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EX-31.1 - CERTIFICATION - Engage Mobility, Incf10k2014ex31i_engagemobility.htm
EX-32.1 - CERTIFICATION - Engage Mobility, Incf10k2014ex32i_engagemobility.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

 

ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended June 30, 2014

 

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

 

For the transition period from ___________to ___________

 

Commission File No. 333-169802

 

Engage Mobility, Inc.

 (Name of small business issuer in its charter)

 

Florida   45-4632256
(State or other jurisdiction of   (IRS Employer Identification No.)
incorporation or organization)    
     

140 Walnut St.

Kansas City, MO

  64106
(Address of principal executive offices)   (Zip Code)

 

(407) 329-7404

(Registrant’s telephone number, including area code)

 

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

 

Title of each class registered:   Name of each exchange on which registered:
None   None

 

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

 

Common Stock, no par value

(Title of class)

 

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

Yes ☐     No

 

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

Yes ☐     No ☒

 

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

Yes ☒     No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒     No ☐

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference Part III of this Form 10-K or any amendment to this Form 10-K. ☒

 

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

 

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

 

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

Yes ☐     No ☒

 

As of October 14, 2014, the registrant had 21,772,567  shares of its common stock outstanding.

 

 
 

 

TABLE OF CONTENTS

 

    PAGE 
  PART I  
Item 1. Business 3
Item 1A. Risk Factors 6
Item 1B. Unresolved Staff Comments 6
Item 2. Properties 6
Item 3. Legal Proceedings 6
Item 4. Mine Safety Disclosures 6
     
  PART II  
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 6
Item 6. Selected Financial Data 7
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation 8
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 12
Item 8. Financial Statements and Supplementary Data 13
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 14
Item 9A. Controls and Procedures 14
Item 9B. Other Information  
     
  PART III  
Item 10. Directors, Executive Officers and Corporate Governance 15
Item 11. Executive Compensation 16
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 17
Item 13. Certain Relationships and Related Transactions, and Director Independence 18
Item 14. Principal Accounting Fees and Services 18
     
  PART IV  
Item 15. Exhibits, Financial Statement Schedules 19
     
SIGNATURES 20

 

 
 

 

CAUTIONARY NOTE FORWARD-LOOKING STATEMENTS

 

This Annual Report on Form 10-K (this “Report”) contains “forward-looking statements” within the meaning of the Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future operations, future cash needs, business plans and future financial results, and any other statements that are not historical facts.

 

From time to time, forward-looking statements also are included in our other periodic reports on Forms 10-Q and 8-K, in our press releases, in our presentations, on our website and in other materials released to the public.  Any or all of the forward-looking statements included in this Report and in any other reports or public statements made by us are not guarantees of future performance and may turn out to be inaccurate. These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors.  Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.

 

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

 

PART I

 

Item 1.    Business 

 

We were incorporated, under the name MarketKast, Inc., under the laws of the State of Florida on December 28, 2011. On March 22, 2013, we filed Articles of Amendment to our Articles of Incorporation (the “Amendment”) to change our name from “MarketKast, Incorporated” to “Engage Mobility, Inc.” The Amendment was effective as of March 22, 2013. In connection with the name change, our trading symbol was changed from “MRKK” to “ENGA,” effective April 4, 2013.

 

We function as a provider of mobile marketing systems and solutions for business. We combine relevant technologies, data management and delivery and proprietary marketing methodology to assist business owners with marketing their products or services.

 

We sell to businesses, on monthly subscription or per user basis, our Mobile Engagement System, which includes a front end augmented reality browser to allow their business logos to come to life in video, and a back end mobile CRM that allows them to interact with their customers in an ongoing manner in the mobile environment. We offer the Engage Mobility App as a free download to consumers and allow the consumer to locate businesses in their area through our platform and receive information, contact the business, receive coupons or offers or otherwise engage with that brand. Our platform also offers the business full analytics regarding their customer base and the ability to communicate with their customer base in a contextually relevant manner.

 

As of October 2014 we have taken the following steps to become an operating company:

 

1. We have experienced some revenue and have signed up a number of customers for the system, however we have not begun to experience substantial revenue from the offering of the system as of October 2014.
   
2. We partnered with certain parties in China to develop and launch a Chinese version of our mobile platform, and we entered into a Joint Venture Agreement with our partners in China in February 2014. The Chinese JV was formed in August 2014 and the initial product launch in China commenced in late August 2014. We have not yet experienced any revenue from our interest in the Chinese Joint Venture.
   
3. We have continued to offer our full suite of mobile marketing products to business and during the past 12 months we have begun offering mobile responsive website design and hosting services, mobile marketing services and other related services to our clients. We have begun to experience some recurring monthly revenues from these offerings.

 

3
 

 

We do not own any real estate and no real property is included in our financial statements. We lease our corporate office in Kansas City, Missouri on a three year lease at $2,602.50 per month.

 

Our Service

 

We provide a full menu of mobile and online marketing services for business owners who want to grow or maintain their customer base, with the focus being on using video content as a marketing platform for driving customer acquisition.

 

Our Strategy

 

Our objective is to become the leader in mobile marketing, data delivery and customer engagement for business owners. We believe that the mobile marketing industry is growing rapidly and with our augmented reality platform, MCRM, data delivery and marketing system we have the potential to take advantage of that growth.

 

Acquire and Retain Clients.  We believe a strong and diverse client base is critical to the success of our company. The use of mobile marketing is growing rapidly, and our ability to acquire business owners as clients during this growth phase is important to developing market share. Subject to availability of capital, we intend to focus on client acquisition through a variety of means including e-mail marketing, national and local sales marketing, telemarketing, development of agreements with channel partners, as well as the use of conventional Internet marketing methods such as pay per click and cost per acquisition programs. Additionally, and subject to availability of capital, we intend to use our own marketing efforts for our video content and video syndication for the purpose of driving customer acquisition and revenues. Once we have acquired the client initially, we intend to continue to work with the client to deepen the relationship as we assist the client in using our services to enhance their business. If we do a good job for clients and help their business grow, we should be able to expand our relationship with the client as well, resulting in greater long term sustainable revenue for us.  However, we cannot be certain that sufficient capital will be available to us to accomplish the above objectives, or that we will be able to expand our relationships with our clients in order to create such revenue and that we will be able to generate long term sustainable revenue from such relationships. 

 

Distribution and Marketing

 

Subject to availability of capital, we plan to distribute our products and services through national and local sales efforts, independent reps, channel partners, online marketing, and video marketing, as well as through email, our website, social networks, telemarketing and by affiliating with channel partners such as advertising and other marketing companies.  We intend to use both internal and outsourced sales groups and programs to sell our products and offerings to qualified client lists and databases.

 

Operations

 

Our business operations are divided into the following core functions:

 

Sales and Marketing

 

We intend, subject to availability of capital, to implement all of the above stated programs in fiscal 2015 for purposes of driving customer acquisition and building our revenue base. Our sales and marketing initiatives will include deployment and oversight of our internal sales and marketing personnel, our outsourced telesales and channel partner sales organizations, and our email and direct marketing partners to deploy an array of marketing programs as set forth above and herein.

 

Fulfillment

 

We will deploy both internal product fulfillment and outsourced fulfillment services that will fulfill all sales and service obligations to our customers.

 

Customer Service

 

We will have a dedicated customer services group with two primary functions. One is to answer questions about products, procedures and our business philosophy.  In addition, our customer service group will monitor fulfillment and solve fulfillment issues and handle other aspects of post purchase issues that may arise.

 

4
 

 

Competition

 

In the past few years, the number of online and mobile video technologies, offerings and companies has grown rapidly. The markets for the products and services that we offer are very competitive, are rapidly evolving and have relatively low barriers to entry. In addition to other video production and technology companies, we compete with all general advertising and marketing companies who eventually will want to include video marketing in their suite of product offerings, and who may develop their own similar products and compete with us for market share. These potential competitors may have more mature lines of distribution than us, be better financed than us, or may create a product offering that is superior to ours. Any of these factors can cause a competitor to take market share away from us or otherwise substantially hurt our business. We believe that competition in our market is based predominantly on:

 

  price

 

  brand recognition;

 

  product and service components and deliverables;

 

  track record of creating and keeping satisfied clients;

 

  success of underlying marketing programs for online video content;

 

order delivery performance and customer service.

 

We believe that we will enjoy the following competitive advantages, provided that we have sufficient access to capital:

 

  Our President, Chief Executive Officer and Chief Financial Officer, Douglas S. Hackett, has experience in internet marketing including video driven internet marketing.  We believe his knowledge of design and sales strategy gleaned from previous experience with online marketing products and services, will be critical to our success.

 

  We intend, subject to capital availability, to provide a suite of products that will allow all business owners to use our Mobile Engagement System including the pricing of our product offerings based on per user or performance based pricing. By developing a user based pricing model, we believe that we will make mobile marketing business video affordable for all business owners, even small proprietors or home based business owners. By opening this door to a larger group of potential users, we believe that we have the ability to gain market share rapidly and take a leadership role in this growing space.

 

  We will attempt to use our outsourced relationships to keep costs down, which will allow us to offer competitive pricing. We have outsourced certain sales and fulfillment functions, including the outsourcing of certain fulfillment functions to offshore contractors, and that will allow us to keep our sales and fulfillment costs low and marginal. This will allow us to maintain margin and pricing integrity, and this should give us a competitive advantage.

 

Government Regulation

 

We are subject to a number of laws and regulations that affect companies generally and specifically those conducting business on the internet, many of which are still evolving and could be interpreted in ways that could harm our business.  Existing and future laws and regulations may impede our growth. These regulations and laws may cover online marketing, e-mail marketing, telemarketing, taxation, privacy, data protection, pricing, content, copyrights, distribution, mobile communications, electronic contracts and other communications, consumer protection, web services, the provision of online payment services, unencumbered internet access to our services, the design and operation of websites, and the characteristics and quality of products and services. It is not clear how existing laws governing issues such as property ownership, libel, and personal privacy apply to the internet, e-commerce, digital content and web services. Unfavorable regulations and laws could diminish the demand for our products and services and increase our cost of doing business.

 

5
 

 

Intellectual Property

 

Although we believe that our business methodology is proprietary in terms of how we deliver our service to our client, and how we use deploy video in a marketing context, we currently hold no patents, copyrights or trademarks. We have filed for patent protection on our Mobile Engagement System, however we do not know if such a patent will issue. It is our policy to enter into confidentiality agreements with any outsourced sales or service providers so that our proprietary methodology, customer’s lists and business information are contractually protected, and we intend to enforce any such contractual provisions as the law allows in the event of a breach. We cannot assure you that these contractual arrangements will prevent third parties from acquiring or using our proprietary business information to compete against us.

 

Employees 

 

We currently have 4 full time and 2 part time employees in the areas of sales, marketing, IT and tech support, financial management, administrative, investor relations and executive management.

 

Item 1A.    Risk Factors

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

 

Item 1B.    Unresolved Staff Comments

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

 

Item 2.    Properties

 

We rent our office space at 140 Walnut St, Kansas City, Mo for $2,602.50 per month where we house our company and staff.

 

Item 3.    Legal Proceedings

 

From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. Other than discussed below, we are not aware of any other legal proceedings.

 

We are currently involved in one legal proceeding, a breach of contract lawsuit against IRTH Communications, LLC. On May 24, 2014, we filed a lawsuit in Orange County, FL (case # 2014-CA-00-2626-O), against IRTH for breach of a contract to provide investor relations services to us. In that lawsuit we seek return of $110,000 of monies paid to IRTH, and we seek the cancellation of 54,950 shares of stock issued to IRTH. IRTH has subsequently sued us for breach of contract, seeking damages and also seeking to have their shares cleared for trading, which they are not currently.

 

Item 4.    Mine Safety Disclosures

 

Not applicable.

 

PART II

 

Item 5.    Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

Market Information

 

Our common stock has been trading on the Over-the-Counter (OTC) Markets under the symbol ENGA since April 4, 2013. Between February 20, 2013 and April 4, 2013 we traded under the symbol MRKK. The OTC Markets is a quotation service that displays real-time quotes, last-sale prices, and volume information in over-the-counter, or the OTC, equity securities.

 

Price range of common stock

 

The following table shows, for the periods indicated, the high and low bid prices per share of our common stock as reported by the OTC Markets quotation service.   The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions, and may not represent actual transactions.

 

   Fiscal June 30, 2014   Fiscal June 30, 2013 
   High   Low   High   Low 
First Quarter (July 1 – Sept 30)  $1.84   $0.80   $--(1)  $--(1)
Second Quarter (October 1 – December 31)  $3.19   $1.28   $--(1)  $--(1)
Third Quarter (January 1 – March 31)  $4.50   $2.05   $1.30   $    
Fourth Quarter (April 1 – June 30)  $4.00   $1.30   $1.59   $1.25 

 

(1)  A public market for our common stock did not exist prior to February 20, 2013.

 

6
 

 

Holders

 

As of October 14, 2014, we had 452 shareholders of our common stock.

 

Transfer Agent and Registrar

 

ClearTrust, LLC is currently the transfer agent and registrar for our common stock. Its address is 16540 Pointe Village Dr., Suite 206, Lutz, FL 33558. Its phone number is (813) 235-4490.

 

Authorized Capital Stock

 

Our authorized stock consists of 100,000,000 shares of common stock, with no par value. There are currently 21,772,567 shares of common stock issued and outstanding.

 

Common Stock

 

Each share of our common stock entitles its holder to one vote in the election of each director and on all other matters voted on generally by our stockholders, other than any matter that (1) solely relates to the terms of any outstanding series of preferred stock or the number of shares of that series and (2) does not affect the number of authorized shares of preferred stock or the powers, privileges and rights pertaining to the common stock. No share of our common stock affords any cumulative voting rights. This means that the holders of a majority of the voting power of the shares voting for the election of directors can elect all directors to be elected if they choose to do so.

 

Holders of our common stock will be entitled to dividends in such amounts and at such times as our Board of Directors in its discretion may declare out of funds legally available for the payment of dividends. We currently intend to retain our entire available discretionary cash flow to finance the growth, development and expansion of our business and do not anticipate paying any cash dividends on the common stock in the foreseeable future. Any future dividends will be paid at the discretion of our Board of Directors after taking into account various factors, including:

 

  general business conditions;
     
  industry practice;
     
  our financial condition and performance;
     
  our future prospects;
     
  our cash needs and capital investment plans;
     
  our obligations to holders of any preferred stock we may issue;
     
  income tax consequences; and
     
  the restrictions Delaware and other applicable laws and our credit arrangements then impose.

 

If we liquidate or dissolve our business, the holders of our common stock will share ratably in all our assets that are available for distribution to our stockholders after our creditors are paid in full and the holders of all series of our outstanding preferred stock, if any, receive their liquidation preferences in full.

 

Our common stock has no preemptive rights and is not convertible or redeemable or entitled to the benefits of any sinking or repurchase fund.

 

Dividends

 

Since inception we have not paid any dividends on our common stock. We currently do not anticipate paying any cash dividends in the foreseeable future on our common stock, when issued pursuant to this offering. Although we intend to retain our earnings, if any, to finance the exploration and growth of our business, our Board of Directors will have the discretion to declare and pay dividends in the future. Payment of dividends in the future will depend upon our earnings, capital requirements, and other factors, which our Board of Directors may deem relevant.

 

Securities Authorized for Issuance Under Equity Compensation Plans

 

We presently do not have any equity based or other long-term incentive programs. In the future, we may adopt and establish an equity-based or other long-term incentive plan if it is in the best interest of the Company and our stockholders to do so.

 

Item 6.    Selected Financial Data

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

 

7
 

 

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The following is management’s discussion and analysis of the consolidated financial condition and results of operations of Engage Mobility, Inc. (“Engage Mobility”, the “Company”, “we”, and “our”) for the three and nine month period ended June 30, 2014 and 2013.  

 

Overview

 

We were incorporated, under the name MarketKast, Inc., under the laws of the State of Florida on December 28, 2011. On March 22, 2013, we filed Articles of Amendment to our Articles of Incorporation (the “Amendment”) to change our name from “MarketKast, Incorporated” to “Engage Mobility, Inc.” The Amendment was effective as of March 22, 2013. In connection with the name change, our trading symbol was changed from “MRKK” to “ENGA,” effective April 4, 2013.

 

We function as a provider of mobile technology, marketing and data solutions for business.  Through the sale of our Mobile Engagement System, we enable business owners to engage with new and existing customers with a turnkey mobile marketing solution. The Mobile Engagement System integrates an augmented reality browser and content with our proprietary cloud based mobile video delivery system, a mobile customer relationship manager and our Dynamic Data platform to create a full solution for business to market their products in the mobile environment. The Mobile Engagement System is sold to businesses under a “user based” model – so that the business pays us a monthly user fee based on the number of “engaged” users in their database at any given time.

 

In addition to this core product offering, we will offer to our clients additional products and services in order to assist in growing their business, including mobile optimization of websites, as well as additional mobile marketing, customer acquisition services and mobile data services.

 

Recent Developments 

 

In September 2013, we completed initial development and launch of version 1.0 of our Mobile Engagement System. In conjunction therewith we launched our Engage Mobility mobile application as a free download in the Apple iTunes® and Google Play® stores. We began initial marketing and sales efforts for version 1.0 of the system to clients in September 2013.

 

We partnered with certain parties in China to develop and launch a Chinese version of our mobile platform, and we entered into a Joint Venture Agreement with our partners in China in February 2014. The Chinese JV was formed in August 2014 and the initial product launch in China commenced in late August 2014. We have not yet experienced any revenue from our interest in the Chinese Joint Venture. 

 

In April, 2014 we completed development of version 2.0 of our Mobile Engagement System, which was developed internally by our own development team, and which includes our new product immersion , a street view augmented reality platform that allows users to locate businesses in their geographical area who are on the Engage system. We have filed a provisional patent application seeking patent protection for version 2.0 of our Mobile Engagement System.

 

In May 2014, we commenced our marketing and sales efforts for our new Mobile Engagement System. We have only experienced nominal initial revenue, and we do not expect to experience consistent revenue until fiscal 2015. Due to our failure to raise substantial capital to roll out a full sales initiative for the Mobile Engagement System, we have recently scaled back our staff and are focusing on larger contracts with certain corporate clientele in order to build revenue. If we are able to raise the capital necessary to launch a full sales and marketing initiative we will hire the sales and marketing staff to do so at that time.

 

Plan of Operation

 

Until May 2014, our efforts have been primarily limited to business formation, strategic development, marketing, website and product development, negotiations with third party sales and channel partners, and capital raising activities. We have developed and begun to launch our newest suite of products including version 2.0 of the Mobile Engagement System as of May 2014.  We are, subject to availability of capital, in the process of developing and implementing sales and marketing initiatives to sell our products. Although we have experienced some initial revenue, mainly in the form of initial development fees, we do not expect to begin realizing consistent revenue until fiscal 2015.

 

As of October, 2014, we have taken the following steps to implement our business plan:

 

We partnered with certain parties in China to develop and launch a Chinese version of our mobile platform, and we entered into a Joint Venture Agreement with our partners in China in February 2014. The Chinese JV was formed in August 2014 and the initial product launch in China commenced in late August 2014. We have not yet experienced any revenue from our interest in the Chinese Joint Venture. 

 

In April, 2014 we completed development of version 2.0 of our Mobile Engagement System, which was developed internally by our own development team, and which includes our new product immersion , a street view augmented reality platform that allows users to locate businesses in their geographical area who are on the Engage system. We have filed a provisional patent application seeking patent protection for version 2.0 of our Mobile Engagement System.

 

8
 

 

In May 2014, we commenced our marketing and sales efforts for our new Mobile Engagement System.

 

During the next 12 months, subject to availability of capital, we expect to:

 

Launch a full roll out in the U.S. of our Mobile Engagement System. We expect to market the Mobile Engagement System through direct marketing via the internet, through trade shows and seminars, through the hiring of both national and local sales personnel, through channel partners, independent reps and telesales. Subject to availability of capital, we intend to implement all of these sales initiatives during the 4th quarter of 2014 or the first quarter of 2015. This will involve hiring a national sales manager, a number of local sales managers and local sales representatives, five to 15 telesales people, as well as associated staffs. The cost of marketing our Mobile Engagement System is estimated to be between $30,000 and $250,000 per month, but will be scaled in if and when capital is available.

 

We have a current burn rate, as of October 2014, of approximately $15,000 to $25,000 per month. It includes office rental expenses, payroll, insurance, marketing, travel, telephone, internet and other office expenses, legal and accounting expenses and other miscellaneous expenses including filing fees, transfer agent fees and other costs of being public.

 

Therefore, if we do not experience any income or obtain additional financing, we could expect to run out of capital sometime between November 2014 and December 2014. For this reason, if we do not experience any income in the first half of fiscal 2015, we will need to raise additional capital of between $15,000 and $25,000 per month, in order to continue our business.  In addition, in order to fully implement our business plan, we will need to raise an additional $1,000,000 to $5,000,000 of capital for the purpose of initiating and ramping up marketing and sales efforts, hiring of sales personnel and for general working capital. This additional $1,000,000 to $5,000,000 of financing will need to be raised between October 2014 and March 2015 in order to effectively implement our business plan.  It is not necessary that we receive such a capital infusion at any one time; we could implement our plan through the raising of at least $500,000 per quarter beginning October 2014. However, there is no assurance that we will be able to raise any capital in the future, or that capital will be available on terms acceptable to us.

 

Results of Operations

 

Comparison of the year ended June 30, 2014 and 2013

 

Revenues

 

Since inception, our activities have been primarily limited to business formation, strategic development, marketing, website and product development, negotiations with third party sales and channel partners, and capital raising activities. During the year ended June 30, 2013, we have generated $23,234 in revenue as compared to $87,185 for the year ended June 30, 2014.   

 

Operating Expenses

 

During the year ended June 30, 2013, we incurred general and administrative expenses of $417,520, and during the year ended June 30, 2014 we incurred general and administrative expenses of $4,259,153. These general and administrative expenses consist of rent, insurance, professional fees, travel, employee compensation and other miscellaneous items. In addition, they include $3,125,410 of non-cash stock based costs in 2014.

 

Net Income and Loss

 

We had net loss of $419,855 for the year ended June 30, 2013, compared to $5,083,628 for the period ended June 30, 2014. Our auditor has expressed doubt as to whether we will be able to continue to operate as a “going concern” due to the fact that the Company has had no material revenues since inception and will need to raise capital to further its operations.

 

Liquidity and Capital Resources

 

As of June 30, 2014, we had minimal cash.  Our primary uses of cash were for development and testing of products, marketing expenses, employee compensation, and general and administrative expenses. We have historically financed our operations through sale of common stock to our founders, private equity offering, and debt from third party lenders. The following trends are reasonably likely to result in a material decrease in our liquidity in both near and long term:

 

 

An increase in working capital requirements;

     
  Addition of administrative and sales personnel as the business grows;
     
 

Increases in advertising, public relations and sales promotions as we commence operations;

     
 

Development of new customers and market initiation, and

     
  Increased cost of being a public company due to governmental compliance activities.

 

9
 

 

The following summarizes the key components of the Company’s cash flows for the year ended June 30, 2014:    
     
Cash used in operating activities  $(1,400,880)
Cash used in investing activities  $(89,242)
Cash flows provided by financing activities   1,506,323 
Net increase in cash and cash equivalents  $16,201

 

Cash flows used in investing activities consisted of the acquisition of intangibles of $75,000 and the acquisition of property and equipment of $14,000.

 

Cash flows provided by financing activities consisted of the proceeds from notes and convertible notes payable of $430,000, the sale of common shares for cash of $1,276,000 and the repayment of notes payable of $185,000.

 

We have a current burn rate, as of October 2014, of approximately $15,000 to $25,000 per month. It includes office rental expenses, payroll, consulting fees, insurance, marketing, travel, telephone, internet and other office expenses, legal and accounting expenses and other miscellaneous expenses including filing fees, transfer agent fees and other costs of being public.

 

Therefore, if we do not experience any income or obtain additional financing, we could expect to run out of capital sometime between November 2014 and December 2014. For this reason, if we do not experience any income in the first half of fiscal 2014, we will need to raise additional capital of between $15,000 and $25,000 per month, in order to continue our business. In addition, in order to fully implement our business plan, we will need to raise an additional $1,000,000 to $5,000,000 of capital for the purpose of initiating and ramping up marketing and sales efforts, hiring of sales personnel and for general working capital. This additional $1,000,000 to $5,000,000 of financing will need to be raised in between October 2014 and January 2015 in order to effectively implement our business plan. However, there is no assurance that we will be able to raise any capital in the future, or that capital will be available on terms acceptable to us.  

 

Off-Balance Sheet Arrangements

 

We do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, sales or expenses, results of operations, liquidity or capital expenditures

 

Critical Accounting Policies

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates.

 

Loss Per Share

 

Basic earnings (loss) per share are calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding. During periods in which the Company incurs losses common stock equivalents, if any, are not considered, as their effect would be anti dilutive.

 

Income Taxes

 

Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.

 

All tax periods from inception remain open to examination by taxing authorities.

 

Fair Value of Financial Instruments

 

The Company’s short-term financial instruments consist of cash, ,receivables, accounts payable and accrued expenses, and other current liabilities. The carrying amounts of these financial instruments approximate fair value because of their short-term maturities. The Company does not hold or issue financial instruments for trading purposes nor does it hold or issue interest rate or leveraged derivative financial instruments. The carrying value of the Company’s long-term debt approximates fair value based on the terms and conditions at which the Company could obtain similar financing.

 

10
 

 

Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplate continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.  As reflected in the accompanying financial statements, the Company had an accumulated deficit of $5,534,892 and a working capital deficit of $479,369. We have a current burn rate, as of October 2015, of approximately $15,000 to $25,000 per month. It includes office rental expenses, payroll, consulting fees, insurance, marketing, travel, telephone, internet and other office expenses, legal and accounting expenses and other miscellaneous expenses including filing fees, transfer agent fees and other costs of being public. Therefore, if we do not experience any income or obtain additional financing, we could expect to run out of capital sometime between October 2014 and December 2014. For this reason, if we do not experience any income in the first half of fiscal 2015, we will need to raise additional capital of between $15,000 and $25,000 per month, in order to continue our business. These conditions raise substantial doubt about its ability to continue as a going concern. 

 

While the Company is attempting to execute its business strategy, the Company’s cash position may not be sufficient to support the Company’s daily operations without significant financing.  While the Company believes in the viability of its strategy to produce sales volume and in its ability to raise additional funds, there can be no assurances to that effect.  The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenues.  The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.  

 

Item 7A.   Quantitative and Qualitative Disclosures About Market Risk

 

We are not required to provide the information required by this Item because we are a smaller reporting company.

 

11
 

 

Item 8.      Financial Statements and Supplementary Data

 

ENGAGE MOBILITY, INC.

FINANCIAL STATEMENTS

AS OF JUNE 30, 2014 and 2013

 

Financial Statements Table of Contents

 

FINANCIAL STATEMENTS

 

Balance Sheets F-2
   
Statements of Operations F-3
   
Statement of Stockholders’ Equity (Deficit) F-4
   
Statements of Cash Flows F-5
   
Notes to the Financial Statements F-6

  

12
 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

Shareholders and Board of Directors

Engage Mobility, Inc.

 

We have audited the accompanying balance sheets of Engage Mobility, Inc. (the "Company") as of June 30, 2014 and 2013, and the related statements of operations, stockholders' equity (deficit), and cash flows for the years ended June 30, 2014 and 2013. 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 financial statements referred to above present fairly, in all material respects, the financial position of Engage Mobility, Inc. as of June 30, 2014 and 2013, and the related statements of operations, stockholders' equity (deficit), and cash flows for the years ended June 30, 2014 and 2013, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 3 to the financial statements, the Company has incurred significant losses from operations and a working capital deficit. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to this matter are also discussed in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Kingery & Crouse PA

Certified Public Accountants

Tampa, Florida

October 14, 2014

 

F-1
 

 

ENGAGE MOBILITY, INC.

BALANCE SHEETS

As of June 30, 2014 and 2013

 

   2014   2013 
ASSETS
         
CURRENT ASSETS        
Cash  $16,201   $- 
Accounts receivable   650    8,500 
Prepaid expenses   32,805    - 
Total Current Assets   49,656    8,500 
           
PROPERTY AND EQUIPMENT, net   9,627    2,958 
           
OTHER ASSETS          
Intangible asset, net   74,263    24,000 
           
TOTAL ASSETS  $133,546   $35,458 
           
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)          
           
CURRENT LIABILITIES          
Accounts Payable and accrued expenses  $59,025   $21,940 
Other current liabilities  470,000   - 
Due to bank   -    14,282 
Total Current Liabilities   529,025    36,222 
           
LONG TERM LIABILITIES          
Notes payable   275,000    280,000 
Convertible notes payable   2,454    - 
           
STOCKHOLDERS' EQUITY (DEFICIT)          
           
Common Stock - No Par Value;          
Authorized: 100,000,000          
Issued and Outstanding: 21,772,567 and 20,126,500 shares   1,976,595    166,500 
Paid in capital   2,885,364    4,000 
Accumulated Deficit   (5,534,892)   (451,264)
Total stockholders' equity (deficit)   (672,933)   (280,764)
           
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $133,546   $35,458 

 

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

 

F-2
 

 

ENGAGE MOBILITY, INC.
STATEMENTS OF OPERATIONS
Years ended June 30, 2014 and 2013

 

   2014   2013 
         
REVENUE  $87,185   $23,234 
           
COST OF SALES   6,500    15,626 
           
GROSS PROFIT   80,685    7,608 
           
OPERATING EXPENSES:          
GENERAL AND ADMINISTRATIVE EXPENSES   4,259,153    417,520 
           
TOTAL OPERATING EXPENSES   4,259,153    417,520 
           
OPERATING LOSS   (4,178,468)   (409,912)
           
INTEREST EXPENSE   905,160    9,943 
           
LOSS BEFORE INCOME TAXES   (5,083,628)   (419,855)
           
INCOME TAXES   -    - 
           
NET LOSS  $(5,083,628)  $(419,855)
           
Net Loss Per Common Share, basic & diluted  $(0.24)  $(0.02)
           
Weighted  Average Common Shares Outstanding, basic & diluted   20,836,050    20,126,500 

 

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

 

F-3
 

 

ENGAGE MOBILITY, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Years ended June 30, 2014 and 2013

 

                    
                    
                    
   COMMON STOCK   PAID-IN   ACCUMULATED     
   SHARES   AMOUNT   CAPITAL   DEFICIT   TOTAL 
                     
Balance, June 30, 2012   20,126,500   $166,500   $4,000   $(31,409)  $139,091 
                          
Net Loss   -    -    -    (419,855)   (419,855)
Balance, June 30, 2013   20,126,500    166,500    4,000    (451,264)   (280,764)
                          
Stock issued for cash   1,343,150    1,275,605    -    -    1,275,605 
Stock issued for services, inducements and interest   47,967    234,490    -    -    234,490 
Stock issued for debt conversion   200,000    200,000         -    200,000 
Stock issued for deferred compensation   54,950    100,000    (100,000)          
Options and warrants issued for services and interest   -    -    2,807,587    -    2,807,587 
Beneficial conversion feature   -    -    90,444    -    90,444 
Deferred compensation expense recognized   -    -    83,333    -    83,333 
Net Loss   -    -    -    (5,083,628)   (5,083,628)
Balance, June 30, 2014   21,772,567   $1,976,595   $2,885,364   $(5,534,892)  $(672,933)

 

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

 

F-4
 

 

ENGAGE MOBILITY, INC.

STATEMENTS OF CASH FLOWS

Years ended June 30, 2014 and 2013

   2014  2013
CASH FLOWS FROM OPERATING ACTIVITIES          
           
Net loss  $(5,083,628)  $(419,855)
           
Depreciation and amortization of property and equipment and intangibles   31,828    1,443 
Non-cash interest expense resulting from beneficial conversion feature   42,898    —   
Common stock, options and warrants issued for services, interest and inducements   3,125,410    —   
Changes in assets and liabilities:          
Accounts receivable   7,850    (8,500)
Prepaid expenses   (32,805)   2,500 
Accounts payable and accrued expenses   37,085    19,940 
Other current liabilities   470,000    —   
           
Total adjustments to net income   3,682,266    15,383 
           
Net cash (used in) operating activities   (1,401,362))   (404,472)
           
CASH FLOWS FROM INVESTING ACTIVITIES          
           
Acquisition of intangibles   (74,963)   (24,000)
Purchase of property and equipment   (13,797)   (4,401)
Net cash (used in) investing activities   (88,760)   (28,401)
           
           
CASH FLOWS FROM FINANCING ACTIVITIES          
           
Due to bank   (14,282)   14,282 
Notes payable   180,000    265,000 
Convertible notes payable   250,000    —   
Notes payable – repayment   (185,000)   —   
Common shares issued for cash, net   1,275,605    —   
Net cash provided by financing activities   1,506,323    279,282 
           
Net increase (decrease) in cash   16,201    (153,591)
Cash - beginning balance   —      153,591 
           
CASH ENDING BALANCE  $16,201   $—   
           
Cash paid for:          
Interest  $—     $9,943 
Income taxes  $—     $—   
           
Non-cash investing and financing activities:          
Conversion of note payable to common stock  $200,000   $—   
Beneficial conversion feature on note payable  $90,444   $—   

 

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

 

F-5
 

 

ENGAGE MOBILITY, INC.

NOTES TO FINANCIAL STATEMENTS

June 30, 2014 and 2013

 

NOTE 1 NATURE OF OPERATIONS

 

Engage Mobility, Inc.  (the “Company”) was incorporated on December 28, 2011 under the laws of the State of Florida as MarketKast Incorporated. On March 22, 2013, the Company changed its name to Engage Mobility, Inc. The Company functions as a provider of mobile marketing services, online and mobile video production, distribution, syndication and marketing services for business owners.

 

The Company has adopted its fiscal year end to be June 30.

 

NOTE 2 SUMMARY OF ACCOUNTING POLICIES

 

Basis of Presentation

 

The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

Cash Equivalents

 

The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. Bank overdrafts are presented in the financial statements under the caption “Due to Bank”.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amount of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates include the valuation of stock based compensation.

 

Revenue Recognition

 

In general, the Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. Revenue is recognized at the time the product is delivered or the service is performed. Where the Company has entered into a revenue sharing agreement with a third party, the Company will record its’ proportionate share of the revenue.

  

Deferred revenue is recorded for amounts received in advance of the time at which services are performed and included in revenue at the completion of the related services.

 

Accounts Receivable and Allowance for Doubtful Accounts

 

Accounts receivable are reported at their outstanding unpaid principal balances reduced by an allowance for doubtful accounts. The Company estimates doubtful accounts based on historical bad debts, factors related to specific customers' ability to pay and current economic trends. The Company writes off accounts receivable against the allowance when a balance is determined to be uncollectible.

 

F-6
 

 

Intangible Assets and Long Lived Assets

 

The Company makes reviews for the impairment of long-lived assets and certain identifiable intangibles whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount.

 

 During January 2013 the Company entered into a licensing and development agreement with a third party to develop and integrate a mobile communication platform for a fee aggregating $48,000 In addition to the development fee the Company will pay a monthly license fee based on the number of users. Amortization for the intangible asset began in February 2014.

 

In November 2013 the Company entered into an agreement to build a mobile platform for a fee of $50,000. The platform was completed during the year and the Company began amortizing the platform in January 2014.

 

In addition, the Company developed a website at a cost of $963.

 

Intangible assets consisted of the following:

 

    2014    2013 
Cost basis  $98,963   $24,000 
Accumulated amortization   (24,700)   - 
   $74,263   $24,000 

  

Property and Equipment

 

Depreciation of office and production equipment is provided for by the straight-line method over the estimated useful lives of the related assets. Equipment is currently being depreciated over a period of 5 years.

  

Property and Equipment consist of the following:

 

Equipment and furniture  $16,755   $2,958 
Accumulated depreciation   (7,128)   - 
   $9,627   $2,958 

 

Fair value of financial instruments

 

The Company’s short-term financial instruments consist of cash, accounts receivable, accounts payable and accrued expenses, and other current liabilities. The carrying amounts of these financial instruments approximate fair value because of their short-term maturities.  The Company does not hold or issue financial instruments for trading purposes nor does it hold or issue interest rate or leveraged derivative financial instruments. The carrying value of the Company’s long-term debt approximates fair value based on the terms and conditions at which the Company could obtain similar financing.

 

Income Taxes

 

Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.

 

All tax periods from inception remain open to examination by taxing authorities.

  

Stock-Based Compensation

 

The Company records the cost resulting from all share-based transactions in the financial statements. The Company applies a fair-value-based measurement in accounting for share-based payment transactions with employees and when the Company acquires goods or services from non-employees in share-based payment transactions.

 

Net Income (Loss) Per Common Share

 

Basic earnings (loss) per share are calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding. During periods in which the Company incurs losses common stock equivalents, if any, are not considered, as their effect would be anti-dilutive.

 

Recent Pronouncements

 

The Company has elected to early adopt the FASB Codification topic 915 Development Stage Entities.

 

F-7
 

 

The Company does not believe that other recently issued accounting pronouncements will have a material impact on its financial statements.

 

NOTE 3 GOING CONCERN

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.  As reflected in the accompanying financial statements, the Company has an accumulated deficit of $5,534,892 and a working capital deficit of $479,369 at June 30, 2014. These conditions raise substantial doubt about its ability to continue as a going concern.

 

While the Company is attempting to execute its strategy, the Company’s cash position may not be sufficient to support the Company’s daily operations without significant financing.  While the Company believes in the viability of its strategy to produce sales volume and in its ability to raise additional funds, there can be no assurances to that effect.  The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenues to meet its obligations.  The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.   

 

NOTE 4 ACCOUNTS PAYABLE AND OTHER LIABILITIES

 

Accounts payable and accrued expenses consist of accruals from normal operations of the business.  As of June 30, 2014 and 2013 the balances are $59,025 and $21,940.

 

Other current liabilities consist of an aggregate of $470,000 received for the development of a mobile platform from the Joint Venture described in Note 12.

 

NOTE 5  NOTES PAYABLE

 

Through June 30, 2013, the Company borrowed an aggregate of $280,000 pursuant to non-convertible promissory notes, bearing interest at 10% per annum. During the year ended June 30, 2014, the Company borrowed an additional $180,000 pursuant to non-convertible promissory notes with similar terms. In addition, the Company repaid $185,000 of the previously issued notes. Interest is payable monthly and the principal, together with any unpaid interest, is due 48 months from the dates of the notes.

 

The notes are due as follows:

 

Year Ended June 30, 2017  $205,000 
Year Ended June 30, 2018   70,000 
  $275,000 

 

NOTE 6 CONVERTIBLE NOTES PAYABLE

 

During July 2013, the Company issued $250,000 of 10% convertible promissory notes to certain private investors. The convertible notes mature after three years, at which time all outstanding principal and accrued interest is due. The notes were convertible by the investors into the Company's current registered offering on Form S-1 with $200,000 being convertible into the offering at a 20% discount to the offering price of $1.60 per share, or $1.28 per share, and $50,000 being convertible at a 50% discount to the offering price, or $0.80 per share. In addition to the interest due, the Company issued 125,000 warrants to the lenders at an exercise price of 125% of the share price of the proposed offering or $2.00 per share (see Note 8). These convertible notes are secured by all of the Company’s assets.

  

In addition, the Company recognized a beneficial conversion feature related to the convertible notes of $90,444, calculated using a binomial model which was credited to additional paid-in capital. Interest on the notes is being recognized using the effective yield method over the three year life of the notes.

 

F-8
 

 

During February 2014 the holder of the $200,000 convertible note agreed to convert the note into 200,000 shares of the Company’s common stock (see Note 7). This note holder also purchased an additional 100,000 shares of the Company’s common stock for $100,000 in cash. The Company also granted the note holder an option to purchase 200,000 common shares at $1.50 per share and 200,000 shares at $2.00 per share for a three year period (see Note 8).

  

Convertible notes payable consist of the following at June 30, 2014:

 

Notes payable  $50,000 
Beneficial conversion feature and unamortized warrants   (47,546)
   $2,454 

 

Charges to interest expense related to amortization of the cost of the warrants and beneficial conversion feature during the year ended June 30, 2014, were $202,454.

   

NOTE 7 STOCKHOLDERS’ EQUITY

 

Common Stock includes 100,000,000 shares authorized at no par value.

 

During the year ended June 30, 2014, the Company issued common shares as follows:

 

The Company issued 1,343,150 shares of common stock for cash of $1,275,605.

 

On July 31, 2013, the Company’s registration statement on Form S-1 became effective. The Company is offering for sale a maximum of 6,250,000 shares of its no par value common stock at a price of $1.60 per share. As of June 30, 2014, 312,500 shares had been sold pursuant to the offering for cash of $500,000. These shares are included in the shares issued for cash described above.

 

The Company issued 47,967 shares of common stock for services, inducements and interest. These shares were valued at the trading price of the Company’s common shares on the date it was agreed the shares would be issued of $234,490 which has been charged to operations during the period.

 

The Company issued 200,000 shares of common stock for the conversion of a $200,000 note (see Note 6). The fair value of the shares in excess of the note of $84,000 has been charged to operations during the period.

 

The Company issued 54,950 common shares for services to be performed over a one year period, which were valued at their estimated fair value of $100,000 based on the trading price of the Company’s common shares. The value of these shares has been recorded as deferred compensation as a reduction of paid in capital and is being amortized over the one year period during which the related services will be received. At June 30, 2014 $83,333 of deferred compensation has been charged to operations.

 

NOTE 8 STOCK OPTIONS AND WARRANTS

 

Two employees were granted an aggregate of 614,000 five year options (see Note 10) which vested immediately as to 114,000 options and as to 125,000 options per year over the next 4 years. The options are exercisable at $2.50 per share for 114,000 options, $3.00 per share for 125,000 options, $3.50 per share for 125,000 options, $3.75 for 125,000 options and $4.00 for 125,000 options. The aggregate grant date fair value of the options was $1,415,710 of which $413,398 has been charged to operations during the year ended June 30, 2014. The balance of the fair value of the options will be charged to operations over the vesting period. The options were valued using the Binomial option pricing model with the following assumptions:

 

Volatility 154% - Dividend rate 0% - Interest rate 1.36% - 1.66% - Term 5 years

 

F-9
 

  

A summary of the status of the stock options granted to employees and others as of June 30, 2014 is as follows:

 

      Weighted
   Number  Average
   of  Exercise
   Options  Price
           
Options outstanding at beginning of year   —     $—   
Changes during the year:          
Granted   614,000   $3.37 
Cancelled/exercised   —        
           
Options outstanding at end of year   614,000   $3.37 
           
Options exercisable at end of year   114,000   $2.50 
           
Weighted average fair value of options granted during the year       $3.37 

 

Costs incurred with respect to stock based compensation related to options for the years ended June 30, 2014 was $413,398. Unrecognized cost as of June 30, 2014 was $1,002,312 which amount is expected to be recognized over approximately 54 months. As of June 30, 2014, the aggregate intrinsic value of all stock options outstanding and expected to vest was approximately $0 and the aggregate intrinsic value of currently exercisable stock options was approximately $0. The intrinsic value of each option share is the difference between the fair market value of our common stock and the exercise price of such option share to the extent it is “in-the-money”. Aggregate intrinsic value represents the value that would have been received by the holders of in-the-money options had they exercised their options on the last trading day of the year and sold the underlying shares at the closing stock price on such day. The intrinsic value calculation is based on the assumed market value of our common stock on June 30, 2014, at $2.01 per share. The total number of in-the-money options outstanding and exercisable as of June 30, 2014, was 0.

The following table presents summary information concerning the options outstanding as of June 30, 2014:

 

Exercise
prices
   Number
Outstanding
   Number
Exercisable
   Weighted
Average
Remaining
Contractual
Life (Years)
 
 $ 2.50 – 4.00    614,000    114,000    4.50 

 

Stock Warrants

 

In conjunction with the issuance of the convertible notes described in Note 6, the Company issued 125,000 warrants exercisable at $2.00 per share that expire after three years. The aggregate fair value of the warrants was $157,584, using a binomial option pricing model and the following assumptions:

 

F-10
 

 

Volatility 154% - Dividend rate 0% - Interest rate 0.77% - Term 3 years

 

In conjunction with the conversion of the $200,000 note described in note 6 the Company issued an aggregate of 400,000 three year warrants exercisable 200,000 warrants at $1.50 per share and 200,000 warrants at $2.00 per share. The aggregate grant date fair value of the warrants was $580,600 and has been charged to operations during the year ended June 30, 2014. The warrants were valued using the Binomial option pricing model with the following assumptions:

Volatility 108% - Dividend rate 0% - Interest rate 0.86% - 1.66% - Term 3 years

 

The Company issued a 1,000,000 five year warrant exercisable at $1.00 per share for services. The aggregate grant date fair value of the warrant was $1,572,005 and has been charged to operations during the year ended June 30, 2014. The warrant was valued using the Binomial option pricing model with the following assumptions:

 

Volatility 108% - Dividend rate 0% - Interest rate 0.86% - 1.66% - Term 3 years

 

The total fair value of all warrants issued was $2,310,189

 

Stock warrants outstanding at June 30, 2014 are as follows:

Date Issued  Expiration Date  Exercise Price   Number of Warrants 
July 2013  July 2016  $2.00    125,000 
February 2014  February 2019  $1.00    1,000,000 
February 2014  February 2017  $1.50    200,000 
February 2014  February 2017  $2.00    200,000 

 

NOTE 9 INCOME TAXES

 

No provision was made for federal income tax since the Company has significant net operating losses. At June 30, 2014 , the Company had operating loss carryforwards of approximately $1,400,000 . The net operating loss carry-forwards may be used to reduce taxable income through the year 2034. The principal difference between the net operating loss for book purposes and income tax purposes results from non-cash charges to operations related to stock options and warrants and common shares issued for services that are not currently deductible for income tax purposes. The availability of the Company’s net operating loss carry-forwards are subject to limitation if there is a 50% or more positive change in the ownership of the Company’s stock.

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets as of June 30, 2013 and 2014, are as follows:

 

2013:
Deferred tax assets:
    
Federal net operating loss  $142,000 
State net operating loss   21,000 
Total deferred tax assets   163,000 
Less valuation allowance   (163,000)
   $-- 

 

2014:
Deferred tax assets:
    
Federal net operating loss  $457,000 
State net operating loss   67,000 
Total deferred tax assets   524,000 
Less valuation allowance   (524,000)
   $-- 

 

F-11
 

 

The Company has provided a 100% valuation allowance on the deferred tax assets at June 30, 2014 and 2013, to reduce such asset to zero, since there is no assurance that the Company will generate future taxable income to utilize such assets. Management reviews this valuation allowance requirement periodically and makes adjustments as warranted.

 

The reconciliation of the effective income tax rate to the federal statutory rate for the periods ended June 30, 2014 and 2013 is as follows:

 

Federal income tax rate   (34.0)%
State tax, net of federal benefit   (5.0)
Increase in valuation allowance   39.0 
Effective income tax rate   -%

 

NOTE 10 COMMITMENTS AND CONTINGENCIES

 

During the period ended March 31, 2014, the Company entered into a consulting agreement for a one year period. The Company advanced $103,000 in cash and issued 54,950 shares of common stock for these services, which shares were valued at their estimated fair value of $100,000. The total consideration paid of $203,000 is being amortized over the one year period of the agreement commencing in September 2013. The unamortized balance is included in prepaid expenses for the cash payment ($14,128) and deferred compensation for the share payment ($16,667).

 

During the period ended March 31, 2014, the Company entered into employment contracts with two employees, with no set duration, for aggregate compensation of $260,000 per year. The employees were granted an aggregate of 614,000 five year options which vested immediately as to 114,000 options and as to 125,000 options per year over the next 4 years. The options are exercisable at $2.50 per share for 114,000 options, $3.00 per share for 125,000 options, $3.50 per share for 125,000 options, $3.75 for 125,000 options and $4.00 for 125,000 options (see Note 8).

 

We are currently involved in one legal proceeding, a breach of contract lawsuit against IRTH Communications, LLC. On May 24, 2014, we filed a lawsuit in Orange County, FL (case # 2014-CA-00-2626-O), against IRTH for breach of a contract to provide investor relations services to us. In that lawsuit we seek return of $110,000 of monies paid to IRTH, and we seek the cancellation of 54,950 shares of stock issued to IRTH. IRTH has subsequently sued us separately in the California courts for breach of contract, seeking damages and also seeking to have their shares cleared for trading, which they are not currently. However, the California action has been stayed pending the outcome of the Florida lawsuit. We believe the counterclaim is without merit and if needed will defend it vigorously. Because of this, and because the case is in the early stages it is not possible to estimate its possible outcome. As such, no effect has been given to any loss that may result from the resolution of this matter in the accompanying financial statements.

 

NOTE 11 STOCK BASED EXPENSES

 

During the year ended June 30, 2014, the Company charged stock based compensation to operations as follows:

 

General and administrative expense  $2,348,329 
Interest expense  $867,081 

 

NOTE 12 SUBSEQUENT EVENTS

 

We partnered with certain parties in China to develop and launch a Chinese version of our mobile platform, and we entered into a Joint Venture Agreement with our partners in China in February 2014. The Chinese JV was formed in August 2014 and the initial product launch in China commenced in late August 2014. We have not yet experienced any revenue from our interest in the Chinese Joint Venture. We have a 15% interest in this JV.

 

F-12
 

 

Item 9.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

There have been no disagreements with our auditor regarding accounting and financial disclosure.

 

Our financial statements as of and for the year ended June 30, 2014 and 2013 included in this report have been audited by Kingery & Crouse PA as set forth in this Report.

 

Item 9A.   Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s President, Chief Financial Officer, Secretary, Treasurer and Director, of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure for the reasons discussed below.

 

Management's Annual Report on Internal Control Over Financial Reporting.

 

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Our internal control system was designed to, in general, provide reasonable assurance to the Company’s management and board regarding the preparation and fair presentation of published financial statements, but because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 

 

Our management assessed the effectiveness of the Company’s internal control over financial reporting as of June 30, 2014. The framework used by management in making that assessment was the criteria set forth in the document entitled “ Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, our President and Chief Financial Officer have determined and concluded that, as of June 30, 2014, the Company’s internal control over financial reporting were not effective.

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control our financial reporting as of June 30, 2014, the Company determined that the following items constituted a material weakness:

 

  The Company does not have an independent audit committee in place, which would provide oversight of the Company’s officers, operations and financial reporting function;
     
  The Company’s accounting department, which consists of a limited number of personnel, does not provide adequate segregation of duties and timely information; and
     
  The Company does not have effective controls over period end financial disclosure and reporting processes.

 

Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board. Management plans to take action and implementing improvements to our controls and procedures when our financial position permits.

 

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to the permanent exemption of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.

 

Changes in Internal Control over Financial Reporting

 

No change in our system of internal control over financial reporting occurred during the period covered by this report (i.e. the fourth quarter of the fiscal year ended June 30, 2014) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

14
 

 

PART III

 

Item 10.     Directors, Executive Officers and Corporate Governance

 

On October 13, 2014, Ms. Byrd resigned as our chief executive officer and secretary. Mr. Byrd’s resignation is not a result of any disagreement with the Company or its executive officers, or any matter relating to the Company’s operations, policies or practices. Mr. Byrd will continue to serve as the Company’s chairman of the board of directors. On the same date, the Board appointed Mr. Hackett, the Company’s president, chief financial officer, treasurer and director to serve as chief executive officer of the Company.

 

The following table sets forth the name, age, and position of our executive officers and directors. Executive officers are elected annually by our Board of Directors. Each executive officer holds his office until he resigns, is removed by the Board, or his successor is elected and qualified. Directors are elected annually by our shareholders at the annual meeting. Each director holds his office until his successor is elected and qualified or his earlier resignation or removal.

 

Name   Age   Position
James S. Byrd, Jr.   55   Chairman of the Board of Directors
Douglas S. Hackett   50   President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and Director
Eric Fellows   43   Chief Operating Officer

 

James Byrd Jr. has served as our chairman of the board of directors since inception. Mr. Byrd has spent his career focused on building businesses in a wide range of industries, from start-ups to mature companies, both publicly traded and privately held. In addition to being CEO of our Company, Mr. Byrd is also a practicing attorney and partner in Byrd & Byrd, PL, a small commercial law firm that he owns with his wife. Prior to that, Mr. Byrd was a Managing Director and Attorney for the Morgan & Morgan Business Trial Group (2010 – 2012). From 2008 to 2009 Mr. Byrd was the Chairman and CEO of Gen2Media Corp. (now Vidaroo Corp), and was a Director at Best Energy Services, Inc. Mr. Byrd was also a Principal owner and Managing Member of Vanguard Capital, LLC, a privately owned venture capital firm, from 2005 to 2010. We believe that Mr. Byrd’s experience as a business attorney, public company officer and director qualify him to serve on our board of directors.

 

Douglas S. Hackett has served as our president, treasurer and director since inception and was appointed as our acting chief financial officer in July 2012. On October 13, 2014, Mr. Hackett was appointed to serve as our chief executive officer. He is a media and marketing veteran with special interest in humanitarian projects around the world. Mr. Hackett has experience in public company and privately held business leadership positions. From 2011 until the present, he has served as Partner and Chairman of Market Leverage, LLC, a digital advertising network. From 2009 until 2011 he served on the Board of Directors of C3 Investment Fund, a fund related to the Global Orphan Project concentrated on sustainable business projects in third world countries to support the care of children. From 2011 to 2012, he was a Member of Life Giving Fuels, LLC and LSK Farms, entities that concentrate on sustainable bio fuel and farming projects. In 2012, he served as a Board Member of a mobile marketing company called Total Communicator Solutions, Inc. In addition, he is a Co-Founder (2009) and currently serving as Chairman of the Board of Directors for Life Giving Force Foundation, a not for profit company focused on delivering clean water solutions to third world countries and specializes in disaster relief assistance. Mr. Hackett also served on the Board of Directors of the World Rainforest Foundation (2009-2010), a non-profit organization focused on preserving the unique and precious resources that abound in undisturbed natural rainforest land for future generations of the world. Mr. Hackett presently serves as a Director for Looking Glass Funds, a venture fund that targets emerging companies with strong growth potential for early stage financing. Mr. Hackett is currently a Board Member and President for Hub Data, Inc, a technology firm that specializes in website hosting, web-based marketing services and database management. We believe that Mr. Hackett’s experience as an entrepreneur and officer and director of public company qualify him to serve on our board of directors.

 

Eric Fellows, Mr. Fellows serves as the Chief Operating Officer for Engage Mobility. He has an MBA and experienced financial and business analyst, customer acquisition expert, and multi-channel marketing and advertising executive. As the Network Director and partner at Market Leverage, he has managed online, email and website marketing, and has vast experience in affiliate marketing; media planning; financial analysis; business planning; website “sales funnel” optimization for online lead and customer acquisition; lead generation; ecommerce; website search engine optimization and online product launch management.

 

Term of Office

 

Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.

 

Employment Agreements

 

With the exception of the employment agreements discussed in Note 10 of the accompanying financial statements, we have not entered into employment agreements with any of our employees, officers and directors.

 

Certain Legal Proceedings

 

Our directors and officers have not been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, nor have been a party to any judicial or administrative proceeding during the past ten years that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws, except for matters that were dismissed without sanction or settlement. Except as set forth in our discussion below in “Certain Relationships and Related Transactions,” our directors and officers have not been involved in any transactions with us or any of our affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.

 

15
 

 

Except as set forth in our discussion below in “Certain Relationships and Related Transactions,” none of our directors or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.

 

Code of Ethics

 

To date, we have not adopted a code of business conduct and ethics for our management and employees. We intend to adopt one in the near future.

 

Board Committees

 

Our Board of Directors has no separate committees and our Board of Directors acts as the audit committee and the compensation committee. We do not have an audit committee financial expert serving on our Board of Directors

 

Item 11.     Executive Compensation

 

The following table sets forth the compensation paid by us for the last two fiscal years ending June 30, 2014 and 2013 for our executive officers. This information includes the dollar value of base salaries, bonus awards and number of stock options granted, and certain other compensation, if any. The compensation discussed addresses all compensation awarded to, earned by, or paid or named executive officers. On October 13, 2014, Mr. Byrd resigned as our chief executive officer. Mr. Byrd’s resignation is not a result of any disagreement with the Company or its executive officers, or any matter relating to the Company’s operations, policies or practices. Mr. Byrd will continue to serve as the Company’s secretary and chairman of the board of directors. On the same date, the Board appointed Mr. Hackett, the Company’s president,, acting chief financial officer, treasurer and director to serve as chief executive officer of the Company.

 

Summary Compensation Table 

 

The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to the named persons for services rendered in all capacities during the noted periods.

 

Name and Principal Position  Year Ended June 30   Salary
($)
   Bonus
($)
   Stock Awards
($)
   Option Awards
($)
   Non-Equity Incentive Plan Compensation Earnings
($)
   Non- Qualified Deferred Compensation Earnings
($)
   All Other Compensation ($)   Total
($)
 
James S. Byrd, Jr.   2014   $67,754.46                           $67,754.46 
Chairman (1)                                             
                                              
James S. Byrd, Jr.   2013   $0                           $0 
Chairman (1)                                             
                                              
Douglas S. Hackett   2014   $54,807.69                           $54,807.69 
President, CEO, CFO, Secretary, Treasurer, and Director                                             
                                              
Douglas S. Hackett   2013   $0                           $0 
President, CEO, CFO, Secretary, Treasurer, and Director                                             
                                              
Eric Fellows   2014   $35,966.73                           $35,966.73 
COO                                             
                                              
Eric Fellows   2013(2)  $                           $ 
COO                                             

 

(1)On October 13, 2014, Ms. Byrd resigned as our chief executive officer and secretary.
   
 (2)Mr. Fellows was appointed as COO in October 2013.

 

16
 

 

Outstanding Equity Awards at Fiscal Year-End Table

 

During our 2014 fiscal year, two employees were granted an aggregate of 614,000 five year options (see Note 8 of our Financial Statements) which vested immediately as to 114,000 options and as to 125,000 options per year over the next 4 years. The options are exercisable at $2.50 per share for 114,000 options, $3.00 per share for 125,000 options, $3.50 per share for 125,000 options, $3.75 for 125,000 options and $4.00 for 125,000 options. The aggregate grant date fair value of the options was $1,415,710 of which $413,398 has been charged to operations during the year ended June 30, 2014.

 

A summary of the status of the stock options granted to employees and others as of June 30, 2014 is provided in Note 8 of our Financial Statements.

 

Other than discussed above, we do not have any equity compensation plans and therefore no equity awards are outstanding as of June 30, 2014.

 

Compensation of Directors

 

Our directors are reimbursed for expenses incurred by them in connection with attending board of directors’ meetings. They do not receive any other compensation for serving on the board of directors, but may participate in our incentive compensation program, once such a program is established

 

Compensation Committee Interlocks and Insider Participation

 

Our Board of Directors does not have a compensation committee and the entire Board of Directors performs the functions of a compensation committee.

 

No member of our Board of Directors has a relationship that would constitute an interlocking relationship with our executive officers or directors or another entity.

 

Item 12.     Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

The following table sets forth certain information regarding our shares of common stock beneficially owned as of October 14, 2014, for (i) each stockholder known to be the beneficial owner of 5% or more of our outstanding shares of common stock, (ii) each named executive officer and director, and (iii) all executive officers and directors as a group. A person is considered to beneficially own any shares: (i) over which such person, directly or indirectly, exercises sole or shared voting or investment power, or (ii) of which such person has the right to acquire beneficial ownership at any time within 60 days through an exercise of stock options or warrants or otherwise. Unless otherwise indicated, voting and investment power relating to the shares shown in the table for our directors and executive officers is exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children.

 

For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person has the right to acquire within 60 days of the date of this prospectus. For purposes of computing the percentage of outstanding shares of our common stock held by each person or group of persons named above, any shares that such person or persons has the right to acquire within 60 days of the Closing Date is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership.

 

Unless otherwise specified, the address of each of the persons set forth below is in care of the Company, 140 Walnut St. Kansas City, MO 64106.

 

Name and Address of Beneficial Owner  Amount and
Nature of
Beneficial
Ownership
  Percentage
of Class (1)
Executive Officers and Directors          
James S. Byrd, Jr. (3)   1,694,500    7.78%
Douglas S. Hackett (2)   15,235,005    69.97%

Eric Fellows

   0    0%
Directors and executive officers as a group (3 persons)   16,929,505    77.91%
Other 5% Holders:          
None.          

 

(1) Based on 21,772,567 shares of common stock issued and outstanding as of October 14, 2014. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Except as otherwise indicated, we believe that the beneficial owners of the common stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable.
   
(2)

Including 8,581,218 shares of common stock held by Douglas S. Hackett and Neala S. Hackett, TBE, and 62,500 beneficially owned in HK Holdings, LLC.

   
(3)

Includes 62,500 beneficially owned through HK Holdings, LLC

 

17
 

 

Item 13.    Certain Relationships and Related Transactions, and Director Independence

 

Director Independence

 

We do not have any independent directors. Because our common stock is not currently listed on a national securities exchange, we have used the definition of “independence” of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion of the Company’s Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:

 

  the director is, or at any time during the past three years was, an employee of the company;
     
  the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);
     
  a family member of the director is, or at any time during the past three years was, an executive officer of the company;
     
  the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);

 

  the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or
     
  the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.

 

We do not currently have a separately designated audit, nominating or compensation committee.

 

Item 14.     Principal Accounting Fees and Services

 

Audit Fees

 

For the Company’s fiscal years ended June 30, 2014 and June 30, 2013, we were billed approximately $18,750 and $9,750, respectively, for professional services rendered for the audit and reviews of our financial statements.

 

Audit Related Fees

 

The Company did not incur any audit related fees, other than the fees discussed in Audit Fees, above, for services related to our audit for the fiscal years ended June 30, 2014 and June 30, 2013.

 

Tax Fees

 

For the Company’s fiscal years ended June 30, 2014 and June 30, 2013, we were not billed for professional services rendered for tax compliance, tax advice, and tax planning.

 

All Other Fees

 

The Company incurred $3,475 and $1,300, respectively, in audit related fees pertaining to the filing of a registration statement during the fiscal years ended June 30, 2012 and 2013.

 

18
 

 

Pre-Approval of Services

 

We do not have an audit committee. As a result, our Board of Directors performs the duties of an audit committee. Our Board of Directors evaluates and approves in advance the scope and cost of the engagement of an auditor before the auditor renders the audit and non-audit services. We do not rely on pre-approval policies and procedures.

 

PART IV

 

Item 15.     Exhibits, Financial Statement Schedules

 

Exhibit
No.
  Description
3.1   Articles of Incorporation. (1)
3.2   By-Laws. (1)
4.1   Form of Subscription Agreement. (4)
10.1   Promissory Note, dated March 9, 2012. (2)
10.2   Sales Agreement between MarketKast, Inc. and Veritas Consulting Group, Inc., dated May 29, 2012. (3)
10.3   Technology License and Services Agreement, by and among Total Communicator Solutions and Engage Mobility, Inc. (f/k/a MarketKast), dated January 24, 2013. (4)
31.1   Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1   Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS   XBRL Instance Document
101.SCH   XBRL Taxonomy Extension Schema Document
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document
101.LAB   XBRL Taxonomy Extension Label Linkbase Document
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document

 

(1)Incorporated by reference to the Company’s registration statement on Form S-1 filed with the SEC on July 26, 2012.
(2)Incorporated by reference to the Company’s registration statement on Form S-1/A filed with the SEC on September 7, 2012.
(3)Incorporated by reference to the Company’s registration statement on Form S-1/A filed with the SEC on September 28, 2012.
(4)Incorporated by reference to the Company’s registration statement on Form S-1/A filed with the SEC on July 9, 2013.

 

19
 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: October 15, 2014

 

  Engage Mobility
   
  /s/ Douglas S. Hackett
 

Name: Douglas S. Hackett

Position: President, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer

Duly Authorized and Principal Financial Officer

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signature   Title   Date
/s/ James S. Byrd, Jr.   Chairman of the Board   October 15, 2014
         
/s/ Douglas S. Hackett  

President, Chief Executive Officer, Chief Financial Officer Secretary, Treasurer, Director

  October 15, 2014
         

/s/ Eric Fellows

 

Chief Operating Officer

 

October 15, 2014

 

 

20