate market value of the voting stock held by non-affiliates of the registrant based on the closing sales price, or the average bid and asked price on such stock, as of October 31, 2016, the last business day of the registrant’s most recently completed second quarter, was $1,386,469.  Shares of the registrant’s common stock held by each executive officer and director and by each entity or person that, to the registrant’s knowledge, owned 10% or more of registrant’s outstanding common stock as of October 31, 2016 have been excluded in that such persons may be deemed to be affiliates of the registrant.  This determination of affiliate status is not necessarily a conclusive determination for other purposes.

The number of shares of the registrant’s common stock outstanding as of August 14, 2017 was 199,365,345.

DOCUMENTS INCORPORATED BY REFERENCE
 
A description of “Documents Incorporated by Reference” is contained in Part IV, Item 15.

DEFENSE TECHNOLOGIES INTERNATIONAL CORP.
TABLE OF CONTENTS
 
   
Page
PART  I 
 
     
Item 1.
Business
3
     
Item 1A.
Risk Factors
5
     
Item 1B.
Unresolved Staff Comments
5
     
Item 2.
Properties
5
     
Item 3.
Legal Proceedings
5
     
Item 4.
Mine Safety Disclosures
5
     
PART  II 
 
     
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
6
     
Item 6.
Selected Financial Data
8
     
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
8
     
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
14
     
Item 8.
Financial Statements and Supplementary Data
14
     
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
14
     
Item 9A.
Controls and Procedures
14
     
Item 9B
Other Information
14
     
PART  III 
 
     
Item 10.
Directors, Executive Officers and Corporate Governance
15
     
Item 11.
Executive Compensation
16
     
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
 17 
     
Item 13.
Certain Relationships and Related Transactions and Director Independence
18
     
Item 14.
Principal Accounting Fees and Services
19
     
PART  IV 
 
     
Item 15.
Exhibits, Financial Statement Schedules.
20
     
 
Signatures
21

As used in this report, unless otherwise indicated, “we”, “us”, “our”, “DTII” and the “Company” refer to Defense Technologies International Corp.
                           
This report contains forward-looking statements relating to future events or our future financial performance.  In some cases, you can identify forward-looking statements by terminology such as “may,” “will” “should,” “expect,” “intend,” “plan,” anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” or similar terms, variations of such terms or the negative of such terms.  These statements are only predictions and involve known and unknown risks, uncertainties and other factors.  Although forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment, actual results could differ materially from those anticipated in such statements.  Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

2


PART  I

Item 1.  Business

Defense Technologies International Corp. (the “Company”) was incorporated in the State of Delaware on May 27, 1998.  Effective June 15, 2016, the Company changed its name from Canyon Gold Corp. to Defense Technologies International Corp. to more fully represent the Company’s expansion goals into the advanced technology sector.

Our principal executive office is located at 4730 South Fort Apache Road, Suite 300, Las Vegas, Nevada 89147, telephone (1-800) 520-9485.  Additional office space is subleased from EMAC Handels AG (“EMAC’), a related party, at 641 West 3rd Street, North Vancouver BC, Canada.
           
Our website address is http://www.defensetechnologiesintl.com.

Development of Scanner Technology Business

Defense Technologies International Corp. (the “Company”) plans to bring defense detection and protection products to market intended to improve security for military personnel, schools and other public facilities.

Effective July 15, 2016, the Company executed documents intended to finalize the acquisition of 100% of Defense Technology Corporation, a privately held Colorado company (“DTC”), a developer of defense, detection and protection products to improve security for Anchor schools and other public facilities.  Subsequently, the Company and DTC mutually agreed to rescind the acquisition of DTC and entered into a Rescission Agreement and Mutual Release (the “Rescission Agreement”), dated October 17, 2016.

In connection with the Rescission Agreement with the Company, DTC rescinded its agreement with the inventor and developer of the technology and assets that were subject to the original agreement between the Company and DTC.  On October 19, 2016, the Company entered into a new Definitive Agreement with Controlled Capture Systems, LLC (“CCS”), representing the inventor of the technology and assets previously acquired by DTC, that included a new exclusive Patent License Agreement and Independent Contractor agreement.  Under the license agreement with CCS, the Company acquired the world-wide exclusive rights and privileges to the CCS security technology, patents, products and improvements.  The term of the License Agreement shall be from October 19, 2016 until the expiration of the last to expire of the licensed issued patents or patents to be issued.

The Company agreed to pay CCS an initial licensing fee of $25,000 and to pay ongoing royalties at the end of each six-month period at the rate of the greater of 5% of gross sales used or sold, or the minimum royalty payment of $25,000.  The Company also agreed to compensate investors that have provided funding for the development of CCS’s technology with 4,000,000 shares of the Company’s common stock.  Additionally, CCS will be entitled to receive 250,000 shares of the Company’s common stock upon completed sales of 1,000 passive scanner units based on the CCS technology.

The Independent Contractor Agreement between the Company and CCS provides that CCS will provide support for the development of the security technology and products.  An initial payment of $5,000 was paid to CCS plus ongoing hourly compensation for services provided.

The Company capitalized the costs to acquire the License Agreement, including the $25,000 initial licensing fee and the estimated value of $353,600 of the 4,000,000 shares of the Company’s common stock issued on November 10, 2016 to the CCS investors, which value was based on the closing market price of the Company’s common stock on the date of the Definitive Agreement. The Company has recorded a current liability of $25,000 for the remaining obligation in its consolidated balance sheet as of April 30, 2017.  Once sales of products based on the CCS technology begin, the Company will amortize the capitalized costs over the estimated life of the license agreement as determined by the legal life of patents issued.

Effective January 12, 2017, Passive Security Scan, Inc. (“PSSI”) was incorporated in the state of Utah as a wholly owned subsidiary.  The Company merged its wholly-owned subsidiary, Long Canyon Gold Resources Corp. (“Long Canyon”), into PSSI, with PSSI the surviving entity.  The Company transferred to PSSI its exclusive world-wide license to the defense, detection and protection security products previously acquired by the Company.  The Company currently owns 65.38% of PSSI with 34.62% acquired by several individuals and entities.  With the merger of Long Canyon into PSSI, the Company discontinued its mineral exploration business.  The Company plans to continue the development of the technology and conduct all sales and marketing activities in PSSI.
3

The security products licensed from CCS and to be developed by the Company are designed for personal and collateral protection.  The proposed detection technology is intended to provide passive security scanning units for either walk-through or hand-held use to improve security for schools and other public facilities.  The units use electromagnets and do not emit anything (such as x-rays) through the subject.  The Company, in consultation with CCS, recently completed a prototype with optional “Digital Imaging” which will give the user of the scanner the ability to recall the entire traffic passing through the scanner at any time thereafter.  The prototype scanner unit has successfully passed lab testing and is ready for deployment and demonstration.

Competition

We believe we have the only known passive scanner technology based on earth magnetic technology that does not cause any harm to the subject passing through the scanner.  Our scanners are therefore uniquely suited for school systems and other public venues.  Our competitors’ technology is based on X-Ray, microwave or radio signals, all of which are harmful over time.  We believe this provides an advantage to our scanners over those developed by our competition.

Sales and Marketing

Through a contract representative, we have made contact with several schools that have expressed interest in having the Passive Security Scan Unit presented at the school for demonstration and evaluation.  Furthermore, as funding permits, we plan to install a demonstration unit in every state free of charge via the state’s Governor’s Office. We expect major exposure through this program.
 
We will also plan to announce the availability of distributorships.  A distributor will get a 20% discount on Gross Sales, but is required to purchase a minimum of 25 units at time of signing for a distributorship.  General referrals will earn a 10% discount.
 
With the completion of requisite funding, we expect to place the first units during September 2017 and commence a major marketing campaign at the same time.  We believe that we will start production and sales within the coming three months.
               
With the start of initial sales, we believe that we will be able to raise major funding through more conventional sources for our production.

Trademarks and Copyrights
 
We acquired the world-wide exclusive rights and privileges to the CCS security technology, patents, products and improvements.  The term of the License Agreement shall be from October 19, 2016 until the expiration of the last to expire of the licensed issued patents or patents to be issued.  CCS currently owns 3 patents and 2 patents pending related to the technology.

Employees
 
We presently do not have any employees and do not anticipate adding employees until our business operations and financial resources so warrant. The Independent Contractor Agreement between the Company and CCS provides that CCS will provide support for the development of the security technology and products.  The management of our Company is provided through a series of service agreements with our officers and directors and key consultants.
 
Facilities

We presently rent office facilities in Las Vegas, Nevada that serve as our principal executive offices.  The facilities are rented on a month-to-month basis on terms of $497 per month.  Additional office space is subleased from EMAC, a related party, in North Vancouver BC, Canada on a month-to-month basis at $250 per month.
4

Employee Stock Plan

We have not adopted any kind of stock or stock option plan for employees at this time.

Industry Segments

No information is presented regarding industry segments.  We are presently an emerging company seeking business opportunities in one segment, the defense, detection and protection products industry.
               
Item 1A. Risk Factors.

This item is not required for a smaller reporting company.
                       
Item 1B.  Unresolved Staff Comments.

This item is not required for a smaller reporting company.
                     
Item 2.  Properties.

We do not presently own any property.
                       
Item 3.  Legal Proceedings.

There are no material pending legal proceedings to which the Company or its subsidiary is a party, or to which any property is subject and, to the best of our knowledge, no such action against us is contemplated or threatened.
                    
Item 4.  Mine Safety Disclosures.

This item is not applicable.
5


PART II

Item 5.   Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common shares are quoted on the OTCQB under the symbol “DTII”.  Set forth in the table below are the quarterly high and low prices of our common stock as obtained from the OTCQB for the past two fiscal years ended April 30, 2017.

Fiscal year ended April 30, 2017
 
    High     Low  
             
First Quarter
 
$
0.46
   
$
0.05
 
Second Quarter
 
$
0.21
   
$
0.082
 
Third Quarter
 
$
0.15
   
$
0.005
 
Fourth Quarter
 
$
0.0398
   
$
0.0007
 


Fiscal year ended April 30, 2016
 
    High     Low  
             
First Quarter
 
$
0.195
   
$
0.02
 
Second Quarter
 
$
0.42
   
$
0.02
 
Third Quarter
 
$
0.54
   
$
0.22
 
Fourth Quarter
 
$
0.45
   
$
0.031
 


As of August 11, 2017, there were approximately 136 stockholders of record of our common stock, which does not take into account those shareholders whose certificates are held in the name of broker-dealers or other nominee accounts.

Secondary trading of our shares may be subject to certain state imposed restrictions.  Except for the OTCQB, we have no immediate plans, proposals, arrangements or understandings with any person concerning the development of a trading market in any of our securities. The ability of individual stockholders to trade their shares in a particular state may be subject to various rules and regulations of that state. A number of states require that an issuer’s securities be registered in their state or appropriately exempted from registration before the securities are permitted to trade in that state. Presently, we have no plans to register our securities in any particular state.

Penny Stock Rule

It is unlikely that our securities will be listed on any national or regional exchange or The Nasdaq Stock Market in the foreseeable future.  Therefore our shares most likely will be subject to the provisions of Section 15(g) and Rule 15g-9 of the Exchange Act, commonly referred to as the “penny stock” rule.  Section 15(g) sets forth certain requirements for broker-dealer transactions in penny stocks and Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.

The SEC generally defines a penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions.  Rule 3a51-1 provides that any equity security is considered to be a penny stock unless that security is:  

registered and traded on a national securities exchange meeting specified criteria set by the SEC;
   
authorized for quotation on The Nasdaq Stock Market;
   
issued by a registered investment company;
   
excluded from the definition on the basis of price (at least $5.00 per share) or the issuer’s net tangible assets; or
   
exempted from the definition by the SEC.

6

A broker-dealer who sells penny stocks to a person other than an established customer or accredited investor is subject to additional sales practice requirements.  An accredited investor is generally defined as a person with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse.

For transactions covered by these rules, a broker-dealer must make a special suitability determination for the purchase of such securities and must receive the purchaser’s written consent to the transaction prior to the purchase.  Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the first transaction, of a risk disclosure document relating to the penny stock market.  A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities.  Finally, a monthly statement must be sent to the client disclosing recent price information for the penny stocks held in the account and information on the limited market in penny stocks.  Consequently, these rules may restrict the ability of broker-dealers to trade and/or maintain a market in our common stock and may affect the ability of stockholders to sell their shares.

These requirements may be considered cumbersome by broker-dealers and could impact the willingness of a particular broker-dealer to make a market in our shares, or they could affect the value at which our shares trade. Classification of the shares as penny stocks increases the risk of an investment in our shares.

Rule 144

All of our outstanding common shares were issued in private transactions and considered restricted securities, except for those shares included in our July 2017 and November 2011 registration statement.  Rule 144 is the common means for stockholders to resell restricted securities and for affiliates, to sell their securities, either restricted or non-restricted (control) shares. Rule 144 was amended, effective February 15, 2008.
                  
Under the amended Rule 144, an affiliate of a company filing reports under the Exchange Act who has held their shares for more than six months, may sell in any three-month period an amount of shares that does not exceed the greater of:

the average weekly trading volume in the common stock, as reported through the automated quotation system of a registered securities association, during the four calendar weeks preceding such sale, or
   
1% of the shares then outstanding.

Sales by affiliates under Rule 144 are also subject to certain requirements as to the manner of sale, filing appropriate notice and the availability of current public information about the issuer.  

A non-affiliate stockholder of a reporting company who has held their shares for more than six months, may make unlimited resales under Rule 144,  provided  only that the issuer has available current public information about itself.  After a one-year holding period, a non-affiliate may make unlimited sales with no other requirements or limitations.  

An important exception to the above described availability of the amended Rule 144 is that Rule 144 is not available for either a reporting or non-reporting shell company, unless the company:

has ceased to be a shell company;
   
is subject to the Exchange Act reporting obligations;
   
has filed all required Exchange Act reports during the preceding twelve months; and
   
at least one year has elapsed from the time the company filed with the SEC current Form 10 type information reflecting its status as an entity that is not a shell company.  

Because the Company was previously classified as a “shell” company, stockholders holding restricted shares of common stock would not be able to rely on Rule 144 until one year after we ceased to be a shell company and filed with the SEC adequate information that we are no longer a shell company.  The information included in our registration statement dated July 2017 is considered adequate information and, accordingly, our stockholders, both affiliates and non-affiliates, became eligible to use Rule 144 after one year from the initial filing of the registration statement.
      
We cannot predict the effect any future sales under Rule 144 may have on the market price of our common stock, if a market for our shares develops, but such sales may have a substantial depressing effect on such market price.
7

Dividends Policy

We have never declared cash dividends on our common stock, nor do we anticipate paying any dividends on our common stock in the foreseeable future.

The following presents equity compensation plan information as of April 30, 2017.


EQUITY COMPENSATION PLAN INFORMATION

Plan category
 
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
   
Weighted average
exercise price of
outstanding options,
warrants and rights
   
Number of securities
remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)
 
   
(a)
   
(b)
   
(c)
 
Equity compensation plans approved by security holders
   
-0-
     
-0-
     
-0-
 
                         
Equity compensation plans not approved by security holders (1)
   
1,300,000
   
$
1.385
     
-0-
 
                         
Total
   
1,300,000
   
$
1.385
     
-0-
 

(1)   Consists   of options to purchase a total of 1,000,000 common shares and warrants to purchase 300,000 common shares.

Item 6.  Selected Financial Data.

This item is not required for a smaller reporting company.
     
Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following information should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this Form 10-K.

The consolidated financial statements included in this annual report include the financial statements of the Company and those of Passive Security Scan, Inc. (“PSSI”), a consolidated subsidiary

Effective January 12, 2017, PSSI was incorporated in the state of Utah as a wholly owned subsidiary.  The Company merged its wholly owned subsidiary, Long Canyon Gold Resources Corp. (“Long Canyon”), into PSSI, with PSSI the surviving entity.  The Company transferred to PSSI its exclusive world-wide license to the defense, detection and protection security products previously acquired by the Company.  The Company currently owns 65.38% of PSSI with 34.62% acquired by several individuals and entities.  With the merger of Long Canyon into PSSI, the Company discontinued its mineral exploration business.  The Company plans to continue the development of the technology and conduct all sales and marketing activities in PSSI.

8

Forward Looking and Cautionary Statements

This report contains forward-looking statements relating to future events or our future financial performance.  In some cases, you can identify forward-looking statements by terminology such as “may,” “will” “should,” “expect,” “intend,” “plan,” anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” or similar terms, variations of such terms or the negative of such terms.  These statements are only predictions and involve known and unknown risks, uncertainties and other factors.  Although forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment, actual results could differ materially from those anticipated in such statements.  Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Going Concern

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States applicable to a going concern.  Through April 30, 2017, the Company has no revenues, has accumulated losses of $6,586,401 since inception on June 19, 2008 and had a working capital deficit of $2,277,601 and expects to incur further losses in the development of its business, all of which cast substantial doubt about the Company’s ability to continue as a going concern.  Management plans to continue to provide for the capital needs during the year ending April 30, 2018 by issuing debt and equity securities and by the continued support of its related parties.  The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.  There is no assurance that funding will be available to continue the Company’s business operations.  In addition, the Company does not have a sufficient number of authorized shares to allow for conversion of all outstanding convertible debt and convertible preferred stock, and will need to restructure its equity to allow for further convertible debt or equity financing.
   
Results of Operations

We currently have no sources of operating revenues. Accordingly, no revenues were recorded for the years ended April 30, 2017 and 2016.

Our general and administrative expenses increased $853,063 to $1,329,899 in the year ended April 30, 2017 from $476,836 in the year ended April 30, 2016.  The increases are due primarily to an increase in stock based compensation, including shares issued to our new President and to a Director, and the issuance of shares to investor relations consultants.  We also incurred an increase in professional and consulting fees and costs associated with the rescinded agreement with DTC, the new Definitive Agreement with CCS and the formation of PSSI.
          
Exploration costs were $1,452 in the year ended April 30, 2017 compared to $2,200 in the year ended April 30, 2016.  The exploration costs for all periods consisted of annual claims maintenance fees and the costs of re-staking the Nevada mineral claims.  We abandoned the claims in fiscal year 2016.

We were unable to renew our mineral lease claims prior to April 30, 2016, and the $37,820 cost basis was expensed as abandoned mineral claims in the year ended April 30, 2016. With the merger of Long Canyon into PSSI, the Company discontinued its mineral exploration business.

Our interest expense increased to $762,203 in the year ended April 30, 2017 from $224,998 in the year ended April 30, 2016.  The increase in interest expense is due primarily to new interest-bearing debt issued to institutional investors, default interest rate increases, related extension and early payment penalties, and to the amortization of debt discount to interest expense in the current year.  A portion of our interest expense is incurred to related parties.

We recognized a loss on derivative liability of $412,372 and $2,104,872 in the years ended April 30, 2017 and 2016, respectively.  We estimate the fair value of the derivative for the conversion feature of our convertible notes payable using the Black-Scholes pricing model at the inception of the debt, at the date of conversions to equity, cash payments and at each reporting date, recording a derivative liability, debt discount and a gain or loss on change in derivative liability as applicable.  These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price volatility, and variable conversion prices based on market prices as defined in the respective loan agreements.  These inputs are subject to significant changes from period to period; therefore, the estimated fair value of the derivative liability and associated gain or loss on derivative liability will fluctuate from period to period and the fluctuation may be material.
9

We recognized a gain on extinguishment of debt of $420,203 and $122,222 in the years ended April 30, 2017 and 2016, respectively.  The gain on extinguishment of debt resulted primarily from the elimination of derivative liabilities upon debt extinguishment.  This gain will fluctuate from period to period depending on the number of debt conversions and the associated balance of derivative liabilities, and the fluctuation may be material.

As a result, we recognized a loss before the non-controlling interest of $2,085,723 and $2,724,504 in the years ended April 30, 2017 and 2016, respectively.
                     
Because we own 65.38% of PSSI as of April 30, 2017, we include 65.38% of the net loss of PSSI for the year ended April 30, 2017 in our consolidated net loss and have reported non-controlling interest of 34.62% of the net loss of PSSI, or $11,102, for the year ended April 30, 2017.

Liquidity and Capital Resources

At April 30, 2017, we had total current assets of $193, consisting of cash, and total current liabilities of $2,277,794, resulting in a working capital deficit of $2,277,601.  Included in our current liabilities and working capital deficit are derivative liabilities totaling $823,452 related to the conversion features of certain of our convertible notes payable.  We do not believe the derivative liabilities will require settlement in cash.

A significant portion of our current liabilities as of April 30, 2017 is comprised of amounts due to related parties: accrued interest payable – related parties of $13,953; convertible notes payable – related parties of $57,050; notes payable – related parties of $34,426; and payables – related parties of $334,753.  We anticipate that in the short-term, operating funds will continue to be provided by related parties and other lenders.  Subsequent to April 30, 2017, we extinguished a substantial portion of our related party liabilities through the issuance of shares of our Class A preferred stock.

At April 30, 2017, we had total convertible notes payable of $633,183, before a discount of $38,411.  Several of the note agreements require repayment through conversion of principal and interest into shares of the Company’s common stock.  We anticipate, therefore, converting these notes payable into shares of our common stock without the need for replacement financing; however, there can be no assurance that we will be successful in accomplishing this.  Currently, the Company does not have a sufficient number of authorized common shares to allow for conversion of all outstanding convertible debt and convertible preferred stock, and will need to restructure its equity to allow for further conversions of convertible debt.
     
Pursuant to sixteen convertible notes payable, we received total net cash proceeds of $579,777 during the year ended April 30, 2017.  These new short-term notes, which have a total principal balance of $470,533 at April 30, 2017, bear interest at annual rates ranging from 6% to 15% per annum and are convertible into common shares of the Company upon the terms and subject to the limitations and conditions set forth in the note agreements.  The notes generally contain early repayment penalties if repaid before defined payment dates in the note agreements.
 
From proceeds from the new convertible notes payable, we repaid $228,345 in principal of convertible notes payable and further extinguished $176,349 in principal through conversion of convertible notes payable to common stock.

We also repaid $45,230 in principal of notes payable – related parties, $9,702 in accrued interest payable – related parties and $381,841 in payables – related party through the issuance of preferred stock, and repaid $56,100 in payables – related parties through the issuance of common stock.

During the year ended April 30, 2017, net cash used in operating activities was $351,262, as a result of our loss before non-controlling interest of $2,085,723 and non-cash gain on extinguishment of debt of $420,203, partially offset by non-cash expenses totaling $1,776,019, decrease in prepaid expenses of $1,875, and increases in accounts payable of $105,534, accrued interest and fees payable of $48,357, accrued interest payable – related parties of $5,809 and payables – related parties of $217,070.
10

During the year ended April 30, 2016, net cash used in operating activities was $115,174, as a result of our loss before non-controlling interest of $2,724,504, gain on extinguishment of debt of $122,222, and increase in prepaid expenses of $12,311, partially offset by non-cash expenses totaling $2,460,783, and increases in accounts payable of $40,863, accrued interest and fees payable of $39,233, accrued interest payable – related parties of $6,703, and payables – related parties of $196,281.
            
During the years ended April 30, 2017 and 2016, we had no net cash provided by or used in investing activities. 

During the year ended April 30, 2017, net cash provided by financing activities was $351,432, comprised of net proceeds from convertible notes payable of $579,777, partially offset by repayment of convertible notes payable of $228,345.

During the year ended April 30, 2016, net cash provided by financing activities was $115,014, comprised of proceeds from convertible notes payable of $159,000, partially offset by repayment of convertible notes payable of $43,986.

We have not realized any revenues since inception and paid expenses and costs with proceeds from the issuance of securities as well as by loans from investor, stockholders and other related parties.
 
Our immediate goal is to provide funding for the completion of the initial production of the Offender Alert Passive Scan licensed from CCS.  The Offender Alert Passive Scan is an advanced passive scanning system for detecting and identifying concealed threats.

As of April 30, 2017, we did not have sufficient cash to fund our operations for the next twelve months.

We believe a related party and other lenders will provide sufficient funds to carry on general operations in the near term and fund DTII’s production and sales.  We expect to raise additional funds from the sale of securities, stockholder loans and convertible debt.  However, we may not be successful in our efforts to obtain financing to carry out our business plan.
 
On July 24, 2017, the Company entered into a Funding Agreement with RAB Investments AG, a current lender and stockholder located in Zug, Switzerland, which is intended to provide necessary funding towards the initial production of our Offender Alert Passive Scan. The Funding Agreement calls for RAB to fund a minimum of $50,000 to a maximum of $150,000 on a “best efforts basis,” with a first tranche of $25,000 to be completed during August 2017. In exchange for the funds, DTIC will issue convertible notes that may be converted into common stock of the Company at a discount of 25%, based on the 10-day average trading value of Company shares at the time of the initial conversion.  The notes may be converted at any time, in whole or partially, but all conversions must be at the same rate as the initial conversion.
       
No funding has been provided as of the date hereof and there is no assurance that funds will be provided by the anticipated initial first tranche during August 2017, or thereafter.  The Company does not intend to file a registration statement for the convertible notes or any shares of the Company’s common stock to be issued upon conversion of the notes. Any securities issued pursuant to the Funding Agreement or conversion of the notes will be considered restricted securities.
       
Inflation

In the opinion of management, inflation has not and will not have a material effect on our operations until such time as we successfully complete an acquisition or merger.  At that time, management will evaluate the possible effects of inflation related to our business and operations following a successful acquisition or merger.

Net Operating Loss Carryforward

We have accumulated a net operating loss carryforward of approximately $3,432,000 as of April 30, 2017.  This loss carry forward may be offset against future taxable income through the year 2038.  The use of these losses to reduce future income taxes will depend on the generation of sufficient taxable income prior to the expiration of the net operating loss carryforward.  In the event of certain changes in control, there will be an annual limitation on the amount of net operating loss carryforward that can be used.  No tax benefit has been reported in the financial statements for the years ended April 30, 2017 and 2016 because it has been fully offset by a valuation reserve.  The use of future tax benefit is undeterminable because we presently have no operations.
 
11

Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to intangible assets, derivative liabilities, income taxes, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. 

For further information on our significant accounting policies see Note 2 to our consolidated financial statements included in this Annual Report. There were no changes to our significant accounting policies during the year ended April 30, 2017. The following is a description of those significant accounting policies that involve estimates and judgment by management.

Derivative Liabilities

We have identified the conversion features of certain of our convertible notes payable as derivatives.  We estimate the fair value of the derivatives using the Black-Scholes pricing model.  We estimate the fair value of the derivative liabilities at the inception of the financial instruments, at the date of conversions to equity and at each reporting date, recording a derivative liability, debt discount, and a gain or loss on change in derivative liabilities as applicable.  These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price volatility and variable conversion prices based on market prices as defined in the respective agreements.  These inputs are subject to significant changes from period to period and to management’s judgment; therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material.

Basic and Diluted Loss per Common Share

The Company computes net loss per share in accordance with ASC 260, Earnings per Share, which requires presentation of both basic and diluted loss per share (“EPS”) on the face of the statement of operations.  Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period.  Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options and warrants, using the treasury stock method, convertible preferred stock, and convertible debt, using the if-converted method.  In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants.  Diluted EPS excludes all potentially dilutive common shares if their effect is antidilutive.

Financial Instruments

Pursuant to ASC 820, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value using a hierarchy based on the level of independent, objective evidence when measuring fair value using a hierarch based on the level of independent, objective evidence surrounding the inputs used to measure fair value.  A financial instrument’s categorization with the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.  The hierarchy prioritized the inputs into three levels that may be used to measure fair value:
12

Level 1:  applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2:  applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in markets that are not active.

Level 3:  applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

As of April 30, 2017 and 2016, the Company believes the amounts reported for cash, payables, accrued liabilities and amounts due to related parties approximate their fair values due to the nature or duration of these instruments.

Liabilities measured at fair value on a recurring basis were estimated as follows at April 30, 2017 and 2016:

2017
 
Total
   
Level 1
   
Level 2
   
Level 3
 
                         
Derivative liabilities
 
$
823,452
   
$
-
   
$
-
   
$
823,452
 
Convertible notes payable, net
   
594,772
     
-
     
-
     
594,772
 
                                 
Total liabilities measured at fair value
 
$
1,418,224
   
$
-
   
$
-
   
$
1,418,224
 

2016
 
Total
   
Level 1
   
Level 2
   
Level 3
 
                         
Derivative liabilities
 
$
2,081,931
   
$
-
   
$
-
   
$
2,081,931
 
Convertible notes payable, net
   
63,486
     
-
     
-
     
63,486
 
                                 
Total liabilities measured at fair value
 
$
2,145,417
   
$
-
   
$
-
   
$
2,145,417
 

Impairment of Long-Lived Assets

The Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.

Recent Accounting Pronouncements

See Note 11 to our consolidated financial statements included in this Annual Report for disclosure of recent accounting pronouncement.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
13

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

This item is not required for a smaller reporting company.
                      
Item 8.  Financial Statements and Supplementary Data.

The consolidated financial statements filed with this report are presented beginning on page F-1, immediately following the signature page.

Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.
        
Item 9A. Controls and Procedures.

Evaluation of Disclosures and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management has concluded that our internal control over financial reporting was not effective as of April 30, 2017.

Management’s Annual Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting.  Our intent is to design this system to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States.

We operate with a limited number of accounting and financial personnel.  Although we retain the services of an experienced certified public accountant, we have been unable to implement proper segregation of duties over certain accounting and financial reporting processes, including timely and proper documentation of material transactions and agreements.  We believe these control deficiencies represent material weaknesses in internal control over financial reporting.

Despite the material weaknesses in financial reporting noted above, we believe that our consolidated financial statements included in this report fairly present our financial position, results of operations and cash flows as of and for the periods presented in all material respects.

We are committed to the establishment of effective internal controls over financial reporting and will place emphasis on quarterly and year-end closing procedures and timely documentation and internal review of accounting and financial reporting consequences of material contracts and agreements.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.  The Company’s internal control over financial reporting was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

Changes in Internal Control over Financial Reporting
 
Other than the matters discussed above, management has concluded that there has been no significant change in our internal control over financial reporting during the fiscal year ended April 30, 2017 that could materially affect, or is reasonably likely to materially affect, our internal control over financial reporting.
 
Item 9B. Other Information.

Not applicable.
14

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Our executive officers and directors are as follows:

Name
Age
Position
     
Merrill W. Moses
 63
President, CEO, Secretary, Interim CFO
and Director
   
     
Charles C. Hooper
 69
Director

On April 30, 2016, the Board of Directors appointed Merrill W. Moses to replace Stephen M. Studdert as a director, President, CEO, acting CFO and Secretary of the Company.

On May 20, 2016, the Board of Directors appointed Charles C. Hooper to replace Frank Thorwald as a director.

All directors serve for a one-year term until their successors are elected or they are re-elected at the annual stockholders’ meeting. Officers hold their positions at the pleasure of the board of directors and are currently compensated pursuant to service agreements.
 
We presently anticipate that we will consider new, qualified persons to become directors in the future, although no new appointments or arrangements have been made as of the date hereof.

There is no arrangement, agreement or understanding between any of the directors or officers and any other person pursuant to which any director or officer was or is to be selected as a director or officer. Also, there is no arrangement, agreement or understanding between management and non-management stockholders under which non-management stockholders may directly or indirectly participate in or influence the management of our affairs.

The business experience of each of the persons listed above during the past five years is as follows:

Merrill W. Moses is a graduate of Brigham Young University and over the past 40 years has been an entrepreneur and founder of a variety of independent business ventures.  He has also been involved in operating an independent oil and gas company and a mining and exploration company.  Since 1992, Mr. Merrill has served as President and CEO of two oil and gas companies, Energy Pro Inc. and Dynamic Energy & Petroleum Inc.  Mr. Moses is also a founding partner in 2007 of Liberty Capital International, Inc., an international financial and project management company that provides various private client financial and asset management services.

Charles C. Hooper has a background in Mineral Exploration and Mining and currently is the owner of Old Town Financial in La Jolla, California, a designer, financier and developer of commercial buildings and other real estate projects. Previously, he was a missile guidance engineer designing and building missile guidance systems for the U.S. Army. Mr. Hooper also served as an officer in the U.S. Navy during the Vietnam war. He is a graduate systems engineer from the University of California at Los Angeles and holds a Master of Science Degree in Management.

None of our officers, directors or control persons has had any of the following events occur:

any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer, either at the time of the bankruptcy or within two years prior to that time;
   
any conviction in a criminal proceeding or being subject to a pending criminal proceeding, excluding traffic violations and other minor offenses;
   
being subject to any order, judgment or decree, not substantially reversed, suspended or vacated, of any court of competent jurisdiction, permanently enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking business; and
 
 
being found by a court of competent jurisdiction in a civil action, the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

No director is deemed to be an independent director. Our board of directors performs some of the functions associated with a nominating committee and a compensation committee, including reviewing all forms of compensation provided to our executive officers, directors, consultants and employees, including stock compensation. The board will also perform the functions of an audit committee until we establish a formal committee.
15

Compliance With Section 16(a) of the Exchange Act

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of our common stock, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities.  We believe that no reports were filed during the fiscal year fiscal 2017.

Code of Ethics

We have adopted a corporate code of ethics that applies to our executive officers, including senior financial officers, CEO and CFO.  We believe that our code of ethics is reasonable designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; and insure prompt internal reporting of code violations. A copy of our code of ethics is filed herewith as Exhibit 14.1.
 
Item 11. Executive Compensation .

We do not have a bonus, profit sharing, or deferred compensation plan for the benefit of employees, officers or directors.  We currently have no employees and do not pay any salaries.  Compensation for our officers and directors is generally established through a written Service Agreement.

The following table depicts compensation accrued to officers and directors for the fiscal years ended April 30, 2017, 2016 and 2015.
 
 
Name and Principal Position
 
Year Ended
April 30,
   
Salary
   
Bonus
   
All Other
Consideration
   
Total
 
Merrill W. Moses, President, CEO, Secretary, Interim CFO and Director (1)
   
2015
2016
2017
   
$
$
$
-
 -
 -
   
$
$
$
-
 -
 -
   
$
$
$
-
 -
 260,750
   
$
$
$
-
 -
 260,750
 
Charles Cortland Hooper, Director (2)
   
2015
2016
2017
   
$
$
$
-
 -
 -
   
$
$
$
-
 -
 -
   
$
$
$
-
 -
 167,500
   
$
$
$
-
 -
 167,500
 
Stephen M. Studdert, Former President, CEO, Secretary, Interim CFO and Director (3)
   
2015
2016
2017
   
$
$
$
-
 -
 -
   
$
$
$
-
 -
 -
   
$
$
$
30,000
 30,000
 -
   
$
$
$
30,000
 30,000
 -
 
Delbert G. Blewett, former President, CEO, Secretary, Interim CFO and Director (4)
   
2015
2016
2017
   
$
$
$
-
 -
 -
   
$
$
$
-
 -
 -
   
$
$
$
15,000
 -
-
   
$
$
$
15,000
 -
 -
 
Frank Thorwald, former Director (3)
   
2015
2016
2017
   
$
$
$
-
 -
 -
   
$
$
$
-
 -
-
   
$
$
$
-
116,020
 -
   
$
$
$
-
 116,020
 -
 
 
(1)   Mr. Moses' compensation for the fiscal year ended April 30, 2017 includes $90,000 accrued as a payable to Mr. Moses and a total of 700,000 common shares of the Company issued to Mr. Moses valued at $162,750 based on the market price on the date of issuance.  The compensation for services as President, CEO, Secretary, Interim CFO and Director was accrued pursuant to a Service Agreement with the Company dated April 25, 2016, including the issuance of 700,000 shares of the Company's common stock and monthly compensation of $7,500.  As of April 30, 2017, $90,000 was payable to Mr. Moses by the Company.  In addition, pursuant to a Service Agreement with Passive Security Scan Inc. ("PSSI"), compensation of $7,500 was accrued and payable to Mr. Moses and 500,000 common shares of PSSI valued at $500 were issued to Mr. Moses.
16

(2)   Mr. Hooper's compensation for the fiscal year ended April 30, 2017 includes $55,000 accrued as a payable to Mr. Hooper and a total of 250,000 common shares of the Company issued to Mr. Hooper valued at $112,500 based on the market price on the date of issuance.  The compensation for services as Director was accrued pursuant to a Service Agreement dated May 20, 2016, including the issuance of 250,000 shares of the Company's common stock and monthly compensation of $5,000.  As of April 30, 2017, $55,000 was payable to Mr. Hooper.
      
(3)   On April 30, 2016, Mr. Studdert resigned as a director, President, CEO, acting CFO and Secretary of the Company.  Mr. Studdert’s compensation for fiscal years ended April 30, 2015 and 2016 includes $30,000 in each year for services as President and CEO.  All such services were accrued as a payable to Mr. Studdert pursuant to a Service Agreement dated April 30, 2011 and terminated effective April 30, 2016.  As of April 30, 2017, $42,500 was payable to Mr. Studdert.

(4)   Mr. Blewett’s compensation for the fiscal year ended April 30, 2015 includes $15,000 to serve as our President and CEO.  As of April 30, 2017, $20,792 was payable to the estate of Mr. Blewett.  Mr. Blewett passed away in October 2014.

(5)   Mr. Thorwald’s compensation for serving as a director in the fiscal year ended April 30, 2016 includes $20,000 accrued as a payable to Mr. Thorwald and a total of 250,000 common shares of the Company issued to Mr. Thorward valued at $91,250 based on the market price on the date of issuance.  As of April 30, 2017, $20,000 was payable to Mr. Thorwald.

During each of the fiscal years ended April 30, 2015, 2016 and 2017, we accrued accounts payable for services rendered by EMAC in the amount of $60,000 pursuant to an Administration Agreement.  Total accrued payable to EMAC for services and expense reimbursement as of April 30, 2017 was $22,793.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth certain information as of August 11, 2017 with respect to the beneficial ownership of our common stock and based on 231,619,035 total shares: 199,365,345 common shares outstanding and a total of 32,253,690 convertible preferred stock common share equivalents:
        
Each stockholder believed to be the beneficial owner of more than 5% of our common stock;
   
by each of our directors and executive officers; and
   
all of our directors and executive officers as a group.
 
For purposes of the following table, a person is deemed to be the beneficial owner of any shares of common stock (i) over which the person has or shares, directly or indirectly, voting or investment power, or (ii) of which the person has a right to acquire beneficial ownership at any time within 60 days after the date of this report. “Voting power” is the power to vote or direct the voting of shares and “investment power” includes the power to dispose or direct the disposition of shares.
 
17

 
Name and Address
of Beneficial Owner
 
Amount and
Nature of
Beneficial
Ownership (1)
   
Percent (2)
 
             
Directors and Executive Officers :
 
Merrill W. Moses, President & CEO
         4730 S. Fort Apache Road, Suite 300
         Las Vegas, Nevada 89147
   
 
 
 
700,000
     
0.30
%
Charles C. Hooper, Director
         4730 S. Fort Apache Road, Suite 300
         Las Vegas, Nevada 89147
   
250,000
     
0.10
%
 
   5% Beneficial Owners :
 
EMAC Handels AG (3)
Schuetzenstr. 22
Pfaeffikon,Switzerland
   
13,100,550
     
6.30
%
Velania Treuhand AG (4)
Churerstr. 106
Pfaeffikon, Switzerland
   
13,737,550 
     
5.90
 %
                 
All directors and executive officers
as a group (2 person)
   
950,000
     
0.40
%
 
(1)
Unless otherwise indicated, the named person will be the record and beneficially owner of the shares indicated.
(2)
Percentage ownership is based on 231,619,035 total shares: 199,365,345 common shares outstanding and a total of 32,253,690 convertible preferred stock common share equivalents.
(3)
EMAC Handels AG is a Swiss company that is owned and controlled by Reinhard Hiestand. Of the total amount shown, 60,000 shares of common stock are held in the name of Reinhard Hiestand, 6,750 shares of common stock are held in the name of EMAC Handels AG and 1,520,000 and 13,093,800 shares represent unissued shares of common stock that may be issued upon the conversion of certain DTII preferred stock held by Reinhard Hiestand and EMAC Handels AG, respectively.
(4)
Velania Treuhand AG is a Swiss company that is owned and controlled by Reinhard Hiestand. The 13,737,550 shares shown represent unissued shares of common stock that may be issued upon the conversion of certain DTII preferred stock held by Velania Treuhand AG.

As of August 11, 2017, there were no owners of record who held greater than 5% of our outstanding common stock, except for those persons depicted above who might achieve 5% by converting preferred shares.
 
Item 13.  Certain Relationships and Related Transactions, and Director Independence.

Except as set forth below, we have not entered into any other material transactions with any officer, director, nominee for election as director, or any stockholder owning greater than five percent (5%) of our outstanding shares, nor any member of the above referenced individuals’ immediate family.
 
During the years ended April 30, 2017 and 2016, management and administrative services were compensated by the Company pursuant to: a Service Agreement between the Company and Merrill Moses, President, CEO, Secretary, acting CFO and director, dated April 25, 2016; a Service Agreement between the Company and Charles Hooper, director, dated May 20, 2016; a Service Agreement between the Company and Stephen Studdert, former President, CEO, Secretary, acting CFO and director, dated April 30, 2011; and an Administration Agreement with a EMAC Handles AG (“EMAC”) executed on March 15, 2011 and renewed on May 1, 2014.  We also incurred consulting fees in fiscal year 2017 of $15,200 to Reinhard Hiestand, a shareholder and affiliate of EMAC.
 
During the year ended April 30, 2017, management and administrative services were compensated by PSSI pursuant to: a Service Agreement between PSSI and Merrill Moses, President, CEO, Secretary, acting CFO and director, dated January 12, 2017 and effective February 1, 2017; and an Administration and Management Agreement dated January 12, 2017 between PSSI and RAB Investments AG (“RAB”), a significant lender of the Company and a major shareholder of PSSI.
.
The fees are based on services provided and invoiced by the related parties on a monthly basis and the fees are paid in cash when possible or with the Company’s common stock.  The Company also, from time to time, has some of its expenses paid by related parties with the intent to repay.  These types of transactions, when incurred, result in payables to related parties in the Company’s consolidated financial statements as a necessary part of funding the Company’s operations.

As of April 30, 2017, the Company and PSSI had the following consolidated payable balances due to related parties, which resulted from transactions with significant shareholders and officers and directors of the Company.

EMAC
 
$
22,793
 
RAB    
18,468
 
Merrill Moses, President, CEO, Secretary, acting CFO & director
   
97,500
 
Charles Hooper, director
   
55,000
 
Reinhard Hiestand, shareholder     15,200  
Stephen Studdert, Former President & CEO
   
42,500
 
Delbert Blewett, Former President & CEO
   
20,792
 
Frank Thorwald, Former Director
   
25,000
 
Harold Schneider, Former CFO
   
32,500
 
Alexander Burton, Former Advisory Board Member
   
5,000
 
         
   
$
334,753
 

18

Convertible notes payable – related parties consisted of the following at April 30, 2017:

Note payable to EMAC, no interest, convertible into common stock of the Company at $0.10 per share, imputed interest at 9% per annum
 
$
25,000
 
Note payable to Velania Treuhand AG, interest at 6%, convertible into common stock of the Company at $0.10 per share
   
32,050
 
         
   
$
57,050
 

Notes payable – related parties are currently in default and consisted of the following at April 30, 2017:

Note payable to EMAC, with interest at 6% per annum, due September 15, 2013
 
$
24,656
 
Note payable to EMAC, with interest at 6% per annum, due March 8, 2014
   
7,500
 
Note payable to EMAC, with interest at 6% per annum, due December 5, 2013
   
2,270
 
         
   
$
34,426
 

Accrued interest payable – related parties was $13,953 at April 30, 2017.

During the year ended April 30, 2017, 873,545 shares of our preferred stock were issued to related parties in payment of $381,841 payables – related parties, $45,229 notes payable – related parties and $9,703 accrued interest payable – related parties.

During the year ended April 30, 2017, 950,000 shares of our common stock valued at $275,250 were issued to our directors for directors’ compensation.

During the year ended April 30, 2017, 561,000 shares of our common stock valued at $56,100 were issued in payment of payables – related parties.

None of our directors are deemed to be independent directors.  We do not have a compensation, audit or nominating committee, rather those functions are carried out by the board as a whole.

Item 14.  Principal Accounting Fees and Services.

We do not have an audit committee and as a result our entire board of directors performs the duties of an audit committee.  Our board of directors will approve in advance the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services. As a result, we do not rely on pre-approval policies and procedures.

Audit Fees

The aggregate fees billable to us by our auditors, Haynie & Company, for (i) services related to the audit of our annual financial statements for the years ended April 30, 2017 and 2016 included in this annual report and (ii) quarterly reviews performed for the years ended April 30, 2017 and 2016 total approximately $100,000 and $50,000, respectively.
 
    Audit - Related Fees
             
We incurred audit-related fees for the years ended April 30, 2017 and 2016 to Haynie & Company of approximately $30,000 and $0, respectively.
               
Tax Fees

We incurred no tax fees for the years ended April 30, 2017 and 2016 to Haynie & Company.

All Other fees

We incurred no other fees for the years ended April 30, 2017 and 2016 to Haynie & Company.
19

PART  IV

Item 15.  Exhibits, Financial Statement Schedules

(a)
Exhibits

Exhibit No.   Exhibit Name

   3.1 (2)
Articles of Incorporation and amendments thereto
 
     
  3.2 (1)
 
     
  4.1 (2)
 
     
10.1 (3)
 
     
10.2
Service Agreement with Merrill W. Moses
 
     
10.3
Service Agreement with Charles Cortland Cooper
 
     
10.4
Service Agreement between Passive Security Scan, Inc. and Merrill W. Moses
 
     
10.5
Administration and Management Agreement between Passive Security Scan, Inc. and RAB Investments AG
 
     
10.6 (4)
 
     
14.1 Code of Ethics  
     
21.1
Subsidiaries
 
     
31.1
Certification of Chief Executive Officer and Interim Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
     
32.1
Certification of Chief Executive Officer and Interim Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
     
101 INS*
XBRL Instance Document
 
     
101 SCH*
XBRL Schema Document
 
     
101 CAL*
XBRL Calculation Linkbase Document
 
     
101DEF*
XBRL Definition Linkbase Document
 
     
101 LAB*
XBRL Labels Linkbase Document
 
     
101 PRE*
XBRL Presentation Linkbase Document
 

*The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

( 1)
Filed as exhibit to Form S-1 filed on November 10, 2011.
(2)
Filed as exhibit to Amendment No. 1 to Form S-1 filed on March 12, 2012.
(3)
Filed as exhibit to Amendment No. 4 to Form S-1 filed on August 17, 2012.
(4)
Filed as exhibit to Form 8-K filed on July 28, 2017.

20

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

               
 
Defense Technologies International Corp.
   
 
 By:  /S/    Merrill W. Moses
                         
Merrill W. Moses
 
Chief Executive Officer
 
Dated:   August 14, 2017

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature
Title
    Date
     
/S/      Merrill W. Moses
Director
August 14, 2017
Merrill W. Moses
   
     
/S/      Charles C. Hooper
Director
August 14, 2017
Charles C. Hooper
   
21

Defense Technologies International Corp. and Subsidiary

Index to Consolidated Financial Statements

Years Ended April 30, 2017 and 2016


Report of Independent Registered Public Accounting Firm
F-2
   
Consolidated Balance Sheets as of April 30, 2017 and 2016
F-3
 
 
Consolidated Statements of Operations for the Years Ending April 30, 2017 and 2016
F-4
 
 
Consolidated Statements of Stockholders’ Deficit for the Years Ending April 30, 2017 and 2016
F-5
 
 
Consolidated Statements of Cash Flows for the Years Ending April 30, 2017 and 2016
F-7
 
 
Notes to the Consolidated Financial Statements
F-8

F - 1

 
Report of Independent Registered Public Accounting Firm


To the Board of Directors and Shareholders
Defense Technologies International Corp.

We have audited the accompanying consolidated balance sheets of Defense Technologies International Corp. and subsidiary as of April 30, 2017 and 2016, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the years then ended.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Defense Technologies International Corp. and subsidiary as of April 30, 2017 and 2016, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 1 to the financial statements, the Company has suffered significant recurring losses which have resulted in an accumulated deficit.  This raises substantial doubt about the Company’s ability to continue as a going concern.  Management’s plans in regard to these matters are also described in Note 1.  The financial statements do not include an adjustment that might result from the outcome of this uncertainty.  Our opinion is not modified with respect to this matter.


/s/ Haynie & Company CPAs
Haynie & Company CPAs
Salt Lake City, Utah
August 14, 2017
F - 2

 
Defense Technologies International Corp. and Subsidiary
Consolidated Balance Sheets
 
   
April 30,
 
   
2017
   
2016
 
ASSETS
           
Current assets:
           
   Cash
 
$
193
   
$
23
 
   Prepaid expenses
   
-
     
18,169
 
   Total current assets
   
193
     
18,192
 
                 
License agreement
   
378,600
     
-
 
Total assets
 
$
378,793
   
$
18,192
 
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
         
Current liabilities:
               
   Accounts payable
 
$
320,207
   
$
150,362
 
   Accrued license agreement payment
   
25,000
     
-
 
   Accrued interest and fees payable
   
74,181
     
63,979
 
   Accrued interest payable – related parties
   
13,953
     
17,846
 
   Derivative liabilities
   
823,452
     
2,081,931
 
   Convertible notes payable, net of discount
   
594,772
     
63,486
 
   Convertible notes payable – related parties
   
57,050
     
57,050
 
   Notes payable – related parties
   
34,426
     
79,656
 
   Payables – related parties
   
334,753
     
565,459
 
   Total current liabilities
   
2,277,794
     
3,079,769
 
                 
Total liabilities
   
2,277,794
     
3,079,769
 
                 
Commitments and contingencies
               
                 
Mezzanine equity:
               
   Convertible preferred stock, $0.0001 par value; 20,000,000 shares authorized:
               
      Series A – 1,473,545 and 600,000 shares issued and outstanding, respectively
   
147
     
60
 
      Series B – 500,000 shares issued and outstanding, respectively
   
50
     
50
 
   Total mezzanine equity
   
197
     
110
 
                 
Stockholders’ deficit:
               
   Common stock, $0.0001 par value; 200,000,000 shares authorized, 188,324,721 and 21,249,676  shares issued and outstanding, respectively
   
18,833
     
2,125
 
   Additional paid-in capital
   
4,663,537
     
1,447,968
 
   Accumulated deficit
   
(6,586,401
)
   
(4,511,780
)
      Total
   
(1,904,031
)
   
(3,061,687
)
   Non-controlling interest
   
4,833
     
-
 
   Total stockholders’ deficit
   
(1,899,198
)
   
(3,061,687
)
Total liabilities and stockholders’ deficit
 
$
378,793
   
$
18,192
 
 
The accompanying notes are an integral part of these consolidated financial statements
F - 3


Defense Technologies International Corp. and Subsidiary
Consolidated Statements of Operations
 
       
   
Years Ended April 30,
 
   
2017
   
2016
 
             
Revenue
 
$
-
   
$
-
 
                 
Operating expenses:
               
   General and administrative
   
1,329,899
     
476,836
 
   Exploration costs
   
1,452
     
2,200
 
   Abandoned mineral claims
   
-
     
37,820
 
                 
   Total operating expenses
   
1,331,351
     
516,856
 
                 
Loss from operations
   
(1,331,351
)
   
(516,856
)
                 
Other income (expense):
               
   Interest expense
   
(762,203
)
   
(224,998
)
   Loss on derivative liabilities
   
(412,372
)
   
(2,104,872
)
   Gain on extinguishment of debt
   
420,203
     
122,222
 
                 
   Total other income (expense)
   
(754,372
)
   
(2,207,648
)
                 
Loss before income taxes
   
(2,085,723
)
   
(2,724,504
)
                 
Provision for income taxes
   
-
     
-
 
                 
Loss before non-controlling interest
   
(2,085,723
)
   
(2,724,504
)
                 
Non-controlling interest in net loss of consolidated subsidiary
   
11,102
     
-
 
                 
Net loss attributed to the Company
 
$
(2,074,621
)
 
$
(2,724,504
)
                 
Net loss per common share – basic and diluted
 
$
(0.05
)
 
$
(0.13
)
                 
Weighted average shares outstanding – basic and diluted
   
41,131,618
     
21,099,768
 
 
The accompanying notes are an integral part of these consolidated financial statements
F - 4

 
Defense Technologies International Corp. and Subsidiary
Consolidated Statements of Stockholders’ Deficit
For the Years Ended April 30, 2017 and 2016
 
 
Common Stock
    Additional
Paid-In
     Accumulated      Non-Controlling    
Total
Stockholders'
 
   
Shares
   
Amount
   
Capital
   
Deficit
   
Interest
   
Deficit
 
                                     
Balance, April 30, 2015
   
20,867,943
   
$
2,087
   
$
952,475
   
$
(1,787,276
)
 
$
-
   
$
(832,714
)
                                                 
Common stock issued for conversion of debt
   
181,748
     
18
     
33,969
     
-
     
-
     
33,987
 
Common stock issued for director fees
   
200,000
     
20
     
91,000
     
-
     
-
     
91,020
 
Adjustment to common shares outstanding
   
(15
)
   
-
     
-
     
-
     
-
     
-
 
Stock-based compensation
   
-
     
-
     
117,221
     
-
     
-
     
117,221
 
Beneficial conversion feature of convertible debt
   
-
     
-
     
232,650
     
-
     
-
     
232,650
 
Warrants issued for interest expense
   
-
     
-
     
18,403
     
-
     
-
     
18,403
 
Imputed interest on convertible notes payable
   
-
     
-
     
2,250
     
-
     
-
     
2,250
 
Net loss for the year ended April 30, 2016
   
-
     
-
     
-
     
(2,724,504
)
   
-
     
(2,724,504
)
                                                 
Balance, April 30, 2016
   
21,249,676
   
$
2,125
   
$
1,447,968
   
$
(4,511,780
)
 
$
-
   
$
(3,061,687
)
 
The accompanying notes are an integral part of these consolidated financial statements
F - 5

Defense Technologies International Corp. and Subsidiary
Consolidated Statements of Stockholders’ Deficit
For the Years Ended April 30, 2017 and 2016 (continued)
 
                               
   
Common Stock
    Additional
Paid-In
     Accumulated       Non-Controlling    
Total
Stockholders'
 
   
Shares
   
Amount
   
Capital
   
Deficit
   
Interest
   
Deficit
 
                                     
Balance, April 30, 2016
   
21,249,676
   
$
2,125
   
$
1,447,968
   
$
(4,511,780
)
 
$
-
   
$
(3,061,687
)
Series A preferred stock issued in payment of related party debt
   
-
     
-
     
436,686
     
-
     
-
     
436,686
 
Common stock issued for conversion of debt
   
158,207,545
     
15,821
     
1,650,297
     
-
     
-
     
1,666,118
 
Common stock issued for payables – related parties
   
561,000
     
56
     
56,044
     
-
     
-
     
56,100
 
Common stock issued for services 
   
3,330,000
     
333
     
591,547
     
-
     
-
     
591,880
 
Common stock issued for accrued expenses
   
4,126,500
     
413
     
373,273
     
-
     
-
     
373,686
 
Common stock issued for debt discount
   
550,000
     
55
     
79,945
     
-
     
-
     
80,000
 
Stock-based compensation
   
-
     
-
     
9,056
                     
9,056
 
Warrant settlement liability
   
-
     
-
     
(50,000
)
   
-
     
-
     
(50,000
)
Common stock issued for warrant settlement
   
300,000
     
30
     
(30
)
   
-
     
-
     
-
 
Beneficial conversion feature of convertible debt
   
-
     
-
     
52,136
     
-
     
-
     
52,136
 
Warrants issued for debt discount
   
-
     
-
     
14,365
     
-
     
-
     
14,365
 
Imputed interest on convertible notes payable
   
-
     
-
     
2,250
     
-
     
-
     
2,250
 
Services and accrued expenses for non-controlling interest
   
-
     
-
     
-
     
-
     
15,935
     
15,935
 
Net loss
   
-
     
-
     
-
     
(2,074,621
)
   
(11,102
)    
(2,085,723
)
                                                 
Balance, April 30, 2017
   
188,324,721
   
$
18,833
   
$
4,663,537
   
$
(6,586,401
)
 
$
4,833
   
$
(1,899,198
)
 
The accompanying notes are an integral part of these consolidated financial statements
F - 6

Defense Technologies International Corp. and Subsidiary
Consolidated Statements of Cash Flows
 
   
Years Ended April 30,
 
   
2017
   
2016
 
             
Cash flows from operating activities:
           
Net Loss 
 
$
(2,085,723
)
 
$
(2,724,504
)
   Adjustments to reconcile loss before non-controlling interest to net cash used in operating activities:
               
      Common stock issued for services
   
591,880
     
91,020
 
      Non-controlling interest for services
   
6,100
     
-
 
      Imputed interest on convertible notes payable
   
2,250
     
2,250
 
      Amortization of debt discount to interest expense
   
671,431
     
89,197
 
      Loan penalties added to debt principal
   
75,450
     
-
 
      Loss on derivative liabilities
   
412,372
     
2,104,872
 
      Gain on extinguishment of debt
   
(420,203
)
   
(122,222
)
      Stock-based compensation
   
9,056
     
117,221
 
      Warrants issued for interest expense
   
-
     
18,403
 
      Abandoned mineral claims
   
-
     
37,820
 
      Change in operating assets and liabilities:
               
         (Increase) decrease in prepaid expenses
   
1,875
     
(12,311
)
         Increase in accounts payable
   
113,014
     
40,863
 
         Increase in accrued interest and fees payable
   
48,357
     
39,233
 
         Increase in accrued interest payable – related parties
   
5,809
     
6,703
 
         Increase in payables – related parties
   
217,070
     
196,281
 
                 
   Net cash used in operating activities
   
(351,262
)
   
(115,174
)
                 
Cash flows from investing activities
   
-
     
-
 
                 
Cash flows from financing activities:
               
   Proceeds from convertible notes payable
   
593,277
     
159,000
 
   Debt issuance costs
   
(13,500
)
   
-
 
   Payments on convertible notes payable
   
(228,345
)
   
(43,986
)
                 
   Net cash provided by financing activities
   
351,432
     
115,014
 
                 
Net increase (decrease) in cash
   
170
     
(160
)
                 
Cash at beginning of the year
   
23
     
183
 
                 
Cash at end of the year
 
$
193
   
$
23
 
 

The accompanying notes are an integral part of these consolidated financial statements
F - 7

Defense Technologies International Corp. and Subsidiary
Notes to Consolidated Financial Statements
Years Ended April 30, 2017 and 2016


1. Nature of Operations and Continuation of Business

Defense Technologies International Corp. (the “Company “) was incorporated in the State of Delaware on May 27, 1998.  Effective June 15, 2016, the Company changed its name to Defense Technologies International Corp. from Canyon Gold Corp. to more fully represent the Company’s expansion goals into the advanced technology sector.

Effective January 12, 2017, Passive Security Scan, Inc. (“PSSI”) was incorporated in the state of Utah as a wholly owned subsidiary.  The Company merged its wholly owned subsidiary, Long Canyon Gold Resources Corp. (“Long Canyon”), into PSSI, with PSSI the surviving entity.  The Company transferred to PSSI its exclusive world-wide license to the defense, detection and protection security products previously acquired by the Company.  The Company currently owns 65.38% of PSSI with 34.62% acquired by several individuals and entities.  With the merger of Long Canyon into PSSI, the Company discontinued its mineral exploration business.  The Company plans to continue the development of the technology and conduct all sales and marketing activities in PSSI.

Going Concern

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America applicable to a going concern.  Through April 30, 2017, the Company has no revenues, has accumulated losses of $6,586,401 since inception on June 19, 2008 and a working capital deficit of $2,277,601 and expects to incur further losses in the development of its business, all of which cast substantial doubt about the Company’s ability to continue as a going concern.  Management plans to continue to provide for the Company’s capital needs during the year ending April 30, 2018 by issuing debt and equity securities and by the continued support of its related parties (see Note 5).  The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.  There is no assurance that funding will be available to continue the Company’s business operations.  In addition, the Company does not have a sufficient number of authorized shares to allow for conversion of all outstanding convertible debt and convertible preferred stock, and will need to restructure its equity to allow for further convertible debt or equity financing.

2. Summary of Significant Accounting Policies

(a)   Basis of Presentation

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States.  The Company’s fiscal year end is April 30.

(b)   Consolidation and Non-Controlling Interest.

These consolidated financial statements include the accounts of the Company, and its wholly owned subsidiary, Long Canyon, through January 15, 2017, and its majority-owned subsidiary, PSSI, from its formation on January 15, 2017.  All inter-company transactions and balances have been eliminated.

The non-controlling interest in PSSI, representing 7,941,436 common shares, or 34.62%, was acquired by several individuals and entities, including related parties, in exchange for services and accrued expenses totaling $15,935.

(c)   Basic and Diluted Net Loss per Share

The Company computes net loss per share in accordance with ASC 260, Earnings per Share , which requires presentation of both basic and diluted loss per share (“EPS”) on the face of the statement of operations.  Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period.  Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options and warrants, using the treasury stock method, convertible preferred stock, and convertible debt and preferred stock, using the if-converted method.  In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants.  Diluted EPS excludes all potentially dilutive common shares if their effect is antidilutive.
F - 8

As of April 30, 2017, convertible debt and related accrued interest payable were convertible into 226,066,477 shares of the Company’s common stock, convertible preferred stock was convertible into 19,735,450 shares of the Company’s common stock, and 1,300,000 shares of the Company’s common stock were issuable upon exercise of outstanding stock options and warrants.

As of April 30, 2016, convertible debt and related accrued interest payable were convertible into 12,730,870 shares of the Company’s common stock, convertible preferred stock was convertible into 11,000,000 shares of the Company's common stock, and 1,068,333 shares of the Company’s common stock were issuable upon exercise of outstanding stock options and warrants.

Since we had no dilutive effect of stock options, warrants or convertible debt for the years ended April 30, 2017 and 2016, basic weighted average number of common shares outstanding is the same as diluted weighted average number of common shares outstanding.

(d)   Income Taxes

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, Income Taxes .  The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carry forwards.  Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse.  The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

(e)   Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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 revenues and expenses during the reporting period.  The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources.  The actual results experienced by the Company may differ materially and adversely from the Company’s estimates.  To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

(f)   Financial Instruments

Pursuant to ASC 820, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value using a hierarchy based on the level of independent, objective evidence when measuring fair value using a hierarch based on the level of independent, objective evidence surrounding the inputs used to measure fair value.  A financial instrument’s categorization with the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.  The hierarchy prioritized the inputs into three levels that may be used to measure fair value:

Level 1:  applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2:  applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in markets that are not active.

Level 3:  applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

As of April 30, 2017 and 2016, the Company believes the amounts reported for cash, payables, accrued liabilities and amounts due to related parties approximate their fair values due to the nature or duration of these instruments.
F - 9

Liabilities measured at fair value on a recurring basis were estimated as follows at April 30, 2017 and 2016:

2017
 
Total
   
Level 1
   
Level 2
   
Level 3
 
                         
Derivative liabilities
 
$
823,452
   
$
-
   
$
-
   
$
823,452
 
Convertible notes payable, net
   
594,772
     
-
     
-
     
594,772
 
                                 
Total liabilities measured at fair value
 
$
1,418,224
   
$
-
   
$
-
   
$
1,418,224
 

2016
 
Total
   
Level 1
   
Level 2
   
Level 3
 
                         
Derivative liabilities
 
$
2,081,931
   
$
-
   
$
-
   
$
2,081,931
 
Convertible notes payable, net
   
63,486
     
-
     
-
     
63,486
 
                                 
Total liabilities measured at fair value
 
$
2,145,417
   
$
-
   
$
-
   
$
2,145,417
 

(g)   Derivative Liabilities

We have identified the conversion features of certain of our convertible notes payable as derivatives.  We estimate the fair value of the derivatives using the Black-Scholes pricing model.  We estimate the fair value of the derivative liabilities at the inception of the financial instruments, at the date of conversions to equity and at each reporting date, recording a derivative liability, debt discount, and a gain or loss on change in derivative liabilities as applicable.  These estimates are based on multiple inputs, including the market price of our stock, interest rates, our stock price volatility and variable conversion prices based on market prices as defined in the respective agreements.  These inputs are subject to significant changes from period to period and to management’s judgment; therefore, the estimated fair value of the derivative liabilities will fluctuate from period to period, and the fluctuation may be material.

(h)                Over Commitment of Shares

The number of shares issuable under convertible debt with variable exercise prices is undeterminable.  Currently, the Company does not have a sufficient number of authorized common shares to allow for conversion of all outstanding convertible debt and convertible preferred stock or exercise of stock options and warrants, and will need to restructure its equity.

(i)   Non-Monetary Transactions

All issuances of the Company’s common stock for non-cash consideration have been assigned a dollar amount equaling either the market value of the shares issued or the value of consideration received whichever is more readily determinable.  The majority of the non-cash consideration received pertains to services rendered by consultants and others and has been valued at the market value of the shares issued.

The Company’s accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of ASC 505, Equity Based Payments to Non Employees .  The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor’s performance is complete.

In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement.

(j)   Cash and Cash Equivalents

The Company considers all investments purchased with original maturity of three or fewer months to be cash equivalents.

(k)   Exploration Costs

The Company has discontinued its mineral exploration business.  All exploration costs, including lease payments, sampling, metallurgical, engineering, contractor costs, and efforts to obtain mineral rights have been charged to expense as incurred.

F - 10

(l)   Impairment of Long-Lived Assets

The Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.

(m)   Reclassifications

Certain amounts in the 2016 consolidated financial statements have been reclassified to conform with the current year presentation.

3.  License Agreement

Effective July 15, 2016, the Company executed documents intended to finalize the acquisition of 100% of Defense Technology Corporation, a non-related privately held Colorado company (“DTC”), a developer of defense, detection and protection products to improve security for Anchor schools and other public facilities.  Subsequently, the Company and DTC mutually agreed to rescind the acquisition of DTC and entered into a Rescission Agreement and Mutual Release (the “Rescission Agreement”), dated October 17, 2016.

In connection with the Rescission Agreement with the Company, DTC rescinded its agreement with the inventor and developer of the technology and assets that were subject to the original agreement between the Company and DTC.  On October 19, 2016, the Company entered into a new Definitive Agreement with Controlled Capture Systems, LLC (“CCS”), representing the inventor of the technology and assets previously acquired by DTC, that included a new exclusive Patent License Agreement and Independent Contractor agreement.  Under the license agreement with CCS, the Company acquired the world-wide exclusive rights and privileges to the CCS security technology, patents, products and improvements.  The term of the License Agreement will be from October 19, 2016 until the expiration of the last to expire of the licensed issued patents or patents to be issued.

The Company agreed to pay CCS an initial licensing fee of $25,000 and to pay ongoing royalties at the end of each six-month period at the rate of the greater of 5% of gross sales used or sold, or the minimum royalty payment of $25,000.  The Company also agreed to compensate investors that have provided funding for the development of CCS’s technology with 4,000,000 shares of the Company’s common stock.  Additionally, CCS will be entitled to receive 250,000 shares of the Company’s common stock upon completed sales of 1,000 passive scanner units based on the CCS technology.

The Independent Contractor Agreement between the Company and CCS provides that CCS will provide support for the development of the security technology and products.  An initial payment of $5,000 was paid to CCS plus ongoing hourly compensation for services provided.

The Company capitalized the costs to acquire the License Agreement, including the $25,000 initial licensing fee and the estimated value of $353,600 for the 4,000,000 shares of the Company’s common stock issued on November 10, 2016 to the CCS investors, which value was based on the closing market price of the Company’s common stock on the date of the Definitive Agreement. The Company has recorded a current liability of $25,000 for the remaining obligation in its consolidated balance sheet as of April 30, 2017.  The Company amortizes the capitalized costs over the estimated life of the license agreement as determined by the legal life of patents issued.

On January 15, 2017, the Company transferred the License Agreement to PSSI in exchange for 15,000,000 common shares of PSSI, or 65.38% ownership.  The Company plans to continue the development of the technology and conduct all sales and marketing activities in PSSI.

On January 22, 2017, the Company and CCS entered into an Amendment to the Definitive Agreement, whereby CCS consented to the transfer of the Definitive Agreement, Patent License Agreement and Independent Contractor Agreement to PSSI and agreed to extend the due dates of certain payments due CCS to April 30, 2017.  In exchange, CCS received 100,000 shares of PSSI common stock.

Also in connection with the Amendment to the Definitive Agreement, the investors that provided funding for the development of CCS’s technology received 500,000 shares of PSSI common stock.
F - 11

4.  Related Party Transactions and Balances

Payables – Related Parties

During the years ended April 30, 2017 and 2016, management and administrative services were compensated by the Company pursuant to: a Service Agreement between the Company and Merrill Moses, President, CEO, Secretary, acting CFO and director, dated April 25, 2016; a Service Agreement between the Company and Charles Hooper, director, dated May 20, 2016; a Service Agreement between the Company and Stephen Studdert, former President, CEO, Secretary, acting CFO and director, dated April 30, 2011; and an Administration Agreement with EMAC Handles AG (“EMAC”), a shareholder of the Company and PSSI, executed on March 15, 2011 and renewed on May 1, 2014.  We also incurred consulting fees in fiscal year 2017 of $15,200 to Reinhard Hiestand, a shareholder and affiliate of EMAC.

During the year ended April 30, 2017, management and administrative services were compensated by PSSI pursuant to a Service Agreement between PSSI and Merrill Moses, dated January 12, 2017 and effective February 1, 2017 and an Administration and Management Agreement dated January 12, 2017 between PSSI and RAB Investments AG (“RAB”), a significant lender of the Company and a shareholder of PSSI.

The fees are based on services provided and invoiced by the related parties on a monthly basis and the fees are paid in cash when possible or with the Company’s or PSSI's common stock.  The Company also, from time to time, has some of its expenses paid by related parties with the intent to repay.  These types of transactions, when incurred, result in payables to related parties in the Company’s consolidated financial statements as a necessary part of funding the Company’s operations.

On December 17, 2016, the Company issued 561,000 shares of its common stock to EMAC in payment of $56,100 of payables – related parties.

On December 31, 2016, the Company issued a total of 873,545 shares of its Series A preferred stock in payment of $381,841 of payables – related parties, $45,230 in notes payable – related parties and $9,702 in accrued interest payable – related parties.

On January 31, 2017, $9,835 of payables – related parties were extinguished by EMAC for 1,841,436 shares of PSSI.

As of April 30, 2017 and 2016, the Company had payable balances due to related parties totaling $334,753 and $565,459, respectively, which resulted from transactions with shareholders, officers and directors of the Company.  Total compensation to related parties, including stock-based compensation was $495,450 and $209,020 for the years ended April 30, 2017 and 2016, respectively.      
   
Convertible Notes Payable – Related Parties

Convertible notes payable – related parties are currently in default and consisted of the following at April 30:

   
2017
   
2016
 
Note payable to related party, no interest, convertible into common stock of the Company at $0.10 per share, imputed interest at 9% per annum
 
$
25,000
   
$
25,000
 
Note payable to related party, interest at 6%, convertible into common stock of the Company at $0.10 per share
   
32,050
     
32,050
 
                 
   
$
57,050
   
$
57,050
 

Convertible notes payable – related parties issued prior to the fiscal year ended April 30, 2014 were convertible 30 days from the first day the Company’s common shares are qualified for trading on the OTC Bulletin Board, which occurred in November 2012.  As of April 30, 2016, the convertible note payable – related party of $25,000 had not been converted and therefore is in default.

The convertible notes payable – related parties were paid in full in June 2017 through the issuance of shares of the Company’s Series B preferred stock (see Note 13).
F - 12

Notes Payable – Related Parties

Notes payable – related parties are currently in default and consisted of the following at April 30:

   
2017
   
2016
 
Note payable to related party, with interest at 6% per annum, due September 15, 2013
 
$
24,656
   
$
24,656
 
Note payable to related party, with interest at 6% per annum, due March 8, 2014
   
7,500
     
7,500
 
Note payable to related party, with interest at 6% per annum, due December 5, 2013
   
2,270
     
47,500
 
                 
   
$
34,426
   
$
79,656
 

On December 31, 2016, the Company issued 109,864 shares of its Class A preferred stock to a related party in payment of $45,230 note principal and $9,702 accrued interest payable.

Accrued interest payable – related parties was $23,078 and $17,846 at April 30, 2017 and 2016, respectively.  Interest expense incurred to related parties was $8,060 and $8,952 for the years ended April 30, 2017 and 2016, respectively.
 
The notes payable – related parties and related accrued interest payable were paid in full in June 2017 through the issuance of shares of the Company’s Series B preferred stock (see Note 13).

5. Convertible Notes Payable

Convertible notes payable consisted of the following at:

   
April 30,
2017
   
April 30,
2016
 
                 
Note payable, amended April 30, 2016, with interest at 6% per annum, convertible into common stock of the Company at $0.05 per share 90 days from demand
 
$
11,000
   
$
11,000
 
                 
Note payable, amended April 30, 2016, with interest at 6% per annum, convertible into common stock of the Company at $0.05 per share 90 days from demand
   
9,000
     
9,000
 
                 
Note payable, amended April 30, 2016, with interest at 6% per annum, convertible into common stock of the Company at $0.05 per share 90 days from demand
   
91,150
     
141,150
 
                 
Note payable, amended April 30, 2016, with interest at 6% per annum, convertible into common stock of the Company at $0.05 per share 90 days from demand
   
14,500
     
14,500
 
                 
Note payable, amended April 30, 2016, with interest at 6% per annum, convertible into common stock of the Company at $0.05 per share 90 days from demand
   
20,000
     
20,000
 
                 
Note payable, with interest at 6% per annum, convertible into common stock of the Company at $0.05 per share
   
17,000
     
17,000
 
                 
Note payable to institutional investor, with interest at 15% per annum, convertible into common stock of the Company at a defined conversion price, in default
   
183,825
     
-
 
                 
Note payable, with interest at 6% per annum, convertible into common stock of the Company at $0.05 per share
   
53,650
     
-
 
                 
Note payable to institutional investor, with interest at 15% per annum, convertible into common stock of the Company at a defined conversion price, in default
   
10,000
     
-
 
 
 
F - 13

 
Note payable to institutional investor, with interest at 15% per annum, convertible into common stock of the Company at a defined conversion price, in default
   
15,000
     
-
 
                 
Note payable to institutional investor, with interest at 15% per annum, convertible into common stock of the Company at a defined conversion price, in default
   
34,337
     
-
 
                 
Note payable to institutional investor, with interest at 15% per annum, convertible into common stock of the Company at a defined conversion price, in default
   
50,000
     
-
 
                 
Note payable, with interest at 6% per annum, convertible into common stock of the Company at $0.10 per share
   
23,750
     
-
 
                 
Note payable to institutional investor, with interest at 12% per annum, convertible into common stock of the Company at a defined conversion price
   
12,500
     
-
 
                 
Note payable to institutional investor, with interest at  8% per annum, convertible into common stock of  the Company at a defined conversion price
   
10,931
     
-
 
                 
Note payable, with interest at 6% per annum,  convertible into common stock of the Company at $0.035 per share
   
4,190
     
-
 
                 
Note payable, with interest at 6% per annum, convertible into common stock of the Company at $0.035 per share
   
17,350
     
-
 
                 
Note payable to institutional investor, with interest at 8% per annum, convertible after 180 days into common stock of the Company at a defined conversion price
   
37,000
     
-
 
                 
Note payable to institutional investor, with interest at 8% per annum, convertible into common stock of the Company at a defined conversion price
   
18,000
     
-
 
                 
Note payable to institutional investor, with interest at 12% per annum, convertible into common stock of the Company at a defined conversion price, repaid in August 2016
   
-
     
41,000
 
                 
Note payable to institutional investor, with interest at 8% per annum, convertible into common stock of the Company at a defined conversion price, repaid in July 2016
   
-
     
55,500
 
                 
Note payable to institutional investor, with interest at 8% per annum, convertible into common stock of the Company at a defined conversion price, repaid in July 2016
   
-
     
39,000
 
                 
Total
   
633,183
     
348,150
 
                 
Less discount
   
(38,411
)
   
(284,664
)
                 
   
$
594,772
   
$
63,486
 

On April 30, 2016, the convertible notes payable with principal balances of $11,000, $9,000, $141,150, $14,500 and $20,000 were amended to establish a conversion price of $0.05 per share, interest at 6% retroactive to the original issuance date of the notes, and a conversion date of 90 days from demand of the lender.  The amendments were determined to be extinguishments of the prior debt and the issuance of new debt in accordance with ASC 470-50, Debt – Modifications and Extinguishments , resulting in a loss on extinguishment of debt totaling $33,237.  In addition, the Company recorded a debt discount and a beneficial conversion feature totaling $195,650 at the inception of the new debt.  On June 9, 2016, the Company issued 1,232,880 shares of its common stock in the conversion of $50,000 principal of the $141,150 note and accrued interest payable of $11,644.

On March 10, 2016, the Company entered into a convertible promissory note for $17,000, which bears interest at an annual rate of 6% and is convertible into shares of the Company’s common stock at $0.05 per share.  The Company recorded a debt discount and a beneficial conversion feature of $17,000 at the inception of the note.

Pursuant to a Securities Purchase Agreement dated July 18, 2016 (the “July 2016 SPA”, the Company entered into a Senior Secured Convertible Promissory Note (the “July 2016 Note”)with an institutional investor for $189,000, with net proceeds to the Company of $175,000.  The note bears interest at an annual rate of 8% (15% in the event of default), matures on January 17, 2017 and was convertible into common shares of the Company after six months at a fixed conversion price of $0.25 per share.  In the event of default, the conversion price changes to a variable price based on a defined discount to the market price of the Company’s common stock.  As of January 17, 2017, the Company was in default on this note and a penalty of $50,000 was added to the note principal.  In a series of conversions during January through April 2017, the lender converted total principal of $55,175 into a total of 67,240,997 shares of the Company’s common stock.  As of April 30, 2017, the note was in default with respect to the maturity date, and the Company was in default on certain terms of the July 2016 SPA.  In August 2017, the Company and the lender entered into a settlement agreement (see Note 13).
F - 14

The Company subsequently entered into Amendments #1 through #4 to the July 2016 SPA, receiving net proceeds of $10,000 on August 1, 2016, $15,000 on March 15, 2017, $34,337 on March 20, 2017 and $50,000 on April 28, 2017.  The amendments are subject to the terms and conditions of the July 2016 SPA and the July 2016 Note.  At the inception of the convertible note, the Company, recorded total debt discount of $99,337, a derivative liability of $2,836,791 related to the conversion feature, and a loss on derivative liability of $2,737,454.

On July 31, 2016, the Company entered into a convertible promissory note for $53,650, which has no defined maturity date.  The note bears interest at an annual rate of 6% and is payable only on conversion into shares of the Company’s common stock at $0.10 per share.

On August 1, 2016, the Company entered into a convertible promissory note for $23,750, which has no defined maturity date.  The note bears interest at an annual rate of 6% and is payable only on conversion into shares of the Company’s common stock at $0.10 per share.

On August 3, 2016, the Company entered into a convertible promissory note with an institutional investor for $25,000, which bears interest at an annual rate of 12% and matures on February 4, 2017.  The note holder has the right, after a period of 180 days of the note, to convert the note and accrued interest into shares of the common stock of the Company at a discounted price per share equal to 50% to 65% of the market price of the Company’s common stock, depending upon the stock’s liquidity as determined by the note holder’s broker.  At the inception of the convertible note, the Company paid debt issuance costs of $2,500, recorded a debt discount of $22,500, and recorded a derivative liability of $64,942 related to the conversion feature, and a loss on derivative liability of $42,442.  Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the life of the convertible note.  On March 20, 2017, the lender converted $12,500 principal into 1,000,000 shares of the Company’s common stock.  The note is currently in default.

On August 3, 2016, the Company entered into a convertible promissory note with an institutional investor for $37,000, which bears interest at an annual rate of 8% and matures on August 3, 2017.  The investor has the right, after the first six months of the note, to convert the note and accrued interest in whole or in part into shares of the common stock of the Company at a price per share equal to 55% (representing a discount rate of 45%) of the lowest bid price of the Company’s common stock during the 30 trading days immediately ending on the last trading date prior to the conversion date.  At the inception of the convertible note to institutional investor, the Company paid debt issuance costs of $25,500, including 150,000 shares of its common stock valued at $24,000, and recorded a debt discount of $37,000, including an original issue discount of $5,000, a derivative liability of $173,227 related to the conversion feature, and a loss on derivative liability of $166,727.  Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the life of the convertible note.  In a series of conversions during February through April 2017, the lender converted total principal of $26,069 into a total of 87,515,449 shares of the Company’s common stock.

On November 1, 2016, the Company entered into a convertible promissory note for $4,190, which has no defined maturity date.  The note bears interest at an annual rate of 6% and is payable only on conversion into shares of the Company’s common stock at $0.10 per share.

On December 15, 2016, the Company entered into a convertible promissory note with an institutional investor for $37,000, which bears interest at an annual rate of 8% and matures on September 30, 2017.  The investor has the right, commencing on the 180 th day of the note, to convert the note and accrued interest in whole or in part into shares of the common stock of the Company at a price per share equal to 58% (representing a discount rate of 42%) of the average of the lowest three trading price of the Company’s common stock during the 15 trading days prior to the conversion date.  At the inception of the convertible note to institutional investor, the Company recorded a debt discount of $35,000, a derivative liability of $96,039 related to the conversion feature, and a loss on derivative liability of $61,039.  Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the life of the convertible note.

On January 31, 2017, the Company entered into a convertible promissory note for $17,350, which has no defined maturity date.  The note bears interest at an annual rate of 6% and is payable only on conversion into shares of the Company’s common stock at $0.035 per share.
F - 15

On March 20, 2017, the Company entered into a convertible promissory note with an institutional investor for $18,000, which bears interest at an annual rate of 8% and matures on March 20, 2018.  The investor has the right, after the first six months of the note, to convert the note and accrued interest in whole or in part into shares of the common stock of the Company at a price per share equal to 55% (representing a discount rate of 45%) of the lowest bid price of the Company’s common stock during the 20 trading days immediately ending on the last trading date prior to the conversion date.  At the inception of the convertible note to institutional investor, the Company recorded a debt discount of $18,000, including an original issue discount of $2,000, a derivative liability of $1,285,720 related to the conversion feature, and a loss on derivative liability of $1,269,720.  Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the life of the convertible note.

On November 24, 2015, the Company entered into a convertible promissory note with an institutional investor for $55,500, bearing interest at an annual rate of 8% and maturing on November 24, 2016.  At the inception of the convertible note, the Company recorded debt issuance costs of $3,000 in prepaid expenses, a debt discount of $55,500, including an original issue discount of $7,000, a derivative liability of $167,776 related to the conversion feature, and a loss on derivative liability of $119,276.  Interest expense for the amortization of the debt discount was calculated on a straight-line basis over the life of the convertible note.  The investor had the right, after the first 180 days of the note, to convert the note and accrued interest in whole or in part into shares of the common stock of the Company at a price per share equal to 55% (representing a discount rate of 45%) of the lowest sale price of the Company’s common stock during the 20 consecutive trading days immediately preceding the date of the conversion notice.  The note was paid in full through conversion of $15,125 into a total of 325,000 shares of the Company’s common stock in June 2016 and a cash payment of $40,375 in July 2017.

On December 31, 2015, the Company entered into a convertible promissory note with an institutional investor for $39,000, bearing interest at an annual rate of 8% and maturing on December 31, 2016.  At the inception of the convertible note, the Company recorded debt issuance costs of $4,500 in prepaid expenses, a debt discount of $39,000, including an original issue discount of $3,000, a derivative liability of $70,144 related to the conversion feature, and a loss on derivative liability of $34,144.  Interest expense for the amortization of the debt discount was calculated on a straight-line basis over the life of the convertible note. The investor had the right, after the first 180 days of the note, to convert the note and accrued interest in whole or in part into shares of the common stock of the Company at a price per share equal to 55% (representing a discount rate of 45%) of the lowest trading price of the Company’s common stock during the twenty consecutive trading days immediately preceding the date of the conversion notice.  A $5,000 extension fee was added to the principal of the note in June 2016.  The note was paid in full in July 2016 through conversion of $7,480 into a total 272,000 shares of the Company’s common stock and a cash payment of $36,520.

On February 4, 2016, the Company entered into a convertible promissory note with an institutional investor for $41,000 maturing on February 4, 2017.  A one-time interest charge of 12% was payable in the event the Company did not repay the note during the first 120 days. At the inception of the convertible note, the Company recorded debt issuance costs of $2,500 in prepaid expenses, a debt discount of $41,000, including an original issue discount of $3,500, a derivative liability of $78,034 related to the conversion feature, and a loss on derivative liability of $40,534.  Interest expense for the amortization of the debt discount was calculated on a straight-line basis over the life of the convertible note. The Company also issued warrants to the investor to purchase 68,333 shares of the Company’s common stock at $0.60 per share (see Note 7).  The investor had the right, after the first 180 days of the note, to convert the note and accrued interest in whole or in part into shares of the common stock of the Company at a price per share equal to 60% (representing a discount rate of 40%) of the lowest bid price of the Company’s common stock during the 60 consecutive trading days immediately preceding the date of the conversion notice.  The note was paid in full with a cash payment in July 2017.

On June 8, 2016, the Company entered into a convertible promissory note with an institutional investor for $25,000, bearing interest at an annual rate of 10% and maturing on December 9, 2016.  At the inception of the convertible note, the Company paid debt issuance costs of $2,500, recorded a debt discount of $22,500, and recorded a derivative liability of $51,553 related to the conversion feature, and a loss on derivative liability of $29,053.  Interest expense for the amortization of the debt discount was calculated on a straight-line basis over the life of the convertible note.  The note holder had the right, after a period of 180 days of the note, to convert the note and accrued interest into shares of the common stock of the Company at a discounted price per share equal to 50% to 65% of the market price of the Company’s common stock, depending upon the stock’s liquidity as determined by the note holder’s broker.  The Company obtained an extension of the maturity date to December 22, 2016 in exchange for the principal amount of the note increasing from $25,000 to $45,000.  In December 2016, the Company paid the lender a principal payment of $35,000 and converted $4,000 principal into 129,032 shares of the Company’s common stock.  In March 2017, the remaining principal of $6,000 plus $1,875 accrued interest payable were converted into 492,187 common shares of the Company.
F - 16

On September 20, 2016, the Company entered into a convertible promissory note with an institutional investor for $35,000, bearing interest at an annual rate of 9% and maturing on June 20, 2017.  At the inception of the convertible note to institutional investor, the Company recorded debt issuance costs comprised of an obligation to issue 110,000 shares of its common stock valued at $14,311, and recorded a debt discount of $35,000, a derivative liability of $42,432 related to the conversion feature, and a loss on derivative liability of $21,743.  Interest expense for the amortization of the debt discount was calculated on a straight-line basis over the life of the convertible note.  The investor had the right, commencing on the 180 th day of the note, to convert the note and accrued interest in whole or in part into shares of the common stock of the Company at a price per share equal to 72.5% (representing a discount rate of 27.5%) of the lowest trading price of the Company’s common stock during the 15 trading days prior to the conversion date.  The note principal was increased by a penalty of $12,250 and the total principal of $47,250 was paid in March 2017.

On October 27, 2016, the Company entered into a convertible promissory note with an institutional investor for $40,000, bearing interest at an annual rate of 9% and maturing on July 7, 2017.  At the inception of the convertible note to institutional investor, the Company recorded a debt discount of $40,000, a derivative liability of $47,939 related to the conversion feature, and a loss on derivative liability of $7,939.  Interest expense for the amortization of the debt discount was calculated on a straight-line basis over the life of the convertible note.  The investor had the right, commencing on the 180 th day of the note, to convert the note and accrued interest in whole or in part into shares of the common stock of the Company at a price per share equal to 72.5% (representing a discount rate of 27.5%) of the lowest trading price of the Company’s common stock during the 15 trading days prior to the conversion date.  The note principal was increased by a penalty of $8,200 and the total principal of $48,200 was paid in March 2017.  As of April 30, 2017, an additional penalty of $5,800 was accrued, which was paid through the issuance of common stock of the Company in May 2017 (see Note 13).

During the year ended April 30, 2017, the Company issued a total of 158,207,545 shares of its common stock in the conversion of $176,349 convertible notes principal and $13,519 accrued interest payable.  During the year ended April 30, 2016, the Company issued a total of 181,748 shares of its common stock in the conversion of $10,014 convertible notes principal.
                          
During the years ended April 30, 2017 and 2016, we had the following activity in our derivative liabilities:

Balance at April 30, 2015
 
$
63,359
 
         
Issuance of convertible notes
   
122,000
 
Gain on derivative liability
   
2,104,872
 
Conversion of debt to shares of common stock and repayment of debt
   
(192,749
)
         
Balance at April 30, 2016
   
2,081,931
 
         
Issuance of convertible notes
   
262,525
 
Loss on derivative liability
   
412,372
 
Conversion of debt to shares of common stock and repayment of debt
   
(1,933,376
)
         
Balance at April 30, 2017
 
$
823,452
 

The estimated fair value of the derivative liabilities at April 30, 2017 was calculated using the Black-Scholes pricing model with the following assumptions:

Risk-free interest rate
   
0.80 – 1.070
%
Expected life in years
   
0.25 – 0.89
 
Dividend yield
   
0
%
Expected volatility
   
514.17% - 687.46
%

Accrued interest and fees payable were $74,181 and $63,979 at April 30, 2017 and 2016, respectively.
F - 17

6.  Mezzanine Equity
 
Convertible Preferred Stock

The Company has 20,000,000 shares of $0.0001 par value preferred stock authorized and has designated Series A and Series B preferred stock.  Each share of the Series A preferred stock is convertible into ten common shares and carries voting rights on the basis of 100 votes per share.  Each share of the Series B preferred stock is convertible into ten common shares and carries no voting rights.

During the year ended April 30, 2017, the Company issued a total of 873,545 shares of its Series A preferred stock: 763,681 shares in payment of payables – related party of $381,841 and 109,864 shares in payment of notes payable – related parties principal of $45,230 and accrued interest payable of $9,702.

The Company had 1,473,545  and 600,000 shares of Series A preferred stock outstanding as of April 30, 2017 and 2016, respectively and 500,000 shares of Series B preferred stock outstanding at April 30, 2017 and 2016.  Due to lack of authorized common shares available, the Series A and Series B preferred stock has been classified as mezzanine equity in our consolidated balance sheets.

7.  Stockholders’ Deficit

Common Stock:

The Company has 200,000,000 shares of $0.0001 par value common stock authorized.

During the year ended April 30, 2017, the Company issued a total of 167,075,045 shares of its common stock: 3,330,000 shares for services valued at $591,880; 158,207,545 shares in the conversion of  $176,349 convertible notes principal and $13,519 accrued interest payable (net of derivative liabilites, debt discounts, and gain/loss on extinguishment of debt); 561,000 shares in payment of payables – related party of $56,100; 4,126,500 shares in payment of accounts payable and accrued expenses of $373,686 (including 4,000,000 shares for the acquisition of the license agreement – Note 3); 550,000 shares valued at $80,000 for debt issuance costs; and 300,000 shares for settlement of warrants (see Note 8).

During the year ended April 30, 2016, the Company issued a total of 381,748 shares of its common stock: 181,748 shares for conversion of debt of $33,987 and 200,000 shares for director fees of $91,020.  A reduction of 15 shares was recorded to adjust the number of common shares outstanding.

All issuances of the Company’s common stock for non-cash consideration have been assigned a dollar amount equaling either the market value of the shares issued or the value of consideration received whichever is more readily determinable.  The majority of the non-cash consideration received pertaining to services rendered by consultants and others has been valued at the market value of the shares issued.

8.  Stock Options and Warrants

On July 18, 2016, the Company issued warrants to a lender to purchase 250,000 shares of the Company’s common stock at an exercise price of $0.60 per share.  The warrants vested upon grant and expire on July 17, 2018.  The Company estimated the grant date fair value of the warrants at $14,365 using the Black-Scholes option-pricing model and charged the amount to debt discount.

On June 14, 2016, the Company issued warrants to a consultant to purchase 50,000 shares of the Company’s common stock at an exercise price of $0.50 per share. The warrants vested upon grant and expire on June 14, 2017.  The Company estimated the grant date fair value of the warrants at $9,056 using the Black-Scholes option-pricing model and charged the amount to general and administrative expenses.

The following assumptions were used in estimating the value of the warrants issued June and July 2016:

Risk free interest rate
   
.55 – .68
%
Expected life in years
   
1.0 – 2.0
 
Dividend yield
   
0
%
Expected volatility
   
137.99 – 351.37
%

F - 18

On April 30, 2016, the Company issued options to a consultant to purchase a total of 1,000,000 shares of the Company’s common stock.  The options vested upon grant, expire on May 31, 2018, with 250,000 options exercisable at $1.25 per share, 250,000 options exercisable at $1.50 per share, 250,000 options exercisable at $1.75 per share and 250,000 options exercisable at $2.00 per share.  The Company estimated the grant date fair value of the options at $117,221 using the Black-Scholes option-pricing model and charged the amount to professional fees.

On February 4, 2016, the Company issued warrants to a lender to purchase 68,333 shares of the Company’s common stock at $0.60 per share.  The warrants vested upon grant and were to expire on February 4, 2021.  The Company estimated the grant date fair value of the warrants at $18,403 using the Black-Scholes option pricing model and charged the amount to interest expense.  Pursuant to a dispute regarding stock prices, t he Company and the warrant holder entered into a Warrant Settlement Agreement on August 9, 2016 requiring a cash payment by the Company of $50,000, recorded as a reduction of additional paid-in capital, and the issuance by the Company of 300,000 of its common shares, recorded at par value of $30. 

A summary of the Company’s stock options and warrants as of April 30, 2017, and changes during the two years then ended is as follows:

   



Shares
   

Weighted
Average
Exercise Price
   
Weighted Average
Remaining
Contract Term
(Years)
   

Aggregate
Intrinsic
Value
 
                         
Outstanding at April 30, 2015
   
-
   
$
-
             
Granted
   
1,068,333
   
$
1.559
             
Exercised
   
-
   
$
-
             
Forfeited or expired
   
-
   
$
-
             
                             
Outstanding and exercisable at April 30, 2016
   
1,068,333
   
$
1.559
     
2.26
   
$
-
 
Granted
   
300,000
   
$
0.583
                 
Exercised
   
(68,333
)
 
$
0.600
                 
Forfeited or expired
   
-
                    $    
                                 
Outstanding and exercisable at April 30, 2017
   
1,300,000
   
$
1.385
     
1.07
   
$
-
 

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on our closing stock price of $0.0039 as of April 30, 2017, which would have been received by the holders of in-the-money options had the option holders exercised their options as of that date.  

9.  Income Taxes

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred liabilities are recognized for taxable temporary differences.  Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.  Deferred tax assets are reduced by the valuation allowances when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
F - 19

Net deferred tax assets consist of the following components at April 30:
 
   
2017
   
2016
 
             
Deferred tax assets:
           
   Net operating loss carryforwards
 
$
1,349,200
   
$
770,400
 
   Related party accrued interest
   
9,000
     
27,900
 
   Accrued expenses – related parties
   
127,100
     
220,500
 
   Valuation allowance
   
(1,485,300
)
   
(1,018,800
)
                 
Net deferred tax assets
 
$
-
   
$
-
 

The income tax provision (benefit) differs from the amount of income tax determined by applying U.S. Federal corporate income tax rates to pre-tax loss due to the following:
 
   
Year Ended April 30,
 
   
2017
   
2016
 
             
Book loss
 
$
(705,400
)
 
$
(926,300
)
Non deductible expenses
   
441,600
     
746,800
 
Gain on debt settlement
   
(142,900
)
   
(41,600
)
Related party accruals
   
(81,500
)
   
66,700
 
Related party interest
   
(16,500
)
   
19,700
 
Valuation allowance
   
504,700
     
134,700
 
                 
Total
 
$
-
   
$
-
 

At April 30, 2017, the Company had net operating loss carry forwards of approximately $3,417,000 that may be offset against future taxable income through 2036.  No tax benefit has been reported in the accompanying consolidated financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.

The Company has adopted the Income Tax topic of FASB ASC 740, Accounting for Uncertainty in Income Taxes .  Included in the balance at April 30, 2017 and 2016, are no tax positions for which the ultimate deductibility is uncertain. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

The Company’s policy is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.

Due to the change in ownership provisions of U.S. federal income tax laws, operating loss carryforwards are potentially subject to annual limitations.  All tax years are open to audit.
         
10.  Contingencies and Commitments

(a)   Litigation

From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business.  However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Company.  The Company is currently not aware of any such legal proceedings or claims that the Company believes will have, individually or in the aggregate, a material adverse effect on its business, financial condition or operating results.
F - 20

(b)   Indemnities and Guarantees

During the normal course of business, the Company has made certain indemnities and guarantees under which it may be required to make payments in relation to certain transactions.  The Company indemnifies its directors, officers, employees and agents to the maximum extent permitted under the laws of the State of Nevada.  These indemnities include certain agreements with the Company’s officers under which the Company may be required to indemnify such person for liabilities arising out of their employment relationship.  The duration of these indemnities and guarantees varies and, in certain cases, is indefinite.  The majority of these indemnities and guarantees do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not been obligated to make significant payments for these obligations and no liabilities have been recorded for these indemnities and guarantees in the accompanying consolidated balance sheets.

(c)   Commitments

The Company has the following commitments as of April 30, 2017:

a)  
Administration Agreement with EMAC Handels AG, renewed effective May 1, 2014 for a period of three years. The agreement has not been further renewed. Monthly fee for administration services of $5,000, office rent of $250 and office supplies of $125.  Extraordinary expenses are invoiced by EMAC on a quarterly basis.  The fee may be paid in cash and or with common stock.

b)  
Service Agreement signed April 25, 2016 with Merrill W. Moses, President, Director and CEO, for services of $7,500 per month beginning May 2016 and the issuance of 350,000 restricted common shares of the Company.  No term of the agreement is specified. The fees may be paid in cash and or with common stock.

c)  
Service Agreement signed May 20, 2016 with Charles C. Hooper, Director, for services of $5,000 per month beginning May 2016 and the issuance of 350,000 restricted common shares of the Company.  No term of the agreement is specified. The fees may be paid in cash and or with common stock.
 
d)  
Administration and Management Agreement of PSSI signed January 12, 2017 for a three-year term, with RAB Investments AG, for general fees of $5,000 per month, office rent of $250 and telephone of $125 beginning January 2017, the issuance of 3,000,000 common shares of PSSI and a 12% royalty calculated on defines sales revenues payable within 10 days after the monthly sales.

e)  
Service Agreement of PSSI signed January 12, 2017 with Merrill W. Moses, President, Director and CEO, for services of $2,500 per month beginning February 2017 and the issuance of 500,000 common shares of PSSI. No term of the agreement is specified.

f)  
Business Development and Consulting Agreement of PSSI signed January 15, 2017 for a twelve-month term, with WSMG Advisors, Inc., for finder’s fees of 10% of funding raised for PSSI and the issuance of 1,500,000 common shares of PSSI.

 
11.  Recent Accounting Pronouncements

In July 2017, the FASB issued Accounting Standards Update ("ASU") 2017-11, "Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Non-controlling Interests with a Scope Exception." Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, "Distinguishing Liabilities from Equity," because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable non-controlling interests. The amendments in Part II of this update do not have an accounting effect. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018.  The Company is currently unable to determine the impact on its consolidated financial statements of the adoption of this new accounting pronouncement.
 
In January 2017, the FASB issued ASU No. 2017-4, “Intangibles – Goodwill and Other (Topic 350): “Simplifying the Test for Goodwill Impairment.”  This update simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test.  Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill.  Instead, under the amendments in this update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.  An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value.  An entity should apply the amendments in this update on a prospective basis.  An entity is required to disclose the nature of and reason for the change in accounting principle upon transition.  That disclosure should be provided in the first annual period and in the interim period within the first annual period when the entity initially adopts the amendments in this update. A public business entity that is an SEC filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.  The Company is currently unable to determine the impact on its consolidated financial statements of the adoption of this new accounting pronouncement.
F - 21

In January 2017, the FASB issued ASU No. 2017-1, “Business Combinations (Topic 805): Clarifying the Definition of a Business.”  The amendments in this update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.  The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation.  The amendments of this ASU are effective for public business entities for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019.  The amendments in this Update are to be applied prospectively on or after the effective date.  The Company is currently unable to determine the impact on its consolidated financial statements of the adoption of this new accounting pronouncement.

In October 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-17, “Consolidation (Topic 810): Interests Held Through Related Parties That are Under Common Control.” This update amends the consolidation guidance on how a reporting entity that is the single decision maker of a variable interest entity (“VIE”) should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. The primary beneficiary of a VIE is the reporting entity that has a controlling financial interest in a VIE and, therefore, consolidates the VIE. A reporting entity has an indirect interest in a VIE if it has a direct interest in a related party that, in turn, has a direct interest in the VIE. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company is currently unable to determine the impact on its consolidated financial statements of the adoption of this new accounting pronouncement.
 
In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” This ASU addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently unable to determine the impact on its consolidated financial statements of the adoption of this new accounting pronouncement.

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)".  This standard provides a single set of guidelines for revenue recognition to be used across all industries and requires additional disclosures. This ASU is effective for the Company in the first quarter of fiscal year 2019 using either of two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within the ASU; or (ii) retrospective with the cumulative effect of initially applying the ASU recognized at the date of initial application and providing certain additional disclosures as defined in the ASU. Early adoption in the first quarter of fiscal year 2018 is permitted.  The Company is currently unable to determine the impact on its consolidated financial statements of the adoption of this new accounting pronouncement.

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)," which supersedes the lease accounting requirements in Topic 840.  This ASU requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize a straight-line total lease expense. The guidance also requires qualitative and specific quantitative disclosures to supplement the amounts recorded in the financial statements so that users can understand more about the nature of an entity's leasing activities, including significant judgments and changes in judgments. This guidance is effective beginning in the first quarter of fiscal year 2020 on a modified retrospective approach. The Company is currently unable to determine the impact on its consolidated financial statements of the adoption of this new accounting pronouncement.

Although there are several other new accounting pronouncements issued or proposed by the FASB, which the Company has adopted or will adopt, as applicable, the Company does not believe any of these accounting pronouncements has had or will have a material impact on its consolidated financial position or results of operations.

12.   Supplemental Statement of Cash Flows Information

During the years ended April 30, 2017 and 2016, the Company paid no amounts for income taxes.

During the years ended April 30, 2017 and 2016, the Company paid $137,855 and $67,514 for interest.

During the year ended April 30, 2017, the Company had the following non-cash investing and financing activities:

Increased accounts payable and debt discount by $14,311.

In debt conversions, increased common stock by $15,821, increased additional paid-in capital by $1,650,297, decreased convertible notes payable by $176,349, decreased accrued interest and fees payable by $13,519, decreased debt discount by $48,953 and decreased derivative liabilities by $1,933,376.

Increased debt discount and additional paid-in capital by $52,136 for beneficial conversion feature of new convertible notes payable.
F - 22

Increased debt discount and decreased prepaid expenses by $16,294.

Increased debt discount and derivative liability by $262,525.

Increased common stock by $413 and additional paid-in capital by $373,273 and decreased accrued interest and fees payable by $24,636 and accrued license agreement payments by $353,600.

Increased debt discount and additional paid-in capital by $14,365 for the issuance of warrants.

Increased common stock and decreased additional paid-in capital by $30 for net settlement of warrants.

Increased accounts payable and decreased additional paid-in capital by $50,000 for settlement of warrants obligation.

Increased license agreement and accrued license agreement payments by $378,600.

Increased debt discount by $80,000, common stock by $55 and additional paid-in capital by $79,945 for issuance of common stock for debt issuance costs.

Increased preferred stock by $11, increased additional paid-in capital by $54,921, decreased notes payable – related parties by $45,230 and decreased accrued interest payable – related parties by $9,702.

Increased preferred stock by $76, increased additional paid-in capital by $381,841 and decreased payables – related parties by $381,841.

Increased non-controlling interest and decreased payables – related parties by $9,835.

Increased common stock by $56, increased additional paid-in capital by $56,044 and decreased payables – related parties by $56,100.

During the year ended April 30, 2016, the Company had the following non-cash investing and financing activities:
                  
Increased common stock by $18, increased additional paid-in capital by $33,969, decreased convertible notes payable by $10,014, decreased debt discount by $2,594 and decreased derivative liability by $24,051.
                           
Decreased debt discount by $10,723 and derivative liability by $168,698.
                                            
Increased debt discount and derivative liability by $122,000.
                                     
Increased debt discount and additional paid in capital by $232,650.
                             
13.  Subsequent Events

In accordance with ASC 855, Subsequent Events , the Company has evaluated subsequent events to determine events occurring after April 30, 2017 that would have a material impact on the Company’s results or require disclosure.

Issuances of Common Stock

Subsequent to April 30, 2017, the Company issued 8,815,624 shares of its common stock in the conversion of debt of $13,890 and 14,000,000 shares for services valued at $25,200.

Issuances of Preferred Stock
 
Effective June 12, 2017, the Company issued 1,309,380 shares of Series A preferred stock to EMAC for consideration totaling $130,938: convertible note payable of $25,000; three notes payable totaling $34,426; accrued interest payable of $18,718; payables – related parties of $22,794 and prepayment of services of $30,000 for the months of May 2017 through October 2017.  The accrued interest payable included interest on the $25,000 convertible note payable compounded at 6% per annum retroactive to January 1, 2012, as negotiated between the parties.
Effective June 12, 2017, the Company issued 442,444 shares of Series A preferred stock to a related party lender in payment of Company indebtedness totaling $44,244: convertible note payable of $32,050; accrued interest payable of $4,694 and repayment of accounts payable of $7,500.

Effective June 12, 2017, the Company issued 152,000 shares of Series A preferred stock to a related party in repayment of accrued services of $15,200.
 
F - 23
Business Consulting Agreement

In June 2017, the Company entered into a ninety-day Business Consulting Agreement with Mark Taggatz (“Taggatz”) for the development and commercialization of the Company’s progressive scan technology.  The Company is to pay Taggatz fees totaling $37,500, payable in common stock of the Company.  The Company issued 14,000,000 shares of its common stock in July 2017 in partial payment of this obligation.

Convertible Promissory Note

On May 25, 2017, the Company entered into a Convertible Promissory Note with an institutional investor for $56,500, with net proceeds to the Company of $52,000.  The note bears interest at an annual rate of 2%, matures on May 25, 2017 and is convertible into common shares of the Company after twelve months at a variable conversion price equal to 55% multiplied by the lowest one-day trading price of the Company’s common stock during the twenty trading days prior to the conversion date.

Amendment #5 to the July 2016 SPA

On July 7, 2017, the Company entered into Amendment #5 to the July 2016 SPA, with proceeds to the Company of $25,000.  The amendment is subject to the terms and conditions of the July 2016 SPA and the July 2016 Note.  The proceeds from this loan were used to pay accounts payable of $25,000.
 
Cancellation of Common Shares

Effective July 5, 2017, EMAC returned 11,775,000 common shares of the Company that were previously issued in payment for certain mineral lease properties in Nevada.

Funding Agreement

On July 24, 2017, the Company entered into a Funding Agreement with RAB Investments AG, a current lender and stockholder located in Zug, Switzerland, which is intended to provide necessary funding towards the initial production of our Offender Alert Passive Scan. The Funding Agreement calls for RAB to fund a minimum of $50,000 to a maximum of $150,000 on a “best efforts basis,” with a first tranche of $25,000 to be completed during August 2017. In exchange for the funds, DTIC will issue convertible notes that may be converted into common stock of the Company at a discount of 25%, based on the 10-day average trading value of Company shares at the time of the initial conversion.  The notes may be converted at any time, in whole or partially, but all conversions must be at the same rate as the initial conversion.  No funding has been provided as of the date of this filing and there is no assurance that funds will be provided by the anticipated initial first tranche during August 2017, or thereafter. 
    
Waiver and Settlement Agreement

Pursuant to a Securities Purchase Agreement dated July 18, 2016 (the "July 2016 SPA", the Company entered into a Senior Secured Convertible Promissory Note (the "July 2016 Note") with Firstfire Global Opportunities Fund, LLC ("Firstfire) for $189,000.  The July 2016 Note was in default with respect to the maturity date, and the Company was in default on certain terms of the July 2016 SPA, including calculation of exercise prices on Firstfire debt conversions and limitations on the Company entering into subsequent "Variable Rate Transactions."  On August 9, 2017, the Company and Firstfire entered into a Waiver and Settlement Agreement whereby the Company will issue an additional 13,000,000 shares of its common stock to Firstfire to cure the deficiency of shares previously issued in the debt conversions.  Further, Firstfire agreed to waive any default with respect to the subsequent variable rate transactions.
     
Payment to CCS

In May 2017, the Company paid $17,500 of the accrued license agreement payment to CCS.
 
 
 
F - 24

 
Exhibit 10.2

 

Exhibit 10.3

 
 

Exhibit 10.4

 

Exhibit 10.5

 
 

 

 
 

Exhibit 14.1