YAPPN CORP. (Form: 10-Q, Received: 10/15/2015 16:50:58)

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal quarter ended August 31, 2015

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from _______ to _______

YAPPN CORP.

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

Delaware		000-55082		27-3848069
(State of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)

1001 Avenue of the Americas, 11th Floor

New York, NY 10018

(Address of principal executive offices) (Zip code)

888-859-4441

(Registrant’s telephone number, including area code)

Securities registered under Section 12(b) of the Exchange Act:

None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $0.0001 par value per share

(Title of Class)

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	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 ☒

There were 13,434,481 shares outstanding of registrant’s common stock, par value $0.001 per share, as of October 15, 2015.

Transitional Small Business Disclosure Format Yes ☐ No ☒

TABLE OF CONTENTS

PART I

Item 1.	Financial Statements	3
	Interim Condensed Consolidated Balance Sheets as of August 31, 2015 (unaudited) and May 31, 2015	4
	Interim Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the three months ended August 31, 2015 and 2014 (unaudited)	5
	Interim Condensed Consolidated Statement of Stockholders’ Deficit for the three months ended August 31, 2015 (unaudited) and year end May 31, 2015	6
	Interim Condensed Consolidated Statements of Cash Flows for the three months ended August 31, 2015 and 2014 (unaudited)	7
	Notes to Interim Condensed Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4	Controls and Procedures	37

PART II

Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3	Defaults Upon Senior Securities	38
Item 4.	Mine Safety Disclosures	38
Item 5.	Other Information	38
Item 6.	Exhibits	39
SIGNATURES		42

PART I

Item 1.

Interim Financial Statements and Notes to Interim Financial Statements

General

The accompanying reviewed interim financial unaudited statements have been prepared in accordance with the instructions to Form 10-Q. Therefore, they do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders' equity in conformity with generally accepted accounting principles. Except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements included in the Company's annual report on Form 10-K for the year ended May 31, 2015. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the three months ended August 31, 2015 are not necessarily indicative of the results that can be expected for the year ending May 31, 2016.

All references to “dollars”, “$” or “US$” are to United States dollars and all references to “CAD$” are to Canadian dollars. United States dollar equivalents of Canadian dollar figures are based on the exchange rate as reported by the Bank of Canada on the applicable date.

YAPPN CORP.

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	Note		As of August 31, 2015			(audited) As of May 31, 2015
Assets
Current assets:
Cash			$	5,797		$	19,496
Accounts receivable				1,436,489			1,444,009
Subscriptions receivable				250,000			-
Prepaid expenses				49,138			6,068
Total current assets				1,741,424			1,469,573

Equipment, net				1,093			1,250

Total Assets			$	1,742,517		$	1,470,823

Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable			$	352,897		$	340,041
Accrued expenses				692,735			543,535
Accrued development and related expenses - related party		11		275,151			468,766
Short term loans		4		222,482			791,928
Line of credit		5		150,000			2,167,025
Secured debentures		5		3,575,000			-
Deferred revenue				12,500			12,500
Convertible promissory notes and debentures		6		2,641,962			3,477,825
Total current liabilities				7,922,727			7,801,620

Other liabilities:
Convertible promissory notes and debentures		6		183,784			312,486
Total Liabilities				8,106,511			8,114,106

Stockholders' Deficit
Preferred stock, par value $.0001 per share, 50,000,000 shares authorized: Series 'A' Convertible, 10,000,000 shares authorized; nil shares issued and outstanding		8		-			-
Common stock, par value $.0001 per share, 400,000,000 shares authorized (13,434,481 issued and outstanding (13,422,814 May 31, 2015)				13,435			13,423
Common stock, par value $.0001 per share, 99,344 and nil shares subscribed not issued		7		124,567			124,567
Additional paid-in capital				8,094,208			7,981,579
Deficit				(14,596,204	)		(14,762,852	)
Total Stockholders' Deficit				(6,363,994	)		(6,643,283	)
Total Liabilities And Stockholders' Deficit			$	1,742,517		$	1,470,823

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

YAPPN CORP.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE

INCOME/(LOSS) (Unaudited)

		For the three months ended August 31
	Note	2015			2014

Revenues		$	758,159		$	-

Cost of revenue			128,471			-

Gross profit			629,688			-

Operating expenses:
Marketing	11		102,785			283,434
Research and development expenses	11		95,070			320,977
General and administrative expenses	11		352,133			320,177
Professional fees			91,569			36,877
Consulting			102,000			104,500
Depreciation			91			58
Stock-based compensation			112,642			524,349
Total operating expenses			856,290			1,590,372

Loss from operations			(226,602	)		(1,590,372	)

Other (income) expense:
Interest expense			153,985			63,900
Financing expense on issuance of convertible promissory notes and common stock			89,490			4,167
Change in fair value of derivative liabilities and convertible promissory notes	6		(801,639	)		(945,065	)
Prepayment fees on convertible promissory notes			177,232			-
Miscellaneous (income) expense			(12,318	)		13,637
Total other (income) expense			(393,250	)		(863,361	)

Net income/(loss) before taxes			166,648			(727,011	)

Provision for income taxes			-			-

Net income/(loss) and comprehensive income/(loss)		$	166,648		$	(727,011	)

Net income/(loss) per weighted-average shares of common stock – basic		$	0.01		$	(0.06	)

Net income/(loss) per weighted-average shares of common stock – diluted		$	0.01		$	(0.06	)

Weighted-average number of shares of common stock issued and outstanding – basic			13,422,941			12,585,579

Weighted-average number of shares of common stock issued and outstanding – diluted			16,254,733			12,585,579

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

YAPPN CORP.

INTERIM CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT (UNAUDITED)

For the three months ended August 31, 2015 and year ended May 31, 2015

	Common								Preferred						Additional
	Shares Outstanding		Amount		Subscribed Shares		Subscribed Amounts		Shares Outstanding			Amount			Paid-in Capital			Accumulated Deficit			Total
Balance - May 31, 2014		12,585,579		12,586		-		-		201,000			201			4,071,022			(10,138,108	)		(6,054,299	)

Reclassification of warrant liabilities to equity		-		-		-		-		-			-			1,851,089			-			1,851,089
Issuance of warrants classified as equity		-		-		-		-		-			-			41,060			-			41,060
Stock options issued		-		-		-		-		-			-			982,624			-			982,624
Stock to be issued under prior obligations		-		-		99,344		124,567		-			-			-			-			124,567
Beneficial conversion feature		-		-		-		-		-			-			622,636			-			622,636
Stock issued to consultants and vendors		329,000		329		-		-		-			-			307,638			-			307,967
Issuance of common stock on conversion of Series A Preferred stock		201,000		201		-		-		(201,000	)		(201	)		-			-			-
Issuance of common stock on conversion of convertible debt		307,235		307		-		-		-			-			105,510			-			105,817
Net loss for the year ended May 31, 2015		-		-		-		-		-			-			-			(4,624,744	)		(4,624,744	)

Balance - May 31, 2015		13,422,814		13,423		99,344		124,567		-			-			7,981,579			(14,762,852	)		(6,643,283	)
Stock-based compensation		-		-		-		-		-						112,641			-			112,641
Stock issued on exercise of warrants		11,667		12		-		-		-			-			(12	)		-			-
Net income for the three months ended August 31, 2015		-		-		-		-		-			-			-			166,648			166,648
Balance - August 31, 2015		13,434,481		13,435		99,344		124,567		-			-			8,094,208			(14,596,204	)		(6,363,994	)

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

YAPPN CORP.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the three months ended August 31
	2015			2014
Cash Flows From Operating Activities:
Net income /(loss) and comprehensive income/(loss)	$	166,648		$	(727,011	)
Adjustments to reconcile net income /(loss) to cash used in operating activities:
Depreciation		91			58
Stock based compensation		112,642			524,349
Change in fair value of derivative liabilities and convertible notes		(801,639	)		(945,065	)
Financing expense on issuance of convertible promissory notes, and common stock		89,490			4,167
Changes in operating assets and liabilities:
Accounts receivable		7,520			-
Prepaid expenses		(43,070	)		(233,686	)
Accounts payable and accrued liabilities		162,056			242,098
Accrued development and related expenses - related party		(193,616	)		(124,368	)
Net Cash Used in Operating Activities		(499,878	)		(1,259,458	)

Cash Flows From Investing Activity:
Capital expenditures		-			(1,679	)

Cash Flows From Financing Activities:
Proceeds from convertible promissory notes and debentures		90,750			159,223
(Repayments)/Proceeds from line of credit, net		(942,025	)		150,000
Proceeds from secured debentures		1,830,695			-
Repayments of short term loans		(152,395	)		(261,533	)
Proceeds from short term loans		-			369,607
Repayment of convertible promissory notes and debentures		(340,846	)		(99,549	)
Net Cash Provided by Financing Activities		486,179			317,748

Net decrease in cash		(13,699	)		(943,389	)
Cash, beginning of period		19,496			988,692
Cash, end of period	$	5,797		$	45,303

Supplemental Disclosure of Cash Flow Information

Non Cash Investing and Financing Activities Information:
Common stock issued on exercise of warrants	$	37,100			-
Reclassification of derivative liabilities to additional paid in capital	$	-		$	755,200
Conversion of short term loans into convertible debentures	$	-		$	100,000
Conversion of short term loan and line of credit into secured debentures	$	1,494,305			-
Cash paid for interest during the three month period	$	49,885		$	19,607

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

YAPPN CORP.

Notes to Interim Condensed Consolidated Financial Statements

August 31, 2015

(Unaudited)

All references to “dollars”, “$” or “US$” are to United States dollars and all references to “Canadian” are to Canadian dollars. United States dollar equivalents of Canadian dollar figures are based on the exchange rate as reported by the Bank of Canada on the applicable date.

1. Summary of Significant Accounting Policies

Basis of Presentation and Organization

Yappn Corp., formerly “Plesk Corp.”, (the “Company”) was incorporated under the laws of the State of Delaware on November 3, 2010. The business plan of the Company is to provide effective unique and proprietary tools and services that create dynamic solutions that enhance a brand’s messaging, media, e-commerce and support platforms. The Company has offices in the United States and Canada. In March 2013, the Company acquired a concept and technology license from Intertainment Media Inc., a Canadian company, in exchange for 7,000,000 shares of common stock of the Company. As a result of this exchange, Intertainment Media Inc. acquired, at that time, a Seventy percent (70%) ownership of the Company. The accompanying Interim Condensed consolidated financial statements of the Company were prepared from the accounts of the Company under the accrual basis of accounting.

Unaudited Interim Interim Condensed Consolidated Financial Statements

The interim Interim Condensed consolidated financial statements (“interim financial statements”) of the Company as of August 31, 2015, and for the three month period ended August 31, 2015 and 2014, are unaudited. However, in the opinion of management, the interim financial statements include all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the Company’s financial position as of August 31, 2015, and the results of its operations and its cash flows for the three month period ended August 31, 2015 and August 31, 2014. These results are not necessarily indicative of the results expected for the fiscal year ending May 31, 2016. The accompanying interim financial statements and notes thereto do not reflect all disclosures required under accounting principles generally accepted in the United States. Refer to the Company’s audited consolidated financial statements as of May 31, 2015 filed with the Securities and Exchange Commission, for additional information including significant accounting policies.

Principles of Consolidation

The interim financial statements include the accounts of the Company and its wholly-owned subsidiaries, Yappn Acquisition Corp. and Yappn Canada, Inc. All inter-company balances and transactions have been eliminated on consolidation.

Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update No. 2014-09: Revenue from Contracts with Customers. The standard outlines a five-step model for revenue recognition with the core principle being that a company should recognize revenue when it transfers control of goods or services to customers at an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. Companies can choose to apply the standard using either the full retrospective approach or a modified retrospective approach. Under the modified approach, financial statements will be prepared for the year of adoption using the new standard but prior periods presented will not be adjusted. Instead, companies will recognize a cumulative catch-up adjustment to the opening balance of retained earnings. This new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The Company has not yet made a determination as to the method of application (full retrospective or modified retrospective). It is too early to assess whether the impact of the adoption of this new guidance will have a material impact on the Company's results of operations or financial position.

On August 27, 2014 the FASB issued a new financial accounting standard on going concern, Update 2014-15, “Presentation of Financial Statements – Going Concern (subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The standard provides guidance about management’s responsibility to evaluate whether there is substantial doubt about the organization’s ability to continue as a going concern. The amendments in this update apply to all companies. They become effective in the annual period ending after December 15, 2016, with early application permitted. The Company is currently evaluating the impact of this accounting standard.

In November 2014, the FASB issued Accounting Standard Update (“ASU”) 2014-16, Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity. The ASU clarifies how current guidance should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. Specifically, the amendments clarify that an entity should consider all relevant terms and features, including the embedded derivatives feature being evaluated for bifurcation, in evaluating the nature of a host contract. The ASU is effective for fiscal years and interim periods beginning after December 15, 2015. The Company is currently assessing the impact, if any, of implementing this guidance on its consolidated financial position and results of operations.

2. Going Concern

The accompanying interim financial statements have been prepared assuming that the Company will continue as a going concern. The Company has experienced negative cash flows from operations since inception and has incurred a deficit of $14,596,204 through August 31, 2015.

As of August 31, 2015, the Company had a working capital deficit of $6,181,303. During the three months ended August 31, 2015, net cash used in operating activities was $499,878. The Company expects to have similar cash needs for the next twelve months. At the present time, the Company does not have sufficient funds to fund operations over the next twelve months.

Implementation of our business plan will require additional debt or equity financing and there can be no assurance that additional financing can be obtained on acceptable terms. We have realized limited revenues to cover our operating costs. As such, we have incurred an operating loss since inception. This and other factors raise substantial doubt about our ability to continue as a going concern. Our continuation as a going concern is dependent on our ability to meet our obligations, to obtain additional financing as may be required and ultimately to attain profitability. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Management plans to meet its operating cash flow requirements from financing activities until the future operating activities become sufficient to support the business to enable the Company to continue as a going concern. The Company continues to work on generating operating cash flows from the commercialization of its business. Until those cash flows are sufficient the Company will pursue other financing when deemed necessary.

The Company is pursuing a number of different financing opportunities in order to execute its business plan. These include, short term debt arrangements, convertible debt arrangements, common share equity financings, either through a private placement or through the public markets and has engaged a number of investment brokers to assist management in achieving its financing objectives. During the three months ended August 31, 2015, the Company raised $486,179 through various financial instruments, net of repayments. Subsequent to the three months ended August 31, 2015, the Company raised $500,000 in net cash proceeds as part of a secured debenture financing.

There can be no assurance that the raising of future equity or debt will be successful or that the Company’s anticipated financing will be available in the future, at terms satisfactory to the Company. Failure to achieve the equity and financing at satisfactory terms and amounts could have a material adverse effect on the Company’s ability to continue as a going concern. If the Company cannot successfully raise additional capital and implement its strategic development plan, its liquidity, financial condition and business prospects will be materially and adversely affected, and the Company may have to cease operations.

3. Concentration of Credit Risk

All of the Company’s revenues are attributed to a small number of customers. One customer comprises 99% of the accounts receivable as at August 31, 2015 and 100% of the revenue recorded for the three months ended August 31, 2015.

The Company’s subscription receivables as of August 31, 2015, pertain to one investor who subscribed but the Company agreed to receive the cash proceeds subsequent to the closing date. Subsequent to the Company’s quarter end, these cash proceeds have been received in full by the Company.

4. Short Term Loans

On April 1, 2014, the Company entered into a short term loan for $219,480 (Canadian $240,000) with a private investor. The Company previously converted a portion of a previous loan from this lender (Canadian $350,000), from a prior fiscal year, into a convertible debenture. The loan had a maturity of July 10, 2014 with an interest rate of 1% per month. The Company repaid $46,025 (Canadian $50,000) of this loan on June 13, 2014 leaving $175,330 ($190,000 Canadian) outstanding. As at August 31, 2015, the loan had a value of $144,197 ($190,000 Canadian).

On January 7, 2014, the Company borrowed $253,200 (Canadian $280,000) from a private investor. The loan had a term of three months and had an interest rate of 12% per annum payable at the maturity date. A preparation fee of 10% or $25,300 (Canadian $28,000) was paid at inception. The loan was extended past its due date of April 7, 2014 and is accruing interest without penalty until payment. On June 12, 2014, the Company repaid $142,056 (Canadian $152,000) against the loan and on June 27, 2014 $90,777 (Canadian $100,000) was retired and contributed to a subscription agreement for Units that included an unsecured 6% convertible debenture, $100 par value, convertible into shares of the Company’s common stock and 166,667 issuable shares of common stock (Series C warrants) at a purchase price of $2.20 per share (Note 6). As at August 31, 2015 an amount of $21,281 ($28,000 Canadian) remains outstanding.

On July 17, 2014 the Company borrowed $100,915 (Canadian $110,000) from a private investor in the form of a short term loan due on December 31, 2014. This loan carries a 1% arrangement fee and an interest rate of 1% per month. During fiscal 2015 $90,145 (Canadian $105,000) was repaid on this note. The remaining balance was repaid during the three months ended August 31, 2015.

On August 4, 2014, the Company borrowed $93,458 (Canadian $100,000) in the form of a bridge loan from a private investor, with combined origination fees and interest of $3,210 (Canadian $3,500), due on August 14, 2014. The Company repaid $22,768 (Canadian $25,000) of this loan on August 25, 2014. As of August 31, 2015, the value of the remaining balance of the loan was $57,004 (Canadian $75,000).

On May 6, 2015, the Company borrowed $150,000 ($187,000 Canadian) in the form of a bridge loan from a private investor with a financing fee of $6,000 ($7,200 Canadian). This loan was paid back on June 30, 2015.

On May 11, 2015, the Company received $419,463 ($500,000 Canadian) from an intended subscriber for secured debentures, which closed on July 15, 2015. The Company treated this as a short term loan where interest is accrued at 12% (same rate as the secured debenture) for each lender from the date of the loan to the date of the subscription for the convertible debenture.

On June 19, 2015, the Company received $78,265 ($96,000 Canadian) from an intended subscriber for secured debentures, which closed on July 15, 2015. The Company treated this as a short term loan where interest is accrued at 12% (same rate as the secured debenture) for each lender from the date of the loan to the date of the subscription for the convertible debenture.

On July 10, 2015, the Company borrowed $250,000 in the form of a bridge loan from a private investor. This loan was paid back on July 16, 2015.

The following is a summary of Short Term Loans:

Principal amounts	April 1, 2014 Term Loan			January 7, 2014 Term Loan			Other Loans			Total
Fair value at May 31, 2014	$	220,159		$	257,152		$	-		$	477,311
Borrowing on July 17, 2014		-			-			100,915			100,915
Borrowing on July 23, 2014		-			-			50,234			50,234
Borrowing on August 4, 2014		-			-			93,458			93,458
Borrowings in August 2014 (multiple dates)		-			-			125,000			125,000
Borrowing on January 23, 2015		-			-			16,098			16,098
Borrowing on March 30, 2015								250,000			250,000
Borrowing on May 6, 2015		-			-			144,729			144,729
Borrowing on May 11, 2015		-			-			419,463			419,463
Total		-			-			1,199,897			1,199,897
Fair value adjustments		(21,589	)		(1,356	)		(21,893	)		(44,838	)
Repayments		(46,025	)		(142,506	)		(436,134	)		(624,665	)
Conversions		-			(90,777	)		(125,000	)		(215,777	)
Fair value at May 31, 2015	$	152,545		$	22,513		$	616,870		$	791,928
Borrowing on June 19, 2015		-			-			78,265			78,265
Borrowing on July 10, 2015		-			-			250,000			250,000
Fair value adjustments		(8,348	)		(1,232	)		(23,026	)		(32,606	)
Conversions		-			-			(461,300	)		(461,300	)
Repayments		-			-			(403,805	)		(403,805	)
Fair value at August 31, 2015	$	144,197		$	21,281		$	57,004		$	222,482

5. Line of Credit Arrangement and Secured Debenture

On April 7, 2014, the Company finalized its line of credit arrangement whereby the Company can borrow up to $3,000,000 from a third party lender. The loan agreement is for an initial two year term subject to the lender’s right to demand repayment of the outstanding balance. It carries an interest rate of 12% per annum and a 1% draw down fee on each draw. Pursuant to the loan agreement, the Company issued the lender warrants to purchase up to 800,000 shares of the Company’s common stock at an exercise price of $1.00. Upon the Company’s first draw down of $200,000 from the line of credit, 200,000 five year warrants vest. For each subsequent $100,000 the Company draws, 100,000 five year warrants will vest until the 800,000 warrants are vested. The Company’s common stocks that are issuable on the exercise of warrants were granted registration rights, allowing the shares to be sold. In addition, the Company entered into a general security agreement with the lender to which it granted the lender a first position security interest in all of its assets and in the event of default under the security agreement or the promissory note, the lender may foreclose on the assets of the Company.

During fiscal 2015, the Company borrowed $1,900,155 against the line of credit and repaid $533,130 resulting in a net additional amount drawn down against the line of credit of $1,367,025 and an outstanding obligation of $2,167,025 at May 31, 2015. During fiscal 2016, the Company borrowed $150,000 against the line of credit, repaid and released a total of $1,092,025 (immediately after conversion of $2 million into a secured debenture (see below)) and converted $1,075,000 to secured debentures resulting in a net additional amount drawn down against the line of credit of $150,000 resulting in an outstanding obligation of $150,000 at August 31, 2015.

Yappn has also secured a debt financing of US $4.5 million of secured debentures. The secured debentures carry an annual interest rate of 12% payable at maturity. Maturity is the earlier of the date proceeds are available from a public offering or December 31, 2015. This financing is supported by Yappn's secured line of credit holders through their participation as described above. Yappn executed a non-binding letter of intent with Winterberry Investments Inc. ("Winterberry"), a private company led by Mr. David Berry, pursuant to which Winterberry will facilitate and manage the financing transaction as well as to advise on Yappn's future capital programs. To August 31, 2015, the Company has received $2.5 million of this financing in the form of cash and cash commitments, including conversion of the short term loans obtained on May 11, 2015 and June 19, 2015 as described in Note 4. $1,075,000 of the $4.5 million financing is conversion of a portion of the Company’s existing debt that remained in the secured debenture. $925,000 was repaid out of the secured debenture, in the form of cash in the amount of $465,000 with the remainder in the form of the release of secured deposit that was applied against accounts receivable. The secured debentures balance as at August 31, 2015 after the repayments and release of $925,000 noted above was $3,575,000.

6. Convertible Promissory Notes and Debentures

The Company has issued various convertible notes and debentures with various terms. As a result of the variability in the amount of shares of common stock to be issued in accordance with variable pricing terms or conversion price protection clauses, the Company has recorded these instruments as liabilities at fair value. The Company has determined the convertible notes and debentures to be Level 2 fair value measurement and has used the binominal lattice pricing model to calculate the fair value as of August 31, 2015, May 31, 2015, and the commitment dates.

The following is a summary of the convertible promissory notes and debentures as of August 31, 2015:

Principal amounts:	JMJ Financial Notes			Convertible Debentures			Other Notes			Total
Total Borrowings at May 31, 2014	$	80,000		$	2,219,000		$	92,500		$	2,391,500
Borrowing on June 27, 2014		-			250,000			-			250,000
Borrowing on September 2, 2014		-			125,000			-			125,000
Borrowing on September 3, 2014		50,000			-			-			50,000
Borrowing on October 6, 2014		-			50,000			-			50,000
Borrowing on October 22, 2014		40,000			-			-			40,000
Borrowing on October 27, 2014		-			50,000			-			50,000
Borrowing on December 24, 2014		-			-			75,000			75,000
Borrowing on December 24, 2014		-			-			100,000			100,000
Borrowing on December 29, 2014		-			-			50,000			50,000
Borrowing on February 4, 2015		-			-			115,000			115,000
Borrowing on February 9, 2015		-			-			90,750			90,750
Borrowing on March 30, 2015		-			-			92,000			92,000
Borrowing on April 15, 2015		-			-			69,000			69,000
Borrowing on April 20, 2015		-			-			50,000			50,000
Borrowing on April 23, 2015		-			-			60,500			60,500
Borrowing on April 23, 2015		-			-			25,000			25,000
Conversions		(80,000	)		-			-			(80,000	)
Repayments		(90,000	)		-			(92,500	)		(182,500	)
Total Borrowings at May 31, 2015	$	-		$	2,694,000		$	727,250		$	3,421,250
Borrowings on June 24, 2015		-			-			45,375			45,375
Borrowings on June 29, 2015		-			-			45,375			45,375
Repayments		-			-			(109,917	)		(109,917	)
Total Borrowings at August 31, 2015	$	-		$	2,694,000		$	708,083		$	3,402,083

Convertible notes and debt at fair value at May 31, 2014	$	142,189		$	2,264,140		$	100,846		$	2,507,175
Convertible notes and debt at fair value at the commitment date		137,071			436,887			1,020,110			1,594,068
Change in fair value (from commitment date)		(70,223	)		(755,194	)		858,573			33,156
Repayments (cash)		(103,220	)		-			(135,051	)		(238,271	)
Conversions to common stock		(105,817	)		-			-			(105,817	)
Convertible notes and debt at fair value at May 31, 2015	$	-		$	1,945,833		$	1,844,478		$	3,790,311
Convertible notes and debt at fair value at the commitment date		-			-			171,990			171,990
Change in fair value (from commitment date)		-			155,846			(957,485	)		(801,639	)
Repayments (cash)		-			-			(334,916	)		(334,916	)
Convertible notes and debt at fair value at August 31, 2015	$	-		$	2,101,679		$	724,067		$	2,825,746

Balance at May 31, 2015
Current		-			1,633,347			1,844,478			3,477,825
Long term		-			312,486			-			312,486
	$	-			1,945,833			1,844,478			3,790,311
Balance at August 31, 2015
Current		-			1,919,895			722,067			2,641,962
Long term		-			183,784			-			183,784
	$	-		$	2,103,679		$	722,067		$	2,825,746

JMJ Financial

On November 15, 2013, the Company executed and issued a Convertible Promissory Note agreement with JMJ Financial in the principal amount of $500,000, with a $50,000 original issue discount that shall be ratably applied towards payments made by the investor and forms part of the amount qualifying for conversion. On November 15, 2013, the Company borrowed $65,000 against the Note. The agreement was amended on February 21, 2014 and applies retroactively to the date of issuance. The Convertible Promissory Note is due two years from the effective date of each payment. It is interest free if repaid within 90 days and if not paid within 90 days, it bears a one-time interest charge of 12%, which is in addition to the original issue discount. The Company agreed to pay a closing and due diligence fee of 8% of each payment made by the investor which shall be applied to the principal amount of the Convertible Promissory Note. After 90 days from the effective date and until the maturity date the Company may not make further payments on the note without written approval. After 180 days from issuance, the principal and any accrued interest are convertible into the Company’s common stock at the lower of $1.00 per share or 60% of the lowest trade price in the 25 days prior to conversion. The note has piggyback registration rights with respect to the shares into which the note is convertible. On February 21, 2014 the Company borrowed an additional $40,000 against the Note and on April 16, 2014 the Company borrowed an additional $40,000 against the Note. During May of 2014, JMJ Financial elected to convert the $65,000 principal, original issue discount, due diligence fees and interest accrued in exchange for 160,579 common shares (Note 7). On September 3, 2014 the Company borrowed an additional $50,000 against the Note and on October 22, 2014 the Company borrowed an additional $40,000 against the Note. During September of 2014, JMJ Financial elected to convert $40,000 in principal, original issue discount, due diligence fees and interest accrued in exchange for 111,170 common shares (Note 7). During the same quarter of 2014, JMJ Financial elected to convert an additional $40,000 in principal, original issue discount, due diligence fees and interest accrued in exchange for 196,064 common shares (Note 7). On December 12, 2014 the Company repaid $50,000 plus original issue discount from the September 3, 2014 borrowings. On January 23, 2015 the Company repaid $40,000 plus original issue discount from the October 27, 2014 borrowing. On February 10, 2015 the note and associated share reserve was cancelled.

JSJ Investments Inc.

On December 24, 2014, the Company sold a Convertible Note in the principal amount of $100,000 to JSJ Investments Inc. The Convertible Note matures on June 23, 2015 and has an interest rate of 15% per annum payable at maturity. The note may be converted into common stock of the Company on or after the maturity date at a conversion price of 50% of the lowest 15 days prior to conversion or $1.00. Early payback penalties are 140% from 120-150 days and 150% up to the maturity date of the note. This Convertible Note was repaid on June 24, 2015.

LG Capital Funding, LLC

On December 24, 2014, the Company sold a Convertible Note in the principal amount of $75,000. The Convertible Note matures on December 24, 2015 and has an interest rate of 8% per annum. The note may be converted into shares of common stock of the Company at any time beginning on the 180th day of the date of the note at a conversion price of 55% of the average of 2 lowest closing bid prices from the 10 days prior to conversion. Early payback penalties are 150% and payback is eligible up to 180 days from the inception of the note. This Convertible Note was repaid on June 24, 2015.

Vista Capital Investments, LLC

On December 29, 2014, the Company sold a Convertible Note in the principal amount of $110,000, 10% original issuance discount and advanced $50,000 on closing. The Convertible Note matures on December 29, 2015 and has a one-time interest charge of 12%. The note may be converted into shares of common stock of the Company at any time beginning on the 180th day of the date of the note at a conversion price of 60% of the lowest trading price from the 25 days prior to conversion or $1.00. Early payback penalties are 125% up to 90 days and 145% after 90 days. On April 23, 2015, Company borrowed an additional $25,000 against this Convertible Note. The $50,000 drawn on December 29, 2014 was repaid on June 26, 2015.

Typenex Co-Investments, LLC

On February 4, 2015, the Company sold a Convertible Note in the principal amount of $115,000 carrying a 10% original issuance discount (“OID”). The Convertible Note matures on January 4, 2016 and has an interest rate of 10% per annum. The note may be converted into common stock at an exercise price of $1.00 per share six months after the sale of the Note. The Company can repay the Note within the first six months at a penalty of 125% of principal amount. After six months, repayments can be made on an installment basis, either in cash (plus OID), or in shares of common stock. If installment payments are made in the form of common stock, the effective price for the stock issuance is at 70% of the average of the three lowest closing bid prices over a ten day look back period from the date the installment is due. The installments must be made on a monthly schedule if the lender does not convert at their option at the exercise price of $1.00 per share. At the funding date the Company issued 70,000 fixed price warrants at an exercise price of $1.00 per share with no price protection. The warrants were recorded at a value of $37,100 in additional paid-in capital (Note 8). The Company elected not to prepay the Typenex Co-Investment, LLC Convertible Note, and made its first installment payment of $25,096 in August 2015 comprising principal and interest.

Iconic Holdings, LLC

On February 9, 2015, the Company sold a Convertible Note with a face value of $220,000, carrying a 10% original issuance discount. $90,750 was advanced to the Company on closing of the Note. The Convertible Note matures on February 9, 2016 and has an interest rate on the principal balance of 10%. The note may be converted into shares of common stock of the Company at any time beginning on the 180th day of the date of the note at a conversion price of 60% of the lowest average daily trading price from the 25 days prior to conversion or 10 cents, whichever is lower. The Note carries early payback penalties on principal repayment which are 115% from 1-60 days, 125% between 61 and 120 days, 130% between 121 and 180 days, and may not be paid back after 180 days without consent from the Holder. During August 2015, the Company prepaid the portion of the convertible note advanced in February 2015 in the principal amount of $90,750. On June 24, 2015 and June 29, 2015, Iconic Holdings LLC, provided funding of $90,750 (two advances of $45,375) to the Company under the existing Convertible Note.

Group 10 Holdings LLC

On March 30, 2015, the Company sold a Convertible Note for the principal amount of $92,000 with a 10% original issue discount. The Convertible Note matures on March 30, 2016 and has an interest rate of 12% per annum. The note may be converted into shares of common stock of the Company at any time beginning on the 180th day of the date of the note at a conversion price of 55% of the average of the two lowest closing bid prices with a twenty day look back period as of the date a notice of conversion is given. The debenture may be paid back any time before maturity with a prepayment penalty of 123%. Subsequent to the quarter end the Company repaid this Convertible Note (note 12).

Vis Vires Group, Inc.

On April 15, 2015, the Company sold a Convertible Note for the principal amount of $69,000. The convertible note matures on January 6, 2016 and has an interest rate of 8% per annum. The note may be converted into shares of common stock of the Company at any time beginning on the 180th day of the date of the note at a conversion price of 58% of the average of the three lowest trading prices from previous ten trading days including the date notice is given. The Note may be paid back any time before maturity with a prepayment penalty of 110% if paid back within the first 30 days, 115% if paid back between 31 and 60 days, 120% if paid between 61 and 90 days, 125% if paid between 91 and 120 days, 130% if paid between 121 and 150 days, and 135% if paid back between 151 and 180 days after which it cannot be repaid. Subsequent to the quarter end the Company repaid this Note (note 12).

Adar Bays, LLC

On April 20, 2015, the Company sold a Convertible Note for the principal amount of $50,000. The convertible note matures on April 20, 2016 and has an interest rate of 8% per annum. The note may be converted into shares of common stock of the Company at any time beginning on the 180th day of the date of the note at a conversion price of 60% of the average of the three lowest trading prices from previous fifteen trading days. The Note may be paid back any time before maturity with a prepayment penalty of 140%.

Auctus Private Equity Fund, LLC

On April 23, 2015, the Company sold a Convertible Note for the principal amount of $60,500. The convertible note matures on January 21, 2016 and has an interest rate of 10% per annum. The note may be converted into shares of common stock of the Company at any time beginning on the 180th day of the date of the note at a conversion price of 60% of the average of the two lowest trading prices from previous twenty trading days. The Note may be paid back any time before maturity with a prepayment penalty of 130%.

The following table summarizes the fair values by fiscal quarter for issued convertible variable notes and the inputs to determine fair value at commitment date and quarter end dates.

Accounting allocation of initial proceeds:	Second Quarter Fiscal 2015			Third Quarter Fiscal 2015			Fourth Quarter Fiscal 2015			First Quarter Fiscal 2016
Gross proceeds	$	90,000		$	430,750		$	296,500		$	90,750
Fair value of promissory notes		(137,071	)		(656,507	)		(363,604	)		(171,990	)
Fair value of equity warrant		-			(37,100	)		-			-
Financing expense on the issuance of promissory notes	$	47,071		$	262,857		$	67,104		$	81,240

Key inputs to determine the fair value at the commitment date:
Stock price	$	0.40-1.20		$	0.50-0.70		$	0.50-0.60		$	0.60
Current exercise price	$	0.40-0.60		$	0.20-1.00		$	0.30		$	0.20
Time to expiration – days		389-436			181-365			250-366			225-230
Risk free interest rate		.1-.11	%		.14-.26	%		.09-.27	%		.30-.27	%
Estimated volatility		150	%		150	%		150	%		150	%
Dividend		-			-			-			-
Key inputs to determine the fair value at May 31, 2015:
Stock price	$	N/A		$	0.50		$	0.60		$	N/A
Current exercise price	$	N/A		$	0.30-1.00		$	0.30		$	N/A
Time to expiration – days		N/A			115-346			212-325			N/A
Risk free interest rate		N/A	%		.07-.22	%		.06-.26	%		N/A
Estimated volatility		N/A	%		150	%		150	%		150	%
Dividend		N/A			N/A			N/A			N/A
Key inputs to determine the fair value at August 31, 2015:
Stock price	$	N/A		$	N/A		$	0.80		$	0.80
Current exercise price	$	N/A		$	N/A		$	0.30-0.50		$	0.30
Time to expiration – days		N/A			N/A			120-233			162
Risk free interest rate		N/A	%		N/A	%		.08-.27	%		.27	%
Estimated volatility		N/A	%		N/A	%		176-205	%		193	%
Dividend		N/A			N/A			N/A			NA

Convertible Debentures with Series A and B Warrants

On January 29, 2014, February 27, 2014, and April 1, 2014, the Company issued 395, 305, and 469 Units for $395,000, $305,000, and $469,000 respectively, to accredited investors under subscription agreements. The Units, as defined in the subscription agreements, consist of (i) one unsecured 6% convertible promissory note, $100 par value, convertible into shares of the Company’s common stock; (ii) a warrant entitling the holder thereof to purchase 1,000 shares of common stock (individually Series A Warrant) at an exercise price of $1.50; and, (iii) a warrant entitling the holder thereof to purchase 1,000 shares of common stock (individually Series B Warrant) at an exercise price of $2.00. The purchase price for each Unit was $1,000 and resulted in a funding total of $1,069,000 in cash and the retirement of $100,000 debt obligation to a private investor (Note 4).

The Notes mature 24 months from the issuance date and have an interest rate of 6% per annum payable in arrears on the earlier of a default date or the maturity date. The Notes may be converted at any time after the original issuance date at the election of their holders to convert all or part of the outstanding and unpaid principal amount and accrued interest at a conversion price of $1.00 per share. Under the subscription agreement, the Company has granted price protection provisions that provide the holder of Series A warrants with a potential increase in the amount of common stock exchanged or a reduction in the exercise price of the instruments should the Company subsequently issue stock or securities convertible into common stock at a price lower than the stated exercise price of $1.50 for a period of twelve months from issuance. The Company determined the warrants issued to the Line of Credit lenders (Note 5) qualified as a breach of this covenant, therefore all Series A warrants were revalued to a $1.00 exercise price with the adjustment reflected as a change in the fair value. Any amount of principal or interest which is not paid when due, shall bear interest at the rate of 16% per annum from the date it is due.

As some of the instruments are considered derivatives and the assigned fair values were greater than the net cash proceeds from the transaction, the excess was treated as a financing expense on issuance of derivative instruments for accounting purposes and reported on the Company’s consolidated statements of operations and comprehensive income/(loss) below the operating income/(loss) as an “other expense”.

The following table summarizes the fair values of Convertible Debentures with Series A and B Warrants and the respective inputs to determine fair values at the commitment date and the quarter end dates.

Accounting allocation of initial proceeds:	January 29, 2014			February 27, 2014			April 1, 2014
Gross proceeds	$	395,000		$	305,000		$	469,000
Fair value of the convertible promissory notes		(320,787	)		(247,696	)		(665,511	)
Derivative warrant liability fair value – Series A (Note 9)		(161,950	)		(125,050	)		(776,664	)
Financing expense on the issuance of instruments	$	87,737		$	67,746		$	973,175

Key inputs to determine the fair value at the commitment date:
Stock price	$	0.50		$	0.50		$	1.80
Current exercise price – promissory notes	$	1.00		$	1.00		$	1.00
Current exercise price – Series A warrants	$	1.50		$	1.50		$	1.50
Time to expiration – days (promissory notes)		732			731			731
Time to expiration – days (warrants)		1,826			1,826			1,826
Risk free interest rate (promissory notes)		.32	%		.32	%		.32	%
Risk free interest rate (warrants)		1.52	%		1.51	%		1.74	%
Estimated volatility		150	%		150	%		150	%
Dividend		N/A			N/A			N/A
Market interest rate for the Company		18	%		18	%		18	%

Key inputs to determine the fair value of the promissory notes at May 31, 2015:
Stock price	$	N/A		$	N/A		$	N/A
Current exercise price	$	N/A		$	N/A		$	N/A
Time to expiration – days		243			272			306
Risk free interest rate		N/A	%		N/A	%		N/A	%
Estimated volatility		N/A	%		N/A	%		N/A	%
Dividend		N/A			N/A			N/A
Key inputs to determine the fair value of the promissory notes at August 31, 2015:
Stock price	$	N/A		$	N/A		$	N/A
Current exercise price	$	N/A		$	N/A		$	N/A
Time to expiration – days		153			181			214
Risk free interest rate		N/A	%		N/A	%		N/A	%
Estimated volatility		N/A	%		N/A	%		N/A	%
Dividend		N/A			N/A			N/A

Convertible Debentures with Series C or Series D Warrants

On April 23, 2014, the Company authorized and issued 50 Units for $50,000 to a private investor. The Units, as defined in the subscription agreement, consist of (i) one unsecured 6% convertible debenture, $100 par value convertible into shares of the Company’s common stock at a conversion price of $1.50 per share with a price protection clause on any conversion feature issued after the issuance date that mature on April 23, 2016; and (ii) a warrant entitling the holder thereof to purchase 33,333 shares of common stock (Series C Warrant) at a purchase price of $2.20 per share that expires on April 23, 2019.

On May 30, 2014, the Company authorized and issued 1,000 Units for $1,000,000 to Array Capital Corporation. The Units, as defined in the subscription agreement, consist of (i) one unsecured 6% convertible debenture, $100 par value convertible into shares of the Company’s common stock at a conversion price of $1.50 per share with a price protection clause on any conversion feature issued after the issuance date that matures on May 30, 2016; and (ii) a warrant entitling the holder thereof to purchase 666,667 shares of common stock (Series C Warrant) at a purchase price of $2.20 per share that expires on May 30, 2019.

On June 27, 2014, the Company authorized and issued two separate issues of 125 Units. This total authorized and issuance of 250 Units, at a value of $250,000, was to two independent accredited investors in exchange for $150,000 in cash and release of $90,777 (Canadian $100,000) in the loan originated on January 7, 2014 as described in Note 4. The Units, as defined in the subscription agreement, consist of (i) one unsecured 6% convertible debenture, $100 par value convertible into shares of the Company’s common stock at a conversion price of $1.50 per share with a price protection clause on any conversion feature issued after the issuance date that matures on June 27, 2016; and (ii) a warrant entitling the holder thereof to purchase 166,667 shares of common stock (Series C Warrant) at a purchase price of $2.20 per share that expires on June 27, 2019.

On September 2, 2014, the Company authorized and issued three separate issues of 25, 75, and 25 Units. This total authorized and issuance of 125 Units, at a value of $125,000, was to three independent accredited investors in exchange for $125,000 in cash proceeds (see note 4). The Units, as defined in the subscription agreement, consist of (i) one unsecured 6% convertible debenture, $100 par value convertible into shares of the Company’s common stock at a conversion price of $1.50 per share with a price protection clause on any conversion feature issued after the issuance date that matures on September 2, 2016; and (ii) a warrant entitling the holder thereof to purchase 83,333 shares of common stock (Series C Warrant) at a purchase price of $2.20 per share that expires on September 2, 2019.

On October 6, 2014, the Company authorized and issued 50 Units for $50,000 to Subtle Disruption in exchange for the settlement of $50,000 in trade payables. The Units, as defined in the subscription agreement, consist of (i) one unsecured 6% convertible debenture, $100 par value convertible into shares of the Company’s common stock at a conversion price of $1.50 with a price protection clause on any conversion feature issued after the issuance date that matures on October 6, 2016; and (ii) a warrant entitling the holder thereof to purchase 33,333 shares of common stock (Series D Warrant) at a purchase price of $2.20 per share that expires on October 6, 2019.

On October 27, 2014, the Company authorized and issued 50 Units for $50,000 to IBEC Holdings Inc. The Units, as defined in the subscription agreement, consist of (i) one unsecured 6% convertible debenture, $100 par value convertible into shares of the Company’s common stock at a conversion price of $1.50 with a price protection clause on any conversion feature issued after the issuance date that matures on October 6, 2016; and (ii) a warrant entitling the holder thereof to purchase 33,333 shares of common stock (Series D Warrant) at a purchase price of $2.20 per share that expires on October 27, 2019.

The debentures mature 24 months from the issuance date and have an interest rate of 6% per annum payable in arrears on the earlier of a default date or the maturity date. The notes may be converted at any time after the original issuance date at the election of their holders to convert all or part of the outstanding and unpaid principal amount and accrued interest at a conversion price of $1.50 per share. The warrants may be exercised in whole or in part.

Due to the Company’s breach of the authorization limit of common stock on a diluted basis on August 14, 2014, the Company initially classified the above noted warrants issued since this date as financial liabilities, which would otherwise be recorded as equity instruments and classified as part of additional paid in capital. All derivatives other than stock options issuable into common stock were to be classified and accounted for as financial liabilities (see note 1 for applicable accounting policies) until the breach of the Company’s authorization limit of common stock on a diluted basis was rectified. On December 31, 2014 the Company increased its authorized share issuance limit to 400,000,000 which rectified the breach. The accounting impact of the August 14, 2014, breach only occurred under the earliest issue date sequencing approach at the date of the next issued applicable derivative, which was September 2, 2014. On December 31, 2014 all derivatives impacted by the Company’s breach of its authorized share limit were reclassified to equity from liabilities.

The following table summarizes the fair values of Convertible Debentures with Series C or Series D Warrants and the respective inputs to determine fair values at the commitment date and the quarter end dates.

Accounting allocation of initial proceeds:	Fourth Quarter Fiscal 2014			First Quarter Fiscal 2015			Second Quarter Fiscal 2015
Gross proceeds	$	1,050,000		$	250,000		$	225,000
Fair value of the convertible debentures		(852,726	)		(254,167	)		(182,720	)
Fair value of liability warrants		-			-			(152,951	)
Fair value of equity warrants		(197,274	)		-			-
Financing expense on the issuance of derivative instruments	$	-		$	4,167		$	110,671

Key inputs to determine the fair value at the commitment date:
Stock price	$	1.50-1.60		$	2.00		$	N/A
Current exercise price	$	1.50		$	1.50		$	N/A
Time to expiration – days		731			731			N/A
Risk free interest rate		.37	%		.45	%		N/A	%
Estimated volatility		150	%		150	%		N/A	%
Dividend		-			-			-
Market interest rate for the Company		18	%		18	%		N/A	%
Key inputs to determine the fair value of the convertible debentures at May 31, 2015:
Stock price	$	N/A		$	N/A			N/A
Current exercise price	$	N/A		$	N/A			N/A
Time to expiration – days		328-365			393			460-515
Risk free interest rate		N/A	%		N/A	%		N/A	%
Estimated volatility		N/A	%		N/A	%		N/A	%
Dividend		N/A			N/A			N/A
Market interest rate for the Company		N/A	%		N/A	%		N/A	%
Key inputs to determine the fair value of the convertible debentures at August 31, 2015:
Stock price	$	N/A		$	N/A		$	N/A
Current exercise price	$	N/A		$	N/A		$	N/A
Time to expiration – days		236-273			301			368-423
Risk free interest rate		N/A	%		N/A	%		N/A	%
Estimated volatility		N/A	%		N/A	%		N/A	%
Dividend		N/A			N/A			N/A
Market interest rate for the Company		N/A	%		N/A	%		N/A	%

7. Common Stock

On September 3, 2014, and September 16, 2014, the Company issued 27,000 and 84,170 shares to JMJ Financial as a result of the settlement and conversion of the convertible note with a principal amount of $40,000 dated November 15, 2013 (Note 6).

On October 23, 2014, November 5, 2014 and November 20, 2014, the Company issued 45,000, 70,000 and 81,641 shares respectively to JMJ Financial as a result of the settlement and conversion of $40,000 of principal amount, representing a portion of the convertible note dated November 15, 2013 (Note 6).

On December 31, 2014, the Company’s authorized number of common shares was increased to 400,000,000.

During the Company’s second quarter of Fiscal 2015, the Company issued 95,000 shares of common stock to consultants at a value of $95,000. During the Company’s third quarter of Fiscal 2015, the Company issued 80,000 shares of common stock to consultants at a value of $80,000. During the Company’s fourth quarter of Fiscal 2015, the Company issued 54,000 shares of common stock to consultants at a value of $52,500.

On May 25, 2015, the Company issued 100,000 shares of common stock with a value of $80,000 in partial settlement of an amount owing to a vendor of the Company.

On August 31, 2015 the Company issued 11,667 shares of common stock in the form of a cashless exercise with a previous allocation to equity of $37,100 in full settlement of warrants issued to Typenex (Note 6).

From April 9, 2014 through February 3, 2015, various holders of convertible preferred stock exercised their right to convert to common stock. A total of 936,000 shares of convertible preferred stock were converted into common stock (Note 8).

On July 6, 2015, the Company announced it had entered into an agreement with Ortsbo Inc. to acquire all of its intellectual property assets. The purchased assets include US Patent No. 8,983,850 B2, US Patent No. 8,917,631 B2, US Patent No. 9,053,097 B2, and other intellectual property including Ecommerce and Customer Care know-how for a total purchase price of US $17 Million, which will be paid by the assumption of US $1 Million in debt and the issuance of US $16 Million worth of Yappn restricted common shares (32 Million shares at US $0.50 per share). This transaction was closed subsequent to the Company’s quarter end (note 12).

Registration Statement

The Company filed a Registration Statement on Form S-1 (File No. 333-199569) (the “ Registration Statement ”) with the Securities and Exchange Commission (the “ SEC ”) for up to 7,592,667 shares of Yappn Corp.’s $0.0001 par value per share common stock (the "Common Stock") issuable to certain selling stockholders upon conversion of promissory notes and/or warrants currently held by those selling stockholders, specifically (i) 1,844,000 shares of Common Stock issuable to them upon exercise of promissory notes and (ii) 4,588,000 shares of Common Stock issuable to them upon exercise of warrants. The warrants have an exercise price varying from $1.00 to $2.20 per share (subject to adjustment). The Registration Statement covering the above noted shares was declared effective under the Securities Act of 1933 on November 17, 2014. Subsequent to quarter end, the Company filed a continuing registration statement in part to update to this S-1 filing (note 12).

As part of the contractual rights of certain existing convertible debenture holders, the Company finalized its calculation of shares to be issued in association with the timing of filing its Registration Statement noted above. This resulted in a value of shares to be issued in the amount of $124,567.

8. Preferred Stock and Warrants

Series A Preferred Stock

The Company has an authorized limit of 50,000,000 shares of preferred stock, par value $0.0001.

The following table reflects the preferred stock activity for the year ended May 31, 2015 and three month period ended August 31, 2015:

	Preferred Stock
Total – as of May 31, 2014		201,000
Conversion of preferred stock into common stock		(201,000	)
Total – as of May 31, 2015 and August 31, 2015		-

The 201,000 preferred shares were exchanged into common shares on February 3, 2015 at a conversion value of $201,000.

Warrants

Subscription Agreement with Series A Preferred Shares

On March 28, 2013, May 31, 2013 and June 7, 2013, the Company issued a total of 936,000 five year warrants as part of a Unit under subscription agreements that included Series A preferred shares with full ratchet anti-dilution protection provisions. The price protection provisions were effective for twelve months from date of issuance.

On November 15, 2013, the Company issued 12,000 warrants under the same full ratchet anti-dilution provisions as the other warrants, to a broker as compensation for a portion of the private placement made on May 31, 2013 for these Units.

Series A, B, C and D Warrants

On January 29, 2014, February 27, 2014, and April 1, 2014, the Company issued 395 Series A and Series B warrants, 305 Series A and Series B warrants, and 469 Series A and Series B warrants, respectively, with unsecured 6% convertible promissory notes (Note 6), as part of the defined offered Unit under the subscription agreements on those respective dates. Each Series A warrant entitles the holder thereof to purchase 1,000 shares of common stock for a purchase price of $1.00 per share after the re-pricing of the instruments took place. Each Series B warrant entitles the holder thereof to purchase 1,000 shares of common stock for a purchase price of $2.20 per share.

The Series A and Series B warrants permit cashless exercise beginning with the effective date unless and until a registration statement covering the resale of the shares underlying the warrants is effective with the Securities and Exchange Commission. The Series A warrants, for a period of twelve months from the original date of issuance, provide full ratchet price protection provisions and as such are treated as a derivative liability at the commitment date and until such provisions expire being January 29, 2015 February 27, 2015 and April 1, 2015, respectively. The Series B warrants do not provide any price protection provisions and therefore are treated as equity instruments at the commitment date and thereafter. Both the Series A and Series B warrants have a five year life.

During the fourth quarter of Fiscal 2014, the Company authorized and issued Series C warrants to acquire 33,333 and 666,667 shares of common stock on April 23, 2014 and May 30, 2014, respectively, to accredited investors with unsecured 6% convertible debenture, $100 par value, convertible into shares of the Company’s common stock at a conversion price of $1.50 per share, with a one year price protection clause on any conversion feature issued after the issuance date, that matures on April 23, 2016 and May 30, 2016 respectively. The Series C warrants entitle the holder thereof to purchase shares of common stock at a purchase price of $2.20 per share and have a five year life. The Series C warrants do not provide any price protection provisions and therefore are treated as equity instruments at the commitment date and thereafter.

During the first quarter of Fiscal 2015, the Company authorized and issued two separate issues of 125 Units on June 27, 2014. This total authorized and issuance of 250 Units, at a value of $250,000, was to two independent accredited investors in exchange for $150,000 in cash and release of $100,000 in the loan originated on January 7, 2014 as described in Note 6. The Units, as defined in the subscription agreement, consist of (i) one unsecured 6% convertible debenture, $100 par value convertible into shares of the Company’s at a common stock conversion price of $1.50 per share, with a one year price protection clause on any conversion feature issued after the issuance date, that matures on June 27, 2016; and (ii) a warrant entitling the holder thereof to purchase 166,667 shares of common stock (Series C Warrant) at a purchase price of $2.20 per share that expires on June 27, 2019.

During the second quarter of Fiscal 2015, the Company authorized and issued Series C warrants to acquire 83,333 shares of common stock on September 2, 2014 and issued Series D warrants to acquire 33,333 and 33,333 shares of common stock on October 6, 2014, and October 27, 2014 respectively, to accredited investors. The Units, as defined in the subscription agreement, consist of (i) one unsecured 6% convertible debenture, $100 par value convertible into shares of the Company’s common stock at a conversion price of $1.50 per share, with a one year price protection clause on any conversion feature issued after the issuance date, that matures on September 2, 2016, October 6, 2016, and October 27, 2016 respectively; and (ii) a warrant entitling the holder thereof to purchase 166,667 shares of common stock (Series D Warrant) at a purchase price of $2.20 per share that expires on September 2, 2016, October 6, 2016, and October 27, 2016 respectively. The Series D warrants do not provide any price protection provisions and therefore should be treated as equity instruments at the commitment date and thereafter; however these warrants were originally recorded as liabilities as the Company breached its authorized share limit on a diluted basis, which required any additional warrants that otherwise would have been recorded as equity instruments to be recorded as liability instruments. On December 31, 2014, the Company rectified its breach of authorized share limit and the warrants were reclassified to equity.

Line of Credit Arrangement

Pursuant to the loan agreement and promissory note entered on April 7, 2014 (Note 5), the Company issued the lender warrants to purchase up to 800,000 shares of the Company’s common stock at an exercise price of $1.00 per share.

The following is a summary of warrants issued, exercised and expired through August 31, 2015:

	Shares Issuable Under Warrants			Exercise Price		Expiration
Outstanding as of May 31, 2012		-			-	-
Issued on March 28, 2013		401,000		$	1.00	March 28, 2018
Issued on May 31, 2013		370,000		$	0.54	May 31, 2018
Exercised and expired		-			-	-
Total – as of May 31, 2013		771,000			-	-
Issued on June 7, 2013		165,000		$	0.54	June 7, 2018
Issued on November 15, 2013		12,000		$	1.00	November 15, 2018
Issued Series A warrants on January 29, 2014		395,000		$	1.00	January 29, 2019
Issued Series B warrants on January 29, 2014		395,000		$	2.00	January 29, 2019
Issued Series A warrants on February 27, 2014		305,000		$	1.00	February 27, 2019
Issued Series B warrants on February 27, 2014		305,000		$	2.00	February 27, 2019
Issued Series A warrants on April 1, 2014		469,000		$	1.00	April 1, 2019
Issued Series B warrants on April 1, 2014		469,000		$	2.00	April 1, 2019
Issued to Lender – Line of Credit		800,000		$	1.00	April 7, 2019
Issued Series C warrants on April 23, 2014		33,333		$	2.20	April 23, 2019
Issued Series C warrants on May 30, 2014		666,667		$	2.20	May 30, 2019
Exercised and expired		-
Total – as of May 31, 2014		4,786,000
Issued Series C warrants on June 27, 2014		166,667		$	2.20	June 27, 2019
Issued Series C warrants on September 2, 2014		83,333		$	2.20	September 2, 2019
Issued Series D warrants on October 6, 2014		33,333		$	2.20	October 6, 2019
Issued Series D warrants on October 27, 2014		33,333		$	2.20	October 27, 2019
Issued warrants – consultants		330,000		$	1.50	May 30, 2019
Issued Warrants on February 4, 2015 Typenex Co-Investments, LLC		70,000		$	1.00	February 4, 2020
Issued Warrants – consultant		5,000		$	1.00	May 31, 2017
Issued Warrants – consultant		15,000		$	1.50	May 31, 2017
Exercised and expired		-
Total – as of May 31, 2015		5,522,667
Exercised Warrants Typenex Co-Investments, LLC		(70,000	)	$	1.00
Total – as of August 31, 2015		5,452,667

The outstanding warrants at August 31, 2015 and May 31, 2015 have a weighted average exercise price of approximately $1.40 for both periods and have an approximate weighted average remaining life of 3.5 and 3.7 years, respectively.

The price protection provisions of those warrants issued as part of the Series A Preferred Stock subscription prior to May 31, 2013, have expired and, as such, the instruments issued on March 28, 2013 are recognized as equity instruments. The price protection provisions of the Series A warrants issued as part of the January 29, 2014 and February 28, 2014 convertible debenture financing have expired, and as such, these warrants are now recognized as equity instruments. The Series B warrants, Series C warrants, and warrants associated with the Line of Credit arrangement do not provide the holder any price protection, and as there is no variability in the determination of common stock, these warrants are also reflected as equity instruments.

The Company issued warrants to two separate consulting firms in the amount of 200,000 and 130,000 respectively included in consulting expense on October 6, 2014 with an exercise price of $1.50 both with expiry dates of May 30, 2019.

The Company issued warrants to a consultant in the amount of 5,000 at an exercise price of $1.00 and 15,000 with an exercise price of $1.50, both with expiry dates of May 31, 2017.

The following table is a summary of those warrants that are reflected in equity as at August 31, 2015:

	Shares Issuable Under Warrants		Equity Value
Issued warrants on March 28, 2013		401,000	$	917,087
Issued warrants on May 31, 2013		370,000		543,530
Issued warrants on June 7, 2013		165,000		211,670
Issued Series A warrants on January 29, 2014		395,000		397,895
Issued Series B warrants on January 29, 2014		395,000		-
Issued Series A warrants on February 27, 2014		305,000		224,135
Issued Series B warrants on February 27, 2014		305,000		-
Issued Series A warrants on April 1, 2014		469,000		234,969
Issued Series B warrants on April 1, 2014		469,000		-
Issued to Loan Agreement - Credit Line		800,000		1,495,200
Issued Series C warrants on April 23, 2014		33,333		9,395
Issued Series C warrants on May 30, 2014		666,667		187,574
Issued Series C warrants on June 27, 2014		166,667		-
Issued Series C warrants on September 2, 2014		83,333		38,584
Issued Series D warrants on October 6, 2014		33,333		15,567
Issued Series D warrants on October 27, 2014		33,333		15,667
Warrants issued to consultants		330,000		165,330
Issued warrants on November 30, 2013		12,000		3,744
Issued warrants on May 31, 2015		20,000		3,960
Total – as of August 31, 2015		5,452,667	$	4,464,307

9. Warrant Liabilities

The Company has determined derivative warrant liabilities are Level 2 fair value measurement and has used the binominal lattice pricing model to calculate the fair value as at each reporting period in fiscal 2015 and prior to expiry. The binomial lattice model requires six basic data inputs: the exercise or strike price, time to expiration, the risk free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate.

The following is a summary of the derivative warrant liability as at August 31, 2015 and May 31, 2015:

	Shares Issuable Under Warrants			Derivative Warrant Value
Balance as of June 1, 2013		771,000		$	4,050,278
Warrants issued June 7, 2013		165,000			1,146,915
Warrants issued November 15, 2013		12,000			9,636
Series A warrants issued on January 29, 2014		395,000			161,950
Series A warrants issued on February 27, 2014		305,000			125,050
Series A warrants issued on April 1, 2014		469,000			776,664
Warrants reclassified to equity (price protection expiry)		(401,000	)		(917,087	)
Warrants exercised or expired		-			-
Decrease in fair value of derivative warrant liability		-			(2,822,124	)
Balance as of May 31, 2014		1,716,000			2,531,282
Warrants reclassified to equity (price protection expiry and authorized share limit increase Notes 7 and 8)		(1,716,000	)		(1,851,090	)
Warrants exercised or expired		-			-
Decrease in fair value of derivative warrant liability		-			(680,192	)
Balance as of May 31, 2015 and August 31, 2015		-		$	-

For the three months ended August 31, 2015 and August 31, 2014, the revaluation of the warrants at each reporting period resulted in the recognition of a gain of $nil and $492,969 respectively within the Company’s consolidated statements of operations and comprehensive income/(loss) and is included under the caption “Change in fair value of derivative liabilities and convertible notes”. The fair value of the warrants at August 31, 2015 and August 31, 2014 was $nil and $1,283,113 respectively.

10. Employee Benefit and Incentive Plans

On August 14, 2014, the Board of Directors approved the adoption of the 2014 Stock Option Plan. The Company completed its first grant of stock options immediately after the plan was approved. The Company completed a second grant of stock options on March 2, 2015. The following table outlines the options granted and related disclosures:

	Stock Options		Weighted- Average Exercise Price
Outstanding (Granted all in Fiscal 2015)		1,804,500	$	1.00
Exercised		-		-
Cancelled, forfeited or expired		-		-
Outstanding at August 31, 2015		1,804,500	$	1.00
Options exercisable at August 31, 2015		1,181,167	$	1.00
Fa ir value of options vested as at August 31, 2015	$	907,200		-

On August 21, 2015, the Company amended its 2014 Stock Option Plan to increase the number of options available to 2,500,000.

As at August 31, 2015, vested and exercisable options do not have any intrinsic value and have a weighted-average remaining contractual term of 3.2 years. It is expected the 623,333 unvested options will ultimately vest, and each has an exercise price of $1.00 per share and a weighted average remaining term of 2.2 years. The aggregate intrinsic value of options represents the total pre-tax intrinsic value, the difference between our closing stock price as at August 31, 2015 and the option’s exercise price, for all options that are in the money. This value was $nil as at August 31, 2015.

As at August 31, 2015, there is $426,756 of unearned stock based compensation cost related to stock options granted that have not yet vested (623,333 options). This cost is expected to be recognized over a remaining weighted average period of 0.7 years.

710,000 of the stock options granted on August 14, 2014 vest 1/3 immediately, 1/3 after one year and 1/3 after two years. 15,000 options vest contingent on revenue targets, and 15,000 options have vested on April 1, 2015. The remaining options all have immediate vesting terms. 520,000 of the stock options granted on March 2, 2015 vest 1/3 immediately, 1/3 after one year and 1/3 after two years. 50,000 vest 1/2 immediately and 1/2 after one year. The remaining options all have immediate vesting terms.

The estimated fair value of options granted on August 14, 2014 is measured using the binomial model using the following assumptions:

Total number of shares issued under options		1,047,000
Stock price	$	1.00
Exercise price	$	1.00
Time to expiration – days (2 year options)		730
Time to expiration – days (5 year options)		1,826
Risk free interest rate (2 year options)		.42	%
Risk free interest rate (5 year options)		1.58	%
Forfeiture rate (all options)		0	%
Estimated volatility (all options)		150	%
Weighted-average fair value of options granted		0.90
Dividend		-

The estimated fair value of options granted on March 2, 2015 is measured using the binomial model using the following assumptions:

Total number of shares issued under options		757,500
Stock price	$	0.60
Exercise price	$	1.00
Time to expiration – days (2 year options)		730
Time to expiration – days (5 year options)		1,826
Risk free interest rate (2 year options)		.66	%
Risk free interest rate (5 year options)		1.57	%
Forfeiture rate (all options)		0	%
Estimated volatility (all options)		150	%
Weighted-average fair value of options granted		0.50
Dividend		-

The assumptions used in the stock based compensation binomial models are consistent with the methodology used in valuing the Company’s convertible debt instruments with two year lives, and the Company’s warrants with five year lives. Due to a lack of history, the Company has assumed the expected life of the options, is the contractual life of the options.

11. Related Party Balances and Transactions

On March 28, 2013, the Company purchased the Yappn assets from Intertainment Media, Inc. in consideration for 7,000,000 shares of common stock for a controlling 70 percent interest (as of that date, 52.1% as at August 31, 2015) in the Company. At this time, The Chief Executive Officer and director of the Company, David Lucatch, is the Chief Executive Officer and director of Intertainment Media, Inc. and Herb Willer is a director of both the Company and Intertainment Media, Inc.

On March 28, 2013, as part of the assets purchased, the Company also assumed a technology services agreement with Ortsbo Inc. (“Ortsbo”), a wholly-owned subsidiary of Intertainment Media, Inc. Mr. Lucatch is also the president and a member of the Board of Directors of Ortsbo, Inc. Mr. Lucatch is also a member of the Board of Directors of Ortsbo USA, Inc. The service agreement requires the Company to pay cost plus thirty percent (30%) for actual cost incurred by Ortsbo in providing technology services. In addition, the Company shall pay to Ortsbo an ongoing revenue share which shall equal seven percent (7%) of the gross revenue generated by the Company’s activities utilizing the technology.

On October 23, 2013, the Company and Ortsbo, entered into an amendment to the Services Agreement dated March 21, 2013 for an exclusive license to use the Ortsbo property and an option to purchase a copy of the Ortsbo source code in exchange for 166,667 shares of restricted common stock of the Company. The shares of common stock were valued at the market price on the date of the agreement for a value of $133,333. On April 28, 2014, the Company exercised its right to purchase a copy of the source code for the Ortsbo property in exchange for 1,333,333 shares of restricted common stock. Since both the Company and Ortsbo are under the common control of Intertainment Media, Inc., and as Ortsbo’s carrying value for these assets was $nil, the Company reflected the acquisition value at $nil on the consolidated balance sheet. As of August 31, 2015, Ortsbo holds 1,500,000 restricted shares of common stock of the Company (see note 7 and 12).

Services provided by Intertainment Media, Inc. personnel are invoiced on a per hour basis at a market rate per hour as determined by the type of activity and the skill set provided. Costs incurred by Intertainment Media, Inc. on behalf of the Company for third party purchases are invoiced at cost.

For the three month period ended August 31, 2015, related party fees incurred and paid for general development and managerial services performed by Intertainment Media, Inc. and its subsidiary totaled $83,646 ($425,573 – August 31, 2014). As of August 31, 2015 the related party liability balance totaled $275,151 ($468,766 – May 31, 2015).

12. Subsequent Events

Intellectual Property Asset purchase

On September 15, 2015, the Company finalized its purchase of Intellectual property assets of Ortsbo pursuant to the Asset Purchase Agreement signed on July 15, 2015. With this closing, the Company has an obligation to issue 31,987,000 shares of common stock of Yappn (previously estimated at 32 million). Yappn also assumed $975,388 of debt as part of the transaction (previously estimated to be $1 million). This assumed debt was immediately subscribed as part of the secured debenture in Yappn. The final purchase price for the acquisition of Intellectual property from Ortsbo was $16,968,888.

In connection with the terms of the Asset Purchase Agreement related to the purchase of Intellectual property assets of Ortsbo, the Company committed to complete a share consolidation as described in Note 7. On September 9, 2015, Yappn Corp. amended its Certificate of Incorporation to implement a reverse stock split in the ratio of 1 share for every 10 shares of common stock. This amendment was approved and filed of record by the Delaware Secretary of State on September 9, 2015. FINRA declared the Company’s 1-for-10 reverse stock split ex-dividend date to be effective as of October 2, 2015. The reverse stock split will reduce the Company’s common stock outstanding from approximately 134,344,806 shares to approximately 13,434,481 shares. The effects of this reverse stock split has been reflected in these interim financial statements.

Registration Statement

On October 5, 2015, the Company filed a Registration Statement on Form S-1 which is a continuation of the registration statement (File No. 333-199569) (the “Registration Statement”) of Yappn Corp. filed on October 24, 2014, amended on November 7, 2014 and declared effective on November 17, 2014.

The original Registration Statement covered the resale of up to 7,618,334 shares of the Company’s common stock (given the effect of the ten for one reverse split). The filing covers the same offering as the prior Registration Statement but includes holders of additional warrants (included in the list of Selling Shareholders) which were not included in the original Registration Statement. While the total number of shares of common stock registered in the Registration Statement, given effect to the reverse stock split, equals the total number of shares of common stock in the prior Registration Statement, the continuing Registration Statement includes additional securities of the same class in an amount that is greater than 20 percent of the maximum aggregate offering price for such class of securities (specifically the Warrants) and exceeds the amount permitted for a Post-Effective Amendment pursuant to Rule 462(b) of the Securities Act of 1933. In addition, the Continuing Registration statement was filed to provide more recent financial statements.

Typenex

Subsequent to quarter end, the Company made two instalment payments totaling $39,803 against the outstanding principal plus accrued interest. See Note 6.

Group 10

On October 6, 2015, the Company paid $120,191 to settle in full the outstanding balance of the $92,000 convertible note advanced on March 31, 2015 including original issuance discount, interest and prepayment penalties as described in Note 6.

Vis Vires

On October 12, 2015, the Company paid $96,825 to settle in full the outstanding balance of the $69,000 convertible note advanced on April 15, 2015 plus accrued interest and prepayment penalties as described in Note 6.

Advances on Secured Debentures

Subsequent to quarter end, the Company received short term loans in the amount of $500,000 which are intended to be converted into a secured debenture financing once terms are finalized and the debenture financing closed.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Unless otherwise indicated, references in this Quarterly Report on Form 10-Q to “we,” “Yappn,” “us,” and “our” are to Yappn Corp., unless the context requires otherwise. The following discussion and analysis by our management of our financial condition and results of operations should be read in conjunction with our unaudited Interim Condensed interim financial statements and the accompanying related notes included in this quarterly report and our audited financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended May 31, 2015 filed with the Securities and Exchange Commission.

Forward Looking Statements

The discussion contained in this Quarterly Report on Form 10-Q (“Quarterly Report”) contains “forward-looking statements” within the meaning of Section 27A of the United States Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the United States Securities Exchange Act of 1934, as amended, or the Exchange Act. Any statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases like “anticipate,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “target,” “expects,” “management believes,” “we believe,” “we intend,” “we may,” “we will,” “we should,” “we seek,” “we plan,” the negative of those terms, and similar words or phrases. We base these forward-looking statements on our expectations, assumptions, estimates and projections about our business and the industry in which we operate as of the date of this Quarterly Report. These forward-looking statements are subject to a number of risks and uncertainties that cannot be predicted, quantified or controlled and that could cause actual results to differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. Statements in this Quarterly Report describe factors, among others, that could contribute to or cause these differences. Actual results may vary materially from those anticipated, estimated, projected or expected should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect. Because the factors discussed in this Quarterly Report could cause actual results or outcomes to differ materially from those expressed in any forward-looking statement made by us or on our behalf, you should not place undue reliance on any such forward-looking statement. New factors emerge from time to time, and it is not possible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available after the date of this Quarterly Report or the date of documents incorporated by reference herein that include forward-looking statements.

Management’s Discussion and Analysis of Results of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with our financial statements included herein. Further, this quarterly report on Form 10-Q should be read in conjunction with our Financial Statements and Notes to Financial Statements included in our Annual Report on Form 10-K for the year ended May 31, 2015, filed with the Securities and Exchange Commission on August 26, 2015. Our actual results could differ materially from those anticipated by the forward-looking statements due to important factors and risks including, but not limited to, those set forth under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K.

Business History

We were originally incorporated under the laws of the State of Delaware on November 3, 2010 under the name of “Plesk Corp.” Our initial business plan was to import consumer electronics, home appliances and plastic house wares. In March 2013, we filed an amended and restated certificate of incorporation to change our name to “YAPPN Corp.” and increase our authorized capital stock to 200,000,000 shares of common stock, par value $0.0001 per share and 50,000,000 shares of preferred stock, par value $0.0001 per share. Further, in March 2013, our Board of Directors declared a stock dividend, whereby an additional 14 shares of our common stock was issued for each one share of common stock outstanding to each holder of record on March 25, 2013. All per share information in this report reflect the effect of such stock dividend. On December 22, 2014, our shareholders approved the increase of authorized and issued shares of common stock to 400,000,000 shares of common stock. We filed an amendment with the State of Delaware to affect this change which was accepted effective December 31, 2014.

On March 28, 2013, we purchased a prospective social media platform and related group of assets known as Yappn (“Yappn”) from Intertainment Media, Inc. (“IMI”), a corporation organized under the laws of Canada, for 7,000,000 shares of our common stock, pursuant to an asset purchase agreement (the “Purchase Agreement” and the transaction, the “Asset Purchase”) by and among IMI, us, and our newly formed wholly owned subsidiary, Yappn Acquisition Sub., Inc., a Delaware corporation (“Yappn Sub”). Mr. David Lucatch, our Chief Executive Officer and a director, is the Chief Executive Officer of IMI. IMI, as a result of this transaction has a controlling interest in our company. Included in the purchased assets is a services agreement (the “Services Agreement”) dated March 21, 2013 by and among IMI and its wholly owned subsidiaries Ortsbo, Inc., a corporation organized under the laws of Canada (“Ortsbo Canada”), and Ortsbo USA, Inc., a Delaware corporation (“Ortsbo USA” and, collectively with Ortsbo Canada, “Ortsbo”). Ortsbo is the owner of certain multi-language real time translation intellectual property that we believe is a significant component of the Yappn business opportunity. On July 6, 2015, Yappn entered into a definitive agreement to acquire all of the intellectual property assets of Ortsbo (see “The Services Agreement” below).

Immediately following the Asset Purchase, under the terms of an Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations, we transferred all of our pre-Asset Purchase assets and liabilities (consisting of our former business of import consumer electronics, home appliances and plastic house wares ) to our wholly owned subsidiary, Plesk Holdings, Inc., a Delaware corporation. Thereafter, pursuant to a stock purchase agreement, we transferred all of the outstanding capital stock of Plesk Holdings, Inc. to certain of our former shareholders in exchange for cancellation of an aggregate of 11,250,000 shares of our common stock held by such persons.

Our principal executive offices are located at 1001 Avenue of the Americas, 11th Floor, New York, NY 10018 and our telephone number is (888) 859-4441. Our website is http://www. yappn.com (which website is expressly not incorporated into this filing).

Our Business

Our company is a real-time multilingual company that amplifies brand and social messaging, expands online commerce and provides customer support by globalizing these experiences with its proprietary technologies, solutions and linguistic computational approach to language service and engagement in a cost effective way. Through our real-time multilingual amplification platform, we eliminate the language barrier, allowing the free flow of communications in 67 languages to support brand and individuals’ marketing objectives, commerce revenue goals and customer support objectives by making language universal for all fans and consumers.

Focused on delivering global reach and efficiencies without the primary need of human intervention, these services are increasingly becoming essential for companies to conduct business online, as English is no longer the language of the Internet. According to InternetWorldStats.com, as of December 2014, there were over 3 billion Internet users and over 73% engage online in a language other than English. The US Census released by the Center of Immigration Studies last October, 2014 cites that in 2013, a record 61.8 million U.S. residents spoke a language other than English at home, which means that approximately one in five U.S. residents speaks a language other than English, representing a 32% increase from 2010 and almost a 94% increase since 1990.

Our offerings engage through all phases of Ecommerce, online events, and content programming. Through our recently launched Windrose Global Ecommerce framework (“WGE”), we provide an end-to-end multilingual Ecommerce solution for companies of all sizes. Covering everything from pre to post sale, WGE’s proprietary suite includes all the tools for multilingual marketing (advertising), shopping (store, catalog, shopping cart and check-out) and customer support.

Our cloud-based platform is built from the ground up upon our company’s first-in-class technology that automatically detects an online or mobile user’s language. WGE completes the process through advanced technology to understand the meaning and interpretation of a message to seamlessly return a translation that is reflective of the meaning and spirit of the message.

Our WGE technology is, in managements’ opinion, a game changing solution that can help a retailer revolutionize their business quickly and cost effectively. By interfacing with a retailer’s existing Ecommerce solution, we can assist the E-tailer to greatly expand their global reach by presenting and promoting their store as well as supporting sales in multiple languages. An E-tailer no longer has to be constrained to whom they can sell to because of language.

We derive our revenue from a percentage of each sale and/or through professional services fees, when applicable, depending on the application and installation of its offerings. We redefine global social marketing by providing a set of stand-alone commercial tools for brands to easily implement cost effective globalization solutions as they are complementary, not competitive, to today’s top social media networks such as Twitter, Facebook, Pinterest, Instagram, Flickr and YouTube, web, mobile, video players, blogs, online broadcasting, private networks, event virtualization and Ecommerce platforms.

Continued expansion of our business rollout will likely require additional debt or equity financing and there can be no assurance that additional financing can be obtained on acceptable terms. Was are in the early stage of commercialization, and management believes that we have insufficient revenues to cover our operating costs. As such, we have incurred an operating loss since inception. This and other factors raise substantial doubt about our ability to continue as a going concern. Our continuation as a going concern is dependent on our ability to meet our obligations, to obtain additional financing as may be required, and ultimately to attain profitability. Our independent auditors have included an explanatory paragraph, in their audit report on our financial statements for the fiscal year ended May 31, 2015 regarding concerns about our ability to continue as a going concern. Footnote 2 to the Notes to this Form 10-Q Report also discusses concerns about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Our Strategy

The Yappn Ecommerce business model includes a business plan that we believe allows companies to extend their reach online and become truly “international” by servicing customers in 67 languages. This advantage can improve their relationship with their consumers through the elimination of the language barrier and by offering the shopping cart and catalog in multiple languages. Out of 3 billion Internet users, only 800.6 million engage online in English, according to Internet World Stats.com. Management believes that prime markets for Ecommerce growth are in China, Eastern Europe and Latin America.

The Yappn tool set is comprised of three segments: Online Marketing, Ecommerce Sales, and Customer Care, to provide brands with a series of technology add-ons to complement their current social media activities and allows them to reach a global audience by instantly providing key messaging in 67 languages.

Online Marketing: Advertisement, Social Wall and FotoYapp, Live and Global Events, Video Capturing

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Digital Advertisement will be presented in the viewer’s choice of language, regardless of their location. The WGE technology will automatically detect the language of the customers’ browser and present the ad in that language, inclusive of local promotions.

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The Social Wall is an aggregation of major social media accounts for fans and consumers to interact with in 67 languages on up to 54 social media platforms.

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FotoYapp is a mobile app that provides brands with the ability to share media content instantly across the global social sphere, engaging customers via pictures and short burst video, deploying coupons presented as images. Customers can also use FotoYapp to draw users into their Estore from their social network pages with a unique embeddable FotoWall that resides in their web-store, thereby dramatically increasing traffic to their store. FotoYapp can currently connect to 54 different networks.

	●	A live Q&A is an interactive live stream with fans worldwide that allows them to participate and ask moderated questions in 67 languages.

	●	Engagement events such as a custom branded Twitter Q&A session which allows for real-time multilingual events to activate on a global scale for brands and individuals.

	●	Live video captioning is to broadcast a live event with real-time video closed captioning in 67 languages.

	●	Post-production video provides closed captioning in 67 languages for archive videos and feature films.

Ecommerce Sales: Store, Catalog, Shopping Cart & Check-Out

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By interfacing with a retailer’s existing Ecommerce solution, the WGE technology helps a retailer greatly expand their global reach by presenting its store, catalog, shopping cart and check-out in up to 67 different languages instantaneously using enhanced machine-based translation.

Customer Care: Multilingual Chat

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Multilingual Chat provides companies, brands, organizations and consumers with the ability to have topical discussions in almost any language in real-time. Instant globalization allows a company to converse in a customer’s language of choice without incurring the heavy cost of a Customer Service Representative having fluency in every language that the business chooses to service in.

The tools are a "build once and deploy everywhere" arrangement allowing brands to embed key social media like Twitter, Facebook, YouTube, Instagram, Pinterest, Flickr and Tumblr and mobile into a total of 54 existing platforms. Yappn tools have been effectively tested and commercially deployed through a number of entertainment, sports and commercial brands and they are now available to agencies to enhance their client's domestic and global outreach plans. The programs are available on a servicing contractual basis and we have begun to receive commitments from various brands for the use of its tool sets.

According to eMarketer.com, China and USA are the world’s leading Ecommerce markets, combining for more than 55% of the world’s Internet retail in 2014. In 2015, worldwide web sales are expected to increase nearly 21% to $1.59 Trillion. With this view in mind, our newly launched WGE platform is focused on the Ecommerce market to enable retailers to break the language barrier that prevents them from accessing global markets. Yappn has altered this paradigm with an API (application program interface) that renders any Ecommerce site into a global site in real-time and in up to 67 languages inclusive of the shopping cart checkout. With very high fidelity experience and without any human translation or intervention, the Software as a Service (SaaS) application is focused on three distinct sales models: Partner, Direct and Channel.

The Partner Model is a “One to Many” sales model based on the Yappn Sales Team building relationships directly with partners with the intent of establishing contacts into the partner’s own community in addition to working with the partner themselves. This includes agencies, developer networks and software partnership communities.

The Direct Sales model is a “One-to-One” Model based on the Yappn Sales Team directly selling to a particular customer. This model is generally reserved for strategic and high brand value sales opportunities.

The Channel Sales Model is “One-to-One-to-Many” sales model based on the Yappn Sales Team building relationships directly with software and platform developers, like Shopify and other Ecommerce systems.

Management will continue to develop additional revenue-centric features and tools and refine our current business plan. Each new feature set is built on a prime revenue driver for our business as it continues to work with clients and their agencies to develop new deployment tools and programs to reach an expanding global audience.

Digital Widget Factory

We have executed a three-year Master Services Agreement (MSA) and Statement of Work (SOW) with Digital Widget Factory to develop and manage a minimum of 200 multilingual Ecommerce sites which will include multilingual online marketing through traditional online services and social engagement. Expected first year revenues for the program are estimated to be up to $3,000,000 (although no assurances can be provided that such amounts will be achieved or profitability realized) with rapid expansion of sites planned for 2016 and 2017. Contract terms allowed for pre-paid fees in association with the project of a minimum of $700,000 plus ongoing professional fees and 20% net profit on the program for the term duration.

The Global Content Market is an ever growing market, with Ipsos Market Research stating that 7 out of 10 online consumers in 24 countries indicate that in a month they share some type of content on social media sites, including pictures as well as articles and something recommended, such as a product, service, movie or book. Emarketer.com also points out that global ad spending will be nearly $600 billion worldwide in 2015 with the increase in digital and mobile platforms being the key growth in ad spending.

We will provide multilingual online marketing through traditional online services and social engagement with its proprietary patented technology to DWF by scheduling and supporting DWF’s revenue programs related to direct and network online advertising, schedule and support DWF’s affiliate and Ecommerce partnerships and also support DWF users to customize their content experience, submit original content and provides tools to incent sharing of content and encourage users to build the membership base.

Revenues recognized to August 31, 2015 from this program totaled $757,105, which were from ongoing development, programs. Future higher revenues are expected, but not guaranteed, based on an advertising model and an affiliate/membership model which has been effective after the fiscal year end. With over 73% of the Internet surfing languages other than English, this program is designed to capture the foreign advertising market for content that is dominated in English speaking ad partners.

The Services Agreement

We acquired the rights to use technology and management and development support services under the Services Agreement, dated March 21, 2013, between Intertainment Media, Inc. (“IMI”), and IMI’s wholly owned Ortsbo subsidiaries. Pursuant to the terms of the Services Agreement, Ortsbo made available to us its representational state transfer application programming interface (the “Ortsbo API”), which provides multi-language real-time translation as a cloud service. The Services Agreement also provides that Ortsbo makes its “Live and Global” product offering, which enables a cross language experience for a live, video streaming production, available to us as a service for marketing and promoting the Yappn product in the marketplace (the “Services”). The Services do not include the “chat” technology itself and we shall be solely responsible for creating, securing or otherwise building out our website and any mobile applications to include chat functionality, user forums, user feedback, and related functionality within which the Ortsbo API can be utilized to enable multi-language use. Under the initial agreement, no intellectual property owned by Ortsbo would be transferred to us except to the extent set forth in the Services Agreement as described in “Intellectual Property” set forth below.

For all ongoing services provided under the Services Agreement, we shall pay Ortsbo an amount equal to the actual cost incurred by Ortsbo in providing the Services, plus thirty percent (30%). In addition, we shall pay to Ortsbo an ongoing revenue share which shall equal seven percent (7%) of the gross revenue generated by our activities utilizing the Services. If we are earning revenue without the use of the Services because, for example, all communications are taking place in English, then no revenue share shall be owing to Ortsbo with respect thereto. If there is a blend of multi-language and English-English communications, then the parties shall do their best to pro rate or apportion the revenues appropriately in order to compensate Ortsbo for the portion of our revenues enabled by use of the Services from Ortsbo. The Services Agreement may be terminated by either party with 60 days written notice and both parties may not, for the term of the Agreement and a period of two years thereafter, (i) directly or indirectly assist any business that is competitive with the other party’s business, (ii) solicit any person to leave employment with the other and (iii) solicit or encourage any customer to terminate or otherwise modify adversely its business relationship with the other.

In October 2013, we amended the Services Agreement. Under the terms of the amendment to the Services Agreement, we would have the first right of refusal to purchase the Ortsbo platform and all its assets and operations for a period of two years; increasing its use of Ortsbo's technology for business to consumer social programs at a purchase price to be negotiated at the time we exercise our right. We would also have a right to purchase a copy of the source code only applicable to Yappn programs for $2,000,000 which may be paid in cash or restricted shares of our common stock at a per share price of $1.50 per share. As part of the enhancement agreement, we issued Ortsbo 166,667 shares of our restricted common stock. On April 28, 2014, we exercised our right to purchase a copy of the source code for the Ortsbo property in exchange for 1,333,333 shares of restricted common stock for a value of $2,000,000.

On July 6, 2015, we entered into a definitive agreement to acquire all of the intellectual property assets of Ortsbo. The purchased assets include US Patent No. 8,983,850 B2, US Patent No. 8,917,631 B2, US Patent No. 9,053,097 B2, and other intellectual property including Ecommerce and Customer Care know-how for a total purchase price of US $17 Million, which will be paid by the assumption of US $1 Million in debt and the issuance of US $16 Million worth of our restricted common shares (32 Million shares at US $0.50 per share). The transaction is subject to closing conditions including each party obtaining all necessary approvals, including stock exchange approval and shareholder approval, if required. Upon the completion of the transaction the amended Services Agreement will be terminated.

Competition

Our business relating to and arising from the development of the Yappn assets is characterized by innovation, rapid change, patented, proprietary and disruptive technologies. We may face significant competition, including from companies that provide translation, tools to facilitate the sharing of information, that enable marketers to display advertising and that provide users with multilingual real-time translation of Ecommerce, events and proprietary social media and chat platforms. These may include:

	●	Companies that offer full-featured products that provide a similar range of communications and related capabilities that we provide.

	●	Companies that provide web- and mobile-based information and entertainment products and services that are designed to engage users.

	●	Companies that offer Ecommerce solutions with built in language support.

	●	Traditional and online businesses that offer corporate sponsorship opportunities and provide media for marketers to reach their audiences and/or develop tools and systems for managing and optimizing advertising campaigns.

Competitors, in some cases, may have access to significantly more resources than Yappn.

We anticipate that we will compete to attract, engage, and retain clients and users, to attract and retain marketers, to attract and retain corporate sponsorship opportunities, and to attract and retain highly talented individuals, especially software engineers, designers, and product managers. As we introduce new features to the Yappn platform, as the platform evolves, or as other companies introduce new platforms and new features to their existing platforms, we may become subject to additional competition. We believe that our ability to quickly adapt to a changing marketplace, and our experienced management team, will enable us to compete effectively in the market. Further, we believe that our focus on encouraging user engagement based on topics and interests, rather than on “friends” or connections, will differentiate us from much of the competition.

Intellectual Property

We own (i) the yappn.com domain name (which website is expressly not incorporated into this filing) and (ii) the Yappn name and all trademarks, service marks, trade dress and copyrights associated with the Yappn name, logo and graphic art. We may prepare several patent filings in the future. Upon payment of the applicable fees pursuant to the Services Agreement, we became the exclusive owner of copyright in the literary works or other works of authorship delivered by Ortsbo to us as part of the Services provided under the Services Agreement (the “Deliverables”). All such rights shall not be subject to rescission upon termination of the Services Agreement. Also as set forth in the Services Agreement, we shall grant to Ortsbo (i) a non-exclusive (subject to certain limitations) license to use the Deliverables for the sole purpose of developing its technology, (ii) a non-exclusive license to use, solely in connection with the provision of the Services, any intellectual property owned or developed by us or on our behalf and necessary to enable Ortsbo to provide the Services and (iii) a license to use intellectual property obtained by us from third parties and necessary to enable Ortsbo to provide the Services. All such licenses shall expire upon termination of the Services Agreement.

On April 28, 2014, we purchased a copy of the source code for the Ortsbo property and all the rights associated with it.

On July 16, 2015, Yappn entered into a definitive agreement to acquire all of the intellectual property assets of Ortsbo. The purchased assets include US Patent No. 8,983,850 B2, US Patent No. 8,917,631 B2, US Patent No. 9,053,097 B2, and other intellectual property including Ecommerce and Customer Care know-how (Proprietary lexicons and linguistic databases that integrate into our language services platform).

We continue to engage in activities to maintain and further build differentiated technologies that increase our intellectual properties.

Government Regulation

We are subject to a number of U.S. federal and state, and foreign laws and regulations that affect companies conducting business on the Internet, many of which are still evolving and being tested in courts, and could be interpreted in ways that could harm our business. These may involve user privacy, rights of publicity, data protection, content, intellectual property, distribution, electronic contracts and other communications, competition, protection of minors, consumer protection, taxation and online payment services. In particular, we are subject to federal, state, and foreign laws regarding privacy and protection of user data. Foreign data protection, privacy, and other laws and regulations are often more restrictive than those in the United States. U.S. federal and state and foreign laws and regulations are constantly evolving and can be subject to significant change. In addition, the application and interpretation of these laws and regulations are often uncertain, particularly in the new and rapidly-evolving industry in which we operate. There are also a number of legislative proposals pending before the U.S. Congress, various state legislative bodies, and foreign governments concerning data protection which could affect us. For example, a revision to the 1995 European Union Data Protection Directive is currently being considered by legislative bodies that may include more stringent operational requirements for data processors and significant penalties for non-compliance.

Legal Proceedings

None.

Registration Statement

We filed a Registration Statement on Form S-1 (File No. 333-199569) (the “ Registration Statement ”) with the Securities and Exchange Commission (the “ SEC ”) on October 24, 2014 (amended November 7, 2014) for up to 7,592,667 shares of our $0.0001 par value per share common stock (the "Common Stock") issuable to certain selling stockholders upon conversion of promissory notes and/or warrants currently held by those selling stockholders, specifically (i) 1,844,000 shares of Common Stock issuable to them upon exercise of promissory notes and (ii) 4,588,000 shares of Common Stock issuable to them upon exercise of warrants. The warrants have an exercise prices varying from $1.00 to $2.20 per share (subject to adjustment). The Registration Statement covering the above noted securities was declared effective under the Securities Act of 1933 on November 17, 2014. Subsequent to quarter end, the Company filed a continuing registration statement in part to update to this S-1 filing (See note 12 of the financial statements).

RESULTS OF OPERATIONS

Three months ended August 31, 2015 and August 31, 2014

Revenues

We are in the process of commercialization of our multi-language e-commerce and marketing businesses. We had revenues of $758,159 and $nil for the three months ended August 31, 2015 and August 31, 2014, respectively. Revenues for the current period relate predominately to professional services for Digital Widget Factory. Our management is focusing on developing and refining its technologies, and its relationships with commercial partners and influencers, which has delayed revenue realization in recent quarters related to e-commerce.

Cost of revenue

We incurred costs of revenues of $128,471 and $nil, for the three months ended August 31, 2015 and 2014, respectively. These costs were directly attributable to the revenues generated in the applicable periods and resulted in a gross profit of $629,688 and $nil, for the three months ended August 31, 2015 and 2014, respectively.

Total operating expenses

During the three months ended August 31, 2015 and 2014, our total operating expenses were $856,290 and $1,590,372, respectively.

For the three months ended August 31, 2015, the operating expenses consisted of marketing expense of $102,785, research and development expenses of $95,070, general and administrative expenses of $352,133, professional fees of $91,569, consulting fees of $102,000, amortization of $91, and stock based compensation of $112,642. For the comparable three months ended August 31, 2014 the operating expenses consisted of marketing expenses of $283,434, research and development expenses of $320,977, general and administrative expenses of $320,177, professional fees of $36,877, consulting fees of $104,500, amortization of $58 and stock based compensation of $524,349 .

All of our research and development costs are partially for fees to technology consultants from Intertainment Media and Ortsbo, in the prior year, with higher weighting on our own employees and third party consultants in the latter half of fiscal 2015 and in the three months ended August 31, 2015. There were significant costs incurred in development of the various technologies supporting the business towards the commencement of commercialization. Many of these costs will not continue into the future, however there will continue to be maintenance and ongoing development customization to ensure our technology solutions meet required standards for our current and prospective customers.

Marketing expenses include costs incurred for public relations, and promotional events and related activities. In the prior fiscal year, there was a significant launch event in regard to the our FotoYapp application early in our second quarter. A similar event did not incur in the three months ended August 31, 2015, which is the primary reason for the decrease in marketing expenses for the three months ended August 31, 2015.

General and administrative expenses include executive and office salaries, administrative services for accounting and finance, and general office needs and averaged approximately $350,000 per quarter. These costs have remained relatively consistent period over period as we continue to work to develop a customer base and meet the needs of investors to finance our operation. Management has made some direct employee engagements over the comparative period, while certain other costs have been reduced. Upon further significant increases in revenue, management will continue to hire, but the growth of this cost, we believe, will be far less than the impact to Net Income (Loss).

Professional fees were incurred primarily for use of legal counsel related to financing arrangements for convertible promissory notes and for accounting and auditing services. We expect our professional fees to vary from period to period based upon our corporate needs and were relatively consistent period over period.

Consulting fees incurred primarily for consulting service costs for third party consultants. We have used a number of different outside firms to provide investor relations services, strategic position of our products, markets and customer introductions. Some of the fees of the firms providing these services were paid with shares of common stock. Consultants were used approximately to the same extent in the three months ended August 31, 2015 as in the three months ended August 31, 2014. Although consultants are more expensive on a per hour basis, the effort required for some consultants would not support a full time engagement, but overall more services for the Company were required.

Stock based compensation relates to our two grants of stock options during the three months ended August 31, 2015. Stock based compensation is recorded using the binomial lattice model which provides a fair value based on assumptions determined to be appropriate by management. Stock based compensation is recorded over the vesting period using a graded vesting schedule which results in a higher proportion of expense recorded earlier in the vesting term than later. We completed our first grant of stock options during the three months ended August 31, 2014 which resulted in a much higher cost for this grant than in subsequent quarters.

Total other income and expenses

Other (income) expenses totaled $(393,250) and $(863,361) for the three months ended August 31, 2015 and August 31, 2014, respectively. The change of $470,111 is primarily due to the change in the fair value of derivative financial instruments. Many of our financing instruments are either convertible into shares of our common stock or have provisions that provide an option to convert into shares of our common stock. For accounting purposes we are required to value such instruments at fair value which can fluctuate as the market price of shares of our common stock fluctuates.

During the three months ended August 31, 2015, total other (income) consisted of interest expense of $153,985, financing expenses related to convertible debentures, and derivative liabilities totaling $89,490, a gain resulting from the change in fair value of the derivative liabilities and convertible notes of $(801,639), prepayment fee on variable notes of $177,233 and other miscellaneous income of $(12,319).

During the three months ended August 31, 2014, the total other income and expenses resulted in income of $(863,361). The other (income) consisted of interest expense of $63,900 and financing expenses on the issuance of derivative liabilities of $4,167. Other income consisted of the increase in the fair value of the derivative liabilities resulting in a gain of $(945,065) and miscellaneous other expense of $13,637.

The financing expenses related to the issuance of derivative liabilities for the three months ended August 31, 2015 and August 31, 2014 related primarily to the raising of convertible notes with exercise prices tied to a discount to market rates. For accounting purposes, since certain financial instruments had convertible provisions and in some cases provisions that protect the holder by including full ratchet anti-dilution measures, they were treated as derivatives liabilities and are valued using a binomial lattice fair value model upon inception and adjusted accordingly to market at the close of the period. Based on our stock price on the date of issuance, which is the date the fair value exercise was completed, the initial financing expense was significant for the three months ended August 31, 2014. The financing expense associated with the capital raises were $89,490 and $4,167 for the three months ended August 31, 2015 and August 31, 2014, respectively. There were fewer dilutive financings raised in the period ending August 31, 2015 from convertible notes and no financing from preferred share issuance than the comparative period as we primarily relied on secured debenture, bridge loans, and the line of credit arrangement for financing during the three months ended August 31, 2015.

As of August 31, 2014, we adjusted the fair value of the derivatives instruments related to the sale of warrants and debentures previously issued. This reduction was based on both a slight increase in our share price as the market price of the common shares increased from a May 31, 2014 share price of $1.60 to an August 31, 2014 share price of $1.30 as well as an element due to elapsed time. There was a further reduction in fair values for the three months ended August 31, 2015 as the market price of the common shares declined from a May 31, 2015 share price of $0.60 to an August 31, 2015 share price of $0.80. The changes in market value of our common stock coupled with the other parameters used in the binomial lattice model for all instruments marked to market, resulted in a gain of $801,639 for the three months ended August 31, 2015 in contrast to a larger gain of $945,065 for the three months ended August 31, 2014, a change of $(143,426).

During the three months ended August 31, 2015 and three months ended August 31, 2014, we raised $486,179 and $317,748, respectively, in cash from short term notes payable, line of credit, convertible notes and debentures through normal channels and private placements.

Net loss and comprehensive loss

During the three months ended August 31, 2015 and 2014, we had net loss and comprehensive income (loss) of $166,648 and $(727,011) respectively.

Liquidity and Capital Resources

As of August 31, 2015, we had a cash balance of $5,797, which is a decrease of $13,699 from the ending cash balance of $19,496 as of May 31, 2015. We do not have sufficient funds to fund our expenses over the next twelve months. There can be no assurance that additional capital will be available to us. Since we have no other financial arrangements or plans currently in effect, our inability to raise funds for the above purposes will have a severe negative impact on our ability to remain a viable going concern.

To fund our operations, we have issued secured debentures, short term notes, and convertible debt instruments for gross cash receipts of $1,921,445 and $678,830 for the three months ended August 31, 2015 and the three months ended August 31, 2014, respectively.

We have used this financing for funding operations and replacing short term high cost debt instruments with lower cost longer term financial instruments where the economics made sense.

We estimate we will need additional capital to cover our ongoing expenses and to successfully market our product offerings. This is only an estimate and may change as we receive feedback from customers and have a better understanding of the demand for our application and the ability to generate revenues from our new products. Both of these factors may change and we may not be able to raise the necessary capital and if we are able to, that it may not be at favorable rates.

On July 6, 2015, Yappn entered into a definitive agreement to acquire all of the intellectual property assets of Ortsbo. The purchased assets include US Patent No. 8,983,850 B2, US Patent No. 8,917,631 B2, US Patent No. 9,053,097 B2, and other intellectual property including Ecommerce and Customer Care know-how for a total purchase price of US $17 Million, which will be paid by the assumption of US $1 Million in debt and the issuance of US $16 Million worth of Yappn restricted common shares (32 Million shares at US $0.50 per share). The transaction is subject to closing conditions including each party obtaining all necessary approvals, including stock exchange approval and shareholder approval, if required.

On July 7, 2015, the Board of Directors and the holders of a majority of the voting power approved a resolution to effectuate a 10:1 Reverse Stock Split (“Reverse Stock Split”). Under this Reverse Stock Split each 10 shares of our Common Stock will be automatically converted into 1 share of Common Stock. To avoid the issuance of fractional shares of Common Stock, the Company will issue an additional share to all holders of fractional shares. FINRA declared the Company’s 1-for-10 reverse stock split ex-dividend date to be effective as of October 2, 2015.

On July 15, 2015, we completed a secured debt financing of US $4.5 Million of 12% Secured Debentures. The Secured Debentures have a maturity date of December 31, 2015 but may be accelerated under certain conditions. $2.0 million of the $4.5 Million secured debt financing is in the form of conversion of previously existing debt of the Company.

Going Concern Consideration

We incurred net losses and comprehensive losses resulting in a deficit of $14,596,204 through August 31, 2015. At August 31, 2015, we had total assets of $2,667,517 and liabilities totaling $1,470,823 and a working capital deficit of $6,181,303. These factors raise substantial doubt as to our ability to continue as a going concern.

Implementation of our business plan will require additional debt or equity financing and there can be no assurance that additional financing can be obtained on acceptable terms. We are in the development stage, and have limited revenues to cover our operating costs. As such, we have incurred an operating loss since inception. Our ability to continue as a going concern is dependent on its ability to raise adequate capital to fund operating losses until we are able to engage in profitable business operations. This and other factors raise substantial doubt about our ability to continue as a going concern. Our continuation as a going concern is dependent on our ability to meet our obligations, to obtain additional financing as may be required and ultimately to attain profitability. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

There can be no assurance that the raising of equity or debt will be successful or that our anticipated financing will be available in the future, at terms satisfactory us. Failure to achieve the equity and financing at satisfactory terms and amounts could have a material adverse effect on our ability to continue as a going concern. If we cannot successfully raise additional capital and implement its strategic development plan, its liquidity, financial condition and business prospects will be materially and adversely affected, and we may have to cease operations.

Off-Balance Sheet Arrangements

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

Critical Accounting Policies

None.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable

ITEM 4. CONTROLS AND PROCEDURES

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures designed to ensure that information required to be disclosed by us in the reports it files or submits under the Securities Exchange Act of 1934, as amended (Exchange Act), is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports it files or submits under the Exchange Act is accumulated and communicated to management, including the principal executive officer and principal financial officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Because of inherent limitations, disclosure controls and procedures, as well as internal control over financial reporting, may not prevent or detect all inaccurate statements or omissions.

Our management, with the supervision and participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of August 31, 2015 were effective such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

(b) Changes In Internal Control Over Financial Reporting

During the three months ended August 31, 2015, there were no changes in our internal controls over financial reporting that materially affected, or is reasonably likely to have a materially affect, on our internal control over financial reporting.

PART II

ITEM 1. LEGAL PROCEEDINGS

We are subject from time to time to litigation, claims and suits arising in the ordinary course of business. As of August 31, 2015, we were not a party to any material litigation, claim or suit whose outcome could have a material effect on our unaudited consolidated financial statements.

ITEM 1A. RISK FACTORS

Not required under Regulation S-K for “smaller reporting companies”.

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

On August 28, 2015, the Company issued 11,667 shares of common stock, valued at $37,100 on exercise of warrants.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

There were no defaults upon senior securities during the period ended August 31, 2015.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

There is no information with respect to which information is not otherwise called for by this form.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (the “Commission”). Our Commission filings are available to the public over the Internet at the Commission’s website at http://www.sec.gov . The public may also read and copy any document we file with the Commission at its Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549, on official business days during the hours of 10:00 am to 3:00 pm. The public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. We maintain a website at http://www. yappn.com (Information contained on our website is not part of this report on Form 10-Q).

ITEM 6. EXHIBITS

Index to Exhibits

Exhibit No.		Description

2.1		Asset Purchase Agreement by and among Yappn Corp., Yappn Acquisition Sub., Inc. and Intertainment Media, Inc., dated March 28, 2013 (2)
2.2		Asset Purchase Agreement between the Company, Ortsbo Inc., Intertainment Media, Inc., and Winterberry Investments Inc. dated July 6, 2015 (17)
3.1		Amended and Restated Certificate of Incorporation filed on March 14, 2013. (1)
3.2		Amended and Restated Bylaws. (1)
3.3		Amended and Restated Certificate of Designation and Preferences of Series A Convertible Preferred Stock, filed with the Secretary of State of Delaware on May 31, 2013 (3)
3.4		Amended Certificate of Incorporation filed on December 31, 2014 *
3.5		Amended Certificate of Incorporation filed on September 9, 2015*
4.1		Convertible Promissory Note (4)
4.2		Convertible Promissory Note Issued in Favor of JMJ Financial (6)
4.3		8% Convertible Note (7)
4.4		Form of 8% Convertible Note (8)
4.5		Form of 6% Convertible Promissory Note (9) (10) (12)
4.6		Form of Promissory Note (13)
4.7		Common Stock Purchase Warrant (13)
10.1		Lock-Up Agreement by and between Yappn Corp. and Intertainment Media, Inc. (2)
10.2		Form of Warrant (2)
10.3		Form of Subscription Agreement (2)
10.4		Form of Registration Rights Agreement (2)
10.5		Form of Note Purchase Agreement (2)
10.6		Form of Note (2)
10.7		Form of First Amendment to Note Purchase Agreement (2)
10.8		Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations (2)
10.9		Stock Purchase Agreement (2)
10.10		2013 Equity Incentive Plan (2)
10.11		Bill of Sale dated March 28, 2013 (2)
10.12		Services Agreement by and between Ortsbo, Inc., Ortsbo USA, Inc. and Intertainment Media, Inc. dated March 21, 2013 (2)
10.13		Form of Indemnification Agreement (2)
10.14		Securities Purchase Agreement (4)
10.15		Amendment to Services Agreement (5)
10.16		Amendment Agreement to Convertible Promissory Note Issued in Favor of JMJ Financial (6)
10.17		Securities Purchase Agreement (7)
10.18		Securities Purchase Agreement between Yappn Corp. and GEL Properties LLC (8)
10.19		Securities Purchase Agreement between Yappn Corp. and LG Capital Funding LLC (8)
10.20		Form of Securities Purchase Agreement (9) (10) (12)
10.21		Form of Registration Rights Agreement (9) (10) (12)
10.22		Form of Series A Warrant (9) (10) (12)
10.23		Form of Series B Warrant (9) (10) (12)

10.24		Amendment Agreement to Convertible Promissory Note issued in favor of JMJ Financial (11)
10.25		Loan Agreement (13)
10.26		General Security Agreement between Yappn Corp. and Toronto Tree Top Holdings Ltd. (13)
10.27		General Security Agreement (Yappn Canada Inc.) (13)
10.28		General Security Agreement (Intertainment Media Inc.) (13)
10.29		Guaranty and Indemnity (Yappn Canada Inc.) (13)
10.30		Guaranty and Indemnity (Intertainment Media Inc.) (13)
10.31		Assignment of Monies and Debt Due Arrangement (13)
10.32		Employment Agreement between Yappn Corp. and Mr. David Lucatch dated June 1, 2014. (14)
10.33		Form of Series C Warrant (15)
10.34		Form of Series D Warrant (15)
10.35		Amendment to the Employment Agreement between Yappn Corp. and Mr. David Lucatch dated September 2, 2014. (16)
10.36		Form of Master Services Agreement between Yappn Corp. and Digital Widget Factory, dated November 6, 2014. (16)
10.37		Form of 12% Secured Debentures(17)
10.38		Form of Security Agreement, dated July 15, 2015 (17).
10.39		Yappn Corp 2014 Stock Option Plan Amendment One*
14.1		Code of Ethics and Conduct (14)
31.1		Rule 13a-14(a) / 15d-14(a) Certification of Principal Executive Officer.*
31.2		Rule 13a-14(a) / 15d-14(a) Certification of Principal Financial Officer.*
32.1		Section 1350 Certifications of Principal Executive Officer *
32.2		Section 1350 Certifications of Principal Financial Officer *
101.INS		XBRL Instance Document *
101.SCH		XBRL Taxonomy Extension Schema Document *
101.CAL		XBRL Taxonomy Extension Calculation Linkbase *
101.DEF		XBRL Taxonomy Extension Definition Linkbase *
101.LAB		XBRL Taxonomy Extension Labels Linkbase *
101.PRE		XBRL Taxonomy Extension Presentation Linkbase *

(1) Incorporated by reference to the Company’s Current Report on Form 8-K, as filed with the SEC on March 18, 2013.

(2) Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on April 3, 2013.

(3) Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on June 3, 2013.

(4) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on October 15, 2013.

(5) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on October 29, 2013.

(6) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on November 21, 2013.

(7) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on December 18, 2013.

(8) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on December 20, 2013.

(9) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on January 30, 2014.

(10) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on February 27, 2014.

(11) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on March 4, 2014.

(12) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on April 1, 2014.

(13) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on April 11, 2014.

(14) Incorporated by reference to the Company’s Annual Report on Form 10-K, filed with the SEC on August 29, 2014.

(15) Incorporated by reference to the Company’s Registration Statement on Form S-1 filed with the SEC on October 24, 2014.

(16) Incorporated by reference to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on January 13, 2015.

(17) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on July 6, 2015.

* Filed herewith.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 15th day of October 2015.

	YAPPN CORP.

	By:	/s/ David Lucatch
		DAVID LUCATCH
		Chief Executive Officer

	By:	/s/ Craig McCannell
		Craig McCannell
		Chief Financial Officer
		(Principal Financial Officer)

Exhibit 3.4

	*State of Delaware*
	*Secretary of State*
	*Division of Corporations*
	*Delivered 01:20 PM 12/31/2014*
	*FILED 01:20 PM 12/31/2014*
	*SRV 150011187 - 4893182 FILE*

STATE OF DELAWARE

CERTIFICATE OF AMENDMENT

OF CERTIFICATE OF INCORPORATION

The corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware does hereby certify:

FIRST: That at a meeting of the Board of Directors of Yappn Corp. resolutions were duly adopted setting forth a proposed amendment of the Certificate of Incorporation of said corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows:

RESOLVED, that the Certificate of Incorporation of this corporation be amended by changing the Article thereof numbered “Fourth” so that, as amended, said Article shall be and read as follows:

A. Classes and Number of Shares. The total number of shares of stock that the Corporation shall have authority to issue is Four Hundred Fifty Million (450,000,000). The classes and aggregate number of shares of each class (see attached exhibit A)

SECOND: That thereafter, pursuant to resolution of its Board of Directors, a special meeting of the stockholders of said corporation was duly called and held upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware at which meeting the necessary number of shares as required by statute were voted in favor of the amendment,

THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, said corporation has caused this certificate to be signed this 31 ^st day of December, 2014.

	By :	/s/ Craig McCannell
		Authorized Officer

	Title:	Chief Financial Officer

	Name:	Craig McCannell
		Print or Type

Exhibit A

which the Corporation shall have authority to issue are as follows:

1. Four Hundred Million (400,000,000) shares of common stock, par value $0.0001 per share (the “ Common Stock ”); and

2. Fifty Million (50,000,000) shares of preferred stock, par value $0.000l per share (the “ Preferred Stock ”).

B. Blank Check Powers . The Corporation may issue any class of the Preferred Stock in any series. The Board of Directors shall have authority to establish and designate series, and to fix the number of shares included in each such series and the variations in the relative rights, preferences and limitations as between series, provided that, if the stated dividends and amounts payable on liquidation are not paid in full, the shares of all series of the same class shall share ratably in the payment of dividends including accumulations, if any, in accordance with the sums which would be payable on such shares if all dividends were declared and paid in full, and in any distribution of assets other than by way of dividends in accordance with the sums which would be payable on such distribution if all sums payable were discharged in full. Shares of each such series when issued shall be designated to distinguish the shares of each series from shares of all other series.

Exhibit 3.5

	State of Delaware
	Secretary of State
	Division of Corporations
	Delivered 02:27 PM 09/09/2015
	FILED 02:27 PM 09/09/2015
	SR 20150060080 - File Number 4893182

STATE OF DELAWARE

CERTIFICATE OF AMENDMENT

OF CERTIFICATE OF INCORPORATION

The corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware does hereby certify:

FIRST: That at a meeting of the Board of Directors of YAPPN CORP. resolutions were duly adopted setting forth a proposed amendment of the Certificate of Incorporation of said corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows:

RESOLVED, that the Certificate of Incorporation of this corporation be amended by changing the Article thereof numbered “FOURTH” so that, as amended, said Article shall be and read as follows:

The issued and outstanding Common Stock shall be reduced on the basis of one post-split share of the Common Stock for every 10 pre-split shares of the Common Stock outstanding. The Company will issue an additional share to all holders of fractional shares

THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, said corporation has caused this certificate to be signed this 19 ^th day of August, 2015.

	By:	/s/ Craig McCannell
		Authorized Officer

	Title:	Chief Financial Officer

	Name:	Craig McCannell
		Print or Type

Exhibit 10.39

YAPPN CORP.

2014 STOCK OPTION PLAN

AMENDMENT ONE

August 21, 2015

TABLE OF CONTENTS

ARTICLE I	GENERAL PROVISIONS

ARTICLE II	DEFINITIONS

ARTICLE III	ADMINISTRATION

ARTICLE IV	INCENTIVE STOCK OPTIONS

ARTICLE V	NONQUALIFIED STOCK OPTIONS

ARTICLE VI	STOCK APPRECIATION RIGHTS

ARTICLE VII	INCIDENTS OF STOCK OPTIONS AND STOCK RIGHTS

ARTICLE VIII	ACCELERATION EVENTS

ARTICLE IX	AMENDMENT AND TERMINATION

ARTICLE X	MISCELLANEOUS PROVISIONS

ARTICLE I
GENERAL PROVISIONS

1.1 The Plan is designed for the benefit of the directors, executives, independent contractors, and key employees of the Company (i) to attract and retain for the Company personnel of exceptional ability; (ii) to motivate such personnel through added incentives to make a maximum contribution to greater profitability; (iii) to develop and maintain a highly competent management team; and (iv) to be competitive with other companies with respect to executive compensation.

1.2 Awards under the Plan may be made to Participants in the form of (i) Incentive Stock Options; (ii) Nonqualified Stock Options; (iii) Stock Appreciation Rights; (iv) Restricted Stock; (v) Deferred Stock; (vi) Stock Awards; (vii) Performance Shares; (viii) Other Stock-Based Awards; and (ix) other forms of equity-based compensation as may be provided and are permissible under this Plan and the law.

1.3 The Plan shall be effective on August 14, 2014 (the "Effective Date"), subject to the approval of the Plan by a majority of the votes cast by the holders of the Company’s Common Stock, which may be voted at the next annual or special shareholder’s meeting. Any Awards granted under the Plan prior to such approval shall be effective when made (unless otherwise specified by the Committee at the time of grant) but shall be conditioned on, and subject to, the approval of the Plan by the Company’s shareholders.

ARTICLE II
DEFINITIONS

Except where the context otherwise indicates, the following definitions apply:

2.1 "Acceleration Event" means the occurrence of an event defined in Article XIII of the Plan.

2.2 "Act" means the Securities Exchange Act of 1934, as amended.

2.3 "Agreement" means the written agreement evidencing each Award granted to a Participant under the Plan.

2.4 "Award" means an award granted to a Participant in accordance with the provisions of the Plan, including, but not limited to, a Stock Option or Stock Appreciation Award or any combination of the foregoing.

2.5 "Board" means the Board of Directors of the Company.

2.6 "Change in Control" shall have the meaning set forth in Section 8 of the Plan.

2.7 "Change in Control Price" shall have the meaning set forth in Section 8 of the Plan.

2.8 "Code" means the Internal Revenue Code of 1986, as amended.

2.9 "Committee" means the Compensation Committee of the Board, or in the absence of a Committee, the Board of Directors.

2.10 "Company" means Yappn Corp., a Delaware corporation.

2.11 "Disability" means disability as determined under procedures established by the Committee or in any Award.

2.12 "Discount Stock Options" means the Nonqualified Stock Options, which provide for an exercise price of less than the Fair Market Value of the Stock at the date of the Award.

2.13 "Early Retirement" means retirement from active employment with the Company, with the express consent of the Committee, pursuant to the early retirement provisions established by the Committee or in any Award.

2.14 "Effective Date" shall have the meaning set forth in Section 1.3 of the Plan.

2.15 "Eligible Participant" means any director, executive or key employee of the Company, as shall be determined by the Committee, as well as any other person whose participation the Committee determines is in the best interest of the Company, subject to limitations as may be provided by the Code, the Act or the Committee. For purposes of Article IV and Incentive Stock Options that may be granted hereunder, the term "Eligible Participant" shall be limited to an executive or other key employee meeting the qualifications for receipt of an Incentive Stock Option under the provisions of Section 422 of the Code.

2.16 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended.

2.17 "Fair Market Value" means, with respect to any given day, the closing price of the Stock reported on the next day on which the Stock was traded, all as reported by such source as the Committee may select. The Committee may establish an alternative method of determining Fair Market Value. Notwithstanding the foregoing, the Committee shall, to the extent Section 409A of the Code applies, use a valuation method that satisfies Section 409A and any regulations thereunder.

2.18 "Incentive Stock Option" means a Stock Option granted under Article IV of the Plan, and as defined in Section 422 of the Code.

2.19 "Limited Stock Appreciation Rights" means a Stock Right which is exercisable only in the event of a Change in Control, as described in Section 6.8 of this Plan, which provides for an amount payable solely in cash, equal to the excess of the Stock Appreciation Right Fair Market Value of a share of Stock on the day the Stock Right is surrendered over the price at which a Participant could exercise a related Stock Option to purchase the share of Stock.

2.20 "Nonqualified Stock Option" means a Stock Option granted under Article V of the Plan.

2.21 "Normal Retirement" means retirement from active employment with the Company or any Subsidiary on or after age 65, or pursuant to such other requirements as may be established by the Committee or in any Award.

2.22 "Option Grant Date" means, as to any Stock Option, the latest of:

(a) the date on which the Committee grants the Stock Option to the Participant;

(b) the date the Participant receiving the Stock Option becomes an employee of the Company or its Subsidiaries, to the extent employment status is a condition of the grant or a requirement of the Code or the Act; or

2.23 "Participant" means an Eligible Participant to whom an Award of equity-based compensation has been granted and who has entered into an Agreement evidencing the Award.

2.24 "Plan" means the 2014 Stock Option Plan, as amended from time to time.

2.25 "Related Stock Appreciation Right" shall have the meaning set forth in Section 6.1 of the Plan.

2.26 "Retirement" means Normal or Early Retirement.

2.27 "Stock" means shares of common stock par value $.0001 per share of the Company, as may be adjusted pursuant to the provisions of Section 3.10.

2.28 "Stock Appreciation Right" means a Stock Right, as described in Article VI of this Plan, which provides for an amount payable in Stock and/or cash, as determined by the Committee, equal to the excess of the Fair Market Value of a share of Stock on the day the Stock Right is exercised over the price at which the Participant could exercise a related Stock Option to purchase the share of Stock; provided that, such price shall not be less than one hundred percent (100%) of the Fair Market Value of the Stock on the date of grant.

2.29 "Stock Appreciation Right Fair Market Value" means a value established by the Committee for the exercise of a Stock Appreciation Right or a Limited Stock Appreciation Right.

2.30 "Stock Option" means an Award under Article IV or V of the Plan of an option to purchase Stock. A Stock Option may be either an Incentive Stock Option or a Nonqualified Stock Option.

2.31 "Stock Right" means an Award under Article VI of the Plan. A Stock Right may be either a Stock Appreciation Right or a Limited Stock Appreciation Right.

2.32 "Termination of Employment" means the discontinuance of employment of a Participant with the Company. The determination of whether a Participant has discontinued employment shall be made by the Committee in its discretion. In determining whether a Termination of Employment has occurred, the Committee may provide that service as a consultant or service with a business enterprise in which the Company has a significant ownership interest shall be treated as employment with the Company. The Committee shall have the discretion, exercisable either at the time the Award is granted or at the time the Participant terminates employment, to establish as a provision applicable to the exercise of one or more Awards that during the limited period of exercisability following Termination of Employment, the Award may be exercised not only with respect to the number of shares of Stock for which it is exercisable at the time of the Termination of Employment but also with respect to one or more subsequent installments for which the Award would have become exercisable had the Termination of Employment not occurred. Notwithstanding the foregoing, Termination of Employment shall, for purposes of any payment under an Award to which Section 409A of Code applies, have the same meaning as “separation from service” under Section 409A (and any regulations thereunder).

ARTICLE III
ADMINISTRATION

3.1 This Plan shall be administered by the Committee. Members of the Committee may vote on any matters affecting the administration of the Plan or the grant of Awards pursuant to the Plan, except that no such member shall act upon the granting of an Award to himself or herself, but any such member may be counted in determining the existence of a quorum at any meeting of the Committee or Board during which action is taken with respect to the granting of an Award to such member. The Committee, in its discretion, may delegate to one or more of its members such of its powers, as it deems appropriate. The Committee also may limit the power of any member to the extent necessary to comply with Rule 16b-3 under the Act or any other law. The Board, in its discretion, may require that all or any final actions or determinations by the Committee be made by or be subject to approval or ratification by the Board before becoming effective. To the extent all or any decisions, actions, or determinations relating to the administration of the Plan are made by the Board, the Board shall have all power and authority granted to the Committee in this Article and otherwise in this Plan, and for these purposes, all references to the "Committee" herein shall be deemed to include the Board.

3.2 The Committee shall have the exclusive right to interpret, construe and administer the Plan, to select the persons who are eligible to receive an Award, and to act in all matters pertaining to the granting of an Award and the contents of the Agreement evidencing the Award, including, without limitation, the determination of the number of Stock Options or Stock Appreciation Rights, and any amendment thereof consistent with the provisions of the Plan. All acts, determinations and decisions of the Committee made or taken pursuant to grants of authority under the Plan or with respect to any questions arising in connection with the administration and interpretation of the Plan, including the severability of any and all of the provisions thereof, shall be conclusive, final and binding upon all Participants, Eligible Participants and their beneficiaries.

3.3 The Committee may adopt such rules, regulations and procedures of general application for the administration of this Plan, as it deems appropriate.

3.4 Without limiting the foregoing Sections 3.1, 3.2 and 3.3, and notwithstanding any other provisions of the Plan, the Committee is authorized to take such action as it determines to be necessary or advisable, and fair and equitable to Participants, with respect to an Award in the event of an Acceleration Event as defined in Article XIII. Such action may include, but shall not be limited to, establishing, amending or waiving the forms, terms, conditions and duration of an Award and the Award Agreement, so as to provide for earlier, later, extended or additional times for exercise or payments, differing methods for calculating payments, alternate forms and amounts of payment, an accelerated release of restrictions or other modifications. The Committee may take such actions pursuant to this Section 3.4 by adopting rules and regulations of general applicability to all Participants or to certain categories of Participants, by including, amending or waiving terms and conditions in an Award and the Award Agreement, or by taking action with respect to individual Participants.

3.5 The aggregate number of shares of Stock, which are reserved for issuance under the Plan, shall be Twenty-Five Million (25,000,000). The aggregate number of shares of stock reserved for issuance under the plan shall be adjusted in accordance with Section 3.10.

(a) If, for any reason, any shares of Stock awarded or subject to purchase under the Plan are not delivered or purchased, or are reacquired by the Company, for reasons including, but not limited to, the termination, expiration or cancellation of a Stock Option, or any other termination of an Award without payment being made in the form of Stock (whether or not Restricted Stock), such shares of Stock shall not be charged against the aggregate number of shares of Stock available for Award under the Plan, and shall again be available for Award under the Plan.

(b) To the extent a Stock Right granted in connection with a Stock Option is exercised without payment being made in the form of Stock (whether or not Restricted Stock), the shares of Stock which otherwise would have been issued upon the exercise of such related Stock Option shall not be charged against the aggregate number of shares of Stock subject to an Award under the Plan, and shall again be available for Award under the Plan.

3.6 Each Award granted under the Plan shall be evidenced by a written Award Agreement. Each Award Agreement shall be subject to and incorporate (by reference or otherwise) the applicable terms and conditions of the Plan, and any other terms and conditions (not inconsistent with the Plan) required by the Committee.

3.7 The Company shall not be required to issue or deliver any certificates for shares of Stock prior to:

(a) the listing of such shares on any stock exchange on which the Stock may then be listed; and

(b) the completion of any registration or qualification of such shares of Stock under any federal or state law, or any ruling or regulation of any government body which the Company shall, in its discretion, determine to be necessary or advisable.

3.8 All certificates for shares of Stock delivered under the Plan shall also be subject to such stop-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Stock is then listed and any applicable federal or state laws, and the Committee may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions. In making such determination, the Committee may rely upon an opinion of counsel for the Company.

3.9 Subject to the restrictions on Restricted Stock, as provided in Article VIII of the Plan and in the Restricted Stock Award Agreement, each Participant who receives an Award of Restricted Stock shall have all of the rights of a shareholder with respect to such shares of Stock, including the right to vote the shares to the extent, if any, such shares possess voting rights and receive dividends and other distributions. Except as provided otherwise in the Plan or in an Award Agreement, no Participant awarded a Stock Option, Stock Right, Deferred Stock, Stock Award or Performance Share shall have any right as a shareholder with respect to any shares of Stock covered by his or her Stock Option, Stock Right, Deferred Stock, Stock Award or Performance Share prior to the date of issuance to him or her of a certificate or certificates for such shares of Stock.

3.10 If any reorganization, recapitalization, reclassification, stock split-up, stock dividend, or consolidation of shares of Stock, merger or consolidation of the Company or its Subsidiaries or sale or other disposition by the Company or its Subsidiaries of all or a portion of its assets, any other change in the Company's or its Subsidiaries' corporate structure, or any distribution to shareholders other than a cash dividend results in the outstanding shares of Stock, or any securities exchanged therefor or received in their place, being exchanged for a different number or class of shares of Stock or other securities of the Company, or for shares of Stock or other securities of any other Company; or new, different or additional shares or other securities of the Company or of any other Company being received by the holders of outstanding shares of Stock, then equitable adjustments shall be made by the Committee in:

(a) the limitation of the aggregate number of shares of Stock that may be awarded as set forth in Sections 3.5, 3.15, and 4.1(e) (to the extent permitted under Section 422 of the Code) of the Plan;

(b) the number of shares and class of Stock that may be subject to an Award, and which have not been issued or transferred under an outstanding Award;

(c) the purchase price to be paid per share of Stock under outstanding Stock Options and the number of shares of Stock to be transferred in settlement of outstanding Stock Rights; and

(d) the terms, conditions or restrictions of any Award and Award Agreement, including the price payable for the acquisition of Stock; provided, however, that all adjustments made as the result of the foregoing in respect of (i) each Incentive Stock Option shall be made so that such Stock Option shall continue to be an Incentive Stock Option, as defined in Section 422 of the Code and (ii) any Award that is subject to Section 409A of the Code shall comply with Section 409A and any regulations thereunder.

3.11 In addition to such other rights of indemnification as they may have as directors or as members of the Committee, the members of the Committee shall be indemnified by the Company against reasonable expenses, including attorney's fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan or any Award granted thereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment or settlement in any such action, suit or proceeding, except as to matters as to which the Committee member has been negligent or engaged in misconduct in the performance of his duties; provided, that within sixty (60) days after institution of any such action, suit or proceeding, a Committee member shall in writing offer the Company the opportunity, at its own expense, to handle and defend the same. Any payments required under this Section 3.11 that are subject to Section 409A of the Code shall be made by the end of year following the year in which the expenses and liabilities were incurred.

3.12 The Committee may require each person purchasing shares of Stock pursuant to a Stock Option or other Award under the Plan to represent to and agree with the Company in writing that he is acquiring the shares of Stock without a view to distribution thereof. The certificates for such shares of Stock may include any legend, which the Committee deems appropriate to reflect any restrictions on transfer.

3.13 The Committee shall be authorized to make adjustments in a performance based criteria or in the terms and conditions of other Awards in recognition of unusual or nonrecurring events affecting the Company or its financial statements or changes in applicable laws, regulations or accounting principles. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award Agreement in the manner and to the extent it shall deem desirable to carry it into effect or comply with applicable law. In the event the Company (or any Subsidiary, if applicable) shall assume outstanding employee benefit awards or the right or obligation to make future such awards in connection with the acquisition of another Company or business entity, the Committee may, in its discretion, make such adjustments in the terms of Awards under the Plan as it shall deem appropriate.

3.14 The Committee shall have full power and authority to determine whether, to what extent and under what circumstances, any Award shall be canceled or suspended. In particular, but without limitation, all outstanding Awards to any Participant shall be canceled if (a) the Participant, without the consent of the Committee, while employed by the Company or after termination of such employment, becomes associated with, employed by, renders services to, or owns any interest in (other than any non-substantial interest, as determined by the Committee), any business that is in competition with the Company or with any business in which the Company has a substantial interest as determined by the Committee; or (b) is terminated for cause as determined by the Committee.

ARTICLE IV
INCENTIVE STOCK OPTIONS

4.1 Each provision of this Article IV and of each Incentive Stock Option granted hereunder shall be construed in accordance with the provisions of Section 422 of the Code, and any provision hereof that cannot be so construed shall be disregarded. Incentive Stock Options shall be granted only to Eligible Participants, each of whom may be granted one or more such Incentive Stock Options at such time or times determined by the Committee following the Effective Date until the ten (10) year anniversary of the Effective Date, subject to the following conditions:

(a) The Incentive Stock Option price per share of Stock shall be set in the Award Agreement, but shall not be less than one hundred percent (100%) of the Fair Market Value of the Stock at the time of the Option Grant Date.

(b) The Incentive Stock Option and its related Stock Right, if any, may be exercised in full or in part from time to time within ten (10) years from the Option Grant Date, or such shorter period as may be specified by the Committee in the Award; provided, that in any event, the Incentive Stock Option and related Stock Right shall lapse and cease to be exercisable upon, or within such period following, a Termination of Employment as shall have been determined by the Committee and as specified in the Incentive Stock Option Award Agreement or its related Stock Right Award Agreement; provided, however, that such period following a Termination of Employment shall not exceed three (3) months unless employment shall have terminated:

(i) as a result of death or Disability, in which event, such period shall not exceed one year after the date of death or Disability; and

(ii) as a result of death, if death shall have occurred following a Termination of Employment and while the Incentive Stock Option or Stock Right was still exercisable, in which event, such period shall not exceed one year after the date of death; provided, further, that such period following a Termination of Employment shall in no event extend the original exercise period of the Incentive Stock Option or any related Stock Right.

(c) The aggregate Fair Market Value, determined as of the Option Grant Date, of the shares of Stock with respect to which Incentive Stock Options are exercisable for the first time during any calendar year by any Eligible Participant shall not exceed one hundred thousand dollars ($100,000); provided, however, to the extent permitted under Section 422 of the Code:

(i) if a Participant's employment is terminated by reason of death, Disability or Retirement and the portion of any Incentive Stock Option that is otherwise exercisable during the post-termination period applied without regard to the one hundred thousand dollar ($100,000) limitation contained in Section 422 of the Code is greater than the portion of such option that is immediately exercisable as an Incentive Stock Option during such post-termination period under Section 422, such excess shall be treated as a Nonqualified Stock Option; and

(ii) if the exercise of an Incentive Stock Option is accelerated by reason of an Acceleration Event, any portion of such Award that is not exercisable as an Incentive Stock Option by reason of the one hundred thousand dollar ($100,000) limitation contained in Section 422 of the Code shall be treated as a Nonqualified Stock Option. Notwithstanding the foregoing, no Stock Option that is intended to be an Incentive Stock Option shall be invalid for failure to qualify as such and the Company shall honor any such stock Option as a Nonqualified Stock Option.

(d) Incentive Stock Options shall be granted only to an Eligible Participant who, at the time of the Option Grant Date, does not own Stock possessing more than 10% of the total combined voting power of all classes of stock of the Company; provided, however, the foregoing restriction shall not apply if at the time of the Option Grant Date the option price is at least one hundred ten percent (110%) of the Fair Market Value of the Stock subject to the Incentive Stock Option and such Incentive Stock Option by its terms is not exercisable after the expiration of five (5) years from the Option Grant Date.

(e) The Committee may adopt any other terms and conditions which it determines should be imposed for the Incentive Stock Option to qualify under Section 422 of the Code, as well as any other terms and conditions not inconsistent with this Article IV as determined by the Committee.

4.2 The Committee may at any time offer to buy out for a payment in cash, Stock, Deferred Stock or Restricted Stock an Incentive Stock Option previously granted, based on such terms and conditions as the Committee shall establish and communicate to the Participant at the time that such offer is made.

4.3 If the Incentive Stock Option Award Agreement so provides, the Committee may, to the extent consistent with Section 409A of the Code (and any regulations thereunder), require that all or part of the shares of Stock to be issued upon the exercise of an Incentive Stock Option shall take the form of Deferred or Restricted Stock, which shall be valued on the date of exercise, as determined by the Committee, on the basis of the Fair Market Value of such Deferred Stock or Restricted Stock determined without regard to the deferral limitations and/or forfeiture restrictions involved.

ARTICLE V
NONQUALIFIED STOCK OPTIONS

5.1 One or more Stock Options may be granted as Nonqualified Stock Options to Eligible Participants to purchase shares of Stock at such time or times determined by the Committee, following the Effective Date, subject to the terms and conditions set forth in this Article V.

5.2 The Nonqualified Stock Option price per share of Stock shall be established in the Award Agreement, but shall not be less than one hundred percent (100%) of the Fair Market Value of the Stock on the Option Grant Date.

5.3 The Nonqualified Stock Option and its related Stock Right, if any, may be exercised in full or in part from time to time within such period as may be specified by the Committee or in the Award Agreement; provided, that, in any event, the Nonqualified Stock Option and the related Stock Right shall lapse and cease to be exercisable upon, or within such period following, Termination of Employment as shall have been determined by the Committee and as specified in the Nonqualified Stock Option Award Agreement or Stock Right Award Agreement; provided, however, that such period following Termination of Employment shall not exceed three (3) months unless employment shall have terminated:

(a) as a result of Retirement or Disability, in which event, such period shall not exceed one year after the date of Retirement or Disability, or within such longer period as the Committee may specify; and

(b) as a result of death, or if death shall have occurred following a Termination of Employment and while the Nonqualified Stock Option or Stock Right was still exercisable, in which event, such period may exceed one year after the date of death, as provided by the Committee or in the Award Agreement.

5.4 The Nonqualified Stock Option Award Agreement may include any other terms and conditions not inconsistent with this Article V or with Article VII, as determined by the Committee.

ARTICLE VI
STOCK APPRECIATION RIGHTS

6.1 A Stock Appreciation Right may be granted to an Eligible Participant in connection with an Incentive Stock Option or a Nonqualified Stock Option granted under Article IV or Article V of this Plan (a “Related Stock Appreciation Right”), or may be granted independent of any related Incentive or Nonqualified Stock Option.

6.2 A Related Stock Appreciation Right shall entitle a holder of a Stock Option, within the period specified for the exercise of the Stock Option, to surrender the unexercised Stock Option (or a portion thereof) and to receive in exchange therefor a payment in cash or shares of Stock having an aggregate value equal to the amount by which the Fair Market Value of each share of Stock exceeds the Stock Option price per share of Stock, times the number of shares of Stock under the Stock Option, or portion thereof, which is surrendered.

6.3 Each Related Stock Appreciation Right granted hereunder shall be subject to the same terms and conditions as the related Stock Option, including limitations on transferability, if any, and shall be exercisable only to the extent such Stock Option is exercisable and shall terminate or lapse and cease to be exercisable when the related Stock Option terminates or lapses. The grant of a Related Stock Appreciation Right related to an Incentive Stock Option must be concurrent with the grant of the Incentive Stock Option. With respect to Nonqualified Stock Options, the grant of a Related Stock Appreciation Right either may be concurrent with the grant of the Nonqualified Stock Option, or (to the extent consistent with the exemption for stock appreciation rights under the Section 409A regulations) subsequent to the grant of the Nonqualified Stock Option, in connection with a Nonqualified Stock Option previously granted under Article V, which is unexercised and has not terminated or lapsed.

6.4 The Committee shall have the sole discretion to determine, in each case whether the payment with respect to the exercise of a Stock Appreciation Right shall be made in the form of all cash, all Stock, or any combination thereof. If payment is to be made in Stock, the number of shares of Stock shall be determined based on the Fair Market Value of the Stock on the date of exercise of the Stock Appreciation Right. If the Committee elects to make full payment in Stock, no fractional shares of Stock shall be issued and cash payments shall be made in lieu of fractional shares.

6.5 The Committee shall have sole discretion as to the timing of any payment made in cash, Stock, or a combination thereof upon exercise of a Stock Appreciation Right. Payment may, to the extent consistent with Section 409A of the Code (and any regulations thereunder), be made in a lump sum, in annual installments or may be otherwise deferred and the Committee shall have sole discretion to determine whether any deferred payments may bear amounts equivalent to interest or cash dividends.

6.6 Upon the exercise of a Related Stock Appreciation Right, the number of shares of Stock subject to exercise under any related Stock Option shall automatically be reduced by the number of shares of Stock represented by the Stock Option or portion thereof which is surrendered.

6.7 The Committee, in its sole discretion, may, to the extent consistent with the exemption for stock appreciation rights under the Section 409A regulations, also provide that, in the event of a Change in Control, the amount to be paid upon the exercise of a Stock Appreciation Right or Limited Stock Appreciation Right shall be based on the Change in Control Price, subject to such terms and conditions as the Committee may specify at grant.

6.8 In its sole discretion, the Committee may grant Limited Stock Appreciation Rights under this Article VI. Limited Stock Appreciation Rights shall become exercisable only in the event of a Change in Control, subject to such terms and conditions as the Committee, in its sole discretion, may specify at grant. Such Limited Stock Appreciation Rights shall be settled solely in cash. A Limited Stock Appreciation Right shall entitle the holder of the related Stock Option to surrender such Stock Option, or any portion thereof, to the extent unexercised, in respect of the number of shares of Stock as to which such Limited Stock Appreciation Right is exercised, and to receive a cash payment equal to the difference between (a) the Stock Appreciation Right Fair Market Value (at the date of surrender) of a share of Stock for which the surrendered Stock Option or portion thereof is then exercisable, and (b) the price at which a Participant could exercise a related Stock Option to purchase the share of Stock. Such Stock Option shall, to the extent so surrendered, thereupon cease to be exercisable. A Limited Stock Appreciation Right shall be subject to such further terms and conditions as the Committee shall, in its sole discretion, deem appropriate.

ARTICLE VII
INCIDENTS OF STOCK OPTIONS AND STOCK RIGHTS

7.1 Each Stock Option and Stock Right shall be granted subject to such terms and conditions, if any, not inconsistent with this Plan, as shall be determined by the Committee, including any provisions as to continued employment as consideration for the grant or exercise of such Stock Option or Stock Right and any provisions which may be advisable to comply with applicable laws, regulations or rulings of any governmental authority.

7.2 An Incentive Stock Option and its related Stock Right, if any, shall not be transferable by the Participant other than by will or by the laws of descent and distribution, and shall be exercisable during the lifetime of the Participant only by him or by his guardian or legal representative. A Nonqualified Stock Option and its related Stock Right, if any, shall be subject to the transferability and exercisability restrictions of the immediately preceding sentence unless otherwise determined by the Committee, in its sole discretion, and set forth in the applicable Award Agreement.

7.3 Shares of Stock purchased upon exercise of a Stock Option shall be paid for in such amounts, at such times and upon such terms as shall be determined by the Committee, subject to limitations set forth in the Stock Option Award Agreement. Without limiting the foregoing, the Committee may establish payment terms for the exercise of Stock Options which permit the Participant to deliver shares of Stock (or other evidence of ownership of Stock satisfactory to the Company) with a Fair Market Value equal to the exercise price of the Stock Option as payment.

7.4 No cash dividends shall be paid on shares of Stock subject to unexercised Stock Options. To the extent consistent with the exemption for stock options under the Section 409A regulations (if applicable), the Committee may provide, however, that a Participant to whom a Stock Option has been granted which is exercisable in whole or in part at a future time shall be entitled to receive an amount per share equal in value to the cash dividends, if any, paid per share on issued and outstanding Stock, as of the dividend record dates occurring during the period between the date of the grant and the time each such share of Stock is delivered pursuant to exercise of such Stock Option or the related Stock Right. Such amounts (herein called "dividend equivalents") may, in the discretion of the Committee, be:

(a) paid in cash or Stock either from time to time prior to, or at the time of the delivery of, such Stock, or upon expiration of the Stock Option if it shall not have been fully exercised; or

(b) converted into contingently credited shares of Stock (with respect to which dividend equivalents may accrue) in such manner, at such value, and deliverable at such time or times, as may be determined by the Committee. Such Stock (whether delivered or contingently credited) shall be charged against the limitations set forth in Section 3.5.

7.5 The Committee may, in its sole discretion consistent with Section 409A of the Code (and any regulations thereunder), authorize payment of interest equivalents on dividend equivalents which are payable in cash at a future time.

7.6 In the event of death or Disability, the Committee, with the consent of the Participant or his legal representative, may authorize payment, in cash or in Stock, or partly in cash and partly in Stock, as the Committee may direct, of an amount equal to the difference at the time between the Fair Market Value of the Stock subject to a Stock Option and the exercise price of the Option in consideration of the surrender of the Stock Option.

7.7 If a Participant is required to pay to the Company an amount with respect to income and employment tax withholding obligations in connection with exercise of a Nonqualified Stock Option and/or with respect to certain dispositions of Stock acquired upon the exercise of an Incentive Stock Option, the Committee, in its discretion and subject to such rules as it may adopt, may permit the Participant to satisfy the obligation, in whole or in part, by making an irrevocable election that a portion of the total Fair Market Value of the shares of Stock subject to the Nonqualified Stock Option and/or with respect to certain dispositions of Stock acquired upon the exercise of an Incentive Stock Option, be paid in the form of cash in lieu of the issuance of Stock and that such cash payment be applied to the satisfaction of the withholding obligations. The amount to be withheld shall not exceed the statutory minimum Federal and State income and employment tax liability arising from the Stock Option exercise transaction.

7.8 The Committee may, to the extent consistent with the exemption for stock options under the Section 409A regulations (if applicable), permit the voluntary surrender of all or a portion of any Stock Option granted under the Plan to be conditioned upon the granting to the Participant of a new Stock Option for the same or a different number of shares of Stock as the Stock Option surrendered, or may require such voluntary surrender as a condition precedent to a grant of a new Stock Option to such Participant. Subject to the provisions of the Plan, such new Stock Option shall be exercisable at the same price, during such period and on such other terms and conditions as are specified by the Committee at the time the new Stock Option is granted. Upon surrender, the Stock Options surrendered shall be canceled and the shares of Stock previously subject to them shall be available for the grant of Awards under the Plan.

ARTICLE VIII
ACCELERATION EVENTS

8.1 For the purposes of the Plan, an Acceleration Event shall occur in the event of a "Change in Control".

8.2 A "Change in Control" shall be deemed to have occurred if:

(a) Any "Person" as defined in Section 3(a)(9) of the Act, including a "group" (as that term is used in Sections 13(d)(3) and 14(d)(2) of the Act), but excluding the Company and any employee benefit plan sponsored or maintained by the Company and (including any trustee of such plan acting as trustee) who:

(i) makes a tender or exchange offer for all shares of the Company's Stock pursuant to which all shares of the Company's Stock are purchased (an "Offer"); or

(ii) together with its "affiliates" and "associates" (as those terms are defined in Rule 12b-2 under the Act) becomes the "Beneficial Owner" (within the meaning of Rule 13d-3 under the Act) of at least fifty percent (50%) of the Company's Stock (an "Acquisition");

(b) The shareholders of the Company approve a definitive agreement or plan (i) to merge or consolidate the Company with or into another Company and (x) the Company shall not be the surviving corporation or (y) the Company shall be the surviving corporation and in connection therewith, all or part of the outstanding stock shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property, (ii) to sell or otherwise dispose of 50% or more of its assets, or (iii) to liquidate the Company;

(c) The Company shall be a party to a statutory share exchange with any other Person after which the Company is a subsidiary of any other Person; or

(d) When, as a result of, or in connection with, any tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing, the individuals who, prior to such transaction, constitute the Board (the "Incumbent Directors") cease for any reason other than death to constitute at least a majority thereof.

8.3 Upon the occurrence of an Acceleration Event, the Committee may, in its discretion, declare that all then outstanding Performance Shares with respect to which the applicable Performance Period has not been completed shall be paid as soon as practicable as follows:

(a) all Performance Objectives applicable to the Award of Performance Shares shall be deemed to have been satisfied to the extent necessary to result in payment of one hundred percent (100%) of the Performance Shares covered by the Award; and

(b) the applicable Performance Period shall be deemed to have ended on the date of the Acceleration Event;

(c) the payment to the Participant shall be the amount determined either by the Committee, in its sole discretion, or in the manner stated in the Award Agreement. This amount shall then be multiplied by a fraction, the numerator of which is the number of full calendar months of the applicable Performance Period that have elapsed prior to the date of the Acceleration Event, and the denominator of which is the total number of months in the original Performance Period; and

(d) upon the making of any such payment, the Award Agreement as to which it relates shall be deemed canceled and of no further force and effect.

8.4 Upon the occurrence of an Acceleration Event, the Committee, in its discretion, may declare that any or all of the then outstanding Stock Options not previously exercisable and vested as immediately exercisable and fully vested, in whole or in part.

8.5 The value of all outstanding Stock Option, in each case to the extent vested, shall, unless otherwise determined by the Committee in its sole discretion at or after grant but prior to any Change in Control, be cashed out on the basis of the "Change in Control Price," as defined herein as of the date such Change in Control is determined to have occurred or such other date as the Committee may determine prior to the Change in Control.

8.6 The value of all outstanding Stock Option, Stock Rights, Restricted Stock, Deferred Stock, Performance Shares, Stock Awards and Other Stock-Based Awards, in each case to the extent vested, shall, unless otherwise determined by the Committee in its sole discretion at or after grant but prior to any Change in Control, be cashed out on the basis of the "Change in Control Price," as defined in Section 13.7 as of the date such Change in Control is determined to have occurred or such other date as the Committee may determine prior to the Change in Control.

8.7 For purposes of Section 8.7, "Change in Control Price" means the highest price per share of Stock paid in any transaction reported on the Nasdaq Global Market tier of The Nasdaq Stock Market, or paid or offered in any bona fide transaction related to a Potential or actual Change in Control of the Company at any time during the sixty (60) day period immediately preceding the occurrence of the Change in Control, in each case as determined by the Committee except that, in the case of Incentive Stock Options and Stock Appreciation Rights (or Limited Stock Appreciation Rights) relating to such Incentive Stock Options, such price shall be based only on transactions reported for the date on which the Participant exercises such Stock Appreciation Rights (or Limited Stock Appreciation Rights). Notwithstanding the foregoing, Fair Market Value on the date of exercise shall be used for any Award, the use of any other value for which would result in the imposition of income taxes and penalties under Section 409A of the Code.

8.8 Notwithstanding the foregoing, the time for payment of any Award subject to Section 409A of the Code shall not be accelerated or otherwise changed under this Article to the extent such acceleration or other change would be contrary to the payment timing or other rules under Section 409A (or any regulations thereunder).

ARTICLE IX
AMENDMENT AND TERMINATION

9.1 The Board, upon recommendation of the Committee, or otherwise, at any time and from time to time, may amend or terminate the Plan as may be necessary or desirable to implement or discontinue this Plan or any provision thereof. No amendment, without approval by the Company's shareholders, shall:

(a) alter the group of persons eligible to participate in the Plan;

(b) extend the period during which Incentive Stock Option Awards may be granted beyond August 14, 2024;

(d) change any of the provisions of this Article IX.

9.2 No amendment to or discontinuance of this Plan or any provision thereof by the Board or the shareholders of the Company shall, without the written consent of the Participant, adversely affect, as shall be determined by the Committee, any Award theretofore granted to such Participant under this Plan; provided, however, the Committee retains the right and power to:

(a) annul any Award if the Participant competes against the Company or any Subsidiary or is terminated for cause as determined by the Committee;

(b) provide for the forfeiture of shares of Stock or other gain under an Award as determined by the Committee for competing against the Company or any Subsidiary; and

ARTICLE X
MISCELLANEOUS PROVISIONS

10.1 Nothing in the Plan or any Award granted hereunder shall confer upon any Participant any right to continue in the employ of the Company (or to serve as a director thereof) or interfere in any way with the right of the Company to terminate his or her employment at any time. Unless specifically provided otherwise, no Award granted under the Plan shall be deemed salary or compensation for the purpose of computing benefits under any employee benefit plan or other arrangement of the Company or its Subsidiaries for the benefit of its employees unless the Company shall determine otherwise. No Participant shall have any claim to an Award until it is actually granted under the Plan. To the extent that any person acquires a right to receive payments from the Company under the Plan, such right shall, except as otherwise provided by the Committee, be no greater than the right of an unsecured general creditor of the Company. All payments to be made hereunder shall be paid from the general funds of the Company, and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts.

10.2 The Company may make such provisions and take such steps as it may deem necessary or appropriate for the withholding of any taxes which the Company or any Subsidiary is required by any law or regulation of any governmental authority, whether federal, state or local, domestic or foreign, to withhold in connection with any Stock Option, but not limited to, the withholding of payment of all or any portion of such Award or (to the extent consistent with Section 409A of the Code) another Award under this Plan until the Participant reimburses the Company for the amount the Company is required to withhold with respect to such taxes, or canceling any portion of such Award or (to the extent consistent with Section 409A) another Award under this Plan in an amount sufficient to reimburse itself for the amount it is required to so withhold, or (to the extent consistent with Section 409A) selling any property contingently credited by the Company for the purpose of paying such Award or another Award under this Plan, in order to withhold or reimburse itself for the amount it is required to so withhold.

10.3 The Plan and the grant of Awards shall be subject to all applicable federal and state laws, rules, and regulations and to such approvals by any government or regulatory agency as may be required. Any provision herein relating to compliance with Rule 16b-3 under the Act shall not be applicable with respect to participation in the Plan by Participants who are not subject to Section 16(b) of the Act.

10.4 The terms of the Plan shall be binding upon the Company, its Subsidiaries, and their successors and assigns.

10.5 No Stock Option, or Stock Appreciation Right shall be transferable except as provided for herein or with the express written consent of the Company. If any Participant makes such a transfer in violation hereof, any obligation of the Company shall forthwith terminate.

10.6 This Plan and all actions taken hereunder shall be governed by the laws of the State of Delaware, except to the extent preempted by ERISA.

10.7 The Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver shares of Stock or payments in lieu of or with respect to Awards hereunder; provided, however, that, unless the Committee otherwise determines with the consent of the affected Participant, the existence of such trusts or other arrangements is consistent with the "unfunded" status of the Plan.

10.8 Each Participant exercising an Award hereunder agrees to give the Committee prompt written notice of any election made by such Participant under Section 83(b) of the Code, or any similar provision thereof.

10.9 If any provision of this Plan or an Award Agreement is or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or any Award Agreement under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award Agreement, it shall be stricken and the remainder of the Plan or the Award Agreement shall remain in full force and effect.

10.10 All Awards shall, to extent applicable, comply and be administered in accordance with the rules and requirements of Section 409A of the Code. Notwithstanding any other provision of the Plan, the Committee may take such actions as it deems necessary or appropriate to ensure that any Award comply with or be exempt from Section 409A and may interpret this Plan in any manner necessary to ensure that Awards comply with or are exempt from Section 409A. In the event that the Committee determines that an Award should comply with or be exempt from Section 409A and that a Plan provision or Award Agreement provision is necessary to ensure that such Award complies with or is exempt from Section 409A of the Code, such provision shall be deemed included in the Plan or such Award Agreement. The Committee may also unilaterally reform any Agreement to the extent necessary to comply with Section 409A.

10.11 In the event that a Participant is a “specified employee” within the meaning of Section 409A (as determined by the Company or its delegate), any payment required under this Plan that is subject to Section 409A and is payable upon Termination of Employment, shall not be made or begin until the expiration of the 6-month period following the Participant’s Termination of Employment.

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Exhibit 31.1

Certification of CEO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 and 906 of the
Sarbanes-Oxley Act of 2002.

I, David Lucatch, certify that:

1. I have reviewed this annual report on Form 10-Q of Yappn Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c) Evaluated the effectiveness of the Issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Issuer’s internal control over financial reporting that occurred during the Registrant’s fiscal quarter ending August 31, 2015 that has materially affected, or is reasonably likely to materially affect, the Issuer’s internal control over financial reporting.

5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditor and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

(a) All deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: October 15, 2015

	/s/ David Lucatch
	David Lucatch, Chief Executive Officer

Exhibit 31.2

Certification of CFO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 and 906 of the
Sarbanes-Oxley Act of 2002.

I, Craig McCannell, certify that:

1. I have reviewed this annual report on Form 10-Q of Yappn Corp.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: October 15, 2015

/s/ Craig McCannell

Craig McCannell, Chief Financial Officer

(Principal Accounting Officer)

Exhibit 32.1

CERTIFICATIONS PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the annual report of Yappn Corp. (the "Company") on Form 10-Q for the period ending August 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, David Lucatch, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Dated: October 15, 2015

	/s/ David Lucatch
	David Lucatch, Chief Executive Officer

Exhibit 32.2

CERTIFICATIONS PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the annual report of Yappn Corp. (the "Company") on Form 10-Q for the period ending August 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Craig McCannell, Chief Financial Officer (Principal Accounting Officer) of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Dated: October 15, 2015

	/s/ Craig McCannell
	Craig McCannell, Chief Financial Officer (Principal Accounting Officer)