Item 1. Financial Statements.
The
accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in
the United States and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction
with the audited financial statements and notes thereto contained in our Annual Report on Form 10-K for the fiscal year ended
June 30, 2015, filed with the SEC on September 29, 2015. In the opinion of management, all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have
been reflected herein. The results of operations for the periods presented are not necessarily indicative of the results to be
expected for the full year.
TABLE
OF CONTENTS
|
PAGE
|
|
|
Balance
Sheets as of December 31, 2015 (unaudited) and June 30, 2015
|
5
|
|
|
Statements
of Operations for the three and six month periods December 31, 2015 and 2014 (unaudited)
|
6
|
|
|
Statements
of Cash Flows for the six month periods ended December 31, 2015 and 2014 (unaudited)
|
7
|
|
|
Notes
to the Financial Statements (unaudited)
|
8
|
ENGAGE
MOBILITY, INC.
Balance
Sheets
|
|
December 31,
2015
|
|
|
June 30,
2015
|
|
|
|
(Unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Accounts receivable, net of allowance for doubtful accounts of $0 and $14,660 for December 31 and June 30, 2015
|
|
$
|
-
|
|
|
$
|
-
|
|
Total current assets
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Intangible assets, net
|
|
|
-
|
|
|
|
26,629
|
|
Total assets
|
|
$
|
-
|
|
|
$
|
26,629
|
|
Liabilities and Stockholders’ Deficiency
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accrued expenses
|
|
$
|
30,909
|
|
|
$
|
79,688
|
|
Note payable
|
|
|
5,000
|
|
|
|
5,000
|
|
Due to related party
|
|
|
658,759
|
|
|
|
562,096
|
|
Total Liabilities
|
|
|
694,668
|
|
|
|
646,784
|
|
Stockholders’ Deficiency:
|
|
|
|
|
|
|
|
|
Common stock (No par value, 100,000,000 shares authorized, 23,082,567 shares issued and outstanding at December 31 and June 30, 2015.)
|
|
|
2,891,995
|
|
|
|
2,891,995
|
|
Paid in capital
|
|
|
3,091,072
|
|
|
|
3,091,072
|
|
Accumulated deficit
|
|
|
(6,677,735
|
)
|
|
|
(6,603,222
|
)
|
Total Stockholders’ Deficiency
|
|
|
(694,668
|
)
|
|
|
(620,155
|
)
|
Total Liabilities and Stockholders’ Deficiency
|
|
$
|
-
|
|
|
$
|
26,629
|
|
See
accompanying notes to financial statements.
ENGAGE
MOBILITY, INC.
Statements
of Operations
(Unaudited)
|
|
For the Three Months
Ended
December 31,
|
|
|
For the Six Months
Ended
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
10,205
|
|
|
$
|
-
|
|
|
$
|
32,032
|
|
Cost of revenue
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Gross profit
|
|
|
-
|
|
|
|
10,205
|
|
|
|
-
|
|
|
|
32,032
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
18,721
|
|
|
|
86,659
|
|
|
|
56,051
|
|
|
|
414,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(18,721
|
)
|
|
|
(76,454
|
)
|
|
|
(56,051
|
)
|
|
|
(382,548
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment loss from intangible assets
|
|
|
18,462
|
|
|
|
-
|
|
|
|
18,462
|
|
|
|
-
|
|
Interest expense
|
|
|
-
|
|
|
|
8,377
|
|
|
|
-
|
|
|
|
16,656
|
|
Total other expenses
|
|
|
18,462
|
|
|
|
8,377
|
|
|
|
18,462
|
|
|
|
16,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations before income taxes
|
|
|
(37,183
|
)
|
|
|
(84,831
|
)
|
|
|
(74,513
|
)
|
|
|
(399,204
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net loss
|
|
$
|
(37,183
|
)
|
|
$
|
(84,831
|
)
|
|
$
|
(74,513
|
)
|
|
$
|
(399,204
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share - basic and diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding, basic and diluted
|
|
|
23,082,567
|
|
|
|
21,772,567
|
|
|
|
23,082,567
|
|
|
|
21,772,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share
|
|
$
|
|
a
|
|
$
|
|
a
|
|
$
|
|
a
|
|
$
|
(0.02
|
)
|
a
= Less the ($0.01) per share
See
accompanying notes to financial statements.
ENGAGE
MOBILITY, INC.
Statements
of Cash Flows
(Unaudited)
|
|
For the Six Months
Ended
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net loss
|
|
$
|
(74,513
|
)
|
|
$
|
(399,204
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation expense
|
|
|
-
|
|
|
|
2,603
|
|
Amortization expense
|
|
|
8,167
|
|
|
|
25,735
|
|
Impairment loss from intangible assets
|
|
|
18,462
|
|
|
|
-
|
|
Non-cash interest expense
|
|
|
-
|
|
|
|
16,667
|
|
Common stock, options and warrants issued for services, interest and inducements
|
|
|
-
|
|
|
|
147,248
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Decrease in accounts receivable
|
|
|
-
|
|
|
|
175
|
|
Decrease in prepaid expenses
|
|
|
-
|
|
|
|
7,208
|
|
Increase in accrued expenses
|
|
|
47,884
|
|
|
|
52,307
|
|
Net cash used in operating activities
|
|
|
-
|
|
|
|
(147,261
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Note payable
|
|
|
-
|
|
|
|
134,581
|
|
Net cash provided by financing activities
|
|
|
-
|
|
|
|
134,581
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
-
|
|
|
|
(12,680
|
)
|
Cash, beginning of period
|
|
|
-
|
|
|
|
16,201
|
|
Cash, end of period
|
|
$
|
-
|
|
|
$
|
3,521
|
|
|
|
|
|
|
|
|
|
|
SUPPLMENTAL DISCLOSURE:
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
Interest expense paid
|
|
$
|
-
|
|
|
$
|
-
|
|
Income tax paid
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Non-cash financing activities
|
|
|
|
|
|
|
|
|
Payments of accrued expenses assumed by stockholder
|
|
$
|
96,663
|
|
|
$
|
-
|
|
See
accompanying notes financial statements.
ENGAGE
MOBILITY, INC.
NOTES
TO FINANCIAL STATEMENTS
December
31, 2015
(Unaudited)
NOTE
1—ORGANIZATION, BUSINESS AND OPERATIONS
Engage
Mobility, Inc. (the “Company”) was incorporated on December 28, 2011 under the laws of the State of Florida
as MarketKast Incorporated. On March 22, 2013, the Company changed its name to Engage Mobility, Inc. Since formation, the Company
functioned as a provider of mobile marketing services, online and mobile video production, distribution, syndication and marketing
services for business owners.
On
April 9, 2015, a Stock Purchase Agreement (“Stock Purchase Agreement”) was entered into by and among Engage International
Technology Co. Ltd. (“Engage International”), James S. Byrd, Jr. (“Byrd”) and Douglas S. Hackett (“Hackett”)
(Byrd and Hackett, collectively, the “Sellers”), who were the principal stockholders of the Company, pursuant to which
Engage International acquired from the Sellers a total of 16,462,505 shares of the Company’s common stock, representing
75.61% of the Company’s issued and outstanding shares on that date. Pursuant to the Stock Purchase Agreement, a change in
control of the Company occurred.
The
Company was not able to raise sufficient capital to execute its original business plan and has decided to cease its plan of operation
as a mobile technology provider. As a result, the Company is now a “shell company” (as such term is defined in Rule
12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Going
forward, the Company intends to seek, investigate and, if such investigation warrants, engage in a business combination with a
private entity whose business presents an opportunity for the Company’s stockholders.
NOTE
2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States
of America (“U.S. GAAP”).
The
unaudited interim financial statements of the Company as of December 31, 2015, and for the six months ended December 31, 2015
and 2014, have been prepared in accordance with accounting principles generally accepted in the United States of America and the
rules and regulations of the SEC which apply to interim financial statements.
Accordingly,
they do not include all of the information and footnotes normally required by accounting principles generally accepted in the
United States of America for annual financial statements. The interim financial information should be read in conjunction with
the financial statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended
June 30, 2015, previously filed with the SEC. In the opinion of management, the interim information contains all adjustments,
consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the periods presented. The
results of operations for the six months ended December 31, 2015 are not necessarily indicative of the results to be expected
for future quarters or for the year ending June 30, 2016.
Use
of Estimates
In
preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from
those estimates.
ENGAGE
MOBILITY, INC.
NOTES
TO FINANCIAL STATEMENTS
December
31, 2015
(Unaudited)
NOTE
2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash
and Cash Equivalents
The
Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents.
At December 31 and June 30, 2015, the Company had no cash and cash equivalents.
Revenue
Recognition
In
general, the Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product
delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. The
following reflects specific criteria for the various revenues streams of the Company:
Revenue
for services is recognized at the time the services are rendered.
Where
the Company has entered into a revenue sharing agreement with a third party, the Company records their proportionate share of
the revenue.
The
Company’s revenues have principally been from video distribution and advertising fees via the platform. However, since July
1, 2015 until the date of this report, the Company did not report any revenues.
Accounts
Receivable and Allowance for Doubtful Accounts
Accounts
receivable are reported at their outstanding unpaid principal balances reduced by an allowance for doubtful accounts. The Company
estimates doubtful accounts based on historical bad debts, factors related to specific customers' ability to pay and current economic
trends. The Company writes off accounts receivable against the allowance when a balance is determined to be uncollectible.
Property,
Plant and Equipment
Property,
plant and equipment are recorded at cost, less accumulated depreciation. Cost includes the price paid to acquire or construct
the asset, including capitalized interest during the construction period, and any expenditures that substantially increase the
assets value or extends the useful life of an existing asset. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets. Major repairs and betterments that significantly extend original useful lives or improve
productivity are capitalized and depreciated over the periods benefited. Maintenance and repairs are generally expensed as incurred.
ENGAGE
MOBILITY, INC.
NOTES
TO FINANCIAL STATEMENTS
December
31, 2015
(Unaudited)
NOTE
2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Intangible
Assets and Long-lived Assets
The
Company reviews for impairment its long-lived assets and certain identifiable intangible assets whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when
estimated future cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying
amount. The Company’s finite lived intangibles, comprised of patents, a mobile platform, and web and domain assets, are
being amortized over a period of three years. During the six months ended December 31, 2015 and 2014, the Company reported an
impairment loss of $18,462 and $0, respectively. The impairment loss during the six months ended December 31, 2015 was due to
the cessation of the Company’s plan of operation as a mobile technology provider.
Fair
Value of Financial Instruments
The
Company’s short-term financial instruments consist of cash, accounts receivable, and accrued expenses, and other current
liabilities. The carrying amounts of these financial instruments approximate fair value because of their short-term maturities. The
Company does not hold or issue financial instruments for trading purposes nor does it hold or issue interest rate or leveraged
derivative financial instruments. The carrying value of the Company’s long-term debt approximates fair value based on the
terms and conditions at which the Company could obtain similar financing.
Income
Taxes
In
accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”),
“Income
Taxes”
(“ASC 740”), deferred tax assets and liabilities are computed based upon the difference between
the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the
related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes
in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all
of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount
that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred
income taxes in the period of change. The Company has recorded a valuation allowance against its deferred tax assets based on
the history of losses incurred.
ASC
740 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in
the financial statements. Under ASC 740, the Company may recognize the tax benefit from an uncertain tax position only if it is
more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical
merits of the position. The tax benefits recognized in the financial statements from such a position would be measured based on
the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance
on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities,
and accounting for interest and penalties associated with tax positions. As of December 31, 2015 and June 30, 2015, the Company
does not have a liability for any unrecognized tax benefits.
All
tax periods from inception remain open to examination by taxing authorities.
ENGAGE
MOBILITY, INC.
NOTES
TO FINANCIAL STATEMENTS
December
31, 2015
(Unaudited)
NOTE
2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock-based
Compensation
The
Company records the cost resulting from all share-based transactions in the financial statements. The Company applies
a fair-value-based measurement in accounting for share-based payment transactions with employees and when the Company acquires
goods or services from non-employees in share-based payment transactions.
Basic
and Diluted Loss per Share
The
Company reports loss per share in accordance with FASB ASC 260 “Earnings per share”. The Company’s basic earnings
per share are computed using the weighted average number of shares outstanding for the periods presented. Diluted earnings per
share are computed based on the assumption that any dilutive options or warrants were converted or exercised. Dilution is computed
by applying the treasury stock method. Under this method, the Company’s outstanding stock warrants are assumed to be exercised,
and funds thus obtained were assumed to be used to purchase common stock at the average market price during the period. There
were no dilutive instruments outstanding during the six months ended December 31, 2015 and the year ended June 30, 2015. However,
if present, a separate computation of diluted loss per share would not have been presented, as these common stock equivalents
would have been anti-dilutive due to the Company’s net loss.
Recently
Issued Accounting Pronouncements
Accounting
standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have
a material impact on the consolidated financial statements upon adoption.
NOTE
3—GOING CONCERN
The
accompanying unaudited condensed financial statements have been prepared assuming that the Company will continue as a going concern,
which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. As
reflected in the accompanying unaudited condensed financial statements, the Company has an accumulated deficit of approximately
$6,674,000 and a working capital deficit of approximately $691,000 at December 31, 2015. In addition, the Company continues to
generate operating losses and negative cash flows from operations. This raises substantial doubt about its ability to continue
as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise
additional capital and implement its business plan, which is now to seek, investigate and, if such investigation warrants, engage
in a business combination with a private entity whose business presents an opportunity for our stockholders. The financial statements
do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Management intends
to provide the Company with additional loans as needed and is seeking a merger target to implement its strategic plans. Management
feels these actions provide the opportunity for the Company to continue as a going concern.
NOTE
4—PROPERTY, PLANT AND EQUIPMENT
The
Company currently does not have any property, plant or equipment. During the year ended June 30, 2015, the Company disposed
of all its property and equipment and recognized a loss on disposal of $3,909. Depreciation expense charged to operations for
the six months ended December 31, 2015 and 2014 was $0 and $2,603, respectively.
ENGAGE
MOBILITY, INC.
NOTES
TO FINANCIAL STATEMENTS
December
31, 2015
(Unaudited)
NOTE
5—INTANGIBLE ASSETS
The
officer and director of the Company are involved in other business activities and may, in the future, become involved in other
business opportunities. If a specific business opportunity becomes available, the officer and director of the Company may face
a conflict in selecting between the Company and his other business interests. The Company has not formulated a policy for the
resolution of such conflicts.
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2015
|
|
|
2015
|
|
Mobile platform
|
|
$
|
98,000
|
|
|
$
|
98,000
|
|
Patents
|
|
|
1,000
|
|
|
|
1,000
|
|
|
|
|
99,000
|
|
|
|
99,000
|
|
Less:
|
|
|
|
|
|
|
|
|
Accumulated amortization
|
|
|
(80,538
|
)
|
|
|
(72,371
|
)
|
Impairment reserve
|
|
|
(18,462
|
)
|
|
|
-
|
|
Intangible assets, net
|
|
$
|
-
|
|
|
$
|
26,629
|
|
Amortization
expense charged to operations for the six months ended December 31, 2015 and 2014 was $8,167 and $25,735, respectively. Amortization
expense charged to operations for the three months ended December 31, 2015 and 2014 was $0 and $10,467, respectively. During the
six months ended December 31, 2015, the Company reported an impairment loss of $18,462 over its intangible assets. The impairment
loss during the six months ended December 31, 2015 was due to the cessation of the Company’s plan of operation as a mobile
technology provider, and corresponding write down of the Company’s intangible assets.
NOTE
6—DUE TO RELATED PARTY
Parties,
which can be a corporation or individual, are considered to be related if we have the ability, directly or indirectly, to control
the other party or exercise significant influence over the other party in making financial and operating decisions. Companies
are also considered to be related if they are subject to common control or common significant influence.
The
Company received advances from the following related parties, under common control, to supplement the Company’s working
capital.
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2015
|
|
|
2015
|
|
Shenzhen Engage Mobile Technology Co., Ltd. (“Engage Mobile”)
|
|
$
|
470,000
|
|
|
$
|
470,000
|
|
Shenzhen Datang Engage Telecom Co., Ltd. (“Engage Telecom”)
|
|
|
188,759
|
|
|
|
92,096
|
|
|
|
$
|
658,759
|
|
|
$
|
562,096
|
|
Shenzhen
Engage Mobile Technology Co., Limited became a related party after Engage International Technology Co., Ltd. purchased 75.61%
of the Company’s common stock from two stockholders of the Company on April 9, 2015. The advance is unsecured, payable on
demand and non-interest bearing. During the three and six month periods ended December 31, 2015, the Company received $40,000
and $96,663, respectively, in advances from Engage Telecom. As of December 31, 2015, the balance of the advances form related
parties was $658,759.
ENGAGE
MOBILITY, INC.
NOTES
TO FINANCIAL STATEMENTS
December
31, 2015
(Unaudited)
NOTE
7—STOCKHOLDERS’ DEFICIT
Equity
During
the three and six months ended December 31, 2015, the Company had not issued any new shares of common stock to the stockholders.
Stock
Options
During
the year ended June 30, 2014, two employees were granted an aggregate of 614,000 five year options which vested immediately as
to 114,000 options and will vest as to 125,000 options per year over the next 4 years. The options are exercisable at $2.50 per
share for 114,000 options, $3.00 per share for 125,000 options, $3.50 per share for 125,000 options, $3.75 for 125,000 options
and $4.00 for 125,000 options. The aggregate grant date fair value of the options was approximately $1,416,000, of which $413,398
has been charged to operations during the year ended June 30, 2014. The balance of the fair value of the options will be charged
to operations over the vesting period of which $144,936 has been charged to operations during the period ended December 31, 2014.
The options were valued using a binomial option pricing model with the following assumptions:
Volatility
154% - Dividend rate 0% - Interest rate 1.36% - 1.66% - Term 5 years
A
summary of the status of the stock options granted to employees and others as of December 31, 2015 is as follows:
|
|
Number of Shares
|
|
Options outstanding at June 30, 2015
|
|
$
|
207,750
|
|
Changes:
|
|
|
|
|
Granted
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
Cancelled
|
|
|
-
|
|
Options outstanding at December 31, 2015
|
|
|
207,750
|
|
|
|
|
|
|
Options exercisable at December 31, 2015
|
|
$
|
207,750
|
|
ENGAGE
MOBILITY, INC.
NOTES
TO FINANCIAL STATEMENTS
December
31, 2015
(Unaudited)
NOTE
7—STOCKHOLDERS’ DEFICIT
(CONTINUED)
Stock
Warrants
Stock
warrants outstanding at December 31, 2015 were as follows:
|
|
Number of Shares
|
|
|
Weighted Average Remaining Contractual Life
(Years)
|
|
Warrants outstanding at June 30, 2015
|
|
$
|
525,000
|
|
|
|
1.48
|
|
Changes:
|
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Cancelled
|
|
|
-
|
|
|
|
-
|
|
Warrants outstanding at December 31, 2015
|
|
|
525,000
|
|
|
|
1.03
|
|
|
|
|
|
|
|
|
|
|
Warrants exercisable at December 31, 2015
|
|
$
|
525,000
|
|
|
$
|
1.03
|
|
Date Issued
|
|
Expiration Date
|
|
Exercise Price
|
|
|
Number of Warrants
|
|
July 2013
|
|
July 2016
|
|
$
|
2.00
|
|
|
|
125,000
|
|
February 2014
|
|
February 2017
|
|
$
|
1.50
|
|
|
|
200,000
|
|
February 2014
|
|
February 2017
|
|
$
|
2.00
|
|
|
|
200,000
|
|
NOTE
8—COMMITMENTS AND CONTINGENCY
From
time to time the Company may be a party to litigation matters involving claims against the Company. Management believes
that there are no current matters that would have a material effect on the Company’s financial position or results of operations.
NOTE
9—BUSINESS SEGMENTS
There
are no reportable business segments.
NOTE
10—SUBSEQUENT EVENTS
Management
has evaluated all activity and concluded that no subsequent events occurred as of February 15, 2016 that would require recognition
in the financial statements or disclosure in the notes to the financial statements.
Item
2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
This
Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide a reader of
our financial statements with a narrative from the perspective of our management on our financial condition, results of operations,
liquidity, and certain other factors that may affect our future results. The following discussion and analysis should be read
in conjunction with: (i) the accompanying unaudited condensed financial statements and notes thereto for the six months ended
December 31, 2015, (ii) the financial statements and notes thereto for the year ended June 30, 2015 included in our Annual Report
on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on September 29, 2015 and (iii) the discussion
under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of
our Annual Report on Form 10-K. Aside from certain information as of June 30, 2015 all amounts herein are unaudited. Unless the
context otherwise indicates, references to “Engage Mobility,” “we,” “our,” “us”
and the “Company” refer to Engage Mobility, Inc.
Overview
We
were incorporated, under the name MarketKast, Inc., under the laws of the State of Florida on December 28, 2011, to serve as a
provider of mobile marketing services, online and mobile video production, distribution, syndication and marketing services for
business owners. On March 22, 2013, we filed Articles of Amendment to our Articles of Incorporation (the “Amendment”)
to change our name from “MarketKast, Incorporated” to “Engage Mobility, Inc.” The Amendment was effective
as of March 22, 2013. In connection with the name change, our trading symbol was changed from “MRKK” to “ENGA,”
effective April 4, 2013.
On
February 18, 2014, we entered into a joint venture agreement (“Joint Venture Agreement”) with Xinhua Ruide (Beijing)
Network Technology Co., Ltd. (“Xinhua Ruide”) and Shenzhen Yingjia Mobile Technology Co., Ltd. (“Shenzhen Yingjia”)
to establish a joint venture, Datang Engage (China) Mobile Technology Co., Ltd. (“Datang Engage”) to develop and launch
a Chinese version of our mobile platform. We own 30% interest in the joint venture. The Chairman of the joint venture is Mr. Hua
Zhang.
In
April 2014, we completed development of version 2.0 of our Mobile Engagement System, which included our new product immersion,
a street view augmented reality platform that allowed users to locate businesses in their geographical area who are on the Engage
system. We filed a provisional patent application seeking patent protection for version 2.0 of our Mobile Engagement System.
In
May 2014, we commenced our marketing and sales efforts for our new Mobile Engagement System, but only experienced nominal initial
revenue.
On
April 9, 2015, pursuant to a Stock Purchase Agreement (the “Stock Purchase Agreement”), Engage International Technology
Co. Ltd. (“Engage International”) acquired from James S. Byrd, Jr. (“Byrd”) and Douglas S. Hackett (“Hackett”),
who were the principal stockholders of the Company, a total of 16,462,505 shares of the Company’s common stock, representing
75.61% of the Company’s then issued and outstanding shares. As a result of the transaction, a change in control of the Company
occurred. Pursuant to the terms of the Stock Purchase Agreement, as a condition to the sale and transfer of the controlling stake
of the Company, the then directors and officers of the Company resigned simultaneously at the closing of the transaction. Accordingly,
Mr. Byrd ceased to be Chairman of the Board of Directors of the Company; and Mr. Hackett ceased to be President, Chief Executive
Officer, Chief Financial Officer, Secretary, Treasurer and Director of the Company; and Eric Fellows ceased to be the Chief Operating
Officer of the Company. At the same time, Mr. Hua Zhang was appointed as the sole director and Chairman of the Board of Directors,
as well as the Chief Executive Officer of the Company.
Through
June 2015, our efforts were primarily limited to business formation, strategic development, marketing, website and product development,
negotiations with third party sales and channel partners, and capital raising activities. However, the Company was not able to
raise sufficient capital to execute its original business plan and, during the Company’s second fiscal quarter ended December
31, 2015, management decided to cease our plan of operation as a mobile technology provider. In connection with this determination,
the Company’s finite lived intangibles, comprised of patents, a mobile platform, and web and domain assets, have been impaired,
and the Company has reported an impairment loss of $18,462. As a result of the foregoing, the Company is a “shell company”
(as such term is defined in Rule 12b-2 under the Exchange Act).
Going
forward, the Company intends to seek, investigate and, if such investigation warrants, engage in a business combination with a
private entity whose business presents an opportunity for our stockholders.
Our
principal business objective for the next twelve (12) months and beyond such time will be to achieve long-term growth potential
through a combination with a business rather than immediate, short-term earnings. We will not restrict our potential candidate
target companies to any specific business, industry or geographical location and, thus, may acquire any type of business. We believe
the costs of investigating and analyzing business combinations for the next twelve (12) months and beyond such time will be paid
with money to be loaned to or invested in us by related parties. During the next twelve (12) months we also anticipate incurring
costs related to filing of the reports required under the Securities Exchange Act of 1934, as amended, and consummating an acquisition.
We believe we will be able to meet these costs through funds to be loaned by or invested in us by related parties. However, our
related parties have made no commitments written or oral, with respect to providing a source of liquidity in the form of
cash advances, loans and/or financial guarantees. During the three and six month periods ended December 31, 2015, the Company
received $40,000 and $96,663, respectively, in advances from Engage Telecom, a related parties. As of December 31, 2015, the balance
of the advances was $658,759.
We
have negative working capital, negative stockholders’ equity and have not earned any revenues from operations to date. These
conditions raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern
is dependent upon our ability to develop additional sources of capital, locate and complete a merger with another company, and
ultimately, achieve profitable operations.
Results
of Operation
Comparison
of the three months ended December 31, 2015 and 2014
Revenues
Since
inception, our activities have been primarily limited to business formation, strategic development, marketing, website and product
development, negotiations with third party sales and channel partners, and capital raising activities. We have conducted minimal
operations during the three months ended December 31, 2015, and have not generated any revenues, as compared to $10,205 for the
three months ended December 31, 2014. The decrease was the result of the cessation of our plan of operation as a mobile technology
provider.
Operating
Expenses
During
the three months ended December 31, 2015, we incurred general and administrative expenses of $18,721 and during the same period
of 2014, we incurred general and administrative expenses of $86,659. These general and administrative expenses consist of rent,
insurance, professional fees, travel, employee compensation and other miscellaneous items. The decrease in expenses resulted primarily
from a decrease in stock, options and warrants issued for services of $57,000 and decrease in amortization expense of $10,000
for the three months ended December 31, 2015.
Impairment
loss from intangible assets
Impairment
loss from intangible assets was $18,462 for the three months ended December 31, 2015, as compared to $0 for the three months ended
December 31, 2014. The increase in impairment loss from intangible assets resulted from the impairment of our finite lived intangibles,
comprised of patents, a mobile platform, and web and domain assets in connection with the cessation of our plan of operation as
a mobile technology provider.
Interest
expense
Interest
expense was $0 for the three months ended December 31, 2015, as compared to $8,377 for the three months ended December 31, 2014.
The decrease in interest expense resulted from the termination, conversion, and repayments of our outstanding debts.
Net
Loss
We
had net loss of $37,183 for the three months ended December 31, 2015, compared to $84,831 for the three months ended December
31, 2014. Our auditor has expressed doubt as to whether we will be able to continue to operate as a “going concern”
due to the fact that the Company has incurred significant losses since inception.
Comparison
of six months ended December 31, 2015 and 2014
Revenues
Since
inception, our activities have been primarily limited to business formation, strategic development, marketing, website and product
development, negotiations with third party sales and channel partners, and capital raising activities. We have conducted minimal
operations during the six months ended December 31, 2015, and have not generated any revenues, as compared to $32,032 for the
six months ended December 31, 2014. The decrease was the result of the cessation of our plan of operation as a mobile technology
provider.
Operating
Expenses
During
the six months ended December 31, 2015, we incurred operating expenses of $56,051 compared to $414,580 for the six months ended
December 31, 2014. These general and administrative expenses consist of rent, insurance, professional fees, travel, employee compensation
and other miscellaneous items. The decrease in expenses in the 2015 periods resulted primarily from decrease in stock, options
and warrants issued for services of $147,248 and decrease in amortization expense of $17,568 for the six months ended December
31, 2015.
Impairment
loss from intangible assets
Impairment
loss from intangible assets was $18,462 for the six months ended December 31, 2015, as compared to $0 for the six months ended
December 31, 2014. The increase in impairment loss from intangible assets resulted from the impairment of our finite lived intangibles,
comprised of patents, a mobile platform, and web and domain assets in connection with the cessation of our plan of operation as
a mobile technology provider.
Interest
expense
Interest
expense was $0 and $16,656 for the six months ended December 31, 2015 and 2014, respectively. The decrease in interest expense
resulted from the termination, conversion, and repayments of our outstanding debts.
Net
Loss
We
had net loss of $74,513 and $399,204 for the six months ended December 31, 2015 and 2014, respectively. Our auditor has expressed
doubt as to whether we will be able to continue to operate as a “going concern” due to the fact that the Company has
incurred significant losses since inception and will need to raise capital to further its operations.
Liquidity
and Capital Resources
At
December 31, 2015 and June 30, 2015, we had cash and cash equivalents of $0. We intend to rely upon loans from our related parties.
During the six months ended December 31, 2015, we received advances from Engage Telecom, one of our related parties, to fund our
administrative expenses. However, our related parties are under no obligation to provide such funding. During the three and six
month periods ended December 31, 2015, the Company received $40,000 and $96,663, respectively, in advances from related parties.
As of December 31, 2015, the balance of the advances was $658,759.
We
expect that we will need to raise funds in order to effectuate our business plan. We anticipate that we will need to seek financing
through means such as borrowings from institutions or private individuals. There can be no assurance that we will be able to raise
such funds. If we are unsuccessful at raising sufficient funds, for whatever reason, to fund our operations, we may be forced
to seek a buyer for our business or another entity with which we could create a joint venture. If all of these alternatives
fail, we expect that we will be required to seek protection from creditors under applicable bankruptcy laws.
Management
anticipates seeking out a target company through solicitation. Such solicitation may include newspaper or magazine advertisements,
mailings and other distributions to law firms, accounting firms, investment bankers, financial advisors and similar persons, the
use of one or more websites and similar methods. No estimate can be made as to the number of persons who will be contacted or
solicited. Management may engage in such solicitation directly or may employ one or more other entities to conduct or assist in
such solicitation. Management and its affiliates may pay referral fees to consultants and others who refer target businesses for
mergers into public companies in which management and its affiliates have an interest. Payments are made if a business combination
occurs, and may consist of cash or a portion of the stock in the Company retained by management and its affiliates, or both.
As
discussed above, we incurred a net loss of $37,183 and $84,831, respectively, for the three months ended December 31, 2015 and
2014. During the six months ended December 31, 2015 and 2014, we reported $74,513 and $399,204 net losses, respectively. Cash
used in operating activities for the six months ended December 31, 2015 and 2014 were $0 and $147,261, respectively. Cash used
in investing activities for each of the six months ended December 31, 2015 and 2014 were $0. Cash provided by financing activities
for the six months ended December 31, 2015 and 2014 were $0 and $134,581, respectively. As of December 31, 2015 and June 30, 2015,
we had a stockholders’ deficiency of $694,668 and $620,155, respectively. Accordingly, there is substantial doubt about
our ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to raise additional
capital and implement our business plan. The financial statements do not include any adjustments that might be necessary if we
are unable to continue as a going concern.
Management
believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity
for the Company to continue as a going concern.
Mr.
Hua Zhang, the sole director and officer of the Company, supervises the search for target companies as potential candidates for
a business combination. We believe Mr. Hua Zhang will pay, at his own expense, any costs he incurs in supervising the search for
a target company, although he is under no obligation to do so. Mr. Hua Zhang may enter into agreements with other consultants
to assist in locating a target company and may share stock received by it or cash resulting from the sale of its securities with
such other consultants.
Recently
Issued Accounting Pronouncements
A
variety of proposed or otherwise potential accounting standards are currently under study by standard setting organizations and
various regulatory agencies. Due to the tentative and preliminary nature of those proposed standards, we have not determined whether
implementation of such proposed standards would be material to our financial statements.
Off
Balance Sheet Items
Under
SEC regulations, we are required to disclose off-balance sheet arrangements that have or are reasonably likely to have a current
or future effect on our financial condition, such as changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that are material to investors. An off-balance sheet arrangement means a
transaction, agreement or contractual arrangement to which any entity that is not consolidated with us is a party, under which
we have:
|
●
|
any
obligation under certain guarantee contracts,
|
|
●
|
any
retained or contingent interest in assets transferred to an unconsolidated entity or
similar arrangement that serves as credit, liquidity or market risk support to that entity
for such assets,
|
|
●
|
any
obligation under a contract that would be accounted for as a derivative instrument, except
that it is both indexed to our stock and classified in stockholders’ deficiency
in our statement of financial position, and
|
|
●
|
any
obligation arising out of a material variable interest held by us in an unconsolidated
entity that provides financing, liquidity, market risk or credit risk support to us,
or engages in leasing, hedging or research and development services with us.
|
We
do not have any off-balance sheet arrangements that we are required to disclose pursuant to these regulations. In the ordinary
course of business, we enter into operating lease commitments, purchase commitments and other contractual obligations. These transactions
are recognized in our financial statements in accordance with generally accepted accounting principles in the United States.
Contractual
Obligations
None.
Critical
Accounting Policies
Use
of Estimates
In
preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from
those estimates.
Revenue
Recognition
In
general, the Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product
delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. The
following reflects specific criteria for the various revenues streams of the Company:
Revenue
for services is recorded at the time the services are complete.
Where
the Company has entered into a revenue sharing agreement with a third party, the Company will record its’ proportionate
share of the revenue.
The
Company’s revenues have principally been from video distribution and advertising fees via the platform. However, since July
1, 2015 until the date of this report, the Company did not report any revenues.
Accounts
Receivable and Allowance for Doubtful Accounts
Accounts
receivable are reported at their outstanding unpaid principal balances reduced by an allowance for doubtful accounts. The Company
estimates doubtful accounts based on historical bad debts, factors related to specific customers' ability to pay and current economic
trends. The Company writes off accounts receivable against the allowance when a balance is determined to be uncollectible.
Property,
Plant and Equipment
Property,
plant and equipment are recorded at cost, less accumulated depreciation. Cost includes the price paid to acquire or construct
the asset, including capitalized interest during the construction period, and any expenditures that substantially increase the
assets value or extends the useful life of an existing asset. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets. Major repairs and betterments that significantly extend original useful lives or improve
productivity are capitalized and depreciated over the periods benefited. Maintenance and repairs are generally expensed as incurred.
Intangible
Assets and Long Lived Assets
The
Company reviews for impairment its long-lived assets and certain identifiable intangible assets whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when
estimated future cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying
amount. The Company’s finite lived intangibles, comprised of patents, a mobile platform, and web and domain assets, are
being amortized over a period of three years.
Stock-Based
Compensation
The
Company records the cost resulting from all share-based transactions in the financial statements. The Company applies
a fair-value-based measurement in accounting for share-based payment transactions with employees and when the company acquires
goods or services from non-employees in share-based payment transactions.
Going
Concern
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates
continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. As reflected
in the accompanying financial statements, the Company had an accumulated deficit of $6,677,735 at December 31, 2015, and has incurred
losses for all periods presented. These conditions raise substantial doubt about the Company’s ability to continue as a
going concern.
The
Company’s cash position and operations may not be sufficient to support the Company’s daily operations without significant
financing. The Company believes in the viability of its strategy to produce sales volume and in its ability to raise additional
funds; however there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent
upon the Company’s ability to further implement its business plan and generate sufficient revenues. The financial statements
do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.