PROSPECTUS
|
|
Filed
Pursuant to Rule 424(b)(4)
|
|
|
Registration No.: 333-210250
|
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. The public
offering price is $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. Our common
stock has been approved for listing on the NASDAQ Capital Market
under the symbol “MOXC,” subject to notice of
issuance.
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.
|
|
|
|
|
|
|
Minimum
Offering (2,500,000 shares)
|
|
$
|
4.00
|
|
$
|
0.16
|
(2)
|
|
$
|
9,600,000
|
(2)
|
Maximum
Offering (5,000,000 shares)
|
|
$
|
4.00
|
|
$
|
0.22
|
(2)
|
|
$
|
18,900,000
|
(2)
|
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 115% of 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.
|
|
Cuttone & Co.,
Inc.
|
The date of this
prospectus is October 4, 2016
TABLE OF
CONTENTS
|
|
|
SUMMARY
|
|
1
|
THE OFFERING
|
|
4
|
SUMMARY FINANCIAL AND OTHER DATA
|
|
5
|
RISK FACTORS
|
|
7
|
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
|
|
17
|
USE OF PROCEEDS
|
|
18
|
CAPITALIZATION
|
|
19
|
DILUTION
|
|
21
|
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
|
|
22
|
EXCHANGE RATE INFORMATION
|
|
23
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
|
|
25
|
OUR HISTORY AND CORPORATE STRUCTURE
|
|
31
|
BUSINESS
|
|
34
|
REGULATIONS
|
|
43
|
DIRECTORS AND EXECUTIVE OFFICERS
|
|
47
|
EXECUTIVE COMPENSATION
|
|
51
|
CERTAIN RELATIONSHIPS AND RELATED-PARTY
TRANSACTIONS
|
|
54
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
|
|
57
|
DESCRIPTION OF SECURITIES
|
|
59
|
SHARES ELIGIBLE FOR FUTURE SALE
|
|
61
|
PLAN OF DISTRIBUTION
|
|
62
|
LEGAL MATTERS
|
|
66
|
EXPERTS
|
|
66
|
WHERE YOU CAN FIND MORE INFORMATION
|
|
66
|
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
|
|
Minimum: 2,500,000 shares
Maximum: 5,000,000 shares
|
|
|
|
Shares of Common stock outstanding before this
offering
|
|
64,005,949 shares
|
|
|
|
Shares of Common stock outstanding after this
offering
|
|
Minimum: 67,005,949 shares
Maximum: 69,505,949 shares
|
|
|
|
Timing and Delivery of the Shares
|
|
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.
|
|
|
|
Use of Proceeds
|
|
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 at the 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.
|
|
|
|
Escrow
|
|
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.
|
|
|
|
Approved NASDAQ trading symbol
|
|
“MOXC”
|
|
|
|
Risk Factors
|
|
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.
|
|
|
|
Lock-up agreements
|
|
See “Plan of Distribution” for more
information.
|
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, at the public offering price of $4.00. 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 the public offering price of $4.00 per
share, and includes 500,000 shares of common stock issuable upon
conversion of $2 million in loans to related parties, at the public
offering price of $4.00, after deducting the estimated placement
agent commissions and estimated offering expenses payable by
us.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Audited)
|
|
(Audited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
3,479,750
|
|
$
|
2,511,841
|
|
|
$
|
736,735
|
|
9,736,735
|
|
18,936,735
|
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 44.5% of our outstanding common stock
assuming the minimum offering amount is raised and 42.9% 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 public offering price of $4.00 per share, 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 the public offering price
of $4.00 per share, 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
|
|
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
|
|
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
|
|
$
|
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
C
hina.
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
U
serb
ase.
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
Hong Kong
|
|
302534274
|
|
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
|
|
Moxian (Hong Kong) Limited
|
|
Registered
|
|
|
America
|
|
85931344
|
|
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
|
|
Moxian (Hong Kong) Limited
|
|
Registered
|
|
|
China
|
|
13460852
|
|
Class 9: Magnetic data carries, recording discs,
data processing equipment and computers
|
|
Moxian Shenzhen Technologies Co Ltd
|
|
Registered
|
|
|
China
|
|
13461178
|
|
Class 38: Telecommunications
|
|
Moxian Shenzhen Technologies Co Ltd
|
|
Registered
|
We have applied to register the following trademarks:
|
|
China
|
|
13460714
|
|
Class 42: Design and development of computer
hardware and software
|
|
Moxian Shenzhen Technologies Co Ltd
|
|
Pending
|
|
|
China
|
|
10624504
|
|
Class 42: Design and development of computer
hardware and software
|
|
Moxian Shenzhen Technologies Co Ltd
|
|
Pending
|
Patents
We have submitted the patent applications as follows:
40
|
|
|
|
|
|
|
|
|
|
|
A business promotion method based on internet
platform for users to access the information
independently
|
|
China
|
|
201310734492.2
|
|
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
|
|
27
th
December 2013
|
|
Pending
|
A method based on internet platform to achieve
interactive information through QR code
|
|
China
|
|
201410235257.5
|
|
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
|
|
30
th
May 2014
|
|
Pending
|
The method and system of pushing targeted
advertising based on consumption patterns
|
|
China
|
|
201510628706.7
|
|
Including access user’s chat session
content, analyze and abstract user’s interested information,
send the corresponding targeted advertising to users through data
analysis
|
|
28
th
September 2015
|
|
Pending
|
The method and system of pushing targeted
advertising based on chat session
|
|
China
|
|
201510628708.6
|
|
Including access user’s consumption
record, analyze and understand user’s consumption mode, send
the corresponding targeted advertising to users through data
analysis
|
|
28
th
September 2015
|
|
Pending
|
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.
|
|
|
|
|
James Mengdong Tan
|
|
55
|
|
President, Chief Executive Officer and
Director
|
Hao Qing Hu
|
|
55
|
|
Director
|
Clarence Luo Xiao Yun
|
|
42
|
|
Vice President of Products
|
Tan Wan Hong
|
|
62
|
|
Chief Financial Officer
|
Yang Nan
(1)(2)(3)
|
|
38
|
|
Independent Director
|
Liew Kwong Yeow
(1)(2)(3)
|
|
62
|
|
Independent Director
|
Ajay Rajpal
(1)(2)(3)
|
|
42
|
|
Independent Director
|
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
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Clarence Luo Xiaoyun
Vice President of Products
|
|
0
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Liew Kwong Yeow
Independent Director
|
|
0
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Yang Nan
Independent Director
|
|
0
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Ajay Rajpal
Independent Director
|
|
0
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Tan Wan Hong
Chief Financial Officer
|
|
0
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All officers and directors as a group
(7 persons named above)
|
|
33,915,000
|
|
52.98
|
%
|
|
50.7
|
%
|
|
48.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
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,
Singapore U0 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
Our common stock has been approved for listing on the NASDAQ
Capital Market under the symbol “MOXC,” subject to
notice of issuance.
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 at the public offering
price of $4.00 per share, 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 $580,000. This estimate does not include (i) due diligence
fees and legal expenses of the placement agents not to exceed a
total of $200,000; (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 $5,000. 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 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 115% of 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