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EX-3 - EXHIBIT 3.1.3 - China Media Group CORPex31-3-071514cmg.htm
EX-32 - EXHIBIT 32.2 - China Media Group CORPex322-071514cmg.htm
EX-21 - EXHIBIT 21.1 - China Media Group CORPex211-071514cmg.htm
EX-3 - EXHIBIT 3.2.1 - China Media Group CORPex32-1-071514cmg.htm
EX-32 - EXHIBIT 32.1 - China Media Group CORPex321-071514cmg.htm
EX-31 - EXHIBIT 31.2 - China Media Group CORPex312-071514cmg.htm
EX-31 - EXHIBIT 31.1 - China Media Group CORPex311-071514cmg.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2013

 

----------------------------------------

 

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from [ ] to [ ]

 

-----------------------------------------

Commission File Number: 000-50431

 

 CHMD

 

CLIXSTER MOBILE GROUP INC.

------------------------------------------------------------

 

(Exact name of small business issuer as specified in its charter)

Texas 7310 32-0034926
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)

 

No. 3, Jalan Sri Hartamas 7, Taman Sri Hartamas

50480 Kuala Lumpur, Malaysia

N/A
(Address of Company's principal executive offices) (Zip Code)

 

Tel: +601122112211   Fax: +60327262640

(Company's Telephone Number, Including Area Code)

 

Securities registered under Section 12(b) of the Act:

 

Title of each class registered:

-------------------------------

None

Name of each exchange on which registered:

------------------------------------------

None

 

Securities registered under Section 12(g) of the Act:

 

Common Stock, No Par Value

(Title of Class)

 


 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

[   ] Yes [ x ] No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

[   ] Yes [ x ] No

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

[ x ] Yes [   ] No

 

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

[   ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

 

[   ] Large accelerated filer [   ] Accelerated filer [   ] Non-accelerated filer (Do not check if a smaller reporting company) [ x ] Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

[   ]Yes [ x ] No

 

The aggregate market value of the registrant's voting stock held by non-affiliates (488,176,791 shares) of the registrant based upon the per share closing price of $0.0195 on December 31, 2013 was approximately $9,519,447.

 

Solely for the purpose of this calculation, shares held by directors and officers of the registrant have been excluded. Such exclusion should not be deemed a determination or an admission by registrant that such individuals are, in fact, affiliates of the registrant.

 

As of May 31, 2014, there were 11,307,232,960 no par value common stock of the Company issued and outstanding.

 

 

DOCUMENTS INCORPORATED BY REFERENCE

 

Exhibits incorporated by reference are referred under Part IV.

 


 

DEFINITIONS AND CONVENTIONS
 
 
References to "China" refer to the Peoples' Republic of China.
 
References to "Common Stock" means the common stock, no par value, of China Media Group Corporation.
 
References to the "Commission" or "SEC" means the U.S. Securities and Exchange Commission.
References to "ECE" means ECE Technologies Sdn. Bhd., a company incorporated in Malaysia.
References to the "ATeam" means A-Team Resources Sdn. Bhd., a company incorporated in Malaysia that is engaged in the business of consumer electronics and light appliances.
References to the "BRR" means Beijing Ren Ren Health Culture Promotion Co., Limited, a company incorporated in China that is a 50% subsidiary of Good World. BRR is engaged in advertising sales in China.
References to the "ATC Marketing" means ATC Marketing Limited, a company incorporated in Hong Kong that is a 50% subsidiary of Good World. ATC Marketing is a joint venture company with AdvanceTech Communications Sdn. Bhd. holding the worldwide marketing rights, other than certain rights belonging to the Company, of a convergent communication device named M.A.G.I.C.
References to the "Good World" means Good World Investments Limited, an investment holding company incorporated in the British Virgin Islands that is a wholly owned subsidiary of CMG.  
References to the "RRMG" means Ren Ren Media Group Limited, a company incorporated in Hong Kong that is a wholly owned subsidiary of CMG. RRMG is an administrative and advertising sales company in Hong Kong and China.
References to the "Clixster Mobile" means Clixster Mobile Sdn. Bhd., a company incorporated in Malaysia that is a mobile virtual network operator (MVNO) and principally engaged in providing cellular and mobile broadband services in Malaysia.
 
References to "Company", "CHMD", "we", "our" means Clixster Mobile Group Inc. (fka China Media Group Corporation) and include, unless the context requires or indicate otherwise, the operation of its subsidiaries (all hereinafter defined).
 
References to "33 Act" or "Securities Act" means the Securities Act of 1933, as amended.
 
References to "34 Act" or "Exchange Act" means the Securities Exchange Act of 1934, as amended.

 

 

FORWARD-LOOKING STATEMENTS

 

 

This Form 10-K report contains forward-looking statements of management of the Company that are, by their nature, subject to risks and uncertainties. Forward-looking statements are statements that estimate the happening of future events are not based on historical fact. Forward-looking statements may be identified by the use of forward-looking terminology, such as "may", "shall", "could", "expect", "estimate", "anticipate", "predict", "probable", "possible", "should", "continue", or similar terms, variations of those terms or the negative of those terms. The forward-looking statements appear in a number of places in this Form 10-K report have been formed by our management on the basis of assumptions made by management and considered by management to be reasonable. However, whether actual results and developments will meet the Company's expectations and predictions depends on a number of known and unknown risks and uncertainties and other factors, any or all of which could cause actual results, performance or achievements to differ materially from Company's expectations, whether expressed or implied by such forward looking statements. Our future operating results are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements.

 

The assumptions used for purposes of the forward-looking statements contained in this Form 10-K report represents estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. No assurance can be given that any of the assumptions relating to the forward-looking statements in this Form 10-K report are accurate, and we assume no obligation to update any such forward-looking statements. If we do update or correct one or more forward-looking statements, investors and others should not conclude that we will make additional updates or corrections with respect to other forward-looking statements.

 


 

TABLE OF CONTENTS

 

PART I      
       
ITEM 1. Business 1  
ITEM 1A. Risk Factors 6  
ITEM 1B. Unresolved Staff Comments 19  
ITEM 2. Properties 19  
ITEM 3. Legal Proceedings 19  
ITEM 4. Mine Safety Disclosures 19  

 

PART II      
ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities 20  
ITEM 6. Selected Financial Data 23  
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operation 24  
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 26  
ITEM 8. Financial Statements and Supplementary Data 27  
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures 27  
ITEM 9A Controls and Procedures 27  
ITEM 9B. Other Information 28  

 

PART III      
       
Item 10 Directors, Executive Officers and Corporate Governance 29  
Item 11 Executive Compensation 32  
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 34  
Item 13 Certain Relationships and Related Transactions, and Director Independence 35  
Item 14 Principal Accounting Fees and Services 35  

 

PART IV      

 

ITEM 15 Exhibits, Financial Statement Schedules 36  

 

SIGNATURES   38  

 


 

PART I
 
ITEM 1. BUSINESS.

 

DESCRIPTION OF BUSINESS

 

OUR BACKGROUND. The Company was incorporated in Texas on October 1, 2002 and in 2005 changed its business focus to advertising and media in the emerging China market. Under the then new management, the Company commenced to position the Company to capitalize on the growth of the Chinese advertising market.

 

Our mission then was to become one of China's new age media companies through the use of new technologies and devices combined with traditional media of TV, Newspapers, Magazines, Billboards and Internet to reach today's mobile society. In order to facilitate this, the Company established 3 strategic business units being "Advertising", "Telecommunications and Mobile Computing", and "Products and Services".

 

We planned to offer advertising services in China. These advertising services would be targeted across all media thus we will offer our customers selective advertising on specific media for nationwide campaign. We aimed to differ from other advertisers so that we can provide nationwide campaigns across all media spectrum. However due to the high investment costs, we were not able to raise the capital to implement our business plans.

 

In June 2012, the Group acquired A-Team Resources Sdn. Bhd. a company that distributes light appliances products in South East Asia and Middle East to strengthen our Products and Services Business Unit. The Company issued 558,779,837 shares in the Company, representing 51% of the then enlarged share capital of the Company. The transaction was accounted for in substance as a reverse acquisition of the Company by ATeam since the stockholders of ATeam owned a majority of the Company's voting power immediately following the acquisition and ATeam's management assumed operational, management and governance control.  For accounting purposes, ATeam shall be the accounting acquirer and or the surviving entity.  Accordingly, the historical financial statements are those of Ateam, the accounting acquirer, immediately following the consummation of the reverse merger.

 

As announced in a Form 8K filed on October 29, 2013, the Company and Samata Ventures Sdn Bhd (“Samata”) and Clixster Sdn Bhd (“CSB”) (jointly referred to as the “Vendors”) entered into a conditional Sales and Purchase Agreement (“SP Agreement”) for the Company to acquire 63.2% equity interests in Clixster Mobile Sdn Bhd (“CMSB”) from the Vendors.

 

On January 15, 2014, the Group disposed of its loss making light appliances and advertising operation.  The management believes that this transaction affords the Company the opportunity to streamline its trading operation and focus on its Products and Services Business Unit.

 

On January 31, 2014, this merger transaction was consummated and CMSB became a subsidiary of the Company.  As a result of the closing of the SP Agreement, we will now focus our business plans to pursue the mobile virtual network operator (“MVNO”) business and to expand our Telecommunication Business Unit with a focus on provision of mobile telecom service through a MVNO platform initially in Malaysia and then to other regions.

 

Upon the closing of the SP Agreement, the Company issued to Samata and CSB 5,760,898,203 shares and 4,432,711,461 shares in the Company, respectively, for a total issuance of 10,193,609,664 shares in the Company, representing approximately 90.15% in the issued share capital of the Company.

 

On January 31, 2014, Samata transferred 4,301,422,970 to CSB and 1,459,475,233 shares to the newly appointed directors of the Company.  After the above transfers, Samata did not hold any shares in the Company and CSB held a total of 8,734,134,431 shares, representing approximately 77.24% in the Company, becoming the new controlling shareholder of the Company.  On the same date following the completion of the SP Agreement, the changes to the board of directors were announced in the Form 8K filed on February 6, 2014.  In June 2014, CSB transferred 550,000,000 shares to one of the Company’s partners and after the transfer CSB held 8,184,134,431 shares, representing approximately 72.38% in the Company.

 

At the date of this report, the Group will focus on its Telecommunications and Mobile Business Unit and its Products and Services Business Unit.  The Group will suspend its adverting business until a viable advertising business opportunity is identified.

 

 

1

 


 

OUR BUSINESS REVIEW AND FUTURE STRATEGY.

The consumer electronics and light appliances business in 2013 faced a very competitive environment from other low costs manufacturer. The management took the view to restructure and rationalize the operation so that it can face the challenges ahead.  In 2013, the Group rationalize the trading operation for consumer electronics and light appliances products with a view to reduce costs. To a certain extent it was successful however, we were not able to be competitive in face of the competitive environment.

 

In October 2013, the Company entered into the SP Agreement to acquire Clixster Mobile, a MVNO company engages in the provisioning of cellular and mobile broadband services in Malaysia. The provisioning of cellular and mobile broadband business is an exciting and growth industry as more people rely on the mobile network to enhance their daily lives. This acquisition will change the direction of the Company from a trading in consumer electronics and light appliances to a service company providing cellular and mobile data services complementing our existing Telecommunication Business Unit. This acquisition closed on January 31, 2014. Therefore the review of operation and business contained in this report as set out below will focus on the existing business of trading in consumer electronics and light appliances, consulting business and the telecom MVNO business.

 

2013 Products & Services Overview

 

We have established 3 business units namely “Advertising”, “Telecommunication and Mobile” and “Product Services”. A brief review and description of these three business units' strategies and operations are described below.

 

Advertising Unit

 

On March 13, 2007, the Company acquired 100% of the issued and outstanding shares of Good World Investments Limited, which owns 50% of the registered capital of Beijing Ren Ren Health Culture Promotion Limited ("BRR"). BRR is working with the Chinese Government on a benevolent project named "Great Wall of China Project" to advertise and promote health education and health awareness in China. We believe BRR provides a strategic advertising platform for us to launch our advertising operations in China as it can advertise in hospitals and districts in China. However the capital requirement to activate this project on the national and provincial level will require us to raise at least US$2 million which is difficult given the financial situation of the Group.  Therefore in 2012, we had determined to defocus from the BRR program and to focus on other advertising activities going forward. During the year, the Company did not derive any advertising income from the BRR project.  In 2014, the Group divested from its investment in BRR and the Group has suspended the advertising business unit until other advertising opportunities that are synergistic to the Group’s business are identified.   

 

Telecommunications Unit

 

 

In 2006, the Company announced the establishment of the Telecommunications and Mobile Computing Division to focus on the new media advertising where we would take advantage of new convergent devices for telecommunications advertising. The business of selling advertising and services through telecommunications media and devices is growing and the Group intends to enter into this business sector. No revenue has been generated from advertising through telecommunications media and devices during this reporting period.

 

Advertising through mobile devices is becoming more prominent to reach the mobile society of today. The goal of the Telecommunications and Mobile Computing Unit is to provide the Company with entry into the new sector of advertising through telecommunication media and devices. Our strategy on gaining access in telecommunication media is through cooperation with existing networks or establishes select networks. Our longer term strategy is to partner with network operators to provide extensive network access for our advertising media. We had secured the distribution rights for M.A.G.I.C. Convergent Device for the territory of China and Hong Kong, and we were still waiting for the delivery of its commercial products in 2013. However, in 2014, we divested from this product and instead we determined to focus on other telecommunication products and services. In 2013, we entered into a conditional agreement to acquire Clixster Mobile Sdn. Bhd. a Mobile Virtual Network Operator (“MVNO”) in Malaysia.  This transaction closed on January 31, 2014.  Going forward, we will focus on developing the MVNO business to compliment and strengthen this Business Unit, and the branding of Clixster Mobile in Malaysia.  

 

Products Services Units

 

We have commenced a Products Services Unit to build brands recognition and to take advantage of our contacts networks, distribution channel and trading partners. We intended to leverage on our advertising platform to develop our own brands name for select products. This will uniquely position our Product Services for brand awareness as well as develop a long term business unit that will serve both consumers and industries markets.  We had a distribution of electronics and light appliances in 2012 but we ran into difficulties and the market conditions changed such that the Company recorded a loss in 2012.  In view of our focus on Telecommunications we determined to divest of our investment in the electronics and light appliances business, namely ATeam in 2014. Accordingly the sales and operational results were disclosed as Operations Held for Sale in the Company’s consolidated balance sheet and income statement.  During the year ended December 31, 2013, we recorded $145,495 in consulting services revenue from this business unit.

 

2

 


 

Industry Overview and Competition

 

Telecommunication Market

 

In Malaysia, the major mobile network operators (MNOs) are Maxis, Celcom and DiGi, and recently U-Mobile.  The big 3’s combined market size is over 36 million subscribers with a total annual turnover of RM23.8 billion or about USD7.3 billion in 2013.  The market breakdown indicated Maxis and Celcom have a mobile subscriber base of 13 million each and DiGi with 11 million.¹ 

 

Sectorial industry updates concur that year on year revenue growth has been strong, According to RHB Research Institute Sdn Bhd (RHB Research), it stated that on the year-on-year (y-o-y) basis, the four major telcos in the country namely Telekom Malaysia Bhd (TM) grew 11%; DiGi Telecommunication Bhd (DiGi) surged 9.7%; Celcom Axiata Bhd (Celcom) increased by 8% and Maxis Telecommunication Bhd (Maxis) captured a 4.5% growth.

 

During the first half of 2013, the communication subsector increased by 9.4% (January - June 2012: 9.5%) driven by expansion in the cellular segment on increased use of data services. As at end-June 2013, cellular phone subscriptions grew 9.1% to 42.6 million to reach a penetration rate of 143.4% (end-June 2012 : 10.7%; 39 million; 135.3%), with the prepaid segment dominating 83% of total subscriptions.²

 

The broadband segment continued to expand 6.9% to 6.2 million subscriptions with a penetration rate of 66.8% as at end-June 2013 (end-June 2012; 8.2%; 5.8 million; 63.7%). This was largely due to offerings of bundled services with attractive pricing plans and improved network coverage. Data remained as a growth driver in the industry, and is expected to grow 25% annual moving forward. The growth is fueled by penetration of smartphones and other internet ready devices.²

 

¹ Annual Reports of Maxis Berhad, DiGi.com Berhad and Axiata Group Berhad

² Malaysia Economic Report 2013/2014

 

Subscriber Market

 

Mobile penetration in Malaysia has long surpassed the 100.0% mark and is currently hovering around 143%¹; putting her as one of the countries in Asia Pacific with penetration rates above 100%. Out of 32 countries in Asia Pacific, Hong Kong ranked the highest penetration rate of 155.1% followed by Singapore with 153.4%.

 

By 2015, the Malaysian market is expected to reach a mobile subscriber base of over 50 million (as at 2013: 42.6 million¹). Although growth is expected to slow down as the market approaches saturation but it is still expected to register a CAGR of 6.0% from 2011-2015. Riding on increasing demand for internet access, 3G subscriptions reached 14.5 million with an annual growth of 41.0% in 2012 and is expected to cross 18.4 million by December 2013. Broadband internet has also been expanding strongly in recent years and as at first quarter of 2014, reached a 67% household penetration with more than half of households having some form of broadband access.¹

 

Greater affordability of mobile services, development of platforms and mobile enabled services including mobile payments, information services and educational tools) and entry of non traditional players into the ecosystem including technology companies and content provider are key indicators to the potential future growth opportunities of the market.

 

¹ MCMC : Pocket Book of Statistics, Q1 2014

 

Mobile Virtual Network Operator Market

 

The explosive growth of wireless is one of the most striking aspects of the telecom industry since the 1990s. Demand for low-cost and high-value cellular service has been driving the mobile industry towards price wars. As the industry continue to mature, Mobile Network Operators (MNO’s) recognize that future growth depends on the pursuit of new markets beyond the conventional method of direct acquisition of new subscribers. The growth driven by bundled service offerings with slashed rates is only a short-term remedy. A new strategic model through alliances with Mobile Virtual Network Operator (MVNO) offered a far sighted solution. The MVNO model is seen as both, a solution as well as an opportunity for MNOs to pursue new markets that present sustainable growth and retention.

 

MVNO’s typically do not own a network but lease the network of a service provider that does have a network. An MVNO business consists of managing two key relationships; Mobile Network Operator (MNO) and the end-users. MVNO provides mobile services without owning spectrum and relies on the MNO network infrastructure. Notably, this business arrangement allows smaller service providers to be focused on specific aspects of the mobile business by offering specialized services and enriching the industry service offerings through optimization usage of the network infrastructure.

 

MVNOs provide lower operational costs for mobile operators through billing, sales, customer service, marketing, increase revenue through new applications, value added services and attractive rates. As such, the opportunity for mobile operators to take advantage of MVNOs generally outweighs the competitive threat.

  

Type of MVNO’s

 

Discount Provides very low call rates to market segments for example, the foreign workers market
Lifestyle Focuses on specific niche market demographics for example on the high income executives with specific interests
Advertising-funded Earns advertising revenue in order to provide free voice, SMS and data to its subscribers.
Ethnic Provides services to certain ethnic groups in the country. For e.g. XOX caters to the Chinese community in Malaysia, other MVNOs like Lycamobile, Lebara, iCard Mobile, Globalcell Mobile and Dialog Vizz who target ethnic communities by providing inexpensive calls to their home country.
Data Focuses on selling data subscriptions to end-users. Amazon in US and Dell in Japan are Data MVNOs. Merchantrade in Malaysia is a Data MVNO.

 

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Examples of other MVNO’s in Malaysia

Merchantrade A strong presence in the foreign workers’ in the country on Celcom network.
XOX Focus to serve the Chinese community offering services riding on Maxis network
Redtone Serving the small and medium-sized enterprises market segment. A spin-off of Redtone International Bhd riding on Maxis.
Tune Talk A lifestyle service offering as sister companies Tune Hotels and Tune Money. Operates on Celcom’s network,
Smart Pinoy A service zooming into over 700,000 Filipino migrant workers in Malaysia, A JV between Celcom and PLDT
Tron Offering a yearlong validity for Tron user community numerous incentives. Rides on DiGi network,
MyEvolution Malaysia’s first Machine-to-Machine (M2M) MVNO service on DiGi network.
Tesco Affinity program via Clubcard (Tesco loyalty card) on Maxis network.
SpeakOut Targeting students, youth, business travelers, tourists, migrant workers and telco-blacklisted individuals.
Buzz Me A prepaid mobile services operating on U Mobile targeting the urban young market.
FRiENDi A joint venture between Virgin Mobile Middle East & Africa and Kumpulan Perangsang Selangor
Altel A MVNO under Puncak Semangat, within the Al-Bukhary group, in collaboration with CELCOM. No clear direction or target market

 

 

Plan of operations

 

OUR PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS.

 

We hope to generate additional revenues in the next twelve months by engaging business operations through internal growth and through strategic acquisitions and cooperative advertising agreements, as described more fully under "Overview" above.

 

We have cash and cash equivalents of $2,581 as of December 31, 2013. In the opinion of management, these funds will not satisfy our working capital requirements to operate at our current level of activity for the next twelve months. We had closed the acquisition of Clixster Mobile Sdn. Bhd. in January 2014, and we will be required to raise additional funds to effectuate our new business plans and to integrate and support this new business in the next twelve months.

 

Financing and funding

 

Management intends to continue to raise additional financing through debt and equity financing or other means and interests that it deems necessary, with a view to implementing our business plan and building a revenue base. We plan to use the proceeds of such financings to provide working capital to our operations and increase our capital expenditure for marketing and working with our co-operative partners. There can be no assurances that sufficient financing will be available on terms acceptable to us or at all. Our forecast for the period for which financial resources will be needed to support our operations involves risks and uncertainties and actual results could fail as a result of a number of factors.

 

Specifically, we hope to accomplish the steps as set out in this report to implement our business plan in respect of the newly acquired company, Clixster Mobile Sdn. Bhd., in developing and integrating the MVNO business. The success of our plans is subject to our ability to obtain adequate funding. Such additional capital may be raised through public or private equity financing, borrowings, or other sources, such as contributions from our officers and directors. If we are unable to obtain funds necessary to implement our business plan, we may revise or scale back our business plan.

 

We are not currently conducting any research and development activities, other than the continual development of our website. We do not anticipate conducting any other research and development activities in the near future. In the event that we expand our business scope, then we may need to hire additional employees or independent contractors as well as purchase or lease additional equipment and open new office locations.

 

4

 


 

Governmental Regulation

 

We are subject to federal, state and local laws and regulations applied to businesses in general. We believe that we comply with the requirements in Malaysia for any licenses or approvals to pursue our proposed business plan. In locations where we operate, the applicable laws and regulations are subject to amendment or interpretation by regulatory authorities. Generally, such authorities are vested with relatively broad discretion to grant, renew and revoke licensee and approvals, and to implement regulations. Licenses may be denied or revoked for various reasons, including the violation of such regulations, conviction of crimes and the like. Possible sanctions which may be imposed include the suspension of individual employees, limitations on engaging in a particular business for specific periods of time, revocation of licenses, censures, redress to customers and fines. We believe that we are in conformity with all applicable laws in all relevant jurisdictions. We may be prevented from operating if our activities are not in compliance and must take action to comply with the relevant laws and regulations. 

 

We have posted our privacy policy and practices concerning the use and disclosure of any consumer information collected on our website, www.clixster.net. Any failure by us to comply with posted privacy policies, Federal Trade Commission requirements or other domestic or international privacy-related laws and regulations could result in proceedings by governmental or regulatory bodies that could potentially harm our business, results of operations and financial condition. In this regard, there are a large number of legislative proposals before the U.S. Congress and various state legislative bodies regarding privacy issues related to online commerce to which the Group may participate in the future. It is not possible to predict whether or when such legislation may be adopted, and certain proposals, if adopted, could harm our business by causing a decrease in the use of our applications and services by our small business customers and thereby a decrease in our revenues. Such decreases could be caused by, among other possible provisions, the required use of disclaimers or other requirements before consumers can utilize our Internet technology solutions.

 

Employees

 

As of the date of this report, we have 80 full time employees. From time to time, we utilize consultants or contractors for specific assignments. None of our employees are represented by a labor union and we have never experienced a work stoppage. We believe that our relationships with our employees are good.

 

5

 


 

ITEM 1A. RISK FACTORS

 

Risk Factors

There are numerous and varied risks, known and unknown, that may prevent us from achieving our goals. If any of these risks actually occur, our business, financial condition or results of operation may be materially adversely affected. In such case, the trading price of our Common Stock could decline and investors could lose all or part of their investment.

 

Risks Related to Our Business

 

Our business is subject to various risks and uncertainties, including those set forth below. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties not presently known to us or that we currently deem to be immaterial may also materially and adversely affect our business operations. If any of the risks set out or referred to below actually occur, our business, financial condition or results of our operations could be materially adversely affected.

 

Our risks for the existing and future business disclosed in this section has included our newly acquired business Clixster Mobile Sdn. Bhd., a Mobile Virtual Network Operator (“MVNO”) in Malaysia

 

RISKS RELATED TO EXISTING AND PROPOSED OPERATIONS

 

If we are unable to obtain additional funds from other financings we may have to curtail the scope of our operations significantly and alter our business model

 

We must achieve profitability for our business model to succeed. Prior to accomplishing this goal, we may need to raise additional funds, from equity or debt sources. Our cash requirements are substantial and our current financial position is insufficient to meet our cash needs in the future. If additional financing is not available when required or is not available on acceptable terms, we may be unable to continue our operations at current or planned levels. In addition, any failure to raise additional funds in the future may result in our inability to successfully secure our business platform, take advantage of business opportunities or respond to competitive pressures, any of which circumstances could have a material adverse effect on our financial condition and results of operations.

 

We do not have substantial cash resources and if we cannot raise additional funds or generate more revenues, we will not be able to pay our vendors and will probably not be able to continue as a going concern

 

We will need to raise additional funds to pay outstanding debts, vendor invoices and execute our business plan. Our future cash flows depend on our ability to enter into, and be paid under, contracts with our distributors for the consumer electronics and light appliances business. There can be no assurance that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to us.

 

We may be required to pursue sources of additional capital through various means, including joint venture projects and debt or equity financings. Future financings through equity investments will be dilutive to existing stockholders. Also, the terms of securities we may issue in future capital transactions may be more favorable for our new investors. Newly issued securities may include preferences, superior voting rights, the issuance of warrants or other convertible securities, which will have additional dilutive effects. Further, we may incur substantial costs in pursuing future capital and/or financing, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which will adversely impact our financial condition and results of operations.

 

Our ability to obtain needed financing may be impaired by such factors as the weakness of capital markets and the fact that we have not been profitable, which could impact the availability or cost of future financings. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, is not sufficient to satisfy our capital needs, even to the extent that we reduce our operations accordingly, we may be required to cease operations.

 

6

 


 

We have a limited operating history, and it may be difficult for potential investors to evaluate our business

 

The consumer electronics and light appliance business started in early 2000 and the advertising business stated in August 2006 which has been disposed in early 2014.  Currently we are focusing our operation on MVNO business in Malaysia which we recently acquired. Our limited operating history makes it difficult for potential investors to evaluate our business or prospective operations. We are subject to all the risks inherent in the initial organization, financing, expenditures, complications and delays inherent in a relatively new business. Investors should evaluate an investment in us in light of the uncertainties encountered by such companies in a competitive environment. Our business is dependent upon the implementation of our business plan, as well as the ability of our merchants to enter into agreements with consumers for their respective products and/or services. There can be no assurance that our efforts will be successful or that we will be able to attain profitability.

 

Our limited operating history and rapidly evolving business makes it difficult for us to accurately forecast revenues and expenses

 

We have a limited operating history on which to base an evaluation of our business and prospects. Our operating results may fluctuate as a result of a number of factors, many of which are outside of our control. For these reasons, comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on our past results as an indication of our future performance. Our prospects must be considered in light of inherent risks, expenses, and difficulties encountered by companies in their early stages of development, particularly in new and evolving markets.

 

We have generated losses for the past year as our consumer electronics and advertising businesses has come under competitive price pressure recently which the management is rationalizing the operation in order to be competitive and to build up the customer base for future years. The advertising and mobile devices operations in April 2006 with a very limited operating history for these operations due to the lack of operating and financial resources. Our operating results to date relate principally to trading in consumer electronics and light appliances, and mobile devices. However in January 2014 these businesses were disposed and we closed the acquisition of the MVNO business. Accordingly, our future prospects are uncertain in light of the risks and uncertainties experienced by early stage companies in evolving industries, and in particular our future MVNO operation in Malaysia. Due to our limited history and limited resources, it is difficult for us to predict future revenues and operating expenses. We based our expense levels, in part, on our expectations of future revenues from anticipated transactions. If our MVNO and mobile device business develops slower than we expect, our losses may be higher than anticipated, we may have to curtail parts of our business plan and to the market price of our stock may decline.

 

Some of the other risks and uncertainties of our business relate to our ability to:

 

  - offer new and innovative products and services to attract and retain a larger consumer base;
  - attract customers;
  - increase awareness of our brand and continue to develop consumer and customer loyalty;
  - respond to competitive market conditions;
  - respond to changes in our regulatory environment;
  - manage risks associated with intellectual property rights;
  - maintain effective control of our costs and expenses;
  - raise sufficient capital to sustain and expand our business;
  - attract, retain and motivate qualified personnel; and
  - upgrade our technology to support increased traffic and expanded services.

 

If we are unsuccessful in addressing any of these risks and uncertainties, our business may be materially and adversely affected.

 

The development of our business is dependent upon the completion and integration of acquisitions and other transactions that have only recently or not yet closed

 

Our principal focus is on our MVNO and mobile device and products services businesses. We have closed the acquisition of Clixster and other potential acquisitions have not closed to date and may never close. Accordingly, it is difficult to evaluate our business based upon our historical financial results, including those for the year ended December 31, 2013. Even when we close acquisitions like Clixster, our business will not be successful if we are unable to successfully operate and integrate the businesses we acquire. We expect to continually look for new businesses to acquire to maintain and sustain our operations. If we fail to identify such business, are unable to acquire such businesses on reasonable terms, or fail to successfully integrate such businesses, our operating results and prospects could be harmed.

 

7

 


 


We face significant competition and may suffer from a loss of users and customers as a result

 

We expect to face significant competition in our MVNO and mobile devices businesses, particularly from other companies that seek to provide similar products and services. Many of these competitors have significantly greater financial resources and more personnel than we do. They may also have longer operating histories and more experience in attracting and retaining and managing customers. They may use their experience and resources to compete with us in a variety of ways, including by competing more for users, customers, distributors, media channels and by investing more heavily in research and development and making acquisitions. If we fail to compete effectively, our business, financial condition and results of operation will be adversely affected.

 

Our business depends on a strong brand, and if we are not able to maintain and enhance our brand, our business and operating results may be harmed

 

We believe that recognition of our brand will contribute significantly to the success of our business. We also believe that maintaining and enhancing our brand is critical to expanding our base of consumers and customers. As our market becomes increasingly competitive, maintaining and enhancing our brand will depend largely on our ability to fund the advertising and promotion campaigns, which may be increasingly difficult and expensive.

 

We may face intellectual property infringement claims and other related claims that could be time-consuming and costly to defend and may result in our inability to continue providing certain of our existing services

 

Technology and service companies are frequently involved in litigation based on allegations of infringement of intellectual property rights, unfair competition, and invasion of privacy, defamation and other violations of third-party rights. The validity, enforceability and scope of protection of intellectual property, particularly in Malaysia, are uncertain and still evolving. In addition, many parties are actively developing and seeking protection for electronics technologies, including seeking patent protection. There may be patents issued or pending that are held by others that cover significant aspects of our technologies, products, business methods or services. As we face increasing competition and as litigation becomes more common in Malaysia and elsewhere in Asia for resolving commercial disputes, we face a higher risk of being the subject of intellectual property infringement claims.

 

Intellectual property litigation is expensive and time consuming and could divert resources and management attention from the operations of our businesses. If there is a successful claim of infringement, we may be required to pay substantial fines and damages or enter into royalty or license agreements that may not be available on commercially acceptable terms, if at all. Our failure to obtain a license of the rights on a timely basis could harm our business. Any intellectual property litigation could have a material adverse effect on our business, financial condition or results of operations.

 

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud

 

We are subject to reporting obligations under the U.S. securities laws. The SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company to include in its annual report a management report on such company's internal controls over financial reporting which contains management's assessment of the effectiveness of the company's internal controls over financial reporting. In addition, an independent registered public accounting firm must attest to and report on management's assessment of the effectiveness of the company's internal controls over financial reporting. These requirements may first apply to our annual report on Form 10-K for the fiscal year ending December 31, 2011. Our management may conclude that our internal controls over financial reporting are not effective. Moreover, even if our management concludes that our internal controls over financial reporting are effective, our independent registered public accounting firm may still decline to attest to our management's assessment or may issue a report that is qualified if they are not satisfied with our controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. Our reporting obligations as a public company will place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We are a company with limited accounting personnel and other resources with which to address our internal financial controls and procedures. If we fail to timely achieve and maintain the adequacy of our internal financial controls, we may not be able to conclude that we have effective internal controls over financial reporting at a reasonable assurance level. Moreover, effective internal controls over financial reporting are necessary for us to produce reliable financial reports and are important to help prevent fraud. As a result, our failure to achieve and maintain effective internal controls over financial reporting could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm our business and negatively impact the market price of our Common Stock.

 

8

 


 

If we fail to attract customers for our advertising and convergent device business our growth prospects could be seriously harmed

 

Our distributors will not work with us if our products and services offerings do not sell well or do not have adequate sales margin for their sales channels.  In addition, our advertising customers will not maintain their business relationships with us if we cannot secure attractive competitive product and service offerings. Failure to retain customers, distributors or channel partners could seriously harm our business and growth prospects.

 

Because we primarily rely on distributors in distributing MVNO, our failure to retain key distributors or attract additional distributors could materially and adversely affect our business

 

For MVNO operation, we will rely heavily on a nationwide distribution network of third-party distributors for sales to, and collection of payment from, our corporate and consumer customers. If our distributors do not provide quality services to our consumer customers or otherwise breach their contracts with our consumer customers, we may lose customers and our results of operations may be materially and adversely affected. We will sign distributing agreements with our distributors, although we may not sign any long-term agreements with them, but we cannot assure that we can maintain favorable relationships with them. Our distribution arrangements will be non-exclusive. Furthermore, some of our potential distributors may have contracts with our competitors or potential competitors and may not sign distribution agreements with us. If we fail to retain our key distributors or attract additional distributors on terms that are commercially reasonable, our business and results of operations could be materially and adversely affected.

 

We may not be able to manage our expanding operations effectively

 

We commenced our MVNO and mobile device operations in early 2012 and 2006, respectively. We anticipate continuous developing of our business in 2014 as we focus growth in our customer base through expanding our network and channel partners and consumer market opportunities. To manage the potential growth of our operations and personnel, we will be required to improve operational and financial systems, procedures and controls, and expand, train and manage our growing employee base. Furthermore, our management will be required to maintain and expand our relationships with customers. We cannot assure that our current and planned personnel, systems, procedures and controls will be adequate to support our future operations.

 

The recent global economic and financial market crisis has had and may continue to have a negative effect on our business and results of operations

 

Global economic conditions could have a negative effect on our business and results of operations like the global economic downturn in 2008 when economic activity in China, United States and throughout much of the world has undergone a sudden, sharp economic downturn following the recent housing downturn and subprime lending collapse in both the United States and Europe. Since then the global credit and liquidity have tightened in much of the world. Some of our customers in Southeast Asia and Malaysia may face business downturn and credit issues, and could experience cash flow problems and other financial hardships, which could affect timeliness of doing business with us.

 

Changes in governmental banking, monetary and fiscal policies to restore liquidity and increase credit availability may not be effective in alleviating the global economic declines. It is difficult to determine the breadth and duration of the economic and financial market problems and the many ways in which they may affect our customers and our business in general. Nonetheless, continuation or further worsening of these difficult financial and macroeconomic conditions could have a significant effect on our business and results of operations.

 

Capital markets are currently experiencing a period of dislocation and instability, which has had and could continue to have a negative impact on the availability and cost of capital

 

The general disruption in the U.S. capital markets has impacted the broader financial and credit markets and reduced the availability of debt and equity capital for the market as a whole. These conditions could persist for a prolonged period of time or worsen in the future. Our ability to access the capital markets may be restricted at a time when we would like, or need, to access such markets, which could have an impact on our flexibility to react to changing economic and business conditions. The resulting lack of available credit, lack of confidence in the financial sector, increased volatility in the financial markets and reduced business activity could materially and adversely affect our business, financial condition, results of operations and our ability to obtain and manage our liquidity. In addition, the cost of debt financing may be materially adversely impacted by these market conditions.

 

9

 


 

Our success depends on the continuing efforts of our senior management team and other key personnel and our business may be harmed if we lose their services

 

Our future success depends heavily upon the continuing services of the members of our senior management. If one or more of our senior executives or other key personnel are unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all, and our business may be disrupted and our financial condition and results of operations may be materially and adversely affected. Competition for senior management and key personnel is intense, the pool of qualified candidates is very limited, and we may not be able to retain the services of our senior executives or key personnel, or attract and retain high-quality senior executives or key personnel in the future.

 

In addition, if any member of our senior management team or any of our other key personnel joins a competitor or forms a competing company, we may lose customers, distributors, know-how and key professionals and staff members. Each of our executive officers and key employees has entered into an employment agreement with us which contains confidentiality and non-competition provisions. Legal proceedings to enforce such provisions would be costly in both money and management time and such provisions may not be enforced or enforceable.

 

The success of our business depends on the continuing contributions of Megat Radzman Megat Khairuddin and Noor Azlan Khamis and other key personnel who may terminate their employment with us at any time, and we will need to hire additional qualified personnel

 

We rely heavily on the services of Megat Radzman Megat Khairuddin, director and Chairman of our Company and Noor Azlan Khamis, our director and Chief Executive Officer, as well as several other management personnel. Loss of the services of any such individuals would adversely impact our operations. In addition, we believe our technical personnel represent a significant asset and provide us with a competitive advantage over many of our competitors and that our future success will depend upon our ability to retain these key employees and our ability to attract and retain other skilled financial, engineering, technical and managerial personnel. We do not currently maintain any "key man" life insurance with respect to any of such individuals.

 

We rely on highly skilled personnel and if we are unable to retain or motivate key personnel or hire qualified personnel, we may not be able to grow effectively

 

Our performance and future success depends on the talents and efforts of highly skilled individuals. We will need to continue to identify, hire, develop, motivate and retain highly skilled personnel for all areas of our organization. Competition in our industry for qualified employees is intense. Our continued ability to compete effectively depends on our ability to attract new employees and to retain and motivate our existing employees.

 

As competition in our industry intensifies, it may be more difficult for us to hire, motivate and retain highly skilled personnel. If we do not succeed in doing so, we may be unable to grow effectively.

 

We have no business insurance coverage

 

We do not have any business liability or disruption insurance coverage for our operations in Malaysia. Any business disruption, litigation or natural disaster may result in our incurring substantial costs and the diversion of our resources.

 

We are exposed to risks associated with the ongoing financial crisis and weakening global economy, which increase the uncertainty of consumers purchasing products and/or services

 

The recent severe tightening of the credit markets, turmoil in the financial markets, and weakening global economy are contributing to a decrease in spending by consumers.  If these economic conditions are prolonged or deteriorate further, the market for layaway services will decrease accordingly.

 

10

 


 

Our Company may experience, and continues to experience, rapid growth in operations, which may placed, and may continue to place, significant demands on its management, operational and financial infrastructure

 

If the Company does not effectively manage its growth, the quality of its products and services could suffer, which could negatively affect the Company's brand and operating results. To effectively manage this growth, the Company will need to continue to improve its operational, financial and management controls and its reporting systems and procedures. Failure to implement these improvements could hurt the Company's ability to manage its growth and financial position.

 

Our Company's business faces inherent risk in the mobile communication industry

 

Our Group's business is subject to certain risks inherent in the mobile communication industry. Our Group's revenue and operating results could be adversely affect by many factors which include, amongst others, changes in general economic, business and credit conditions, fluctuation in foreign exchange rates, changes in demand for and market acceptance of our products and services, our ability to introduce new products and services and enhancements in a timely manner, rapid technological changes, increase in operating expenses, lower profit margins due to pricing competition and delay in expansion plans.

 

Our Group seeks to limit these business risks through, inter-alia prudent management policies, keeping abreast with new developments and technologies in the relevant industries and maintaining good relationship with customers and suppliers. However there can be no assurance that any changes in these factors will not have any material adverse effect on our Group's business.

 

Our Company's business faces competition from local and foreign competitors

 

Our Group faces competition from both local and foreign competitors which offer similar products that of our Group offerings. Increased competition could result in competitive pricing resulting in lower profit margins. However, our Group believes that we have competitive edge over our competitors; including amongst others, quality products from our suppliers, access to R&D capabilities and technological expertise acquired over the years.

 

Our Group seeks to limit the competitive risks through, inter-alia constant review of our development and marketing strategies to adapt to changes in economic conditions and market demands as well as focusing on certain markets and industries. However, there can be no assurance that our Group will be able to compete effectively against our competitors and that competitive pressure will not materially and adversely affect our Group’s business, operations and results and or financial condition.

 

11

 


 

Risks Relating to Our Organization and Our Common Stock

 

Public company compliance may make it more difficult for us to attract and retain officers and directors

 

The Sarbanes-Oxley Act and new rules subsequently implemented by the SEC have required changes in corporate governance practices of public companies. As a public company, we expect these new rules and regulations to increase our compliance costs and to make certain activities more time consuming and costly. As a public company, we also expect that these new rules and regulations may make it more difficult and expensive for us to obtain director and officer liability insurance in the future and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers.

 

We may not be able to attract the attention of major brokerage firms

 

Securities analysts of major brokerage firms may not provide coverage of us since there is no incentive to brokerage firms to recommend the purchase of our Common Stock. No assurance can be given that brokerage firms will, in the future, want to conduct any secondary offerings on behalf of our Company.

 

Our stock price may be volatile

 

The market price of our Common Stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:

 

  * changes in our industry;
  * competitive pricing pressures;
  * our ability to obtain working capital financing;
  * additions or departures of key personnel;
  * limited "public float" in the hands of a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market price for our Common Stock;
  * sales of our Common Stock;
  * our ability to execute our business plan;
  * operating results that fall below expectations;
  * loss of any strategic relationship;
  * regulatory developments;
  * economic and other external factors; and
  * period-to-period fluctuations in our financial results.

 

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our Common Stock.

 

We may not pay dividends in the future. Any return on investment may be limited to the value of our Common Stock

 

We do not anticipate paying cash dividends in the foreseeable future. The payment of dividends on our Common Stock will depend on earnings, financial condition and other business and economic factors affecting us at such time as our board of directors may consider relevant. If we do not pay dividends, our Common Stock may be less valuable because a return on your investment will only occur if our stock price appreciates.

 

12

 


 

There is currently no liquid trading market for our Common Stock and we cannot ensure that one will ever develop or be sustained

 

To date there has not been an active trading market for our Common Stock. We cannot predict how liquid the market for our Common Stock might become. As soon as is practicable after becoming eligible, we anticipate applying for listing of our Common Stock on either the NYSE Amex Equities, The Nasdaq Capital Market or other national securities exchange, assuming that we can satisfy the initial listing standards for such exchange. We currently do not satisfy the initial listing standards for any of these exchanges, and cannot ensure that we will be able to satisfy such listing standards or that our Common Stock will be accepted for listing on any such exchange. Should we fail to satisfy the initial listing standards of such exchanges, or our Common Stock is otherwise rejected for listing and remains quoted on the OTC markets or is suspended from the OTC markets, the trading price of our Common Stock could suffer and the trading market for our Common Stock may be less liquid and our Common Stock price may be subject to increased volatility.

 

Furthermore, for companies whose securities are quoted on the OTC markets, it is more difficult (i) to obtain accurate quotations, (ii) to obtain coverage for significant news events because major wire services generally do not publish press releases about such companies and (iii) to obtain needed capital.

 

Our Common Stock is currently a "penny stock," which may make it more difficult for our investors to sell their shares

 

Our Common Stock is currently and may continue in the future to be subject to the "penny stock" rules adopted under Section 15(g) of the Exchange Act. The penny stock rules generally apply to companies whose Common Stock is not listed on The NASDAQ Stock Market or other national securities exchange and trades at less than $4.00 per share, other than companies that have had average revenue of at least $6,000,000 for the last three years or that have tangible net worth of at least $5,000,000 ($2,000,000 if the company has been operating for three or more years). These rules require, among other things, that brokers who trade penny stock to persons other than "established customers" complete certain documentation, make suitability inquiries of investors and provide investors with certain information concerning trading in the security, including a risk disclosure document and quote information under certain circumstances. Many brokers have decided not to trade penny stocks because of the requirements of the penny stock rules and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited. If we remain subject to the penny stock rules for any significant period, it could have an adverse effect on the market, if any, for our securities. Since our securities are subject to the penny stock rules, investors may find it more difficult to dispose of our securities.  

 

Offers or availability for sale of a substantial number of shares of our Common Stock may cause the price of our Common Stock to decline

 

If our stockholders sell substantial amounts of our Common Stock in the public market, or upon the expiration of any statutory holding period under Rule 144, or issued upon the exercise of outstanding options or warrants, it could create a circumstance commonly referred to as an "overhang" and in anticipation of which the market price of our Common Stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.

 

Megat Radzman Megat Khairuddin, our director and Chairman and Noor Azlan Khamis, our director and CEO and their spouses beneficially owns or holds the proxies for a substantial portion of our outstanding Common Stock, which enables them to influence many significant corporate actions and in certain circumstances may prevent a change in control that would otherwise be beneficial to our stockholders

 

Megat Radzman Megat Khairuddin and Noor Azlan Khamis and their spouses currently beneficially owns and holds the proxies for approximately 74% of our outstanding Common Stock. As such, they have a substantial impact on matters requiring the vote of the stockholders, including the election of our directors and most of our corporate actions. This control could delay, defer, or prevent others from initiating a potential merger, takeover or other change in our control, even if these actions would benefit our stockholders and us. This control could adversely affect the voting and other rights of our other stockholders and could depress the market price of our Common Stock.

 

13

 


 

RISKS RELATING TO THE BUSINESS

 

We have a limited operating track record

 

Our newly acquired subsidiary, Clixster Mobile Sdn Bhd has a limited operating and financial history upon which you may evaluate us. Clixster commenced operations in 2012 and has only generated revenue since then. As a result, your evaluation of us and our prospects will be based on a limited operating and financial history. In addition, most of our products and services have been sold for only a relatively short time, which is since 2012. Therefore, it is difficult to accurately forecast our future revenue and budget our operating expenses.  

 

There can be no assurance that our business model or any specific products or services will be profitable or competitive in the long term against larger, facilities-based mobile telecommunications operator or other MVNOs.

 

We may experience significant fluctuations in our revenues and cash flows. We have experienced, and may continue to experience, operating losses. In the event that we do become profitable, we can provide no assurances that such profitability can or will be sustained in the future.

 

We are highly dependent on DiGi’s core network infrastructure

 

As an MVNO, we do not own or operate our own physical network. Clixster provides mobile telecommunications services over network infrastructure that relies entirely on DiGi’s core network infrastructure. Clixster does not have control over the service provision and is completed dependent on coverage, quality, reliability, service upgrades and network capacity supplied by our host network providers. Therefore, the provision of our services may be adversely affected by:

 

(i) Damage or interruptions to DiGi’s Digital Network;

 

(ii) System and network management, modification or maintenance, by DiGi; or

 

(iii) Failure or obsolescence of DiGi’s network infrastructure and/or related systems.

 

Notwithstanding the above, our host network provider will provide prior notice to us of any service interruption. To date, we have not experience any material disruptions. There is also a service level agreement with the MVNO service agreement which provide assurance that service quality to Clixster’s subscribers will be the same as that provided by DiGi to its own subscribers.

 

DiGi, in entering into the MVNO services agreement, intended for Clixster to assist in developing its markets and we are bound by the MVNO services agreement not to directly compete with DiGi for its existing DiGi subscribers may inadvertently prefer our services over DiGi’s. Hence it is not only important that we adhere to the terms and conditions of the MVNO services agreement, such as the minimum value commitment,] to avoid legal, operational and/or financial repercussions but imperative for us to work closely with DiGi to forge and maintain a sound relationship in light of a strategic long term partnership.

 

We may not be able to successfully extend and/or launch existing or new products and services into the market

 

As part of our strategy, we intend to introduce, and to continue to develop, a number of products, services and service experiences for its subscribers, particularly services such as convergence subscription plans, social portal applications and other similar services. Although Clixster has, in the past year, pioneered and launched innovative mobile services into the market which were well received by our targeted subscriber segments, there is no assurance that we will be able to successfully extend and/or launch existing or new products and services into the market, due to rapid technological changes, shifts in market expectations as well as competitive pressures.

 

There is a risk that we may not identify consumer trends correctly. Any new product or services we launch may not be provided on a cost-effective or price-competitive basis due to a misreading of consumer demand or trends. Such misjudgment may adversely affect the operational and financial results of us.

 

14

 


 

We depend significantly on our network of traditional dealers and distributors for sales or our products and services

 

Our mobile services are principally sold through a network of traditional dealers and distributors. Any dispute with them may disrupt sales and have an adverse effect on Clixster’s operational and financial results.  

 

Dependence on directors and key personnel

 

The technology industry is growing and fast evolving, and the management and operation of the business requires the employment of highly skilled knowledge workers, whether in technology or non-technology related fields. We recognize and believe that the our continuing success depends to a significant extent on the abilities and continuing efforts of its existing Managing and Executive Directors and key personnel, and the ability of Clixster to attract new personnel and retain its existing skilled personnel. The labour market for skilled personnel in this field is highly competitive.  

 

We seek to mitigate this risk by offering its employees competitive salary/remuneration, benefit packages and also to offer internships to undergraduates pursuing tertiary education in the telecommunications field for possible future employment with us.

 

If one or more of these personnel are unable or unwilling to continue in their present positions, or if they join a competitor or form a competing company, we may not be able to replace them easily. Our business may be significantly disrupted and its financial condition and results of operations may be materially and adversely affected.

 

We may be unable to adequately protect our intellectual property or may face intellectual property claims that may be costly to resolve or may limit our ability to use our intellectual property in the future.

 

The popularity of our products and services is dependent on the goodwill associated with the Clixster brand names and logos. In the case of trademarks and service marks applied and/or registered with the Intellectual Property Corporation of Malaysia, we have a perpetual, royalty-free licence to use such trademarks and service marks in Malaysia.

 

Clixster relies on a combination of trademarks, service marks and domain name registrations, common law copyright protection and contractual restrictions to establish and protect their intellectual property. Any third party may challenge our intellectual property. We may incur substantial costs in defending any claims relating to its intellectual property rights.  

 

Breach of customer data protection could materially affect our reputation and business and subject Clixster to liability

 

Clixster has a large database on our subscribers’ information stored in various business systems and used in many business processes. We are required under our licenses to take all reasonable steps to ensure that parties who have access to our subscribers’ information in the ordinary course of business do not disclose such information without the prior consent of the subscribers. Under the Malaysian Personal Data Protection Act 2010 (“PDPA”) which regulates the processing of personal data in regards to commercial transaction and safeguard the interests of data subjects, the penalty for non-compliance will be between RM100,000 - RM500,000 and /or imprisonment between 1-3 years.  

 

15

 


 

RISK RELATING TO THE INDUSTRY

 

We are exposed to competition in the Malaysian mobile telecommunications industry

 

The market for mobile telecommunications services in Malaysia is highly competitive. Increasing competition in the Malaysian mobile telecommunications industry has had, and is expected to continue to have, significant impact on our financial condition and results of operations. Clixster directly competes with the incumbent MNOs as well as three (3) main other MVNOs in the market. Mobile telecommunications service providers compete for subscribers in a number of different areas including the services and features offered customer service and price. In addition, the mobile telecommunications industry in Malaysia may experience technological changes, evolving industry standards, liberalization and changes in subscribers’ preferences. Competition in the mobile telecommunications industry in Malaysia may increase as a result of industry consolidation, the entry of new competitors, regulations, foreign investment in existing competitors, and the development of new technologies, products and services.

 

Malaysia recorded a mobile penetration rate of of 143.8% in 2013¹. This penetration rate in Malaysia is not viewed as saturated yet, as Singapore and Hong Kong Special Administrative Region have achieved penetration rates of 154.3%² and 155.1%³ (as of June 2013) respectively. Nevertheless as consumers become more affluent and also due to the decline in costs of cellular phones, the adoption of multiple SIMs per individual has become more common.

 

Under the current telecommunications laws in Malaysia, mobile operators are obliged to provide their subscribers with number portability, which allows subscribers of mobile services to retain their existing number when changing from one operator to the other. Number portability de creases the hurdles for mobile subscribers to switch to another operator and could lead to increased churn rates and increased subscriber acquisition costs.

 

In view of the above, we rely on our competitive strengths to complete effectively in the Malaysian mobile telecommunications industry. As an MVNO, we rely on our host network provider’s network infrastructure and thus do not need to incur significant amount of capital expenditure to set up network infrastructure. This in turn translates into lower breakeven for our costs. In view of lower capital expenditure, we are able to focus our financial resources towards penetrating new market segments faster. We also have flexibility in pricing and thus are able to respond to changing market demands fast without the need to obtain approvals from our host network providers.

 

Being a new MVNO, the MNP feature may actually help us to acquire relatively more subscribers than other incumbent mobile telecommunications operators as it presents to mobile users a whole new mobile experience and innovation, on top of attractive pricing. Being a niche market player, we are able to direct all our strengths to our target market segment intensively and aggressively.

 

Nevertheless, there can be no assurance however that these or other strategies will prove effective in avoiding any materials adverse effects on our future growth and profitability, and there can be no assurance that the level of existing and future competition will not adversely affect the results of operations and financial condition of Clixster.

 

¹MCMC : Pocket Book of Statistics, Q1 2014

² Office of the Communications Authority,Hong Kong

³ Infocomm Development Authority of Singapore

 

The mobile telecommunications industry is subject to rapid technological changes

 

The mobile telecommunications industry is subject to rapid, ongoing technological changes and has experienced significant changes in recent years, which we expect to continue.

 

Emerging and future technological changes may adversely affect the viability or competitiveness of Clixster. We continuously evaluates and analyses new and/or suitable technologies to be adopted or assimilated into our business as we strive to keep abreast with the ever changing market trends and demand, increase competitiveness and avoid technological obsolescence timely and cost effectively.

 

However, as an MVNO, we rely on our host network provider’s telecommunications network infrastructure, i.e. DiGi Digital Network. This frees us from investing in related heavy capital expenditures, maintenance and upgrading of network infrastructure due to technological changes.

 

16

 


 

Shift in business and revenue model

 

The on-going fragmentation of the sector value chain and aggressive moves by competitors in the marketplace is shifting legacy business models and strategies. There is a pivotal challenge to operators to explore new revenue streams in an effort to entice user loyalty. The failure to shift and adapt to changes and trends in the ecosystem can be adversely affect the financial prospects of the company. A pivotal trend in the ecosystem is the migration from charging for minutes to moving rising volumes of data across networks, shifting away from the traditional revenue streams of voice and SMS related charges. Having long-term financial sustainability is dependent on the structural and operational flexibility and ability of the organization to monetize the increase and changes in demand. In order to limit risks, we are constantly investing time and resources in diversifying our revenue mix through research and development, and exploration of data enabled services and new business models. However there can be no assurance that our Group will be able to compete effectively against our competitors.

 

Emergence of Over-The-Top (OTT) Providers taking a share of future expansion of service revenues

 

The explosion of affordable smartphones (often Wi-Fi enabled), coupled with inexpensive and widespread mobile broadband plans have paved the way for a new category of disruptive competitors in the telecom market OTT players. OTT Voice and Messaging players are the biggest threats for communication service providers. OTT providers have a direct effect on the providers’ core service revenues and margins through substitution of conventional utilization away from the traditional voice, SMS and roaming through Internet Protocol (IP) alternatives. The challenge herein lies with the company to effectively manage the competitive pressures of the market. Adoption of opportunistic and collaborative strategies has its merits in diversification of revenue streams. Embarking on this this approach will generate new revenue streams and balance profit margins, there are however legal limitations to the opportunistic approach following the content of our legal arrangements with the network provide. In order to remain competitive a more collaborative approach needs to be adopted. The company has embarked on this route by exploring new revenue generating streams and balance profit margins through collaborations with other OTT players.

 

Extend of capital expenditure needed to support growth

 

Content streaming players place significant strain on communication service provider networks and resources. Although mobile data revenue growth has helped the industry compensate for voice revenue stagnation, data profitability is lagging. The presence of content streaming players is pushing the envelope with traditional providers. The increased load on the network through transfer of huge amounts of data is forcing providers to make capital investment in network upgrades and operational cost in order to sustain the significant traffic optimization. As an MVNO we rely on the host network providers telecommunications infrastructure and don’t foresee any heavy capital investment in expenditure, maintenance or upgrading of network infrastructure however this does not eliminate the potential threat and risk that could be associated with the indirect effect of network overload or saturation. Establishing an effective communication channel with our network provider partner to address issues of bandwidth will not be an assurance of material mitigation.

 

Data Security breach or threats and attacks from third parties

 

The profile of digital security has increased in recent years and mainly attributed to headlining news in the media. As global communities become increasingly dependent on computing and networking it is imperative that these systems operate securely. While standards continue to meet the needs of the industry and end user, the increased use of open interphases and protocols and the sheer diversity of applications and platforms are increasingly raising threats for malicious use of networks. The surge of security violations (such as viruses and breach of confidentiality) have been observed throughout global networks and often resulted in major cost impacts. Keeping abreast rapidly evolving data security threats is a priority for Clixster. In addressing these threats the Company approaches all threats with a comprehensive, up-to-the minute knowledge about information assets, ecosystem threats and vulnerabilities. The company also employs industry standards in data management, storage and handling of information through its systems, processes and management to mitigate any related risk. The company has deployed all necessary and available resources to ensure competent handling of data and neutralization of threats however this cannot completely eliminate the threat and risk associated with data security breach or threats and attacks from third parties to its systems or data. Breach of data security or threats and attacks on the systems or data of the company could materially affect the reputation of the Company and could be detrimental to the organizations finances.

 

Regulated relationship between MVNO and MNO

 

The relationship between the Company and its respective MNO, DIGI is defined in great length through its engagement contract. The Company purchases airtime and bandwidth at wholesale rates and resells them to the market offering value added services and package bundles to attract the pool of potential subscribers in the market. At the same time the loose ended agreement does not restrict the MNO from offering the similar bundles and value added services at a lower rate, due to its lower cost price to the same pool of potential subscribers. Some may argue that this arrangement of good faith is done in market competitiveness however this form of non-regulated relationship in terms of product offerings can adversely affect the current and future prospects of the company.

 

17

 


 

Clixster’s business is subject to extensive regulation

 

The provision of telecommunications services in Malaysia are subject to extensive regulation and supervision by the MCMC under the ambit of the Ministry of energy, Green Technology and Water (formerly known as Ministry of Energy, Water and Communications Malaysia). We are further governed by the Malaysian Communications and Multimedia Act, 1998 (“CMA”) pursuant to which our NSP-I was granted. While we strongly believe that our NSP-I licence and approvals and in good standing and expect to be able to continue to fulfill our licence and approval terms to the satisfaction of the MCMC, there is no assurance that renewals will be on the same terms as the existing licences.

 

Any inability to obtain new licences, or delay in the renewal of existing licences, could impede our provision of services and could therefore have a material adverse effect on our business and results of operations. Our operational and financial results could also be adversely affected if adverse fee charges, such as the establishment of regulated pricing, are introduced by the MCMC.

 

Changes in laws, regulations or MCMC policy affecting our business activities and those of its competitors could adversely affect our financial condition or results of operations. In particularly, decision by the MCMC in the areas of the grant, amendment or renewal of licenses to Clixster or third parties, if unfavourable to Clixster, could adversely affect our financial condition and results of operations. There can be no assurance that the Minister will not issue new or additional telecommunications licences to new or existing mobile operators whose services will compete with those offered by Clixster.

 

We may be liable for our distributors’ actions

 

As our distributors are third parties, we have no control over their operations but we may be held accountable for their actions as they are deemed to be agents or representatives of Clixster.

 

Currently, liability for agent actions is limited to prepaid registration which is governed by MCMC’s guidelines on Registration of End-Users of Prepaid Public cellular Services (No. 1 and No. 2) and the Guidelines on Prepaid Registration (collectively “Prepaid Guidelines”). There is no guarantee that liabilities for agent actions will not be extended to other areas since the Minister has the power to impose additional conditions.

 

However, all our distributors and their dealers are required to follow strictly to the Clixster’s standard operating procedures for prepaid registration to minimize non-compliance and possible fines by MCMC.  

 

We are exposed to risks relating to content downloaded or uploaded by its subscribers

 

Mobile communications providers may be subject to third party allegations of intellectual property rights infringement with regards to content downloaded or uploaded by its subscribers. There can be no assurance that our subscribers do not and will not infringe the intellectual property rights of others.

 

In some instances, these third party allegations may have progressed to lawsuits alleging infringement of patent and other rights. Any such allegations, whether or not meritorious, could result in costly litigation and divert the efforts of our personnel. While we continuously seek appropriate assurances and indemnification from vendors, if it is ultimately determined that a third party has enforceable intellectual property rights with respect to our products and services, it may adversely affect our results of operations or prevent us from offering our services.

 

If we are found liable for infringement, we may be required to other into licensing agreements (if available on acceptable terms or at all) or pay damages and cease selling certain products and services. In addition, we may need to redesign some of our product and service offerings to avoid future infringement liabilities.  

 

Concerns about alleged mobile telecommunications health risk

 

Certain reports, albeit not conclusive, indicate that radio frequency emissions from mobile handsets and other mobile equipment may have an adverse effect on the health of mobile telephone users and others. The issuances of such reports in the future could adversely affect the market price of the shares of mobile telecommunications service providers, including that of Clixster, and the actual or perceived risk of mobile telecommunications devices could adversely affect mobile operators such as Clixster through reduced subscriber growth, reduction in subscribers or reduced usage per subscriber.

 


 

RISKS RELATING TO MALAYSIA

 

Developments in Asia and globally may negatively impact Clixster

 

The global economy though expanded at a modest pace in 2013 was riled with the increase in payroll tax and the automatic government spending cuts in US and the uncertainties emanating from the crisis in Cyprus. To a certain extent, the Malaysian economy was affected but was driven by the continued strong growth in domestic demand. The Malaysian economy expanded by 4.7% in 2013 (2012: 5.6%) with GDP recorded at 4.7% (2012: 5.6%).¹ Further adverse economic developments globally and in Asia could have a material adverse effect on Clixster’s financial condition and results of operation.

 

¹ Bank Negara Malaysia Annual Report 2013

 

Political, economic and social developments or other changes in tax law or other regulations in Malaysia may adversely affect Clixster

 

Clixster’s business, prospects, financial condition and results of operations may be adversely affected by political, economic, social and legal developments in Malaysia. Such political and economic uncertainties include, but are not limited to, the risks of war, terrorism, nationalism or nullification of contract, changes in interest rates and methods of taxation. Negative developments in Malaysia’s socio-political environment may adversely affect the business, financial condition and results of operations of Clixster. In addition, changes in tax laws or other regulations or actions taken by the Government to partially or wholly nationalize Clixster or its operating assets could adversely affect Clixster’s results of operations and financial condition.

 

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ITEM 1B. UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 2. PROPERTIES

 

PROPERTY HELD BY US. Neither the Company nor its subsidiaries own any properties or facilities.

 

During the year under review, we lease and occupy 1,000 square feet of office space in Kuala Lumpur for our executive and administrative office at a cost of about RM1,185 or about US$395 per month.

 

At the date of this report, we are operating at No. 3 Jalan Sri Hartamas 7, Taman Sri Hartamas 50480 Kuala Lumpur, Malaysia with an area of 6,000 square feet. This lease was assumed on the acquisition of Clixster Mobile Sdn. Bhd. This lease is for the term until February 28, 2015 at a rate of RM15,000 or about US$5,000 per month. We believe we will be able to obtain additional space, as needed, on commercially reasonable terms.

 

ITEM 3. LEGAL PROCEEDINGS

 

There are no legal actions pending against us nor are any legal actions contemplated by us at this time.

 

ITEM 4. MINE SAFETY DISCLOSURES
 
Not applicable.

 

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PART II
 
ITEM 5. MARKET PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

 

MARKET INFORMATION

 

Our shares are quoted and traded from time to time on the OTC Bulletin Board under the symbol "CHMD". Although trading in our Common Stock has occurred on a relatively consistent basis, the volume of shares traded has been limited; the quotations are limited and sporadic at times.

 

The following table shows the reported quarterly high and low closing sales price for our shares within the last two fiscal years on the OTC Bulletin Board. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions. Investors should not rely on historical prices of our Common Stock as an indication of its future price performance. The closing price of our Common Stock on December 31, 2013 was $0.0195 per share.

 

 

  Quarter High Low
  ------------------------ ------------- --------------
  Fourth Quarter 2013 $0.028 $0.010
  Third Quarter 2013 $0.020 $0.009
  Second Quarter 2013 $0.030 $0.001
  First Quarter 2013 $0.0228 $0.0125
       
  Fourth Quarter 2012 $0.020 $0.010
  Third Quarter 2012 $0.030 $0.010
  Second Quarter 2012 $0.038 $0.007
  First Quarter 2012 $0.0119 $0.0030
       

 

HOLDERS

 

The number of record holders of our common stock as of May 31, 2014, was approximately 74 based on information received from our transfer agent. This amount excludes an indeterminate number of shareholders whose shares are held in "street" or "nominee" name.

 

DIVIDENDS

 

There have been no cash dividends declared on our Common Stock since inception. It is the present policy of the Company to retain earnings to finance the growth and development of the business and, therefore, the Company does not anticipate paying dividends on its common stock in the foreseeable future.

 

The holders of our Common Stock are entitled to one vote for each share of record on all matters to be voted on by shareholders. There is no cumulative voting with respect to the election of our directors or any other matter. Therefore, the holders of more than 50% of the shares voted for the election of those directors can elect all of the directors. The holders of our Common Stock are entitled to receive dividends when, as and if declared by our Board of Directors from funds legally available therefore. Cash dividends are at the sole discretion of our Board of Directors. In the event of our liquidation, dissolution or winding up, the holders of Common Stock are entitled to share ratably in all assets remaining available for distribution to them after payment of our liabilities and after provision has been made for each class of stock, if any, having any preference in relation to our Common Stock. Holders of shares of our Common Stock have no conversion, preemptive or other subscription rights, and there are no redemption provisions applicable to our Common Stock.

 

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STOCK OPTIONS

 

During the year, we had two effective equity compensation plans: (1) the 2002 Stock Option Plan and (2) the 2007 Stock Incentive Plan. The 2002 Stock Option Plan expired in October 2012, however there were 19,000,000 share options issued and outstanding during 2013. The details of both equity compensation plans are set out below.

 

2002 Stock Option Plan

 

In October 2002, our Board of Directors authorized and approved the adoption of the 2002 Stock Option Plan effective the same date (the "2002 Stock Option Plan").

 

The purpose of the 2002 Stock Option Plan was to enhance our long-term stockholder value by offering opportunities to our directors, officers, employees and eligible consultants to acquire and maintain stock ownership in order to give these persons the opportunity to participate in our growth and success, and to encourage them to remain in our service.

 

The 2002 Stock Option Plan is administered by our Board of Directors or a committee ("Plan Administrator") appointed by and consisting of two or more members of our Board of Directors, which shall determine (i) the persons to be granted stock options under the 2002 Stock Option Plan; (ii) the number of shares subject to each option, the exercise price of each stock option; and (iii) whether the stock option shall be exercisable at any time during the option period of ten years or whether the stock option shall be exercisable in installments or by vesting only. The 2002 Stock Option Plan provides authorization to the Board of Directors to grant stock options to purchase a total number of shares not to exceed 211,111,112 shares as at the date of adoption by the Board of Directors. At the time a stock option is granted under the 2002 Stock Option Plan, the Plan Administrator shall fix and determine the exercise price at which shares may be acquired.

 

In the event an optionee ceases to be employed by or to provide services to us for reasons other than cause or voluntary resignation of position, any stock option that is vested and held by such optionee generally may be exercisable within up to one year after the effective date that his position ceases, and after such one year period any unexercised stock option shall expire. In the event an optionee ceases to be employed by or to provide services to us for reasons of cause or voluntary resignation from the position, any stock option that is vested and held by such optionee shall forthwith terminate.

 

No stock options granted under the 2002 Stock Option Plan will be transferable by the optionee other than by will or by the laws of descent and distribution following the optionee's death, and each stock option will be exercisable during the lifetime of the optionee subject to the option period of ten years or limitations described above.

 

The exercise price of a stock option granted pursuant to the 2002 Stock Option Plan shall be paid in full to us by delivery of consideration equal to the product of the number of shares covered multiplied by the exercise price.

 

The 2002 Stock Option Plan further provides that the Plan Administrator may grant to any key individuals who are employees eligible to receive options one or more incentive stock options to purchase the number of shares allotted by the Board of Directors (the "Incentive Stock Options"). The option price per share of Common Stock deliverable upon the exercise of an Incentive Stock Option shall be at least 100% of the fair market value of the shares and in the case of an Incentive Stock Option granted to an optionee who owns more than 10% of the total combined voting power of all classes of our stock, shall not be less than 110% of the fair market value. The option term of each Incentive Stock Option shall be determined by the Plan Administrator, and shall not commence sooner than from the date of grant and shall terminate no later than ten years from the date of grant, except for an optionee who owns more than 10% of the total combined voting power of all classes of our stock and whose Incentive Stock Option shall terminate no later than five year from the date of grant.

 

There were 19,000,000 stock options to purchase our Common Stock under the 2002 Stock Option Plan, issued in 2010 and outstanding as at January 1, 2013. In September 2013, these 19,000,000 stock options were terminated. As at December 31, 2013 there were no share options outstanding in respect of the 2002 Share Option Plan.

 

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2007 Stock Incentive Plan

 

On February 19, 2007, our Board of Directors authorized and approved the adoption of the 2007 Stock Incentive Plan effective the same date (the "2007 Stock Incentive Plan").

 

The purpose of the 2007 Stock Incentive Plan is to enhance our long-term stockholder value by offering opportunities to our directors, officers, employees and eligible consultants to acquire and maintain stock ownership in order to give these persons the opportunity to participate in our growth and success, and to encourage them to remain in our service.

 

The 2007 Stock Incentive Plan is to be administered by our Board of Directors or a committee ("Plan Administrator") appointed by and consisting of two or more members of our Board of Directors, which shall determine (i) the persons to be granted stock options under the 2007 Stock Incentive Plan; (ii) the number of shares subject to each option, the exercise price of each stock option; and (iii) whether the stock option shall be exercisable at any time during the option period of ten years or whether the stock option shall be exercisable in installments or by vesting only. The 2007 Stock Incentive Plan provides authorization to the Board of Directors to grant stock options to purchase a total number of shares, not exceed 38,400,000 shares as at the date of adoption by the Board of Directors. At the time a stock option is granted under the 2007 Stock Incentive Plan, the Board of Directors shall fix and determine the exercise price at which shares of our Common Stock may be acquired.

 

In the event an optionee ceases to be employed by or to provide services to us for reasons other than cause, retirement, disability or death, any stock option that is vested and held by such optionee generally may be exercisable for such period of time thereafter as shall be determined by the Plan Administrator and set forth in the documents evidencing the option. The Plan Administrator shall have complete discretion either at the time an option is granted or at any time while the option remains outstanding, to i) extend the period of time which the option is to be exercisable following the optionees cessation of service, but not beyond the expiration of the option term and/or ii) permit the option to be exercised after the cessation of employment of both vested and unvested options at the time of cessation of employment.

 

No stock options granted under the 2007 Stock Incentive Plan will be transferable by the optionee other than by will or by the laws of descent and distribution following the optionee's death, and each stock option will be exercisable during the lifetime of the optionee subject to the option period of ten years or limitations described above. The options can be assigned in whole or in part during the Optionee's lifetime to one or more members of the optionee's immediate family, provided the assignment is connected to estate planning or pursuant to a domestic relations order.

 

The exercise price of a stock option granted pursuant to the 2007 Stock Incentive Plan shall be paid in full to us by delivery of consideration equal to the product of the number of shares multiplied by the exercise price. Any stock option settlement, including payment deferrals or payments deemed made by way of settlement of pre-existing indebtedness from the Company may be subject to such conditions, restrictions and contingencies as may be determined by the Plan Administrator.

 

The 2007 Stock Incentive Plan further provides that, subject to the provisions of the 2007 Stock Incentive Plan and prior Stockholder approval, the Board of Directors may grant to any key individuals who are our employees eligible to receive options, one or more incentive stock options to purchase the number of shares of Common Stock allotted by the Board of Directors (the "Incentive Stock Options"). The option price per share of Common Stock deliverable upon the exercise of an Incentive Stock Option shall be at lease 100% of the fair market value of the Common Shares of the Company and in the case of an Incentive Stock Option granted to an optionee who owns more than 10% of the total combined voting power of all classes of our stock, shall not be less than 110% of the fair market value of our Common Stock. The option term of each Incentive Stock Option shall be determined by the Plan Administrator, which shall not commence sooner than from the date of grant and shall terminate no later than ten years from the date of grant of the Incentive Stock Option, except for optionee who owns more than 10% of the total combined voting power of all classes of our stock whom shall terminate no later than five year from the date of grant of the Incentive Stock Option.

 

On March 8, 2007, we registered 38,400,000 shares underlying stock options under the 2007 Stock Incentive Plan with the SEC pursuant to a registration statement on Form S-8.

 

From 2007 to 2012 the Company issued a total of 6,522,309 shares under the 2007 Stock Incentive Plan.

 

In 2013, the Company did not issue any shares under the 2007 Stock Incentive Plan.

 

In summary, as of December 31, 2013, (i) the Company has issued 6,522,309 shares under the 2007 Stock Incentive Plan, (ii) there are no outstanding stock options to purchase our Common Stock under the 2007 Stock Incentive Plan and, (iii) there are still 31,877,691 shares issuable under the 2007 Stock Incentive Plan.

 

22

 


 

ISSUER PURCHASES OF EQUITY SECURITIES

 

No repurchases of our Common Stock were made during the fourth quarter and during our fiscal year ended December 31, 2013.

 

PENNY STOCK REGULATIONS

 

Shares of our Common Stock are subject to rules adopted by the Securities and Exchange Commission that regulate broker-dealer practices in connection with transactions in "penny stocks". Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the Nasdaq system, provided that current price and volume information with respect to transactions in those securities is provided by the exchange or system).

 

The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, deliver a standardized risk disclosure document prepared by the Securities and Exchange Commission, which contains the following:

 

- a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading;
- a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to violation to such duties or other requirements of securities' laws;
- a brief, clear, narrative description of a dealer market, including "bid" and "ask" prices for penny stocks and the significance of the spread between the "bid" and "ask" price;
- a toll-free telephone number for inquiries on disciplinary actions;
- definitions of significant terms in the disclosure document or in the conduct of trading in penny stocks; and
- such other information and is in such form (including language, type, size and format), as the Securities and Exchange Commission shall require by rule or regulation

 

Prior to effecting any transaction in penny stock, the broker-dealer also must provide the customer the following:

 

- the bid and offer quotations for the penny stock;
- the compensation of the broker-dealer and its salesperson in the transaction;
- the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and
- monthly account statements showing the market value of each penny stock held in the customer's account.

 

In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitably statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for a stock that becomes subject to the penny stock rules. Holders of shares of our Common Stock may have difficulty selling those shares because our Common Stock will probably be subject to the penny stock rules.

 

ITEM 6. SELECTED FINANCIAL DATA

 

A registrant that qualifies as a smaller reporting company is not required to provide the information required by this item.

 

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion of our financial condition and our subsidiaries and our results of operations should be read together with the consolidated financial statements and related notes that are included later in this Annual Report on Form 10- K. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Risk Factors or in other parts of this Annual Report on Form 10-K.

 

Year ended December 31, 2013 compared with year ended December 31, 2012

 

Results of Operations

 

REVENUES

 

For the year ended December 31, 2013, the Group has realized revenue of $145,495 and a cost of revenue of $95,462, achieving a gross profit of $50,033 from its continuing operations and there was no revenue, costs of sales and gross profit in 2012 from the continuing operations. For the year ended December 31, 2013, the Group has realized revenue of $135,220 and a cost of revenue of $90,925 achieving a gross profit of $44,295 from its business operations held for sale (Note 6). For the year ended December 31, 2012, Group has realized revenue of $2,449,489 and a cost of revenue of $1,557,672 achieving a gross profit of $891,815 from its business operations held for sale (Note 6).

 

OPERATING EXPENSES

 

For the year ended December 31, 2013, from our continuing operations, our gross profit was $50,033 and our total operating expenses were $99,635, all of which were selling, general and administrative expenses. In addition, we have a write back of option liability of $236,504. We also had $163,101 in interest expenses and loss from our operations held for sales of $139,257 so that the net loss to our shareholders for the year ended December 31, 2013 was $115,456. This was in comparison to the year ended December 31, 2012 where we had no gross profit and we had general expenses of $55,319, interest expense of $48 and a loss of $7,135,114 from our operations held for sale, resulting in a loss of $7,190,481 to our shareholders.

 

For the year ended December 31, 2013, from our operation held for sale, our gross profit was $44,295 and our total operating expenses were $179,280, all of which were general and administrative expenses. We also had $5,073 in interest expenses, loss on foreign exchange of $371, and bank charges $1,770 and other income of $2,942 so that the net loss from our operations held for sale for the year ended December 31, 2013 was $139,257 (Note 6). This is in comparison to the year ended December 31, 2012 from operations held for sale, where our gross profit was $891,815 and our total operating expenses were $7,957,266, all of which were selling, general and administrative expenses. In addition we had impairment of goodwill of $6,323,061. We also had $147,274 in interest expenses and gain on foreign exchange of $16,317 and other income of $61,030 and $264 in interest income, so that the net loss from our operations held for sale for the year ended December 31, 2012 was $7,135,114 (Note 6).    

 

Liquidity and Capital Resources

 

As at December 31, 2013, the Company had cash and cash equivalents totaling $2,581, other current assets of $14,068 consisting of trade receivables and prepayments, and assets of operations held for sale of $1,457,228. The total assets of the Company were $1,474,162 as of December 31, 2013. We also had current liabilities of $2,801,164 which were represented by $243 in trade payables, $924,000 in other payables and accruals, and $1,876,921 in operations held for sale as of December 31, 2013. We also had $2,000,000 in long-term shareholders loan as of December 31, 2013, making our total liabilities $4,801,164.

 

At present the Company does not have sufficient cash resources to provide for all general corporate operations in the foreseeable future. The Company will be required to raise additional capital in order to continue and expand its operations in fiscal 2013.

 

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Liquidity and Capital Resources

 

Net cash used in operating activities was $30,602 during the year ended December 31, 2013 as compared to net cash used in operating activities of $64,922 in the prior year. The Company intends to monitor the monthly cash outlays in the coming months and conserve cash until additional financing can be received through other funding. The net loss for the year was $115,456 compared to net loss of $7,190,445 in the prior year.

 

There were no net cash provided by investing activities and financing activities in 2013. In 2012, the net cash provided by investing activities and financing activities was $1,181 and nil respectively.

 

At present the Company does not have sufficient cash resources, receivables and cash flow to provide for all general corporate operations in the foreseeable future. In 2013, the Group’s light appliances business faced many competitive and financial pressure that this business faced financial difficulty which lead to the decline of the business. In January 2014, this business was disposed in order to rationalize the operating costs and reduce our liabilities. On January 31, 2014, the Company closed the transaction to acquire 63.2% of Clixster Mobile Sdn. Bhd. by the issuance of 10,193,609,664 Common Stock representing approximately 90% of the enlarged issued share capital of the Company. Clixster Mobile is a MVNO company engages in the provisioning of cellular and mobile broadband services in Malaysia. The MVNO business will change the direction of the Company from a trading in consumer electronics and light appliances to a service company providing cellular and mobile data services.  This MVNO business requires injection of cashflow which the Group requires cashflow of funds to expand and develop its business.  The Company will be required to raise further funds to meet its other liabilities and operation requirements to continue to operation in 2014 by i) selling its Common Stock ii) raise from the capital markets, iii) sell additional assets.

 

Going Concern

 

The Company's financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

 

As of December 31, 2013, the Company has an accumulated deficits totaling $6,110,891 and its current liabilities exceed its current assets by $1,327,002. The Company has also experienced a significant loss from operations in 2012 as a result of the write down of the goodwill. For the year ended December 31, 2013, the Company incurred net losses of $115,456 (2012:$7,190,445).

 

The Company's ability to continue as a going concern is contingent upon its ability to secure additional financing and attain profitable operations. In addition, the Company's ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered in developing markets and the competitive environment in which the Company operates.

 

The Company is pursuing financing for its operations and seeking additional investments. In addition, the Company is seeking to expand its revenue base in its consulting business and in developing and integrating its newly acquired MVNO business in Malaysia. Failure to secure such financing, to raise additional equity capital and to expand its revenue base may result in the Company depleting its available funds and not being able pay its obligations.

 

The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

 

Off-Balance Sheet Arrangements

 

There are no off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

 

Capital Expenditure Commitments

 

We had no material capital expenditures for the year ended December 31, 2013. However we expect to invest, subject to availability of funding, approximately $1,500,000 in capital expenditure over the next 12 month for the MVNO business.

 

 

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Critical Accounting Policies

 

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States, and make estimates and assumptions that affect our reported amounts of assets, liabilities, revenue and expenses, and the related disclosures of contingent liabilities. We base our estimates on historical experience and other assumptions that we believe are reasonable in the circumstances. Actual results may differ from these estimates.

 

The following critical accounting policies affect our more significant estimates and assumptions used in preparing our consolidated financial statements.

 

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 collect ability is reasonably assured.

 

Stock-Based Compensation

 

The Company accounts for equity instruments issued to employees for services based on the fair value of the equity instruments issued and accounts for equity instruments issued to other than employees based on the fair value of the consideration received or the fair value of the equity instruments, whichever is more reliably measurable.

 

The Company accounts for stock based compensation in accordance with ASC 718 “Compensation – Stock Compensation” which, prescribes accounting and reporting standards for all stock-based payments award to employees, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights, may be classified as either equity or liabilities. The Company should determine if a present obligation to settle the share-based payment transaction in cash or other assets exists. A present obligation to settle in cash or other assets exists if: (a) the option to settle by issuing equity instruments lacks commercial substance or (b) the present obligation is implied because of an entity’s past practices or stated policies. If a present obligation exists, the transaction should be recognized as a liability; otherwise, the transaction should be recognized as equity.

 

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50 “Equity –Based Payments to Non-Employees”. Measurement of share-based payment transactions with non-employees shall be based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction should be determined at the earlier of performance commitment date or performance completion date.

 

Recently Issued Accounting Pronouncements

 

Recently issued accounting pronouncements and their effect on us are discussed in the notes to the consolidated financial statements in our December 31, 2013 audited financial statements.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

A smaller reporting company is not required to provide the information required by this Item.

 

26

 


 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

Consolidated Financial Statements

 

Please see page F-1 through F-17 of this Form 10-K.

 

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

During the reports for the two most recent fiscal years, there were no disagreements with HKCMCPA Company Limited on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure as covered by Item 304 (a)(1)(iv) of Regulation S-K, which disagreements, if not resolved to the satisfaction of HKCMCPA Company Limited would have caused them to make reference thereto in their report on the financial statements for such years.

 

 

ITEM 9A. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management, including our then Chief Executive Officer, Mohd Mahyudin bin Zainal, and our Chief Financial Officer, Mohd Suhaimi bin Rozali, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act as of a date (the "Evaluation Date") within ninety (90) days prior to the filing of our December 31, 2013 Form 10-K.

 

Based upon that evaluation, our Management has concluded that, as of December 31, 2013, our disclosure controls and procedures were not effective in timely alerting management to the material information relating to us (or our consolidated subsidiaries) required to be included in our periodic filings with the SEC.

 

Internal Control over Financial Reporting

 

(a) Management’s Annual Report on Internal Control Over Financial Reporting.

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

 

27

 


 

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the registrant’s annual or interim financial statements will not be prevented or detected on a timely basis.

 

Our management, with the participation of its CEO and President, assessed the effectiveness of our internal control over financial reporting as of December 31, 2013. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of The Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on that assessment under such criteria, management concluded that our internal controls over financial reporting were not effective as of December 31, 2013 due to control deficiencies that constituted material weaknesses. A material weakness is a control deficiency, or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

 

In the course of making our assessment of the effectiveness of internal controls over financial reporting, we identified one material weakness in our internal control over financial reporting. This material weakness consisted of inadequate staffing within the accounting operations of our Company. The small number of employees who are responsible for accounting functions (more specifically, two in our subsidiary accounting department) prevents us from segregating duties within our internal control system. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews.

 

We are in the process of developing and implementing remediation plans to address our material weaknesses.

 

Management has identified specific remedial actions to address the material weaknesses described above:

 

* Improve the effectiveness of the accounting group by continuing to augment our existing resources with additional consultants or employees to improve segregation procedures and to assist in the analysis and recording of complex accounting transactions and preparation of tax disclosures. We plan to mitigate the segregation of duties issues by hiring additional personnel in the accounting department once we have achieved positive cash flow from operations, and/or have raised significant additional working capital.

* Improve segregation procedures by strengthening cross approval of various functions including cash disbursements and quarterly internal audit procedures where appropriate.

 

Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

 

 

Changes in Controls and Procedures

 

There were no significant changes made in our internal controls over financial reporting as of December 31, 2013, that have materially affected or are reasonably likely to materially affect these controls. Thus, no corrective actions with regard to significant deficiencies or material weaknesses were necessary.

 

 

Attestation Report of the Registered Public Accounting Firm

 

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. We were not required to have, nor have we, engaged our independent registered public accounting firm to perform an audit of internal control over financial reporting pursuant to the rules of the Commission that permit us to provide only management’s report in this annual report.

 

 

ITEM 9B.  OTHER INFORMATION

 

None.

 

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PART III

 

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERANCE.

 

Executive Officers and Directors. Our directors and principal executive officers during year 2013 and to the date of this report are as specified on the following table:

 

NAME   AGE   POSITION   APPOINTED / RESIGNED DURING THE PERIOD
             
Megat Radzman MEGAT KHAIRUDDIN   47   Executive Chairman and Executive Director   Appointed on January 31, 2014
Noor Azlan KHAMIS   41   Chief Executive Officer, President and Executive Director   Appointed on January 31, 2014
Mohd Mahyudin bin ZAINAL   44   Director    
Andrew Hwan LEE   52   Non Executive Director   Appointed on January 31, 2014
Azrinaz Mazhar HAKIM MAZHAR   35   Director   Appointed on January 31, 2014
CHING Chiat Kwong   49   Non Executive Director   Appointed on January 31, 2014
Mohd Suhaimi bin ROZALI   52   Chief Financial Officer, Company Secretary, and Treasurer    
Norlizah binti ZAINAL   48   Director   Resigned on January 31, 2014
Mohd Khairudin bin RAMLI   42   Director   Resigned on January 31, 2014

 

 

Ir. Dr Megat Radzman Megat Khairuddin, Ph.D. Dr. Megat Radzman, aged 47, was appointed as Chairman and Executive Director on January 31, 2014, Dr. Megat Radzman is an Engineer by training, a graduate of University of British Columbia, Vancouver, Canada with a Degree in Electronics Engineering specializing in Data Communication.

 

Dr. Megat Radzman is a serial entrepreneur with a penchant interest in technology. He had successfully created several ventures over the last 15 years, most notably when he co-founded the largest mobile-phone manufacturer and supplier in Malaysia with offices in Singapore, Indonesia, Bangladesh and China. His profound understandings of the mobile consumer market and astute business skills led his venture to become the largest mobile phones distribution network in Malaysia with over 4000 authorized distributors, resellers and specialized mobile retail stores nationwide, and over 17 distributors in countries within the region.

 

He began his career as a Consultant & Business Partner for Siemens & Ericsson and subsequently for the Hungarian Telecommunication Association. He then worked as Designer & Technical Consultant for RISTI (R&D division of PT Telekom, Indonesia based in Bandung). He left to set-up and build CSL Group of Companies, the largest mobile-phone manufacturer and supplier in Malaysia with businesses in Singapore, Indonesia, Bangladesh and China. He served as the Vice Chairman of CSL and consequently departed from the Group after the CSL brand was acquired by S i2i Limited (formerly known as Spice i2i Limited), one of the largest Mobile Internet companies in ASEAN region which is headquartered in Singapore.

 

Dr. Megat Radzman received his doctorate in International Marketing from National University of Malaysia in 2010.

 

Noor Azlan Khamis. Noor Azlan aged 41, was appointed as Chief Executive Officer, President and Executive Director of the Company on January 31, 2014. Noor Azlan holds an MBA in Strategic Marketing from Maastricht School of Management (Holland) with 15 years of technology and marketing experience in both enterprise and service provider networking.

 

He began his career with Asia Connect (1994) under the STI group of companies which was one of the first Internet companies in South East Asia that provided such services as email addresses, domain name registration and even streaming internet radio broadcasts. From October 2007 until May 2010 he led the turnaround exercise for Konsortium Multimedia Swasta Sdn Bhd (KOMMS) as its Director of Business Development and Strategic Planning. He was later appointed as the Chief Executive Officer at Myputralink Group of Companies, a Wireless solution provider and data networking systems company which is part of Zenith Capital Sdn Bhd, a company linked to Oilcorp Berhad.

 

Mr. Noor Azlan was also involved with Medical Online Sdn Bhd during the introduction of MSC 7 flagship in the end-90s, where he was responsible for Strategic Planning and Marketing of Malaysian Telehealth Project. Subsequently, Mr. Noor Azlan led an initiative to deploy private sector telemedicine project with Malaysian Medical Association and Association of Private Hospital of Malaysian under Open Net System Inc. Mr. Noor Azlan was also the co-founder of Giro Mobile Payment Sdn Bhd, whose principal activities were in the telecommunications, ICT and its related business services.

 

29

 


 

MOHD MAHYUDIN BIN ZAINAL. Mohd Mahyudin was appointed as Director and President and Chief Executive Officer of the Company on June 8, 2012 and resigned as President and Chief Executive Officer on January 31. 2014, Since August 2008, Modh Mahyudin has been the Chief Executive Officer of ECE Technologies Sdn. Bhd which was a major shareholder of the Company. Modh Mahyudin obtained a Bachelor of Law Degree LLB (Hons) from Universiti Kebangsaan Malaysia and has been admitted as Advocate & Solicitor of High Court Of Malaya in 1994. He has extensive experience in many spheres of law including commercial litigation, conveyancing and corporate legal practice. He has been involved in large scale corporate restructuring exercises involving corporate restructuring, mergers and acquisitions of public listed companies locally in Malaysia and also acquisitions of foreign companies in South East Asia. He was directly involved in the listing of Mutiara Goodyear Development Berhad on the Main Board of Bursa Malaysia and the restructuring of Idaman Unggul Berhad (formerly known as Idris Hydraulic (M) Berhad). He was also directly involved in the establishment of Tahan Insurance Berhad via the merger of three insurance companies namely Talasco Insurance Berhad, Tenaga Insurance Berhad and People Insurance Berhad.

 

Prior to joining ECE Technologies in August 2008, he was the Chief Executive Officer/President of WWCable Berhad (company listed in Bursa Malaysia). He was involved in various industries such as manufacturing, property development, construction, financial and insurance and also an executive director and director of several public listed companies listed in Bursa Malaysia namely Idaman Unggul Berhad, Idris Hydraulic Berhad, Mutiara Goodyear Development Berhad, Sern Kou Resources Berhad, Tap Resouces Berhad. He was also Director of Talasco Insurance Berhad, People Insurance Berhad and Tahan Insurance Berhad. Modh Mahyudin is not an officer or director of any reporting company.

 

Andrew Hwan Lee. Mr. Lee, aged 52, was appointed to be the Non-Executive Director on January 31, 2014. Mr. Lee is a Korean American with an extensive international work experience. Soon after completing his studies, he joined the International Computer Consulting (ICC) Corp before joining the Clinton-Gore Presidential Campaign team in Washington DC for 13 months as the System Manager, responsible for data communications and as such tasked with designing the LAN and WAN infrastructure to support the presidential campaign and its subsequent testing and implementation.

 

He later joined Hughes Communication under the National Rural Telecommunication Co-operative as the Head of Billing where he was responsible for the selection, specification, development, implementation and operations of the Billing System. He was later recruited as the Chief Information Officer of MEASAT Broadcast Network Systems Malaysia, which form a part of the core team from Hughes Communication that was assigned to set up and operate the first satellite TV service. Operating under the brand ASTRO, it is an integrated electronic media enterprise offering wide-range of multimedia broadcasting services and one of the largest broadcasting companies in Asia, offering 100 television and 8 radio channels in digital format. Appointed as the Chief Information Officer of Astro All Asia Broadcast where he played a key role in setting the operation provider in the region.

 

Subsequently, Andrew was appointed as the Group CEO of DataOne, a wholly owned subsidiary of KEPPEL T&T, that built and operated world class Internet Data Center in Singapore, Malaysia, Philippines and Thailand, managing an operating budget of over S$500 million.

 

Presently, he is the Chief Strategy Officer of HUB Technologies SB, a fire prevention solution company. Its product Aerohub is known as the only organic aerosol fire extinguish solution in the world and recognized by the Government of Malaysia as the National Product. HUB Technologies was awarded a Central Contract from the Ministry of Finance of Malaysia worth RM 2 Billion.

 

Mr. Lee studied computer engineering at University of Missouri in 1985.

 

Azrinaz Mazhar Hakim Mazhar. Hakim Mazhar, aged 35, was appointed as the Non-Executive Director of the Company on January 31, 2014. Hakim Mazhar started work as a broadcast journalist with Malaysia’s number one private television station TV3 in 1997. She was a graduate from Malaysia Institute of Integrative Media (MIIM) in broadcasting and appeared on TV3’s Bulletin Pagi, Berita Terkini and Bulletin 1.30 news segments. She won several accolades throughout her career with TV3 including TV3’s "Most Promising Journalist" award in 2000 and received the MIIM Alumni Award in 2002. During her broadcasting stints, she completed numerous assignments including covering several government and business conferences, as well as interviewing world government leaders and business personalities. She left the TV station in May 2005 to venture into other undertakings.

 

Hakim Mazhar, who is the former wife of the Sultan of Brunei, is also active in social and community work and currently the Patron of the Drug Free Youths Association of Malaysia, an NGO that promotes 'tobacco-alcohol-drug' free lifestyle amongst the youths. She also sits on the board of directors of BACA, an NGO that promotes literacy among the rural communities. Previously, she was the Patron of the Brunei Breast Cancer Awareness Association for three years.

 

Ching Chiat Kwong. Mr. Ching, aged 49, was appointed as the Non-Executive Director of the Company on January 31, 2014. Mr. Ching is the Executive Chairman and CEO of Oxley Holdings Limited, a company listed on the Singapore Stock Exchange (“SGX”). He is responsible for the overall performance as well as for the formulation of corporate strategies, and the future direction of the Oxley Group. Mr. Ching also serves as a Non-Executive Director of Artivision Technologies Ltd, a SGX Catalist-listed company and NewSat Limited, a company listed on the Australia Stock Exchange (“ASX”).

 

Mr. Ching possesses more than 15 years of industry experience. Prior to establishing the Oxley Group, he invested in, developed and successfully launched 13 residential property projects in various parts of Singapore. His ability to identify market trends and business opportunities has enabled him to chart the course for the Oxley Group’s expansion towards the development of industrial and commercial projects in addition to residential properties. Under Mr. Ching’s leadership, the Oxley Group completed its initial public offering (IPO) on the SGX Catalist in October 2010. Oxley’s IPO was then the largest offering ever made on SGX Catalist.

 

Apart from his commitments at Oxley, Mr. Ching is also an active supporter of programmes that benefit the elderly and socially disadvantaged. Mr. Ching graduated with a Bachelor of Arts degree and a Bachelor of Social Sciences (Hons) degree from the National University of Singapore in 1989 and 1990, respectively.

 

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MOHD SUHAIMI BIN ROZALI. Mr. Rozali, aged 52, was appointed Chief Financial Officer, Treasurer and Secretary of the Company on June 8, 2012. Mr Rozali graduated from Universiti Teknologi Mara and started his career with Bank Bumiputra Malaysia Berhad, serving at its branches and in the commercial banking division. He later joined the public listed company, Idris Hydraulic (Malaysia) Bhd ("IHMB") in November 2000 and was part of the white knight's team that undertook the comprehensive corporate debt restructuring exercise of IHMB. Upon the completion of the restructuring exercise of IHMB, the white knight company, Idaman Unggul Berhad ("IUB") assumed the listing status of IHMB and was listed on the Main Board of Bursa Malaysia on November 2003. Mr Rozali left IUB to join Transmission Resources Sdn. Bhd. in November 2005, before leaving Transmission Resources Sdn. Bhd. to set up his own company in February 2007. He joined ECE Technologies in December 2009. Mr. Rozali is not an officer or director of any reporting company.

 

NORLIZAH BINTI ZAINAL. Ms. Zainal was appointed as Director and Chief Technology Officer of the Company on June 8, 2012 and resigned as Director and Chief Technology Officer on January 31, 2014. Ms. Zainal graduated with a Degree in Electrical Engineering (Hons) from Universiti Teknologi Malaysia in 1989 and obtained a Diploma in Translation (Science and Technical) from Dewan Bahasa dan Pustaka Malaysia in 1990. She was attached to Muhibbah Engineering CMS Berhad as a consultant engineer before joining Ericsson Telecommunications, Malaysia in 1990. During her eleven years at Ericsson, she was responsible for local and international tenders as well as conducting training for local and international staff and clients. In 2002, she joined Unique Network Sdn Bhd. and later joined ECE Technologies Sdn. Bhd. on August 1, 2008 as Chief Technical Officer. Ms. Zainal is not an officer nor a director of any reporting company.

 

MOHD KHAIRUDIN BIN RAMLI. Mr. Ramli was appointed to be our Director on March 9, 2012 and resigned on January 31, 2014. Mr. Ramli is a seasoned businessman with over 15 years of experience in Malaysia and South East Asia. Mr. Ramli has broad experience and proven ability to execute and deliver successful business operations and proven his entrepreneurship skills For the past 5 years, Mr. Ramli has been doing trading business in Malaysia. Mr. Ramli is not an officer or director of any reporting company.

 

There are no orders, judgments, or decrees of any governmental agency or administrator, or of any court of competent jurisdiction, revoking or suspending for cause any license, permit or other authority to engage in the securities business or in the sale of a particular security or temporarily or permanently restraining any of our officers or directors from engaging in or continuing any conduct, practice or employment in connection with the purchase or sale of securities, or convicting such person of any felony or misdemeanor involving a security, or any aspect of the securities business or of theft or of any felony. Nor are any of the officers or directors of any corporation or entity affiliated with us so enjoined.

 

There are no family relationships among any of our officers and directors, other than Mohd Mahyudin bin Zainal and Norlizah binti  Zainal are siblings.

 

AUDIT COMMITTEE AND FINANCIAL EXPERT. The Committee has adopted regulations relating to audit committee composition and functions, including disclosure requirements relating to the presence of an "audit committee financial expert" serving on its audit committee. In connection with these requirements, our Board of Directors examined the Committee’s definition of "audit committee financial expert" and concluded that we do not currently have a person that qualifies as such an expert. Presently, there are only five directors serving on our Board of which two are in the audit committee, and we are not in a position at this time to attract, retain and compensate additional directors in order to acquire a director who qualifies as an "audit committee financial expert", but we intend to retain an additional director who will qualify as such an expert, as soon as reasonably practicable. While neither of our current audit committee members meet the qualification of an "audit committee financial expert", each of our audit committee members, by virtue of his past employment experience, has considerable knowledge of financial statements, finance, and accounting, and has significant employment experience involving financial oversight responsibilities. Accordingly, we believe that our current audit committee members capably fulfill the duties and responsibilities of an audit committee in the absence of such an expert.

 

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Section 16(a) of the Securities Act of 1934 requires our directors, executive officers, and any persons who own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. SEC regulation requires executive officers, directors and greater than 10% stockholders to furnish us with copies of all Section 16(a) forms they file. Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during the fiscal year ended December 31, 2013 our executive officers, directors, and greater than 10% stockholders complied with all applicable filing requirements.

 

CODE OF ETHICS. We have adopted a corporate code of ethics that applies to the Company's principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The full text of our Code of Conduct is published on our website at www.clixster.net. The Company shall disclose any substantive amendments to the Code of Ethics or any waivers from a provision of the code on its website at  www.clixster.net or in a report on Form 8-K.

 

31

 


 

ITEM 11. EXECUTIVE COMPENSATION.

 

Any compensation received by our officers, directors, and management personnel will be determined from time to time by our Board of Directors. Our officers, directors, and management personnel will be reimbursed for any out-of-pocket expenses incurred on our behalf.

 

COMPENSATION FOR DIRECTORS AND EXECUTIVES.

 

The following table sets forth the annual and long-term compensation for services in all capacities to the Company for its fiscal year ended December 31, 2013 paid to our directors and executive officers who earned more than $100,000 per year at the end of the last completed fiscal year. We refer to all of these officers collectively as our "named executive officers."

 

 

SUMMARY COMPENSATION TABLE
Name and principal position Year (8) Salary
($)
Bonus
($)

Stock Awards

($)

Option Awards

($)

Non-Equity Incentive Plan Compensation

($)

Nonqualified Deferred Compensation Earnings

($)

All Other Compensation ($) Total ($)
---------------------- ------- ---------- ------------ --------- --------- -------------- ---------------- ------------- -----------
Mohd Mahyudin bin Zainal (1) 2013 - - - - - - - -
  2012 - - - - - - - -
Norlizah binti Zainal (2) 2013 - - - - - - - -
  2012 - - - - - - - -
Mohd Suhaimi bin Rozali (3) 2013 - - - - - - - -
  2012 - - - - - - - -
Mohd Khairudin bin Ramli (4) 2013 - - - - - - - -
  2012 - - - - - - - -
Pui Kit Lam (5) 2013 - - - - - - - -
  2012 - - - - - - - -
Cheng Pheng Loi (6) 2012 - - - - - - - -
Con Unerkov (7) 2013 - - - - - - - -
  2012 - - - - - - - -

 

(1) Mohd Mahyudin bin Zainal was appointed as CEO, President and Director on June 8, 2012 and resigned as CEO and President on January 31, 2014.
(2) Norlizah binti Zainal was appointed as CTO and Director on June 8, 2012 and resigned as CTO and Director on January 31, 2014.
(3) Mohd Suhaimi bin Rozali was appointed as CFO, Treasurer and Secretary on June 8, 2012.
(4) Mohd Khairudin bin Ramli was appointed as Director on March 9, 2012 and resigned as Director on January 31, 2014.
(5) Mr. Pui Kit Lam was a Director from April 8, 2011 to February 25, 2013 and the Treasurer and Secretary from April 8, 2011 to June 8, 2012.
(6) Mr. Cheng Pheng Loi was the President, CEO, and Director of the Company with effect from May 2009 until June 8, 2012 when he resigned from all positions.
(7) Mr. Con Unerkov was the CFO, and Director and he resigned from these two positions on June 8, 2012 and January 25, 2013, respectively.  
(8) Figures represent the year ended December 31 for the indicative years.

 

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The following table sets forth certain information concerning stock option awards granted to our executive officers and our directors. No options were exercised by our executive officers or directors during the year ended December 31, 2013 and 2012.

 

OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2013
------------------------------------------------------------------------------------------------------------------------------------------------------
OPTION AWARDS STOCK AWARDS
                   
Name Number of securities underlying unexercised options (#) Exercisable

Number of securities underlying unexercised options (#)

Unexercisable

Equity Incentive Plan Awards: Number of Securities underlying unexercised unearned options (#) Option exercise price ($) Option expiration date Number of shares or units of stock that have not vested (#) Market value of shares or units of stock that have not vested ($) Equity incentive plan awards: number of unearned shares, units or other rights that have not vested (#) Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested (#)
------------- ---------- ------------ ----------- -------- --------- --------- ---------- ---------- ----------
Mohd Mahyudin bin Zainal (1) - - - - - - - - -
Norlizah binti Zainal (2) - - - - - - - - -
Mohd Suhaimi bin Rozali (3) - - - - - - - - -
Mohd Khairudin bin Ramli (4) - - - - - - - - -
Pui Kit LAM (5) - - - - - - - - -
Cheng Pheng LOI(6) - - - - - - - - -
Con Unerkov (7) - - - - - - - - -
                     

 

(1) Mohd Mahyudin bin Zainal was appointed as CEO, President and Director on June 8, 2012 and resigned as CEO and President on January 31, 2014.
(2) Norizah binti Zainal was appointed as CTO and Director on June 8, 2012 and resigned as CTO and Director on January 31, 2014.
(3) Mohd Suhaimi bin Rozali was appointed as CFO, Treasurer and Secretary on June 8, 2012.
(4) Mohd Khairudin bin Ramli was appointed as Director on March 9, 2012 and resigned as Director on January 31, 2104.
(5) Mr. Pui Kit Lam was a director from April 8, 2011 to February 25, 2013 and the Treasurer and Secretary from April 8, 2011 to June 8, 2012.
(6) Mr. Cheng Pheng Loi was the President, CEO, and Director of the Company with effect from May 2009 until June 8, 2012 when he resigned from all positions.
(7) Mr. Con Unerkov was the CFO, and Director and he resigned from these two positions on June 8, 2012 and January 25, 2013, respectively.  

 

 

Employment Agreements

 

In 2013 and 2012, all the directors did not receive any salaries and did not have any employment contracts with the Group.

 

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT RELATED STOCKHOLDER MATTERS
 
The following table sets forth information regarding shares of our common stock beneficially owned as of December 31, 2013 by: (i) each of our officers and directors; (ii) all officers and directors as a group; and (iii) each person known by us to beneficially own five percent or more of the outstanding shares of our common stock.

 

Name/Address(1)

Common

Stock

Common Stock

Options

Exercisable

Within

60 Days

Common Stock

Purchase

Warrants/

Convertible Note

Exercisable

Within 60 Days

Total Stock

and Stock

Based

Holdings (1)

%

Ownership (2)

--------------------------- ------------------ ----------------- -------------------- ------------------ -----------------
Mohd Mahyudin bin Zainal(3)(4) (6) 50,000,000 - - 50,000,000 4.48%
Norlizah binti Zainal(3)(4) - - - - -
Mohd Suhaimi bin Rozali(4) - - - - -
Mohd Khairudin bin Ramli(3) - - - - -
           
  ------------------ ------------------- -------------------- ------------------ ------------------

All officers and directors as a group

(6 persons)

50,000,000 - - 50,000,000 4.48%
           
           

Maxcom Group International Ltd. (MGIL)

of P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands.

141,666,668 - - 141,666,668 12.48%
           

Liu Kang (5),

No 42, Tujilin Wuchan, Wuhan City, Hubei Ching, China.

141,666,668 - - 141,666,668 12.48%
           

Central High Limited (CHL)

of P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands.

125,000,000 - - 125,000,000 11.01%
           

 

 

Notes:

 

(1) Except as otherwise indicated, based on information furnished by the owners, we believe that the beneficial owners listed above have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws where applicable and to the information contained in the footnotes to this table. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Unless otherwise indicated, the address of the beneficial owner is c/o Clixster Mobile Group Inc. (fka China Media Group Corporation) at No.55 Jalan Snuker 13/28, Tadisma Business Park, Section 13, 40100 Shah Alam, Malaysia.
(2) For purposes of computing the percentage of outstanding Common Stocks held by each person or group of persons named above, any shares that such person or group has the right to acquire within 60 days are deemed outstanding but are not deemed to be outstanding for purposes of computing the percentage ownership of any other person or group. As of the date of the table above, there were 1,113,623,296 outstanding shares of our common stock and there was no options, warrants, and convertible notes outstanding entitling the holders to purchase any shares of our Common Stock owned by officers and/or directors of the Company.
(3) A director of Company as of December 31, 2013.
(4) An officer of Company as of December 31, 2013
(5) Includes 141,666,668 shares of common stock held by MGIL. Mr. Liu Kang is a director and holds 100% shareholding of MGIL.
(6) Includes 50,000,000 shares of Common Stock held by the spouse of Mohd Mahyudin bin Zainal, Ms. Nuriati binti Mohd Nordin.

 

34

 


 

Changes in Control

 

As announced in the Form 8K on October 30, 2013, the Company on October 29, 2013 entered into a conditional agreement to acquire 63.2% equity interests in Clixster Mobile for the purchase consideration of the issuance of 10,193,609,664 Common Stock representing approximately 90% of the enlarged issued share capital of the Company. This transaction closed on January 31, 2014 and the Vendors, the current owners of Clixster Mobile, have become the new controlling shareholder of the Company as at the date of this report. Except for the Clixster Mobile transaction noted above, we are unaware of any contract, or other arrangement or provisions, the operation of which may at a subsequent date result in a change of control of the Company.

 

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 
Other than disclosed below or under the caption entitled "Executive Compensation and Other Matters", since the beginning of the Company's last fiscal year, the Company was not a participant in any transaction in which a director, officer or stockholder of the Company, or any family member of any such person, had a direct or indirect material interest where the amount involved exceeded $120,000.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors and persons who beneficially own more than 10% of our Common Stock to file with the SEC initial statements of beneficial ownership and reports of changes in beneficial ownership. Such persons are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.

 

Based solely on our review of such statements and reports furnished to us and written representations from certain reporting persons, we believe that our executive officers, directors and greater-than-10% stockholders were complied with the beneficial ownership reporting requirements of Section 16(a).

 

 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
 
AUDIT FEES. The aggregate fees billed in each of the fiscal years ended December 31, 2013 and 2012 for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our Form 10-K or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements as well as registration statement filings for those fiscal years were $20,000 and $18,000 respectively.
 
AUDIT-RELATED FEES. There aggregate fees billed for services reasonably related to the performance of the audit or review of the financial statements outside of those fees disclosed above under "Audit Fees" for fiscal years 2013 and 2012 were $6,000 and $4,200 respectively.
 
TAX FEES. For the fiscal years ended December 31, 2013 and December 31, 2012, our principal accountants did not render any services for tax compliance, tax advice, and tax planning work.
 
ALL OTHER FEES. None
 
PRE-APPROVAL POLICIES AND PROCEDURES. Prior to engaging its accountants to perform a particular service, our board of directors obtains an estimate for the service to be performed. All of the services described above were approved by the board of directors in accordance with its procedures.

 

35

 


 

PART IV

 

ITEM 15. EXIBITS, FINANCIAL STATEMENT SCHEDULES

 

(a) Index to Financial Statements and Financial Statement Schedules

 

Table of Contents
 
Report of Independent Registered Public Accounting Firm  
 
Consolidated Balance Sheets  
 
Consolidated Statements of Operations  
 
Consolidated Statements of Stockholders' Deficits  
 
Consolidated Statements of Cash Flows  
 
Notes to Consolidated Financial Statements

 

36

 


 

(b) Exhibits.
 

 

Exhibit Number Description of Exhibit
   
   
2.1 Shareholders’ Agreement between Good World Investments Limited, Advance Tech Communications Sdn. Bhd. and ATC Marketing Limited(6)
3.1 Articles of Incorporation (1)
3.1.1 Certificate of Amendment to Articles of Incorporation (2)
3.1.2 Certificate of Amendment to Articles of Incorporation, as amended.(5)
3.1.3 Certificate of Amendment to Articles of Incorporation, as amended.(10)
3.2 Bylaws (1)
3.2.1 Bylaws, as amended (10)
10.1 2002 Stock Option Plan (3)
10.2 2007 Stock Incentive Plan (4)
10.3 Sale and Purchase Agreement on acquisition of ATeam Resources Sdn. Bhd (7)
10.4 Sale and Purchase Agreement on acquisition of Clixster Mobile Sdn. Bhd.  (8)
10.5 Sale and Purchase Agreement on disposal the Group’s subsidiaries namely Good World Investments Limited, ATeam Resources Sdn. Bhd., Beijing Ren Ren Health Culture Promotion Limited and Ren Ren Media Group Limited.  (9)
21.1 Subsidiaries of small business issuer. (10)
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (10)
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (10)
32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (10)
32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (10)
   

 

   
1. Incorporated by reference to our Registration Statement on Form SB-2 as filed with the SEC on April 15, 2003.
2. Incorporated by reference to our Current Report on Form 8-K as filed with the SEC on February 3, 2005.
3. Incorporated by reference to our Registration Statement on Form SB-2 as filed with the SEC on April 15, 2003.
4. Incorporated by reference to our Registration Statement on Form S8 as filed with the SEC on March 8, 2007.
5. Incorporated by reference to our Registration Statement on Form SB-2 as filed with the SEC on March 16, 2007.
6. Incorporated by reference to our Current Report on Form 8-K as filed with the SEC on May 26, 2009.
7. Incorporated by reference to our Current Report on Form 8-K as filed with the SEC on March 16, 2012.
8. Incorporated by reference to our Current Report on Form 8-K as filed with the SEC on October 30, 2013.
9. Incorporated by reference to our Current Report on Form 8-K as filed with the SEC on January 15, 2014.
10. Filed herewith.
   

 

37

 


 

SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 34, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  Clixster Mobile Group Inc.
  a Texas corporation
   
    /s/  Noor Azlan Khamis
  ---------------------------------------
  Noor Azlan Khamis
 

Chief Executive Officer

 

 

   
    /s/ Mohd Suhaimi bin Rozali
  ---------------------------------------
  Mohd Suhaimi bin Rozali
 

Chief Financial Officer

 

 

   

 

 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

 

By:   /s/ Megat Radzman Megat Khairuddin July 15, 2014
  --------------------------------------------  
  Megat Radzman Megat Khairuddin  
Its: Chairman, Director  

 

By:   /s/  Noor Azlan Khamis July 15, 2014
  --------------------------------------------  
  Noor Azlan Khamis  
Its: President, Chief Executive Officer, Director  

 

By:   /s/  Andrew Hwan Lee July 15, 2014
  --------------------------------------------  
  Andrew Hwan Lee  
Its: Director  

 

By:   /s/ Azrinaz Mazhar Hakim Mazhar July 15, 2014
  --------------------------------------------  
  Azrinaz Mazhar Hakim Mazhar  
Its: Director  

 

By:   /s/ Ching Chiat Kwong July 15, 2014
  --------------------------------------------  
  Ching Chiat Kwong  
Its: Director  

 

By:   /s/ Mohd. Mahyudin bin Zainal July 15, 2014
  --------------------------------------------  
  Mohd Mahyudin bin Zainal  
Its: Director  

 

By:   /s/ Mohd. Suhaimi bin Rozali July 15, 2014
  --------------------------------------------  
  Mohd Suhaimi bin Rozali  
Its: Chief Financial Officer, Company Secretary, Treasurer  

 

 

38

 


 

 
Clixster Mobile Group Inc. and Subsidiary
Index to Consolidated Financial Statements
For the Years Ended December 31, 2013 and 2012
 

 

Table of Contents Page
   
   
Report of Independent Registered Public Accounting Firm   F-2  
   
Consolidated Balance Sheets   F-3
   
Consolidated Statements of Operations   F-4
   
Consolidated Statements of Stockholders' Equity F-5
   
Consolidated Statements of Cash Flows   F-6
   
Notes to Consolidated Financial Statements F-7 to F-17

 

 

F-1

 


 

 HKCMCPA

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Stockholders and Board of Directors
Clixster Mobile Group Inc (formerly China Media Group Corporation) and its subsidiaries

 

We have audited the accompanying consolidated balance sheets of Clixster Mobile Group Inc (formerly China Media Group Corporation) and its subsidiaries (the "Company") as of December 31, 2013 and 2012 (restated), and the related consolidated statements of operations, stockholders' deficits and cash flows for the years ended December 31, 2013 and 2012 (restated). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Clixster Mobile Group Inc. (fka China Media Group Corporation) and its subsidiaries as of December 31, 2013 and 2012 (restated), and the results of its operations and its cash flows for the years ended December 31, 2013 and 2012 (restated), in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has incurred substantial losses this year, all of which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ HKCMCPA Company Limited
CERTIFIED PUBLIC ACCOUNTANTS
 
Hong Kong, China
July 15, 2014
 

 

 

 

 

 

Unit 602, 6/F., Hoseinee House, 69 Wyndham Street, Central, Hong Kong

Tel: (852) 2573 2296  Fax: (852) 2384 2022  http://www.hkcmcpa.us

 

F-2

 


 

CLIXSTER MOBILE GROUP INC
(Formerly China Media Group Corporation)
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2013 AND 2012 (Restated)

 

       2013    2012
  Notes       (Restated, see Note 6)
      US$   US$
ASSETS          
Current assets:          
Cash and cash equivalents     2,581   1,144
Trade receivables 7   14,068   -
Assets of operations held for sale 6   1,457,228   1,673,429
Prepayments, deposit and other receivables     285   1,213
           
Total current assets     1,474,162   1,675,786
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
Current liabilities:          
Trade payables 8   243   -
Other payables and accruals 9   924,000   699,033
Liabilities of operations held for sale 6   1,876,921   1,983,834
Option liabilities     -   236,504
Total current liabilities     2,801,164   2,919,371
           
Long-term debts:          
Shareholder loans 10   2,000,000   2,000,000
      2,000,000   2,000,000
           
Total liabilities     4,801,164   4,919,371
           
Commitments and contingencies          
           
Stockholders' deficit:          
Common stock, no par value, 85,000,000,000 shares authorized, 1,113,623,296  (2012: 1,113,623,296) shares issued and outstanding 4   2,580,543   2,580,543
Comprehensive income     203,382   171,343
Non-controlling interest     (36)   (36)
Accumulated deficits     (6,110,891)   (5,995,435)
Total stockholders' deficit     (3,327,002)   (3,243,585)
           
 Total liabilities and shareholders’ deficit     1,474,162   1,675,786

 

 

The accompanying notes are an integral part of these consolidated financial statements

 

 

F-3

 


 

CLIXSTER MOBILE GROUP INC
(Formerly China Media Group Corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 (Restated)

 

      2013   2012
  Notes   US$   US$
           
Net revenue     145,495   -
Cost of revenue     (95,462)    -
Gross profit     50,033   -
           
Operating expenses:          
Administration expenses     (95,847)   (55,319)
Selling and distribution expenses     (3,788)    -
Total operating expenses     (99,635)   (55,319)
           
Loss from operations     (49,602)    (55,319)
           
Other income / (expenses)          
   Write off of option liability     236,504   -
    Interest expenses     (163,101)   (48)
           
Profit / (loss) from continuing operations     23,801   (55,367)
           
Discontinued operations, net of tax     (139,257)    (7,135,114)
           
Loss before uncontrolled interest     (115,456)   (7,190,481)
           
Uncontrolled interest     -   36
           
Net loss for the year     (115,456)   (7,190,445)
           
Other comprehensive income          
    Foreign currency translation gain     32,039   64,885
Comprehensive loss     (83,417)   (7,125,560)
           
Basic and diluted loss per common share     0.00   (0.01)
           
Basic and diluted weighted average number of common shares *     1,113,623,296   871,924,365
           

 

*

Weighted average number of shares used to compute basic and diluted loss per share for the years ended December 31, 2013 and 2012 are the same since the effect of dilutive securities are anti-dilutive.

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

F-4

 


 

CLIXSTER MOBILE GROUP INC
(Formerly China Media Group Corporation)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012

 

                             
        Number of shares   Common Stock Amount   Comprehensive Income   Accumulated Deficits   Non-controlling Interest   Total
Shareholders’ Equity
            US$   US$   US$   US$   US$
                       
Balance at December 31, 2011 558,779,837   583,107   106,458   1,195,010   -   1,884,575
                       
Issuance of shares for acquisition of legal acquirer 554,843,459   1,997,436   -   -   -   1,997,436
Comprehensive income - foreign currency translation gain -   -   64,885   -   -   64,885
Net loss for the year -   -   -   (7,190,445)   (36)   (7,190,481)
                       
Balance at December 31, 2012 1,113,623,296   2,580,543   171,343   (5,995,435)   (36)   (3,243,585)
                       
                       
Comprehensive income – foreign currency translation gain -   -   32,039   -   -   32,039
Net loss for the year -   -   -   (115,456)   -   (115,456)
                       
Balance at December 31, 2013 1,113,623,296   2,580,543   203,382   (6,110,891)   (36)   (3,327,002)
                             

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

F-5

 


 

CLIXSTER MOBILE GROUP INC
(Formerly China Media Group Corporation)
CONSOLIDATED STATEMENTS OF CASHFLOWS
FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 (Restated)

 

      2013   2012
      US$   US$
Cash flows from operating activities:          
Net loss     (115,456)   (7,190,445)
Adjustment to reconcile net loss to net cash used in operating activities:          
Uncontrolling interest     -   (36)
(Increase) / decrease in assets:          
Trade receivables     (14,068)   -
Prepayments, deposits and other receivables     928   (396)
(Increase) / decrease in liabilities:          
Trade payables     243   -
Other payables and accruals     224,968   259,530
Option liabilities     (236,504)   -
Operations held for sale, net     109,287   6,866,425
Net cash used in by operating activities     (30,602)   (64,922)
           
Cash flows from investing activities:          
Acquisition of legal acquirer, net of cash     -   1,181
Net cash provided by investing activities     -   1,181
           
Cash flows from financing activities :          
Net cash used in financing activities     -  
           
Net decrease in cash and cash equivalents     (30,602)   (63,741)
Effect of exchange rate changes on cash and cash equivalents     32,039   64,885
Cash and cash equivalents - net, beginning     1,144   -
           
Cash and cash equivalents - net, ending     2,581   1,144
           
Supplemental disclosure of cash flow information:          
Interests paid     -    -
           
Income tax paid     -   -
           

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

F-6

 


 

CLIXSTER MOBILE GROUP INC

(Formerly China Media Group Corporation)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 (Restated)

 

NOTE 1 ORGANIZATION

 

China Media Group Corporation (the "Company") is a Texas corporation, incorporated on October 1, 2002.

 

In January 2006, the Company established a wholly owned subsidiary Ren Ren Media Group Limited, a company incorporated in Hong Kong, as its operating company in Hong Kong. In March 2007, the Company acquired all the outstanding shares of Good World Investments Limited, a British Virgin Islands corporation that holds 50% of Beijing Ren Ren Health Culture Promotion Limited, a company incorporated in China in the advertising and media business in China.

 

In May 2009, the Group established a 50/50 joint venture company, ATC Marketing Limited, which is to be in the business of marketing and distributing of convergent multimedia communication and internet devices.  

 

In June 2012, the Company acquired 100% equity interests of A-Team Resources Sdn. Bhd. (“ATeam”), a distributor of electronics and light appliances, at a consideration price of $2,011,607 by the issuance of 558,779,837 shares, at a price of $0.0036 per share.

 

The Group is engaged in the distribution of electronics and light appliances and the marketing and distribution of convergent devices and the consultancy of resources management. During the year, the Group derived its revenue from consultancy services and in the distribution of electronic products.

 

Subsequent to the period end, on January 15, 2014, the Company sold its subsidiaries namely Ren Ren Media Group Limited, ATeam Resources Sdn Bhd, Good World Investments Limited and Beijing Ren Ren Health Culture Promotion Limited (the “Disposed Subsidiaries”) containing its light appliances distribution business and advertising business in China.

 

Subsequent to the balance sheet date, on January 31, 2014, the Group closed the transaction to acquire 63.2% of Clixster Mobile Sdn. Bhd. (“Clixster Mobile”), a company incorporated in Malaysia by the issuance of 10,193,609,664 shares in the Company.  Clixster Mobile is a mobile virtual network provider and principally engaged in providing cellular and mobile broadband services in Malaysia.     

 

 

NOTE 2 UNCERTAINTY OF ABILITY TO CONTINUE AS A GOING CONCERN

 

The Company's consolidated financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. As of December 31, 2013, the Company has an accumulated deficits totaling $6,110,891 and its current liabilities exceed its current assets by $1,327,002. In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheets is dependent upon continued operations of the Company, which in turn is dependent upon the Company's ability to raise additional capital, obtain financing and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Management has taken steps to revise its operating and financial requirements, which it believes are sufficient to provide the Company with the ability to continue as a going concern. The Company is actively pursuing additional funding and potential merger or acquisition candidates and strategic partners, which would enhance stockholders' investment. Management believes that the above actions will allow the Company to continue operations through the next fiscal year.

 

 

F-7

 


 

CLIXSTER MOBILE GROUP INC

(Formerly China Media Group Corporation)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 (Restated)

 

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

Clixster Mobile Group Inc. (fka China Media Group Corporation) ("CMG" or the "Registrant"), a public traded and holding company was incorporated under the laws of the State of Texas in October 2002.  

 

All references that refer to (the "Company" or "CMG" or "we" or "us" or "our") are to CMG, and its wholly or majority owned subsidiaries unless otherwise differentiated.  The Company was engaged in the business of distributing electronics and light appliances and in consultancy services.

 

These accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“US GAAP”), and are expressed in U.S. dollars. The Company's fiscal year end is December 31.

 

Subsequent to the reporting period, on January 15, 2014 we completed the sale of our distribution in light appliances and the advertising business in China (the “Disposed Business”) (Note 15(c)).  As a result in this year, we reported the operating results of the Disposed Business as Discontinued Operations – Net of Tax in the condensed consolidated statement of income in all periods presented.  In addition, the assets and liabilities associated with these businesses are reported as Asset of Operations Held for Sale and Liabilities of Operations Held For Sale in the consolidation balance sheets (refer to Note 6).

 

Principles of Consolidation

 

The consolidated financial statements for the year ended December 31, 2013 include the financial statements of the Company, its wholly owned subsidiary CMG Resources Sdn. Bhd. and its 50% subsidiary ATC Marketing Limited.  The Company consolidated the 50% ownership company during the period as it controls the Board of Director of this company.  Subsequent to the period of this report on January 15, 2014, the Company disposed its subsidiary companies namely Ren Ren Media Group Limited, Good World Investments Limited, ATeam Resources Sdn Bhd and its 50% subsidiary Beijing Ren Ren Health Culture Promotion Limited (collectively the “Disposed Companies”). Accordingly the operating results of the Disposed Companies are disclosed as Discontinued Operations - Net of Tax in the consolidated statement of income for all period presented.  In addition, the assets and liabilities of these Disposed Companies are reported as Assets of Operations Held for Sale and Liabilities of Operations Held for Sale, as appropriate, in the consolidated balance sheet.

 

The results of subsidiaries acquired or sold during the year are consolidated from their effective dates of acquisition or through their effective dates of disposition, respectively.

 

All significant inter-company transactions and balances have been eliminated on consolidation.

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the years presented. Actual results could differ from those estimates.

 

Net Income (Loss) per Share

 

Basic earnings per share were computed by dividing net loss or net profit by the weighted average number of shares of common stock outstanding during the year. Diluted loss and profit per common share for the years ended December 31, 2013 and 2012, respectively are not presented as it would be anti-dilutive.

 

 

F-8

 


 

CLIXSTER MOBILE GROUP INC

(Formerly China Media Group Corporation)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 (Restated)

 

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Fair Value Measurements and Disclosures

 

ASC 820 "Fair Value Measurements and Disclosures" applies to all entities, transactions, and instruments that require or permit fair value measurements, with specific exceptions and qualifications. The Company is required to disclose estimated fair values of financial instruments. Unless otherwise indicated, the fair values of all reported assets and liabilities, which represent financial instruments, none of which are held for trading purposes, approximate are carrying values of such amounts.

 

Cash and Cash Equivalents

 

Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.

 

Trade Receivables

 

Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. An allowance for doubtful accounts is established and determined based on managements’ assessment of known requirements, aging of receivables, payment history, the customer’s current credit worthiness and the economic environment. The Company recorded no (2012: Nil) allowance for doubtful accounts for the years presented.

 

Income Taxes  

 

The Company accounts for income taxes under ASC 740 “Income Taxes”. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.

 

ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.

 

(a) Current Tax
 

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.

 

Current taxes are recognized in the statement of income except to the extent that the tax relates to items recognized outside the statement of income, either in other income or directly in equity.

 

(b) Deferred Tax
 

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

 

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company records a valuation allowance for deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

 

F-9

 


 

CLIXSTER MOBILE GROUP INC

(Formerly China Media Group Corporation)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 (Restated)

 

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS (Continued)

 

Contingent Liabilities

 

A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence of one or more uncertain future events not wholly within the control of the Company. It can also be a present obligation arising from past events that is not recognized because it is not probable that an outflow of economic resources will be required or the amount of obligation cannot be measured reliably.

 

The Company has acted as guarantor for bank loans granted to certain local authorities and certain business associates. The Company assessed its obligation under this guarantee pursuant to the provision of ASC 460 “Guarantee”.

 

Stock-Based Compensation

 

ASC 718 "Compensation – Stock Compensation" prescribes accounting and reporting standards for all stock-based payments award to employees, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights. , may be classified as either equity or liabilities. The Company should determine if a present obligation to settle the share-based payment transaction in cash or other assets exists. A present obligation to settle in cash or other assets exists if: (a) the option to settle by issuing equity instruments lacks commercial substance or (b) the present obligation is implied because of an entity’s past practices or stated policies. If a present obligation exists, the transaction should be recognized as a liability; otherwise, the transaction should be recognized as equity.

 

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50 “Equity –Based Payments to Non-Employees”. Measurement of share-based payment transactions with non-employees shall be based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction should be determined at the earlier of performance commitment date or performance completion date.

 

Employees' Pension Obligations

 

Contributions to retirement schemes (which are defined contribution plans) are charged to general and administrative expenses in the statements of operation and comprehensive income as and when the related employee service is provided.

 

The Company is required to make contribution under a defined contribution pension scheme for all of its eligible employees in Malaysia and Hong Kong. The Company is required to contribute a specified percentage of the participants’ relevant income based on their ages and wages level.

 

Revenue Recognition

 

Revenue is measured at the fair value of the consideration received and receivable. Provided it is probably that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognized when the services are rendered.

 

Foreign Currency Translation

 

The accounts of the Company's Hong Kong, China and Malaysia subsidiaries are maintained, in the local currencies of their respective countries namely Hong Kong dollars (HK), Chinese Renminbi (RMB) and Malaysia Riggnet (RM), respectively. Such financial statements are translated into U.S. Dollars (USD) in accordance with ASC 830 “Foreign Currency Translation” with the respective currency as the functional currency. According to the Statement, all assets and liabilities were translated at the exchange rate on the balance sheet date, stockholder's equity are translated at the historical rates and statement of operations items are translated at the weighted average exchange rate for the year. The resulting translation adjustments are reported under other comprehensive income in accordance with ASC 220 “Comprehensive Income”. As of December 31, 2013 and 2012, the accumulated comprehensive income was $203,382 and $171,343, respectively.

 

F-10

 


 

CLIXSTER MOBILE GROUP INC

(Formerly China Media Group Corporation)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 (Restated)

 

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS (Continued)

 

Comprehensive Income

 

ASC Topic 220, “Comprehensive Income” establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated comprehensive income, as presented in the accompanying statements of stockholders’ equity consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.

 

Segment Reporting

 

ASC Topic 280, “Segment Reporting” establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about geographical areas, business segments and major customers in financial statements. The Company operates in one reportable operating segment in Malaysia during the years ended December 31, 2013 and 2012.

 

Related Parties

 

Parties, which can be a corporation or individual, are considered to be related if the Company has 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.

 

Reclassifications

 

Certain comparative amounts have been reclassified to conform to the current year’s presentation.

 

Recent Pronouncements

 

Recently Implemented Standards

 

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.

 

In February 2013, the FASB issued ASU No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” (“ASU 2013-02”). This standard requires companies to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, companies are required to present, either on the face of the statement where net income is presented or in the accompanying notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income, but only if the amount reclassified is required to be reclassified to net income in its entirety in the same reporting period. For amounts that are not required to be reclassified in their entirety to net income, companies are required to cross-reference to other disclosures that provide additional detail on those amounts. ASU 2013-02 is effective prospectively for reporting periods beginning after December 15, 2012. The adoption of this pronouncement will not have a material impact on the Company’s consolidated financial statements.

 

F-11

 


 

CLIXSTER MOBILE GROUP INC

(Formerly China Media Group Corporation)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 (Restated)

 

 

NOTE 4 STOCKHOLDERS’ EQUITY

 

Common Stock

 

In May 2012, the Company issued 711,009 shares of its common stock to a consultant for his services under the 2007 Stock Incentive Plan (Note 5).

 

On June 8, 2012, the Company issued 558,779,837 shares of its common stock in consideration of the acquisition of 100% equity interests in ATeam.

 

As at December 31, 2012 and December 31, 2013 the Company had a total of 1,113,623,296 shares of its common stock issued and outstanding.

 

NOTE 5 STOCK OPTIONS

 

Stock Options

 

The Company adopts ASC 718 “Compensation – Stock Compensation” and requires companies to measure and recognize the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value.

 

2002 Stock Option Plan

 

The 2002 Stock Option Plan was effective from October 2002 to October 2012 when it expired.  This stock option plan allowed the rewarding of options to acquire common stock and the grant of incentive stock options to key employees and directors.  

 

As at December 31, 2012, the Company had 19,000,000 stock options outstanding under the 2002 Stock Option Plan, and the option liability was $236,504. In 2013, the 19,000,000 stock options were forfeited.

 

As at December 31, 2013 there was no outstanding stock option under the 2002 Stock Option Plan and there was no option liability.

 

 

2007 Stock Incentive Plan

 

On February 19, 2007, the Company adopted the 2007 Stock Incentive Plan (the "2007 Plan") allowing for the awarding of options to acquire shares of common stock. This plan provides for the grant of incentive stock options to key employees, directors and consultants. Options issued under this plan will expire over a maximum term of ten years from the date of grant.

 

On March 8, 2007, the Company registered 38,400,000 shares underlying stock options under the 2007 Stock Incentive Plan with the SEC pursuant to a registration statement on Form S-8.

 

During the year 2007 to 2011, the Company had issued a total of 5,811,300 shares to its staff and consultants for their service provided.

 

In May 2012, the Company paid a consultant $15,500 for his services by issuing 711,009 shares in the Company at the then current market value of $0.0218 per share.

 

As at December 31, 2013 and 2012, there were i) no outstanding stock options and ii) 31,877,691 shares available to be issued under the 2007 Stock Incentive Plan.  

 

F-12

 


 

CLIXSTER MOBILE GROUP INC

(Formerly China Media Group Corporation)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 (Restated)

 

NOTE 6 DISCONTINUED OPERATIONS HELD FOR SALE

 

Subsequent to the year end, on January 15, 2014, the Company sold its subsidiaries namely Ren Ren Media Group Limited, ATeam Resources Sdn Bhd, Good World Investments Limited and Beijing Ren Ren Health Culture Promotion Limited (the “Disposed Subsidiaries”) containing its light appliances distribution business and advertising business in China. It resulted in an anticipated gain of $422,606 with a consideration receivable of $5,000, which is expected to be fully received in cash and use to settle Group’s liabilities within the next twelve months from the completion date. As a result of the sale, the historical activities and balances of these operations are reported as discontinued operations held for sale in the accompanying consolidated financial statements for all periods presented.    

 

The following table provides the components of Discontinued operations – net of tax:    

 

      Year ended December 31
      2013   2012
      US$   US$
           
Net revenue     135,220   2,449,487
Cost of revenue     (90,925)   (1,557,672)
Gross profit     44,295   891,815
Administration expenses     (179,280)   (1,606,992)
Impairment of goodwill     -   (6,323,061)
Selling and distribution expenses     -   (27,213)
Loss from operations     (134,985)   (7,065,451)
Other income / (expenses)          
(Loss) / gain on foreign exchange     (371)   16,317
Bank charges     (1,770)   -
Other income     2,942   61,030
Interest income     -   264
Interest expenses     (5,073)   (147,274)
Loss from discontinued operations before taxation     (139,257)   (7,135,114)
Taxation     -   -
Loss from discontinued operations, net of tax     (139,257)   (7,135,114)
           

 

The following table provides the components of assets and liabilities of operations held for sale:    
     

December 31

2013

 

December 31

2012

 
      US$   US$  
Current assets:            
Cash and cash equivalents     -   37,576  
Restricted cash     -   70,093  
Trade receivables     696,259   869,412  
Due from related parties     263,164   263,833  
Prepayments, deposit and other receivables     379,483   313,941  
Property and equipment, net     118,322   118,574  
             
Assets of operations held for sale     1,457,228   1,673,429  
             
             
Bank overdraft     41,358   -  
Trade payables     41,569   46,739  
Other payables and accruals     759,479   694,082  
Short term debt     271,590   291,548  
Due to related parties     417,094   493,338  
Trade finance payables     79,816   148,467  
Taxation payable     115,554   124,046  
Obligations under finance lease – current     75,042   25,651  
Obligations under finance leases – non-current     11,715   91,578  
Term loans – non-current     63,704   68,385  
             
Liabilities of operations held for sale     1,876,921   1,983,834  
             

 

The net cash flows of our discontinued operations for each of the categories of operating, investing and financing activities are not significant for any years presented.    

 

F-13

 


 

CLIXSTER MOBILE GROUP INC

(Formerly China Media Group Corporation)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 (Restated)

 

NOTE 7 TRADE RECEIVABLES

 

    2013   2012
    US$   US$
         
Trade receivables   14,068   -
Less:   Allowance for impairment losses   -   -
    14,068   -
          

 

Trade receivables are non-interest bearing and the normal credit terms range from 30 to 90 days (2012: 30 to 90 days) terms. Other credit terms are assessed and approved on a case-by-case basis.   

 

The fair value of trade receivables approximates its carrying amount.

 

 

NOTE 8 TRADE PAYABLES
    2013   2012  
    US$   US$  
           
Trade payables   243   -  
            

 

These amounts are non-interest bearing. Trade payables are normally settled on 30 to 90 days (2012: 30-90 days) terms.

 

 

NOTE 9 OTHER PAYABLES AND ACCRUALS

 

    2013   2012
    US$   US$
         
Accrued accounting, legal and consulting fees   35,228   64,228
Potential tax penalty liability   360,000   310,000
Other payables (a) 510,781   306,809
Due to an officer of a subsidiary held for sale   17,991   17,996
    924,000   699,033

 

a) Other payables are Company expenses such as postage, sundries, etc., and advanced on behalf of the Company from various parties. These amounts are non-interest bearing and normally settled on an average term of 6 months.

 

 

NOTE 10 SHAREHOLDER LOAN

 

    2013   2012
    US$   US$
         
Shareholder loan   2,000,000   2,000,000
          

 

The long term shareholder loan of $2,000,000 is unsecured, bears interest at 8% per annum, repayable on May 25, 2015.

 

F-14

 


 

CLIXSTER MOBILE GROUP INC

(Formerly China Media Group Corporation)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 (Restated)

 

 

NOTE 11 RELATED COMPANY TRANSACTIONS

 

For the years ended December 31, 2013 and 2012, the Company did not pay the directors and its officers any remuneration for their services provided to the Company.

 

The Company accrued interest of approximately $163,000 (2012: $91,745) for the year ended December 31, 2013 under a long-term shareholder loan of $2,000,000, which is unsecured, bears interest of 8% per annum and repayable on May 25, 2015.

 

 

NOTE 12 INCOME TAXES

 

No provision was made for income tax for the year ended December 31, 2013, since the Company and its subsidiaries had significant net operating loss. The Company made an income tax provision under Malaysian tax jurisdiction while Malaysian operation generates an operating profit.

 

For the years ended December 31, 2013 and 2012, the Company and its subsidiaries incurred net operating results for tax purposes of approximately profit of $23,801 and loss of $54,228, respectively. Total net operating losses carry forward at December 31, 2013 and 2012, (i) for Federal and State purpose were $11,258,593 and $11,282,393, respectively and (ii) for its entities outside of the United States there were no tax loss carried forward respectively for the two years. The net operating loss carry-forwards may be used to reduce taxable income through the year 2025. The availability of the Company's net operating loss carry-forwards are subject to limitation if there is a 50% or more change in the ownership of the Company's stock.

 

There was no significant difference between reportable income tax and statutory income tax. The gross deferred tax asset balance as of December 31, 2013 and 2012 was approximately $4,513,953 and $4,512,957, respectively. A 100% valuation allowance has been established against the deferred tax assets, as the utilization of the loss carry-forwards cannot reasonably be assured.

 

The Company is subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. The Company has not concluded all U.S. federal income tax matters for the years through fiscal 2013, with remaining fiscal years subject to income tax examination by federal tax authorities.

 

The Company’s policy is to recognize accrued interest and penalties related to unrecognized tax benefits in its income tax provision. The Company has not accrued or paid interest or penalties which were material to its results of operations for the years ended December 31, 2013 and 2012. The Company has adopted ASC 740-10 “Accounting for Income Taxes” and recorded a liability for an uncertain income tax position, tax penalties and any imputed interest thereon. The amount, recorded as an obligation, is $360,000 at December 31, 2013 (2012:$310,000).

 

A reconciliation between the income tax computed at the Malaysia and Hong Kong statutory rate and the Company’s provision for income tax is as follows:

 

    2013   2012
         
Malaysia statutory rate   25%   25%
Tax allowance   -   -
Valuation allowance – Loss carryforward under Malaysia rate   (25%)   (25%)
         
Hong Kong statutory rate   16.5%   16.5%
Valuation allowance – Loss carryforward under Hong Kong rate   (16.5%)   (16.5%)
         
Provision for income tax   -   -

 

As of December 31, 2013 and 2012, there were no material deferred tax assets or liabilities to be recognized.

 

 

F-15

 


 

CLIXSTER MOBILE GROUP INC

(Formerly China Media Group Corporation)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 (Restated)

 

NOTE 13 CONCENTRATIONS OF RISK

 

The Company is exposed to the following concentrations of risk:

 

(a) Major customers

 

For the years ended December 31, 2013 and 2012 the customer who accounted for 10% or more of the Company’s revenues is presented as follows:

 

  2013   2013   2013   2012   2012   2012
  Revenue   Percentage of Revenue   Trade accounts Receivable   Revenue   Percentage of Revenue   Trade accounts Receivable
  US$       US$   US$       US$
Customer A 43,129   29.64%   -   -   -   -
Customer B 38,235   26.28%   3,046   -   -   -
Customer C 38,130   26.21%   11,022   -   -   -
Customer D 15,853   10.90%   -   -   -   -
Total: 135,347   93.03%   14,068   -   -   -

 

(b) Major vendors

 

During the year, the Group was a provider of consulting services.  In the opinion of the Board, it is therefore of no value to disclose details of the Group’s vendors.

 

(c) Credit risk

 

Financial instruments that are potentially subject to credit risk consist principally of trade receivables. The Company believes the concentration of credit risk in its trade receivables is substantially mitigated by its ongoing credit evaluation process and relatively short collection terms. The Company does not generally require collateral from customers. The Company evaluates the need for an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.

 

(d) Exchange rate risk

 

The reporting currency of the Company is US$, to date the majority of the revenues and costs are denominated in MYR. As a result, the Company is exposed to foreign exchange risk as its revenues and results of operations may be affected by fluctuations in the exchange rate between US$ and MYR. If MYR depreciates against US$, the value of MYR revenues and assets as expressed in US$ financial statements will decline. The Company does not hold any derivative or other financial instruments that expose to substantial market risk.

 

(e) Economic and political risks

 

Substantially all of the Company’s services are conducted in Malaysia. The Company’s operations are subject to various political, economic, and other risks and uncertainties inherent in Malaysia. Among other risks, the Company’s operations are subject to the risks of restrictions on transfer of funds; export duties, quotas, and embargoes; domestic and international customs and tariffs; changing taxation policies; foreign exchange restrictions; and political conditions and governmental regulations in Malaysia.

 

(f) Interest rate risks

 

As the Company has no significant interest-bearing assets, the Company’s income and operating cash flows are substantially independent of changes in market interest rates.

 

The Company’s interest-rate risk arises from shareholder loans. The Company manages interest rate risk by varying the issuance and maturity dates variable rate debt, limiting the amount of variable rate debt, and continually monitoring the effects of market changes in interest rates. As of December 31, 2013 and 2012, shareholder loan was at fixed interest rate.

 

F-16

 


 

CLIXSTER MOBILE GROUP INC

(Formerly China Media Group Corporation)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Restated)

FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012

 

NOTE 14 COMMITMENTS AND CONTINGENCIES

 

The Company’s commitments and contingencies are set out below as follows:-

 

(a)

The Company leases office premises for its operations in Malaysia under operating leases. Rental expenses under operating lease for the year ended December 31, 2013 and 2012 were $4,588 and nil, respectively.

 

As of December 31, 2013 future minimum rental payments under non-cancelable operating leases in the next 12 months is $395.

 

 

NOTE 15 SUBSEQUENT EVENTS

 

The Group has evaluated all subsequent events through to the date these consolidated financial statements were issued, and determined that, other than as disclosed below, there were no subsequent events or transactions that require recognition or disclosures in the financial statements.  

 

(a)

On October 29, 2013, the Company ("Purchaser") and Samata Ventures Sdn Bhd (“Samata”) and Clixster Sdn. Bhd. (“CSB”) (jointly referred to as the "Vendors") entered into a conditional Sale and Purchase Agreement ("SP Agreement") for the Company to acquire 63.2% equity interests in Clixster Mobile Sdn Bhd ("Clixster Mobile") from the Vendors. The purchase consideration is the issuance of 10,193,609,664 shares at a price of US$0.01 per share in the Company which represented approximately 90% of the enlarged issued share capital of the Company to the Vendors. Clixster Mobile, a company incorporated in Malaysia, is a mobile virtual network operator ("MVNO") and principally engaged in providing cellular and mobile broadband services.

 

As announced in the Form 8K filed on February 5, 2014, on January 31, 2014, following the fulfillment of all the conditions set forth in and otherwise in accordance with the terms of the SP Agreement, this merger transaction was consummated and the Company issued to Samata and CSB 5,760,898,203 shares and 4,432,711,461 shares, respectively, for a total issuance of 10,193,609,664 shares in the Company, representing approximately 90.15% in the issued share capital of the Company.

 

On January 31, 2014, Samata transferred 4,301,422,970 to CSB and 1,459,475,233 shares to the newly appointed directors of the Company. After the above transfers, Samata did not hold any shares in the Company and CSB held a total of 8,734,134,431 shares, representing approximately 77.24% in the Company, becoming the new controlling shareholder of the Company.

 

Following the completion of the above transaction, Clixster Mobile became a 63.2% subsidiary of the Company.

 

(b) In January 2014, the Company issued 10,193,609,664 shares of its common stock in consideration for the acquisition of 63.2% equity interests in Clixster Mobile Sdn Bhd.  

 

(c) On January 15, 2014, the Company sold its subsidiaries namely Ren Ren Media Group Limited, ATeam Resources Sdn Bhd, Good World Investments Limited and Beijing Ren Ren Health Culture Promotion Limited (the “Disposed Subsidiaries”) containing its light appliances distribution business and advertising business in China.

 

(d) As announced in the Form 8K filed on January 16, 2014, the Company disposed of its subsidiaries Good World Investments Limited, ATeam Resources Sdn. Bhd., Beijing Ren Ren Health Culture Promotion Limited and Ren Ren Media Group Limited to KR Ventures Sdn. Bhd. for a consideration of US$5,000 and the assumption of certain debts in these companies. It resulted in an anticipated gain of $422,606 with a consideration receivable of $5,000, which is expected to be fully received in cash and use to settle Group’s liabilities within the next twelve months from the completion date.

 

 

F-17