As
filed with the Securities and Exchange Commission on September 9, 2016
Registration No. 333-210250
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM S-1/A
(Amendment
No. 3)
_______________
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MOXIAN, INC.
(Exact name of registrant as specified in its
charter)
_______________
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(State or other
jurisdiction of incorporation or organization)
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(Primary standard
industrial classification code number)
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(I.R.S. employer
identification number)
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Block A, 9/F, Union
Plaza
5022 Binjiang Avenue
Futian District Shenzhen City, Guangdong Province, China
+86 (0)755-66803251
(Address, including zip code, and
telephone number, including area code, of registrant’s
principal executive offices)
228 Park Ave South, #82217
New York, NY 10003
(U.S. correspondence address of
registrant)
VCorp
Services, LLC
25 Robert Pitt Dr. #204,
Monsey, NY 10952
(845) 425-0077
(Name, address, including zip code,
and telephone number, including area code, of agent for
service)
_______________
Copies to:
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Mitchell S. Nussbaum, Esq.
David Levine,
Esq.
Tahra Wright,
Esq.
Loeb & Loeb
LLP
345 Park
Avenue
New York, New York
10154
(212)
407-4000
Fax: (212)
937-3943
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Ralph V. De Martino, Esq.
Cavas S. Pavri,
Esq.
F. Alec Orudjev,
Esq.
Schiff Hardin
LLP
901 K Street, Suite
700
Washington, DC
20001
(202)
778-6400
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_______________
Approximate date of commencement of proposed
sale to the public:
As soon as practicable after the effective date
of this registration statement.
If any of the securities being
registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box.
x
If this Form is filed to register
additional securities for an offering pursuant to Rule 462(b) under
the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement for the same offering.
¨
If this Form is a post-effective
amendment filed pursuant to Rule 462(c) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering.
¨
If this Form is a post-effective
amendment filed pursuant to Rule 462(d) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering.
¨
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
¨
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Accelerated
filer
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Non-accelerated
filer
¨
(Do not check if smaller reporting company)
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Smaller reporting
company
x
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CALCULATION OF
REGISTRATION FEE
Title
of Each Class of Security Being Registered
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Proposed
Maximum Aggregate Offering Price
(1)
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Amount
of Registration Fee
(2)
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Common
Stock, $0.001 par value
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$
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20,000,000
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$
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2,014.00
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Placement
Agent Warrants
(3)
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$
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—
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$
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—
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Common
Stock Underlying Placement Agent Warrants
(4)
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$
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800,000
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$
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80.56
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Total
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$
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20,800,000
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$
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2,094.56
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(5)
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The registrant hereby
amends this registration statement on such date or dates as may be
necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this
registration statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until
the registration statement shall become effective on such date as
the Commission, acting pursuant to said Section 8(a), may
determine.
The information in
this prospectus is not complete and may be changed. We may not sell
these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is
not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale
is not permitted.
Subject
to Completion, Preliminary Prospectus dated
September 9,
2016
MOXIAN, INC.
MINIMUM
OFFERING: 2,500,000 shares of common stock
MAXIMUM OFFERING: 5,000,000 shares of common stock
Moxian, Inc. is offering a minimum
of 2,500,000 shares of common stock, par value $0.001 per share, and a maximum of 5,000,000 shares of common stock. We currently
expect the public offering price to be $4.00 per share of common stock. The offering is being made on a “best efforts”
basis without a firm commitment by the placement agents, who have no obligation or commitment to purchase any of our shares. The
placement agents must sell the minimum number of shares offered (2,500,000 shares of common stock), if any are sold, and are only
required to use their best efforts to sell the shares offered. The offering will remain open through November 14, 2016. See “Plan
of Distribution.”
On
September 7, 2016, we entered into note conversion agreements with Shenzhen Bayi Consulting Co. Ltd. and Moxian China Limited.
The note conversion agreements provide for the conversion of promissory notes in the aggregate amount of $2 million payable by
us into shares of our common stock at the public offering price. On the date of this prospectus, the notes will automatically
convert into shares of common stock at a conversion price equal to the public offering price per share being offered in this offering.
We
are a reporting company under Section 13(a) of the Securities Exchange Act of 1934, as amended. Our common stock is currently
quoted on the OTCQB Marketplace (the “OTCQB”) under the symbol “MOXC.” There is a limited public trading
market for our common stock. We have applied to list our common stock on the NASDAQ Capital Market under the symbol “MOXC.”
Investing
in our securities involves a high degree of risk. You should carefully consider the risk factors beginning on page 7 of this prospectus
before purchasing shares of our common stock.
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Minimum
Offering (2,500,000 shares)
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$
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4.00
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$
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0.16
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(2)
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$
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9,600,000
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(2)
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Maximum
Offering (5,000,000 shares)
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$
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4.00
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$
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0.22
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(2)
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$
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18,900,000
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(2)
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In
addition to the placement agent commissions listed above and the non-accountable expense allowance described in the footnote,
we have agreed to issue Axiom Capital Management Inc. warrants, exercisable commencing 180 days immediately following the date
of effectiveness of the registration statement of which this prospectus forms a part or the commencement of sales in this offering
for a period of five years, to purchase shares of common stock equal to 4% of the total number of shares sold in this offering
and may be exercisable on a cashless basis at a per share price equal to the public offering price (the “Placement Agent
Warrants”). The registration statement of which this prospectus is a part also covers the Placement Agent. Warrants and
the shares of common stock issuable upon the exercise thereof. For additional information regarding our arrangement with the placement
agents, please see “Plan of Distribution” beginning on page 62.
Until we sell at least of 2,500,000 shares
of common stock, all investor funds will be held in an escrow account at Continental Stock Transfer & Trust, New York, New
York, as agent, for the benefit of the investors. If we do not sell at least 2,500,000 shares of common stock by November 14, 2016,
all funds will be promptly returned to investors without interest or deduction. If we complete this offering, net proceeds will
be promptly delivered to us on the closing date. Affiliates of the company and affiliates and associated persons of the placement
agents may invest in this offering on the same terms and conditions as the public investors participating in this offering, and
any shares of common stock purchased will make up a portion of the minimum offering needed to complete this offering.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of
these securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The
placement agents expect to deliver the shares of common stock to purchasers no later than November 14, 2016, subject to the condition
that at least 2,500,000 shares of common stock have been subscribed and paid for. The offering period cannot be extended.
Axiom Capital Management
Inc.
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Cuttone & Co.,
Inc.
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The date of this
prospectus is
, 2016
TABLE OF
CONTENTS
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SUMMARY
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1
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THE OFFERING
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4
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SUMMARY FINANCIAL AND OTHER DATA
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5
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RISK FACTORS
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7
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
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17
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USE OF PROCEEDS
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18
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CAPITALIZATION
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19
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DILUTION
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21
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MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
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22
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EXCHANGE RATE INFORMATION
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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25
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OUR HISTORY AND CORPORATE STRUCTURE
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31
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BUSINESS
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34
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REGULATIONS
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43
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DIRECTORS AND EXECUTIVE OFFICERS
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47
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EXECUTIVE COMPENSATION
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51
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CERTAIN RELATIONSHIPS AND RELATED-PARTY
TRANSACTIONS
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54
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
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57
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DESCRIPTION OF SECURITIES
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59
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SHARES ELIGIBLE FOR FUTURE SALE
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61
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PLAN OF DISTRIBUTION
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62
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LEGAL MATTERS
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66
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EXPERTS
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66
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WHERE YOU CAN FIND MORE INFORMATION
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66
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i
ABOUT THIS
PROSPECTUS
You should rely only on the information contained in this
prospectus or any supplement or amendment hereto. We and the
placement agents have not authorized any person to provide you with
different information. We and the placement agents are not offering
to sell, or seeking an offer to buy, our common stock in any
jurisdiction where such offer or sale is not permitted. You should
assume that the information contained in this prospectus and any
supplement or amendment hereto is accurate only as of the date of
this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock or warrants. Our
business, financial condition, results of operations and prospects
may have changed since that date.
Unless the context otherwise indicates, all references in this
prospectus to:
•
“China” and “PRC,” refer to the
People’s Republic of China;
•
“Moxian,” “we,” “us,”
“our” and the “Company,” refer to Moxian,
Inc. and its consolidated subsidiaries and variable interest
entities;
•
“Moxian CN Samoa” refers to Moxian CN Group
Limited;
•
“Moxian IP Samoa” refers to Moxian Intellectual
Property Limited;
•
“Moxian BVI” refers to Moxian Group Limited;
•
“Moxian HK” refers to Moxian (Hong Kong) Limited;
•
“Moxian Shenzhen” refers to Moxian Technologies
(Shenzhen) Co., Ltd.;
•
“Moxian Beijing” refers to Moxian Technologies
(Beijing) Co., Ltd.;
•
“Moxian Malaysia” refers to Moxian Malaysia SDN BHD;
and
•
“Moyi” refers to Shenzhen Moyi Technologies Co. Ltd.
Unless otherwise noted, all currency figures in this filing are in
U.S. dollars. References to “yuan” or “RMB”
are to the Chinese yuan (also known as the renminbi). References to
“RM” are to the Malaysian Ringgit.
ii
SUMMARY
This summary
highlights certain information appearing elsewhere in this
prospectus. For a more complete understanding of this offering, you
should read the entire prospectus carefully, including the
information under “Risk Factors” and our financial
statements and the related notes included elsewhere in this
prospectus before investing in our common stock.
On
June 20, 2016, we effected a 1 for 2 reverse split on our shares of common stock and the proportional reduction of our authorized
shares from 500,000,000 shares to 250,000,000 shares.
Overview
We are in the O2O (“Online-to-Offline”) business. With
respect to our business, O2O means providing an online platform for
small and medium sized enterprises (“SMEs”) with brick
and mortar businesses that allows them to conduct business,
interact with existing customers and obtain new customers online.
We refer to our customers as “Merchant Clients” and we
use the term “Users,” to refer to those existing and
potential customers of our Merchant Clients who use our mobile
application and platform. Through the features, products and
services offered on our platform, we seek to create interactions
between Users and Merchant Clients, which will allow Merchant
Clients to study consumer behavior. Our platform has five main
components that allow Merchant Clients to conduct targeted
advertising campaigns and promotions, which we believe are
effective because they are geared to the customers that a Merchant
Client wishes to attract. Our platform is also designed and built
to encourage Users to return and refer new Users, each of which is
a potential customer for our Merchant Clients.
The Platform
“Moxian+” is an App that caters to SMEs that wish to
promote services and products offered at their brick and mortar
stores through social media. The application connects Users to
Merchant Clients through games, rewards and social events that they
enjoy and in return, Users provide valuable information such as
their nickname, gender, birthdate, age, career, hometown, school
and residential area that our Merchant Clients can use to market
their products and services effectively.
We have two different mobile applications, one for individual
Users, referred to as the Moxian+ User App, and one for our
Merchant Clients, referred to as the Moxian+ Business App. The apps
connect to each other to form a symbiotic relationship that
provides Users with entertainment and social interaction while the
Merchant Clients get the chance to advertise products and
services.
Merchant Clients can choose
between a free or paid account. With a free account, Merchant
Clients get a “Do It Yourself” webpage and can add
different modules into their account, including the address and
phone number of the business, as well as list up to five products.
When a Merchant Client purchases one of our subscription packages
they get access to a number of robust add-on features including,
the ability to manage social relationships and target marketing, as
well as other features. Our subscription packages range from a free
account to a paid subscription of $2,000 per year.
Our individual Users, also
called “MO-Pals,” can download the Moxian+ User App
free-of-charge on their Android or iOS smartphone. Users provide
basic information to sign up for an account and then can invite
friends and family members to join Moxian+, search and join
different interest groups and participate in social media by
sharing activities, stories, photos and videos. They can also send
micro-blog messages, play online games in Moxian+’s game
center, and earn MO-Coins, a virtual currency similar to credit
card reward points, among other the features.
There are five main components to the Moxian+ platform, which we
believe provide the most robust and beneficial experience for both
the Merchant Clients and the Users. These components form the
Moxian+ backend.
(1)
Social
Media Engine — allows users to connect with each other,
discover new friends, share interests and swap media. It also
allows Merchant Clients to reach individual Users.
(2)
E-commerce features — Merchant Clients are able to conduct
business by posting products, offering coupons and advertising
sales as well as creating events and blogs. Users can also order
products at the Merchant Clients’ online shops for express
delivery.
(3)
Rewards
— Users can obtain MO-Points when they shop online, which
allow them to play games on our platform or engage in other
activities sponsored by Merchant Clients and MO-Points that can
either
1
be redeemed at Merchant Clients’ online shops, or can be
redeemed for MO-Coins which are virtual currency that can be used
at any Merchant Client’s physical store location.
(4)
Game
Development — allows Users to play games to earn MO-Points
and MO-Coins and other rewards which may be specific to a certain
Merchant Client.
(5)
Data
Analytics — provides reports on consumer behaviors to each
Merchant Client to help them better design their promotions and
reach their target audience.
Our Strategy
We use two benchmarks to measure growth: (1) number of users and
(2) number of merchants.
Our success depends upon signing up paid Merchant Clients. The
Merchant Clients, in turn, help to build up our base of Users by
encouraging their customers to download our User App, with the
MO-Points and MO-Coins incentives that we provide. In order to
attract more Merchant Clients, we also need an established base of
Users. Therefore, we are in the process of signing up additional
Merchant Clients, as well as acquiring additional Users to download
our User App. We are initially marketing to merchants in Shenzhen,
China, where we launched Moxian version 1.0.
In order to expand our number of merchants we have a sales force of
20 people based in Shenzhen, China and recently opened an office in
Beijing. By the end of 2016, we aim to have a 100 member sales
force collectively in Shenzhen and Beijing. In addition, we are
scheduling seasonal sales events to promote our products and
services to merchants and users. During 2016, we also plan to
utilize third party distributors who have an existing base of
merchants to market our products and expand into major cities, such
as Guangzhou and Shanghai.
Competitive Strengths
Major
providers of social network platforms have the advantage of an existing user base. However, we believe that Moxian’s platform
offers social media features that enable us to stand out among the competition. Other major social networking platforms usually
focus on personal photo sharing, video sharing, chatting, micro-blogging, following others’ online activities, rating and
commenting on products and services. Moxian’s platforms offer Merchant Clients (i) individual promotion pages, (ii) local
event programs for their customer Users, (iii) location-based promotion information, (iv) mobile chat applications, (v) give-away
prizes for the Users, (vi) advertising opportunities on Moxian’s social pages, (vii) a social customer relationship management
system, (viii) a loyalty program using MO-Points and MO-Coins, and (ix) customized online games to promote merchants’ brands
and group sales promotions. By establishing our Merchant Client base, we believe that we will be able to acquire additional Users.
Recent
Development
On September 7, 2016, we entered into
note conversion agreements with Shenzhen Bayi Consulting Co. Ltd. and Moxian China Limited. The note conversion agreements provide
for the conversion of promissory notes in the aggregate amount of $2 million payable by us into shares of our common stock at
the public offering price. On the date of this prospectus, the notes will automatically convert into shares of common stock at
a conversion price equal to the public offering price per share being offered in this offering.
2
Risk Related to Our
Business
Our ability to implement our business strategy is subject to
numerous risks and uncertainties that you should be aware of before
making an investment decision. As a technology company, we face
many risks inherent in our business and our industry generally. You
should carefully consider all of the information set forth in this
prospectus and, in particular, the information under the heading
“Risk Factors,” prior to making an investment in our
common stock. These risks include, among others, the following:
•
We cannot provide any assurance that we have properly registered
our intellectual property, or that it has been registered in
certain jurisdictions where we do business;
•
If the PRC government does not agree that our contractual
arrangement with Moyi complies with PRC laws, rules and regulations
we could face severe penalties;
•
Moxian Shenzhen’s contractual arrangements may not be as
effective in providing control over Moyi as direct ownership, and
any failure by Moyi and its shareholders to perform their
obligations under contractual arrangements would have material and
adverse effects on our business;
•
Loss of, or failure to obtain any license or permit necessary or
desirable in the operation of our business could have a material
adverse effect on our business and results of operations;
•
If we fail to stay current with new smart phone and mobile device
technologies our apps could become obsolete;
•
We intend to use Moxian virtual currency to conduct substantially
all of the payment processing on our platform. The virtual currency
business is highly regulated, and it is subject to a range of
risks. If our virtual currency is limited or restricted in any way
or becomes unavailable to us for any reason, our business may be
materially and adversely affected;
•
We currently primarily operate in China and if the growth rate of
the Chinese economy continues to slow down, the demand for products
sold by our Merchant Clients may also slow down;
•
The cross-border online shopping market in China is continuing to
grow and may become a new competitor to the Chinese consumer goods
market;
•
We compete with other IT companies which can develop similar
technologies and online-to-offline application to identify consumer
behaviors; and
•
If China adopts privacy laws they may impact our ability to provide
our current data analytics features to Merchant Clients or to
develop new uses for such data analytics.
Our Corporate
Information
We were incorporated on October 12, 2010 in the State of Nevada.
Our principal executive offices are located at Block A, 9/F, Union
Plaza, 5022 Binjiang Avenue, Futian District, Shenzhen City,
Guangdong Province, China. Our telephone number is +86
(0)755-66803251. We maintain a website at
www.moxian.com
.
The information contained on our website is not, and should not be
interpreted to be, a part of this prospectus.
3
THE OFFERING
The
offering is being made on a “best efforts, minimum/maximum” basis. The offering is being made without a firm commitment
by the placement agents, who have no obligation or commitment to purchase any of our shares. The closing of the offering and delivery
of the shares is expected to occur no later than November 14, 2016. See “Plan of Distribution.” The placement agents
must sell the minimum number of shares offered (2,500,000 shares of common stock), if any are sold, and are only required to use
their best efforts to sell the shares offered.
Common
stock being offered
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Minimum:
2,500,000 shares
Maximum: 5,000,000 shares
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Shares of Common stock outstanding before this
offering
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64,005,949 shares
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Shares
of Common stock outstanding after this offering
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Minimum:
67,005,949 shares
Maximum:
69,505,949 shares
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Timing
and Delivery of the Shares
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The
shares of common stock are expected to be delivered against payment no later than November
14, 2016 subject to the condition that at least 2,500,000 shares of common stock have
been subscribed and paid for.
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Use
of Proceeds
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Our
net proceeds from this offering, assuming the minimum number of shares of common stock
offered (2,500,000 shares) is sold are expected to be approximately $9.0 million, and
assuming the maximum number of shares of common stock offered (5,000,000 shares) is sold
are expected to be approximately $18.2 million, each assuming a public offering price
of $4.00. We intend to use the net proceeds from this offering for expansion of our business
in China and throughout Asia, working capital and other general corporate purposes. Proceeds
of this offering in the amount of $500,000 shall be used to fund an escrow account for
a period of 24 months following the closing date of this offering, which account shall
be used in the event we have to indemnify the placement agents pursuant to the terms
of a Placement Agency Agreement with the placement agents. See “Use of Proceeds”
on page 18.
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Escrow
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Unless
sooner withdrawn or cancelled by either us or the placement agents, the offering will
continue through November 14, 2016. Until we sell at least 2,500,000 shares of common
stock, all investor funds will be held in an escrow account at Continental Stock Transfer
& Trust, New York, New York, as agent, for the benefit of the investors. If we do
not sell at least 2,500,000 shares of common stock by November 14, 2016, all funds will
be promptly returned to investors without interest or deduction. If we complete this
offering, net proceeds will be promptly delivered to us on the closing date.
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Proposed NASDAQ trading symbol
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“MOXC”
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Risk Factors
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The securities offered by this prospectus are
speculative and involve a high degree of risk and investors
purchasing securities should not purchase the securities unless
they can afford the loss of their entire investment. See
“Risk Factors” beginning on page 7.
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Lock-up agreements
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See
“Plan of Distribution” for more information.
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The
number of shares of our common stock to be outstanding after this offering is based on the number of shares outstanding as of
September 2, 2016 and includes 500,000 shares of common stock issuable upon conversion of $2.0 million in loans to related parties,
assuming a public offering price of $4.00, which is set forth on the cover page of this prospectus. The loans will convert on
the date of this prospectus at the public offering price.
Unless
otherwise indicated, all information in this prospectus gives effect to a 1-for-2 reverse stock split of our common stock effected
on June 20, 2016.
4
SUMMARY
FINANCIAL AND OTHER DATA
The following tables set forth our summary historical financial
data for the periods presented. The following summary financial
data for the years ended September 30, 2015 and 2014 are derived
from our audited financial statements appearing elsewhere in this
prospectus. The following summary financial data for the nine-month
periods ended June 30, 2016 and 2015 and the selected balance sheet
data as of June 30, 2016 are derived from our unaudited financial
statements appearing elsewhere in this prospectus.
This summary financial data should be read together with the
historical financial statements and related notes to those
statements, as well as “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,”
which are included elsewhere in this prospectus.
The
pro forma as adjusted balance sheet data reflects the balance sheet data as of June 30, 2016, as adjusted to reflect our receipt
of the estimated net proceeds from our sale of the minimum offering amount (2,500,000 shares) and maximum offering amount ( 5,000,000
shares) in this offering at an assumed public offering price of $4.00 per share, which is set forth on the cover page of this
prospectus, and includes 500,000 shares of common stock issuable upon conversion of $2 million in loans to related parties, assuming
a public offering price of $4.00, which is set forth on the cover page of this prospectus, after deducting the estimated placement
agent commissions and estimated offering expenses payable by us.
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(Audited)
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(Audited)
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(Unaudited)
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(Unaudited)
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(Unaudited)
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Balance
Sheet Data:
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Current
assets
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$
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3,479,750
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$
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2,511,841
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$
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736,735
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9,736,735
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18,936,735
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Other
assets
|
|
$
|
9,594,456
|
|
$
|
348,669
|
|
|
$
|
7,515,625
|
|
7,515,625
|
|
7,515,625
|
Total
Assets
|
|
$
|
13,074,206
|
|
$
|
2,860,510
|
|
|
$
|
8,252,360
|
|
17,252,360
|
|
26,452,360
|
Total
Current Liabilities
|
|
$
|
7,569,115
|
|
$
|
7,447,533
|
|
|
$
|
3,800,035
|
|
1,800,035
|
|
1,800,035
|
Total
Liabilities
|
|
$
|
7,569,115
|
|
$
|
7,447,533
|
|
|
$
|
3,800,035
|
|
1,800,035
|
|
1,800,035
|
Total
Stockholders’ equity
|
|
$
|
5,505,091
|
|
$
|
(4,587,023
|
)
|
|
$
|
4,452,325
|
|
15,452,325
|
|
24,652,325
|
5
|
|
Year
Ended
September 30
,
|
|
Nine
Months Ended
June 30
,
|
|
|
|
|
|
|
|
|
|
Statements
of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
83,870
|
|
|
$
|
56,122
|
|
|
$
|
18,645
|
|
|
$
|
86,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
and Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of Sales
|
|
|
(25,269
|
)
|
|
|
(15,514
|
)
|
|
|
(4,163
|
)
|
|
|
(26,852
|
)
|
Depreciation
and Amortization Expenses
|
|
|
(843,299
|
)
|
|
|
(78,571
|
)
|
|
|
1,356,306
|
|
|
|
494,793
|
|
Research
and Development
|
|
|
—
|
|
|
|
—
|
|
|
|
2,034,103
|
|
|
|
936,624
|
|
Advertising
Agency Fee
|
|
|
—
|
|
|
|
—
|
|
|
|
462,430
|
|
|
|
—
|
|
Impairment
charge on intangible assets
|
|
|
—
|
|
|
|
—
|
|
|
|
1,264,700
|
|
|
|
—
|
|
Selling,
General and Administrative Expenses
|
|
|
(5,443,815
|
)
|
|
|
(2,176,963
|
)
|
|
|
3,834,542
|
|
|
|
2,661,793
|
|
Impairment
of Goodwill
|
|
|
—
|
|
|
|
(2,600,315
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
From Operations
|
|
|
(6,228,513
|
)
|
|
|
(4,815,241
|
)
|
|
|
(8,937,599
|
)
|
|
|
(4,033,709
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before Income Tax
|
|
|
(6,226,255
|
)
|
|
|
(4,791,342
|
)
|
|
|
(9,418,853
|
)
|
|
|
(4,063,639
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(6,173,646
|
)
|
|
$
|
(4,791,342
|
)
|
|
$
|
(9,382,343
|
)
|
|
$
|
(4,063,639
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per common share (retroactively restated for effect of 1:2 reserve stock split effected
on June 20, 2016) – actual
|
|
$
|
(0.06
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
(0.04
|
)
|
Basic
and diluted loss per common share (retroactively restated for effect of 1:2 reserve stock split effected on June 20, 2016) pro
forma – minimum
offering*
|
|
$
|
(0.06
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.10
|
)
|
|
$
|
(0.04
|
)
|
Basic
and diluted loss per common share (retroactively restated for effect of 1:2 reserve stock split effected on June 20, 2016) pro
forma – maximum
offering*
|
|
$
|
(0.06
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.10
|
)
|
|
$
|
(0.04
|
)
|
6
RISK FACTORS
You should carefully consider the risks described below and
elsewhere in this report, which could materially and adversely
affect our business, results of operations or financial condition.
Our business faces significant risks and the risks described below
may not be the only risks we face. Additional risks not presently
known to us or that we currently believe are immaterial may
materially affect our business, results of operations, or financial
condition. If any of these risks occur, the trading price of our
common stock could decline and you may lose all or part of your
investment.
Risk
relating to our Business and Industry
If we fail to stay current with new smart phone and mobile device
technologies our apps could become obsolete.
Smartphone and mobile devices are evolving rapidly. We incur
significant costs for research and development not only for the
creation of new products, but also for ensuring that our current
products will be compatible with new technologies. If our research
and development team fails to upgrade our products to stay current
with new technologies, our apps could become obsolete, which could
result in a material adverse impact on our business and results of
operations.
If the use of our Mo-Coins becomes restricted or unavailable, our
business may be materially and adversely affected.
We use Moxian virtual currency to conduct substantially all of the
payment processing on our platform. We track the User behaviors by
the usage of Mo-Coins. If the use of virtual currency is limited or
restricted in any way or becomes unavailable to us for any reason,
the accuracy of our User behavior data may be comprised, and our
business could be therefore materially and adversely affected.
The cross-border online shopping market in China is continuing to
grow and may become a new competitor to the Chinese consumer goods
market.
Currently, all of our Merchant Clients are located in China. As
access to cross-border online shopping is made available in China,
Chinese consumers may begin to purchase goods outside of China and
as a result, the demand for products by Chinese merchants may
decline.
We compete with other IT companies which can develop similar
technologies and online-to-offline applications to identify
consumer behavior.
We are not the only company that analyzes consumer behavior and
provides such data to clients. There are other companies that have
similar technology or are developing superior technology that can
be used in the same or more advantageous ways. We cannot assure you
that the market will not become saturated with similar
applications, or that our research and development efforts will
give us an advantage over these other companies. We rely on our
marketing efforts to sell our application and platform over our
competitors, but if we are not successful in such efforts our
business and results of operations could be significantly
harmed.
We depend on our key executives, and our business and growth may be
severely disrupted if we lose their services.
Our future success depends substantially on the continued services
of our key executives. In particular, we are highly dependent upon
Mr. Tan Meng Dong, James, our chairman, chief executive officer and
president, who has established relationships within the industries
we operate. If we lose the services of one or more of our current
executive officers, we may not be able to replace them readily, if
at all, with suitable or qualified candidates, and may incur
additional expenses to recruit and retain new officers with
industry experience similar to our current officers, which could
severely disrupt our business and growth. In addition, if any of
our executives joins a competitor or forms a competing company, we
may lose some of our suppliers or customers. Furthermore, as we
expect to continue to expand our operations and develop new
products, we will need to continue attracting and retaining
experienced management and key research and development
personnel.
Competition for qualified candidates could cause us to offer higher
compensation and other benefits in order to attract and retain
them, which could have a material adverse effect on our financial
condition and results of
7
operations. We may also be unable to attract or retain the
personnel necessary to achieve our business objectives, and any
failure in this regard could severely disrupt our business and
growth.
The technology behind our products contains important trade secrets
and know-how, and our ability to compete could be harmed if any
such trade secrets and know-how are disclosed to third parties by
our engineer.
We regard our trademarks, patents, copyrights and other
intellectual property as critical to our success. In particular, we
have spent a significant amount of time and resources in developing
Moxian+ and our ability to protect our proprietary rights in
connection with our platform and apps is critical for the success
of our features and services and our overall financial performance.
We expect to apply for additional patents, copyrights and
trademarks as we continue the development of our platform. However,
we cannot assure you that our measures will be sufficient to
protect our proprietary information and intellectual property.
Implementation of intellectual property laws in China has
historically been lacking, primarily because of ambiguities in the
laws and difficulties in enforcement.
We may be subject to intellectual property rights disputes, which
could adversely affect our business, results of operations and
financial condition.
We could face infringement claims from our competitors or others
alleging that our methods, processes or products infringe on their
proprietary technologies. If we are found to be infringing on the
proprietary technology of others, we may be liable for damages, and
we may be required to make changes, to redesign our products
partially or completely, to pay to use the technology of others or
to stop using certain technologies or producing the alleged
infringing product(s) entirely. Even if we ultimately prevail in an
infringement suit, the existence of the suit could prompt our
Merchant Clients and Users to switch to products that are not the
subject of infringement suits. We may not prevail in any
intellectual property litigation and such litigation may result in
significant legal costs or otherwise impede our ability to market
our services.
We cannot provide assurance that we have properly registered our
intellectual property, or that it has been registered in certain
jurisdictions where we do business.
Some of our technologies are not covered by any patent or patent
application and, even if a patent application has been filed, it
may not result in an issued patent. If patents are issued to us,
those patents may not provide meaningful protection against
competitors or against competitive technologies. In addition, upon
the expiration of patents issued to us, we will be unable to
prevent our competitors from using or introducing products using
the formerly-patented technology. As a result, we may be faced with
increased competition and our results of operations may be
adversely affected. We cannot assure you that our intellectual
property rights will not be challenged, invalidated, circumvented
or rendered unenforceable.
Third parties may infringe upon our intellectual property rights
which may result in damage to our business reputation.
Protection of our methods and technology is important to our
business. We generally rely on a combination of the patent, trade
secret, trademark and copyright laws of the PRC, the U.S. and Hong
Kong as well as licenses and nondisclosure and confidentiality
agreements, to protect our intellectual property rights. The
patent, trademark, copyright and trade secret laws of some
countries, though, including the PRC and Hong Kong, may not protect
our intellectual property rights to the same extent as the laws of
the U.S.
Failure to protect our intellectual property rights may result in
the loss of valuable proprietary technologies. Even with safeguards
in place, it may be possible for third parties to obtain and use
our intellectual property without authorization. The unauthorized
use of intellectual property is widespread in China, and
enforcement of intellectual property rights by Chinese regulatory
agencies is inconsistent. Moreover, litigation may be necessary in
the future to enforce our intellectual property rights. Future
litigation could result in substantial costs and diversion of our
management’s attention and resources and could disrupt our
business. If we are unable to enforce our intellectual property
rights, it could have a material adverse effect on our financial
condition and results of operations. Given the relative
unpredictability of China’s legal system and potential
difficulties enforcing a court judgment in China, we may be unable
to halt the unauthorized use of our intellectual property through
litigation. Failure to adequately protect our intellectual property
could materially adversely affect our competitive position, our
ability to attract students and our results of operations.
8
If China adopts privacy laws, they may impact our ability to
provide our current data analytics features to Merchant Clients or
to develop new uses for such data analytics.
We use our User data to develop an analysis software. Such data
primarily comes from User conversations in our chat room and the
personal information supplied when they register to use the app.
This data can be analyzed and converted into useful information for
us and our Merchant Clients only when we possess a large amount of
accurate data. The research process may be deemed to violate the
privacy of our Users. Currently, there are no PRC privacy laws
governing how such data may be compiled, analyzed or used. If a law
is adopted that imposes restrictions on our ability to conduct the
analysis and promote data analytics to our Merchant Clients and to
develop new products based on such data, our sales and results of
operations could be materially adversely affected.
If the chops of our subsidiaries and VIEs in China are not kept
safely, are stolen or are used by unauthorized persons or for
unauthorized purposes, the corporate governance of those entities
could be severely and adversely compromised.
In China, a company chop or seal serves as the legal representation
of the company towards third parties even when unaccompanied by a
signature. Each legally registered company in China is required to
have a company chop, which must be registered with the local Public
Security Bureau. Our company chops, or chops, are kept securely at
our President’s Office under the direction of Chief Executive
Officer at the headquarters level or held securely by personnel
designated and approved by the General Manager or Headmaster at
subsidiaries’ or the VIEs level. Use of chops requires proper
approvals in accordance with our internal control procedures. The
custodian at the President’s Office also maintains a log to
keep a detailed record of each use of the chops. Moreover, the
President’s Office is always locked after office hours and
only authorized persons have the access to the keys.
The company believes it has sufficient controls in place over
access to and use of the chops. We, however, cannot assure you that
unauthorized access to or use of those chops can be totally
precluded. To the extent those chops are stolen or are used by
unauthorized persons or for unauthorized purposes, the corporate
governance of these entities could be severely and adversely
compromised and the operations of these entities could be
significantly and adversely impacted.
Our Chief Executive Officer has identified certain material
weaknesses in our internal controls over financial reporting. If we
are unable to remedy these material weaknesses and establish
appropriate internal financial reporting controls and procedures,
it could cause us to fail to meet our reporting obligations, result
in the restatement of our financial statements, harm our operating
results, subject us to regulatory scrutiny and sanctions, cause
investors to lose confidence in our reported financial information
and have a negative effect on the market price of our
shares.
The matters involving internal controls over financial reporting
and disclosure controls and procedures that our management
considered to be material weaknesses under the standards of the
Public Company Accounting Oversight Board were previously disclosed
in our Annual Report on Form 10-K for the year ended September 30,
2015 (the “2015 Annual Report”), which were: (1) lack
of a majority of outside directors on our board of directors,
resulting in ineffective oversight in the establishment and
monitoring of required internal controls and procedures; (2)
inadequate segregation of duties consistent with control
objectives; (3) ineffective controls over period end financial
disclosure and reporting processes; and (4) lack of written
policies and procedures for accounting and financial reporting.
Subsequent to the 2015 Annual Report, management identified
misstatements in the application of certain accounting practices
and procedures, which are discussed in detail in our Current Report
on Form 8-K filed on February 8, 2016, as amended, and as a result,
we restated our audited consolidated financial statements as of and
for the year ended September 30, 2015, our unaudited condensed
consolidated financial statements as of and for the nine month
period ended June 30, 2015 and our unaudited condensed consolidated
financial statements as of and for the six month period ended March
31, 2015. We believe that the lack of a functioning audit
committee, the lack of a majority of outside directors on our board
of directors, and the lack of written policies and procedures for
accounting and financial reporting has resulted in ineffective
oversight in the establishment and monitoring of required internal
controls and procedures, which resulted in the restatements
described above and could result in a material misstatement in our
financial statements in future periods.
As a public company we have significant additional requirements for
enhanced financial reporting and internal controls and are required
to document and test our internal control procedures in order to
satisfy the requirements of
9
Section 404 of the Sarbanes-Oxley Act of 2002, which requires
annual management assessments of the effectiveness of our internal
controls over financial reporting. In addition, an independent
registered public accounting firm will be required to attest to the
effectiveness of our internal controls over financial reporting
beginning with our annual report on Form 10-K following the date on
which we become an accelerated filer or large accelerated filer.
The process of designing and implementing effective internal
controls over financial reporting and disclosure controls and
procedures is a continuous effort that requires us to anticipate
and react to changes in our business and the economic and
regulatory environments and to expend significant resources to
maintain a system of internal controls that is adequate to satisfy
our reporting obligations as a public company.
As part of our continuous effort to remediate the identified
material weaknesses, we have initiated certain initiatives,
including without limitation, appointing outside independent
directors and establishing an audit committee, adding financial
personnel to our management team and prepare written policies and
procedures for accounting and financial reporting to establish a
formal process to close our books monthly on an accrual basis and
account for all transactions, including equity and debt
transactions. However, we cannot assure you that the measures we
are taking and will take to remediate these areas will be
successful or that once implemented, we will be able to maintain
adequate controls over our financial processes and reporting in the
future as we continue our growth. If we are unable to establish
appropriate internal financial reporting controls and procedures,
it could cause us to fail to meet our reporting obligations, result
in future restatements of our financial statements, harm our
operating results, subject us to regulatory scrutiny and sanctions,
cause investors to lose confidence in our reported financial
information and have a material adverse effect on the price of our
shares.
Risks Related to Our
Corporate Structure
If the Peoples Republic of China (‘PRC’) government
does not agree that our contractual arrangement with Shenzhen Moyi
Technologies Co Ltd. complies with PRC laws, rules and regulations
we could face severe penalties.
Foreign investment in the businesses we operate, including
telecommunications and Internet information services, is currently
prohibited or restricted in China. As a U.S. corporation, we are
restricted or prohibited from directly owning all of the equity
interests in any PRC company engaged in internet-related
businesses. See “Regulation.” As a result, our business
in China is operated by our VIE, Shenzhen Moyi Technologies Co Ltd
(“Moyi”) through contractual arrangements. Moyi holds
the relevant internet content provider, or ICP, licenses, which
permits Moyi to engage in the business in China and is currently
owned by PRC citizens and/or PRC companies. We have been and expect
to continue to be dependent on Moyi to operate this business. We do
not have any equity interest in Moyi, but we control their
operations and receive substantially all the economic benefits and
bear substantially all the economic risks through a series of
contractual arrangements.
There are uncertainties regarding the interpretation and
application of current and future PRC laws, rules and regulations,
including but not limited to the laws, rules and regulations
governing the validity and enforcement of our contractual
arrangements with Moyi. Our current contractual arrangements must
also comply with laws and regulations applicable to the Internet
industry.
In August 2011, the Ministry of Commerce, or MOFCOM, promulgated
the Rules of Ministry of Commerce on Implementation of Security
Review System of Mergers and Acquisitions of Domestic Enterprises
by Foreign Investors, or the MOFCOM Security Review Rules, to
implement the Notice of the General Office of the State Council on
Establishing the Security Review System for Mergers and
Acquisitions of Domestic Enterprises by Foreign Investors, or
Circular No. 6, promulgated on February 3, 2011. Under these rules,
a security review by MOFCOM is required for foreign
investors’ mergers and acquisitions that have “national
defense and security” implications and mergers and
acquisitions by which foreign investors may acquire “de facto
control” of domestic enterprises that have “national
security” implications. The MOFCOM Security Review Rules
further prohibit foreign investors from bypassing the security
review requirement by structuring transactions through proxies,
trusts, indirect investments, leases, loans, control through
contractual arrangements or offshore transactions. There is no
explicit provision or official interpretation stating that our
businesses fall within the scope of transactions subject to
security review. We do not believe we are required to submit our
existing contractual arrangements to MOFCOM for a security review.
However, as there is a lack of clear statutory interpretation
regarding the implementation of the rules, there is no assurance
that MOFCOM will have the same view as we do when applying these
national security review-related circulars and rules.
10
Moxian HK’s contractual arrangements may not be as effective
in providing control over Moyi as direct ownership, and any failure
by Moyi and its shareholders to perform their obligations under
contractual arrangements would have material and adverse effects on
our business.
We have no ownership interest in Moyi. We conduct substantially all
of our operations and generate substantially all of our revenues
through contractual arrangements that our subsidiary, Moxian HK,
entered into with Moyi and its shareholders. The contractual
arrangements are designed to provide us with effective control over
Moyi. See “Our Corporate History and Structure” for a
description of these contractual arrangements.
These contractual arrangements may not be as effective in providing
control as direct ownership. For example, if Moyi or their
respective shareholders fail to perform their respective
obligations under these contractual arrangements, or if they take
other actions that are detrimental to our interests, we may incur
substantial costs and have to re-direct resources in connection
with enforcing these arrangements. To enforce these arrangements,
we may rely on legal remedies available under applicable PRC laws,
including seeking specific performance or injunctive relief and
claiming damages, but these remedies may not be effective. In
particular, if shareholders of Moyi refuse to transfer their equity
interests to us or our designated persons when we exercise the
purchase option pursuant to these contractual arrangements, or if
they were otherwise to act in bad faith toward us, then we may need
to initiate legal action to compel them to fulfill their
contractual obligations. In addition, we may not be able to renew
these contracts with our VIE and/or its respective shareholders. If
VIE or their shareholders fail to perform the obligations secured
by the pledges under the equity pledge agreements, one of the
remedies for default is to require the pledgers to sell the equity
interests of VIE in an auction or sale of the shares and remit the
proceeds to us, net of all related taxes and expenses. Such an
auction or sale of the shares may not result in our receipt of the
full value of the equity interests or the business of VIE.
In addition, as all of these contractual arrangements are governed
by PRC law and provide for the resolution of disputes through
either arbitration or litigation in the PRC, they would be
interpreted in accordance with PRC law and any disputes would be
resolved in accordance with PRC legal procedures. Any arbitration,
legal proceedings or disputes may cost us substantial financial and
other resources and result in disruption of our business, and the
outcome might not be in our favor. The relevant PRC arbitration
panel may conclude that our contractual arrangements violate PRC
law or are otherwise unenforceable and we could consequently lose
our ability to consolidate Moyi’s results of operations,
assets and liabilities in our consolidated financial statements
and/or to transfer the revenues of Moyi to Moxian HK. The legal
environment in the PRC is not as developed as in other
jurisdictions, such as the United States. As a result,
uncertainties in the PRC legal system could further limit our
ability to enforce these contractual arrangements. Under PRC law,
prevailing parties in an arbitration proceeding may only enforce
the arbitration award in Chinese courts through arbitration award
recognition proceedings, which would cause us to incur additional
expenses and delay. In the event we are unable to enforce these
contractual arrangements, we may not be able to exert effective
control over Moyi, and our ability to conduct our business may be
materially and adversely affected.
Loss of or failure to obtain any license or permit necessary or
desirable in the operation of our business could have a material
adverse effect on our business and results of
operations.
Moyi is required to obtain various operating licenses and permits
and to make registrations and filings for our current business in
China; failure to comply with these requirements may materially
adversely affect our business operations. Moyi currently holds an
Internet Content Provider, or ICP license, to provide information
to online Internet users. In order to engage in and publish online
games, Moxian was issued an Online Culture Operating Permit and an
Internet Publications Distribution License. Web portals like Moxian
are required to apply to and register with the General
Administration for Press and Publication (“GAPP”),
before distributing Internet publications. Internet publications
include content or articles formally published by press media such
as: (i) books, newspapers, periodicals, audio-visual products and
electronic publications; and (ii) literature, art and articles on
natural science, social science, engineering and other topics that
have been edited. Moxian has applied for, but has not yet obtained,
the license from GAPP that would enable it to distribute Internet
publications.
If we are determined not to be in compliance with the applicable
licensing requirements or if we fail to cure any non-compliance in
a timely manner, we may be subject to fines, confiscation of the
gains derived from our noncompliant operations or the suspension of
our noncompliant operations, which may materially and adversely
affect our business and results of operations.
11
We are a holding company organized in Nevada, with subsidiaries
incorporated in Samoa, the British Virgin Islands, Hong Kong
Malaysia & PRC corporations and all of our officers and
directors reside outside the US. Therefore, investors may
experience difficulties in effecting service of legal process,
enforcing foreign judgments or bringing original actions in any of
these jurisdictions based upon U.S. laws, including the federal
securities laws or other foreign laws against us, our officers and
directors.
All of our subsidiaries and our current operations are conducted
outside of the United States. Moreover, all of our directors and
officers are nationals and residents of China and Singapore. All or
substantially all of the assets of these persons are located
outside the United States. As a result, it may be difficult or
impossible to effect service of process within the United States or
elsewhere upon these persons. In addition, uncertainty exists as to
whether the courts outside of the U.S. would recognize or enforce
judgments of U.S. courts obtained against us or such officers
and/or directors predicated upon the civil liability provisions of
the securities laws of the United States or any state thereof, or
be competent to hear original actions brought in jurisdictions
outside of the U.S. against us or such persons predicated upon the
securities laws of the United States or any state thereof.
Risks Related to Doing
Business in China
If the growth rate of the Chinese economy continues to slow down,
the demand for products sold by our Merchant Clients may also slow
down.
Moody’s Investors Service, which provides credit ratings and
research covering debt instruments and securities, downgraded its
outlook on the Chinese government debt from “stable” to
“negative” which reflects an assumption that the
Chinese economy is weakening and continues to slow down. A slowdown
in the economy may lead to less demand by consumers for products
offered by our Merchant Clients. If our Merchant Clients are
impacted by the low demand, they may attempt to curtail expenses by
cancelling subscriptions for our services, which could have a
material adverse effect on our revenues, and negatively impact our
results of operations.
Contract drafting, interpretation and enforcement in China involves
significant uncertainty.
We have entered into numerous contracts governed by PRC law in the
ordinary course of our business, many of which are material to our
business. As compared with contracts in the United States,
contracts governed by PRC law tend to contain less detail and are
not as comprehensive in defining contracting parties’ rights
and obligations. As a result, contracts in China are more
vulnerable to disputes and legal challenges. In addition, contract
interpretation and enforcement in China is not as developed as in
the United States, and the result of any contract dispute is
subject to significant uncertainties. Therefore, we cannot assure
you that we will not be subject to disputes under our material
contracts, and if such disputes arise, we cannot assure you that we
will prevail. As almost all of our contracts in the ordinary course
of business are governed by PRC law, any dispute involving such
contracts, even those without merit, may materially and adversely
affect our reputation and our business operations, and may cause
the price of our shares to decline.
Governmental control of currency conversion may limit our ability
to utilize our revenues effectively, whether for securing debt or
to expand our business through acquisitions and development and for
dividend payments to our shareholders, which may affect the value
of your investment.
The PRC government imposes controls on the convertibility of RMB
into foreign currencies and, in certain cases, the remittance of
currency out of China. We receive substantially all of our revenues
in RMB. Under our current corporate structure, our Nevada holding
company primarily relies on dividend payments from our wholly owned
PRC subsidiary in China, Moxian Shenzhen, to fund any cash and
financing requirements we may have.
Under existing PRC foreign exchange regulations, payments of
current account items, including profit distributions, interest
payments and trade and service-related foreign exchange
transactions, can be made in foreign currencies without prior SAFE
approval by complying with certain procedural requirements.
Therefore, Moxian Shenzhen may pay dividends in foreign currency to
us without pre-approval from SAFE. However, approval from or
registration with government authorities is required where RMB is
to be converted into foreign currency and remitted out of China to
pay capital expenses such as the repayment of loans denominated in
foreign currencies. With the prior approval from SAFE, cash
generated from the operations of our PRC subsidiary may be used to
pay off debt owed to entities outside China in a currency other
than RMB. The PRC government may, at its discretion,
12
restrict access to foreign currencies for current account
transactions in the future. If the foreign exchange control system
prevents us from obtaining sufficient foreign currencies to satisfy
our foreign currency demands, we may not be able to pay dividends
in foreign currencies to our shareholders, including holders of the
common stock.
Government censorship and control may limit our ability to utilize
our platform in China, which may cause becomes restricted or
unavailable, our business may be materially and adversely
affected.
Our Platform is essential to us in generating revenue. If the use
of our platform is limited or restricted in any way or becomes
unavailable to us for any reason, Merchant Clients and Users may
not be willing to use our platform, and our business could be
therefore materially and adversely affected.
Payment of dividends is subject to restrictions under Nevada and
the PRC laws.
Under Nevada law, we may only pay dividends subject to our ability
to service our debts as they become due and provided that our
assets will exceed our liabilities after the dividend. Our ability
to pay dividends will therefore depend on our ability to generate
sufficient profits. In addition, because of the various rules
applicable to our operations in China and the regulations on
foreign investments as well as the applicable tax law, we may be
subject to further limitations on our ability to declare and pay
dividends to our shareholders.
We can give no assurance that we will declare dividends of any
amounts, at any rate or at all in the future. The declaration of
future dividends, if any, will be at the discretion of our board of
directors and will depend upon our future operations and earnings,
capital requirements, general financial conditions, legal and
contractual restrictions and other factors that our board of
directors may deem relevant.
As we derive substantially all of our revenue from the PRC, any
downturn in Chinese macroeconomic trends may harm our business.
All of our business operations are conducted in China and all of
our revenues are generated in China. Accordingly, our business,
financial condition, results of operations and prospects are
affected significantly by economic, political and legal
developments in China. The Chinese economy differs from the
economies of most developed countries in many respects, including
the amount of government involvement, the level of development, the
growth rate, the control of foreign exchange, and the allocation of
resources.
While the Chinese economy had grown significantly in the past 30
years, the growth has been uneven geographically among various
sectors of the economy, and over the last year we have been
experiencing a period of slowdown. We cannot assure you that
China’s economy will continue to grow, or that if there is
growth, such growth will be steady and uniform, or that if there is
a slowdown, such slowdown will not have a negative effect on our
business. The PRC government also exercises significant control
over China’s economic growth by allocating resources,
controlling the payment of foreign currency-denominated
obligations, setting monetary policy and providing preferential
treatment to particular industries or companies. Between late 2003
and 2008, the PRC government implemented a number of measures, such
as increasing the PBOC’s statutory deposit reserve ratio and
imposing commercial bank lending guidelines, which slowed the
growth of credit. In 2008 and 2009, however, in response to the
global financial crisis, the PRC government loosened such
requirements. Any actions and policies adopted by the PRC
government or any prolonged slowdown in China’s economy could
have a negative impact on our business, operating results and
financial condition in a number of ways.
The enforcement of labor contract law and increase in labor costs
in the PRC may adversely affect our business and our
profitability.
China adopted a labor contract law and its implementation rules
effective on January 1, 2008 and September 18, 2008, respectively.
The labor contract law and its implementation rules impose more
stringent requirements on employers with regard to, among others,
minimum wages, severance payments upon permitted terminations of
the employment by an employer and non-fixed term employment
contracts, time limits for probation period as well as the duration
and the times that an employee can be placed on a fixed term
employment contract. Due to the limited period of effectiveness of
the labor contract law and its implementation rules, and the lack
of clarity with respect to their implementation, potential
penalties and fines, it is uncertain how they will impact our
current employment policies and practices. Our employment policies
and practices may violate the labor contract law or its
implementation rules and we may be subject to related penalties,
fines or legal fees. Compliance with the
13
labor contract law and its implementation rules may increase our
operating expenses, in particular our personnel expenses, as the
continued success of our business depends significantly on our
ability to attract and retain qualified personnel. In the event
that we decide to terminate some of our employees or otherwise
change our employment or labor practices, the labor contract law
and its implementation rules may also limit our ability to effect
those changes in a manner that we believe to be cost-effective or
desirable, which could adversely affect our business and results of
operations.
Additionally, PRC companies are subject to various laws and
regulations regarding social insurance and housing funds, under
which our PRC subsidiary and affiliates are required to pay
employees’ pension contributions, housing funds, medical
insurance premiums and other welfare-oriented payments.
We must comply with the Foreign Corrupt Practices Act.
We are required to comply with the United States Foreign Corrupt
Practices Act, which prohibits U.S. companies from engaging in
bribery or other prohibited payments to foreign officials for the
purpose of obtaining or retaining business. Foreign companies,
including some of our competitors, are not subject to these
prohibitions. In the foreseeable future, some of our suppliers may
be owned by the PRC government and our dealings with them are
likely to be considered to be with government officials for these
purposes. Corruption, extortion, bribery, pay-offs, theft and other
fraudulent practices occur from time-to-time in mainland China. If
our competitors engage in these practices, they may receive
preferential treatment from personnel of some companies, giving our
competitors an advantage in securing business or from government
officials who might give them priority in obtaining new licenses,
which would put us at a disadvantage. We could suffer severe
penalties if our employees or other agents were found to have
engaged in such practices.
Risks Related to this
Offering
Prior to this offering, we had a limited public market for our
shares of common stock and you may not be able to resell our shares
at or above the price you paid, or at all.
Prior to this offering, there was a limited public market for our
common stock in the OTC Market. We cannot assure you that an active
public market for our common stock will develop or that the market
price of our shares will not decline below the public offering
price. The public offering price of our shares may not be
indicative of prices that will prevail in the trading market
following the offering.
Our Chairman of the Board and our Chief Executive Officer, Mr.
Mengdong Tan, own a large percentage of our outstanding stock and
could significantly influence the outcome of our corporate
matters.
Mr.
James Mengdong Tan, our Chairman and CEO, through Good Eastern Investment and Stellar Elite Limited, beneficially owns 46.58%
of our outstanding shares of common stock, and after this offering will beneficially own [•]% of our outstanding common stock
assuming the minimum offering amount is raised and [•]% of our outstanding common stock assuming the maximum offering amount
is raised. As a result, Mr. Tan will be able to exercise significant influence over all matters that require us to obtain shareholder
approval, including the election of directors to our board and approval of significant corporate transactions that we may consider,
such as a merger or other sale of our company or its assets. This concentration of ownership in our shares by an executive officer
will limit the other shareholders’ ability to influence corporate matters and may have the effect of delaying or preventing
a third party from acquiring control over us.
Future sales of substantial amounts of the shares of common stock
by existing shareholders could adversely affect the price of our
common stock.
If our existing shareholders sell substantial amounts of the shares
following this offering, the market price of our common stock could
fall. Such sales by our existing shareholders might make it more
difficult for us to issue new equity or equity-related securities
in the future at a time and place we deem appropriate. The [•]
shares of common stock offered in this offering will be eligible
for immediate resale in the public market without restrictions. All
remaining shares, which are currently held by our existing
shareholders, may be sold in the public market in the future
subject to the lock-up agreements and the restrictions contained in
Rule 144 under the Securities Act. If any existing shareholders
sell a substantial amount of shares, the prevailing market price
for our shares could be adversely affected.
14
The market price of our shares is likely to be highly volatile and
subject to wide fluctuations in response to factors such
as:
•
variations in our actual and perceived operating results;
•
news regarding gains or losses of customers or partners by us or
our competitors;
•
news regarding gains or losses of key personnel by us or our
competitors;
•
announcements of competitive developments, acquisitions or
strategic alliances in our industry by us or our competitors;
•
changes in earnings estimates or buy/sell recommendations by
financial analysts;
•
potential litigation;
•
the imposition of fines or penalties related to our activities in
the PRC and failure to comply with applicable rules and
regulations;
•
general market conditions or other developments affecting us or our
industry; and
•
the operating and stock price performance of other companies, other
industries and other events or factors beyond our control.
In addition, the securities markets have from time to time
experienced significant price and volume fluctuations that are not
related to the operating performance of particular companies. These
market fluctuations may also materially and adversely affect the
market price of the shares
We do not anticipate paying cash dividends on our common stock in
the foreseeable future.
We do not anticipate paying cash dividends in the foreseeable
future. Presently, we intend to retain all of our earnings, if any,
to finance development and expansion of our business. PRC capital
and currency regulations may also limit our ability to pay
dividends. Consequently, your only opportunity to achieve a
positive return on your investment in us will be if the market
price of our common stock appreciates.
We will have discretion in applying a portion of the net proceeds
of this offering and may not use these proceeds in ways that will
enhance the market value of our common stock.
Our management will have considerable discretion in the application
of the proceeds received by us from this offering. Such proceeds
may be used to expand our research and development team, acquire
new technological hardware, and expand our sales and marketing team
all over China and for working capital and general corporate
purposes. You will not have the opportunity, as part of your
investment decision, to assess whether the proceeds are being used
appropriately. You must rely on the judgment of our management
regarding the application of the net proceeds of this offering. The
net proceeds may be used for corporate purposes that do not improve
our profitability or increase our common stock price. The net
proceeds from this offering may also be placed in investments that
do not produce income or that lose value.
Future issuances of capital stock may depress the trading price of
our common stock.
Any issuance of shares of our common stock after this offering
could dilute the interests of our existing stockholders and could
substantially decrease the trading price of our common stock. We
may issue additional shares of common stock in the future for a
number of reasons, including to finance our operations and business
strategy (including in connection with acquisitions, strategic
collaborations or other transactions).
Sales of a substantial number of shares of our common stock in the
public market could depress the market price of our common stock,
and impair our ability to raise capital through the sale of
additional equity securities. We cannot predict the effect that
future sales of our common stock or other equity-related securities
would have on the market price of our common stock
15
Investors
risk loss of use of funds subscribed, with no right of return, during the offering period.
We
cannot assure you that all or any shares of common stock will be sold. The placement agents are offering our shares on a “best
efforts minimum/maximum basis.” We have no firm commitment from anyone to purchase all or any of the shares offered. If
subscriptions for a minimum of 2,500,000 shares are not received on or before November 14, 2016, escrow provisions require that
all funds received be promptly refunded. If refunded, investors will receive no interest on their funds. During the offering period,
investors will not have any use or right to return of the funds.
16
CAUTIONARY NOTE
REGARDING FORWARD-LOOKING STATEMENTS
Statements in this prospectus that are not descriptions of
historical facts are forward-looking statements that are based on
management’s current expectations and are subject to risks
and uncertainties that could negatively affect our business,
operating results, financial condition and stock price. We have
attempted to identify forward-looking statements by terminology
including “anticipates,” “believes,”
“can,” “continue,” “could,”
“estimates,” “expects,”
“intends,” “may,” “plans,”
“potential,” “predicts,”
“should,” or “will” or the negative of
these terms or other comparable terminology.
We may not actually achieve the plans, intentions or expectations
disclosed in our forward-looking statements. We operate in a very
competitive and rapidly changing environment. It is not possible
for our management to predict all risks, nor can we assess the
impact of all factors on our business or the extent to which any
factor, or combination of factors, may cause actual results to
differ materially from those contained in any forward-looking
statements we may make. Accordingly, you should not place undue
reliance on our forward-looking statements. We have included
important factors in the cautionary statements included in this
prospectus, particularly in the “Risk Factors” section,
that we believe could cause actual results or events to differ
materially from the forward-looking statements that we make.
You should read this prospectus and the documents that we reference
in this prospectus and have filed as exhibits to the registration
statement of which this prospectus is a part completely and with
the understanding that our actual future results may be materially
different from what we expect. We qualify all of the
forward-looking statements in this prospectus by these cautionary
statements. We expressly disclaim any obligation or undertaking to
release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in our
expectations or any changes in events, conditions or circumstances
on which any such statement is based, except as required by
law.
17
USE OF PROCEEDS
After deducting the estimated placement
agent commissions and estimated offering expenses payable by us, we expect to receive net proceeds of $9,000,000 from this offering,
if the minimum offering amount is sold, or $18,200,000, if the maximum offering amount is sold. Proceeds of this offering in the
amount of $500,000 shall be used to fund an escrow account for a period of 24 months following the closing date of this offering,
which account shall be used in the event we shall have to indemnify the placement agents pursuant to the terms of the Placement
Agency Agreement. We anticipate that the proceeds of a minimum and a maximum offering would be applied approximately as follows:
MINIMUM
OFFERING (2,500,000 Shares)
|
|
|
Expand
our business in China and throughout Asia including setting up regional and sales offices in first and second tier cities in China,
as well as infrastructure investment for the build-out and expansion of offices in these cities
|
|
$6.0
million
|
General
corporate purposes and funding potential acquisitions of complementary businesses, assets and technologies
|
|
$3.0
million
|
MAXIMUM
OFFERING (5,000,000 Shares)
|
|
|
Expand
our business in China and throughout Asia including setting up regional and sales offices in first and second tier cities in China,
as well as infrastructure investment for the build-out and expansion of offices in these cities
|
|
$13.1
million
|
General
corporate purposes and funding potential acquisitions of complementary businesses, assets and technologies
|
|
$5.1
million
|
The
amounts and timing of these expenditures will vary depending on a number of factors, including the amount of cash generated by
our operations, competitive and technological developments, and the rate of growth, if any, of our business.
Although we may use a portion of the proceeds for the acquisition
of, or investment in, companies, technologies, products or assets
that complement our business, we have no present understandings,
commitments or agreements to enter into any acquisitions or make
any investments. We cannot assure you that we will make any
acquisitions or investments in the future.
18
CAPITALIZATION
The following table sets forth our capitalization as of June 30,
2016:
•
On an actual basis; and
•
On a pro forma, as adjusted basis to give effect to the sale of the minimum and maximum number of shares of common stock
by us in this offering at the assumed public offering price of $4.00 per share, which is set forth on the cover page of this prospectus,
and after deducting the estimated placement agent commissions and estimated offering expenses payable by us.
You should read this table in conjunction with
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and the financial
statements and related notes included elsewhere in this
prospectus.
|
|
Minimum
Offering (2,500,000 shares of common stock) June 30, 2016
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
(unaudited)
|
|
Assets:
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
$
|
736,735
|
|
|
$
|
9,736,735
|
|
Other
Assets
|
|
|
7,515,625
|
|
|
|
7,515,625
|
|
Total
Assets
|
|
$
|
8,252,360
|
|
|
$
|
17,252,360
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
$
|
3,800,035
|
|
|
$
|
1,800,035
|
|
Other
Liabilities
|
|
|
—
|
|
|
|
—
|
|
Total
Liabilities
|
|
|
3,800,035
|
|
|
|
1,800,035
|
|
Shareholder’s
Equity:
|
|
|
|
|
|
|
|
|
Common
shares $0.001 par value per share, 250,000,000 shares authorized, 64,005,949 shares issued
and outstanding, actual; 250,000,000 shares authorized, 67,005,949 shares issued and
outstanding, pro forma*
(1)
|
|
|
64,006
|
|
|
|
67,006
|
|
Additional
paid-in capital
|
|
|
24,691,259
|
|
|
|
35,688,259
|
|
Retained
earnings
|
|
|
(20,557,155
|
)
|
|
|
(20,557,155
|
)
|
Accumulated
other comprehensive income
|
|
|
254,215
|
|
|
|
254,215
|
|
Total
shareholders’ equity
|
|
|
4,452,325
|
|
|
|
15,452,325
|
|
Total
Liabilities and Shareholders’ Equity
|
|
$
|
8,252,360
|
|
|
$
|
17,252,360
|
|
19
|
|
Maximum
Offering
(5,000,000 shares of common stock) June 30, 2016
|
|
|
|
|
|
|
|
(unaudited)
|
|
(unaudited)
|
Assets:
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
$
|
736,735
|
|
|
$
|
18,936,735
|
|
Other
Assets
|
|
|
7,515,625
|
|
|
|
7,515,625
|
|
Total
Assets
|
|
$
|
8,252,360
|
|
|
$
|
26,452,360
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
$
|
3,800,035
|
|
|
$
|
1,800,035
|
|
Other
Liabilities
|
|
|
—
|
|
|
|
—
|
|
Total
Liabilities
|
|
|
3,800,035
|
|
|
|
1,800,035
|
|
Shareholder’s
Equity:
|
|
|
|
|
|
|
|
|
Common
shares $0.001 par value per share, 250,000,000 shares authorized, 64,005,949 shares issued and outstanding, actual; 250,000,000
shares authorized, 69,505,949 shares issued and outstanding, pro forma*
(2)
|
|
|
64,006
|
|
|
|
69,506
|
|
Additional
paid-in capital
|
|
|
24,691,259
|
|
|
|
44,885,759
|
|
Retained
earnings
|
|
|
(20,557,155
|
)
|
|
|
(20,557,155
|
)
|
Accumulated
other comprehensive income
|
|
|
254,215
|
|
|
|
254,215
|
|
Total
shareholders’ equity
|
|
|
4,452,325
|
|
|
|
24,652,325
|
|
Total
Liabilities and Shareholders’ Equity
|
|
$
|
8,252,360
|
|
|
$
|
26,452,360
|
|
20
DILUTION
If
you invest in our common stock, your interest will be diluted immediately to the extent of the difference between the public
offering price per share you will pay in this offering and the pro forma as adjusted net tangible book value per share of our
common stock after this offering. Our net tangible book value as of June 30, 2016 was $(1,251,395) million, or $(0.02) per
share of common stock. Our pro forma net tangible book value per share set forth below represents our total tangible assets
less total liabilities, divided by the number of shares of our common stock outstanding.
If
the minimum offering amount is sold at an assumed public offering price of $4.00 per share, which is set forth on the cover page
of this prospectus, after deducting the estimated placement agent commissions and offering expenses payable by us, the pro forma
as adjusted net tangible book value as of June 30, 2016 would have been $9.7 million, or $0.15 per share. This represents an
immediate increase in net tangible book value to existing shareholders of $0.17 per share. The public offering price per share
will significantly exceed the net tangible book value per share. Accordingly, new investors who purchase shares of common stock
in this offering will suffer an immediate dilution of their investment of $3.85 per share. The following table illustrates this
per share dilution to the new investors assuming the minimum offering amount is sold:
Assumed
public offering price per share
|
|
$
|
4.0
|
Net
tangible book value per share as of June 30, 2016
|
|
|
(0.02)
|
Increase
in net tangible book value per share attributable to the offering
|
|
|
0.17
|
Pro
forma net tangible book value per share as of after giving effect to the offering
|
|
|
0.15
|
Dilution
per share to new investors
|
|
$
|
3.85
|
A
$1.00 increase in the assumed public offering price of $4.00 per share, which is set forth on the cover page of this prospectus,
would increase the pro forma net tangible book value by $2.3 million, the pro forma net tangible book value per share after this
offering by $0.20 per share and the dilution in pro forma net tangible book value per share to investors in this offering by $0.97
per share, assuming that the minimum number of shares offered by us, as set forth on the cover page of this prospectus, remains
the same and after deducting the estimated placement agent commissions and offering expenses payable by us.
If
the maximum offering amount is sold at an assumed public offering price of $4.00 per share, which is set forth on the cover page
of this prospectus, after deducting the estimated placement agent commissions and offering expenses payable by us, the pro forma
as adjusted net tangible book value as of June 30, 2016 would have been $18.9 million, or $0.27 per share. This represents an
immediate increase in net tangible book value to existing shareholders of $0.29 per share. The public offering price per share
will significantly exceed the net tangible book value per share. Accordingly, new investors who purchase shares of common stock
in this offering will suffer an immediate dilution of their investment of $3.73 per share.
The
following table illustrates this per share dilution to the new investors assuming the maximum offering amount is sold:
Assumed
public offering price per share
|
|
$
|
4.0
|
Net
tangible book value per share as of June 30, 2016
|
|
|
(0.02)
|
Increase
in net tangible book value per share attributable to the offering
|
|
|
0.29
|
Pro
forma net tangible book value per share as of after giving effect to the offering
|
|
|
0.27
|
Dilution
per share to new investors
|
|
$
|
3.73
|
A
$1.00 increase in the assumed public offering price of $4.00 per share, which is set forth on the cover page of this prospectus,
would increase the pro forma net tangible book value by $4.6 million, the pro forma net tangible book value per share after this
offering by $0.36 per share and the dilution in pro forma net tangible book value per share to investors in this offering by $0.93
per share, assuming that the maximum number of shares offered by us, as set forth on the cover page of this prospectus, remains
the same and after deducting the estimated placement agent commissions and offering expenses payable by us.
21
MARKET FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Our common stock is currently quoted on the OTCQB under the trading
symbol “MOXC.” Our common stock did not trade prior to
April 10, 2014.
Trading in stocks quoted on the OTCQB is often thin and is
characterized by wide fluctuations in trading prices due to many
factors that may have little to do with a company’s
operations or business prospects. We cannot assure you that there
will be a market for our common stock in the future.
For the periods indicated, the following table sets forth the high
and low bid prices per share of common stock based on inter-dealer
prices, without retail mark-up, mark-down or commission and may not
represent actual transactions. These high and low bid prices per
share of common stock have been adjusted to give effect to the
1-for-2 reverse stock split of our common stock effected on June
20, 2016.
|
|
|
|
|
First
Quarter
|
|
$
|
10.90
|
|
$
|
7.98
|
Second
Quarter
|
|
$
|
10.40
|
|
$
|
8.00
|
Third
Quarter
|
|
$
|
8.20
|
|
$
|
7.20
|
Fourth
Quarter (through September 2, 2016)
|
|
$
|
8.20
|
|
$
|
5.65
|
|
|
|
|
|
First Quarter
|
|
$
|
11.70
|
|
$
|
10.50
|
Second Quarter
|
|
$
|
11.80
|
|
$
|
10.20
|
Third Quarter
|
|
$
|
12.60
|
|
$
|
11.40
|
Fourth Quarter
|
|
$
|
13.00
|
|
$
|
11.40
|
|
|
|
|
|
First Quarter
|
|
$
|
—
|
|
$
|
—
|
Second Quarter
|
|
$
|
—
|
|
$
|
—
|
Third Quarter (commencing on April 10,
2014)
|
|
$
|
10.40
|
|
$
|
6.00
|
Fourth Quarter
|
|
$
|
22.00
|
|
$
|
8.60
|
Holders
As
of September 2, 2016, we had 64,005,949 shares of our common stock issued and outstanding. There were approximately 283 registered
owners of our common stock.
Dividend
Policy
Any
future determination as to the declaration and payment of dividends on shares of our common stock will be made at the discretion
of our board of directors out of funds legally available for such purpose. We are under no contractual obligations or restrictions
to declare or pay dividends on our shares of common stock. In addition, we currently have no plans to pay such dividends. Our
board of directors currently intends to retain all earnings for use in the business for the foreseeable future.
22
EXCHANGE RATE
INFORMATION
Our business is conducted in China and all of our revenues are
denominated in RMB. Capital accounts of our consolidated financial
statements are translated into U.S. dollars from RMB at their
historical exchange rates when the capital transactions occurred.
RMB is not freely convertible into foreign currency and all foreign
exchange transactions must take place through authorized
institutions. No representation is made that the RMB, HKD and MYR
amounts could have been, or could be, converted into U.S. dollars
at the rates used in translation. The following table sets forth
information concerning exchange rates between the RMB and the U.S.
dollar for the periods indicated.
Assets and liabilities are translated at the exchange rates as of
the balance sheet date.
Balance sheet items, except for equity
accounts
|
|
|
|
|
RMB:USD
|
|
6.6443
|
|
6.3568
|
HKD:USD
|
|
7.7589
|
|
7.7501
|
MYR:USD
|
|
4.0046
|
|
4.4124
|
Items in the statements of operations and comprehensive loss, and
statements cash flows are translated at the average exchange rate
of the period.
|
|
Nine Months Ended
June 30,
|
|
|
|
|
|
RMB:USD
|
|
6.4875
|
|
6.1444
|
HKD:USD
|
|
7.7618
|
|
7.7556
|
MYR:USD
|
|
4.1613
|
|
3.6177
|
23
SELECTED HISTORICAL
FINANCIAL AND OPERATING DATA
The following table presents our selected historical financial data
for the periods presented and should be read in conjunction with
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and the financial
statement and notes thereto included elsewhere in this
prospectus.
The following selected consolidated financial and operating data
for the fiscal years ended September 30, 2015 and 2014, and the
consolidated balance sheet data as of September 30, 2015 and 2014,
have been derived from our consolidated financial statements
included elsewhere in this prospectus.
The selected consolidated
statements of operations data for the nine months ended June 30,
2016 and 2015, and the summary consolidated balance sheet data as
of June 30, 2016, have been derived from our unaudited consolidated
financial statements included elsewhere in this prospectus. We have
prepared the unaudited consolidated financial statements on the
same basis as our audited consolidated financial statements. The
unaudited consolidated financial statements include all
adjustments, consisting only of normal and recurring adjustments
that we consider necessary to fairly present our financial position
and results of operations for the periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet
Data:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
2,398,713
|
|
$
|
1,770,196
|
|
|
$
|
96,587
|
Prepayments, Deposits and Other
Receivable
|
|
$
|
1,042,727
|
|
$
|
741,645
|
|
|
$
|
607,645
|
Total Assets
|
|
$
|
13,074,206
|
|
$
|
2,860,510
|
|
|
$
|
8,252,360
|
Total Current Liabilities
|
|
$
|
7,569,115
|
|
$
|
7,447,533
|
|
|
$
|
3,800,035
|
Total Liabilities
|
|
$
|
7,569,115
|
|
$
|
7,447,533
|
|
|
$
|
3,800,035
|
Total Stockholders’ equity
|
|
$
|
5,505,091
|
|
$
|
(4,587,023
|
)
|
|
$
|
4,452,325
|
|
|
|
|
Nine
Months Ended
June 30,
|
|
|
|
|
|
|
|
|
|
Statements
of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
83,870
|
|
|
$
|
56,122
|
|
|
$
|
18,645
|
|
|
$
|
86,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
and Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of Sales
|
|
|
(25,269
|
)
|
|
|
(15,514
|
)
|
|
|
(4,163
|
)
|
|
|
(26,852
|
)
|
Depreciation
and Amortization Expenses
|
|
|
(843,299
|
)
|
|
|
(78,571
|
)
|
|
|
1,356,306
|
|
|
|
494,793
|
|
Research
and Development
|
|
|
—
|
|
|
|
—
|
|
|
|
2,034,103
|
|
|
|
936,624
|
|
Advertising
agency fee
|
|
|
—
|
|
|
|
—
|
|
|
|
462,430
|
|
|
|
—
|
|
Impairment
charge on intangible assets
|
|
|
—
|
|
|
|
—
|
|
|
|
1,264,700
|
|
|
|
—
|
|
Selling,
General and Administrative
Expenses
|
|
|
(5,443,815
|
)
|
|
|
(2,176,963
|
)
|
|
|
3,834,542
|
|
|
|
2,661,793
|
|
Impairment
of Goodwill
|
|
|
—
|
|
|
|
(2,600,315
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
From Operations
|
|
|
(6,228,513
|
)
|
|
|
(4,815,241
|
)
|
|
|
(8,937,599
|
)
|
|
|
(4,033,709
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before Income Tax
|
|
|
(6,226,255
|
)
|
|
|
(4,791,342
|
)
|
|
|
(9,418,853
|
)
|
|
|
(4,063,639
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(6,173,646
|
)
|
|
$
|
(4,791,342
|
)
|
|
$
|
(9,382,343
|
)
|
|
$
|
(4,063,639
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per common share
(retroactively restated for effect of 1 for 2 reserve stock split on June 20, 2016)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
(0.04
|
)
|
Basic
and diluted loss per common share (retroactively restated for effect of 1 for 2 reserve stock split on June 20, 2016), pro forma*
|
|
$
|
(0.06
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
(0.04
|
)
|
24
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following
discussion of our financial condition and results of operations
should be read in conjunction with our audited financial statements
and the related notes thereto and other financial information
appearing elsewhere in this Form S-1. Some of the information
contained in this discussion and analysis or set forth elsewhere in
this prospectus, including information with respect to our plans
and strategy for our business and related financing, includes
forward looking statements that involve risks, uncertainties and
assumptions. As a result of many factors, including those factors
set forth in the “Risk Factors” section of this
prospectus, our actual results could differ materially from the
results described in or implied by the forward-looking statements
contained in this prospectus.
Overview
We are in the O2O (“Online-to-Offline”) business. While
there are many definitions of O2O, with respect to our business,
O2O means providing an online platform for small and medium sized
enterprises (“SMEs”) with physical stores to conduct
business online, interact with existing customers and obtain new
customers. We refer to our customers as “Merchant
Clients” and the users of our platform that are their
existing and potential customers as “Users.” Through
our platform and the products and services offered through it, we
seek to create interaction between our Users and Merchant Clients
by allowing Merchant Clients to study consumer behavior. Our
products and services are designed to allow Merchant Clients to
conduct targeted advertising campaigns and promotions which we
believe are more effective because they are geared for the
customers that a Merchant Client wishes to reach. Our platform is
also designed and built to encourage Users to return and obtain new
Users, each of which is a potential customer for our Merchant
Clients.
We believe we are different from other companies in that our plan
is to sign up merchants first and build our user base utilizing
their customers. Many companies utilize a different strategy of
building up a user base and then signing up paying merchants and
other clients to access that user base.
The current version of our platform is called “Moxian+”
which consists of our user mobile application (“App”)
called the Moxian+ User App and a separate App for our Merchant
Clients called the Moxian+ Business App. Both versions of the App
are currently available in the Google Play Store and the Apple App
Store. There is no charge to download either App. We also have a
website that can be accessed at
www.moxian.com
where either App can also be downloaded.
Moxian principally operates in mainland China with its headquarters
in Shenzhen, China. We launched Moxian version 1.0 which only
consists of the User component App in Malaysia in June 2013 and
subsequently in China in July 2014. During 2014 to 2015, we
developed the Apps as part of “Moxian+,” the successor
to Moxian version 1.0 which was officially launched in October 2015
in China only. In December 2015, we opened our Beijing office. We
are currently operating in both Shenzhen and Beijing.
We are currently in the process of expanding our operations to
Shanghai and Guangzhou.
As of June 30, 2016 and September 30, 2015, our accumulated
deficits were $20,557,155 and $11,174,812, respectively. Our
stockholders’ equity was $4,452,325 and $5,505,091,
respectively. We have so far generated $5,703 and $18,645 in
revenue in the three months and nine months ended June 30, 2016,
respectively. Our losses have principally been attributed to
selling, general administrative, advertising agency fee, impairment
charge on intangible assets and research and development
expenses.
Recent
Developments
As of December 16, 2015, we entered into a Second Amendment
Agreement to the Subscription Agreement (the “Second
Amendment Agreement”) with Xinhua Huifeng Investment Center
Co., Ltd. (Beijing) (“Xinhua”) to amend the
Subscription Agreement entered by the Company and Xinhua
(“Xinhua Subscription Agreement”) dated as of June 4,
2015, which was subsequently amended on August 13, 2015. Under the
Xinhua Subscription Agreement, the Company agreed to sell an
aggregate of 4,095,000 shares of the Company’s Common Stock
at a per share price of $2.00 for gross proceeds of $8,190,000
(approximately RMB50,000,000) (the “Purchase Price”)
and to issue to Xinhua for no additional consideration a warrant
(the “Warrant”) to purchase in the aggregate of
25
16,000,000 shares of Common Stock at an exercise price of $4.00 per
share, exercisable on or prior to July 31, 2015 (the
“Expiration Date”)(such transaction, the
“Transaction”).
Under the Second Amendment Agreement, the Closing Date of the
Transaction was extended to December 31, 2015 and the Expiration
Date of the Warrant was extended to December 31, 2015. As of the
date of this prospectus, we received $8,190,020 of the Purchase
Price, and in turn, issued 4,095,010 shares of common stock to
Xinhua. No warrants were exercised by Xinhua and have expired.
On May 24, 2016 the Board of Directors approved a reverse stock
split of the Company’s issued and outstanding shares of
common stock, par value $0.001 per share (the “Common
Stock”), at a ratio of 1-for-2 (the “Reverse Stock
Split”). The Reverse Stock Split was effective on June 20,
2016 (the “Effective Date”). Simultaneously to the
Reverse Stock Split, the number of shares of the Company’s
authorized Common Stock was correspondingly reduced from
500,000,000 shares to 250,000,000 shares. On July 11, 2016, the
Company received FINRA’s approval of the Reverse Stock Split.
The Company has retroactively restated all shares and per share
data for all the periods presented.
Results of
Operations
For the three months ended June 30, 2016 compared with the three
months ended June 30, 2015
Revenues
The Company had revenues of $5,703 in the three months ended June
30, 2016 compared to $18,187 being generated in the three months
ended June 30, 2015. The Company started to develop the China
market in 2015 and therefore no significant revenue has been
generated.
The decrease in revenue for the three months ended June 30, 2016 as
compared to the three months ended June 30, 2015 was due to
promoting and selling its Moxian version 1.0 to local merchants in
Malaysia and China. Moxian version 1.0 was then retired in
September 2015. In the beginning of 2016, the Company commenced
promoting the new version in the China market; hence there was a
decrease in revenue for the three months ended June 30, 2016 as
compared to the three months ended June 30, 2015.
Operating Expenses
Selling and general administrative expenses for the three months
ended June 30, 2016 and 2015 were $1,139,803 and $1,241,022,
respectively. The expenses consisted of filing fees, professional
fees, payroll and benefits and other general expenses. The selling
and general administrative expense incurred for the three months
ended June 30, 2016 was consistent from the same period of last
year.
The research and development expenses for the three months ended
June 30, 2016 and 2015 were $519,807 and $420,638, respectively.
The increase in research and development expenses was because the
Company hired more software developers in the three months ended
June 30, 2016 for customizing the Moxian + applications in mainland
China, which resulted in the increase in the research and
development expense.
Depreciation and amortization expense for the three months period
ended June 30, 2016 was $455,753, representing a significant
increase from the depreciation and amortization expense of $238,048
incurred in the same period of last year. The increase in
depreciation and amortization expense in the three months ended
June 30, 2016 was due to more amortization expense on the software
system capitalized in the beginning of fiscal 2016.
For the three months ended June 30, 2016, the Company recorded
$1,264,700 impairment charge on intangible asset- IP rights based
on the excess of the carrying value of the assets over the
estimated fair value of the assets. There was no such impairment
charge for the three months ended June 30, 2015.
The Company incurred an
advertising agency fee of $462,430 with Xinhua New Media Culture
Communication Co.,Ltd (“Xinhua”) for the three months
ended June 30, 2016. The Company entered into an exclusive
advertising agency agreement with Xinhua. Pursuant to the
agreement, the Company, as an exclusive agent, is authorized to
operate and sell advertisements on Xinhua’s mobile
application in the gaming channel. The agreement expires on
December 31, 2020. The Company believes the exclusive agency
agreement with Xinhua will promote the Company’s Moxian
mobile application version 2.0 in China market and generate more
revenue on a long term basis.
26
We expect that our operating expenses will continue to increase as
we incur additional costs to support the growth of our
business.
Net Loss
Net loss for the three months ended June 30, 2016 and 2015 was
$3,852,653 and $1,916,140, respectively. The increase in net loss
for the three months ended June 30, 2016 comparing to three months
ended June 30, 2015 was mainly due to an increase in research and
development, depreciation and amortization, intangible impairment
charge and adverting agency fee expense as explained above.
For the nine months ended June 30, 2016 compared with the nine
months ended June 30, 2015
Revenues
The Company had revenues of $18,645 in the nine months ended June
30, 2016 compared to $86,353 generated in the nine months ended
June 30, 2015. The Company started to launch its new version of the
APP in the China market in the beginning of 2016 and therefore no
significant revenue has been generated.
Operating Expenses
Selling and general administrative expenses for the nine months
ended June 30, 2016 and 2015 were $3,834,542 and $2,661,793,
respectively. The expenses consisted of filing fees, professional
fees, payroll and benefits and other general expenses. During the
nine months ended June 30, 2016, the Company incurred additional
approximately $0.4 million in marketing and consulting expenses to
pursue a public offering during the nine months ended June 30,
2016, while the Company did not incur similar expenses for the same
period of last year. The remaining increase was due to $0.3 million
increase in professional and consulting fee, $0.1 million in salary
and wages and $0.3 million increase in rental and property
maintenance fee and $0.1 million increase in marketing and
advertising expense. The Company is in the process of expanding in
the China market, therefore the related operating expenses
increased accordingly.
The research and development expenses for the nine months ended
June 30, 2016 and 2015 were $2,034,103 and $936,624, respectively.
The increase in the research and development expense was mainly due
to the fact that more software developers were hired during the
first half of fiscal 2016.
The Company incurred advertising agency fee of $462,430 with Xinhua
for the nine months ended June 30, 2016. The Company entered into
an exclusive advertising agency agreement with Xinhua. Pursuant to
the agreement, the Company, as an exclusive agent, is authorized to
operate and sell advertisement on Xinhua’s mobile application
in the gaming channel. The agreement expires on December 31, 2020.
The Company believes the exclusive agency agreement with Xinhua
will promote the Company’s Moxian mobile application version
2.0 in China market and generate more revenue on long term
basis.
Depreciation and amortization expense for the nine months ended
June 30, 2016 was $1,356,306; it represents significant increase
from $494,793 in the same period of last year. The increase in
depreciation and amortization expense in the nine months ended June
30, 2016 was due to more amortization expense on the software
system capitalized in the beginning of fiscal 2016.
For the nine months ended June 30, 2016, the Company recorded
$1,264,700 impairment charge on intangible asset-IP right based on
the excess of the carrying value of the assets over the estimated
fair value of the assets. There was no such impairment charge for
the nine months ended June 30, 2015.
We expect that our operating expenses will continue to increase as
we incur additional costs to support the growth of our
business.
Other Expenses
The Company recorded a $482,855 foreign exchange transaction loss
during the nine months ended June 30, 2016 due to the conversion of
the private placement funds, while the Company did not incur
similar expenses for the same period of last year.
27
Net Loss
Net loss for the nine months ended June 30, 2016 and 2015 was
$9,382,343 and $4,063,639, respectively. The increase in net loss
for the nine months ended June 30, 2016 comparing to nine months
ended June 30, 2015 was mainly due to reasons explained above.
Year ended September 30, 2015 Compared with Year ended September
30, 2014
Gross Revenues
The Company received sales revenues of $83,870 in the year ended
September 30, 2015 compared to $56,122 being generated in the year
ended September 30, 2014.
Operating Expenses
Operating expenses for the year ended September 30, 2015 and year
ended September 30, 2014 were $5,443,815 and $2,176,963,
respectively. The expenses consisted of our leases, R&D
expenses, filing fees, professional fees, payroll and benefits and
other general expenses.
We expect that our general and administrative expenses will
continue to increase as we incur additional costs to support the
growth of our business.
Net Profit/(Loss)
Net loss for the year ended September 30, 2015 and year ended
September 30, 2014, were $6,173,646 and $4,791,342, respectively.
Basic and diluted net loss per share amounted $0.03 and $0.02,
respectively, for the year ended September 30, 2015 and year ended
September 30, 2014.
The increase in net loss for the year ended September 30, 2015
compared to the year ended September 30, 2014 was due to an
increase in general and administrative expenses.
Liquidity and Capital
Resources
For
the nine months ended June 30, 2016 and 2015
As
of June 30, 2016, we had working capital deficit of approximately $3.1 million consisting of cash on hand of $96,587 as compared
to working capital deficit of approximately $4.1 million and cash on hand of approximately $2.4 million as of September 30, 2015.
Net
cash used in operating activities for the nine months ended June 30, 2016 was approximately $5.9 million as compared to net cash
used in operating activities of approximately $3.6 million or the nine months ended June 30, 2015. The increase in cash used in
operating activities for the nine months ended June 30, 2016 was mainly due to approximately $0.4 million increases in the advertising
agency fee expense and $1.1 million increase in research development and selling and general and administrative expense.
Net
cash used in investing activities for the nine months ended June 30, 2016 was around $0.5 million as compared to approximately
$1.3 million for the nine months ended June 30, 2015. The higher spending for the nine months ended June 30, 2015 because the
Company expanded its operations in China and purchased approximately $1.3 million in computer and office equipment, but the related
purchase only amounted to approximately $0.3 million for the nine months ended June 30, 2016.
Net
cash provided by financing activities for the nine months ended June 30, 2016 was approximately $4.1 million as compared to around
$5.9 million for the nine months ended June 30, 2015. During the nine months ended June 30, 2016, the Company completed a private
placement of approximately $8.2 million, of which approximately $2.7 million was received during the nine months ended June 30,
2016 and around $5.5 million received by September 30, 2015.
We
will require additional capital to continue to operate our business, and to further expand our business. Sources of additional
capital may come through various financing transactions or arrangements with third parties and may include equity or debt financing,
bank loans or revolving credit facilities. We may not be successful in
28
locating
suitable financing transactions in the time period required or at all, and we may not obtain the capital we require by other means.
Our inability to raise additional funds when required may have a negative impact on our operations, business development and financial
results.
For
the years ended September 30, 2015 and 2014
Cash
Assets
At
year ended September 30, 2015, we had working capital deficit of $4,089,365, consisting of cash of $2,398,713 as compared to working
capital deficit of $4,935,692 and cash of $1,770,196 as of September 30, 2014.
Net
cash used in operating activities for the year ended September 30, 2015 was $5,417,273 as compared to net cash used in operating
activities of $2,106,329 for the year ended September 30, 2014. The cash used in operating activities are mainly for our leases,
R&D expenses, filing fees, professional fees, payroll and benefits and general expenses.
Net
cash from/for investing activities for the year ended September 30, 2015 was that $3,286,593 was used for investing activity as
compared to $667,730 was provided by investing activity for the year ended September 30, 2014. It was mainly because we used about
$3 million to purchase office equipment and perform construction for leased offices (leasehold improvement).
Net
cash provided by financing activities for the year ended September 30, 2015 was $9,236,028 as compared to $3,155,839 for the year
ended September 30, 2015. The increase was mainly because we received $5.5 million investment from Xinhua in the year ended September
30, 2015.
During
the fiscal year ended September 30, 2015, the burn rate for the Company was approximately $400,000 per month, consisting of cost
of research and development, marketing, operation expenditures, and professional fees.
The
Company anticipates utilizing approximately $450,000 monthly for capital expenditures during the fiscal year ended September 30,
2016, including approximately $250,000 for mobile application development and approximately $200,000 for other capital expenditures,
including corporate facilities and infrastructure, information systems hardware, software and enhancements.
Financing
On June 4, 2015, the Company and Beijing Xinhua Huifeng Equity
Investment Center (Limited Partnership) (“Xinhua”)
entered into a subscription agreement, pursuant to which, the
Company agreed to sell an aggregate of 4,095,000 shares of the
Company’s Common Stock at a per share price of $2.00 for
gross proceeds of $8,190,000 (approximately RMB50,000,000) (the
“Purchase Price”) and to issue to Xinhua for no
additional consideration a warrant to purchase in the aggregate of
16,000,000 shares of Common Stock at an exercise price of $4.00 per
share, exercisable on or prior to July 31, 2015.
Under the subscription agreement, we are required to issue an
additional number of shares of our common stock to Xinhua, equal to
50% of the aggregate number of shares issued upon exercise of the
warrant by Xinhua as of September 30, 2016, if we fail to contract
with 25,000 new paying merchants by September 30, 2016. This
“make good” provision will be available only if Xinhua
has exercised the warrant and acquired more than 16,000,000 shares
of common stock. Further, we are required to issue 2,000,000 shares
of common stock to Xinhua, for no additional consideration, if we
fail to publish its full working version of the Moxian mobile
application version 2.0 by September 30, 2015, or if we fail to
uplist to a national securities exchange in the U.S. by June 30,
2017.
Subsequent to the initial subscription agreement, the closing date
of the transaction, as well as the expiration date of the warrant,
were both first extended to September 30, 2015, and then further
extended to December 31, 2015. We received $8,190,020 of the
Purchase Price, and in turn, issued 4,095,010 shares of common
stock to Xinhua. The warrants were not exercised and have
expired.
Loan
As of June 30, 2016, the Company borrowed loans from certain
related parties of the Company for an aggregate of $2,839,158.
As of September 30, 2015, the Company borrowed loans from certain
related parties of the Company for an aggregate of $1,462,525.
29
Foreign
Operations
Substantially all of our business operations are conducted in
Mainland China. Accordingly, our results of operations, financial
condition and prospects are subject to a significant degree to
economic, political and legal developments in the PRC. We also have
operations in Hong Kong. Operating in foreign countries involves
substantial risk. For example, our business activities subject us
to a number of Chinese laws and regulations, such as
anti-corruption laws, tax laws, foreign exchange controls and cash
repatriation restrictions, data privacy and security requirements,
labor laws, intellectual property laws, privacy laws, and
anti-competition regulations, which have uncertainties. Any failure
to comply with the PRC laws and regulations could subject us to
fines and penalties, make it more difficult or impossible to do
business in China and harm our reputation.
Operating in foreign countries also subjects us to risk from
currency fluctuations. Our primary exposure to movements in foreign
currency exchange rates relates to non-U.S. dollar denominated
sales and operating expenses. The weakening of foreign currencies
relative to the U.S. dollar adversely affects the U.S. dollar value
of our foreign currency-denominated sales and earnings. This could
either reduce the U.S. dollar value of our prices or, if we raise
prices in the local currency, it could reduce the overall demand
for our offerings. Either could adversely affect our revenue.
Conversely, a rise in the price of local currencies relative to the
U.S. dollar could adversely impact our profitability because it
would increase our costs denominated in those currencies, thus
adversely affecting gross margins.
Critical Accounting
Policies and Estimates
Use of
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at dates of the financial
statements and the reported amounts of revenue and expenses during
the periods. Actual results could differ from these estimates. Our
significant estimates and assumptions include depreciation and the
fair value of our stock, stock-based compensation, debt discount
and the valuation allowance relating to the Company’s
deferred tax assets.
Recently Issued
Accounting Pronouncements
Reference is made to the “Recent Accounting
Pronouncements” in Note 2 to the Financial Statements
included in this Report for information related to new accounting
pronouncement, none of which had a material impact on our
consolidated financial statements, and the future adoption of
recently issued accounting pronouncements, which we do not expect
will have a material impact on our consolidated financial
statements.
Off-Balance Sheet
Arrangements
We do not have any off-balance sheet arrangements.
30
OUR HISTORY AND
CORPORATE STRUCTURE
The following diagram illustrates our corporate structure as of the
date of this prospectus.
Moxian was incorporated in the State of Nevada on October 12, 2010
under the name SECURE NetCheckIn Inc. On July 29, 2015, we changed
our name to Moxian, Inc. Previously we were engaged in the business
of offering a cloud-based scheduling and notification product
targeted to urgent care facilities and medical offices to increase
the satisfaction of patients in the scheduling and timing of
appointments.
On
February 21, 2014, through Moxian CN Samoa, we acquired Moxian BVI, together with its subsidiaries, Moxian HK, Moxian Shenzhen,
and Moxian Malaysia, from Rebel Group, Inc. (“REBL,” formerly known as Moxian Group Holdings, Inc.) Moxian CN Group
was incorporated by the Company under the laws of Independent State of Samoa on February 17, 2014.
Moxian BVI is a British Virgin Islands company that was
incorporated on July 3, 2012. Moxian HK was incorporated on January
18, 2013, under the laws of Hong Kong. Moxian HK is currently
engaged in the business of online social media and plans to launch
its business in Hong Kong.
Moxian Shenzhen was incorporated on April 8, 2013 in China and is
engaged in the business of internet technology, computer software,
and commercial information consulting. Moxian Malaysia was
incorporated on March 1, 2013 and conducts its business in the IT
Services and Media Advertising industries.
Prior to the acquisition of Moxian BVI, on February 19, 2014,
Moxian HK and Moxian Shenzhen entered into an Assignment and
Assumption Agreement with Moxian IP Samoa, a wholly-owned
subsidiary of REBL at the time, whereby Moxian HK and Moxian
Shenzhen assigned and transferred to Moxian IP Samoa, all of the
intellectual property rights relating to the operation, use and
marketing of the Moxian Platform, including all of the relevant
trademarks, patents and copyrights, in consideration of $1,000,000.
Subsequently on January 30, 2015, we acquired from REBL 100% of the
equity interests of Moxian IP Samoa for $6,782,000. As a result of
the transaction, Moxian IP Samoa became our wholly-owned
subsidiary. Moxian IP Samoa was incorporated on February 17, 2014
in the Independent State of Samoa.
31
On July 15, 2014, Moxian Shenzhen entered into a series of
contractual arrangements with Moyi, which provide Moxian Shenzhen
with control over Moyi’s business affairs and economic
interest, as described in more details below. Moyi was incorporated
on July 19, 2013 in China.
On December 10, 2015, Moxian Shenzhen incorporated Moxian Beijing
and Moxian Beijing became the wholly-owned subsidiary of Moxian
Shenzhen.
Contractual Arrangements
with Moyi and its Shareholders
Due to PRC legal restrictions on foreign ownership and investment
in, among other areas, Internet information services, which include
online advertisement and e-commerce, we, similar to other entities
with foreign-incorporated holding company structures operating in
our industry in China, operate our businesses in which foreign
investment is restricted or prohibited in the PRC through a
wholly-foreign owned enterprise and a variable interest entity. The
variable interest entity, Moyi, which is incorporated in the PRC
and 100% owned by two PRC nationals, Zhang Guohui and Guan Fensheng
(“Moyi Shareholders”), holds the required Internet
Content Provider license, or ICP license and operate our businesses
in China.
We have entered into certain contractual arrangements, as described
in more detail below, which collectively enable us to exercise
effective control over the variable interest entity and realize
substantially all of the economic risks and benefits arising from,
the variable interest entity. As a result, we include the financial
results of the variable interest entity in our consolidated
financial statements in accordance with U.S. GAAP as if it was our
wholly-owned subsidiary.
The following is a summary of the contractual arrangements that
provide us with effective control of our variable interest entity
and that enable us to receive substantially all of the economic
benefits from its operation.
Exclusive Business
Cooperation Agreement
. Pursuant to the Exclusive
Business Cooperation Agreement dated July 15, 2014, between Moxian
Shenzhen and Moyi, Moxian Shenzhen exclusively provides Moyi with
services, including, technical and systems support, marketing
consultancy, product research and development, equipment leasing
and system maintenance. In return, Moyi pays a service fee to
Moxian Shenzhen in an amount equal to 100% Moyi’s pre-tax
profit. Under the agreement, Moxian Shenzhen has an option to
purchase from Moyi any or all of its assets, at the lowest price
permitted under the PRC laws. The initial term of this agreement is
10 years, which may be renewed by Moxian Shenzhen in its sole
discretion. The agreement may be terminated, by Moxian Shenzhen
with a 30-day written notice, or by Moyi only if Moxian Shenzhen
engages in grossly negligent or fraudulent conducts.
Exclusive Option
Agreement
. Pursuant to the Exclusive Option Agreement
dated July 15, 2014, among Moxian Shenzhen, Moyi and Moyi
Shareholders, Moxian Shenzhen or its designee has an exclusive
option to purchase from the Moyi Shareholders, to the extent
permitted under the laws of the PRC, all or a portion of their
equity interest in Moyi, on one or more occasions, at the price of
RMB 10 (or approximately $1.62) per share, or such other price
based on an appraisal if such appraisal is required by the laws of
PRC. Moyi and its shareholders also agreed that, no person, other
than Moxian Shenzhen and its designee, has the right to purchase
any of the equity interest of Moyi. Moyi and the Moyi Shareholders
undertake not to effect major corporate changes, including,
amending its articles of association or bylaws, changing its
registered capital, declaring dividends, or enter into any major
transaction in relation to Moyi, including, the transfer of any of
its business, material assets, or equity interests to any third
party, incurring debts other than in the ordinary course of
business, executing any major contract, or making investments in or
acquiring a third party, without the prior written approval of
Moxian Shenzhen. The initial term of this agreement is 10 years,
which may be renewed by Moxian Shenzhen in its sole discretion.
Loan
Agreement
. Pursuant to the Loan Agreement dated July
15, 2014, by and among Moxian Shenzhen and Moyi Shareholders,
Moxian Shenzhen granted an interest-free loan in the principal
amount of RMB 100,000 (or approximately $15,198) to Moyi
Shareholders, which may only be used for the purposes of
Moyi’s business operation. The loan has a 10-year term, but
Moxian Shenzhen may require acceleration of repayment at its
absolute discretion with a 30-day notice. Moxian Shenzhen will
choose the form of the repayment, which, among others, may be the
proceeds that Moyi Shareholders receive from selling their equity
interest in Moyi to Moxian Shenzhen, pursuant to the Exclusive
Option Agreement described above.
Equity Pledge
Agreement
. Pursuant to the Share Pledge Agreement dated
July 15, 2014, among Moxian Shenzhen and Moyi Shareholders, Moyi
Shareholders pledged all of their equity interests in Moyi to
Moxian
32
Shenzhen, to secure the performance of obligations by themselves
and Moyi under the agreements described above. Under this
agreement, Moyi Shareholders may not transfer or dispose of their
equity interest in Moyi, without Moxian Shenzhen’s prior
written consent. The equity pledge agreement has not yet been
registered with the relevant office of the Administration for
Industry and Commerce in China.
Power of
Attorney
. Pursuant to the Powers of Attorney dated July
15, 2014, Moyi Shareholders respectively granted irrevocable
authority to Moxian Shenzhen, to exercise all their rights as a
shareholder of Moyi, including the right to attend and vote at
shareholders’ meetings and appoint directors. Moyi
Shareholders also authorized Moxian Shenzhen to take necessary
actions, on their behalf, to effect the transactions contemplated
by the Equity Pledge Agreement and Exclusive Option Agreement. Moyi
Shareholders agreed not to grant the same authority under the
Powers of Attorney to any other person, without Moxian
Shenzhen’s prior written consent.
33
BUSINESS
Overview
We are in the O2O (“Online-to-Offline”) business. With
respect to our business, O2O means providing an online platform for
small and medium sized enterprises (“SMEs”) with
“brick and mortar” businesses that allows them to
conduct business, interact with existing customers and obtain new
customers online. We refer to our customers as “Merchant
Clients” and we use the term “Users,” to refer to
those existing and potential customers of our Merchant Clients who
use our mobile application and platform. Through the features,
products and services offered on our platform, we seek to create
interactions between Users and Merchant Clients, which will allow
Merchant Clients to study consumer behavior. Our platform has five
main components that allow Merchant Clients to conduct targeted
advertising campaigns and promotions, which we believe are
effective because they are geared to the customers that a Merchant
Client wishes to attract. Our platform is also designed and built
to encourage Users to return and refer new Users, each of which is
a potential customer for our Merchant Clients.
The current version of our platform is called
“Moxian+,” which consists of our user mobile
application (the “App” and collectively, the
“Apps”) called the Moxian+ User App and a separate App
for our Merchant Clients called the Moxian+ Business App. Both
versions of the App are currently available in the Google Play
Store and the Apple App Store. There is no charge to download
either App. We also have a website that can be accessed at
www.moxian.com
where either App can also be downloaded.
Moxian
principally operates in mainland China with its headquarters in Shenzhen, China. We launched Moxian version 1.0 in Malaysia in
June 2013 and subsequently in China in July 2014. In 2015, we developed the Apps as part of “Moxian+,” the successor
to Moxian version 1.0 which was officially launched in October 2015 in China.
Market
Opportunities
China currently has more than 850 million users actively utilizing
mobile applications (
http://news.xinhuanet.com/english/2015-11/10/c_134802668.htm
).
In 2014, the China Internet Network Information Center reported
that there were approximately 618 million internet users throughout
Asian countries, representing a penetration rate of approximately
46 percent. Among these internet users, over 90 percent have a
social media account. For comparison, just 67 percent of U.S.
internet users engage in social media. However, the opportunity in
China extends beyond the ability to reach a large target audience.
According to the Data Center of China Internet, 38 percent of users
claim they are more likely to buy items recommended by other social
media users (Statistical Report on Internet Development in China by
China Internet Network Information Center, 2014).
O2O platforms serve to substantially enhance marketing and commerce
performance for brands and retailers compared to traditional
digital marketing approaches. O2O refers to any and all activities
that originate online and eventually result in a shopper going to a
physical store. Forrester Research predicts that by 2016, more than
half of the $3.5 trillion spent in offline US retail will be
influenced by the websites (Forrester’s US Cross-Channel
Retail Forecast, 2011 To 2016).
According to official statistics, China’s O2O market reached
98.7 billion yuan (approximately US$9 billion) in 2011. Industry
analysts anticipate that the China O2O market will quadruple to 418
billion yuan (approximately US$67 billion) in 2016 (
http://www.prnewswire.com/news-releases/chinas-o2o-market-the-path-to-success-is-not-uni-directional-201906281.html
).
Moxian believes it will be able to capture a share in this market
by offering its platform to merchants. Our platform allows users to
be aware of their interested merchants’ on-going promotions
so as to attract them to make purchases offline.
Products and
Services
Subscription Packages for Moxian+ Business App Merchant
Clients
The Moxian+ Business App is solely for use by Merchant Clients.
Moxian+ Business App allows them to manage their presence within
the Moxian+ platform, plan a campaign, offer discounts, manage
payments and receive analytics. We offer free and paid subscription
packages to use the Moxian+ Business App. We have three
34
subscription levels. Our basic account is free, our gold account is
$1,200 per year and our diamond account is offered at $2,000 per
year.
With a basic account subscription, Merchant Clients get a “Do
It Yourself” webpage and they can use different modules in
their account, including the business address, business phone
number and list up to 5 products that they can offer for sale
through our e-commerce feature. The following benefits are
available to Merchant Clients that have a basic account:
•
A webpage to create an online shop
•
Ability to interact with customers through MO-Talk, a voice chat
service
•
Receive basic analytics reports
•
Provide rewards to Users
When a Merchant Client purchases one of our paid subscription
packages, in addition to the features provided in the basic
account, Merchant Clients also have access to a more extensive set
of tools on our platform, which allows them to
•
Send out messages to targeted customers
•
Receive more detailed analytics reports
•
Social Customer Relationship Management (‘SCRM’)
•
Fan rewards
•
Events Hosting
•
Vouchers and Product Listing
•
Features for multiple store locations
Moxian+ User App for Users
Our Users are referred to as “MO-Pals” within the User
App. They can download and use the User App for free. Users provide
basic information to sign up for a Moxian+ account and then they
can invite friends and family members to join Moxian+, search and
join different interest groups, and participate in social media by
sharing activities, stories, photos and videos, sending micro-blog
messages, playing online games in Moxian+’s game center, and
earning MO-Coins, a virtual currency similar to credit card reward
points which are explained further below.
The Moxian+ User App has a variety of features to attract and
retain Users. The Moxian+ User App also provides access to a social
media platform with a package of services to provide interaction
with other Users and Merchant Clients.
•
Interact with other Users through MO-Talk;
•
News Center with daily news items under “Hot Topics,”
“Hot Events” and “Nearby People;”
•
Game Center to earn MO-Points;
•
Shop at Merchants’ Online Stores by credit card or MO-Coins;
and
•
MO-Shake allows Users to shake their phone to win: vouchers;
MO-Coins or MO-Points; and coupons, discounts or admission to other
events hosted by Merchant Clients which are in the vicinity of the
User.
35
Services for Merchant Clients
Social Customer Relationship Management (‘SCRM’)
Our SCRM is built to allow Merchant Clients to input their customer
details into the system. The SCRM can then follow the
customers’ activities and allows Merchant Clients to send
promotional messages and advertisements to Users through our
platform.
Targeted Marketing
Our Targeted Marketing tool is offered to paid Merchant Clients
only. Its feature allows our Merchant Clients to contact their
targeted Users directly by sending messages, promotions and
vouchers to a specific range of customers, such as customers who
have visited their store in the past week or month or customers who
have upcoming birthdays. Merchant Clients can send Users discounts
or messages and target people by age, gender or other criteria. We
also provide targeted marketing to assist Merchant Clients to reach
customers more efficiently. For example, we can generate a list of
customers who have browsed a Merchant Client’s products over
the past two months more than once, but not made a purchase, and a
discount can be offered to them for certain products. In addition,
Merchants Clients can find Users near their physical shops (within
1,000 meters) and invite them to their stores.
Analytics Reports
Detailed reports are provided to paid Merchant Clients. These
reports allow Merchant Clients to see the number of followers they
have, the number of points redeemed and rewarded, and the number of
vouchers purchased or redeemed offline. Merchant Clients with a
free account receive only basic analytics, such as how many
MO-points have been distributed. However, for paid accounts,
Merchant Clients receive more detailed analytics regarding the
buying patterns and likes of current and potential customers.
Merchant Clients can provide rewards to customers by including
their customer’s mobile number. Customers who have installed
the Moxian+ User App can then receive rewards on the platform in
the form of MO-Points or discount vouchers. Customers who do not
have the Moxian+ User App installed will receive a text message
informing them of their rewards and that they can download the
Moxian+ User App to redeem them.
Event Hosting
Merchant Clients can host events through the platform and invite
Users within a selected range, such as by proximity, common
interest, or gender to participate in the event.
Vouchers and Product Listings
Merchant Clients can customize coupons or vouchers on the platform,
daily or with whatever frequency they wish, or list available
products.
Multiple store features
For those Merchant Clients which have multiple stores in different
locations, our platform allows different stores to access to the
same account. Moreover, different stores may be differentiated for
which information they can access to by entering their location in
the app.
Webpage to Create an Online Shop
We provide a Do it Yourself Webpage to create an online shop. The
Merchant Client can include its logo, its product/service category,
telephone number, and other information that is relevant to the
business. The Shop will appear in the Moxian+ User App. A Merchant
Client can manage its own shop by adding more information, posting
events, offers, and discounts.
36
Our Platform
There are five components to our Moxian+ platform, which is the
backend of our application. The Moxian+ platform includes the
social media engine, the e-commerce engine, the rewards engine, the
gamification engine, and the analytical engine.
Social Media Engine
Our data use policy governs the use of information that users have
chosen to share and present. We also design our products to include
robust safety tools. These tools are coupled with partnerships with
online safety experts to offer protection for all users,
particularly teenagers. We work with law enforcement to help
promote the safety of our users as required by law. To the extent
permissible, and with prior consent from the Users, we analyze
User’s information to understand the Users behavior.
E-Commerce
Utilizing our e-commerce features, Merchant Clients are able to
conduct business by posting products, offering coupons and sales as
well as creating events and blogs through the Moxian+ Business App.
On the other hand, Users can shop at the Merchant Clients’
shops like at any other e-commerce platform by ordering online and
receiving the products by express delivery.
Rewards
Users are rewarded with MO-Points and MO-Coins. MO-Points are
points granted to Users when they shop at Merchant Clients, play
games on our platform or engage in other activities sponsored by
the Merchant Clients. MO-Points can be redeemed at the Merchant
Clients’ shops as determined by the Merchant Clients, or can
be redeemed for MO-Coins which are virtual currency and can be used
at any Merchant Client’s stores. MO-Coins are backed by cash
paid by Merchant Clients which is held in an escrow account. They
can be redeemed for cash, or used to purchase more MO-Points. The
ratio of MO-Coins to actual currency is currently set at 1:1. A
Merchant Client who pays for MO-Coins can also redeem them for
cash.
MO-Points and MO-Coins are traceable and trackable on the Moxian+
platform through designated serial number so that we can see
exactly what Users do with them and use that information to assist
our Merchant Clients to determine customer behaviors.
From time to time, we may also give away MO-Points or MO-Coins as a
promotion to increase our User base. We also plan to have our own
“shopping mall” with merchandise that Users can
purchase with MO-Points and MO-Coins in the upcoming year.
Gamification
Together with outside contractors we develop games for Users to
earn MO-Points and MO-Coins and other rewards which may be specific
to a certain Merchant Client. Users can use MO-Points to play games
offered in our game center.
Analytical Engine
Moxian provides analytics to each Merchant Client for the consumer
behavior Moxian learns through its platform to assist our Merchant
Clients to better design their promotions and reach their target
audience. We analyze consumer behavior through ‘likes’
of posts by certain merchants or the places they tend to
“check-in” to, to determine their usual hang out.
News Center
On “Hot Topics,” the most popular topics and related
blogs, news, and journals being discussed among Users will be
displayed, so that Users can stay informed in real time. “Hot
Events” provide information about events to be hosted by
Merchant Clients, and they are categorized by different interests.
In addition, Users will be able to see the list of other nearby
Users, with information that a User may be willing to have
displayed.
37
Advertisements
On January 20, 2016, the Company entered into an Exclusive
Partnership Agreement with Xinhua New Media Culture Communication
Co. Ltd. (“Xinhua New Media”), pursuant to which the
Company is engaged as the reseller of the advertisement space for
the Xinhua New Media App.
The Company plans to expand its sales force to include an
advertisement sales team to promote the Xinhua New Media App
advertisement space. In addition to selling the Xinhua
Advertisement space, the sales team will also be selling our own
advertisement space on Moxian platform.
We believe that we will benefit from the partnership with Xinhua
New Media in two ways:
Firstly, Traction and growth of users. Users of the Xinhua New
Media App will be rewarded with Mo-Coins and Mo-Points when
engaging in interactive activities, such as clicking on any
advertisements, within the platform. These Xinhua New Media App
users are expected to then log into Moxian Platform to redeem their
Mo-Coins and Mo-Points. This will allow us to grow our user
base.
Secondly, Cross-Selling. We will bundle our Moxian+ Merchant
App with the advertisement space on the Xinhua New Media App and
offer a package deal to merchants. The package deals will only be
offered to large-scale customers who have chain-shops based in
China.
In addition, we are also the exclusive operator and partner for the
gaming platform included in the Xinhua New Media App. Moxian
charges a fee for operating the gaming platform, which generate
revenues from advertisement, sponsorship and profit sharing
arrangements with gaming companies.
Transaction
Fees
All transactions carried across our platform is done through our
virtual currency. We charge a fee for any transaction carried on
our platform within a range of 3% to 5% of the transaction
price.
White-Label
Solution
We offer large scale merchants the option to “white
label” our Moxian+ Merchant and User App. We charge a yearly
fee to the merchants. White-label merchants sell Moxian+ Merchant
and User App in their own names. We also offer customization of
Moxian+ Merchant and User App at the request of merchants for an
additional fee.
Marketing
Strategy
Our success is dependent upon signing up paid Merchant Clients. The
Merchant Clients, in turn, build up our base of Users by
encouraging their customers to download our User App. Merchant
Clients can offer MO-Points and MO-Coins to attract people to
download our App. In order to attract more Merchant Clients, we
also need to have an established base of Users.
We
initially marketed only to merchants in Shenzhen, China where we launched Moxian version 1.0. Although this was a beta test that
ran for three months from June 2015 to August 2015, 30,000 merchants subscribed for our Moxian version 1.0 services. We are currently
targeting these same merchants for Moxian+ and expanding the Userbase.
We have a sales force of 20 people based in Shenzhen, China. By the
end of 2016, we intend to open an additional sales office in
Shanghai and Guangzhou and hire a sales force of 200 sales people
in four operating cities.
We are currently scheduling seasonal sales events in Shenzhen to
promote our products and services to our initial Merchant Clients
and give away MO-Points and MO-Coins.
During 2016, we also plan to utilize third party distributors with
an existing base of merchants to market our products.
38
Competition
Although major global social network platform providers have the
advantage of an existing user base, we believe Moxian has a unique
social business model and social media features that enable us to
stand out among the competition. Other major social networking
platforms usually focus on personal photo sharing, video sharing,
chat features, group chatting, micro-blogging, following
groups’ online activities, rating and commenting on products
and services. What we believe makes Moxian stand out is that our
Merchant Clients have: (i) their own promotion pages, (ii) local
event programs for their customer Users, (iii) location-based
promotion information, (iv) mobile chat applications, (v) free
prizes for the Users, (vi) advertising on Moxian’s social
pages, (vii) a social customer relationship management systems,
(viii) a loyalty program using MO-Points and MO-Coins, and (ix)
customized online games to promote merchants’ brands and
group sales promotions. Therefore, by establishing our Merchant
Client base first, we believe that our user acquisition will be
easier to build up.
In China, we face stiff competition. Our major competitor in China
is Dazong Dianping (“Dianping”). Dianping targets
merchant clients as we do. In addition, Dianping also offers
merchants a customized page, location based promotion information
and a relationship management tool. The other principal competitors
are Nuomi, Meituan and WeChat.
However, we believe Moxian+ is superior for SMEs because our SCRM
offers Merchant Clients the ability to interact with their
customers via instant messenger. In addition, we offer virtual
currencies that can entice and encourage repeated visits by the
Users.
Our
Technology
Technology is the key to our success in achieving efficiency for
our business, improving the user experience and enabling
innovation. We employ a team of over 80 engineering and data
analytics personnel to build our technology platform and develop
new online and mobile products. Key components of our technology
include:
Data Science
Our data science technology serves various types of data-intensive
computational needs, including deep learning, high-volume batch
processing and multi-variable and multi-dimensional real-time
analytics. Data mining and transaction, payment and behavioral data
science capabilities are used extensively in numerous applications
such as search and online marketing.
Security
We take various steps to ensure the security of the Moxian+
platform and the personal information of users of the platform, as
well as the ecommerce transactions conducted on the platform. We
conduct daily testing and have engaged an outside security
consultant to conduct further testing and make recommendations as
to additional security measures.
Research and
Development
There are 60 people in the Research & Development department,
which is responsible for developing and improving the mobile
application, Moxian platform and customer experience in using our
products. During the past two fiscal years, we have spent
approximately $1,735,704 in 2014 and $4,355,052 in 2015,
respectively on research and development.
Employees
We have a total of 160 employees, of which we have 21 employees in
the product team, 60 employees in the research and development
team, 26 employees in the sales and marketing department, 17
employees in the customer and technical support team and the
remaining in the administrative department. We consider our
employee relations to be good, and to date have not experienced a
work stoppage due to a labor dispute.
39
Intellectual
Property
Trademarks
We have registered for the following trademarks:
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Hong Kong
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302534274
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Class 9: Magnetic data carries, recording discs,
data processing equipment and computers Class 35: Advertising,
business management, business administration Class 38:
Telecommunications Class 40: Treatment of materials Class 41:
Entertainment Class 42: Design and development of computer hardware
and software
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Moxian (Hong Kong) Limited
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Registered
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America
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85931344
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Class 009: Magnetic data carries, recording
discs, data processing equipment and computers Class 035:
Advertising, business management, business administration Class
038: Telecommunications Class 040: Treatment of materials Class
041: Entertainment Class 042: Design and development of computer
hardware and software
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Moxian (Hong Kong) Limited
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Registered
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China
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13460852
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Class 9: Magnetic data carries, recording discs,
data processing equipment and computers
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Moxian Shenzhen Technologies Co Ltd
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Registered
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China
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13461178
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Class 38: Telecommunications
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Moxian Shenzhen Technologies Co Ltd
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Registered
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We have applied to register the following trademarks:
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China
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13460714
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Class 42: Design and development of computer
hardware and software
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Moxian Shenzhen Technologies Co Ltd
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Pending
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China
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10624504
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Class 42: Design and development of computer
hardware and software
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Moxian Shenzhen Technologies Co Ltd
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Pending
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Patents
We have submitted the patent applications as follows:
40
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A business promotion method based on internet
platform for users to access the information
independently
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China
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201310734492.2
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Including background identifying steps giving
feedbacks on the demands sent by terminal application steps, access
end-user’s real-time location information and search nearby
merchants, push merchant’s information and free rewards to
users
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27
th
December 2013
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Pending
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A method based on internet platform to achieve
interactive information through QR code
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China
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201410235257.5
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Including terminal application steps, start the
application terminal of internet platform, access the
merchant’s ID and IP on the platform through scanned QR
code
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30
th
May 2014
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Pending
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The method and system of pushing targeted
advertising based on consumption patterns
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China
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201510628706.7
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Including access user’s chat session
content, analyze and abstract user’s interested information,
send the corresponding targeted advertising to users through data
analysis
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28
th
September 2015
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Pending
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The method and system of pushing targeted
advertising based on chat session
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China
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201510628708.6
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Including access user’s consumption
record, analyze and understand user’s consumption mode, send
the corresponding targeted advertising to users through data
analysis
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28
th
September 2015
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Pending
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Copyright
We have applied for copyright registration of Moxian’s mascot
“Moya” on December 2, 2013. Moya is a mascot
representing the Moxian Platform. Below are some pictures of Moya
with different expressions:
Executive
Office
Our principal executive offices are located at Block A, 9/F, Union
Plaza, 5022 Binjiang Avenue, Futian District, Shenzhen City,
Guangdong Province, China. Our telephone number is +86
(0)755-66803251. We maintain a website at
www.moxian.com
.
The information contained on our website is not, and should not be
interpreted to be, a part of this prospectus.
Property
We do not own any real property. We currently rent office space in
Shenzhen, PRC. The monthly rent is RMB 244,000 (or approximately
$32,103). We also rent an office in Malaysia. The monthly rent for
the Malaysia office is RM 17,841.60 (or approximately $4,210). We
also rent an office in Beijing. The monthly rent for the Beijing
office is RMB121,015 (or approximately $19,424). We believe that
our office space is sufficient for our current needs.
41
Legal
Proceedings
As of the date hereof, we know of no material pending legal
proceedings against to which we or any of our subsidiaries is a
party or of which any of our property is the subject. There are not
proceedings in which any of our directors, executive officers or
affiliates, or any registered or beneficial shareholder, is an
adverse party or has a material interest adverse to our interest.
From time to time, we may be subject to various claims, legal
actions and regulatory proceedings arising in the ordinary course
of business.
42
REGULATIONS
This section sets forth a summary of the significant regulations or
requirements that affect our business activities in Mainland China
and Hong Kong.
PRC Law
Overview
Extensive regulatory schemes governing the operation of business
with respect to telecommunications and Internet information
services were published by the Chinese government. Besides the
Ministry of Industry and Information Technology and State
Administration of Radio, Film and Television, which regulates radio
and television stations in China (“SARFT”), the various
services of the PRC Internet industry are also regulated by various
other governmental authorities, such as the State Council
Information Office (“SCIO”), the General Administration
for Press and Publication (“GAPP”), and the Ministry of
Public Security.
Among all the regulations, the Telecommunications Regulations of
the People’s Republic of China, promulgated on September 25,
2000, is the primary governing law. The Telecom Regulations set out
the general framework under which domestic Chinese companies such
as the Company’s subsidiaries and VIE may engage in various
types of telecommunications services in the PRC. They reiterate the
long-standing principle that telecommunications service providers
need to obtain operating licenses as a mandatory precondition to
begin operation.
The Chinese government restricts foreign investment in
Internet-related businesses. Accordingly, we operate our
Internet-related businesses in China through Moyi, our VIE
operating in Shenzhen, China.
Internet Information Services
The governing law for Internet information service is the Measures
for the Administration of Internet Information Services, or the
Internet Content Provider (“ICP”) Measures, which went
into effect on September 25, 2000. Under the ICP Measures, any
entity that provides information to online Internet users must
obtain an operating license from Ministry of Industry and
Information Technology (“MIIT”) or its local branch at
the provincial level in accordance with the Telecom Regulations
described above. The ICP Measures further stipulate that entities
providing online information services in areas of news, publishing,
education, medicine, health, pharmaceuticals and medical equipment
must obtain permission from responsible national authorities prior
to applying for an operating license from MIIT or its local branch
at the provincial or municipal level. Moreover, ICPs must display
their operating license numbers in a conspicuous location on their
websites. ICPs must police their websites to remove categories of
harmful content that are broadly defined.
Currently, Moyi holds an ICP license which was issued on January
22, 2014.
Online Privacy
Chinese law does not prohibit internet service providers from
collecting and analyzing personal information from their users if
the users agree to do so. The PRC government, however, has the
power and authority to order internet service providers to submit
personal information of an internet user if such user posts any
prohibited content or engages in illegal activities on the
internet.
Under the Several Provisions on Regulating the Market Order of
Internet Information Services (“Order”) promulgated by
the MIIT which became effective on March 15, 2012, internet service
providers may not, without a user’s consent, collect the
user’ personal information that can be used, alone or in
combination with other information, to identify the user, and may
not provide any user’s personal information to third parties
without the prior consent of the user. Internet service providers
may only collect users’ personal information necessary to
provide their services and must expressly inform the users of the
method, scope and purpose of the collection and processing of such
information. They are also required to ensure the proper security
of users’ personal information, and take immediate remedial
measures if such information is suspected to have been
inappropriately disclosed. When a User registers to our
application, we require our users to accept a user agreement
whereby they agree
43
to provide certain personal information to us. We will take other
measures as necessary to comply with these provisions.
ICPs are also required to
establish and publish their rules relating to personal information
collection or use, keep any collected information strictly
confidential, and take technological and other measures to maintain
the security of such information. ICP operators are required to
cease any collection or use of the user personal information, and
de-register the relevant user account, when a given user stops
using the relevant Internet service. ICP operators are further
prohibited from divulging, distorting or destroying any such
personal information, or selling or providing such information
unlawfully to other parties. In addition, if an ICP operator
appoints an agent to undertake any marketing and technical services
that involve the collection or use of personal information, the ICP
operator is still required to supervise and manage the protection
of the information. As to penalties, in very broad terms, the Order
states that violators may face warnings, fines, and disclosure to
the public and, in most severe cases, criminal
liability.
Currently, the collection of the information from the Users is
agreed to by the Users when they sign up. In addition, any data
mining or analyzing of the user data is for internal use only. We
also take steps to ensure that the data collected is stored
securely.
Internet Publishing
On June 27, 2002, SPPA and MIIT jointly released the Provisional
Rules for the Administration of Internet Publishing, or the
Internet Publishing Rules, which define “Internet
publications” as works that are either selected or edited to
be published on the Internet or transmitted to end-users through
the Internet for the purposes of browsing, reading, using or
downloading by the general public. Such works mainly include
content or articles formally published by press media such as: (i)
books, newspapers, periodicals, audio-visual products and
electronic publications; and (ii) literature, art and articles on
natural science, social science, engineering and other topics that
have been edited.
According to the Internet Publishing Rules, web portals like Moxian
are required to apply to and register with GAPP before distributing
Internet publications. Therefore, the Company will apply for a
license by December 31, 2015 to comply with the Internet Publishing
Rules.
Moxian will be applying this license by the end of 2016.
Online Games
On May 10, 2003, the Provisional Regulations for the Administration
of Online Culture were issued by the Ministry of Culture
(“MCPRC”) and went into effect on July 1, 2003 (these
regulations were revised by MCPRC on July 1, 2004). According to
these regulations, commercial entities are required to apply to the
relevant local branch of MCPRC for an Online Culture Operating
Permit to engage in online games services.
On July 27, 2004, GAPP and the State Copyright Bureau jointly
promulgated the Notice on Carrying out the Decision from the State
Council Regarding the Approval of Electronic and Online Games
Publications, or the Games Notice. According to the Games Notice,
the Internet Publications Distribution License is required for
publishing online games.
Currently, Moxian holds the appropriate license which was issued by
the Administration of Online Culture on November 25, 2015.
Encryption Software
On October 7, 1999, the State Encryption Administration Commission
published the Regulations for the Administration of Commercial
Encryption, followed by the first Notice of the General Office of
the State Encryption Administration Commission on November 8, 1999.
Both of these regulations address the use of software in China with
encryption functions. According to these regulations, purchase of
encryption products must be reported. Violation of the encryption
regulations may result in a warning, penalty, confiscation of the
encryption product, or criminal liabilities.
44
On March 18, 2000, the Office of the State Commission for the
Administration of Cryptography issued a public announcement
regarding the implementation of those regulations. The announcement
clarifies the encryption regulations as below:
•
Only specialized hardware and software, the core functions of which
are encryption and decoding, fall within the administrative scope
of the regulations as “encryption products and equipment
containing encryption technology.” Other products such as
wireless telephones, Windows software and browsers do not fall
within the scope of this regulation.
•
The PRC government has already begun to study the laws in question
in accordance with WTO rules and China’s external
commitments, and will make revisions wherever necessary. The
Administrative Regulations on Commercial Encryption will also be
subject to such scrutiny and revision.
In late 2005, the
Administration Bureau of Cryptography further issued a series of
regulations to regulate the development, production and sales of
commercial encryption products, which all came into effect on
January 1, 2006.
We believe that the Company is in proper compliance with these
requirements.
Foreign Exchange
Foreign exchange regulation in China is primarily governed by the
following regulations:
•
Foreign Exchange Administration Rules, or the Exchange Rules of the
PRC, promulgated by the State Council on January 29, 1996, which
was amended on January 14, 1997 and on August 5, 2008 respectively;
and
•
Administration Rules of the Settlement, Sale and Payment of Foreign
Exchange, or the Administration Rules promulgated by China
People’s Bank on June 20, 1996.
Under the Exchange Rules of the PRC, Renminbi is convertible for
current account items, including the distribution of dividends,
interest payments, trade and service-related foreign exchange
transactions. As for capital account items, such as direct
investments, loans, security investments and the repatriation of
investment returns, however, the reservation or conversion of
foreign currency incomes is still subject to the approval of SAFE
or its competent local branches; while for the foreign currency
payments for capital account items, the SAFE approval is not
necessary for the conversion of Renminbi except as otherwise
explicitly provided by laws and regulations.
Under the Administration Rules, enterprises may only buy, sell or
remit foreign currencies at banks that are authorized to conduct
foreign exchange business after the enterprise provides valid
commercial documents and relevant supporting documents and, in the
case of certain capital account transactions, after obtaining
approval from SAFE or its competent local branches. Capital
investments by enterprises outside of China are also subject to
limitations, which include approvals by the SAFE and the National
Development and Reform Commission, or their respective competent
local branches.
On October 21, 2005, SAFE issued the Circular on Several Issues
concerning Foreign Exchange Administration for Domestic Residents
to Engage in Financing and in Return Investments via Overseas
Special Purpose Companies, or Circular No. 75, which went into
effect on November 1, 2005. Circular No. 75 provides that if PRC
residents use assets or equity interests in their PRC entities to
establish offshore companies or inject assets or equity interests
of their PRC entities into offshore companies for the purpose of
overseas capital financing, they must register with local SAFE
branches with respect to their investments in offshore companies.
Circular No. 75 also requires PRC residents to file changes to
their registration if their special purpose companies undergo
material events such as capital increase or decrease, share
transfer or exchange, merger or division, long-term equity or debt
investments, provision of guaranty to a foreign party, etc. SAFE
further promulgated the Implementing Rules for Circular No. 75, or
Circular No. 106, clarifying and supplementing the concrete
operating rules that shall be followed during the implementation
and application of Circular No. 75.
On August 29, 2008, the Notice of the General Affairs Department of
the State Administration of Foreign Exchange on the Relevant
Operating Issues concerning the Improvement of the Administration
of Payment and Settlement of Foreign Currency Capital of
Foreign-funded Enterprises, or the Improvement Notice, was
promulgated by SAFE. Pursuant to the Improvement Notice, the
foreign currency capital of Foreign Investment Entities, after
45
being converted to Renminbi, can only be used for doing business
within the business scope approved by relevant governmental
authorities, and shall not be used for domestic equity investment
except as otherwise explicitly provided by laws and
regulations.
On July 14, 2014, SAFE issued a new Circular on Several Issues
concerning Foreign Exchange Administration for Domestic Residents
to Engage in Investing and Financing and in Return Investments via
Overseas Special Purpose Companies, or Circular No. 37, which
enlarges the definition of SPV comparing to the Circular No. 75,
which can invest in China under Circular No. 37. The method of
investment include forming a new entity in China and through
merging or acquiring a domestic company in China.
Hong Kong Law
Our website is maintained through a server in Hong Kong. Therefore,
our data usage policy and regular terms of service for both our
users and merchants must to comply with the applicable rules and
regulations in Hong Kong SAR. As information from our Merchant
Clients and Users are preserved in Hong Kong, with the law
applicable to the Company is the Hong Kong Personal Data (Privacy)
Ordinance (Cap 486). Non-compliance of such rules in Hong Kong may
result in a fines of up to HKD $500,000. Directors of Moxian Hong
Kong may also be personally liable for the Company’s
violation of Hong Kong Personal Data (Privacy) Ordinance. We
believe we are in compliance with the laws in Hong Kong.
46
DIRECTORS AND EXECUTIVE
OFFICERS
The following table sets forth certain information about our
executive officers and directors as of the date of this
prospectus.
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James Mengdong Tan
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President, Chief Executive Officer and
Director
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Hao Qing Hu
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55
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Director
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Clarence Luo Xiao Yun
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Vice President of Products
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Tan Wan Hong
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Chief Financial Officer
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Yang Nan
(1)(2)(3)
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38
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Independent Director
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Liew Kwong Yeow
(1)(2)(3)
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62
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Independent Director
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Ajay Rajpal
(1)(2)(3)
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Independent Director
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Mr. James Mengdong Tan
has served as our President and Chief
Financial Officer since February 2015. Mr. Tan also served as our
interim Chief Executive Officer from February 2015 until June 2015
when he was appointed as the Chief Executive Officer and a director
of the Company. Mr. Tan has more than 20 years’ experience in
managing private and public companies based in Asia and in the USA.
Mr. Tan is currently the Director and CEO of 8iCapital. From 2003
until 2006, he was the Chairman and CEO of Vashion Group, a company
listed on the Singapore Stock Exchange. From 2006 until 2009, he
was the Executive Director and CEO of Vantage Corporation Limited,
a company listed on the Singapore Stock Exchange. From 2006 to
2009, he served as a director on the Board of Pacific Internet Ltd,
a company listed on NASDAQ, until its sale to Connect Holdings, a
group comprised of Ashmore Investment Management Limited, Spinnaker
Capital Limited and Clearwater Capital Partners. Mr. Tan graduated
from the National University of Singapore (NUS) with a Bachelor of
Arts in 1985. The Board of Directors reached a conclusion that Mr.
Tan should serve as a Director of the Company based on his
extensive experience in managing publicly traded companies.
Mr. Hao Qing Hu
has served as a director of the Company
since January 1, 2016. Mr. Hao has more than 20 years of experience
in managing business operations and business strategy. Since Sept,
2015 he has been the General Manager of Moxian Technologies
(Beijing) Co., Ltd — a subsidiary of Moxian, Inc., in charge
of the company’s overall operations. From June 2014 until
Sept 2015, Mr. Hao was a Deputy General Manager of Xinhua Huamei
Investment Management Co., Ltd. From 2005 until May 2014, Mr. Hao
was a General Manager of Shandong Debang Construction Science and
Technology Co., Ltd, where he was responsible for day to day
operations and business development. Mr. Hao Qinghu was a board
appointee of Xinhua Huifeng Equity Centre (Limited Partnership).
The Board of Directors reached a conclusion that Mr. Hao should
serve as a Director of the Company based on his extensive
experience in PRC Company management.
Ms. Yang Nan
, has served as a director of the Company since
January 1, 2016. Ms. Yang has over 15 years’ working
experience in international accounting firms, experienced in
accounting, auditing, financial management, internal control and
risk management. From 2000 to 2014, She was with KPMG Huazhen
(Beijing) as a Senior Manager of audit department, where she
accumulated experience auditing US listed companies. Ms. Yang
received her MBA degree from Guanghua School of Management, Peking
University in 2014, the Bachelor of Economics from Renmin
University of China in 2000. She is also a Certified Public
Accountant (“CPA”) in both China and United States of
America. The Board of Directors reached a conclusion that Ms. Yang
should serve as an Independent Director of the Company and the
Chairman of the Audit Committee based on her extensive experience
in audit and accounting matters.
Mr. Liew Kwong Yeow
has served as a director of the Company
since June 30, 2015. Mr. Liew has more than 25 years of experience
in several multi-national organizations, such as Matsushita Denki,
General Motors, Intel as well as Urmet Telecoms Italy. He served as
the President, Chief Executive Officer and director of Rebel Group,
Inc. from February 27, 2013 to January 30, 2015. He also held
senior positions and mainly responsible for quality, engineering
and procurement of related products and services. In 2006, Mr. Liew
was instrumental in setting up the first manufacturing plant of
Urmet telecommunications Torino Italy in China and fine-tuning its
supply chains, and with Mr. Liew’s assistance, the entire
operations of Urmet became significantly competitive in
47
the China markets. Prior to that, Mr. Liew was the General Manager
of Aztech Singapore’s plant in China from 2001 through 2005.
During 1992 through 2001, he served as the head of QA Operations of
the manufacturing facilities of Phoenix Mecano Switzerland in
Singapore. Mr. Liew received his diploma in Electrical Engineering
from Singapore Polytechnics University in 1974. He also completed
the management study programs in: City and Guilds regarding
Electrical and Electronics in 1974, Industrial Training Board at
MOE Singapore in 1976, Matsushita DENKI Management Development
Program in 1978, General Motors Institute in 1983 and Intel
University in 1987. Mr. Liew is fluent in English and Chinese. The
Board of Directors reached a conclusion that Mr. Liew should serve
as an Independent Director of the Company based on his extensive
experience.
Mr.
Ajay Rajpal
has served as a director of the Company since June 16, 2016. is a Chartered Accountant, with a broad-ranging
commercial experience developed through an international career with blue chip companies, having had extensive experience in the
US, Europe, Middle East and Far East, with a particular expertise in M&A, financial management and insolvency/restructuring.
Recent work experience has focused on providing Board representation and finance director services for companies quoted on AIM
and private companies based in the Far East. Mr. Rajpal is a non-executive director of New Trend Lifestyle Group Plc and Zibao
Metal Recycling Holdings Plc, and non-executive chairman of MNC Strategic Investments Plc. The Board of Directors reached a conclusion
that Mr. Rajpal should serve as an Independent Director of the Company based on his extensive experience in dealing with listed
companies.
Mr. Tan Wan Hong,
has served as our Chief Financial Officer
since July 25, 2016. Mr. Tan trained with Grant Thornton in
Liverpool, UK and was admitted as an Associate of the Institute of
Chartered Accountants (England and Wales) in 1980. He started his
working career with KPMG Kuala Lumpur in 1981 and was quickly
promoted to be the Resident Manager of the Penang Office. In 1983,
Mr. Tan joined one of his clients, Island & Peninsular as the
Group Financial Controller before leaving for Sime Darby,
Malaysia’s largest Asian-based conglomerate in 1986. He had a
successful career with Sime Darby, holding various senior positions
over a span of 18 years but left in 2004 following a reorganization
of the Group. In 2007, Mr. Tan joined Hong Leong Asia, Singapore on
a specific assignment in China which he completed in 2009.following
which he took the post of Head of Investor Relations with 361
Degrees International, a Mainland sportswear group listed on the
Stock Exchange of Hong Kong and spent the next six years as the
spokesman of the Group to the international financial
community.
Mr. Clarence Luo Xiao Yun,
a China-born Singapore citizen,
has served as our Vice President of Product since January 1, 2014.
Mr. Luo has 22 years of working experience in both China and
Singapore. He received academic training in Information Systems,
started his career as a CAD (Computer Aided Architecture Design)
software developer, and graduated into various management roles,
including Project Management, Product Manager, and Consulting and
System Integration. Since 2011, Luo is the Managing Director for
Earnest Partners PTE LTD, a training and consulting firm. He was
the Senior Product Manager, Global Services, Nokia Siemens Networks
in 2011-12, Senior Product Manager, reporting to the Director of
Professional Services at Motorola Global Services in 2008-11. Luo
received his Bachelor degree in Science in Information Systems from
the Sun Yat Sen University in 1996, master’s degree in
Engineering in Wireless Communications from NUS in 1999 and MBA
from Manchester University in 2011.
None of the events listed in Item 401(f) of Regulation S-K has
occurred during the past ten years that is material to the
evaluation of the ability or integrity of any of our directors,
director nominees or executive officers.
Board of
Directors
All directors hold office
until the next annual meeting of shareholders and until their
successors have been duly elected and qualified. Directors are
elected at the annual meetings to serve for one-year terms.
Officers are elected by, and serve at the discretion of, the board
of directors. Our board of directors shall hold meetings on at
least a quarterly basis.
As a smaller reporting company under the NASDAQ rules we are only
required to maintain a board of directors comprised of at least 50%
independent directors, and an audit committee of at least two
members, comprised solely of independent directors who also meet
the requirements of Rule 10A-3 under the Securities Exchange Act of
1934.
Pursuant to the terms of the
Subscription Agreement with Xinhua Huifeng Investment Center Co.,
Ltd. (Beijing), or Xinhua, upon the completion of the subscription,
Xinhua had the right to nominate one member to the Board of
Directors. On January 1, 2015, Xinhua appointed Mr. Hao Qing Hu to
the Board and like other directors, shall hold office until the
next annual meeting of shareholders and until their successors have
been duly elected and qualified.
48
Director
Independence
The Board of Directors has reviewed the independence of our
directors, applying the NASDAQ independence standards. Based on
this review, the Board of Directors determined that each of Yang
Nan, Liew Kwong Yeow and Ajay Rajpal are independent within the
meaning of the NASDAQ rules. In making this determination, our
Board of Directors considered the relationships that each of these
non-employee directors has with us and all other facts and
circumstances our Board of Directors deemed relevant in determining
their independence. As required under applicable NASDAQ rules, we
anticipate that our independent directors will meet on a regular
basis as often as necessary to fulfill their responsibilities,
including at least annually in executive session without the
presence of non-independent directors and management.
Board
Committees
Our Board of Directors has established standing committees in
connection with the discharge of its responsibilities. These
committees include an Audit Committee, a Compensation Committee and
a Nominating and Corporate Governance Committee. Our Board of
Directors has adopted written charters for each of these
committees. Upon completion of this offering, copies of the
charters will be available on our website. Our Board of Directors
may establish other committees as it deems necessary or appropriate
from time to time.
Audit
Committee
The Audit Committee will be responsible for, among other
matters:
•
appointing, compensating, retaining, evaluating, terminating, and
overseeing our independent registered public accounting firm;
•
discussing with our independent registered public accounting firm
the independence of its members from its management;
•
reviewing with our independent registered public accounting firm
the scope and results of their audit;
•
approving all audit and permissible non-audit services to be
performed by our independent registered public accounting firm;
•
overseeing the financial reporting process and discussing with
management and our independent registered public accounting firm
the interim and annual financial statements that we file with the
SEC;
•
reviewing and monitoring our accounting principles, accounting
policies, financial and accounting controls, and compliance with
legal and regulatory requirements;
•
coordinating the oversight by our board of directors of our code of
business conduct and our disclosure controls and procedures
•
establishing procedures for the confidential and/or anonymous
submission of concerns regarding accounting, internal controls or
auditing matters; and
•
reviewing and approving related-party transactions.
Our audit committee consists of Yang Nan, Liew Kwong Yeow and Ajay
Rajpal. Yang Nan serves as chair of the Audit Committee. Our Board
of Directors has affirmatively determined that each of the members
of the Audit Committee meets the definition of “independent
director” for purposes of serving on an Audit Committee under
Rule 10A-3 of the Exchange Act and NASDAQ rules. In addition, our
Board of Directors has determined that Yang Nan qualifies as an
“audit committee financial expert” as such term is
currently defined in Item 407(d)(5) of Regulation S-K and meets the
financial sophistication requirements of the NASDAQ rules.
Compensation
Committee
The Compensation Committee will be responsible for, among other
matters:
•
reviewing and approving, or recommending to the board of directors
to approve the compensation of our CEO and other executive officers
and directors;
49
•
reviewing key employee compensation goals, policies, plans and
programs;
•
administering incentive and equity-based compensation;
•
reviewing and approving employment agreements and other similar
arrangements between us and our executive officers; and
•
appointing and overseeing any compensation consultants or
advisors.
Our Compensation Committee currently consists of Yang Nan, Liew
Kwong Yeow and Ajay Rajpal. Mr Ajay Rajpal serves as chair of the
Compensation Committee. Our Board of Directors has affirmatively
determined that each of the members of the Compensation Committee
meets the definition of “independent director” for
purposes of serving on an Compensation Committee under NASDAQ
rules.
Corporate Governance and
Nominating Committee
The Corporate Governance and Nominating Committee will be
responsible for, among other matters:
•
selecting or recommending for selection candidates for
directorships;
•
evaluating the independence of directors and director nominees;
•
reviewing and making recommendations regarding the structure and
composition of our board and the board committees;
•
developing and recommending to the board corporate governance
principles and practices;
•
reviewing and monitoring the Company’s Code of Business
Conduct and Ethics; and
•
overseeing the evaluation of the Company’s management
Our Corporate Governance and Nominating Committee consists of Yang
Nan, Liew Kwong Yeow and Ajay Rajpal. Liew Kwong Yeow serves as
chair of the Corporate Governance and Nominating Committee. Our
Board of Directors has affirmatively determined that each of the
members of the Corporate Governance and Nominating Committee meet
the definition of “independent director” for purposes
of serving on a Nominating Committee under NASDAQ rules.
Risk
Oversight
Our Board of Directors will oversee a company-wide approach to risk
management. Our Board of Directors will determine the appropriate
risk level for us generally, assess the specific risks faced by us
and review the steps taken by management to manage those risks.
While our Board of Directors will have ultimate oversight
responsibility for the risk management process, its committees will
oversee risk in certain specified areas.
Specifically, our Compensation Committee will be responsible for
overseeing the management of risks relating to our executive
compensation plans and arrangements, and the incentives created by
the compensation awards it administers. Our Audit Committee will
oversee management of enterprise risks and financial risks, as well
as potential conflicts of interests. Our Board of Directors will be
responsible for overseeing the management of risks associated with
the independence of our Board of Directors.
Code of Business Conduct
and Ethics
Upon or prior to completion of this offering, our Board of
Directors will adopt a code of business conduct and ethics that
applies to our directors, officers and employees. Upon completion
of this offering, a copy of this code will be available on our
website. We intend to disclose on our website any amendments to the
Code of Business Conduct and Ethics and any waivers of the Code of
Business Conduct and Ethics that apply to our principal executive
officer, principal financial officer, principal accounting officer,
controller, or persons performing similar functions.
50
EXECUTIVE
COMPENSATION
Set forth below is information regarding the compensation paid
during the year ended September 30, 2015 and 2014 to our principal
executive officer, principal financial officer and certain of our
other executive officers, who are collectively referred to as
“named executive officers” elsewhere in this
prospectus.
Mr. James Mengdong Tan, who has become our President, Chief
Executive Officer and a director of the Company since February 13,
2015, has not received any compensation prior to this offering and
no arrangements have been entered into in relating to compensation
after this offering.
Name and Principal Position
|
|
|
|
|
|
|
Clarence Luo Xiaoyun,
|
|
2015
|
|
195,997
|
|
195,997
|
Vice President of Products
|
|
2014
|
|
48,999
|
|
48,999
|
Employment Agreement with Mr. Luo
On October 1, 2014, Moxian HK
entered into an agreement with Mr. Luo Xiaoyuan to serve in the
role of Vice President of Product. Pursuant to the terms of the
original agreement, Mr. Luo’s monthly base salary was CNY
100,000 (USD 15,390). Mr. Luo was entitled to receive a
non-qualified stock option to purchase up to 1,500,000 shares of
the Company on the earlier of the third anniversary of the date of
the agreement, and the listing of the Company on a national
securities exchange. The Company shall reimburse Mr. Luo for all
reasonable out of pocket expenses in connection with travel,
entertainment and other expenses incurred in the performance of his
duties.
On March 1, 2016, the compensation terms were amended to provide
that Mr. Luo’s monthly base salary would be reduced to CNY
50,000 (USD 7,695) and he would be entitled to receive a
non-statutory stock option to purchase up to 750,000 shares of the
Company on the earlier of the third anniversary of the date of the
agreement, and the listing of the Company on a national securities
exchange.
The employment agreement may be terminated by either party by
giving one month’s prior written notice, or payment in lieu
of appropriate notice. Mr. Luo’s employment may be terminated
immediately without notice or payment in lieu, if among other
things, Mr. Luo conducts himself in a way that is inconsistent with
the due and faithful discharge of his duties. The payment in lieu
of notice of termination is calculated as one month’s salary
equal to CNY 50,000 (USD 7,695).
Employment Agreement with Mr. Tan
On
July 25, 2016, Moxian HK entered into an agreement with Mr. Tan Wan Hong to serve in the role of Chief Financial Officer. Pursuant
to the terms of such employment agreement, Mr. Tan’s monthly base salary is CNY 35,000 (USD 5,279) for the probation period,
which is the initial three months from the date of the employment agreement, and thereafter, CNY 40,000 (USD 6,033). During the
probation period, the employment agreement may be terminated by giving one week’s prior written notice. After the probation,
the employment agreement may be terminated by either party by giving one month’s prior written notice, or payment in lieu
of appropriate notice. Mr. Tan’s employment may be terminated immediately without notice or payment in lieu, if among other
things, Mr. Tan conducts himself in a way that is inconsistent with the due and faithful discharge of his duties. The Company
shall reimburse Mr. Tan for all reasonable out of pocket expenses in connection with travel, entertainment and other expenses
incurred in the performance of his duties. The payment in lieu of notice of termination is calculated as one month’s salary
equal to CNY 40,000 (USD 6,033).
Outstanding Equity Incentive Awards At Fiscal Year-End
None.
Director Compensation
Ms. Yang Nan, one of our independent directors, entered into an
agreement on January 1, 2016, which provides for compensation equal
to $5,000 per month.
51
Mr. Liew Kwong Yeow, one of our independent directors, entered into
an agreement on January 1, 2016 which provides for compensation
equal to $3,000 per month. Mr. Yeow did not receive any
compensation prior to January 1, 2016.
Mr. Hao Qing Hu, our non-executive director, entered into an
agreement on January 1, 2016, which provides for compensation equal
to $5,000 per month.
The following table sets forth the compensation paid to our
directors during the years ended September 30, 2015 and 2014.
52
DIRECTOR
COMPENSATION
|
|
|
|
Fees Earned or Paid in Cash
($)
|
|
|
|
All Other Compensation
($)
|
|
|
Ng Kian Yong
(1)
|
|
2015
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
2014
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
Qin Chang Jian
(2)
|
|
2015
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
2014
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
James Mengdong Tan
(3)
|
|
2015
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
2014
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
Liew Kwong Yeow
(4)
|
|
2015
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
2014
|
|
0
|
|
0
|
|
0
|
|
0
|
Compensation Committee Interlocks and Insider
Participation
None of our officers currently serves, or has served during the
last completed fiscal year, on the compensation committee or board
of directors of any other entity that has one or more officers
serving as a member of our board of directors.
53
CERTAIN RELATIONSHIPS
AND RELATED-PARTY TRANSACTIONS
The following is a description of transactions since October 1,
2013, in which the amount involved in the transaction exceeded or
will exceed the lesser of $120,000 or one percent of the average of
our total assets as at the year-end for the last two completed
fiscal years, and to which any of our directors, executive officers
or beneficial holders of more than 5% of our capital stock, or any
immediate family member of, or person sharing the household with,
any of these individuals, had or will have a direct or indirect
material interest.
Service and Consultancy
Agreement with REBL
On March 1, 2014, 8i Capital Limited (“8i Capital”), a
company incorporated under the laws of the British Virgin Islands,
of which our CEO, James Mengdong Tan is a sole member and director,
entered into a service and consultancy agreement (the
“Consultancy Agreement”) with SCA Capital Limited, a
subsidiary of Rebel Group, Inc. (REBL). Under the Consultancy
Agreement, 8i Capital agreed to provide corporate service to SCA
Capital to assist it with the reverse merger acquisition of a
company listed on the OTCQB (“Listco”) and general
business advisory service. In consideration, SCA Capital agreed to
(i) pay $500,000 in total to 8i Capital, (ii) issue 5% of total
shares of the Listco on a fully-diluted basis after the reverse
acquisition and (iii) pay a retainer fee of $240,000 to 8i Capital
per year. Mr. Tan is deemed as a promoter as defined under Rule 405
of Regulation C promulgated under the Securities Act.
In February 2013, Mr. Tan assisted in the negotiation of the
acquisition of approximately 77.26% of the then outstanding shares
of REBL by three purchasers from the former shareholder of REBL.
Mr. Tan also later offered consulting and business advisory
services to REBL in connection with REBL’s reverse
acquisition of Moxian BVI and its operating business in April 2013.
In February 2014, Mr. Tan assisted in structuring the sale of all
of the equity interests of Moxian BVI, a former direct subsidiary
of REBL, and the license of the intellectual property rights of
REBL to the Company pursuant to a License and Acquisition
Agreement.
On February 21, 2014, we acquired Moxian BVI, together with its
subsidiaries, Moxian HK, Moxian Shenzhen, and Moxian Malaysia
through our wholly-owned subsidiary, Moxian CN Samoa from REBL, by
entering into a License and Acquisition Agreement (the
“License and Acquisition Agreement”) in consideration
of $1,000,000 (“Moxian BVI Purchase Price”). As a
result, Moxian BVI, together with its subsidiaries, Moxian HK,
Moxian Shenzhen, and Moxian Malaysia, became our subsidiaries.
Under the License and Acquisition Agreement, REBL also agreed to
grant us the exclusive right to use REBL’s intellectual
property rights (collectively, the “IP Rights”) in
Mainland China, Malaysia, and other countries and regions where
REBL conducts its business (the “Licensed Territory”),
and the exclusive right to solicit, promote, distribute and sell
REBL products and services in the Licensed Territory for five years
(the “License,”) and in consideration of such License,
the Company agreed to pay to REBL (i) $1,000,000 as license
maintenance royalty each year commencing on the first anniversary
of the date of the License Agreement; and (ii) 3% of the gross
profits resulting from the distribution and sale of the products
and services on behalf of the Company as an earned royalty.
In January 2015, Mr. Tan, through 8i Capital, assisted with the
share exchange transaction among REBL, Rebel Holdings Limited, a
company incorporated under the laws of the British Virgin Islands
and a wholly-owned subsidiary of REBL (“Rebel FC”) and
the Rebel FC Stockholder.
On January 30, 2015, the Company entered into an Equity Transfer
Agreement (the “Equity Transfer Agreement,” such
transaction, the “Equity Transfer Transaction”) with
REBL, to acquire from REBL 100% of the equity interests of Moxian
IP Samoa for $6,782,000 (the “Moxian IP Samoa Purchase
Price”). Moxian IP Samoa owns all the intellectual property
rights relating to the operation, use and marketing of the Moxian
Platform, including all of the trademarks, patents and copyrights
that are used in the Company’s business. As a result of the
Equity Transfer Transaction, Moxian IP Samoa became a wholly-owned
subsidiary of the Company. In addition, under the Equity Transfer
Agreement, the Company and REBL agreed to terminate the License and
Acquisition Agreement. Immediately prior to the execution of the
Equity Transfer Agreement, the Moxian BVI Purchase Price was not
yet paid and no license maintenance royalty or earned royalty under
the License and Acquisition Agreement had accrued. 8i Capital also
provided business advisory service to REBL regarding the Equity
Transfer Transaction.
The Company agreed to issue to REBL a convertible promissory note
for $7,782,000 (the “Rebel Note”), representing the sum
of the Moxian IP Samoa Purchase Price and the Moxian BVI Purchase
Price. The Rebel Note was due and payable on October 30, 2015
without any interest. The Company had the option to cause REBL
54
to convert any and all amounts due under the Rebel Note into shares
of the Company’s Common Stock at the conversion price of
$2.00 per share (the “Conversion Price”), if the volume
weighted average price (the “VWAP”) of the
Company’s Common Stock for a period of 30 trading days
immediately prior to the date of conversion was higher than the
Conversion Price. The Company also had a right of first refusal to
purchase the shares issuable upon conversion of the Rebel Note at
the price of 80% of the VWAP for 30 trading days immediately prior
to the date of the proposed repurchase by the Company, or at the
price of $2.00 per share if such purchase is lower than $2.00.
On August 14, 2015, the VWAP of the Company’s Common Stock
for 30 trading days prior to August 14, 2015 was higher than $2.00,
which triggered the conversion of the Rebel Note. The Company
notified REBL that it elected to cause it to convert $3,891,000 of
the Rebel Note into 1,945,500 shares of its Common Stock (the
“August Conversion”). As a result of the August
Conversion, the remaining amount of the Rebel Note was
$3,891,000.
On September 30, 2015, the Company notified REBL that it elected to
cause it to convert the remainder of the Rebel Note into 1,945,500
shares of the Company’s Common Stock (the “September
Conversion”). After the August Conversion and September
Conversion, the entire balance of the Rebel Note was converted into
total of 3,891,000 shares of the Company’s Common Stock.
Related Party
Transaction with Shareholders
On June 30, 2015, Moxian Shenzhen and Bayi entered into a loan
agreement whereby Bayi agreed to provide a loan to Moxian Shenzhen
in the amount of $998,559.46 without any interest and with a 12
month term. We plan to seek a six-month extension of the term of
this loan from Bayi.
On November 9, 2015, Moxian HK and Zhang Xin entered into a loan
agreement whereby Zhang Xin agreed to provide a loan to Moxian HK
in the aggregate amount of HKD767,500 (approximately $99,025)
without any interest and with a term of repayment of 12 months.
On November 12, 2015, Moxian HK and Moxian China Limited entered
into a loan agreement whereby Moxian China Limited agreed to
provide a loan to Moxian HK in the aggregate amount of HKD348,000
(approximately $44,900) without any interest and with a term of
repayment of 12 months.
On November 20, 2015, Moxian HK and Ace Keen entered into a loan
agreement whereby Ace Keen agreed to provide a loan to Moxian HK in
the aggregate amount of HKD589,258.80 (approximately $76,028)
without any interest and with a term of repayment of 12 months.
On December 25, 2015, Moxian Shenzhen and Bayi entered into a loan
agreement whereby Bayi agreed to provide a loan to Moxian Shenzhen
in the aggregate amount of RMB4,560,883.40 (approximately $713,675)
without any interest and with a 12 month term.
On June 30, 2015, the Company, Moxian Shenzhen, and Shenzhen Bayi
Consulting Co., Ltd (“Bayi”) entered into an Amended
and Restated Loan Agreement to document the loan of $3,215,282 that
Bayi had advanced to Moxian Shenzhen by May 30, 2015, and in
exchange, the Company agreed to issue a 12-month convertible
interest free promissory note in the amount of $3,215,282
(“Moxian Shenzhen-Bayi Note”). This loan has been
converted into 1,607,641 shares of common stock.
On May 30, 2015, the Company, Moxian HK, and Jet Key entered into
an Amended and Restated Loan Agreement (“Moxian HK-Jet Key
Loan Agreement”) to document the total loan of $223,416 that
Jet Key has advanced to Moxian HK in different tranches by May 30,
2015, and in exchange, the Company agreed to issue a 12-month
convertible interest free promissory note of $223,416
(“Moxian HK-Jet Key Note”) to Jet Key. This loan has
been converted into 111,708 shares of common stock.
On May 30, 2015, the Company, Moxian HK, and Ace Keen entered into
an Amended and Restated Loan Agreement (“Moxian HK-Ace Keen
Loan Agreement”) to document the total loan of $761,379 that
Ace Keen had advanced to Moxian HK in different tranches by May 30,
2015, and in exchange, the Company agreed to issue a 12-month
convertible interest free promissory note of $761,379
(“Moxian HK-Ace Keen Note”) to Ace Keen. This loan has
been converted into 380,690 shares of common stock.
On May 30, 2015, the Company, Moxian HK, and Moxian China Limited
entered into an Amended and Restated Loan Agreement (“Moxian
HK-MCL Loan Agreement”) to document the total loan of
$709,941 that MCL
55
has advanced to Moxian HK in different tranches by May 30, 2015,
and in exchange, the Company agreed to issue a 12-month convertible
interest free promissory note of $709,941 (“Moxian HK-MCL
Note”) to MCL. This loan has been converted into 354,971
shares of common stock.
On May 30, 2015, the Company, Moxian Malaysia, and Ace Keen entered
into an Amended and Restated Loan Agreement (“Moxian
Malaysia-Ace Keen Loan Agreement”) to document the total loan
of $228,937 that Ace Keen advanced to Moxian Malaysia in different
tranches by May 30, 2015, and in exchange, the Company agreed to
issue a 12-month convertible interest free promissory note of
$228,937 (“Moxian Malaysia-Ace Keen Note”) to Ace Keen.
This loan has been converted into 114,469 shares of common
stock.
On May 30, 2015, the Company, Moxian Malaysia, and Morolling
entered into an Amended and Restated Loan Agreement (“Moxian
Malaysia-Morolling Loan Agreement”) to document the total
loan of $765,768 that Morolling has advanced to Moxian Malaysia in
different tranches by May 30, 2015, and in exchange, the Company
agreed to issue a 12-month convertible interest free promissory
note of $765,768 (“Moxian Malaysia-Morolling Note”) to
Morolling with no interest and a 12 month term. This loan has been
converted into 382,884 shares of common stock.
On May 30, 2015, the Company, Moxian Malaysia, and Moxian China
Limited entered into an Amended and Restated Loan Agreement
(“Moxian Malaysia-MCL Loan Agreement”) to document the
total loan of $2,680,221 that Moxian China Limited has advanced to
Moxian Malaysia in different tranches by May 30, 2015, and in
exchange, the Company agreed to issue a 12-month convertible
interest free promissory note of $2,680,221 (“Moxian
Malaysia-MCL Note”). This loan has been converted into
1,340,111 shares of common stock.
On August 14, 2015, the Company issued 4,292,472 shares of Common
Stock to Moxian China Limited, Jet Key Limited, Ace Keen Limited,
Morolling International HK Limited and Shenzhen Bayi Consulting Co
Ltd as a result of the conversion of $8,584,944 of convertible
promissory notes, as described above, held by Moxian China Limited,
Jet Key Limited, Ace Keen Limited, Morolling International HK
Limited and Shenzhen Bayi Consulting Co Ltd at $2.00 per share.
On October 31, 2014 and November 30, 2014, Moxian Shenzhen received
RMB 630,000 (approximately $102,942) and RMB 90,000 (approximately
$14,486), respectively, as loans (the “MCL Shenzhen
Loans”) from Moxian China Limited. The term of such loans is
twelve months and they bear no interest. On December 31, 2014, the
Company, Moxian China Limited and Moxian Shenzhen entered into a
Loan Agreement, where the Company agreed to issue a convertible
promissory note (the “Note”) to Moxian China Limited
for the repayment of the MCL Shenzhen Loans.
On October 31, 2014 and November 30, 2014, Moxian Malaysia received
a loan in the amount of MYR 118,800 (approximately $34,032) and MYR
23,100 (approximately $6,605), respectively, from Moxian China
Limited (the “MCL Malaysia Loans”). The term of such
loans is twelve months and they bear no interest. On December 31,
2014, the Company, Moxian China Limited and Moxian Malaysia entered
into a Loan Agreement, where the Company agreed to issue a Note to
Moxian China Limited for the repayment of the MCL Malaysia
Loans.
On November 30, 2014, Moxian HK received HKD $500,000
(approximately $64,437) as a loan from Moxian China Limited (the
“MCL HK Loan”). The term of such loan is twelve months
and it bears no interest. On December 31, 2014, the Company, Moxian
China Limited and Moxian HK entered into a Loan Agreement, where
the Company agreed to issue a Note to Moxian China Limited for the
repayment of the MCL HK Loan.
The Notes issued to Moxian China Limited by the Company in
consideration of the MCL Shenzhen Loans, the MCL Malaysia Loans and
the MCL HK Loan are on substantially similar terms. The Notes will
be due and payable in one year and bear no interest. Upon
consummation of a financing that generates at least $5,000,000 by
the Company (“Qualified Financing”), the Notes shall
automatically convert into shares of the Company’s Common
Stock at a conversion price equal to the price of the
Company’s securities sold in the Qualified Financing. If no
Qualified Financing is consummated prior to the maturity date of
Notes and as long as there remains any outstanding principal or
interest of the Notes, holders of the Notes shall have the option
to convert the Notes within 30 days after the maturity date at a
conversion price that is equal to the volume weighted average price
of Common Stock during a 20-day trading period prior to the
conversion of the Notes.
56
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth, as of September 2, 2016, certain information concerning the beneficial ownership of our common stock
by (i) each stockholder known by us to own beneficially five percent or more of our outstanding common stock or series a common
stock; (ii) each director; (iii) each named executive officer; and (iv) all of our executive officers and directors as a group,
and their percentage ownership and voting power.
The information presented
below regarding beneficial ownership of our voting securities has
been presented in accordance with the rules of the Securities and
Exchange Commission and is not necessarily indicative of ownership
for any other purpose. Under these rules, a person is deemed to be
a “beneficial owner” of a security if that person has
or shares the power to vote or direct the voting of the security or
the power to dispose or direct the disposition of the security. A
person is deemed to own beneficially any security as to which such
person has the right to acquire sole or shared voting or investment
power within sixty (60) days through the conversion or exercise of
any convertible security, warrant, option, or other right. More
than one (1) person may be deemed to be a beneficial owner of the
same securities. The percentage of beneficial ownership by any
person as of a particular date is calculated by dividing the number
of shares beneficially owned by such person, which includes the
number of shares as to which such person has the right to acquire
voting or investment power within sixty (60) days, by the sum of
the number of shares outstanding as of such date. Consequently, the
denominator used for calculating such percentage may be different
for each beneficial owner. Except as otherwise indicated below and
under applicable community property laws, we believe that the
beneficial owners of our common stock listed below have sole voting
and investment power with respect to the shares shown.
The
column entitled “Percentage of Shares Beneficially Owned — Before Offering” is based on a total of 64,005,949
shares of our common stock outstanding on September 2, 2016. The columns entitled “Percentage of Shares Beneficially Owned
— After Offering” also include (i) 500,000 shares of common stock issuable upon conversion of $2,000,000 in loans
at $4.00, which is set forth on the cover page of this prospectus, and (ii) 2,500,000 shares of common stock outstanding after
completion of this offering assuming the closing of the minimum offering amount, or 5,000,000 shares of common stock outstanding
after completion of this offering, assuming the closing of the maximum offering amount.
|
|
|
|
Percentage
of Shares
Beneficially Owned
|
Name
of Beneficial Owner
(1)
|
|
Number
of Shares Beneficially Owned
|
|
|
|
After
Offering (assuming closing of the minimum offering amount)
|
|
After
Offering
(assuming closing of the maximum offering amount)
|
Officers
and Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
Mengdong Tan
(2)
President, Chief Executive Officer and Director
|
|
29,820,000
|
|
46.58
|
%
|
|
44.5
|
%
|
|
42.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Hao
Qing Hu
(3)
Director
|
|
4,095,010
|
|
6.40
|
%
|
|
6.1
|
%
|
|
5.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Liew
Kwong Yeow
Independent Director
|
|
0
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Yang
Nan
Independent Director
|
|
0
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Ajay
Rajpal
Independent Director
|
|
0
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Tan
Wan Hong
Chief Financial Officer
|
|
0
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
All
officers and directors as a group
(5 persons named above)
|
|
33,915,000
|
|
52.98
|
%
|
|
50.7
|
%
|
|
48.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
57
|
|
|
|
Percentage
of Shares
Beneficially Owned
|
Name
of Beneficial Owner
(1)
|
|
Number
of Shares Beneficially Owned
|
|
|
|
After
Offering (assuming closing of the minimum offering amount)
|
|
After
Offering
(assuming closing of the maximum offering amount)
|
5%
Securities Holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Good
Eastern Investment Holding Limited
(4)
10 Anson Road #35-11 International Plaza
Singapore 079903
|
|
9,990,000
|
|
15.6
|
%
|
|
14.9
|
%
|
|
14.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Moxian
China Limited
(5)
Room 2807, 28/F., Paul Y. Centre, 51 Hung To Road, Kwun Tong, Kowloon, Hong Kong
|
|
17,602,541
|
|
27.5
|
%
|
|
26.5
|
%
|
|
25.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Stellar
Elite Limited
(6)
Room 2807, 28/F., Paul Y. Centre, 51 Hung To Road, Kwun Tong, Kowloon, Hong Kong
|
|
19,830,000
|
|
30.98
|
%
|
|
29.6
|
%
|
|
28.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Beijing
Xinhua Huifeng Equity Investment Centre (Limited Partnership)
(7)
Beijing City, Haiding District, Zhongguan Village, 66 North Road, Block 1, Level 2, Room 05-079
|
|
4,095,010
|
|
6.40
|
%
|
|
6.1
|
%
|
|
5.89
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Rebel
Group, Inc.
(8)
7500A Beach Road, Unit 12-313, The Plaza, 199591
|
|
3,891,000
|
|
6.07
|
%
|
|
5.8
|
%
|
|
5.6
|
%
|
58
DESCRIPTION OF
SECURITIES
The following description of our capital stock is only a summary,
and is qualified in its entirety by reference to the actual terms
and provisions of the capital stock contained in our articles of
incorporation and our bylaws. On February 22, 2016, we entered into
a share cancellation agreement with each of Good Eastern Investment
Holdings Limited, Moxian China Limited and Stellar Elite Limited.
Each entity agreed to cancel 50% of the shares beneficially owned
by them for no consideration.
As
of September 2, 2016, there were 64,005,949 shares of common stock outstanding, which were held by approximately 283 record shareholders.
Our authorized capital consists, post reverse stock split, of
350,000,000 shares, of which 250,000,000 shares are designated as
shares of common stock, par value $0.001 per share, and 100,000,000
shares are designated as shares of preferred stock, par value
$0.001 per share. No shares of preferred stock are currently
outstanding. Shares of preferred stock may be issued in one or more
series, each series to be appropriately designated by a
distinguishing letter or title, prior to the issuance of any shares
thereof. The voting powers, designations, preferences, limitations,
restrictions, relative, participating, options and other rights,
and the qualifications, limitations, or restrictions thereof, of
the Preferred Stock shall hereinafter be prescribed by resolution
of the board of director before the issuance of any shares of
Preferred Stock in such series.
Common Stock
Each share of our common stock entitles its holder to one vote per
share on all matters to be voted or consented upon by the
stockholders. The holders of our common stock are entitled to
receive dividends, in equal amounts per share, when and as declared
by our Board of Directors from legally available sources, subject
to any restrictions in our certificate of incorporation or prior
rights of the holders of our preferred stock. In the event of our
liquidation or dissolution, the holders of our common stock are
entitled to share ratably in the assets available for distribution
after the payment of all of our debts and other liabilities,
subject to the prior rights of the holders of our preferred stock.
The holders of our common stock have no subscription, redemption or
conversion privileges. Our common stock does not entitle its
holders to preemptive rights. All of the outstanding shares of our
common stock are fully paid and non-assessable. The rights,
preferences and privileges of the holders of our common stock are
subject to the rights of the holders of shares of any series of
preferred stock which we may issue in the future.
Registration
Rights
Under the Rebel Note, REBL, the holder of a total of 3,891,000
shares of our common stock, may request that we register all or a
portion of its shares of common stock for sale under the Securities
Act, on one or more occasions, until all of the shares it owns are
so registered, or are sold or otherwise transferred.
Transfer
Agent
The transfer agent for our capital stock is Island Stock Transfer,
located at 15500 Roosevelt Boulevard, Suite 301, Clearwater, FL
33760.
Listing
We
have applied to have our common stock listed on the NASDAQ Capital Market under the symbol “MOXC.”
Control Share
Acquisitions
The “control share” provisions of Sections 78.378 to
78.3793, inclusive, of the NRS, apply to “issuing
corporations” that are Nevada corporations with at least 200
stockholders of record, including at least 100 stockholders of
record who are Nevada residents, and that conduct business directly
or indirectly in Nevada, unless the corporation has elected to not
be subject to these provisions.
59
The control share statute prohibits an acquirer of shares of an
issuing corporation, under certain circumstances, from voting its
shares of a corporation’s stock after crossing certain
ownership threshold percentages, unless the acquirer obtains
approval of the target corporation’s disinterested
stockholders. The statute specifies three thresholds: (a) one-fifth
or more but less than one-third, (b) one-third but less than a
majority, and (c) a majority or more, of the outstanding voting
power. Generally, once a person acquires shares in excess of any of
the thresholds, those shares and any additional shares acquired
within 90 days thereof become “control shares” and such
control shares are deprived of the right to vote until
disinterested stockholders restore the right. These provisions also
provide that if control shares are accorded full voting rights and
the acquiring person has acquired a majority or more of all voting
power, all other stockholders who do not vote in favor of
authorizing voting rights to the control shares are entitled to
demand payment for the fair value of their shares in accordance
with statutory procedures established for dissenters’ rights.
A corporation may elect to not be governed by, or “opt
out” of, the control share provisions by making an election
in its articles of incorporation or bylaws, provided that the
opt-out election must be in place on the 10
th
day following the date an acquiring person has acquired a
controlling interest, that is, crossing any of the three thresholds
described above. We have not opted out of these provisions and will
be subject to the control share provisions of the NRS if we meet
the definition of an issuing corporation upon an acquiring person
acquiring a controlling interest unless we later opt out of these
provisions and the opt out is in effect on the 10
th
day following such occurrence.
The effect of the Nevada control share statute is that the
acquiring person, and those acting in association with the
acquiring person, will obtain only such voting rights in the
control shares as are conferred by a resolution of the stockholders
at an annual or special meeting. The Nevada control share law, if
applicable, could have the effect of discouraging takeovers of our
company.
60
SHARES ELIGIBLE FOR
FUTURE SALE
Prior to this offering, only a limited public market for our common
stock existed on the OTCQB. Future sales of substantial amounts of
our common stock in the public market, including shares issued upon
exercise of outstanding warrants, or the anticipation of such
sales, could adversely affect prevailing market prices of our
common stock from time to time and could impair our ability to
raise equity capital in the future.
Upon
the closing of this offering, including the 500,000 shares of common stock outstanding upon the conversion of $ 2,000,000 loans
assuming a public offering price of $4.00 per share, which is set forth on the cover page of this prospectus, we will have 67,005,949
shares of our common stock issued and outstanding assuming the minimum offering amount is sold and 69,505,949 shares of our common
stock issued and outstanding assuming the maximum offering amount is sold. In addition we will have outstanding 67,105,949 shares
of common stock issuable upon the exercise of the Placement Agents’ Warrants assuming the minimum offering amount is sold
and 69,705,949 shares of our common stock issued and outstanding assuming the maximum offering amount is sold.
All of the shares sold in this offering will be freely tradable
unless purchased by our “affiliates,” as that term is
defined in Rule 144 under the Securities Act of 1933, as amended,
or the Securities Act.
Related
Party Loan Conversion
On
September 7, 2016, we entered into note conversion agreements with Shenzhen Bayi Consulting Co. Ltd. and Moxian China Limited.
The note conversion agreements provide for the conversion of promissory notes in the aggregate amount of $2,000,000 payable by
us into shares of our common stock at the public offering price. On the date of this prospectus, the notes will automatically
convert into shares of common stock at a conversion price equal to the public offering price per share being offered in this offering.
Lock-Up
For further details on the lock-up agreements, see the section
entitled “Plan of Distribution — Lock Up
Agreements.”
Rule 144
In general, under Rule 144 of the Securities Act, as in effect on
the date of this prospectus, any person who is not our affiliate at
any time during the preceding three months, and who has
beneficially owned their shares for at least six months, including
the holding period of any prior owner other than one of our
affiliates, would be entitled to sell an unlimited number of shares
of our common stock provided current public information about us is
available, and, after owning such shares for at least one year,
including the holding period of any prior owner other than one of
our affiliates, would be entitled to sell an unlimited number of
shares of our common stock without restriction.
A person who is our affiliate or who was our affiliate at any time
during the preceding three months, and who has beneficially owned
restricted securities for at least six months, including the
holding period of any prior owner other than one of our affiliates,
is entitled to sell within any three-month period a number of
shares that does not exceed the greater of:
•
1% of the number of shares of our common stock then outstanding, which will equal approximately 670,059 shares assuming
the minimum offering amount is sold and 695,059 shares assuming the maximum offering amount is sold, or
•
the average weekly trading volume of our common stock during the
four calendar weeks preceding the filing of a Notice of Proposed
Sale of Securities pursuant to Rule 144 with respect to the
sale.
Sales under Rule 144 by our affiliates are also subject to manner
of sale provisions and notice requirements and to the availability
of current public information about us.
61
PLAN OF
DISTRIBUTION
In
connection with this offering, we will enter into a placement agency agreement with Axiom Capital Management, Inc. and Cuttone
& Co., Inc., which we refer to as the placement agents. The Placement Agents are not purchasing or selling any securities
offered by this prospectus but will assist us in this offering on a “best efforts” basis. The Placement Agents have
no obligation to buy any of the common shares from us nor are they required to arrange the purchase or sale of any specific number
or dollar amount of the common shares, but have agreed to use their “best efforts” to arrange for the sale of a minimum
of 2,500,000 common shares and a maximum of 5,000,000 common shares. The Placement Agents may retain other brokers or dealers
to act as sub-agents on its behalf in connection with this offering and may pay any sub-agent a solicitation fee with respect
to any securities placed by it. Affiliates of the company and affiliates and associated persons of the Placement Agents may invest
in this offering on the same terms and conditions as the public investors participating in this offering, and any common shares
purchased will make up a portion of the minimum offering needed to complete this offering.
The
common shares are being offered on a “best efforts” basis, meaning that the Placement Agents are not obligated
to purchase any common shares. No common shares will be sold unless at least a minimum of 2,500,000 common shares have been
sold no later than November 14, 2016. All monies collected for subscriptions will be held in a separate escrowed bank account
at Continental Stock Transfer & Trust, New York, NY, which is serving as escrow agent, until the total amount of
2,500,000 common shares has been sold. Any checks for the purchase of shares should be made payable to “Continental
Stock Transfer — Moxian, Inc. Escrow Account.” The Placement Agents will instruct their customers to transfer
funds from their respective accounts directly to the escrow agent via wire transfer and will instruct other purchasers of the
shares to make checks payable to “Continental Stock Transfer — Moxian, Inc. Escrow Account.” Upon receipt
of funds sufficient for the sale of 2,500,000 shares and satisfaction of all other closing conditions, the funds may be
transferred to our business account. In the event the minimum total of 2,500,000 shares is not sold prior to November 14,
2016, all monies will be returned to investors, without interest or deduction, within one business day.
Fees
and Expenses
The
following table shows the public offering price, placement agent commissions and proceeds, before expenses, to us.
|
|
|
|
|
|
|
Minimum
Offering (2,500,000 shares)
|
|
$
|
4.00
|
|
$
|
0.16
|
|
|
$
|
9,600,000
|
|
Maximum
Offering (5,000,000 shares)
|
|
$
|
4.00
|
|
$
|
0.22
|
|
|
$
|
18,900,000
|
|
We
and the placement agents have agreed to pay commissions of 4.0% per share (or $0.16 per share) on the initial $10.0 million in
offering proceeds and 7.0% per share (or $0.28 per share) on all additional amounts, which, assuming completion of the Maximum Offering, results in a combined commission rate of $0.22 per share. We estimate expenses payable by us in connection
with this offering, other than the fees referred to above, will be approximately $[•]. This estimate includes (i) due diligence
fees and legal expenses of the placement agents not to exceed a total of $275,000; (ii) the fees and expenses relating to background
checks of our officers and directors not to exceed $20,000; (iii) the costs associated with the bound volumes of the offering
materials as well as commemorative mementos not to exceed $2,500; (iv) the costs associated with the use of Ipreo’s book
building software for the offering not to exceed $25,000; and (v) accountable “road show” expenses in an amount not
to exceed $40,000. In connection with the successful completion of this offering, we have agreed to issue to the placement agents
warrants as described below under “Placement Agents’ Warrant.” The placement agents’ fee was determined
through an arms’ length negotiation between us and the placement agents.
We
have agreed to pay to the placement agents upon the consummation of the offering, a non-accountable expense allowance equal to
1% of the gross proceeds of the offering.
We
also have agreed that, upon successful completion of this offering, for a period of 12 months from the effective date of the registration
statement related to this offering, we will offer the placement agents the right of first refusal to participate on terms that
are reasonable and customary in the investment banking market for such services in connection with any financing undertaken by
us. We previously paid a non-refundable fee of $50,000 to Wellington Shields & Co., LLC.
62
Placement
Agents’ Warrant
We
have also agreed to issue to the Placement Agents a warrant to purchase a number of shares equal to an aggregate of 4% percent
of the aggregate number of the shares sold in this offering. The warrants will be exercisable on a cashless basis at an exercise
price equal to the offering price of the shares sold in this offering. The warrants are exercisable commencing six months after
the closing date of this offering, and will be exercisable for five years after the effective date of the registration statement
related to this offering. The warrants are not redeemable by us. The Placement Agents’ warrants, and the shares of common
stock issuable upon exercise of such warrants, have been registered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act, on the registration statement of which this prospectus forms a part. Pursuant to applicable FINRA rules, and
in particular Rule 5110, the warrants (and underlying shares) issued to the placement agents may not be sold, transferred, assigned,
pledged, or hypothecated, or the subject of any hedging, short sale, derivative, put or call transaction that would result in
the effective disposition of the securities by any person for a period of 180 days after the effective date of the registration
statement related to this offering; provided, however, that the warrants (and underlying shares) may be transferred to officers
or directors of the placement agents and their affiliates as long as the warrants (and underlying shares) remain subject to the
lockup.
Lock-up
Agreements
We,
each of our directors and officers and holders of ten percent or more of our common stock on a fully diluted basis immediately
prior to the consummation of this offering have agreed or are otherwise contractually restricted for a period of 180 days after
the date of this prospectus, without the prior written consent of the placement agents not to directly or indirectly:
•
issue (in the case of us), offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of any shares
of our common stock or other capital stock or any securities convertible into or exercisable or exchangeable for our common stock
or other capital stock;
•
in the case of us, file or cause the filing of any registration statement under the Securities Act with respect to any
shares of our common stock or other capital stock or any securities convertible into or exercisable or exchangeable for our common
stock or other capital stock, other than registration statements on Form S-8 filed with the SEC after the closing date of this
offering; or
•
enter into any swap or other agreement, arrangement, hedge or transaction that transfers to another, in whole or in part,
directly or indirectly, any of the economic consequences of ownership of our common stock or other capital stock or any securities
convertible into or exercisable or exchangeable for our common stock or other capital stock,
whether
any transaction described in any of the foregoing bullet points is to be settled by delivery of our common stock or other capital
stock, other securities, in cash or otherwise, or publicly announce an intention to do any of the foregoing.
There
are no existing agreements between the placement agents and any person who will execute a lock-up agreement in connection with
this offering providing consent to the sale of shares prior to the expiration of the lock-up period. The lock up does not apply
to the issuance of shares upon the exercise of rights to acquire shares of common stock pursuant to any existing stock option
or the conversion of any of our preferred convertible stock.
Indemnification
and Contribution
The
Placement Agency Agreement provides for indemnification between us and the placement agents against specified liabilities, including
liabilities under the Securities Act, and for contribution by us and the placement agents to payments that may be required to
be made with respect to those liabilities. We have been advised that, in the opinion of the Securities and Exchange Commission,
indemnification of liabilities under the Securities Act is against public policy as expressed in the Securities Act, and is therefore,
unenforceable.
Proceeds
of this offering in the amount of $500,000 shall be used to fund an escrow account for a period of 24 months following the closing
date of this offering, which account shall be used in the event we shall have to indemnify the placement agents pursuant to the
terms of the Placement Agency Agreement.
63
Stabilizing
Transactions and Penalty Bids
In
order to facilitate this offering, persons participating in this offering may engage in transactions that stabilize, maintain,
or otherwise affect the price of our shares of common stock during and after this offering. Specifically, the Placement Agents
may engage in the following activities in accordance with the rules of the Securities and Exchange Commission.
Stabilizing
transactions.
The Placement Agents may make bids for or purchases of shares of our common stock shares or shares for
the purpose of pegging, fixing, or maintaining the price of the shares of our common stock or shares, so long as stabilizing bids
do not exceed a specified maximum.
Penalty
bids.
If the Placement Agents purchase shares in the open market in a stabilizing transaction or syndicate covering transaction,
they may reclaim a selling concession from the placement agents and selling group members who sold those shares as part of this
offering. Stabilization and syndicate covering transactions may cause the price of the shares to be higher than it would be in
the absence of these transactions. The imposition of a penalty bid might also have an effect on the price of the shares if it
discourages resale of shares.
The
transactions above may occur on NASDAQ or otherwise. Neither we nor the placement agents make any representation or prediction
as to the effect that the transactions described above may have on the price of our shares. If these transactions are commenced,
they may be discontinued without notice at any time.
Miscellaneous
A
prospectus in electronic format may be made available on websites maintained by the Placement Agents. These websites and the information
contained on these websites, or connected to these websites, are not incorporated into and are not a part of this prospectus.
In connection with the offering, the Placement Agents or syndicate members may distribute prospectuses electronically. No forms
of electronic prospectus other than prospectuses that are printable as Adobe® PDF will be used in connection with this offering.
The
Placement Agents have informed us that they do not expect to confirm sales of shares offered by this prospectus to accounts over
which they exercise discretionary authority.
Offer
Restrictions outside the United States
Other
than in the United States, no action has been taken by us or the placement agents that would permit a public offering of the securities
offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus
may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in
connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances
that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this
prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution
of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered
by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
China
THIS
DOCUMENT HAS NOT BEEN AND WILL NOT BE CIRCULATED OR DISTRIBUTED IN THE PRC AND THE ORDINARY SHARES MAY NOT BE OFFERED OR SOLD
TO ANY PERSON FOR RE-OFFERING OR RESALE, DIRECTLY OR INDIRECTLY, TO ANY RESIDENT OF THE PRC EXCEPT PURSUANT TO APPLICABLE LAWS
AND REGULATIONS OF THE PRC. FOR THE PURPOSE OF THIS SECTION ONLY, THE PRC DOES NOT INCLUDE TAIWAN AND THE SPECIAL ADMINISTRATIVE
REGIONS OF HONG KONG AND MACAU. THIS DOCUMENT HAS NOT BEEN NOR WILL IT BE APPROVED BY OR REGISTERED WITH THE RELEVANT CHINESE
GOVERNMENTAL AUTHORITIES, AND IT DOES NOT CONSTITUTE NOR IS IT INTENDED TO CONSTITUTE AN OFFER OF SECURITIES WITHIN THE MEANING
PRESCRIBED UNDER THE PRC SECURITIES LAW OR OTHER LAWS AND REGULATIONS OF THE PRC. ACCORDINGLY, THIS DOCUMENT SHALL NOT BE OFFERED
OR MADE AVAILABLE, NOR MAY THE COMMON STOCK BE MARKETED OR OFFERED FOR SALE TO THE GENERAL PUBLIC, DIRECTLY OR INDIRECTLY, IN
THE PRC. THE COMMON STOCK SHALL ONLY BE
64
OFFERED
OR SOLD TO PRC INVESTORS THAT ARE AUTHORIZED OR QUALIFIED TO BE ENGAGED IN THE PURCHASE OF THE COMMON STOCK BEING OFFERED. POTENTIAL
INVESTORS IN THE PRC ARE RESPONSIBLE FOR OBTAINING ALL THE RELEVANT REGULATORY APPROVALS/LICENSES FROM THE CHINESE GOVERNMENT
BY THEMSELVES, INCLUDING, WITHOUT LIMITATION, THOSE THAT MAY BE REQUIRED FROM THE STATE ADMINISTRATION OF FOREIGN EXCHANGE, THE
CHINA BANKING REGULATORY COMMISSION, THE MINISTRY OF COMMERCE AND THE NATIONAL DEVELOPMENT AND REFORM COMMISSION, WHERE APPROPRIATE,
AND FOR COMPLYING WITH ALL THE RELEVANT PRC LAWS AND REGULATIONS IN SUBSCRIBING FOR COMMON STOCK.
Hong
Kong
THESE
SECURITIES HAVE NOT BEEN DELIVERED FOR REGISTRATION TO THE REGISTRAR OF COMPANIES IN HONG KONG AND, ACCORDINGLY, MUST NOT BE ISSUED,
CIRCULATED OR DISTRIBUTED IN HONG KONG OTHER THAN TO PERSONS WHOSE ORDINARY BUSINESS IT IS TO BUY OR SELL SHARES OR DEBENTURES,
WHETHER AS PRINCIPAL OR AGENT, WITHIN THE MEANING OF THE HONG KONG COMPANIES ORDINANCE (THE “ORDINANCE”) OR IN CIRCUMSTANCES
WHICH DO NOT CONSTITUTE AN OFFER TO THE PUBLIC FOR THE PURPOSES OF THE ORDINANCE. UNLESS PERMITTED BY THE SECURITIES LAWS OF HONG
KONG, NO PERSON MAY ISSUE OR CAUSE TO BE ISSUED IN HONG KONG THIS SECURITIES OR ANY OR OTHER INVITATION, ADVERTISEMENT OR DOCUMENT
RELATING TO THE SECURITIES TO ANYONE OTHER THAN A PERSON WHOSE BUSINESS INVOLVES THE ACQUISITION, DISPOSAL OR HOLDING OF SECURITIES,
WHETHER AS PRINCIPAL OR AGENT.
Singapore
THE
SECURITIES REPRESENTED MAY NOT BE OFFERED OR SOLD, NOR MAY ANY DOCUMENT OR OTHER MATERIAL IN CONNECT WITH SUCH SECURITIES BE DISTRIBUTED,
EITHER DIRECTLY OR INDIRECTLY, (I) TO PERSONS IN SINGAPORE OTHER THAN UNDER CIRCUMSTANCES IN WHICH SUCH OFFER OR SALE DOES NOT
CONSTITUTE AN OFFER OR SALE OF SUCH SECURITIES TO THE PUBLIC IN SINGAPORE OR (II) TO THE PUBLIC OR ANY MEMBER OF THE PUBLIC IN
SINGAPORE OTHER THAN PURSUANT TO, AND IN ACCORDANCE WITH THE CONDITIONS OF, AN EXEMPTION INVOKED UNDER DIVISION 5A OR PART IV
OF THE COMPANIES ACT, CHAPTER 50 OF SINGAPORE AND TO PERSONS TO WHOM THE SECURITIES MAY BE OFFERED OR SOLD UNDER SUCH EXEMPTION.
65
LEGAL MATTERS
The validity of the shares of
our common stock offered hereby has been passed upon for us by Loeb
& Loeb LLP, New York, New York. Schiff Hardin LLP, Washington,
DC, is acting as counsel to the placement agents.
EXPERTS
Dominic K.F. Chan & Co., independent registered public
accounting firm, has audited our financial statements at September
30, 2015 and 2014 and for each of the two years ended September 30,
2015 and 2014 as set forth in their report. We have included our
financial statements in the prospectus and elsewhere in the
registration statement in reliance on Dominic K.F. Chan &
Co.’s report which includes an explanatory paragraph about
the existence of substantial doubt concerning the Company’s
ability to continue as a going concern, given on their authority as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE
INFORMATION
We have filed with the SEC a registration statement on Form S-1
under the Securities Act, with respect to the shares of common
stock being offered by this prospectus. This prospectus does not
contain all of the information in the registration statement and
its exhibits. For further information with respect to us and the
common stock offered by this prospectus, we refer you to the
registration statement and its exhibits. Statements contained in
this prospectus as to the contents of any contract or any other
document referred to are not necessarily complete, and in each
instance, we refer you to the copy of the contract or other
document filed as an exhibit to the registration statement. Each of
these statements is qualified in all respects by this
reference.
You can read our SEC filings, including the registration statement,
over the Internet at the SEC’s website at
www.sec.gov.
You may also read and copy any document we file with the SEC at its
public reference facilities at 100 F Street NE, Washington, D.C.
20549. You may also obtain copies of these documents at prescribed
rates by writing to the Public Reference Section of the SEC at 100
F Street NE, Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the
public reference facilities. You may also request a copy of these
filings, at no cost, by writing us at 228 Park Ave South, #82217,
New York, NY 10003 or telephoning us at +86 (0)755-66803251.
We are subject to the information reporting requirements of the
Exchange Act, and file reports, proxy statements and other
information with the SEC. These reports, proxy statements and other
information are available for inspection and copying at the public
reference room and web site of the SEC referred to above. We also
maintain a website at
www.moxian.com
,
at which, following the closing of this offering, you may access
these materials free of charge as soon as reasonably practicable
after they are electronically filed with, or furnished to, the SEC.
The information contained in, or that can be accessed through, our
website incorporated by reference in, and is not part of, this
prospectus.
66
MOXIAN, INC.
Index to Financial
Statements
Unaudited Financial Statements
Consolidated Balance Sheets as of June 30, 2016
(Unaudited) and September 30, 2015
|
|
F-2
|
Consolidated Statements of Operations and
Comprehensive Loss for the Three and Nine Months Ended June 30,
2016 and 2015
|
|
F-3
|
Consolidated Statements of Cash Flows for the
Nine Months Ended June 30, 2016 and 2015
|
|
F-4
|
Notes to Financial Statements
|
|
F-5 – F-17
|
Audited Financial Statements
Report of Independent Registered Public
Accounting Firm
|
|
F-18
|
Consolidated Balance Sheets as of September 30,
2015 and 2014
|
|
F-19
|
Consolidated Statements of Operations and
Comprehensive Income for the Years Ended September 30, 2015 and
2014
|
|
F-20
|
Consolidated Statements of Stockholders’
Equity as of September 30, 2015
|
|
F-21
|
Consolidated Statements of Cash Flows for the
Years Ended September 30, 2015 and 2014
|
|
F-22
|
Notes to Audited Consolidated Financial
Statements
|
|
F-23 – F-33
|
F-1
MOXIAN, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
96,587
|
|
|
$
|
2,398,713
|
|
Prepayments, deposits and other
receivables
|
|
|
607,645
|
|
|
|
1,042,727
|
|
Inventories
|
|
|
32,503
|
|
|
|
38,310
|
|
Total current assets
|
|
|
736,735
|
|
|
|
3,479,750
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets
|
|
|
85,981
|
|
|
|
52,609
|
|
Property and equipment, net
|
|
|
1,725,924
|
|
|
|
2,941,562
|
|
Intangible assets, net
|
|
|
5,703,720
|
|
|
|
6,600,285
|
|
TOTAL
ASSETS
|
|
$
|
8,252,360
|
|
|
$
|
13,074,206
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Accruals and other payables
|
|
$
|
960,877
|
|
|
$
|
600,675
|
|
Loans payable – related parties
|
|
|
2,839,158
|
|
|
|
1,462,525
|
|
Subscription payments
|
|
|
—
|
|
|
|
5,505,915
|
|
Total current liabilities
|
|
|
3,800,035
|
|
|
|
7,569,115
|
|
Total liabilities
|
|
|
3,800,035
|
|
|
|
7,569,115
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value, authorized:
100,000,000 shares. Nil shares issued and outstanding
|
|
|
—
|
|
|
|
—
|
|
Common stock, $0.001 par value, authorized:
250,000,000 shares. 64,005,949 and 107,333,472 shares issued and
outstanding as of June 30, 2016 and September 30, 2015,
respectively *
|
|
|
64,006
|
|
|
|
107,334
|
|
Additional paid-in capital*
|
|
|
24,691,259
|
|
|
|
16,457,910
|
|
Accumulated deficit
|
|
|
(20,557,155
|
)
|
|
|
(11,174,812
|
)
|
Accumulated other comprehensive
income
|
|
|
254,215
|
|
|
|
114,659
|
|
Total stockholders’ equity
|
|
|
4,452,325
|
|
|
|
5,505,091
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
8,252,360
|
|
|
$
|
13,074,206
|
|
See accompanying notes to unaudited condensed consolidated
financial statements
F-2
MOXIAN, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS
|
|
For
the Three Months Ended
June 30,
2016
|
|
For
the Three Months Ended
June 30,
2015
|
|
For
the Nine Months Ended
June 30,
2016
|
|
For
the Nine Months Ended
June 30,
2015
|
Revenues
|
|
$
|
5,703
|
|
|
$
|
18,187
|
|
|
$
|
18,645
|
|
|
$
|
86,353
|
|
Cost of revenues
|
|
|
(1,274
|
)
|
|
|
(15,203
|
)
|
|
|
(4,163
|
)
|
|
|
(26,852
|
)
|
Gross Profit
|
|
|
4,429
|
|
|
|
2,984
|
|
|
|
14,482
|
|
|
|
59,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
455,753
|
|
|
|
238,048
|
|
|
|
1,356,306
|
|
|
|
494,793
|
|
Research and development
|
|
|
519,807
|
|
|
|
420,638
|
|
|
|
2,034,103
|
|
|
|
936,624
|
|
Advertising agency fee
|
|
|
462,430
|
|
|
|
—
|
|
|
|
462,430
|
|
|
|
—
|
|
Impairment charge on intangible
assets
|
|
|
1,264,700
|
|
|
|
—
|
|
|
|
1,264,700
|
|
|
|
—
|
|
Selling, general and administrative
|
|
|
1,139,803
|
|
|
|
1,241,022
|
|
|
|
3,834,542
|
|
|
|
2,661,793
|
|
Loss from operations
|
|
|
(3,838,064
|
)
|
|
|
(1,896,724
|
)
|
|
|
(8,937,599
|
)
|
|
|
(4,033,709
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance expense
|
|
|
(98
|
)
|
|
|
(19,416
|
)
|
|
|
(259
|
)
|
|
|
(32,194
|
)
|
Interest income
|
|
|
—
|
|
|
|
—
|
|
|
|
1,523
|
|
|
|
2,264
|
|
Foreign exchange loss
|
|
|
(26,572
|
)
|
|
|
—
|
|
|
|
(482,855
|
)
|
|
|
—
|
|
Other income (expenses)
|
|
|
(112
|
)
|
|
|
—
|
|
|
|
337
|
|
|
|
—
|
|
Loss before income tax
|
|
|
(3,864,846
|
)
|
|
|
(1,916,140
|
)
|
|
|
(9,418,853
|
)
|
|
|
(4,063,639
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefits
|
|
|
12,193
|
|
|
|
—
|
|
|
|
36,510
|
|
|
|
—
|
|
Net loss
|
|
|
(3,852,653
|
)
|
|
|
(1,916,140
|
)
|
|
|
(9,382,343
|
)
|
|
|
(4,063,639
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustments
|
|
|
(21,601
|
)
|
|
|
85,003
|
|
|
|
139,556
|
|
|
|
276,747
|
|
Comprehensive loss
|
|
$
|
(3,874,254
|
)
|
|
$
|
(1,831,137
|
)
|
|
$
|
(9,242,787
|
)
|
|
$
|
(3,786,892
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per common
share
|
|
$
|
(0.08
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average common shares
outstanding*
|
|
|
45,598,135
|
|
|
|
99,150,000
|
|
|
|
86,755,026
|
|
|
|
99,150,000
|
|
See accompanying notes to unaudited condensed consolidated
financial statements
F-3
MOXIAN, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
Nine
Months Ended
June 30,
2016
|
|
Nine
Months Ended
June 30,
2015
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(9,382,343
|
)
|
|
$
|
(4,063,639
|
)
|
Adjustments to reconcile net loss to cash used
in operating activities
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,356,306
|
|
|
|
494,793
|
|
Impairment charge on intangible
assets
|
|
|
1,264,700
|
|
|
|
|
|
Loss on disposition of property and
equipment
|
|
|
486
|
|
|
|
—
|
|
Deferred tax benefits
|
|
|
(36,510
|
)
|
|
|
—
|
|
Changes in operating assets and
liabilities:
|
|
|
|
|
|
|
|
|
Prepayments, deposits and other
receivables
|
|
|
406,450
|
|
|
|
(331,514
|
)
|
Inventories
|
|
|
4,333
|
|
|
|
(44,034
|
)
|
Accruals and other payables
|
|
|
506,648
|
|
|
|
359,795
|
|
Net cash used in operating activities
|
|
|
(5,879,930
|
)
|
|
|
(3,584,599
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(326,306
|
)
|
|
|
(1,331,774
|
)
|
Purchase of intangible assets
|
|
|
(193,540
|
)
|
|
|
—
|
|
Net cash used in investing activities
|
|
|
(519,846
|
)
|
|
|
(1,331,774
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Loans payable – related parties
|
|
|
3,306,133
|
|
|
|
3,431,571
|
|
Repayments of payable – related
parties
|
|
|
(1,864,333
|
)
|
|
|
—
|
|
Proceeds from private placement – stock
issuance
|
|
|
2,657,533
|
|
|
|
2,475,950
|
|
Net cash provided by financing
activities
|
|
|
4,099,333
|
|
|
|
5,907,521
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rates on cash and cash
equivalents
|
|
|
(1,683
|
)
|
|
|
(39,167
|
)
|
Net decrease in cash and cash
equivalents
|
|
|
(2,302,126
|
)
|
|
|
951,981
|
|
Cash and cash equivalents, beginning of
period
|
|
|
2,398,713
|
|
|
|
1,770,196
|
|
Cash and cash equivalents, end of
period
|
|
$
|
96,587
|
|
|
$
|
2,722,177
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow disclosures:
|
|
|
|
|
|
|
|
|
Cash paid for interest expense
|
|
$
|
—
|
|
|
$
|
—
|
|
Cash paid for income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing
activities
|
|
|
|
|
|
|
|
|
Acquisition by issuing convertible
note
|
|
$
|
—
|
|
|
$
|
6,782,000
|
|
Issuance of shares for subscription payment
received in 2015
|
|
$
|
5,505,915
|
|
|
|
—
|
|
Reclassification of Construction in progress to
intangible assets
|
|
$
|
829,862
|
|
|
|
—
|
|
Cancellation of shares*
|
|
$
|
47,423
|
|
|
|
—
|
|
See accompanying notes to unaudited condensed consolidated
financial statements
F-4
MOXIAN, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.
Organization and nature
of operations
Moxian, Inc. (formerly known as Moxian China, Inc., hereinafter
referred as “Moxian,” together with its subsidiaries,
the “Company”), was incorporated under the laws of the
State of Nevada on October 12, 2010. The Company, through its
subsidiaries and variable interest entity, engages in the business
of operating a social network platform that integrates social media
and business into one single platform.
The Company is currently devoting its efforts to develop mobile
application and an online platform that facilitates attracting more
clients to small to medium size businesses. The Company’s
ability to continue as a going concern is dependent upon its
ability to develop additional sources of capital, develop apps and
websites, generate servicing income, and ultimately, achieve
profitable operations. The accompanying unaudited consolidated
financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
On May 24, 2016 the Board of Directors approved a reverse stock
split of the Company’s issued and outstanding shares of
common stock, par value $0.001 per share (the “Common
Stock”), at a ratio of 1-for-2 (the “Reverse Stock
Split”). The Reverse Stock Split was effective on June 20,
2016 (the “Effective Date”). Simultaneously to the
Reverse Stock Split, the number of shares of the Company’s
authorized Common Stock was correspondingly reduced from
500,000,000 shares to 250,000,000 shares without changes in par
value per share. The Company has retroactively restated all shares
and per share data for all the periods presented.
2.
Summary of
principal accounting policies
Basis of presentation
The accompanying unaudited condensed consolidated financial
statements of the Company have been prepared in accordance with
generally accepted accounting principles in the United States of
America and reflect the activities of the following subsidiaries
and VIE: Moxian CN Samoa, Moxian BVI, Moxian HK, Moxian Shenzhen,
Moxian Malaysia, Moyi, Moxian Beijing and Moxian IP Samoa. All
material intercompany transactions and balances have been
eliminated in the consolidation.
The interim condensed consolidated financial information as of June
30, 2016 and for the three and nine months ended June 30, 2016 and
2015 have been prepared, pursuant to the rules and regulations of
the Securities and Exchange Commission (the “SEC”).
Certain information and footnote disclosures, which are normally
included in annual consolidated financial statements prepared in
accordance with U.S. GAAP, have been omitted pursuant to those
rules and regulations. The interim condensed consolidated financial
information should be read in conjunction with the financial
statements and the notes thereto, included in the Company’s
Form 10-K/A for the fiscal year ended September 30, 2015,
previously filed with the SEC.
In the opinion of management, all adjustments (which include normal
recurring adjustments) necessary to present a fair statement of the
Company’s consolidated financial position as of June 30, 2016
and its condensed consolidated results of operations for three and
nine months ended June 30, 2016 and 2015, and its condensed
consolidated cash flows for the nine months ended June 30, 2016 and
2015, as applicable, have been made. The interim results of
operations are not necessarily indicative of the operating results
for the full fiscal year or any future periods.
In accordance with the Generally Accepted Accounting Principles of
the United States of America (US GAAP), variable interest entities
(VIEs) are generally entities that lack sufficient equity to
finance their activities without additional financial support from
other parties or whose equity holders lack adequate decision making
ability. All VIEs with which the Company is involved must be
evaluated to determine the primary beneficiary of the risks and
rewards of the VIE. The primary beneficiary is required to
consolidate the VIE for financial reporting purposes.
Accounting Standards Codification (“ASC”) 810-10
“Consolidation” addresses whether certain types of
entities referred to as variable interest entities
(“VIEs”), should be consolidated in a company’s
consolidated financial statements. Pursuant to an Exclusive
Business Cooperation Agreement by and between Moxian Shenzhen and
Moyi, dated July 15, 2014, Moxian Shenzhen has the exclusive right
to provide to Moyi technical and systems support, marketing
consulting services, training for technical personnel and technical
consulting services. As payment for
F-5
MOXIAN, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2.
Summary of
principal accounting policies
(cont.)
these services, Moyi has agreed to pay Moxian Shenzhen a service
fee equal to 100% Moyi’s pre-tax profit. In addition, Moxian
Shenzhen will also absorb losses from Moyi, if any, based on the
service agreement. In accordance with the provisions of ASC 810,
the Company has determined that Moyi is a VIE of Moxian Shenzhen
and that the Company is the primary beneficiary, and accordingly,
the financial statements of Moyi are consolidated into the
financial statements of the Company.
Reclassification
Certain prior year amounts have been reclassified to conform to the
current year presentation
Liquidity and Capital Resources
As of June 30, 2016, the Company’s current liabilities
exceeded the current assets by approximately $3.1 million and its
accumulated deficits were approximately $20.6 million and the
Company has incurred losses since inception, which raise
substantial doubt about the ability to continue as a going concern.
To maintain working capital sufficient to support the
Company’s operation and finance the future growth of its
business, the Company has comprehensively considered the available
sources of funds as follows:
•
Financial support from related parties; and
•
Issuance of shares for private placement and or public offering
The Company does not currently have sufficient cash or commitments
for financing to sustain its operations for the next twelve months.
The Company plans to increase the cash flows from an initial public
offering (“IPO”) and or other private placements. If
the Company’s IPO and private placements do not reach the
level anticipated in its plan, and the Company is not able to
obtain the necessary additional capital on a timely basis, on
acceptable terms, or at all, the Company may be unable to implement
its current plans for expansion, repay our debt obligations or
respond to competitive pressures, any of which would have a
material adverse effect on its business, prospects, financial
condition and results of operations. The accompanying unaudited
condensed consolidated financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
Risks and Uncertainties
The Company’s operations are substantially carried out in the
PRC. Accordingly, the Company’s business, financial condition
and results of operations maybe substantially influenced by the
political, economic and legal environments in the PRC, and by the
general state of the PRC’s economy. The Company’s
operations in the PRC are subject to specific considerations and
significant risks not typically associated with companies in North
America and Western Europe. These include risks associated with,
among others, the political, economic and legal environments and
foreign currency exchange. The Company’s results may be
adversely affected by changes in governmental policies with respect
to laws and regulations, anti-inflationary measures, currency
conversion and remittance abroad, and rates and methods of
taxation, among other things.
Fair value of financial instruments
The Company follows the provisions of ASC 820, “Fair Value
Measurements and Disclosures.” ASC 820 clarifies the
definition of fair value, prescribes methods for measuring fair
value, and establishes a fair value hierarchy to classify the
inputs used in measuring fair value as follows:
Level 1 — Observable inputs such as unadjusted quoted prices
in active markets for identical assets or liabilities available at
the measurement date.
Level 2 — Inputs other than quoted prices that are observable
for the asset or liability in active markets, quoted prices for
identical or similar assets and liabilities in markets that are not
active, inputs other than quoted prices that are observable, and
inputs derived from or corroborated by observable market data.
F-6
MOXIAN, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2.
Summary of
principal accounting policies
(cont.)
Level 3 — Inputs are unobservable inputs which reflect
management’s assumptions based on the best available
information.
The carrying value of deposits and other receivables, accruals and
other payables and loans from related parties approximate their
fair values because of the short-term nature of these
instruments.
Use of estimates
The preparation of the unaudited condensed consolidated financial
statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and
liabilities at the date of the accompanying unaudited condensed
consolidated financial statements, and the reported amounts of
revenues and expenses during the reporting period. Significant
estimates required to be made by management include but not limited
to, use lives of property and equipment, intangible assets,
inventory valuation and deferred tax assets. Actual results could
differ from those estimates.
Cash and cash equivalents
The Company considers all short-term highly liquid investments that
are readily convertible to known amounts of cash and have original
maturities of three months or less to be cash equivalents.
Plant and Equipment, net
Plant and equipment are recorded at cost less accumulated
depreciation and impairment. Significant additions or improvements
extending useful lives of assets are capitalized. Maintenance and
repairs are charged to expense as incurred. Depreciation and
amortization are computed using the straight-line method over the
estimated useful lives as follows:
Computers
|
|
3 years
|
Office equipment
|
|
3 years
|
Furniture and fixtures
|
|
3 years
|
Leasehold improvements
|
|
Shorter of estimated useful life or term of
lease
|
Intangible assets
Intangible assets, comprising Intellectual property rights
(“IP rights”), which are separable from the fixed
assets, are stated at cost less accumulated amortization.
Amortization is computed using the straight-line method over the
estimated useful lives of 3- 10 years. The Company makes judgments
about the recoverability of intangible assets whenever events or
changes in circumstances indicate that an impairment may exist.
Recoverability of finite-lived intangible assets is measured by
comparing the carrying amount of the asset to the future
undiscounted cash flows that the asset is expected to generate. The
Company performs an annual impairment assessment in the fourth
quarter of each year for indefinite-lived intangible assets, or
more frequently if indicators of potential impairment exist, to
determine whether it is more likely than not that the carrying
value of the assets may not be recoverable. Recoverability of
indefinite-lived intangible assets is measured by comparing the
carrying amount of the asset to the future discounted cash flows
that the asset is expected to generate. If the Company determines
that an individual asset is impaired, the amount of any impairment
is measured as the difference between the carrying value and the
fair value of the impaired asset.
The assumptions and estimates used to determine future values and
remaining useful lives of our intangible are complex and
subjective. They can be affected by various factors, including
external factors such as industry and economic trends, and internal
factors such as our business strategy and our forecasts for
specific market expansion. Based on the impairment assessment, the
Company recognized impairment charges of $1,264,700 for the three
and nine months ended June 30, 2016. $Nil impairment charge was
recognized for the three and nine months ended June 30, 2015.
F-7
MOXIAN, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2.
Summary of
principal accounting policies
(cont.)
Impairment of long-lived assets
Long-lived assets are evaluated for impairment whenever events or
changes in circumstances (such as a significant adverse change to
market conditions that will impact the future use of the assets)
indicate that the carrying value of an asset may not be fully
recoverable or that the useful life is shorter than the Company had
originally estimated. When these events occur, the Company
evaluates the impairment for the long-lived assets by comparing the
carrying value of the assets to an estimate of future undiscounted
cash flows expected to be generated from the use of the assets and
their eventual disposition. If the sum of the expected future
undiscounted cash flows is less than the carrying value of the
assets, the Company recognizes an impairment loss based on the
excess of the carrying value of the assets over the fair value of
the assets.
Revenue recognition
Revenue is recognized when persuasive evidence of an arrangement
exists; delivery has occurred or services have been rendered; the
price is fixed or determinable; and collectability is reasonably
assured.
Income taxes
The Company utilizes ASC Topic 740 (“ASC 740”)
“Income taxes”, which requires the recognition of
deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the unaudited
consolidated financial statements or tax returns. Under this
method, deferred income taxes are recognized for the tax
consequences in future years of differences between the tax bases
of assets and liabilities and their financial reporting amounts at
each period end based on enacted tax laws and statutory tax rates
applicable to the periods in which the differences are expected to
affect taxable income. Valuation allowances are established, when
necessary, to reduce deferred tax assets to the amount expected to
be realized.
ASC 740 “Income taxes” clarifies the accounting for
uncertainty in tax positions. This interpretation requires that an
entity recognizes in the unaudited condensed consolidated financial
statements the impact of a tax position, if that position is more
likely than not of being sustained upon examination, based on the
technical merits of the position. Recognized income tax positions
are measured at the largest amount that is greater than 50% likely
of being realized. Changes in recognition or measurement are
reflected in the period in which the change in judgment occurs. The
Company has elected to classify interest and penalties related to
unrecognized tax benefits, if and when required, as part of income
tax expense in the statements of operations.
Foreign currency transactions and translation
The reporting currency of the Company is United States Dollars (the
“USD”) and the functional currency of Moxian Shenzhen,
Moyi and Moxian Beijing is Renminbi (the “RMB”) as
China is the primary economic environment in which they operate,
the functional currency of Moxian HK is Hong Kong Dollar (the
“HKD”), and the functional currency of Moxian Malaysia
is Malaysia Ringgit (the “MYR”).
For financial reporting purposes, the financial statements of
Moxian Shenzhen, Moyi, Moxian Beijing, Moxian HK and Moxian
Malaysia, which are prepared using their respective functional
currencies, are translated into the reporting currency, United
States dollar (“U.S. dollar”) so to be consolidated
with the Company’s. Monetary assets and liabilities
denominated in currencies other than the reporting currency are
translated into the reporting currency at the rates of exchange
ruling at the balance sheet date. Revenues and expenses are
translated using average rates prevailing during the reporting
period. Adjustments resulting from the translation are recorded as
a separate component of accumulated other comprehensive income in
stockholders’ deficit. Transaction gains and losses are
recognized in the statements of operations and comprehensive
income.
F-8
MOXIAN, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2.
Summary of
principal accounting policies
(cont.)
The exchange rates applied are as follows:
Balance sheet items, except for equity
accounts
|
|
|
|
|
RMB:USD
|
|
6.6443
|
|
6.3568
|
HKD:USD
|
|
7.7589
|
|
7.7501
|
MYR:USD
|
|
4.0046
|
|
4.4124
|
Items in the statements of operations and comprehensive loss, and
statements cash flows
|
|
Nine
Months Ended June 30,
|
|
|
|
|
|
RMB:USD
|
|
6.4875
|
|
6.1067
|
HKD:USD
|
|
7.7618
|
|
7.7520
|
MYR:USD
|
|
4.1613
|
|
3.6581
|
Research and Development
Research and development expenses include payroll, employee
benefits, stock-based compensation expense, and other related
expenses associated with product development. Research and
development expenses also include third-party development,
programming costs, and localization costs incurred to translate
software for local markets. Such costs related to software
development are included in research and development expense until
the point that technological feasibility is reached. Once
technological feasibility is reached, such costs are capitalized
and amortized to the cost of revenue over the estimated lives of
the products.
Recent accounting pronouncements
In January 2016, the FASB has issued Accounting Standards Update
(ASU) No. 2016-01, Financial Instruments — Overall (Subtopic
825-10): Recognition and Measurement of Financial Assets and
Financial Liabilities. The new guidance is intended to improve the
recognition and measurement of financial instruments. The new
guidance makes targeted improvements to existing U.S. GAAP by: (1)
requiring equity investments (except those accounted for under the
equity method of accounting, or those that result in consolidation
of the investee) to be measured at fair value with changes in fair
value recognized in net income. Requiring public business entities
to use the exit price notion when measuring the fair value of
financial instruments for disclosure purposes; (2) Requiring
separate presentation of financial assets and financial liabilities
by measurement category and form of financial asset (i.e.,
securities or loans and receivables) on the balance sheet or the
accompanying notes to the financial statements; (3) Eliminating the
requirement for public business entities to disclose the method(s)
and significant assumptions used to estimate the fair value that is
required to be disclosed for financial instruments measured at
amortized cost on the balance sheet; and. (4) Requiring a reporting
organization to present separately in other comprehensive income
the portion of the total change in the fair value of a liability
resulting from a change in the instrument-specific credit risk
(also referred to as “own credit”) when the
organization has elected to measure the liability at fair value in
accordance with the fair value option for financial instruments.
The new guidance is effective for public companies for fiscal years
beginning after December 15, 2017, including interim periods within
those fiscal years. The Company is evaluating the effect, if any,
this update will have on the Company’s condensed consolidated
financial position, results of operations and cash flows.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842),
which supersedes the existing guidance for lease accounting, Leases
(Topic 840). ASU 2016-02 requires lessees to recognize leases on
their balance sheets, and leaves lessor accounting largely
unchanged. The amendments in this ASU are effective for fiscal
years beginning after December 15, 2018 and interim periods within
those fiscal years. Early application is permitted for all
entities. ASU 2016-02 requires a modified retrospective approach
for all leases existing at, or entered into after, the date of
initial application, with an option to elect to use certain
transition relief. The Company is currently evaluating the impact
of this new standard on its condensed consolidated financial
statements.
F-9
MOXIAN, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2.
Summary of
principal accounting policies
(cont.)
In April 2016, the FASB released ASU 2016-09, Compensation —
Stock Compensation (Topic 718): Improvements to Employee
Share-Based Payment Accounting. The ASU includes multiple
provisions intended to simplify various aspects of the accounting
for share-based payments. While aimed at reducing the cost and
complexity of the accounting for share-based payments, the
amendments are expected to significantly impact net income, EPS,
and the statement of cash flows. Implementation and administration
may present challenges for companies with significant share-based
payment activities. The ASU is effective for public companies in
annual periods beginning after December 15, 2016, and interim
periods within those years. The Company is currently evaluating the
impact of this new standard on its condensed consolidated financial
statements.
In April 2016, FASB issued Accounting Standards Update No. 2016-10,
Revenue from Contracts with Customers (Topic 606): Identifying
Performance Obligations and Licensing. The amendments clarify the
following two aspects of Topic 606: (a) identifying performance
obligations; and (b) the licensing implementation guidance. The
amendments do not change the core principle of the guidance in
Topic 606. The effective date and transition requirements for the
amendments are the same as the effective date and transition
requirements in Topic 606. Public entities should apply the
amendments for annual reporting periods beginning after December
15, 2017, including interim reporting periods therein (i.e.,
January 1, 2018, for a calendar year entity). Early application for
public entities is permitted only as of annual reporting periods
beginning after December 15, 2016, including interim reporting
periods within that reporting period. The Company is currently
evaluating the impact of this new standard on its condensed
consolidated financial statements.
In May 2016, the FASB issued ASU No. 2016-11 Revenue Recognition
(Topic 605) and Derivatives and Hedging (Topic 815); Rescission of
SEC Guidance Because of Accounting Standards Updates 2014-09 and
2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF
Meeting, which is rescinding certain SEC Staff Observer comments
that are codified in Topic 605, Revenue Recognition, and Topic 932,
Extractive Activities — Oil and Gas, effective upon adoption
of Topic 606. The Company does not expect the adoption of the ASU
to have any impact on its condensed consolidated financial
statements.
In May 2016, FASB issued ASU No. 2016-12 — Revenue from
Contracts with Customers (Topic 606); Narrow-Scope Improvements and
Practical Expedients, which is intended to not change the core
principle of the guidance in Topic 606, but rather affect only the
narrow aspects of Topic 606 by reducing the potential for diversity
in practice at initial application and by reducing the cost and
complexity of applying Topic 606 both at transition and on an
ongoing basis. The Company is assessing the impact of the adoption
of the ASU on its condensed consolidated financial statements,
disclosure requirements and methods of adoption.
3.
Property
and equipment, net
|
|
|
|
|
Electronic equipment
|
|
$
|
2,309,562
|
|
|
$
|
2,357,085
|
|
Furniture and fixtures
|
|
|
85,661
|
|
|
|
22,752
|
|
Construction in progress
|
|
|
—
|
|
|
|
796,996
|
|
Leasehold improvements
|
|
|
392,435
|
|
|
|
193,225
|
|
Total property and equipment
|
|
|
2,787,658
|
|
|
|
3,370,058
|
|
Less: Accumulated depreciation and
amortization
|
|
|
(1,061,734
|
)
|
|
|
(428,496
|
)
|
Total property and equipment, net
|
|
$
|
1,725,924
|
|
|
$
|
2,941,562
|
|
Depreciation and amortization for the three and nine months ended
June 30, 2016 were $221,756 and $671,822, respectively.
Depreciation and amortization for the three and nine months ended
June 30, 2015 were $68,499 and $155,693, respectively.
F-10
MOXIAN, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4.
Intangible
assets
|
|
|
|
|
IP rights
|
|
$
|
5,517,300
|
|
|
$
|
6,782,000
|
|
Other intangible assets
|
|
|
1,405,995
|
|
|
|
354,755
|
|
|
|
|
6,923,295
|
|
|
$
|
7,136,755
|
|
Less: accumulated amortization
|
|
|
(1,219,575
|
)
|
|
|
(536,470
|
)
|
Net intangible assets
|
|
$
|
5,703,720
|
|
|
$
|
6,600,285
|
|
No significant residual value is estimated for these intangible
assets. Aggregate amortization expense for the three and nine
months ended June 30, 2016 totaled $233,997 and $684,484,
respectively. Amortization for the three and nine months ended June
30, 2015 totaled $169,550 and $339,100, respectively. Additionally,
for the three and nine months ended June 30, 2016, the Company
recorded an impairment expense of $1,264,700 on the intangible
— IP rights. No impairment charge was recorded for the three
and nine months ended June 30, 2015.
During the third quarter of
fiscal 2016, the Company determined that sufficient indicators of
potential impairment existed, which require an interim intangible
assets-IP rights impairment analysis as a result of reduction of
revenue and negative working capital. Based on the results of the
assessment, the Company determined that the carrying value of the
intangible asset — IP rights was not fully recoverable, and
an impairment charge was recorded to the extent that estimated fair
value exceeded carrying value. The Company primarily used a relief
from royalty income approach to determine the fair value of the
intangible assets — IP rights. The relief from royalty income
model incorporated projected cash flows over a forecast period
based on the remaining estimated lives of the IP rights. This was
based on a number of key assumptions, including, but not limited
to, a discount rate of 21% and the annual revenue projections based
on the projected levels of merchant participation during the
forecast periods, all of which were classified as Level 3 in the
fair value hierarchy. As a result, the Company recorded an
impairment charge of $1,264,700 on definite-lived intangible assets
— IP rights during the three months and nine months ended
June 30, 2016.
The following table represents the total estimated amortization of
intangible assets for the five succeeding fiscal years subsequent
to June 30, 2016:
For
the Twelve Months Ending June 30,
|
|
Estimated Amortization Expense
|
2017
|
|
$
|
855,516
|
2018
|
|
|
845,798
|
2019
|
|
|
712,595
|
2020
|
|
|
675,319
|
2021
|
|
|
675,319
|
2022 and thereafter
|
|
|
1,939,173
|
Total
|
|
$
|
5,703,720
|
F-11
MOXIAN, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5.
Related
party transactions and balances
The table below sets forth related parties having transactions
during the nine months ended June 30, 2016 and balances as of June
30, 2016 and September 30, 2015, respectively.
|
|
Relationship with the Company
|
Jet Key Limited (“Jet
Key”)
|
|
A below 1% shareholder of the Company
|
Shenzhen Bayi Consulting Co. Ltd.
(“Bayi”)
|
|
A below 5% shareholder of the Company
|
Ace Keen Limited (“Ace
Keen”)
|
|
A below 1% shareholder of the Company
|
Moxian China Limited
|
|
A 27.5% shareholder of the Company
|
Zhang Xin
|
|
A below 5% shareholder of the Company
|
Beijing Xinhua Huifeng Equity Investment Center
(“Xinhua”)
|
|
A Shareholder of the Company (see note
6)
|
Zhongtou Huifeng Investment Management (Beijing)
Co. Ltd
|
|
Affiliated company of Xinhua
|
Morolling International HK Limited
(Morolling)
|
|
A below 5% shareholder of the Company
|
Details of loans payable — related parties are as
follows:
|
|
|
|
|
Loan payable –
related parties
|
|
|
|
|
|
|
|
Bayi
|
|
$
|
1,434,189
|
|
$
|
1,286,811
|
|
Moxian China Limited
|
|
|
733,134
|
|
|
(50,256
|
)
|
Jet Key
|
|
|
211,343
|
|
|
202,373
|
|
Ace Keen
|
|
|
98,522
|
|
|
23,597
|
|
Zhang Xin
|
|
|
98,919
|
|
|
—
|
|
Zhongtou
|
|
|
16,224
|
|
|
—
|
|
Xinhua
|
|
|
246,827
|
|
|
—
|
|
|
|
$
|
2,839,158
|
|
$
|
1,462,525
|
|
For the nine months ended June 30, 2016, the Company obtained
additional borrowings, net of repayment, of $147,378, $783,390,
$8,970, $74,925, $98,919, $16,224 and $246,827 from Bayi, Moxian
China Limited, Jet Key, Ace Keen, Zhang Xin, Zhongtou and Xinhua,
respectively. For the nine months ended June 30, 2015, the Company
obtained additional borrowings, net of repayment, of $4,213,841
from Bayi and $26,906 from Moxian China. The Company made net loan
repayment of $256,753, $435,414 and $117,009 to Ace Keen, Jet Key
and Moroling, respectively.
The loans and advance were made by shareholders to Moxian HK,
Moxian Shenzhen, Moyi and Moxian Malaysia and are unsecured,
interest free and due on various dates specified on loan
agreements.
On November 30, 2014, Moyi and Jet Key entered into a loan
agreement whereby Jet Key agreed to provide a loan to Moyi in
aggregate of $79,078 (RMB510,000) without interest and due in three
years.
On March 28, 2015, Moyi and Ace Keen entered into a loan agreement
whereby Ace Keen agreed to provide a loan to Moyi in aggregate of
$23,258 (RMB150,000) without interest and due in two years.
On September 30, 2015, Moxian Shenzhen and Shenzhen Bayi entered
into a loan agreement whereby Shenzhen Bayi agreed to provide a
loan to Moxian Shenzhen in aggregate of $1,231,125 (RMB8,180,000)
without interest and due in one year.
On November 9, 2015, Moxian HK and Zhang Xin entered into a loan
agreement whereby Zhang Xin agreed to provide a loan to Moxian HK
in aggregate of $98,971 (HKD 767,500) without interest and due in
one year.
F-12
MOXIAN, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5.
Related
party transactions and balances
(cont.)
On November 12, 2015, Moxian HK and Moxian China Limited entered
into a loan agreement whereby Moxian China Limited agreed to
provide loan to Moxian HK in aggregate of $44,852 (HKD 348,000)
without interest and due in one year.
On November 20, 2015, Moxian HK and Ace Keen entered into a loan
agreement whereby Ace Keen agreed to provide a loan to Moxian HK in
aggregate of $75,648 (HKD 589,259) without interest and due in one
year.
On November 25, 2015 and December 24, 2015, respectively, Moxian HK
and Moxian China Limited entered into two loan agreements whereby
Moxian China Limited agreed to provide loans to Moxian HK in
aggregate of $167,639 (HKD 1,300,000) without interest and due in
one year.
On December 25, 2015, Moxian Shenzhen and Shenzhen Bayi entered
into a loan agreement whereby Shenzhen Bayi agreed to provide a
loan to Moxian Shenzhen in aggregate of $686,432 (RMB4,560,883)
without interest and due in one year.
On February 1, 2016, Moxian Shenzhen and Shenzhen Bayi entered into
a loan agreement whereby Shenzhen Bayi agreed to provide a loan to
Moxian Shenzhen in aggregate of $46,516 (RMB300,000) without
interest and due in one year.
On February 1, 2016, Moxian HK and Moxian China Limited entered
into a loan agreement whereby Moxian China Limited agreed to
provide a loan to Moxian HK in aggregate of $64,476 (HKD500,000)
without interest and due in one year.
On February 2, 2016, Moxian HK and Moxian China Limited entered
into a loan agreement whereby Moxian China Limited agreed to
provide a loan to Moxian HK in aggregate of $25,790 (HKD200,000)
without interest and due in one year.
On February 2, 2016, Moxian Shenzhen and Shenzhen Bayi entered into
a loan agreement whereby Shenzhen Bayi agreed to provide a loan to
Moxian Shenzhen in aggregate of $38,763 (RMB250,000) without
interest and due in one year.
On February 26, 2016, Shenzhen Moyi and Shenzhen Bayi entered into
a loan agreement whereby Shenzhen Bayi agreed to provide a loan to
Shenzhen Moyi in aggregate of $33,854 (RMB218,340) without interest
and due in one year.
On
February 26, 2016, Moxian Beijing and Zhongtou entered into a loan agreement whereby Zhongtou agreed to provide a loan to Moxian
Beijing in aggregate of $15,505 (RMB 100,000) without interest and due in one year.
On March 7, 2016, Moxian HK and Moxian China Limited entered into a
loan agreement whereby Moxian China Limited agreed to provide a
loan to Moxian HK in aggregate of $38,686 (HKD300,000) without
interest and due in one year.
On March 10, 2016, Moxian BJ and Xinhua Huifeng entered into a loan
agreement whereby Xinhua Huifeng agreed to provide a loan to Moxian
BJ in aggregate of $13,955 (RMB90,000) without interest and due in
one year.
On March 14, 2016, Moxian HK and Moxian China Limited entered into
a loan agreement whereby Moxian China Limited agreed to provide a
loan to Moxian HK in aggregate of $77,371 (HKD600,000) without
interest and due in one year.
On March 15, 2016, Moxian Shenzhen and Shenzhen Bayi entered into a
loan agreements whereby Shenzhen Bayi agreed to provide loans to
Moxian Shenzhen in aggregate of $155,054 (RMB 1,000,000) without
interest and due in one year.
F-13
MOXIAN, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5.
Related
party transactions and balances
(cont.)
On March 21, 2016, Moxian HK and Moxian China Limited entered into
a loan agreement whereby Moxian China Limited agreed to provide a
loan to Moxian HK in aggregate of $77,371 (HKD600,000) without
interest and due in one year.
From April 11, 2016 through June 15, 2016, Moxian HK and Moxian
China Limited entered into seven loan agreements whereby Shenzhen
Bayi agreed to provide loans to Moxian HK in aggregate of $342,568
(HKD 2,657,440) without interest and due in one year.
From April 1, 2016 through June 8, 2016, Moxian Shenzhen and
Shenzhen Bayi entered into fifteen loan agreements whereby Shenzhen
Bayi agreed to provide loans to Moxian Shenzhen in aggregate of
$1,151,358 (RMB 7,650,000) without interest and due in one
year.
From April 1, 2016 through June 27, 2016, Moxian Shenzhen and
Xinhua Huifeng entered into four loan agreements whereby Xinhua
Huifeng agreed to provide loans to Moxian Shenzhen in aggregate of
$233,282 (RMB 1,550,000) without interest and due in one year.
On June 28, 2016, Moxian Beijing and Zhongtou entered into a loan
agreement whereby Zhongtou agreed to provide loan to Moxian Beijing
in aggregate of $1,174 (RMB 7,800) without interest and due in one
year.
6.
Capital
stock
Xinhua Subscription
The Company entered into a subscription agreement (“Zhongtou
Subscription Agreement”) with Zhongtou Huifeng Investment
Management (Beijing) Co. Ltd. (“Zhongtou”) on April 24,
2015, whereby the Company agreed to sell an aggregate of 4,084,500
shares of the Company’s Common Stock at a per share price of
$2.00 for gross proceeds of $8,190,000 (approximately
RMB50,000,000) and to issue to Zhongtou for no additional
consideration a warrant (the “Warrant”) to purchase in
the aggregate 16,000,000 shares (“Warrant Shares”) of
Common Stock at an exercise price of $4.00 per share, exercisable
on or prior to July 31, 2015. On June 4, 2015, the Company and
Zhongtou entered into a Termination Agreement to terminate the
Zhongtou Subscription Agreement as Zhongtou’s principals have
determined to make the investment described in the Zhongtou
Subscription Agreement through a different entity, Beijing Xinhua
Huifeng Equity Investment Center (Limited Partnership)
(“Xinhua”).
On June 4, 2015, the Company and Xinhua entered into a new
Subscription Agreement (“Xinhua Subscription
Agreement”) on substantially the same terms as the Zhongtou
Subscription Agreement (the “Transaction”). Pursuant to
the Xinhua Subscription Agreement, if the Company fails to contract
with 25,000 new paying merchants by September 30, 2016, the Company
shall issue an additional number of shares of Common Stock to
Xinhua, equal to 50% of the accumulated number of Warrant Shares
exercised and acquired by Xinhua as of September 30, 2016, for no
additional consideration (“Make Good Provision”). The
Make Good Provision will be available only if Xinhua has exercised
the Warrant and acquired more than 8,000,000 Warrant Shares (the
“Condition”). Further, the Company shall issue
2,000,000 shares of Common Stock to Xinhua for no additional
consideration if the Company fails to publish its full working
version of the Moxian mobile application version 2.0 by September
30, 2015, or if the Company fails to uplist to a national
securities exchange in the U.S. by June 30, 2017. Xinhua shall also
have the right to nominate (i) one member of the Company’s
accounting department; and (ii) one member of the board of
directors provided that the Condition has been met.
On August 13, 2015, Xinhua and the Company entered into an
Amendment Agreement (the “Amendment Agreement”) to
amend certain terms under the Xinhua Subscription Agreement between
the Company and Xinhua dated June 4, 2015 to September 30, 2015.
Pursuant to the Xinhua Subscription Agreement, the Company will
issue 4,095,000 shares of the Company’s Common Stock to
Xinhua for $8,190,000 and grant the warrant (the
“Warrant”) to purchase up to 16,000,000 shares of the
Company’s Common Stock on or before July 31, 2015 (the
“Expiration Date”) (such transaction, the
“Transaction”). Pursuant to the Amendment Agreement
(the “First Amendment
F-14
MOXIAN, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6.
Capital
stock
(cont.)
Agreement”), the closing date of the Transaction was extended
to September 30, 2015 and the Expiration Date of the Warrant was
extended to September 30, 2015.
On December 16, 2015, the Company entered into a Second Amendment
Agreement to the Subscription Agreement (the “Second
Amendment Agreement”) with Xinhua. Under the Second Amendment
Agreement, the closing date of the transaction was extended again
to December 31, 2015 and the Expiration Date of the Warrant was
extended to December 31, 2015 as well.
On February 28, 2016, the Company closed the transaction and issued
4,095,010 shares of the Company Common Stock to Xinhua for an
aggregate purchase price of $8,190,020, or $2.00 per share, of
which $5,505,915 proceeds were received by the Company in fiscal
2015 and included in the subscription payments liability.
Cancellation of shares
On February 22, 2016, Good Eastern Investment Limited
(‘GEL’), Stellar Elite Limited (‘SEL’) and
Moxian China Limited (‘MCL’), collectively, the
Designated Shareholders, entered into a Share Cancellation
Agreement (the ‘Agreement’) with the Company. Pursuant
to the Agreement, on February 22, 2016, the Designated Shareholders
cancelled 47,422,541 shares of the Company common stock which
represented 42.93% of our issued and outstanding shares for no
consideration. The cancelled shares resulted in GEL, SEL and MCL
owning after the share cancellation 9,990,000, 19,830,000 and
17,602,541 shares of common stock or any other securities of the
Company respectively.
As of June 30, 2016 and September 30, 2015, there were no warrants
or options outstanding to acquire any additional shares of Common
Stock of the Company.
Stock reverse split
On May 24, 2016 the Board of Directors approved a reverse stock
split of the Company’s issued and outstanding shares of
common stock, par value $0.001 per share (the “Common
Stock”), at a ratio of 1-for-2 (the “Reverse Stock
Split”). The Reverse Stock Split was effective on June 20,
2016 (the “Effective Date”). Simultaneously to the
Reverse Stock Split, the number of shares of the Company’s
authorized Common Stock was correspondingly reduced from
500,000,000 shares to 250,000,000 shares without changes in par
value per share. The Company has retroactively restated all shares
and per share data for all the periods presented.
Purchase of Intangible Asset
On January 30, 2015, the Company issued a convertible note in the
principal amount of $7,782,000 to REBL for the acquisitions of
Moxian IP Samoa and Moxian BVI. On August 14, 2015, $3,981,000 of
such note was converted into 1,945,500 shares of the
Company’s common stock. On September 30, 2015, the Company
issued an additional 1,945,500 shares of its common stock to REBL
upon conversion of the remainder portion of the note.
7.
Income
taxes
The Company and its subsidiaries file separate income tax
returns.
The United States of
America
Moxian is incorporated in the State of Nevada in the U.S., and is
subject to a gradual U.S. federal corporate income tax of 15% to
35%. The State of Nevada does not impose any corporate state income
tax. As of June 30, 2016, future net operation losses of
approximately $ 1.7 million are available to offset future
operating income through 2026.
F-15
MOXIAN, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
7.
Income
taxes
(cont.)
British Virgin
Islands
Moxian BVI is incorporated in the British Virgin Islands. Under the
current laws of the British Virgin Islands, Moxian BVI is not
subject to tax on income or capital gains. In addition, upon
payments of dividends by Moxian BVI, no British Virgin Islands
withholding tax is imposed.
Hong Kong
Moxian HK is incorporated in Hong Kong and Hong Kong’s
profits tax rate is 16.5%. Moxian HK did not earn any income that
was derived in Hong Kong for the three and nine months ended June
30, 2016 and 2015, and therefore, Moxian HK was not subject to Hong
Kong Profits Tax.
Malaysia
The management estimated that Moxian Malaysia will not generate any
taxable income in the future.
PRC
Effective from January 1, 2008, the PRC’s statutory income
tax rate is 25%. The Company’s PRC subsidiaries are subject
to income tax rate of 25%, unless otherwise specified.
Moxian Shenzhen was incorporated in the People’s Republic of
China. Moxian Shenzhen did not generate taxable income in the
People’s Republic of China for the period from April 8, 2013
(date of inception) to June 30, 2016. The management estimated that
Moxian Shenzhen will not generate any taxable income in the
future.
Moyi was incorporated in the People’s Republic of China. Moyi
did not generate taxable income in the People’s Republic of
China for the period from July 19, 2013 (date of inception) to June
30, 2016.
Moxian Beijing was incorporated in the People’s Republic of
China. Moxian Beijing did not generate taxable income in the
People’s Republic of China for the period from December 10,
2015 (date of inception) to June 30, 2016.
The Company’s effective income tax rates were 0.3% and 0.4%
for the three and nine month period ended June 30, 2016. The
Company’s effective income tax rates were Nil for the three
and nine month period ended June 30, 2015. Income tax mainly
consists of foreign income tax at statutory rates and the effects
of permanent and temporary differences.
As of June 30, 2016, the Company has a deferred tax asset of
$85,981 resulting from certain net operating losses in PRC. The
ultimate realization of deferred tax assets depends on the
generation of future taxable income during the periods in which
those net operating losses are available. The Company considers
projected future taxable income and tax planning strategies in
making its assessment. At present, the Company does not have a
sufficient operation in the Moxian Shenzhen, Moxian Malaysia and
Moxian Beijing to conclude that it is more-likely-than-not that the
Company will be able to realize all of its tax benefits in the near
future and therefore a valuation allowance has been provided for
the full value of the deferred tax asset.
A valuation allowance will be maintained until sufficient positive
evidence exists to support the reversal of any portion or all of
the valuation allowance. Should Moxian Shenzhen, Moxian Malaysia
and Moxian Beijing start to have sufficient operation in future
periods with supportable trend, the valuation allowance will be
reduced accordingly.
F-16
MOXIAN, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
8.
Commitments and
contingencies
Operating
Lease
The Company leases a number of properties under operating leases.
Rental expenses under operating leases for the three and nine
months ended June 30, 2016 were $94,877 and $513,472, respectively.
Rental expenses under operating leases for the three and nine
months ended June 30, 2015 were $93,394 and $164,209,
respectively.
As of June 30, 2016, the Company was obligated under
non-cancellable operating leases for minimum rentals as
follows:
For
the Twelve Months Ending June 30,
|
|
|
2017
|
|
$
|
750,974
|
2018
|
|
|
594,077
|
2019
|
|
|
18,813
|
|
|
|
|
Total minimum lease payments
|
|
$
|
1,363,864
|
Arrangement with
Xinhua New Media Co., Ltd
The Company entered into an exclusive advertising agency agreement
with Xinhua New Media Co., Ltd (“Xinhua”). Pursuant to
the agreement, the Company, as an exclusive agent, is authorized to
operate and sell advertisement on Xinhua’s mobile application
in the gaming channel. The agreement expires on December 31, 2020.
The Company is required to compensate Xinhua an agency fee of
$924,860 in the first year and additional agency fees of
approximately $1.5 million in the following years. The payment
schedule is listed below:
For
the twelve months ended
|
|
|
June 30, 2017
|
|
$
|
924,860
|
June 30, 2018
|
|
|
1,541,433
|
June 30, 2019
|
|
|
1,541,433
|
June 30, 2020
|
|
|
1,541,433
|
December 31, 2020
|
|
|
1,079,003
|
Total agency payments
|
|
$
|
6,628,162
|
For the three and nine months ended June 30, 2016, the Company
recorded $462,430 in advertising agency fee expense (Nil for three
and nine months ended June 30, 2015).
Legal
Proceeding
There has been no legal proceeding in which the Company is a party
as of As of June 30, 2016.
9.
Subsequent
events
From July 8, 2016 through July 15, 2016, Moxian Shenzhen and
Shenzhen Bayi entered into four loan agreements whereby Shenzhen
Bayi agreed to provide loans to Moxian Shenzhen in aggregate of
$207,244 (RMB1,377,000) without interest and due in one year.
On July 15, 2016, Moxian Beijing and Xinhua Huifeng entered into a
loan agreement whereby Xinhua Huifeng agreed to provide loans to
Moxian Beijing in aggregate of $97,828 (RMB 650,000) without
interest and due in one year.
F-17
Report of Independent
Registered Public Accounting Firm
To: The Board of Directors and Shareholders of
Moxian, Inc.
We have audited the accompanying consolidated balance sheets of
Moxian, Inc. and its subsidiaries (collectively, the
“Company”) as of September 30, 2015 and 2014, and the
related consolidated statements of operations and comprehensive
income, shareholders’ equity and cash flows for each of the
years ended September 30, 2015 and 2014. These consolidated
financial statements and schedule are the responsibility of the
Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audit.
We conducted our audits in accordance with standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are
free of material misstatement. The Company is not required to have,
nor were we engaged to perform, an audit of the Company’s
internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall consolidated financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of the Company as of September 30, 2015 and
2014, and the results of its operations and comprehensive income,
and its cash flows for each of the years ended September 30, 2015
and 2014 in conformity with accounting principles generally
accepted in the United States of America.
As discussed in Note 2 to the accompanying financial statements,
the financial statements of the Company for the year ended
September 30, 2015 have been restated to correct certain
misstatements.
/s/ Dominic K.F. Chan & Co
Dominic K.F. Chan & Co
Certified Public Accountants
Hong Kong, December 15, 2015
Except for Note 2 dated February 17, 2016
F-18
MOXIAN, INC.
(A DEVELOPMENT STAGE COMPANY)
AUDITED CONSOLIDATED BALANCE SHEETS
(Stated in US Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
2,398,713
|
|
|
$
|
1,770,196
|
|
Prepayments, deposits and other
receivables
|
|
|
1,042,727
|
|
|
|
741,645
|
|
Inventories
|
|
|
38,310
|
|
|
|
—
|
|
Total current assets
|
|
|
3,479,750
|
|
|
|
2,511,841
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets (Note 10)
|
|
|
52,609
|
|
|
|
—
|
|
Property and equipment, net (Note 5)
|
|
|
2,941,562
|
|
|
|
348,669
|
|
Intangible assets (Note 6)
|
|
|
6,600,285
|
|
|
|
—
|
|
TOTAL
ASSETS
|
|
$
|
13,074,206
|
|
|
$
|
2,860,510
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Accruals and other payables
|
|
$
|
600,675
|
|
|
$
|
295,601
|
|
Payable for acquisition (Note 4)
|
|
|
—
|
|
|
|
1,000,000
|
|
Loans from shareholders (Note 7)
|
|
|
1,462,525
|
|
|
|
6,151,932
|
|
Subscription payment
|
|
|
5,505,915
|
|
|
|
—
|
|
Total current liabilities
|
|
|
7,569,115
|
|
|
|
7,447,533
|
|
Total liabilities
|
|
$
|
7,569,115
|
|
|
$
|
7,447,533
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Capital stock (Note 8)
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value, authorized:
100,000,000 shares. Nil shares issued and outstanding as of
September 30, 2015 and September 30, 2014, respectively
|
|
|
—
|
|
|
|
—
|
|
Common stock, $0.001 par value, authorized:
250,000,000 shares. 107,333,472 shares and 99,150,000 shares issued
and outstanding as of September 30, 2015 and September 30, 2014,
respectively
|
|
|
107,334
|
|
|
|
99,150
|
|
Additional paid-in capital
|
|
|
16,457,910
|
|
|
|
262,064
|
|
Deficit accumulated during the development
stage
|
|
|
(11,174,812
|
)
|
|
|
(5,001,166
|
)
|
Accumulated other comprehensive
income
|
|
|
114,659
|
|
|
|
52,929
|
|
Total stockholders’ equity/
(deficit)
|
|
|
5,505,091
|
|
|
|
(4,587,023
|
)
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
13,074,206
|
|
|
$
|
2,860,510
|
|
See accompanying notes to consolidated financial statements
F-19
MOXIAN, INC.
(A DEVELOPMENT STAGE COMPANY)
AUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME
(Stated in US Dollars)
|
|
For
the
Year
Ended
September 30,
2015
|
|
For
the
Year
Ended
September 30,
2014
|
|
For
the period
from
Inception
October 12,
2010 to
September 30,
2015
|
Revenues, net
|
|
$
|
83,870
|
|
|
$
|
56,122
|
|
|
$
|
139,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
(25,269
|
)
|
|
|
(15,514
|
)
|
|
|
(48,694
|
)
|
Depreciation and amortization
expenses
|
|
|
(843,299
|
)
|
|
|
(78,571
|
)
|
|
|
(921,870
|
)
|
Selling, general and administrative
expenses
|
|
|
(5,443,815
|
)
|
|
|
(2,176,963
|
)
|
|
|
(7,822,691
|
)
|
Impairment of goodwill
|
|
|
—
|
|
|
|
(2,600,315
|
)
|
|
|
(2,600,315
|
)
|
Loss from operations
|
|
|
(6,228,513
|
)
|
|
|
(4,815,241
|
)
|
|
|
(11,253,578
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
2,258
|
|
|
|
23,899
|
|
|
|
26,157
|
|
Loss before income tax
|
|
|
(6,226,255
|
)
|
|
|
(4,791,342
|
)
|
|
|
(11,227,421
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expenses-deferred tax
benefit
|
|
|
52,609
|
|
|
|
—
|
|
|
|
52,609
|
|
Net loss
|
|
|
(6,173,646
|
)
|
|
|
(4,791,342
|
)
|
|
|
(11,174,812
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustments
|
|
|
61,730
|
|
|
|
52,929
|
|
|
|
114,659
|
|
Comprehensive loss
|
|
$
|
(6,111,916
|
)
|
|
$
|
(4,738,413
|
)
|
|
$
|
(11,060,153
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per common
share*
|
|
$
|
(0.06
|
)
|
|
$
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average common shares
outstanding*
|
|
|
99,998,087
|
|
|
|
99,150,000
|
|
|
|
|
|
See accompanying notes to consolidated financial statements
F-20
MOXIAN, INC.
(A DEVELOPMENT STAGE COMPANY)
AUDITED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Stated in US Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
paid-in
|
|
Accumulated
deficit
development
|
|
Accumulated
other
comprehensive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at inception, October 12, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
shares issued —
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Founder
for property and equipment
|
|
93,000,000
|
|
$
|
93,000
|
|
$
|
93,000
|
|
|
$
|
(182,900
|
)
|
|
$
|
—
|
|
$
|
3,100
|
|
Additional
paid in capital by founder
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
169
|
|
|
|
—
|
|
|
169
|
|
Net
loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(21
|
)
|
|
|
—
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2010
|
|
93,000,000
|
|
$
|
93,000
|
|
$
|
93,000
|
|
|
$
|
(182,752
|
)
|
|
$
|
—
|
|
$
|
3,248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
paid in capital by founder
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
2,146
|
|
|
|
—
|
|
|
2,146
|
|
Issue
of common stock
|
|
6,150,000
|
|
|
6,150
|
|
|
6,150
|
|
|
|
28,700
|
|
|
|
—
|
|
|
41,000
|
|
Net
loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(12,606
|
)
|
|
|
—
|
|
|
(12,606
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2011
|
|
99,150,000
|
|
$
|
99,150
|
|
$
|
99,150
|
|
|
$
|
(164,512
|
)
|
|
$
|
—
|
|
$
|
33,788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(33,572
|
)
|
|
|
—
|
|
|
(33,572
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2012
|
|
99,150,000
|
|
$
|
99,150
|
|
$
|
99,150
|
|
|
$
|
(198,084
|
)
|
|
$
|
—
|
|
$
|
216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
paid in capital by founder
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
2,950
|
|
|
|
—
|
|
|
2,950
|
|
Net
loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(14,690
|
)
|
|
|
—
|
|
|
(14,690
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
September 30, 2013
|
|
99,150,000
|
|
$
|
99,150
|
|
$
|
99,150
|
|
|
$
|
(209,824
|
)
|
|
$
|
—
|
|
$
|
(11,524
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inclusion
of Moyi (See
Note 1
)
|
|
—
|
|
|
—
|
|
|
162,914
|
|
|
|
—
|
|
|
|
—
|
|
|
162,914
|
|
Net
loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(4,791,342
|
)
|
|
|
—
|
|
|
(4,791,342
|
)
|
Foreign
currency adjustment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
52,929
|
|
|
52,929
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
September 30, 2014
|
|
99,150,000
|
|
$
|
99,150
|
|
$
|
262,064
|
|
|
$
|
(5,001,166
|
)
|
|
$
|
52,929
|
|
$
|
(4,587,023
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of shares
|
|
8,183,472
|
|
|
8,184
|
|
|
16,358,760
|
|
|
|
—
|
|
|
|
—
|
|
|
16,366,944
|
|
Inclusion
of Moyi (See
Note 1
)
|
|
—
|
|
|
—
|
|
|
(162,914
|
)
|
|
|
—
|
|
|
|
—
|
|
|
(162,914
|
)
|
Net
loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(6,173,646
|
)
|
|
|
—
|
|
|
(6,173,646
|
)
|
Foreign
currency adjustment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
61,730
|
|
|
61,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
September 30, 2015
|
|
107,333,472
|
|
$
|
107,334
|
|
$
|
16,457,910
|
|
|
$
|
(11,174,812
|
)
|
|
$
|
114,659
|
|
$
|
5,505,091
|
|
See accompanying notes to consolidated financial statements
F-21
MOXIAN, INC.
(A DEVELOPMENT STAGE COMPANY)
AUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in US Dollars)
|
|
Year
Ended September 30, 2015
|
|
Year
Ended September 30, 2014
|
|
For
the period from Inception October 12, 2010 to September 30,
2015
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(6,173,646
|
)
|
|
$
|
(4,791,342
|
)
|
|
$
|
(11,174,812
|
)
|
Depreciation and amortization expense
|
|
|
843,299
|
|
|
|
78,571
|
|
|
|
921,870
|
|
Impairment of goodwill
|
|
|
—
|
|
|
|
2,600,315
|
|
|
|
2,600,315
|
|
Changes in operating assets and
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in deposits, prepayments and other
receivables
|
|
|
(317,016
|
)
|
|
|
(167,032
|
)
|
|
|
(760,235
|
)
|
Increase in inventories
|
|
|
(22,375
|
)
|
|
|
—
|
|
|
|
(21,246
|
)
|
Increase in deferred tax assets
|
|
|
(52,609
|
)
|
|
|
—
|
|
|
|
(52,609
|
)
|
Increase in accruals and other
payables
|
|
|
305,074
|
|
|
|
173,159
|
|
|
|
554,885
|
|
Net cash used in operating activities
|
|
|
(5,417,273
|
)
|
|
|
(2,106,329
|
)
|
|
|
(7,931,832
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of property and equipment
|
|
|
(2,931,838
|
)
|
|
|
(229,723
|
)
|
|
|
(2,975,767
|
)
|
Acquisition of Intangible asset
|
|
|
(354,755
|
)
|
|
|
—
|
|
|
|
(354,755
|
)
|
Net cash inflow on acquisition of subsidiaries
(Note 4)
|
|
|
—
|
|
|
|
897,453
|
|
|
|
897,453
|
|
Net cash (used in)/provided by investing
activities
|
|
|
(3,286,593
|
)
|
|
|
667,730
|
|
|
|
(2,433,069
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscription received
|
|
|
5,505,915
|
|
|
|
|
|
|
|
5,505,915
|
|
Loan borrowings
|
|
|
3,730,113
|
|
|
|
3,155,839
|
|
|
|
7,116,045
|
|
Capital stock issued for cash
|
|
|
—
|
|
|
|
—
|
|
|
|
49,365
|
|
Net cash provided by financing
activities
|
|
|
9,236,028
|
|
|
|
3,155,839
|
|
|
|
12,671,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign currency
translation
|
|
|
96,355
|
|
|
|
52,928
|
|
|
|
92,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash
equivalents
|
|
|
628,517
|
|
|
|
1,770,168
|
|
|
|
2,398,713
|
|
Cash and cash equivalents, beginning of
year
|
|
|
1,770,196
|
|
|
|
28
|
|
|
|
—
|
|
Cash and cash equivalents, end of
year
|
|
$
|
2,398,713
|
|
|
$
|
1,770,196
|
|
|
$
|
2,398,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow disclosures:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest expense
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Cash paid for income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Major items for non-cash transaction:
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares in conversion of convertible
promissory notes (Note 8)
|
|
$
|
16,366,944
|
|
|
$
|
—
|
|
|
$
|
16,366,944
|
|
IP rights acquired by issuing common stock (Note
4)
|
|
$
|
6,782,000
|
|
|
$
|
—
|
|
|
$
|
6,782,000
|
|
See accompanying notes to consolidated financial statements
F-22
MOXIAN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
1.
Organization and nature
of operations
Moxian, Inc. (formerly known as Moxian China, Inc., hereinafter
referred as “Moxian,” together with its subsidiaries,
the “Company”), was incorporated under the laws of the
State of Nevada on October 12, 2010. The Company, through its
subsidiaries and variable interest entity, engages in the business
of operating a social network platform that integrates social media
and business into one single platform.
On February 17, 2014, the Company incorporated Moxian CN Group
Limited (“Moxian CN Samoa”) under the laws of
Independent State of Samoa.
On February 21, 2014, the Company completed the acquisition of
Moxian Group Limited (“Moxian BVI”) and its
subsidiaries from Rebel Group, Inc., a Florida Corporation
(“REBL”) pursuant to a License and Acquisition
Agreement (the “License and Acquisition
Agreement”).
Moxian BVI was incorporated on July 3, 2012 under the laws of
British Virgin Islands. REBL owned 100% equity interests of Moxian
BVI prior to the closing of the License and Acquisition Agreement,
among the Company, Moxian BVI and REBL.
Moxian (Hong Kong) Limited (“Moxian HK”) was
incorporated on January 18, 2013 and became Moxian BVI’s
subsidiary since February 14, 2013. Moxian HK is currently engaged
in the business of online social media. Moxian HK operates through
two wholly-owned subsidiaries: Moxian Technologies (Shenzhen) Co.,
Ltd. (“Moxian Shenzhen”) and Moxian Malaysia SDN BHD
(“Moxian Malaysia”).
Moxian Shenzhen was invested and wholly owned by Moxian HK. Moxian
Shenzhen was incorporated on April 8, 2013 and was engaged in the
business of internet technology, computer software, commercial
information consulting
Moxian Malaysia was incorporated on March 1, 2013 and became Moxian
HK’s subsidiary since April 2, 2013. Moxian Malaysia is
conducting its business in IT services and media advertising
industry.
Shenzhen Moyi Technologies Co., Ltd. (“Moyi”) was
incorporated on July 19, 2013 under the laws of the People’s
Republic of China and became a variable interest entity
(“VIE”) of Moxian Shenzhen since July 15, 2014. Moxian
Shenzhen controls Moyi through arrangement that absorbs operations
risk, as if Moyi were a wholly-owned subsidiary of Moxian
Shenzhen.
On January 30, 2015, the Company entered into an Equity Transfer
Agreement (the “Equity Transfer Agreement,” such
transaction, the “Equity Transfer Transaction”) with
REBL, to acquire from REBL 100% of the equity interests of Moxian
Intellectual Property Limited, a company incorporated under the
laws of Samoa and a wholly-owned subsidiary of REBL (“Moxian
IP Samoa”) for $6,782,000 (the “Moxian IP Samoa
Purchase Price”). Moxian IP Samoa owns all the intellectual
property rights relating to the operation, use and marketing of the
Moxian Platform, including all of the trademarks, patents and
copyrights that are used in the Company’s business. As a
result of the Equity Transfer Transaction, Moxian IP Samoa became a
wholly-owned subsidiary of the Company.
The Company is in the development stage as defined in Financial
Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) 915. Among the
disclosures required by FASB ASC 915 are that the Company’s
audited consolidated financial statements be identified as those of
a development stage company, and that the statements of earnings,
retained earnings and stockholders’ equity and cash flows
disclose activity since the date of the Company’s inception.
The fiscal year end of the Company is September 30.
The Company’s audited consolidated financial statements have
been presented on the basis that it is a going concern, which
contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company has not
generated significant revenue since inception and has never paid
any dividends and is unlikely to pay dividends or generate
significant earnings in the immediate or foreseeable future. Since
October 12, 2010 (inception), the Company has generated revenue of
$139,992 and has incurred an accumulated deficit of
$11,174,812.
F-23
MOXIAN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
1.
Organization and nature
of operations
(cont.)
The Company is currently devoting its efforts to develop mobile
application and online platform that facilitate the small to medium
size businesses to attract more clients. The Company’s
ability to continue as a going concern is dependent upon its
ability to develop additional sources of capital, develop apps and
websites, generate servicing income, and ultimately, achieve
profitable operations. The accompanying audited consolidated
financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
2.
Restatement
of Financial Statements
Subsequent to the preparation of the Company’s consolidated
financial statements as of and for the year ended September 30,
2015, management identified errors in the Company’s
previously issued consolidated financial statements. The Company
has incorrectly accounted for: (i) the recognition of deferred tax
assets derived from the net operating loss at the year ended
September 30, 2015; (ii) the over accrued amortization of
intangible assets for the year ended September 30, 2015; (iii) the
overstated intangible assets and accruals and other payables as of
September 30, 2015.
1)
The
Company recognized $1.46 million of deferred tax assets derived
from the net operating loss at the year ended September 30, 2015
(See note 10). Management considered this amount was over accrued
by $1.41 million according to their best estimation. As a result,
the deferred tax assets would decrease $1.41 million as of
September 30, 2015, the income tax expenses — deferred tax
benefit would also decrease by $1.41 million and the net loss would
increase by $1.41 million for the year ended September 30,
2015.
2)
The
Company identified that the amortization of intangible assets
— Intellectual Property Rights was over accrued by $169,550
for the year ended September 30, 2015. As a result, the
amortization of intangible assets would decrease $169,550 and the
net loss would decrease by $169,550 for the year ended September
30, 2015.
3)
Moreover, the Company identified that the cost for purchasing
intangible assets was overstated by $173,177 as of September 30,
2015. As a result, the intangible assets would decrease $173,177
and accruals and other payables would decrease $173,177 as of
September 30, 2015
The impact of the restatement on the September 30, 2015 financial
statements is reflected in the following tables:
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
Total current assets
|
|
4,937,210
|
|
|
3,479,750
|
|
Deferred tax assets (note 8)
|
|
1,457,460
|
|
|
52,609
|
|
Intangible assets (note 10)
|
|
6,603,912
|
|
|
6,600,285
|
|
Total Assets
|
|
14,482,684
|
|
|
13,074,206
|
|
Accruals and other payables
|
|
773,852
|
|
|
600,675
|
|
Total current liabilities
|
|
7,742,292
|
|
|
7,569,115
|
|
Total liabilities
|
|
7,742,292
|
|
|
7,569,115
|
|
Deficit accumulated during the development
stage
|
|
(9,939,511
|
)
|
|
(11,174,812
|
)
|
Total stockholders’ equity
|
|
6,740,392
|
|
|
5,505,091
|
|
Total liabilities and stockholders’
equity
|
|
14,482,684
|
|
|
13,074,206
|
|
F-24
MOXIAN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
2.
Restatement
of Financial Statements
(cont.)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
|
|
|
|
For
the period from Inception
|
|
|
For
the year Ended
September 30, 2015
|
|
October 12, 2010 to
September 30, 2015
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization
expenses
|
|
1,012,849
|
|
|
843,299
|
|
|
1,091,420
|
|
|
921,870
|
|
Loss from operations
|
|
(6,398,063
|
)
|
|
(6,228,513
|
)
|
|
(11,423,128
|
)
|
|
(11,253,578
|
)
|
Loss before income tax
|
|
(6,395,805
|
)
|
|
(6,226,255
|
)
|
|
(11,396,971
|
)
|
|
(11,227,421
|
)
|
Income tax expenses
|
|
1,457,460
|
|
|
52,609
|
|
|
1,457,460
|
|
|
52,609
|
|
Net Loss
|
|
(4,938,345
|
)
|
|
(6,173,646
|
)
|
|
(9,939,511
|
)
|
|
(11,174,812
|
)
|
Comprehensive loss
|
|
(4,876,615
|
)
|
|
(6,111,916
|
)
|
|
(9,824,852
|
)
|
|
(11,060,153
|
)
|
Basic and diluted loss per common
share*
|
|
(0.05
|
)
|
|
(0.06
|
)
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF CASH FLOW
|
|
Year
Ended
September 30, 2015
|
|
For
the period from Inception October 12, 2010 to
September 30, 2015
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
(4,938,345
|
)
|
|
(6,173,646
|
)
|
|
(9,939,511
|
)
|
|
(11,174,812
|
)
|
Depreciation and Amortization
expenses
|
|
1,012,849
|
|
|
843,299
|
|
|
1,091,420
|
|
|
921,870
|
|
Increase in deferred tax assets
|
|
(1,457,460
|
)
|
|
(52,609
|
)
|
|
(1,457,460
|
)
|
|
(52,609
|
)
|
Increase in accruals and other
payables
|
|
478,251
|
|
|
305,074
|
|
|
728,062
|
|
|
554,885
|
|
Net cash used in operating activities
|
|
(5,244,096
|
)
|
|
(5,417,273
|
)
|
|
(7,758,655
|
)
|
|
(7,931,832
|
)
|
Acquisition of Intangible assets
|
|
(527,932
|
)
|
|
(354,755
|
)
|
|
(527,932
|
)
|
|
(354,755
|
)
|
Net Cash used in investing activities
|
|
(3,459,770
|
)
|
|
(3,286,593
|
)
|
|
(2,606,246
|
)
|
|
(2,433,069
|
)
|
3.
Summary of
principal accounting policies
Basis of presentation
The accompanying audited
consolidated financial statements of the Company have been prepared
in accordance with generally accepted accounting principles in the
United States of America and reflect the activities of the
following subsidiaries and VIE: Moxian CN Samoa, Moxian BVI, Moxian
HK, Moxian Shenzhen, Moxian Malaysia, Moyi and Moxian IP Samoa. All
material intercompany transactions and balances have been
eliminated in the consolidation.
In accordance with the interpretation of Generally Accepted
Accounting Principles (GAAP), variable interest entities (VIEs) are
generally entities that lack sufficient equity to finance their
activities without additional financial support from other parties
or whose equity holders lack adequate decision making ability. All
VIEs with which the Company is involved must be evaluated to
determine the primary beneficiary of the risks and rewards of the
VIE. The primary beneficiary is required to consolidate the VIE for
financial reporting purposes.
ASC 810 (Financial Accounting Standards Board (“FASB”)
Interpretation Number (“FIN”) 46 (revised December
2003), “Consolidation of Variable Interest Entities, and
Interpretation of ARB No. 51” (“FIN 46R”),
addresses whether certain types of entities referred to as variable
interest entities (“VIEs”), should be consolidated in a
company’s audited consolidated financial statements. Pursuant
to an Exclusive Business Cooperation Agreement by
F-25
MOXIAN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
3.
Summary of
principal accounting policies
(cont.)
and between Moxian Shenzhen and Moyi, dated July 15, 2014, Moxian
Shenzhen has the exclusive right to provide to Moyi technical and
systems support, marketing consulting services, training for
technical personnel and technical consulting services. As payment
for these services, Moyi has agreed to pay Moxian Shenzhen a
service fee equal to 100% Moyi’s pre-tax profit. In
accordance with the provisions of ASC 810, the Company has
determined that Moyi is a VIE of Moxian Shenzhen and that the
Company is the primary beneficiary, and accordingly, the financial
statements of Moyi are consolidated into the financial statements
of the Company.
Revenue recognition
Revenue are recognized when persuasive evidence of an arrangement
exists; delivery has occurred or services have been rendered; the
price is fixed or determinable; and collectability is reasonably
assured.
Use of estimates
The preparation of the audited consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the audited
consolidated financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Income taxes
The Company utilizes FASB Accounting Standard Codification Topic
740 (“ASC 740”) “Income taxes” (formerly
known as SFAS No. 109, “Accounting for Income Taxes”),
which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that
have been included in the audited consolidated financial statements
or tax returns. Under this method, deferred income taxes are
recognized for the tax consequences in future years of differences
between the tax bases of assets and liabilities and their financial
reporting amounts at each period end based on enacted tax laws and
statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation
allowances are established, when necessary, to reduce deferred tax
assets to the amount expected to be realized.
ASC 740 “Income taxes” (formerly known as
Interpretation No. 48,
Accounting for
Uncertainty in Income Taxes, an interpretation of Statement of
Financial Accounting Standards No. 109
(“FIN
48”)) clarifies the accounting for uncertainty in tax
positions. This interpretation requires that an entity recognizes
in the financial statements the impact of a tax position, if that
position is more likely than not of being sustained upon
examination, based on the technical merits of the position.
Recognized income tax positions are measured at the largest amount
that is greater than 50% likely of being realized. Changes in
recognition or measurement are reflected in the period in which the
change in judgment occurs. The Company has elected to classify
interest and penalties related to unrecognized tax benefits, if and
when required, as part of income tax expense in the statements of
operations. The adoption of ASC 740 did not have a significant
effect on the consolidated financial statements.
Cash and cash equivalents
The Company considers all short-term highly liquid investments that
are readily convertible to known amounts of cash and have original
maturities of three months or less to be cash equivalents.
Fair value of financial instruments
The carrying values of the Company’s financial instruments,
including cash and cash equivalents, trade and other receivables,
deposits, trade and other payables approximate their fair values
due to the short-term maturity of such instruments. The carrying
amounts of borrowings approximate their fair values because the
applicable interest rates approximate current market rates.
F-26
MOXIAN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
3.
Summary of
principal accounting policies
(cont.)
Earnings per share
Basic earnings per share is based on the weighted average number of
common shares outstanding during the period while the effects of
potential common shares outstanding during the period are included
in diluted earnings per share. The average market price during the
year is used to compute equivalent shares.
FASB Accounting Standard Codification Topic 260 (“ASC
260”), “Earnings Per Share,” requires that
employee equity share options, non-vested shares and similar equity
instruments granted to employees be treated as potential common
shares in computing diluted earnings per share. Diluted earnings
per share should be based on the actual number of options or shares
granted and not yet forfeited, unless doing so would be
anti-dilutive. The Company uses the “treasury stock”
method for equity instruments granted in share-based payment
transactions provided in ASC 260 to determine diluted earnings per
share. Antidilutive securities represent potentially dilutive
securities which are excluded from the computation of diluted
earnings or loss per share as their impact was antidilutive.
Plant and equipment, net
Plant and equipment are recorded at cost less accumulated
depreciation and impairment. Significant additions or improvements
extending useful lives of assets are capitalized. Maintenance and
repairs are charged to expense as incurred. Depreciation is
computed using the straight-line method over the estimated useful
lives as follows:
Computers
|
|
3 years
|
Office equipment
|
|
3 years
|
Furniture and fixtures
|
|
3 years
|
Leasehold improvements
|
|
Shorter of estimated useful lives or term of
lease
|
Business Combinations
The Company accounts for its business combinations using the
purchase method of accounting in accordance with ASC 805: Business
Combinations. The purchase method accounting requires that the
consideration transferred to be allocated to the assets, including
separately identifiable assets and liabilities the Company acquired
based on their estimated fair values. The consideration transferred
of an acquisition is measured as the aggregate of the fair values
at the date of exchange of the assets given, liabilities incurred,
and equity instruments issued as well as the contingent
considerations and all contractual contingencies as of the
acquisition date. The costs directly attributable to the
acquisition are expensed as incurred. Identifiable assets,
liabilities and contingent liabilities acquired or assumed are
measured separately at their fair value as of the acquisition date,
irrespective of the extent of any non-controlling interests. The
excess of (i) the total of cost of acquisition, fair value of the
non-controlling interests and acquisition date fair value of any
previously held equity interest in the acquiree over (ii) the fair
value of the identifiable net assets of the acquiree, is recorded
as goodwill. If the cost of acquisition is less than the fair value
of the net assets of the subsidiary acquired, the difference is
recognized directly in the consolidated statements of comprehensive
income.
The determination and allocation of fair values to the identifiable
assets acquired, liabilities assumed and non-controlling interests
is based on various assumptions and valuation methodologies
requiring considerable management judgment. The most significant
variables in these valuations are discount rates, terminal values,
the number of years on which to base the cash flow projections, as
well as the assumptions and estimates used to determine the cash
inflows and outflows. The Company determines discount rates to be
used based on the risks inherent in the related activity’s
current business model and industry comparisons. Terminal values
are based on the expected life of assets, forecasted life cycle and
forecasted cash flows over that period.
In a business combination achieved in stages, the Company
re-measures its previously held equity interest in the acquiree at
its acquisition-date fair value and recognizes the resulting gain
or loss in earnings.
F-27
MOXIAN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
3.
Summary of
principal accounting policies
(cont.)
Goodwill
Goodwill represents the excess of purchase price over fair value of
net assets acquired. Under ASC 350, Intangibles — Goodwill
and Other, goodwill is not amortized but evaluated for impairment
annually or whenever events or changes in circumstances indicate
that the value may not be recoverable.
The Company tests goodwill for impairment at the reporting unit
level on an annual basis as of the fiscal year end, and between
annual tests when an event occurs or circumstances change that
could indicate that the asset might be impaired. Commencing in
September 2011, in accordance with the FASB revised guidance on
“Testing of Goodwill for Impairment,” a company first
has the option to assess qualitative factors to determine whether
it is more likely than not that the fair value of a reporting unit
is less than its carrying amount. If the company decides, as a
result of its qualitative assessment, that it is
more-likely-than-not that the fair value of a reporting unit is
less than its carrying amount, the quantitative impairment test is
mandatory. Otherwise, no further testing is required. The
quantitative impairment test consists of a two-step goodwill
impairment test. The first step compares the fair value of each
reporting unit to its carrying amount. If the fair value of each
reporting unit exceeds its carrying amount, goodwill is not
considered to be impaired and the second step will not be required.
If the carrying amount of a reporting unit exceeds its fair value,
the second step compares the implied fair value of goodwill to the
carrying value of a reporting unit’s goodwill. The implied
fair value of goodwill is determined in a manner similar to
accounting for a business combination with the allocation of the
assessed fair value determined in the first step to the assets and
liabilities of the reporting unit. The excess of the fair value of
the reporting unit over the amounts assigned to the assets and
liabilities is the implied fair value of goodwill. This allocation
process is only performed for purposes of evaluating goodwill
impairment and does not result in an entry to adjust the value of
any assets or liabilities. An impairment loss is recognized for any
excess in the carrying value of goodwill over the implied fair
value of goodwill.
Application of a goodwill
impairment test requires significant management judgment, including
the identification of reporting units, assigning assets and
liabilities to reporting units, assigning goodwill to reporting
units, and determining the fair value of each reporting unit. The
judgment in estimating the fair value of reporting units includes
estimating future cash flows, determining appropriate discount
rates and making other assumptions. Changes in these estimates and
assumptions could materially affect the determination of fair value
for each reporting unit.
Intangible assets
Intangible assets, comprising Intellectual property rights
(“IP rights”) and other intangible assets, which are
separable from the fixed assets, are stated at cost less
accumulated amortization. Amortization is computed using the
straight-line method over the estimated useful lives of 10
years.
Comprehensive income
The Company has adopted FASB
Accounting Standard Codification Topic 220 (“ASC 220”)
“Comprehensive income” (formerly known as SFAS No. 130,
“Reporting Comprehensive Income”), which establishes
standards for reporting and display of comprehensive income, its
components and accumulated balances. Accumulated other
comprehensive income represents the accumulated balance of foreign
currency translation adjustments of the Company.
Recent accounting pronouncements
The Company has considered all new accounting pronouncements and
has concluded that there are no new pronouncements that may have a
material impact on results of operations, financial condition, or
cash flows, based on current information.
F-28
MOXIAN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
4.
Acquisitions
Acquisition of Moxian
BVI
On February 21, 2014, the Company entered into a License and
Acquisition Agreement (“License and Acquisition
Agreement”) with REBL, whereby the Company (i) acquired all
the equity interests of Moxian BVI, and (ii) obtained the license
to use the intellectual property rights (as define below) of REBL.
Pursuant to the License and Acquisition Agreement, REBL agreed to
sell, convey, and transfer 100% of the equity interests of Moxian
BVI to Moxian CN Samoa, a newly incorporated wholly-owned
subsidiary of the Company, in cash consideration of an aggregate of
$1,000,000. As a result, The Company began to consolidate Moxian
BVI, together with its subsidiaries, Moxian HK, Moxian Shenzhen,
and Moxian Malaysia’s financial statement on February 21,
2014.
Under the License and Acquisition Agreement, REBL also agreed to
grant us the exclusive right to use REBL’s IP Rights in
Mainland China, Malaysia, and other countries and regions where
REBL conducts its business (the “Licensed Territory”),
and the exclusive right to solicit, promote, distribute and sell
REBL products and services in the Licensed Territory for five years
(the “License”). In exchange for such License, the
Company agreed to pay to REBL: (i) $1,000,000 as a license
maintenance royalty each year commencing from the second year from
the date of the agreement; and (ii) 3% of the gross profit of
distribution and sale of REBL products and services as an earned
royalty. Pursuant to the License and Acquisition Agreement, the
Company has the right to acquire the new IP Rights that are
developed by REBL and sub-license such rights to a third party. The
Company also has the obligation to develop the social media market
in the Licensed Territory of REBL products and services.
The Company accounted for the acquisition of Moxian BVI as business
acquisition in accordance with ASC 805.
The valuations used in the purchase price allocation were
determined by the Company with the assistance of an independent
third party valuation firm with the income approach applied. The
allocation of the consideration for assets acquired and liability
assumed based on their fair value was as follows:
Current assets
|
|
|
|
|
Cash and bank balances
|
|
$
|
897,453
|
|
Prepayments, deposits and other
receivables
|
|
|
264,729
|
|
Inventory
|
|
|
1,129
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
Property and equipment, net
|
|
|
176,116
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
Other payables and accruals
|
|
|
(51,172
|
)
|
Loans
|
|
|
(2,888,570
|
)
|
|
|
$
|
(1,600,315
|
)
|
|
|
|
|
|
Goodwill arising on acquisition:
|
|
|
|
|
Consideration transferred
|
|
$
|
1,000,000
|
|
Less: fair value of identifiable net assets
acquired
|
|
|
(1,600,315
|
)
|
|
|
$
|
2,600,315
|
|
|
|
|
|
|
Net cash inflow on acquisition of
subsidiaries:
|
|
|
|
|
Consideration paid in cash
|
|
$
|
—
|
|
Less: cash and cash equivalent balances
acquired
|
|
|
897,453
|
|
|
|
$
|
897,453
|
|
F-29
MOXIAN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
4.
Acquisitions
(cont.)
The excess of the purchase price over the assets acquired and
liabilities assumed was recorded as goodwill. Goodwill primarily
represents the expected synergies from combining operations of
Moxian BVI with those of the Company, which are complementary to
each other, and intangible assets that do not qualify for separate
recognition. In accordance with ASC350, goodwill is not amortized
but is tested for impairment and is not deductible for tax
purposes.
Prior to the acquisition, Moxian BVI did not prepare its financial
statements in accordance with US GAAP. The Company determined that
the cost of reconstructing the financial statement of Moxian BVI
for the periods prior to the acquisition outweighed the benefits.
Based on a comparison of Moxian BVI’s and the Company’s
financial performance for the fiscal year prior to the acquisition,
the Company did not consider Moxian BVI on its own to be material
to the Company. Thus the Company’s management believes that
the presentation of pro forma financial information with respect to
the results of operations of the Company for the business
combination is impractical.
The changes in carrying value of goodwill by reportable segments
for the years ended September 30, 2015 and 2014 are as follows:
|
|
|
Balance as of September 30, 2013
|
|
$
|
—
|
|
Increase in goodwill related to
acquisition
|
|
|
2,600,315
|
|
Impairment losses
|
|
|
(2,600,315
|
)
|
Balance as of September 30, 2014
|
|
$
|
—
|
|
Balance as of September 30, 2015
|
|
$
|
—
|
|
5.
Property
and equipment, net
|
|
|
|
|
|
|
|
Computers
|
|
$
|
227,886
|
|
|
$
|
213,600
|
|
Office equipment
|
|
|
2,129,199
|
|
|
|
68,623
|
|
Furniture and fixtures
|
|
|
22,752
|
|
|
|
32,011
|
|
Construction in progress
|
|
|
796,996
|
|
|
|
—
|
|
Leasehold improvements
|
|
|
193,225
|
|
|
|
156,101
|
|
Total property and equipment
|
|
|
3,370,058
|
|
|
|
470,335
|
|
Less: Accumulated depreciation
|
|
|
(428,496
|
)
|
|
|
(121,666
|
)
|
Total property and equipment, net
|
|
$
|
2,941,562
|
|
|
$
|
348,669
|
|
The depreciation expenses for the years ended September 30, 2015
and 2014 were $306,829 and $78,571, respectively.
6.
Intangible
assets
As of September 30, 2015 and 2014, the Company has the following
amounts related to intangible assets:
|
|
|
|
|
IP rights
|
|
$
|
6,782,000
|
|
|
$
|
—
|
Other intangible assets
|
|
|
354,755
|
|
|
|
—
|
|
|
|
7,136,755
|
|
|
$
|
—
|
Less: accumulated amortization
|
|
|
(536,470
|
)
|
|
|
—
|
Net intangible assets
|
|
$
|
6,600,285
|
|
|
$
|
—
|
F-30
MOXIAN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
6.
Intangible
assets
(cont.)
No significant residual value is estimated for these intangible
assets. Aggregate amortization expense for the years ended
September 30, 2015, and September 30, 2014, totaled $536,470 and
nil, respectively. The following table represents the total
estimated amortization of intangible assets for the five succeeding
years:
For the Year Ending September 30
|
|
Estimated Amortization Expense
|
2016
|
|
$
|
854,200
|
2017
|
|
|
854,200
|
2018
|
|
|
826,312
|
2019
|
|
|
678,200
|
2020 and thereafter
|
|
$
|
3,387,373
|
7.
Loans from
shareholders
The loans are made to Moxian HK, Moxian Shenzhen, Moyi, and Moxian
Malaysia and are unsecured, interest free and will be due and
payable in 12 months. Details of the loans are analyzed as
follows:
|
|
|
|
|
|
|
|
Within 1 month
|
|
$
|
—
|
|
$
|
—
|
1 to 3 months
|
|
|
—
|
|
|
—
|
More than 3 months but less than 12
months
|
|
|
1,462,525
|
|
|
6,151,932
|
|
|
$
|
1,462,525
|
|
$
|
6,151,932
|
On May 4, 2015, Moxian Malaysia and Jet Key Limited (“Jet
Key”), a shareholder of the Company, entered into a loan
agreement whereby Jet Key agreed to provide a loan to Moxian
Malaysia in an aggregate of $122,144 without any interests and with
a term of repayment of 12 months.
On June 30, 2015, Moxian Shenzhen and Shenzhen Bayi Consulting Co.
Ltd. (“Bayi”), a shareholder of the Company, entered
into a loan agreement whereby Bayi agreed to provide a loan to
Moxian Shenzhen in an aggregate of RMB6,100,000 (approximately
$998,559) without any interests and with a term of repayment of 12
months, as previously disclosed in the Company’s Quarterly
Report on Form 10-Q for the period ending June 30, 2015, filed with
the Securities and Exchange Commission on August 14, 2015.
On September 30, 2015, Moxian Shenzhen and Bayi entered into a loan
agreement a loan agreement whereby Bayi agreed to provide a loan to
Moxian Shenzhen in an aggregate of RMB2,080,000 (approximately
$332,480) without any interests and with a term of repayment of 12
months.
8.
Shareholders’
equity
As of December 22, 2015, the number of total outstanding shares is
107,333,472 shares of Common Stock, par value $.001 per share
(“Common Stock”) and nil share of Preferred Stock, par
value $.001 per share (“Preferred Stock”).
As previously disclosed in the Quarterly Report on Form 10-Q for
the period ended March 31, 2015 filed with the Securities and
Exchange Commission on May 15, 2015, the Company entered into a
subscription agreement (“Zhongtou Subscription
Agreement”) with Zhongtou Huifeng Investment Management
(Beijing) Co. Ltd. (“Zhongtou”) on April 24, 2015,
whereby we agreed to sell an aggregate of 4,095,000 shares of the
Company’s Common Stock at a per share price of $2.00 for
gross proceeds of $8,190,000 (approximately RMB50,000,000) and to
issue to Zhongtou for no additional consideration a warrant (the
“Warrant”) to purchase in the aggregate of 16,000,000
shares (“Warrant Shares”) of Common Stock at an
exercise price of $4.00 per share, exercisable on
F-31
MOXIAN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
8.
Shareholders’
equity
(cont.)
or prior to July 31, 2015. On June 4, 2015, the Company and
Zhongtou entered into a Termination Agreement to terminate the
Zhongtou Subscription Agreement as Zhongtou’s principals have
determined to make the investment described in the Zhongtou
Subscription Agreement through a different entity, Beijing Xinhua
Huifeng Equity Investment Center (Limited Partnership)
(“Xinhua”).
On June 4, 2015, the Company and Xinhua entered into a new
Subscription Agreement (“Xinhua Subscription
Agreement”) on substantially the same terms as the Zhongtou
Subscription Agreement (the “Transaction”). Pursuant to
the Xinhua Subscription Agreement, if the Company fails to contract
with 25,000 new paying merchants by September 30, 2016, the Company
shall issue an additional number of shares of Common Stock to
Xinhua, equal to 50% of the accumulated number of Warrant Shares
exercised and acquired by Xinhua as of September 30, 2016, for no
additional consideration (“Make Good Provision”). The
Make Good Provision will be available only if Xinhua has exercised
the Warrant and acquired more than 8,000,000 Warrant Shares (the
“Condition”). Further, the Company shall issue
2,000,000 shares of Common Stock to Xinhua for no additional
consideration if the Company fails to publish its full working
version of the Moxian mobile application version 2.0 by September
30, 2015, or if the Company fails to uplist to a national
securities exchange in the U.S. by June 30, 2017. Xinhua shall also
have the right to nominate (i) one member of the Company’s
accounting department; and (ii) one member of the board of
directors provided that the Condition has been met.
On August 13, 2015, Xinhua and the Company entered into an
Amendment Agreement (the “Amendment Agreement”) to
amend certain terms under the Xinhua Subscription Agreement between
the Company and Xinhua dated June 4, 2015 to September 30, 2015.
Pursuant to the Xinhua Subscription Agreement, the Company will
issue 4,095,000 shares of the Company’s Common Stock to
Xinhua for $8,190,000 and grant the warrant (the
“Warrant”) to purchase up to 16,000,000 shares of the
Company’s Common Stock on or before July 31, 2015 (the
“Expiration Date”) (such transaction, the
“Transaction”). Pursuant to the Amendment Agreement
(the “First Amendment Agreement”), the closing date of
the Transaction was extended to September 30, 2015 and the
Expiration Date of the Warrant was extended to September 30, 2015.
As of the date of this Annual Report, the Transaction has not
closed yet and there are no shares or warrants issued to
Xinhua.
On August 14, 2015, the Company issued an aggregate of 4,292,472
shares of Common Stock to Ace Keen Limited, Jet Key Limited,
Morolling International HK Limited, and Shenzhen Bayi Consulting
Co., Ltd (the “Noteholders”) as a result of the
conversion of $8,584,944 of convertible promissory notes held by
the Noteholders at $2.00 per share.
On August 14, 2015, due to the VWAP of 30 trading day prior to
August 14, 2015 is higher than $2.00, which triggered the clause of
conversion under the convertible promissory note (the “Rebel
Note”) in the principal amount of $7,782,000 issued to REBL
dated January 30, 2015, the Company provided a notice of conversion
to REBL and elected to convert the amount of $3,891,000 under the
Rebel Note into 1,945,500 shares of the Company’s Common
Stock at the conversion price of $2.00.
On September 30, 2015, the Company notified REBL that it elected to
cause it to convert the remainder of the Rebel Note into 1,945,000
shares of Common Stock (“September Conversion”). After
the August Conversion and September Conversion, the entire Rebel
Note was converted into the total of 3,891,000 shares of the Common
Stock without any balance outstanding.
As of September 30, 2015, there were no warrants or options
outstanding to acquire any additional shares of Common Stock of the
Company.
F-32
MOXIAN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
9.
Earnings
per share
|
|
For the year ended September 30,
|
|
|
|
|
|
Net loss attributable to ordinary shareholders
for computing basic and diluted net loss per ordinary
share
|
|
$
|
(6,173,646
|
)
|
|
$
|
(4,791,342
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares
outstanding – Basic and
diluted*
|
|
|
99,998,087
|
|
|
|
99,150,000
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share*
|
|
$
|
(0.06
|
)
|
|
|
(0.05
|
)
|
Diluted earnings per share*
|
|
$
|
(0.06
|
)
|
|
|
(0.05
|
)
|
10. Subsequent
Events
On June 20, 2016, the Company’s board of directors has
approved a reverse stock split of the Company’s issued and
outstanding shares of common stock, par value $0.001 per share (the
“Common Stock”), at a ratio of 1-for-2 (the
“Reverse Stock Split”). The Reverse Stock Split was
approved by the Board of Directors on May 24, 2016 and effected on
June 20, 2016 (the “Effective Date”). Simultaneously to
the Reverse Stock Split, the number of shares of the
Company’s authorized Common Stock was correspondingly reduced
from 500,000,000 shares to 250,000,000 shares. On July 11, 2016,
the Company received FINRA’s approval of the Reverse Stock
Split.
F-33
MINIMUM
OFFERING: 2,500,000 shares of common stock
MAXIMUM OFFERING: 5,000,000 shares of common stock
_______________
PROSPECTUS
_______________
, 2016
Axiom Capital Management
Inc.
|
|
Cuttone & Co., Inc.
|
Through and including
, 2016 (the 25
th
day after the date of this prospectus), all dealers effecting
transactions in these securities, whether or not participating in
this offering, may be required to deliver a prospectus.
PART II
INFORMATION NOT REQUIRED
IN PROSPECTUS
Item 13. Other Expenses
of Issuance and Distribution
The
following table sets forth the various expenses, all of which will be borne by the registrant, in connection with the sale and
distribution of the securities being registered, other than the placement agents commissions. All amounts shown are estimates
except for the SEC registration fee and the FINRA filing fee.
SEC
registration fee
|
|
$
|
5,156
|
|
FINRA
filing fee
|
|
$
|
9,305
|
|
NASDAQ
Application and listing fee
|
|
$
|
75,000
|
|
Accounting
fees and expenses
|
|
$
|
15,000
|
|
Legal
fees and expenses
|
|
$
|
350,000
|
|
Printing
and Engraving
|
|
$
|
|
*
|
Transfer
agent and registrar fees
|
|
$
|
|
*
|
Miscellaneous
|
|
$
|
|
*
|
Total
|
|
|
|
|
____________
Item 14. Indemnification
of Directors and Officers.
Pursuant to Section 78.7502 of the Nevada Revised Statutes, we have
the power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, except an action by or in the
right of the Company, by reason of the fact that the person is or
was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses,
including attorneys’ fees, judgments, fines and amounts paid
in settlement actually and reasonably incurred by the person in
connection with the action, suit or proceeding if the person acted
in good faith and in a manner which he or she reasonably believed
to be in or not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding, had no
reasonable cause to believe the conduct was unlawful. Our Articles
of Incorporation and Bylaws provide that the registrant shall
indemnify its directors and officers to the fullest extent
permitted by the Nevada law.
With regard to the foregoing provisions, or otherwise, we have been
advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as
expressed in the Securities Act of 1933, as amended, and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
us of expenses incurred or paid by a director, officer or
controlling person of the Corporation in the successful defense of
any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the common shares
being registered, we will, unless in the opinion of our counsel the
matter has been settled by a controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such
indemnification by us is against public policy as expressed in the
Securities Act of 1933, as amended, and will be governed by the
final adjudication of such case.
Item 15. Recent Sales of
Unregistered Securities.
The information below lists all of the securities sold by us during
the past three years which were not registered under the Securities
Act:
On October 31, 2014 and November 30, 2014, Moxian Shenzhen received
RMB 630,000 (approximately $102,942) and RMB 90,000 (approximately
$14,486), respectively, as loans (the “MCL Shenzhen
Loans”) from Moxian China Limited. The term of such loans is
twelve months and they bear no interest. On December 31, 2014, the
Company, Moxian China Limited and Moxian Shenzhen entered into a
Loan Agreement, where the Company agreed to issue a convertible
promissory note (the “Note”) to Moxian China Limited
for the repayment of the MCL Shenzhen Loans.
II-1
On October 31, 2014 and November 30, 2014, Moxian Malaysia received
a loan in the amount of MYR 118,800 (approximately $34,032) and MYR
23,100 (approximately $6,605), respectively, from Moxian China
Limited (the “MCL Malaysia Loans”). The term of such
loans is twelve months and they bear no interest. On December 31,
2014, the Company, Moxian China Limited and Moxian Malaysia entered
into a Loan Agreement, where the Company agreed to issue a Note to
Moxian China Limited for the repayment of the MCL Malaysia
Loans.
On November 30, 2014, Moxian HK received HKD $500,000
(approximately $64,437) as a loan from Moxian China Limited (the
“MCL HK Loan”). The term of such loan is twelve months
and it bears no interest. On December 31, 2014, the Company, Moxian
China Limited and Moxian HK entered into a Loan Agreement, where
the Company agreed to issue a Note to Moxian China Limited for the
repayment of the MCL HK Loan.
On January 30, 2015, we issued a convertible note in the principal
amount of $7,782,000 to REBL for the acquisitions of Moxian IP
Samoa and Moxian BVI.
On May 30, 2015, the Company, Moxian HK, and Jet Key entered into
an Amended and Restated Loan Agreement (“Moxian HK-Jet Key
Loan Agreement”) to document the total loan of $223,416 that
Jet Key has advanced to Moxian HK in different tranches by May 30,
2015, and in exchange, the Company agreed to issue a 12-month
convertible interest free promissory note of $223,416
(“Moxian HK-Jet Key Note”) to Jet Key. Under the Moxian
HK-Jet Key Note, all or any portion of the Moxian HK-Jet Key Note
is convertible into shares of Common Stock of the Company at the
conversion price equal to the purchase price of the securities sold
in the Qualified Financing. If no Qualified Financing is
consummated before the maturity date, Jet Key shall have the right
to convert any and all of the Moxian HK-Jet Key Note into shares of
Common Stock of the Company at the 20 day trading VWAP as reported
by Bloomberg, L.P.
On May 30, 2015, the Company, Moxian HK, and Ace Keen entered into
an Amended and Restated Loan Agreement (“Moxian HK-Ace Keen
Loan Agreement”) to document the total loan of $761,379 that
Ace Keen has advanced to Moxian HK in different tranches by May 30,
2015, and in exchange, the Company agreed to issue a 12-month
convertible interest free promissory note of $761,379
(“Moxian HK-Ace Keen Note”) to Ace Keen. Under the
Moxian HK-Ace Keen Note, all or any portion of the Moxian HK-Ace
Keen Note is convertible into Company’s Common Stock at a
price equal to the purchase price of the securities sold in a
qualified financing for gross proceeds of more than $5,000,000 (a
“Qualified Financing”). If no Qualified Financing is
consummated before the maturity date, Ace Keen shall have the right
to convert any and all of the Moxian HK-Ace Keen Note into shares
of Common Stock at the 20 day trading Volume Weighted Average Price
(“VWAP”) as reported by Bloomberg, L.P.
On May 30, 2015, the Company, Moxian HK, and Moxian China Limited
(“MCL”) entered into an Amended and Restated Loan
Agreement (“Moxian HK-MCL Loan Agreement”) to document
the total loan of $709,941 that MCL has advanced to Moxian HK in
different tranches by May 30, 2015, and in exchange, the Company
agreed to issue a 12-month convertible interest free promissory
note of $709,941 (“Moxian HK-MCL Note”) to MCL. Under
the Moxian HK-MCL Note, all or any portion of the Moxian HK-MCL
Note is convertible into shares of Common Stock of the Company at
the conversion price equal to the purchase price of the securities
sold in the Qualified Financing. If no Qualified Financing is
consummated before the maturity date, MCL shall have the right to
convert any and all of the Moxian HK-MCL Note into shares of Common
Stock of the Company at the 20 day trading VWAP as reported by
Bloomberg, L.P.
On May 30, 2015, the Company, Moxian Malaysia, and Ace Keen entered
into an Amended and Restated Loan Agreement (“Moxian
Malaysia-Ace Keen Loan Agreement”) to document the total loan
of $228,937 that Ace Keen has advanced to Moxian Malaysia in
different tranches by May 30, 2015, and in exchange, the Company
agreed to issue a 12-month convertible interest free promissory
note of $228,937 (“Moxian Malaysia-Ace Keen Note”) to
Ace Keen. Under the Moxian Malaysia-Ace Keen Note, all or any
portion of the Moxian Malaysia-Ace Keen Note is convertible into
Common Stock of the Company at the conversion price equal to the
purchase price of the securities sold in the Qualified Financing.
If no Qualified Financing is consummated before the maturity date,
Ace Keen shall have the right to convert any and all of the Moxian
Malaysia-Ace Keen Note into shares of Common Stock of the Company
at the 20 day trading VWAP as reported by Bloomberg, L.P.
On May 30, 2015, the Company, Moxian Malaysia, and Morolling
entered into an Amended and Restated Loan Agreement (“Moxian
Malaysia-Morolling Loan Agreement”) to document the total
loan of $765,768 that Morolling has advanced to Moxian Malaysia in
different tranches by May 30, 2015, and in exchange, the Company
agreed to issue a 12-month convertible interest free promissory
note of $765,768 (“Moxian Malaysia-Morolling
II-2
Note”) to Morolling with no interest and a term of repayment
of 12 months. Under the Moxian Malaysia-Morolling Note, all or any
portion of the Moxian Malaysia-Morolling Note is convertible into
shares of Common Stock of the Company at the conversion price equal
to the purchase price of the securities sold in the Qualified
Financing. If no Qualified Financing is consummated before the
maturity date, Morolling shall have the right to convert any and
all of the Moxian Malaysia-Morolling Note into shares of Common
Stock of the Company at the 20 day trading VWAP as reported by
Bloomberg, L.P.
On May 30, 2015, the Company, Moxian Malaysia, and MCL entered into
an Amended and Restated Loan Agreement (“Moxian Malaysia-MCL
Loan Agreement”) to document the total loan of $2,680,221
that MCL has advanced to Moxian Malaysia in different tranches by
May 30, 2015, and in exchange, the Company agreed to issue a
12-month convertible interest free promissory note of $2,680,221
(“Moxian Malaysia-MCL Note”). Under the Moxian
Malaysia-MCL Note, all or any portion of the Moxian Malaysia-MCL
Note is convertible into shares of Common Stock of the Company at
the conversion price equal to the purchase price of the securities
sold in the Qualified Financing. If no Qualified Financing is
consummated before the maturity date, MCL shall have the right to
convert any and all of the Moxian Malaysia-MCL Note into shares of
Common Stock of the Company at the 20 day trading VWAP as reported
by Bloomberg, L.P.
On June 30, 2015, the Company, Moxian Shenzhen, and Shenzhen Bayi
Consulting Co., Ltd (“Bayi”) entered into an Amended
and Restated Loan Agreement to document the loan of $3,215,282 that
Bayi has advanced to Moxian Shenzhen by May 30, 2015, and in
exchange, the Company agreed to issue a 12-month convertible
interest free promissory note of $3,215,282 (“Moxian
Shenzhen-Bayi Note”). Under the Moxian Shenzhen-Bayi Note,
all or any portion of the Moxian Shenzhen-Bayi Note is convertible
into shares of Common Stock of the Company at the conversion price
equal to the purchase price of the securities in the Qualified
Financing. If no Qualified Financing is consummated before the
maturity date, Bayi shall have the right to convert any and all of
the Moxian Shenzhen-Bayi Note into shares of Common Stock of the
Company at the 20 day trading VWAP as reported by Bloomberg,
L.P.
The Notes issued to Moxian China Limited by the Company in
consideration of the MCL Shenzhen Loans, the MCL Malaysia Loans and
the MCL HK Loan are of substantially similar terms. The Notes will
be due and payable in one year and bears no interest. Upon
consummation of a financing that generates at least $5,000,000 by
the Company (“Qualified Financing”), the Notes shall
automatically convert into shares of the Company’s Common
Stock at a conversion price equal to the price of the
Company’s securities sold in the Qualified Financing. If no
Qualified Financing is consummated prior to the maturity date of
Notes and as long as there remains any outstanding principal or
interest of the Notes, holders of the Notes shall have the option
to convert the Notes within 30 days after the maturity date at a
conversion price that is equal to the volume weighted average price
of Common Stock during a 20-day trading period prior to the
conversion of the Notes.
On August 14, 2015, the Company issued 4,292,472 shares of Common
Stock to Moxian China Limited, Jet Key Limited, Ace Keen Limited,
Morolling International HK Limited and Shenzhen Bayi Consulting Co
Ltd as a result of the conversion of $8,584,944 of convertible
promissory notes held by Moxian China Limited, Jet Key Limited, Ace
Keen Limited, Morolling International HK Limited and Shenzhen Bayi
Consulting Co Ltd at that moment at $1.00 per share.
On August 14, 2015, $3,981,000 of such note was converted into
1,945,500 shares of our common stock.
On September 30. 2015, we issued an additional 1,945,500 shares of
our common stock to REBL upon conversion of the remainder portion
of the note.
On June 4, 2015, we agreed to sell Beijing Xinhua Huifeng Equity
Investment Center (Limited Partnership) (“Xinhua”), an
aggregate of 4,095,000 shares our common stock at a per share price
of $2.00 for gross proceeds of $8,190,000 (approximately
RMB50,000,000), and to issue to Xinhua, for no additional
consideration, a warrant to purchase in the aggregate of 16,000,000
shares of our common stock at an exercise price of $4.00 per share,
exercisable on or prior to July 31, 2015. The closing date of the
transaction, and the expiration date of the warrant, were both
extended to December 31, 2015. On February 28, 2016, the Company
closed the transaction and issued 4,095,010 shares of the Company
Common Stock to Xinhua for an aggregate purchase price of
$8,190,020, or $2.00 per share, of which $5,505,915 was received by
the Company in fiscal 2015.
The above issuances were made pursuant to the exemption from
registration contained in Section 4(2) of the Securities Act and/or
Regulation S promulgated under the Securities Act as a transaction
by an issuer not involving a public offering.
II-3
Item 16. Exhibits and
Financial Statement Schedules.
(a) The following exhibits are filed as part of this Registration
Statement:
1.1
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|
Form
of Placement Agency Agreement.
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|
|
|
3.1(a)
|
|
Restated Articles of Incorporation of the
Company filed with the Secretary of State of Nevada on May 2, 2011
(incorporated by reference herein to Exhibit 3.1 to the
Company’s Registration Statement on Form S-1 filed with the
SEC on May 9, 2011).
|
|
|
|
3.1(b)
|
|
Certificate of Amendment to the Company’s
Articles of Incorporation filed with the Secretary of State of
Nevada on December 9, 2013 (incorporated by reference herein to
Exhibit 3.1 to the Company’s Current Report on Form 8-K filed
with the SEC on December 19, 2013).
|
|
|
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3.2(c)
|
|
Certificate of Change filed with the Secretary
of State of Nevada on June 20, 2016.013 (incorporated by reference
herein to Exhibit 3.1 to the Company’s Current Report on Form
8-K filed with the SEC on July 13, 2016).
|
|
|
|
3.3
|
|
Bylaws (incorporated by reference herein to
Exhibit 3.2 to the Company’s Registration Statement on Form
S-1 filed with the SEC on March 30, 2011).
|
|
|
|
4.1
|
|
Specimen
Stock Certificate of Common Stock of Moxian, Inc. (incorporated by reference herein to Exhibit 4.1 to the Company’s Annual
Report on Form 10-K filed with the SEC on December 22, 2015).
|
|
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|
5.1
|
|
Opinion
of Loeb & Loeb LLP.
|
|
|
|
10.1
|
|
Subscription Agreement dated as of April 24,
2015 by and between the Company and Zhongtou Huifeng Investment
Management (Beijing) Co. Ltd. (incorporated by reference herein to
Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q
filed with the Securities and Exchange Commission on May 15,
2015).
|
|
|
|
10.2
|
|
Form of Termination Agreement dated as of June
4, 2015 by and between the Company and Zhongtou Huifeng Investment
Management (Beijing) Co. Ltd. (incorporated by reference herein to
Exhibit 10.2 to the Company’s Current Report on Form 8-K
filed with the Securities and Exchange Commission on July 14,
2015).
|
|
|
|
10.3
|
|
Form of Subscription Agreement dated as of June
4, 2015 by and between the Company and Xinhua Huifeng Investment
Center Co., Ltd. (Beijing). (incorporated by reference herein to
Exhibit 10.3 to the Company’s Current Report on Form 8-K
filed with the Securities and Exchange Commission on July 14,
2015).
|
|
|
|
10.4
|
|
Form
of Amendment Agreement dated as of August 14, 2015 by and between the Company and Xinhua Huifeng Investment Center Co., Ltd. (Beijing)
Co. Ltd. (incorporated by reference herein to Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q filed with the
Securities and Exchange Commission on August 14, 2015).
|
|
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10.5
|
|
Form
of Second Amendment Agreement dated as of December 16, 2015 by and between the Company and Xinhua Huifeng Investment Center Co.,
Ltd. (Beijing) Co. Ltd. (incorporated by reference herein to Exhibit 10.5 to the Company’s Annual Report on Form 10-K filed
with the Securities and Exchange Commission on December 22, 2015).
|
|
|
|
10.6
|
|
Loan
Agreement dated May 4, 2015 by and between Jet Key Limited and Moxian Malaysia SDN. BHD. (incorporated by reference herein to
Exhibit 10.6 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 22,
2015).
|
|
|
|
10.7
|
|
Loan
Agreement by and between the Moxian Technologies (Shenzhen) Co., Ltd., and Shenzhen Bayi Consulting Co. Ltd. dated June 30, 2015
(incorporated by reference herein to Exhibit 10.7 to the Company’s Annual Report on Form 10-K filed with the Securities
and Exchange Commission on December 22, 2015).
|
|
|
|
10.8
|
|
Loan
Agreement by and between Moxian Technologies (Shenzhen) Co., Ltd., and Shenzhen Bayi Consulting Co. Ltd. dated September 30, 2015
(incorporated by reference herein to Exhibit 10.8 to the Company’s Annual Report on Form 10-K filed with the Securities
and Exchange Commission on December 22, 2015).
|
II-4
10.9
|
|
Exclusive
Business Cooperation Agreement, dated July 15, 2014 (incorporated by reference herein
to Exhibit 10.3 to the Company’s Annual Report on Form 10-K filed with the Securities
and Exchange Commission on December 31, 2014).
|
|
|
|
10.10
|
|
Loan
Agreement, dated July 15, 2014 (incorporated by reference herein to Exhibit 10.4 to the
Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission
on December 31, 2014)
.
|
|
|
|
10.11
|
|
Share
Pledge Agreement, dated July 15, 2014 (incorporated by reference herein to Exhibit 10.5
to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange
Commission on December 31, 2014).
|
|
|
|
10.12
|
|
Exclusive
Option Agreement, dated July 15, 2014 (incorporated by reference herein to Exhibit 10.7
to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange
Commission on December 31, 2014).
|
|
|
|
10.13
|
|
Moxian
Technologies (Shenzhen) Co., Ltd. Oracle Product Supply Contract, by and between Moxian
Technologies (Shenzhen) Co., Ltd. and Guangzou SIE Consulting Co., Ltd., dated April
27, 2015.+
|
|
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10.14
|
|
Share
Cancellation Agreement by and among Moxian, Inc., and each of Good Eastern Investments
Holdings, Moxian China Limited and Stellar Elite Limited, dated February 22, 2016.+
|
|
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10.15
|
|
Independent
Director Agreement by and between Moxian, Inc. and Yang Nan, dated January 1, 2016.+
|
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|
10.16
|
|
Independent
Director Agreement by and between Moxian, Inc. and Liew Kwong Yeow, dated January 1,
2016
|
|
|
|
10.17
|
|
Lease
Agreement by and between Moxian Technologies (Shenzhen) Co., Ltd. and Cai Bingquan, dated
July 22, 2015.+
|
|
|
|
10.18
|
|
Lease
Agreement by and between Shenzhen Moyi Technologies Co., Ltd. and Shenzhen Kingkey Banner
Business Management Co., Ltd., dated September 1, 2011.+
|
|
|
|
10.19
|
|
Lease
Agreement by and between Moxian Malaysia SDN BHD and MVC Centrepoint South SDN BHD, dated
April 18, 2013.+
|
|
|
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10.20
|
|
Lease
Agreement by and between Moxian Technologies (Beijing) Co., Ltd. and Beijing Zhongjia
Real Estate Broker Co., Ltd., dated August 27, 2015.+
|
|
|
|
10.21
|
|
Director
Agreement by and between Moxian, Inc. and Hao Qing Hu, dated January 1, 2016.*
|
|
|
|
10.22
|
|
Employment
Agreement by and between Moxian (Hong Kong) Limited and Mr. Luo Xiaoyuan, dated October
1, 2014, as amended on March 1, 2016.+
|
|
|
|
10.23
|
|
Form
of Indemnification Escrow Agreement by and among Moxian, Inc., Axiom Capital Management,
Inc. (“Axiom”), Cuttone & Co., Inc. and the escrow agent.
|
|
|
|
10.24
|
|
Advertising
Sole Agency Agreement of Xinhua New Media Culture Communication Co., Ltd., dated December
31, 2015.+
|
|
|
|
10.25
|
|
Employment
Agreement by and between Moxian (Hong Kong) Limited and Mr. Tan Wan Hong, dated July
25, 2016.+
|
|
|
|
10.26
|
|
Independent
Director Agreement by and between Moxian, Inc. and Ajay Rajpal
|
|
|
|
10.27
|
|
Form
of Escrow Agreement by and between Moxian, Inc., Axiom, Cuttone & Co., Inc. and Continental
Stock Transfer & Trust.
|
|
|
|
10.28
|
|
Form of Subscription Agreement by and between Moxian, Inc. and investors in the
offering.
|
|
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|
14.1
|
|
Code
of Ethics of Moxian, Inc. Applicable To Directors, Officers And Employees.
|
|
|
|
21
|
|
Subsidiaries
of Moxian (incorporated by reference herein to the Company’s Annual Report on Form
10-K filed with the SEC on December 22, 2015).
|
|
|
|
23.1
|
|
Consent
of Dominic K.F. Chan & Co.
|
|
|
|
23.2
|
|
Consent
of Loeb & Loeb LLP (included in Exhibit 5.1)
|
|
|
|
24
|
|
Power
of Attorney (included on signature page to this registration statement)+
|
II-5
Item 17.
Undertakings.
The undersigned registrant hereby undertakes to provide to the
placement agents at the closing specified in the placement agency
agreement, certificates in such denominations and registered in
such names as required by the placement agents to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes that:
(1)
For
purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall
be deemed to be part of this registration statement as of the time
it was declared effective.
(2)
For the
purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3)
To file,
during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i)
to
include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii)
to
reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more
than a 20 percent change in the maximum aggregate offering price
set forth in the “Calculation of Registration Fee”
table in the effective registration statement; and
(iii)
to include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material
change to such information in the registration statement.
(4)
That, for
the purpose of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(5)
To remove
from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination
of the offering.
(6)
That,
each prospectus filed pursuant to Rule 424(b) as part of a
registration statement relating to an offering, other than
registration statements relying on Rule 430B or other than
prospectuses filed in reliance on Rule 430A, shall be deemed to be
part of and included in the registration statement as of
II-6
the date it is first used after effectiveness. Provided, however,
that no statement made in a registration statement or prospectus
that is part of the registration statement or made in a document
incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify any
statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such
document immediately prior to such date of first use.
(7)
That, for
the purpose of determining liability of the registrant under the
Securities Act to any purchaser in the initial distribution of the
securities, the undersigned registrant undertakes that in a primary
offering of securities of the undersigned registrant pursuant to
this registration statement, regardless of the underwriting method
used to sell the securities to the purchaser, if the securities are
offered or sold to such purchaser by means of any of the following
communications, the undersigned registrant will be a seller to the
purchaser and will be considered to offer or sell such securities
to such purchaser:
(i)
any
preliminary prospectus or prospectus of the undersigned registrant
relating to the offering required to be filed pursuant to Rule
424;
(ii)
any free
writing prospectus relating to the offering prepared by or on
behalf of the undersigned registrant or used or referred to by the
undersigned registrant;
(iii)
the portion of
any other free writing prospectus relating to the offering
containing material information about the undersigned registrant or
its securities provided by or on behalf of the undersigned
registrant; and
(iv)
any other communication that is an offer in the offering made by
the undersigned registrant to the purchaser.
II-7
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-1/A and has duly caused this registration statement or amendment thereto to
be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Shenzhen, Guangdong Province, China, on
September 9, 2016.
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MOXIAN, INC.
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By:
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/s/ James Mengdong Tan
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Name:
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James Mengdong Tan
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Title:
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President and Chief Executive Officer
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Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in
the capacities held on the dates indicated.
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/s/
James Mengdong Tan
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President,
Chief Executive Officer
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September
9, 2016
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James
Mengdong Tan
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and
Director
(Principal Executive Officer)
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/s/
Tan Wan Hong
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Chief
Financial Officer (Principal Accounting
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September
9, 2016
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Tan
Wan Hong
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and
Financial Officer)
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/s/
Liew Kwong Yeow
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Independent
Director
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September
9, 2016
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Liew
Kwong Yeow
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/s/
Hao Qing Hu
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Director
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September
9, 2016
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Hao
Qing Hu
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/s/
Yang Nan
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Independent
Director
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September
9, 2016
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Yang
Nan
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/s/
Ajay Rajpal
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Independent
Director
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September
9, 2016
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Ajay
Rajpal
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II-8