Explorer

During the year the issuer entered into several transactions with a related party. The following deficiencies were identified: · The firm did not evaluate whether the business purpose (or lack thereof) of certain of these transactions indicated that they may have been entered into to engage in fraudulent financial reporting or to conceal misappropriation of assets given certain facts regarding the transactions. (AS 2401.67)

During the year the issuer recorded a credit loss associated with amounts owed by a related party. The firm did not evaluate whether the business purpose (or the lack thereof) of this transaction indicated that it may have been entered into to engage in fraudulent financial reporting or conceal misappropriation of assets given certain facts regarding this transaction. (AS 2401.67; AS 2410.11)

The issuer settled all debts from prior related parties as part of a stock purchase agreement and recognized a gain on the forgiveness of these debts. The firm did not perform procedures to test this transaction beyond obtaining the executed stock purchase agreement and the journal entry. (AS 2410.12)

During the year the issuer entered into a settlement agreement ('Settlement Agreement') with a related party ('Related Party A') in which the issuer returned rights related to software to Related Party A and Related Party A cancelled the issuer's remaining debt for the issuer's initial purchase of the software. Subsequent to this Settlement Agreement and after the issuer returned its rights to the software the issuer sold the software to another related party ('Related Party B') in exchange for other assets and a loan receivable. Subsequent to this transaction the issuer engaged in another transaction with Related Party A ('Subsequent Transaction') in which the issuer paid Related Party A other assets in exchange for cancellation of debt. The following deficiency was identified: · The firm did not evaluate whether the business purpose (or lack thereof) indicated that the transactions may have been entered into to engage in fraudulent financial reporting or conceal misappropriation of assets. (AS 2401.67)

During the prior year the issuer sold certain assets to Related Party A in return for the cancellation of debt. In addition in the prior year Related Party A transferred these assets to another related party ('Related Party C') as settlement of debt. During the current year the issuer repurchased these assets from Related Party C for the issuance of preferred shares which were recorded as an expense. The issuer did not assign a book value to these assets. The following deficiency was identified: · The firm did not evaluate whether the business purpose (or lack thereof) indicated that the transactions may have been entered into to engage in fraudulent financial reporting or conceal misappropriation of assets. (AS 2401.67)

The issuer entered into an agreement with a related party in which the issuer was to receive quarterly fees from the related party. Since the inception of the agreement the quarterly fees were recorded as receivables and deferred revenue in the issuer's balance sheet. The issuer disclosed that its sole officer and director was also the beneficial owner of and controlled the related party. The firm did not: · Take the transaction into account in its identification of significant unusual transactions. (AS 2401.66)