UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-K

 

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

 

For the fiscal year ended June 30, 2016

 

OR

 

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

 

For the transition period from __________ to ___________.

 

Commission File Number: 333-174759

 

EMS FIND, INC.

(Name of registrant as specified in its charter)

 

Nevada

 

30-0934969

(State of incorporation)

 

(I.R.S. Employer Identification No.)

 

73 Buck Road, Suite 2

Huntingdon Valley, PA 19006

(Address of principal executive offices)

 

(267) 320-2255

(Registrant’s telephone number)

 

Securities registered pursuant to Section 12(b) of the Act:

None

 

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $.001 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   x No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.  ¨ Yes   x No

 

Indicate by check mark if the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  x Yes   ¨ No

 

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

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ¨ No x

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

¨

Smaller reporting company

x

(Do not check if a smaller reporting company)

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  ¨ Yes   x No

 

On December 31, 2015, the last business day of the registrant’s most recently completed second quarter, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $8,909,656, based upon the closing price on that date of the common stock of the registrant on the OTC Bulletin Board system of $0.47. For purposes of this response, the registrant has assumed that its directors, executive officers and beneficial owners of 5% or more of its Common Stock are deemed affiliates of the registrant.

 

As of September 9, 2016, the registrant had 32,711,272 shares of its common stock, $0.001 par value, issued, issuable, and outstanding.

 

 

 
 
 

Table of Contents

 

PART I.

4

 

Item 1.

Business.

4

 

Item 1A.

Risk Factors.

6

 

Item 1B.

Unresolved Staff Comments.

12

 

Item 2.

Properties.

12

 

Item 3.

Legal Proceedings.

12

 

Item 4.

Mine Safety Disclosures.

12

 

PART II.

13

 

Item 5.

Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

13

 

Item 6.

Selected Financial Data.

16

 

Item 7.

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

16

 

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk.

20

 

Item 8.

Financial Statements and Supplementary Data.

21

 

Item 9.

Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.

22

 

Item 9A.

Controls and Procedures.

23

 

Item 9B.

Other Information.

24

 

PART III.

25

 

Item 10.

Directors, Executive Officers and Corporate Governance.

25

 

Item 11.

Executive Compensation.

28

 

Item 12.

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

29

 

Item 13.

Certain Relationships and Related Transactions, and Director Independence.

31

 

Item 14.

Principal Accountant Fees and Services.

31

 

PART IV.

33

 

Item 15.

Exhibits and Financial Statement Schedules.

33

 

2

 

Forward-Looking Statements

 

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

 

Readers of this Annual Report on Form 10-K should carefully consider such risks, uncertainties and other information, disclosures and discussions which contain cautionary statements identifying important factors that could cause our actual results to differ materially from those provided in forward-looking statements. Readers should not place undue reliance on forward-looking statements contained in this Form 10-K. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We do not undertake any obligation to publicly update or revise any forward-looking statements we may make in this Form 10-K or elsewhere, whether as a result of new information, future events or otherwise.

 

As used in this annual report, the terms "we," "us," "our," the “Company,” and "EMS Find" mean EMS Find, Inc., unless otherwise indicated.


 
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PART I

 

Item 1. Business.

 

General Overview

 

We were incorporated in the State of Nevada on March 22, 2013 under the name Lightcollar, Inc. On March 22, 2015, we changed our name to EMS Find, Inc. (“EMS Find”). Effective March 31, 2015, we entered into a Share Exchange Agreement with the sole shareholder of EMS Factory, Inc., a Pennsylvania corporation (“EMS Factory”), and following the closing under the Share Exchange Agreement, EMS Factory became a wholly-owned subsidiary of the Company, with the former stockholder of EMS Factory owning approximately 35% of the outstanding shares of common stock of the combined company. Our offices are located at 73 Buck Road, Suite 2, Huntingdon Valley, Pennsylvania 19006.

 

The Company has developed and plans to market B2B & B2C on-demand mobile platform, designed to connect health care providers and consumers to a network of medical transport companies throughout the United States and Canada and, on the internet and through mobile applications, and to provide specialized online marketing solutions for these businesses that boost customer awareness and merchant visibility on the internet and through mobile applications. Our application is currently in beta testing phase. Our mobile and internet platform will facilitate and speed up connections of health care providers and the public with medical transportation providers for the benefit of the patients. The platform enables users (hospitals, medical offices, dialysis centers, nursing homes, home care agencies and other medical providers) and the public to schedule medical transportation in a timely and efficient way based on the type of medical transportation that best fits each patient's needs. The EMS Find app will work on any smart device including smart phones, tablets or laptops. The app is available in iOS, Android and desktop versions and allows users to connect in real time to local and nearby pre-screened medical transportation companies wherever the medical transport is needed and that fit the medical, logistical and financial criteria for the user.

 

Corporate Developments

 

On March 31, 2015, the Company signed the Share Exchange Agreement (“Agreement”) with EMS Factory, a company incorporated under the laws of the State of Pennsylvania, and the sole shareholder of EMS Factory, Steve Rubakh (“Rubakh”), pursuant to which the Company acquired 100% of the issued and outstanding securities of EMS Factory in exchange for the issuance of 10,000,000 shares of the Company’s restricted common stock and 500,000 shares of the Company’s Series A preferred stock. The Company also agreed to fund $300,000 to support the continued development and commercialization of EMS Factory’s technologies.

 

As a result of the closing under the Agreement, EMS Factory became a wholly-owned subsidiary of the Company, and the Company thereby acquired the business and operations of EMS Factory. Further, on the closing date under the Agreement, Rubakh was appointed the president, chief executive officer, chief financial officer, treasurer, secretary, and a director of the Company.

 

As of June 30, 2016, the Company has completed development of the EMS Find App in the following platforms: iOS, Android, and on the Web. The phase one of the beta testing has been completed by a major ambulance transportation company. The second phase is being planned to be launched in collaboration with a major healthcare plan and healthcare facility, to be completed by December 31, 2016. In addition, we signed a non-disclosure agreement with a major on-demand transportation company with the goal of integration both platforms to provide a patent pending, all-in-one, scheduling solution. The application is available in Apple (iPhone and iPad versions) and Google Play Store.

 

EMS Find's Platforms

 

EMS Find - (B2C) Standard Version

 

This platform connects health care providers (social workers, caregivers, ER nurses, case managers, discharge nurses, etc.) located or affiliated with health care facilities (hospital, nursing home, home care agency, dialysis center, cancer treatment center, hospice, emergency room centers, etc.) and public (patient, friends, family) with pre-screened, nearby transportation providers to schedule non-emergent transport (ALS, BLS, Wheelchair) in timely and efficient manner. Upon acceptance of job, transportation automatically pays EMS Find $5 - $10 per trip via credit card. Patients without insurance coverage will have an access to discounted rate (credit card or cod), pre-negotiated for their benefit. Each accepted trip, results in significant revenue of $250 - $400 (ALS/BLS Ambulance Transport) and $50 - $95 (Wheelchair Transport) to transportation provider. All billing is done by transportation provider. Each user/requestor can submit a request, cancel and track (real time) each trip by accessing Job Screen. In addition, transportation provider can log in and access Job Screen to see which jobs are still available to accept, as well cancel or refer/forward job once it was accepted.

 

 
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EMS Enterprise - (B2B) Enterprise Version

 

This platform is developed to assist health care plans, large facilities, and contracted transportation providers to manage medical transportation department. Platform is very similar in functionality to EMS Find’s business. There are no fees per trip. Revenue model is based on monthly fee, paid by transportation provider.

  

EMS Data Marketing

 

Under HIPPA regulations, we will able to market to health care organization, particularly medical/life insurance plans, regional/national ems organizations, drug manufacturers, home care equipment manufacturers and distributors and use this information for marketing purposes.

 

Market Information

 

Ambulances help rescue injured or medically ill patients by transporting them to medical treatment centers with adequate medical services such as monitoring of health condition and administration of drugs. This service is provided with the help of healthcare professionals and medical equipment installed in the ambulance. The global ambulance services market based on the mode of transport has been segmented as: ground ambulance services, air ambulance services and water ambulance services. On the basis of emergency type, the global market has been segmented as: emergency ambulance services and non-emergency ambulance services.

 

Ambulance services, emergency and non-emergency, are provided to patients based on the medical condition and emergency of transportation. Ambulances are equipped with various types of medical equipment to cater to the need of patients by providing first-line treatment. Based on the type of equipment installed in ambulances, the ambulance services market is segmented into advanced life support (“ALS”) ambulance services and basic life support (“BLS”) ambulance services.

 

A BLS ambulance provides patients with basic medical equipment and services. A BLS ambulance is equipped with medical devices such as automatic external defibrillator oxygen delivery devices, pulse oximetry and blood pressure monitoring equipment. Medical services are provided by emergency medical practitioners and partially-trained personnel in a BLS ambulance. BLS ambulance services are usually provided to patients with complex fractures, medical or surgical patients, discharge for home or some sub-acute care facilities and psychiatrist patients.

 

Patients seeking immediate medical help are provided with emergency ambulance services as their critical medical condition demands medical treatment at an initial stage (before reaching the hospital). Emergency ambulances are incorporated with emergency siren and lights that enable the vehicle to avoid traffic and reach quickly at the hospital. Emergency ambulances are generally equipped with advanced life support systems and are provided with medical professionals who are able to provide first-line treatment including drug administration and monitoring.

 

Trademark and Patents

 

In July 2016, the Company has retained a law firm to file a Provisional Patent for our on-demand medical transportation platform. On June 15, 2015, the application for the Provisional Patent was submitted to United States Patent and Trademark Office (“USPTO”) by MSF. On June 17, 2016, the application for a Utility Patent was submitted to the USPTO. The application serial number that was assigned is No: 15/185,395.

 

Available Information

 

We file Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K and Current Reports on Form 8-K with the Securities and Exchange Commission in order to meet our timely and continuous disclosure requirements. We may also file additional documents with the Commission if they become necessary in the course of our company's operations.

 

The public may read and copy any materials that we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is www.sec.gov.

 

 
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Government Regulation

 

The healthcare industry is subject to numerous federal and state laws, regulations and rules including, among others, those related to government healthcare program participation requirements, various licensure and accreditation standards, reimbursement for patient services, health information privacy and security rules, and government healthcare program fraud and abuse provisions. Firms that are found to have violated any of these laws and regulations may be excluded from participating in government healthcare programs and subjected to significant fines or penalties.

 

Research and Development

 

We have not spent any amounts on research and development activities during the year ended June 30, 2016. We anticipate that we will not incur any expenses on research and development over the next 12 months. Our planned expenditures on our operations or a business combination are summarized under the section of this annual report entitled “Management’s Discussion and Analysis of Financial Position and Results of Operations.”

 

Environmental Regulations

 

We do not believe that we are or will become subject to any environmental laws or regulations of the United States. While our products and business activities do not currently violate any laws, any regulatory changes that impose additional restrictions or requirements on us or on our products or potential customers could adversely affect us by increasing our operating costs or decreasing demand for our products or services, which could have a material adverse effect on our results of operations.

 

Employees and Employment Agreements

 

At present, we have no employees other than our sole officer who devotes approximately 40 hours a week to our business. We presently do not have pension, health, annuity, insurance, stock options, profit sharing or similar benefit plans; however, we may adopt such plans in the future. There are presently no personal benefits available to any officers, directors or employees.

 

Property

 

Our business offices are located at 73 Buck Road, Suite 2, Huntingdon Valley, Pennsylvania 19006. Our telephone number is (215) 350-2255. Our lease provides for a monthly rental of $700 and expires September 1, 2016. The lease will continue month-to-month after the expiration. We believe that our existing facilities are suitable and adequate and that we have sufficient capacity to meet our current anticipated needs.

 

Item 1A. Risk Factors.

 

Risks Relating to Our Business

 

AN INVESTMENT IN THE COMPANY MUST BE CONSIDERED SPECULATIVE.

 

We cannot assure you that you will realize a return on your investment or that our stockholders will not lose their investments in the Company in their entirety. In the event we are forced to dissolve or commence insolvency proceedings, any proceeds from the liquidation of our assets will be distributed to our stockholders only after the satisfaction of the claims of our creditors. Your ability to recover all or any portion of an investment in our capital stock will depend upon the amount of the dissolution proceeds.

 

 
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WE HAVE NOT HAD OPERATIONS OF ANY SIGNIFICANCE SINCE INCEPTION AND WILL BE REQUIRED TO RAISE SUBSTANTIAL AMOUNTS OF CAPITAL

 

We will have to obtain significant additional capital, in addition to the capital proposed to be raised in this offering, to continue with development of our proposed business. There is no assurance that we will be able to obtain sufficient capital to implement our proposed business plan. The Company may not have sufficient resources to fully develop any new products unless it is able to raise additional financing. The Company can make no assurances these required funds will be available on favorable terms, if at all. The failure to raise capital when needed, will adversely affect our business, financial condition and results of operations, and could force the Company to reduce or cease operations.

 

RAISING ADDITIONAL CAPITAL MAY CAUSE DILUTION TO OUR EXISTING STOCKHOLDERS, RESTRICT OUR OPERATIONS OR REQUIRE US TO RELINQUISH RIGHTS. 

  

We have sought additional capital through a combination of private and public equity offerings, debt financings collaborations and strategic and licensing arrangements and have currently six convertible notes outstanding, the proceeds of which we have used to finance our operations. To the extent that we raise additional capital through the sale of common stock or securities convertible or exchangeable into common stock, current stockholders’ ownership interest in the Company will be diluted. In addition, the terms may include liquidation or other preferences that materially adversely affect their rights as a stockholder. Debt financing, if available, would increase our fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration, strategic alliance and licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates, our intellectual property, future revenue streams or grant licenses on terms that are not favorable to us.

  

THE MOBILE APPLICATION INDUSTRY IS CHARACTERIZED BY RAPID TECHNOLOGICAL CHANGE, AND OUR SUCCESS DEPENDS UPON THE FREQUENT ENHANCEMENT OF EXISTING PRODUCTS AND TIMELY INTRODUCTION OF NEW PRODUCTS THAT MEET OUR CUSTOMERS’ NEEDS. 

 

Customer requirements for mobile application products are rapidly evolving and technological changes in our industry occur rapidly. To keep up with new customer requirements and distinguish us from our competitors, we must frequently introduce new products and enhancements of existing products. Enhancing existing products and developing new products is a complex and uncertain process. It often requires significant investments in research and development (“R&D”). Furthermore, we may not be able to launch new or improved products before our competition launches comparable products. Any of these factors could cause our business or financial results to suffer.

 

IF WE FAIL TO CONTINUE TO INTRODUCE NEW PRODUCTS THAT ACHIEVE BROAD MARKET ACCEPTANCE ON A TIMELY BASIS, WE WILL NOT BE ABLE TO COMPETE EFFECTIVELY AND WE WILL BE UNABLE TO INCREASE OR MAINTAIN SALES AND PROFITABILITY.

 

Our future success depends on our ability to develop and introduce new products and product enhancements that achieve broad market acceptance. If we are unable to develop and introduce new products that respond to emerging technological trends and customers’ mission critical needs, our profitability and market share may suffer. The process of developing new technology is complex and uncertain, and if we fail to accurately predict customers’ changing needs and emerging technological trends, our business could be harmed. We are active in the identification and development of new product and technology services and in enhancing our current products. However, in the enterprise mobility solutions industry, such activities are complex and filled with uncertainty. If we expend a significant amount of resources and our efforts do not lead to the successful introduction of new or improved products, there could be a material adverse effect on our business, profitability, financial condition and market share.

 

WE FACE COMPETITION FROM NUMEROUS SOURCES AND COMPETITION MAY INCREASE.

 

We believe that barriers to entry are not significant and start-up costs are relatively low, so that we expect significant competition in the future. New competitors may be able to launch new businesses similar to ours, and current competitors may replicate our business model, at a relatively low cost. If competitors with significantly greater resources than ours decide to replicate our business model, they may be able to quickly gain recognition and acceptance of their business methods and products through marketing and promotion. We may not have the resources to compete effectively with current or future competitors.

 

 
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WE OPERATE IN A HIGHLY COMPETITIVE INDUSTRY IN WHICH WE ARE A SMALL ENTERPRISE COMPARED TO OUR COMPETITORS. 

 

Our revenue is indirectly dependent on the healthcare industry and could be affected by changes in healthcare spending and policy. The healthcare industry is subject to changing political, regulatory and other influences. The PPACA made major changes in how healthcare is delivered and reimbursed, and increased access to health insurance benefits to the uninsured and underinsured population of the United States. The healthcare industry, in which the Company is a very small factor, is highly competitive, and competition among service and healthcare providers has intensified in recent years. Substantially all of our competitors and potential are much larger and better financed companies.

 

WE CONDUCT BUSINESS IN A HEAVILY REGULATED INDUSTRY AND IF WE FAIL TO COMPLY WITH THESE LAWS AND GOVERNMENT REGULATIONS, WE COULD INCUR PENALTIES OR BE REQUIRED TO MAKE SIGNIFICANT CHANGES TO OUR OPERATIONS OR EXPERIENCE ADVERSE PUBLICITY, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITION, AND RESULTS OF OPERATIONS. 

 

The healthcare industry is heavily regulated and closely scrutinized by federal, state and local governments. Comprehensive statutes and regulations govern the manner in which we may provide and bill for services and our payors may collect reimbursement from governmental programs and private payors, our contractual relationships with our clients and vendors, our marketing activities and other aspects of our operations. Of particular importance are:

 

· the federal Anti-Kickback Statute that prohibits the knowing and willful offer, payment, solicitation or receipt of any bribe, kickback, rebate or other remuneration for referring an individual, in return for ordering, leasing, purchasing or recommending or arranging for or to induce the referral of an individual or the ordering, purchasing or leasing of items or services covered, in whole or in part, by any federal healthcare program, such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act;

 

 

· the criminal healthcare fraud provisions of HIPAA and related rules that prohibit knowingly and willfully executing a scheme or artifice to defraud any healthcare benefit program or falsifying, concealing or covering up a material fact or making any material false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation;

 

 

· the federal False Claims Act that imposes civil and criminal liability on individuals or entities that knowingly submit false or fraudulent claims for payment to the government or knowingly making, or causing to be made, a false statement in order to have a false claim paid, including qui tam or whistleblower suits;

 

 

· reassignment of payment rules that prohibit certain types of billing and collection practices in connection with claims payable by the Medicare or Medicaid programs;

 

 

· similar state law provisions pertaining to anti-kickback, self-referral and false claims issues, some of which may apply to items or services reimbursed by any third-party payor, including commercial insurers; and

 

 

· state laws that prohibit general business corporations, such as us, from practicing medicine, controlling physicians' medical decisions or engaging in some practices such as splitting fees with physicians.

 

 
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Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our operations could be indirectly affected through our clients’ activities. The laws, regulations and standards governing the provision of healthcare services may change significantly in the future, and any new or changed healthcare laws, regulations or standards could materially adversely affect our business.

 

WE ARE INCREASINGLY DEPENDENT ON WIRELESS SERVICE AND INFRASTRUCTURE AND INFORMATION TECHNOLOGY SYSTEMS (CYBER SECURITY).

 

As a provider of a mobile application, we rely upon technology systems and infrastructure. In particular, we are heavily dependent and reliant on availability of technology from Apple Ò (iOS phones) and Google (Android phones and geo locating services). Our operations are potentially vulnerable to breakdown or other interruption by fire, power loss, system malfunction, unauthorized access and other events such as computer hackings, cyber-attacks, computer viruses, worms or other destructive or disruptive software. Likewise, data privacy breaches by employees and others with permitted access to our systems may pose a risk that sensitive data may be exposed to unauthorized persons or to the public. There can be no assurance that our efforts will prevent significant breakdowns, breaches in our systems or other cyber incidents that could have a material adverse effect upon our reputation, business, operations or financial condition of the Company. In addition, significant implementation issues may arise if we consolidate and outsource certain computer operations and application support activities.

 

Our systems are an integral part of our customers’ business operations. It is critical for our customers, that our systems provide a continued and uninterrupted performance. Customers may be dissatisfied by any system failure that interrupts our ability to provide services to them. Sustained or repeated system failures would reduce the attractiveness of our services significantly and could result in decreased demand for our services.

 

WE DEPEND HEAVILY ON OUR CHIEF EXECUTIVE OFFICER, AND HIS DEPARTURE COULD HARM OUR BUSINESS. 

 

The expertise and efforts of Steve Rubakh, our Chief Executive Officer, are critical to the success of our business. The loss of Mr. Rubakh’s services could significantly undermine our management expertise and our ability to operate our Company.

 

THE REVENUES AND RESULTS OF OUR OPERATIONS MAY BE SIGNIFICANTLY AFFECTED BY PAYMENTS RECEIVED BY OUR HEALTH CARE CLIENTS’ MANAGED FACILITIES FROM THE GOVERNMENT AND THIRD-PARTY PAYORS. 

 

A significant source of revenues for health care industry companies for which we would provide services is from government healthcare programs, principally Medicare and Medicaid. Changes in these government programs in recent years have resulted in limitations on reimbursement and, in some cases, reduced levels of reimbursement for healthcare services. Payments from federal and state government healthcare programs are subject to statutory and regulatory changes, administrative rulings, interpretations and determinations, requirements for utilization review, and federal and state funding restrictions, all of which could materially increase or decrease program payments, as well as affect the cost of providing service to patients and the timing of payments to facilities. If the rates paid or the scope of services covered by government payors are reduced, there could be a material adverse effect on our business, financial condition and results of operations.

 

Risks Relating Generally to Commercial Applications of Our Technology

 

AT THIS TIME THERE IS NO UNIVERSAL MARKET ACCEPTANCE OF OUR PROPOSED PRODUCTS.

 

We cannot assure you that we will be successful in commercializing one or more of the potential applications of our B2B & B2C on-demand mobile platform technology, or that, if commercial acceptance is obtained by us, our operations will be profitable. The telehealth market is relatively new and unproven, and it is uncertain whether it will achieve and sustain high levels of demand, consumer acceptance and market adoption. We are seeking strategic alliances, government contracts and other distribution and marketing channels; however, we cannot assure you that any significant degree of market acceptance will result, and that acceptance, if achieved, will be sustained for any significant period or that product life cycles will be sufficient (or substitute products developed) to permit the Company to recover start-up and other associated costs. Our goal is to achieve or sustain market acceptance would have a material adverse effect on our business, financial conditions, and results of operations.

 

 
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WE MAY NOT BE ABLE TO RESPOND QUICKLY ENOUGH TO CHANGES IN TECHNOLOGY AND TECHNOLOGICAL RISKS, AND TO DEVELOP OUR INTELLECTUAL PROPERTY INTO COMMERCIALLY VIABLE PRODUCTS.

  

Changes in legislative, regulatory or industry requirements or in competitive technologies may render certain of our planned products obsolete or less attractive. Our ability to anticipate changes in technology and regulatory standards and to successfully develop and introduce new and enhanced products on a timely basis will be a significant factor in our ability to remain competitive. We cannot provide assurance that we will be able to achieve the technological advances that may be necessary for us to remain competitive or that certain of our products will not become obsolete. We are also subject to the risks generally associated with new product introductions and applications, including lack of market acceptance, delays in product development and failure of products to operate properly.

 

OUR GROWTH IS DEPENDENT IN LARGE PART ON THE SUCCESS OF OUR STRATEGIC RELATIONSHIPS WITH THIRD PARTIES. 

 

In order to grow our business, we anticipate that we will continue to depend on our relationships with third parties, including our client and partner organizations and technology and content providers. Identifying potential clients, and negotiating and documenting relationships with them, requires significant time and resources. Our competitors may be effective in providing incentives to third parties to favor their products or services or to prevent or reduce subscriptions to, or utilization of, our products and services. If we are unsuccessful in establishing or maintaining our relationships with third party clients and users, our ability to compete in the marketplace or to grow our revenue could be impaired and our results of operations may suffer. Even if we are successful, we cannot assure you that these relationships will result in increased client use of our applications or increased revenue.

 

WE WILL RELY ON DATA CENTER PROVIDERS, INTERNET INFRASTRUCTURE, BANDWIDTH PROVIDERS, THIRD-PARTY COMPUTER HARDWARE AND SOFTWARE, OTHER THIRD PARTIES AND OUR OWN SYSTEMS FOR PROVIDING SERVICES TO OUR CLIENTS AND USERS, AND ANY FAILURE OR INTERRUPTION IN THE SERVICES PROVIDED BY THESE THIRD PARTIES OR OUR OWN SYSTEMS COULD NEGATIVELY IMPACT OUR RELATIONSHIPS WITH CLIENTS, ADVERSELY AFFECTING OUR BRAND AND OUR BUSINESS.

 

We plan to serve all of our clients and users from data centers. The owners of data center facilities have no obligation to enter into their agreements with us on commercially reasonable terms, or at all. If we are unable to negotiate favorable agreements on commercially reasonable terms, we will be required utilize data center facilities, and we may incur significant costs and possible service interruption in connection with doing so. Problems faced by our third-party data center locations with the telecommunications network providers with whom we or they contract or with the systems by which our telecommunications providers allocate capacity among their clients, including us, could adversely affect the experience of our clients.

 

IF WE ARE UNABLE TO PROTECT OUR PATENTS AND OTHER PROPRIETARY RIGHTS, WE COULD BE FORCED TO CEASE OPERATIONS.

 

There can be no assurance that we will succeed in our applications for U.S. patents covering our B2B & B2C on-demand mobile platform technology we plan to use or, if granted a U.S. patents, that we will be able to prevent misappropriation or infringement of patents that may be issued to us.

 

WE MAY IN THE FUTURE BE SUBJECT TO INTELLECTUAL PROPERTY (e.g., PATENTS, COPYRIGHTS, TRADEMARKS AND TRADE SECRETS) RIGHTS CLAIMS, WHICH ARE COSTLY TO DEFEND, AND COULD REQUIRE US TO PAY DAMAGES AND COULD LIMIT OUR ABILITY TO USE CERTAIN TECHNOLOGIES IN THE FUTURE.

 

Our technologies, when developed and included in commercial products, may not be able to withstand any third-party claims or rights against their use. Any intellectual property claims, with or without merit, could be time-consuming, expensive to litigate or settle and could divert resources and attention.

 

In addition, third parties may initiate litigation against us alleging infringement of their intellectual property rights. With respect to any intellectual property rights claim, we may have to pay damages or discontinue the practices found to be in violation of a third party’s rights. We may have to seek a license to continue such practices, which may not be available on reasonable terms and may significantly increase our operating expenses. A license to continue such practices may not be available to us at all. As a result, we may also be required to develop alternative non-infringing technology or practices or discontinue the practices. The development of alternative non-infringing technology or practices could require significant effort and expense. If we cannot obtain a license to continue such practices or develop alternative technology or practices for the infringing aspects of our business, we may be forced to limit our product and service offerings and may be unable to compete effectively. Any of these results could harm our brand, operating results or could otherwise harm our business.

 
 
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Risks Related to Our Common Stock and its Market

 

BECAUSE CERTAIN EXISTING STOCKHOLDERS OWN A LARGE PERCENTAGE OF OUR VOTING STOCK, OTHER STOCKHOLDERS' VOTING POWER MAY BE LIMITED.

 

Steve Rubakh, our Chief Executive Officer, owns and/or controls a majority of the voting power of our common stock. As a result, Mr. Rubakh will have the ability to control all matters submitted to our stockholders for approval, including the election and removal of directors and the approval of any merger, consolidation or sale of all or substantially all of our assets. This stockholder may make decisions that are averse to your interests. See our discussion under the caption “Principal Stockholders” for more information about ownership of our outstanding shares.

 

We do not have a majority of independent directors on our Board and the Company has not voluntarily implemented various corporate governance measures, in the absence of which stockholders may have more limited protections against interested director transactions, conflicts of interest and similar matters.

 

Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of the corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE or the NASDAQ Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges are those that address board of directors’ independence, audit committee oversight, and the adoption of a code of ethics. We have not yet adopted any of these other corporate governance measures and since our securities are not yet listed on a national securities exchange, we are not required to do so. If we expand our board membership in future periods to include additional independent directors, we may seek to establish an audit and other committee of our board of directors. It is possible that if our Board of Directors included a number of independent directors and if we were to adopt some or all of these corporate governance measures, stockholders would benefit from somewhat greater assurance that internal corporate decisions were being made by disinterested directors. In evaluating our Company, our current lack of corporate governance measures should be borne in mind.

 

OUR SHARE PRICE IS VOLATILE AND MAY BE INFLUENCED BY NUMEROUS FACTORS THAT ARE BEYOND OUR CONTROL. 

  

Market prices for shares of mobile technology companies such as ours are often volatile. The market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including:

 

 

·

fluctuations in stock market prices and trading volumes of similar companies;

 

 

 

 

·

general market conditions and overall fluctuations in U.S. equity markets;

 

 

 

 

·

sales of large blocks of our common stock, including sales by our executive officers, directors and significant stockholders;

 

 

 

 

·

discussion of us or our stock price by the press and by online investor communities; and

 

 

 

 

·

other risks and uncertainties described in these risk factors.

 

 
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WE HAVE NO CURRENT PLANS TO PAY DIVIDENDS ON OUR COMMON STOCK AND INVESTORS MUST LOOK SOLELY TO STOCK APPRECIATION FOR A RETURN ON THEIR INVESTMENT IN US.

 

We do not anticipate paying any further cash dividends on our common stock in the foreseeable future. We currently intend to retain all future earnings to fund the development and growth of our business. Any payment of future dividends will be at the discretion of our board of directors and will depend on, among other things, our earnings, financial condition, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends and other considerations that the board of directors deems relevant. Investors may need to rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize a return on their investment. Investors seeking cash dividends should not purchase our common stock.

  

OUR COMMON STOCK IS DEEMED TO BE “PENNY STOCK,” WHICH MAY MAKE IT MORE DIFFICULT FOR INVESTORS TO SELL THEIR SHARES DUE TO DISCLOSURE AND SUITABILITY REQUIREMENTS. 

  

Our common stock is deemed to be “penny stock” as that term is defined in Rule 3a51-1 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These requirements may reduce the potential market for our common stock by reducing the number of potential investors. This may make it more difficult for investors in our common stock to sell shares to third parties or to otherwise dispose of them. This could cause our stock price to decline. Penny stocks are stock:

 

· With a price of less than $5.00 per share;

 

 

· That are not traded on a “recognized” national exchange;

 

 

· Whose prices are not quoted on the NASDAQ automated quotation system (NASDAQ listed stock must still have a price of not less than $5.00 per share); or

 

 

· In issuers with net tangible assets less than $2.0 million (if the issuer has been in continuous operation for at least three years) or $10.0 million (if in continuous operation for less than three years), or with average revenues of less than $6.0 million.

 

Broker-dealers dealing in penny stocks are required to provide potential investors with a document disclosing the risks of penny stocks. Moreover, broker-dealers are required to determine whether an investment in a penny stock is a suitable investment for a prospective investor. Many brokers have decided not to trade “penny stocks” because of the requirements of the penny stock rules and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited. In the event that we remain subject to the “penny stock rules” for any significant period, there may develop an adverse impact on the market, if any, for our securities.

 

Item 1B. Unresolved Staff Comments.

 

Disclosure under Item 1B is not required of smaller reporting companies.

 

Item 2. Properties.

 

Our business offices are located at 73 Buck Road, Suite 2, Huntingdon Valley, Pennsylvania 19006. Our telephone number is (215) 350-2255. Our lease provides for a monthly rental of $700 and expires September 1, 2016. The Company will continue on a month-to-month basis after expiration. We believe that our existing facilities are suitable and adequate and that we have sufficient capacity to meet our current anticipated needs.

 

Item 3. Legal Proceedings.

 

Although we may, from time to time, become a party to lawsuits in the ordinary course of business, we are not currently a party to or involved in any legal proceedings.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

 
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PART II

 

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

 

Market Information

 

Our common stock is traded over-the-counter market and has been quoted on the OTCQB, since approximately April 24, 2015, under the symbol "EMSF.” The quotations in the table below reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not represent actual transactions.

 

Period

 

High

 

 

Low

 

Fiscal Year Ended June 30, 2015

 

 

 

 

 

 

April 24 through June 30, 2015

 

$ 2.53

 

 

$ 1.05

 

 

 

 

 

 

 

 

 

 

Fiscal Year Ended June 30, 2016

 

 

 

 

 

 

 

 

Quarter ended September 30, 2015

 

$ 1.38

 

 

$ 1.09

 

Quarter ended December 31, 2015

 

$ 1.50

 

 

$ 0.42

 

Quarter ended March 31, 2016

 

$ 0.57

 

 

$ 0.33

 

Quarter ended June 30, 2016

 

$ 0.39

 

 

$ 0.03

 

 

Holders

 

As of September 14, 2016, we had approximately 11 stockholders in street or nominee name.

 

Dividend Distributions

 

No dividends have been declared or paid on our common stock, and we do not anticipate that any dividends will be declared or paid in the foreseeable future.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

Not applicable.

 

Sales of Unregistered Securities

 

The following sets forth the unreported sales of unregistered securities for the fiscal year ended June 30, 2016:

 

On July 22, 2015, the Company sold 48,245 shares of common stock for $55,000, or $1.14 per share.

  

On August 5, 2015, Shang Fei (“Fei”) resigned from the Company as a board member. Fei had provided the Company with $260,000 of capital of which $210,000 and a prior loan for expenses of $19,095 was converted into 212,050 shares of common stock.

 

On August 13, 2015, the Company authorized the issuance 150,000 shares of its common stock to Steve Rubakh (“Rubakh”), the Company’s Chief Executive Officer and Director. The shares were valued at $1.28 per share, or $192,000.

 

 
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On September 18, 2015, the Company authorized the issuance 30,000 shares of its common stock to Rubakh as compensation. The shares were valued at $1.32 per share, or $39,600.

 

On September 25, 2015, the Company authorized the issuance of 125,000 shares of common stock as part of an agreement with Daniel Grillo, a director of the Company, for services from September 25, 2015 through March 31, 2016. The shares were valued at $1.14 per share, or $142,500.

 

On October 1, 2015, the Company issued 30,000 shares of its common stock to Rubakh as compensation. The shares were valued at $1.42 per share, or $.

 

On November 1, 2015, the Company issued 30,000 shares of its common stock to Rubakh as compensation. The shares were valued at $0.9999 per share, or $.

 

On December 1, 2015, the Company issued 30,000 shares of its common stock to Rubakh as compensation. The shares were valued at $0.62 per share, or $.

 

On January 1, 2016, the Company issued 30,000 shares of its common stock to Rubakh as compensation. The shares were valued at $0.47 per share, or $.

 

On January 2, 2016, the Company issued to Johnny Falcones (“Falcones”), an employee of the Company, warrants to purchase 3,000,000 shares of common stock of the Company, with an exercise price of $0.74. The Company recorded an expense of $1,149,000. On April 6, 2016, the warrants were cancelled.

 

On January 2, 2016, the Company issued to Rubakh, warrants to purchase 3,000,000 shares of common stock of the Company, with an exercise price of $0.74. The Company recorded an expense of $1,149,000.

 

On February 1, 2016, the Company issued 30,000 shares of its common stock to Rubakh as compensation. The shares were valued at $0.5099 per share, or $15,297.

 

On March 1, 2016, the Company issued 30,000 shares of its common stock to Rubakh as compensation. The shares were valued at $0.49 per share, or $14,700.

 

On March 15, 2016, the Company issued 242,424 shares of its common stock to Sophia Rubakh, a relative of Rubakh, as compensation. The shares were issued with a value of $0.21 per share, or $50,909.

 

On April 25, 2016, the Company issued 500,000 shares of its common stock to Johnny Falcones, a director, as compensation. The shares were valued at $0.21 per share, or $105,000.

 

On April 26, 2016, the Company issued 60,000 shares of its common stock to Rubakh as compensation. The shares were valued at $0.21 per share, or $12,600.

 

On June 27, 2016, the Company issued 2,712,133 shares of its common stock to Rubakh upon the conversion of a promissory note valued at $81,364. The shares were valued at $0.14 whereas the conversion price was $0.03 per share.

 

On June 30, 2016, the Company authorized the issuance of 360,000 shares of its common stock to Rubakh as compensation. The shares were valued at $0.39 per share, or $139,857.

 

On July 1, 2016, the Company authorized the issuance of 30,000 shares of its Series B preferred stock to Rubakh as compensation. The shares are convertible into common stock at a ratio of 1 for 100. The common stock was valued at $0.125 per share, therefore, on a diluted basis, the shares were valued at $375,000.

 

The issuances to our Chief Executive Officer are viewed by the Company as exempt from registration under the Securities Act of 1933, as amended (“Securities Act”), alternatively, as transactions either not involving any public offering, or as exempt under the provision of Regulation D promulgated by the SEC under the Securities Act.

 

 
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Penny Stock

 

Our common stock is considered "penny stock" under the rules the Securities and Exchange Commission (the "SEC") under the Securities Exchange Act of 1934. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ Stock Market System, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or quotation system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the Commission, that:

 

·

contains a description of the nature and level of risks in the market for penny stocks in both public offerings and secondary trading;

 

 

 

·

contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of Securities' laws; contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price;

 

 

 

·

contains a toll-free telephone number for inquiries on disciplinary actions;

 

 

 

·

defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and

 

 

 

·

contains such other information and is in such form, including language, type, size and format, as the Commission shall require by rule or regulation.

 

The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with:

 

·

bid and offer quotations for the penny stock;

 

 

 

·

the compensation of the broker-dealer and its salesperson in the transaction;

 

 

 

·

the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the marker for such stock; and

 

 

 

·

monthly account statements showing the market value of each penny stock held in the customer's account.

 

In addition, the penny stock rules that require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgement of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitably statement.

 

These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our stock.

 

Related Stockholder Matters

 

None.

 

Purchase of Equity Securities

 

None.

 

 
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Item 6. Selected Financial Data.

 

Disclosure under Item 6 is not required of smaller reporting companies.

 

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

 

You should read the following discussion and analysis in conjunction with our financial statements, including the notes thereto, included in this Report. Some of the information contained in this Report may contain forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1933, as amended (the “Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements which involve assumptions and describe our future plans, strategies and expectations, are generally identifiable by the use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that the projections included in these forward-looking statements will come to pass. Our actual results could differ materially from those expressed or implied by the forward looking statements as a result of various factors. We undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

 

Overview and Recent Developments

 

We were incorporated in the State of Nevada on March 22, 2013 under the name Lightcollar, Inc. On March 22, 2015, we changed our name to EMS Find, Inc. Effective March 31, 2015, we entered into a Share Exchange Agreement with the sole shareholder of EMS Factory, Inc., a Pennsylvania corporation (“EMS Factory”), and following the closing under the Share Exchange Agreement, EMS Factory became a wholly-owned subsidiary of the Company, with the former stockholder of EMS Factory owning approximately 35% of the outstanding shares of common stock of the combined company. Our offices are located at 73 Buck Road, Suite 2, Huntingdon Valley, Pennsylvania 19006.

 

The Company develops and markets B2B & B2C on-demand mobile platform, designed to connect health care providers and consumers to a network of medical transport companies throughout the United States and Canada and, on the internet and through mobile applications, and plans to provide specialized online marketing solutions for these businesses that boost customer awareness and merchant visibility on the internet and through mobile applications.

 

On April 6, 2016 we completed the sale of our subsidiary Viva Entertainment Group, Inc. (“Viva Entertainment”) to Black River Petroleum Corp., a Nevada publicly-traded company (“Black River”), at a closing where, in exchange for all sale of all of the outstanding shares of Viva Entertainment, Black River issued to the Company its 10% promissory note in the principal amount of $100,000, due September 30, 2016. In connection with the sale, Viva Entertainment’s Chief Executive Officer, Johnny Falcones (“Falcones”), a member of our Board of Directors, resigned from all positions at our Company and was elected as the sole director and President and Chief Executive Officer of Black River, to manage the development and marketing of Viva Entertainment’s over the top (IPTV/OTT) application for connected TV’s, desktop computers, tablets, and smart phones.

 

Financial Operations Overview

 

Revenue

 

To date, we have not generated any revenues from product sales and expect to start bring in revenue toward the end of the 2016 calendar year. Revenues to date have been generated substantially from the now discontinued Ambulance services. Since our inception through June 30, 2016, we have generated approximately $1.1 million in revenue. We have since discontinued these services and are focusing on new revenue sources.

 

 
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We are incurring increased costs as a result of being a publicly-traded company. As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, as well as new rules subsequently implemented by the Securities and Exchange Commission, have required changes in corporate governance practices of public companies and will require us to comply with these rules. These new rules and regulations have will increase our legal and financial compliance costs and have made some activities more time-consuming and costly. In addition, these new rules and regulations have made it more difficult and more expensive for us to obtain director and officer liability insurance, which we currently cannot afford to do. As a result of the new rules, it may become more difficult for us to attract and retain qualified persons to serve on our Board of Directors or as executive officers. We cannot predict or estimate the amount of additional costs we may incur as a result of being a public company or the timing of such costs.

 

To fund future operations, we will need to raise additional capital. The amount and timing of future funding requirements will depend on many factors, including the timing and results of our ongoing development efforts, the potential expansion of our current development programs, potential new development programs and related general and administrative support. We anticipate that we will seek to fund our operations through public or private equity or debt financings or other sources, such as potential collaboration agreements. We cannot be certain that anticipated additional financing will be available to us on favorable terms, or at all.

 

COMPARISON OF THE YEAR ENDED JUNE 30, 2016 COMPARED TO THE YEAR ENDED JUNE 30, 2015

 

Results of Operations

 

Revenue. For the year ended June 30, 2016, our revenue was $0, compared to $0 for the transitional period January 1, 2015 through June 30, 2015.

 

Operating Expenses:

 

Direct costs of Revenue. For the year ended June 30, 2016, direct costs of revenue were $0 compared to $0 for the transitional period January 1, 2015 through June 30, 2015.

 

General and Administrative Expenses. For the year ended June 30, 2016, general and administrative expenses were $3,474,016 compared to $297,399 for the transitional period January 1, 2015 through June 30, 2015. The increase was primarily due to stock-based compensation of $3,049,503 for the year ended June 30, 2016.

 

Net Loss. We generated net losses of $5,030,583 for the year ended June 30, 2016, compared to $325,284 for the transitional period January 1, 2015 through June 30, 2015. The increase was primarily due to stock-based compensation of $3,049,503, the change in the fair value of embedded conversion options, $1,056,145, and the amortization of the beneficial conversion feature, $441,240.

 

LIQUIDITY

 

General. At June 30, 2016, we had cash and cash equivalents of $1,974. We have historically met our cash needs through a combination of cash flows from operating activities, proceeds from private placements of our securities and loans, and proceeds from loans from related parties. Our cash requirements are generally for selling, general and administrative activities. We believe that our cash balance is not sufficient to finance our cash requirements for expected operational activities, capital improvements, and partial repayment of debt through the next 12 months.

 

Our operating activities used cash of $478,013 for the year ended June 30, 2016, and we used cash in operations of $97,851 during the transitional period January 1, 2015 through June 30, 2015. The principal elements of cash flow from operations for the year ended June 30, 2016, included a net loss of $5,030,583.

 

 
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Cash used in investing activities during the year ended June 30, 2016, was $0 compared to $8,703 provided by investing activities during the transitional period January 1, 2015 through June 30, 2015.

 

Cash generated in our financing activities was $434,144 for the year ended June 30, 2016, compared to cash generated of $152,229 during the transitional period January 1, 2015 through June 30, 2015.

 

As of June 30, 2016, current liabilities exceeded current assets by 586.7 times. Current assets decreased from $45,843 at June 30, 2015 to $2,540 at June 30, 2016, whereas current liabilities increased from $180,782 at June 30, 2015, to $1,490,174 at June 30, 2016.

 

 

 

 

 

 

For the

 

 

 

 

 

 

Transitional

 

 

 

 

 

 

Period

 

 

 

For the

 

 

January 1, 2015

 

 

 

Year Ended

 

 

through

 

 

 

June 30, 2016

 

 

June 30, 2015

 

Cash used in operating activities

 

$ (478,013 )

 

$ (97,851 )

Cash used in investing activities

 

 

-

 

 

 

(8,703 )

Cash provided by financing activities

 

 

434,144

 

 

 

152,229

 

 

 

 

 

 

 

 

 

 

Net changes to cash

 

$ (43,869 )

 

$ 45,675

 

 

Going Concern

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company had sales of $0 and net losses of $5,030,583 for the year ended June 30, 2016, compared to sales of $0 and net losses of $325,284 for the transitional period January 1, 2015 through June 30, 2015. The Company had a working capital deficit, stockholders’ deficit, and accumulated deficit of $1,487,634, $1,482,063 and $5,159,757, respectively, at June 30, 2016. These factors raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. The Company is highly dependent on its ability to continue to obtain investment capital from future funding opportunities to fund the current and planned operating levels. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to bring in income generating activities and its ability to continue receiving investment capital from future funding opportunities. No assurance can be given that the Company will be successful in these efforts.

 

Critical Accounting Policies

 

Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent 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. Significant estimates in the accompanying financial statements include the amortization period for intangible assets, valuation and impairment valuation of intangible assets, depreciable lives of the web site and property and equipment, valuation of warrant and beneficial conversion feature debt discounts, valuation of share-based payments and the valuation allowance on deferred tax assets.

 

 
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Changes in Accounting Principles. No significant changes in accounting principles were adopted during fiscal 2016 and 2015.

 

Derivatives. The Company evaluates its convertible debt, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for. The result of this accounting treatment is that under certain circumstances the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under this accounting standard are reclassified to liability at the fair value of the instrument on the reclassification date.

 

Impairment of Long-Lived Assets. The Company accounts for long-lived assets in accordance with the provisions of Statement of Financial Accounting Standards ASC 360-10, “Accounting for the Impairment or Disposal of Long-Lived Assets”. This statement requires that long-lived assets and certain identifiable intangibles be reviewed 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 undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

 

Fair Value of Financial Instruments and Fair Value Measurements. The Company measures their financial assets and liabilities in accordance with generally accepted accounting principles. For certain of our financial instruments, including cash, accounts payable, accrued expenses escrow liability and short-term loans the carrying amounts approximate fair value due to their short maturities.

 

We have adopted accounting guidance for financial and non-financial assets and liabilities. The adoption did not have a material impact on our results of operations, financial position or liquidity. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

 

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

 

Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

 

 
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Revenue Recognition. The Company recognizes revenue for our services in accordance with ASC 605-10, "Revenue Recognition in Financial Statements." Under these guidelines, revenue is recognized on transactions when all of the following exist: persuasive evidence of an arrangement did exist, delivery of service has occurred, the sales price to the buyer is fixed or determinable and collectability is reasonably assured. The Company has five primary revenue streams as follows:

 

 

·

Consulting services.

 

 

 

 

·

Advertising services.

 

 

 

 

·

Branding, marketing and selling products for companies.

 

 

 

 

·

Educational seminars.

 

 

 

 

·

Selling branded products.

 

Stock-Based Compensation. The Company accounts for stock-based instruments issued to employees in accordance with ASC Topic 718. ASC Topic 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation issued to employees. The Company accounts for non-employee share-based awards in accordance with ASC Topic 505-50. The value of the portion of an award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method. The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model. The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model.

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

 

Disclosure under Item 7A is not required of smaller reporting companies.

 

 
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Item 8. Financial Statements and Supplementary Data.

 

Set forth below a list of our audited financial statements included in this Annual Report on Form 10-K and their location in this report.

 

Item

Page

 

 

 

 

Reports of Independent Registered Public Accounting Firms

F-1

 

 

 

 

Consolidated Balance Sheets as of June 30, 2016 and 2015

F-3

 

 

 

 

Consolidated Statements of Operations for the Year Ended June 30, 2016 and the Transitional Period January 1, 2015 through June 30, 2015

F-4

 

 

 

 

Consolidated Statements of Changes in Stockholders’ Deficit for the Years Ended June 30, 2016 and 2015

F-5

 

 

 

 

Consolidated Statements of Cash Flows for the Year Ended June 30, 2016 and the Transitional Period January 1, 2015 through June 30, 2015

F-6

 

 

 

 

Notes to Consolidated Financial Statements

F-7

 

 
21
 

 

Leigh J. Kremer, CPA 

Certified Public Accountant 

Member NJCPA, PCAOB

 

Phone (732) 747-6565

95 Locust Avenue  

Red Bank, NJ 07701

 

Report of Independent Registered Public Accounting Firm

 

To the Board of Directors and Shareholders of EMS Find, Inc.

 

We have audited the accompanying consolidated balance sheets of EMS Find, Inc. as of June 30, 2016, and the related consolidated statements of operations, consolidated shareholders' equity, and consolidated cash flows for the year ended June 30, 2016. The consolidated financial statements for the year ended June 30, 2015 were audited by another auditor. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated 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 about whether the consolidated 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 designed audit procedures, 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 consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of EMS Find, Inc. as of June 30, 2016, and the results of its operations and its cash flows for the year in the period ended June 30, 2016, in conformity with U.S. generally accepted accounting principles.

 

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

 

Leigh J. Kremer, CPA                        

Red Bank, N.J. 

September 27, 2016

 

 
F-1
Table of Contents

 

 

PCAOB Registered Auditors – www.sealebeers.com

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of 

EMS Find, Inc.

 

We have audited the accompanying balance sheets of EMS Find, Inc. as of June 30, 2015 and December 31, 2014, and the related statements of operations, stockholders’ equity (deficit), and cash flows for the six month period ended June 30, 2015. EMS Find Inc.’s management is responsible for these financial statements. 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 about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our 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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of EMS Find, Inc. as of June 30, 2015 and December 31, 2014, and the results of its operations and its cash flows for the six month period ended June 30, 2015 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, the Company has no revenues, has negative working capital at June 30, 2015, has incurred recurring losses and recurring negative cash flow from operating activities, and has an accumulated deficit which raises 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/ Seale and Beers, CPAs                    

Seale and Beers, CPAs 

Las Vegas, Nevada 

September 28, 2015

 
F-2
Table of Contents

EMS Find, Inc.

and Subsidiary

Consolidated Balance Sheets

June 30,

 

 

 

2016

 

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ASSETS

Current assets

 

 

 

 

 

 

Cash

 

$ 1,974

 

 

$ 45,843

 

Other receivable

 

 

566

 

 

 

-

 

Total current assets

 

 

2,540

 

 

 

45,843

 

 

 

 

 

 

 

 

 

 

Other assets

 

 

 

 

 

 

 

 

Fixed assets, net

 

 

-

 

 

 

1,353

 

Fixed assets held for sale, net

 

 

4,870

 

 

 

27,080

 

Deposits

 

 

700

 

 

 

-

 

Total other assets

 

 

5,570

 

 

 

28,433

 

 

 

 

 

 

 

 

 

 

Total assets

 

$ 8,111

 

 

$ 74,276

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities

 

 

 

 

 

 

 

 

Notes payable

 

$ -

 

 

$ 31,222

 

Convertible notes payable, net of discounts

 

 

188,131

 

 

 

-

 

Accounts payable

 

 

13,916

 

 

 

20,545

 

Due to related party

 

 

31,476

 

 

 

129,015

 

Accrued expenses

 

 

36,543

 

 

 

-

 

Checks written in excess of cash balance

 

 

11,695

 

 

 

-

 

Derivative liability

 

 

1,208,414

 

 

 

-

 

Total current liabilities

 

 

1,490,174

 

 

 

180,782

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

1,490,174

 

 

 

180,782

 

 

 

 

 

 

 

 

 

 

Stockholders' deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A preferred stock,  $0.001 par value, (20,000,000 shares authorized, 500,000 and 1,000,000 shares issued and outstanding as of  June 30, 2016 and 2015, respectively)

 

 

500

 

 

 

1,000

 

Series B preferred stock,  $0.001 par value, (500,000 shares authorized, 0 and 0 shares issued and outstanding as of  June 30, 2016 and 2015, respectively)

 

 

-

 

 

 

-

 

Common stock,  $0.001 par value, (100,000,000 shares authorized 32,711,272 and 28,484,535  shares issued, issuable and outstanding as of  June 30, 2016 and 2015, respectively)

 

 

32,711

 

 

 

28,485

 

Additional paid in capital

 

 

3,644,483

 

 

 

(6,817 )

Accumulated deficit

 

 

(5,159,757 )

 

 

(129,174 )

Total stockholders' deficit

 

 

(1,482,063 )

 

 

(106,506 )

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' deficit

 

$ 8,111

 

 

$ 74,276

 

 

See accompanying notes to consolidated financial statements.

 

 
F-3
Table of Contents

 

EMS FIND, INC.

and Subsidiary

Consolidated Statements of Operations

 

 

 

 

 

 

For the

 

 

 

 

 

 

Transitional

 

 

 

 

 

 

Period

 

 

 

For the

 

 

January 1, 2015

 

 

 

Year Ended

 

 

through

 

 

 

June 30,

2016

 

 

June 30,

2015

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross sales

 

$ -

 

 

$ -

 

Cost of goods sold

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

General and administrative expenses

 

 

 

 

 

 

 

 

Consulting fees

 

 

64,988

 

 

 

63,600

 

Professional fees

 

 

62,075

 

 

 

28,771

 

Executive compensation

 

 

34,756

 

 

 

152,071

 

Stock-based compensation

 

 

3,049,503

 

 

 

-

 

Research and development

 

 

120,197

 

 

 

10,287

 

Payroll Expense

 

 

56,381

 

 

 

13,293

 

General & administrative

 

 

72,827

 

 

 

24,680

 

Rent

 

 

9,500

 

 

 

4,650

 

Depreciation and amortization

 

 

47

 

 

 

47

 

 

 

 

 

 

 

 

 

 

Total general and administrative expenses

 

 

3,470,273

 

 

 

297,399

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(3,470,273 )

 

 

(297,399 )

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

Amortization of beneficial conversion feature

 

 

(441,240 )

 

 

-

 

Amortization of original issue discount

 

 

(23,668 )

 

 

-

 

Change in FV of embedded conversion options

 

 

(1,056,145 )

 

 

-

 

Loss on sale of fixed assets

 

 

(22,855 )

 

 

-

 

Debt forgiveness

 

 

-

 

 

 

-

 

Other income

 

 

-

 

 

 

302

 

Interest expense

 

 

(12,658 )

 

 

(822 )

 

 

 

 

 

 

 

 

 

Total other income (expense)

 

 

(1,556,566 )

 

 

(520 )

 

 

 

 

 

 

 

 

 

Discontinued operations

 

 

 

 

 

 

 

 

Loss from discontinued operations

 

 

(3,743 )

 

 

(6,068 )

Loss on classification as held for sale

 

 

-

 

 

 

(21,297 )

 

 

 

 

 

 

 

 

 

Total discontinued operations

 

 

(3,743 )

 

 

(27,365 )

 

 

 

 

 

 

 

 

 

Net loss

 

$ (5,030,583 )

 

$ (325,284 )

 

 

 

 

 

 

 

 

 

Basic and diluted loss per share  - income from continuing operations

 

$ (0.17 )

 

$ (0.01 )

Basic and diluted loss per share - discontinued operations

 

$ (0.00 )

 

$ (0.00 )

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding

 

 

29,215,122

 

 

 

28,334,535

 

 

See accompanying notes to consolidated financial statements.


 
F-4
Table of Contents

 

EMS FIND, INC.

and Subsidiary

Consolidated Statement of Changes in Stockholders' Deficit

For The Years  Ended June 30, 2016 and 2015

 

 

 

Series A

 

Series B

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

Preferred Stock

 

Preferred Stock

 

Common Stock

 

Common Stock

 

Paid-in

 

Accumulated

 

 

 

 

 

Shares

 

Amount

 

Shares

 

Amount

 

Issuable

 

Issuable

 

Shares

 

Amount

 

Capital

 

Deficit

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2014

 

 

1,000,000

 

$ 1,000

 

 

-

 

$ -

 

 

-

 

$ -

 

 

28,334,535

 

$ 28,335

 

$ (201,967 ) $ 215,253

 

$ 42,621

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share issuance for consulting fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30,000

 

 

30

 

 

63,570

 

 

 

 

 

63,600

 

Accrued  stock compensation for officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

120,000

 

 

120

 

 

 

 

 

 

 

 

131,580

 

 

 

 

 

131,700

 

Net loss for the period ended June 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(344,427 )

 

(344,427 )

Balance, June 30, 2015

 

 

1,000,000

 

$ 1,000

 

 

-

 

$ -

 

 

120,000

 

$ 120

 

 

28,364,535

 

$ 28,365

 

$ (6,817 ) $ (129,174 ) $ (106,506 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sale of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

48,245

 

 

48

 

 

54,952

 

 

 

 

 

55,000

 

Issuance of common stock for notes payable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

238,935

 

 

239

 

 

260,242

 

 

 

 

 

260,481

 

Share issuance to officer for compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

60,000

 

 

60

 

 

300,000

 

 

300

 

 

488,757

 

 

 

 

 

489,117

 

Issuance of issuable common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(120,000 )

 

(120 )

 

120,000

 

 

120

 

 

 

 

 

 

 

 

-

 

Derivative liability, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

38,673

 

 

 

 

 

38,673

 

Consolidation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(209,672 )

 

 

 

 

(209,672 )

Cancelled preferred stock

 

 

(500,000 )

 

(500 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

500

 

 

 

 

 

-

 

Conversion of debt into common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,712,133

 

 

2,712

 

 

376,986

 

 

 

 

 

379,698

 

Issuance of common stock for services to related party

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

242,424

 

 

242

 

 

50,667

 

 

 

 

 

50,909

 

Issuance of common stock for services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

625,000

 

 

625

 

 

281,875

 

 

 

 

 

282,500

 

Issuance of warrants for common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,308,320

 

 

 

 

 

2,308,320

 

Net loss for the period ended June 30, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,030,583 )

 

(5,030,583 )

Balance, June 30, 2016

 

 

500,000

 

$ 500

 

 

-

 

$ -

 

 

60,000

 

$ 60

 

 

32,651,272

 

$ 32,651

 

$ 3,644,483

 

$ (5,159,757 ) $ (1,482,063 )

  

See accompanying notes to consolidated financial statements.

F-5
Table of Contents

EMS FIND, INC.

and Subsidiary

Consolidated Statements of Cash Flows

 

 

 

 

 

 

For the

 

 

 

 

 

 

Transitional

 

 

 

 

 

 

Period

 

 

 

For the

 

 

January 1, 2015

 

 

 

Year Ended

 

 

through

 

 

 

June 30,

2016

 

 

June 30,

2015

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$ (5,030,583 )

 

$ (325,284 )

Adjustments to reconcile net loss to net cash used in operations:

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

47

 

 

 

47

 

Stock-based compensation

 

 

3,049,503

 

 

 

63,600

 

Amortization of beneficial conversion feature

 

 

441,240

 

 

 

-

 

Amortization of original issue discount

 

 

23,668

 

 

 

-

 

Change in FV of embedded conversion options

 

 

1,056,145

 

 

 

-

 

Loss on sale of fixed assets

 

 

22,855

 

 

 

-

 

Financing fees related to notes payable

 

 

12,000

 

 

 

-

 

Fixed asset write down

 

 

-

 

 

 

8,200

 

Discontinued operations

 

 

3,743

 

 

 

6,511

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

-

 

 

 

7,100

 

Deposits

 

 

(700 )

 

 

-

 

Accounts payable

 

 

(6,630 )

 

 

9,453

 

Due to related party

 

 

(97,539 )

 

 

-

 

Accrued expenses

 

 

36,543

 

 

 

822

 

Checks written in excess of cash balance

 

 

11,695

 

 

 

 

 

Shares payable

 

 

-

 

 

 

131,700

 

 

 

 

 

 

 

 

 

 

Net cash used in operating activities

 

 

(478,013 )

 

 

(97,851 )

 

 

 

 

 

 

 

 

 

Cash flows provided by (used in)investing activities

 

 

 

 

 

 

 

 

Disposal of assets

 

 

-

 

 

 

13,097

 

    Fixed assets

 

 

-

 

 

 

(21,800 )

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) investing activities

 

 

-

 

 

 

(8,703 )

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from sale of common stock

 

 

55,000

 

 

 

-

 

Proceeds from related party

 

 

178,644

 

 

 

-

 

Proceeds received from notes payable

 

 

200,500

 

 

 

152,229

 

 

 

 

 

 

 

 

 

 

Net cash provided by financing activities

 

 

434,144

 

 

 

152,229

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash

 

 

(43,869 )

 

 

45,675

 

 

 

 

 

 

 

 

 

 

Cash at beginning of period

 

 

45,843

 

 

 

168

 

 

 

 

 

 

 

 

 

 

Cash at end of period

 

$ 1,974

 

 

$ 45,843

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for interest

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

Cash paid for taxes

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

Non-cash investing and financing activities

 

 

 

 

 

 

 

 

Shares issued for notes

 

$ 260,480

 

 

$ -

 

Issuance of common stock for related party payable

 

$ 210,000

 

 

$ -

 

Shares issued for consulting fees

 

$ -

 

 

$ 63,600

 

Cancellation of preferred stock

 

$ (500 )

 

$ -

 

 

See accompanying notes to consolidated financial statements.

 

 
F-6
Table of Contents

 

EMS Find, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2016

 

 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Organization

 

EMS Find, Inc. (the "Company," "we," "our," or "EMS Find") was incorporated in the State of Nevada on March 22, 2011, under the name of Lightcollar, Inc. On March 20, 2015, the Company amended its articles of incorporation and changed its name from Lightcollar, Inc. to EMS Find, Inc.

 

On December 23, 2014, the Company authorized a forward split (the "Forward Split") of its issued and authorized common shares, whereby every one (1) old share of common stock was exchanged for five (5) new shares of the Company's common stock. As a result, the issued and outstanding shares of common stock was increased from five million six hundred fifty thousand (5,650,000) common shares prior to the Forward Split to twenty-eight million two hundred fifty thousand (28,250,000) common shares following the Forward Split. Fractional shares were rounded upward.

 

On March 10, 2015, the Company, with the approval of a majority vote of its shareholders filed a Certificate of Designation establishing the designations, preferences, limitations and relative rights of the Company's Series A preferred stock (the "Series A Designation" and the "Series A Preferred Stock"). The terms of the Certificate of Designation of the Series A Preferred Stock, which was filed with the State of Nevada on March 12, 2015, include the right to vote in aggregate, on all shareholder matters equal to 1,000 votes per share of Series A Preferred Stock, Series A Preferred Stock shares are not convertible into shares of our common stock.

 

Effective March 20, 2015, the Company, with the approval of its board of directors and its majority shareholders by written consent in lieu of a meeting, filed a Certificate of Amendment (the "Certificate of Amendment") with the Secretary of State of Nevada. As a result of the Certificate of Amendment, the Company, among other things, (i) changed its name to "EMS Find, Inc.," and (ii) changed its symbol to "EMSF."

 

On March 23, 2015, the Company issued 50,000 shares of Series A Preferred Stock in consideration for services on the Company's Board of Directors.

 

On March 31, 2015, the Company issued 450,000 shares of Series A Preferred Stock in consideration for services on the Company's Board of Directors.

 

On March 31, 2015, the Company signed the share exchange agreement with EMS Factory, Inc. ("EMS Factory"), a company incorporated under the laws of the State of Pennsylvania, and the shareholder of EMS Factory (the "Selling Shareholder") pursuant to a share exchange agreement by and among the Company, EMS Factory and the Selling Shareholder. The Company acquired 100% of the issued and outstanding securities of EMS Factory in exchange for the issuance of 10,000,000 shares of the Company's restricted Common Stock, par value $0.001 per share and 500,000 shares of the Company's Series A Preferred Stock, par value $0.001. The Company also has an agreement with an investor to fund $300,000 over the next one hundred and twenty days, to support the continued development and commercialization of EMS Factory's technology, in the following manner:

 

As a result of the Agreement the Selling Shareholder acquired up to 49% of the voting rights of Company's currently issued and outstanding shares of common stock. Upon completion of the agreement, EMS Factory became a wholly-owned subsidiary and the Company acquired the business and operations of EMS factory. Further, on the Closing date of the Agreement, Steve Rubakh, was appointed the President, Chief Executive Officer, Chief Financial Officer, Treasurer, Secretary and a Director of the Company, and Mr. Matveev Anton resigned all of his positions with the Company.

 

 
F-7
Table of Contents

 

EMS Find, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2016

 

For accounting purposes, the acquisition of EMS Factory by the EMS Find has been recorded as a reverse merger of a public company, with the exception that no goodwill is generated, and followed up with a recapitalization of EMS based on the factors demonstrating that EMS represents the accounting acquirer. Consequently, the historical financial information in the accompanying consolidated financial statements is that of EMS.

 

On October 21, 2015, the Company formed Viva Entertainment Group, Inc. ("Viva Entertainment," a Delaware corporation, as a wholly-owned subsidiary. The Company was formed to manage the development and marketing of it's over the top ("IPTV/OTT") application for connected TVs, desktop computers, tablets and smart phones. The IPTV/OTT streamlining platform is designed to be used in homes, offices or during travel, where users may pay and watch what entertainment they choose based on a subscription or on a pay per view basis. On April 6, 2016, the Company sold Viva Entertainment to Black River Petroleum Corp. ("Black River," see Notes 5 and 7).

 

On December 21, 2015, the Company, with the approval of a majority vote of its shareholders filed a Certificate of Designation establishing the designations, preferences, limitations and relative rights of the Company's Series B Preferred Stock (the "Series B Designation" and the "Series B Preferred Stock"). The terms of the Certificate of Designation of the Series B Preferred Stock, which was filed with the State of Nevada on December 21, 2015, include the right to vote in aggregate, on all shareholder matters equal to one vote per share of Series B Preferred Stock, Series B Preferred Stock shares is convertible into shares of our common stock at a rate of one share of Series B Preferred Stock for one hundred (100) shares of common stock.

 

Nature of Business

 

The Company transitioned its operations from acting as a licensed ambulance provider to providing medical transportation information and acting as an intermediary coordinating dispatch services for providers, patients and medical transport companies. The Company is designing, developing, marketing, and operating software assets mainly in on-demand mobile healthcare sector.

 

Basis of Presentation

 

The Company prepares its financial statements in conformity with generally accepted accounting principles in the United States of America.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of EMS Find and its wholly-owned subsidiaries, EMS Factory and Viva Entertainment. All significant inter-company balances and transactions have been eliminated in consolidation.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Because of the use of estimates inherent in the financial reporting process, actual results could differ significantly from those estimates.

 

 
F-8
Table of Contents

 

EMS Find, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2016

  

Cash and Cash Equivalents

 

The Company maintains cash balances in non-interest-bearing accounts that currently do not exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. The Company had cash balances of $1,974 and $45,843 as of June 30, 2016 and 2015, respectively.

 

Property and Equipment

 

Property and equipment consists of Ambulances and medical equipment and are stated at cost. Ambulance and Medical equipment are depreciated using the straight-line method over the estimated service life of five years. Maintenance and repairs are expensed as incurred and improvements are capitalized. Gains or losses on the disposition of property and equipment are recorded upon disposal.

 

Accounting for Derivatives

 

The Company evaluates its convertible debt, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for. The result of this accounting treatment is that under certain circumstances the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under this accounting standard are reclassified to liability at the fair value of the instrument on the reclassification date.

 

Impairment of Long-Lived Assets

 

The Company accounts for long-lived assets in accordance with the provisions of Statement of Financial Accounting Standards ASC 360-10, “Accounting for the Impairment or Disposal of Long-Lived Assets”. This statement requires that long-lived assets and certain identifiable intangibles be reviewed 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 undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

 

Revenue Recognition

 

Our revenue is derived from the service revenue from ambulance transportation services.

 

The Company's revenue recognition policy is in accordance with the requirements of Staff Accounting Bulletin ("SAB") No. 104, Revenue Recognition ("SAB 104"), and other applicable revenue recognition guidance under US GAAP. Sales revenue is recognized for our retail and wholesale customers when: (i) persuasive evidence of a sales arrangement exists, (ii) the sales terms are fixed or determinable, (iii) title and risk of loss have transferred, and (iv) collectability is reasonably assured — generally when products are shipped to the customer and services are rendered, except in situations in which title passes upon receipt of the products by the customer. In this case, revenues are recognized upon services rendered.

 

 
F-9
Table of Contents

 

EMS Find, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2016

 

Stock-Based Compensation

 

The Company accounts for stock-based instruments issued to employees in accordance with ASC Topic 718. ASC Topic 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation issued to employees. The value of the portion of an award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method. The Company accounts for non-employee share-based awards in accordance with the measurement and recognition provisions ASC Topic 505-50. The Company estimates the fair value of stock options at the grant date by using the Black-Scholes option-pricing model.

 

Income Taxes

 

Beginning September 1, 2009, the Company adopted the provisions of ASC 740-10, “Accounting for Uncertain Income Tax Positions.” When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for unrecognized tax benefits. As of June 30, 2016, tax year 2015 remain open for IRS audit. The Company has received no notice of audit from the IRS for any of the open tax years.

 

Effective September 1, 2009, the Company adopted ASC 740-10, “Definition of Settlement in FASB Interpretation No. 48,” (“ASC 740-10”), which was issued on May 2, 2007. ASC 740-10 amends FIN 48 to provide guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. The term “effectively settled” replaces the term “ultimately settled” when used to describe recognition, and the terms “settlement” or “settled” replace the terms “ultimate settlement” or “ultimately settled” when used to describe measurement of a tax position under ASC 740-10. ASC 740-10 clarifies that a tax position can be effectively settled upon the completion of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. The adoption of ASC 740-10 did not have an impact on the accompanying financial statements.

 

Net Earnings (Loss) Per Share

 

In accordance with ASC 260-10, "Earnings Per Share," basic net earnings (loss) per common share is computed by dividing the net earnings (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share are computed using the weighted average number of common and dilutive common stock equivalent shares outstanding during the period. Dilutive common stock equivalent shares which may dilute future earnings per share consist of convertible notes convertible into 928,402 common shares. Equivalent shares are not utilized when the effect is anti-dilutive (see Note 6).

 

Effect of Recent Accounting Pronouncements

 

The Company reviews new accounting standards and updates as issued. No new standards or updates had any material effect on these unaudited financial statements. The accounting pronouncements and updates issued subsequent to the date of these audited financial statements that were considered significant by management were evaluated for the potential effect on these audited financial statements. Management does not believe any of the subsequent pronouncements will have a material effect on these audited financial statements as presented and does not anticipate the need for any future restatement of these audited financial statements because of the retro-active application of any accounting pronouncements issued subsequent to June 30, 2016 through the date these audited financial statements were issued.

 

 
F-10
Table of Contents

 

EMS Find, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2016

 

NOTE 2 – GOING CONCERN

 

The Company has not generated any revenues, has recurring net losses, a working capital deficiency as of June 30, 2016 of $1,487,634, and used cash in operations of $478,013 and $97,851 for the years ended June 30, 2016 and 2015, respectively. In addition, as of June 30, 2016, the Company had an accumulated deficit of $5,159,757. These conditions raise substantial doubt about the Company's ability to continue as a going concern.

 

The accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The ability of the Company to continue its operations is dependent on the execution of management's plans, which include the raising of capital through the debt and/or equity markets, until such time that funds provided by operations are sufficient to fund working capital requirements. If the Company were not to continue as a going concern, it would likely not be able to realize its assets at values comparable to the carrying value or the fair value estimates reflected in the balances set out in the preparation of the consolidated financial statements.

 

There can be no assurances that the Company will be successful in generating additional cash from the equity/debt markets or other sources to be used for operations. The consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities that might be necessary. Based on the Company's current resources, the Company will not be able to continue to operate without additional immediate funding. Should the Company not be successful in obtaining the necessary financing to fund its operations, the Company would need to curtail certain or all operational activities and/or contemplate the sale of its assets, if necessary.

 

NOTE 3 – COMMITMENTS AND CONTINGENCIES

 

Legal Matters

 

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of September 14, 2016, there were no pending or threatened lawsuits.

 

Lease Commitment

 

Our business offices are located in Huntingdon Valley, Pennsylvania, pursuant to a lease that expires September 1, 2016. The Company will maintain the lease on a monthly basis.

 

Rent expense for the year ended June 30, 2016 was $9,500.

 

NOTE 4 – PROPERTY AND EQUIPMENT

 

At June 30, 2016 and 2015, equipment consisted of the following:

 

 

 

June 30,

 

 

June 30,

 

 

 

2016

 

 

2015

 

Furniture and Equipment

 

$ -

 

 

$ 1,400

 

Less: Accumulated depreciation

 

 

 

 

 

 

(47 )

Total equipment, net

 

$ -

 

 

$ 1,353

 

 

Depreciation and amortization expense for the years ended June 30, 2016 and 2015 was $47 and $47 respectively.

 

 
F-11
Table of Contents

 

EMS Find, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2016

  

Assets held for Sale

 

 

 

June 30,

 

 

June 30,

 

 

 

2016

 

 

2015

 

Assets held for sale

 

$ 13,246

 

 

$ 47,555

 

Less: Accumulated depreciation

 

 

(8,376 )

 

 

(20,475 )

Total equipment, net

 

$ 4,870

 

 

$ 27,080

 

 

Depreciation and amortization expense for the years ended June 30, 2016 and 2015 was $47 and $3,512 respectively. After the merger in March 2015, the Company discontinued all of its ambulance services. The Company wrote down $8,200 as of June 30, 2015 for its assets held for sale and took a loss of $13,097 on a sale of three of its vehicles it used for its medical transportation business. On March 28, 2016, the Company sold various assets valued at $35,521, net of accumulated depreciation, for $23,422. With the fees associated with the sale, the Company recorded a loss on the sale of $22,855.

 

NOTE 5 – RELATED PARTY TRANSACTIONS

 

In April 2015, the Company entered a month-to-month lease agreement for an office space for $1,250 per month owned by a relative of Steve Rubakh (“Rubakh”), an officer and director of the Company. The lease was terminated on August 30, 2015.

 

On August 5, 2015, Shang Fei resigned from the Company as a board member and surrendered his 500,000 shares of Series A Preferred Stock which the company had issued to him in March 2015. Mr. Shang Fei also has provided the Company with $260,000 of capital of which $210,000 and a prior loan for expenses of $19,095 was converted into 212,050 shares of common stock.

 

On September 25, 2015, the Company authorized the issuance of 125,000 shares of common stock as part of an agreement with Daniel Grillo (“Grillo”), a director of the Company, for services from September 25, 2015 through March 31, 2016. The shares are amortized over the period of the agreement. See Note 7.

 

On October 28, 2015, Viva Entertainment, a subsidiary of the Company, entered into an employment agreement with Johnny Falcones (“Falcones”), for the period October 28, 2015 through December 31, 2018. Falcones was issued on January 2, 2016, warrants to purchase 3,000,000 shares of common stock of the Company, with an exercise price of $0.74. Additionally, Falcones would receive three year warrants to purchase up to 5% of the common stock of Viva Entertainment, at an exercise price of $0.50, which are exercisable in the event that Viva Entertainment is spun out of the Company. Furthermore, Falcones was to receive 375,000 shares of common stock of the Company on a monthly basis, starting on February 1, 2016, for a period of four months, for an aggregate total of 1,500,000 shares of common stock of the Company. On April 6, 2016, as part of the sale of Viva Entertainment, these warrants held by Falcones were cancelled and his employment agreement terminated. See Notes 1 and 7.

 

On January 2, 2016, the Company issued 3,000,000 warrants for common stock of the Company to Rubakh as a compensation incentive. The warrants mature on January 2, 2021. The exercise price is $0.74 and the warrant has a cashless exercise option. The common stock of the Company current price on the date of issuance was $0.47. The warrants were valued at $0.383 using a Black-Scholes calculation. The Company recorded an expense of $1,149,000. See Note 7.

 

 
F-12
Table of Contents

 

EMS Find, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2016

  

On January 2, 2016, the Company issued 3,000,000 warrants for common stock of the Company to Falcones as a compensation incentive. The warrants mature on January 2, 2021. The exercise price was $0.74 and the warrant had a cashless exercise option. The common stock of the Company current price on the date of the issuance was $0.47. The warrants were value at $0.383 using a Black-Scholes calculation. The Company recorded an expense of $1,149,000. See Note 7. As part of the April 6, 2016 sale of Viva Entertainment (see Notes 1 and 7), these warrants were cancelled effective the date of issuance.

 

On March 15, 2016, the Company issued 242,424 shares of common stock to Sophia Rubakh, a relative of Rubakh, in consideration of various consulting administrative and marketing services provided to the Company. The shares were issued with a value of $0.21, or $50,909. See Note 7.

 

On June 1, 2016, the Company entered into a convertible promissory note with Rubakh, converting $81,364 of payables to Rubakh into the note. The note is non-interest bearing and matures on December 1, 2016. The note has a conversion rate of $0.03 per share. The closing price of the Company’s common stock on the previous day was $0.08. On June 27, 2017, Rubakh converted the principal of $81,364 into 2,712,133 shares of common stock. The conversion resulted in a loss of $298,335. Additionally, beneficial conversion feature expense of $61,134 had been recorded as of the date of conversion. See Notes 6 and 7.

 

On June 27, 2016, Rubakh converted his convertible promissory note in the amount of $81,364 into 2,712,133 shares of common stock. The conversion price was $0.03 whereas the current stock price was $0.14 therefore, a loss of $298,335 was recorded. See Notes 6 and 7.

 

For the year ended June 30, 2016, the Company authorized the issuance of 360,000 shares of common stock as part of Rubakh's compensation package. Stock-based compensation of $139,857 was recorded. See Note 7.

 

On July 1, 2016, the Board of Directors of the Company agreed with Rubakh to reduce his compensation to $75,000 per year and to terminate the monthly issuance of 30,000 shares of common stock and in exchange, Rubakh will receive 30,000 shares of Series B Preferred Stock on a quarterly basis. The initial issuance effective for the period April 1, 2016 through June 30, 2016 was issued on August 29, 2016, and the second issuance for the period July 1, 2016 through September 30, 2016 was issued on September 1, 2016.

 

NOTE 6 – NOTES PAYABLE AND CONVERTIBLE NOTES PAYABLE, NET OF DISCOUNTS

 

Notes payable and convertible notes payable, all classified as current at June 30, 2016 and 2015, consist of the following:

 

Notes and convertible notes, net of discounts

 

 

 

June 30, 2016

June 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Principal

 

 

 

 

 

 

 

 

 

Original

 

 

Principal,

 

 

 

 

 

 

 

 

and

 

 

 

 

 

 

Debt

 

 

Issue

 

 

net of

 

 

 

 

 

Accrued

 

 

Accrued

 

 

 

Principal

 

 

Discounts

 

 

Discount

 

 

Discounts

 

 

Principal

 

 

Interest

 

 

Interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Green Construction

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

$ 30,400

 

 

$ 822

 

 

$ 31,222

 

LG Capital Funding, LLC

 

 

125,000

 

 

 

(13,905 )

 

 

(5,840 )

 

 

105,255

 

 

 

-

 

 

 

-

 

 

 

-

 

LG Capital Funding, LLC

 

 

125,000

 

 

 

(34,132 )

 

 

(7,992 )

 

 

82,876

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$ 250,000

 

 

$ (48,037 )

 

$ (13,832 )

 

$ 188,131

 

 

$ 30,400

 

 

$ 822

 

 

$ 31,222

 

 

On March 23, 2015, the Company issued a note to Green Construction for $30,400 with 10% interest per annum, as of June 30, 2015 the note had accrued interest of $822. The note was due on October 15, 2015. On July 30, 2015, the Company issued 26,885 shares of common stock to satisfy this debt.

 

 
F-13
Table of Contents

 

EMS Find, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2016

 

On October 22, 2015, the Company entered into a Securities Purchase Agreement ("Purchase Agreement"), dated as of October 22, 2015, with LG Capital Funding, LLC ("LG"), pursuant to which the Company sold LG a convertible note in the principal amount of $125,000 (the first of four such Convertible Notes each in the principal amount of $125,000 provided for under the Purchase Agreement), bearing interest at the rate of 8% per annum (the "Convertible Note"). Each of the Convertible Notes issuable under the Purchase Agreement provides for a 15% original issue discount ("OID"), such that the purchase price for each Convertible Note is $106,250, and at each closing LG is entitled to be paid $6,000 for legal and other expenses. The Convertible Note provides LG the right to convert the outstanding balance, including accrued and unpaid interest, of such Convertible Note into shares of the Company's common stock at a price ("Conversion Price") for each share of common stock equal to 80% of the lowest trading price of the common stock as reported on the National Quotations Bureau for the OTCQB exchange on which the Company's shares are traded or any exchange upon which the common stock may be traded in the future, for the twenty prior trading days including the day upon which a Notice of Conversion is received by the Company or its transfer agent. The Convertible Note is payable, along with interest thereon, on October 22, 2016. As of June 30, 2016, $6,904 of interest has been accrued. The convertible note has an OID of 15%, which was recorded at $18,750 of which $12,910 was amortized as of June 30, 2016. The Company recorded a debt discount of $44,643 which, as of June 30, 2016, $30,738 has been amortized. The Company has recorded a derivative liability of $573,157 as of June 30, 2016. On April 20, 2016, the Company issued 60,000 warrants for common stock of the Company to LG. The issuance was related to the Purchase Agreement dated October 22, 2015 (see Note 7). The warrants expire on April 20, 2019. The exercise price is $0.25 and the warrant has a cashless exercise option. On August 3, 2016, LG converted $5,000 of principal of the October 22, 2015 convertible promissory note into 250,000 shares of common stock. The conversion price, based on a 50% discount, was $0.02. On August 8, 2016, LG converted $10,000 of principal of the October 22, 2015 convertible promissory note (see Note 6) into 500,000 shares of common stock. The conversion price, based on a 50% discount, was $0.02. On September 12, 2016, LG converted $8,500 of principal of the October 22, 2015 convertible promissory note (see Note 6) into 680,000 shares of common stock. The conversion price, based on a 50% discount, was $0.0125. A loss on the conversions will be recorded accordingly. See Note 12.

 

On December 3, 2015, the Company issued the second convertible note to LG, as discussed, for $125,000. As of June 30, 2016, $5,753 of interest has been accrued. The Company has recorded an OID of 15%, which was recorded at $18,750 of which $10,758 was amortized as of June 30, 2016. The Company recorded a debt discount of $85,165 which, as of June 30, 2016, $48,865 has been amortized. The Company has recorded a derivative liability of $635,258 as of June 30, 2016.

 

On June 1, 2016, the Company entered into a convertible promissory note with Rubakh, converting $81,364 of payables to Rubakh into the note. The note is non-interest bearing and matures on December 1, 2016. The note has a conversion rate of $0.03 per share. The closing price of the Company’s common stock on the previous day was $0.08. On June 27, 2017, Rubakh converted the principal of $81,364 into 2,712,133 shares of common stock. The conversion resulted in a loss of $298,335. Additionally, beneficial conversion feature expense of $61,134 had been recorded as of the date of conversion. See Notes 5 and 7.

 

NOTE 7 – STOCKHOLDERS' DEFICIT

 

Preferred Stock

 

Series A Preferred Stock

 

On March 10, 2015, the Company, with the approval of a majority vote of its Board of Directors approved the filing of a Certificate of Designation establishing the designations, preferences, limitations and relative rights of the Company's Series A preferred stock (the "Series A Designation" and the "Series A Preferred Stock"). The terms of the Certificate of Designation of the Series A Preferred Stock, which was filed with the State of Nevada on March 12, 2015, include the right to vote in aggregate, on all shareholder matters equal to 1,000 votes per share of Series A Preferred Stock and each Series A Preferred Stock share are not convertible into shares of our common stock.

 

 
F-14
Table of Contents

 

EMS Find, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2016

 

The Company has 1,000,000 shares of Series A Preferred Stock authorized.

 

On March 23, 2015, the Company issued 50,000 shares of Series A Preferred Stock in consideration for services on the Company's Board of Directors.

 

On March 31, 2015, the Company issued 450,000 shares of Series A Preferred Stock in consideration for services on the Company's Board of Directors.

 

On March 31, 2015, the Company issued 500,000 shares of Series A Preferred Stock as part of the share exchange agreement with EMS Factory, Inc.

 

On August 5, 2015, Shang Fei resigned from the Company as a board member and surrendered his 500,000 shares of Series A Preferred Stock which the company had issued to him in March 2015. Mr. Shang Fei also has provided the Company with $260,000 of capital of which $210,000 and a prior loan for expenses of $19,095 was converted into 212,050 shares of common stock.

 

Series B Preferred Stock

 

On December 21, 2015, the Company filed a Certificate of Designation for its new Series B Convertible Preferred Stock with the State of Nevada following approval by the board of directors of the Company. Five Hundred (500,000) Thousand shares of the Company's authorized preferred stock are designated as the Series B Convertible Preferred Stock (the "Series B Preferred Stock"), par value of $0.001 per share and with a stated value of $0.001 per share (the "Stated Value"). Holders of Series B Preferred Stock shall be entitled to receive dividends, when and as declared by the Board of Directors out of funds legally available therefor. At any time and from time to time after the issuance of shares of the Series B Preferred Stock, each issued share of Series B Preferred Stock is convertible into One (100) Hundred shares of Common Stock ("Conversion Ratio"). The holders of the Series B Preferred Stock shall have the right to vote together with holders of Common Stock, on an as "converted basis", on any matter that the Company's shareholders may be entitled to vote on, either by written consent or by proxy. Upon any liquidation, dissolution or winding-up of the Company, the holders of the Series B Preferred Stock shall be entitled to receive out of the assets of the Company, whether such assets are capital or surplus, for each share of Series B Preferred Stock an amount equal to the Stated Value, and all other amounts in respect thereof then due and payable prior to any distribution or payment shall be made to the holders of any junior securities. If, at any time while any shares of Series B Preferred Stock remain outstanding ("Outstanding Shares"), the Company effectuates a stock split or reverse stock split of its Common Stock or issues a dividend on its Common Stock consisting of shares of Common Stock, the Conversion Ratio will be equitably adjusted to reflect such action with respect to Outstanding Shares at the record date of such split.

 

On July 1, 2016, the Board of Directors of the Company agreed with Rubakh to reduce his compensation to $75,000 per year and to terminate the monthly issuance of 30,000 shares of common stock and in exchange, Rubakh will receive 30,000 shares of Series B Preferred Stock on a quarterly basis with the initial issuance effective for the period April 1, 2016 through June 30, 2016 were issued on August 29, 2016, and the second issuance for the period July 1, 2016 through September 30, 2016 were issued on September 1, 2016. See Note 12.

 

Common Stock

 

On July 22, 2015, the Company sold 48,245 shares of common stock for $55,000.

 

On July 30, 2015, the Company issued 26,885 shares of common stock for debt converted of $31,465. The balance of $115 was forgiven.

  

On August 5, 2015, Shang Fei resigned from the Company as a board member and surrendered his 500,000 shares of Series A Preferred Stock which the company had issued to him in March 2015. Mr. Shang Fei also has provided the Company with $260,000 of capital of which $210,000 and a prior loan for expenses of $19,095 was converted into common stock. On August 6, 2015, the Company issued 17,606 shares of common stock for debt converted of $19,015 and 194,444 shares of common stock for debt converted of $210,000, for a total of 212,050 shares of common stock. See Note 5.

 

 
F-15
Table of Contents

 

EMS Find, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2016

 

On September 25, 2015, the Company authorized the issuance of 125,000 shares of common stock as part of an agreement with Grillo, a director of the Company, for services from September 25, 2015 through March 31, 2016. The shares are amortized over the period of the agreement. See Note 5.

 

On March 15, 2016, the Company issued 242,424 shares of common stock to Sophia Rubakh, a relative of Rubakh, in consideration of various consulting administrative and marketing services provided to the Company. The shares were issued with a value of $0.21, or $50,909. See Note 5.

 

On April 25, 2016, the Company issued 500,000 shares of common stock to Falcones as compensation for his services. The shares were issued with a value of $0.21 or $105,000.

 

On June 27, 2016, Rubakh converted his convertible promissory note in the amount of $81,364 into 2,712,133 shares of common stock. The conversion price was $0.03 whereas the current stock price was $0.14 therefore, a loss of $298,335 was recorded. See Notes 5 and 6.

 

For the year ended June 30, 2016, the Company authorized the issuance of 360,000 shares of common stock as part of Rubakh's compensation package. Stock-based compensation of $139,857 was recorded. See Note 5.

 

Stock Warrants

 

The Company has granted warrants to officers and directors. Warrant activity for officers and directors for the year ended June 30, 2016 is as follows:

 

 

 

 

 

 

 

 

 

 Weighted

 

 

 

 

 

 

 

 

 

 Weighted

 

 

 Average

 

 

 

 

 

 

 

 

 

 Average

 

 

 Remaining

 

 

 Aggregate

 

 

 

 Number of

 

 

 Exercise

 

 

 Contractual

 

 

 Intrinsic

 

 

 

 Warrants

 

 

 Price

 

 

 Terms

 

 

 Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at June 30, 2015

 

 

 

 

$ -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Granted

 

 

6,000,000

 

 

$ 0.74

 

 

 

 

 

 

 

Forfeited

 

 

(3,000,000 )

 

$ 0.74

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

$ -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at June 30, 2016

 

 

3,000,000

 

 

$ 0.74

 

 

 

4.51

 

 

$ -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable at June 30, 2016

 

 

3,000,000

 

 

$ 0.74

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Grant Date Fair Value

 

 

 

 

 

$ 0.74

 

 

 

 

 

 

 

 

 

 

 
F-16
Table of Contents

 

EMS Find, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2016

 

On January 2, 2016, the Company issued 3,000,000 warrants for common stock of the Company to Rubakh as a compensation incentive. The warrants mature on January 2, 2021. The exercise price is $0.74 and the warrant has a cashless exercise option. The common stock of the Company current price on the date of issuance was $0.47. The warrants were valued at $0.383 using a Black-Scholes calculation. The Company recorded an expense of $1,149,000. See Note 5.

 

 On January 2, 2016, the Company issued 3,000,000 warrants for common stock of the Company to Falcones as a compensation incentive. The warrants mature on January 2, 2021. The exercise price is $0.74 and the warrant has a cashless exercise option. The Company recorded an expense of $1,149,000 (see Note 5). As part of the April 6, 2016 sale of Viva Entertainment (see Notes 1, 3 and 8), these warrants were cancelled effective the date of issuance, therefore there were no expenses recorded related to the issuance.

 

The Company has granted warrants to non-employees. Warrant activity for non-employees for the year ended June 30, 2016 is as follows:

 

 

 

 

 

 

 

 

 

 

 Weighted

 

 

 

 

 

 

 

 

 

 Weighted

 

 

 Average

 

 

 

 

 

 

 

 

 

 Average

 

 

 Remaining

 

 

 Aggregate

 

 

 

 Number of

 

 

 Exercise

 

 

 Contractual

 

 

 Intrinsic

 

 

 

 Warrants

 

 

 Price

 

 

 Terms

 

 

 Valu e

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at June 30, 2015

 

 

 

 

$ -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Granted

 

 

60,000

 

 

$ 0.25

 

 

 

 

 

 

 

Forfeited

 

 

 

 

 

$ -

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

$ -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at June 30, 2016

 

 

60,000

 

 

$ 0.25

 

 

 

2.81

 

 

$ -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable at June 30, 2016

 

 

 

 

 

$ 0.25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Grant Date Fair Value

 

 

 

 

 

$ 0.25

 

 

 

 

 

 

 

 

 

 

 

On April 20, 2016, the Company issued 60,000 warrants for common stock of the Company to LG. The issuance was related to the Purchase Agreement dated October 22, 2015 (see Note 6). The warrants expire on April 20, 2019. The exercise price is $0.25 and the warrants have a cashless exercise option. The Company recorded an expense of $10,320.

 

 
F-17
Table of Contents

 

EMS Find, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2016

 

NOTE 8 – DISCONTINUED OPERATIONS

 

As of the second quarter of 2015, the subsidiary, EMS Factory, Inc. discontinued operations which is reflected in the consolidated statements of income and consolidated statements of cash flows. Assets classified as held for sale are reported in the consolidated balance sheet. The Company will sell the remainder if the fixed assets and currently has no cost associated to the assets. The Company reported a loss of $3,743 and income of $79,935 during the period ending June 30, 2016 and 2015, respectively.

 

Reconciliation of the Items Constituting Profit and (Loss)

from Discontinued Operations

 

 

 

June 30,

 

 

June 30,

 

 

 

2016

 

 

2015

 

Revenues

 

$ -

 

 

$ 128,263

 

Cost of sales

 

 

-

 

 

 

83,003

 

General and administrative

 

 

3,743

 

 

 

93,318

 

Depreciation and amortization

 

 

-

 

 

 

10,580

 

Debt forgiveness

 

 

-

 

 

 

13,097

 

Loss on disposal of assets

 

 

-

 

 

 

8,200

 

 

 

$ (3,743 )

 

$ (79,935 )

 

Note: The June 30, 2015 column is unaudited.

 

 
F-18
Table of Contents

 

EMS Find, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2016

 

NOTE 9 – CHANGE IN ACCOUNTING YEAR

 

The Company changed its fiscal year from December 31 to June 30 and filed a Form 10-KT for the transitional period January 1, 2015 through June 30, 2016. The Company has prepared unaudited financial statements for the twelve months ended June 30, 2015 as shown below:

 

Revenues

 

 

 

 

 

 

 

Gross sales

 

$ -

 

Cost of goods sold

 

 

-

 

 

 

 

 

 

Gross profit

 

 

-

 

 

 

 

 

 

General and administrative expenses

 

 

 

 

Consulting fees

 

 

-

 

Professional fees

 

 

113,741

 

Executive compensation

 

 

131,700

 

Stock-based compensation

 

 

 

 

Research and development

 

 

 

 

Payroll Expense

 

 

 

 

General & administrative

 

 

15,602

 

Rent

 

 

3,750

 

 

 

 

 

 

Total general and administrative expenses

 

 

264,793

 

 

 

 

 

 

Loss from operations

 

 

(264,793 )

 

 

 

 

 

Other income (expense)

 

 

 

 

Debt forgiveness

 

 

301

 

 

 

 

 

 

Total other income (expense)

 

 

301

 

 

 

 

 

 

Discontinued operations

 

 

 

 

Income from discontinued operations

 

 

(79,935 )

 

 

 

 

 

Total discontinued operations

 

 

(79,935 )

 

 

 

 

 

Net loss

 

$ (344,427 )

 

 

 

 

 

Basic and diluted income (loss) per share  - income from continuing operations

 

$ (0.01 )

Basic and diluted earnings (loss) per share - discontinued operations

 

$ (0.00 )

 

 

 

 

 

Weighted average number of common shares outstanding

 

 

28,334,535

 

 

 
F-19
Table of Contents

 

EMS Find, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2016

 

NOTE 10 – INCOME TAX

 

For the fiscal year 2015 and 2014, there was no provision for income taxes and deferred tax assets have been entirely offset by valuation allowances.

 

As of June 30, 2016 and 2015, the Company has net operating loss carry forwards of $185,141 and $139,610, respectively. The carry forwards expire through the year 2034. The Company’s net operating loss carry forwards may be subject to annual limitations, which could reduce or defer the utilization of the losses as a result of an ownership change as defined in Section 382 of the Internal Revenue Code.

 

The Company’s tax expense differs from the “expected” tax expense for Federal income tax purposes (computed by applying the United States Federal tax rate of 34% to loss before taxes), as follows:

 

 

 

For the Years Ended

 

 

 

June 30,

 

 

 

2016

 

 

2015

 

 

 

 

 

 

 

 

Tax expense (benefit) at the statutory rate

 

$ (1,710,398 )

 

$ (117,105 )

State income taxes, net of federal income tax benefit

 

 

(29,844 )

 

 

(22,505 )

Non-deductible items

 

 

1,555,101

 

 

 

-

 

Change in valuation allowance

 

 

185,141

 

 

 

139,610

 

 

 

 

 

 

 

 

 

 

Total

 

$ -

 

 

$ -

 

 

 

 

The tax effects of the temporary differences between reportable financial statement income and taxable income are recognized as deferred tax assets and liabilities.

 

The tax years 2011 through 2016 remain open to examination by federal agencies and other jurisdictions in which it operates.

  

The tax effect of significant components of the Company’s deferred tax assets and liabilities at June 30, 2016 and 2015, respectively, are as follows:

 

 

 

June 30,

 

 

 

2016

 

 

2015

 

 

 

 

 

 

 

 

Deferred tax assets:

 

 

 

 

 

 

Net operating loss carryforward

 

$ 185,141

 

 

$ 139,610

 

Stock options

 

 

-

 

 

 

-

 

Total gross deferred tax assets

 

 

185,141

 

 

 

139,610

 

Less: Deferred tax asset valuation allowance

 

 

(185,141 )

 

 

(139,610 )

Total net deferred tax assets

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Deferred tax liabilities:

 

 

 

 

 

 

 

 

Depreciation

 

 

-

 

 

 

-

 

Total deferred tax liabilities

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Total net deferred taxes

 

$ -

 

 

$ -

 

 

 
F-20
Table of Contents

 

EMS Find, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2016

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

 

Because of the historical earnings history of the Company, the net deferred tax assets for 2016 were fully offset by a 100% valuation allowance. The valuation allowance for the remaining net deferred tax assets was $185,141 and $139,610 as of June 30, 2016 and 2015, respectively.

 

NOTE 11 – CONCENTRATIONS

 

Concentration of Credit Risk

 

Financial instruments, which potentially subject the Company to a concentration of credit risk, consist principally of temporary cash investments.

 

The Company places its temporary cash investments with financial institutions insured by the FDIC. No amounts exceeded federally insured limits as of June 30, 2016. There have been no losses in these accounts through June 30, 2016.

 

Concentration of Supplier

 

The Company does not rely on any particular suppliers for its services.

 

Concentration of Intellectual Property

 

In July 2016, the Company has retained a law firm to file a Provisional Patent for our on-demand medical transportation platform. On June 15, 2015, the application for the Provisional Patent was submitted to United States Patent and Trademark Office (“USPTO”) by MSF. On June 17, 2016, the application for a Utility Patent was submitted to the USPTO. The application serial number that was assigned is No: 15/185,395.

 

NOTE 12 – SUBSEQUENT EVENTS

 

On July 1, 2016, the Board of Directors of the Company agreed with Rubakh to reduce his compensation to $75,000 per year and to terminate the monthly issuance of 30,000 shares of common stock and in exchange, Rubakh will receive 30,000 shares of Series B Preferred Stock on a quarterly basis with the initial issuance effective for the period April 1, 2016 through June 30, 2016 were issued on August 29, 2016, and the second issuance for the period July 1, 2016 through September 30, 2016 were issued on September 1, 2016.

 

 
F-21
Table of Contents

 

EMS Find, Inc. and Subsidiary

Notes to Consolidated Financial Statements

June 30, 2016

 

On July 21, 2016, the Company entered into a convertible promissory note with Old Main Capital, LLC (“Old Main”) for $33,333. The note matures on July 21, 2017 and bears interest at 10%. The convertible promissory note provides for an OID of $3,333, a deduction of $1,250 for Old Main’s legal fees, and $2,500 for Old Main’s legal fees related to the equity purchase agreement. Therefore, the net proceeds to the Company was $26,250. The conversion price is the lower of 65% of the lowest traded price for the twenty consecutive trading days immediately preceding the applicable conversion date or the closing bid price on the original issue date.

 

On July 25, 2016, the Company entered into an equity purchase agreement with River North Equity, LLC (“River North”) for up to $2,000,000. On July 25, 2016, the Company entered into a convertible promissory note with River North for $40,000. The convertible promissory note has a maturity date of March 29, 2017 and is non-interest bearing. The conversion price is the lower of 65% of the lowest traded price for the twenty consecutive trading days immediately preceding the applicable conversion date.

 

On August 3, 2016, LG converted $5,000 of principal of the October 22, 2015 convertible promissory note (see Note 6) into 250,000 shares of common stock. The conversion price, based on a 50% discount, was $0.02. A loss on conversion will be recorded accordingly.

 

On August 10, 2016, the Company entered into a securities purchase agreement with Global Opportunity Group, LLC (“Global”) for $16,500. The Company received net proceeds of $15,000. Additionally, the Company issued 165,000 warrants for common stock with an exercise price of $0.15 per share. The warrants have a cashless exercise option.

 

On August 8, 2016, LG converted $10,000 of principal of the October 22, 2015 convertible promissory note (see Note 6) into 500,000 shares of common stock. The conversion price, based on a 50% discount, was $0.02. A loss on conversion will be recorded accordingly.

 

On August 23, 2016, the Company entered into a securities purchase agreement with EMA Financial, LLC, for $33,000. The Company received net proceeds of $29,700.

 

On September 12, 2016, LG converted $8,500 of principal of the October 22, 2015 convertible promissory note (see Note 6) into 680,000 shares of common stock. The conversion price, based on a 50% discount, was $0.0125. A loss on conversion will be recorded accordingly.

 

 
F-22
Table of Contents

 

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

 

On May 29, 2015, the Company, after review and recommendation by its board of directors, dismissed DeCoria Maichel & Teague, P.S. (“DeCoria”) as the Registrant’s independent registered public accounting firm. The resignation was accepted by the Board of Directors of the Company (the “Board”). During the two most recent fiscal years and through the date of this report, there were no (1) disagreements with DeCoria on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements if not resolved to its satisfaction would have caused DeCoria to make reference in its reports on the Company’s financial statements for such years to the subject matter of the disagreement, or (2) “reportable events,” as such term is defined in Item 304(a)(1)(v) of Regulation S-K. The audit reports of DeCoria on the financial statements of the Company, during the periods from March 31, 2011 through December 31, 2014, did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles, except that the reports stated there is substantial doubt about the Company’s ability to continue as a going concern.

 

On May 29, 2015, the Board of Directors approved the appointment of Seale and Beers, CPAs as the independent registered public accounting firm of the Company. During the Company’s two most recent fiscal years and the subsequent interim periods preceding Seale and Beers, CPAs engagement, neither the Company nor anyone on behalf of the Company consulted with Seale and Beers, CPAs regarding the application of accounting principles to any specific completed or contemplated transaction, or the type of audit opinion that might be rendered on the Company’s financial statements, and Seale and Beers, CPAs did not provide any written or oral advice that was an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issue or any matter that was the subject of a “disagreement” or a “reportable event,” as such terms are defined in Item 304(a)(1) of Regulation S-K.

 

On March 7, 2016, Seale & Beers, CPAs ("Seale & Beers") was dismissed as EMS Find, Inc.'s independent accountant. Seale & Beers' report on our financial statements for the year ended June 30, 2015, contained no adverse opinion or disclaimer of opinion and was not qualified or modified as to audit scope or accounting except that the report contained an explanatory paragraph stating that there was substantial doubt about the Company's ability to continue as a going concern. Our Board of Directors participated in and approved the decision to change independent accountants. Through the period covered by the financial review of financial statements of the quarterly periods September 30, 2015 and December 31, 2015, there have been no disagreements with Seale & Beers on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Seale & Beers, would have caused them to make reference thereto in their report on the financial statements. Through the interim period from December 31, 2015, to March 7, 2016, (the date of dismissal of the former accountant), there have been no disagreements with Seale & Beers on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements if not resolved to the satisfaction of Seale & Beers would have caused them to make reference thereto in their report on the financial statements. During the interim period through December 31, 2015, there have been no reportable events with us as set forth in Item 304(a)(1)(iv) of Regulation S-K.

 

On March 8, 2016, the Company engaged Green & Company CPA's ("Green") of Tampa, Florida, as its new registered independent public accountant. During the years ended June 30, 2015 and 2014, and prior to March 8, 2016 (the date of the new engagement), we did not consult with Green regarding (i) the application of accounting principles to a specified transaction, (ii) the type of audit opinion that might be rendered on the Company's financial statements by Green, in either case where written or oral advice provided by Green would be an important factor considered by us in reaching a decision as to any accounting, auditing or financial reporting issues or (iii) any other matter that was the subject of a disagreement between us and our former auditor or was a reportable event (as described in Items 304(a)(1)(iv) or Item 304(a)(1)(v) of Regulation S-K, respectively). The Board of Directors of the Company was advised by letter dated July 26, 2016, of the resignation of Green & Company, CPAs, its independent registered public accounting firm.

 

On August 2, 2016, the accounting firm of Leigh J. Kremer, CPA was engaged as the Company's new independent registered public accounting firm, to audit the Company’s financial statements for its fiscal year ending June 30, 2016. From the date that Green & Company, CPAs were engaged, March 8, 2016, to the present time, or any other period of time, Green & Company, CPAs did not issue any audit reports on the Company's financial statements. During the Company's most recent fiscal year and the subsequent interim periods thereto, there were no disagreements with Green & Company, CPAs, whether or not resolved, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to the satisfaction of Green & Company, CPAs, would have caused it to make reference to the subject matter of the disagreement in connection with its report on the Company's financial statements. During the two most recent fiscal years and the interim periods preceding the engagement, the Company has not consulted Leigh J. Kremer, CPA regarding any of the matters set forth in Item 304(a)(2)(i) or (ii) of Regulation S-K.

 

 
22
Table of Contents

 

Item 9A. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Our Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934), as of June 30, 2016. Based on such review and evaluation, our chief executive officer and chief financial officer have concluded that, as of June 30, 2016, our disclosure controls and procedures were not effective to ensure that information required to be disclosed by us in the reports that we file or submit to the Securities and Exchange Commission pursuant to the reporting obligations of the Exchange Act, including this Annual Report on Form 10-K, is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures.

 

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. The design of any system of controls also is based in part on certain assumptions regarding 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. Given these and other inherent limitations of control systems, there is only reasonable assurance that our controls will succeed in achieving their stated goals under all potential future conditions.

 

Management’s Annual Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and Rule 15d-15(f) of the Exchange Act. Internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States (“US GAAP”), including those policies and procedures that:

 

· pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company,

 

 

· provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with US GAAP, and that receipts and expenditures are being made only in accordance with authorizations of management and directors of the company, and

 

 

· 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 control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies and procedures may deteriorate.

 

Under the supervision and with the participation of our management, we have assessed the effectiveness of our internal control over financial reporting as of June 30, 2016. In making this assessment, our management used the 1992 criteria described in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Due to the inherent issue of segregation of duties in a small company, we have relied heavily on entity or management review controls to lessen the issue of segregation of duties. Based on this assessment and those criteria, our management concluded that the Company did not maintain effective internal control over financial reporting as of June 30, 2016.

 

 
23
Table of Contents

 

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Our management identified the following material weaknesses as of June 30, 2016:

 

Entity Level. We recognize the need to provide leadership and guidance to our employees regarding the maintenance and preparation of financial matters. There is a weakness due to the fact that there are no documented policies and procedures in place for certain procedures. An audit committee has not been established.

 

Financial Reporting. There needs to be a more structured mechanism for evidence of review in the financial reporting process. The following procedures have been implemented since the beginning of 2009, (a) CFO signs and date all financial documents upon the completion of reviewing such documents, (b) all approval or permission will be evidenced by either email or in writing. No oral approval or permission is allowed, (c) General Journal is recorded only after CFO approves (in writing) such entry and (d) monthly bank reconciliations must complete within 15 days after month ends and reviewed by CFO 5 days after the completion of bank reconciliation.

 

Confidential Reporting Mechanism. We recognize that we need to provide leadership and guidance to our employees, clients and vendors regarding business ethics and professional conduct. A confidential reporting mechanism must be in place for anonymous reporting of a breach to these ethics that will enable prompt and thorough investigation. In January 2009, we implemented a whistleblower program. A toll-free number, as well as an email address, were posted on the homepage of our website to encourage our employee, contractors, sub-contractors, vendors to report any unethical or illegal behavior they suspect.

 

The entire staff consists of one officer. Therefore, we have relied heavily on entity or management review controls to lessen the issue of segregation of duties. Upon receiving adequate financing, the Company plans to increase its controls in these areas by hiring more experienced employees in financial reporting, establishing an audit committee and formally documenting the controls the Company has in place.

 

Attestation Report

 

This Annual Report on Form 10-K 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 SEC that permit us to provide only our management’s annual report on internal control over financial reporting in this Form 10-K.

 

Changes in Internal Controls Over Financial Reporting

 

There were no changes in our internal control over financial reporting during the fourth quarter of our fiscal year ended June 30, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B. Other Information.

 

None.

 

 
24
Table of Contents

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance.

 

Directors and Executive Officers

 

The following table sets forth the names and positions of our current executive officers and directors.

 

 

Name and Address

Age

Position(s) Held

 

Steve Rubakh

55

President, CEO, CFO, Secretary, and Director

 

Biographies of Directors and Executive Officers

 

Steve Rubakh has been our President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer, and a Director since April 1, 2015. Mr. Rubakh founded EMS Factory, Inc., in 2011, where he oversaw the day to day operations and assisted in building and creating a vision for the company. At the end of 2014, Mr. Rubakh took the company to the next stage by initiating the development of the on-demand mobile application and platform on which the Company strategy is now based. In 2003, he founded Power Sports Factory, Inc., and served as the President until 2010. Prior to founding Power Sports Factory, Mr. Rubakh was the founder of International Parking Concepts specializing in providing services to the hospitality industry. Mr. Rubakh attended both Community College of Philadelphia and Temple University majoring in business administration.

 

Indemnification of Directors and Officers

 

Nevada Corporation Law allows for the indemnification of officers, directors, and any corporate agents in terms sufficiently broad to indemnify such persons under certain circumstances for liabilities, including reimbursement for expenses, incurred arising under the 1933 Act. The Bylaws of the Company provide that the Company will indemnify its directors and officers to the fullest extent authorized or permitted by law and such right to indemnification will continue as to a person who has ceased to be a director or officer of the Company and will inure to the benefit of his or her heirs, executors and Consultants; provided, however, that, except for proceedings to enforce rights to indemnification, the Company will not be obligated to indemnify any director or officer in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized by the Board of Directors. The right to indemnification conferred will include the right to be paid by the Company the expenses (including attorney’s fees) incurred in defending any such proceeding in advance of its final disposition.

 

The Company may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Company similar to those conferred to directors and officers of the Company. The rights to indemnification and to the advancement of expenses are subject to the requirements of the 1940 Act to the extent applicable.

 

Furthermore, the Company may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Company or another company against any expense, liability or loss, whether or not the Company would have the power to indemnify such person against such expense, liability or loss under the Nevada General Corporation Law.

 

Corporate Governance

 

Our board of directors has determined that Steve Rubakh is not "independent" within the meaning of the applicable rules of the SEC and The New York Stock Exchange.

 

 
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Table of Contents

 

Audit Committee

 

Our Board of Directors plans to establish an Audit Committee, the members of which shall be considered as independent under the standards for independence for audit committee members established by the NYSE. The Audit Committee will operate under a written charter.

 

Other Committees

 

Our Board of Directors performs the functions usually designated to an Audit Committee.

 

The Board does not have standing compensation or nominating committees. Our Board plans to evaluate on an ongoing basis the need for establishing a compensation committee and/or a nominating committee, and it plans to so at the appropriate time.

 

The entire Board of Directors would participate in the consideration of compensation issues and of director nominees. To date, the Board of Directors has not formally established any criteria for Board membership. Candidates for director nominees would be reviewed in the context of the current composition of the Board, the Company’s operating requirements and the long-term interests of its stockholders. In conducting this assessment, the Board of Directors would consider skills, diversity, age, and such other factors as it deems appropriate given the current needs of the Board and the Company, to maintain a balance of knowledge, experience and capability. In particular, weight would be given to experience relevant to the Company’s mobile technology operations.

 

The Board’s process for identifying and evaluating nominees for director, including nominees recommended by stockholders, involves compiling names of potentially eligible candidates, conducting background and reference checks, conducting interviews with the candidate and others (as schedules permit), meeting to consider and approve the final candidates and, as appropriate, preparing an analysis with regard to particular recommended candidates.

 

Board Role in Risk Oversight

 

Our Board has overall responsibility for risk oversight with a focus on the most significant risks facing our Company. Not all risks can be dealt with in the same way, and it is the Board’s responsibility to evaluate the potential adverse impact of risks faced by the company and the resources allocated to avoid or mitigate the potential adverse impact.

 

Risk Assessment in Compensation Programs

 

The responsibility of the Board is to assess the Company’s compensation programs to identify potential risks arising from the Company’s compensation policies and practices that are reasonably likely to have a material adverse effect on the Company.

 

Directors’ and Officers’ Liability Insurance

 

The Company does not have directors’ and officers’ liability insurance insuring our directors and officers against liability for acts or omissions in their capacities as directors or officers.

 

Stockholder Communications

 

The Board has not established a formal process for stockholders to send communications, including director nominations, to the Board; however, the names of all directors are available to stockholders in this Information Statement. Any stockholder may send a communication to any member of the Board of Directors, in care of the Company, at 73 Buck Road, Suite 2, Huntingdon Valley, PA 19006 (Attention: Secretary). Director nominations submitted by a stockholder will be considered by the full Board. Each communication should clearly specify the name of the individual director or group of directors to whom the communication is addressed. Communications sent by email will be delivered directly to the Corporate Secretary, who will promptly forward such communications to the specified director addressees. Communications sent by mail will be promptly forwarded by the Corporate Secretary to the specified director addressee or, if such communication is addressed to the full Board of Directors, or to the Chairman of the Board (when one is appointed), who will promptly forward such communication to the full Board of Directors. Due to the infrequency of stockholder communications to the Board, the Board does not believe that a more formal process is necessary. However, the Board will consider, from time to time, whether adoption of a more formal process for such stockholder communications has become necessary or appropriate.

 

 
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In general, advance notice of nominations of persons for election to our Board or the proposal of business to be considered by the shareholders must be given to our Secretary no earlier than the November 1 or later than June 1 preceding the next year's annual meeting, which would be scheduled in the month of November or December.

 

A shareholder's notice of nomination should set forth (i) as to each person whom the shareholder proposes to nominate for election or re-election as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934 (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director, if elected); (ii) as to any other business that the shareholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such shareholder and the beneficial owner, if any, on whose behalf the proposal is made; and (iii) as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made, (A) the name and address of such shareholder, as they appear on our books, and of such beneficial owner, (B) the number of shares of our common stock that are owned (beneficially or of record) by such shareholder and such beneficial owner, (C) a description of all arrangements or understandings between such shareholder and such beneficial owner and any other person or persons (including their names) in connection with the proposal of such business by such shareholder and any material interest of such shareholder and of such beneficial owner in such business, and (D) a representation that such shareholder or its agent or designee intends to appear in person or by proxy at our annual meeting to bring such business before the meeting.

 

Director Compensation

 

DIRECTORS' COMPENSATION IN FISCAL 2016

 

We compensate directors as per specific agreements with each director. In 2016, we issued Daniel Grillo 125,000 shares of common stock as compensation for his services as a director in 2015 and 2016.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Value and

 

 

 

 

 

 

 

 

 

Fees

 

 

 

 

 

 

 

 

Non-Equity

 

 

Nonqualified

 

 

 

 

 

 

 

 

 

Earned

 

 

 

 

 

 

 

 

Incentive

 

 

Deferred

 

 

 

 

 

 

 

 

 

or Paid in

 

 

Stock

 

 

Warrant

 

 

Plan

 

 

Compensation

 

 

All Other

 

 

 

Director

 

Cash

 

 

Awards

 

 

Awards

 

 

Compensation

 

 

Earnings

 

 

Compensation

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Daniel Grillo

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2016

 

$ -

 

 

$ 177,500

 

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

$ 177,500

 

2015

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

Other Information about our Board of Directors

 

We do not have a formal policy on attendance at meetings of our shareholders; however, we encourage all Board members to attend shareholder meetings that are held in conjunction with a meeting of our Board of Directors.

 

Attendance of Directors at Shareholder Meetings

 

We do not have a formal policy on attendance at meetings of our shareholders

 

 
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Section 16(a) Compliance by Officers and Directors

 

Based solely upon a review of Forms 3, 4 and 5 and amendments to these forms furnished to us, together with written representations received by us from applicable parties that no Form 5 was required to be filed by such parties, all parties subject to the reporting requirements of Section 16(a) of the Exchange Act filed all such required reports during and with respect to our fiscal year ended June 30, 2016.

 

Code of Ethics

 

We plan to adopt a revised Code of Ethics designed to deter wrongdoing and promote honest and ethical conduct, full, fair and accurate disclosure, compliance with laws, prompt internal reporting and accountability to adherence to the Code of Ethics.

 

Item 11. Executive Compensation.

 

General

 

We have one executive officer, who is currently our only employee. The following summary compensation table sets forth information concerning compensation for services rendered in all capacities during 2016 and 2015 awarded to, earned by or paid to our executive officers.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Option

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and

 

 

 

 

 

 

 

Name and

 

 

 

 

 

 

Deferred

 

 

 

 

 

Stock

 

 

Warrant

 

 

All Other

 

 

 

Principal Position

 

 

 

Salary

 

 

Compen sation

 

 

Bonus

 

 

Awards

 

 

Awards

 

 

Compen sation

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Steve Rubakh (1)

 

2016

 

 

$ 26,381

 

 

$ -

 

 

$ -

 

 

$ 489,117

 

 

$ -

 

 

$ 34,756

 

 

$ 550,254

 

Chief Executive Officer,

 

2015

 

 

$ 32,371

 

 

$ -

 

 

$ -

 

 

$ 131,700

 

 

$ -

 

 

$ -

 

 

$ 164,071

 

Chief Financial Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and Director

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shang Fei (2)

 

 

2016

 

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

Director

 

 

2015

 

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Matveev Anton (3)

 

 

2016

 

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

Chief Executive Officer,

 

 

2015

 

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

Chief Financial Officer  and Director

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                                                                                                                                                                         

(1) Mr. Rubakh was appointed as CEO, CFO and Director on April 1, 2015.
(2) Mr. Fei resigned from all position on August 5, 2015.
(3) Mr. Anton resigned from all positions on March 23, 2015.

 

 
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Board of Directors Policy on Executive Compensation

 

Executive Compensation

 

Our executive compensation philosophy is to provide competitive levels of compensation by recognizing the need for multi-discipline management responsibilities, achievement of our company’s overall performance goals, individual initiative and achievement, and allowing our company to attract and retain management with the skills critical to its long-term success. Management compensation is intended to be set at levels that we believe is consistent with that provided in comparable companies. Our company’s compensation programs will be designed to motivate executive officers to meet annual corporate performance goals and to enhance long-term stockholder value. Our company's executive compensation has four major components: base salary, performance incentive, incentive stock options and other compensation. Our executive officer is not paid a base salary at this time, but is receiving stock compensation only.

 

Executive Base Salaries

 

Base salaries are determined by evaluating the various responsibilities for the position held, the experience of the individual and by comparing compensation levels for similar positions at companies within our principal industry. We plan to review our executives’ base salaries and determine increases based upon an officer’s contribution to corporate performance, current economic trends and competitive market conditions.

 

Performance Incentives

 

We plan to utilize performance incentives based upon criteria relating to performance in special projects undertaken during the past fiscal year, contribution to the development of new products, marketing strategies, manufacturing efficiencies, revenues, income and other operating goals to augment the base salaries received by executive officers.

 

Incentive Stock Options

 

Our Company plans to utilize stock options as a means to attract, retain and encourage management and to align the interests of executive officers with the long-term interest of our company’s stockholders.

 

Benefits and Other Compensation

 

At this time, our Company does not offer a health plan to its executive officers or employees.

 

Retirement and Post-Retirement Benefits

 

Our Company does not offer at this time a post-retirement health plan to its executive officers or employees unless it is included in an employment agreement directly entered between employee and us.

 

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

 

The following table sets forth information regarding the beneficial ownership of the Company’s common stock (and preferred stock) as of June 30, 2016, for:

 

 

(i) each person or entity who, to our knowledge, beneficially owns more than 5% of our common stock;

 

 

 

 

(ii) each executive officer and named officer;

 

 

 

 

(iii) each director; and

 

 

 

 

(iv) all of our officers and directors as a group.

  

 
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Except as indicated in the footnotes to the following table, the persons named in the table has sole voting and investment power with respect to all shares of common stock and preferred stock beneficially owned. Except as otherwise indicated, the address of each of the stockholders listed below is: c/o 73 Buck Road, Suite 2, Huntingdon Valley, PA 19006.

 

 

 

 

 

Amount &

 

 

 

 

 

 

 

 

Nature

 

 

 

 

 

 

 

 

of Beneficial

 

 

Percent of

 

Title of Class

 

Name of Beneficial Owners

 

Ownership (1)

 

 

Class (2)

 

 

 

 

 

 

 

 

 

 

Common stock, $0.001 par value

 

Steve Rubakh (3) (4)

 

 

14,901,030

 

 

 

41.7 %

Series A preferred stock, $0.001 par value

 

Steve Rubakh (3) (5)

 

 

500,000

 

 

 

100 %

Series B preferred stock, $0.001 par value

 

Steve Rubakh (3) (6)

 

 

-

 

 

 

0 %

 

 

 

 

 

 

 

 

 

 

 

Common stock, $0.001 par value

 

All officers and directors as a Group

 

 

14,901,030

 

 

 

41.7 %

Series A preferred stock, $0.001 par value

 

All officers and directors as a Group

 

 

500,000

 

 

 

100 %

Series B preferred stock, $0.001 par value

 

All officers and directors as a Group

 

 

-

 

 

 

0 %

_________

(1) Beneficial Ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Each of the beneficial owners listed above has direct ownership of and sole voting power and investment power to the shares of the Company's common stock.

 

 

(2) As of June 30, 2016, a total of 35,711,272 (includes warrants to purchase 3,000,000 shares of common stock) shares of the Company's common stock are considered to be outstanding (issued and issuable) pursuant to SEC Rule 13d-3(d)(1). For each Beneficial Owner listed, any options exercisable within 60 days have been also included for purposes of calculating their percent of class.

 

 

(3) Officer and director.

 

 

(4) Mr. Rubakh has been issued, or has issuable, 14,901,030 shares of common stock. Furthermore, Mr. Rubakh holds warrants to purchase 3,000,000 shares of common stock.

 

 

(5) The Series A preferred stock is not convertible into common stock whereas it is representative of 500,000,000 shares of common stock solely for voting purposes.

 

 

(6) On July 1, 2016, the Company authorized the issuance of 30,000 shares of Series B preferred stock to Steve Rubakh. The 30,000 shares are convertible into 3,000,000 shares of common stock.

 

Changes in Control

 

None.

 

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

 

On July 22, 2015, Shang Fei (“Fei”) resigned from the Company as a board member and surrendered his 500,000 shares of Series A Preferred Stock which the company had issued to him in March 2015. Fei also has provided the Company with 260,000 of capital of which 210,000 and a prior loan for expenses of $19,095 was converted into common stock.

 

On September 25, 2015, the Company authorized the issuance of 125,000 shares of common stock as part of an agreement with Daniel Grillo, a director of the Company for services from September 25, 2015 through March 31, 2016. The shares are amortized over the period of the agreement. As of March 31, 2016, the shares remained issuable.

 

On October 28, 2015, Viva Entertainment, a subsidiary of the Company, entered into an employment agreement with Johnny Falcones (“Falcones”), for the period October 28, 2015 through December 31, 2018. Falcones was issued on January 2, 2016, warrants to purchase 3,000,000 shares of common stock of the Company, with an exercise price of $0.74. Additionally, Falcones would receive three year warrants to purchase up to 5% of the common stock of Viva Entertainment, at an exercise price of $0.50, which are exercisable in the event that Viva Entertainment is spun out of the Company. Furthermore, Falcones was to receive 375,000 shares of common stock of the Company on a monthly basis, starting on February 1, 2016, for a period of four months, for an aggregate total of 1,500,000 shares of common stock of the Company. On April 6, 2016, as part of the sale of Viva Entertainment, these warrants were cancelled and his employment agreement terminated.

 

On January 2, 2016, the Company issued 3,000,000 warrants for common stock of the Company to Steve Rubakh (“Rubakh”) as a compensation incentive. The warrants mature on January 2, 2021. The exercise price is $0.74 and the warrant has a cashless exercise option. The common stock of the Company current price on the date of issuance was $0.47. The warrants were valued at $0.383 using a Black-Scholes calculation. The Company recorded an expense of $1,149,000.

 

On January 2, 2016, the Company issued 3,000,000 warrants for common stock of the Company to Falcones as a compensation incentive. The warrants mature on January 2, 2021. The exercise price was $0.74 and the warrant had a cashless exercise option. As part of the April 6, 2016 sale of Viva Entertainment, these warrants were cancelled effective the date of issuance, therefore there were no expenses recorded related to the issuance.

 

On March 15, 2016, the Company issued 242,424 shares of common stock to Sophia Rubakh, a relative of Rubakh, in consideration of various consulting administrative and marketing services provided to the Company. The shares were issued with a value of $0.21, or $50,909.

 

On June 27, 2016, Rubakh converted his convertible promissory note in the amount of $81,364 into 2,712,133 shares of common stock. The conversion price was $0.03 whereas the current stock price was $0.14 therefore, a loss of $298,335 was recorded.

 

For the year ended June 30, 2016, the Company authorized the issuance of 360,000 shares of common stock as part of Rubakh's compensation package. Stock-based compensation of $139,857 was recorded.

 

Director Independence

 

We currently do not have any independent directors, as the term “independent” is defined in Section 803A of the NYSE Amex LLC Company Guide. Since the Over the Counter Pink (“OTCPK”) does not have rules regarding director independence, the Board makes its determination as to director independence based on the definition of “independence” as defined under the rules of the New York Stock Exchange (“NYSE”) and American Stock Exchange (“Amex”).

   

Item 14. Principal Accountant Fees and Services.

 

Audit Fees

 

For the years ended March 31, 2015 and 2014, the aggregated fees billed by Seale and Beers, CPAs, for professional services rendered for the audit (including quarterly review) of our annual consolidated financial statements included in our annual report on Form 10-K were $20,000 and $10,000, respectively.

 

 
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Audit-Related Fees

 

The audit fees of Seale and Beers, CPAs, for providing audit-related services for the transition period ended June 30, 2015was $10,000, and the fees of Leigh J. Kremer, CPA for providing audit-related services for the year ended June 30, 2016 were $12,500.

 

 

 

 Fiscal

 

 

 Transition

 

 

 Fiscal

 

 

 

 Year

 

 

 Period

 

 

 Year

 

 

 

 Ended

 

 

 Ended

 

 

 Ended

 

 

 

 March 31,

 

 

 June 30,

 

 

 June 30,

 

Category

 

 2015

 

 

 2015

 

 

 2016

 

 

 

 

 

 

 

 

 

 

Audit fees (1)

 

$ 13,046

 

 

$ 10,000

 

 

$ 14,750

 

Audit-related fees (2)

 

$ -

 

 

$ -

 

 

$ -

 

Tax fees (3)

 

$ -

 

 

$ -

 

 

$ -

 

All other fees (4)

 

$ -

 

 

$ -

 

 

$ -

 

_______

(1) Consists of fees billed for the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements.

 

 

(2) Consists of assurance and related services that are reasonably related to the performance of the audit and reviews of our financial statements and are not included in “audit fees” in this table.

 

 

(3) Consists of professional services rendered for tax compliance, tax advice and tax planning. The nature of these tax services is tax preparation.

 

 

(4) No other services were provided during the year ended March 31, 2015, the transition period ended June 30, 2015, or the fiscal year ended June 30, 2016.

 

Tax Fees

 

Our accounting firm does not provide us with tax compliance, tax advice or tax planning services.

 

All Other Fees

 

None.

 

Audit Committee Approval

 

We do not have an audit committee of our board of directors. We believe that each member of our board has the expertise and experience to adequately serve our stockholders’ interests while serving as directors. Since we are not required to maintain an audit committee and our full board acts in the capacity of an audit committee, we have not elected to designate any member of our board as an “audit committee financial expert.”

 

Board of Directors Approval of Audit-Related Activities

 

Management is responsible for the preparation and integrity of our financial statements, as well as establishing appropriate internal controls and financial reporting processes. Marcum is responsible for performing an independent audit of our financial statements and issuing a report on such financial statements. Our board of directors’ responsibility is to monitor and oversee these processes.

 

Our board reviewed the audited financial statements of our company for the year ended June 30, 2016 and met with the independent auditors, separately and together, to discuss such financial statements. Management and the auditors have represented to us that the financial statements were prepared in accordance with generally accepted accounting principles in the United States. Based upon these reviews and discussions, our board authorized and directed that the audited financial statements be included in our Annual Report on Form 10-K for the year ended June 30, 2016.

 
 
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PART IV

 

Item 15. Exhibits and Financial Statement Schedules

 

(a) Financial Statements

 

The financial statements and schedules included in this Annual Report on Form 10-K are listed in Item 8.

 

(b) Exhibits

 

The following exhibits are being filed as part of this Annual Report on Form 10-K, or incorporated herein by reference as indicated.

 

Exhibit

 

Number

 

Exhibit Description

 

 

 

3.1

 

Certificate of Incorporation of the Company. [Incorporated by reference to Exhibit 2 to Company’s Registration Statement on Form S-1, filed with the SEC on June 7, 2011.]

 

3.1(a)

 

Certificate of Amendment, filed December 1, 2014. [Incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K, filed with the SEC on December 8, 2015.]

 

3.1(b)

 

Certificate of Designations of the Company’s Series A Preferred Stock, filed March 12, 2015. [Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the SEC on March 20, 2015.]

 

3.2

 

By-Laws of the Company. [Incorporated by reference to Exhibit 3 to Company’s Registration Statement on Form S-1, filed with the SEC on June 7, 2011.]

 

3.2(a)

 

Amendment to Exhibit A to the Company’s By-Laws, effective August 12, 2015. [Incorporated by reference to Exhibit 10.2(a) to our Current Report on Form 8-K, filed with the SEC on August 12, 2015.]

 

3.1(c)

 

Certificate of Amendment to Articles of Incorporation, filed August 3, 2016, with the Secretary of State of Nevada. [Incorporated by reference to Exhibit 3.1(c) to our Current Report on Form 8-K, filed with the SEC on August 11, 2016.]

 

10.1

 

Share Exchange Agreement, dated March 31, 2015, between the Company, EMS Factory, Inc., and the shareholders of EMS Factory, Inc. [Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on April 7, 2015.]

 

10.2

 

Employment Agreement, dated October 28, 2015, between Viva Entertainment Group, Inc., a subsidiary of the Company and Johnny Falcones. [Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K, filed with the SEC on October 30, 2015.]

 
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Table of Contents

 

10.3

 

Form of Common Stock Purchase Warrant issued October 8, 2015. [Incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K, filed with the SEC on October 30, 2015.]

 

10.4

 

$125,000 Promissory Convertible Note issued to LG Capital Funding, LLC. [Incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K, filed with the SEC on October 30, 2015.]

 

10.5

 

Securities Purchase Agreement, dated as of October 22, 2015, between LG Capital Funding, LLC and the Company. [Incorporated by reference to Exhibit 10.5 to our Current Report on Form 8-K, filed with the SEC on October 30, 2015.]

 

10.6

 

Termination Agreement, dated April 5, 2016, by and among the Company, Viva Entertainment Group, Inc., a subsidiary of the Company, and Johnny Falcones. [Incorporated by reference to Exhibit 10.6 to our Current Report on Form 8-K, filed with the SEC on April 11, 2016.]

 

10.7

 

Purchase Agreement, dated as of April 5, 2016, by and among the Company, Viva Entertainment Group, Inc., a subsidiary of the Company, Black River Petroleum Corp., Alexander Stanbury, Steve Rubakh and Johnny Falcones. [Incorporated by reference to Exhibit 10.7 to our Current Report on Form 8-K, filed with the SEC on April 11, 2016.]

 

10.8

 

$33,333 Promissory Convertible Note issued July 21, 2016 to Old Main Capital, LLC. [Incorporated by reference to Exhibit 10.8 to our Current Report on Form 8-K, filed with the SEC on August 11, 2016.]

 

10.9

 

$2,000,000 Equity Purchase Agreement, dated as of July 21, 2016, between Old Main Capital, LLC and the Company. [Incorporated by reference to Exhibit 10.9 to our Current Report on Form 8-K, filed with the SEC on August 11, 2016.]

 

10.10

 

$33,333 Promissory Convertible Note issued July 25, 2016 to River North Equity, LLC. [Incorporated by reference to Exhibit 10.10 to our Current Report on Form 8-K, filed with the SEC on August 11, 2016.]

 

10.11

 

Equity Purchase Agreement, dated as of July 25, 2016, between River North Equity, LLC and the Company. [Incorporated by reference to Exhibit 10.11 to our Current Report on Form 8-K, filed with the SEC on August 11, 2016.]

 

 

 

10.12

 

Securities Purchase Agreement, dated August 10, 2016, between Global Opportunity Group, LLC, and the Company, filed herewith.

 

 

 

10.13

 

Common Stock Purchase Warrant, dated August 10, 2016, issued to Global Opportunity Group, LLC, filed herewith.

 

 

 

10.14

Securities Purchase Agreement, dated August 23, 2016, between EMA Financial, LLC, and the Company, filed herewith.

 

 

 

23

 

Consent of Seale & Beers, CPAs, filed herewith.  

 

31.1

 

Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer and Principal Financial Officer. Filed herewith.

 

32.1

 

Section 1350 Certification of Chief Executive Officer and Principal Financial Officer. Filed herewith.

 

101.INS

 

XBRL Instance Document *

 

 

 

101.SCH

 

XBRL Taxonomy Extension Schema *

 

 

 

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase *

 

 

 

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase *

 

 

 

101.LAB

 

XBRL Taxonomy Extension Label Linkbase *

 

 

 

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase *

_________

* Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed “furnished” and not “filed” or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, or deemed “furnished” and not “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise is not subject to liability under these sections.

 
 
34
Table of Contents

 

SIGNATURES

 

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

 

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.

 

/s/ Steve Rubakh

 

September 27, 2016

Steve Rubakh, Principal Executive Officer and Principal Accounting Officer

 

Date

 

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

 

/s/ Steve Rubakh

 

September 27, 2016

Steve Rubakh, Director

 

Date

 

 

35

 

 

EXHIBIT 10.12

 

SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of August 10, 2016, by and between EMS FIND, INC. , a Nevada corporation, with headquarters located at 73 Buck Road, Suite 2, Huntingdon, PA 19006 (the “Company”), and GLOBAL OPPORTUNITY GROUP, LLC , a New York limited liability company, with its address at 395 Pearsall Avenue, Unit D, Cedarhurst, NY 11516 (the “Buyer”).

 

WHEREAS :

 

A. The Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”);

 

B. Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement, the 12% convertible note of the Company, in the form attached hereto as Exhibit A, in the aggregate principal amount of US$16,500.00 (together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, the “Note”), convertible into shares of common stock of the Company (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note; and

 

C. The Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Note as is set forth immediately below its name on the signature pages hereto.

 

NOW THEREFORE , the Company and the Buyer severally (and not jointly) hereby agree as follows:

 

1. PURCHASE AND SALE OF NOTE.

 

a. Purchase of Note. On the Closing Date (as defined below), the Company shall issue and sell to the Buyer and the Buyer agrees to purchase from the Company such principal amount of Note as is set forth immediately below the Buyer’s name on the signature pages hereto, subject to the express terms of the Note. In connection with the issuance of the Note, the Company shall issue to Buyer as a commitment fee, warrants to purchase 165,000 shares of its common stock.

 

 
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b. Form of Payment. On or around the Closing Date (as defined below), the Buyer shall pay the purchase price for Note, which is equal to $15,000.00 (the “Purchase Price”) by wire transfer of immediately available funds, in accordance with the Company’s written wiring instructions, against delivery of the Note, and (i) the Company shall deliver such duly executed Note on behalf of the Company, to the Buyer. 

 

c. Closing Date. Subject to the satisfaction (or written waiver) of the conditions thereto set forth in Section 6 and Section 7 below, the date and time of the issuance and sale of the Note pursuant to this Agreement (the “Closing Date”) shall be 5:00 P.M., Eastern Standard Time on or about August 10, 2016, or such other mutually agreed upon time. The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties.

 

2. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and warrants to the Company that:

 

a. Investment Purpose. As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock issuable upon conversion of or otherwise pursuant to the Note (including, without limitation, such additional shares of Common Stock, if any, as are issuable (i) on account of interest on the Note or (ii) as a result of the events described in Sections 1.3 and 1.4(g) of the Note, such shares of Common Stock being collectively referred to herein as the “Conversion Shares” and, collectively with the Note, the “Securities”) for its own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act; provided, however, that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act.

 

b. Reliance on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities.

 

c. Information. The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, afforded the opportunity to ask questions of the Company. Notwithstanding the foregoing, the Company has not disclosed to the Buyer any material nonpublic information and will not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer. Neither such inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or affect Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below. The Buyer understands that its investment in the Securities involves a significant degree of risk. The Buyer is not aware of any facts that may constitute a breach of any of the Company's representations and warranties made herein.

 

 
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d. Governmental Review. The Buyer understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities.

 

e. Transfer or Re-sale. The Buyer understands that (i) the sale or re-sale of the Securities has not been and is not being registered under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the Securities are sold pursuant to an effective registration statement under the 1933 Act, (b) the Buyer shall have delivered to the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in comparable transactions to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration, which opinion shall be accepted by the Company, (c) the Securities are sold or transferred to an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited Investor, (d) the Securities are sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S under the 1933 Act (or a successor rule) (“Regulation S”), and the Buyer shall have delivered to the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions, which opinion shall be accepted by the Company; (ii) any sale of such Securities made in reliance on Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case). Notwithstanding the foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.

 

f. Legends. The Buyer understands that the Note and, until such time as the Conversion Shares have been registered under the 1933 Act may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Conversion Shares may bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for such Securities):

 

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE  SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

 

 
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The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion shall be accepted by the Company so that the sale or transfer is effected. The Buyer agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

 

g. Authorization; Enforcement. This Agreement has been duly and validly authorized. This Agreement has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms.

 

h. Residency. The Buyer is a resident of the jurisdiction set forth immediately below the Buyer’s name on the signature pages hereto.

 

3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to the Buyer that:

 

a. Organization and Qualification. The Company and each of its Subsidiaries (as defined below), if any, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted. Schedule 3(a) sets forth a list of all of the Subsidiaries of the Company and the jurisdiction in which each is incorporated. The Company and each of its Subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which its ownership or use of property or the nature of the business conducted by it makes such qualification necessary except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. “Material Adverse Effect” means any material adverse effect on the business, operations, assets, financial condition or prospects of the Company or its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or by the agreements or instruments to be entered into in connection herewith. “Subsidiaries” means any corporation or other organization, whether incorporated or unincorporated, in which the Company owns, directly or indirectly, any equity or other ownership interest.

 

 
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b. Authorization; Enforcement. (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the Note and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Note by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the issuance and reservation for issuance of the Conversion Shares issuable upon conversion or exercise thereof) have been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its shareholders is required, (iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such authorized representative is the true and official representative with authority to sign this Agreement and the other documents executed in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Note, each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms.

 

c. Capitalization. Except as disclosed in the SEC Documents, no shares are reserved for issuance pursuant to the Company’s stock option plans, no shares are reserved for issuance pursuant to securities (other than the Note) exercisable for, or convertible into or exchangeable for shares of Common Stock and sufficient shares are reserved for issuance upon conversion of the Note (as required by the Note and transfer agent share reserve letter). All of such outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued, fully paid and non-assessable. No shares of capital stock of the Company are subject to preemptive rights or any other similar rights of the shareholders of the Company or any liens or encumbrances imposed through the actions or failure to act of the Company. Except as disclosed in the SEC Documents, as of the effective date of this Agreement, (i) there are no outstanding options, warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments or rights of any character whatsoever relating to, or securities or rights convertible into or exchangeable for any shares of capital stock of the Company or any of its Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries, (ii) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of its or their securities under the 1933 Act and (iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of the Note or the Conversion Shares. The Company has filed in its SEC Documents true and correct copies of the Company’s Certificate of Incorporation as in effect on the date hereof (“Certificate of Incorporation”), the Company’s By-laws, as in effect on the date hereof (the “By-laws”), and the terms of all securities convertible into or exercisable for Common Stock of the Company and the material rights of the holders thereof in respect thereto. The Company shall provide the Buyer with a written update of this representation signed by the Company’s Chief Executive on behalf of the Company as of the Closing Date.

 

d. Issuance of Shares. The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note in accordance with its respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.

 

 
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e. Acknowledgment of Dilution. The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance of the Conversion Shares upon conversion of the Note. The Company further acknowledges that its obligation to issue Conversion Shares upon conversion of the Note in accordance with this Agreement, the Note is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.

 

f. No Conflicts. The execution, delivery and performance of this Agreement, the Note by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect). Neither the Company nor any of its Subsidiaries is in violation of its Certificate of Incorporation, By-laws or other organizational documents and neither the Company nor any of its Subsidiaries is in default (and no event has occurred which with notice or lapse of time or both could put the Company or any of its Subsidiaries in default) under, and neither the Company nor any of its Subsidiaries has taken any action or failed to take any action that would give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party or by which any property or assets of the Company or any of its Subsidiaries is bound or affected, except for possible defaults as would not, individually or in the aggregate, have a Material Adverse Effect. The businesses of the Company and its Subsidiaries, if any, are not being conducted, and shall not be conducted so long as the Buyer owns any of the Securities, in violation of any law, ordinance or regulation of any governmental entity. Except as specifically contemplated by this Agreement and as required under the 1933 Act and any applicable state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency, regulatory agency, self-regulatory organization or stock market or any third party in order for it to execute, deliver or perform any of its obligations under this Agreement, the Note in accordance with the terms hereof or thereof or to issue and sell the Note in accordance with the terms hereof and to issue the Conversion Shares upon conversion of the Note. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. The Company is not in violation of the listing requirements of the Over-the- Counter Bulletin Board (the “OTCBB”), the OTCQB or any similar quotation system, and does not reasonably anticipate that the Common Stock will be delisted by the OTCBB, the OTCQB or any similar quotation system, in the foreseeable future. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.

 

 
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g. SEC Documents; Financial Statements. The Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “1934 Act”) (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents (other than exhibits to such documents) incorporated by reference therein, being hereinafter referred to herein as the “SEC Documents”). The Company has delivered to the Buyer true and complete copies of the SEC Documents, except for such exhibits and incorporated documents. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the statements made in any such SEC Documents is, or has been, required to be amended or updated under applicable law (except for such statements as have been amended or updated in subsequent filings prior the date hereof). As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the periods involved and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). Except as set forth in the financial statements of the Company included in the SEC Documents, the Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business, and (ii) obligations under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in such financial statements, which, individually or in the aggregate, are not material to the financial condition or operating results of the Company. The Company is subject to the reporting requirements of the 1934 Act. For the avoidance of doubt, filing of the documents required in this Section 3(g) via the SEC’s Electronic Data Gathering, Analysis, and Retrieval system (“EDGAR”) shall satisfy all delivery requirements of this Section 3(g).

 

h. Absence of Certain Changes. There have been no material adverse change and no material adverse development in the assets, liabilities, business, properties, operations, financial condition, results of operations, prospects or 1934 Act reporting status of the Company or any of its Subsidiaries.

 

i. Absence of Litigation. There is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries, or their officers or directors in their capacity as such, that could have a Material Adverse Effect. Schedule 3(i) contains a complete list and summary description of any pending or, to the knowledge of the Company, threatened proceeding against or affecting the Company or any of its Subsidiaries, without regard to whether it would have a Material Adverse Effect. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.

 

j. Patents, Copyrights, etc. The Company and each of its Subsidiaries owns or possesses the requisite licenses or rights to use all patents, patent applications, patent rights, inventions, know-how, trade secrets, trademarks, trademark applications, service marks, service names, trade names and copyrights (“Intellectual Property”) necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future); Except as disclosed in the SEC Documents, there is no claim or action by any person pertaining to, or proceeding pending, or to the Company’s knowledge threatened, which challenges the right of the Company or of a Subsidiary with respect to any Intellectual Property necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future); to the best of the Company’s knowledge, the Company’s or its Subsidiaries’ current and intended products, services and processes do not infringe on any Intellectual Property or other rights held by any person; and the Company is unaware of any facts or circumstances which might give rise to any of the foregoing. The Company and each of its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of their Intellectual Property.

 

 
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k. No Materially Adverse Contracts, Etc. Neither the Company nor any of its Subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company’s officers has or is expected in the future to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a party to any contract or agreement which in the judgment of the Company’s officers has or is expected to have a Material Adverse Effect.

 

l. Tax Status. The Company and each of its Subsidiaries has made or filed all federal, state and foreign income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. The Company has not executed a waiver with respect to the statute of limitations relating to the assessment or collection of any foreign, federal, state or local tax. None of the Company’s tax returns is presently being audited by any taxing authority.

 

m. Certain Transactions. Except for arm’s length transactions pursuant to which the Company or any of its Subsidiaries makes payments in the ordinary course of business upon terms no less favorable than the Company or any of its Subsidiaries could obtain from third parties and other than the grant of stock options disclosed on Schedule 3(c), none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.

 

n. Disclosure. All information relating to or concerning the Company or any of its Subsidiaries set forth in this Agreement and provided to the Buyer pursuant to Section 2(d) hereof and otherwise in connection with the transactions contemplated hereby is true and correct in all material respects and the Company has not omitted to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they were made, not misleading. No event or circumstance has occurred or exists with respect to the Company or any of its Subsidiaries or its or their business, properties, prospects, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed (assuming for this purpose that the Company’s reports filed under the 1934 Act are being incorporated into an effective registration statement filed by the Company under the 1933 Act).

 

 
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o. Acknowledgment Regarding Buyer’ Purchase of Securities. The Company acknowledges and agrees that the Buyer is acting solely in the capacity of arm’s length purchasers with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by the Buyer or any of its respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Buyer’ purchase of the Securities. The Company further represents to the Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its representatives.

 

p. No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the 1933 Act of the issuance of the Securities to the Buyer. The issuance of the Securities to the Buyer will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any shareholder approval provisions applicable to the Company or its securities.

 

q. No Brokers. The Company has taken no action which would give rise to any claim by any person for brokerage commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby.

 

r. Permits; Compliance. The Company and each of its Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate its properties and to carry on its business as it is now being conducted (collectively, the “Company Permits”), and there is no action pending or, to the knowledge of the Company, threatened regarding suspension or cancellation of any of the Company Permits. Neither the Company nor any of its Subsidiaries is in conflict with, or in default or violation of, any of the Company Permits, except for any such conflicts, defaults or violations which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries has received any notification with respect to possible conflicts, defaults or violations of applicable laws, except for notices relating to possible conflicts, defaults or violations, which conflicts, defaults or violations would not have a Material Adverse Effect.

 

s. Environmental Matters.

 

(i) There are, to the Company’s knowledge, with respect to the Company or any of its Subsidiaries or any predecessor of the Company, no past or present violations of Environmental Laws (as defined below), releases of any material into the environment, actions, activities, circumstances, conditions, events, incidents, or contractual obligations which may give rise to any common law environmental liability or any liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 or similar federal, state, local or foreign laws and neither the Company nor any of its Subsidiaries has received any notice with respect to any of the foregoing, nor is any action pending or, to the Company’s knowledge, threatened in connection with any of the foregoing. The term “Environmental Laws” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.

 

 
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(ii) Other than those that are or were stored, used or disposed of in compliance with applicable law, no Hazardous Materials are contained on or about any real property currently owned, leased or used by the Company or any of its Subsidiaries, and no Hazardous Materials were released on or about any real property previously owned, leased or used by the Company or any of its Subsidiaries during the period the property was owned, leased or used by the Company or any of its Subsidiaries, except in the normal course of the Company’s or any of its Subsidiaries’ business.

 

(iii) There are no underground storage tanks on or under any real property owned, leased or used by the Company or any of its Subsidiaries that are not in compliance with applicable law.

 

t. Title to Property. Except as disclosed in the SEC Documents the Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects or such as would not have a Material Adverse Effect. Any real property and facilities held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as would not have a Material Adverse Effect.

 

u. Internal Accounting Controls. Except as disclosed in the SEC Documents the Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient, in the judgment of the Company’s board of directors, to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

 

v. Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor any director, officer, agent, employee or other person acting on behalf of the Company or any Subsidiary has, in the course of his actions for, or on behalf of, the Company, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

 

w. Solvency. The Company (after giving effect to the transactions contemplated by this Agreement) is solvent (i.e., its assets have a fair market value in excess of the amount required to pay its probable liabilities on its existing debts as they become absolute and matured) and currently the Company has no information that would lead it to reasonably conclude that the Company would not, after giving effect to the transaction contemplated by this Agreement, have the ability to, nor does it intend to take any action that would impair its ability to, pay its debts from time to time incurred in connection therewith as such debts mature. The Company did not receive a qualified opinion from its auditors with respect to its most recent fiscal year end and, after giving effect to the transactions contemplated by this Agreement, does not anticipate or know of any basis upon which its auditors might issue a qualified opinion in respect of its current fiscal year. For the avoidance of doubt any disclosure of the Borrower’s ability to continue as a “going concern” shall not, by itself, be a violation of this Section 3(w).

 

 
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x. No Investment Company. The Company is not, and upon the issuance and sale of the Securities as contemplated by this Agreement will not be an “investment company” required to be registered under the Investment Company Act of 1940 (an “Investment Company”). The Company is not controlled by an Investment Company.

 

y. Insurance. Upon written request the Company will provide to the Buyer true and correct copies of all policies relating to directors’ and officers’ liability coverage, errors and omissions coverage, and commercial general liability coverage, if any.

 

z. Breach of Representations and Warranties by the Company. If the Company breaches any of the representations or warranties set forth in this Section 3, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an Event of default under Section 3.4 of the Note.

 

4. COVENANTS.

 

a. Best Efforts. The parties shall use their commercially reasonable best efforts to satisfy timely each of the conditions described in Section 6 and 7 of this Agreement.

 

b. Use of Proceeds. The Company shall use the proceeds from the sale of the Note for working capital and other general corporate purposes and shall not, directly or indirectly, use such proceeds for any loan to or investment in any other corporation, partnership, enterprise or other person (except in connection with its currently existing direct or indirect Subsidiaries).

 

c. Financial Information. The Company agrees to send or make available the following reports to the Buyer until the Buyer transfers, assigns, or sells all of the Securities:

 

(i) within ten (10) days after the filing with the SEC, a copy of its Annual Report on Form 10-K its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K; (ii) within one (1) day after release, copies of all press releases issued by the Company or any of its Subsidiaries; and (iii) contemporaneously with the making available or giving to the shareholders of the Company, copies of any notices or other information the Company makes available or gives to such shareholders. For the avoidance of doubt, filing the documents required in (i) above via EDGAR or releasing any documents set forth in (ii) above via a recognized wire service shall satisfy the delivery requirements of this Section 4(f).

 

 
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d. Listing. The Company shall promptly secure the listing of the Conversion Shares upon each national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and, so long as the Buyer owns any of the Securities, shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Conversion Shares from time to time issuable upon conversion of the Note. The Company will obtain and, so long as the Buyer owns any of the Securities, maintain the listing and trading of its Common Stock on the OTCBB, OTCQB, OTC Pink or any equivalent replacement exchange, the Nasdaq National Market (“Nasdaq”), the Nasdaq SmallCap Market (“Nasdaq SmallCap”), the New York Stock Exchange (“NYSE”), or the NYSE MKT and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”) and such exchanges, as applicable. The Company shall promptly provide to the Buyer copies of any material notices it receives from the OTCBB, OTCQB and any other exchanges or quotation systems on which the Common Stock is then listed regarding the continued eligibility of the Common Stock for listing on such exchanges and quotation systems.

 

e. Corporate Existence. So long as the Buyer beneficially owns any Note, the Company shall maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s obligations hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded corporation whose Common Stock is listed for trading on the OTCBB, OTCQB, OTC Pink, Nasdaq, NasdaqSmallCap, NYSE or AMEX.

 

f. No Integration. The Company shall not make any offers or sales of any security (other than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities.

 

g. Failure to Comply with the 1934 Act. So long as the Buyer beneficially owns the Note, the Company shall comply with the reporting requirements of the 1934 Act; and the Company shall continue to be subject to the reporting requirements of the 1934 Act.

 

h. Trading Activities. Neither the Buyer nor its affiliates has an open short position (or other hedging or similar transactions) in the common stock of the Company and the Buyer agree that it shall not, and that it will cause its affiliates not to, engage in any short sales of or hedging transactions with respect to the common stock of the Company.

 

i. Breach of Covenants. If the Company breaches any of the covenants set forth in this Section 4, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an event of default under Section 3.3 of the Note.

 

 
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5. Transfer Agent Instructions. Prior to registration of the Conversion Shares under the 1933 Act or the date on which the Conversion Shares may be sold pursuant to Rule 144 without any restriction as to the number of Securities as of a particular date that can then be immediately sold, all such certificates shall bear the restrictive legend specified in Section 2(g) of this Agreement. The Company warrants that: (i) no stop transfer instructions to give effect to Section 2(f) hereof (in the case of the Conversion Shares, prior to registration of the Conversion Shares under the 1933 Act or the date on which the Conversion Shares may be sold pursuant to Rule 144 without any restriction as to the number of Securities as of a particular date that can then be immediately sold), will be given by the Company to its transfer agent and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Note; (ii) it will not direct its transfer agent not to transfer or delay, impair, and/or hinder its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for Conversion Shares to be issued to the Buyer upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement; and (iii) it will not fail to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Conversion Shares issued to the Buyer upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement. Nothing in this Section shall affect in any way the Buyer’s obligations and agreement set forth in Section 2(g) hereof to comply with all applicable prospectus delivery requirements, if any, upon re-sale of the Securities. If the Buyer provides the Company, at the cost of the Buyer, with (i) an opinion of counsel in form, substance and scope customary for opinions in comparable transactions, to the effect that a public sale or transfer of such Securities may be made without registration under the 1933 Act and such sale or transfer is effected or (ii) the Buyer provides reasonable assurances that the Securities can be sold pursuant to Rule 144, the Company shall permit the transfer, and, in the case of the Conversion Shares, promptly instruct its transfer agent to issue one or more certificates, free from restrictive legend, in such name and in such denominations as specified by the Buyer. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer, by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section may be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section, that the Buyer shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate transfer, without the necessity of showing economic loss and without any bond or other security being required.

 

6. CONDITIONS PRECEDENT TO THE COMPANY’S OBLIGATIONS TO SELL. The obligation of the Company hereunder to issue and sell the Note to the Buyer at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions thereto, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion: 

 

a. The Buyer shall have executed this Agreement and delivered the same to the Company.

 

b. The Buyer shall have delivered the Purchase Price in accordance with Section 1(b) above.

 

 
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c. The representations and warranties of the Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing Date.

 

d. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

 

7. CONDITIONS PRECEDENT TO THE BUYER’S OBLIGATION TO PURCHASE. The obligation of the Buyer hereunder to purchase the Note at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions, provided that these conditions are for the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole discretion:

 

a. The Company shall have executed this Agreement and delivered the same to the Buyer.

 

b. The Company shall have delivered to the Buyer duly executed Note (in such denominations as the Buyer shall request) in accordance with Section 1(b) above.

 

c. The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at such time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date. The Buyer shall have received a certificate or certificates, executed by the chief executive officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Buyer including, but not limited to certificates with respect to the Company’s Certificate of Incorporation, By-laws and Board of Directors’ resolutions relating to the transactions contemplated hereby.

 

 
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d. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

 

e. No event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company including but not limited to a change in the 1934 Act reporting status of the Company or the failure of the Company to be timely in its 1934 Act reporting obligations.

 

f. The Conversion Shares shall have been authorized for quotation on the OTCBB, OTCQB or any similar quotation system and trading in the Common Stock on the OTCBB, OTCQB or any similar quotation system shall not have been suspended by the SEC or the OTCBB, OTCQB or any similar quotation system.

 

g. The Buyer shall have received an officer’s certificate described in Section 3(c) above, dated as of the Closing Date.

 

8. GOVERNING LAW; MISCELLANEOUS.

 

a. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state of New York. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens . The Company and Buyer waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

 

 
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b. Counterparts; Signatures by Facsimile. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.

 

c. Headings. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.

 

d. Severability. In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.

 

e. Entire Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the majority in interest of the Buyer.

 

f. Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

 

If to the Company, to:

EMS FIND, INC.

73 Buck Road, Suite 2

Huntingdon, PA 19006

e-mail: Investors@EMSFindapp.com

 

 
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If to the Holder, to:

GLOBAL OPPORTUNITY GROUP, LLC

395 Pearsall Avenue, Unit D Cedarhurst, NY 11516

e-mail: GabrielBerkowitz@live.com

 

Each party shall provide notice to the other party of any change in address.

 

g. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, subject to Section 2(f), the Buyer may assign its rights hereunder to any person that purchases Securities in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the 1934 Act, without the consent of the Company.

 

h. Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

 

i. Survival. The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the closing hereunder. The Company agrees to indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result of or related to any breach by the Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.

 

j. Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

k. No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

 

 
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l. Remedies.

 

(i) The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without any bond or other security being required.

 

(ii) In addition to any other remedy provided herein or in any document executed in connection herewith, Borrower shall pay Holder for all costs, fees and expenses in connection with any litigation, contest, dispute, suit or any other action to enforce any rights of Holder against Borrower in connection herewith, including, but not limited to, costs and expenses and attorneys' fees, and costs and time charges of counsel to Holder. In furtherance of the foregoing, Borrower shall pay an amount equal to $25,000 to the Holder immediately upon the Holder’s filing of any litigation, contest, dispute, suit or any other action to enforce any rights of Holder against Borrower in connection herewith, which such amount shall be used to pay Holder’s attorneys’ fees, cost and expenses. Additional amounts shall be paid by Borrower to Holder immediately upon Borrower’s receipt of invoices from Holder’s attorney evidencing the charges and fees assessed in connection with any such litigation, contest, dispute, suit or any other action to enforce any rights of Holder and, upon receiving such invoices which indicate outstanding fees in excess of $20,000 at any time, Borrower shall promptly pay an additional $25,000 to Holder to be used in satisfaction of additional attorneys’ fees, and costs and time charges of counsel to Holder. Such payments shall continue indefinitely until said litigation, contest, dispute, suit or any other action to enforce any rights of Holder against Borrower is settled to the satisfaction of the Holder. Further, Borrower agrees to save and hold Holder harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such costs and expenses.

 

m. Publicity. The Company, and the Buyer shall have the right to review a reasonable period of time before issuance of any press releases, SEC, OTCQB (or other applicable trading market), or FINRA filings, or any other public statements with respect to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of the Buyer, to make any press release or SEC, OTCQB (or other applicable trading market) or FINRA filings with respect to such transactions as is required by applicable law and regulations (although the Buyer shall be consulted by the Company in connection with any such press release prior to its release and shall be provided with a copy thereof).

 

[ - signature page follows - ]

 

 
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IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above written.  

 

EMS FIND, INC.
     
By: /s/ Steve Rubakh

Name: 

Steve Rubakh  
Title: Chief Executive Officer  

 

 

GLOBAL OPPORTUNITY GROUP, LLC
     
By: /s/ Charles Berkowitz

Name: 

Charles Berkowitz  
Title: Member  

 

AGGREGATE SUBSCRIPTION AMOUNT:

Aggregate Principal Amount of Note: US$16,500.00

Aggregate Purchase Price: US$15,000.00*

*The $15,000.00 purchase price shall be paid within a reasonable amount of time after the closing of the Note.

 

 

 

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EXHIBIT 10.13

 

NEITHER THIS SECURITY NOR THE SECURITIES AS TO WHICH THIS SECURITY MAY BE EXERCISED HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

COMMON STOCK PURCHASE WARRANT

 

EMS FIND, INC.

 

Warrant Shares: 165,000

 

Date of Issuance: August 10, 2016 (“Issuance Date”)

 

This COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received (in connection with the funding of the $16,500.00 convertible promissory note issued to the Holder (as defined below) of even date) (the “Note”), Global Opportunity Group, LLC (including any permitted and registered assigns, the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date of issuance hereof, to purchase from EMS Find, Inc., a Nevada corporation (the “Company”), 165,000 shares of Common Stock (as defined below) (the “Warrant Shares”) at the Exercise Price per share then in effect (whereby such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant). This Warrant is issued by the Company as of the date hereof in connection with that certain securities purchase agreement dated August 10, 2016, by and among the Company and the Holder (the “Purchase Agreement”).

 

 
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