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EX-31.1 - CERTIFICATION - GigWorld Inc.ex_311.htm
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q
 
x
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
 
For the nine months ended September 30, 2015.
OR
 
o
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
 
For the transition period from                  to                     
 
Commission file number: 333-194748
 
HotApp International Inc
 (Exact name of registrant in its charter)
 
Delaware
 
47-4742558
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)


4800 Montgomery Lane, Suite 450, Bethesda MD
 
20814
(Address of principal executive offices)
 
(Zip Code)
 
Issuer’s telephone number: 317-HOTAPP9 (468-2779)

Securities registered under Section 12(b) of the Exchange Act: None
 
Securities registered under Section 12(g) of the Exchange Act: None
 
Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 day. x Yes o No
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
Yes o     No o
(Does not currently apply to the Registrant)
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 if the Exchange Act.
 
Large accelerated filter  o                                                                                                         Accelerated filter  o
 
Non-accelerated filter    o                                      (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  o  No  x  
 
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date.
 
Class
 
Outstanding November 14 2015
Common Stock, $0.001 par value per share
 
                              5,909,687 shares
 
 


 
 
 

 
 
  TABLE OF CONTENTS
 
  
 

 
 
 

 

 

PART I. Financial Information


 


 
 

 
 
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2015 (UNAUDITED) AND DECEMBER 31, 2014

ASSETS
 
9/30/15
   
12/31/14
 
CURRENT ASSETS:
           
Cash or cash equivalents
  $ 1,237,157     $ 4,009,884  
Prepaid expenses
    39,579       5,661  
Security deposits
    5,450       16,056  
TOTAL CURRENT ASSETS
    1,282,186       4,031,601  
                 
Fixed assets, net
    199,773       79,400  
Excess purchase price over net assets
    60,068       60,068  
Security deposits – long term
    25,003       -  
TOTAL ASSETS
  $ 1,567,030     $ 4,171,069  
                 
LIABILIATIES AND STOCKHOLDERS' EQUITY
               
                 
CURRENT LIABILITIES:
               
Accounts payable and accrued expenses
  $ 81,032     $ 191,719  
Accrued taxes and franchise fees
    250       3,814  
Loan from shareholder
    87,334       4,428,437  
TOTAL CURRENT LIABILITIES
    168,616       4,623,970  
                 
TOTAL LIABILITIES
    168,616       4,623,970  
                 
STOCKHOLDERS' EQUITY(DEFICIT):
               
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,
               
5,909,687 and 5,132,000 shares issued and outstanding,
               
as of September 30, 2015 and December 31, 2014, respectively
    591       513  
Accumulated other comprehensive income
    (162,402 )     4,022  
Additional paid-in capital
    4,202,020       213,267  
Accumulated deficit
    (2,643,175 )     (672,083 )
TOTAL STOCKHOLDERS' EQUITY(DEFICIT)
    1,398,414       (452,901 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
  $ 1,567,030     $ 4,171,069  
 
The accompanying notes to condensed financial statements are an integral part of these statements.
 
 
F-1

 
 
 
                                                                            
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014 (UNAUDITED)
 
   
Quarter Ended September 30, 2015
   
Quarter Ended September 30, 2014
   
9 Months Ended September 30, 2015
   
9 Months Ended September 30, 2014
 
   
 
   
 
   
 
   
 
 
Operating expenses:
 
 
   
 
   
 
   
 
 
Research and product development
    353,594     -       907,810       -  
Stock based compensation
    -       -       -       8,250  
Sales and marketing
    145,345       -       322,310       -  
Depreciation
    9,866       -       25,683       -  
General & administrative
    353,950       11,949       721,021       38,508  
General and administrative from a related party
    -       15,000               45,000  
      Total operating expenses
    862,755       26,949       1,976,824       91,758  
                                 
Loss from operations
    (862,755 )     (26,949 )     (1,976,824 )     (91,758 )
                                 
Other (income) expenses
                               
  Interest expense
    -       1,955       -       4,061  
  Foreign exchange (gain) / loss
    (5,308 )     -       (5,732 )     -  
      Total other expenses (income)
    (5,308 )     1,955       (5,732 )     4,061  
                                 
(Loss) before taxes
    (857,447 )     (28,904 )     (1,971,092 )     (95,819 )
                                 
Income tax provision
    -       -       -       -  
Net (loss) applicable to common shareholders
    (857,447 )     (28,904 )     (1,971,092 )     (95,819 )
Net income (loss) per share:
                               
Weighted number of shares outstanding - Basic and diluted
    5,807,135       4,132,000       5,357,872       4,098,636  
                                 
Net income (loss) per share - basic and diluted
    (0.15 )     (0.01 )     (0.37 )     (0.02 )
                                 
Net (Loss)
    (857,447 )     (28,904 )     (1,971,092 )     (95,819 )
Other comprehensive income, net of tax:
                               
 Foreign currency translation adjustments
    (173,189 )     -       (166,424 )     -  
 Comprehensive (loss)
    (1,030,636 )     (28,904 )     (2,137,516 )     (95,819 )
 
The accompanying notes to condensed financial statements are an integral part of these statements.
 
 
F-2

 
 
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM DECEMBER 31, 2014
THROUGH SEPTEMBER 30, 2015 (UNAUDITED)
 
   
Preferred Stock
   
Common
   
Paid-In
   
Accumulated other comprehensive
   
Accumulated
   
Stockholders'
 
 
 
Shares
   
Par Value
   
Shares
   
Par Value
   
Capital
   
Gain
   
(Deficit)
   
(Deficit)Equity
 
                                                 
Balance December 31, 2014
    13,800,000       1,380       5,132,000     $ 513     $ 213,267     $ 4,022     $ (672,083 )   $ (452,901 )
                                                                 
Issuance of common stock   (Debt Conversion)
                    777,687       78       3,988,753                       3,988,831  
Net loss for period
                                                    (1,971,092 )     (1,971,092 )
Foreign currency translation adjustment
                                            (166,424     -       (166,424
                                                                 
Balance September 30, 2015
    13,800,000     $ 1,380       5,909,687     $ 591     $ 4,202,020     $ (162,402   $ (2,643,175 )   $ 1,398,414  
 
The accompanying notes to condensed financial statements are an integral part of these statements.
 
 
F-3

 
 
 
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014

   
9 Months Ended September 30, 2015
   
9 Months Ended September 30, 2014
 
   
 
       
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net (loss)
  $ (1,971,092 )   $ (95,819 )
Adjustments to reconcile net (loss) to cash used in operating activities:
         
 
               
Stock based compensation
    -       8,250  
Depreciation
    25,683       -  
Foreign exchange (gain)/loss     (5,782        
                 
Change in operating assets and liabilities:
               
Prepaid expenses
    (35,340 )     -  
Accrued interest
    -       4,060  
Accounts payable and accrued expenses
    (108,087 )     34,595  
Accrued taxes payable
    (3,564 )     -  
Security deposit and other assets
    (15,877 )     -  
Net cash used in operating activities
  $ (2,114,009 )   $ (48,914 )
                 
CASH FLOW FROM INVESTING ACTIVITIES:
               
Acquisition of fixed assets
    (151,082 )     -  
Net cash used in investing activities
  $ (151,082 )   $ -  
                 
CASH FLOW FROM FINANCING ACTIVITIES:
               
Proceeds from revolving credit facility
    -       55,000  
Repayment of shareholder loan
    (423,153 )     -  
Proceeds from shareholder loan
    87,334          
Net cash provided by (used in) financing activities
  $ (335,819 )   $ 55,000  
                 
NET INCREASE (DECREASE) IN CASH
    (2,600,910 )     6,086  
Effects of exchange rates on cash
    (171,817 )     -  
                 
CASH AND CASH EQUIVALENTS at beginning of period
    4,009,884       556  
CASH AND CASH EQUIVALENTS at end of period
  $ 1,237,157     $ 6,642  
                 
Supplemental disclosure of cash flow information
               
   Cash paid for:
               
       Interest
  $ -     $ -  
       Income Taxes
  $ -     $ -  
                 
Supplemental schedule of non-cash investing and financing activities
               
     Conversion of shareholder loan into common stock
  $ 3,988,831       -  
 
The accompanying notes to financial statements are an integral part of these statements.
 
 
F-4

 


NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1.  The Company History and Nature of the Business 

 
Hotapp International Inc, formerly Fragmented Industry Exchange Inc, (the “Company” or “Group”) 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 messaging and calling services for HotApp users (text, photo, audio). HotApp can be used on any mobile platform (i.e. 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 9 for further description.
 
As of September 30, 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”)
 
May 23, 2014
 
Republic of Singapore
 
100% owned by Company
2nd Tier Subsidiaries:
           
HotApps Call Pte Ltd
 
September 15, 2014
 
Republic of Singapore
 
100% owned by HIP
HotApps Information Technology Co Ltd
 
November 10, 2014
 
Republic of China
 
100% owned by HIP
HotApp International Limited
 
July 8, 2014
 
Hong Kong (Special Administrative Region)
 
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 $2,643,175 and has a working capital of $1,113,570 at September 30, 2015.
 
Note 2.  Summary of Significant Accounting Policies
 
Basis of presentation
 
The condensed consolidated balance sheet at September 30, 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 Group 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.
 
 
F-5

 
 
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 September 30, 2015, cash and cash equivalents of the Group includes, on an as converted basis to US dollars, $78,259, $73,056 and $1,055,573 in Chinese Yuan Renminbi (“RMB”), in Hong Kong Dollars (“HK$”) and Singapore Dollars (“S$”), respectively.
 

The 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
 Motor Vehicles    10 years
 Leasehold improvements    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.
 
 
F-6

 
 
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, Hong Kong and the PRC are maintained in their local currencies, the Singapore Dollar (S$), Hong Kong Dollar (“HK$”) and Chinese Yuan 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 HK$, RMB and S$, 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 nine months ended September 30, 2015, the Company recorded other comprehensive income from translation loss of $166,424 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.
 
Recent accounting pronouncements
 
In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This update provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if “conditions or events raise substantial doubt about [the] entity’s ability to continue as a going concern.” The ASU applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The Company is currently evaluating the possible impact of ASU 2014-15, but does not anticipate that it will have a material impact on the Company's consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers which modifies how all entities recognize revenue and various other revenue accounting standards for specialized transactions and industries. This update is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, which deferred the effective date of the ASU to fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is currently evaluating the possible impact of ASU 2014-15, but does not anticipate that it will have a material impact on the Company's consolidated financial statements.

In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, or ASU No. 2015-02. The amendments of ASU No. 2015-02 were issued in an effort to minimize situations under previously existing guidance in which a reporting entity was required to consolidate another legal entity in which that reporting entity did not have: (1) the ability through contractual rights to act primarily on its own behalf; (2) ownership of the majority of the legal entity's voting rights; or (3) the exposure to a majority of the legal entity's economic benefits. ASU No. 2015-02 affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. The guidance in ASU No. 2015-02 is effective for periods beginning after December 15, 2015. Early adoption is permitted. The Company is currently evaluating the possible impact of ASU 2014-15, but does not anticipate that it will have a material impact on the Company's consolidated financial
 
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.
 
F-7

 
 
Note 3. PREPAID EXPENSES AND OTHER CURRENT ASSETS
 
Prepaid expenses and other current assets consisted of the following:

   
September 30,
2015
   
December 31,
2014
 
Rental deposit (1)
  $ 5,450     $ 16,056  
Prepaid rental and communication facilities expenses
    39,579       5,661  
    $ 45,029     $ 21,717  
 
(1) Rental deposit represents current portion of amounts paid as deposit for the Company’s offices in China, Hong Kong and Singapore. The long term portion of the rental deposit totaled $25,003 and $0, respectively, at September 30, 2015 and December 31, 2014.
 
 Note 4.  ACQUISITION ACCOUNTING
 
On October 15, 2014, HotApp International Inc (formerly, Fragmented Industry Exchange Inc)(the “Company”) 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 October 15, 2014 was   $60,068.
 
The purchase price allocation has not been finalized as of September 30, 2015, but has been finalized subsequent to that date and 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. On a pro forma basis, including the Subsidiary from its inception (May 23, 2014), the loss from operations was $607,842 or $0.14 per share.
 
On March 25, 2015, HotApp International Pte Ltd acquired 100% of issued share capital in HotApp International Limited, a Hong Kong company, for a cash consideration of HK$1.00 from Mr Chan Heng Fai, a substantial shareholder and the Company’s Executive Director and CEO.  HotApp International Pte Ltd is a corporation incorporated in Hong Kong Special Administrative Region of the People’s Republic of China with a total issued share capital of HK$1.00 represented by one (1) issued share at HK$1.00 each.  The consideration of the acquisition was based on the issued share capital of HotApp International Limited which is principally engaged in the sales and marketing of mobile application.  HotApp International Limited was dormant and has a net equity deficiency of HK$5,456 due to incorporation expenses as at the date of acquisition.

 
Note 5.  FIXED ASSETS, NET
 
Fixed assets, net consisted of the following:
 
   
September 30,
   
December 31,
 
   
2015
   
2014
 
Computer equipment
  $ 65,725     $ 21,613  
Office equipment
    19,439       13,455  
Furniture and fixtures
    46,011       48,514  
Motor Vehicle
    97,420       -  
Less: accumulated depreciation
    (28,822 )     (4,182 )
Fixed assets, net
  $ 199,773     $ 79,400  

Depreciation expense charged to the consolidated statements of operations for the three and nine months ended September 30, 2015 was $9,866 and $25,683, respectively. There was no depreciation expense for the three and nine months ended September 30, 2014.
 
 
F-8

 
 
Note 6.  ACCOUNTS PAYABLE AND ACCRUED EXPENSES
 
Accrued expenses and other current liabilities consisted of the following:
 
   
September 30,
   
December 31,
 
   
2015
   
2014
 
Accrued payroll
  $ 37,556     $ 77,513  
Accrued professional fees
    38,834       27,000  
Due to affiliates
    -       86,465  
Other
    4,642       741  
Total
  $ 81,032     $ 191,719  
 
Note 7.  INCOME TAXES
 
The provision for income taxes for the nine months ended September 30, 2015 and 2014, was as follows (assuming a 15% effective tax rate):
 

 
 
   
Nine months ended September 30,
2015
   
Nine months ended September 30,
2014
 
             
Current Tax Provision:
           
Federal-State-Local
    -       -  
Local
    -       -  
                 
Total current tax provision
    -       -  
                 
Deferred Tax Provision:
               
Loss carry-forwards
    (295,664 )     (22,446 )
Change in valuation allowance
    295,664       22,446  
Total deferred tax provision
    -       -  
                 
The Company had deferred income tax assets as of September 30, 2015 as follows:
         
                 
Loss carry-forwards
  $ (396,476 )     (22,446 )
Less - valuation allowance
    396,476       22,446  
Total net deferred tax assets
    -       -  
 
The Company provided a valuation allowance equal to the deferred income tax assets for period ended September 30, 2015 because it is not presently known whether future taxable income will be sufficient to utilize the loss carry-forwards.
 
As of September 30, 2015, the Company had approximately $396,476 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.

 
F-9

 
 
Note 8.   SHAREHOLDER LOANS
 
On June 30, 2015, the Company owed Singapore eDevelopment Limited (SeD), its majority shareholder, $3,903,940. This amount reflects the US$ equivalent of a S$ loan made on December 28, 2014 whereby SeD loaned the Company under a promissory note (the “Note”) that covered S$5,250,534 (equivalent to $3,988,831 USD as of exchange rate on December 28, 2014). The Note is non-interest bearing and matures on July 25, 2015. The Note has no prepayment penalty. During the nine months ended September 30, 2015 the Company repaid $423,153 of the balance owed pertaining to the payments on behalf by its majority shareholder.  As at September 30, 2015, the Company has an outstanding balance of $87,334 being amount owed pertaining to payments on behalf by its majority shareholder during the three months then ended.

On July 13, 2015, the Company entered into a Loan Conversion Agreement with SeD, pursuant to which SeD converted outstanding loans made to the Company into common stock of the Company at a rate of $5.00 per share (rounded to the nearest full share). The total amount converted consists of outstanding principal in the amount of $5,250,554 Singapore Dollars (or $3,888,437 USD as of exchange rate on July 10, 2015) which amount was evidenced by a promissory note in favor of SeD effective December 28, 2014 (“SeD Promissory Note”). The principal amount of $3,888,437 was converted to common stock of the Company, and in exchange, SeD received 777,687 shares of common stock of the Company. Pursuant to the Loan Conversion agreement, the SeD Promissory Note was cancelled and satisfied in full.  Additional value of $100,394 was included as Additional Paid in Capital (APIC) in the Stockholder’s Equity.  The gain is being treated as APIC due to the related party nature of the conversion.
 
Note 9.  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 September 30, 2015, the Company had issued and outstanding, 5,909,687 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.
 
On July 13, 2015, SED acquired 777,687 shares of the Company common stock by converting outstanding loans made to the Company into common stock of the Company at a rate of $5.00 per share (rounded to the nearest full share).After such transactions SED owned 98.17% of the Company.  
 
Note 10 – COMMITMENTS & CONTINGENCIES
 
On September 17, 2014, the Company entered into a lease agreement with Allbest Property Management Pte Ltd for 586 square feet of office space in Singapore. The lease commenced on September 22, 2014 and runs through June 30, 2017. Gross month rental payments are $2,341. The Company was required to put up a security deposit of $11,269. On October 20, 2014, the Company paid the prior tenant $12,099 in rent for the space through the commencement date of the new lease. The total rent expense for the nine months ended September 30, 2015 was $48,796.  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. The lease was renewed for another one year and will expire on August 2016.  Gross month rental payments are $4,998.  The Company was required to put up a security deposit of $4,154. For the nine month ended September 30, 2015, the Company recorded rent expenses of $44,766 for this office.
 
 
F-10

 
 
On April 10, 2015 the Company entered into a lease agreement with Lam Wai Wing for 347 square feet of office space in Hong Kong, Kowloon. The lease commenced on May 20, 2015 and runs through April 2017. Gross month rental payment is $2,579. The Company was required to put up a security deposit of $5,519. For the nine months ended September 30, 2015, the Company recorded rent expenses of $13,751 for this office.
 
The following is a schedule by years of future minimum lease  payments:
     
2015
  $ 39,120  
2016
    137,212  
2017
    43,660  
Total
  $ 219,992  
 
Note 11.  RELATED PARTY BALANCES AND 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.

During nine month period, the Company had received additional loans, repaid and converted certain loans from SED (see Note 8 Shareholder Loans).
 
Note 12. Subsequent Events
 
None to note.
 
 
F-11

 

Item 2.  Management’s Discussion and Analysis or Plan of Operation.
 
FORWARD-LOOKING STATEMENTS
 
Certain matters discussed herein are forward-looking statements.  Such forward-looking statements contained in this Form 10-Q involve risks and uncertainties, including statements as to:
 
1. 
 
our future operating results;    
2. 
 
our business prospects; 
3. 
 
any contractual arrangements and relationships with third parties; 
4. 
 
the dependence of our future success on the general economy; 
5. 
 
any possible financings; and 
6. 
 
the adequacy of our cash resources and working capital. 
 
These forward-looking statements can generally be identified as such because the context of the statement will include words such as we “believe,” “anticipate,” “expect,” “estimate” or words of similar meaning.   Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements.   Such forward-looking statements are subject to certain risks and uncertainties which are described in close proximity to such statements and which could cause actual results to differ materially from those anticipated as of the date of filing of this Form 10-Q.   Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements.  The forward-looking statements included herein are only made as of the date of filing of this Form 10-Q, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

This discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results may differ materially from those anticipated in these forward-looking statements.
 
Background
 
Hotapp International Inc, formerly Fragmented Industry Exchange Inc, (the “Company” or “Group”) 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 HotApp 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, social network and ecommerce. It provides a user to user calling services as well as text messaged with any kind of attachment (text, photo, audio).
 
As of September 30, 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”)
May 23, 2014
Republic of Singapore
100% by Company
2nd Tier Subsidiaries:
     
HotApps Call Pte Ltd
September 15, 2014
Republic of Singapore
100% owned by HIP
HotApps Information Technology Co Ltd
November 10, 2014
Republic of China
100% owned by HIP
HotApp International Limited
July 8, 2014
Hong Kong (Special Administrative Region, Republic of China)
100% owned by HIP
 
   Trends in the Market and Our Opportunity
 
With the growing popularity of smartphones and tablets together with 24x7 - anywhere unrestricted advanced mobile data connectivity, the “Over-The-Top” services (“OTT Services”) has emerged as a new market for innovations. OTT Services can be understood as any service received over the internet that is not provided directly by an Internet Service Provider. OTT Services have experienced an exponential growth over the past few years driven by higher quality and speed of mobile broadband access and lower costs of both devices and internet access. These OTT services are not only changing the lifestyle of consumer but widely adopted by enterprises for mobile collaboration and engagement among the organization and communicate to enterprises’ stakeholders.
 
 
2

 
 
Messaging Mobile Apps are becoming a commodity everywhere in the mobile world, dominated by a handful number of industry players. There are, however, opportunities for specific usages and markets where users do not want to mix the purpose of usage with generic messaging and social Apps. OTT Services serving targeted specific community becomes a clear opportunity for developers that own well connected clients network and competency in understanding the local culture.
 
Based upon the above trends, we believe there exists significant opportunities for:
 

  
HotApp to be positioned as a relevant player in the Community based OTT Service market reaching an appropriate critical mass of active users in 3 years. For this, the App will be available on multi-platforms initially on Android and iPhone.
 

  
Continuing growth in demand for OTT Services encapsulated within a scalable mobile platform. HotApp will provide a full array of services, including text messaging, hold-to-talk voice messaging, location services, community service, sharing of photos and videos, Community users Voice Calling, eCommerce services, etc. and will be an effective eCommerce and advertising platform for Brands.
 

  
Enterprises to increase usage of OTT Services with mobile devices as secure medium to engage both their internal communications and their customers to promote and market their products and services, secure communications among staff and partners and mobile collaboration services such as shared document and event calendar for members in organization to effective engage their team with and without a desktop. HotApp’s approach in white labelling for the enterprises will augment and fill this demand in the market.
 
Online to Offline (“O2O”) operations has been identified as an integral aspect of HotApp’s e-commerce and monetization. As such HotApp will continue to develop and explore partnerships to exploit such O2O operation Our Growth Strategy
 
We believe that we have significant opportunities to further enhance the value we deliver to our Users.  We intend to pursue the following growth strategy:
 
●  
Expand our target segments by two dimensions, geographical expansion through the cultural adaptation and localization of HotApp for countries in Asia, Europe, USA and Latin America; and at the same time partnering with communities, both enterprise in nature and individuals, positioning HotApp as the local community platform of choice
 
●  
Increase User monetization capabilities by connecting HotApp to O2O by grouping common interest users together as a community
 
●  
Expand the technology platform to serve Enterprise Messaging and collaboration, and position as the leading mobile Enterprise Collaboration and Communication App provider
 
●  
Establish community and business partnerships (collectively, “HotApp Partnerships”) to expand our user base and engagement for specific markets such as healthcare and wellness market.
 
●  
Make strategic investments and acquisitions to expand our user base, add complementary products and technologies
 
Results of Operations
 
 
3

 
 
Summary of Key Results
 
For the unaudited three-month period ending September 30, 2015 and 2014
 
Research and Development Expense

Research and development expenses consists primarily of salary and benefits.   Expenditures incurred during the research phase are expensed as incurred.   We expect our research and development expenses to increase as we expand our team, to further develop the platform, new features and services.  Total research and development for the three months ending September 30, 2015 and 2014 was, $353,594 and $0, respectively.  The increase was due to research and development costs relating to development of new features such as app-to-app calling for our mobile platform in 2015.
 
Sales and Marketing Expense

Sales and marketing expenses consist primarily of salary and benefits. We expect our sales and marketing expenses to increase as our business grows. Total sales and marketing expenses for the three months ended September 30, 2015 and 2014 was $145,345 and $0, respectively. The increase was due to the marketing expenses incurred for acquisition of new users for HotApp.
 
General and Administrative

General and administrative expenses consist primarily of salary and benefits, professional fees and rental expense. We expect our general and administrative expenses to increase as our business grows and we comply with our reporting obligations under US securities laws as a public company. Total general and administrative expenses for the three months ending September 30, 2015 and 2014 were $353,950 and $26,949, respectively. Included in those amounts were $0 and $15,000, respectively, in general and administrative expenses of a related party.
 
Other Expense
 
We gain $5,308 mainly in foreign exchange gain arising from the appreciation of USD against other foreign currencies during the three months ended September 30, 2015. No foreign exchange difference was recorded in the quarter ended September 30, 2014 as there was no transaction denominated in other currencies. For the three month period ended September 30, 2015 and 2014, we have incurred $0 and $1,955 in interest expense relating to a revolving line of credit respectively. The line of credit was terminated in late 2014.
 
For the unaudited nine-month period ending September 30, 2015 and 2014
 
Research and Development Expense

Research and development expenses consists primarily of salary and benefits.   Expenditures incurred during the research phase are expensed as incurred.   We expect our research and development expenses to increase as we expand our team, to further develop the platform, new features and services.  Total research and development for the nine months ending September 30, 2015 and 2014 was $907,810  and $0, respectively.  The increase was due to research and development costs relating to development of new features, such as App to App calling, for our mobile platform in 2015.
 
Sales and Marketing Expense

Sales and marketing expenses consist primarily of salary and benefits. We expect our sales and marketing expenses to increase as our business grows. Total sales and marketing expenses for the nine months ended September 30, 2015 and 2014 was $322,310 and $0, respectively. The increase was due to the marketing expenses incurred for acquisition of new users for HotApp. The increase is in line with the increase with numbers of users in HotApp as at September 30 2015.
 
 
4

 
 
General and Administrative

General and administrative expenses consist primarily of salary and benefits, professional fees and rental expense. We expect our general and administrative expenses to increase as our business grows and we comply with our reporting obligations under US securities laws as a public company. Total general and administrative expenses for the nine months ending September 30, 2015 and 2014 were $721,021 and $83,508 respectively. Included in those amounts were $0 and $45,000 respectively, in general and administrative expenses of a related party as at September 30, 2015 and 2014 respectively.
 
Other Expense
 
We incurred $5,732 mainly in foreign exchange gain arising from the appreciation of USD against other foreign currencies during the nine months ended September 30, 2015. No foreign exchange difference was recorded in the nine months ended September 30, 2014 as there was no transaction denominated in other currencies. For the nine month period ended September 30, 2015 and 2014, we have incurred $0 and $4,061 in interest expense relating to a revolving line of credit respectively. The line of credit was terminated in late 2014.

Liquidity and Capital Resources
 
At September 30, 2015, we had cash of $1,237,157 and a working capital of $1,113,570. Cash had decreased during the nine months ended September 30, 2015 principally due to depreciation of amount held in foreign currencies, payment to creditors and operating losses incurred during the quarter.

We had a total stockholders’ equity of $1,398,414 and an accumulated deficit of $2,643,175 as of September 30, 2015 compared with total stockholders’ deficit of $452,901 and an accumulated deficit of $ 672,083 as of December 31, 2014. The change was principally due to net loss incurred during the quarter.

We repaid $423,153 of loan from Singapore eDevelopment Limited during the nine months ended September 30, 2015. In 2014, an aggregate of $34,500 was raised from issuance of new shares and borrowings under revolving line of credit.
 
On December 31, 2014, the Company issued a Singapore Dollar denominated promissory note (the “Note”) for S$5,250,553.93 (equivalent to $3,900,225 USD as of exchange rate on December 28, 2014) to SED, its controlling shareholder. The Note is non­interest bearing and matures on July 25, 2015. The Note has no prepayment penalty.  It can be extended by mutual agreement upon 30 day written notice from the Company.  The Note relates to three separate fundings by SED, US $185,725 (equivalent to about S$250,000) on October 16, 2014, US$50,000 on October 28, 2014 and US$3,714,500 (equivalent to about S$5,000,000) on December 26, 2014.  The remaining US$1,275 was due from shareholder of SED.   The Note is reported within the caption “Loan from Shareholder” at US$3,900,225 and US$0 on the consolidated balance sheet as at December 31, 2014 and September 30, 2015 respectively.  The decrease in Loan from Shareholder was principally due to the conversion of the Note into common stock of the Company (see below) offset by a payment on behalf of the Company for setting up Hotapp International Limited by the Director.
 
On July 13, 2015, the Company entered into a Loan Conversion Agreement with Singapore eDevelopment Limited (“SeD”), the Company’s major shareholder, pursuant to which SeD converted outstanding loans made to the Company into common stock of the Company at a rate of $5.00 per share (rounded to the nearest full share). The total amount converted consists of outstanding principal in the amount of $5,250,554 Singapore Dollars (or $3,888,437 US$ as of exchange rate on July 10, 2015) which amount was evidenced by a promissory note in favor of SeD effective December 28, 2014 (“SeD Promissory Note”).  The SeD Promissory Note was non-interest bearing.   The principal amount of $3,888,437 was converted to common stock of the Company, and in exchange, SeD received 777,687 shares of common stock of the Company. Pursuant to the Loan Conversion agreement, the SeD Promissory Note was cancelled and satisfied in full. After giving effect to the conversion, SeD common stock ownership in the Company will increase from 5,024,000 common shares (or 97.9% of the total issued outstanding common shares) to 5,801,687 (or 98.17% of the total issued outstanding common shares).

As of September 30, 2015, we have fixed operating office lease agreements for both Guangzhou’s office amounting to US$52,988 from 2015 to 2016, Singapore’s offices minimum lease commitments of US$118,487 from 2015 to 2017, and Hong Kong’s office amounting to US$48,517 from 2015 to 2017.
 
 
5

 

Consistent with Section 144 of the Delaware General Corporation Law, it is our current policy that all transactions between us and our officers, directors and their affiliates will be entered into only if such transactions are approved by a majority of the disinterested directors, are approved by vote of the stockholders, or are fair to us as a corporation as of the time it is authorized, approved or ratified by the board. We will conduct an appropriate review of all related party transactions on an ongoing basis.
 
 Critical Accounting Policies
 
Our discussion and analysis of the financial condition and results of operations are based upon the Company’s financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our financial statements, so we consider these to be our critical accounting policies. Because of the uncertainty inherent in these matters, actual results could differ from the estimates we use in applying the critical accounting policies. Certain of these critical accounting policies affect working capital account balances, including the policies for revenue recognition, allowance for doubtful accounts, inventory reserves and income taxes. These policies require that we make estimates in the preparation of our financial statements as of a given date.
 
Within the context of these critical accounting policies, we are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.
 
Revenue recognition
 
The Company 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; salaries and benefits for research and development personnel, 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.
 
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 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.
 
 
6

 
 
Item 3. Quantitative and Qualitative Disclosures about Market Risk
 
Not applicable to a “smaller reporting company” as defined in Item 10(f)(1) of SEC Regulation S-K
 
Item 4. Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining disclosure controls and procedures for the Company.
 
(a) Evaluation of Disclosure Controls and Procedures
 
Based on the evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Accounting Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are not effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s (“SECs”) rules and forms and to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Accounting Officer, as appropriate to allow timely decisions regarding required disclosure.
 
(b) Changes in the Company’s Internal Controls Over Financial Reporting

Other than described above, there have been no changes in the Company’s internal control over financial reporting during the most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect, the Company’s internal control over financial reporting.  

Item 5. Other
 
None
 
Part II- Other Information
 
Item 1. Legal Proceedings
 
We are not a party to any legal proceedings. Management is not aware of any legal proceedings proposed to be initiated against us. However, from time to time, we may become subject to claims and litigation generally associated with any business venture operating in the ordinary course.
 
Item 1A. Risk Factors
 
Not applicable to a “smaller reporting company” as defined in Item 10(f)(1) of SEC Regulation S-K
 
Item 3. Recent Sale of Unregistered Securities

None.

Item 6. Exhibits
 
 Exhibit
Number
  Description
     
31.1*
 
Rule 13a-14(a) Certification of the Chief Executive and Financial Officer
32.1*
 
Section 1350 Certification of Chief Executive and Financial Officer
 
 
*
 
* Filed along with this document

 
 
7

 
 
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.
 
   
       
Dated: November 23, 2015
By:
/s/ CHAN HENG FAI  
   
Chan Heng Fai
 
   
Chief Executive Officer
 
       
 
 
HOTAPP INTERNATIONAL INC
 
       
Dated: November 23 , 2015
By:
/s/ SIEN LUP CHEW  
    SIEN LUP CHEW  
    Chief Financial Officer  
       
 
 
 Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated.
 
Signature
 
Title
 
Date
         
/s/Chan Heng Fai
 
Chief Executive Officer and Director
 
November 23, 2015
Chan Heng Fai
       
         
/s/ Sien Lup Chew
 
Chief Financial Officer
 
November 23, 2015
Sien Lup Chew