UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
| [x] | ANNUAL REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES |
| EXCHANGE ACT OF 1934 | |
| For the fiscal year ended July 31, 2014 | |
| OR | |
| [ ] | TRANSITIOINAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
| EXCHANGE ACT OF 1934 | |
For the transitional period from _____________ to ______________ |
Commission file number 000-55101
Xumanii International Holdings Corp.
(Exact name of registrant as specified in its charter)
| NEVADA | 90-0582397 | |
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
9550 South Eastern Ave. Suite 253-A86
Las Vegas, Nevada 89123
(Address of principal executive offices, including zip code.)
800-416-5934
(telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Class | Name of exchange in which registered |
| None | None |
Securities registered pursuant to section 12(g) of the Act:
Common Stock, par value $0.00001 per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [x]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act: Yes [ ] No [x]
Indicate by check mark whether the registrant(1) has filed all reports required 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 day. Yes [x] 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 (Section 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 files).Yes [x] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, ”accelerated filer” and “smaller reporting company” in Rule 12b-2 if the Exchange Act.
Large Accelerated filer |
[ ] | Accelerated filer | [ ] |
| Non-accelerated filer | [ ] | Smaller reporting company |
[x] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [x]
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of the last business day of the registrants most recently completed fourth fiscal quarter: January 31, 2014 is $7,117,624.
As of November 13, 2014 the registrant had 6,377,286,253 shares issued and outstanding.
EXPLANATORY NOTE
This Amendment No. 1 to Form 10-K (this “Amendment”) amends the Annual Report on Form 10-K for the fiscal year ended July 31, 2014 (the “2014 Form 10-K”) originally filed on November 14, 2014 (the “Original Filing”) by Xumanii International Holdings Corp ( the “Company,” “we,” or “us”) with the U.S. Securities and Exchange Commission. The Amendment is being filed to submit updated 10K along with Exhibits 101. The Amendment revises the previous 10K filed and it replaces the previously filed 10K
The Original Filing continues to speak as of the date of the Original Filing, and we have not updated the disclosures contained therein to reflect any events which occurred at a date subsequent to the filing of the Original Filing. Currently dated certifications from the Company’s Chief Executive Officer and Chief Financial Officer have been included as exhibits to this Amendment No. 1.
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CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION
This Annual Report on Form 10-K (this “Report”) contains “forward-looking statements. 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. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.
We cannot predict all of the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.
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.
CERTAIN TERMS USED IN THIS REPORT
When this report uses the words “we,” “us,” “our,” and the “Company,” they refer to Xumanii, International Holdings Corp (referred to as ‘Xumanii’). and its consolidated subsidiaries. “SEC” refers to the Securities and Exchange Commission.
PART I
General
We were incorporated in the State of Nevada on May 6, 2010.
We maintain our statutory registered agent’s office at Nevada Corporate Headquarter, 101 Convention Center Drive, Suite 700 Las Vegas, Nevada 89109 and our mailing address and business office is located at 9550 South Eastern Ave. Suite 253-A86 Las Vegas, NV 89123. Our telephone number is 800-416-5934.
The Company's name and trading symbol were changed from Medora Corp. and MORA effective September 7, 2012 to Xumanii, Inc. and XUII, respectively. Subsequently, the name was changed to Xumanii International Holdings Corp.
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Until September 30, 2013, Xumanii was a platform that broadcasted live events in HD with a new technology that combines hardware and a software platform to broadcast from multiple cameras, wirelessly an event with an extremely low production cost.
In October 2013, the business plan for Xumanii was changed to enter into the branded tablet market, cloud storage market and app market and pursue acquisitions that may be synergistic to the company’s focus in various technologies.
Subsequent to the acquisition of RMT July 21, 2014, we now have a division related to GPS and other tracking technologies. Rocky Mountain Tracking, Inc. (“RMT”), based in Fort Collins, Colorado, was founded in 2003. RMT began selling “passive” devices (i.e. recording devices) and later carried “real-time” devices (i.e. fleets) and “on-demand” devices. RMT employs its own programmers, technical support, customer service, accounting, and sales staff. In 2009, RMT received the M2M Value Chain Award. In 2010, RMT received Space Foundation Certification.
The Company’s new website is www.imerjn.com.
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
None.
Our business office is located at 9550 South Eastern Ave. Suite 253-A86 Las Vegas, NV 89123.
We are not presently a party to any litigation.
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 had been quoted on the OTC Bulletin Board since May 3, 2011 under the symbol “MORA.OB”. Our name and trading symbol were subsequently changed, effective September 7, 2012, to Xumanii, Inc. and XUII respectively. The name was later changed to Xumanii International Holdings Corp.
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The following table sets forth the high and low bid prices for our Common Stock per quarter as reported by the OTC Markets for the quarterly periods indicated below based on our fiscal year end of July 31, 2014. These prices represent quotations between dealers without adjustment for retail mark-up, markdown or commission and may not represent actual transactions.
| BID PRICE PER SHARE | |||||||||
| HIGH | LOW | ||||||||
| Three Months Ended October 31, 2012 | n/a | n/a | |||||||
| Three Months Ended January 31, 2013 | $ | 0.1000 | $ | 0.1000 | |||||
| Three Months Ended April 30, 2013 | $ | 0.1000 | $ | 0.1000 | |||||
| Three Months Ended July 31, 2013 | $ | 0.4000 | $ | 0.4000 | |||||
| Three Months Ended October 31, 2013 | $ | 0.0350 | $ | 0.0271 | |||||
| Three Months Ended January 31, 2014 | $ | 0.0560 | $ | 0.0160 | |||||
| Three Months Ended April 30, 2014 | $ | 0.0245 | $ | 0.0070 | |||||
| Three Months Ended July 31, 2014 | $ | 0.0090 | $ | 0.0009 | |||||
The SEC issued an order temporarily suspending the trading of our common stock from September 25, 2014 to October 9, 2014. Our stock is currently trading on the grey sheet market. “Grey Market" is a security that is not currently traded on the OTCQX, OTCQB or OTC Pink marketplaces, due to investor or regulatory issues. We are attempting to appeal the order. We have also discussed filing a 15c-211 with a broker. We do not know the potential cost, timing or likely outcome of these actions, or if they will be completed or successful. FINRA announced the effective date for our 10,000:1 stock split is November 19.
Holders
As of July 31, 2014, we had 17 shareholders of record for our common stock, and approximately 15,000 beneficial shareholders.
Dividends
To date, we have not declared or 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 our offering. Although we intend to retain our earnings, if any, to finance the expansion 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.
Stock Option Grants
To date, we have not granted any stock options.
Registration Rights
We have not granted registration rights to the selling shareholders or to any other persons.
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Securities authorized for issuance under equity compensation plans
We have no equity compensation plans
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.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition for the fiscal years ended July 31, 2014 and 2013. The discussion should be read along with our financial statements and notes thereto. The following discussion and analysis contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements. See “Cautionary Statement on Forward-Looking Information.”
Overview
In October 2013, the business plan for Xumanii was changed to enter into the branded tablet market, cloud storage market and app market and pursue acquisitions that may be synergistic to the company’s focus in various technologies.
Subsequent to the acquisition of RMT July 21, 2014, we now have a division related to GPS and other tracking technologies. The Company’s new website is www.imerjn.com.
Limited Operating History
There is limited historical financial information about us upon which to base an evaluation of our performance. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns due to price and cost increases in services and products.
Need for Additional Capital
We need additional capital. We have no assurance that future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, or expand our operations. Equity financing could result in additional dilution to our existing stockholders. We anticipate that we will need to meet our ongoing cash requirements through the generation of revenue or equity and/or debt financing.
We intend to meet our cash requirements for the short term by generating revenue and, if possible, through a combination of debt financing and equity financing by way of private placements. We currently do not have any arrangements or commitments in place to complete any private placement financings and there is no assurance that we will be successful in completing any such financings on terms that will be acceptable to us.
If we are not able to raise all monies needed to fully implement our business plan for the next year as anticipated, we will scale our business development in line with available capital. Our primary priority in that scenario would be to retain our reporting status with the SEC which means that we would first ensure that we have sufficient capital to cover our legal and accounting expenses. Once these costs are accounted for, in accordance with how much financing we are able to secure, we will focus on market awareness, and servicing costs as well as marketing and advertising to social media marketing websites. We will likely not expend funds on the remainder of our planned activities unless we have the required capital.
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If we are able to raise the required funds we will fully implement our business plan. If we are not able to raise all required funds, we will prioritize our corporate activities.
Plan of Operation
The minimum cash needs for the next 12 months will be at least $300,000 in excess of RMT’s profits. If the Company attempts to expand, the amount could be significantly higher, due to marketing, salaries, research & development, legal, acquisition and other costs. At the present time, we have not made any arrangements to raise additional cash. At this time, there are no or few potential financing sources available due to the company’s stock only trading on the ‘grey sheet market’ If we do not return to trading on the OTC exchange soon we will not be able to raise additional funds and will have to consider other options for the business, including selling assets to pay our minimum expenses.
Results of Operations
Lack of Revenues
We have limited operational history and just started to generate revenues in July, 2014. Subsequent to the acquisition of RMT on July 25, 2014, our revenues are approximately $80,000 per month.
Year Ended July 31, 2014 Compared to Year Ended July 31, 2013
Revenues
We had $18,230 of revenues for the year ended July 31, 2014 and $0 for the year ended July 31, 2013. The increase is due to the RMT revenues and tablet computer revenues.
Cost of Revenues
We had $63,856 of cost of revenues for the year ended July 31, 2014 and $0 for the year ended July 31, 2013. The increase is due to the purchases of products related to the RMT and tablet computer revenues.
Operating expenses
For the year ended July 31, 2014 and 2013, we incurred operating expenses of $2,663,506 and $1,465,722, respectively. The operating expenses increased due to stock issuance costs for consultants and expenses associated with due diligence and related costs for potential acquisitions.
Other expense
For the year ended July 31, 2014 and 2013, we incurred other expense of $9,090,157 and $60,840, respectively. We recognized a $1,715,533 gain on financial derivatives
$2,441,270 amortization of debt discount, and $8,164,201 as interest expense for the fair value of derivatives over the face value of the convertible notes payable for the year ended July 31, 2014. The large amount is attributable to our declining stock price and the discount that the debt converters use in calculating the amount of stock they receive. This is a non-cash expense. In 2013, we only had interest accrued for outstanding loans.
Net loss
For the year ended July 31, 2014 and 2013, we had a net loss of $11,799,289 and $1,526,562, respectively. The increase was due to the amortization of debt discount and increasing operating expenses.
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EBITDA
The company’s EBITDA is ($2,696,283). EBITDA is earnings before tax, depreciation and amortization. EBITDA is a non-GAAP measure that management uses to determine what it’s operating income is. It is primarily cash items and accruals for expenses incurred that are payable in cash or stock.
| Loss | (11,799,288 | ) | ||
| Gain Fair value derivatives | (1,715,533 | ) | ||
| Interest | 10,805,690 | |||
| Loss on asset disposal | 52,781 | |||
| Gain debt extinguishment | (61,630 | ) | ||
| Depreciation/amortization | 21,697 | |||
| Adjusted EBITDA | (2,696,283 | ) |
Liquidity and Capital Resources
As of July 31, 2014, our total assets were $3,411,840, comprised of cash and fixed assets, and our total liabilities were $8,050,752, including third-party loans and note payable of $1,862,617 and accounts payable of $516,389.
The Company has an accumulated deficit, limited liquidity and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs for the next twelve-month period, which raise substantial doubt about its ability to continue as a going concern.
Our auditors have raised substantial doubt as to our ability to continue as an on-going business for the next 12 months.
To meet our need for cash, we have raised $1,712,941 in loans from third parties during the year ended July 31, 2013 and $1,902,290 during the year ended July 31, 2014. The minimum cash needs for the next 12 months will be at least $300,000 in excess of RMT’s profits. If the Company attempts to expand, the amount could be significantly higher, due to marketing, salaries, research & development, legal, acquisition and other costs. At the present time, we have not made any arrangements to raise additional cash. At this time, there are no or few potential financing sources available due to the company’s stock only trading on the ‘grey sheet market’ If we do not return to trading on the OTC Market soon we will not be able to raise additional funds and will have to consider other options for the business, including selling assets to pay our minimum expenses.
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, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Critical Accounting Policies
Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States. To prepare these financial statements, we must make estimates and assumptions that affect the reported amounts of assets and liabilities. These estimates also affect our expenses.
Judgments must also be made about the disclosure of contingent liabilities. Actual results could be significantly different from these estimates. We believe that the following discussion addresses the accounting policies that are necessary to understand and evaluate our reported financial results.
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Basis of Presentation
The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and (iii) the reported amount of net revenues and expenses recognized during the periods presented. Adjustments made with respect to the use of estimates often relate to improved information not previously available. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements; accordingly, actual results could differ from these estimates.
In managements’ opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.
The financial statements are on a combined basis with all intercompany receivable, payable, revenue and expenses eliminated.
Concentration of Credit Risk
The Company maintains its cash in financial institutions which exceeded the federally insured deposit limit of $250,000. The Company has not experienced any losses from in such accounts and does not believe it is exposed to any significant credit risk on cash.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
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.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
| Xumanii International Holdings Corp.(formerly Xumanii, Inc.)For the years ended July 31, 2014 and 2013 | ||
| Report of Independent Registered Public Accounting Firm | F-1 | |
| Consolidated Balance Sheets | F-2 | |
| Consolidated Statements of Operations | F-3 | |
| Consolidated Statement of Changes in Stockholders’ Equity (Deficit) | F-4 | |
| Consolidated Statements of Cash Flows | F-5 | |
| Notes to Consolidated Financial Statements | F-6 |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Xumanii, International Holdings Corp.
(formerly Xumanii, Inc.)
Las Vegas, Nevada
We have audited the accompanying consolidated balance sheets of Xumanii International Holdings Corp..(“Xumanii” or the “Company”) as of July 31, 2014 and 2013, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for the years then ended. 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 audit to obtain reasonable assurance 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 audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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 Xumanii as of July 31, 2014 and 2013, and the results of its operations and its cash for the years then ended, 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 2 to the financial statements, as of July 31, 2014, the Company has an accumulated deficit, limited liquidity and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs, which raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
| /s/ GBH CPAs, PC |
| GBH CPAs, PC |
| www.gbhcpas.com |
| Houston, Texas |
| November 13, 2014 |
| F-1 |
Xumanii International Holdings Corp
(formerly Xumanii, Inc.)
| July 31, 2014 | July 31, 2013 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | 135,906 | $ | 38,170 | ||||
| Accounts receivable | 2,593 | — | ||||||
| Inventory | 28,484 | — | ||||||
| Notes receivable - related party | 258,501 | — | ||||||
| Other current assets | 4,776 | 12,276 | ||||||
| Total current assets | 430,260 | 50,446 | ||||||
| Fixed assets, net of accumulated depreciation of $0 and $19,742, respectively | 5,700 | 52,781 | ||||||
| Goodwill | 2,160,494 | — | ||||||
| Intangible assets, net | 815,386 | — | ||||||
| Total assets | $ | 3,411,840 | $ | 103,227 | ||||
| LIABILITIES AND STOCKHOLDERS DEFICIT | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | 516,389 | $ | 49,580 | ||||
| Advances from related parties | — | 48,250 | ||||||
| Deferred revenue | 15,010 | — | ||||||
| Loans payable | — | 1,070,699 | ||||||
| Notes payable | 797,242 | 642,242 | ||||||
| Convertible notes payable, net of discounts of $769,941 and $0, respectively | 1,065,375 | — | ||||||
| Derivative liabilities | 5,656,736 | — | ||||||
| Total current liabilities | 8,050,572 | 1,810,771 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders' deficit: | ||||||||
| Series A redeemable, convertible preferred stock, $0.00001 par value; 100,000,000 shares authorized; 5,000,000 and 0 shares issued and outstanding | 50 | — | ||||||
| Series B preferred stock, $0.00001 par value; 100,000,000 shares authorized; none issued and outstanding | — | — | ||||||
| Common stock, $0.00001 par value; 10,000,000,000 shares authorized; 2,228,731,842 and 271,610,552 shares issued and outstanding, respectively | 22,287 | 2,716 | ||||||
| Additional paid-in capital | 8,929,364 | 81,065 | ||||||
| Accumulated deficit | (13,590,613 | ) | (1,791,325 | ) | ||||
| Total stockholders' deficit | (4,638,912 | ) | (1,707,544 | ) | ||||
| Total liabilities and stockholders'' deficit | $ | 3,411,840 | $ | 103,227 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-2 |
Xumanii International Holdings Corp
(formerly Xumanii, Inc.)
Consolidated Statements of Operations
For the Years Ended July 31, 2014 and 2013
| 2014 | 2013 | |||||||
| Revenues | $ | 18,230 | $ | — | ||||
| Cost of revenues | 63,856 | — | ||||||
| Gross loss | (45,626 | ) | — | |||||
| Operating expenses: | ||||||||
| General and administrative | 2,650,658 | 1,465,722 | ||||||
| Depreciation, depletion and amortization | 21,697 | — | ||||||
| Gain on extinguishment of debt | (61,630 | ) | — | |||||
| Loss on disposal of assets | 52,781 | — | ||||||
| Total operating expenses | 2,663,506 | 1,465,722 | ||||||
| Operating losses | (2,709,132 | ) | (1,465,722 | ) | ||||
| Other income (expense): | ||||||||
| Gain on change in fair value of derivatives | 1,715,533 | — | ||||||
| Interest expense | (10,805,690 | ) | (60,840 | ) | ||||
| Total other expense | (9,090,157 | ) | (60,840 | ) | ||||
| Net loss | $ | (11,799,288 | ) | $ | (1,526,562 | ) | ||
| Weighted average number of common shares outstanding - basic and diluted | 460,259,878 | 271,610,552 | ||||||
| Net loss per common share - basic and diluted | $ | (0.03 | ) | $ | (0.01 | ) | ||
The accompanying notes are an integral part of these consolidated financial statements
| F-3 |
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
Xumanii International Holdings Corp
(formerly Xumanii, Inc.)
Consolidated Statements of Cash Flows
For the Years Ended July 31, 2014 and 2013
| 2014 | 2013 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | (11,799,288 | ) | $ | (1,526,562 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization expense | 21,697 | 19,242 | ||||||
| Stock based compensation | 763,119 | — | ||||||
| Amortization of debt discount | 2,441,270 | — | ||||||
| Fair value of derivative liabilities in excess of face value of convertible notes payable | 8,164,201 | — | ||||||
| Gain on change in fair value of financial derivatives | (1,715,533 | ) | — | |||||
| Gain on extinguishment of debt | (61,630 | ) | — | |||||
| Loss on disposal of fixed assets | 52,781 | — | ||||||
| Imputed interest | 42,800 | 42,805 | ||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable | 3,744 | — | ||||||
| Inventory | (2,883 | ) | — | |||||
| Other current assets | 7,500 | (12,276 | ) | |||||
| Accounts payable and accrued liabilities | 501,256 | 44,063 | ||||||
| Deferred revenue | (1,435 | ) | — | |||||
| Net cash used in operating activities and operations | (1,582,401 | ) | (1,432,728 | ) | ||||
| CAHS FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Cash paid for notes receivable - related party | (508,681 | ) | — | |||||
| Proceeds from notes receivable - related party | 250,180 | — | ||||||
| Purchase of Rocky Mountain Tracking, Inc. | (380,500 | ) | (57,068 | ) | ||||
| Purchase of intangible assets | (48,342 | ) | — | |||||
| Net cash used in investing activities | (687,343 | ) | (57,068 | ) | ||||
| CASH FLOW FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from loans payable | — | 1,470,720 | ||||||
| Repayments on loans payable | (1,165,000 | ) | — | |||||
| Proceeds from convertible notes payable | 3,275,730 | — | ||||||
| Repayments on convertible notes payable | (25,000 | ) | ||||||
| Proceeds from related party loans payable | — | 110,982 | ||||||
| Repayments on related party loans payable | — | (68,861 | ) | |||||
| Related party advance | (48,250 | ) | 6,400 | |||||
| Proceeds from issuance of common stock | 330,000 | |||||||
| Net cash provided by financing activities | 2,367,480 | 1,519,241 | ||||||
| NET CHANGE IN CASH | 97,736 | 29,445 | ||||||
| CASH AT BEGINNING OF PERIOD | 38,170 | 8,725 | ||||||
| CASH AT END OF PERIOD | $ | 135,906 | $ | 38,170 | ||||
| SUPPLIMENTAL INFORMATION | ||||||||
| Interest paid | $ | — | $ | 18,035 | ||||
| Income tax paid | $ | — | $ | — | ||||
| NONCASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Conversion from loans payable to note payable | $ | — | $ | 642,242 | ||||
| Common stock issued for settlement of convertible notes payable and derivative liabilities | $ | 5,412,599 | $ | — | ||||
| Debt discount from embedded derivative conversion feature | $ | 2,529,597 | $ | — | ||||
| Retirement of common shares | $ | 112 | $ | — | ||||
| Common stock issued to acquire intangible assets | $ | 325,348 | $ | — | ||||
| Net Assets acquired from RMT | $ | 464,060 | $ | — | ||||
| Preferred shares issued to acquire RMT | $ | 1,994,054 | $ | — | ||||
The accompanying notes are an integral part of these consolidated financial statements
| F-5 |
Xumanii International Holdings Corp
(formerly Xumanii, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Xumanii International Holdings Corp. (the “Company” or “Xumanii”) (formerly Xumanii, Inc.) was incorporated in Nevada on May 6, 2010.
The Company was a platform that broadcasted live events in HD with a new technology that combines hardware and a software platform to broadcast from multiple cameras, wirelessly an event with an extremely low production cost until September 30, 2013. In October 2013, the business plan for Xumanii was changed to enter into the branded tablet market, cloud storage market and app market and pursue acquisitions that may be synergistic to the company’s focus in various technologies.
The Company completed an acquisition of Rocky Mountain Tracking Inc. (“RMT”), an established provider of GPS tracking solutions in North America on July 21, 2014. RMT was incorporated in Colorado in 2004 and has been a leading provider of GPS tracking solutions. It offers several GPS trackers and GPS tracking systems that are ideal for personal or business use. RMT’s software is proprietary and enables users to track the movement of virtually anything using tracking devices. The Company’s new website is www.imerjn.com.
Principles of Consolidation
The consolidated financial statements include the Company’s accounts and those of the Company’s wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates (sometimes significant) and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In Management’s opinion all adjustments considered necessary for a fair presentation have been included.
Reclassification
Certain prior period amounts have been reclassified to conform to current period presentation.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Accounts Receivable
Trade accounts receivable is recorded net of an allowance for expected losses. The allowance is estimated from historical performance and projections of trends. Management closely monitors outstanding balances and writes off, as of year-end, all balances that are not expected to be collected by the time the financial statements are issued. No allowance was required as of July 31, 2014 and 2013.
| F-6 |
Inventory
Inventories are stated at the lower of cost or market. Cost is determined by the average cost method for all inventories. Inventories consist primarily of components and finished products held for sale. Rapid technological change and new product introductions and enhancements could result in excess or obsolete inventory. To minimize this risk, Xumanii evaluates inventory levels and expected usage on a periodic basis and records adjustments as required.
Property and Equipment
Property and Equipment are stated at cost. Depreciation is computed over the estimated useful lives of the related assets using the straight-line method for financial reporting purposes.
Expenditures for normal repairs and maintenance are charged to expense as incurred. Significant renewals and improvements are capitalized. The cost and related accumulated depreciation of assets retired or otherwise disposed of are eliminated from the accounts, and any resulting gain or loss is recognized in the year of disposal.
Intangible assets
Intangible assets with definite lives are recorded at cost and amortized using the straight-line method over their estimated useful lives.
Long-lived Assets
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment is measured by the amount by which the carrying amount of the assets exceeds their related fair values. The Company has not recognized any impairment on its long lived assets as of the years ended July 31, 2014 and 2013.
Derivatives
All derivatives are recorded at fair value on the balance sheet. Fair values for securities traded in the open market and derivatives are based on quoted market prices. Where market prices are not readily available, fair values are determined sing market based pricing models incorporating readily observable market data and requiring judgment and estimates.
Fair Value of Financial Instruments
The carrying amounts of cash, accounts receivable and accounts payable approximate their fair values due to the short-term maturities of these instruments.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company utilizes a three-level valuation hierarchy for disclosures of fair value measurements, defined as follows:
|
Level 1: inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets; |
| Level 2: inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments; |
| Level 3: inputs to the valuation methodology are unobservable and significant to the fair value. |
| F-7 |
The following tables set forth assets and liabilities measured at fair value on a recurring and non-recurring basis by level within the fair value hierarchy as of July 31, 2014 and 2013. As required by ASC 820, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Derivative liabilities: | ||||||||||||||||
| At July 31, 2014 | $ | — | $ | — | $ | 5,656,736 | $ | 5,656,736 | ||||||||
| At July 31, 2013 | — | — | — | — | ||||||||||||
Income Taxes
Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company computes a deferred tax asset for net operating losses carried forward. The potential benefit of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.
Revenue Recognition
The Company recognizes revenues on sale of goods when (1) there is persuasive evidence of an arrangement with the customer, (2) product risk and title has passed which generally coincides with the shipment of the products to the customer, (3) amount due from the customer is fixed or determinable, and (4) collectability is reasonably assured. Customer discounts and allowances are netted against revenues.
Subscription revenue is generated from the GPS tracking services provided. Customers are to be billed monthly, quarterly and annually. Subscription revenue is recognized ratably over the term of the subscription period. The Company records deferred revenues for the services to be performed subsequent to the yearend.
Cost of Subscription
Cost of subscription revenue is primarily comprised of the costs associated with the GPS tracking services that provided by the third parties.
Shipping and Handling
The Company bills the customers for, and recognizes as revenue, any charges for shipping and handling costs. The related costs are recognized as cost of sales.
Share-Based Payments
The Company estimates the fair value of each stock option award at the grant date by using the Black-Scholes option pricing model and value of common shares based on the last common stock valuation done by third party valuation expert of the Company’s common stock on the date of the share grant. The fair value determined represents the cost for the award and is recognized over the vesting period during which an employee is required to provide service in exchange for the award. As share-based compensation expense is recognized based on awards ultimately expected to vest, the Company reduces the expense for estimated forfeitures based on historical forfeiture rates. Previously recognized compensation costs may be adjusted to reflect the actual forfeiture rate for the entire award at the end of the vesting period. Excess tax benefits, if any, are recognized as an addition to paid-in capital.
| F-8 |
Basic and Diluted Earnings (Loss) Per Common Share
The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss, adjusted on an "as if converted" basis, by the weighted average number of common shares outstanding plus potential dilutive securities. As of July 31, 2014 and 2013, there were no potentially dilutive securities outstanding. The weighted average number of shares is calculated by taking the number of outstanding shares and multiplying the portion of the reporting period those shares covered, doing this for each portion and, finally, summing the total.
Recently Issued Accounting Pronouncements
On June 10, 2014, the FASB issued ASU No. 2014-10 (ASU 2014-10), Development Stage Entities (Topic 915) – Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation, which eliminates the concept of a development stage entity (DSE) its entirety from current accounting guidance. We have elected early adoption of this standard, which eliminates the designation of DSEs and the requirement to disclose results of operations and cash flows since inception.
Subsequent Events
The Company has evaluated all transactions from July 31, 2014 through the financial statement issuance date for subsequent event disclosure consideration.
NOTE 2 – GOING CONCERN
These financial statements have been prepared on a going concern basis, which implies Xumanii will continue to meet its obligations and continue its operations for the next fiscal year. As of July 31, 2014, the Company has an accumulated deficit of $13,590,613, limited liquidity and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs for the next twelve month period. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The continuation of Xumanii as a going concern is dependent upon financial support from its stockholders, the ability of Xumanii to obtain necessary equity financing to continue operations, and the attainment of profitable operations. Realization value may be substantially different from carrying values as shown and these financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should Xumanii be unable to continue as a going concern.
Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses. The Company intends to position itself so that it may be able to raise additional funds through the capital markets. In light of management’s efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 3 – RELATED PARTY TRANSACTIONS
During the year ended July 31, 2014, Xumanii advanced $508,681 to ACLH, LLC (“ACLH”), an entity associated with the Company’s CEO, in conjunction with a potential acquisition.
ACLH paid back $250,180 during the year and at July 31, 2014 the balance due from ACLH was $258,501. Subsequent to July 31, 2014, ACLH paid back another $40,000 and the remaining balance of $218,501 plus accrued interest have been converted into stock of another public company, an asset owned by ACLH.
| F-9 |
NOTE 4 – ACQUISITIONS
TRAKKERS LLC
On October 1, 2013, the Company announced that it intended to acquire RFID business Trakkers LLC (“Trakkers”) for 2 million preferred shares of Xumanii the preferred shares had a face value of $1 per share, valuing Trakkers at $2 million. This acquisition entered escrow on October 1, 2013. The Company determined that the acquisition of Trakkers was no in the Company’s best interest. Therefore, the transaction was canceled and the Company has since successfully identified better acquisition opportunities.
ROCKY MOUNTAIN TRACKING, INC.
Xumanii acquired Rocky Mountain Tracking, Inc. ("RMT"), an established provider of GPS tracking solutions in North America on July 25, 2014. Under the acquisition method of accounting, the total estimated purchase price is allocated to RMT’s tangible and intangible assets and liabilities based on their estimated fair values at the date of the completion of the acquisition.
The purchase price allocation is preliminary awaiting a final valuation of the assets acquired. The estimated fair values of the assets acquired and the liabilities assumed at July 21, 2014 are as follows:
| Cash and cash equivalents | $ | 2,153 | ||
| Accounts receivable | 4,184 | |||
| Inventory | 25,601 | |||
| Fixed assets | 5,700 | |||
| Intangible assets | 463,393 | |||
| Accounts payable and accrued liabilities | (36,971 | ) | ||
| Net assets acquired | $ | 464,060 | ||
| Goodwill | 2,160,494 | |||
| Total | $ | 2,624,554 |
The Company allocated $463,393 to acquired intangibles. These intangibles consisted of technology, an e-commerce website, and existing customer relationships.
The Company recorded $1,697 in amortization expense for the year ended July 31, 2014.
As of July 31, 2014, the Company performed its annual goodwill impairment assessment and concluded that there was no impairment of goodwill.
| F-10 |
The following proforma information has been prepared assuming the acquisition of RMT was done as of August 1, 2013.
Xumanii | Rocky Mountain Tracking, Inc. | Pro forma Combined | ||||||||||
| July 31, 2014 | July 31, 2014 | July 31, 2014 | ||||||||||
| Net sales | $ | 18,230 | $ | 1,202,241 | $ | 1,220,471 | ||||||
| Cost of sales | 63,856 | 584,082 | 647,938 | |||||||||
| Gross profit | (45,626 | ) | 618,159 | 572,533 | ||||||||
| Operating expenses: | ||||||||||||
| General and administrative | 2,650,658 | 475,257 | 3,125,915 | |||||||||
| Depreciation, depletion and amortization | 21,697 | 11,242 | 32,939 | |||||||||
| Gain on extinguishment of debt | (61,630 | ) | — | (61,630 | ) | |||||||
| Loss on disposal of assets | 52,781 | — | 52,781 | |||||||||
| Total operating expenses | 2,709,132 | 486,499 | 3,150,005 | |||||||||
| Operating income (loss) | (2,655,800 | ) | 131,660 | (2,577,472 | ) | |||||||
| Other expense, net | (9,090,157 | ) | 10,074 | (9,080,083 | ) | |||||||
| Net income (loss) | $ | (11,799,288 | ) | $ | 141,734 | $ | (11,657,555 | ) | ||||
| Weighted average number of common shares outstanding - basic and diluted | 460,259,878 | 460,259,878 | ||||||||||
| Net loss per common share - basic and diluted | $ | (0.03 | ) | $ | (0.03 | ) | ||||||
NOTE 5 – INTANGIBLE ASSETS
During the year ended July 31, 2014, the Company issued 9,615,384 shares of common stock to RFidea Works Corp. for the acquisition of patents for Radio Frequency Identification technology. The shares were valued at $272,500 based on the stock price on the date of grant. The Company has also capitalized $48,342 in legal fees that were paid to support these patents. The Company will amortize the patents over the useful life of 15 years. The Company recorded $18,500 in amortization expense during the year ended July 31, 2014.
During the year ended July 31, 2014, the Company issued 70,000,000 shares of common stock to a related party for the acquisition of a website. The shares were valued at $52,848, which was the carrying costs of the website from the related party. The Company will amortize the patents over the useful life of 5 years. The Company recorded $1,500 in amortization expense during the year ended July 31, 2014.
NOTE 6 – LOANS PAYABLE AND NOTE PAYABLE
As of July 31, 2014, the Company had the following loans payable outstanding:
Convertible notes:
The Company evaluated the conversion features on the following convertible notes and determined that they created an embedded financial derivative due to there being no explicit limit to the number of shares to be issued upon conversion. The Company recorded the initial fair value of $11,078,298 on the financial derivatives as discount to the convertible notes.
| F-11 |
On October 10, 2013, the Company entered into a convertible promissory note with a third party for $37,500, with an initial discount of $2,500. The note bears interest at 8% and a maturity date of July 12, 2014. In the event that the note remains unpaid at that date, the Company will pay default interest at 22%. The lender has the right after a period of 180 days to convert the balance outstanding into the Company's common stock at a rate equal to 51% of the average of the three trading prices during the 10 trading days prior to the conversion date.
On March 17, 2014, the Company entered into a convertible promissory note with a third party for $53,500. The note bears interest at 8% and a maturity date of December 19, 2014. The lender has the right after a period of 270 days to convert the balance outstanding into the Company's common stock at a rate equal to 45% of the lowest trading prices during the 30 trading days prior to the conversion date.
On October 21, 2013, the Company entered into a convertible note with a third party for $25,000. This note bears an interest rate of 12% per annum and is due April 21, 2014. The lender has the right at any time prior to the maturity date to convert the principal and interest outstanding into the Company's common stock at a rate equal to 50% of the average of three lowest closing prices during the ten trading days prior to the conversion date.
On March 24, 2014, the Company entered into a convertible promissory note with a third party for $100,000. The note bears interest at 12% and a maturity date of September 24, 2014. The lender has the right after a period of 180 days to convert the balance outstanding into the Company's common stock at a rate equal to 50% of the average of the three trading prices during the 20 trading days prior to the conversion date.
On October 23, 2013, the Company entered into a promissory note with a third party for $500,000, with an initial discount of $50,000. During the three months ended October 31, 2013, the Company received the first advance of $50,000. During the three months ended April 30, 2014 the Company received an additional $125,000. The note has a maturity date of two years from effective date of each payment and bears and interest rate of 12%. The note can be converted into the Company’s common stock at lessor of $0.03 or 60% of the lowest trade price in the 25 trading days previous to the conversion.
On December 23, 2013, the Company entered into a note purchase agreement with a third party to purchase a Convertible Promissory Note for $113,500, with an initial discount of $13,500. This note bears an interest rate of 8% per annum and is due December 27, 2014. The lender has the right at any time on or after 90 days from the issuance date to convert the balance outstanding into the Company's common stock at a rate equal to 55% of the lowest sale price of the common stock for the 20 trading immediately prior to the voluntary conversion date.
On December 13, 2013, the Company entered into a convertible note with a third party for $35,000, with an initial discount of $5,000. This note bears an interest rate of 10% per annum and is due June 1, 2014. The lender has the right after a period of 180 days to convert the balance outstanding into the Company's common stock at a rate equal to 60% of the lowest closing prices during the twenty trading days prior to the conversion date. The Company is currently default on this loan.
On March 21, 2014, the Company entered into a convertible promissory note with a third party for $55,000, with and an initial discount of $5,000. The note bears interest at 10% and a maturity date of October 1, 2014. The lender has the right after a period of 180 days to convert the balance outstanding into the Company's common stock at a rate equal to 60% of the lowest trading prices during the 20 trading days prior to the conversion date.
On December 3, 2013, the Company entered into a senior convertible note with a third party for $450,000, with an initial discount of $150,000. The note has a maturity date of June 3, 2014 and bears and interest rate of 12%. The lender has the right at any time to convert the balance outstanding into the Company's common stock at a conversion price of $0.00616 (subject to adjustment). The Company is currently default on this loan.
On December 12, 2013, the Company entered into a convertible note with a third party for $100,000, with an initial discount of $10,000. This note bears an interest rate of 10% per annum and is due December 12, 2014. The lender has the right to convert the balance outstanding into the Company's common stock at a rate equal to 60% of the lowest trading prices during the 15 trading days prior to the holder elected conversion date.
| F-12 |
On December 12, 2013, the Company entered into a convertible promissory note with a third party for $450,000, with an initial discount of $10,000. $250,000 of the note was advanced prior to January 31, 2014. During the quarter ended April 30, 2014 the additional $200,000 was advanced. This note bears an interest rate of 10% per annum and is due December 12, 2014. The lender has the right to convert the balance outstanding into the Company's common stock at a rate equal to 60% of the lowest trading prices during the 15 trading days prior to the holder elected conversion date.
On October 31, 2013, the Company entered into a convertible note with a third party for $50,000, with an initial discount of $5,500. This note bears an interest rate of 8% per annum and is due October 31, 2014. The lender has the right to convert the balance outstanding into the Company's common stock at a rate equal to 60% of the lowest closing prices during the 20 trading days prior to the conversion date.
On December 27, 2013, the Company entered into a convertible note with a third party for $50,000, with an initial discount of $5,500. This note bears an interest rate of 12% per annum and is due September 30, 2014. The lender has the right to convert the balance outstanding into the Company's common stock at a rate equal to 50% of the lowest closing prices during the 20 trading days prior to the conversion date.
On December 27, 2013, the Company also entered into a convertible note with a third party for $50,000, with an initial discount of $5,500. This note bears an interest rate of 12% per annum and is due September 30, 2014. The lender has the right to convert the balance outstanding into the Company's common stock at a rate equal to 50% of the lowest closing prices during the 20 trading days prior to the conversion date.
On March 20, 2014, the Company entered into a convertible promissory note with a third party for $84,000. The note bears interest at 8% and a maturity date of March 20, 2015. The lender has the right after a period of 360 days to convert the balance outstanding into the Company's common stock at a rate equal to 50% of the lowest trading prices during the 20 trading days prior to the conversion date.
On November 18, 2013, the Company entered into a convertible debenture with a third party for $250,000. This note bears an interest rate of 10% per annum and is due May 18, 2014. The lender has the right to convert the balance outstanding into the Company's common stock at a rate equal to 50% of the lowest closing prices during the twenty trading days prior to the conversion date. The Company is currently default on this loan.
On November 18, 2013, the Company entered into a convertible debenture with a third party for $150,000. This note bears an interest rate of 10% per annum and is due May 18, 2014. The lender has the right to convert the balance outstanding into the Company's common stock at a rate equal to 50% of the lowest closing prices during the twenty trading days prior to the conversion date. The Company is currently default on this loan.
On November 18, 2013, the Company entered into a convertible debenture with a third party for $150,000. This note bears an interest rate of 10% per annum and is due May 18, 2014. The lender has the right to convert the balance outstanding into the Company's common stock at a rate equal to 50% of the lowest closing prices during the twenty trading days prior to the conversion date. The Company is currently default on this loan.
On November 18, 2013, the Company entered into a convertible debenture with a third party for $225,000. This note bears an interest rate of 10% per annum and is due May 18, 2014. The lender has the right to convert the balance outstanding into the Company's common stock at a rate equal to 50% of the lowest closing prices during the twenty trading days prior to the conversion date. The Company is currently default on this loan.
On December 27, 2013, the Company entered into a convertible note with a third party for $50,000. This note bears an interest rate of 12% per annum and is due September 30, 2014. The lender has the right to convert the balance outstanding into the Company's common stock at a rate equal to 50% of the lowest closing prices during the 20 trading days prior to the conversion date.
On December 27, 2013, the Company also entered into a convertible note with a third party for $50,000. This note bears an interest rate of 12% per annum and is due September 30, 2014. The lender has the right to convert the balance outstanding into the Company's common stock at a rate equal to 50% of the lowest closing prices during the 20 trading days prior to the conversion date.
| F-13 |
On March 20, 2014, the Company entered into a convertible promissory note with a third party for $94,500. The note bears interest at 8% and a maturity date of March 20, 2015. The lender has the right after a period of 360 days to convert the balance outstanding into the Company's common stock at a rate equal to 50% of the lowest trading prices during the 20 trading days prior to the conversion date.
On March 24, 2014, the Company entered into a convertible note with a third party for $80,000. This note bears an interest rate of 12% per annum and is due April 24, 2015. The lender has the right at any time prior to the maturity date to convert the principal and interest outstanding into the Company's common stock at a rate equal to 50% of the average of three lowest closing prices during the ten trading days prior to the conversion date.
On April 30, 2014, the Company entered into a convertible promissory note with a third party for $37,500. The note bears interest at 8% and a maturity date of January 30, 2015. The lender has the right after a period of 360 days to convert the balance outstanding into the Company's common stock at a rate equal to 55% of the average lowest 2 day trading prices during the 15 trading days prior to the conversion date.
On May 18, 2014, the Company entered into a convertible debenture with a third party for $150,000. This note bears an interest rate of 10% per annum and is due May 18, 2015. The lender has the right to convert the balance outstanding into the Company's common stock at a rate equal to 50% of the lowest closing prices during the twenty trading days prior to the conversion date.
On July 28, 2014, the Company entered into a convertible promissory note with a third party for $50,000. The note bears interest at 8% and a maturity date of December 31, 2014. The lender has the right to convert the balance outstanding into the Company’s common stock at a rate equal to 50% of the lowest closing prices during the 20 trading days prior to the conversion date.
The Company evaluated the conversion features on the above convertible notes and determined that they created embedded financial derivatives due to there being no explicit limit to the number of shares to be issued upon conversion. On the above convertible notes, the Company recorded an aggregated debt discount of $3,244,812, as result of the embedded conversion feature being a financial derivative and original issuance discounts, for proceeds received. During the year ended July 31, 2014, the Company recorded $2,441,270 amortization of debt discount on this note. $1,768,200 of these notes and accrued interest were converted to 5,412,599 shares of the Company’s common stock during the year. As of July 31, 2014, the Company had a notes payable balance of $1,835,316, unamortized discount of $769,941, and accrued interest of $173,751 on these notes.
Notes payable:
The Company has a note payable to Atoll Finance. Interest on the note is 5% per annum. During the year ended July 31, 2014, the Company (through its other lenders) repaid $1,165,000 and the balance was reduced from $1,712,242 to $547,242 including accrued interest. The note is unsecured and is currently past due. A lender has an option to purchase $547,242 of the remaining balance.
As part of the acquisition of RMT, the Company issued a $250,000 note payable to the sellers of RMT. The note bears interest at a rate of 8% per annum. Accrued interest is payable monthly and the principal balance is payable in six equal installments of $41,667 every six months beginning six months from the closing of the acquisition.
Equity Credit Agreement:
We entered into an Equity Credit Agreement with Southridge Partners that provides that we may sell up to $5,000,000 of our common stock to Southridge, 1,324,339,645 shares of our common stock are being offered under the prospectus. If all of the 1,324,339,645 shares were offered at the current trading price of $.0001 we would receive proceeds of $132,434. We have filed an S1 to register these shares. However, the SEC has indicated we need to trade on the OTC exchange before they will continue reviewing the S-1.
| F-14 |
NOTE 7 – DERIVATIVE LIABILITIES
The Company evaluated the terms of the convertible notes and concluded that since the conversion prices were not fixed, and the number of shares of the Company’s common stock that are issuable upon the conversion of the convertible notes are indeterminable until such time as the note holder elects to convert to common stock, the embedded conversion features created a derivative liability.
The Company measured the derivative liabilities using the input attributes at each issuance date and recorded an initial derivative liabilities of $11,078,298. On July 31, 2014, the Company re-measured the derivative liabilities using the input attributes below and determined the derivative liability value to be $5,656,736. Loss on derivative liabilities of $1,715,533 was recorded for the year ended July 31, 2014 and included in the statements of operations in order to adjust the derivative liabilities to the re-measured value.
| Issuance date | July 31, 2014 | |||||||
| Stock price | $0.007 - $0.024 | $ | 0.0015 | |||||
| Exercise price | $0.005 - $0.0236 | $0.0006 - $0.018 | ||||||
| Shares issuable upon conversion | 97,538,960 shares | 977,642,857 shares | ||||||
| Expected dividend yield | 0.00 | % | 0.00 | % | ||||
| Expected life (years) | 0.5 - 2 years | 0.15 – 1.72 years | ||||||
| Risk-free interest rate | 0.30% - 0.47% | 0.30% - 0.47% | ||||||
| Expected volatility | 147% - 310% | 173% - 298% | ||||||
Change in fair value of financial derivatives during the year ended July 31, 2014 is as follows:
| Fair value | ||||
| Balance, July 31, 2013 | $ | — | ||
| New derivatives | 11,078,298 | |||
| Transfer from liability classification to equity classification | (3,706,029 | ) | ||
| Change in fair value | (1,715,533 | ) | ||
| Balance, July 31, 2014 | $ | 5,656,736 | ||
NOTE 8 – INCOME TAXES
The Company uses the liability method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes. Due to the Company’s accumulated net loss, there was no provision for income taxes for the years ended July 31, 2014 and 2013.The difference between the income tax expense of zero shown in the statement of operations and pre-tax book net loss times the federal statutory rate of 35% is principally due to the change in the valuation allowance.
At July 31, 2014 and 2013, deferred tax assets consisted of the following:
| 2014 | 2013 | |||||||
| Deferred tax assets (net operating loss carry-forwards) | $ | 1,387,109 | $ | 609,050 | ||||
| Less: valuation allowance | (1,387,109 | ) | (609,050 | ) | ||||
| Net deferred tax asset | $ | — | $ | — | ||||
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of deferred assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.
| F-15 |
Based on the available objective evidence, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, management has applied a full valuation allowance against its net deferred tax assets at July 31, 2014 and 2013. The net change in the total valuation allowance from July 31, 2013 to July 31, 2014 was an increase of $778,059.
As of July 31, 2014, the Company has federal net operating loss carryforwards of approximately $3,943,000 for federal and state tax purposes, respectively. If not utilized, these losses will expire beginning in 2030 for both federal and state purposes.
NOTE 9 – COMMITMENT AND CONTINGENCIES
The Company is not aware of any pending or threatened legal proceedings.
As part of its regular operations, the Company may become party to various pending or threatened claims, lawsuits and administrative proceedings seeking damages or other remedies concerning its’ commercial operations, products, employees and other matters. Although the Company can give no assurance about the outcome of these or any other pending legal and administrative proceedings and the effect such outcomes may have on the Company, the Company believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided for or covered by insurance, will not have a material adverse effect on the Company’s financial condition or results of operations.
The Company has paid significant legal expenses associated with potential acquisitions, including the Trakkers acquisition that did not close. It may continue to pay more expenses as a result of these acquisitions.
NOTE 10 – EQUITY TRANSACTIONS
Equity transactions during the year ended July 31, 2014:
| - | 5,000,000 shares of preferred stock, valued at $1,994,054, were issued by the Company to acquire RMT; |
| - | 11,160,023 shares of common stock were cancelled and returned to the Company and added back by the Company to treasury stock; |
| - | 79,615,384 shares of common stock valued at $325,348 were issued by the Company for certain assets; |
| - | 33,000,000 shares of common stock were issued by the Company for cash of $330,000; |
| - | 1,804,463,117 shares of common stock valued at $5,412,599 were issued to third party lenders to conversion of outstanding notes payable and the related accrued interest; |
| - | 51,202,812 shares of common stock, with an aggregated fair value of $763,119, were issued by the Company to third party vendors for services. These shares were valued and recorded at their fair market value on the date of grant; |
| - | $42,800 imputed interest was recorded by the Company for the related party notes. |
Equity transaction during the year ended July 31, 2013:
On October 4, 2012, the sole Board of Director and the majority shareholder of the Company approved and consented in writing in lieu of a special meeting of the Board of Directors and a special meeting of the Stockholders to a 5.5-for-1 forward stock split of the issued and outstanding shares of the Company’s Common Stock, bringing the total issued and outstanding Common shares from 49,383,737 to 271,610,552. The Company’s financial statements have been retroactively restated to incorporate the effect of the forward split. Also, $42,805 imputed interest was recorded by the Company for the related party notes.
| F-16 |
NOTE 11 – SUBSEQUENT EVENTS
On August 1, 2014, the Company received an additional $50,000 from third-party equity lenders. This advance bears interest at various rates, is unsecured, and has various terms of repayment.
On August 8, 2014, the Company entered into a convertible promissory note with a third party for $400,000. The note bears interest at 10% per annum and with a maturity date of November 2, 2014. The lender has the right to convert the balance outstanding into the Company's common stock at a rate equal to 50% of the lowest one day closing prices during the 20 trading days prior to the conversion date. Only $150,000 of the note had been received as of October 31, 2014. The Company is currently default on this loan.
On August 13, 2014, the Company entered into a convertible promissory note with a third party for $100,000. The note bears interest at 10% per annum and with a maturity date of November 2, 2014. The lender has the right to convert the balance outstanding into the Company's common stock at a rate equal to 50% of the lowest one day closing prices during the 20 trading days prior to the conversion date. The Company is currently default on this loan.
On September 1, 2014, the Company entered into a convertible promissory note with a third party for $50,000. The note bears interest at 10% per annum and with a maturity date of November 2, 2014. The lender has the right to convert the balance outstanding into the Company's common stock at a rate equal to 50% of the lowest one day closing prices during the 20 trading days prior to the conversion date. The Company is currently default on this loan.
On September 18, 2014, the Company entered into a convertible promissory note with a third party for $20,000. The note bears interest at 12% per annum and with a maturity date of May 7, 2015. The lender has the right to convert the balance outstanding into the Company's common stock at a rate equal to 55% of the lowest one day closing prices during the 5 trading days prior to the conversion date.
On October 22, 2014, the sole Board of Director and the majority shareholder of the Company approved and consented in writing in lieu of a special meeting of the Board of Directors and a special meeting of the Stockholders to approve the following action: 10,000:1 reverse stock split.
On October 25, 2014, the Company issued 10,000,000 Preferred Shares to Intersino Ltd. as a result of Intersino providing further subscribers and development to the Company.
Subsequent to July 31, 2014, 4,148,554,912 shares of common stock were issued to third party lenders to convert outstanding notes payable and accrued interest.
| F-17 |
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
There were no disagreements with our accountants related to accounting principles or practices, financial statement disclosure, internal controls or auditing scope or procedure during the two fiscal years and interim periods, including the interim periods up through the date the relationship ended.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
We maintain "disclosure controls and procedures," as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We conducted an evaluation (the "Evaluation"), under the supervision and with the participation of our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the design and operation of our disclosure controls and procedures ("Disclosure Controls") as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act. Based on this Evaluation, our CEO and CFO concluded that our Disclosure Controls were not effective because of the identification of a material weakness in our internal control over financial reporting which is identified below, which we view as an integral part of our disclosure controls and procedures.
The material weakness relates to the monitoring and review of work performed by our limited accounting staff in the preparation of financial statements, footnotes and financial data provided to our independent registered public accounting firm in connection with the annual audit. More specifically, the material weakness in our internal control over financial reporting is due to the fact that:
| (1) | Insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC requirements |
| (2) | Ineffective controls over period end financial disclosure and reporting processes |
| (3) | The Company lacks proper segregation of duties due to our limited resources. |
Limitations on the Effectiveness of Controls
Our management, including our CEO and CFO, does not expect that our Disclosure Controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
| 11 |
CEO and CFO Certifications
Certifications of our Chief Executive Officer and the Chief Financial Officer are filed as exhibits to this Annual Report on Form 10-K. These certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). Item 9A of this annual report on Form 10-K, which you are currently reading is the information concerning the Evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company's internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. 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 our internal control over financial reporting as of July 31, 2014. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment, as of July 31, 2014, the Company's internal control over financial reporting were not effective. It is common for small companies to not meet this requirement as it requires an audit committee and significant expenses to be compliant with Sarbanes Oxley.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management's report in this annual report.
Changes in Internal Controls
There were no changes in our internal control over financial reporting during the quarter ending July 31, 2014 that have affected, or are reasonably likely to affect, our internal control over financial reporting.
None.
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Other Information:
At inception, we sold 192,500,000 shares of common stock to our former sole officer and director, Dr. Jehovan Owayne Fairclough for approximately $7,025. On June 10, 2010, Fairclough appointed Craig McKenzie as his replacement by way of board resolution as the president, chief executive officer, chief financial officer, treasurer, secretary and sole member of the board of directors. On June 10, 2010, Fairclough resigned as the president, chief executive officer, chief financial officer, treasurer, secretary and sole member of the board of directors and sold to Craig McKenzie his 192,500,000 shares of common stock for $7,025 in a private transaction.
These shares were issued in reliance on the exemption under Section 4(2) of the Securities Act of 1933, as amended (the “Act”). These shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance shares by us did not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, the foregoing investors had the necessary investment intent as required by Section 4(2) since they agreed to and received share certificates bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. This restriction ensures that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for this transaction.
We issued these shares in reliance on the safe harbor provided by Regulation S promulgated under the Securities Act of 1933, as amended. These investors who received the securities represented and warranted that they are not “U.S. Persons” as defined in Regulation S. In the alternative, the issuance of these shares was exempt from registration pursuant to Section 4(2) of the Securities Act. We made this determination based on the representations of the Shareholders which included, in pertinent part, that such shareholders were either (a) “accredited investors” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act, or (b) not a “U.S. person” as that term is defined in Rule 902(k) of Regulation S under the Act, and that such shareholders were acquiring our common stock, for investment purposes for their own respective accounts and not as nominees or agents, and not with a view to the resale or distribution thereof, and that the Shareholders understood that the shares of our common stock may not be sold or otherwise disposed of without registration under the Securities Act or an applicable exemption therefrom.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Officers and Directors
Our directors will serve until his successor is elected and qualified. Our officers are elected by the board of directors to a term of one (1) year and serves until his or her successor is duly elected and qualified, or until he or she is removed from office. The board of directors has no nominating, auditing or compensation committees.
The name, address, age and position of our officers and directors are set forth below:
| Name | Age | Position with the Company | Director/Officer Since | |||||||
| Adam Radly | 46 | President, Secretary and Director | October 1, 2013 | |||||||
| Jeff Mandelbaum | 51 | Director | April 1, 2014 | |||||||
| Bob Bates | 46 | Chief Financial Officer, Treasurer | April 1, 2014 | |||||||
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Background of officers and directors
Adam Radly, President, Secretary and Director
On October 1, 2013, Adam Radly was appointed as the Company’s President, Secretary, Treasurer and Director.
Mr. Radly was Chief Executive Officer of Inova Technology, an IT firm of Nevada from 2007-2013. Mr. Radly was previously the founder and CEO of Isis Communications, an IT firm of Australia from 1997-2001. This experience and Mr. Radly's ability to handle numerous highly challenging issues successfully and creatively makes him a stellar officer/leader.
Jeffrey Mandelbaum, Director
Mr. Jeffrey Mandelbaum, serves as an Advisor of Accept Software Corp, a technology process company in California. Mr. Mandelbaum was a founder of Software Growth Services. Mr. Mandelbaum served as Vice President of Sales and Marketing of Daticon Electronic Evidence Discovery, Inc., a Washington Electronic Evidence company, since August 2004. He served as the Chairman of the Board and Chief Executive Officer of GlobalMedia.Com, an Arizona telemedical company, since May 2000 and also served as its President since January 2000. Mr. Mandelbaum joined Globalmedia.Com from RealNetworks, Inc., (a Washington Nasdaq streaming media company) where he served as Vice President of Media Systems Sales from 1998 to 2000 Before joining RealNetworks in April 1998, Mr. Mandelbaum served as Vice President of Worldwide Sales of Commerce One (ecommerce company in California). Prior to Commerce One, Mr. Mandelbaum held a number of positions at Sybase Inc. (California enterprise software and services company) from 1986 to 1996. He served as Chief Executive Officer and President of Sybase Financial Services Inc. and also served as a Member of its Initial Management team. He served as the Chief Executive Officer of Magnitude Network. He worked with Broadmark Capital Corporation and Watertower Group (venture advisory firms), where he headed the software, Internet and New Media Practices. He served as a Director of GlobalMedia.Com since February 2000. He served as a Director of Magnitude Network. He served as a Member of Advisory Board of Visible Path Corporation. He served as the National Vice President of the Muscular Dystrophy Association. He was named by Streaming Magazine as one of the industry's 25 most influential executives. He is a graduate of the Executive Program in Business Administration from the Columbia University Graduate School of Business. Mr. Mandelbaum was chosen to serve as Director due to has many years of industry, advisory and management experience.
Bob Bates, Chief Financial Officer
Mr. Bob Bates is a CPA, CVA and CFE. He was with Allied Capital (NYSE) as the Controller in 1996-1998 and as Controllerfor May Company in 1990-1993 and Controller of Strategis Group 1994-1996. He also worked at KPMG in 1999-2001. He is a director of Orion Financial Group and Velocity Data Inc.. Mr. Bates' company, HP Accounting Inc., provides the accounting services of 3 staff to Xumanii on a consulting basis. He is a graduate of Bucknell University. His experience in the areas of Reverse Mergers, Capital Raising and SEC financial reporting. Specifically he has vast experience in consolidation accounting, small business valuation and accounting experience in debt and acquisition accounting make him a strong accounting officer.
None of the companies referred to above are parents, subsidiary corporations or other affiliates of the Company.
During the past ten years, none of the officers/directors has not been the subject of the following events:
1. A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;
2. Convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);
3. The subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities;
| 14 |
i) Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;
ii) Engaging in any type of business practice; or
iii) Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;
4. The subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph 3.i in the preceding paragraph or to be associated with persons engaged in any such activity;
5. Was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;
6. Was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;
7. Was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:
i) Any Federal or State securities or commodities law or regulation; or
ii) Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or
iii) Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
8. Was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
Transactions with Related Persons, Promoters and Certain Control Persons
Audit Committee Financial Expert
We do not have an audit committee financial expert. We do not have an audit committee financial expert because we believe the cost related to retaining a financial expert at this time is prohibitive. Further, because we have no operations, at the present time, we believe the services of a financial expert are not warranted.
Code of Ethics
We have adopted a corporate code of ethics. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code. A copy of the code of ethics was filed as Exhibit 14.1 on Form 10-K on November 1, 2011and is herein incorporated by reference.
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Disclosure Committee and Charter
We have a disclosure committee and disclosure committee charter. Our disclosure committee is comprised of all of our officers and directors. The purpose of the committee is to provide assistance to the Chief Executive Officer and the Chief Financial Officer in fulfilling their responsibilities regarding the identification and disclosure of material information about us and the accuracy, completeness and timeliness of our financial reports. A copy of the disclosure committee charter was filed as Exhibit 99.3 in Form 10-K on November 1, 2011 and is herein incorporated by reference.
Section 16(a) of the Securities Exchange Act of 1934
As of the date of this report, we are subject to Section 16(a) of the Securities Exchange Act of 1934.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by us through July 31, 2013 for our sole officer. 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.
EXECUTIVE OFFICER COMPENSATION TABLE
The following table sets forth Executive officer compensation as of the fiscal year ended July 31, 2014:
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | ||||||||||||||||||||||
| Adam Radly-2014 | -200,000- | -0- | -0- | -0- | -0- | -0- | -200,000- | ||||||||||||||||||||||
| Adam Radly-2013 | -0- | -0- | -0- | -0- | -0- | -0- | -0- | ||||||||||||||||||||||
| Bob Bates-2014 | -80,000- | -0- | -0- | -0- | -0- | -0- | -80,000- | ||||||||||||||||||||||
| Bob Bates-2013 | -0- | -0- | -0- | -0- | -0- | -0- | -0- | ||||||||||||||||||||||
We have no employment agreement with of our officers. We do not contemplate entering into any employment agreements until such time as we begin profitable operations. The compensation discussed herein addresses all compensation awarded to, earned by, or paid to our named executive officers.
There are no other stock option plans, retirement, pension, or profit sharing plans for the benefit of our officers and directors other than as described herein.
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DIRECTOR’S COMPENSATION TABLE
The following table sets forth director compensation as of the fiscal year ended July 31, 2014:
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||
| Jeff Mandelbaum (1) | -24,000- | -0- | -0- | -0- | -0- | -0- | -24,000- | |||||||||||||||||||||
| Adam Radly | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth, as of the date of this report, the total number of shares owned beneficially by our directors, officers and key employees, individually and as a group, and the present owners of 5% or more of our total outstanding shares. The stockholders listed below have direct ownership of their shares and possesses sole voting and dispositive power with respect to the shares.
NAME AND ADDRESS OF BENEFICIAL OWNER (1) |
AMOUNT AND NATURE OFBENEFICIAL OWNERSHIP |
PERCENT OF CLASS (2) |
Adam Radly President, Secretary and Director |
181,000,000 (common stock) |
7% |
| Intersino Ltd.(4) | 26,700,600,227 (as if converted from Preferred Stock of the Company) (3) | 91% |
All officers and directors as a group |
26,881,600,227 |
92% |
(1) Unless otherwise noted, the address of each person listed is 9550 South Eastern Ave. #253-A86
(2) This table is based on 6,077,232,853 shares of common stock issued and outstanding on October 31, 2014.
(3) There is an agreement between Intersino and Xumanii whereby Intersino receives Convertible Preferred Shares of Xumanii when it performs services to obtain new subscribers for Xumanii. On a fully-converted basis the 10,000,000 shares of Preferred Stock are convertible at $0.267 per share into 2,670,000 shares of common stock. At the current price of $0.0001, this is 26,700,000,000 shares of common stock. The super-majority is arrived at by showing the stock on an as-if converted basis.
(4) Intersino is an entity associated with Adam Radly
As of the date of this Annual Report, we have 6,377,286,253 shares of common stock issued, 5,000,000 shares of Series A Preferred Stock, and 10,000,000 shares of Series B Convertible Preferred Stock issued.
There are no outstanding options or warrants to purchase, or securities convertible into, our common stock. There are 17 holders of record for our common stock and approximately 15,000 beneficial owners.
| 17 |
ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
During the year ended July 31, 2014, we issued a total of 181,000,000 shares of common stock to Adam Radly who is the Company’s President and Director. The shares were issued in conjunction with the acquisition of Xumanii from its former CEO, Alex Frigon and in conjunction with the sale of Amonshare to Xumanii.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit Fees
For the Company’s fiscal years ended July 31, 2014 and 2013, we were billed approximately $22,750 and $19,050 for professional services rendered for the audit and quarterly reviews of our financial statements.
Tax Fees
None.
All Other Fees
None.
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.
Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before our auditor is engaged by us to render any auditing or permitted non-audit related service, the engagement be:
- approved by our audit committee; or
- entered into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures are detailed as to the particular service, the audit committee is informed of each service, and such policies and procedures do not include delegation of the audit committee's responsibilities to management.
We do not have an audit committee. Our entire board of directors pre-approves all services provided by our independent auditors.
The pre-approval process has just been implemented in response to the new rules. Therefore, our board of directors does not have records of what percentage of the above fees were pre- approved. However, all of the above services and fees were reviewed and approved by the entire board of directors either before or after the respective services were rendered.
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
| Incorporated by reference | |||||
| Exhibit | Document Description | Form | Date | Number | Filed herewith |
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | |||
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | |||
| 32.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | |||
| 32.2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | |||
| 101 | Interactive Data Files | X | |||
| 101.INS - XBRL Instance Document | |||||
| 101.SCH - XBRL Taxonomy Schema | |||||
| 101.CAL - XBRL Taxonomy Calculation Linkbase | |||||
| 101.DEF - XBRL Taxonomy Definition Linkbase | |||||
| 101.LAB - XBRL Taxonomy Label Linkbase | |||||
| 101.PRE - XBRL Taxonomy Presentation Linkbase | |||||
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Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing of this Form 10-K and has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in Las Vegas, NV on this 13th day of November 2014.
Xumanii International Holdings Corp. |
|||
| BY: | /s/ Adam Radly | ||
| Adam Radly | |||
President, Director
|
|||
| /s/ Bob Bates | |||
| Bob Bates | |||
| Chief Financial Officer | |||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant and in the capacities.
| Signature | Title | Date |
| /s/ADAM RADLY | President, Treasurer, Director | November 13, 2014 |
| Adam Radly | ||
| /s/JEFF MANDELBAUM | Director | November 13, 2014 |
Jeff Mandelbaum |
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Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13a-14
I, Adam Radly, the President, CEO of Xumanii International Holdings Corp. (the “Registrant”), certify that;
| (1) | I have reviewed this Annual Report on Form 10-K/A of the Registrant; | ||
| (2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||
| (3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; | ||
| (4) | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) for the Registrant and have: | ||
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the Registrant is made known to me by others within those entities, particularly during the period in which this report is being prepared; |
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| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
| c) | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
| d) | Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and | ||
| (5) | I have disclosed, based on my most recent evaluation of the internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions): | ||
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and | ||
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. | ||
November 13, 2014 | |||
| /s/Adam Radly | |||
| By: | Adam Radly | ||
| Chief Executive Officer | |||
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13a-14
I, Bob Bates, the CFO of Xumanii International Holdings Corp. (the “Registrant”), certify that;
| (1) | I have reviewed this Annual Report on Form 10-K/A of the Registrant; | ||
| (2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||
| (3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; | ||
| (4) | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) for the Registrant and have: | ||
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the Registrant is made known to me by others within those entities, particularly during the period in which this report is being prepared; |
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| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
| c) | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
| d) | Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and | ||
| (5) | I have disclosed, based on my most recent evaluation of the internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions): | ||
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and | ||
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. | ||
November 13, 2014 | |||
| /s/Bob Bates | |||
| By: | Bob bates | ||
| Chief Financial Officer | |||
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Adam Radly, the Chief Executive Officer of Xumanii International Holdings Corp. (the “Company”), hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
| (i) | the annual report on Form 10-K/A of the Company, for the period ended July 31, 2014, and to which this certification is attached as Exhibit 32 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and | |
| (ii) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| By: | /s/ Adam Radly | ||
| Name: | Adam Radly | ||
| Title: | Chief Executive Officer | ||
| Date: | November 13, 2014 |
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Adam Radly, the Chief Executive Officer and Chief Financial Officer of Xumanii International Holdings Corp. (the “Company”), hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
| (i) | the annual report on Form 10-K/A of the Company, for the period ended July 31, 2014, and to which this certification is attached as Exhibit 32 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and | |
| (ii) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| By: | /s/ Bob Bates | ||
| Name: | Bob Bates | ||
| Title: | Chief Financial Officer | ||
| Date: | November 13, 2014 |