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: March 31, 2015
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from: _____________ to _____________
ENXNET, INC.
(Exact name of registrant as specified in its charter)
| Oklahoma | 000-30675 | 73-1561191 |
| (State or Other Jurisdiction of Incorporation or Organization) | (Commission File Number) | (I.R.S. Employer Identification No.) |
7450 S. Winston Ave, Tulsa, OK 74136
(Address of principal executive offices & zip code)
(918) 494-6663
Registrant’s telephone number, including area code:
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common Stock
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 Act. [ ] Yes [X] No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark 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 (§ 229.405 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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to this Form 10K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):
| Large accelerated filer | [ ] | Accelerated filer | [ ] |
Non-accelerated filer (Do not check if a smaller reporting company) |
[ ] | Smaller reporting company | [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No
The aggregate market value of the voting common equity held by non-affiliates of the registrant on September 30, 2013 (the last business day of the registrant’s most recently completed second fiscal quarter), was $1,190,682.
On July 8, 2015, the registrant had 52,601,518 shares of common outstanding.
Documents incorporated by reference: None.
ENXNET, INC.
INDEX
| PAGE | ||
| PART I | ||
| Item 1. | Description of Business. | 3 |
| Item 1A. | Risk Factors. | 5 |
| Item 1B. | Unresolved Staff Comments. | 6 |
| Item 2. | Description of Property. | 6 |
| Item 3. | Legal Proceedings. | 6 |
| Item4. | Mine Safety Procedures. | 6 |
| PART II | ||
| Item 5. | Market for Common Equity and Related Stockholder Matters. | 7 |
| Item 6. | Selected Financial Data. | 7 |
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operation. | 7 |
| Item 8. | Financial Statements. | 9 |
| Item 9. | Changes In And Disagreements With Accountants On Accounting and Financial Disclosure. | 21 |
| Item 9A. | Controls and Procedures. | 21 |
| Item 9B. | Other Information. | 22 |
| PART III | ||
| Item 10. | Directors, Executive Officers, and Corporate Governance. | 22 |
| Item 11. | Executive Compensation. | 23 |
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. | 24 |
| Item 13. | Certain Relationships and Related Transactions. | 25 |
| Item 14. | Principal Accountant Fees and Services. | 25 |
| PART IV | ||
| Item 15. | Exhibits. | 26 |
| Signatures | 27 | |
| Exhibit Index | 28 | |
PART I
FORWARD LOOKING STATEMENTS
This Report on Form 10K (including the Exhibits hereto) contains certain “forward-looking statements” within the meaning of the of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995, such as statements relating to our financial condition, results of operations, plans, objectives, future performance and business operations. Such statements relate to expectations concerning matters that are not historical fact. Accordingly, statements that are based on management’s projections, estimates, assumptions and judgments are forward-looking statements. These forward-looking statements are typically identified by words or phrases such as “believe,” “expect,” “anticipate,” “plan,” “estimate,” “approximately,” “intend,” and other similar words and expressions, or future or conditional verbs such as “should,” “would,” “could,” and “may.” In addition, we may from time to time make such written or oral “forward-looking statements” in future filings (including exhibits thereto) with the Securities and Exchange Commission (the “Commission” or “SEC”), in our reports to stockholders, and in other communications made by or with our approval. These forward-looking statements are based largely on our current expectations, assumptions, plans, estimates, judgments and projections about our business and our industry, and they involve inherent risks and uncertainties. Although we believe that these forward-looking statements are based upon reasonable estimates and assumptions, we can give no assurance that our expectations will in fact occur or that our estimates or assumptions will be correct, and we caution that actual results may differ materially and adversely from those in the forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties, contingencies and other factors that could cause our or our industry’s actual results, level of activity, performance or achievement to differ materially from those discussed in or implied by any forward-looking statements made by or on behalf of us and could cause our financial condition, results of operations or cash flows to be materially adversely effected. Accordingly, investors and all others are cautioned not to place undue reliance on such forward-looking statements. In evaluating these statements, some of the factors that you should consider include those described below under “Risk Factors” and elsewhere in this Report on Form 10K.
ITEM 1. BUSINESS.
Overview
EnXnet, Inc. (the “Company”) was formed under the laws of the State of Oklahoma on March 30, 1999. EnXnet is a natural gas and petroleum exploitation, development and production company engaged in locating and developing hydrocarbon resources, primarily in the Rocky Mountain region. The Company’s principal business strategy is to enhance stockholder value by generating and developing high-potential exploitation resources in these areas. The Company’s principal business is the acquisition of leasehold interests in petroleum and natural gas rights, either directly or indirectly, and the exploitation and development of properties subject to these leases. The Company is currently searching for opportunities in the natural gas and petroleum industry. Our initial goal is to lease the mineral rights of acreage that has a high likelihood of becoming a producing property. Once a property is leased, we will require additional funding to drill and complete if necessary a producing natural gas and petroleum well.
Products and Services
Natural gas and petroleum Industry
The Company is searching for opportunities in the natural gas and petroleum industry. Our initial goal is to lease the mineral rights of acreage that has a high likelihood of becoming a producing property. Once a property is leased, we will require additional funding to drill and complete if necessary a producing natural gas and petroleum well.
Legacy Products
Thermal Air Control Unit
The TAC Unit provides air conditioning and heating for semi-truck cabs that are now required to meet State and Federal engine idling rules. The Tac Unit uses a 12 Volt Technology and is operated solely from the truck’s auxiliary batteries. The batteries are recharged by the truck’s alternator while running. With the TAC Unit, a truck can remain parked with the motor off and maintain a comfortable environment for the driver while burning no diesel fuel for up to 10 hours on the auxiliary battery system. The TAC Unit’s technology has the ability to serve numerous other vehicle applications as well. The patent for the TAC Unit was received on January 11, 2011 and the rights, title and patent were acquired by the Company on July 7, 2011.
ThinDisc
The Thin Disc is our Optical Disc Having a Reduced Planar Thickness. Thin Disc’s primary function is to make any size optical disc thinner with reading capability in players that play optical disc media. The Company has filed for a United States and an international patent covering the technology included in the Thin Disc. On March 31, 2010 the Company announced receiving the official Patent for the Optical Disc Having A Reduced Planar Thickness.
Tap ‘n Go II
We received a patent for our Optical Disc Having Remote Reading Capabilities on May 27, 2010.
Disc Security Tag
Disc Security Tag, (DSTag), is an invention which utilizes proprietary Electronic Article Surveillance (EAS) tags embedded or adhered to a DVD or CD during the injection mold phase of the manufacturing process. Products, to which this process is applied, provide unique item identification for its customers and clients. Manufacturers that use this product are given the opportunity to enhance the integrity of their product while providing added value to their customers (retailers). This will help reduce or stop the enormous losses attributed to employee and retail theft. Additionally, it can give content developers, manufacturers, and distributors the ability to protect their investment by providing an efficient means to authenticate legitimate products over counterfeit products produced by unauthorized manufacturers. On November 2, 2010 the Company received the patent for DSTag. On September 29, 2009 the Company announced receiving the official Patent for the Passive Resonant Reflector.
Manufacturing
The Company will not manufacture any of its products. We will outsource any manufacturing needs.
Distribution
The Company has not distributed any of the products created with the use of the Company’s technology.
Marketing
The Company is attempting to license Thin Disc technology , Security Tags, and Tap ‘n Go to other companies or manufacturers.
Patents
The patent for the TAC Unit was received on January 11, 2011 and the rights, title and patent were acquired by the Company on July 7, 2011.
The Company has received a patent covering ThinDisc which is our optical disc having a reduced planar thickness. The Company believes that this patent will afford protection under existing patent laws against infringement. There is no assurance, however, that third parties will not attempt to infringe on the ThinDisc patents.
The Company has received a patent covering our Optical Disc Having Remote Reading Capabilities. The Company believes that this Patent will afford protection under existing Patent law against infringement. There is no assurance, however, that third parties will not attempt to infringe on the Optical Disc Having Remote Reading Capabilities patents.
The Company has received a patent covering Disc Security Tag (DSTag). The Company believes that this patent will afford protection under existing patent laws against infringement. There is no assurance, however, that third parties will not attempt to infringe on the Disc Security Tag (DSTag) patents.
The Company has received a patent covering an Antenna for a Storage Disc. The Company believes that this Patent will afford protection under existing Patent law against infringement. There is no assurance, however, that third parties will not attempt to infringe on the Antenna for a Storage Disc design Patents.
Competition
Our natural gas and petroleum exploitation development and
our future production activities will take place in a highly competitive and speculative business atmosphere. In seeking
suitable natural gas and petroleum properties for acquisition, we compete with a number of other companies operating in our
areas of interest, including large natural gas and petroleum companies and other independent operators. Many of our
competitors have greater financial resources than we do, which is exacerbated due to our current liquidity position. Also,
many have been engaged in the exploration and production business for a much longer time than we have or not only explore for
and produce, but also market natural gas and oil and other products on a regional, national or worldwide basis. Many of our
competitors also have a substantially larger operating staff than we do. These competitors may be able to pay more for
productive natural gas and oil properties and exploratory prospects and define, evaluate, bid for and purchase a greater
number of properties and prospects than us. In addition, these competitors may have a greater ability to continue exploration
activities during periods of low market prices. Our ability to acquire additional properties and to discover reserves in the
future will depend on our ability to evaluate and select suitable properties and to consummate transactions in a highly
competitive environment.
Governmental Regulation
If our natural gas and petroleum activities are successful, we will be subject are subject to stringent federal, regional, state, and local laws and regulations governing occupational safety and health, the discharge of materials into the environment or otherwise relating to environmental protection. These laws and regulations may require the acquisition of permits before conducting drilling or other regulated activities, limit or prohibit operations on environmentally sensitive lands such as wetlands or wilderness areas, require capital expenditures to limit or prevent emissions or discharges, impose specific safety and health criteria addressing worker protection, and place restrictions on the management of wastes. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of remedial obligations, and the issuance of injunctive relief. Any changes in environmental laws and regulations that result in more stringent and costly well drilling, construction, completion or water management activities, or waste handling, disposal or cleanup requirements could have an adverse effect on our financial position and results of operations. We may be unable to pass on such increased compliance costs to our customers. Moreover, accidental releases or spills may occur in the course of our operations, and we cannot assure you that we will not incur significant costs and liabilities as a result of such releases or spills, including any third-party claims for damage to property, natural resources or persons. While we believe that we are in substantial compliance with current environmental laws and regulations and that continued compliance with existing requirements will not materially affect us, there is no assurance that this trend will continue in the future.
Company’s Office
The Company’s offices and technology center are located at 7450 S. Winston Ave, Tulsa, OK 74136 and its telephone number is (918) 494-6663.
Employees
The Company has no full-time employee and two consultants. The president and CEO of the Company is not receiving or accruing a salary at this time.
ITEM 1A. RISK FACTORS.
We are a smaller reporting issuer as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended and are not required to provide the information under this item.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company does not own any real property. The Company owns personal property in the form of patents, licenses and office equipment.
The Company conducts its business from the office of its CEO, Ryan Corley, rent free. The office is located at 7450 S. Winston Ave. in Tulsa, OK. The Company’s offices are currently adequate and suitable for its operations.
ITEM 3. LEGAL PROCEEDINGS.
We may from time to time be a party to various legal actions in the ordinary course of business. There can be no assurance that the Company will not be a party to litigation in the future that could have an adverse effect on the Company.
ITEM 4. MINE SAFETY DISCLOSURES.
None.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
The Company’s stock is traded under the symbol “EXNT” on the OTCQB, and the symbol “AOHMDW” on the Frankfurt, Berlin and Stuttgart Stock Exchanges in Germany. There can be no assurance that an active or regular trading market for the common stock will develop or that, if developed, will be sustained. Various factors, such as operating results, changes in laws, rules or regulations, general market fluctuations, changes in financial estimates by securities analysts and other factors may have a significant impact on the market of the Company securities. The market price for the securities of public companies often experience wide fluctuations that are not necessarily related to the operating performance of such public companies such as high interest rates or impact of overseas markets.
The following table shows the reported high and low closing bid prices per share for our common stock based on information provided by the OTC Bulletin Board. The over-the-counter market quotations set forth for our common stock reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
| High | Low | ||||
| Period from January 1, 2015 to March 31, 2015 | $ | 0.07 | $ | 0.01 | |
| Period from October 1, 2014 to December 31, 2014 | $ | 0.03 | $ | 0.01 | |
| Period from July 1, 2014 to September 30, 2014 | $ | 0.04 | $ | 0.01 | |
| Period from April 1, 2014 to June 30, 2014 | $ | 0.05 | $ | 0.02 | |
| Period from January 1, 2014 to March 31, 2014 | $ | 0.07 | $ | 0.03 | |
| Period from October 1, 2013 to December 31, 2013 | $ | 0.09 | $ | 0.01 | |
| Period from July 1, 2013 to September 30, 2013 | $ | 0.09 | $ | 0.04 | |
| Period from April 1, 2013 to June 30, 2013 | $ | 0.08 | $ | 0.05 | |
Holders
There were approximately 117 stockholders of record of the Common Stock as of June 4, 2015 . This does not reflect those shares held beneficially or in “street” name.
Dividend Policy
The Company has never declared or paid any cash dividends on its Common Stock, and the Company currently intends to retain any future earnings to fund the development of its business and therefore does not anticipate paying any cash dividends on its Common Stock in the foreseeable future. Future declaration and payment of dividends on its Common Stock, if any, will be determined in light of the then-current conditions, including the Company’s earnings, operations, capital requirements, financial conditions, restrictions in financing agreements, and other factors deemed relevant by the Board of Directors.
Recent Sales of Unregistered Securities
None
ITEM 6. SELECTED FINANCIAL DATA.
We are a smaller reporting issuer as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended and are not required to provide the information under this item.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following plan of operation, discussion of the results of operations and financial conditions should be read in conjunction with the financial statements and related notes appearing in this report.
Overview
EnXnet, Inc. (the “Company”) was formed under the laws of the State of Oklahoma on March 30, 1999. It is a business and technology development enterprise engaged in the development, marketing, and licensing of emerging technologies and innovative business strategies and practices. EnXnet is primarily focusing on products, solutions and services that support and enhance environmental products and multimedia management.
The Company currently can satisfy its current cash requirements for approximately 30 days and has a plan to raise additional working capital by the sale of shares of the Company common stock to select perspective individuals and from additional borrowings. This plan should provide the additional necessary funds required to enable the Company to continue marketing and developing its products until the Company can generate enough cash flow from sales to sustain its operations.
The Company does not anticipate any
significant cash requirements for the purchase of any facilities.
The Company currently has no full-time employee on the payroll. Currently our outside consultants are used for the further development of our products.
Results of Operations.
Year Ended March 31, 2015 Compared to Year Ended March 31, 2014.
Revenues.
We had no revenues from operations for the years ending March 31, 2015 and 2014. At the present time we are focusing our efforts on searching for an opportunity in the natural gas and petroleum industry.
Operating Expenses.
The Company incurred operating expenses for the years ended March 31, 2015 and 2014 of $102,146 and $135,453. The decrease in operating expenses was $33,307 or (24.6%). Expense categories changed from year to year as follows:
| • | Consulting expense decreased by $15,210 |
| • | Impairment expense increased by $33,634 |
| • | Payroll expenses decreased by $27,153 |
| • | Professional services expense decreased by $15,555 |
| • | All other expense categories decreased by $9,023 |
Consulting expenses for the year ended March 31, 2015 decreased $15,210 from the year ended March 31, 2014. The decrease in consulting expenses is due to decreased amounts paid for the development of the TAC Unit.
Impairment expense increased by $33,634 as we fully impairment the rights to the TAC Unit during the current year. We could not achieve desirable results that were marketable on our test units.
Payroll expense decreased for the year ended March 31, 2015 by $27,153 from the previous year. The decrease was a result of not issuing stock to employees, reducing our workforce to zero and other related expenses. In the years ended March 31, 2015 and 2014 the value of stock options issued to employees, officers and directors was recorded in the amount of $1,961 and $24,661 for options that had vested. In the years ended March 31, 2015 and 2014 we spent $10,802 and $25,912 on salaries and taxes for employees.
Professional services expense decreased for the year ended March 31, 2015 by $15,555 from the previous year. The decrease is attributed to a lower amount paid for EDGAR conversion services in the current year and stock options that were issued in the prior year which were not issued in the current year.
We incurred net losses for the years ended March 31, 2015 and 2014 of $132,703 and $160,376 or $(0.00) and $(0.00) per share.
Liquidity and Capital Resources.
The Company from inception through June 4, 2015 has issued 52,601,518 shares of its Common Stock to officers, directors and others. The Company has little operating history and no material assets. The Company has $137,509 in cash as of March 31, 2015, of which $115,000 is restricted for use in natural gas and petroleum exploration.
The Company has a limited source of revenue and has incurred operating losses since inception. The Company has incurred operating losses each year since its inception and has had a working capital deficit at March 31, 2015 and 2014. The working capital deficit at March 31, 2015 and 2014 was $1,641,378 and $1,597,592, respectively. These factors raise substantial doubt about the Company’s ability to continue as a going concern. As a result of these factors, the Company’s independent certified public accountants have included an explanatory paragraph in their reports on the Company’s March 31, 2015 and 2014 financial statements which expressed substantial doubt about the Company’s ability to continue as a going concern.
Contractual Obligations.
The Company at the present time has no material commitments for capital expenditures. If capital expenditures are required after operations commence, the Company will pay for the same through the sale of common stock; or through loans from third parties. There is no assurance, however, that such financing will be available and in the event such financing is not available, the Company may have to cease operations.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES.
Management’s discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements. These statements have been prepared in accordance with generally accepted accounting principles in the United States of America.
Use of estimates in preparation of financial statements
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, based on historical experience, and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The following critical accounting policies rely upon assumptions, judgments and estimates and were used in the preparation of our consolidated financial statements:
Licenses
The costs associated with acquiring exclusive licensing rights to patented technology have been capitalized and are being charged to expense using the straight line method of amortization over ten years, the estimated remaining useful lives of the patents.
Fair Value of Financial Instruments
The carrying amounts reported in the balance sheets as of March 31, 2015 and 2014 for cash equivalents and accounts payable and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments.
Contingent Liability
We may have certain contingent liabilities with respect to material existing or potential claims, lawsuits and other proceedings. We accrue liabilities when it is probable that future cost will be incurred and such cost can be measured.
Off Balance Sheet Arrangements
We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
ITEM 8. FINANCIAL STATEMENTS.
The information for this Item is included beginning on Page F-1 of this Annual Report.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
EnXnet, Inc.
Tulsa, Oklahoma
We have audited the accompanying balance sheets of EnXnet, Inc. (the “Company”) as of March 31, 2015 and 2014 and the related statements of expenses, stockholders’ deficit, and cash flows for the years ended March 31, 2015 and 2014. These 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 an 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 audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2015 and 2014 and the results of its operations and its cash flows for the years then ended and 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 1 to the financial statements, the Company suffered recurring losses since inception, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters also are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
MALONEBAILEY, LLP
www.malonebailey.com
Houston, Texas
July 14, 2015
ENXNET, INC
BALANCE SHEETS
| March 31, | ||||||||
| 2015 | 2014 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | 22,529 | $ | 23,439 | ||||
| Restricted cash | 115,000 | — | ||||||
| Prepaid expenses | 559 | 544 | ||||||
| TOTAL CURRENT ASSETS | 138,088 | 23,983 | ||||||
| OTHER ASSETS | ||||||||
| Patent technology, net of accumulated amortization of $41,404 and $5,698 respectively | — | 35,706 | ||||||
| Deposits | 1,137 | 1,137 | ||||||
| TOTAL OTHER ASSETS | 1,137 | 36,843 | ||||||
| TOTAL ASSETS | $ | 139,225 | $ | 60,826 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable and accrued expenses | $ | 567,865 | $ | 547,557 | ||||
| Advances from officer - related party | 20,500 | 12,500 | ||||||
| Advances from stockholder | 31,000 | 32,400 | ||||||
| Convertible notes payable | 325,000 | 200,000 | ||||||
| Convertible notes payable - related party | 835,101 | 829,118 | ||||||
| TOTAL CURRENT LIABILITIES | 1,779,466 | 1,621,575 | ||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Common stock, $0.00005 par value; 200,000,000 shares authorized, 52,601,518 and 49,651,518 shares issued and outstanding | 2,630 | 2,483 | ||||||
| Additional paid-in capital | 5,629,294 | 5,576,230 | ||||||
| Accumulated deficit | (7,172,165 | ) | (7,039,462 | ) | ||||
| Other comprehensive loss | (100,000 | ) | (100,000 | ) | ||||
| TOTAL STOCKHOLDERS’ DEFICIT | (1,640,241 | ) | (1,560,749 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 139,225 | $ | 60,826 | ||||
The accompanying notes are an integral part of these audited financial statements.
ENXNET, INC
STATEMENTS OF EXPENSES
| For the Years Ended | ||||||||
| March 31, | ||||||||
| 2015 | 2014 | |||||||
| EXPENSES | ||||||||
| Consulting fees | $ | 14,200 | $ | 29,410 | ||||
| Depreciation & amortization | 35,706 | 2,072 | ||||||
| Payroll | 12,763 | 39,915 | ||||||
| Professional services | 23,568 | 39,123 | ||||||
| Occupancy and office | 11,929 | 18,913 | ||||||
| Travel | 1,922 | 3,876 | ||||||
| Other | 2,058 | 2,144 | ||||||
| Total Expenses | 102,146 | 135,453 | ||||||
| LOSS FROM OPERATIONS | (102,146 | ) | (135,453 | ) | ||||
| OTHER EXPENSE | ||||||||
| Interest expense | (30,557 | ) | (24,923 | ) | ||||
| NET LOSS | $ | (132,703 | ) | $ | (160,376 | ) | ||
| BASIC AND DILUTED NET LOSS PER SHARE | $ | (0.00 | ) | $ | (0.00 | ) | ||
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED | 50,727,902 | 49,278,367 | ||||||
The accompanying notes are an integral part of these audited financial statements.
ENXNET, INC
STATEMENT OF STOCKHOLDERS’ DEFICIT
For the years ended March 31, 2014 and March 31, 2015
| Additional | Other | Total | ||||||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Comprehensive | Stockholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Loss | Deficit | |||||||||||||||||||
| Balance, March 31, 2013 | 47,981,518 | $ | 2,399 | $ | 5,468,153 | $ | (6,879,086 | ) | $ | (100,000 | ) | $ | (1,508,534 | ) | ||||||||||
| Common stock issued for: | ||||||||||||||||||||||||
| Cash | 1,570,000 | 79 | 78,421 | — | — | 78,500 | ||||||||||||||||||
| Services | 100,000 | 5 | 4,995 | — | — | 5,000 | ||||||||||||||||||
| Stock options issued | — | — | 24,661 | — | — | 24,661 | ||||||||||||||||||
| Net loss | — | — | — | (160,376 | ) | — | (160,376 | ) | ||||||||||||||||
| Balance, March 31, 2014 | 49,651,518 | $ | 2,483 | $ | 5,576,230 | $ | (7,039,462 | ) | $ | (100,000 | ) | $ | (1,560,749 | ) | ||||||||||
| Common stock issued for: | ||||||||||||||||||||||||
| Cash | 700,000 | 35 | 34,965 | — | — | 35,000 | ||||||||||||||||||
| Services | 2,000,000 | 100 | 11,900 | — | — | 12,000 | ||||||||||||||||||
| Debt issuance cost | 250,000 | 12 | 4,238 | — | — | 4,250 | ||||||||||||||||||
| Stock options issued | — | — | 1,961 | — | — | 1,961 | ||||||||||||||||||
| Net loss | — | — | — | (132,703 | ) | — | (132,703 | ) | ||||||||||||||||
| Balance, March 31, 2015 | 52,601,518 | $ | 2,630 | $ | 5,629,294 | $ | (7,172,165 | ) | $ | (100,000 | ) | $ | (1,640,241 | ) | ||||||||||
The accompanying notes are an integral part of these audited financial statements.
ENXNET, INC
STATEMENTS OF CASH FLOWS
| For the Years Ended | ||||||||
| March 31, | ||||||||
| 2015 | 2014 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | (132,703 | ) | $ | (160,376 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | — | 2,072 | ||||||
| Impairment expense | 35,706 | — | ||||||
| Common stock issued for services | 12,000 | 5,000 | ||||||
| Stock options issued | 1,961 | 24,661 | ||||||
| Debt issuance cost | 4,250 | — | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | (15 | ) | 483 | |||||
| Accounts payable & accrued expenses | 20,308 | 23,001 | ||||||
| Net cash used in operating activities | (58,493 | ) | (105,159 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from stock sales | 35,000 | 78,500 | ||||||
| Proceeds from note payable | 125,000 | 20,000 | ||||||
| Proceeds from related party | 2,583 | — | ||||||
| Proceeds from advances from officer and stockholder | 10,000 | 23,000 | ||||||
| Repayment of advances | — | (1,000 | ) | |||||
| Net cash provided by financing activities | 172,583 | 120,500 | ||||||
| NET INCREASE (DECREASE) IN CASH | 114,090 | 15,341 | ||||||
| CASH - Beginning of period | 23,439 | 8,098 | ||||||
| CASH - End of period | $ | 137,529 | $ | 23,439 | ||||
| SUPPLEMENTAL CASH FLOW DISCLOSURES: | ||||||||
| Interest expense | $ | — | $ | — | ||||
| Income taxes | $ | — | $ | — | ||||
| NON-CASH FINANCING AND INVESTING TRANSACTIONS: | ||||||||
| Conversion of accounts payable- related party to note payable- related party | $ | 3,400 | 20,000 | |||||
The accompanying notes are an integral part of these audited financial statements.
ENXNET, INC.
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED March 31, 2015 and 2014
NOTE 1 – DESCRIPTION OF BUSINESS AND GOING CONCERN
EnXnet, Inc. (the “Company”) was formed in Oklahoma on March 30, 1999. EnXnet is a natural gas and petroleum exploitation, development and production company engaged in locating and developing hydrocarbon resources, primarily in the Rocky Mountain region. The Company’s principal business strategy is to enhance stockholder value by generating and developing high-potential exploitation resources in these areas. The Company’s principal business is the acquisition of leasehold interests in petroleum and natural gas rights, either directly or indirectly, and the exploitation and development of properties subject to these leases. The Company is currently searching for opportunities in the natural gas and petroleum industry. Our initial goal is to lease the mineral rights of acreage that has a high likelihood of becoming a producing property. Once a property is leased, we will require additional funding to drill and complete if necessary a producing natural gas and petroleum well.
The Company has a working capital deficit and has incurred losses since inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern.
Funds required to carry out management’s plans are expected to be derived from future stock sales and borrowings from outside parties. There can be no assurances that the Company will be successful in executing its plans.
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES
Cash and cash equivalents
Cash equivalents are highly liquid investments with an original maturity of three months or less.
Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States necessarily requires management to make estimates and assumptions that affect the amounts reported in the financial statements. We regularly evaluate estimates and judgments based on historical experience and other relevant facts and circumstances. Actual results could differ from those estimates.
Fixed Assets
Fixed assets are recorded at cost. Depreciation and amortization are provided using the straight-line method over the useful lives of the respective assets, typically 3-10 years. Major additions and betterments are capitalized. Upon retirement or disposal, the cost and related accumulated depreciation or amortization is removed from the accounts and any gain or loss is reflected in operations.
Depreciation expenses included in operating expenses for the years ended March 31, 2015 and 2014 were $-0- and $-0-, respectively.
Impairment of long-lived assets
The Company reviews the carrying value of its long-lived assets annually or whenever events or changes in circumstances indicate that the historical-cost carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the asset by comparing the undiscounted future net cash flows expected to result from the asset to its carrying value. If the carrying value exceeds the undiscounted future net cash flows of the asset, an impairment loss is measured and recognized. An impairment loss is measured as the difference between the net book value and the fair value of the long-lived asset. Fair value is estimated based upon either discounted cash flow analysis or estimated salvage value. As of March 31, 2015 and 2014, the company recognized $35,706 and $0 of impairment expense.
ENXNET, INC.
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED March 31, 2015 and 2014
Goodwill and other intangibles
Goodwill and other intangibles with indefinite lives are not amortized but are reviewed for impairment at least annually, or more frequently if an event or circumstance indicates that an impairment may have occurred. To test for impairment, the fair value of each reporting unit is compared to the related net book value, including goodwill. If the net book value of the reporting unit exceeds the fair value, an impairment loss is measured and recognized. An income approach is utilized to estimate the fair value of each reporting unit. The income approach is based on the projected debt-free cash flow, which is discounted to the present value using discount factors that consider the timing and risk of cash flows.
Licenses
The costs associated with acquiring exclusive licensing rights to patented technology have been capitalized and are being charged to expense using the straight line method of amortization over ten years, the estimated remaining useful lives of the patents.
Amortization expenses included in operating expenses for the years ended March 31, 2015 and 2014 were $-0- and $2,072, respectively.
Stock Based Compensation
FASB ASC 718 requires that measurement of the cost of employee services received in exchange for an award of equity instruments be based on the grant-date fair value of the award. Such costs are recorded over the periods employees are required to render services in exchange for the awards.
Income taxes
Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. These assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse.
We have net operating loss carryforwards available to reduce future taxable income. Future tax benefits for these net operating loss carryforwards are recognized to the extent that realization of these benefits is considered more likely than not. To the extent that we will not realize a future tax benefit, a valuation allowance is established.
Basic and diluted net loss per share
Basic loss per share is computed using the weighted average number of shares of common stock outstanding during each period. Diluted loss per share includes the dilutive effects of common stock equivalents on an “as if converted” basis. For the years ended March 31, 2015 and 2014 potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share
Recent Accounting Pronouncements
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operation, financial position or cash flows.
Reclassifications
Certain amounts have been reclassified from the prior financial statements for comparative purposes.
ENXNET, INC.
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED March 31, 2015 and 2014
NOTE 3 – INCOME TAXES
At March 31, 2015 and 2014, the Company had net deferred tax assets of approximately $940,000 and $900,000 principally arising from net operating loss carryforwards for income tax purposes. As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the net deferred tax asset, a valuation allowance equal to the net deferred tax asset has been established at March 31, 2015 and 2014. At March 31, 2015, the Company has net operating loss carry forwards totaling approximately $2,764,000 which will begin to expire in the year 2015.
Income tax provision (benefit) for the years ended March 31, 2015 and 2014 is summarized below:
| 2015 | 2014 | |||||||
| Current: | ||||||||
| Federal | $ | — | $ | — | ||||
| State | — | — | ||||||
| Total current | — | — | ||||||
| Deferred: | ||||||||
| Federal | (940,000 | ) | (900,000 | ) | ||||
| State | — | — | ||||||
| Total deferred | (940,000 | ) | (900,000 | ) | ||||
| Increase in valuation allowance | 940,000 | 900,000 | ||||||
The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate before provision for income taxes. The sources and tax effect of the differences are as follows:
| 2015 | 2014 | |||||||
| Income tax provision at the federal statutory rate | 34.0 | % | 34.0 | % | ||||
| State income taxes, net of federal benefit | — | % | — | % | ||||
| Effect of net operating loss | (34.0 | %) | (34.0 | %) | ||||
| — | % | — | % | |||||
Components of the net deferred income tax assets at March 31, 2015 and 2014 were as follows:
| 2015 | 2014 | |||||||
| Net operating loss carryover | $ | 2,764,000 | $ | 2,647,000 | ||||
| Valuation allowance | (2,764,000 | ) | (2,647,000 | ) | ||||
| $ | — | $ | — | |||||
ASC 740 requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of evidence, it is more than likely than not that some portion or all of the deferred tax assets will not be recognized. After consideration of all the evidence, both positive and negative, management has determined that a $940,000 and $900,000 allowance at March 31, 2015 and 2014, respectively, is necessary to reduce the deferred tax assets to the amount that will more likely than not be realized. The change in the valuation allowance for the current year is $40,000.
As of March 31, 2015, we have a net operating loss carry forward of approximately $2,764,000. The loss will be available to offset future taxable income. If not used, this carry forward will expire as follows:
ENXNET, INC.
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED March 31, 2015 and 2014
NOTE 4 – CONVERTIBLE NOTES PAYABLE
| Convertible notes payable-related party consists of the following: | March 31, | |||||||
| 2015 | 2014 | |||||||
| 3% convertible note payable to Ryan Corley, President of the Company, due on demand | — | 21,705 | ||||||
| 2% convertible notes payable to Ryan Corley, President of the Company, due on demand | — | 640,750 | ||||||
| 2% convertible notes payable to Ryan Corley, President of the Company, due on demand, convertible into a maximum of 33,222,750 common shares | 664,455 | — | ||||||
| 2% convertible note payable to an entity controlled by Ryan Corley, President of the Company, due on demand, convertible into a maximum of 978,000 common shares | 48,900 | 48,900 | ||||||
| 3% convertible notes payable to an entity controlled by Ryan Corley, President of the Company, due on demand, convertible into a maximum of 1,619,500 common shares | 111,350 | 111,350 | ||||||
| 2% convertible notes payable to Douglas Goodsell, a related party, due on demand, convertible into a maximum of 519,850 common shares | 10,396 | 6,413 | ||||||
| Total notes payable-related party | $ | 835,101 | $ | 829,218 | ||||
| Convertible notes payable consist of the following: | March 31, | |||||||
| 2015 | 2014 | |||||||
| 7% convertible notes payable to stockholders, due March 16, 2017, convertible into a maximum of 6,250,000 common shares, | 125,000 | — | ||||||
| 4% convertible notes payable to a stockholder, due on demand, convertible into a maximum of 350,000 common shares | 175,000 | 175,000 | ||||||
| 2% convertible notes payable to stockholders, due on demand, convertible into a maximum of 1,100,000 common shares | 25,000 | 25,000 | ||||||
| Total notes payable | $ | 325,000 | $ | 200,000 | ||||
In March 2015, the Company issued two conventional convertible notes in the aggregate amount of $125,000 to stockholders. A portion of the proceeds of these notes are restricted and to be used to obtain natural gas and petroleum properties. The restricted amount is $115,000. In connection with these notes, the Company issued 250,000 common shares valued in the amount of $4,250. These notes are convertible into 6,250,000 common stock shares and accrue interest at a 7% per year rate. A Black-Scholes valuation of the conversion feature was determined to have no value and therefore no liability for the conversion feature was recorded. These notes are due March 16, 2017, however, if suitable natural gas and petroleum properties are not located in the near term, the restricted cash will be used to pay off these notes. For this reason, the notes have been classified as current liabilities.
On December 1, 2014, the Company consolidated, renewed and modified certain notes payables that are convertible into common stock of the Company. At the issuance of the new notes, the conversion price was decreased to $.02 per share and the interest rate was reduced to 2%. The notes were evaluated pursuant to ASC470-60 Troubled Debt Restructuring and ASC 470-50 Modification and Extinguishment. The change in the fair value of the conversion option was greater than 10% of the carrying value of the debt immediately prior to the modification however there was no accounting impact as there were no direct costs associated with the modification to capitalize, fees paid to lenders or unamortized discounts to account for.
ENXNET, INC.
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED March 31, 2015 and 2014
The Company had eight notes payable to and an advance from the CEO which were combined and renewed into one note in the amount of $664,455.
The Company had two notes payable to and an advance from a related party which were combined and renewed into one note in the amount of $10,396.
The Company had a note payable to a third party which was renewed in the amount of $20,000.
NOTE 5 – ADVANCES FROM OFFICER AND STOCKHOLDER
Advances from Stockholder:
Advances from two stockholders at March 31, 2015 and 2014 were $31,000 and $32,400, respectively.
Advances from Officer:
Our CEO, Ryan Corley, has made advances to the Company in prior years. During the years ended March 31, 2015 and 2014, the CEO made additional unsecured advances totaling $10,000 and $23,000. During the years ended March 31, 2015 and 2014, the Company made payments on these advances of $-0- and $1,000. Also during the years ended March 31, 2015 and 2014, the Company converted $2,000 and $20,000 of the advances into notes payable. At March 31, 2015 and 2014, advances from the CEO were $10,000 and $2,000 respectively.
The Company has notes payable to the CEO in the aggregate amount of $664,455 and $662,455 as of March 31, 2015 and 2014. During the year ended March 31, 2015 and 2014, the Company converted $20,000 and $36,900 advances from the CEO to notes payable. Accrued interest owed on these notes at March 31, 2015 and 2014 is $148,704 and $135,569. These notes and accrued interest are convertible into 15,664,622 and 14,880,388 shares of restricted common stock of the company.
At March 31, 2015 and 2014, advances from the entity controlled by the CEO were $10,500 and $10,500 and notes payable totaled $160,250 and $160,250. Accrued interest owed on these notes at March 31, 2015 and 2014 is $25,392 and $21,014. These notes and accrued interest are convertible into 2,990,982 and 2,921,896 shares of restricted common stock of the company.
NOTE 6 - COMMON STOCK TRANSACTIONS
The Company issued 250,000 common shares with the issuance of two notes payable in the aggregate of $125,000 during the years ended March 31, 2015. The Company recorded debt issuance cost of $4,250.
The Company issued 2,000,000 and 100,000 common shares during the years ended March 31, 2015 and 2014 for services valued at $12,000 and $5,000.
The Company sold 700,000 and 1,570,000 common shares during the years ended March 31, 2015 and 2014 cash of $35,000 and $78,500.
NOTE 7 – STOCK OPTIONS
On July 24, 2001, the Company filed with the SEC Form S-8, for its 2002 Stock Option Plan, (the Plan). An aggregate amount of common stock that may be awarded and purchased under the Plan is 3,000,000 shares of the Company’s common stock. Under the Plan during the years ended March 31, 2015 and 2014, the Company did not grant any stock options to employees and members of the Board of Directors. At March 31, 2015 there were 1,590,000 options issued under the Plan and there were no available options to be issued under the Plan.
ENXNET, INC.
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED March 31, 2015 and 2014
The Company also issues stock options to purchase common stock outside of the Plan. During the years ended March 31, 2015 and 2014, the Company granted -0- and 500,000 such options for 24 months at exercise prices from $0.15 to $0.50 per share to unrelated entities. At March 31, 2015 and 2014, there were 1,000,000 such options outstanding.
During the year ended March 31, 2015 and 2014, the Company estimated the fair value of each stock option for employees and consultants at the grant date by using the Black-Scholes option-pricing model with the following assumptions:
| Dividends yield | 0 | % | ||
| Computed volatility | 108% -158 | % | ||
| Risk-free interest rate | .11% - .63 | % | ||
| Expected life | 1 to 4 years |
During the year ended March 31, 2015, the Company recognized $1,961 in stock option expense.
A summary of the status of the Company’s stock options as of March 31, 2015 and 2014 is presented below:
| 2015 | 2014 | |||||||
| Options outstanding at beginning of year | 3,290,000 | 3,290,000 | ||||||
| Options granted | — | 500,000 | ||||||
| Options exercised | — | — | ||||||
| Options canceled/expired | (700,000 | ) | (500,000 | ) | ||||
| Options outstanding at end of year | 2,590,000 | 3,290,000 | ||||||
The following table summarizes the information about the stock options as of March 31, 2015:
Range of Exercise Price | Number Outstanding | Weighted Average Remaining Contractual Life Years | Number Exercisable | |||||||||||
| $ | .12 | 1,590,000 | 2.30 | 1,590,000 | ||||||||||
| .15 | 500,000 | 1.65 | 500,000 | |||||||||||
| .40 | 300,000 | 1.25 | 200,000 | |||||||||||
| .25 | 200,000 | .25 | — | |||||||||||
| $ | .12 – .40 | 2,590,000 | 3.18 | 2,290,000 | ||||||||||
The following table summarizes the information about the stock options as of March 31, 2014:
Range of Exercise Price | Number Outstanding | Weighted Average Remaining Contractual Life Years | Number Exercisable | |||||||||||
| $ | .12 | 1,990,000 | 3.30 | 1,990,000 | ||||||||||
| .15 | 300,000 | .26 | 300,000 | |||||||||||
| .15 | 500.000 | 2.65 | 500,000 | |||||||||||
| .25 | 200,000 | 1.25 | — | |||||||||||
| .50 | 300,000 | 2.25 | 100,000 | |||||||||||
| $ | .12 – .50 | 3,290,000 | 3.18 | 2,890,000 | ||||||||||
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROL AND PROCEDURES.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
In connection with the preparation of this annual report on Form 10K, EnXnet’s management, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.
During the evaluation of disclosure controls and procedures as of March 31, 2015, management identified a material weakness in internal control over financial reporting, which management considers an integral component of disclosure controls and procedures. The material weakness identified relates to a lack of appropriate accounting policies and related procedures. As a result of the material weakness identified, management concluded that EnXnet’s disclosure controls and procedures were ineffective.
Notwithstanding the existence of this material weakness, EnXnet believes that the consolidated financial statements in this annual report on Form 10K fairly present, in all material respects, EnXnet’s financial condition as of March 31, 2015 and 2014, and the results of its operations and cash flows for the years ended March 31, 2015 and 2014, in conformity with United States generally accepted accounting principles (GAAP).
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of EnXnet is responsible for establishing and maintaining adequate internal control over financial reporting. EnXnet’s internal control over financial reporting is a process, under the supervision of the Chief Executive Officer and the Chief Financial Officer, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with United States generally accepted accounting principles (GAAP). Internal control over financial reporting includes 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 Company’s assets; |
| • | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the Board of Directors; 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 the policies or procedures may deteriorate.
EnXnet’s management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as of March 31, 2014, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). As a result of this assessment, management identified a material weakness in internal control over financial reporting.
A material weakness is a control deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
The material weakness identified is disclosed below:
Lack of Appropriate Accounting Policies and Related Procedures.
| • | We do not have adequate personnel and other resources to assure that significant and complex transactions are timely analyzed and reviewed. |
| • | We have limited personnel and financial resources available to plan, develop, and implement disclosure and procedure controls and other procedures that are designed to ensure that information required to be disclosed in our periodic reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. |
| • | Our limited financial resources restrict our employment of adequate personnel needed and desirable to separate the various receiving, recording, reviewing and oversight functions for the exercise effective control over financial reporting. |
| • | Our limited resources restrict our ability to ensure that information required to be disclosed in our periodic reports filed under the Exchange Act is accumulated and communicated to management to allow timely decisions regarding required disclosure. |
As a result of the material weakness in internal control over financial reporting described above, EnXnet management has concluded that, as of March 31, 2015, EnXnet’s internal control over financial reporting was not effective based on the criteria in Internal Control – Integrated Framework issued by the COSO.
This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. We were not required to have, nor have we, engaged our independent registered public accounting firm to perform an audit of internal control over financial reporting pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
The Company intends, as capital resources allow, remedying its material weaknesses by identifying steps that can be taken in the process of documenting and evaluating the applicable accounting treatment for non-routine or complex transactions as they may arise. Despite the Company’s intention to remedy its material weaknesses in the manner described, the actions required to accomplish these objectives may require the Company to engage additional personnel which actions may not be possible in the near term due to our limited financial resources and operations.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
As of the end of the period covered by this report, there have been no changes in internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended March 31, 2010, that materially affected, or are reasonably likely to materially affect, EnXnet internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERANCE.
Directors and Executive Officers
Set forth below are the names, ages, and positions of each of our executive officers and directors, together with such person’s business experience during the past five (5) years.
| Name | Age | Position(s) | ||
| Ryan Corley | 71 | President, Chief Executive Officer, Chairman of the Board of Directors | ||
| Stephen Hoelscher | 56 | Chief Financial Officer, Chief Accounting Officer, Treasurer | ||
| Richard W Martel, Jr. | 57 | Director | ||
| Michael Jackson | 58 | Executive Vice President |
Ryan Corley - President, CEO, and a member of the Board of Directors.
Mr. Corley has served as president and a member of the Board of Directors of the Company since February 5, 2000. Mr. Corley is the managing member of Treasure Finders LLC since it was founded on September 9, 2009. Mr. Corley became the Managing member of San Juan Minerals, LLC in April 2006. Mr. Corley received a Bachelor of Science in Business Administration and a Masters in Business Administration from the University of Tulsa.
Stephen Hoelscher - Chief Financial Officer and Treasurer
Mr. Hoelscher has been Chief Financial Officer of the Company since May 21, 2004 and has been providing accounting consulting services to the Company since January 2001. Mr. Hoelscher is a Certified Public Accountant and has 34 years of accounting and auditing experience. Prior to joining the Company, Mr. Hoelscher was and continues to be the CFO for Mastodon Ventures, Inc., a financial consulting business in Austin, Texas since June 2000. Mr. Hoelscher will continue his work with EnXnet and Mastadon and does not anticipate that this will interfere with his work for the Company. Mr. Hoelscher received a Bachelor of Business Administration from West Texas A&M University (formerly West Texas State University) in Canyon, Texas in 1981.
Richard W. Martel, Jr. - Member of the Board of Directors
Mr. Martel was elected to the Board of Directors and began serving on October 1, 2006. Mr. Martel had been the President of Gem Depot, Inc which was an ecommerce company that sold and distributed gemstones, gold and jewelry over the internet. Mr. Martel is also the co-founder and President of Detekt Corporation, a company that provides nondestructive infrared services to diagnose electrical and roofing problems for facilities. Detekt was founded in April 1986. Mr. Martel received his B.S. in Chemistry from Oklahoma State University in Stillwater, Oklahoma in 1981 and a MBA in Telecommunications Management from St. Edwards University in Austin, Texas in 1998.
Michael Jackson – Executive Vice President
Mr. Jackson joined the Company in June 2012 serving in the position of Executive Vice President. Mr. Jackson was President of US Operations for the Duplium Corporation from January 2000 through April 2012. As President of Duplium, Mr. Jackson oversaw manufacturing, assembly, finance and human resources. He was President of Computer Media and Services, a diskette replicating company that he started in 1985. In December 1999 he merged that company with a Canadian company and created Duplium Corporation. Mr. Jackson has extensive manufacturing and assembly experience, as well as working with start-up companies. Mr. Jackson served in the U.S. Navy from 1974 to 1980.
Election of Officers and Directors
All directors hold office until the next annual meeting of shareholders and until their successors have been elected and qualified. The Company’s officers are elected by the Board of Directors after each annual meeting of the Company’s shareholders and hold office until their death, or until they resign or have been removed from office.
Compensation of Directors
It is intended that each member of our board of directors who is not also an employee (a “non-employee director”) will receive an annual retainer in shares of our common stock as determined by our board of directors and all directors will be reimbursed for costs and expenses related to attending meetings of the board of directors or committees of the board of directors on which they serve.
Our employee directors will not receive any additional compensation for serving on our board of directors or any committee of our board of directors, and our non-employee directors will not receive any compensation from us for their roles as directors other than the stock and stock option grants.
Committees of the Board of Directors
The Board of Directors currently consists of two members and the entire Board acts as the Company’s audit committee. There are no other committees of the Board. The board meets as needed.
Audit Committee and Code of Ethics.
The entire Board serves as the audit committee of the Company. We have not adopted an audit committee charter or made a determination as to whether any of our directors would qualify as an audit committee financial expert. The Company has not yet adopted a code of ethics applicable to its chief executive officer and chief accounting officer, or persons performing those functions, because of the small number of persons involved in management of the Company.
Family Relationships
There are no family relationships among our officers or directors.
Legal Proceedings
Based on our inquiries of all of our officers and directors, we are not aware of any pending or threatened legal proceedings involving any of our officers or directors that would be material to an evaluation of our management.
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth certain information concerning all cash and non-cash compensation awarded to, earned by or paid to our Chief Executive Officer and other executive officers whose total compensation exceeded $100,000 for the fiscal years ended March 31, 2015 and 2014.
Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Total ($) | ||||||||||||||||||
| Ryan Corley | 2015 | -0- | -0- | -0- | -0- | -0- | ||||||||||||||||||
| President and Chief Executive Officer | 2014 | -0- | -0- | -0- | -0- | -0- | ||||||||||||||||||
(1) There is a stock option plan for the benefit of the Company’s officers and directors. There is no pension, or profit sharing plan for the benefit of the Company’s officers and directors.
Employment Agreements
We do not have an employment agreement with our CEO, Mr. Corley.
Other Compensation
We may issue to our independent directors stock options and common stock as compensation as determined by the Board of directors.
Stock option Plan
2001 Stock Option Plan
We adopted our 2001 Stock Option Plan on July 24, 2001. The plan provides for the grant of options intended to qualify as “incentive stock options” and options that are not intended to so qualify or “non-statutory stock options”. The total number of shares of common stock reserved for issuance under the plan is 3,000,000 shares. We have issued 1,590,000 stock options that are outstanding at March 31, 2015.
The plan is administered by our board of directors, which selects the eligible persons to whom options or stock awards shall be granted, determines the number of shares subject to each option or stock award, the exercise price therefore and the periods during which options are exercisable, interprets the provisions of the plan and, subject to certain limitations, may amend the plan. Each option or stock award granted under the plan shall be evidenced by a written agreement between us and the optionee.
Grants may be made to our employees that includes officers and directors and to certain consultants and advisors.
The exercise price for incentive stock options granted under the plan may not be less than the fair market value of the common stock on the date the option is granted. The exercise price for non-statutory options is determined by the board of directors. Incentive stock options granted under the plan have a maximum term of ten years. Options granted under the plan are not transferable, except by will and the laws of descent and distribution.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
OPTION AWARDS
Number of Securities Underlying Unexercised Options (#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | |||||||||||||||||
| Name | Exercisable | Unexercisable | ||||||||||||||||||
| Ryan Corley | 200,000 | — | 200,000 | $ | 0.12 | 2017 | ||||||||||||||
| Richard Martel, Jr. | 200,000 | — | 200,000 | $ | 0.12 | 2017 | ||||||||||||||
| Stephen Hoelscher | 500,000 | — | 500,000 | $ | 0.12 | 2017 | ||||||||||||||
| Michael Jackson | — | 200,000 | — | $ | 0.25 | 2015 | ||||||||||||||
| Michael Jackson | 200,000 | 100,000 | — | $ | 0.50 | 2016 | ||||||||||||||
Compensation of Directors
DIRECTOR COMPENSATION
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Non-Qualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||
| Ryan Corley | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
| Richard Martel, Jr. | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
Securities Authorized for Issuance under Equity Compensation Plans
The following table shows information about securities authorized for issuance under our equity compensation plans as of March 31, 2015:
| Plan Category | Number of Securities to be issued upon exercise of outstanding options (a) | Weighted- average exercise price of outstanding (b) | Number of Securities remaining for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | |||||||||
| Equity compensation plans approved by security holders | 1,590,000 | $ | 0.12 | -0- | ||||||||
| Equity compensation plans not approved by security holders | -0- | $ | -0- | -0- | ||||||||
| Total | 1,590,000 | $ | 0.12 | -0- | ||||||||
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table sets forth certain information as of March 31, 2013 regarding the beneficial ownership of our common stock by (i) each person who, to our knowledge, beneficially owns more than 5% of our Common Stock; (ii) each of our directors and named executive officers; and (iii) all of our named executive officers and directors as a group:
| Name and address of Beneficial Owner (2) | Amount (1) | Percent of Class | ||||||
| Directors and Named Executive Officers: | ||||||||
| Ryan Corley (3) | 8,293,948 | 15.77 | % | |||||
| Steve Hoelscher (4) | 840,760 | 1.58 | % | |||||
| Richard W Martel, Jr. (5) | 320,000 | * | ||||||
| Michael Jackson (6) | 798,800 | 1.51 | % | |||||
| All directors and named executive officers as a group (5 persons) | 10,253,508 | 19.09 | % | |||||
| Other 5% or Greater Beneficial Owners | -0- | N/A | ||||||
* Less than 1%.
| (1) | Beneficial ownership is calculated based on 52,601,518 shares of our common stock issued and outstanding. Beneficial ownership is determined in accordance with Rule 13d-3 of the Securities and Exchange Commission. The number of shares beneficially owned by a person includes shares of common stock subject to options or warrants held by that person that are currently exercisable or exercisable within 60 days following the date hereof. The shares issuable pursuant to those options or warrants are deemed outstanding for computing the percentage ownership of the person holding these options and warrants but are not deemed outstanding for the purposes of computing the percentage ownership of any other person. The persons and entities named in the table have sole voting and sole investment power with respect to the shares set forth opposite the stockholder’s name, subject to community property laws, where applicable. |
| (2) | The address for the directors and named executive officers is c/o EnXnet, Inc. 7450
S. Winston Ave, Tulsa, OK 74136 |
| (3) | Includes 200,000 shares of common stock issuable upon the exercise of options at an average price of $.12 per share. |
| (4) | Includes 500,000 shares of common stock issuable upon the exercise of options at an average price of $.12 per share. |
| (5) | Includes 200,000 shares of common stock issuable upon the exercise of options at an average price of $.12 per share. |
| (6) | Includes 200,000 shares of common stock issuable upon the exercise of options at an average price of $.50 per share.. |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.
Our CEO, Ryan Corley, has made advances to the Company in prior years. During the years ended March 31, 2015 and 2014, the CEO made additional unsecured advances totaling $10,000 and $23,000. During the years ended March 31, 2015 and 2014, the Company made payments on these advances of $-0- and $1,000. Also during the years ended March 31, 2015 and 2014, the Company converted $2,000 and $20,000 of the advances into notes payable. At March 31, 2015 and 2014, advances from the CEO were $10,000 and $2,000 respectively.
The Company has notes payable to the CEO in the aggregate amount of $662,455 and $642,555 as of March 31, 2015 and 2014 .During the year ended March 31, 2015 and 2014, the Company converted $20,000 and $36,900 advances from the CEO to notes payable. Accrued interest owed on these notes at March 31, 2015 and 2014 is $148,704 and $135,569. These notes and accrued interest are convertible into 15,664,622 and 14,880,388 shares of restricted common stock of the company.
At March 31, 2015 and 2014, advances from the entity controlled by the CEO were $10,500 and $10,500 and notes payable totaled $160,250 and $160,250. Accrued interest owed on these notes at March 31, 2015 and 2014 is $25,392 and $21,014. These notes and accrued interest are convertible into 2,990,982 and 2,921,896 shares of restricted common stock of the company.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Audit Fees
Our board of directors appointed MaloneBailey, LLP as independent auditors to audit our financial statements for the year ended March 31, 2015 and 2014. The aggregate fees billed by MaloneBailey LLP for professional services rendered for the audit of our annual financial statements included in this Annual report on Form 10K and for the review of our quarterly financial statements included in our Quarterly reports on Form 10Q for the fiscal years ended March 31, 2015 and 2014 were $21,250 and $20,000.
Audit Related Fees
None.
Tax Related Fees
None.
All Other Fees
None.
PART IV
ITEM 15. EXHIBITS.
| (a) | Exhibits | |
Exhibit Number |
Exhibit Description | |
| 3.1 | Articles of Incorporation (1) | |
| 3.2 | First Amendment to Articles of Incorporation (1) | |
| 3.3 | Second Amendment to Articles of Incorporation (1) | |
| 3.4 | Bylaws (1) | |
| 10.1 | Sub-License Agreement with Ryan Corley as Nominee (1) | |
| 10.2 | License agreement for Clear Video (1) | |
| 10.3 | License agreement for Clear Video - addendum (1) | |
| 31.1 | Chief Executive Officer’s Certificate, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (2) | |
| 31.2 | Chief Financial Officer’s Certificate, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (2) | |
| 32.1 | Chief Executive Officer’s Certificate, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (2) | |
| 32.2 | Chief Financial Officer’s Certificate, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (2) | |
| (1) | Filed as an exhibit to Registrant’s Form 10-SB filed on May 22, 2000 and incorporated herein by reference. |
| (2) | Filed herewith. |
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| July 14, 2015 | EnXnet, Inc. |
| By:/s/ Ryan Corley | |
| Name: Ryan Corley | |
Title: President, Chief Executive Officer and Director (principal executive officer) |
In accordance with the Securities Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| July 14, 2015 | /s/ Ryan Corley |
Ryan Corley, President, Chief Executive Officer and Director (principal executive officer) | |
| July 14, 2015 | /s/ Stephen Hoelscher |
Stephen Hoelscher, Chief Financial Officer (principal financial and accounting officer) | |
| July 14, 2015 | /s/ Richard W. Martel |
| Richard W. Martel, Director |
EXHIBIT INDEX
Exhibit Number |
Exhibit Description | |
| 3.1 | Articles of Incorporation (1) | |
| 3.2 | First Amendment to Articles of Incorporation (1) | |
| 3.3 | Second Amendment to Articles of Incorporation (1) | |
| 3.4 | Bylaws (1) | |
| 10.1 | Sub-License Agreement with Ryan Corley as Nominee (1) | |
| 10.2 | License agreement for Clear Video (1) | |
| 10.3 | License agreement for Clear Video - addendum (1) | |
| 31.1 | Chief Executive Officer’s Certificate, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (2) | |
| 31.2 | Chief Financial Officer’s Certificate, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (2) | |
| 32.1 | Chief Executive Officer’s Certificate, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (2) | |
| 32.2 | Chief Financial Officer’s Certificate, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (2) |
| (1) | Filed as an exhibit to Registrant’s Form 10-SB filed on May 22, 2000 and incorporated herein by reference. |
| (2) | Filed herewith. |