Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2015 | 15-May-15 | |
Document And Entity Information | ||
Entity Registrant Name | HotApp International, Inc. | |
Entity Central Index Key | 1600347 | |
Document Type | 10-Q | |
Document Period End Date | 31-Mar-15 | |
Amendment Flag | TRUE | |
Amendment Description | This amendment is being filed to comply with regulations | |
Current Fiscal Year End Date | -19 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 5,132,000 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2015 |
CONDENSED_BALANCE_SHEETS_Unaud
CONDENSED BALANCE SHEETS (Unaudited) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
CURRENT ASSETS: | ||
Cash or cash equivalents | $3,337,274 | $4,009,884 |
Prepaid expenses | 15,765 | 5,661 |
Security deposits | 15,706 | 16,056 |
TOTAL CURRENT ASSETS | 3,368,745 | 4,031,601 |
Fixed assets, net | 101,698 | 79,400 |
Excess purchase price over net assets | 60,068 | 60,068 |
TOTAL ASSETS | 3,530,511 | 4,171,069 |
CURRENT LIABILITIES: | ||
Accounts payable and accrued expenses | 209,737 | 191,719 |
Accrued taxes and franchise fees | 250 | 3,814 |
Loan from shareholder | 4,196,837 | 4,428,438 |
TOTAL CURRENT LIABILITIES | 4,406,824 | 4,623,971 |
TOTAL LIABILITIES | 4,406,824 | 4,623,971 |
Preferred stock, $.0001 par value, 15,000,000 shares authorized, 13,800,000 issued and outstanding | 1,380 | 1,380 |
Common stock, $.0001 par value, 500,000,000 shares authorized, 5,132,000 shares issued and outstanding, as of March 31, 2015, and December 31 2014, respectively | 513 | 513 |
Accumlated other comprehensive income | 46,566 | 4,022 |
Additional paid-in capital | 213,267 | 213,267 |
Accumulated deficit | -1,138,039 | -672,083 |
TOTAL STOCKHOLDERS' EQUITY | -876,314 | -452,902 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $3,530,511 | $4,171,069 |
CONDENSED_BALANCE_SHEETS_Paren
CONDENSED BALANCE SHEETS (Parenthetical) (Unaudited) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Preferred stock, Par Value | $0.00 | $0.00 |
Preferred stock, Share Authorized | 15,000,000 | 15,000,000 |
Preferred stock, Issued | 13,800,000 | 13,800,000 |
Preferred stock, Outstanding | 13,800,000 | 13,800,000 |
Common stock, Par Value | $0.00 | $0.00 |
Common stock, Shares Authorized | 500,000,000 | 500,000,000 |
Common stock, Issued | 5,132,000 | 5,132,000 |
Common stock, Outstanding | 5,132,000 | 5,132,000 |
CONDENSED_STATEMENTS_OF_OPERAT
CONDENSED STATEMENTS OF OPERATIONS (Unaudited) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Revenues: | ||
Total Revenues | $0 | $0 |
Operating expenses: | ||
Research and product development | 268,689 | 0 |
Stock based compensation | 0 | 8,250 |
Sales and marketing | 57,329 | 0 |
Depreciation | 6,638 | 0 |
General and administrative | 133,054 | 25,407 |
General and administrative from a related party | 0 | 15,000 |
Total operating expenses | 465,710 | 48,657 |
Loss from operations | -465,710 | -48,657 |
Interest expense | 246 | 819 |
(Loss) before taxes | -465,956 | -49,476 |
Income tax provision | 0 | 0 |
Net (loss) applicable to common shareholders | -465,956 | -49,476 |
Net income (loss) per share - basic and diluted | ($0.09) | ($0.01) |
Weighted number of shares outstanding - Basic and diluted | 5,132,000 | 4,031,167 |
Net loss | -465,956 | -49,476 |
Foregin currency translation gain(loss) | 42,544 | 0 |
Total comprehensive loss | ($423,412) | ($49,476) |
CONDENSED_STATEMENTS_OF_STOCKH
CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (Unaudited) (USD $) | Preferred Stock | Common Stock | Paid-In Capital | Accumulated Other Comprehensive Income (Loss) [Member] | Accumulated Deficit | Total |
Beginning Balance, Amount at Dec. 31, 2014 | $1,380 | $513 | $213,267 | $4,022 | ($672,083) | ($452,902) |
Beginning Balances, Shares at Dec. 31, 2014 | 13,800,000 | 5,132,000 | ||||
Net loss for period | -465,956 | -465,956 | ||||
Foreign currency translation adjustment | 42,544 | 42,544 | ||||
Ending Balance, Amount at Mar. 31, 2015 | $1,380 | $513 | $213,267 | $46,566 | ($1,138,039) | ($876,314) |
Ending Balance, Shares at Mar. 31, 2015 | 13,800,000 | 5,132,000 |
CONDENSED_STATEMENTS_OF_CASH_F
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net (loss) | ($465,956) | ($49,476) |
Adjustments to reconcile net income (loss) to cash used in operating activities: | ||
Stock based compensation | 0 | 8,250 |
Depreciation | 6,638 | 0 |
Change in operating assets and liabilities: | ||
Prepaid expenses | -9,576 | 0 |
Accrued interest | 0 | 819 |
Accounts payable and accrued expenses | 1,097 | 21,795 |
Accrued taxes payable | -3,564 | 0 |
Security deposits and other assets | 459 | 0 |
Net cash used in operating activities | -470,902 | -18,612 |
CASH FLOW FROM INVESTING ACTIVITIES | ||
Acquisition of computers and office equipment | -26,944 | 0 |
Net cash (used in) investing activities | -26,944 | 0 |
CASH FLOW FROM FINANCING ACTIVITIES: | ||
Proceeds from revolving credit facility | 0 | 19,500 |
Repayment of shareholder loan | -45,244 | 0 |
Net cash provided by financing activities | -45,244 | 19,500 |
NET INCREASE (DECREASE) IN CASH | -543,090 | 888 |
Effects of exchange rates on cash | -129,520 | 0 |
CASH AND CASH EQUIVALENTS at beginning of period | 4,009,884 | 556 |
CASH AND CASH EQUIVALENTS at end of period | 3,337,274 | 1,444 |
Supplemental disclosure of cash flow information | ||
Interest | 0 | 0 |
Income Taxes | $0 | $0 |
1_The_Company_History_and_Natu
1. The Company History and Nature of the Business | 3 Months Ended | ||||||
Mar. 31, 2015 | |||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||
1. The Company History and Nature of the Business | Hotapp International Inc., formerly Fragmented Industry Exchange Inc, (the “Company” ) was incorporated in the State of Delaware on March 7, 2012 and established a fiscal year end of December 31. The Company’s initial business plan was to be a financial acquisition intermediary which would serve buyers and sellers for companies that are in highly fragmented industries. The Company determined it was in the best interest of the shareholders to expand its business plan. On October 15, 2014, through a sale and purchase agreement (the “Purchase Agreement”) the Company acquired all the issued and outstanding stock of HotApps International Pte Ltd (the “HIP”) from Singapore eDevelopment Limited (“SED”). HIP owned certain intellectual property relating to instant messaging for portable devices (the “HotApp”). HotApp is a cross-platform mobile application that incorporates instant messaging and ecommerce. It provides a free VOIP phone that allows for free calls as well as text messaged with any kind of attachment (video, photo, and audio). HotApp can be used on any mobile platform (ie IOS Online or Android). | ||||||
Pursuant the Purchase Agreement, the Company issued SED 1,000,000 shares of common stock and 13,800,000 shares of newly created convertible preferred stock. See Note 8 for further description. | |||||||
As of March 31, 2015, details of the Company’s subsidiaries are as follows: | |||||||
Subsidiaries | Date of Incorporation | Place of Incorporation | Percentage of Ownership | ||||
1st Tier Subsidiary: | |||||||
HotApps International Pte Ltd (“HIP”) | 23-May-14 | Republic of Singapore | 100% owned by Company | ||||
2nd Tier Subsidiaries: | |||||||
HotApps Call Pte Ltd | 15-Sep-14 | Republic of Singapore | 100% owned by HIP | ||||
HotApps Information Technology Co Ltd | 10-Nov-14 | Republic of China | 100% owned by HIP | ||||
HotApp International Limited | 8-Jul-14 | Hong Kong (Special Administrative Region, Republic of China) | 100% owned by HIP | ||||
The financial statements have been prepared using accounting principles generally accepted in the United States of America applicable for a going concern, which assumes that the Company will realize its assets and discharge its liabilities in the ordinary course of business. Since inception, the Company has incurred net losses of $1,138,039 and has a working capital deficit of $1,038,079 at March 31, 2015. Accordingly, these factors raise substantial doubt as to the Company’s ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty. Our ability to continue as a going concern is dependent upon achieving sales growth, management of operating expenses and ability of the Company to obtain the necessary financing to meet its obligations and pay its liabilities arising from normal business operations when they come due, and upon profitable operations. | |||||||
We may need to either borrow funds from our majority shareholder or raise additional capital through equity or debt financings. We expect our current majority shareholder will be willing and able to provide such additional capital. However, we cannot be certain that such capital (from our shareholders or third parties) will be available to us or whether such capital will be available on terms that are acceptable to us. Any such financing likely would be dilutive to existing stockholders and could result in significant financial operating covenants that would negatively impact our business. If we are unable to raise sufficient additional capital on acceptable terms, we will have insufficient funds to operate our business or pursue our planned growth. |
2_Summary_of_Significant_Accou
2. Summary of Significant Accounting Policies | 3 Months Ended | |
Mar. 31, 2015 | ||
Accounting Policies [Abstract] | ||
2. Summary of Significant Accounting Policies | Basis of presentation | |
The condensed consolidated balance sheet at March 31, 2015 was derived from audited financial statement but does not include all disclosures required by accounting principles generally accepted in the United States of America. The other information in these condensed financial statements is unaudited but, in the opinion of management, reflects all adjustments necessary for a fair presentation of the results for the periods covered. All such adjustments are of a normal recurring nature unless disclosed otherwise. These condensed financial statements, including notes, have been prepared in accordance with the applicable rules of the Securities and Exchange Commission and do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. These condensed financial statements should be read in conjunction with the financial statements and additional information as contained in our Annual Report on Form 10-K for the year ended December 31, 2014. | ||
Basis of consolidation | ||
The consolidated financial statements of the Company include the financial statements of Hotapp International Inc and its subsidiaries. All inter-company transactions and balances have been eliminated upon consolidation. | ||
Use of estimates | ||
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenues, cost and expenses in the financial statements and accompanying notes. Significant accounting estimates reflected in the Group’s consolidated financial statements include revenue recognition, the useful lives and impairment of property and equipment, valuation allowance for deferred tax assets and share-based compensation. | ||
Cash and cash equivalents | ||
Cash and cash equivalents consist of cash on hand and highly liquid investments, which are unrestricted from withdrawal or use, or which have original maturities of three months or less when purchased. | ||
Foreign currency risk | ||
Because of its foreign operations, the Company holds cash in non-US dollars. As of March 31, 2015, cash and cash equivalents of the Group includes, on an as converted basis to US dollars, $167,415 and $3,139,540, in Reminbi (“RMB”) and Singapore Dollars (“S$”), respectively. | ||
The Renminbi (“RMB”) is not a freely convertible currency. The State Administration for Foreign Exchange, under the authority of the People’s Bank of China, controls the conversion of RMB into foreign currencies. The value of the RMB is subject to changes in central government policies and to international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market. | ||
Concentration of credit risk | ||
Financial instruments that potentially expose the Group to concentration of credit risk consist primarily of cash and cash equivalents. The Group places their cash with financial institutions with high-credit ratings and quality. | ||
Fixed assets, net | ||
Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over the following estimated useful lives: | ||
Office equipment | 3 years | |
Computer equipment | 3 years | |
Furniture and Fixtures | 3 years | |
Leasehold improvement | Shorter of the lease term or estimated useful lives | |
Fair value | ||
Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability. | ||
Revenue recognition | ||
The Group recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collectability is reasonably assured. The Group currently has no revenue but plans to derive its revenue from membership subscription services, offering the platform for mobile games developed by third parties and other services, including the use of the paid emoticons and mobile marketing services. | ||
Research and development expenses | ||
Research and development expenses primarily consist of (i) salaries and benefits for research and development personnel, and office rental, general expenses and depreciation expenses associated with the research and development activities. The Company’s research and development activities primarily consist of the research and development of new features for its mobile platform and its self-developed mobile games. Expenditures incurred during the research phase are expensed as incurred. | ||
Income taxes | ||
Current income taxes are provided for in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Net operating loss carry forwards and credits are applied using enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that a portion of or all of the deferred tax assets will not be realized. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics. | ||
The impact of an uncertain income tax position on the income tax return is recognized at the largest amount that is more-likely- than-not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Interest and penalties on income taxes will be classified as a component of the provisions for income taxes. The Group did not recognize any income tax due to uncertain tax position or incur any interest and penalties related to potential underpaid income tax expenses for the years ended December 31, 2014 or 2013, respectively. | ||
Uncertainties exist with respect to the application of the New EIT Law to our operations, specifically with respect to our tax residency. The New EIT Law specifies that legal entities organized outside of the PRC will be considered residents for PRC income tax purposes if their “de facto management bodies” as “establishments that carry on substantial and overall management and control over the operations, personnel, accounting, properties, etc. of the Company.” Because of the uncertainties that have resulted from limited PRC guidance on the issue, it is uncertain whether our legal entities outside the PRC constitute residents under the New EIT Law. If one or more of our legal entities organized outside the PRC were characterized as PRC residents, the impact would adversely affect our results of operations. | ||
Foreign currency translation | ||
The functional and reporting currency of the Company is the United States dollar (“U.S. dollar”). The financial records of the Company’s subsidiaries located in Singapore and the PRC are maintained in their local currencies, the Singapore Dollar (S$) and Renminbi ("RMB"), which are also the functional currencies of these entities. | ||
Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at the rates of exchange ruling at the balance sheet date. Transactions in currencies other than the functional currency during the year are converted into functional currency at the applicable rates of exchange prevailing when the transactions occurred. Transaction gains and losses are recognized in the statement of operations. | ||
The Company’s entities with functional currency of Renminbi and Singapore Dollar, translate their operating results and financial positions into the U.S. dollar, the Company’s reporting currency. Assets and liabilities are translated using the exchange rates in effect on the balance sheet date. Revenues, expenses, gains and losses are translated using the average rate for the year. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of comprehensive income (loss). | ||
For the period ended March 31, 2015, the Company recorded other comprehensive income from translation gains of $42,544 in the consolidated financial statements. | ||
Operating leases | ||
Leases where the rewards and risks of ownership of assets primarily remain with the lessor are accounted for as operating leases. Payments made under operating leases are charged to the consolidated statements of operations on a straight-line basis over the lease periods. | ||
Comprehensive income (loss) | ||
Comprehensive income (loss) includes gains (losses) from foreign currency translation adjustments. Comprehensive income (loss) is reported in the consolidated statements of operations. | ||
Loss per share | ||
Basic loss per share is computed by dividing net loss attributable to shareholders by the weighted average number of shares outstanding during the period. | ||
The Company's convertible preferred shares are not participating securities and have no voting rights until converted to common stock. As of March 31, 2015, no shares of preferred stock are eligible for conversion into voting common stock. | ||
Recent accounting pronouncements | ||
In June 2014, the Financial Accounting Standards Board issued Accounting Standards Codification update No. 2014-10 for Development Stage entities (Topic 915). The amendments in this updated removed the definition of a development stage entity from the master glossary of the Accounting Standards Codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities from US GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. The Company has elected to adopt such provisions this reporting period. | ||
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. |
3_Prepaid_Expenses_And_Other_C
3. Prepaid Expenses And Other Current Assets | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Notes to Financial Statements | |||||||||
Prepaid Expenses and Other Current Assets | Prepaid expenses and other current assets consisted of the following: | ||||||||
March 31, | December 31, | ||||||||
2015 | 2014 | ||||||||
Rental deposit (1) | $ | 15,707 | $ | 16,056 | |||||
Prepaid rental expenses | 15,765 | 5,661 | |||||||
$ | 31,472 | $ | 21,717 | ||||||
(1) Rental deposit represent amounts paid as deposit for the Company’s offices in China and Singapore. |
4_Acquisition_Accounting
4. Acquisition Accounting | 3 Months Ended |
Mar. 31, 2015 | |
Notes to Financial Statements | |
4. Acquisition Accounting | On October 15, 2014, HotApp International Inc. entered into a Sale & Purchase Agreement (“Purchase Agreement”) with Singapore eDevelopment Limited, a Singapore company (“SED”), pursuant to which the Company acquired all of the issued and outstanding capital stock of Hotapps International Pte. Ltd., a Singapore company (the “Subsidiary”) in exchange for the issuance of 1,000,000 shares of common stock and 13,800,000 shares of a newly created class of preferred stock. The acquisition was accounted for under the acquisition method of accounting in accordance with the Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 805, Business Combinations. Under the acquisition method of accounting, the total purchase price is allocated to the net tangible and intangible assets acquired and liabilities assumed of the Subsidiary based on their estimated fair values. Based upon the consideration that the Subsidiary was purchased by SED on August 27, 2014 for S$98,000 (in Singapore dollars), the Company has reflected the fair value of the purchase price to be S$98,000 or $78,244 based on the May 23, 2014 exchange rate. The excess purchase price over the net assets as of March 31, 2015 was $60,068. |
The purchase price allocation has not been finalized, but will be within the measurement period. As of the acquisition date, October 15, 2014, the Subsidiary had $574 in prepaid expenses, $20,700 in net fixed assets, $6,894 in security deposits and a loan due shareholder of $46,344. For the period from inception through October 15, 2014, the Subsidiary incurred $18,734 in general and administrative expenses. There is no pro forma information required as the subsidiary was organized subsequent to March 31, 2014. |
5_Fixed_Assets_Net
5. Fixed Assets, Net | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Fixed Assets Net | |||||||||
Fixed assets, net | Fixed assets, net consisted of the following: | ||||||||
March 31, | December 31, | ||||||||
2015 | 2014 | ||||||||
Computer equipment | $ | 45,880 | $ | 21,613 | |||||
Office equipment | 20,003 | 13,455 | |||||||
Furniture and fixtures | 46,518 | 48,514 | |||||||
Less: accumulated depreciation | (10,703 | ) | (4,182 | ) | |||||
Fixed assets, net | $ | 101,698 | $ | 79,400 | |||||
Depreciation expenses charged to the consolidated statements of operations for the three months ended March 31, 2015 and 2014 were $6,638 and $0, respectively. |
6_Accounts_Payable_and_Accrued
6. Accounts Payable and Accrued Expense | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Accounts Payable And Accrued Expense | |||||||||
Accounts Payable and Accrued Expenses | Accrued expenses and other current liabilities consisted of the following: | ||||||||
March 31, | December 31, | ||||||||
2015 | 2014 | ||||||||
Accrued payroll | $ | 90,434 | $ | 77,513 | |||||
Accrued professional fees | 31,582 | 27,000 | |||||||
Due to affiliates | 87,721 | 86,465 | |||||||
Other | 741 | ||||||||
Total | $ | 209,737 | $ | 191,719 | |||||
7_Income_Taxes
7. Income Taxes | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Income Tax Disclosure [Abstract] | |||||||||
Income Taxes | The provision for income taxes for the three months ended March 31, 2015 and 2014, was as follows (assuming a 15% effective tax rate): | ||||||||
Three months ended March 31, | |||||||||
2015 | 2014 | ||||||||
Current Tax Provision: | |||||||||
Federal-State-Local | - | - | |||||||
Local | - | - | |||||||
Total current tax provision | - | - | |||||||
Deferred Tax Provision: | |||||||||
Loss carry-forwards | (66,160 | ) | (7,421 | ) | |||||
Change in valuation allowance | 66,160 | 7,421 | |||||||
Total deferred tax provision | - | - | |||||||
The Company had deferred income tax assets as of March 31, 2015 as follows: | |||||||||
Loss carry-forwards | $ | (166,973 | ) | (19,830 | ) | ||||
Less - valuation allowance | $ | 166,973 | (19,830 | ) | |||||
Total net deferred tax assets | - | - | |||||||
The Company provided a valuation allowance equal to the deferred income tax assets for period ended March 31, 2015 because it is not presently known whether future taxable income will be sufficient to utilize the loss carry-forwards. | |||||||||
As of March 31, 2015, the Company had approximately $1,138,039 in tax loss carry-forwards that can be utilized in future periods to reduce taxable income, and expire by the year 2035. The Company did not identify any material uncertain tax positions. The Company did not recognize any interest or penalties for unrecognized tax benefits. | |||||||||
The federal income tax returns of the Company are subject to examination by the IRS, generally for three years after they are filed. The tax returns for the years ended December 31, 2014, 2013 and 2012 are still subject to examination by the taxing authorities. |
8_Shareholder_Loans
8. Shareholder Loans | 3 Months Ended |
Mar. 31, 2015 | |
Shareholder Loans | |
Shareholder Loans | On March 31, 2015, the Company owed Singapore eDevelopment Limited (SED), its majority shareholder, $4,196,837. This amount reflects a loan of $50,000 and the USD equivalent of S$5,250,000. It also includes $24,669 in payments made by SED on behalf of the Company. On December 28, 2014, SED loaned the Company under a promissory note (the “Note”) that covered $3,812,937 (S$5,250,533.93). The Note is non-interest bearing and matures on June 25, 2015. The Note has no prepayment penalty. The other loans and expenses covered by SED for the benefit of the Company are not covered under a loan document. |
9_Share_Capitalization
9. Share Capitalization | 3 Months Ended |
Mar. 31, 2015 | |
Share Capitalization | |
Share Capitalization | The Company is authorized to issue 500 million shares of common stock and 15 million shares of preferred stock. Both share types have a $0.0001 par value. As of March 31, 2015, the Company had issued and outstanding, 5,132,000, and 13,800,000 shares of common and preferred stock, respectively |
Common Shares: | |
On August 31, 2013, the Company issued 351,000 shares of common stock to 20 new shareholders at a price of $0.05 per share for a total of $17,550. On September 30, 2013, the Company issued 95,000 shares of common stock to 11 new shareholders at a price of $0.05 per share for a total of $4,750. On October 31, 2013, the Company issued 21,000 shares of common stock to 7 new shareholders at a price of $0.05 per share for a total of $1,050. | |
On February 25, 2014, the Company issued 165,000 shares of common stock to its legal counsel in consideration of services rendered in connection with the preparation of the Company’s registration statement on Form S-1 and counsel’s agreement to defer fees in connection therewith. | |
Preferred Shares: | |
Pursuant to the Purchase Agreement, dated October 15, 2014, the Company issued 1,000,000 shares of common stock to SED. Such amount represented 19% ownership in the Company. Pursuant to the Purchase Agreement, dated October 15, 2014, the Company issued 13,800,000 shares of a class of preferred stock called Perpetual Preferred Stock (“Preferred Stock”) to SED. The Preferred Stock has no dividend or voting rights. The Preferred Stock is convertible to common stock of the Company dependent upon the number of commercial users of the Software. For each 1,000,000 commercial users of the Software (without duplication), SED shall have the right to convert 1,464,000 shares of Perpetual Preferred Stock into 7,320,000 shares of Common Stock, so that there must be a minimum of 9,426,230 commercial users in order for all of the shares of the Perpetual Preferred Stock to be converted into common stock of the Company (13,800,000 shares of Preferred Stock convertible into 69,000,000 shares of common stock). | |
Other than the conversion rights described above, the Preferred Stock has no voting, dividend, redemption or other rights. | |
On December 31, 2014, SED acquired a total of 4,024,000 shares of the Company common stock from certain shareholders, including the 3,500,000 shares owned by GBP. After such transactions SED owned 97.9% of the Company. | |
10_Commitments_and_Contingenci
10. Commitments and Contingencies | 3 Months Ended | ||||
Mar. 31, 2015 | |||||
Commitments And Contingencies | |||||
Commitments and Contingencies | |||||
On September 17, 2014, the Company entered into a lease agreement with Allbest Property Management Pte Ltd (“Allbest”) for 586 square feet of office space in Singapore. The lease commenced on September 22, 2014 and runs through June 30, 2017. The Company was required to put up a security deposit of $6,894. A new lease with Allbest was signed on February 21, 2015 for 954 square feet of office space in Singapore and commenced on 01 March 2015. Combined gross month rental payments are $5,799 . The total rent expense for the three months ended March 31, 2015 was $10,926. Under the lease arrangement the Company will be billed a month electricity charge equal to that amount consumed according to a separate meter reading. | |||||
On September 1, 2014 the Company entered into a lease agreement with Jiang Qi Hang and Xu Zi Quan for 3,470 square feet of office space in Guangzhou, PRC. The lease commenced on November 1, 2014 and runs through August 2015. Gross month rental payments are $4,998. The Company was required to put up a security deposit of $4,154. For the three months ended March 31, 2015, the Company recorded rent expense of $14,230 for this office. | |||||
The following is a schedule by years of future minimum lease payments: | |||||
2015 | $ | 77,185 | |||
2016 | 69,593 | ||||
2017 | 34,796 | ||||
Total | $ | 181,574 | |||
11_Related_Party_Balances_and_
11. Related Party Balances and Transactions | 3 Months Ended |
Mar. 31, 2015 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | The Company’s Chief Executive Officer (CEO) and Director is the Chief Executive Officer of SED. SED is the majority shareholder of the Company. The Company’s other two directors, one being the Chief Financial Officer, are affiliated to the CEO through other corporate organization where the CEO holds either a management or ownership position. As of the date of this report, the Company has not entered into any employment arrangement with any director or officer. |
As described in Note 8, the Company owes SED, its major shareholder $4,196,837. This amount is not interest bearing. | |
The Company owes $76,978 and $7,141 to Guangzhou CloudCom Technology Limited Liability Company (“CloudCom”) and Guangzhou International Real Estate Exchange Limited Liability Company (“IREE”), respectively. The CEO of the Company is the majority shareholder in CloudCom and IREE. Such amounts are reflected in accounts payable and accrued expenses on the Condensed Consolidated Balance Sheet. | |
12_Subsequent_Events
12. Subsequent Events | 3 Months Ended |
Mar. 31, 2015 | |
Subsequent Events [Abstract] | |
Subsequent Events | None to note. |
2_Summary_of_Significant_Accou1
2. Summary of Significant Accounting Policies (Policies) | 3 Months Ended | |
Mar. 31, 2015 | ||
Summary Of Significant Accounting Policies Policies | ||
Basis of Presentation | The condensed consolidated balance sheet at March 31, 2015 was derived from audited financial statement but does not include all disclosures required by accounting principles generally accepted in the United States of America. The other information in these condensed financial statements is unaudited but, in the opinion of management, reflects all adjustments necessary for a fair presentation of the results for the periods covered. All such adjustments are of a normal recurring nature unless disclosed otherwise. These condensed financial statements, including notes, have been prepared in accordance with the applicable rules of the Securities and Exchange Commission and do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. These condensed financial statements should be read in conjunction with the financial statements and additional information as contained in our Annual Report on Form 10-K for the year ended December 31, 2014. | |
Basis of consolidation | The consolidated financial statements of the Company include the financial statements of Hotapp International Inc and its subsidiaries. All inter-company transactions and balances have been eliminated upon consolidation. | |
Use of estimates | ||
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenues, cost and expenses in the financial statements and accompanying notes. Significant accounting estimates reflected in the Group’s consolidated financial statements include revenue recognition, the useful lives and impairment of property and equipment, valuation allowance for deferred tax assets and share-based compensation. | ||
Cash and Cash Equivalents | Cash and cash equivalents consist of cash on hand and highly liquid investments, which are unrestricted from withdrawal or use, or which have original maturities of three months or less when purchased. | |
Foreign currency risk | Because of its foreign operations, the Company holds cash in non-US dollars. As of March 31, 2015, cash and cash equivalents of the Group includes, on an as converted basis to US dollars, $167,415 and $3,139,540, in Reminbi (“RMB”) and Singapore Dollars (“S$”), respectively. | |
The Renminbi (“RMB”) is not a freely convertible currency. The State Administration for Foreign Exchange, under the authority of the People’s Bank of China, controls the conversion of RMB into foreign currencies. The value of the RMB is subject to changes in central government policies and to international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market. | ||
Concentration of credit risk | Financial instruments that potentially expose the Group to concentration of credit risk consist primarily of cash and cash equivalents. The Group places their cash with financial institutions with high-credit ratings and quality. | |
Fixed assets, net | Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over the following estimated useful lives: | |
Office equipment | 3 years | |
Computer equipment | 3 years | |
Furniture and Fixtures | 3 years | |
Leasehold improvement | Shorter of the lease term or estimated useful lives | |
Fair Value | Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability. | |
Revenue Recognition | The Group recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collectability is reasonably assured. The Group currently has no revenue but plans to derive its revenue from membership subscription services, offering the platform for mobile games developed by third parties and other services, including the use of the paid emoticons and mobile marketing services. | |
Research and development expenses | Research and development expenses primarily consist of (i) salaries and benefits for research and development personnel, and office rental, general expenses and depreciation expenses associated with the research and development activities. The Company’s research and development activities primarily consist of the research and development of new features for its mobile platform and its self-developed mobile games. Expenditures incurred during the research phase are expensed as incurred. | |
Income Taxes | Current income taxes are provided for in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Net operating loss carry forwards and credits are applied using enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that a portion of or all of the deferred tax assets will not be realized. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics. | |
The impact of an uncertain income tax position on the income tax return is recognized at the largest amount that is more-likely- than-not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Interest and penalties on income taxes will be classified as a component of the provisions for income taxes. The Group did not recognize any income tax due to uncertain tax position or incur any interest and penalties related to potential underpaid income tax expenses for the years ended December 31, 2014 or 2013, respectively. | ||
Uncertainties exist with respect to the application of the New EIT Law to our operations, specifically with respect to our tax residency. The New EIT Law specifies that legal entities organized outside of the PRC will be considered residents for PRC income tax purposes if their “de facto management bodies” as “establishments that carry on substantial and overall management and control over the operations, personnel, accounting, properties, etc. of the Company.” Because of the uncertainties that have resulted from limited PRC guidance on the issue, it is uncertain whether our legal entities outside the PRC constitute residents under the New EIT Law. If one or more of our legal entities organized outside the PRC were characterized as PRC residents, the impact would adversely affect our results of operations. | ||
Foreign currency translation | The functional and reporting currency of the Company is the United States dollar (“U.S. dollar”). The financial records of the Company’s subsidiaries located in Singapore and the PRC are maintained in their local currencies, the Singapore Dollar (S$) and Renminbi ("RMB"), which are also the functional currencies of these entities. | |
Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at the rates of exchange ruling at the balance sheet date. Transactions in currencies other than the functional currency during the year are converted into functional currency at the applicable rates of exchange prevailing when the transactions occurred. Transaction gains and losses are recognized in the statement of operations. | ||
The Company’s entities with functional currency of Renminbi and Singapore Dollar, translate their operating results and financial positions into the U.S. dollar, the Company’s reporting currency. Assets and liabilities are translated using the exchange rates in effect on the balance sheet date. Revenues, expenses, gains and losses are translated using the average rate for the year. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of comprehensive income (loss). | ||
For the period ended March 31, 2015, the Company recorded other comprehensive income from translation gains of $42,544 in the consolidated financial statements. | ||
Operating leases | Leases where the rewards and risks of ownership of assets primarily remain with the lessor are accounted for as operating leases. Payments made under operating leases are charged to the consolidated statements of operations on a straight-line basis over the lease periods. | |
Comprehensive income (loss) | Comprehensive income (loss) includes gains (losses) from foreign currency translation adjustments. Comprehensive income (loss) is reported in the consolidated statements of operations. | |
Loss per share | Basic loss per share is computed by dividing net loss attributable to shareholders by the weighted average number of shares outstanding during the period. | |
The Company's convertible preferred shares are not participating securities and have no voting rights until converted to common stock. As of March 31, 2015, no shares of preferred stock are eligible for conversion into voting common stock. | ||
Recent Accounting Pronouncements | In June 2014, the Financial Accounting Standards Board issued Accounting Standards Codification update No. 2014-10 for Development Stage entities (Topic 915). The amendments in this updated removed the definition of a development stage entity from the master glossary of the Accounting Standards Codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities from US GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. The Company has elected to adopt such provisions this reporting period. | |
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. | ||
Recovered_Sheet1
3. Prepaid Expenses and Other Current Assets (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Prepaid Expenses And Other Current Assets Tables | |||||||||
Prepaid Expenses and Other Current Assets | Prepaid expenses and other current assets consisted of the following: | ||||||||
March 31, | December 31, | ||||||||
2015 | 2014 | ||||||||
Rental deposit (1) | $ | 15,707 | $ | 16,056 | |||||
Prepaid rental expenses | 15,765 | 5,661 | |||||||
$ | 31,472 | $ | 21,717 | ||||||
(1) Rental deposit represent amounts paid as deposit for the Company’s offices in China and Singapore. | |||||||||
5_Fixed_Assets_Net_Tables
5. Fixed Assets, Net (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Fixed Assets Net Tables | |||||||||
Fixed Assets, Net | Fixed assets, net consisted of the following: | ||||||||
March 31, | December 31, | ||||||||
2015 | 2014 | ||||||||
Computer equipment | $ | 45,880 | $ | 21,613 | |||||
Office equipment | 20,003 | 13,455 | |||||||
Furniture and fixtures | 46,518 | 48,514 | |||||||
Less: accumulated depreciation | (10,703 | ) | (4,182 | ) | |||||
Fixed assets, net | $ | 101,698 | $ | 79,400 |
6_Accounts_Payable_and_Accrued1
6. Accounts Payable and Accrued Expense (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Accounts Payable And Accrued Expense Tables | |||||||||
Schedule of accounts payable and accrued expenses | Accrued expenses and other current liabilities consisted of the following: | ||||||||
March 31, | December 31, | ||||||||
2015 | 2014 | ||||||||
Accrued payroll | $ | 90,434 | $ | 77,513 | |||||
Accrued professional fees | 31,582 | 27,000 | |||||||
Due to affiliates | 87,721 | 86,465 | |||||||
Other | 741 | ||||||||
Total | $ | 209,737 | $ | 191,719 |
7_Income_Taxes_Tables
7. Income Taxes (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Income Taxes Tables | |||||||||
Schedule of provision for income taxes | The provision for income taxes for the three months ended March 31, 2015 and 2014, was as follows (assuming a 15% effective tax rate): | ||||||||
Three months ended March 31, | |||||||||
2015 | 2014 | ||||||||
Current Tax Provision: | |||||||||
Federal-State-Local | - | - | |||||||
Local | - | - | |||||||
Total current tax provision | - | - | |||||||
Deferred Tax Provision: | |||||||||
Loss carry-forwards | (66,160 | ) | (7,421 | ) | |||||
Change in valuation allowance | 66,160 | 7,421 | |||||||
Total deferred tax provision | - | - | |||||||
The Company had deferred income tax assets as of March 31, 2015 as follows: | |||||||||
Loss carry-forwards | $ | (166,973 | ) | (19,830 | ) | ||||
Less - valuation allowance | $ | 166,973 | (19,830 | ) | |||||
Total net deferred tax assets | - | - |
10_COMMITMENTS_CONTINGENCIES_T
10. COMMITMENTS & CONTINGENCIES (Tables) | 3 Months Ended | ||||
Mar. 31, 2015 | |||||
Commitments Contingencies Tables | |||||
Schedule by years of future minimum lease payments | 2015 | $ | 77,185 | ||
2016 | 69,593 | ||||
2017 | 34,796 | ||||
Total | $ | 181,574 | |||
3_Prepaid_Expenses_and_Other_C1
3. Prepaid Expenses and Other Current Assets (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Prepaid Expenses And Other Current Assets Details | ||
Rental deposit | $15,707 | $16,056 |
Prepaid rental expenses | 15,765 | 5,661 |
Total prepaid expenses and other current assets | $31,472 | $21,717 |
5_Fixed_Assets_Net_Details
5. Fixed Assets, Net (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Fixed Assets Net Details | ||
Computer equipment | $45,880 | $21,613 |
Office equipment | 20,003 | 13,455 |
Furniture and fixtures | 46,518 | 48,514 |
Less: accumulated depreciation | -10,703 | -4,182 |
Fixed assets, net | $101,698 | $79,400 |
6_Accounts_Payable_and_Accrued2
6. Accounts Payable and Accrued Expense (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Accounts Payable And Accrued Expense Details | ||
Accrued payroll | $90,434 | $77,513 |
Accrued professional fees | 31,582 | 27,000 |
Due to affiliates | 87,721 | 86,465 |
Other | 741 | |
Total | $209,737 | $191,719 |
7_Income_Taxes_Details
7. Income Taxes (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Income Taxes Details | ||
Federal-State-Local | $0 | $0 |
Local | 0 | 0 |
Total current tax provision | 0 | 0 |
Loss carry-forwards | -66,160 | -7,421 |
Change in valuation allowance | 66,160 | 7,421 |
Total deferred tax provision | $0 | $0 |
7_Income_Taxes_Details_1
7. Income Taxes (Details 1) (USD $) | Mar. 31, 2015 | Mar. 31, 2014 |
Income Taxes Details 1 | ||
Loss carry-forwards | ($166,973) | ($19,830) |
Less - valuation allowance | 166,973 | -19,830 |
Total net deferred tax assets | $0 | $0 |
7_Income_Taxes_Details_Narrati
7. Income Taxes (Details Narrative) (USD $) | 3 Months Ended |
Mar. 31, 2015 | |
Income Taxes Details Narrative | |
Tax loss carryforward | $1,138,039 |
Expiration of carryforward | year 2035 |
10_COMMITMENTS_CONTINGENCIES
10. COMMITMENTS & CONTINGENCIES (USD $) | Mar. 31, 2015 |
Commitments Contingencies | |
2015 | $77,185 |
2016 | 69,593 |
2017 | 34,796 |
Total | $181,574 |