10-K 1 edebit_10k-123112.htm FORM 10-K FOR THE FISCAL YEAR ENDED 12/31/2012 edebit_10k-123112.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
 
  x  
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
     
For the fiscal year ended December 31, 2012
     
  o  
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
     
For the transition period from              to             
 
Commission file number:   0-32501
 
E-DEBIT GLOBAL CORPORATION
(Exact name of registrant as specified in its charter)
 
 
Colorado
  
98-0233968
(State or other jurisdiction of
incorporation or organization)
  
(I.R.S. Employer
Identification No.)
     
#12, 3620 – 29th Street NE Calgary Alberta Canada
  
T1Y 5Z8
(Address of principal executive offices)
  
(Zip Code)
 
(403) 290 0264
Registrant's telephone number, including area code)

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

Securities registered pursuant to Section 12(g) of the Act:

Common Stock
Title of Class

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

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o  No x
 
Indicate by check mark whether the issuer (1) filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x  No o
 
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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes  x No  o

 
 
 
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting Corporation.  See the definitions of "large accelerated filer,"  "accelerated filer" and "smaller reporting Corporation" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer     o   
Accelerated filer  o
 
Non-accelerated filer      o Smaller reporting Corporation  x
 
Indicate by check mark whether the registrant is a shell Corporation (as defined in Rule 12b-2 of the Exchange Act).
Yes o   No x
 
The aggregate market value of the Common Stock of E-Debit Global Corporation held by non-affiliates as of the last business day of the registrant's most recently completed second fiscal quarter: (248,923,808 shares) based on the closing price of the common stock of $1,244,619.

As of March 31, 2013 there were 320,046,834 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:  None.


NOTE REGARDING FORWARD LOOKING STATEMENTS
 
This Form 10-K and the documents we incorporate by reference contain certain forward-looking statements that involve a number of risks and uncertainties.  These statements, in addition to statements made in conjunction with the words “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” and similar expressions, are forward-looking statements within the meaning of the Safe Harbor provision of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements relate to future events or our future financial performance and only reflect management’s expectations and estimates. The following is a list of factors, among others, that could cause actual results to differ materially from the forward-looking statements:
 
We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Form 10-K to conform them to actual results. We do not, nor does any other person, assume responsibility for the accuracy and completeness of those statements. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed under the caption “Risk Factors.”
 
We caution the reader that these risk factors may not be exhaustive. We operate in a continually changing business environment, and new risk factors emerge from time to time. We cannot predict such new risk factors, nor can we assess the impact, if any, of such new risk factors on our businesses or the extent to which any factor or combination of factors may cause actual results to differ materially from those projected in any forward-looking statements. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this Form 10-K and the documents we incorporate by reference might not occur.
 
For these statements, we claim the protection of the safe harbor for forward-looking statements contained in Section 21E of the Securities Act.
 
You should carefully read this Form 10-K and the documents incorporated by reference in their entirety. They contain information that you should consider when making your investment decision.


 
 
 

TABLE OF CONTENTS
 
 
PART I
 
ITEM 1.
DESCRIPTION OF BUSINESS 
  2
ITEM 1A.
RISK FACTORS 
  10
ITEM 1B.
UNRESOLVED STAFF COMMENTS 
  16
ITEM 2.
DESCRIPTION OF PROPERTIES 
  17
ITEM 3.
LEGAL PROCEEDINGS 
  17
ITEM 4.
(REMOVED AND RESERVED) 
  18
 
PART II
 
ITEM 5.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS ITIES 
  19
ITEM 6.
SELECTED FINANCIAL DATA 
  20
ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 
  20
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 
  28
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 
  F-1
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 
  28
ITEM 9A.
 CONTROLS AND PROCEDURES  28
 
PART III
 
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT
  30
ITEM 11.
EXECUTIVE COMPENSATION
  33
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 
  36
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 
  38
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES  39
ITEM 15. EXHIBITS  39
     
SIGNATURES  40


 

 
1
 
PART I
 
 
ITEM 1    DESCRIPTION OF BUSINESS
 
General Description and Development of Business
 
Unless otherwise noted, all dollar references are in U.S. Dollars.
 
On July 21, 1998, Westsphere Asset Corporation, Inc., a Colorado corporation, was incorporated under the laws of the State of Colorado, under the name of Newslink Networks TDS, Inc. On April 23, 1999, the Corporation changed its name to “Westsphere Asset Corporation, Inc.”  Westsphere Asset Corporation is referred to herein as “Westsphere”, “the Corporation” “we” and “our”.

Since 2000, the Corporation focused its business development on the “non-conventional financial services industry” and has sought opportunities available to it through acquisitions of equity positions within operating corporations or the establishment of wholly owned subsidiary companies that could assist in the asset growth of the Corporation.

“Non-Conventional Financial Services Business” is described as business related activities which would be normally associated in Canada with a registered chartered bank or bank affiliated financial institution but is privately owned and operated and not affiliated with a Canadian Chartered Bank.  The Corporation provides automated consumer financial services through its Canadian national network of automated teller machines (“ATMs”) and its Financial Processing Services associated to its membership within the Canadian Interac Network.

E-Debit has no ongoing business operations other than acting as a holding corporation.

On April 2, 2010, the Corporation changed its name to “E-Debit Global Corporation.”  E-Debit Global Corporation is referred to herein as “E-Debit”, “the Corporation”, “the Corporation”, “we” and “our”.

General Description and Development of Subsidiary Corporation Business
 
Vencash Capital Corporation - Vencash Financial Corporation
 
Vencash Capital Corporation (“Vencash Capital”) was incorporated in the province of Alberta, Canada on October 2, 1996.  In July 1998, Vencash Capital Corporation entered into the “non-conventional banking industry” otherwise known in the industry as the “white label” Automated Teller Machine (“ATM”) marketplace. Vencash Capital became the seventh (7th) Canadian “channel” authorized to participate within the Canadian INTERAC system.
 
The “white label” ATM marketplace as used herein means the privately owned and operated ATMs that dispense cash for a fee, which are unaffiliated by ownership or operation to Canadian Registered Chartered Banks.  A “channel” as used herein means a provider of audit control which channels the fee revenues generated through customer usage of the ATM equipment to settlement accounts of contracted site holders and equipment suppliers.
 
Vencash Capital had sites located nationally across Canada most notably in the Provinces of British Columbia and Alberta, Saskatchewan, Ontario and Maritimes.  A “site” is described as used herein means a location where an ATM has been placed, and has contracted with Vencash Capital to provide monitoring, reporting and distribution of financial surcharge transaction revenues.
 
On January 7, 2009 the Board of Directors after reviewing the Corporations business operations at the Annual General Meeting of the Shareholders on December 6, 2008 approved the consolidation of Vencash’s processing and business operations with the assignment of ATM related processing agreements and ATM assets under a purchase and sale agreement to be offset against receivables and payables to the Corporation’s wholly owned subsidiary Westsphere Systems Inc.
 
While the business operations of Vencash Capital were wound down during the consolidation and integration of the ATM operations on May 1, 2009, into Westsphere Systems Inc., Vencash Capital’s corporate entity was maintained in order to secure and protect the “Vencash” brand name.  This includes the maintenance of Vencash Capital’s wholly owned subsidiary, Vencash Financial Corporation ("Vencash Financial"), as a federal corporation under the laws of Canada, in order to secure and protect the "Vencash" name in all Provincial jurisdictions in Canada.  Vencash Financial conducts no actual business activities.
 
 
 
2
 
(See "Business of Westsphere Systems Inc.")
 
Westsphere Systems Inc.
 
On May 16, 2000, Westsphere Systems Inc. (“Westsphere Systems”) was incorporated under the laws of the Province of Alberta. In January 2002, Westsphere Systems began business in the area of hosting web-sites, leasing server space and network services.
 
On January 7, 2009 the Board of Directors after reviewing the Corporations business operations at the Annual General Meeting of the Shareholders on December 6, 2008 approved the consolidation of Vencash’s processing and business operations with the assignment of ATM related processing agreements and ATM assets under a purchase and sale agreement to be offset against receivables and payables to the Corporation’s wholly owned subsidiary Westsphere Systems Inc.
 
As a result of the changes to the Interac Network EMV chip card requirements and to meet the financial requirements resulting from these changes the Corporation on December 1, 2011 completed the move of its ATM assets including ATM equipment and related Site Location and Placement Agreements into E-Debit Global Corporation’s wholly owned subsidiary VenCash Payment Solutions Inc., which segregated the Corporation’s Canadian national network of automated teller machines (“ATMs”) and our technical and transaction processing operations platforms (the “Switch”) which remained within Westsphere Systems Inc.
 
E-Debit International Inc.
 
On August 1, 2000, the Corporation acquired a five percent (5%) interest in E-Debit International Inc., an Alberta registered corporation (“E-Debit International”), a provider of pre-paid debit cards, for $1,350 cash ($2,000 CDN) from a non-affiliated third party, Julio Rivera.  In connection with the purchase, we also acquired an option to purchase the balance of Mr. Rivera’s remaining sixty-five percent (65%) ownership in E-Debit International.
 
On March 13, 2001, we acquired an additional twenty-five percent (25%) interest in E-Debit International for $9,737 ($15,100 CDN) from another non-affiliated third party, Dev Studios Inc.
 
On May 15, 2001, we executed a share exchange agreement with Julio Rivera to exchange a total of 200,000 shares of our common stock at $0.50 per share for a sixty percent (60%) interest in E-Debit International.
 
On June 1, 2004, we executed a share exchange agreement with a non-affiliated third party E-Debit shareholder, Mr. Prathavan Venkatraman, to exchange a total of 33,333 shares of our common stock at $0.04 per share for a ten percent (10%) interest in E-Debit International. As a result of this share exchange, E-Debit became a wholly owned subsidiary of the Corporation.
 
 (See "Business of E-Debit International Inc.")
 
Cash Direct Financial Services Inc.
 
Currently the Corporation is a 10% shareholder of Cash Direct Financial Services Inc. (“Cash Direct”).  Cash Direct was  incorporated under the laws of the Province of Alberta on July 17, 2003 to develop a “bricks and mortar” expansion to our business of “non-conventional banking” operations branded “Personal Financial $olutions”. (See "General Description and Development of Business" below.).
 
Westsphere Capital Group Ltd.
 
Westsphere Capital Group Inc. (“Westsphere Capital”) was incorporated under the laws of the Province of Alberta on January 4, 2005 to supply operational, financial, and administrative support to the Westsphere group of companies.
 
Group Link Inc.
 
Group Link Inc.  (“Group Link”) was incorporated under the laws of the Province of Alberta on December 13, 2012 as the foundation of the re-establishment of our nationwide distribution network, which in the past allowed for our presence in the Canadian marketplace.  Group Link utilizes a “gated-access network approach” where our Independent Sales Organization members within the Group Link distribution network require either an existing relationship with the Corporation or its affiliate members or the intervention of a contact of the affiliate member.  The Group Link distribution network has full access to all business operations of the Corporation and is integrated within the member distributors.
 
The Corporation is the majority shareholder of Group Link holding 55% of the issued and outstanding common stock of the Corporation.  The Corporation’s Chief Executive Officer is Group Link’s Chief Executive Officer and Director and holds personally 15% of the issued and outstanding common stock of Group Link.  E-Debit’s Chief Operating Officer is a Director and personally holds 10% of the issued and outstanding common stock of Group Link.  Group Link’s President and Group Link’s Chief Development Officer both are Directors of Group Link and each hold 10% of the issued and outstanding common stock of the Group Link.
 
 
3
 
Our Business
 
Our principal place of business and executive offices are located at #12, 3620 – 29th Street N.E., Calgary, Alberta, Canada T1Y 5Z8.  We provide operational and administrative support as well as financial services and related packages to our subsidiaries through our wholly-owned subsidiary Westsphere Capital, and currently conduct our business operations through our wholly-owned subsidiaries. (See "General Description and Development of Business" below.).
 
Business of Westsphere Systems Inc.
 
On January 7, 2009 the Board of Directors after reviewing the Corporations business operations at the Annual General Meeting of the Shareholders on December 6, 2008 approved the sale and transfer of the 100% of the issued and outstanding shares of E-Debit International to the Corporation’s wholly owned subsidiary Westsphere Systems Inc. Also at this time the Board approved the consolidation of its wholly owned subsidiary Vencash Capital Corporation’s business operations with the assignment of ATM related processing agreements and ATM assets under a purchase and sale agreement to be offset against receivables and payables to Westsphere System made effective on May 1, 2009.

As a result of the changes to the Interac Network EMV chip card requirements and to meet the financial requirements resulting from these changes the Corporation on December 1, 2011 completed the move of its ATM assets including ATM equipment and related Site Location and Placement Agreements into E-Debit Global Corporation’s wholly owned subsidiary VenCash Payment Solutions Inc., which segregated the Corporation’s Canadian national network of automated teller machines (“ATMs”) and our technical and operations platforms (the “Switch”) transaction processing operations which remained within Westsphere Systems Inc.

Westsphere System received approval in March 2007 by INTERAC Association, as an acquirer in the Association’s SCD Service and as an acquirer in the Association’s IDP Service. This allowed Westsphere Systems to become an indirect connector, thereby resulting in it owning and managing a switch. Westsphere Systems currently provides transaction processing to the majority of our ATM estate through its participation within the Canadian INTERAC Association.
 
Business of Vencash Payment Solutions Inc.
 
ATM Business in Canada
 
Background of the ATM Business
 
Historically, the predominant Canadian ATM banking network is the Interac network and was the organization primarily responsible for the early development and operation of a Canadian national network of two shared electronic financial services ATM and Debit transactions.  Prior to 1997 The Interac Network was operated as a non-profit organization which under regulatory guidelines sets its fees on a cost recovery basis, and was only a closed network jointly operated by Canada's largest financial institution and the only devices that were allowed to be connected to Interac were devices owned/operated by member financial institutions.

In June 1996, the Canadian Competition Tribunal issued a consent order negotiated between a number of the Interac Association's members and the Competition Bureau.  As a result the Canadian Banking and Financial initiated this government deregulation program which under deregulation of the Canada Bank Act, allowed for the release of certain segments of proprietary control involving banking institutions.  One of the preliminary results of the deregulation was the allowance of the private operation of ATMs not associated with Canadian Banking financial institutions.

Designed to increase competition in the Canadian financial market for electronic payment services, the Consent Order resulted in Interac allowing nonfinancial organizations to participate as members of Interac, and permitted surcharging at ATMs and Debit Terminals in Canada.  Surcharging allows the owner of an ATM and/or Debit Terminal to charge a Surcharge Fee on each Interac transaction performed at an ATM and/or Debit Terminal. This private ownership and operation of ATM equipment has been described within the industry as the "white label ATM" market.
 
Canadian Banking Institutions had been participating in the development of new technology, particularly in regard to online computer banking.  Advances originating from the introduction of credit card and debit card services evolved into the installation of commercial point of sale management systems across the country and the development of the Canadian INTERAC system which provided complete online banking services and 24-hour customer banking between the various existing banking institutions. It also provided for full-bank service availability from remote site locations throughout Canada.
 
Evolving online financial technology being pursued by the institutional banking financial sectors has been confronted by growth of computer-based commerce. The Internet and the expansion of computer generated online commerce shifted a significant amount of consumer financial services from conventional banking and financial institutions to non-traditional and new and innovative virtual-based methods of conducting financial transactions. INTERAC connection of the conventional banking institutions is a significant factor for profits produced by Canadian conventional banking and financial institutions.
 
 
 
4
 
The Corporation as well as many other Canadian companies pursued participation in the field of marketing, distribution, selling, and leasing cash dispensing equipment recognized in the market place as ATMs, "ABMs" (automated banking machines), "white label machines" (a privately owned and operated cash dispensing machine).
 
Currently Canadian ATM and Debit transactions are facilitated through various Networks like Interac, VISA, MasterCard, Cirrus, Plus, etc. The two main parts of these networks are "issuers" and "acquirers". The following is a brief description of the Network functions:

Networks:  Networks have rules and regulations that members of the Network must comply with. These rules typically govern operations, security, limits, etc.

Acquirers:  Acquirers control the individual devices connected to a Network. Examples of these devices are ATMs and Debit Terminals. Acquirers receive transactions from devices and then route these transactions through the Network to the card issuers for approval. Acquirers settle (i.e. receive or distribute funds) cash amounts withdrawn from ATMs and purchase amounts made with Debit Terminals (based upon what has been approved by the card issuers) to the applicable merchants, debit terminal owners and ATM owners.

Card Issuers:  Card Issuers are typically financial institutions that provide their customers (also known as "account holders") with cards that have access to Networks. Card issuers receive transactions from acquirers and authorize these transactions based upon the card issuers' customer/account holders' account balances and also validate the customer's/account holder's PIN as required.
When transactions are completed the card issuers pay the applicable Networks (which funds are routed to the applicable acquirer) for amounts purchased or withdrawn plus any fees on a daily basis.

Switch:   A "switch" as used herein means a computer system that receives requests for financial transactions from ATM terminals, POS or electronic transfer terminals in retail businesses which routes transaction requests to and from ATM devices and financial institutions for final transaction processing and/or authorization. In Canada, the Canadian INTERAC network coordinates this activity. Under recent deregulation, non-financial institutions that are members of INTERAC are allowed to be indirect connectors. These non-financial institutions provide switching services for shared cash dispensing, data processing, and other associated services in connection with the network. Pursuant to the rules and regulations set out by INTERAC and current switch technology, a switch can process up to ten thousand (10,000) transactions at any given time.

Currently the Corporation through its wholly owned subsidiary Westsphere Systems Inc. (“WSI”) acts as an "acquirer" for Terminals that the Corporation owns (through arrangements called "ATM Placements" or "Debit Placements") and for Terminals that are owned by third parties (through arrangements called "ATM Processing" or "Debit Processing").

A transaction at an ATM or Debit Terminal in the Corporation’s network, commences when a consumer holding a card issued by a Network member decides to withdraw cash or make a purchase using a Debit Card or Credit Card.  WSI has access to various Networks (including Interac, MasterCard and VISA) through agreements WSI  has with the Networks or Network members that are authorized to enter into sponsorship arrangements for the Network. In the case of a cash withdrawal at an ATM, the cardholder inserts his or her card into the machine, enters his or her PIN and requests a sum of money.

In the case of a Debit or Point of Sale (POS) Terminal purchase the process is the same, except that instead of dispensing cash the Debit Terminal sends the merchant an approval notice and the merchant provides the goods or services that the cardholder has requested. The Acquirer (in this case WSI) sends this request through to the Acquirer's connection service provider (the “Switch”) which in turn sends the request electronically through the applicable Network to the cardholder's financial institution (the "Issuer") which verifies the cardholder's PIN and determines if sufficient funds (or credit) are available to fulfill the request. The Issuer then provides an approval response back through the applicable Network to the Acquirer, and then the Acquirer electronically causes the ATM to dispense the funds accordingly. All of this occurs in a matter of seconds. At the end of each business day, through a process referred to as "settlement" the Issuer deposits funds which are routed to the Acquirer's settlement agent (and then on to the Acquirer to reimburse for the cash dispensed from ATMs and goods/services paid for through the Debit Terminal).
 
The Corporation’s ATM business
 
In late 1997, "non-conventional banking" participation and private ownership of ATMs was authorized allowing for participation within the "Canadian INTERAC system". The "Canadian Interac Association" as used herein is a national organization linking enterprises that have proprietary networks to enable them to communicate with each other for purposes of exchanging electronic financial transactions. Five (5) Canadian Banking and Financial Institutions founded the association in 1984. As of March 2013, there were eighty-three (83) member organizations. INTERAC is the organization responsible for the development of a national network of shared electronic financial services: INTERAC Shared Cash Dispensing Service (“SCD”) at ATMs and INTERAC Direct Payment Services (“IDP”), Canada's national debit service. IDP is Canada's national debit card service, available at more than 630,000 IDP terminals and 600,000+ ATMs across the country.
 
 
5
 
 
As a result of a review and investigation of opportunities developing from the 1997 government deregulation of the Canadian Banking and Financial sectors which allowed for the private operation of ATMs not associated with Canadian Banking financial institutions, the Corporation entered the "white label" ATM marketplace through its subsidiary Vencash Capital Corporation (“Vencash”). Vencash became the 7th Canadian Channel authorized to participate within the "white label" ATM business in Canada.
 
Currently the Corporation through its subsidiary holdings is a fully integrated ATM provider, and offers a complete suite of ATM management services from ATM deployment and maintenance to transaction processing, reporting and settlement. Since inception, our ATM business grew significantly peaking in 2009 with approximately 1,000 within its ATM network.  In the past year and during the transition over to the EMV Network Standards of Interac, the Corporation continued to reduce its network size by selling selected regional ATM estates to an investor.  As of December 31, 2012, 275 ATM are being processed by WSI’s switch.  At present, we continue to earn revenue from the following sources: (i) transaction fees which include Interchange Fees and surcharge revenue; (ii) processing fees and maintenance fees; and (iii) margin on the sale of ATMs.  We are continuing to sign exclusive five-year plus agreements (which contain renewal provisions) with our customers for their ATM transaction processing and maintenance and management services.

Since 1999 the Corporation’s focus was to grow our ATM estate organically utilizing in house sales as well as established distributor relationships.  In the past, the distributor relationship has been the keystone to our national ATM presence but as the Canadian marketplace matured, so did our established distributor model.  Combined with network changes within the Canadian Interac Network particularly the initiation of EMV chip encryption and the marketplace’s matured state the Corporation’s focus has been to maximize its current ATM placements, with a site by site evaluation of the go forward profitability of our ATM estate.  The process of eliminating non profitable site locations and the sale of selected regional ATM site estates saw the Corporation meet the deadline of Interac EMV implementation by the end of 2012.

Previously Vencash Capital acted as a "channel" which contracted its financial electronic transfer responsibilities with two (2) non owned "switches" (Data West Solutions and Calypso Canada Ltd.).  In November 2008 the Corporation commenced the transfer of its previously contracted switch to Westsphere Systems, and with the roll out of our ATM estate onto Westsphere System’s processing switch, reliance on outsourced switching has been eliminated.

The Corporation currently provides our leading merchant customers with all of the services required to successfully and profitably operate ATMs which include monitoring, maintenance, cash management, customer service and transaction processing.  With a strategic relationship developed within the Canadian “white label” marketplace the Corporation’s management believes while we operate in very competitive marketplace the re-establishment of a nationwide distribution network, which allowed for our presence in the marketplace in the past and allow us to capitalize on the opportunities afforded with the changeover to chip based transaction processing.
 
Current Stage of Corporate Development
 
While our ATM network has historically provided a majority of the cash flow which fuelled our business operations the combination of a matured business, routine acceptance of the white label ATM placement and market saturation will continue to be norm.  With the move to chip enabled card products, both debit and credit, the non-conventional bank “white label” ATM business has changed and so has the Corporation’s ability to rely on our ATM business operations to continue to generate positive revenues and returns.  The Corporation plans to focus on the re-establishment of our historic distribution network to allow for the growth of the ATM business operations and to expand our Switch Direct ATM business model.
 
Growth Strategy and Market Niche
 
The Corporation is an integrated transaction processor and an ATM provider offering a complete suite of ATM management services ranging from ATM deployment, maintenance reporting and settlement and transaction processing.   Historically we have focused on organic growth and our management's plan is to continue this effort as follows:
 
i.  
Continue our review of our nationwide ATM estate to evaluate profitability of each site within the network in order to maximize our current revenues and reduce our costs of administration, which might include the sale of those ATM estates to our distribution network or other third parties.
 
ii.  
We will re-establish our nationwide distribution network, which allowed for our presence in the marketplace in the past and allow us to capitalize on the opportunities afforded with the changeover to chip based transaction processing.
 
Over the past four years the Corporation has developed and implemented its Switching capabilities and membership within the INTERAC association and our national access to all regions within Canada through the INTERAC System.  This has been a very time and financially sensitive development but one which management believes holds significant potential.  Combined with consolidation of its various business operations and elimination of administrative and operation costs we have a vertically integrated business operation.
 
 
 
6
 
Competitors
 
 
i
DirectCash Payments Inc.- Canada's largest ATM Corporation in operation. It has offices and distribution centers in all of the major cities across Canada and supplies consolidated distribution, switching and processing services
 
 
ii.
Ezee Cash – Second largest national ATM estate holder centered in Ontario and Quebec supplies ATM products not including Financial Processing Services.
 
 
iii.
Several Regional and National Companies - These companies compete on a regional basis with the Corporation’s regional distributor network and nationally with Westsphere Systems corporately.
 
Our Strengths
 
We are a fully integrated full service Financial Processor and ATM operator focusing on providing retailers with reliable, low cost ATMs with contractual relationships which provide us with recurring transactional and fixed revenue streams with a large number of geographically diverse customers including small, medium and large retail enterprises in a variety of market segments. We enter into contracts with all our customers which typically have an initial term of five years plus first right of refusal to contract extensions.
 
Historically, we have deployed and operated our devices under two distinct arrangements with our retail partners: Corporation-owned and merchant-owned arrangements. Under Corporation-owned arrangements, we provide the device and are typically responsible for all aspects of its operation, including transaction processing, managing cash, supplies, and telecommunications as well as routine and technical maintenance. Under our merchant-owned arrangements, the retail merchant or the distributor owns the device and is usually responsible for providing cash and performing simple maintenance tasks, while we provide more complex maintenance services, transaction processing, and connection to the EFT networks.
 
We will continue to utilize selective placement and monitoring of ATMs, to obtain maximum value for placement and a higher percentage return per terminal. Service and information dissemination will continue to be a priority for the management team.
 
The Corporation’s ownership of our communication network related to our Switch operation has provided us with (i) equal or an enhanced economic advantage over the majority of our ATM competitors who must totally rely on third parties to provide them with various services including transaction processing through our access to Interac; (ii) the ability to provide additional products and services which our smaller regional competitors are not able to offer such as real time and customized reporting; (iii) control of the core technologies of our business; (iv) the ability to upgrade our products by adding new functionality and services not easily replicated by our competitors; and (v) the ability to grow organically without significant incremental technical capital.

In addition to deploying our devices under Corporation-owned and merchant-owned arrangements, we recently began offering a managed services solution, under which we provide certain services to retailers, financial institutions and other ATM operators. We offer various forms of managed services, depending on the needs of our customers, and offer a customized ATM management solution that can include monitoring, maintenance, cash management, customer service, transaction processing and other services.

Our strategy is to enhance our position as a major provider of automated consumer financial services not only in Canada but internationally and to expand our business operations to become a significant provider of managed services to further expand our network and service offerings into select international markets.
 
Risk Assessment
 
We operate in a changing and unpredictable regulatory environment. If we are subject to new legislation regarding the operation of our ATMs, we could be required to make substantial expenditures, as we have in the recent past, to comply with that legislation, which may continue to reduce our net income and our profit margins.

The Corporation depends on a number of counterparties in the conduct of its business operations including; Moneris Solutions Corp., Bank of Montreal, Royal Bank of Canada, ACI Worldwide Inc. and Shaw Communications Inc.  There can be no assurance that any of these counterparties will be able to continue to perform their respective obligations and contracts. An interruption in or the termination of any contract or business arrangement by any counterparty, including, in relation to our membership within Interac, the supply by banks of cash for our ATM cash loads, the use of our own employees to load our Full Placement ATMs, and the Corporation’s inability to make alternative arrangements in a timely manner, or at all, could have a material adverse effect on the our business, financial condition and operating results. In addition, we periodically negotiate renewal terms for these contracts and business arrangements and there can be no assurance that such renewal terms will remain financially acceptable.  Any interruption in the Corporation’s relationship with certain of these counterparties could materially adversely affect our ability to process ATM transactions. If the Corporation were to lose its access to Interac membership, this would immediately result in a material adverse effect to our business. There can be no assurance the Corporation would be able to find alternate supplies or sources of distribution in a timely manner.

 
7
 
Counterparty Risk – The ATM Business:    The private "white label" ATM business is highly competitive. We face competition from large numbers of companies engaged in the selling and servicing of ATM products in all areas in which we may attempt to operate. Competition includes some of the major financial institutions in Canada who have greater financial and human resources and greater name recognition.  If existing or new competitors gain market share our business and operating results could be adversely affected. Our future and existing competitors could also introduce products with superior features and functionality at lower prices than the Corporation's products, and could potentially bundle existing or new products with other more established products in order to compete with us. The introduction of new technologies, and any potential limitations or changes to our network or changes to security requirements could all have a materially adverse impact on our business. Competitors could also gain market share by acquiring or forming strategic alliances with other competitors. If existing or future competitors seek to gain or retain market share by reducing margin on products sold, we may also be required to reduce our margins or our fee structure or increase amounts payable to third parties, retailers, sales agents and resellers, which may reduce our revenue.

We may be unable to maintain and expand our customer base and may not be able to renew our contracts on the same or similar terms and conditions as those which presently exist. As well, our profitability may be affected by a number of factors including the expiry or termination of existing placement contracts or processing contracts.

Counterparty Risk – Networks:    The profitability of the Business will be in part dependent upon the continuation of a favorable regulatory regime with respect to the continuing operations and the future growth and development of independent ATM operators. Should the regulatory regime in an applicable jurisdiction be modified in a manner which adversely affects independent operators, including increases in taxes or increased regulatory burdens (including burdens imposed by Interac, Cirrus, Maestro, Visa and Plus), revenues may be adversely affected. The failure to obtain all necessary licenses or permits, including renewals thereof or modifications thereto, may adversely affect the Corporation’s cash flows.

Interac, MasterCard or VISA have mandated hardware and software security upgrades for ATMs, Debit Terminals and our Switch, and with the accompanying change of the rules and regulations around approved devices, members or security, our revenues may continue to be adversely impacted.  The Corporation’s operations are subject to a variety of federal, provincial laws and regulations, including Interac, Cirrus, Maestro, Visa, Plus and Canadian Payment Association rules and regulations. The Corporation and the companies with whom it contracts to provide services are required to invest financial and human resources to comply with such laws and the Corporation anticipates that it will continue to do so in the future. Although such expenditures historically have not been material to us, such laws or regulations are subject to change and accordingly, it is impossible to predict the cost or impact of such laws or regulations on its future operations. Although, to our knowledge, such fees are not anticipated to change, any change that Interac makes to its interchange fees, its fee structure or acquirer fees could have an adverse impact on our revenues. As well, current revenues would be adversely impacted if Interac decided to eliminate surcharging.

If a fraud occurs in the Interac network or in the Corporation’s network, this could result in an adverse impact on the Corporation and its revenues as a result of the implementation of more stringent regulations or the loss of consumer confidence, each of which may result in the transaction volumes at our ATMs declining and our revenues being adversely impacted.

Historically, Interac has enjoyed a near monopoly status in Canada to process PIN secured Debit Card transactions (as compared to the signature secured Credit Card transaction processing that several Credit Card Networks compete for). Merchants accepting payment by Interac debit card have historically enjoyed a very low cost fee structure (typically a few cents per transaction regardless of the size of the payment) and most bank customers have account fee arrangements with their financial institution that allows for a significant number of Debit Card transactions per month to be included in their monthly account fee. In comparison, a Credit Card acquirer's typical business model involves charging a share referred to as a Merchant Discount Rate (typically a percentage of 2-5% plus a flat per transaction fee in some circumstances) of the value of all transactions which a merchant agrees to accept payment through a Credit Card. The financial institution which issued the Credit Card then receives an Interchange Fee from the Credit Card acquirer.

The Canadian affiliates of the MasterCard and VISA Networks announced in early 2009 their intention to establish Canadian networks that would allow for the issuance of PIN secured Credit Cards in Canada (i.e. that would be functionally the same as the Debit Cards historically used through Interac).  In March 20, 2011 one of Interac founding member financial institutions CIBC (Canadian Imperial Bank of Commerce) announced the launch of the CIBC VISA debit card product.  MasterCard and VISA are profit orientated businesses. Credit Card Networks like MasterCard and VISA compete with each other to try to get financial institutions to connect their issued card base to the Credit Card Networks. Financial institutions compete for customers who open accounts with the financial institution and make money off the customers by charging interest for borrowed funds and charging various kinds of account and transaction fees.

 
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In search for greater market penetration and share the major Canadian Banking Institutes offer enhanced product services, the latest is the issuance of Debit Cards and/or Credit Cards to their customers that can be used on multiple Networks such as Interac, MasterCard or VISA. Customers will decide to use a particular card based on a number of factors such as whether the card is associated with a network accepted by the merchant the customer purchases goods and services from, the fees the customer will pay to use the card, and any benefits the customer receives from use of the card (i.e. air miles, cash back, etc.). Concerns have been expressed by retail merchants that the new PIN secured Credit Cards offered by MasterCard and VISA will be favored by financial institutions over Interac (because financial institutions can earn more revenue through the higher pricing models typically associated with Credit Card).   The routing of the debit or credit transaction to proprietary networks such as VISA and MasterCard could have a dramatic effect on the historical revenue stream of Canada’s largest debit network Interac which could result in effecting the Corporation’s ongoing revenue stream.  The Canadian federal government has announced that they will not be taking steps to block MasterCard and VISA from offering PIN based card products in competition with Interac.

The Corporations revenues have historically been dependent on ATM transaction volume.  In the event that transaction volume decreases with the proliferation of additional ATMs in the market, the Corporation’s revenues will be negatively impacted.  Actual expenses may exceed the Corporation’s projected amounts and/or actual revenues may be less than the Corporation currently projects, in which case the Corporation may need to raise additional funds from lenders and equity markets in the future. In addition, the Corporation may choose to raise additional financing in order to capitalize on perceived opportunities in the marketplace that may accelerate the Corporation’s growth objectives. The Corporation’s abilities to arrange such financing in the future will depend in part on the prevailing capital market conditions as well as the Corporation’s business performance. There can be no assurance that the Corporation will be successful in its efforts to arrange additional financing, if needed, on terms satisfactory to the Corporation. If additional equity or debt financing is raised by the issuance of common stock, control of the Corporation may change and shareholders may experience dilution to their equity interest in the Corporation.
 
Business of E-Debit International Inc.
 
E-Debit International Inc.’s (“E-Debit International”) initial development stages focused on meeting the payment system needs of current and potential online shoppers specifically the “un-banked/under-banked” which refers to those that cannot obtain a bank account or do not wish to have a conventional bank account.  While E-Debit International's business model was originally based on an anonymous payment system to protect the identity of the purchaser while allowing for guaranteed payment to the merchant the events of September 11, 2001 caused our management to evaluate the anonymity factor of the E-debit International process to ensure our policy of “knowing our customer”.
 
The Corporation entered into an asset purchase agreement on June 21, 2010 with an investor related to certain hardware equipment, and software equipment for the establishment of a proprietary card management system in order to establish the foundation platform to enable E-Debit International to launch its card product entry into the loyalty, prepaid, debit and credit card business space originating in Canada and North America wide to date the card management system has not been implemented or put into commercial production.
 
As of December 31, 2012, the Corporation recorded an impairment charge of $381,019 to reduce the idle property and equipment to zero based on an annual property and equipment impairment analysis performed in response to a hardware and software security upgrade mandated under Interac, MasterCard and VISA rules.  These upgrades include the requirements to have EMV (Europay, MasterCard, VISA) certified chip card (the replacement technology for the historical magnetic stripe cards) software/readers, and network approved encrypted PIN pad ("EPP") devices, installed on all ATMs and debit terminals:  thereby providing the ability to accept EMV chip card transactions.  The Corporation has determined that it is not cost effective for the upgrades and the outcome is uncertain.  In addition, management intends to raise funds for the project but no assurance can be given that the Corporation will be successful in raising additional capital.
 
Business of Cash Direct Financial Services Inc.
 
Cash Direct was formed to expand our “non-conventional banking” operations branded “Personal Financial $olutions”.
 
The first Personal Financial Solutions storefront commenced business operations on November 1, 2004 supplying short-term cash advance loan agreements under the brand name “Cash Direct Advance”, cheque cashing services, corporate registry and filing and other related services.
 
Cash Direct generated revenues from its investment in Personal Financial $olutions and through its first beta site which grew on a monthly basis during the first full year of operations.  It was apparent that the beta test supported the acceptance, convenience, versatility and reliability of the Cash Direct proprietary hardware and related software although two (2) additional Personal Financial $olutions arms length privately held distributorships – one in Edmonton, Alberta and another in Calgary, Alberta
 
The Corporation had previously determined that the operation of cheque cashing services, corporate registry and filing services was not adding to the financial potential of our core business model as the fee per transaction based business operations of its ATM, POS and card management businesses.  On October 15, 2010, the Corporation sold forty-one (41%) percent of the issued and outstanding shares of Cash Direct’s subsidiary 1105725 Alberta Ltd operating as Personal Financial Solutions to 1498328 Alberta Ltd. of which E-Debit Global officer and Chief Operating Officer is a principal shareholder. The sale resulted in 1498328 Alberta Ltd. controlling ninety (90%) of the issued and outstanding shares of 1105725 Alberta Ltd.   E-Debit Global has the option to repurchase up to 40% of the issued and outstanding shares of 1498328 Alberta Ltd. at $1.00 per share on or before October 14, 2013.
 
 
 
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Concurrent to the sale of the shares of 1105725 Alberta Ltd. and in order to facilitate the financing of replacement ATM equipment to meet Interac EMV requirements, the Corporation on May 1, 2011 completed the sale of ninety (90%) percent of the issued and outstanding shares of Cash Direct Financial Services Inc. to 732352 Alberta Ltd. a wholly owned subsidiary of a Corporation controlled by Douglas Mac Donald, the Corporation’s President and CEO.  E-Debit Global has the option to repurchase up to 51% of the issued and outstanding shares of Cash Direct Financial Services at $1.00 per share on or before April 30, 2013.
 
Business of Group Link Inc.
 
Group Link Inc.  (“Group Link”) was incorporated under the laws of the Province of Alberta on December 13, 2012 as the foundation of the re-establishment of our nationwide distribution network, which in the past allowed for our presence in the Canadian marketplace.  The Corporation is the majority shareholder of Group Link holding 55% of the issued and outstanding common stock of the Corporation.  The Corporation’s Chief Executive Officer is Group Link’s Chief Executive Officer and Director and holds personally 15% of the issued and outstanding common stock of Group Link.  E-Debit’s Chief Operating Officer is a Director and personally holds 10% of the issued and outstanding common stock of Group Link.  Group Link’s President and Group Link’s Chief Development Officer both are Directors of Group Link and each hold 10% of the issued and outstanding common stock of the Group Link.
 
Built on the Corporation’s traditional historic distribution model which has been utilized for the past 14 years within the VenCash ATM network, Group Link utilizes a “gated-access network approach” where Independent Sales Organization (“ISO”) members within the Group Link distribution network require either an existing relationship with the Corporation or any of its affiliate members and/or the intervention of a contact of the affiliate member.  The Group Link distribution network utilizes and has full access to all business operations and services of the Corporation and our financial processing services as supplied by Westsphere Systems Inc. is integrated within the Group Link Independent Sales Organization (“ISO”) member network.
 
Group Link intends to expand its opportunities to not only the ATM industry but to also build on our experience in developing, managing and operating a national marketing and distribution channel being offered to all Group Link member ISO’s with exclusive utilization of the Corporation’s wholly owned subsidiary Westsphere Systems Inc. for financial processing services related to revenue payment and revenue splitting functionality.
 
Current Stage of Our Development
 
Our group of companies employs twelve (12) full-time employees and six (6) contracted consultant groups working in Calgary & Edmonton, Alberta, Kingston, Toronto & Orangeville, Ontario and Omaha, Nebraska.
 
We were incorporated in Colorado on July 21, 1998, and hold wholly owned as well as majority controlled subsidiaries which conduct business throughout Canada.  The Corporation also has investment interests in associated companies in Canada.  We file and prepare our financial information in accordance with U.S. generally accepted accounting principles (“GAAP”).
 
ITEM 1A      RISK FACTORS
 
The following are certain risk factors relating to E-Debit Global Corporation, and the Corporation’s subsidiary business operations.  The following information is a summary only of certain risk factors and is qualified in its entirety by reference to, and must be read in conjunction with, the detailed information appearing elsewhere in this document.

E-Debit Global Corporation is organized to be a holding corporation of the various other entities held as wholly owned subsidiaries and therefore is not directly subject to risks of the business.  However, since the Corporation derives its value and cash flow from its subsidiaries, the risks faced by the Corporation’s subsidiaries are effectively also faced by the Corporation. The risks and uncertainties described below are not the only risks and uncertainties the Corporation faces.

Additional risks and uncertainties not currently known to the Corporation or that the Corporation currently deems immaterial also may impair the Corporation’s business operations. If any of the following risks actually occur, the Corporation's business, results of operations and financial condition could suffer.

Over the past several years the various geographical regulators and Security Commissions in Canada have placed restrictions on the Canadian Brokerage Houses in Canada for the acceptance of OTC:QB shares into Canadian shareholder trading accounts.  While the Corporation has continued to maintain a continual and uninterrupted SEC filing presence as a publicly listed Corporation since 2001, the ability of the Corporation’s holders of common stock to place their stock into brokerage accounts has been seriously impaired.

 
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An investment in the Corporation’s common stock involves a high degree of risk.  You should carefully consider the following risk factors and the other information in this registration statement before investing in our common stock.  Our business and results of operations could be seriously harmed by any of the following risks.

We operate in a changing and unpredictable regulatory environment. If we are subject to new legislation regarding the operation of our ATMs, we could be required to make substantial expenditures to comply with that legislation, which may reduce our net income and our profit margins.
 
We have substantial indebtedness.

As of December 31, 2012, we had a working capital deficit of $2,225,293 which includes $495,014 payable to suppliers for day-to-day operations.  Our ability to meet our debt service requirements will depend upon achieving significant and sustained growth in our expected cash flow.  Our cash flow will be affected by our success in implementing our business strategy, prevailing economic conditions and financial, business and other factors, some of which are beyond our control.  Accordingly, we cannot be certain as to whether or when we will have sufficient resources to meet our debt service obligations. If we are unable to generate sufficient cash flow to service our indebtedness, we will have to sell assets, restructure or refinance our indebtedness or seek additional equity capital. We cannot assure that any of these strategies can be effective on satisfactory terms, if at all, particularly in light of our high levels of indebtedness. In addition, the extent to which we continue to have substantial indebtedness could have significant consequences, including:

·  
our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions and other general corporate purposes may be materially  limited or impaired,

·  
a substantial portion of our cash flow from operations may need to be dedicated to the payment of general operations and therefore not available to finance our business growth, and our indebtedness,

·  
our high degree of indebtedness may make us more vulnerable to economic downturns, limit our ability to withstand competitive pressures or reduce our flexibility in responding to changing business and economic conditions.

Requirements associated with being a reporting Public Corporation will require significant Corporation resources and management attention.

Over the past several years the various geographical regulators and Security Commissions in Canada have placed restrictions on the Canadian Brokerage Houses in Canada for the acceptance of OTC:QB shares into Canadian shareholder trading accounts.  While the Corporation has continued to maintain a continual and uninterrupted SEC filing presence as a publicly listed Corporation since 2001 the ability of the Corporations holders of Common Stock to place their stock into brokerage accounts has been seriously impaired.

Compliance with reporting and other requirements applicable to public companies such as Sarbanes Oxley will continue to create additional costs for us, will require the time and attention of management and will require the hiring of additional personnel and outside consultants. We cannot predict or estimate the amount of the additional costs we may incur, the timing of such costs or the degree of impact on our management's attention to these matters will have on our business.

In addition, being a reporting public Corporation could make it more difficult or more costly for us to obtain certain types of insurance, including directors' and officers' liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.

Regulatory Regime

The profitability of the Corporation’s subsidiary business operations will be in part dependent upon the continuation of a favorable regulatory regime with respect to the continuing operations and the future growth and development of independent ATM, Debit Terminal and Prepaid Card operators. Should the regulatory regime or the interpretation of the legislation in an applicable jurisdiction be modified in a manner which adversely affects independent operators, including increases in taxes or increased regulatory burdens (including burdens imposed by Interac, Cirrus, Maestro, Canadian Payments Association, VISA and Plus), the Corporation’s profitability may be adversely affected.

The failure to obtain all necessary licenses or permits, including renewals thereof or modifications thereto, may adversely affect profitability.  If the Networks, like Interac, VISA, MasterCard, Plus, or Cirrus change their rules to alter the financial terms under which acquirers and issuers operate, such a change could have an adverse effect on the Corporations’ profitability (or a positive effect depending on the direction of the change).

 
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Some examples of the types of financial terms that the Networks have the power to change under their rules include, changing of amounts of interchange that is paid to/by card issuers or transaction acquirers, adjusting the fees paid by card issuers and/or transaction acquirers to the Network, creating new fees or levies charged to card issuers and/or transaction acquirers, changing the rules for allocating the liability for fraudulent transactions and their associated costs, changing the requirements for connecting to the network for transaction processing, eliminating or restricting the use of surcharging, allowing non financial institution members to deploy or process transactions, increasing Network association fees charged to card issuers or transaction acquirers, changing their rules so that different rules/fees apply to financial institutions versus non financial institution terminal deployers or processors, and changing or adding new monetary sanctions for breaches of network rules. If such changes result in increased costs or decreased revenue for the Corporation, the Corporation may or may not be able to recover the difference by altering the terms of the contracts Corporation has with its customers (or the Corporation may not be able to make the necessary adjustments until the terms of existing contracts reach the end of their current term).

If Interac, MasterCard or VISA mandate a hardware or software security upgrade for ATMs, Debit Terminals or the Corporation’s Switch, or change the rules and regulations around approved devices, members or security, profitability may be adversely impacted.

Security upgrades are required under Interac, MasterCard, and VISA rules. These upgrades include the requirements to have:
 
(a)  
EMV (Europay, MasterCard, VISA) certified chip card (the replacement technology for the historical magnetic stripe cards)software/readers, and

(b)  
network approved encrypted PIN pad ("EPP") devices, installed on all ATMs and debit terminals:
thereby providing the ability to accept EMV chip card transactions. This has required and will also require further upgrading the Corporation’s Switch to process EMV chip card transactions, and adding additional encryption methods to Corporations managed ATMs and Debit terminals, Triple DES Encryption.
 
The Corporation has met all of the deadlines mandated by Interac and MasterCard for conversion of ATMs and debit terminals (i.e. to read the EMV microchip on a card rather than a magnetic stripe) are as follows:

(a)  
50% of all ATMs must be upgraded with an EMV certified chip pin entry device by December 31, 2011 and 100% of ATMs must be upgraded by December 31, 2012;
(b)  
35% of debit terminals must be upgraded with an EMV certified chip pin entry device by December 31, 2010, 60% must be converted by December 31, 2012, and 100% must be upgraded by December 31, 2015.

Notwithstanding our past compliance to mandated network and card product protocols the Corporation could experience difficulty or an inability to comply with future network and card product change.

The result of non-compliance can include penalties, fines, sanctions and contractual penalties by the applicable Network(s) and ultimately disconnection of the ATM and Debit Terminal device or card from the Network for failure to comply by the end dates.  The Corporation will be investing maintenance capital and upgrading its IT department to meet these upgrade deadlines.  The Corporation’s customers who own their own equipment are encouraged to make the necessary changes to their equipment and in some cases the Corporation has the contractual right to make the necessary changes for the customer (and charge the customer for the cost of the change).

The Corporation’s business operations are subject to a variety of federal laws, provincial laws and the rules of various financial networks ("Networks"), including Interac, Cirrus, Maestro, VISA and Plus. Also, the Corporation or the entities with whom the Corporation contracts are subject to the jurisdiction of various government agencies and departments, including the Office of the Superintendent of Financial Institutions ("OSFI"), the Canadian Payments Association (the "CPA"), Canadian Deposit Insurance Corporation ("CDIC"), Financial Transactions and Reports Analysis Centre of Canada ("FINTRAC"), offices of Provincial privacy commissioners as well as various jurisdictional Securities Commissions.

Some of the more common areas where regulatory compliance can become relevant to operation of the Corporation's business include (a) anti-money laundering ("AML") requirements which includes reporting of suspicious transactions and checking of customer names against various lists of terrorist organizations, (b) know your client ("KYC") requirements (c) fee disclosure requirements ("FDR"), (d) Identification of politically exposed foreign persons ("PEFP") and collection of additional information regarding PEFP transactions. Although the cost of compliance with such requirements historically has not had a material effect financially to the Corporation, such laws or regulations are subject to change and accordingly, it is impossible to predict the cost or impact of such laws or regulations on its future operations.

 
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Each of the Networks, the CPA and other regulators are constantly reviewing, revising and updating their rules and regulations with a view to addressing and regulating new business practices, the needs of the marketplace and generally to meet their public interest mandates. Recently some Canadian provinces have chosen to legislate their own AML requirements (in addition to those already legislated under federal legislation). If any of the Networks or government agencies that regulate financial institutions change their rules (or their interpretation of the rules) so as to increase the administrative burdens necessary to operate the Corporation’s Prepaid Card program (for example, requiring that each Prepaid Card customer become a customer of the financial institution and provide the necessary information to open and maintain a separate deposit account), such changes/increased costs could negatively impact our card product business model. If other legislation not directly dealing with financial institutions (for example, the Tax Rebate and Discount Act (Canada)) or legislation similar to the legislation introduced to regulate "gift" cards, is passed to restrict or limit the ability to charge fees on Prepaid Cards, this may make the use of Prepaid Cards in such applications uneconomic.

The Canadian affiliates of the MasterCard and VISA Networks announced in early 2009 their intention to establish Canadian networks that would allow for the issuance of PIN secured Credit Cards in Canada (i.e. that would be functionally the same as the Debit Cards historically used through Interac).  As of March 20, 2011 one of Interac’s founding member financial institutions CIBC announced the launch of the CIBC VISA debit card product.  MasterCard and VISA are profit orientated businesses. Credit Card Networks like MasterCard and VISA compete with each other to try to get financial institutions to connect their issued card base to the Credit Card Networks. Financial institutions compete for customers who open accounts with the financial institution and make money off the customers by charging interest for borrowed funds and charging various kinds of account and transaction fees.

In search for greater market penetration and share, the major Canadian Banking Institutes offer enhanced product services; the latest is the issuance of Debit Cards and/or Credit Cards to their customers that can be used on multiple Networks such as Interac, MasterCard or VISA. Customers will decide to use a particular card based on a number of factors such as whether the card is associated with a network accepted by the merchant the customer purchases goods and services from, the fees the customer will pay to use the card, and any benefits the customer receives from use of the card (i.e. air miles, cash back, etc.). Concerns have been expressed by retail merchants that the new PIN secured Credit Cards offered by MasterCard and VISA will be favored by financial institutions over Interac (because financial institutions can earn more revenue through the higher pricing models typically associated with Credit Card).   The routing of the debit or credit transaction to proprietary networks such as VISA and MasterCard could have a dramatic effect on the historical revenue stream of Canada’s largest debit network Interac which could result in effecting the Corporation’s ongoing revenue stream.  The Canadian federal government has announced that they will not be taking steps to block MasterCard and VISA from offering PIN based card products in competition with Interac.

The Corporation employs a number of employees and contractors that conduct very significant services to the Corporation’s operating systems associated to our Switch Operations.  In the course of supplying those services and supports if one or more of these individuals in key control positions were to perpetrate a fraud (for example, relating to settlement of transactions, altering account deposit account details, changing customer charging details, fraudulently ordering cash to a non Corporate owned location, or creating fake accounts), this could have a negative impact on the Corporation's cash flow.  To reduce this risk the Corporation has put into place significant internal controls and monitoring to detect any of these possible activities, and the Corporation requires dual entry for many of the encryption key loading and control processes related to the cash settlement process.

You should not consider prior growth rates in our revenue to be indicative of our future operating results. The timing and amount of future revenues will depend on our ability to add new ATM/POS terminals to the switch product.  Our future operating results will depend upon many other factors, including:

     - the level of processing transactions and price competition,

     - our success in expanding our business network and managing our growth,

     - our ability to develop and market product enhancements and new products,

     - the ability to hire additional employees, and

     - the timing of such hiring and the ability to control costs.

We do not anticipate paying cash dividends on our capital stock in the foreseeable future.
 
We do not anticipate paying cash dividends in the foreseeable future. We currently intend to retain our future earnings, if any, to fund the growth of our business.
 
 
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Disaster Recovery

The Corporation  has a Disaster Recovery Site located off-site in Calgary, Alberta, and it may not be possible to effectively transition on a timely basis all of the Corporation’s operations and functions to the off-site facility in the event of disaster or equipment failure. The Corporation maintains an addition manual backup program and UPS (uninterruptible power source or battery backup) on site within the Corporation’s general office and full back up auxiliary power and redundant broad band supply at our off-site Disaster Recovery Site.

Software Viruses and Network Intrusion

The Corporation maintains many different networks and management information systems (some of which are interconnected) and some of which are connected to the internet or to other external networks. The Corporation may be susceptible to viruses and network intrusions by third parties. Furthermore, network intrusions that occur on outside networks (or the internet) that the Corporation connects to can spread to the Corporation. Any intrusion or virus could impact the performance of the transaction processing capabilities of the Corporation’s Switch and management software and in a worst case scenario could require temporary shutdown of the affected systems (and the related services offered by the Corporation), and compromise information about customers, users and employees. Systems that are accessed through the internet are also subject to "denial of service" attacks.  These attacks do not involve an intrusion into the system but can effectively make the systems unavailable to the Corporation's customers and employees.

The Corporation maintains significant and complex security policies and procedures to manage these risks, some of which include intrusion detection software, virus monitoring software, IP blocking, IP tracking software, complex encryption for transactions, network monitoring and reporting solutions as well as application and data base level restrictions and controls through network design and implementation.

Uninsured and Underinsured Losses

The insurance coverage currently maintained by the Corporation is in the form of comprehensive property and casualty insurance, including coverage in respect of claims for bodily injury or property damage arising out of assets or operations. In many of the Corporation's customer contracts, the customer is required to maintain insurance with the Corporation named as a loss payee.  Although efforts are made to carry out verification it is difficult to monitor as to the effectiveness of the maintenance of the insurance coverage and that the necessary insurance is currently in place.  Even in cases where the Corporation’s customers remain contractually obligated to maintain insurance for the Corporation's benefit, it is possible that when a loss occurs the necessary insurance will not be in place or will deny coverage.

The Corporation does carry insurance for cash in transit. As a result, not all risks facing the Corporation are now or will be covered by insurance, and no assurance can be given that insurance will be consistently available on an economically feasible basis or that the amounts of insurance will at all times be sufficient to cover each and every loss or claim that may occur involving the Corporation’s assets or operations. In particular, damage caused by an accidental or natural disaster to any or all of the Corporation's office/warehouse facilities, including the contracted Switch operation, may have a material adverse affect on the financial well being of the Corporation’s operations.

Dependency on Networks and Other Counterparties for a Number of Contracts and Business Arrangements

The Corporation depends (directly or indirectly) on a number of Networks and counterparties in the conduct of the Corporation's Business, including Interac, MasterCard, VISA, Plus, Cirrus, Moneris Solutions Corp., Bank of Montreal, Royal Bank of Canada,  Shaw Communications Inc., the DPL Group, TNSI, Trans Armored Canada Ltd., and equipment and software vendors such as ACI Worldwide Inc., Rycom Inc. and ebackup Inc. There can be no assurance that any of these counterparties will be able to continue to perform their respective obligations and contracts or that the Corporation will be allowed to continue its memberships with applicable Networks.  An interruption in or the termination of any contract or business arrangement by any counterparty (including, in relation to the Corporation's access to Networks, the supply by banks of cash for The Corporation's ATM cash loads, the use of the Corporation's own employees to load the Corporation's Full Placement ATMs, and the Corporation's inability to make alternative arrangements in a timely manner, or at all), could have a material adverse effect on The Corporation's Business, financial condition and operating results.

In addition, the Corporation periodically negotiates renewal terms for these contracts, business arrangements and memberships and there can be no assurance that such renewal terms will remain acceptable to the Corporation or any such counterparty or Network. An interruption in the Corporation's relationship with certain of these counterparties could materially adversely affect the Corporation's ability to process ATM, Debit Terminal, Prepaid Card transactions.  If The Corporation were to lose the Corporation's access to Interac or MasterCard memberships, this would immediately result in a material adverse effect to the Corporation's business. The Corporation is also a large user of, and the Corporation's communication and processing systems are dependent on hardware and software sourced from ACI Worldwide Inc. and Rycom Inc. There can be no assurance that the Corporation would be able to find alternate supplies or sources of distribution in a timely manner.

 
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We depend upon key personnel, the loss of which could seriously harm our business.

Our performance is substantially dependent on the continued services of our executive officers and key employees.   Our long-term success will depend on our ability to recruit, retain and motivate highly skilled personnel. Competition for such personnel is intense. We have at times experienced difficulties in recruiting qualified personnel, and we may experience difficulties in the future.  The Corporation has historically been dependent on a relatively small number of key officers and employees, the loss of any of whom could have an adverse effect on the Corporation. Due to the technical nature of its business operations, the Corporation is dependent upon its ability to continue to attract and retain qualified management, marketing, information technology and technical personnel. There is competition for qualified personnel in the Corporation’s business and in related businesses and there can be no assurance that the Corporation will be able to continue to attract and retain qualified personnel necessary for the development of the Corporation's businesses. Douglas Mac Donald continues to act as President and C.E.O. of the Corporation and its principal subsidiaries under an ongoing employment agreement with the Corporation.

Clients, Contracts & Market Saturation

The Corporation may be unable to maintain and expand the Corporation's customer base and may not be able to renew the Corporation's contracts on the same or similar terms and conditions as that which presently exist. The ATM and Debit Terminal markets may reach saturation and organic growth may be limited to market size. As well, the Corporation's profitability may be affected by a number of factors including the expiry or termination of existing Placement Contracts, Processing Contracts or card management contracts. The Corporation may not be able to enforce the terms of certain of the Corporation's contracts depending on the laws of the applicable jurisdiction.

Competition and Technological Change

The ATM, Debit Terminal and prepaid products businesses are highly competitive. The Corporation's competitors include some of the major financial institutions in Canada who have greater financial and human resources and greater name recognition than the Corporation. As well, if existing or new competitors gain market share, the Corporation's business and operating results could be adversely affected. The Corporation's future and existing competitors could also introduce products with superior features and functionality at lower prices than the Corporation's products, and could potentially bundle existing or new products with other more established products in order to compete with the Corporation.

The introduction of new technologies, and any potential limitations or changes to the Corporation's network or changes to security requirements could all have a materially adverse impact on the Corporation's business. Competitors could also gain market share by acquiring or forming strategic alliances with other competitors. If existing or future competitors seek to gain or retain market share by reducing margin on products sold, the Corporation may also be required to reduce the Corporation's margins or the Corporation's fee structure or increase amounts payable to third parties, retailers, sales agents and resellers, which may reduce the Corporation's revenue and cash flow.

Transaction Volumes

The Corporation's revenues are largely dependent on (a) transaction volumes at ATMs.  If these transaction volumes decrease with the proliferation of additional ATMs in the market, the Corporation's revenues and profitability will be negatively impacted.

Requirement for Additional Capital

Actual expenses may exceed the Corporation's projected amounts and/or actual revenues may be less than the Corporation currently anticipates, in which case the Corporation may need to raise additional funds from lenders and equity markets in the future. In addition the Corporation may choose to raise additional financing in order to capitalize on perceived opportunities in the marketplace that may accelerate the Corporation's growth objectives.  The Corporation's abilities to arrange such financing in the future will depend in part on the prevailing capital market conditions as well as the Corporation's business performance. There can be no assurance that the Corporation will be successful in efforts to arrange additional financing, if needed, on terms satisfactory to the Corporation. If additional equity or debt financing is raised by the issuance of the Corporation Shares, control of the Corporation may change and holders of the Corporation Shares may experience dilution to their equity interest in the Corporation.

Vault Cash

The Corporation maintains cash in many ATMs (i.e. is the owner of the cash and is responsible for replenishing cash in such ATMs). The Corporation's vault cash requirements are funded in part from private credit facilities. Funding increasing vault cash requirements from historic lines of credit may become limited.  The Corporation's ability to fund such requirements and the Corporation’s inability to arrange an appropriate expansion of such credit facilities, would require the Corporation to consider funding alternatives for some ATMs which could result in a reduced level of profitability from the affected ATMs.

Credit Risk

The Corporation's ability to collect amounts due or realize on the personal property security act registration on the Corporation's clients may affect profitability.

 
15
 
Alternative Payments

Alternative payment options could be developed that change individuals' requirements to get cash from ATMs or make purchases with debit cards or credit cards. Some new payment technologies that have emerged in the past few years include pay-pass and touch and go systems and payment systems that utilize features built into cellular phones. To date these alternative technologies have not had a measurable impact. However, these technologies and new technologies developed in the future could become more prevalent and thereby negatively impact the Corporation's business.

Need to Manage Growth Effectively

If the Corporation fails to manage the Corporation's growth effectively, The Corporation's business and operating results could be adversely affected, which could impact the market price of the Corporation’s Shares to fall. The Corporation expects to continue to grow the operations of the Corporation domestically and internationally, and to hire additional employees. The growth in the Corporation's operations and staff has placed, and will continue to place, a strain on existing management systems and resources. If the Corporation fails to manage its future anticipated growth, the Corporation may experience higher operating expenses, and may be unable to meet the expectations of shareholders, securities analysts or prospective investors with respect to future operating results.

The Market Price of the Corporation Shares Will Fluctuate

Since being listed for trading on the OTC:QB under the trading symbol WSHE on July 21, 2001, shares of the Corporation have  not necessarily traded at values determined solely by reference to the underlying value of its assets.  In addition, the market price for the Corporation’s Shares may be affected by changes in general market conditions, fluctuations in the market for equity or debt securities and numerous other factors beyond the control of the Corporation.  The Management and Board of Directors have over the past year examined the cost-benefits of the continuation of being listed for trading, particularly on the OTC:QB.  Trading restrictions issued by various securities jurisdictions combined with less than positive brokerage acceptance of our stock for placement within our shareholders brokerage accounts has been problematic to the Board.  The Board will continue to review all options available to the Corporation in order to ensure preservation of shareholder value, one of which is the expansion of the preferred share position to include all current shareholders.

Proprietary Information

The Corporation relies on a combination of copyright, trademark and trade secret laws, confidentiality procedures, contractual provisions and other measures to protect its proprietary information. All of these measures afford only limited protection. These measures may be invalidated, circumvented or challenged. Despite the Corporation's best efforts to protect proprietary rights, unauthorized parties may attempt to obtain or use information that the Corporation regards as proprietary.

Interest Rate Fluctuations

The Corporation's debt fluctuates from time to time and the Corporation pays interest on the Corporation's debt on floating and fixed interest rates. Accordingly, any increase in rates may have a negative impact on profitability.

Our management has broad discretion over the use of capital raised.

We plan on raising capital for working capital and to help pay off the outstanding indebtedness and for general corporate purposes. Thus, management will have broad discretion in allocating proceeds of any offering.
 
ITEM 1B    UNRESOLVED STAFF COMMENTS
 
As a smaller reporting Corporation, the Corporation is not required to include this Item.
 
 
16
 
ITEM 2      DESCRIPTION OF PROPERTIES
 
Principal Offices and Other Property
 
Our property holdings are as follows:
 
1.  
#12, 3620 – 29th Street N.E. Calgary, Alberta T1Y 5Z8
 
Effective May 01, 2009, E-Debit Global consolidated all of its business operations into a 3,400 square foot facility in the northeast area of Calgary just minutes from the Calgary International Airport. This move reduced our payments significantly from the previous leased space.  We lease this property at a rate of $6,269.00 CDN per month plus operating expenses and applicable taxes.  This facility houses our administrative headquarters, ATM and POS operations, service and administrative center, Westsphere Systems and E-Debit.  On May 1, 2009, we signed the lease for five (5) years commencing on May 1, 2009 and ending on April 30, 2014 with Alberta Registered Corporation 1480325 Alberta Ltd. who’s Officers and Directors consist of the Corporation’s President and Chief Executive Officer, Douglas Mac Donald and the Corporation’s Director, Bernd Reuscher.  The shareholders of 1480325 Alberta Ltd. (the Landlord) are corporations controlled by Douglas Mac Donald and Bernd Reuscher.  The lease agreement provides the Corporation an option to purchase the property during the course of the Lease Agreement.

2.  
#11, 3620 – 29th Street N.E. Calgary, Alberta T1Y 5Z8

Effective June 1, 2010, E-Debit Global leased this property at a rate of $3,100.00 CDN per month plus operating expenses and applicable taxes.  This facility houses our ATM and POS service and sales operations center, Westsphere Systems and E-Debit.  On June 1, 2010, we signed a month to month lease commencing on June 1, 2010 with Alberta Registered Corporation 1480325 Alberta Ltd. who’s Officers and Directors consist of the Corporation’s President and Chief Executive Officer, Douglas Mac Donald and the Corporation’s Director, Bernd Reuscher.  The shareholders of 1480325 Alberta Ltd. (the Landlord) are corporations controlled by Douglas Mac Donald and Bernd Reuscher.  The lease agreement provides the Corporation an option to purchase the property during the course of the Lease Agreement.

ITEM 3      LEGAL PROCEEDINGS

On May 28, 2004 Peter Gregory filed an action in the Ontario Superior Court of Justice against Vencash Capital Corporation.  Peter Gregory was a Vencash distributor and agent who filed the action related to a claim of wrongful dismissal from Vencash of $260,000 (CDN).  On July 30, 2004 Vencash filed a Statement of Defence and Counterclaim in the amount of $1,600,000 for breach of contract, breach of confidence, breach of fiduciary duties, interference with economic relations, damages for inducing breach of contract, and punitive damages. The Corporation believes the claim by Gregory to be without merit.  In January 2012, the Corporation received a copy of notice of garnishment from our bank institution against Vencash’s bank account for the total amount not to exceed $31,649 CDN.  The Corporation did not receive the notification for the judgement and is presently seeking legal advice.  This notice was rescinded by the bank upon delivery.  The Corporation is currently reviewing the related correspondence and in consultation with legal counsel upon completion of the review will respond to any further action initiated by Gregory in this regard.

On January 25, 2009, Victory ATM filed an action in the Nova Scotia Superior Court against Vencash Capital Corporation.  Victory ATM was formerly a customer of Vencash distributor Bullion Investments Inc. and claimed that supplied vault cash to a contracted armoured car Corporation had been misappropriated for a total of approximately $45,000 CDN.  The Corporation has filed a statement of defense stating that Vencash had no care control or access to the vault cash supplied by Victory ATM and the only role that Vencash played was processing the Victory ATM transactions in their designated site locations.  The Corporation believes the claim by Victory ATM to be without merit and has not accrued a liability for the claim.  As of March 2011, our Nova Scotia legal counsel has advised that she will monitor this situation for the next month and upon discussion with Victory ATM legal counsel will make application to the courts to have the claim initiated against Vencash terminated.

On December 11, 2012, Mainland Investments, Inc. and Research Driven Investor, LLC filed an action in the Alberta Court of Queen’s Bench against E-Debit Global Corporation, E-Debit’s officers, and various other parties.  Mainland Investment Inc. and Research Driven Investor, LLC (RDI) are specialized in investor relations firms and claimed for a total of $150,000 CDN as per the investor relations consulting agreement between RDI and the Corporation.  On February 4, 2013, the Corporation and E-Debit’s officers have filed a statement of defense denying that there had ever existed an agreement between RDI and E-Debit.  The Corporation has a signed Investor Relations Consulting Agreement with Open Waters Investments Inc. (OWI) and deny that OWI ever had authority to enter into written or oral agreement with RDI on behalf of E-Debit, or, that E-Debit ever contractually agreed to or represented that it had appointed RDI as its advisor.  The Corporation believes the claim by Mainland Investments, and Research Drive Investor, LLC to be without merit and has not accrued a liability for the claim.

 
17
 
On December 14, 2012, Trans-Armored Canada Inc. filed an action in the Nova Scotia Superior Court against Westsphere Systems Inc. (WSI).  Trans-Armored Canada Inc. (TAC) was formerly a contracted armoured car Corporation to deliver vault cash to site locations and claimed for a total outstanding debt of $34,325 CDN.   As set out in the 15th of August 2007 TAC/Vencash Agreement, the Corporation’s President and Chief Executive Officer sits as a member of the board of directors and represents 50% of TAC’s board of directors.  The Corporation is currently reviewing the related correspondence and is in consultation with legal counsel to file a statement of defense.  The Corporation has released what it believes to be the full and final payment to TAC in May 2012 where the Corporation and TAC mutually agreed to offset the full amount of deposit due from TAC against the accounts payable owed to TAC.  The Corporation believes the claim by Trans-Armored Canada Inc. to be without merit and has not accrued a liability for the claim.

Contingency

Since 2009, Interac, MasterCard and VISA have mandated a hardware and software security upgrade for ATMs, Debit Terminals and the Corporation’s Switch.

Security upgrades are required under Interac, MasterCard, and VISA rules. These upgrades include the requirements to have:
 
 
(a)  
EMV (Europay, MasterCard, VISA) certified chip card (the replacement technology for the historical magnetic stripe cards)software/readers, and

(b)  
network approved encrypted PIN pad ("EPP") devices, installed on all ATMs and debit terminals:  thereby providing the ability to accept EMV chip card transactions. This has required and will also require further upgrading the Corporation’s Switch to process EMV chip card transactions, and adding additional encryption methods to Corporations managed ATMs and Debit terminals, Triple DES Encryption.

The Corporation’s understanding of the deadlines mandated by Interac and MasterCard for conversion of ATMs and debit terminals (i.e. to read the EMV microchip on a card rather than a magnetic stripe) are as follows:

(c)  
50% of all ATMs must be upgraded with an EMV certified chip pin entry device by December 31, 2011 and 100% of ATMs must be upgraded by December 31, 2012;
(d)  
35% of debit terminals must be upgraded with an EMV certified chip pin entry device by December 31, 2010, 60% must be converted by December 31, 2012, and 100% must be upgraded by December 31, 2015.

VISA's rule changes do not require a switch to the new technology by any particular date. However, both MasterCard and VISA rules provide that after March 31, 2011, certain liabilities (i.e. in respect of transaction errors or frauds) will be reallocated to industry participants who are still accessing the MasterCard and VISA networks using non-upgraded equipment, cards or software.

In addition to the security upgrades to ATM and Debit Terminals, in order to access Interac, cards (i.e. the debit cards issued by financial institutions) must be upgraded (i.e. reissued) to have EMV chips installed: 65% by December 31 2011 and 100% by December 31, 2012.

The result of non-compliance can include penalties, fines, sanctions and contractual penalties by the applicable Network(s) and ultimately disconnection of the ATM and Debit Terminal device or card from the Network for failure to comply by the end dates.  The Corporation will be investing maintenance capital and upgrading its IT department to meet these upgrade deadlines.  The Corporation’s customers who own their own equipment are encouraged to make the necessary changes to their equipment and in some cases the Corporation has the contractual right to make the necessary changes for the customer (and charge the customer for the cost of the change).

Management believes that the Corporation and/or its subsidiaries are in compliance with EMV requirements.
 
Investment Policies
 
 
We do not have any investments in real estate, real estate mortgages or securities involving real estate.
 
 
ITEM 4    REMOVED AND RESERVED
 
 

 
18
 
 
 
PART II
 
 
ITEM 5                                MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
On June 22, 2001, our common stock was posted for trading on the Over-the-Counter Bulletin Board (“OTCBB”) under the symbol “WSHA”.
 
Effective April 01, 2005, our common stock was trading on the OTCBB under the symbol “WSHE”. Our preferred shares are non-trading and voting is vested with the Board of Directors.  On March 29, 2010, Westsphere officially changed its name from Westsphere Asset Corporation, Inc. to E-Debit Global Corporation. The new CUSIP number is 26841A 105, which was filed with Colorado Secretary of State on March 29, 2010. The Corporation submitted all documents to FINRA for the name change on April 01, 2010.
 
 
2012
  
High
 
  
Low
 
1st Quarter
   $
0.01
  
$0.00
2nd Quarter
   $
0.00
  
$0.00
3rd Quarter
   $
0.01
  
$0.00
4th Quarter
   $
0.05
  
$0.00

2011
  
High
 
  
Low
 
1st Quarter
   $
0.09
  
$0.02
2nd Quarter
   $
0.12
  
$0.01
3rd Quarter
   $
0.04
  
$0.01
4th Quarter
   $
0.02
  
$0.00
 
These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.
 
As of March 31, 2013, we have approximately three hundred and seventy six (376) shareholders including unknown shareholders in brokerage accounts.

No dividends on outstanding common or preferred stock have been paid or declared within the last two (2) fiscal years or during any interim periods. We do not anticipate or intend to pay any dividends in the foreseeable future.
 
Securities Authorized for Issuance under Equity Compensation Plans
 
       Plan Category
 
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
(a)
  
Weighted-average
exercise price of
outstanding
options, warrants
and rights
(b)
  
Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column
(a)) (1)
(c)
Equity compensation plans approved by
0
    
0
  
0
security holders
            
           
Equity compensation plans not
11,739,286
  
$
953,393
  
0
approved by security holders (1)
 
          
           
Total
11,739,286
  
$
953,393
  
0
           
 
 
19
 
(1) The Board of Directors adopted the Westsphere Asset Corporation 2004 Stock Option and Stock Award Plan. The Plan is administered by the Corporation’s President, Mr. Douglas Mac Donald.  In December 2009, the Corporation approved the amendment of the outstanding and current Stock Option and Stock Award Plan filed on January 26, 2005 which remains in effect to January 26, 2015.  The maximum number of shares of the Common Stock that may be optioned or awarded under this Plan is 7,500,000 pre-split shares.  No Participant shall receive, over the term of this Plan, awards of free trading stock and restricted stock, awards in the form of stock appreciation rights or options, whether incentive stock options or options other than incentive stock option, to purchase, more than 20 percent of the total shares of Common Stock authorized for issuance under the Plan.
 
On October 26, 2010, pursuant to the authorization of the Corporation’s shareholders given at the annual shareholders meeting held on March 27, 2010, management filed a notice of corporate action with the Financial Industry Regulatory Authority (FINRA) declaring a 5 to 1 forward split of the outstanding common stock effective November 8, 2010 or as soon thereafter as determined by FINRA.
 
On November 15, 2010, the Financial Industry Regulatory Authority made the previously announced 5 to 1 forward split of the outstanding common stock effective. Therefore the maximum number of shares of the Common Stock that may be optioned or awarded under this Plan is 37,500,000 shares.
 
ITEM 6       SELECTED FINANCIAL DATA
 
As a smaller reporting Corporation, the Corporation is not required to include this Item.
 
ITEM 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND CHANGES IN FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
E-Debit and its subsidiaries generated a net loss of $831,276 from operations for the twelve month period ending December 31, 2012.  During the period of operations ending December 31, 2011, E-Debit and its subsidiaries generated a net loss of $1,095,912.  The decrease in year 2012’s net loss of $264,636 over the previous year was primarily due to a decrease in consulting fees of $26,458, a decrease in salaries and benefits of $36,535, a decrease in stock-based compensation of $29,227, a decrease in travel, delivery and vehicle expenses of $23,060, a decrease in interest expense of $5,674, and an increase in gain on sale of $801,204.  The decrease in net loss is partially offset against a decrease in gross profit of $218,468, an increase in impairment loss of $381,019, and a decrease in other income of $72,410 over the same period from the previous year.

The decrease in consulting fees was caused by a decrease adjustment in the monthly consulting fee contract effective May 2012.

The decrease in salaries and benefits was caused by an elimination of four positions during year 2011: An account manager, a programmer, a sales consultant, and a junior accountant.

The decrease in stock-based compensation expense was related to the Corporation granted options to three consultants under the 2004 Stock Option and Stock Award Plan in the prior year.  The stock-based compensation expense was determined by using the Black Scholes calculation.

The decrease in interest expense was due to a reduction of $12,193 interest charged from a vendor.

On April 30, 2012 the Corporation concluded the sale of a portion of the Corporation’s eastern Canada ATMs site location contracts to an investor for a total of $263,418 ($266,000 CDN).  This sale transaction is included in the accompanying consolidated income statement as Gain on sale.  As a result, the General Security Agreement (GSA) for the current debts owed to related parties and shareholders dated December 2011 was cancelled in order for this sales transaction to be filed in priority to other loans advanced to the Corporation by related parties.

On October 25, 2012 the Corporation concluded the sale of a portion of the Corporation’s Western Canada ATMs site location contracts to an investor for a total of $184,643 ($183,000 CDN).  This sale transaction is included in the accompanying consolidated income statement as Gain on sale.

On December 5, 2012 the Corporation concluded the sale of a portion of the Corporation’s eastern Canada ATMs site location contracts to an investor for a total of $353,143 ($350,000 CDN).  This sale transaction is included in the accompanying consolidated income statement as Gain on sale.

The Corporation is expecting a net loss of $57,000 in residual and interchange revenue in the year 2013 for the sale of the Corporation’s ATMs site location contracts to an investor in the year 2012.
 
 
 
20
 
The decrease in gross profit of $218,468 was primarily caused by a decrease in residual and interchange income of $993,809 and a decrease in equipment and supplies revenue of $14,041. The decrease is partially offset against a decrease in residual and interchange costs of $740,202 and a decrease in equipment and supplies cost of sales of $70,389.
 
The decrease in residual and interchange income was mainly caused by the sale of a majority of the Corporation’s ATMs site location contracts to an investor during the year 2012.

The decrease in other income was mainly related to the forgiveness of debt owed to the Corporation’s former auditor and suppliers in the prior year.
 
The property and equipment which has been idle was related to the purchase of computer hardware and software for the card management system in June 2010.  The software and computer hardware was purchased as a turnkey operating system which focused on a loyalty based platform.  As of December 31, 2012, the Corporation recorded an impairment charge of $381,019 to reduce the idle property and equipment to zero based on an annual property and equipment impairment analysis performed in response to hardware and software security upgrade mandated under Interac, MasterCard and VISA rules.  These upgrades include the requirements to have EMV (Europay, MasterCard, VISA) certified chip card (the replacement technology for the historical magnetic stripe cards) software/readers, and network approved encrypted PIN pad ("EPP") devices, installed on all ATMs and debit terminals:  thereby providing the ability to accept EMV chip card transactions.  The Corporation has determined that it is not cost effective for the upgrades and the outcome is uncertain.  In addition, management intends to raise funds for the project but no assurance can be given that the Corporation will be successful in raising additional capital.

At this date, 275 ATM are being processed by WSI’s switch.  The number of ATMs being processed during the year 2012 has been decreased as compared to 661 ATM in the prior year.  The decrease is mainly caused by the sale of a majority of the Corporation’s ATMs site location contracts to an investor during year 2012.

In May 2012, the Corporation’s Board of Directors authorized the holders of its Common Stock the right to convert their Common Stock to Series “A” Preferred Shares of the Corporation commencing the 1st of June 2012 and ending on the 30th of November 2012.  The Board of Directors has reserved the right to extend the conversion period anytime at a later date.

A contingency initially existed due to insufficient authorized preferred stock to convert all the common stock.  The Corporation proposed to increase the number of authorized preferred stock to be voted on at the shareholder meeting in September 2012.

The Corporation’s Series “A” Preferred Shares have the following conditions and rights attached:

(a)  
Upon any sale, liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any distribution or payment shall be made to the holders of any stock ranking junior to the Corporation’s Series “A” Preferred Stock, the holders of the Series “A” Preferred Stock shall be entitled to be paid out of the assets of the Corporation any dividends declared by the Board of Directors, in the form of stock, cash or otherwise, shall be distributed to the Corporation’s shareholders as follows: (a) ninety-five percent (95%) of such dividend shall be distributed to the holders of the Series “A” Preferred Shares on a pro rata basis; and (b) the remaining five (5%) shall be equally distributed to any holder of the Corporations Stock including Series “A” Preferred shareholders, on a pro rata basis.

(b)  
In the case of a sale of any of the Corporation's business operations or in the event of a wind up or a liquidation of the Corporation's assets, the remaining cash to be distributed to the shareholders shall be distributed on the same basis as described in paragraph (a) above.

(c)  
The Board of Directors will determine the amount of proceeds to be distributed from the sale of any of the Corporation's assets and will determine whether any dividend will be issued by the Corporation.  The Board of Directors will determine the date that such dividend or distribution will be paid.

(d)  
During the period commencing on June 1, 2012 and concluding on November 30, 2012, each holder of shares of common stock shall have the right to surrender their shares of common stock in exchange for shares of preferred stock on a basis of 1:1. Each shareholder shall exercise this right by delivering to the Corporation or the Corporation’s transfer agent the certificates representing such shareholder’s shares of common stock, duly endorsed with appropriate signature guarantees affixed thereto, on or before the date determined above in this subsection (d).

(e)  
Each share of Series “A” Preferred stock shall have voting rights of one vote per share for any election or other vote placed before the shareholders of the Corporation.

 
21
 
(f)  
Upon conversion the Board of Directors shall exercise the right to vote the preferred shares at any duly called meeting of the shareholders in the same manner as previously issued preferred shares.

(g)  
Series “A” Preferred Stock are anti-dilutive to reverse splits in relation to the voting rights of the Corporation’s  Series “A” Preferred Stock, and therefore in the case of a reverse split, the voting rights of the Series “A” Preferred Stock after the reverse split shall be equal to the ratio established prior to the reverse split. The voting rights of Series “A” Preferred Stock, however, would increase proportionately in the case of forward splits, and may not be diluted by a reverse split following a forward split.

(h)  
Excepting for Section (g) above, a consolidation or split of one class of the Corporation’s stock the Board of Directors shall determine the effect on any other class of shares.

(i)  
Upon conversion of a common share to a preferred share, the preferred shareholder will have the right to convert such preferred share to share of common stock upon delivery of 21 days written notice to the Corporation, at the closing trading price on the date that notice is given for the conversion per share payable to the Corporation.

(j)  
Upon receipt of notice of the request to convert from preferred share to common stock, share certificates will be issued with the following share trading restrictions.  1/3 of the total shares to be converted will be restricted from trading for a period of 1 months from the date of conversion; 1/3 of the total shares to be converted will be restricted from trading for a period of 3 months from the date of conversion; and 1/3 of the total shares to be converted will be restricted from trading for a period of 6 months from the date of conversion.

On August 10, 2012, the Board of Directors authorized all holders of the Corporation’s outstanding indebtedness by way of loan agreements, promissory notes or other security instruments to convert their debt to common stock of the Corporation at a conversion price which would have been the average of the previous 5 day closing trading price of the Corporation’s stock currently listed on the OTC QB under trading symbol “WSHE” or $0.001 per share whichever is greater at the time the Convertible Note Holders would have notified the Corporation in writing of its request to convert.

The Corporation’s Board of Directors would have had the right at its sole discretion and determination to obtain from the converting note-holder or its authorized assigns an irrevocable proxy to vote the converted common stock related to the conversion at any duly constituted meeting of the shareholders while the debt holder or its authorized assigns held an interest in the common stock.

The Corporation’s Board of Directors also resolved that the common stock issued as a result of any conversion of debt by way of the issued Convertible Note would not qualify for conversion to the Corporation’s preferred share at the time of conversion or any time in the future and request for conversion from common stock to preferred is prohibited and will be rejected.

On October 10, 2012, the Board of Directors amended the August 10, 2012 Directors resolution regarding the issuance of convertible notes.  The Board determined that in addition to the terms and conditions as set out in the Debt Settlement Resolution, any debt settlement commencing after the 10th day of October, 2012 must be approved by the President of the Corporation and authorized by a majority of the Board of Directors of the Corporation to become effective.  This resolution invites the debt holders to discuss the option to convert their debt into equity but the Corporation has no obligation to do so and the debt holder have no contractual right to make any conversion.   The Corporation has the right to accept or reject the request to convert by the debt holders on a case by case basis.  The terms and conditions of any agreed to conversion will be disclosed in the appropriate SEC filings.

On August 15, 2012, three of the creditors of $95,460, $50,000 and $90,000 debt (as further discussed below) exercised their convertible notes totaling of $235,460 for 235,460,000 shares of common stock at $0.001 per share, being the greater of the previous five day average closing trading price.  These shares are restricted for six (6) months until February 15, 2013 pursuant to rule 144 of the Securities and Exchange Commission.

The Corporation issued 95,460,000 shares of common stock to a creditor in conversion of $95,460 ($95,460 CDN), of convertible debt at the rate of $0.001 per share, being the greater of the previous five day average closing trading price.  These shares are restricted for six (6) months until February 15, 2013.  The security holder has assigned an irrevocable proxy to vote to the Corporation Board of Directors.  This proxy shall not be revocable until the transfer of the title and ownership to the shares from the record holder to an arm’s length non related third party.

The Corporation issued 50,000,000 shares of common stock to a creditor in conversion of $50,000 ($50,000 CDN), of convertible debt at the rate of $0.001 per share, being the greater of the previous five day average closing trading price.  These shares are restricted for six (6) months until February 15, 2013.  The security holder has assigned an irrevocable proxy to vote to the Corporation Board of Directors.  This proxy shall not be revocable until the transfer of the title and ownership to the shares from the record holder to an arm’s length non related third party.

 
22
 
The Corporation issued 90,000,000 shares of common stock to an Investor Relations firm in conversion of $90,000 ($90,000 CDN), of convertible debt at the rate of $0.001 per share, being the greater of the previous five day average closing trading price.  These shares are restricted for six (6) months until February 15, 2013.  The security holder has assigned an irrevocable proxy to vote to the Corporation Board of Directors.  This proxy shall not be revocable until the transfer of the title and ownership to the shares from the record holder to an arm’s length non related third party.

On September 18, 2012, the Corporation amended its articles of incorporation to increase its authorized capital to Ten Billion (10,000,000,000) shares of no par value common stock and Two Hundred Million (200,000,000) of no par value preferred stock.

On November 25, 2012, the Corporation’s president exercised the right to convert Common Stock to Series “A” Preferred Shares for 10,662,510 common shares to 10,662,510 preferred shares.  The issuance of 6,250,000 of preferred shares was issued to the Corporation’s president and 4,412,510 of preferred shares were issued to two of the affiliated Corporation that is controlled by the Corporation’s president.

Total issued and outstanding share capital as of March 31, 2013 was 320,046,834 common shares and 81,518,410 preferred shares.

On August 15, 2012 the Corporation and its subsidiaries jointly and severally entered into a Demand Loan Agreement and related GSA with an investor for a loan of $100,509 ($100,000 CDN) at a prime lending rate of Canadian Prime plus four (4%) percent.  Under the GSA, this debt is collateralized by all of the Corporation’s assets.  Upon demand the Corporation has forty-five (45) days to repay the Demand Loan and interest.  As of December 31, 2012, the balance is $100,509 ($100,000 CDN).  This loan is included in the accompanying consolidated balance sheet as Loans payable.

On November 26, 2012 the Alberta Securities Commission (ASC) notified the Corporation of the new rule, Multilateral Instrument 51-105 Issuers Quoted in the U.S. Over-the-Counter Markets (the Instrument) that was effective on July 31, 2012.  The Instrument designates as reporting issuers in the local jurisdiction, any issuer whose securities are quoted on a US OTC market but not on another North American exchange listed in the Instrument or in AB Blanket Order 51-513 Relief from Multilateral Instrument 51-105 Issuers Quoted in the U.S. Over-the-Counter Markets (the Blanket Order) and that have a significant connection to that local jurisdiction.  ASC has performed a preliminary review of the Corporation’s affairs and determined that the Corporation appears to have a sufficient connection to Alberta so as to cause the Corporation to be designated as an “OTC reporting issuer” under the Instrument in Alberta.

E-Debit currently is a reporting issuer in British Columbia jurisdiction in Canada.  On December 11, 2012, E-Debit confirmed with British Columbia Securities Commission (BCSC) that the Corporation no longer required filing the reporting requirements to BCSC.  The Corporation started to file the reporting requirements in Alberta effective July 31, 2012.

In December 2012 the Corporation entered into an agreement to sell its remaining ATM site location contracts to an investor for an amount to be determined.  The Corporation expects such transactions to be completed by the end of the second quarter 2013.

On December 11, 2012, Mainland Investments, Inc. and Research Driven Investor, LLC filed an action in the Alberta Court of Queen’s Bench against E-Debit Global Corporation, E-Debit’s officers, and various other parties.  Mainland Investment Inc. and Research Driven Investor, LLC (RDI) (specialized investor relations firms) claimed for a total of $150,000 CDN related to an alleged investor relations consulting agreement between RDI and the Corporation.  On February 4, 2013, the Corporation and E-Debit’s officers have filed a statement of defense denying that there had ever existed an agreement between RDI and E-Debit.  The Corporation has a signed Investor Relations Consulting Agreement with Open Waters Investments Inc. (OWI) and deny that OWI ever had authority to enter into written or oral agreement with RDI on behalf of E-Debit, or that E-Debit ever contractually agreed to or represented that it had appointed RDI as its advisor.  The Corporation believes the claim by Mainland Investments, and Research Drive Investor, LLC to be without merit and has not accrued a liability for the claim.

On December 14, 2012, Trans-Armored Canada Inc. filed an action in the Nova Scotia Superior Court against Westsphere Systems Inc. (WSI).  Trans-Armored Canada Inc. (TAC) was formerly a contracted armoured car Corporation to deliver vault cash to site locations and claimed for a total outstanding debt of $34,325 CDN.   As set out in the 15th of August 2007 TAC/Vencash Agreement, the Corporation’s President and Chief Executive Officer sits as a member of the board of directors and represents 50% of TAC’s board of directors.  The Corporation is currently reviewing the related correspondence and is in consultation with legal counsel to file a statement of defense.  The Corporation has released what it believes to be the full and final payment to TAC in May 2012 where the Corporation and TAC mutually agreed to offset the full amount of deposit due from TAC against the accounts payable owed to TAC.  The Corporation believes the claim by Trans-Armored Canada Inc. to be without merit and has not accrued a liability for the claim.

On December 13, 2012, Group Link Inc. (“Group Link”) was incorporated under the laws of the Province of Alberta as the foundation of the re-establishment of our nationwide distribution network, which in the past allowed for our presence in the Canadian marketplace.

 
23
 
Group Link utilizes a “gated-access network approach” where our Independent Sales Organization members within the Group Link distribution network require either an existing relationship with the Corporation or its affiliate members or the intervention of a contact of the affiliate member.  The Group Link distribution network has full access to all business operations of the Corporation and is integrated within the member distributors.

Group Link intends to expand its opportunities to not only the ATM industry but also to build on our experience in developing, managing and operating a national marketing and distribution channel being offered to all Group Link member ISO’s with exclusive utilization of the Corporation’s wholly owned subsidiary Westsphere Systems Inc. for financial processing services related to revenue payment and revenue splitting functionality.

The Corporation is the majority shareholder of Group Link holding 55% of the issued and outstanding common stock of the Corporation.  The Corporation’s Chief Executive Officer is Group Link’s Chief Executive Officer and Director and holds personally 15% of the issued and outstanding common stock of Group Link.  E-Debit’s Chief Operating Officer is a Director and personally holds 10% of the issued and outstanding common stock of Group Link.  Group Link’s President and Group Link’s Chief Development Officer both are Directors of Group Link and each hold 10% of the issued and outstanding common stock of the Group Link.

E-Debit and its subsidiaries currently do not generate sufficient revenues to meet overhead needs.  This is due to E-Debit switch operations which were launched in January 2009 and commencing rollover of ATMs to process all transactions.  The switch operations currently do not generate sufficient revenue to cover its expenses.  In addition, E-Debit continues to experience a steady decrease in gross profit mainly due to the sale of the majority of ATMs site location contracts during the year 2012.  Management recognizes that the Corporation must generate additional resources to enable it to continue operations.  Management intends to raise additional funds through debt financing and equity financing or through other means that it deems necessary, with a view to moving forward and sustaining a prolonged growth in its strategy phases.  However, no assurance can be given that the Corporation will be successful in raising additional capital.

E-Debit believes that the continued investment from related parties and outside investors will continue to produce sufficient ongoing funding to meet its current and future financial requirements.

In order to meet its growth plan, E-Debit will continue to be dependent on equity funds raised, joint venture arrangements and/or loan proceeds. E-Debit believes that it will continue as a going concern with the present revenues from its subsidiaries Westsphere Systems Inc. and Vencash Payment Solutions Inc. and loans advanced by the related parties, but it would be unable to meet its market growth projections without further funding outside of the ongoing revenue from operations of Westsphere Systems Inc. and Vencash Payment Solutions Inc.

Changes in Financial Position
 
During fiscal year 2012, total assets decreased from $1,602,685 to $636,246.  The decrease is primarily due to a decrease in cash of $49,594, a decrease in restricted cash of $406,808, a decrease in property and equipment, idle of $364,625, and a decrease in deposit – related party of $156,668.  The decrease is partially offset against an increase in inventory of $54,570.
 
The decrease in restricted cash over the prior year was mainly caused by the sale of the majority ATMs site location contracts to an investor during the year 2012.

The decrease in property and equipment, idle was caused by management’s determination that the card management systems was fully impaired based on an annual property and equipment impairment analysis performed in response to hardware and software security upgrade mandated under Interac, MasterCard and VISA rules.  The Corporation has determined that it is not cost effective for the upgrades and the outcome is uncertain.  In addition, management intends to raise funds for the project but no assurance can be given that the Corporation will be successful in raising additional capital.

The deposit – related party consists of an amount due from a contractor, Trans Armored Canada (TAC).  The deposit carried no interest rate, and required no monthly payments.  The purpose of this deposit was to supply vault cash to E-Debit’s wholly owned subsidiary Vencash Payment Solutions Inc. (VPSI)’s customer-owned ATM equipment and site locations.  The Corporation earned revenues from surcharge transactions generated from these ATMs.

VPSI previously supplied vault cash to these site locations because its customers did not have sufficient vault cash for these site locations.  VPSI had subcontracted TAC to deliver vault cash to these site locations.  TAC was accountable for the rotation of the cash.

Presently, the Corporation’s President and Chief Executive Officer sits as a member of the board of directors which represents 50% of TAC’s board of directors and the Corporation has the option to purchase 20% ownership in TAC.

 
24
 
On April 30, 2012 the Corporation concluded the sale of a portion of the Corporation’s eastern Canada ATMs estate to an investor.  As a result, VPSI was no longer required to supply vault cash to its customer-owned ATM equipment and site locations and the deposit was to be returned to VPSI.

In May 2012, the Corporation and TAC mutually agreed to offset the full amount of deposit against the accounts payable owed to TAC.

The increase in inventory was mainly due to the return of the Corporation’s owned ATMs from an investor for the sale of site location contracts during the year 2012.

As of December 31, 2012, E-Debit’s current liabilities consisted of accounts payable of $396,988, accrued liabilities of $98,026, loans payable of $287,047, indebtedness to related parties of $1,517,601, and shareholder loans of $292,741.

Accounts payable and accrued liabilities include a payable of $33,793 for the return of surcharge and interchange; the return of switch vault cash of $188,236; legal and accounting fees of $58,071; switch and hosting fees of $71,835; contingent expense of $31,810; accrued vacation payable of $9,035; investors deposits of $10,718; and $91,516 due for consulting services, office expenses and various other general fees and charges.

In September 2007, Vencash entered into a loan agreement with an initial term of twelve months totaling $100,509 ($100,000 CDN) with an external arms-length investor, bearing interest at 12% per annum, with blended monthly payments of interest only of $1,009 ($1,000 CDN).  The initial term may be automatically extended for further six (6) month terms (a “renewal period”) after the end of the initial term or terminated subject to mutual termination agreements.  The investor must give a written notice not less than 90 days before the end of the initial term or renewal period, whichever the case may be, to not renew the loan agreement.  Vencash must notify the investor not less than 60 days before the end of the initial term or renewal period, its intention to terminate the loan.  Currently, no written notice has been received from the investor to Vencash or vice versa.  The purpose of the loan is to supply vault cash to Vencash’s customer-owned ATM equipment and site locations.  Vencash supplies vault cash to these site locations because its customers do not have sufficient vault cash for these site locations.

The loan amount has been forwarded to an armored car Corporation that supplies vault cash to these site locations.  The armored car Corporation is accountable for the rotation of the cash and has signed a note receivable for the amount.  As of December 31, 2012, the balance is $100,509 ($100,000 CDN).  This loan is included in the accompanying consolidated balance sheet as Loans payable.

In November 2007, Westsphere’s subsidiary Westsphere Systems Inc. (WSI) raised $128,547 ($131,000 CDN) through a loan agreement with an initial term of twenty-four months with an external arms-length investor, bearing interest at 12% per annum, with blended monthly payments of interest only of $1,322 ($1,310 CDN). The initial term may be automatically extended for further twelve month terms (a “renewal period”) after the end of the initial term or terminated subject to mutual termination agreements.  The investor must give a written notice not less than 90 days before the end of the initial term or renewal period, whichever the case may be, to not renew the loan agreement.  Vencash must notify the investor not less than 30 days before the end of the initial term or renewal period, its intention to terminate the loan.  Currently, no written notice has been received from the investor to WSI or vice versa.  The purpose of the loan was to fund the switch development project.  In February 2010, the loan was reduced by $62,212 ($65,000 CDN) in exchange for 622,123 common shares at $0.10 per share.  In May 2012, the loan was reduced by $1,003 ($998 CDN) in offsetting against the expenses.  In September 2012, the loan was reduced by $60 ($60 CDN) in offsetting against the expenses.  In December 2012, WSI recorded an accrued interest of $4,570 ($4,547 CDN).   As of December 31, 2012, the balance is $69,842 ($69,489 CDN).  This loan is included in the accompanying consolidated balance sheet as loans payable.

On December 20, 2011 the Corporation and its subsidiaries jointly and severally entered into a Demand Loan Agreement and related GSA with an investor for a loan of $201,017 ($200,000 CDN) at a prime lending rate of Canadian Prime plus four (4%) percent.  Under the GSA, this debt is collateralized by all of the Corporation’s assets.  Upon demand the Corporation has forty-five (45) days to repay the Demand Loan and interest.  On October 24, 2012, the loan was repaid by $107,936 ($107,390 CDN).  On December 5, 2012, the loan was repaid by $76,892 ($76,503 CDN).  As of December 31, 2012, the balance is $16,187 ($16,107 CDN).  This loan is included in the accompanying consolidated balance sheet as Loans payable.

On August 15, 2012 the Corporation and its subsidiaries jointly and severally entered into a Demand Loan Agreement and related GSA with an arms-length third party investor for a loan of $100,509 ($100,000 CDN) at a prime lending rate of Canadian Prime plus four (4%) percent.  Under the GSA, this debt is collateralized by all of the Corporation’s assets.  Upon demand the Corporation has forty-five (45) days to repay the Demand Loan and interest.  As of December 31, 2012, the balance is $100,509 ($100,000 CDN).  This loan is included in the accompanying consolidated balance sheet as Loans payable.

 
25
 
The following table summarizes the Corporation’s indebtedness to related parties’ transactions as at December 31, 2012:

Payable to:
  
Amount
  
Terms/Maturities
Interest Rate
A loan advanced from E-Debit’s President for working capital.
   $ 95,674  
Demand loans
8% per annum
A loan advanced from an affiliated Corporation that is controlled by E-Debit’s President for working capital.
      867,701  
 
Demand loans
 
8% per annum
A loan advanced from E-Debit’s vice President for working capital.
      8,521  
Demand loans
8% per annum
A loan advanced from E-Debit’s officers for working capital.
      6,421  
Demand loans
8% per annum
A loan advanced from E-Debit’s directors for working capital.
      89,353  
Demand loans
8% per annum
A loan advanced from an affiliated Corporation that is controlled by E-Debit’s director for working capital.
      208,926  
Demand loans
No interest
Officers’ and Directors’ bonuses payable carried forward from year 2002
      33,611  
Demand loans
No interest
A loan advanced from an affiliated Corporation that is controlled by E-Debit’s President for working capital.
      207,394  
Demand loans
No interest
Total  
   $ 1,517,601      

The indebtedness to related parties consists of loans that are payable on demand by the related parties.  The interest rate is Eight (8%) percent annually calculated and paid quarterly attached to the related party loans.  There is no interest attached to a loan advanced from E-Debit’s director of $208,926, the Officers’ and Directors’ bonuses payable carried forward from year 2002 of $33,611, and the loan advanced from an affiliated Corporation that is controlled by E-Debit’s President for working capital of $207,394.  The above obligations are reflected in the accompanying consolidated balance sheet as indebtedness to related parties.

The following table summarizes the Corporation’s shareholder loans transactions as at December 31, 2012:

Payable to:
  
Amount
  
Terms/Maturities
Interest Rate
A loan advanced from E-Debit’s vice President for working capital.
      55,280  
Demand loans
  8% per annum
A loan advanced from E-Debit’s directors for working capital.
      142,481  
Demand loans
  8% per annum
A loan advanced from E-Debit’s vice President for working capital.
      44,726  
Demand loans
12% per annum
A loan advanced from E-Debit’s shareholder for working capital.
      50,254  
Demand loans
  9% per annum
Total  
   $ 292,741    
 

E-Debit’s shareholder loans related to cash advanced from E-Debit’s vice president total $55,280 and from directors total $142,481 have an interest rate of 8% per annum calculated and paid quarterly with no specific terms of repayment.  The remaining balance of shareholder loans totaling $94,980 consist of a loan advance from E-Debit’s vice president totaling $44,726 has an interest rate of 12% per annum with no specific terms of repayment, and a loan advance from a shareholder of $50,254 has an interest rate of 9% per annum with no specific terms of repayment.  The above obligations are reflected in the accompanying consolidated balance sheet as shareholder loans.

 
26
 
During the year ended December 31, 2012, E-Debit raised $126,003 cash from an investor to fund for the purchase of ATMs.

During the year ended December 31, 2012, E-Debit raised $171,870 cash from directors and officers to support the switch operations and general and administrative costs.

During the year ended December 31, 2012, $235,460 of debt was converted to 235,460,000 common shares at $0.001 per share.
 
Liquidity
 
E-Debit and its subsidiaries currently do not generate sufficient revenues to meet overhead needs.  This is due to E-Debit switch operations which was launched in January 2009 and commencing rollover of ATMs to process all transactions.  The switch operations currently do not generate sufficient revenue to cover its expenses.  The shortages of funds, recurring losses, and stockholders’ deficit raise substantial doubt as to the Corporation’s ability to continue as a going concern.

E-Debit expects that its need for liquidity will increase in 2013 in anticipation of expending funds to meet the security upgrade plan.  The security upgrades are required under Interac, MasterCard, and VISA rules. These upgrades include the requirements to have:
 
(a)  
EMV (Europay, MasterCard, VISA) certified chip card (the replacement technology for the historical magnetic stripe cards) software/readers, and

(b)  
network approved encrypted PIN pad ("EPP") devices, installed on all ATMs and debit terminals thereby providing the ability to accept EMV chip card transactions. This has required and will also require further upgrading the Corporation’s Switch to process EMV chip card transactions, and adding additional encryption methods to Corporations managed ATMs and Debit terminals, Triple DES Encryption.

The result of non-compliance can include penalties, fines, sanctions and contractual penalties by the applicable Network(s) and ultimately disconnection of the ATM and Debit Terminal device or card from the Network for failure to comply by the end dates.  This has resulted in a requirement to find additional financial recourses to meet the upgrade requirements as set forth in regards to meet ongoing regulatory compliance.
 
E-Debit did not raise funds this year to facilitate Westsphere Systems growth opportunities due to the condition of Corporations’ financial market.

Short Term

On a short term basis, E-Debit and its subsidiaries currently do not generate sufficient revenues to meet overhead needs.  This is due to E-Debit switch operations which were launched in January 2009 and commence rollover of ATMs to process all transactions.  The switch operations currently do not generate sufficient revenue to cover it expenses.  In addition, E-Debit continues to experience a steady decrease in gross profit due to the sale of the majority of ATMs site locations during the year 2012.  The Corporation has incurred net losses for the years ended December 31, 2012 and 2011, and as of December 31, 2012, had a working capital deficit of $2,225,293 and an accumulated deficit of $1,956,157. These conditions raise substantial doubt as to the Corporation’s ability to continue as a going concern.

Management recognizes that the Corporation must generate additional resources to enable it to continue operations. Management intends to raise additional funds through debt financing and equity financing or through other means that it deems necessary, with a view to moving forward and sustaining a prolonged growth in its strategy phases. However, no assurance can be given that the Corporation will be successful in raising additional capital.

Furthermore, there is no demand for payment on the indebtedness to related parties of $1,517,601 and shareholders’ loan of $292,741 as these liabilities are owed to internal officers and directors. E-Debit believes that the investment from related parties, outside investors, and private offering memorandum will continue to produce sufficient ongoing funding to meet its current and future financial requirements.

In order to meet its growth plan, E-Debit will continue to be dependent on equity funds raised, joint venture arrangements and/or loan proceeds. E-Debit believes that it will continue as a going concern with the present revenues from its subsidiary Westsphere Systems Inc., but it would be unable to meet its market growth projections without further funding outside of the ongoing revenue from operations of Westsphere Systems Inc.

 
27
 
Long Term

The Corporation through its subsidiary Westsphere Systems Inc. has successfully gained membership into the Canadian Interac Association as an Acquirer. This will enable the direct processing of ATM, POS and other transactions for the Corporation’s other subsidiary, Vencash Payment Solutions Inc. E-Debit has sourced out an industry leader, ACI Worldwide, and invested in the development and ongoing support required to facilitate the processing of transactions. Westsphere Systems Inc. processes all transactions through its association with ACI thereby eliminating the costs, restrictions, and potential risks of relying on third party processors. Most importantly, the investment in the processor, or switch, will also enable E-Debit’s direct entry into new and emerging markets such as card management and processing. To fund the switch operation, E-Debit will continue to be dependent on equity funds raised, joint venture arrangements and/or loan proceeds.

As mentioned above, E-Debit believes that the Corporation’s subsidiaries upon consolidation combined with continued investment from related parties, outside investors, and private offering memorandum will continue to produce sufficient ongoing funding to meet its current and future financial requirements. The Corporation also will continue its plan to sell some of its business operations to its current distribution network participants and/or non-related parties in order to maximize the financial potential of those assets.

Capital Resources

The primary capital resources of E-Debit are its consolidated business operations as well as equity funds raised, joint venture arrangements and/or loan proceeds.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

As a Smaller Business Issuer, E-Debit is not required to include this Item.
 
 
28
 
ITEM 8     FINANCIAL STATEMENTS
 
E-DEBIT GLOBAL CORPORATION
 
CONSOLIDATED FINANCIAL STATEMENTS
 
with
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
December 31, 2012


 
              Page
   
Report of Independent Registered Public Accounting Firm
F-2
   
Consolidated Financial Statements:
  
   
Consolidated Balance Sheets at December 31, 2012 and 2011
F-3
   
  Consolidated Statements of Operations for the Years Ended December 31, 2012 and 2011
 F-4
   
  Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2012 and 2011
F-5
   
Consolidated Statement of Changes in Stockholders’ Deficit for the Period from January 1, 2011 through December 31, 2012
F-6
   
Consolidated Statements of Cash Flows for the Years Ended December 31, 2012 and 2011
F-7
   
Notes to Consolidated Financial Statements
F-8 to F-24


 
F-1
 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 

Board of Directors
E-Debit Global Corporation
 
We have audited the accompanying consolidated balance sheets of E-Debit Global Corporation (Company) as of December 31, 2012 and 2011 and the related consolidated statements of operations, changes in stockholders’ (deficit) and cash flows for the years ended December 31, 2012 and 2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based upon our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.   The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.  An audit also includes examining on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of E-Debit Global Corporation as of December 31, 2012 and 2011, and the results of its operations and its cash flows for the years ended December 31, 2012 and 2011 in conformity with accounting principles generally accepted in the United States of America.  
 
The accompanying financial statements have been prepared assuming the Company will continue as a going concern.  As described in Note 14, the Company has incurred net losses for the years ended December 31, 2012 and 2011, and had a working capital deficit and a stockholders’ deficit at December 31, 2012 and 2011, which raise substantial doubt about its ability to continue as a going concern.  Management’s plan in regard to this matter is also discussed in Note 14.   The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

 
 
/s/ Schumacher & Associates, Inc.
Schumacher & Associates, Inc.
Certified Public Accountants
7931 S. Broadway, #314
Littleton, Colorado 80122

April 12, 2013 
 
 
 
F-2
 

 
E-DEBIT GLOBAL CORPORATION
Consolidated Balance Sheets
December 31, 2012 and 2011
 
 
ASSETS
  
2012
    
2011
  
CURRENT ASSETS
            
Cash
   $ 46,898     $ 96,492  
    Restricted cash
     188,236       595,044  
Accounts receivable net of allowance for doubtful
 accounts of $23,413 and $13,172
     37,791       37,342  
Other receivable – related parties
     16,535       6,917  
Inventory
     68,628       14,058  
Prepaid expense and deposit
     9,022       20,017  
Total current assets
     367,110       769,870  
                 
Property and equipment, net of depreciation
     225,190       232,113  
Property and equipment, idle
     —       364,625  
Investment, at cost
     20       20  
Deposit – related party
     —       156,668  
Intangible Assets, net of amortization
     43,926       79,389  
                 
Total assets
   $ 636,246     $ 1,602,685  
LIABILITIES AND STOCKHOLDERS’ DEFICIT
                
                 
CURRENT LIABILITIES
                
Accounts payable
     396,988       1,051,828  
   Accrued liabilities
     98,026       156,287  
Loans payable
     287,047       358,754  
Indebtedness to related parties
     1,517,601       1,081,259  
   Shareholder loans
     292,741       285,194  
Total current liabilities
     2,592,403       2,933,322  
                 
Total liabilities
     2,592,403       2,933,322  
                 
COMMITMENTS AND CONTINGENCIES (Notes 2,5,6,7,8,9,10,11,13 and 14)
 
                
STOCKHOLDERS’ DEFICIT
                
Preferred stock – authorized 200,000,000 shares, no par value,
81,518,410 shares issued and outstanding at
December 31, 2012 and 70,855,900 at December 31, 2011
     1,475,493       1,400,855  
Common stock - authorized 10,000,000,000 shares, no par value;320,046,834 shares issued and outstanding at
December 31, 2012 and 95,249,344 at December 31, 2011
     2,212,392       2,051,570  
   Additional paid-in capital
     654,018       654,018  
Accumulated other comprehensive income
     86,207       115,911  
Accumulated deficit
     (6,384,267 )     (5,552,991 )
Total stockholders’ deficit
     (1,956,157 )     (1,330,637 )
                 
Total liabilities and stockholders’ Deficit
   $ 636,246     $ 1,602,685  
                 
 
The accompanying notes are an integral part of these statements.
 
 
F-3
 

E-DEBIT GLOBAL CORPORATION
Consolidated Statements of Operations
For the Years Ended December 31, 2012 and 2011
 
   
2012
    
 
2011
  
Revenue -
            
   Equipment and supplies
   $ 47,841     $ 61,882  
   Residual and interchange income
     2,216,264       3,210,073  
   Other
     71,448       73,734  
Total revenue
     2,335,553       3,345,689  
                 
Cost of sales -
                
Equipment and supplies
     50,949       121,338  
Residual and interchange costs
     1,432,119       2,172,321  
Other
     633,820       614,897  
Total cost of sales
     2,116,888       2,908,556  
                 
Gross profit
     218,665       437,133  
                 
Operating expenses -
                
Depreciation and amortization
     103,067       99,810  
    Impairment of property and equipment, idle
     381,019       —  
Consulting fees
     169,117       195,575  
Legal and accounting fees
     99,067       93,757  
Salaries and benefits
     501,300       537,835  
Stock-based compensation
     —       29,227  
Travel, delivery and vehicle expenses
     41,452       64,512  
Other
     429,294       452,236  
Total operating expenses
     1,724,316       1,472,952  
                 
(-Loss-) from operations
     (1,505,651 )     (1,035,819 )
                 
Other income (expense) -
                
   Interest expense
     (144,350 )     (150,024 )
   Gain on sale
     801,204       —  
   Other income
     17,521       89,931  
                 
Net (-loss-) before income taxes
     (831,276 )     (1,095,912 )
                 
Provision for income taxes
     —       —  
                 
Net (-loss-)
   $ (831,276 )   $ (1,095,912 )
                 
Basic net (-loss-) per common share
   $ (0.00 )   $ (0.01 )
Weighted number of shares outstanding
     189,803,507        93,543,094  
 
The accompanying notes are an integral part of these statements.
 
 
F-4
 
E-DEBIT GLOBAL CORPORATION
Consolidated Statements of Comprehensive Income
For the Years Ended December 31, 2012 and 2011


   
2012
    
2011
  
             
  Net (-loss-)
   $ (831,276 )   $ (1,095,912 )
                 
Other comprehensive (-loss-), net of tax
                
  Foreign currency translation adjustment
     (29,704 )     33,617  
     Other comprehensive (-loss-), net of tax
     (29,704 )     33,617  
                 
Comprehensive (-loss-)
   $ (860,980 )   $ (1,062,295 )
                 
The accompanying notes are an integral part of these statements.

 
F-5
 
 
E-DEBIT GLOBAL CORPORATION
Consolidated Statements of Changes in Stockholders' Deficit
For the Period from January 1, 2011 to December 31, 2012
 
 
               
Additional
    
Foreign
Currency
              
   
Preferred Stock
    
Common Stock
    
Paid-in
    
Translation
    
Accumulated
        
   
Shares
    
Amount
    
Shares
    
Amount
     Capital    
Adjustment
    
(Deficit)
    
Total
  
Balance, January 1, 2011
     70,855,900     $ 1,400,855       89,413,630     $ 1,969,870     $ 624,791     $ 82,294     $ (4,457,079 )   $ (379,269 )
Exercise of options to officers for settlement of debts – related parties
     —       —       1,125,000       15,750       —       —       —       15,750  
Exercise of options to a director for settlement of debts – related parties
     —       —       1,785,714       25,000       —       —       —       25,000  
Exercise of options to consultants for settlement of debts – related parties
     —       —       2,925,000       40,950       —       —       —       40,950  
Stock based compensation resulting from granting of stock options to consultants
     —       —       —       —       29,227       —       —       29,227  
Other comprehensive gain, net of tax
     —       —       —       —       —       33,617       —       33,617  
Net loss for the year ended December 31, 2011
     —       —       —       —       —       —       (1,095,912 )     (1,095,912 )
Balance, December 31, 2011
     70,855,900     $ 1,400,855       95,249,344     $ 2,051,570     $ 654,018     $ 115,911     $ (5,552,991 )   $ (1,330,637 )
                                                                 
Exercise of convertible notes to creditors for settlement of debts
     —       —       145,460,000       145,460       —       —       —       145,460  
Exercise of convertible note to an Investor Relations firm for settlement of debt
     —       —       90,000,000       90,000       —       —       —       90,000  
Exercise of right to convert common to preferred stock – related parties
     10,662,510       74,638       (10,662,510 )     (74,638 )     —       —       —       —  
Other comprehensive loss, net of tax
     —       —       —       —       —       (29,704 )     —       (29,704 )
Net loss for the year ended December 31, 2012
     —       —       —       —       —       —       (831,276 )     (831,276 )
 
Balance, December 31, 2012
     81,518,410     $ 1,475,493       320,046,834     $ 2,212,392     $ 654,018     $ 86,207     $ (6,384,267 )   $ (1,956,157 )
 
The accompanying notes are an integral part of these statements.
 
 
F-6
 
E-DEBIT GLOBAL CORPORATION
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2012 and 2011
 
   
 
2012
    
 
2011
  
Cash flows from operating activities:
            
Net (loss) income from operations
   $ (831,276 )   $ (1,095,912 )
Reconciling adjustments -
                
Depreciation and amortization
     103,067       99,810  
Impairment of property and equipment, idle
     381,019       —  
       Stock-based compensation
     —       29,227  
Changes in operating assets and liabilities
                
      Restricted cash
     422,555       (122,446 )
   Accounts receivable
     (8,103 )     32,716  
   Inventory
     (54,198 )     62,837  
   Prepaid expenses and other
     11,525       1,841  
      Cash overdraft
     —       (20,918 )
  Accounts payable and accrued liabilities
     (552,716 )     275,535  
Net cash (used for) provided by operations
     (528,127 )     (737,310 )
                 
Cash flows from investing activities:
                
Purchase of equipment
     —       (48,689 )
Disposal of equipment
     —       —  
Net cash (used for) investing activities
     —       (48,689 )
                 
Cash flows from financing activities:
                
   Indebtedness to related parties
     557,711       269,482  
   Proceeds from loans, net of repayments
     100,509       195,835  
Proceeds from related parties
     171,870       444,189  
Repayments to related parties
     (321,853 )     (60,632 )
Net cash provided by financing activities
     508,237       848,874  
                 
Foreign currency translation adjustment
     (29,704 )     33,617  
Net change in cash and cash equivalents
     (49,594 )     96,492  
Cash (overdraft) at beginning of year
     96,492       —  
Cash (overdraft) at end of year
   $ 46,898     $ 96,492  
                 
Supplemental schedules:
                
Cash paid for interest
   $ 35,468     $ 80,834  
Cash paid for income taxes
   $ —     $ —  
Noncash investing and financing activities
                
Shares issued for the settlement of debt
   $ 235,460     $ 71,238  
 
The accompanying notes are an integral part of these statements.

 
F-7
 
 
E-DEBIT GLOBAL CORPORATION
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2012 and 2011
 
Note 1 – Organization and Principles of Consolidation
 
Westsphere Asset Corporation, Inc. (Corporation) was incorporated in Colorado on July 21, 1998 as Newslink Networks TDS, Inc. and changed its name to Westsphere Asset Corporation Inc. on April 29, 1999.  On April 2, 2010, the Corporation officially changed its name to E-Debit Global Corporation.

The Corporation’s primary business is the sale and operation of cash vending (ATM) and point of sale (POS) machines in Canada.

On October 26, 2010, the Corporation amended its articles of incorporation to increase its authorized capital to Five Hundred Million (500,000,000) shares of no par value common stock and Seventy Five Million (75,000,000) of no par value preferred stock.

On September 18, 2012, the Corporation amended its articles of incorporation to increase its authorized capital to Ten Billion (10,000,000,000) shares of no par value common stock and Two Hundred Million (200,000,000) of no par value preferred stock.
 
Principles of Consolidation
 
The accompanying consolidated financial statements include the accounts of the Corporation and all of its wholly-owned subsidiaries. The Corporation also has a minority interest in two entities that are not consolidated and are immaterial.  All inter-Corporation accounts have been eliminated in the consolidation.
 
  Subsidiaries Percentage of Ownership
     
  Westsphere Systems Inc. 100%
  E Debit International Inc. 100% 
  Vencash Capital Corporation   100%
  Vencash Payment Solutions Inc.  100%
  Westsphere Capital Group Ltd.  100%
  Group Link Inc. 55%
 
Minority interests in the income and equity of consolidated subsidiaries that are less than wholly-owned are recorded except when the subsidiary has a deficit and there are no agreements for the minority shareholders to contribute additional capital.  As of December 31, 2012 all minority-owned subsidiaries had deficits and therefore no minority interest is recorded.
 
Note 2 – Summary of Significant Accounting Policies
 
These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and are stated in United States dollars.
 
Use of Estimates in the Preparation of Financial Statements
 
The preparation of the Corporation’s financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and to report amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
 
Cash and Cash Equivalents
 
The Corporation considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents.  Cash equivalents totaled $46,898 and $96,492 at December 31, 2012 and 2011, respectively.
 
Restricted cash

The Corporation relies on a contractual agreement with Moneris Solution Corporation to settle daily ATM vault cash dispensements throughout our ATM Network into our bank account.  The ATM vault cash will be settled to the cash owners within 24 hours turn around.

 
F-8
 
Estimated Fair Value of Financial Instruments

The carrying amounts of current assets and current liabilities approximate fair value because of the short-term nature or the current rates at which the Corporation could borrow funds with similar remaining maturities. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment, and, therefore, cannot be determined with precision.  Changes in assumptions could significantly affect these estimates.  The Corporation does not hold or issue financial instruments for trading purposes, nor does it utilize derivative instruments.

The FASB ASC clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. It also requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows:
 
      Level 1: 
Quoted prices in active markets for identical assets or liabilities.
 
Level 2:
Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability.
 
Level 3:
Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Accounts Receivable

Accounts receivable consists of amounts due from customers.  The nature of the receivables consists of equipment sales, parts and accessories, and service provided.  The Corporation considers accounts more than 180 days old to be past due, since the Corporation can withhold the transactions revenue owed to the customers should their receivables become past due.  The account is deemed uncollectible and written off when the site locations are out of business and or in receivership.  The Corporation uses the allowance method for recognizing bad debts. When an account is deemed uncollectible, it is written off against the allowance.
 
     2012      2011  
Accounts Receivable
            
      Equipment   $ 597     $ 5,579  
      Services     -       462  
      Other     60,607       44,473  
      61,204       50,514  
                 
Less: Allowance for doubtful accounts     (23,413 )     (13,172 )
    $ 37,791     $ 37,342  

 
The bad debt expense for the year ended December 31, 2012 and 2011 totaled $10,577 and $74,223, respectively.  The bad debt is reflected in the accompanying Consolidated Statements of Operations as Other operating expenses.
 
Inventory
 
Inventory consists of the following elements:
 
     Quantity     Cost  
December 31, 2012 -                
ATM     27     $ 68,628  
POS     -       -  
Parts and accessories     -       -  
Total
           $ 68,628  
 
     Quantity     Cost  
December 31, 2011 -                
ATM     6     $ 14,058  
POS     -       -  
Parts and accessories     -       -  
Total
           $ 14,058  

Inventories are valued at the lower of cost (on a first-in, first-out method) or net realizable value.

 
F-9
 
Property, Equipment and Depreciation

Property and equipment are stated at cost less accumulated depreciation.  Depreciation is calculated using a declining balance method over the estimated useful lives of the property and equipment.

Earnings (Loss) per Share

Basic earnings (loss) per share are computed by dividing the net (loss) by the weighted average number of shares outstanding during the years ended December 31, 2012 and 2011 respectively.  Diluted earnings (loss) per common share is calculated by dividing the applicable net earnings (loss) by the sum of the weighted-average number of common shares outstanding and all additional common shares that would have been outstanding if potentially dilutive E Debit Global Corporation common shares had been issued during the years ended December 31, 2012 and 2011.

Total outstanding stock options of 11,739,286 and 11,739,286 at December 31, 2012 and December 31, 2011, respectively, would potentially dilute the earnings per share.  However, these stock options are anti-dilutive and were not included in the earnings per share calculation.  As a result, there is no variance between basic and dilute earnings per share at December 31, 2012 and December 31, 2011.
 
Total outstanding convertible preferred shares of 81,518,410 and 70,855,900 at December 31, 2012 and December 31, 2011, respectively, would potentially dilute the earnings per share.  The preferred shareholders have the right to convert such preferred share to a share of common stock (1:1) upon delivery of 21 days written notice to the Corporation, at a price of $0.05 per share payable to the Corporation.
 
Impairment of Long-Lived Assets
 
The Corporation periodically analyzes its long-lived assets for potential impairment, assessing the appropriateness of lives and recoverability of unamortized balances through measurement of undiscounted operation cash flows on a basis consistent with accounting principles generally accepted in the United States of America.

The Corporation identified an impairment loss of $381,019 from the idle property and equipment based on an annual property and equipment impairment analysis performed during the year ended December 31, 2012.  No impairment of long-lived assets was identified during the year ended December 31, 2011.
 
Revenue Recognition
 
Product revenues (or service revenues) are recognized when persuasive evidence of an arrangement exists, delivery has occurred (or service has been performed), the sales price is fixed and determinable and collection is reasonably assured.

Revenues from sales, leasing and servicing of individual cash vending machines are recognized when substantially all significant events to be provided by the Corporation have been performed. Interchange and residual revenues from the operation of vending and point-of-sale machines are recognized when the transaction is processed and due to the Corporation.

The Corporation offers no warranties or right of return beyond manufacturers’ warranties.
 
Foreign Currency Translation
 
The functional currency of the Corporation and its subsidiaries is the Canadian dollar. The accounts are translated into USD in accordance with ASC Topic 830 “Foreign Currency Matters,” with the Canadian dollar as the functional currency.  According to Topic 830, all assets and liabilities are translated at the exchange rate on the balance sheet date, equity is translated at historical rates and statement of operations items are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with ASC Topic 220, “Comprehensive Income.”  Gains and losses resulting from the translations of foreign currency transactions and balances are reflected in the statements of operations.

Concentration of credit risk

The Corporation depends (directly or indirectly) on Switch equipment and software particularly ACI Worldwide Inc. related to the Corporation’s Switch and an interruption in or the termination of any contract or business arrangement with ACI Worldwide Inc. could have a material adverse effect on The Corporation's Business.  Although the Corporation maintains switching contract relations with two alternative Switch providers our business would be interrupted until transition and during the period of transition it could trigger financial loss to the Corporation.

 
F-10
 
In addition the Corporation relies on a contractual agreement with Moneris Solution Corporation to settle daily ATM vault cash dispensements throughout our ATM Network.  If Moneris fails to settle the ATM vault cash it would have a very significant adverse effect on the Corporation business, financial condition and operating results making the Corporation liable for payment of the non settled vault cash to our customer base.

Other financial instruments that potentially subject the Corporation to significant concentrations of credit risk include cash equivalents, restricted cash, and notes and accounts receivable.  The Corporation maintains its cash balances in the form of bank demand deposits and money market accounts that management believes to be of high credit quality.  The balance at times may exceed federally insured limits.  Accounts receivable are typically uncollateralized and are derived from transactions with and from customers primarily located in Canada.

No revenues to unaffiliated customers represented 10% or more of the Corporation’s revenue for the years ended December 31, 2012 and 2011.
 
Income Taxes
 
The Corporation uses the liability method of accounting for income taxes.  Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates resulting from new legislation is recognized in income in the period of enactment.  A valuation allowance is established against deferred tax assets when management concludes more likely than not the deferred asset is recoverable.

Expected future losses represent sufficient negative evidence regarding its recoverability and accordingly, a full valuation allowance was recorded against deferred tax assets. A full valuation allowance on the deferred tax assets will be maintained until sufficient positive evidence exists to support reversal of the valuation allowance.

The Corporation has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions.  The Corporation has identified its federal tax return and its state tax return in Colorado as “major” tax jurisdictions, as defined.  The Corporation is not currently under examination by the Internal Revenue Service or any other jurisdiction.  The Corporation believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on the Corporation’s financial condition, results of operations, or cash flow.  Therefore, no reserves for uncertain income tax positions have been recorded. 

Advertising expenses

The Corporation expenses advertising costs as incurred and the total amounts for 2012 and 2011 were nominal.

Dividends

The Corporation did not declare or pay any dividends during the years presented.

Reclassifications

Certain reclassifications were made to conform 2011 to the 2012 financial statement presentation. There is no impact to operations or cash flows.
 
Recent Accounting Pronouncements
 
Effective January 1, 2012, we retrospectively adopted new guidance issued by the Financial Accounting Standards Board by presenting a total for comprehensive income and the components of net income and other comprehensive income in two separate but consecutive statements. The adoption of this guidance resulted only in a change in how we present other comprehensive income in our consolidated financial statements and did not have any impact on our results of operations, financial position, or cash flows.

A variety of proposed or otherwise potential accounting standards are currently under study by standard setting organizations and various regulatory agencies. Due to the tentative and preliminary nature of those proposed standards, management has not determined whether implementation of such proposed standards would be material to our consolidated financial statements.
 
 
F-11
 
Note 3 – Property and Equipment
 
Property and equipment in service consists of the following elements:

   
Cost
    
Accumulated
Depreciation/
Amortization
    
Net
Book Value
  
Depreciation
Rate
and
Method
December 31, 2011 -
                    
Office furniture and equipment
   $ 60,772     $ 31,274     $ 29,498  
20% DB
Computer hardware and software
     175,699       118,420       57,279  
30% DB
ATM machines
     236,845       93,317       143,528  
30% DB
Other
     8,252       6,444       1,808  
Var
    $ 481,568     $ 249,455     $ 232,113    
December 31, 2012 -
                          
Office furniture and equipment
   $ 62,380     $ 38,947     $ 23,433  
20% DB
Computer hardware and software
     180,349       142,516       37,833  
30% DB
ATM machines
     210,627       47,789       162,838  
30% DB
Other
     7,494       6,408       1,086  
Var
    $ 460,850     $ 235,660     $ 225,190    

There are no leased ATMs included in the Corporation’s property and equipment for the year ended December 31, 2012 and for the year ended December 31, 2011.

Depreciation and amortization have been provided in amounts sufficient to recover asset costs over their estimated useful lives.  All components of property and equipment are being depreciated or amortized.  Depreciation and amortization expense for the years ended December 31, 2012 and December 31, 2011 totaled $103,067 and $99,810, respectively.

Property and equipment, idle consists of the following elements:

   
Cost
  
December 31, 2011 -
      
Computer hardware and software
   $ 364,625  
    $ 364,625  
December 31, 2012 -
        
Computer hardware and software
   $ —  
    $ —  

The property and equipment which has been idle was related to the purchase of computer hardware and software for the card management system in June 2010.  The software and computer hardware was purchased as a turnkey operating system which focused on a loyalty based platform.  As of December 31, 2012, the Corporation recorded an impairment charge of $381,019 to reduce the idle property and equipment to zero based on an annual property and equipment impairment analysis performed in response to hardware and software security upgrade mandated under Interac, MasterCard and VISA rules.  These upgrades include the requirements to have EMV (Europay, MasterCard, VISA) certified chip card (the replacement technology for the historical magnetic stripe cards) software/readers, and network approved encrypted PIN pad ("EPP") devices, installed on all ATMs and debit terminals:  thereby providing the ability to accept EMV chip card transactions.  The Corporation has determined that it is not costs effective for the upgrades and the outcome is uncertainty.  In addition, Management intends to raise funds for the project but no assurance can be given that the Corporation will be successful in raising additional capital.
 
Note 4 – Deferred Costs/Intangible Assets
 
On the 9th of November 2007, E-Debit contracted with ACI Worldwide through its wholly owned subsidiary Westsphere Systems Inc. (WSI) to provide its ACI ‘Base 24 On Demand” (AOD) hosted solution for ATM and POS transaction acquiring where WSI shares responsibilities with ACI as the transaction processor.  ACI hosts the processing environment which is set up to specific requirements as set out by WSI, which supports WSI ATM and POS devices, debit and credit transaction processing and card management requirement that is unique and scalable to WSI’s current and future requirements and not shared with other ACI customers.  ACI supplies software acquisition, operation and maintenance, facilities, operations and environment development and maintenance and disaster recovery infrastructure and services; whereby WSI supports, authorizes and distributes all settlements and revenues distributions through its account maintenance software developed by WSI and specific to ACI On Demand processing platform.

 
F-12
 
As a result Westsphere Systems Inc. processed all transactions through its association with ACI hosted transaction processing solution eliminating the costs, restrictions, and potential risks of relying on third party processors.  

The Corporation capitalized costs related to development of software totaling $168,690 in 2007.  The Corporation is amortizing these costs over its expected life.  E-Debit officially launched its switch in January 2009 and commenced rollover of ATMs to process all transactions through its association with ACI.  The deferred costs were reclassified as intangible assets upon the completion of all the specific requirements including coding and testing in year 2009.  The Corporation assessed the useful life of the intangible asset in relation to its five-year contract with ACI commencing November 2008.  The Corporation also determined the technology may be outdated at the end of the term of the contract and an enhancement of the software may be required at that time.

Depreciation is calculated using a declining balance method.

Intangible assets consist of the following elements:
 
   
Cost
    
Accumulated
Amortization
    
Net
Book Value
  
Depreciation
Method
December 31, 2011 -
                    
License – ACI
   $ 164,340     $ 98,605     $ 65,735  
Straight-line
Patent
     14,688       13,884       804  
Straight-line
License – Paragon
     17,846     $ 4,996       12,850  
Straight-line
    $ 196,874     $ 117,485     $ 79,389    
December 31, 2012 -
                          
License – ACI
   $ 168,690     $ 134,953     $ 33,737  
Straight-line
Patent
     15,076       14,416       660  
Straight-line
License – Paragon
     18,319     $ 8,790       9,529  
Straight-line
    $ 202,085     $ 158,159     $ 43,926    

Depreciation and amortization have been provided in amounts sufficient to recover asset costs over their estimated useful lives.  Depreciation and amortization expense for the year ended December 31, 2012 and December 31, 2011 totaled $37,712 and $27,910, respectively.  This depreciation and amortization expense was part of the totals which are reflected in the accompanying consolidated statements of operations as Depreciation and amortization.
 
Expected future depreciation and amortization of the intangible assets are as follows:
 
Year
  Amount
2013
 $43,926
 
Note 5 – Loans Payable
 
In September 2007, Vencash entered into a loan agreement with an initial term of twelve months totaling $100,509 ($100,000 CDN) with an external arms-length investor, bearing interest at 12% per annum, with blended monthly payments of interest only of $1,009 ($1,000 CDN).  The initial term may be automatically extended for further six (6) month terms (a “renewal period”) after the end of the initial term or terminated subject to mutual termination agreements.  The investor must give a written notice not less than 90 days before the end of the initial term or renewal period, whichever the case may be, to not renew the loan agreement.  Vencash must notify the investor not less than 60 days before the end of the initial term or renewal period, its intention to terminate the loan.  Currently, no written notice has been received from the investor to Vencash or vice versa.  The purpose of the loan is to supply vault cash to Vencash’s customer-owned ATM equipment and site locations.  Vencash supplies vault cash to these site locations because its customers do not have sufficient vault cash for these site locations.

The loan amount has been forwarded to an armored car company that supplies vault cash to these site locations.  The armored car company is accountable for the rotation of the cash and has signed a note receivable for the amount.
 
As of December 31, 2012, the balance is $100,509 ($100,000 CDN).  This loan is included in the accompanying consolidated balance sheet as Loans payable.

 
F-13
 
In November 2007, Westsphere’s subsidiary Westsphere Systems Inc. (WSI) raised $128,547 ($131,000 CDN) through a loan agreement with an initial term of twenty-four months with an external arms-length investor, bearing interest at 12% per annum, with blended monthly payments of interest only of $1,322 ($1,310 CDN). The initial term may be automatically extended for further twelve month terms (a “renewal period”) after the end of the initial term or terminated subject to mutual termination agreements.  The investor must give a written notice not less than 90 days before the end of the initial term or renewal period, whichever the case may be, to not renew the loan agreement.  Vencash must notify the investor not less than 30 days before the end of the initial term or renewal period, its intention to terminate the loan.  Currently, no written notice has been received from the investor to WSI or vice versa.  The purpose of the loan was to fund the switch development project.  In February 2010, the loan was reduced by $62,212 ($65,000 CDN) in exchange for 622,123 common shares at $0.10 per share.  In May 2012, the loan was reduced by $1,003 ($998 CDN) in offsetting against the expenses.  In September 2012, the loan was reduced by $60 ($60 CDN) in offsetting against the expenses.  In December 2012, WSI recorded an accrued interest of $4,570 ($4,547 CDN).   As of December 31, 2012, the balance is $69,842 ($69,489 CDN).  This loan is included in the accompanying consolidated balance sheet as loans payable.

On December 20, 2011 the Corporation and its subsidiaries jointly and severally entered into a Demand Loan Agreement and related GSA with an investor for a loan of $201,017 ($200,000 CDN) at a prime lending rate of Canadian Prime plus four (4%) percent.  Under the GSA, this debt is collateralized by all of the Corporation’s assets.  Upon demand the Corporation has forty-five (45) days to repay the Demand Loan and interest.  On October 24, 2012, the loan was repaid by $107,936 ($107,390 CDN).  On December 5, 2012, the loan was repaid by $76,892 ($76,503 CDN).  As of December 31, 2012, the balance is $16,187 ($16,107 CDN).  This loan is included in the accompanying consolidated balance sheet as Loans payable.

On August 15, 2012 the Corporation and its subsidiaries jointly and severally entered into a Demand Loan Agreement and related GSA with an arms-length third party investor for a loan of $100,509 ($100,000 CDN) at a prime lending rate of Canadian Prime plus four (4%) percent.  Under the GSA, this debt is collateralized by all of the Corporation’s assets.  Upon demand the Corporation has forty-five (45) days to repay the Demand Loan and interest.  As of December 31, 2012, the balance is $100,509 ($100,000 CDN).  This loan is included in the accompanying consolidated balance sheet as Loans payable.
 
Note 6– Common and Preferred Stock
 
Year 2011
 
Exercise of options to officers for settlement of debts – related parties
 
 
In January 2011, a director exercised his options of 1,785,714 common shares at $0.014 per share for a total of $25,000.  The issuance of 1,785,714 shares was issued as the settlement of $25,000 of debt.
 
In January 2011, an officer exercised his options of 1,125,000 common shares at $0.014 per share for a total of $15,750.  The issuance of 1,125,000 shares was issued as the settlement of $15,750 of debt owed to an affiliated Corporation that is controlled by the Corporation’s president.

In August 2011, a consultant exercised his options of 200,000 common shares at $0.014 per share for a total of $2,800.  The issuance of 200,000 shares was issued as the settlement of $2,800 of debt owed to an affiliated Corporation that is controlled by the Corporation’s president.

In August 2011, a consultant exercised his options of 875,000 common shares at $0.014 per share for a total of $12,250.  The issuance of 875,000 shares was issued as the settlement of $12,250 of debt owed to an affiliated Corporation that is controlled by the Corporation’s president.

In August 2011, a consultant exercised his options of 1,850,000 common shares at $0.014 per share for a total of $25,900.  The issuance of 1,850,000 shares was issued as the settlement of $25,900 of debt owed to an affiliated Corporation that is controlled by the Corporation’s president.

Year 2012

In May 2012, the Corporation Board of Directors authorized the holders of its Common Stock the right to convert their Common Stock to Series “A” Preferred Shares of the Corporation commencing the 1st of June 2012 and ending on the 30th of November 2012.  The Board of Directors has reserved the right to extend the conversion period anytime at a later date.

A contingency existed due to insufficient authorized preferred stock to convert all the common stock.  The Corporation proposed to increase the number of authorized preferred stock which was voted on at the shareholder meeting in September 2012.

 
F-14
 
On September 18, 2012, the Corporation amended its articles of incorporation to increase its authorized capital to Ten Billion (10,000,000,000) shares of no par value common stock and Two Hundred Million (200,000,000) of no par value preferred stock.

The Corporation’s Series “A” Preferred Shares have the following conditions and rights attached:

(a)  
Upon any sale, liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any distribution or payment shall be made to the holders of any stock ranking junior to the Corporation’s Series “A” Preferred Stock, the holders of the Series “A” Preferred Stock shall be entitled to be paid out of the assets of the Corporation any dividends declared by the Board of Directors, in the form of stock, cash or otherwise, shall be distributed to the Corporation’s shareholders as follows: (a) ninety-five percent (95%) of such dividend shall be distributed to the holders of the Series “A” Preferred Shares on a pro rata basis; and (b) the remaining five (5%) shall be equally distributed to any holder of the Corporations Stock including Series “A” Preferred shareholders, on a pro rata basis.

(b)  
In the case of a sale of any of the Corporation's business operations or in the event of a wind up or a liquidation of the Corporation's assets, the remaining cash to be distributed to the shareholders shall be distributed on the same basis as described in paragraph (a) above.

(c)  
The Board of Directors will determine the amount of proceeds to be distributed from the sale of any of the Corporation's assets and will determine whether any dividend will be issued by the Corporation.  The Board of Directors will determine the date that such dividend or distribution will be paid.

(d)  
During the period commencing on June 1, 2012 and concluding on November 30, 2012, each holder of shares of common stock shall have the right to surrender their shares of common stock in exchange for shares of preferred stock on a basis of 1:1. Each shareholder shall exercise this right by delivering to the Corporation or the Corporation’s transfer agent the certificates representing such shareholder’s shares of common stock, duly endorsed with appropriate signature guarantees affixed thereto, on or before the date determined above in this subsection (d).

(e)  
Each share of Series “A” Preferred stock shall have voting rights of twenty votes per share for any election or other vote placed before the shareholders of the Corporation.

(f)  
Upon conversion the Board of Directors shall exercise the right to vote the preferred shares at any duly called meeting of the shareholders in the same manner as previously issued preferred shares.

(g)  
Series “A” Preferred Stock are anti-dilutive to reverse splits in relation to the voting rights of the Corporation’s  Series “A” Preferred Stock, and therefore in the case of a reverse split, the voting rights of the Series “A” Preferred Stock after the reverse split shall be equal to the ratio established prior to the reverse split. The voting rights of Series “A” Preferred Stock, however, would increase proportionately in the case of forward splits, and may not be diluted by a reverse split following a forward split.

(h)  
Excepting for Section (g) above, a consolidation or split of one class of the Corporation’s stock the Board of Directors shall determine the effect on any other class of shares.

(i)  
Upon conversion of a common share to a preferred share, the preferred shareholder will have the right to convert such preferred share to share of common stock upon delivery of 21 days written notice to the Corporation, at the closing trading price on the date that notice is given for the conversion per share payable to the Corporation.

(j)  
Upon receipt of notice of the request to convert from preferred share to common stock, share certificates will be issued with the following share trading restrictions.  1/3 of the total shares to be converted will be restricted from trading for a period of 1 months from the date of conversion; 1/3 of the total shares to be converted will be restricted from trading for a period of 3 months from the date of conversion; and 1/3 of the total shares to be converted will be restricted from trading for a period of 6 months from the date of conversion.

 
F-15
 
On August 10, 2012, the Board of Directors authorized all holders of the Corporation’s outstanding indebtedness by way of loan agreements, promissory notes or other security instruments to convert their debt to common stock of the Corporation at a conversion price which would have been the average of the previous 5 day closing trading price of the Corporation’s stock currently listed on the OTC QB under trading symbol “WSHE” or $0.001 per share whichever is greater at the time the Convertible Note Holders would have notified the Corporation in writing of its request to convert.

The Corporation’s Board of Directors would have the right at its sole discretion and determination to obtain from the converting note-holder or its authorized assigns an irrevocable proxy to vote the converted common stock related to the conversion at any duly constituted meeting of the shareholders while the debt holder or its authorized assigns held an interest in the common stock.

The Corporation’s Board of Directors also resolved that the common stock issued as a result of any conversion of debt by way of the issued Convertible Note would not qualify for conversion to the Corporation’s preferred shares at the time of conversion or any time in the future and request for conversion from common stock to preferred is prohibited and will be rejected.

On October 10, 2012, the Board of Directors amended the August 10, 2012 Directors resolution regarding the issuance of convertible notes.  The Board determined that in addition to the terms and conditions as set out in the Debt Settlement Resolution, any debt settlement commencing after the 10th day of October, 2012 must be approved by the President of the Corporation and authorized by a majority of the Board of Directors of the Corporation to become effective.  This resolution invites the debt holders to discuss the option to convert their debt into equity but the Corporation has no obligation to do so and the debt holders have no contractual right to make any conversion.   The Corporation has the right to accept or reject the request to convert by the debt holders on a case by case basis.

On August 15, 2012, three of the creditors converted debt of $95,460, $50,000 and $90,000 (as further discussed below) for 235,460,000 shares of common stock at $0.001 per share, being the greater of the previous five day average closing trading price.  These shares are restricted for six (6) months until February 15, 2013 pursuant to rule 144 of the Securities and Exchange Commission.

The Corporation issued 95,460,000 shares of common stock to a creditor in conversion of $95,460 ($95,460 CDN), of convertible debt at the rate of $0.001 per share, being the greater of the previous five day average closing trading price.  These shares are restricted for six (6) months until February 15, 2013.  The security holder has assigned an irrevocable proxy to vote to the Corporation Board of Directors.  This proxy shall not be revocable until the transfer of the title and ownership to the shares from the record holder to an arm’s length non related third party.

The Corporation issued 50,000,000 shares of common stock to a creditor in conversion of $50,000 ($50,000 CDN), of convertible debt at the rate of $0.001 per share, being the greater of the previous five day average closing trading price.  These shares are restricted for six (6) months until February 15, 2013.  The security holder has assigned an irrevocable proxy to vote to the Corporation Board of Directors.  This proxy shall not be revocable until the transfer of the title and ownership to the shares from the record holder to an arm’s length non related third party.

The Corporation issued 90,000,000 shares of common stock to an Investor Relations firm in conversion of $90,000 ($90,000 CDN), of payables at the rate of $0.001 per share, being the greater of the previous five day average closing trading price.  These shares are restricted for six (6) months until February 15, 2013.  The security holder has assigned an irrevocable proxy to vote to the Corporation Board of Directors.  This proxy shall not be revocable until the transfer of the title and ownership to the shares from the record holder to an arm’s length non related third party.

On November 25, 2012, the Corporation’s president exercised the right to convert 10,662,510 shares of common stock to 10,662,510 shares of preferred stock.  6,250,000 of preferred shares were issued to the Corporation’s president and 4,412,510 of preferred shares were issued to two of the affiliated corporations that are controlled by the Corporation’s president.
 
Note 7 – Income Taxes
 
The Corporation is required to file United States income tax returns, and the Corporation’s operating subsidiaries file Canadian income tax returns.

The Corporation has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions.  We are not currently under examination by the Internal Revenue Service or any other jurisdiction.  The Corporation believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on the Corporation’s financial condition, results of operations, or cash flow.  Therefore, no reserves for uncertain income tax positions have been recorded.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets are comprised entirely of net operating loss carry-forwards.

 
F-16
 
For the years ended December 31, 2012 and 2011, the reconciliation between the statutory federal tax rate and the effective tax rate as a percentage is as follows:

   
2012
    
2011
  
Statutory federal income tax rate
     34 %     34 %
Effect of net operating loss carry-forward
     (34 )     (34 )
      - %     - %

The Corporation has estimated net operating loss carry forwards of $5,937,115 available to reduce future taxable income, which expire as follows:

2021
   $ 185,899  
2022
   $ 249,921  
2023
   $ 252,849  
2024
   $ 569,296  
2027
   $ 314,427  
2028
   $ 650,868  
2029
   $ 976,297  
2030
   $ 839,597  
2031   $ 1,066,685  
2032   $ 831,276  
 
   $ 5,937,115  

The Corporation has a limited history of earnings, and there is no guarantee of future earnings to offset the net operating loss carry forwards. The deferred tax asset resulting from the net operating loss carry forwards of approximately $2,018,619 is offset by a valuation allowance due to the uncertainty of the realization of the net operating loss carry forwards.  The net increase in the valuation allowance was approximately $282,634 from December 31, 2011 to December 31, 2012, and primarily results from the operating loss for the year ended December 31, 2012.

The Corporation has no U.S. income other than from its Canadian subsidiaries. The Corporation anticipates that foreign tax credits allowed for payment of Canadian taxes will be sufficient so that there will be no U.S. income tax liability for the parent Corporation.

The Corporation is delinquent on filing its Federal and state tax returns and may be subject to penalties and interest.  All delinquent income tax returns are subject to Federal and state tax examinations by tax authorities.  A contingency exists with respect to this matter, the ultimate resolution of which may not be presently determined.

Note 8 - Stock Based Compensation

During 2002, the Corporation adopted the 2002 Employees Stock Option and Stock Award Plan for directors, employees and consultants. The maximum number of shares that may be optioned or awarded under the plan is 20,000,000.  In December 2009, the Corporation approved an amendment of the Stock Option and Stock Award Plan filed on January 26, 2005 which remains in effect through January 26, 2015.  The maximum number of shares that may be optioned or awarded under the plan is amended to 37,500,000.  Additional provisions of the plan call for awards, exercise prices and vesting to be determined by the board of directors or its designated administrator. 

Following is a table of outstanding options and changes during 2012 and 2011:

   
Employee
Options *
    
Non-
Employee
Options *
    
Weighted
Average
Exercise
Price *
    
Aggregate
Intrinsic
Value
  
Options Outstanding, December 31, 2010
     15,650,000       1,925,000     $ 0.07     $ 0  
Options granted in 2011
     —       2,925,000     $ 0.01       —  
Options exercised in 2011
     (2,910,714 )     (2,925,000 )   $ 0.01       —  
Options cancelled in 2011
     (2,925,000 )     —     $ 0.01       —  
Options Outstanding, December 31, 2011
     9,814,286       1,925,000     $ 0.08     $ 0  
Options granted in 2012
     —       —     $ 0.01       —  
Options exercised in 2012
     —       —     $ 0.01       —  
Options cancelled in 2012
     —       —     $ 0.01       —  
Options Outstanding, December 31, 2012
     9,814,286       1,925,000     $ 0.08     $ 0  
Options Exercisable, December 31, 2012
     9,814,286       1,925,000     $ 0.08     $ 0  
                                 
All outstanding options vest immediately.

 
F-17
 
If not previously exercised or canceled, options outstanding at December 31, 2012 will expire as follows:

   
Range of Exercise Prices
    
Number of Shares
    
Weighted
Average
Exercise Price
  
   
High
    
Low
              
January 26, 2015
     .01       .01       7,339,286       .01  
August 15, 2015
     .20       .20       4,400,000       .20  

In August 2011, 2,925,000 stock options were granted to certain consultants under the Stock Award Plan at an exercise price of $0.014 per share.  The options vested on the date of grant and expire on January 26, 2015.

The Corporation used the simplified method for estimating the fair value expense for granted stock options.

The fair value of the options was calculated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:
 
    2012     2011  
Risk-free interest rate       –       0.01% - 0.20%  
Dividend yield       –        0.00%  
Volatility factor     –       514%  
Expect life        –     0.01 – 1.75 years  

The fair value of the options granted in 2011 totaled $29,227, which was fully expensed as of December 31, 2011.
 
Note 9 – Commitments and Contingencies
 
The Corporation leases real estate (office and warehouse space) under non-cancellable operating leases that expire on varying dates through 2014.

The Corporation leases additional real estate (office and warehouse space) for an “Initial Term” commencing June 1, 2010 on a month to month basis.  The Corporation may renew the Lease on a monthly basis by giving notice to the Landlord.
 
 
The Corporation also has various obligations for auto and equipment leases through 2016.

The Corporation’s real estate leases are with an affiliated Corporation that is controlled by the Corporation’s president.

Minimum future rental payments under non-cancellable operating leases having remaining terms in excess of one year are as follows:

   
Real Estate
    
Other
  
2013
   $ 73,264     $ 12,013  
2014
   $ 12,211     $ 11,583  
2015
   $ —     $ 6,953  
2016
   $ —     $ 2,319  


   
December 31, 2012
    
December 31, 2011
  
Rental expense
   $ 96,602     $ 83,475  

 
The Corporation leases telephone equipment under a non-cancellable capital lease commencing January 2011 and expiring in May 2015 with the option to purchase at the expiration of the 48 month lease term.  As of December 31, 2012, the cost of telephone equipment under capital lease at the Corporation is $21,945 with accumulated amortization of $7,900.

 
F-18
 
Minimum future capital lease payments under non-cancellable capital lease having remaining terms in excess of one year are as follows:

   
Capital Lease
  
2013
   $ 6,648  
2014
   $ 6,648  
2015
   $ 2,216  
 
On May 28, 2004 Peter Gregory filed an action in the Ontario Superior Court of Justice against Vencash Capital Corporation.  Peter Gregory was a former Vencash distributor and agent who filed the action related to a claim of wrongful dismissal from Vencash for $260,000 (CDN).  On July 30, 2004 Vencash filed a Statement of Defence and Counterclaim in the amount of $1,600,000 for breach of contract, breach of confidence, breach of fiduciary duties, interference with economic relations, damages for inducing breach of contract, and punitive damages. The Corporation believes the claim by Gregory to be without merit.  In January 2012, the Corporation received a copy of notice of garnishment from our bank institution against Vencash’s bank account for the total amount not to exceed $31,649 CDN.  The Corporation did not receive the notification for the judgement and is presently seeking legal advice.  This notice was rescinded by the bank upon delivery.  As of February 7, 2013 the Corporation has not been contacted further relating to the action initiated by Gregory.  The Corporation is currently reviewing the related correspondence and is in consultation with legal counsel and upon completion of the review will respond to any further action initiated by Gregory in this regard.
 
On January 25, 2009, Victory ATM filed an action in the Nova Scotia Superior Court against Vencash Capital Corporation.  Victory ATM was formerly a customer of Vencash distributor Bullion Investments Inc. and claimed that supplied vault cash to a contracted armoured car Corporation had been misappropriated for a total of approximately $45,000 CDN.  The Corporation has filed a statement of defense stating that Vencash had no care control or access to the vault cash supplied by Victory ATM and the only role that Vencash played was processing the Victory ATM transactions in their designated site locations.  The Corporation believes the claim by Victory ATM to be without merit and has not accrued a liability for the claim.  As of February 7, 2013 the Corporation has not been contacted further and per our knowledge no court actions have been initiated to date.  Our Nova Scotia legal counsel has advised that she will continue to monitor this situation and upon discussion with Victory ATM legal counsel will make application to the courts to have the claim initiated against Vencash terminated.

On December 11, 2012, Mainland Investments, Inc. and Research Driven Investor, LLC filed an action in the Alberta Court of Queen’s Bench against E-Debit Global Corporation, E-Debit’s officers, and various other parties.  Mainland Investment Inc. and Research Driven Investor, LLC (RDI) (specialized investor relations firms) claimed for a total of $150,000 CDN related to an alleged investor relations consulting agreement between RDI and the Corporation.  On February 4, 2013, the Corporation and E-Debit’s officers have filed a statement of defense denying that there had ever existed an agreement between RDI and E-Debit.  The Corporation has a signed Investor Relations Consulting Agreement with Open Waters Investments Inc. (OWI) and deny that OWI ever had authority to enter into written or oral agreement with RDI on behalf of E-Debit, or that E-Debit ever contractually agreed to or represented that it had appointed RDI as its advisor.  The Corporation believes the claim by Mainland Investments, and Research Drive Investor, LLC to be without merit and has not accrued a liability for the claim.

On December 14, 2012, Trans-Armored Canada Inc. filed an action in the Nova Scotia Superior Court against Westsphere Systems Inc. (WSI).  Trans-Armored Canada Inc. (TAC) was formerly a contracted armoured car Corporation to deliver vault cash to site locations and claimed for a total outstanding debt of $34,325 CDN.   As set out in the 15th of August 2007 TAC/Vencash Agreement, the Corporation’s President and Chief Executive Officer sits as a member of the board of directors and represents 50% of TAC’s board of directors.  The Corporation is currently reviewing the related correspondence and is in consultation with legal counsel to file a statement of defense.  The Corporation has released what it believes to be the full and final payment to TAC in May 2012 where the Corporation and TAC mutually agreed to offset the full amount of deposit due from TAC against the accounts payable owed to TAC.  The Corporation believes the claim by Trans-Armored Canada Inc. to be without merit and has not accrued a liability for the claim.

Since 2009, Interac, MasterCard and VISA have mandated a hardware and software security upgrade for ATMs, Debit Terminals and the Corporation’s Switch.

Security upgrades are required under Interac, MasterCard, and VISA rules. These upgrades include the requirements to have:
 
(c)  
EMV (Europay, MasterCard, VISA) certified chip card (the replacement technology for the historical magnetic stripe cards)software/readers, and

(d)  
network approved encrypted PIN pad ("EPP") devices, installed on all ATMs and debit terminals:  thereby providing the ability to accept EMV chip card transactions. This has required and will also require further upgrading the Corporation’s Switch to process EMV chip card transactions, and adding additional encryption methods to Corporations managed ATMs and Debit terminals, Triple DES Encryption.

 
F-19
 
The Corporation’s understanding of the deadlines mandated by Interac and MasterCard for conversion of ATMs and debit terminals (i.e. to read the EMV microchip on a card rather than a magnetic stripe) are as follows:

(e)  
50% of all ATMs must be upgraded with an EMV certified chip pin entry device by December 31, 2011 and 100% of ATMs must be upgraded by December 31, 2012;
(f)  
35% of debit terminals must be upgraded with an EMV certified chip pin entry device by December 31, 2010, 60% must be converted by December 31, 2012, and 100% must be upgraded by December 31, 2015.

VISA's rule changes do not require a switch to the new technology by any particular date. However, both MasterCard and VISA rules provide that after March 31, 2011, certain liabilities (i.e. in respect of transaction errors or frauds) will be reallocated to industry participants who are still accessing the MasterCard and VISA networks using non-upgraded equipment, cards or software.

In addition to the security upgrades to ATM and Debit Terminals, in order to access Interac, cards (i.e. the debit cards issued by financial institutions) must be upgraded (i.e. reissued) to have EMV chips installed: 65% by December 31 2011 and 100% by December 31, 2012.

The result of non-compliance can include penalties, fines, sanctions and contractual penalties by the applicable Network(s) and ultimately disconnection of the ATM and Debit Terminal device or card from the Network for failure to comply by the end dates.  The Corporation will be investing maintenance capital and upgrading its IT department to meet these upgrade deadlines.  The Corporation’s customers who own their own equipment are encouraged to make the necessary changes to their equipment and in some cases the Corporation has the contractual right to make the necessary changes for the customer (and charge the customer for the cost of the change).

Management believes that the Corporation and/or its subsidiaries are in compliance with EMV requirements.
 
Note 10 – Related party transactions
 
Investment, at cost:

In October 2010, E-Debit decided to sell 41 common shares (41%) of the issued and outstanding shares held in its wholly owned subsidiary, 1105725 Alberta Ltd. o/a Personal Financial Solutions (PFS) at $1.00 per share.  The common shares were sold to a number Corporation that is controlled by an officer of E-Debit.  The purchaser agrees that the current outstanding advances made to the Corporation by E-Debit will remain outstanding and owed by the related party to E-Debit.  As a result of the sale transaction, E-Debit remains a 10% shareholder in Personal Financial Solutions.  PFS has had no active business activities for the last four years.  The 10% or $10 interest in Personal Financial Solutions is reflected in the accompanying consolidated balance sheet as investment, at cost.

In May 2011, E-Debit decided to sell 90 common shares (90%) of the issued and outstanding shares held in its wholly owned subsidiary, Cash Direct Financial Services Ltd. (CDF) at $1.00 per share.  The common shares were sold to a number Corporation that is controlled by the president of E-Debit.  The purchaser agreed that the current outstanding advances made to Cash Direct by the Corporation will remain outstanding and owed by the related party to E-Debit.  As a result of the sale transaction, E-Debit remains a 10% shareholder in Cash Direct Financial Services.  CDF commenced the sale of ATMs in 2012.  The 10% or $10 interest in Cash Direct Financial Services is reflected in the accompanying consolidated balance sheet as investment, at cost.

On December 13, 2012, Group Link Inc. (“Group Link”) was incorporated under the laws of the Province of Alberta as the foundation of the re-establishment of our nationwide distribution network, which in the past allowed for our presence in the Canadian marketplace.

The Corporation is the majority shareholder of Group Link holding 55% of the issued and outstanding common stock of the Corporation.  The Corporation’s Chief Executive Officer is Group Link’s Chief Executive Officer and Director and holds personally 15% of the issued and outstanding common stock of Group Link.  E-Debit’s Chief Operating Officer is a Director and personally holds 10% of the issued and outstanding common stock of Group Link.  Group Link’s President and Group Link’s Chief Development Officer both are Directors of Group Link and each hold 10% of the issued and outstanding common stock of the Group Link.  Group Link has had no active business activities since its incorporation in December 2012.

Other receivable – related parties:

The other receivable – related parties was from the sale transaction of 41% of the subsidiary 1105725 Alberta Ltd. o/s Personal Financial Solutions (PFS) in October 2010 and sale transaction of 90% of the subsidiary Cash Direct Financial Services Ltd. (CDF) in May 2011, and sale transactions to E-Debit’s directors.

 
F-20
 
As of December 31, 2011 and December 31, 2012, the Corporation setup an allowance for doubtful collections of $51,386 and $52,746 respectively for the related parties’ receivables as collection was unknown.

The following table summarizes the Corporation’s others receivable to related parties transactions as of December 31, 2012 and December 31, 2011:
 
    2012     2011  
1105725 Alberta Ltd. o/a
           $    
Personal Financial Solutions   $ 40,162       39,127  
Cash Direct Financial Services Ltd.      12,584       12,259  
Trans Armored Canada     7,922       -  
Accounts receivable – directors     8,613       6,917  
    $ 69,281     $ 58,303  
                 
Less: Allowance for doubtful accounts      (52,746 )     (51,386 )
    $ 16,535     $ 6,917  
 
The current outstanding advances are reflected in the accompanying consolidated balance sheet as other receivable – related parties and totaled $16,535 and $6,917, respectively, at December 31, 2012 and December 31, 2011.

Deposit – related party:

The deposit – related party consisted of an amount due from a contractor, Trans Armored Canada (TAC).  The deposit carried no interest rate, and required no monthly payments.  The purpose of this deposit was to supply vault cash to E-Debit’s wholly owned subsidiary Vencash Payment Solutions Inc. (VPSI)’s customer-owned ATM equipment and site locations.  The Corporation earned revenues from surcharge transactions generated from these ATMs.

VPSI supplies vault cash to these site locations because its customers do not have sufficient vault cash for these site locations.  VPSI subcontracted with TAC to deliver vault cash to these site locations.  TAC was accountable for the rotation of the cash.  The deposit was receivable on demand.
 
 
Presently, the Corporation’s President and Chief Executive Officer sits as a member of the board of directors which represents 50% of TAC’s board of directors and the Corporation has the option to purchase 20% ownership in TAC.

On April 30, 2012 the Corporation concluded the sale of a portion of the Corporation’s eastern Canada ATMs estate to an arms-length investor.  As a result, VPSI is no longer required to supply vault cash to its customer-owned ATM equipment and site locations and the deposit is to be returned to VPSI.

In May 2012, the Corporation and TAC mutually agreed to offset the full amount of deposit against the accounts payable owed to TAC.

The following table summarizes the Corporation’s deposit - related party transactions as of December 31, 2012 and December 31, 2011:
 
    2012     2011  
Trans Armored Canada 
   $ -     $ 156,668  
Less: Allowance for doubtful accounts      -       -  
    $ -     $ 156,668  
 
The outstanding deposit is reflected in the accompanying consolidated balance sheet as deposit – related party and totaled $0 and $156,668, respectively, at December 31, 2012 and December 31, 2011.  The decrease in the full amount of deposit was due to the offsetting to payables in May 2012.

Armor car services:

The Corporation wholly owned subsidiary Vencash Payment Solutions Inc. (VPSI) subcontracted with Trans Armored Canada (TAC) to deliver vault cash to VPSI’s customer-owned ATM equipment and site locations.  The Corporation earned revenues from surcharge transactions generated from these ATMs.
 
The following table summarizes the amounts paid by the Corporation to TAC for armor car services as of December 31, 2012 and 2011:
 
December 31, 2012     December 31, 2011  
  $41,526       $191,043  

The armor car services paid to a related party is in accordance with the contract with it services.  The above payments are reflected in the accompanying consolidated statements of operations as follows:
 
    December 31, 2012     December 31, 2011  
Residual & interchange costs   $36,063       $167,032  
Other    5,463       24,011   
    $41,526        $191,043   

Real estate leases:

The Corporation’s real estate leases are with an affiliated Corporation that is controlled by the Corporation’s president.

The Corporation leases real estate (office and warehouse space) under non-cancellable operating leases that expire on varying dates through 2014.  The monthly lease payment is $6,025 ($5,971 CDN).

The Corporation leases additional real estate (office and warehouse space) for an “Initial Term” commencing June 1, 2010 on a month to month basis.  The Corporation may renew the Lease on a monthly basis by giving notice to the Landlord.  The monthly lease payment is $$3,128 ($3,100 CDN).
 
Minimum future rental payments under non-cancellable operating leases having remaining terms in excess of one year are as follows:

   
Real Estate
  
2013
   $ 73,264  
2014
   $ 12,211  
2015
   $ —  
2016
   $ —  


 
December 31, 2012
December 31, 2011
Rental expense
$96,602
$83,475

 
Residual and interchange costs:
 
The following table summarizes the amounts paid by the Corporation for residual and interchange fees to related parties as of December 31, 2012 and 2011:
 
Payable to:
  
December 31, 2012
    
December 31, 2011
  
Two affiliated companies that are controlled by E-Debit’s President.
   $ 21,996     $ 29,549  
An affiliated Corporation that is controlled by E-Debit’s vice President.
   $ 12,582     $ 16,436  
An affiliated Corporation that is controlled by E-Debit’s director.
   $ 103,647     $ 148,929  
An affiliated Corporation that is controlled by E-Debit’s director.
   $ 282     $ 301  
An officer
   $ 1,176     $ 1,046  
Total  
   $ 139,683     $ 196,261  

The residual and interchange paid to related parties are in accordance with the contracts with their distributorship.  The above payments are reflected in the accompanying consolidated statements of operations as residual and interchange costs.

 
F-21
 
Indebtedness to related parties:

The Corporation expensed $104,566 ($103,635 CDN) during 2012 and $103,676 ($103,635 CDN) during 2011 for consulting and management services to an affiliated Corporation that is controlled by the Corporation’s president.  This expense is reflected in the accompanying consolidated Statements of Operations as a Consulting fees.

In February 2011, the Corporation and its subsidiary, Westsphere Systems Inc., jointly signed the General Security Agreement (GSA) for the current debts owed to related parties and shareholders.  The Corporation has requested that the related parties and shareholders individually or collectively advance loans up to one million five hundred thousand ($1,500,000) dollars in Canadian Funds to the Corporation.  The loans are due “On Demand” with initial thirty-six months (36) terms which can be renewed from the date initial funds were advanced.  The interest rate is Eight (8%) percent per year and is payable quarterly.  Under the GSA, these debts are collateralized by the Corporation’s Accounts Receivables, Inventory, Equipment, Intangibles, Leasehold, Real and Immovable Property, and Proceeds.

In December 2011, the Corporation and its subsidiaries jointly and severally, signed a General Security Agreement (GSA) as well as loan agreements related to the loan from an investor for $200,000.  As a result the aforementioned GSA dated February 2011 was cancelled in order that this new loan and GSA could be filed in priority to other loans advance to the Corporation by related parties.

Upon completion of the first party claim related to the December loan and GSA the Corporation and its subsidiaries jointly and severally signed a GSA for the current debts owed to related parties and shareholders.  The Corporation has requested that the related parties and shareholders individually or collectively advance loans up to one million seven hundred and fifty thousand ($1,750,000) dollars in Canadian Funds to the Corporation.  The loans are due “On Demand” with initial thirty-six months (36) terms which can be renewed from the date initial funds were advanced.  The interest rate is Eight (8%) percent per year and is payable quarterly.  Under the GSA, these debts are collateralized by the Corporation’s Accounts Receivables, Inventory, Equipment, Intangibles, Leasehold, Real and Immovable Property, and Proceeds.

The total amount owed to relate parties (consist of indebtedness to related parties and shareholder loans) as of December 31, 2012 and 2011 are $1,810,342 and $1,366,453 respectively.  The remaining credit available to be drawn against related to this GSA and Line of Credit as of December 31, 2012 and 2011 are $0 and $383,547 respectively.
 
The following table summarizes the Corporation’s indebtedness to related parties’ transactions as of December 31, 2012 and 2011:
 
Payable to:
  
December 31, 2012
    
December 31, 2011
  
Terms/Maturities
  
Interest Rate
A loan advanced from E-Debit’s President for working capital.
   $ 95,674     $ 65,542  
Demand loans
  
8% per annum
A loan advanced from an affiliated Corporation that is controlled by E-Debit’s President for working capital.
      867,701        740,250  
Demand loans
  
8% per annum
A loan advanced from E-Debit’s vice President for working capital.
      8,521        7,349  
Demand loans
  
8% per annum
A loan advanced from E-Debit’s officers for working capital.
      6,421        32,323  
Demand loans
  
8% per annum
A loan advanced from E-Debit’s directors for working capital.
      89,353        71,282  
Demand loans
  
8% per annum
A loan advanced from E-Debit’s director for working capital.
      208,926        108,219  
Demand loans
  
No interest
Officers’ and Directors’ bonuses payable carried forward from year 2002
      33,611        32,745  
Demand loans
  
No interest
A loan advanced from an affiliated Corporation that is controlled by E-Debit’s President for working capital.
      207,394        23,549  
Demand loans
  
No interest
Total  
   $ 1,517,601     $ 1,081,259        

 
F-22
 
The indebtedness to related parties as of December 31, 2012 consists of loans that are payable on demand by the related parties.  The interest rate is Eight (8%) percent per year and is payable quarterly.  There is no interest attached to a loan advanced from E-Debit’s director of $208,926, the Officers’ and Directors’ bonuses payable carried forward from year 2002 of $33,611, and the loan advanced from an affiliated Corporation that is controlled by E-Debit’s President for working capital of $207,394 at December 31, 2012.  The above obligations are reflected in the accompanying consolidated balance sheet as indebtedness to related parties.

The indebtedness to related parties as of December 31, 2011 consists of loans that are payable on demand by the related parties.  The interest rate is Eight (8%) percent per year and is payable quarterly.  There is no interest attached to a loan advanced from E-Debit’s director of $108,219, the Officers’ and Directors’ bonuses payable carried forward from year 2002 of $32,745, and the loan advanced of $23,549 from an affiliated Corporation that is controlled by E-Debit’s President.  The above obligations are reflected in the accompanying consolidated balance sheet as indebtedness to related parties.

Note 11 – Shareholder loans

In February 2011, the Corporation and its subsidiary, Westsphere Systems Inc., jointly signed the General Security Agreement (GSA) for the current debts owed to related parties and shareholders.  The Corporation has requested that the related parties and shareholders individually or collectively advance loans up to one million five hundred thousand ($1,500,000) dollars in Canadian Funds to the Corporation.  The loans are due “On Demand” with initial thirty-six months (36) terms which can be renewed from the date initial funds were advanced.  The interest rate is Eight (8%) percent per year and is payable quarterly.  Under the GSA, these debts are collateralized by the Corporation’s Accounts Receivables, Inventory, Equipment, Intangibles, Leasehold, Real and Immovable Property, and Proceeds.

In December 2011, the Corporation and its subsidiaries jointly and severally, signed a General Security Agreement (GSA) as well as loan agreements related to the loan from an investor for $200,000.  As a result the aforementioned GSA dated February 2011 was cancelled in order that this new loan and GSA could be filed in priority to other loans advance to the Corporation by related parties.

Upon completion of the first party claim related to the December loan and GSA the Corporation and its subsidiaries jointly and severally signed a GSA for the current debts owed to related parties and shareholders.  The Corporation has requested that the related parties and shareholders individually or collectively advance loans up to one million seven hundred and fifty thousand ($1,750,000) dollars in Canadian Funds to the Corporation.  The loans are due “On Demand” with initial thirty-six months (36) terms which can be renewed from the date initial funds were advanced.  The interest rate is Eight (8%) percent per year and is payable quarterly.  Under the GSA, these debts are collateralized by the Corporation’s Accounts Receivables, Inventory, Equipment, Intangibles, Leasehold, Real and Immovable Property, and Proceeds.

The following table summarizes the Corporation’s shareholder loans transactions as of December 31, 2012 and 2011:

Payable to:
  
December 31, 2012
    
December 31, 2011
  
Terms/Maturities
Interest Rate
A loan advanced from E-Debit’s vice President for working capital.
      55,280        53,854  
Demand loans
  8% per annum
A loan advanced from E-Debit’s directors for working capital.
      142,481        138,808  
Demand loans
  8% per annum
A loan advanced from E-Debit’s vice President for working capital.
      44,726        43,573  
Demand loans
12% per annum
A loan advanced from E-Debit’s shareholder for working capital.
      50,254        48,959  
Demand loans
  9% per annum
Total  
   $ 292,741     $ 285,194    
 

 
F-23
E-Debit’s shareholder loans as of December 31, 2012 are related to cash advanced from E-Debit’s vice president total $55,280 and the directors total $142,481 have an interest rate of 8% per annum calculated and paid quarterly with no specific terms of repayment.  The remaining balance of shareholder loans totaling $94,980 consist of a loan advance from E-Debit’s vice president totaling $44,726 has an interest rate of 12% per annum with no specific terms of repayment, and a loan advance from a shareholder of $50,254 has an interest rate of 9% per annum with no specific terms of repayment.  The above obligations are reflected in the accompanying consolidated balance sheet as shareholder loans.

E-Debit’s shareholder loans as of December 31, 2011 are related to cash advances from E-Debit’s vice president total $53,854, and advances from the directors total $138,808, and have an interest rate of 8% per annum calculated and paid quarterly with no specific terms of repayment.  The remaining balance of shareholder loans totaling $92,532 consist of a loan advance from E-Debit’s vice president of $43,573 with an interest rate of 12% per annum and no specific terms of repayment, and a loan advance from a shareholder of $48,959 with an interest rate of 9% per annum and no specific terms of repayment.  The above obligations are reflected in the accompanying consolidated balance sheet as shareholder loans.

Note 12 – Other income

On April 30, 2012 the Corporation concluded the sale of a portion of the Corporation’s eastern Canada ATMs site location contracts to an investor for a total of $263,418 ($266,000 CDN).  This sale transaction is included in the accompanying Consolidated Statement of Operations as Gain on sale.

On October 25, 2012 the Corporation concluded the sale of a portion of the Corporation’s Western Canada ATMs site location contracts to an investor for a total of $184,643 ($183,000 CDN).  This sale transaction is included in the accompanying Consolidated Statement of Operations as Gain on sale.

On December 5, 2012 the Corporation concluded the sale of a portion of the Corporation’s eastern Canada ATMs site location contracts to an investor for a total of $353,143 ($350,000 CDN).  This sale transaction is included in the accompanying Consolidated Statement of Operations as Gain on sale.

Note 13 – Subsequent Events

In December 2012 the Corporation entered into an agreement to sell the remainder ATMs site location contracts to an investor for an amount to be determined.  The Corporation expects such transactions to be completed by the end of the second quarter 2013.

Note 14 – Going Concern

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Corporation as a going concern.  The Corporation has recurring net losses from operations, and had a working capital deficit and a stockholders’ deficit at December 31, 2012 and 2011.  These conditions raise substantial doubt as to the Corporation's ability to continue as a going concern.  These financial statements do not include any adjustments that might result from the outcome of this uncertainty.  These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might be necessary should the Corporation be unable to continue as a going concern.

Management recognizes that the Corporation must generate additional resources to enable it to continue operations.  Management intends to raise additional funds through debt financing and equity financing or through other means that it deems necessary, with a view to moving forward and sustaining a prolonged growth in its strategy phases. However, no assurance can be given that the Corporation will be successful in raising additional capital.  Furthermore, management is in the process of negotiations with a third party investor to potentially sell part or all of the Corporation’s ATM estate.  In addition, there is no demand for payment on the accounts payable to related parties of $1,517,601 and shareholder loans of $292,741 as these liabilities are owed to internal officers and directors.   Further, even if the Corporation raises additional capital, there can be no assurance that the Corporation will achieve profitability or positive cash flow. If management is unable to raise additional capital and expected significant revenues do not result in positive cash flow, the Corporation will not be able to meet its obligations and may have to cease operations.
 

 
 
F-24
 
ITEM  9
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
 
None.
 
ITEM 9A            CONTROLS AND PROCEDURES.
 
Disclosure Controls and Procedures
 
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s (“SEC”) rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Internal controls are procedures that are designed with the objective of providing reasonable assurance that (1) our transactions are properly authorized, recorded and reported; and (2) our assets are safeguarded against unauthorized or improper use, to permit the preparation of our consolidated financial statements in conformity with United States generally accepted accounting principles.
 
Evaluation of Disclosure Controls and Procedures
 
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e) and 15d-15(e). Based upon the foregoing, our Chief Executive Officer and our Chief Financial Officer concluded that (i) there continue to be material weaknesses in the Corporation’s internal controls over financial reporting, that the weaknesses constitute a “deficiency” and that this deficiency could result in misstatements of the foregoing accounts and disclosures that could result in a material misstatement to the financial statements for the period covered by this report that would not be detected, and (ii) accordingly, our disclosure controls and procedures were not effective as of December 31, 2012.
 
Management’s Report on Internal Control over Financial Reporting
 
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting refers to a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and effected by our Board, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in connection with generally accepted accounting principles, including those policies and procedures that:
 
 
-
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
     
 
-
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
     
 
-
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements.
 
Because of its inherent limitations, internal control over financial reporting cannot provide absolute assurance of the prevention or detection of misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
In connection with the preparation of this Annual Report on Form 10-K for the year ended December 31, 2012, management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our internal controls over financial reporting, pursuant to Rule 13a-15 under the Exchange Act. Our Chief Executive Officer and Chief Financial Officer have concluded that the design and operation of our internal controls and procedures are not effective as of December 31, 2012 due to material weaknesses in the system of internal control.
 
 
28
 
Specifically, management identified the following material weaknesses:
 
(1) We have not properly segregated duties as one individual initiates, authorizes, and completes all transactions. We have not implemented measures that would prevent the individual from overriding the internal control system. We do not believe that this control deficiency has resulted in deficient financial reporting because the Chief Financial Officer is aware of his responsibilities under the SEC's reporting requirements and personally certifies the financial reports; and
 
 (2) Certain internal controls were not fully operating and effective in a manner to effectively support the requirements of the financial reporting and period-end close process. Principally, this related to the controls and procedures surrounding the consistent completion, review and approval of key balance sheet account analyses and reconciliations. Material errors were corrected in the preparation of the financial statements for the year ended December 31, 2011. It is reasonably possible that, if not remediated, these control deficiencies could result in a material misstatement of the Corporation’s financial statements in a future annual or interim period.
 
Accordingly, while we have identified certain material weaknesses in our system of internal control over financial reporting, we believe that we have taken reasonable steps to ascertain that the financial information contained in this Annual Report is in accordance with generally accepted accounting principles. Management has determined that current resources would be appropriately applied elsewhere and when resources permit, they will alleviate material weaknesses through various steps.

Changes in Internal Controls over Financial Reporting
 
There have been no changes in our internal controls over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.
 
Inherent Limitations on Effectiveness of Controls
 
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. This is because a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Corporation have been detected.
 
 
 
29
 
PART III
 
 
ITEM 10
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
 
(a)              Our Directors and Officers and Our Subsidiaries
 
1.  
Our Management

The following table furnishes the information concerning the members of our Board of Directors and Officers as of March 31, 2013. Our Directors are elected every year and serve until their successors are elected and qualified:

Name
Age
Title
Term of Service
Douglas N. Mac Donald
64
Director, President, CEO
07/98 to present
Robert L. Robins
71
Director/V.P./Sec. Treasurer
07/98 to present
Dr. Roy Queen
70
Director
12/98 to present
Kim Law
45
V.P./CFO
Director
05/00 to present
08/02 to present
Bernd Reuscher
69
Director
04/02 to present
Jack (John) Thomson
83
Director
11/04 to present
Sonja Dreyer
61
Vice-President
05/00 to present
 
Mr. Douglas N. Mac Donald – Chief Executive Officer, President and Director
 
Mr. Mac Donald is one of the original founders of Vencash Capital. In March 1995, Mr. Mac Donald retired from the Royal Canadian Mounted Police after twenty-five (25) years of service. In April 1995, Mr. Mac Donald formed the Mac Donald Gaming Specialists Inc. and Mac Donald Venture Corporation. Since 1998, Mr. Mac Donald has devoted his time to our development and the development of our subsidiary companies. Mr. Mac Donald is presently both our and Vencash Capital’s President, Chief Executive Officer (“CEO”) and is member of the Board of Directors.
 
Mr. Robert L. Robins – Vice President, Secretary Treasurer and Director
 
Mr. Robins retired as a member of the Calgary Police Service in 1991 after serving in the Homicide and Criminal Intelligence Units. Prior to his employment with the Police Service, Mr. Robins was a member of the Canadian Armed Forces serving with U.N. Peace Keeping in the Middle East and NATO in Europe. After retiring from the Police Service, Mr. Robins was employed by Alberta Family & Social Services Fraud Investigation. Mr. Robins has a total of thirty-eight (38) years of experience in various levels of government, including federal, provincial and municipal. Because of his employment experience, Mr. Robins acts as our Security Officer. Mr. Robins also serves as the Secretary, Treasurer, and Director of Vencash Capital.
 
Dr. Roy Queen, B.A., D.M.D., M.S.C., M.R.C.D. – Director
 
Dr. Roy Queen graduated with a Doctor of Medical Dentistry (D.M.D.) and a Master's Degree in Biological Science (M.S.C.) from the University of Manitoba. He has established a successful practice in Clinical Orthodontics in Kamloops, British Columbia and became a Fellow of the Royal College of Dentistry (M.R.C.D.) Dr. Queen also acts as an officer and director of several publicly traded companies.
 
Bernd Reuscher – Director
 
On April 30, 2002, Mr. Reuscher joined our Board of Directors.  Mr. Reuscher was employed for twenty (20) years by Siemans AG, one of the largest German multi-national companies. During his employment with Siemans AG, Mr. Reuscher held several senior executive positions in Europe, South America and Southeast Asia. Since 1994, Mr. Reuscher has been involved in the ownership and management of several private Canadian corporations in the areas of fast food franchising, fast food processing, land development, design and construction of high-end apartment buildings, corporate registries services and research and design of environmental products. Mr. Reuscher graduated in 1973 with an Engineering Degree in Telecommunications in Hamburg, Germany.
 
 
 
30
 
Mr. Kim S. Law – Chief Financial Officer, Vice President of Finance and Director
 
Mr. Law has acted as our Chief Financial Officer, Vice President of Finance and Director since May, 2000. Mr. Law has been instrumental in establishing our financial controls and those of our subsidiary companies. From July 1999 to April 2000, Mr. Law was the Vice President of Finance of Kan-Can Resorts Ltd., a property development corporation. In the nine (9) years prior, Mr. Law was a controller in the hospitality and resort industry.  Mr. Law graduated in 2007 with a Bachelor of Applied Business Administration – Accounting & Information Technology Major and a Certified General Accountant designation in Calgary, Alberta, Canada.
 
Mr. Jack (John) Thomson – Director
 
Mr. Thomson was appointed to our Board of Directors on October 23, 2004.  Mr. Thomson served in the Canadian military from 1943 to 1978 and retired with a rank of Colonel.  From 1978 to 1983, he was Vice-President and co-owner of the Seattle based automobile dealership, Auburn Lincoln Mercury Inc.  During this same period, Mr. Thomson was President and CEO of Auburn Import Export as well as Auburn Electronics.  In 1983, Mr. Thomson returned to Canada and became the CEO and Chief Operating Officer of International Tempest Corporation, a Corporation which provides electronic security sensing devices. From 1986 to 1990, Mr. Thomson acted as an Executive Director of the Canadian Red Cross Society in Kingston and District Branch.
 
Presently, Mr. Thomson is the President, CEO and sole shareholder of Cedar Island Sales and Service Ltd., an electronic gaming and lottery corporation and is an active member of the Board of Directors of the "Break Open Ticket Program Management Alliance".  He is currently the Chairman of the "Ethics and Education" committee.  From 1989 to 1995, Mr. Thomson served as Vice-Chairman of the Board of Directors of the Canadian Forces "Communication Museum" and later served as its Chairman and CEO. From 1994 to 1986, Mr. Thomson also served on the Board of Directors of the Canadian Red Cross Kingston Ontario Division.
 
Ms. Sonja Dreyer – Vice President of Administration
 
Ms. Dreyer acts as the Executive Assistant to our Board of Directors. Ms. Dreyer has held this position since May 2000.   E-Debit calls upon Ms. Dreyer’s considerable administrative background along with her commercial marketing, client service and customer relations experience in order to coordinate the Administration and Management of E-Debit and its subsidiary companies.

Ms. Sonja Dreyer- Vice President- Westsphere Systems Inc.  (WSI)

This position includes overseeing all management and administration of the Base 24-ACI processing Switch.
Westsphere Systems Inc, controls the switching Process of the ATM’s

Ms. Dreyer – Vice President and COO- Vencash Payments Solutions Inc. (VPSI)

Mr. Mac Donald assists in the day to day operations of the ATM business.
 
1.  
Management of Vencash Capital (a wholly owned subsidiary) Changed to Vencash Payments Solutions Inc.
 
 
Name
Age
Title
Term of Service
Douglas N. Mac Donald
64
Director/CEO/
07/98 to present
Robert L. Robins
71
Director//Secretary/Treasurer
07/98 to present
Bernd Reuscher
69
Director
04/02 to present
Dr. Roy Queen
70
Director
12/98 to present
Kim Law
45
Director/CFO
08/02 to present
Mr. Jack (John) Thomson
83
Director
11/04 to present
Sonja Dreyer
61
Vice President & COO
07/09 to present
 
For information on Douglas N. Mac Donald, Robert L. Robins, Bernd Reuscher, Kim Law, Dr. Roy Queen, and Jack Thomson see Our Management" see above.
 
2.  
Management of Westsphere Capital Group Ltd. (a wholly owned subsidiary)

Name
Age
Title
Term of Service
Douglas N. Mac Donald
64
 Director/CEO/President
 07/05 to Present
Robert L. Robins
71
Director
07/05 to Present
Bernd Reuscher
69
Director
07/05 to Present
Dr. Roy Queen
70
Director
07/05 to Present
Kim Law
45
Director, CFO
07/05 to Present
Mr. Jack (John) Thomson
83
Director
07/05 to Present
Ms. Sonja Dreyer
61
Vice President
07/05 to present
 
For information on Douglas N. Mac Donald, Robert L. Robins, Bernd Reuscher, Kim Law, Dr. Roy Queen, and Jack Thomson see "Our Management” above.
 
 
31
 
3.  
Management of E-Debit International Inc. (a wholly owned subsidiary)

Name
Age
Title
Term of Service
Douglas N. Mac Donald
64
Director/CEO/President
 03/00 to Present
Robert L. Robins
71
Director
03/00 to Present
Bernd Reuscher
69
Director
03/00 to Present
Dr. Roy Queen
70
Director
03/00 to Present
Kim Law
45
Director/CFO
03/00 to Present
Mr. Jack (John) Thomson
83
Director
03/00 to Present
Ms. Sonja Dreyer
61
Vice President
06/06 to present
 
For information on Douglas N. Mac Donald, Robert L. Robins, Bernd Reuscher, Kim Law, Dr. Roy Queen, and Jack Thomson see "Our Management" above.
 
4.  
Management of Westsphere Systems Inc. (a wholly owned subsidiary)

Name
Age
Title
Term of Service
Douglas N. Mac Donald
64
Director, CEO/President
10/01to present
Robert L. Robins
71
Director
10/01to present
Dr. Roy Queen
69
Director
10/01 to present
Bernd Reuscher
70
Director
10/01 to present
Kim Law
45
Director/CFO
10/01 to present
Mr. Jack (John) Thomson
83
Director
11/04 to present
Ms. Sonja Dreyer
61
VP/Chief Operating Officer
06/06 to present
 
For information on Douglas N. Mac Donald, Robert L. Robins, Bernd Reuscher, Kim Law, Dr. Roy Queen, Jack Thomson, and Sonja Dreyer see "Our Management" above.
 
The term of office for each director is one (1) year, or until his/her successor is elected at our annual meeting and qualified.  Each of our officers serves at the pleasure of the Board of Directors.
 
(b)              Section 16(a) Beneficial Ownership Reporting Compliance
 
The following represents each person who did not file on a timely basis, reports required by Section 16(a) of the Exchange Act during the most recent fiscal year or prior fiscal years:
 
Name
Reporting Person
Form 3/# of transactions
Form 4/# of transactions
Form5/# of transactions
Douglas Mac Donald
President, Chief Executive Officer and a member of the B.O.D.
0
0
N/A
Robert Robins
Vice President, Sec., Treasurer and member of the B.O.D.
0
0
N/A
Sonja Dreyer
Vice President of Administration and Executive Assistant to the B.O.D.
0
2
N/A
Kim Law
Vice President of Finance, Chief Financial Officer and a member of the B.O.D.
0
2
N/A
Bernd Reuscher
Member of Board of Directors
0
0
N/A
Dr. Roy Queen
Member of Board of Directors
0
0
N/A
Mr. Jack (John) Thomson
Member of Board of Directors
0
1
N/A

 
32
 
Code of Ethics

As of the date of the filing of this report, we have not adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions.  Since 2005 we have reviewed our requirements and circumstances related to the preparation of such a code of ethics for presentment to our Board of Directors.  Upon adoption of a code of ethics, we will file a copy of it with the SEC as an exhibit to our next periodic report after its adoption and post it on our website.

Audit Committee
 
Our Board of Directors does not currently have an audit committee.
 
ITEM 11       EXECUTIVE COMPENSATION
 
Cash Compensation
 
Compensation paid by us for all services provided during the fiscal year ended December 31, 2012, (1) to each of our five (5) most highly compensated executive officers whose cash compensation exceeded $100,000 and (2) to all officers as a group is set forth below under directors.
 
Summary Compensation Table of Executives
 
Name and Principal Position
Year
  
Salary
    
Stock Options
    
Stock Options Value
  
Douglas N. Mac Donald*
2008
   $ 84,293       —       —  
 
2009
   $ 96,309       —       —  
 
2010
   $ 123,215 **     366,666     $ 73,333  
 
2011
   $ 123,013       —       —  
 
2012
   $ 121,683       —       —  
                           
 
*Mr. Mac Donald receives his salary through his corporation, Mac Donald and Associates Gaming Specialists Inc. total $103,676 ($103,635 CDN) and $18,007 ($18,000 CDN) under Douglas Mac Donald.
 
Name and Principal Position
Year
  
Salary
    
Stock Options
    
Stock Options Value
  
Kim Law*
2008
   $ 97,873       —       —  
 
2009
   $ 99,513       —       —  
 
2010
   $ 105,756       366,667     $ 73,333  
 
2011
   $ 105,582       —       —  
 
2012
   $ 104,442       —       —  
                           
 
*Mr. Law receives his salary through his corporation, 1100307 Alberta Ltd. total $20,408 ($20,400 CDN) and $84,034 ($84,000 CDN) under Kim Law.
 
**** USD to CAD currency exchange rate year 2012 average (365 days): 0.9996.
 
 
33
 
Compensation Pursuant to Management Contracts
 
Douglas Mac Donald
 
Effective March 1, 2010, Mac Donald & Associates Gaming Specialists Inc. receives $103,635 CDN per annum payable monthly. The management contract provides for an automatic renewal every six (6) months subject only to any defaults by Mr. Mac Donald of the terms of the contract. The contract also provides for a six (6) month severance package. In addition, effective April 1, 2003, Mr. Mac Donald receives $18,000 CDN per annum payable monthly. The contract allows for an automatic renewal every six (6) months subject only to any defaults by Mr. Mac Donald of the terms of the contract. The contract also provides for a six (6) month severance package.
 
Kim Law
 
Effective March 1, 2007, 1100307Alberta Ltd. receives $20,400 CDN per annum payable monthly. The management contract provides for an automatic renewal every six (6) months subject only to any defaults by Mr. Law of the terms of the contract. The contract also provides for a six (6) month severance package. In addition, Mr. Law receives $84,000 CDN per annum payable semi-monthly. The contract allows for an automatic renewal every six (6) months subject only to any defaults by Mr. Law of the terms of the contract. The contract also provides for a six (6) month severance package.
 
Option Grants
 
The following table sets forth information regarding stock option grants to our officers and directors as of March 31, 2013:
 
Options granted in year 2009
 
Name
  
Number of Securities Underlying Options Granted (#)
    
% of Total Options Granted
    
Exercise Base Price ($/Share)
  
Expiration Date
Doug Mac Donald
     10,075,000       24.19 %   $ 0.014  
Jan 26, 2015
Robert Robins
     3,000,000       7.20 %   $ 0.014  
Jan 26, 2015
Sonja Dreyer
     4,750,000       11.40 %   $ 0.014  
Jan 26, 2015
Kim Law
     3,625,000       8.70 %   $ 0.014  
Jan 26, 2015
Jack Thomson
     1,325,000       3.18 %   $ 0.014  
Jan 26, 2015
Bernd Reuscher
     1,325,000       3.18 %   $ 0.014  
Jan 26, 2015
Dr. Roy Queen
     1,325,000       3.18 %   $ 0.014  
Jan 26, 2015
 
Options granted in year 2010
 
Name
  
Number of Securities Underlying Options Granted (#)
    
% of Total Options Granted
    
Exercise Base Price ($/Share)
  
Expiration Date
Doug Mac Donald
     366,666       0.88 %   $ 0.20  
August 14, 2015
Robert Robins
     366,667       0.88 %   $ 0.20  
August 14, 2015
Kim Law
     366,667       0.88 %   $ 0.20  
August 14, 2015
Jack Thomson
     1,100,000       2.64 %   $ 0.20  
August 14, 2015
Bernd Reuscher
     1,100,000       2.64 %   $ 0.20  
August 14, 2015
Dr. Roy Queen
     1,100,000       2.64 %   $ 0.20  
August 14, 2015
 
Option Exercises
 
The following table sets forth details of each exercise of stock options as of December 31, 2012 by any of the named Executive Officers and Directors, and the December 31, 2012 value of unexercised options on an aggregate basis.
 
 
34
 
Aggregated Options Exercised
 
Name
  
Securities Acquired on Exercise (#)
    
Aggregate Value Realized ($)
  
Unexercised Options as of December 31, 2012
Exercisable (2)/Unexercisable
Value of Unexercised in the Money-Options at December 31, 2012
Douglas Mac Donald
  
Nil
    
Nil
  
366,666 (exercise)
0 (unexercisable)
$0.20 (exercise)
$0 (unexercisable)
Robert Robins
     1,785,714     $ 0.014  
1,214,286 (exercise)
   366,667 (exercise)
0 (unexercisable)
$0.014 (exercise)
$0.200 (exercise)
$0 (unexercisable)
Sonja Dreyer
  
Nil
    
Nil
  
1,100,000 (exercise)
0 (unexercisable)
$0.014 (exercise)
$0 (unexercisable)
Kim Law
  
Nil
    
Nil
  
2,500,000 (exercise)
   366,667 (exercise)
0 (unexercisable)
$0.014 (exercise)
$0.200 (exercise)
$0 (unexercisable)
Jack Thomson
  
Nil
    
Nil
  
1,325,000 (exercise)
1,100,000 (exercise)
0 (unexercisable)
$0.014 (exercise)
$0.200 (exercise)
$0 (unexercisable)
Bernd Reuscher
  
Nil
    
Nil
  
1,100,000 (exercise)
0 (unexercisable)
$0.200 (exercise)
$0 (unexercisable)
Dr. Roy Queen
  
Nil
    
Nil
  
1,100,000 (exercise)
0 (unexercisable)
$0.200 (exercise)
$0 (unexercisable)

Compensation of Directors
 
We did not pay any compensation for services provided by the directors during the fiscal year ended December 31, 2012.
 
Termination of Employment and Change of Control Arrangements
 
None.
 
Compensation Discussion and Analysis

The following Compensation Discussion and Analysis (CD&A) provides information on the compensation programs established for our "Named Executive Officers" during our fiscal year ended December 31, 2012. All information provided herein should be read in conjunction with the tables provided below.

Our Board of Directors is responsible for establishing, implementing and monitoring the policies governing compensation for our executives.  Currently our Board does not have a compensation committee.  Our officers are members of our Board of Directors and are able to vote on matters of compensation.  We are not currently under any legal obligation to establish a compensation committee and have elected not to do so at this time.  In the future, we may establish a compensation committee if the Board determines it to be advisable or we are otherwise required to do so by applicable law, rule or regulation. During the year ended December 31, 2011 our Board did not employ any outside consultants to assist in carrying out its responsibilities with respect to executive compensation, although we have access to general executive compensation information regarding both local and national industry compensation practices.  In future periods we may participate in regional and national surveys that benchmark executive compensation by peer group factors such as Corporation size, annual revenues, market capitalization and geographical location.

The executive employment market in general is very competitive due to the number of companies with whom we compete to attract and retain executive and other staff with the requisite skills and experience to carry out our strategy and to maintain compliance with multiple Federal and State regulatory agencies.  Many of these companies have significantly greater economic resources than our own. Our Board has recognized that our compensation packages must be able to attract and retain highly talented individuals that are committed to our goals and objectives, without at this time paying cash salaries that are competitive with some of our peers with greater economic resources.  Our compensation structure is weighted towards equity compensation in the form of options to acquire common stock, which the Board believes motivates and encourages executives to pursue strategic opportunities while managing the risks involved in our current business stage, and aligns compensation incentives with value creation for our shareholders.

 
35
 
Components of Our Executive Compensation Program

Our current executive compensation program is entirely salary based.  In the future we intend to incorporate additional components we believe are necessary in order for the Corporation to provide a competitive compensation package relative to our peers and to provide an appropriate mix between short-term and long-term cash and non-cash compensation. Elements of our future executive compensation are likely to include:

     o    Base Salary
     o    Stock Awards
     o    Other benefits available to all employees
     o    Items specific to our President and Chief Executive Officer per an employment agreement

Base Salary: At present we do not have a salary structure for employees and Executives, and amounts are based on skill set, knowledge and responsibilities.  Base salaries may be established as necessary.
 
Stock Awards:  A portion of compensation paid to our executives will be equity based.  We believe equity compensation helps align the interests of our executives with the interests of our shareholders. In that regard, our executives' compensation is subject to downside risk in the event that our common stock price decreases. In addition, we believe stock awards provide incentives to aid in the retention of key executives.  No stock compensation awards were granted to directors during the year ending December 31, 2012.

Other Benefits: Our Executive Officers and employees receive group benefits plan.
 
ITEM 12     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
 
The following table sets forth information concerning the beneficial ownership of our outstanding common and preferred stock as of March 31, 2013 for: each of our directors and executive officers individually; each person or group that we know owns beneficially more than five percent (5%) of our common stock; and all directors and executive officers as a group.
 
 
Rule 13d-3 under the Securities Exchange Act defines the term, “beneficial ownership”. Under this rule, the term includes shares over which the indicated beneficial owner exercises voting and/or investment power. The rules also deem common stock subject to options currently exercisable or exercisable within sixty (60) days, to be outstanding for purposes of computing the percentage ownership of the person holding the options, but do not deem such stock to be outstanding for purposes of computing the percentage ownership of any other person. The applicable percentage of ownership for each shareholder is based on 320,046,834 shares of common stock and 81,518,410 shares of preferred stock outstanding as of March 31, 2013 together with applicable options for that shareholder. Except as otherwise indicated, we believe the beneficial owners of the common stock listed below, based on information furnished by them, have sole voting and investment power over the number of shares listed opposite their names.
 
Name and Address of Beneficial Owner
Officers and Directors
  
Number of Common Shares of
Beneficial Owner
    
Percentage of Common Shares
Owned
    
Number of Preferred Shares of
Beneficial Owner
    
Percentage of Preferred Shares
Owned
    
Note
  
Douglas N. Mac Donald
St. Albert, Alberta, Canada
(Personal Shares Held
  
 
            24,291,485             (1 )
(Personal Options Held
     366,666                              
Patty Mac Donald
                   2,750,000                
Total
     366,666       0.11 %     27,041,485       33.17 %        
                                         
Robert L. Robins
Calgary, Alberta, Canada
                                     (2 )
(Personal Shares Held)
     1,835,839               1,801,250                  
(Personal Options Held)
     1,580,953                                  
(Robins Nest Holdings)
                     1,900                  
                                         
Total
     3,416,792       1.06 %     1,803,150       2.21 %        
                                         
Dr. Roy L. Queen
Kamloops, B.C., Canada
                                     (3 )
(Personal Shares Held)
     5,148,700               6,055,950                  
(Personal Options Held)
     1,100,000                                  
(Drin Holdings Ltd.)
     52,025                                  
(Transural Trade)
                     574,800                  
                                         
Total
     6,300,725       1.96 %     6,630,750       8.13 %        
                                         
Bernd Reuscher
Edmonton, Alberta, Canada
                                     (4 )
(Personal Shares Held)
     3,825,000               2,479,100                  
(Personal Options Held)
     1,100,000                                  
(989939 Alberta Ltd.)
                     3,293,075                  
(MBR Venture Corp.)
                     7,062,500                  
                                         
Total
     4,925,000       1.53 %     12,834,675       15.74 %        
                                         
Kim Law
Calgary, Alberta, Canada
                                     (5 )
(Personal Shares Held)
     363,615               750,000                  
(Personal Options Held)
     2,866,667                                  
                                         
Total
     3,230,282       1.00 %     750,000       0.92 %        
                                         
Sonja Dreyer
Calgary, Alberta, Canada
                                     (6 )
(Personal Shares Held)
     543,165               15,500                  
(Personal Options Held)
     1,100,000                                  
(1035760 Alberta Ltd,)
                     1,375,050                  
Total
     1,643,165       0.51 %     1,390,550       1.71 %        
                                         
Jack (John) Thomson
Kingston, Ontario
Canada
                                     (7 )
(Personal Shares Held)
     126,877               937,500                  
(Personal Options Held)
     2,425,000                                  
                                         
Total
     2,551,877       0.79 %     937,500       1.15 %        
                                         
Total shares owned by Officers and Directors
     22,434,507       6.98 %     51,388,110       63.04 %        

 
36
 

(1)      Doug Mac Donald        27,041,485 Shares
8,060,000 preferred shares are held in the name of Douglas  Mac Donald; 2,750,000 preferred shares are held in the name of  Mr. Mac Donald’s’ wife Patricia Mac Donald; 3,000,100 preferred shares are held in the name of Mac Donald Venture Corp. of which Mr. Mac Donald  is the sole officer and Director; 3,326,500 preferred shares are held in the name of  797320 Alberta Ltd. of which Mr. Mac Donald is the sole officer and Director;  4,479,410 Preferred shares are held in the name of 723352 Alberta Ltd. of which Mr. Mac Donald is the sole officer and Director, 366,667 of these shares are held in the form of a Directors option, giving Mr. Mac Donald the right to purchase up to  366,667shares at 0.20 per share until August 14,2015, Doug Mac Donald is part owner of 989939 Alberta Ltd. with a share position of 3,293,075 preferred shares. *(50% is owned by Doug Mac Donald and 50% is owned by Bernd Reuscher, 2,132,400 Preferred shares are held in the name of Mac Donald & Associates Gaming Specialists Inc., of which Mr. Mac Donald is the sole officer and Director.

(2)      Bob Robins        5,219,942 Shares
1,900 preferred shares are held in the name of Robins Nest Holdings Inc.; 800,000 preferred shares are held in the name of Bob Robins; 1,835,839 common shares are held in the name of Robert L. Robins, 1,001,250 preferred shares are held in the name of Robert L. Robins, 1,214,286 of these shares are held in the form of stock options giving Mr. Robins the right to purchase up to 1,214,286 shares for $0.014 per share until January 14,366,667 of these shares are held in the form of a Directors option, giving Mr. Robins the right to purchase up to  366,667shares at 0.20 per share until August 14, 2015,

(3)      Dr. Roy Queen          12,931,475 Shares
6,055,950 preferred shares are held in the name of Dr. Queen; 5,148,700 common shares are held in the name of Roy Queen, 52,025 common shares are held in the name of Drin Holdings Ltd., which is solely owned by Dr. Queen and 574,800 preferred shares are held in the name of Transural Inc., which is solely owned by Dr. Queen and 1,100,000 of these shares are held in the form of a Directors option, giving Dr.. Queen the right to purchase up to 1,100,000 shares at 0.20 per share until August 14, 2015.

(4)      Bernd Reuscher         17,759,675 Shares
2,479,100 preferred shares are held in the name of Bernd Reuscher; 3,825,000 common shares in the name of Bernd Reuscher, 7,062,500  preferred shares are held in the name of MBR Venture Corp. of which Mr. Reuscher is the sole officer and Director, Bernd Reuscher is part owner of 989939 Alberta Ltd. with a preferred share position of 3,293,075 shares. *(50% is owned by Bernd Reuscher and 50% is owned by Doug Mac Donald) and 1,100,000 of these shares are held in the form of a Directors option, giving Mr. Reuscher the right to purchase up to 1,100,000 shares at 0.20 per share until August 14, 2015.
 
 
(5)      Kim Law         3,980,282 Shares
363,615 common shares and 750,000 preferred shares are held in the name of Kim Law, and 2,500,000 of these shares are held in the form of stock options giving Mr. Law the right to purchase up to 2,500,000 shares for $0.014 per share until January 26, 2015 and 366,667 of these shares are held in the form of a Directors option, giving Mr. Law the right to purchase up to 366,667 shares at 0.20 per share until August 14, 2015.

(6)      Sonja Dreyer          3,018,215 Shares
543,165 common shares are held in the name of Sonja Dreyer, 1,375,050 preferred shares are in 1035760 Alberta Ltd, a numbered Corporation wholly owned by Ms Dreyer, 15,500 Preferred shares are held in the name of Sonja Dreyer and 1,100,000 of these shares are held in the form of stock options giving Ms. Dreyer the right to purchase up to 1,100,000 shares for $0.014 per share until January 26, 2015.
 
(7)      Jack (John) Thomson             3,489,377 Shares
937,500 preferred shares are held in the name of Jack John Thomson 126,877 common shares are held in the name of Jack Thomson and 1,325,000 of these shares are held in the form of stock options giving Mr. Thomson the right to purchase up to 265,000 shares for $0.014 per share until January 26, 2015 and 1,100,000 of these shares are held in the form of a Directors option, giving Mr. Thomson the right to purchase up to 1,100,000 shares at 0.20 per share until August 14, 2015

 
37
 
ITEM 13      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Real estate leases:

The Corporation’s real estate leases are with an affiliated Corporation that is controlled by the Corporation’s president.

The Corporation leases real estate (office and warehouse space) under non-cancellable operating leases that expire on varying dates through 2014.  The monthly lease payment is $6,025 ($5,971 CDN).

The Corporation leases additional real estate (office and warehouse space) for an “Initial Term” commencing June 1, 2010 on a month to month basis.  The Corporation may renew the Lease on a monthly basis by giving notice to the Landlord.  The monthly lease payment is $$3,128 ($3,100 CDN).
 
 
Minimum future rental payments under non-cancellable operating leases having remaining terms in excess of one year are as follows:

   
Real Estate
  
2013
   $ 73,264  
2014
   $ 12,211  
2015
   $ —  
2016
   $ —  


 
December 31, 2012
December 31, 2011
Rental expense
$96,602
$83,475

 
Residual and interchange costs:
 
The following table summarizes the amounts paid by the Corporation for residual and interchange fees to related parties as of December 31, 2012 and 2011:
 
Payable to:
  
December 31, 2012
    
December 31, 2011
  
Two affiliated companies that are controlled by E-Debit’s President.
   $ 21,996     $ 29,549  
An affiliated Corporation that is controlled by E-Debit’s vice President.
   $ 12,582     $ 16,436  
An affiliated Corporation that is controlled by E-Debit’s director.
   $ 103,647     $ 148,929  
An affiliated Corporation that is controlled by E-Debit’s director.
   $ 282     $ 301  
An officer
   $ 1,176     $ 1,046  
Total  
   $ 139,683     $ 196,261  

The residual and interchange paid to related parties are in accordance with the contracts with their distributorship.  The above payments are reflected in the accompanying consolidated statements of operations as residual and interchange costs.
 
 
38
 
ITEM 14      PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
Audit Fees
 
The aggregate fees billed for each of the last two (2) fiscal years for professional services rendered by Cordovano and Honeck LLP for the review of financial statements included in our Form 10-Q quarterly reports and services normally provided by Cordovano and Honeck LLP, in connection with statutory and regulatory filings or engagements were $11,313 for the fiscal year ended 2011 and $0 for the fiscal year ended 2012.
 
Effective August 23, 2011, Westsphere appointed Schumacher & Associates Inc. as our new auditor. The Corporation’s previous independent accountant, Cordovano & Honeck was dismissed.  Cordovano & Honeck’s consent letter was filed in the 8-K to Securities and Exchange Commission on August 29, 2011.  The aggregate fees billed during each of the last two (2) years for professional services rendered by Schumacher & Associates Inc. for the audit of our annual financial statements and review of financial statements included in our Form 10-Q quarterly reports and services normally provided by Schumacher & Associates Inc., in connection with statutory and regulatory filings or engagements were $15,650 during the fiscal year ended 2011 and $53,300 during the fiscal year ended 2012.
 
Audit-Related Fees
 
There were no fees for other audit related services for the fiscal years ended 2011and 2012.
 
Tax Fees
 
There were no fees for tax compliance, tax advice, and tax planning for the fiscal years ended 2011 and 2012.
 
All Other Fees
 
There were no other aggregate fees billed in either of the last two fiscal years for products and services provided by Schumacher & Associates Inc. other than the services reported above.
 
ITEM 15   EXHIBITS
 
 
 
 


Exhibit Number
Description
Reference
3.i.1
Articles of Incorporation
(1)
3.i.2
Articles of Amendment  dated May 3, 1999
(1)
3.i.3
Articles of Amendment dated March 29, 2010
(2)
3(ii)
By-Laws
(1)
21
Subsidiaries of the Registrant
*
31.1
Section 302 Certification - Chief Executive Officer
*
31.2
Section 302 Certification - Chief Financial Officer
*
32.1
Section 1350 Certification - Chief Executive Officer
*
32.2
Section 1350 Certification - Chief Financial Officer
*
 101 Interactive Data Files *

(1)
Incorporated by Reference from Form 10-SB filed December 1, 2000
(2)
Incorporated by Reference from Form 8-K filed on April 4, 2010
*
Filed Herewith
 

 
39
 
 
 
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.
 
 
E-Debit Global Corporation
 
 
        In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
 
By:   /s/ Douglas N. Mac Donald
Name:   Douglas N. Mac Donald
Title:   President
Date:   April 15, 2013
 
 
By:   /s/ Kim Law
Name:   Kim Law Title:   Principal Financial and Accounting Officer
Date:   April 15, 2013
 
 
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated, who constitute the entire board of directors:
 
 
By:   /s/ Douglas N. Mac Donald
Name:   Douglas N. Mac Donald
Title:   President and Board of Directors
Date:   April 15, 2013
 
 
By:   /s/ Robert L. Robins
Name:   Robert L. Robins
Title:   Board of Directors
Date:   April 15, 2013
 
 
By:   /s/ Bernd Reuscher
Name:   Bernd Reuscher
Title:   Board of Directors
Date:   April 15, 2013
 
 
By:   /s/ Roy L. Queen
Name:   Roy L. Queen
Title:   Board of Directors
Date:   April 15, 2013
 
 
By:   /s/ Kim Law
Name:   Kim Law
Title:   Board of Directors
Date:   April 15, 2013
 
 
By:   /s/ John (Jack) Thomson
Name:   Jack Thomson
Title:   Board of Directors
Date:   April 15, 2013
 
 
 
40