UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark
One)
☒ ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended June 30, 2015
☐ TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from ___________to ___________
Commission
File No. 333-169802
Engage
Mobility, Inc.
(Name
of small business issuer in its charter)
Florida |
|
45-4632256 |
(State
or other jurisdiction of |
|
(IRS
Employer |
incorporation
or organization) |
|
Identification No.) |
|
|
|
15C,
China Merchants Tower
No.
1166 Wanghai Road, Nansha District
Shenzhen,
Guangdong, China |
|
518067 |
(Address
of principal executive offices) |
|
(Zip
Code) |
+86-755-86575200
(Registrant’s
telephone number, including area code)
Securities
registered under Section 12(b) of the Exchange Act:
Title
of each class registered: |
|
Name
of each exchange on which registered: |
None |
|
None |
Securities
registered under Section 12(g) of the Exchange Act:
Common
Stock, no par value
(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 ☐ No ☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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
reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate
by check mark 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 Part III of this Form 10-K or any amendment to this Form 10-K. ☒
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer |
☐ |
Accelerated
filer |
☐ |
Non-accelerated
filer |
☐ |
Smaller reporting
company |
☒ |
(Do not check if a smaller reporting company) |
|
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐ No ☒
As
of September 29, 2015, the registrant had 23,082,567 shares of its common stock outstanding.
TABLE OF CONTENTS
|
|
PAGE |
|
PART
I |
|
Item
1. |
Business |
3 |
Item
1A. |
Risk
Factors |
4 |
Item
1B. |
Unresolved
Staff Comments |
4 |
Item
2. |
Properties |
4 |
Item
3. |
Legal
Proceedings |
4 |
Item
4. |
Mine
Safety Disclosures |
5 |
|
|
|
|
PART
II |
|
Item
5. |
Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
5 |
Item
6. |
Selected
Financial Data |
7 |
Item
7. |
Management’s
Discussion and Analysis of Financial Condition and Results of Operation |
7 |
Item
7A. |
Quantitative
and Qualitative Disclosures About Market Risk |
11 |
Item
8. |
Financial
Statements and Supplementary Data |
F-1 |
Item
9. |
Changes
in and Disagreements with Accountants on Accounting and Financial Disclosure |
12 |
Item
9A. |
Controls
and Procedures |
12 |
Item
9B. |
Other
Information |
|
|
|
|
|
PART
III |
|
Item
10. |
Directors,
Executive Officers and Corporate Governance |
13 |
Item
11. |
Executive
Compensation |
14 |
Item
12. |
Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
16 |
Item
13. |
Certain
Relationships and Related Transactions, and Director Independence |
17 |
Item
14. |
Principal
Accounting Fees and Services |
17 |
|
|
|
|
PART
IV |
|
Item
15. |
Exhibits,
Financial Statement Schedules |
18 |
|
|
|
SIGNATURES |
19 |
CAUTIONARY NOTE
FORWARD-LOOKING STATEMENTS
This
Annual Report on Form 10-K (this “Report”) contains “forward-looking statements” within the meaning of
the Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical
facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,”
“believe,” “estimate,” “intend,” “could,” “should,” “would,”
“may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,”
“project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions.
These forward-looking statements are found at various places throughout this Report and include information concerning possible
or assumed future results of our operations; business strategies; future cash flows; financing plans; plans and objectives of
management; any other statements regarding future operations, future cash needs, business plans and future financial results,
and any other statements that are not historical facts.
From
time to time, forward-looking statements also are included in our other periodic reports on Forms 10-Q and 8-K, in our press releases,
in our presentations, on our website and in other materials released to the public. Any or all of the forward-looking
statements included in this Report and in any other reports or public statements made by us are not guarantees of future performance
and may turn out to be inaccurate. These forward-looking statements represent our intentions, plans, expectations, assumptions
and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are
outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking
statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might
not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral
forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our
behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.
Except
to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result
of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or
otherwise.
PART
I
Item
1. Business
We
were incorporated, under the name MarketKast, Incorporated, under the laws of the State of Florida on December 28, 2011. On March
22, 2013, we filed Articles of Amendment to our Articles of Incorporation (the “Amendment”) to change our name from
“MarketKast, Incorporated” to “Engage Mobility, Inc.” The Amendment was effective as of March 22, 2013.
In connection with the name change, our trading symbol was changed from “MRKK” to “ENGA,” effective April
4, 2013.
We
functioned as a provider of mobile marketing systems and solutions for business. We combined relevant technologies, data management
and delivery and proprietary marketing methodology to assist business owners with marketing their products or services.
We
sold to businesses, on monthly subscription or per user basis, our Mobile Engagement System, which included a front end augmented
reality browser to allow their business logos to come to life in video, and a back end mobile CRM that allowed them to interact
with their customers in an ongoing manner in the mobile environment. We offered the Engage Mobility App as a free download to
consumers and allowed the consumer to locate businesses in their area through our platform and receive information, contact the
business, receive coupons or offers or otherwise engage with that brand. Our platform also offered the business full analytics
regarding their customer base and the ability to communicate with their customer base in a contextually relevant manner.
On
February 18, 2014, we entered into a joint venture agreement (“Joint Venture Agreement”, a form of which is filed
herewith as Exhibit 10.4) with Xinhua Ruide (Beijing) Network Technology Co., Ltd. (“Xinhua Ruide”) and Shenzhen Yingjia
Mobile Technology Co., Ltd. (“Shenzhen Yingjia”) to establish a joint venture, Datang Engage (China) Mobile Technology
Co., Ltd. (“Datang Engage”) to develop and launch a Chinese version of our mobile platform. However, the joint venture
has never commenced any operations. We own 30% interest of the joint venture. The Chairman of the joint venture is Mr. Hua Zhang.
Although
the joint venture we established in 2014 has not yet commenced operations, our partners in China had confidence in our business
and technology and hoped to continue the alliance through acquisition of the control of our Company. On April 9, 2015, a Stock
Purchase Agreement (“Stock Purchase Agreement”) was entered into by and among Engage International Technology Co.
Ltd. (“Engage International”), of which Mr. Hua Zhang owns substantially all of the shares, and James S. Byrd, Jr.
(“Byrd”) and Douglas S. Hackett (“Hackett”) (collectively, the “Sellers”), who were the principal
stockholders of Engage Mobility, Inc.. Pursuant to the Stock Purchase Agreement, Engage International acquired from the Sellers
a total of 16,462,505 shares of the Company’s common stock, representing 75.61% of the Company’s issued and outstanding
shares on that date, and a change in control of the Company occurred. Mr. Zhang was appointed as the Company’s Chairman
of the Board and Chief Executive Officer, while the then directors and officers of the Company resigned.
We
do not own any real estate and no real property is included in our financial statements. We leased our corporate office in Kansas
City, Missouri on a three year lease at approximately $2,600 per month. The lease was terminated in May 2015 pursuant to mutual
agreement with the landlord.
Our
Services
We
provided a full menu of mobile and online marketing services for business owners who want to grow or maintain their customer base,
with the focus being on using video content as a marketing platform for driving customer acquisition. The Company was not able
to generate significant revenues and currently does not have significant operation of its mobile and online marketing business.
Since the change of its ownership on April 9, 2015, the Company intends to work together with its China affiliate, under common
control, to further develop the its existing platform and introduce it to the Chinese market. As the platform matures, the Company
plans to reintroduce it into the U.S. and other markets.
Intellectual
Property
Although
we believe that our business methodology is proprietary in terms of how we deliver our service to our client, and how we use deploy
video in a marketing context. It is our policy to enter into confidentiality agreements with any outsourced sales or service providers
so that our proprietary methodology, customer’s lists and business information are contractually protected, and we intend
to enforce any such contractual provisions as the law allows in the event of a breach. We cannot assure you that these contractual
arrangements will prevent third parties from acquiring or using our proprietary business information to compete against us. We
have filed a provisional patent application seeking patent protection for version 2.0 of our Mobile Engagement System.
Item
1A. Risk Factors
We
are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under
this item.
Item
1B. Unresolved Staff Comments
We
are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under
this item.
Item
2. Properties
We
rented our office space at 140 Walnut St, Kansas City, Mo for $2,602.50 per month until May 2015.
Item
3. Legal Proceedings
From
time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business.
However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time
to time that may harm our business. Other than discussed below, we are not aware of any other legal proceedings.
We
were involved in one legal proceeding, a breach of contract lawsuit against IRTH Communications, LLC. On May 24, 2014, we filed
a lawsuit in Orange County, FL (case # 2014-CA-00-2626-O), against IRTH for breach of a contract to provide investor relations
services to us. In that lawsuit we sought return of $110,000 of monies paid to IRTH, and the cancellation of 54,950 shares of
stock issued to IRTH. IRTH subsequently sued us for breach of contract, seeking damages and to have their shares cleared for trading.
On December 10, 2014, both parties entered into a settlement agreement to settle and dismiss the suit. As part of the settlement,
the Company reissued 54,950 shares of common stock to IRTH, which IRTH agreed not sell, hypothecate, pledge or otherwise transfer
any of the stocks until after December 15, 2015.
The
Company is currently not involved in any legal proceedings.
Item
4. Mine Safety Disclosures
Not
applicable.
PART
II
Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market
Information
Our
common stock has been trading on the Over-the-Counter (OTC) Markets under the symbol ENGA since April 4, 2013. Between February
20, 2013 and April 4, 2013 we traded under the symbol MRKK. The OTC Markets is a quotation service that displays real-time quotes,
last-sale prices, and volume information in over-the-counter, or the OTC, equity securities.
Price
range of common stock
The
following table shows, for the periods indicated, the high and low bid prices per share of our common stock as reported by the
OTC Markets quotation service. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions,
and may not represent actual transactions.
| |
June 30, 2015 | | |
June 30, 2014 | |
| |
High | | |
Low | | |
High | | |
Low | |
First Quarter (July 1 – Sept 30) | |
$ | 2.40 | | |
$ | 1.90 | | |
$ | 1.84 | | |
$ | 0.80 | |
Second Quarter (October 1 – December 31) | |
$ | 1.90 | | |
$ | 0.25 | | |
$ | 3.19 | | |
$ | 1.28 | |
Third Quarter (January 1 – March 31) | |
$ | 1.50 | | |
$ | 0.32 | | |
$ | 4.50 | | |
$ | 2.05 | |
Fourth Quarter (April 1 – June 30) | |
$ | 3.38 | | |
$ | 0.50 | | |
$ | 4.00 | | |
$ | 1.30 | |
On
September 25, 2015, the closing bid price of our common stock was $0.33.
Holders
As
of June 30, 2015, we had 447 stockholders of our common stock.
Transfer
Agent and Registrar
ClearTrust,
LLC is currently the transfer agent and registrar for our common stock. Its address is 16540 Pointe Village Dr., Suite 206, Lutz,
FL 33558. Its phone number is (813) 235-4490.
Authorized
Capital Stock
Our
authorized stock consists of 100,000,000 shares of common stock, with no par value. There are currently 23,082,567 shares of common
stock issued and outstanding.
Common
Stock
Each
share of our common stock entitles its holder to one vote in the election of each director and on all other matters voted on generally
by our stockholders, other than any matter that (1) solely relates to the terms of any outstanding series of preferred stock or
the number of shares of that series and (2) does not affect the number of authorized shares of preferred stock or the powers,
privileges and rights pertaining to the common stock. No share of our common stock affords any cumulative voting rights. This
means that the holders of a majority of the voting power of the shares voting for the election of directors can elect all directors
to be elected if they choose to do so.
Holders
of our common stock will be entitled to dividends in such amounts and at such times as our Board of Directors in its discretion
may declare out of funds legally available for the payment of dividends. We currently intend to retain our entire available discretionary
cash flow to finance the growth, development and expansion of our business and do not anticipate paying any cash dividends on
the common stock in the foreseeable future. Any future dividends will be paid at the discretion of our Board of Directors after
taking into account various factors, including:
|
● |
general
business conditions; |
|
|
|
|
● |
industry
practice; |
|
|
|
|
● |
our
financial condition and performance; |
|
|
|
|
● |
our
future prospects; |
|
|
|
|
● |
our
cash needs and capital investment plans; |
|
|
|
|
● |
our
obligations to holders of any preferred stock we may issue; |
|
|
|
|
● |
income
tax consequences; and |
|
|
|
|
● |
the
restrictions Delaware and other applicable laws and our credit arrangements then impose. |
If
we liquidate or dissolve our business, the holders of our common stock will share ratably in all our assets that are available
for distribution to our stockholders after our creditors are paid in full and the holders of all series of our outstanding preferred
stock, if any, receive their liquidation preferences in full.
Our
common stock has no preemptive rights and is not convertible or redeemable or entitled to the benefits of any sinking or repurchase
fund.
Dividends
Since
inception we have not paid any dividends on our common stock. We currently do not anticipate paying any cash dividends in the
foreseeable future on our common stock, when issued pursuant to this offering. Although we intend to retain our earnings, if any,
to finance the exploration and growth of our business, our Board of Directors will have the discretion to declare and pay dividends
in the future. Payment of dividends in the future will depend upon our earnings, capital requirements, and other factors, which
our Board of Directors may deem relevant.
Securities
Authorized for Issuance Under Equity Compensation Plans
We
presently do not have any equity based or other long-term incentive programs. In the future, we may adopt and establish an equity-based
or other long-term incentive plan if it is in the best interest of the Company and our stockholders to do so.
Item
6. Selected Financial Data
We
are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under
this item.
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The
following is management’s discussion and analysis of the consolidated financial condition and results of operations of Engage
Mobility, Inc. (“Engage Mobility”, the “Company”, “we”, and “our”) for the years
ended June 30, 2015 and 2014.
Overview
We
were incorporated, under the name MarketKast, Incorporated, under the laws of the State of Florida on December 28, 2011. On March
22, 2013, we filed Articles of Amendment to our Articles of Incorporation (the “Amendment”) to change our name from
“MarketKast, Incorporated” to “Engage Mobility, Inc.” The Amendment was effective as of March 22, 2013.
In connection with the name change, our trading symbol was changed from “MRKK” to “ENGA,” effective April
4, 2013.
On
February 18, 2014, we entered into a joint venture agreement (“Joint Venture Agreement”) with Xinhua Ruide (Beijing)
Network Technology Co., Ltd. (“Xinhua Ruide”) and Shenzhen Yingjia Mobile Technology Co., Ltd. (“Shenzhen Yingjia”)
to establish a joint venture, Datang Engage (China) Mobile Technology Co., Ltd. (“Datang Engage”) to develop and launch
a Chinese version of our mobile platform. We own 30% interest of the joint venture. However, the joint venture has never commenced
any operations. The Chairman of the joint venture is Mr. Hua Zhang.
Although
the joint venture we established in 2014 has not yet commenced operations, our partners in China had confidence in our business
and technology and hoped to continue the alliance through acquisition of the control of our Company. On April 9, 2015, pursuant
to a Stock Purchase Agreement (the “Stock Purchase Agreement”), Engage International Technology Co. Ltd. (“Engage
International”) acquired from James S. Byrd, Jr. (“Byrd”) and Douglas S. Hackett (“Hackett”), who
were the principal stockholders of the Company, a total of 16,462,505 shares of the Company’s common stock, representing
75.61% of the Company’s issued and outstanding shares. Following the transaction, a change in control of the Company has
occurred. Pursuant to the terms of the Stock Purchase Agreement, as a condition to the sale and transfer of the controlling stake
of the Company, the then directors and officers of the Company resigned simultaneously at the closing of the transaction. Accordingly,
Mr. Byrd ceased to be Chairman of the Board of Directors of the Company; and Mr. Hackett ceased to be President, Chief Executive
Officer, Chief Financial Officer, Secretary, Treasurer and Director of the Company; and Eric Fellows ceased to be the Chief Operating
Officer of the Company. At the same time, Mr. Hua Zhang was appointed as the sole director and Chairman of the Board of Directors,
as well as the Chief Executive Officer of the Company. Mr. Zhang is also the Chairman of the Chinese joint venture, Datang
Engage.
We
functioned as a provider of mobile technology, marketing and data solutions for business. Through the sale of our Mobile Engagement
System, we enable business owners to engage with new and existing customers with a turnkey mobile marketing solution. The Mobile
Engagement System integrated an augmented reality browser and content with our proprietary cloud based mobile video delivery system,
a mobile customer relationship manager and our Dynamic Data platform to create a full solution for business to market their products
in the mobile environment. The Mobile Engagement System was sold to businesses under a “user based” model so that
the business pays us a monthly user fee based on the number of “engaged” users in their database at any given time.
In
addition to this core product offering, we also offered to our clients additional products and services in order to assist in
growing their business, including mobile optimization of websites, as well as additional mobile marketing, customer acquisition
services and mobile data services.
Currently
we do not have significant operation of our mobile technology business. We intend to work together with our China affiliate, under
common control, to further develop the Company’s platform and introduce it to the Chinese market. As the platform matures,
the Company plans to reintroduce it into the U.S. and other markets.
Recent
Developments
As
of December 2014, we were unable to raise the necessary capital to continue to fund marketing and sales efforts for our products,
and therefore we greatly reduced our efforts in that regard.
On
April 9, 2015, the Company entered into a Stock Purchase Agreement (“Stock Purchase Agreement”) with Engage International,
pursuant to which Engage International acquired a total of 16,462,505 shares of the Company’s common stock from the principal
stockholders of the Company, which representing 75.61% of the Company’s issued and outstanding shares on that date. Pursuant
to the Stock Purchase Agreement, a change in control of the Company has occurred.
Since
the change in control of the Company, the Company intends to raise capital through future mergers and acquisitions. The Company
intends to work together with one of its China affiliates, under common control, to development a data platform for investment,
corporation internal management, financial management, marketing and wealth management for small and mid-size corporations.
Plan
of Operation
Until
May 2014, our efforts had been primarily limited to business formation, strategic development, marketing, website, and product
development, negotiations with third party sales and channel partners, and capital raising activities. We developed and begun
to launch our newest suite of products including version 2.0 of the Mobile Engagement System as of May 2014. Version
2.0 of our Mobile Engagement System includes our new product immersion, which is a street view augmented reality platform
that allows users to locate businesses in their geographical area who are on the Engage system. We have filed a provisional patent
application seeking patent protection for version 2.0 of our Mobile Engagement System. We were not able to raise additional capital
necessary to properly launch and market our products and had to cease operations.
On
April 9, 2015, Engage International purchased 75.61% of the Company’s issued and outstanding shares from two major stockholders
of the Company. Following the transaction, a change in control of the Company has occurred and all of the then directors and officers
of the Company resigned simultaneously at the closing of the transaction. At the same time, Mr. Hua Zhang was appointed to be
the sole director and Chairman of the Board of Directors, as well as the Chief Executive Officer. Mr. Zhang is also the Chairman
of the Chinese joint venture of which we own 30%.
We
had not experienced significant revenue from our business operations, and we have been unable to raise the
capital necessary to fund our marketing and sales plan. Therefore, during the next 12 months, the Company:
| - | Anticipates
to raise additional funds through debt or equity financing. |
| - | Intends
to work together with its China affiliate, under common control, to further develop the
Company’s platform and introduce it to the Chinese market. As the platform matures,
the Company plans to reintroduce it into the U.S. and other markets. |
Results
of Operations
Comparison
of the years ended June 30, 2015 and 2014
Revenues
Since inception, our activities have
been primarily limited to business formation, strategic development, marketing, website and product development, negotiations with
third party sales and channel partners, and capital raising activities. During the year ended June 30, 2014, we have generated
$87,185 in revenue as compared to $32,086 for the year ended June 30, 2015. Our revenue was
derived primarily from development and service fees. For the year ended June 30, 2015, we were unable to raise the necessary
capital to continue to fund marketing and sales efforts for our products, and therefore our business was limited to marketing and
sales efforts in the United States, resulting in a decrease in revenue.
During
the year ended June 30, 2014, we incurred $6,500 cost of revenues for commission expenses and video production costs. For the
year ended June 30, 2015, the Company did not incur any such costs.
Operating
Expenses
During
the year ended June 30, 2014, we incurred general and administrative expenses of $4,259,153, and during the year ended June 30,
2015, we incurred general and administrative expenses of $926,152. These general and administrative expenses consist of rent, insurance,
professional fees, travel, employee compensation and other miscellaneous items. The decrease in general and administrative expenses
was primarily due to our issuance of $3,125,410 of non-cash stock based compensation in 2014.
Interest
Expense
Interest
expense was $905,160 for the year ended June 30, 2014, as compared to $31,125 for the year ended June 30, 2015. The decrease in
interest expense resulted from a decrease in the amortization of the beneficial conversion features and warrants issued in conjunction
with debt.
Net
Loss
We
had net loss of $5,083,628 for the year ended June 30, 2014, compared to $1,068,330 for the year ended June 30, 2015. The decrease
was primarily due to the decrease in operating expenses and interest expense as discussed above.
Liquidity
and Capital Resources
As
of June 30, 2015, we had no cash. Our primary uses of cash were for development and testing of products, marketing
expenses, employee compensation, and general and administrative expenses. We have historically financed our operations through
sale of common stock to our founders, private equity offerings, and debt from third party lenders. We are attempting
to obtain fund from additional debt or equity financing to support our daily business.
The
following summarizes the key components of the Company’s cash flows for the years ended June 30, 2015 and 2014:
| |
2015 | | |
2014 | |
Cash flows (used in) operating activities | |
$ | (388,297 | ) | |
$ | (1,871,362 | ) |
Cash flows (used in) investing activities | |
$ | - | | |
$ | (88,760 | ) |
Cash flows from financing activities | |
$ | 372,096 | | |
$ | 1,976,323 | |
Net increase (decrease) in cash and cash equivalents | |
$ | (16,201 | ) | |
$ | 16,201 | |
During
the year ended June 30, 2015, the Company had a net loss of $1,068,330, and net cash used in its operating activities was $388,297.
Comparatively, during the year ended June 30, 2014, the Company had a net loss of $5,083,628, and net cash used in its operating
activities was $1,871,362 including $7,850 decrease in accounts receivable, $32,805 increase in prepaid expenses, and $37,085
increase in accrued expenses. We have a current monthly cash expenditure rate of approximately $7,000 to $10,000 per month. It
includes office rental expenses, payroll, insurance, marketing, travel, telephone, internet and other office expenses, legal and
accounting expenses and other miscellaneous expenses including filing fees, transfer agent fees and other costs of being public.
We
did not have cash flows from investing activities in 2015. For the year ended June 30, 2014, cash flows used in investing activities
consisted of the purchase of the mobile platform for $75,000 and the acquisition of property and equipment of $14,000.
For
the year ended June 30, 2015, cash flows provided by financing activities consisted of the proceeds from notes payable of $181,000,
advances from related parties of $92,096, repayment of notes payable of $451,000 and common shares issued for cash of $550,000.
For the year ended June 30, 2014, cash flows provided by financing activities consisted of the proceeds from notes payable of
$180,000, proceeds of convertible note payable of $250,000, advances from related parties of $470,000, repayment of notes payable
of $185,000, common share issued for cash of $1,275,605, and cash overdraft of $14,282.
Off-Balance
Sheet Arrangements
We
do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, sales or expenses, results of operations, liquidity or capital expenditures
Critical
Accounting Policies
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ
from those estimates.
Revenue
Recognition
In
general, the Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product
delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. The
following reflects specific criteria for the various revenues streams of the Company:
Revenue
for services is recognized at the time the services are rendered.
Where
the Company has entered into a revenue sharing agreement with a third party, the Company records their proportionate share of
the revenue.
Intangible
Assets and Long Lived Assets
The
Company reviews its long-lived assets and certain identifiable finite lived intangibles for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized
when estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition are less
than its carrying amount. The Company’s finite lived intangibles, including mobile platform, patents, and web and
domain assets, are being amortized over a period of 3 years.
Stock-Based
Compensation
The
Company records the cost resulting from all share-based transactions in the financial statements. The Company applies
a fair-value-based measurement in accounting for share-based payment transactions with employees and when the Company acquires
goods or services from non-employees in share-based payment transactions.
Going
concern
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates
continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. As
reflected in the accompanying financial statements, the Company had an accumulated deficit of approximately $6,600,000 and a working
capital deficit of approximately $647,000 at June 30, 2015, and has no significant revenue generating operations. These conditions
raise substantial doubt about the Company’s ability to continue as a going concern.
The
Company’s lack of cash and profit generating activities are not sufficient to support the Company’s daily operations without significant
financing. The Company believes in its ability to raise additional funds; however there can be no assurances to that
effect, and to date insufficient capital has been raised for the Company to execute this strategy. The ability of the
Company to continue as a going concern is dependent upon the Company’s ability to obtain funds from additional debt or equity
funding, and generate sufficient revenues. The financial statements do not include any adjustments that might be necessary
if the Company is unable to continue as a going concern.
During
the next 12 months, we hope to raise additional funds through debt or equity financing. We intend to work together with our China
affiliate, under common control, to further develop the Company’s platform and introduce it to the Chinese market. As the
platform matures, the Company plans to reintroduce it into the U.S. and other markets.
Item
7A. Quantitative and Qualitative Disclosures About Market Risk |
We
are not required to provide the information required by this Item because we are a smaller reporting company.
Item 8. Financial Statements and Supplementary Data
ENGAGE MOBILITY, INC.
Financial Statements Table of Contents
FINANCIAL STATEMENTS
Balance Sheets |
F-4 |
|
|
Statements of Operations |
F-6 |
|
|
Statements of Stockholders’ (Deficit) |
F-7 |
|
|
Statements of Cash Flows |
F-8 |
|
|
Notes to the Financial Statements |
F-10 |
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Stockholders
Engage
Mobility, Inc.
We
have audited the accompanying balance sheet of Engage Mobility, Inc. (the “Company”) as of June 30, 2015, and the
related statements of operations, stockholders’ (deficit), and cash flows for the year ended June 30, 2015. These financial
statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We
conducted our audit 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 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 audit provides a reasonable basis for our opinion.
In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Engage
Mobility, Inc. as of June 30, 2015, and the results of its operations and cash flows for the year ended June 30, 2015, in conformity
with accounting principles generally accepted in the United States of America.
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 4 to the financial statements, the Company has incurred significant losses and has deficiencies in both stockholders’
equity and working capital. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
Management’s plans in regard to this matter are also discussed in Note 4. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/
Friedman LLP
New
York, New York
September
29, 2015
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
Shareholders and Board of Directors
Engage Mobility, Inc.
We have audited the accompanying balance sheet
of Engage Mobility, Inc. (the "Company") as of June 30, 2014, and the related statements of operations, stockholders'
equity (deficit), and cash flows for the year ended June 30, 2014. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit 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 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial position of Engage Mobility, Inc. as of June 30, 2014,
and the results of operations and cash flows for the year ended June 30, 2014, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern. As discussed in Note 4 to the
financial statements, the Company has incurred significant losses from operations and a working capital deficit. These
factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in
regard to this matter are also discussed in Note 4. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/ Kingery & Crouse PA
Kingery & Crouse PA
Certified Public Accountants
Tampa, Florida
October 14, 2014
ENGAGE MOBILITY, INC.
BALANCE SHEETS
June 30, 2015 and 2014
| |
2015 | | |
2014 | |
| |
| | |
| |
ASSETS | |
| | |
| |
Current assets: | |
| | |
| |
Cash | |
$ | - | | |
$ | 16,201 | |
Accounts receivable, net of allowance for doubtful accounts of $14,660 for 2015 and $14,185 for 2014 | |
| - | | |
| 650 | |
Prepaid expenses | |
| - | | |
| 32,805 | |
| |
| | | |
| | |
Total Current Assets | |
| - | | |
| 49,656 | |
| |
| | | |
| | |
Property and equipment | |
| - | | |
| 16,755 | |
Less: accumulated depreciation | |
| - | | |
| 7,128 | |
| |
| | | |
| | |
Total property, plant and equipment, net | |
| - | | |
| 9,627 | |
| |
| | | |
| | |
Other assets | |
| | | |
| | |
Intangible assets | |
| 26,629 | | |
| 74,263 | |
| |
| | | |
| | |
TOTAL ASSETS | |
$ | 26,629 | | |
$ | 133,546 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) | |
| | | |
| | |
| |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accrued expenses | |
$ | 79,688 | | |
$ | 59,025 | |
Notes payable | |
| 5,000 | | |
| - | |
Due to related parties | |
| 562,096 | | |
| 470,000 | |
| |
| | | |
| | |
Total current liabilities | |
| 646,784 | | |
| 529,025 | |
| |
| | | |
| | |
Long-term liabilities | |
| | | |
| | |
Notes payable | |
| - | | |
| 275,000 | |
Convertible notes payable | |
| - | | |
| 2,454 | |
| |
| | | |
| | |
Total Long-term liabilities | |
| - | | |
| 277,454 | |
| |
| | | |
| | |
TOTAL LIABILITIES | |
| 646,784 | | |
| 806,479 | |
The accompanying notes are an integral
part of these financial statements.
ENGAGE MOBILITY, INC.
BALANCE SHEETS
June 30, 2015 and 2014
| |
2015 | | |
2014 | |
| |
| | |
| |
COMMITMENTS AND CONTINGENCIES | |
| - | | |
| - | |
| |
| | | |
| | |
Stockholders’ (deficit) | |
| | | |
| | |
Common stock – no par value; authorized: 100,000,000 issued and outstanding: 23,082,567 shares and 21,772,567 shares at June 30, 2015 and 2014, respectively. | |
| 2,891,995 | | |
| 1,976,595 | |
Additional paid-in capital | |
| 3,091,072 | | |
| 2,885,364 | |
Accumulated (deficit) | |
| (6,603,222 | ) | |
| (5,534,892 | ) |
| |
| | | |
| | |
TOTAL STOCKHOLDERS’ (DEFICIT) | |
| (620,155 | ) | |
| (672,933 | ) |
| |
| | | |
| | |
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) | |
$ | 26,629 | | |
$ | 133,546 | |
The accompanying notes are an integral
part of these financial statements.
ENGAGE MOBILITY, INC. |
STATEMENTS OF OPERATIONS |
For the years ended June 30, 2015 and 2014 |
| |
2015 | | |
2014 | |
| |
| | |
| |
Revenues | |
$ | 32,086 | | |
$ | 87,185 | |
Costs of revenues | |
| - | | |
| 6,500 | |
| |
| | | |
| | |
Gross profit | |
| 32,086 | | |
| 80,685 | |
| |
| | | |
| | |
Operating expenses: | |
| | | |
| | |
General and administrative expenses | |
| 926,152 | | |
| 4,259,153 | |
| |
| | | |
| | |
Operating loss | |
| (894,066 | ) | |
| (4,178,468 | ) |
| |
| | | |
| | |
Other (income) and expense | |
| | | |
| | |
Loss on disposal of assets | |
| 3,909 | | |
| - | |
Loss on extinguishment of debt | |
| 139,230 | | |
| - | |
Interest expense | |
| 31,125 | | |
| 905,160 | |
| |
| | | |
| | |
Total other expense | |
| 174,264 | | |
| 905,160 | |
| |
| | | |
| | |
Loss before provision for income taxes | |
| (1,068,330 | ) | |
| (5,083,628 | ) |
| |
| | | |
| | |
PROVISION FOR INCOME TAXES | |
| - | | |
| - | |
| |
| | | |
| | |
NET LOSS | |
$ | (1,068,330 | ) | |
$ | (5,083,628 | ) |
| |
| | | |
| | |
Net loss per common share, basic & diluted | |
$ | (0.05 | ) | |
$ | (0.24 | ) |
| |
| | | |
| | |
Weighted average common shares outstanding, basic & diluted | |
| 22,068,594 | | |
| 20,836,050 | |
The accompanying notes are an integral
part of these financial statements.
ENGAGE MOBILITY, INC.
STATEMENTS OF STOCKHOLDERS’ (DEFICIT)
For the years ended June 30, 2015 and 2014
| |
COMMON
STOCK | | |
ADDITIONAL
PAID-IN | | |
ACCUMULATED | | |
| |
| |
SHARES | | |
AMOUNT | | |
CAPITAL | | |
DEFICIT | | |
TOTAL
| |
| |
| | |
| | |
| | |
| | |
| |
Balance,
June 30, 2013 | |
| 20,126,500 | | |
$ | 166,500 | | |
$ | 4,000 | | |
$ | (451,264 | ) | |
$ | (280,764 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Stock
issued for cash | |
| 1,343,150 | | |
| 1,275,605 | | |
| - | | |
| - | | |
| 1,275,605 | |
Stock
issued for services, inducements and interest | |
| 47,967 | | |
| 234,490 | | |
| - | | |
| - | | |
| 234,490 | |
Stock
issued for debt conversion | |
| 200,000 | | |
| 200,000 | | |
| - | | |
| - | | |
| 200,000 | |
Stock
issued for deferred compensation | |
| 54,950 | | |
| 100,000 | | |
| (100,000 | ) | |
| - | | |
| - | |
Options
and warrants issued for services and interest | |
| - | | |
| - | | |
| 2,807,587 | | |
| - | | |
| 2,807,587 | |
Beneficial
conversion feature | |
| - | | |
| - | | |
| 90,444 | | |
| - | | |
| 90,444 | |
Deferred
compensation expense recognized | |
| - | | |
| - | | |
| 83,333 | | |
| - | | |
| 83,333 | |
Net
Loss | |
| - | | |
| - | | |
| - | | |
| (5,083,628 | ) | |
| (5,083,628 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance,
June 30, 2014 | |
| 21,772,567 | | |
| 1,976,595 | | |
| 2,885,364 | | |
| (5,534,892 | ) | |
| (672,933 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance
of common stock for cash | |
| 1,100,000 | | |
| 550,000 | | |
| - | | |
| - | | |
| 550,000 | |
Stock
issued for debt conversion | |
| 110,000 | | |
| 191,400 | | |
| (41,722 | ) | |
| - | | |
| 149,678 | |
Stock
issued for compensations | |
| 100,000 | | |
| 174,000 | | |
| - | | |
| - | | |
| 174,000 | |
Stock
based compensation | |
| - | | |
| - | | |
| 247,430 | | |
| - | | |
| 247,430 | |
Net
Loss | |
| - | | |
| - | | |
| - | | |
| (1,068,330 | ) | |
| (1,068,330 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance,
June 30, 2015 | |
| 23,082,567 | | |
$ | 2,891,995 | | |
$ | 3,091,072 | | |
$ | (6,603,222 | ) | |
$ | (620,155 | ) |
The accompanying notes are an integral
part of these financial statements.
ENGAGE MOBILITY, INC.
STATEMENTS OF CASH FLOWS
For the years ended June 30, 2015
and 2014
| |
2015 | | |
2014 | |
| |
| | |
| |
Cash flows from operating activities: | |
| | |
| |
Net loss | |
$ | (1,068,330 | ) | |
$ | (5,083,628 | ) |
Adjustment to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Loss on disposal of assets | |
| 3,909 | | |
| - | |
Loss on debt extinguishment | |
| 139,230 | | |
| - | |
Provision for doubtful accounts | |
| 475 | | |
| - | |
Depreciation and amortization | |
| 53,352 | | |
| 31,828 | |
Non-cash interest expense | |
| 7,994 | | |
| 42,898 | |
Common stock, options and warrants issued for services, interest and inducements | |
| 421,430 | | |
| 3,125,410 | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Decrease in accounts receivable | |
| 175 | | |
| 7,850 | |
Decrease (increase) in prepaid expenses | |
| 32,805 | | |
| (32,805 | ) |
Increase in accrued expenses | |
| 20,663 | | |
| 37,085 | |
| |
| | | |
| | |
Net cash used in operating activities | |
| (388,297 | ) | |
| (1,871,362 | ) |
| |
| | | |
| | |
Cash flows from investing activities: | |
| | | |
| | |
Disposition of intangible asset | |
| - | | |
| (74,963 | ) |
Disposition of property and equipment | |
| - | | |
| (13,797 | ) |
| |
| | | |
| | |
Net cash (used in) investing activities | |
| - | | |
| (88,760 | ) |
| |
| | | |
| | |
Cash flows from financing activities: | |
| | | |
| | |
Advances from related parties | |
| 92,096 | | |
| 470,000 | |
Cash overdraft | |
| - | | |
| (14,282 | ) |
Proceeds of note payable | |
| 181,000 | | |
| 180,000 | |
Proceeds of convertible note payable | |
| - | | |
| 250,000 | |
Repayment of note payable | |
| (451,000 | ) | |
| (185,000 | ) |
Net proceeds from issuance of common stock | |
| 550,000 | | |
| 1,275,605 | |
| |
| | | |
| | |
Net cash provided by financing activities | |
| 372,096 | | |
| 1,976,323 | |
| |
| | | |
| | |
Net change in cash | |
| (16,201 | ) | |
| 16,201 | |
Cash – beginning balance | |
| 16,201 | | |
| - | |
| |
| | | |
| | |
Cash – ending balance | |
$ | - | | |
$ | 16,201 | |
The accompanying notes are an integral
part of these financial statements.
ENGAGE MOBILITY, INC.
STATEMENTS OF CASH FLOWS
For the Years ended June 30, 2015
and 2014
| |
2015 | | |
2014 | |
| |
| | |
| |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |
| | |
| |
| |
| | |
| |
Cash paid for interest | |
$ | 20,993 | | |
$ | - | |
| |
| | | |
| | |
Cash paid for income taxes | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
Non-cash investing and financing activities: | |
| | | |
| | |
| |
| | | |
| | |
Conversion of note payable to common stock | |
$ | - | | |
$ | 200,000 | |
| |
| | | |
| | |
Stock issued for debt extinguishment | |
$ | 191,400 | | |
$ | - | |
| |
| | | |
| | |
Beneficial conversion feature on note payable | |
$ | - | | |
$ | 90,444 | |
The accompanying notes are an integral
part of these financial statements.
ENGAGE MOBILITY, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2015 and 2014
NOTE 1 |
NATURE OF OPERATIONS |
Engage Mobility, Inc. (the “Company”)
was incorporated on December 28, 2011 under the laws of the State of Florida as MarketKast Incorporated. On March 22, 2013, the
Company changed its name to Engage Mobility, Inc. The Company functioned as a provider of mobile marketing services, online and
mobile video production, distribution, syndication and marketing services for business owners.
On April 9, 2015, a Stock Purchase Agreement
(“Stock Purchase Agreement”) was entered into by and among Engage International Technology Co. Ltd. (“Engage
International”), James S. Byrd, Jr. (“Byrd”) and Douglas S. Hackett (“Hackett”) (collectively, the
“Sellers”) who were the principal stockholders of the Company, pursuant to which Engage International acquired from
the Sellers a total of 16,462,505 shares of the Company’s common stock, representing 75.61% of the Company’s issued
and outstanding shares on that date. Pursuant to the Stock Purchase Agreement, a change in control of the Company has occurred.
NOTE 2 |
SUMMARY OF ACCOUNTING POLICIES |
Basis of Accounting Presentation
The Company’s financial statements
are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Reclassification
Certain prior year amounts have been
reclassified to conform to the current year presentation. These reclassifications had no effect on the accompanying statements
of operations and cash flows.
Cash and Cash Equivalents
The Company considers all highly liquid
investments with maturities of three months or less at the time of purchase to be cash equivalents. Bank overdrafts are presented
in the financial statements under the caption “Due to Bank”.
Use of Estimates
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States 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 as well as the reported amount of revenues and expenses during the reporting period. Actual results could
differ from these estimates. Significant estimates include the valuation of options and warrants issued for services and compensation
and deferred income taxes.
Revenue Recognition
In general, the Company records revenue
when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price
to the customer is fixed or determinable, and collectability is reasonably assured. The following reflects specific criteria for
the various revenues streams of the Company:
Revenue for services is recognized at
the time the services are rendered.
Where the Company has entered into a
revenue sharing agreement with a third party, the Company records their proportionate share of the revenue.
The Company’s revenues are principally
from video distribution and advertising fees via the platform.
NOTE 2 |
SUMMARY OF ACCOUNTING
POLICIES (continued) |
Accounts Receivable and Allowance
for Doubtful Accounts
Accounts receivable are reported at
their outstanding unpaid principal balances reduced by an allowance for doubtful accounts. The Company estimates doubtful accounts
based on historical bad debts, factors related to specific customers’ ability to pay and current economic trends. The Company
writes off accounts receivable against the allowance when a balance is determined to be uncollectible.
Property, Plant and Equipment
Property, plant and equipment are recorded
at cost, less accumulated depreciation. Cost includes the price paid to acquire or construct the asset, including capitalized interest
during the construction period, and any expenditures that substantially increase the assets value or extends the useful life of
an existing asset. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Major
repairs and betterments that significantly extend original useful lives or improve productivity are capitalized and depreciated
over the periods benefited. Maintenance and repairs are generally expensed as incurred.
The estimated useful lives for property,
plant and equipment categories are as follows:
Machinery and equipment |
1-2 years |
Furniture and fixture |
2
years |
Intangible Assets and Long Lived
Assets
The Company reviews for impairment its
long-lived assets and certain identifiable intangible assets whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. An impairment loss would be recognized when estimated future cash flows expected to
result from the use of the asset and its eventual disposition is less than its carrying amount. The Company’s finite lived
intangibles, comprised of patents, a mobile platform, and web and domain assets, are being amortized over a period of three years.
Fair value of financial instruments
The Company’s short-term financial
instruments consist of cash, accounts receivable, accounts payable and accrued expenses, and other current liabilities. The carrying
amounts of these financial instruments approximate fair value because of their short-term maturities. The Company does
not hold or issue financial instruments for trading purposes nor does it hold or issue interest rate or leveraged derivative financial
instruments. The carrying value of the Company’s long-term debt approximates fair value based on the terms and conditions
at which the Company could obtain similar financing.
Income Taxes
In accordance with FASB ASC 740, “Income
Taxes” (“ASC 740”), deferred tax assets and liabilities are computed based upon the difference between the
financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related
asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in
the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of
the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount
that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred
income taxes in the period of change. The Company has recorded a valuation allowance against its deferred tax assets based on the
history of losses incurred.
ASC 740 addresses the determination
of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under
ASC 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax
position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits
recognized in the financial statements from such a position would be measured based on the largest benefit that has a greater than
50% likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on de-recognition of income tax assets
and liabilities, classification of current and deferred income tax assets and liabilities, and accounting for interest and penalties
associated with tax positions. As of June 30, 2015 and 2014, the Company does not have a liability for any unrecognized tax benefits.
All tax periods from inception remain
open to examination by taxing authorities.
NOTE 2 |
SUMMARY OF ACCOUNTING
POLICIES (continued) |
Stock-Based Compensation
The Company records the cost resulting
from all share-based transactions in the financial statements. The Company applies a fair-value-based measurement
in accounting for share-based payment transactions with employees and when the Company acquires goods or services from
non-employees in share-based payment transactions.
Basic and Diluted Earnings Per Share
Basic earnings (loss) per share are
calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings
(loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common
stock equivalents outstanding. During periods in which the Company incurs losses, common stock equivalents, if any, are not considered,
as their effect would be anti-dilutive.
NOTE 3 |
RECENTLY ISSUED ACCOUNTING STANDARDS |
In August 2015, the FASB issued ASU
No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. The amendment in this ASU defers
the effective date of ASU No. 2014-09 for all entities for one year. Public business entities, certain not-for-profit entities,
and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning December 15,
2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting
periods beginning after December 31, 2016, including interim reporting periods with that reporting period. This accounting standard
update is not expected to have a material impact on the Company’s financial statements.
In April 2015, the Financial Accounting
Standards Board, or FASB, issued Accounting Standards Update No. 2015-05, Intangibles – Goodwill and Other – Internal-Use
Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement, or ASU 2015-05. This amendment
provides guidance to help entities determine whether a cloud computing arrangement contains a software license that should be accounted
for as internal-use software or as a service contract. ASU 2015-05 is effective for interim and annual reporting periods beginning
after December 15, 2015, with early adoption permitted. Upon adoption, an entity has the option to apply the provisions of ASU
2015-05 either prospectively to all arrangements entered into or materially modified, or retrospectively. We will evaluate the
effects, if any, the adoption of ASU 2015-05 will have upon our consolidated financial position, results of operations or cash
flows. This accounting standard update is not expected to have a material impact on the Company’s financial statements.
In November 2014, the FASB issued ASU
2014-17, Business Combinations (Topic 805): Pushdown Accounting. The amendments in this Update apply to the separate financial
statements of an acquired entity and its subsidiaries that are a business or nonprofit activity (either public or nonpublic) upon
the occurrence of an event in which an acquirer (an individual or an entity) obtains control of the acquired entity. An acquired
entity may elect the option to apply pushdown accounting in the reporting period in which the change-in-control event occurs. If
pushdown accounting is not applied in the reporting period in which the change-in-control event occurs, an acquired entity will
have the option to elect to apply pushdown accounting in a subsequent reporting period to the acquired entity’s most recent
change-in-control event. The amendments in this Update are effective on November 18, 2014. After the effective date, an acquired
entity can make an election to apply the guidance to future change-in-control events or to its most recent change-in-control event.
This Update is not expected to have a significant impact on the Company’s financial statements. This accounting standard
update is not expected to have a material impact on the Company’s financial statements.
In August 2014, the FASB issued ASU
2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. ASU 2014-15
is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s
ability to continue as a going concern and to provide related footnote disclosures. For all entities, the ASU is effective for
annual periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016. Early
adoption is permitted. The Company is currently assessing the potential impact, if any, the adoption of ASU 2014-15 may have on
its condensed consolidated financial statements. This accounting standard update is not expected to have a material impact on the
Company’s financial statements.
NOTE 3 |
RECENTLY ISSUED ACCOUNTING STANDARDS (continued) |
In June 2014, FASB issued ASU No. 2014-12,
“Compensation – Stock Compensation (Topic 718); Accounting for Share-Based Payments When the Terms of an Award Provide
That a Performance Target Could Be Achieved after the Requisite Service Period”. The amendments in this ASU apply to all
reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target
that affects vesting could be achieved after the requisite service period. The amendments require that a performance target that
affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting
entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account
for such awards. For all entities, the amendments in this ASU are effective for annual periods and interim periods within those
annual periods beginning after December 15, 2015. Earlier adoption is permitted. This accounting standard update is not expected
to have a material impact on the Company’s financial statements.
In May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers (a new revenue recognition standard). The Update’s core principle is that a company
will recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to
which the entity expects to be entitled in exchange for those goods or services. In addition, this update specifies the accounting
for certain costs to obtain or fulfill a contract with a customer and expands disclosure requirements for revenue recognition.
This Update is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that
reporting period. The Company is evaluating the effect of adopting this new accounting Update. This accounting standard update
is not expected to have a material impact on the Company’s financial statements.
In April 2014, the FASB issued ASU 2014-08,
Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360). ASU 2014- 08 amends the requirements
for reporting discontinued operations and requires additional disclosures about discontinued operations. Under the new guidance,
only disposals representing a strategic shift in operations or that have a major effect on the Company’s operations and financial
results should be presented as discontinued operations. This new accounting guidance is effective for annual periods beginning
after December 15, 2014. This accounting standard update did not have a material impact on the Company’s financial statements.
The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization
of assets, and liquidation of liabilities in the normal course of business. As reflected in the accompanying financial
statements, the Company has an accumulated deficit of approximately $6,600,000 and a working capital deficit of approximately $647,000
at June 30, 2015. In addition, the Company continues to generate operating losses and negative cash flows from operations. Management
believes these factors raise substantial doubt about the Company’s ability to continue as a going concern.
While management is attempting to
execute its strategy, the Company does not have the cash to support the Company’s daily operations and requires
significant additional debt or equity financing. While the Company believes in the viability of its strategy to
increase sales volume and in its ability to raise additional funds, there can be no assurances to that effect. The
ability of the Company to continue as a going concern is dependent upon the Company’s ability to obtain additional debt
or equity financing, further implement its business plan and generate sufficient revenues to meet its
obligations. The financial statements do not include any adjustments that might be necessary if the Company is
unable to continue as a going concern.
During the next 12 months, the Company:
| - | Anticipates to raise additional funds through debt or equity financing. |
| - | Intends to work together with its China affiliate, under common control, to further develop the
Company’s platform and introduce it to the Chinese market. As the platform matures, the Company plans to reintroduce it into
the U.S. and other markets. |
NOTE 5 |
PROPERTY, PLANT AND EQUIPMENT |
Property and Equipment consist of the
following:
| |
June 30, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Equipment and furniture | |
$ | - | | |
$ | 16,755 | |
Accumulated depreciation | |
| - | | |
| (7,128 | ) |
| |
| | | |
| | |
| |
$ | - | | |
$ | 9,627 | |
Depreciation expense for the year ended
June 30, 2015 and 2014 was $ 6,681 and $7,128, respectively. During the fourth quarter of 2015, the Company disposed of all its
property and equipment and recognized a loss on disposal of $3,909.
Intangible assets consisted of the following:
| |
June 30, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Mobile platform | |
$ | 98,000 | | |
$ | 98,000 | |
Patents | |
| 1,000 | | |
| - | |
Web and domain | |
| - | | |
| 963 | |
| |
| | | |
| | |
Total intangible assets | |
| 99,000 | | |
| 98,963 | |
Less: accumulated amortization | |
| (72,371 | ) | |
| (24,700 | ) |
| |
| | | |
| | |
| |
$ | 26,629 | | |
$ | 74,263 | |
Amortization expense for the year ended
June 30, 2015 and 2014 was $46,671 and $24,700, respectively. Future estimated amortization expense is $26,629 for the year ended
June 30, 2016.
NOTE 7 |
RELATED PARTY TRANSACTIONS |
The Company received advances from the
following related parties, under common control, to supplement the Company’s working capital.
| |
June 30, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Shenzhen Engage Mobile Technology Co., Limited | |
$ | 470,000 | | |
$ | 470,000 | |
Shenzhen Datang Engage Telecom Co., Limited | |
| 92,096 | | |
| - | |
| |
| | | |
| | |
| |
$ | 562,096 | | |
$ | 470,000 | |
Shenzhen Engage Mobile Technology Co.,
Limited became a related party after Engage International Technology Co., Ltd. purchased 75.61% of the Company’s common stock
from two stockholders of the Company on April 9, 2015. The advance is payable on demand and non-interest bearing.
As of June 30, 2014, the Company had borrowed
funds pursuant to non-convertible promissory notes of $275,000, bearing interest at 10% per annum. Interest was payable monthly
and the principal, together with any unpaid interest, was to be repaid 48 months from the dates of the notes. Total interest accrued
on the outstanding note was approximately $21,000 for the year ended. The Company repaid the outstanding balance of the note along
with interest on April 9, 2015.
During the nine months ended March 31, 2015,
the Company borrowed $181,000 pursuant to promissory notes from its two major stockholders of the Company at that time. The notes
were fully repaid in April 2015.
NOTE 9 |
CONVERTIBLE NOTES PAYABLE |
During July 2013, the Company issued
$250,000 of 10% convertible promissory notes to private investors. The convertible notes were to mature in three years, at which
time all outstanding principal and accrued interest was to be paid. The notes were convertible by the investors into the Company’s
common stock based upon the price in a proposed registered offering on Form S-1 with $200,000 being convertible at a 20% discount
to the offering price of $1.60 per share, or $1.28 per share, and $50,000 being convertible at a 50% discount to the offering price,
or $0.80 per share. In addition to the interest due, the Company issued 125,000 warrants to the lenders at an exercise price of
125% of the share price of the offering or $2.00 per share (see Note 7).
During February 2014 the holder of the
$200,000 convertible note agreed to convert the note into 200,000 shares of the Company’s common stock. This note holder
also purchased an additional 100,000 shares of the Company’s common stock for $100,000 in cash. The Company also granted
the note holder warrants to purchase 200,000 common shares at $1.50 per share and 200,000 shares at $2.00 per share for a three
year period. On April 6, 2015, the holder of the $50,000 convertible note agreed to convert the note and its interest into the
110,000 shares of the Company’s common stock (See Note 11). The loss on extinguishment of the above debt was $139,230 and
there was $41,722 decrease to additional paid-in capital for the value allocated to the beneficial conversion feature of the debt.
NOTE 10 |
COMMITMENTS AND CONTINGENCY |
Lease
On June 1, 2014, the Company entered
into a three-year lease agreement with an unrelated third party.
Rent expense for the year ended
June 30, 2015 and 2014 was $42,964 and $34,193, respectively. Pursuant to a termination agreement dated May 6, 2015 between the
Company and the landlord, the lease has been terminated.
Legal Status
The Company was involved in one legal
proceeding, a breach of contract lawsuit against IRTH Communications, LLC. On May 24, 2014, the Company filed a lawsuit in Orange
County, FL (case # 2014-CA-00-2626-O), against IRTH for breach of a contract to provide investor relations services to them. In
that lawsuit the Company sought return of $110,000 of monies paid to IRTH, and the cancellation of 54,950 shares of stock issued
to IRTH. IRTH subsequently sued the Company for breach of contract, seeking damages and also to have their shares cleared for trading.
On December 10, 2014, both parties entered into a settlement agreement to settle and dismiss the suit. As part of the settlement,
the Company reissued 54,950 shares to IRTH, which IRTH agreed not to sell, hypothecate, pledge or otherwise transfer any of the
stock until after December 15, 2015.
The Company is currently not involved
in any legal proceedings.
NOTE 11 |
STOCKHOLDERS’ (DEFICIT) |
Equity
Common Stock includes 100,000,000 shares
authorized at no par value.
2014
During the year ended June 30, 2014,
the Company issued common shares as follows:
On July 31, 2013, the Company’s
registration statement on Form S-1 became effective. The Company offered for sale a maximum of 6,250,000 shares of its no par value
common stock at a price of $1.60 per share.
The Company issued 1,343,150 shares
of common stock for cash of $1,275,605, among which 312,500 shares had been sold pursuant to the offering.
The Company issued 47,967 shares of
common stock for services, inducements and interest. These shares were valued at the trading price of the Company’s common
shares on the date it was agreed the shares would be issued of $234,490 which has been charged to operations during the period.
The Company issued 200,000 shares of
common stock for the conversion of a $200,000 note. The fair value of the shares in excess of the note of $84,000 has been charged
to operations during the period.
The Company issued 54,950 common shares
for services to be performed over a one year period, which were valued at their estimated fair value of $100,000 based on the trading
price of the Company’s common shares. The value of these shares has been recorded as deferred compensation as a reduction
of paid in capital and is being amortized over the one year period during which the related services will be received. At June
30, 2014, $83,333 of deferred compensation has been charged to operations.
2015
On April 6, 2015, the Company issued 110,000
shares of common stock pursuant to the conversion of a $50,000 note issued by the Company, and 100,000 shares of common stock to
a consultant in consideration for his service.
On April 9, 2015, the Company completed a Subscription
Agreement with Engage International Technology Co. Ltd. pursuant to which Engage International purchased 1,100,000 shares of the
Company’s restricted common stock, at the price of $0.50 per share for a total purchase price of $550,000. The price was
based on the market price of the Company’s stock prior to April 9, 2015 when the agreement was being negotiated. The issuance
of the shares was in reliance upon the exemptions from securities registration afforded by Regulation S promulgated under Regulations
of the Securities Act of 1933, as amended. The sole purpose and objective of the sale was to use the proceeds received to pay off
certain outstanding debts, loans, obligations and liabilities of the Company.
NOTE 11 |
STOCKHOLDERS’ (DEFICIT)
(continued) |
Stock Options and Warrants
During the year ended June 30, 2014,
two employees were granted an aggregate of 614,000 five year options which vested immediately as to 114,000 options and 125,000
options each year over the next 4 years. The options were exercisable at $2.50 per share for 114,000 options, $3.00 per share for
125,000 options, $3.50 per share for 125,000 options, $3.75 for 125,000 options and $4.00 for 125,000 options. The aggregate grant
date fair value of the options was approximately $1,415,710, of which $225,719 and $413,398 had been charged to operations during
the year ended June 30, 2015 and 2014, respectively. As of June 30, 2015 and 2014, respectively, the aggregate intrinsic value
of all stock options outstanding and expected to vest was approximately $0 and the aggregate intrinsic value of currently exercisable
stock options was approximately $0. The intrinsic value of each option share is the difference between the fair market value of
our common stock and the exercise price of such option share to the extent it is “in-the-money”. Aggregate intrinsic
value represents the value that would have been received by the holders of in-the-money options had they exercised their options
on the last trading day of the year and sold the underlying shares at the closing stock price on such day. The intrinsic value
calculation is based on the assumed market value of our common stock on June 30, 2015 and 2014, at $0.5 and $2.01 per share. The
total number of in-the-money options outstanding and exercisable as of June 30, 2015 and 2014, was 0. The fair value of the options
charged to operations during the year ended June 30, 2015 was $247,430. These two employees left the Company in April 2015 and
the remaining unvested options were cancelled. The options were valued using a binomial option pricing model with the following
assumptions:
Volatility 154% - Dividend rate 0% -
Interest rate 1.36%-1.66% - Term 5 years
A summary of the status of the stock
options granted to employees and others as of June 30, 2015 and 2014 are as follows:
| |
June 30, | |
| |
2015 | | |
2014 | |
| |
Number of Options | | |
Weighted Average Exercise Price | | |
Weighted Average Remaining Contractual Life (Years) | | |
Number of Options | | |
Weighted Average Exercise Price | | |
Weighted Average Remaining Contractual Life (Years) | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Options outstanding at beginning of year | |
| 614,000 | | |
$ | 3.37 | | |
| 4.37 | | |
| - | | |
$ | - | | |
| - | |
Changes: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Granted | |
| - | | |
| - | | |
| - | | |
| 614,000 | | |
| 3.37 | | |
| - | |
Exercised | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Forfeited | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Cancelled | |
| 406,250 | | |
| 3.69 | | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Options outstanding at end of year | |
| 207,750 | | |
| 2.73 | | |
| 3.42 | | |
| 614,000 | | |
| 3.37 | | |
| 4.37 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Options exercisable at end of year | |
| 207,750 | | |
$ | 2.73 | | |
| 3.42 | | |
| 114,000 | | |
$ | 2.50 | | |
| 0.83 | |
NOTE 11 |
STOCKHOLDERS’ (DEFICIT)
(continued) |
Stock Options and Warrants (continued)
Stock warrants outstanding at June 30, 2015 are as follows:
| |
Number of Shares | | |
Weighted Average Remaining Contractual Life (Years) | |
| |
| | |
| |
Warrants outstanding at June 30, 2014 | |
| 1,525,000 | | |
| 0.60 | |
Changes: | |
| | | |
| | |
Granted | |
| - | | |
| - | |
Exercised | |
| - | | |
| - | |
Forfeited | |
| - | | |
| - | |
Cancelled | |
| 1,000,000 | | |
| - | |
| |
| | | |
| | |
Warrants outstanding at June 30, 2015 | |
| 525,000 | | |
| 1.48 | |
| |
| | | |
| | |
Warrants exercisable at June 30, 2015 | |
| 525,000 | | |
| 1.48 | |
Stock warrants outstanding at June 30, 2015 were as follows:
Date Issued | |
Expiration Date | |
Exercise
Price | | |
Number of
Warrants | |
July 2013 | |
July 2016 | |
$ | 2.00 | | |
| 125,000 | |
February 2014 | |
February 2017 | |
$ | 1.50 | | |
| 200,000 | |
February 2014 | |
February 2017 | |
$ | 2.00 | | |
| 200,000 | |
On April 9, 2015, in anticipation of
and in connection with the share purchase by Engage International, the holder of a warrant to purchase 1,000,000 shares of common
stock at an exercise price of $1.00, agreed to its cancellation for no consideration.
No provision was made for federal income
taxes since the Company has significant net operating losses. At June 30, 2015, the Company had operating loss carryforwards of
approximately $3,000,000. The net operating loss carry-forwards may be used to reduce taxable income through the year 2035. The
principal difference between the net operating loss for book purposes and income tax purposes results from non-cash charges to
operations related to stock options and warrants and common shares issued for services that are not currently deductible for income
tax purposes. The availability of the Company’s net operating loss carry-forwards are subject to significant limitation since
there was more than 50% positive change in the ownership of the Company’s stock.
Deferred income taxes reflect the net
tax effects of temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and
the amounts used for income tax purposes. Significant components of the Company’s deferred tax liabilities and assets as
of June 30, 2014 and 2015, are as follows:
| |
June 30, | |
| |
2015 | | |
2014 | |
Deferred tax assets: | |
| | |
| |
Federal net operating loss | |
$ | 979,000 | | |
$ | 457,000 | |
State net operating loss | |
| 145,000 | | |
| 67,000 | |
| |
| | | |
| | |
Total deferred tax assets | |
| 1,124,000 | | |
| 524,000 | |
Less: valuation allowance | |
| (1,124,000 | ) | |
| (524,000 | ) |
| |
| | | |
| | |
| |
$ | - | | |
$ | - | |
NOTE 12 |
INCOME TAXES (continued) |
The Company has provided a 100% valuation
allowance on the deferred tax assets at June 30, 2015 and 2014, to reduce such assets to zero, since there are significant limitations
on the utilization of the Company’s net operating loss carry-forwards and there is no assurance that the Company will generate
future taxable income to utilize such assets. Management reviews this valuation allowance requirement periodically and makes adjustments
as warranted. The valuation allowance increased $600,000 and $361,000.
The reconciliation of the effective income tax rate to the
federal statutory rate for the years ended June 30, 2015 and 2014 is as follows:
| |
June 30, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Federal income tax rate | |
| (34.0 | )% | |
| (34.0 | )% |
State tax, net of federal benefit | |
| (5.0 | ) | |
| (5.0 | ) |
Increase in valuation allowance | |
| 39.0 | | |
| 39.0 | |
| |
| | | |
| | |
Effective income tax rate | |
| 0.0 | % | |
| 0.0 | % |
NOTE 13 |
CONCENTRATION OF CREDIT RISK |
For the year ended June 30, 2015, three
customers accounted for approximately 89% of sales. For the year ended June 30, 2014, another three customers accounted for approximately
89% of sales.
Item 9. Changes
in and Disagreements with Accountants on Accounting and Financial Disclosure
On February 17, 2015,
the Company dismissed Kingery & Crouse PA (“Kingery”) as its registered independent public accounting firm and
engaged Frazier & Deeter, LLC (“Frazier & Deeter”) as a result of the acquisition of substantially all of the
assets and business of Kingery by Frazier & Deeter. The report of Kingery on the Company’s financial statements for the
years ended June 30, 2014 and 2013, did not contain an adverse opinion or disclaimer of opinion, and such report were not qualified
or modified as to uncertainty, audit scope, or accounting principles, except that the report contained a going concern paragraph.
This change in the Company’s certifying accountant was reported in a Current Report on Form 8-K filed on February 24, 2015.
On June 16, 2015,
the Company dismissed Frazier & Deeter as its registered independent public accounting firm. The decision to dismiss Frazier
& Deeter and retain Friedman was approved by the Company’s Board of Directors. During the period from February 17, 2015
to June 16, 2015, Frazier & Deeter reviewed the Company’s interim financial statements for the quarters ended December
31, 2014 and March 31, 2015. During the period when Frazier & Deeter was engaged by us, there have been no disagreements between
the Company and Frazier & Deeter on any matter of accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements if not resolved to the satisfaction of Frazier & Deeter would have caused them to make
reference thereto in their report on the financial statements. During the Engaged Period, there were no reportable events, as defined
in Item 304(a)(1)(v) of Regulation S-K of the Securities Exchange Act of 1934, as amended.
On June 16,
2015, the Board approved the appointment of Friedman LLP (“Friedman”) as its new registered independent public accountant.
Our financial statements as of and for the year ended June 30, 2015 included in this report have been audited by Friedman
as set forth in this Report.
Item 9A. Controls
and Procedures
Evaluation of Disclosure Controls
and Procedures
Pursuant to Rule 13a-15(b) under the
Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of
the Company’s management, including the Company’s President, Chief Financial Officer, Secretary, Treasurer and Director,
of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange
Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded
that the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed
by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and
reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated
to the Company’s management, including the Company’s CEO, to allow timely decisions regarding required disclosure for
the reasons discussed below.
Management’s Annual Report
on Internal Control Over Financial Reporting.
The management of the Company is responsible
for establishing and maintaining adequate internal control over financial reporting for the Company. Our internal control system
was designed to, in general, provide reasonable assurance to the Company’s management and board regarding the preparation
and fair presentation of published financial statements, but because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate.
Our management assessed the effectiveness
of the Company’s internal control over financial reporting as of June 30, 2015. The framework used by management in making
that assessment was the criteria set forth in the document entitled “Internal Control – Integrated Framework 2013”
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, our Chief Executive Officer
has determined and concluded that, as of June 30, 2015, the Company’s internal control over financial reporting were not
effective.
A material weakness is a deficiency,
or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that
a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely
basis. In its assessment of the effectiveness of internal control our financial reporting as of June 30, 2015, the Company determined
that the following items constituted a material weakness:
|
● |
The Company does not have an independent audit committee in place, which would provide oversight of the Company’s officers, operations and financial reporting function; |
|
|
|
|
● |
The Company’s accounting department, which consists of a limited number of personnel, does not provide adequate segregation of duties and timely information; |
|
|
|
|
● |
The Company does not have effective controls over period end financial disclosure and reporting processes; |
|
|
|
|
● |
The Company does
not have a Chief Financial Officer; and |
|
|
|
|
● |
Lack of formal security policies and management oversight, including
formal password policy for IT management. |
Management believes that the appointment
of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning
audit committee and a lack of a majority of outside directors on our Board. Management plans to take action and implementing improvements
to our controls and procedures when our financial position permits.
This annual report does not include
an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the
permanent exemption of the Securities and Exchange Commission that permit the Company to provide only management’s report
in this annual report.
Changes in Internal Control over Financial Reporting
No change in our system of internal
control over financial reporting occurred during the period covered by this report (i.e. the fourth quarter of the fiscal year
ended June 30, 2015) that has materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.
PART III
Item 10. Directors, Executive
Officers and Corporate Governance
The following table sets forth the name,
age, and position of our executive officers and directors as of June 30, 2015. Executive officers are elected annually by our Board
of Directors. Each executive officer holds his office until he resigns, is removed by the Board, or his successor is elected and
qualified. Directors are elected annually by our shareholders at the annual meeting. Each director holds his office until his successor
is elected and qualified or his earlier resignation or removal.
Name |
|
Age |
|
Position |
Hua Zhang |
|
66 |
|
Chairman of the Board of Directors, Chief Executive Officer, President, Secretary and Treasurer |
Mr. Hua Zhang has over 20-years experience
in business management and marketing. Mr. Zhang was the President of Tianli Agritech, Inc. from 2006 to 2010. He established Beijing
Fengrong Insurance Brokerage Co., Ltd. In 2010 and served as Chairman of the Board. He also established an investment fund management
company in 2011 and served as the Legal Representative and Chairman. He established Shenzhen Engage Mobility Technology Co., Ltd
in 2013 and successfully introduced the technology of augmented reality from the U.S. to China. He also contributed in the establishment
of a joint venture, Datang Engage Mobility Inc. in 2014. He is Special Adviser to the Marketing Association of Beijing University,
and tens of thousands of people across China have been to his lectures about marketing. With his connections in the domestic and
international finance industry and profound business experience, he assisted three companies to go public in the United States.
Mr. Zhang received a Bachelor degree from Hunan Economic Management University.
Term of Office
Our directors are appointed for a one-year
term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our
bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.
Employment Agreements
We have not entered into employment
agreements with any of our employees, officers and directors.
Certain Legal Proceedings
Our directors and officers have not
been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, nor have been a party to any judicial
or administrative proceeding during the past ten years that resulted in a judgment, decree or final order enjoining the person
from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation
of federal or state securities laws, except for matters that were dismissed without sanction or settlement. Except as set forth
in our discussion below in “Certain Relationships and Related Transactions,” our directors and officers have not been
involved in any transactions with us or any of our affiliates or associates which are required to be disclosed pursuant to the
rules and regulations of the SEC.
Except as set forth in our discussion
below in “Certain Relationships and Related Transactions,” none of our directors or executive officers has been involved
in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed
pursuant to the rules and regulations of the SEC.
Code of Ethics
To date, we have not adopted a code
of business conduct and ethics for our management and employees. We intend to adopt one in the near future.
Board Committees
Our Board of Directors has no separate
committees and our Board of Directors acts as the audit committee and the compensation committee. We do not have an audit committee
financial expert serving on our Board of Directors
Item 11. Executive Compensation
The following table sets forth the compensation
paid by us for the last two fiscal years ending June 30, 2015 and 2014 for our executive officers. This information includes the
dollar value of base salaries, bonus awards and number of stock options granted, and certain other compensation, if any. The compensation
discussed addresses all compensation awarded to, earned by, or paid or named executive officers. On October 13, 2014, Mr. Byrd
resigned as our chief executive officer. Mr. Byrd’s resignation is not a result of any disagreement with the Company or its
executive officers, or any matter relating to the Company’s operations, policies or practices. Until April 9, 2015, Mr. Byrd
continued to serve as the Company’s secretary and chairman of the board of directors. On October 13, 2014, the Board appointed
Mr. Hackett, the Company’s then President, Acting Chief Financial officer, Treasurer and Director, to serve as Chief Executive
Officer of the Company. Mr. Hackett resigned from all positions with the Company on April 9, 2015.
Summary Compensation Table
The following table sets forth information concerning all
cash and non-cash compensation awarded to, earned by or paid to the named persons for services rendered in all capacities during
the noted periods.
Name and
Principal Position | |
Year
Ended June 30 | | |
Salary
($) | | |
Bonus
($) | | |
Stock
Awards ($) | | |
Option
Awards ($) | | |
Non-Equity
Incentive Plan Compensation Earnings ($) | | |
Non-
Qualified Deferred Compensation Earnings ($)
| | |
All
Other Compensation ($) | | |
Total
($) | |
Hua
Zhang, Chairman, Chief Executive Officer, President, Secretary and Treasurer | |
| 2015 | (1) | |
$ | — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
$ | — | |
Hua
Zhang, Chairman, Chief Executive Officer, President, Secretary and Treasurer | |
| 2014 | | |
$ | — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
$ | — | |
James
S. Byrd, Jr., Chairman | |
| 2015 | (2) | |
$ | — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
$ | — | |
James
S. Byrd, Jr., Chairman | |
| 2014 | | |
$ | 67,754.46 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
$ | 67,754.46 | |
Douglas
S. Hackett, President, CEO, CFO, Secretary, Treasurer, and Director | |
| 2015 | (3) | |
$ | — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
$ | — | |
Douglas
S. Hackett, President, CEO, CFO, Secretary, Treasurer, and Director | |
| 2014 | | |
$ | 54,807.69 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
$ | 54,807.69 | |
Eric
Fellows, COO | |
| 2015 | (4) | |
$ | 10,250 | | |
| — | | |
| 174,000 | | |
| — | | |
| — | | |
| — | | |
| — | | |
$ | 184,250 | |
Eric
Fellows, COO | |
| 2014 | | |
$ | 35,966.73 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
$ | 35,966.73 | |
|
(1) |
On April 9, 2015, Mr. Zhang was appointed as the Company’s Chairman, Chief Executive Officer, President, Secretary and Treasurer. Mr. Zhang did not take compensation from the Company in fiscal year ended June 30, 2015. |
|
(2) |
On April 9, 2015, Ms. Byrd resigned from all positions with the Company. |
|
(3) |
On April 9, 2015, Ms. Hackett resigned from all positions with the Company. |
|
(2) |
On April 9, 2015, Mr. Fellows resigned as COO of the Company. |
Outstanding Equity Awards at Fiscal
Year-End Table
During our 2014 fiscal year, two employees
were granted an aggregate of 614,000 five year options (see Note 11 of our Financial Statements) which vested immediately as to
114,000 options and as to 125,000 options per year over the next 4 years. The options are exercisable at $2.50 per share for 114,000
options, $3.00 per share for 125,000 options, $3.50 per share for 125,000 options, $3.75 for 125,000 options and $4.00 for 125,000
options. The aggregate grant date fair value of the options was $1,415,710 of which $247,430 and $413,398 has been charged to operations
during the year ended June 30, 2015 and 2014, respectively.
A summary of the status of the stock options granted to employees and others as of June 30, 2015 is provided
in Note 11 of our Financial Statements.
Other than discussed above, we do not
have any equity compensation plans and therefore no equity awards are outstanding as of June 30, 2015.
Compensation of Directors
Our directors are reimbursed for expenses
incurred by them in connection with attending board of directors’ meetings. They do not receive any other compensation for
serving on the board of directors, but may participate in our incentive compensation program, once such a program is established
Compensation Committee Interlocks
and Insider Participation
Our Board of Directors does not have
a compensation committee and the entire Board of Directors performs the functions of a compensation committee.
No member of our Board of Directors
has a relationship that would constitute an interlocking relationship with our executive officers or directors or another entity.
Item 12. Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth certain
information regarding our shares of common stock beneficially owned as of September 29, 2015, for (i) each stockholder known to
be the beneficial owner of 5% or more of our outstanding shares of common stock, (ii) each named executive officer and director,
and (iii) all executive officers and directors as a group. A person is considered to beneficially own any shares: (i) over which
such person, directly or indirectly, exercises sole or shared voting or investment power, or (ii) of which such person has the
right to acquire beneficial ownership at any time within 60 days through an exercise of stock options or warrants or otherwise.
Unless otherwise indicated, voting and investment power relating to the shares shown in the table for our directors and executive
officers is exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children.
For purposes of this table, a person
or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person has the
right to acquire within 60 days of the date of this prospectus. For purposes of computing the percentage of outstanding shares
of our common stock held by each person or group of persons named above, any shares that such person or persons has the right to
acquire within 60 days of the Closing Date is deemed to be outstanding, but is not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not
constitute an admission of beneficial ownership.
Unless otherwise specified, the address
of each of the persons set forth below is in care of the Company, 15C, China Merchants Tower, No. 1166 Wanghai Road, Nansha District,
Shenzhen, Guangdong, China 518067.
Name and Address of Beneficial Owner | |
Amount and Nature of Beneficial Ownership | | |
Percentage of Class (1) | |
Executive Officers and Directors | |
| | |
| |
Hua Zhang | |
| 17,562,505 | (2) | |
| 76.09 | % |
Directors and executive officers as a group (1 person) | |
| 17,562,505 | | |
| 76.09 | % |
Other 5% Holders: | |
| None | | |
| | |
(1) |
Based on 23,082,567 shares of common stock issued and outstanding as of September 29, 2015. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Except as otherwise indicated, we believe that the beneficial owners of the common stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable. |
|
|
(2) |
Includes 16,462,505 shares of common stock held through Engage International Technology Co. Ltd. purchased from two shareholders on April 9, 2015, and 1,100,000 shares of common stock acquired through a subscription agreement with the Company on April 9, 2015. |
Item 13. Certain Relationships and Related Transactions, and Director Independence |
Director Independence
We do not have any independent directors.
Because our common stock is not currently listed on a national securities exchange, we have used the definition of “independence”
of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director”
is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion
of the Company’s Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities
of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:
|
● |
the director is, or at any time during the past three years was, an employee of the company; |
|
|
|
|
● |
the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service); |
|
|
|
|
● |
a family member of the director is, or at any time during the past three years was, an executive officer of the company; |
|
|
|
|
● |
the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions); |
|
● |
the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or |
|
|
|
|
● |
the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit. |
We do not currently have a separately
designated audit, nominating or compensation committee.
Affiliation with Joint Venture in
China
Mr. Hua Zhang, Chairman of Datang Engage
(China) Mobile Technology Co., Ltd., which we own 30% interest is also the Company’s current Chairman,
Chief Executive Officer and President.
Item 14. Principal
Accounting Fees and Services
Audit Fees
For the Company’s fiscal years
ended June 30, 2015 and June 30, 2014, we were billed approximately $62,500 and $18,750, respectively, for professional services rendered
for the audit and reviews of our financial statements.
Audit Related Fees
The Company did not incur any audit
related fees, other than the fees discussed in Audit Fees, above, for services related to our audit for the fiscal years ended
June 30, 2015 and 2014.
Tax Fees
For the Company’s fiscal years
ended June 30, 2015 and June 30, 2014, we were not billed for professional services rendered for tax compliance, tax advice, and
tax planning.
All Other Fees
None.
Pre-Approval of Services
We do not have an audit committee. As
a result, our Board of Directors performs the duties of an audit committee. Our Board of Directors evaluates and approves in advance
the scope and cost of the engagement of an auditor before the auditor renders the audit and non-audit services. We do not rely
on pre-approval policies and procedures.
PART IV
Item 15. Exhibits, Financial
Statement Schedules
Exhibit
No. |
|
Description |
3.1 |
|
Articles of Incorporation. (1) |
3.2 |
|
By-Laws. (1) |
4.1 |
|
Form of Subscription Agreement. (4) |
10.1 |
|
Promissory Note, dated March 9, 2012. (2) |
10.2 |
|
Sales Agreement between MarketKast, Inc. and Veritas Consulting Group, Inc., dated May 29, 2012. (3) |
10.3 |
|
Technology License and Services Agreement, by and among Total Communicator Solutions and Engage Mobility, Inc. (f/k/a MarketKast), dated January 24, 2013. (4) |
10.4 * |
|
Joint Venture Agreement, by and among Engage Mobility Inc., Xinhua Ruide (Beijing) Network Technology Co., Ltd. and Shenzhen Yingjia Mobile Technology Co., Ltd., dated February 18, 2014 |
31.1 * |
|
Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1 * |
|
Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
101.INS * |
|
XBRL Instance Document |
101.SCH * |
|
XBRL Taxonomy Extension Schema Document |
101.CAL * |
|
XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF * |
|
XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB * |
|
XBRL Taxonomy Extension Label Linkbase Document |
101.PRE * |
|
XBRL Taxonomy Extension Presentation Linkbase Document |
(1) |
Incorporated by reference to the Company’s registration statement on Form S-1 filed with the SEC on July 26, 2012. |
(2) |
Incorporated by reference to the Company’s registration statement on Form S-1/A filed with the SEC on September 7, 2012. |
(3) |
Incorporated by reference to the Company’s registration statement on Form S-1/A filed with the SEC on September 28, 2012. |
(4) |
Incorporated by reference to the Company’s registration statement on Form S-1/A filed with the SEC on July 9, 2013. |
* Filed herewith.
SIGNATURES
Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: September 29, 2015
|
Engage Mobility, Inc. |
|
|
|
/s/ Hua Zhang |
|
Name: Hua Zhang
Position: Chief Executive Officer, President, Secretary and
Treasurer |
Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
Signature |
|
Title |
|
Date |
/s/ Hua Zhang |
|
Chairman of the Board |
|
September 29, 2015 |
19
Exhibit
10.4
Form
of Joint Venture Agreement
This
Joint Venture Agreement (the “Agreement") is signed by the following three parties in Beijing, China on
February 18 , 2014 (the “Signing Day"):
Engage
Mobility, Inc. (Hereinafter referred to as "Engage U.S."), a Corporation under the U.S. law; and
Xinhua
Ruide (Beijing) Network Technology Co., Ltd. (hereinafter referred to as "Xinhua Ruide "), a limited liability company
incorporated under the Chinese law; and
Shenzhen
Yingjia Mobile Technology Co., Ltd. (hereinafter referred to as " Shenzhen Yingjia"), a limited liability company incorporated
under the Chinese law; and
Engage
U.S., Xinhua Ruide, Zhichengxin and Anyishen hereinafter collectively referred to as "all parties", or individually
a "Party".
Foreword
WHEREAS,
Engage U.S. has ownership of the software and related intellectual property of the mobile Internet video platform based on AR
technology, and the company has been listed on the U.S. OTCBB market. Engage U.S. intends to work with the domestic Chinese partners
in China to promote their mobile marketing and data products and develop the China market.
WHEREAS,
Xinhua Ruide has been recognized as a hi-tech enterprise with independent and innovative technology platform of cloud services,
mobile Internet industry resources and multiple advantages of innovation business incubator and is in accordance with China's
industrial policies.
WHEREAS,
Shenzhen Yingjia is a company with resources in industry investment and financial, and marketing.
WHEREAS,
China has the world's largest mobile Internet market, all parties hope to input their respective capabilities and resources,
and set up a joint venture in China Datang Engage (China) Mobile Technology Ltd. (hereinafter referred to as Engage China
engaged in development and sales of the AR technology product.All parties have had in-depth communications in regards to setting
up Engage China, and reached the agreement on the tem1s of the investment contract to be signed and reached the following consensus:
the effectiveness of the following terms and conditions depends on the formation, approval and signing of a formal investment
contract.
Article
1 Partner
1.1 |
Partners of the Agreement |
Company
Name: Engage Mobility, Inc.
Registered
Address:
Authorized
Representative: Name: James S. Byrd, Jr., Position: Chairman and CEO
Nationality : U.S.
Company
Name: Xinhua Ruide (Beijing) Network Technology Co., Ltd.
Registered
address:
Legal
representative:
Name:
Cao Bin Position: Chairman Nationality: China
Company
Name: Shenzhen Yingjia Mobile Technology Ltd.
Registered
Address:
Legal
representative: Name: Zhang Hua
Position:
Chairman
Nationality:
People's Republic of China
1.2 |
Change of Legal Representative or Authorized Representative |
If
any party changes the legal representative or authorized representative provided by Section 1.1 (the Agreement parties), the party
shall inform to the other party by written notice within thirty (30) days after the change implemented.
Article
2 Establishment of the Company
The
company's Chinese name is “Datang Engage (China) Mobile Technology Co., Ltd.” (subject to AIC approval) .
The
company's registered address is No. 6, North Yongjia Road, Haidian District, Beijing China.
The
Company is a limited liability company. Parties shall share the company's profits and share the company's risks and losses based
on the proportion for which their respective capital contribution accounted of the total registered capital of the company; however,
the company's creditors only have recourse to the assets of the Company and shall not be entitled to seek or requests reimbursement
from any party.
2.4 |
Compliance with Applicable Laws |
The
company is a legal entity as defined by the Chinese Law. Company activities are governed by applicable Chinese laws, the articles
of association and the jurisdiction and protection of this Agreement.
The
headquarter and registered office of the Company should be set up in Beijing, China. T he Company's initial server and backup
platform shall be. The operation center should be set up in Shenzhen, China.
Article
3 Business Purpose and Scope
The
company's purpose is to gather the resources of all parties to jointly develop the China market and to become China’s leading
mobile Internet cloud service provider.
The
business scope ("Business Scope") includes research, development, design, production and sales of software products,
and providing technology license, technical consulting, and technology services.
Article
4 Total Investment and Registered Capital
The
company's total investment ( Total Investment”) is RMB 20,000,000.
All
parties agree to the company’s registered capital ( Registered Capital of RMB10,000,000. All parties agreed to the capital
contribution of the registered capital of the company according to the following ratio:
(a)
Engage USA: USD cash equivalents to three million RMB cash, accounting for 30% of the registered capital of the company. This
capital will be contributed byShenzehn Yingjia on behalf of Engage and credited to Engage;
(b)
Xinhua Ruide: patented technology, accounting for 10% of the registered capital of the company.
(c)
Shenzhen Yingjia: six million RMB in cash, accounting for 60% of the registered capital of the company.
Under
the premise to be in compliance with the laws of China, other than the initial registered capital, the remaining the registered
capital should be funded parties should have the funding in place not later than one (1) month after the day of incorporation.
The remaining registered capital shall be funded no later than two years from the business license issuance date.
4.4 |
Verification and Proof of Funding |
The
cooperating parties agree to hire an accounting firm registered in China for verification in accordance with international guidelines
with verification report issued.
4.5 |
Investment Certificate |
After
capital contributed by any party, the Company shall issue investment certificate signed by the president to the party within thirty
(30) business days upon receipt of verification report. Every investment certificate shall set forth the amount and the specific
date of contribution proved by the investment certificate on the front page.
If
any party fails to pay wholly or partly funded amount of the registered capital in accordance with the terms of the Agreement
(“ Default Amount”) shall pay to the company simple interest on the Default Amount at the rate of 0.5% per
day during the period between the contribution due date to the date of payment, and in any case it shall make up the breach within
twenty (20) business days upon receipt of notice of default sent by the other party. Each party hereby agrees to procure that
their respective directors appointed will vote for approval of termination, equity transfer or other remedial measures made as
contemplated under section 4.6 herein (failure for contributions), and to seek in good faith to obtain all necessary authorization
to realize such termination, equity transfer or other remedy.
4.7 |
Additional Capital Contribution |
The
company can increase the registered capital with unanimous approval of all parties of the company.
The
parties are entitled to subscribe the additional registered capital based on its stake in the company at that time, unless otherwise
agreed in writing by all parties.
When
increasing the registered capital, the company shall, firstly, issue subscription offer to each party based on the proportion
of their respective stake of the company's equity at that time (such offer issued to each of the parties is a "subscription
offer", and all such offers referred to as "the· subscription offers"), unless otherwise
agreed in writing by all parties.
If
a party gives up the subscription, the other parties can subscribe those shares based on the proportion of their stake of the
company at that time.
For
any unsubscribed shares that are not subscribed by the cooperating parties based on the agreement, the company can make subscription
offer to any party approved by all parties in accordance with the terms and conditions not more favorable than the provisions
subscribed in the subscription offers (but the cooperating parties shall not unreasonably refuse to approve ) .
Article
5 Equity Transfer
The
cooperating parties hereby acknowledge that any party shall not sell, transfer to any third party, including mortgage, pledge
all or part of its holding in the company, nor shall set any encumbrances thereon, without the prior written consent of the other
partners, unless otherwise provided in this Agreement
5.2 |
Right of First Refusal |
If
any party (the "Transferor") wish to transfer to a third party all or part of its shares in the company, it shall
issue a written notice ("Transfer Notice") to the rest of its partners ("Non- transferor Party"),
which states it wishes to transfer the shares, the price of such transfer, the proposed transferee's identity, as well as other
proposed transactions ·with these terms and conditions. For all (but not some) the proposed transfer equity, non-transferor
side has right of first refusal. If the non-transferor wishes to exercise its right of first refusal, it shall submit the notification
("Call Notice") to the transferor to exercise its right of first refusal within thirty (30) days ("30-day
period") after receipt of the Transfer Notice. Call notice is final and binding on non- transferor. If the non-transferor
does not submit call notice within the period of 30 days, the transferor shall be entitled to sell the shares to the proposed
third party transferee, provided that the final purchase price and other terms and conditions available to the transferee, in
any case, shall not superior to the prices, terms and conditions provided to the non transferor parties.
Both
Parties shall sign a share purchase Agreement in all material respects accordance with the terms and conditions set fort in the
Transfer Notice within thirty (30) days upon the date of the Subscription. The amount of the purchase price of such shares shall
be paid in cash immediately available to the account designated by the transferor, without any set-off, deduction or counterclaim.
5.3
AII parties agree Xinhua Ruide can choose to receive 12% ownership of the company from Shenzhen Yingjia and increase its investment
in the Company (in other words, Xinhua Ruide by itself can increase up to 12% ownership of the Company); Xinhua Ruide will invest
RMB one million two hundred thousand Yuan in intangible assets that are evaluated by a valuation agency that are jointly en gaged
by all parties in t his agreement The above ownership transfer will be completed within one month of Xinhua Ruide issuing the
ownership transfer transaction written notice, all parties shall cooperate and sign related documents and carry through related
procedures.
Article
6 Obligations of the Parties
Besides
as otherwise provided in performance of the obligations of this Agreement, under the premise of being in compliance with other
provisions of this Agreement, Engage U.S. shall :
6.1.1
assist the company to obtain any and all necessary or appropriate government registration, license (not including any necessary
industry product certification), approvals, as well as any other documents of any nature necessary for setting up operating companies
in China.
6.1.2
join in and form Engage China company with technical inputs, providing comprehensive technical support for server deployment,
software maintenance, software improvements and the post-stage development of new technologies of its legally owned software in
China .
6.2 |
Obligations of Xinhua Ruide |
Besides
as otherwise provide in performance of the obligations of this Agreement, under the premise of being in compliance with other
provisions of this Agreement, Xinhua Ruide shall :
6.2.1
assist the company to obtain any and all necessary or appropriate government registration, license (not including any necessary
industrial product certification), approvals, as well as any other documents of any nature necessary for setting up operating
companies in China.
6.2.2
join in and form Engage China with its brand, resources; provide office space, server maintenance, network infrastructure equipment
and network bandwidth, cloud services and other associated industry resources during the phases of product testing (before formal
launch out of the product) .
6.2.3
in accordance with applicable policies and regulations, to assist the company to obtain tax relief, including, but not limited
to, the company obtain preferential tax incentives for certified high-tech enterprises or other similar nature corporates;
6.2.4
assist the company to obtain any government grants or subsidies or tax incentives applicable to the company with best efforts.
6.3 |
Obligations of Shenzhen Yingjia |
Besides
as otherwise provided in perfom1ance of the obligations of this Agreement, under the premise of being in compliance with other
provisions of this Agreement, Shenzhen Yingjia shall
6.3.1
assist the company to obtain any and all necessary or appropriate government registration, license (not including any necessary
industrial product certification), approvals, or any other documents of any nature necessary for setting up operating companies
in China. ·
6.3.2
join in and form Engage China by the way of capital investment and is responsible for the market operations and team building
of Engage China utilizing its domestic network.
6.4.1
In addition to the obligations of the parties listed above, each party must make its best endeavors to procure the Company's investment
direction and operations comply with (i) applicable law, (ii) any administrative rules adopted by the Board, (ii) prudent management,
and (iii) the company's business, financial and legal obligations.
6.4.2
all parties expressly acknowledged that all parties and the company's areas of expertise, technology, goods, sales activities
and services are subject to the regulations of the establishment location and the business activities location (including but
not limited to China and the United States) .
Article
7 Technology License and Services
Engage
U.S. will provide JV with all of its licensed technology, technical know how, product types, business and marketing expertise,
technical and product support, and general business and product expertise for use throughout China. The JV shall not acquire any
license or use rights for anywhere else in the world unless done by subsequent written agreement.
All
parties agree, Shenzhen Yingjia will make wire payments of USD 300,000 to Engage U.S. on or before November 18, 2013 as initial
development fund to create and deliver to the JV a Chinese mobile interactive systems customized for the China market (i.e. Chinese
AR system) after the capital contribution. JV will repay Shenzhen Yingjia the amount after JV receives the registered capital.
Engage U.S. shall deliver to the JV a commercially available Chinese mobile interactive system within 100 days after collecting
the fees.
Article
8 Trademark License
All
parties acknowledge and agree that the company can use the combination of markers (the "Company Exclusive Trademark")
containing certain kinds of trademarks, logos or other commercial trademarks of Engage U.S., Xinhua Ruide, and Shenzhen Yingjia
in the products produced and sold by the company and related technical support, maintenance, professional, consulting, development
and integration services provided. The Company can also use the Company Exclusive Trademark in corporate identity materials, and
sales and promotion materials. The use of any trademarks, logos or trade dress of Engage US shall be for the limited purpose of
operation of the JV throughout China.
Article
9 Board of Directors
9.1 |
Establishment of the Board of Directors |
9.1.1
The Board of Directors shall be established in on the date of the establishment.
9.1.2
The Board of Directors shall consist of 3 Directors, of which 1 shall be appointed by Engage U.S., 1 shall be appointed by Xinhua
Ruide, and 1 shall be appointed by Shenzhen Yingjia.
9.1.3
Shenzhen Yinjia shall appoint one of its directors as the Chairman of the Board and the Chairman of the Board is the legal representative
of the JV.
9.1.4
The term of office for the directors shall be two (2) years and any Director may be reappointed or replaced at any time by the
Party which originally appointed the director. The Party which initially appointed the Director shall appoint a successor in case
the Director is absent from the office due to retirement, resignation, illness, loss of capability or death
9.1.5
Directors shall possess adequate experience and ability and ensure adequate time and energy to perform the duties in an honest
and diligent manner. Members who are not in line with these qualifications shall not be in the Board of Directors.
9.1.6
The resolution any of the following matters should be unanimously approved by all the Directors in written forms:
(a)
amendments to the Articles :
(b)
approval of changes to the company's business scope or range of products ;
(c)
the termination, dissolution or liquidation of the Company. and any action taken thereon ;
(d)
the division. Merger or sale of the company or a change in the company's form of economic organization;
(e)
increasing or decreasing the company's total investment. and I or registered capital , the transfer of the shares of the
registered capital of the company:
(f)
investment, purchasing, subscription or otherwise acquiring or disposal of any shares or other securities of any nature of the
Company ;
(g)
Undertaking any encumbrances on the Company's entire or any part of the business, property, assets or equity;
(h)
sale, transfer, lease, assign or otherwise dispose of the company's business, property or assets ( or any interest therein) during
the non-regular business progress , and the amount involved exceeds 10% of the net asset or over the most current limits subsequently
and unanimously approved by the Board of Directors;
(i)
any overseas investment or establish any branch within and outside of China:
(j)
approval of the annual budget and changes to any contents of the approved annual budget that are more than 10% of approved amounts:
(k)
approval of the final settlements of the accounts and annual financial statements:
(l)
approval of the annual profit distribution plan and the associated recovery of losses plan, including statutory fund reserve plan:
(m)
approval of any transactions or entering into any agreement for the benefit of any party in this agreement or their respective
related parties: or conducting any transactions or agreements with any party described and the amount of the transactions or agreements
would cause changes to the content of the approved annual budget for more than 10% of the approved annual budgeted amount:
(n)
approval of any significant transactions or entering into any agreement the “significant transaction” refers to any
transactions of series related transactions exceed the total value of RMB 1.000.000 or above the most current limits subsequently
and unanimously approved by the Board of Directors;
(o)
incur any indebtedness (including any loans provided to the Company by a third party or the Company providing any guarantee for
other companies) or provide any loan or payment of any advanced payment or provide credits to any parties other than the trade
credits incur in the normal course of business;
(p)
initiate any litigation or arbitration proceedings or in any litigation or arbitration proceedings reconciliation or the company
is a party to release any claim under the any agreement, and the amount involved is more than RMB 1.000.000 Yuan or the most current
limits subsequently and unanimously approved by the Board of Directors:
(q)
approval of any product sales arrangements or policies that the Company intends to establish or use that are inconsistent or do
not cohere to the principals within the scope of the provisions on the product sales arrangements and policies under the general
principles of this agreement or any related other sub-agreements:
(r)
the approval of the signing authority of the Chairman or the Managing:
(s)
approval of the Company's management and staff compensation and benefit m aster plan (including the maximum limits for the bonuses)
that deviate from the relevant provisions of the annual budgeted compensation master plan:
(t)
appointment and removal of president, vice president, chief financial officer, chief technology officer and deputy technical director.
Article
10 Board of Supervisors
10.1 |
Establishment of the Board of Supervisors |
10.1.1
The JV shall consist of three (3) Supervisors ("Supervisors"). The Supervisors shall perform its duties and responsibilities
in line with all laws and regulations of China and the regulations in the Agreement. Engage US, Xinhua Ruide shall each appoint
one (1) Supervisor. Xinhua Ruide shall appoint the Chairman of the Board of Supervisor. After the JV is setup, J V shall appoint
one employee representative as Supervisor.
10.1.2
Any Director or management shall not at the same time act as the Supervisor.
10.1.3
Any Supervisor shall possess adequate experience and ability and ensure adequate time and energy to perform the duties in a honest
and diligent manner.
10.1.4
The term of Supervisor shall be two (2) years and any Supervisor may be reappointed when the term is due by the Party which originally
appointed the Supervisor. The Party which initially appointed the Supervisor shall appoint a successor in case the Supervisor
is absent from the office due to retirement, resignation, illness, loss of capability or death.
Article
11 Business Management
11.1 |
Management Structure |
The
management shall have: (i) a General Manager "General Manager"); (ii) two Deputy General Manager ("Deputy General
Manager"), (iii) a Chief Financial Officer ("Chief Financial Officer"); and (iv) a Chief Technology Officer ("Chief
Technology Officer") (all called "Management").
The
General Manager shall have the responsibility of implementing the general policies and decisions of the Board of Directors, and
of organizing and conducting the daily management of the JV. In the first year of the JV, the post of the General Manager
shall be concurrently held bythe Chairman of the Board. The General Manager shall be nominated until determined by the Board of
Directors with a term of one (1) years, and may be renominated and reappointed by the Board of Directors.
11.3 |
Vice General Manager |
Deputy
General Managers shall be nominated from Engage US and Xinhua Ruide each, and be determined by the Board of Directors. The Deputy
General Managers shall be report to and assist the General Manager in dealing with everyday management with a term of one (1)
years, and may be renominated and reappointed by the Board of Directors.
11.4 |
Chief Financial Officer |
The
Chief Financial Officer shall be nominated by Shenzhen Yingjia and determined by the Board of Directors. The Chief Financial Officer
shall report to the General Manager with a term of one (1) years and may be renominated and reappointed by the Board of Directors.
Salary
and welfare of the Management shall be approved by the Board of Director.
11.6 |
Other Senior Officials |
The
appoint of any Senior Officials that are not mentioned above shall be determined by the General Manager.
11.7 |
Full Time Requirement |
Management
shall work full time and shall not work part time any entity in direct competition with the JV 's business aany identity within
the JV 's legitimate scope of business and shall not join any business that is in direct competition with the JV 's business.
Article
12 Non-competition and Non Solicitation
Each
Party shall ensure that the Party and its affiliates: shall not perform or join (individually or with other person(s)) directly
or indirectly any business of the similar kind with the JV as long as the cooperation of the JV exist; and
12.1.1
The restriction in 12.1.1 does not prohibit the parties and their controlled affiliates to perform the prohibited activity after
the prohibition being terminated. Nothing in this Article 12 shall limit or prohibit Engage USA from conducting any of its business
outside of China.
Article
13 Financing and Accounting
The
financial and accounting system ("Financial and Accounting System") to be adopted by the JV shall
be able to perform the internal and procedure control effectively and shall be in accordance with the relevant laws, regulations
and rules of the PRC governing finance and accounting systems. The JV’s statements shall be true and complete, shall include
the JV’s financial status up to the date of the statement and shall include the JV’s performance, cash flow and equity
variation covering the statement period in accordance with the relevant laws and regulations of PRC.
13.1.2
The financial and accounting system shall be conducted after the approval of the Board of the Directors. Subject to relevant laws,
the financial and accounting system and its amendments shall be reported and documented in relevant authority of PRC. The company
shall use Renminbi as the standard currency for bookkeeping.
13.2 |
Financial Statements: the right to know of both Parties |
The
JV shall engage a independent audit entity to perform audit on the JV’s annual financial reports. The independent audit
entity for the JV shall be engaged by the Board of Directors.
Any
party can engage the party 's internal staff or independent auditing firm (registered abroad or in China) on its own expenses
to audit JV 's books, records, and other financial, business or legal records on behalf of the party. The JV shall permit the
internal staff or independent auditing firm described above to obtain all records other accounting records of the JV within normal
business process. Additionally, the HV shall provide reasonable work space and conditions for the engaged internal staff or independent
audit entity and tis staff, however, the prerequisite is that the audit staff needs to sign and provide t he standard confidentiality
agreement for the J V and guarantee that to keep all reviewed documents and materials confidential.
The
JV shall submit to the Parties balance sheet, profit and loss statement and income statement and their annexes in Chinese and
English language as soon as possible (no later than ninety (90) days after the end of the respective fiscal year in any case).
The
JV shall submit to the Parties quarterly financial statement prior to the audition on the JV 's finance and operation as soon
as possible (no later than ten (10) business days after the end of the respective quarter in any case).
Article
14 Duration of the Joint Venture and its extension
Agreed
by each Party, the duration of the JV ("Duration") shall be twenty-five (25) years from the date of the establishment
unless the JV being dismissed or cleared or the Duration being extended.
14.2 |
Extension of the JV Duration |
14.2.1
If any Party wants to extend the JV Duration, the Party shall notify and discuss with other Parties two (2) years prior
to the expiration of the first JV Duration (or any extension) to decide whether to extend the duration. If the Parties
agree on the extension, an application shall be submitted to the examination and approval authority at least six (6) months prior
to the expiration of the duration of the JV.
14.2.2
However, if Parties fail to sign in written a Duration extension agreement twelve (12) months (or a period regulated otherwise
by the Parties or by China laws and regulations) prior to the expiration of the duration of the JV , the Agreement shall
be terminated immediately when the duration is reached.
Article
15 Early Termination
15.1 |
Termination of the Agreement |
15.1.1
The Agreement may be terminated prior to its stated expiration date by a unanimous written agreement of all Parties.
15.1.2
The Agreement may be terminated by any Party if any of the following conditions arises or are informed:
(a)
If the JV is unable to continue operations due to serious loss suffered from: (i) successive three (3) years' loss; or (ii) the
accumulated amount of such loss has made the JV’s shareholders' rights less than sixty percent (60%) of the JV’s registered
capital;
(b)
If the JV is unable to obtain all approval, documentation and registration to make the project and its documents effective
within one hundred and eighty (180) day.s of the establishment of the JV;
(c)
If the JV is unable to continue operations for one hundred and eighty (180) days due to an event of force majeure;
(d) If
the government request all or major assets of the JV by Nationalization, appropriation or other ways;
(e)
If the JV is unable to obtain or extend material permits or government authorization for its operation.
Article
16 Dismissal and Clearance
16.1 |
Dismissal and Clearance |
The
JV may dismiss and clear the company in accordance with relevant laws and regulation of PRC. With consensus of the Board of Directors,
the business may be closed and start the dismissal and clearance. If relevant laws and regulations of the PRC apply, the JV shall
submit the dismissal and clearance plan to relevant governing authorities for approval and supervision.
16.1.1
If the Board of Directors decide to dismiss and clear, the JV and the Parties shall obtain approval in accordance with applicable
laws and regulations or PRC in a fair manner.
16.1.2
After the resolution of the Board of Directors and the approval of government authorities, each Party shall establish a clearance
team ("Clearance Team"), the clearance team may represent the JV in any legal matters. The clearance shall be
carried out in accordance with applicable laws and regulations of PRC, this Agreement and articles of the JV.
Article
17 Indemnification
17.1 |
Delinquent Party Indemnification |
If
One Party and its shareholders, directors, senior officials, employees, representatives, agencies, Agreementors and licensees
("Indemnified Party") suffer any damage and loss for (i) the other Party ("Delinquent Party")
breach in any way the Agreement, including but not limited to any false statement or failure to fulfill any commitment, obligations
or arrangements, and (ii) Delinquent Party fails to act or act in a careless or inappropriate manner, Delinquent Party shall compensate
the Indemnified Party and protect it from loss.
Article
18 Force Majeure
18.1 |
Force Majeure Events |
"Force
Majeure" events cannot be controlled or prevented through careful and reasonable measures, either such events are caused
by the non-affected Party 's faults, carelessness, and may impede directly or delay the affected Party to perform its obligations
under the Agreement. The events include but do not limit to earthquake, storm, flood, fire, war, riot and other acts of the same
nature, however, Force Majeure shall not include the following situations in any case:
One
Party is short of capital or fail to pay when due; or Delay of the Agreementor or subAgreementors or breach due to Force Majeure
events not included in the Agreement.
18.2 |
The Occurrence of the Force Majeure |
If
one Party is unable to fulfill any obligations under the Agreement in a complete, timely and appropriate manner when Force Majeure
occur, the Party shall be exempt from such breach within the affected scope. However, the affected Party shall notify the other
Party in details such event and the inability to fulfill any obligations under the Agreement in a complete, timely and appropriate
manner by fax or express on the occurrence of such event or within ten (10) days when the communication recovers. The affected
Party shall not be exempt from the breach if the Party fail to notify and provide evidence as such.
18.3 |
Mitigate the Effect of Force Majeure |
The
affected Party shall adopt any possible measures to offset or mitigate the negative effects of the Force Majeure and resume the
obligations after the offset or mitigation. Failure to perform the obligation of mitigation shall be liable for additional loss
resulted from the suspension because the affected Party does not Perform offset or mitigation.
Article
19 Applicable Laws
The
Agreement shall be governed and interpreted by the laws and regulations of PRC.
Article
20 Settlement of Disputes
All
disputes ("Dispute") arising from the execution of, or in connection with, the Agreement shall be settled
through friendly consultation between Parties. The consultation shall begin as soon as one Party notify in writing the other Party
(Parties) to settle disputes through consultation. If no settlement can be reached through consultation within sixty (60) days
after the Party(Parties) receive the notice, the dispute shall be submitted to arbitration under Article 20 (Settlement of Disputes).
The arbitration is final and binding.
If
disputes or right petition arising from the execution of, or in connection with (including the signing, effectiveness or termination
of the Agreement) the Agreement cannot be settled through consultation in accordance with 20.1(Consultation), the dispute or petition
will be submitted to Beijing arbitration Court.
The
arbitration shall be final and binding for all Parties. The arbitration is the only and exclusive remedy for all Parties' petition,
court charge or dispute. Except the compulsory execution of relevant arbitration agreements or their resolution, the Parties shall
waive any right of application or appeal to any court, court of justice to the largest extent in accordance with relevant laws
and regulations.
20.4 |
Arbitration Expenses |
The
losing Party shall bear the expenses (include but not limited to the expenses of the arbitrator and the arbitration court, reasonable
chargeout and expenses of the lawyers)
20.5 |
Agreement Execution during Arbitration |
During
the arbitration proceeding, the Agreement shall continue to be executed by the Parties, except for the part which is under arbitration.
Article
22 Miscellaneous
22.1 |
Effectiveness and Change of the Agreement |
The
Agreement takes effect after relevant governing authorities' approval. On the basis of its accordance with relevant laws and regulations
of PRC, the Agreement can be changed by writing documents from the Parties at any time.
Notice
in accordance with the Agreement from any Party or company shall be written in English and Chinese, and be delivered by appointed
person, email, fax or FedEx, or DHL or any express companies recognized by both Parties (collectively called "qualified
Express Companies") to the other Party 's following address, or the address provided by the other Party constantly or
legal address of the other Party. If the notice is delivered by qualified express companies, the arrival day will be viewed as
the effective delivery day; if the notice is delivered by email or fax, the first business day after the transmission day (according
to the date in the email or fax) will be viewed as the effective delivery day, and an ordinary mail shall be submitted later.
(a)
Engage Mobility, Inc. (Seal):
Address:
To:
Jim Byrd
(By
email):
Article
23 Confidentiality
23.1 |
Content Confidentiality |
The
Parties shall not disclose or promote the disclosure from their owners, affiliates, directors, senior officials, employees, agencies,
professional or other consultants ("One Representative") and the owners, affiliates, directors, senior officials,
employees, agencies, professional or other consultants the Agreement content to owners, affiliates, directors, senior officials,
employees, agencies, professional or other consultants ("Company Representative", collectively called
"Receiving Party" with the One Representative) to any party outside the Receiving Party.
23.2 |
Disclosure Information Confidentiality |
For
the information the receiving Party know of and the other Part (include One Representative) or Company (include Company Representative)
(collectively called "Disclosure Party") possess or disclose, the rights and obligations relevant to the Agreement,
or the execution or act relevant to the Agreement, or any meetings involving both Parties or the Board of the Directors, or any
exclusive and confident information attached to the services of the Board of Directors, senior officials, employees, agents, consultants,
pertaining to Agreement and its articles (collectively called "Confidential information"), the Parties shall
and shall promote a strict confidentiality between all receiving Parties, and shall not be used for any other purposes (except
for when Directors and employees use it for the JV 's personnel system) except those regulated in the Agreement.
(b)
Xinhua Ruide:
Address:
To:
Yang Yong
Fax:
(c)
Shenzhen Yingjia
Address:
To:
Zhang Hua
Fax:
The
Agreement, the articles of the JV , attached written Agreements for the Agreement, and the attachments and annexes of the
Agreement compose the only and complete agreement between each Parties for the purpose, and replace all previous oral or written
agreements, memorandum and communications between the Parties and/or their respective affiliates for the purpose.
The
article shall be viewed as ineffective in case it violates any authorized article or condition or any laws and regulations despite
conflicting regulations in the Agreement and the article shall be replaced when reasonable and feasible in the case of: (i) regulating
intentions of both Parties, and (ii) non-violating of any authorized article or any laws and regulations. If any Party fail to
fulfill the obligations regulated above and result in the termination of the Agreement by one Party, 22.4 (Di visibility) shall
not be held applicable to terminate or pro hi bit the right of the termination of the Agreement by one Party.
The
Agreement shall be written in Chinese and in English versions. The English language version and the Chinese language version shall
be equally binding.
The
articles of the JV are established in accordance with the articles of the Agreement. In case of discrepancies, the articles of
the Agreement shall prevail.
Respective
Parties shall bear stamp or taxes of the same nature relevant to the signing of the Agreement of the articles of the JV collected
by the government.
Multiply
copies of the Agreement can be signed and the signed copies shall be equally binding with the original Agreement.
The
fact that any Party does not or fail to act or seek timely the rights or remedy under the Agreement, or the fact that any Party
does not or fail to fulfill its obligations under the Agreement shall not compose or be interpreted as the Party full or partial
waiver of its rights, remedy or obligations, and the rights, remedy or obligations continue to be effective.
23.10 |
No Third Party Beneficiary |
Unless
being regulated by the Agreement otherwise, only the Agreement Parties and their affiliates shall be held binding and the rights,
interests or remedy of any kind under the Agreement shall not be granted to any other person explicitly or implicitly .
23.11 |
Fair Interpretation |
The
Agreement shall be interpreted without the consideration on which Party initiates its draft, which Party suggest the language
using or draft it, nor shall any interpretation be held for or against the Party that initiate, suggest or draft the Agreement.
Engage
Mobility, Inc. (seal) |
|
|
|
|
Signature: |
/s/ |
|
Title: |
|
|
|
|
|
Beijing
Xinhua Ruide Network Technology Co., Ltd. (seal) |
|
|
|
Signature: |
/s/ |
|
Title: |
|
|
|
|
|
Shenzhen
Yingjia Mobile Technology Co., Ltd (seal) |
|
|
|
Signature: |
/s/ |
|
Title: |
|
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Page
17 of 17
Exhibit
31.1
CERTIFICATION
OF PRINCIPAL EXECUTIVE OFFICER AND
PRINCIPAL
FINANCIAL OFFICER
PURSUANT
TO 18 U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY
ACT OF 2002
I,
Hua Zhang, certify that:
1. I
have reviewed this annual report on Form 10-K of Engage Mobility, Inc.;
2. Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect
to the period covered by this quarterly report;
3. Based
on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this quarterly report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a) |
designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
|
b) |
designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles; |
|
c) |
evaluated
the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based
on such evaluation; |
|
d) |
disclosed
in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an quarterly report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; |
5. The
registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent function):
|
a) |
all
significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and |
|
b) |
any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal controls over financial reporting. |
Date:
September 29, 2015 |
By: |
/s/ Hua
Zhang |
|
|
Hua
Zhang
Chief
Executive Officer and President
(Principal
Executive Officer and
Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
AND
PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Engage
Mobility, Inc., (the “Company”) on Form 10-K for the year ended June 30, 2015 as filed with the Securities and Exchange
Commission on the date hereof (the “Report”), Hua Zhang, President and Chief Executive Officer of the Company, certifies,
pursuant to 18 U.S.C. section 1350 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: September 29, 2015 |
By: |
/s/ Hua zhang |
|
|
Hua Zhang
Chief Executive Officer and President
(Principal Executive Officer and
Principal Financial Officer) |
A signed original of this written statement
required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed
form within the electronic version of this written statement has been provided to the Company and will be retained by the Company
and furnished to the Securities and Exchange Commission or its staff upon request.
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