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Pulse Evolution Corp – ‘10-K’ for 6/30/15

On:  Friday, 5/20/16, at 1:38pm ET   ·   For:  6/30/15   ·   Accession #:  1493152-16-10132   ·   File #:  333-190431

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended June 30, 2015

OR

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

Commission file number: 333190431

PULSE EVOLUTION CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Registrant’s telephone number, including area code 772-345-4100

Securities registered under Section 12(b) of the Act:

Securities registered under Section 12(b) of the Act: None.

Securities registered under Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] No [X]

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

[  ] Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

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 ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation SK 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 10-K or any amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of the “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

State the aggregate market value of the voting and nonvoting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed fiscal year. $162,677,000 based on 75,663,752 shares held by non-affiliates at a share price of $2.15 on December 31, 2014.

As of April 29, 2016 – 149,913,343 shares of the registrant’s common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.

TABLE OF CONTENTS

A CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K of Pulse Evolution Corporation., a Nevada corporation (the “Company”), contains “forward-looking statements,” as defined in the United States Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “could”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of such terms and other comparable terminology. These forward-looking statements include, without limitation, statements about our market opportunity, our strategies, competition, expected activities and expenditures as we pursue our business plan, and the adequacy of our available cash resources. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Actual results may differ materially from the predictions discussed in these forward-looking statements. The economic environment within which we operate could materially affect our actual results. Additional factors that could materially affect these forward looking statements and/or predictions are discussed in greater detail under Item 1A – “Risk Factors” of this report and other factors discussed in the Company’s filings with the Securities and Exchange Commission (“SEC”).

We caution that the factors described herein and other factors could cause our actual results of operations and financial condition to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

PART I

ITEM 1. BUSINESS

Company

Pulse Evolution Corporation (“we”, “us”, “our” or the “Company”) was incorporated on May 31, 2013 under the laws of the State of Nevada under the name QurApps, Inc. On May 8, 2014, we changed our name to Pulse Evolution Corporation to better reflect our plans to produce high impact applications of hyper-realistic computer-generated human likeness.

We are a market leader in the emerging virtual human likeness space, and the foremost developer of hyper-realistic digital humans – computer generated assets that appear to be human and can perform in live shows, virtual reality, augmented reality, holographic, 3D stereoscopic, web, mobile, interactive and artificial intelligence applications.

We believe that digital humans will be ubiquitous in society, culture and industry. In the last decade, hyper-realistic digital humans have performed in movies such as The Curious Case of Benjamin Button or on stage such as the virtual performance of a digital Tupac Shakur at the Coachella Valley Music Festival. We expect that, in years to come, digital humans will not only perform for audiences on stage and in film, but they will also represent individual consumers as digital likeness avatars, in realistic and fantasy form, appearing and interacting on the consumer’s behalf in electronic and mobile communication, social media, video game, virtual reality, and augmented reality. We believe digital humans will ultimately act as a relatable interface for artificial intelligence applications, allow thinking computers and ‘bots’ to appear as humans, providing useful information and services to people in diverse industries, such as education, health care, telecommunications, defense, transportation and entertainment.

Our leadership team is currently focused on applications of digital humans in entertainment. We believe the entertainment industry provides us with attractive near-term opportunities to put digital humans to work in proven performance-oriented business models, while also allowing us to use the visibility of our globally recognized celebrities to showcase our digital human technologies and their applications across other industries. Accordingly, our current business plan is to generate revenues from our digital human representations of three of the world’s best-known late celebrities – Michael Jackson, Elvis Presley and Marilyn Monroe – in full length entertainment experiences, brand marketing events and digital products.

Although we are initially focused on the near-term revenue opportunities of ‘virtual performance’ as a new form of entertainment, our principal business is to promote the use of digital humans globally, through our technology and through our applications, across diverse digital age industries. As we believe that market demand for digital humans in entertainment, or virtual performers, is considerably greater than our current capacity to meet such demand, we will remain focused on the production of technology and content to support performances and concert tours related to our leading celebrity properties. During this period of development and launch of our live entertainment business, our plans to develop digital humans for other applications, such as artificial intelligence and virtual reality, will be developed through the establishment of joint ventures with third parties, some of which may be affiliated with related parties, that can be separately funded and staffed appropriately to support such opportunities. In 2015, we created one such joint venture, Pulse Biologic, to focus on digital human animation in the surgical simulation and life sciences industries. In 2016, we plan to create a joint venture with a related party to explore the use of digital humans in artificial intelligence.

Media and Entertainment Business

Pulse Entertainment produced a computer-generated and animated human likeness of the late popular entertainer Michael Jackson that appeared in a live performance at the Billboard Music Awards on May 18, 2014. The virtual performance of Michael Jackson contributed to the award show’s highest television viewership in 13 years and an 11-year high in advertising in the demographic of viewers aged 18 to 49. This production reached approximately 11 million television viewers during the initial network broadcast, followed by more than 51 million online views through YouTube and Vevo, more than 2,400 news articles, an estimated 98 billion internet impressions for the Michael Jackson hologram, and more than 300 million internet impressions estimated for Pulse Entertainment and members of its management.

Our media and entertainment business model is focused on participation in intellectual property through the development, production and co-ownership of entertainment properties featuring globally recognized animated virtual performers and through multiyear revenue share relationships with living celebrities and late celebrity estates.

While we intend to fund a portion of our production costs from internal sources, we anticipate that a large portion of these costs will be funded by third parties, including affiliated production companies, associated celebrity estates, corporate sponsors and other entertainment finance vehicles. We believe there is significant interest from third-parties to finance theatrical productions related to our leading celebrity properties. It is our goal to utilize such third-party capital to reduce the risks associated with our entertainment business model and position our company to be paid, as much as possible, as a celebrity or as a producer.

Elvis Presley

In August 2014, we entered into a multiyear agreement with an affiliate of Authentic Brands Group, ABG EPE IP, LLC (“ABG”), the principal owner of rights related to the estate of the late celebrity Elvis Presley to produce a photorealistic digital likeness of the late celebrity and to participate in a share of revenues that could be realized through performances of the “Virtual Elvis Presley” in diverse entertainment and media applications. In January 2016 the Agreement was amended, and supplemented with additional agreements, granting to Pulse certain production rights related to a specific concert production and extending the rights of exclusivity through the full term of the Agreement to December 31, 2021.

In January 2016, we officially began production of our first live concert, featuring a digital Elvis Presley, which will be produced by Simon Fuller and his company XIX Entertainment. Mr. Fuller, noted by Billboard magazine as the most successful British music manager of all time, created the British TV hit Pop Idol, American Idol and the global Idol franchise, which has since garnered 6.5 billion viewers to become the world’s most widely watched television franchise. He also manages, or has managed, such iconic acts as the Spice Girls, the late Amy Winehouse, Annie Lennox, Carrie Underwood, Steven Tyler, Kelly Clarkson, Lisa Marie Presley, Victoria Beckham and David Beckham.

Michael Jackson

In late 2013, Pulse Entertainment Corporation (“Pulse Entertainment”), now a wholly-owned subsidiary of the Company, entered into an exclusive multiyear agreement with the estate of Michael Jackson to produce a photorealistic digital likeness of the late celebrity and to participate in a share of revenues that could be realized through performances of the “Virtual Michael Jackson” in diverse entertainment and media applications.

Marilyn Monroe

In October 2014, we entered into a multiyear agreement with the estate of the late celebrity Marilyn Monroe to produce a photorealistic digital likeness of the late celebrity and to participate in a share of revenues that could be realized through performances of the “Virtual Marilyn Monroe” in diverse entertainment and media applications.

In January 2016, the Agreement was amended, extending the rights of exclusivity through the full term of the Agreement to December 31, 2021 and, at the election of Pulse, a renewal option to December 31, 2024.

Interactive, Virtual Reality, Augmented Reality and Mobile Experiences

On February 26 2016, we entered into an agreement to purchase 100% of the share capital of Float Hybrid Entertainment, Inc., a developer of interactive experiences for brands such as Pepsi, Microsoft, GE, AKQA, Ericsson, XBOX and Anheuser-Busch. Float was also a founding developer on the Kinect depth sensor platform and an experienced developer responsible for a number of yet-to-be-released Virtual and Augmented Reality Platforms.

We believe that Float’s practical experience with creating real-time interactive experiences on a wide range of emerging platforms combined with Pulse’s market leading digital human technology has positioned us to be a leading pioneer in the delivery of digital human experiences to a wide range of brands and customers, especially in the virtual and augmented reality arena.

Artificial Intelligence

We are actively seeking strategic partners and technology licensing relationships with leading developers of artificial intelligence technologies. It is our goal to be the “face” of artificial intelligence, to provide a human form to interactive artificially intelligent computer beings that will be common in society, providing useful information and services to people in diverse industries, such as education, health care, telecommunications, defense, transportation and entertainment. We believe the experience and vision of our leadership team, combined with existing and growing business relationships, have positioned the Company to be a pioneer in the development of consumer facing artificial intelligence applications.

Work and Accolades of our Management and Team

Our management team includes pioneers in the creation and presentation of advanced computer generated imagery, photo-realistic human animation, and holographic virtual performances. They are also accomplished filmmakers and storytellers, who have produced and exploited entertainment media consumed by audiences around the world for more than 20 years. Their works have been recognized with numerous film industry awards and nominations, including Academy Awards® for Best Visual Effects issued by the Academy of Motion Picture Arts and Sciences and similar awards issued by the Visual Effects Society. Our executives, visual effects supervisors and digital artists have contributed materially to the visual imagery of more than 50 major motion pictures and film properties, including such notable films as Lord of the Rings, Transformers, Pirates of the Caribbean, Tron: Legacy, and The Curious Case of Benjamin Button.

Our core development team represents a combination of artists and executives who have come together to form a unique company that specializes in character creation and human animation. Many of our employees have worked, often in leadership roles, with talented artists, at accomplished companies, delivering visually stunning characters and visual effects sequences.

Our creative leadership team is anchored by individuals who are recognized within the entertainment industry for their leadership of largescale feature films and for the development of memorable, award-winning animated characters, resulting in numerous industry awards for creative and technical excellence, including:

Our Executive Chairman, John Textor, has significant experience in the delivery of high-end visual effects and character animation, having served as both Chairman and Chief Executive Officer of a leading visual effects company which, during his tenure, produced visual effects and character animation for 25 major feature films and numerous creative projects, resulting in the multiple industry awards, recognizing the company and, principally, its artists, including:

Collectively, our executives, visual effects supervisors and digital artists have contributed materially to numerous largescale feature films, including 2012, 47 Ronin, The A-Team, Back to the Future Part II, Batman Forever, Blades of Glory, The Chronicles of Narnia: The Lion, the Witch and the Wardrobe, The Curious Case of Benjamin Button, Ender’s Game, Final Fantasy: The Spirits Within, Flags of Our Fathers, Forrest Gump, G.I. Joe: The Rise of the Cobra, Girl with the Dragon Tattoo, The Golden Compass, Green Lantern, Harry Potter and the Sorcerer’s Stone, The Hitcher, Hulk, I am Legend, I Robot, Jack the Giant Killer, Jurassic Park, Letters from Iwo Jima, The Lord of the Rings: Two Towers, The Matrix Reloaded, Meet the Robinsons, Men in Black II, The Mummy: Tomb of the Dragon, My Super Ex-Girlfriend, The Nativity Story, Pearl Harbor, Percy Jackson & the Olympians: The Lightning Thief, Pirates of the Caribbean: At World’s End, Pirates of the Caribbean: Dean Man’s Chest, The Polar Express, Rango, Real Steel, Rock of Ages, The Seeker: The Dark is Rising, The Smurfs, Speed Racer, Star Trek, Star Wars: Episode III Revenge of the Sith, Terminator 2: Judgment Day, The Texas Chainsaw Massacre: The Beginning, Thor, Transformers, Transformers: Dark of the Moon, Transformers: Revenge of the Fallen, TRON: Legacy, War of the Worlds, The Watch, We Own the Night, XMen 2, XMen: First Class, and Zodiac.

Live Virtual Performances of Animated Human Characters

A selection of significant live virtual performances members of our team have taken part in include:

Intellectual Property

We rely on a combination of copyright and trade secret laws in the United States and other jurisdictions, as well as confidentiality and other contractual provisions to protect our trade secrets, proprietary methodologies and our brand. We enter into confidentiality and invention assignment agreements with our employees and consultants, and we rigorously control access to our work and methods.

Despite our efforts, the steps we have taken to protect our proprietary rights may not be adequate to preclude misappropriation of our proprietary information or infringement of our intellectual property rights, and our ability to police such misappropriation or infringement is uncertain, particularly in countries outside of the United States.

Marketing Strategy to Support Productions and Secure New Digital Rights

We intend to achieve sales growth with lower marketing expense by way of two distinct advantages, the uniqueness of our offerings as pioneers of a significant emerging industry and the close relationships, forged over many years, with the small number of large studios, important venues and globally recognized late celebrities that have dominated the entertainment industry.

Marketing for our productions will include:

We also plan to promote our company as the ideal partner for celebrity estates and owners of likeness rights by focusing on the following strategies to achieve ownership of intellectual property or long-term license rights related to music and digital likeness:

Our intellectual property strategies will be to obtain digital likeness rights for the leading celebrity estates prior to its competitors who are not prepared to enter the market. Most managers, agents and attorneys for celebrity estates have not thought deeply and specifically about this new category of rights exploitation. We are generating the interest celebrity managers, agents and attorneys who are not aware of this new category of rights exploitation that have the potential for new revenue streams. We believe that securing these intellectual property rights early on will give it a competitive advantage in the market.

Competition

We have positioned ourselves as a producer of high impact applications of computer-generated human likeness, or functional hyper-realistic digital humans. Our competition in the general visual effects services market includes Industrial Light and Magic (purchased by Disney), Sony Pictures Imageworks Inc., Weta Digital Ltd., Rhythm & Hues Inc. and Framestore CFC, as well as many smaller firms that specialize in visual effects for film and TV productions. Many of these producers are larger than we are and have greater financial resources than we do, although they generally operate on a work-for-hire basis and are not directly involved in the production and financing of their projects.

We believe we can compete effectively with generalist visual effects industry competitors through specialization, developing the highest quality and consistency of digital human likeness, and by being a proven executive producer of large scale live shows and events. We also believe that our long-term exclusive relationships with unique, globally recognized celebrity properties help to further mitigate the risk of competition from other technology companies that may seek to enter the emerging industries of human likeness and virtual performance.

Employees

As of March 31, 2016, we employed 35 full-time employees. We believe that our employee and labor relations are good. We are currently not a party to any collective bargaining agreement.

Government Regulation

We are not currently subject to direct federal, state or local regulations, other than regulations applicable to businesses generally.

Our Corporate History

Pulse Evolution Corporation was incorporated on May 31, 2013 under the laws of the State of Nevada under the name QurApps, Inc. We changed our name to Pulse Evolution Corporation effective May 8, 2014 to better reflect our plans to produce specialized, high impact applications of computer-generated human likeness, or functional hyper-realistic digital humans.

On May 31, 2013 (inception) the Company issued 6,000,000 shares of common stock to Alon Nigri our former Chief Executive Officer and former sole director for cash of $18,000.

During the month of February 2014, we sold 1,380,004 shares of our common stock at $0.03 per share to various investors for cash of $42,600 pursuant to our Registration Statement on Form S-1 declared effective by the SEC on October 7, 2013.

On May 15, 2014, our controlling stockholder at the time, former Chief Executive Officer and former sole director (the “Seller”), entered into and closed on a Share Purchase Agreement (the “Agreement”) with, Tradition Studios IP Acquisition LLC, (Alternative)2 Holding AG, and Scenic Loop Holding, LLC (each a “Purchaser” and collectively, the “Purchasers”) whereby the Purchasers purchased from the Seller a total of 53,612,600 shares of our common stock for an aggregate of $107,225, representing approximately 80.68% of our issued and outstanding shares of common stock. The Purchasers own or control as a group, Pulse Entertainment.

On May 16, 2014, we signed a letter of intent to exchange at least a majority of our unissued shares of common stock for 100% of the outstanding common stock of Pulse Entertainment, a related party.

Effective on June 23, 2014, the Pulse Entertainment amended and restated its articles of incorporation filed with the Secretary of State of the State of Nevada in order to effectuate an increase in the number of authorized shares of common stock, par value $0.001 per share, from 75,000,000 to 300,000,000, increase the authorized blank check preferred stock to 100,000,000 shares and effectuate a 1 for 10 forward stock split of our issued and outstanding common stock (the “Forward Stock Split”). As a result of the Forward Stock Split, every 1 share of our pre-Forward Split common stock was increased and reclassified into 10 shares of our common stock. All references to shares of our common stock in this report on Form 10-K refers to the number of shares of common stock after giving effect to the Forward Stock Split (unless otherwise indicated).

Beginning on July 15, 2014, and continuing through September 23, 2014, we entered into a securities purchase agreements (the “Securities Purchase Agreements”) with six investors who are unrelated parties to us whereby they agreed to purchase an aggregate of 4,855,000 shares of our Common Stock at prices ranging from $0.40 per share to $1.00 per share, for a total purchase price of $2,225,000. The Securities Purchase Agreements provide piggyback registration rights for the Common Stock acquired by the investors in the event that we register any of our Common Stock under the Securities Act of 1933, as amended (the “Securities Act”) for sale to the public for cash in an underwritten offering, if the applicable registration form being used by us will permit such registration. We are not required to register the Common Stock if registration is effected by us on behalf of another shareholder that is exercising registration rights that prohibit registration of other securities or the Common Stock has already been registered.

On September 26, 2014, we entered into a share exchange agreement (the “Share Exchange Agreement”) with Pulse Entertainment shareholders, some of whom are officers and directors of our company, pursuant to which we agreed to issue up to 58,716,870 shares of our unregistered common stock, net of certain share cancellations, to the shareholders of Pulse Entertainment holding 21,535,252 shares of its issued and outstanding common stock, such shares representing 100% of the issued and outstanding common stock of Pulse Entertainment.

On September 30, 2014, Pulse Evolution completed the initial closing under the Share Exchange Agreement pursuant to which we agreed to issue shares of our unregistered common stock to the shareholders of Pulse Entertainment in exchange for shares of its common stock. As part of the Share Exchange, certain of our shareholders who are also shareholders of Pulse Entertainment agreed to cancel 60,910,113 shares of our common stock issuable to them in connection with the Share Exchange. As of July 31 2015, all shares of Pulse Entertainment have been exchanged and Pulse Entertainment is now a wholly owned subsidiary of Pulse Evolution.

ITEM 1A. RISK FACTORS

Not required for smaller reporting companies.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

Until March 31, 2015, the Company leased office space for its company headquarters in Port Saint Lucie, Florida pursuant to a lease for approximately $12,000 per month. The lease expired on March 31, 2015. Beginning on April 1, 2015, the Company leases the office space on a month-to-month basis for $6,000 per month.

The Company also leases office space for its production operations in San Rafael, California. The monthly lease expense during the year ended June 30, 2015 was approximately $7,000 per month. Following the year end, the company entered into a one year lease at a monthly cost of approximately $15,000.

We believe our current facilities are adequate to meet current and near-term operating requirements.

ITEM 3. LEGAL PROCEEDINGS

On May 29, 2014, Hologram USA, Inc., Musion Das Hologram Limited and Uwe Maass (the “Plaintiffs”) filed an amended complaint in the U.S. District Court for the District of Nevada (Case No. 2:14cv00772GMNNJK). The complaint alleged that Plaintiffs own, or control, certain patents related to the projection illusion technique, historically known as “Pepper’s Ghost.” The Plaintiffs further alleged that Pulse Evolution Corporation, Pulse Entertainment Corporation, John Textor, Dick Clark Productions, Inc., John Branca and John McClain, as executors of the Estate of Michael Jackson, MJJ Productions, Inc. Musion Events, Ltd. Musion 3D, Ltd., William James Rock and Ian Christopher O’Connell (collectively, the “Defendants”) infringed on the Plaintiffs’ patent rights by using the Plaintiffs’ projection illusion system to project the visual imagery developed and conceived by our company in connection with the a musical performance at the 2014 Billboard Music Awards in Las Vegas Nevada featuring an image of the late Michael Jackson. The Plaintiffs did not allege that the Company’s core business, the production of visual effects or human animation imagery infringes their intellectual property rights. In March 2016, the parties reached an amicable settlement agreement of all claims and counterclaims. As part of the settlement, our Executive Chairman also agreed to dismiss and release all claims against the principal shareholder of Hologram USA that remained pending through separate actions brought in the state of Florida. All costs associated with the settlement and litigation have been accrued in the period to June 30, 2015.

The Company is involved from time to time in routine litigation arising in the ordinary course of conducting its business. Except as set forth above, in the opinion of the Company’s management, no pending routine litigation will have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is quoted by the OTC Markets Group under the symbol, “PLFX”. On March 25, 2016, the closing sale price for our common stock was $2.94. Our stock is thinly traded and there can be no assurance that a liquid market for our common stock will ever develop.

As of March 27, 2016, there were approximately 150 record holders, an unknown number of additional holders whose stock is held in “street name” and 149,913,343 shares of common stock issued and outstanding.

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds provided by operations and any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future.

On January 7, 2016, our Board of Directors authorized the Company to repurchase up to $5 million of shares of its outstanding common stock. Shares are expected to be repurchased from time to time through open market transactions, in accordance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended. The manner, price, number and timing of share repurchases will be subject to a variety of factors, including market conditions and applicable U.S. Securities and Exchange Commission rules. The share repurchase program has an expiration date of June 30, 2016, and may be limited, terminated or revised at any time without notice. The program does not obligate the Company to purchase any shares.

It is the intent of the company to focus on business fundamentals as its primary strategy to enhance shareholder value. The Company also believes that its publicly traded common stock represents a currency that contributes to its fundamental strategy in a variety of ways. The Company intends to pursue the share repurchase program that its Board of Directors believes represents a sound investment of its available cash and is supportive of its fundamental business strategy. The Company is currently engaged in a number of discussions with strategic parties and financial investors, a process which has been ongoing since inception and is critical to addressing the Company’s working capital needs. Since inception, this strategy has resulted in equity and debt financings which have been used to maintain a consistent level of operations as previously described in the Company’s public filings, such operations continuing without material changes through and including recent unreported periods. The Company has recently received written offers from credible strategic and financial parties that, if consummated, would enhance the value of the Company’s common stock. Such offers, and letters-of-intent, are non-binding in nature and are not assured to result in successfully consummated transactions.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable to a smaller reporting company.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Corporate Background

Pulse Evolution Corporation (“we”, “us”, “our”, the “Company”) was incorporated on May 31, 2013 under the laws of the State of Nevada under the name QurApps, Inc. On May 8, 2014, we changed our name to Pulse Evolution Corporation to better reflect our plans to produce specialized, high impact applications of computer-generated human likeness, or functional hyper-realistic digital humans.

On September 30, 2014, we completed the initial closing under the Share Exchange Agreement we entered into with Pulse Entertainment and certain of its shareholders, some of whom are officers and directors of our company, pursuant to which we agreed to issue shares of our unregistered common stock to certain shareholders of Pulse Entertainment in exchange for shares of its common stock (the “Share Exchange”). See “Business—Our Corporate History.” As of July 2015, Pulse Entertainment became a wholly owned subsidiary of the Company.

Business Overview

We are a market leader in the emerging virtual human likeness space, and the foremost developer of hyper-realistic digital humans – computer generated assets that appear to be human and can perform in live shows, virtual reality, augmented reality, holographic, 3D stereoscopic, web, mobile, interactive and artificial intelligence applications.

We believe that digital humans will be ubiquitous in society, culture and industry. In the last decade, hyper-realistic digital humans have performed in movies such as The Curious Case of Benjamin Button or on stage such as the virtual performance of a digital Tupac Shakur at the Coachella Valley Music Festival. We expect that, in years to come, digital humans will not only perform for audiences on stage and in film, but they will also represent individual consumers as digital likeness avatars, in realistic and fantasy form, appearing and interacting on the consumer’s behalf in electronic and mobile communication, social media, video game, virtual reality, and augmented reality. The Company’s long-term goal is to be the ‘face’ of artificial intelligence, to provide a human form to interactive artificially intelligent computer beings that will be common in society, providing useful information and services to people in diverse industries, such as education, health care, telecommunications, defense, transportation and entertainment.

Pulse Entertainment produced a computer-generated and animated human likeness of the late popular entertainer Michael Jackson that appeared in a live performance at the Billboard Music Awards on May 18, 2014. The virtual performance of Michael contributed to the award show’s highest television viewership in 13 years and an 11-year high in advertising in the demographic of viewers aged 18 to 49. This production reached approximately 11 million television viewers during the initial ABC network broadcast, followed by more than 51 million online views through YouTube and Vevo and generated more than 2,400 news articles and an estimated 98 billion internet impressions for the Michael Jackson hologram and more than 300 million internet impressions estimated for Pulse Entertainment and members of its management. In addition, August and October, 2014 respectively, we entered into multi-year agreements with the owner of the likeness, appearance, and publicity rights of Elvis Presley and Marilyn Monroe to develop entertainment projects that utilize a realistic computer-generated image of these celebrities. These celebrities are among the world’s most famous talent. We plan to use the computer-generated likeness to create entertainment and branding revenue opportunities for us, generated from holographic performances in live shows and commercials which we believe will provide us with a foundation for significant future growth in our core business.

Current Business Focus on Digital Celebrities in Media and Entertainment

Today, we are a recognized pioneer and leading developer of hyper-realistic digital humans for holographic live performances, virtual reality, augmented reality and artificial intelligence. Founded by the producers of the world’s most globally recognized digital humans, we are focused on the development of computer-generated digital humans for entertainment and media applications, such as live and holographic concerts, virtual reality, advertising, feature films and branded content. In this regard, we are principally focused on generating revenues from key agreements with the celebrity estates of Michael Jackson, Elvis Presley and Marilyn Monroe.

Our leadership team is currently focused on applications of digital humans and celebrities in media and entertainment. We believe the entertainment industry provides us with attractive near-term opportunities to put digital humans to work in proven performance-oriented business models, while also allowing us to use the visibility of our globally recognized celebrities to showcase our digital human technologies and their applications across other industries. Accordingly, our current business plan is to generate revenues from our digital human representations of three of the world’s best-known late celebrities – Michael Jackson, Elvis Presley and Marilyn Monroe – in full length entertainment experiences, brand marketing events and digital products.

We have entered into unique, exclusive digital likeness rights agreements with the estates of Michael Jackson, Elvis Presley and Marilyn Monroe, to produce hyper-realistic digital likenesses of these late celebrities and to participate in a share of revenues that could be realized through the performances of such digital humans in diverse entertainment and media applications. Revenues from the estates of these late celebrities rank them among the top earning celebrity estates in the world, with estimated aggregate earnings in 2014 in excess of $200,000,000 as stated by Forbes.com. The revenues of these estates have been derived primarily from licensing the still and motion picture images and recordings captured when the respective celebrities were alive. Further, they are based on clippings, outtakes and performances from the lives and careers of the historical celebrities. We believe that our first live presentation of the Virtual Michael Jackson performance demonstrated that we are able to re-launch the careers of deceased celebrities. More than staging an encore to their historical careers of Michael Jackson, Elvis Presley and Marilyn Monroe, the virtual performances will be judiciously and compellingly contemporized and made relevant to whole new audiences through new performance forms and media. We are poised to create virtual celebrities that can do things and go places their historical originals never could, while remaining true to their original values, identities, personalities and preferences.

We believe that our plans for virtual performances of Michael Jackson, Elvis Presley and Marilyn Monroe provide us with the foundation for significant growth in our core business, which is initially focused on media and entertainment.

Long term opportunities for Digital Humans in Virtual Reality, Augmented Reality and Artificial Intelligence

We believe that digital humans have applications far beyond entertainment. We expect they will not only perform on stage or in film, as has already been witnessed, but they will also represent us individually as digital likeness avatars, in realistic and fantasy form, appearing on our behalf, and interact in electronic and mobile communication, social media, video games and virtual reality. We believe digital humans will ultimately provide a relatable human interface for artificial intelligence applications, “thinking” machine systems that, through the technology, will appear as realistic communicating humans through mobile devices, digital signage, classrooms and through lightweight wearable augmented reality glasses and virtual reality headsets.

Beyond our immediate focus on entertainment, we are devoting resources to developing the role of digital humans in virtual reality and in artificial intelligence. In the first quarter of our fiscal year ending June 30, 2016, we entered into a development relationship, creating digital humans and content, for a leading virtual reality industry company. The initiative has enabled us to further develop our proprietary human animation technologies and position for entry into the high-growth virtual reality industry. We intend to position ourselves as a leading content contributor to the industries of virtual reality and augmented reality. The formation of strategic partnerships with leading companies in the emerging and well-capitalized industries of virtual reality and augmented reality will continue to be a focus of our development efforts and shareholder value objectives.

As we believe that market demand for digital humans, is considerably greater than our current capacity to meet such demand, we will remain focused on the production of technology and content to support performances and concert tours related to our leading celebrity properties. During this period of development and launch of our live entertainment business, our plans to develop digital humans for other applications, such as artificial intelligence and virtual reality, will be developed through the establishment of joint ventures with third parties, some of which may be affiliated with related parties, that can be separately funded and staffed appropriately to support such opportunities. In 2015, we created one such joint venture, Pulse Biologic, to focus on digital human animation in the surgical simulation and life sciences industries. In 2016, we plan to create a joint venture with a related party to explore the use of digital humans in artificial intelligence.

On February 26, 2016, we entered into an agreement to purchase 100% of the share capital of Float Hybrid Entertainment, Inc., a developer of interactive experiences for brands such as Pepsi, Microsoft, GE, AKQA, Ericsson, XBOX and Anheuser-Busch. Float was also a founding developer of the Kinect depth sensor platform and has deep experience of development for a number of yet-to-be-released Virtual and Augmented Reality Platforms. We believe that Float’s practical experience with creating real-time interactive experiences on a wide range of emerging platforms combined with Pulse’s market leading digital human technology has positioned us to be a leading pioneer in the delivery of digital human experiences to a wide range of brands and customers, especially in the virtual and augmented reality arena.

Plan of Operations and Liquidity

We have raised approximately $16.9 million from inception through June 30, 2015, and are highly dependent on raising capital to fund our startup and growth strategies. Our core business is initially focused on the media and entertainment business, principally the acquisition from estates and other rights holders of certain intellectual property rights to create virtual celebrities, and the right to present, and license others to present, those virtual performers in live, and a variety of live virtual and commercial formats.

We intend to fund an initial portion of show specific production costs from internal sources. Once a live show is “green lit”, we will set up a production entity for the purposes of producing and operating the show. We anticipate that a large portion of these show specific costs will be funded by third parties, including affiliated production companies, associated celebrity estates, corporate sponsors and other entertainment finance vehicles. We do not, however, currently have any such funding or financing arrangements currently in place.

Accounting Treatment of the Merger

For financial reporting purposes, the Share Exchange represents a “reverse merger” rather than a business combination and Pulse Entertainment is deemed to be the accounting acquirer in the transaction. The Share Exchange is being accounted for as a reverse merger and recapitalization effective as of September 30, 2014. Pulse Entertainment is the acquirer for financial reporting purposes and Pulse Evolution Corporation is the acquired company. Consequently, in reports we file with the SEC covering accounting periods after September 30, 2014, the assets and liabilities and the operations will reflect the historical financial statements prior to the Share Exchange will be those of Pulse Entertainment and will be recorded at the historical cost basis of Pulse Entertainment, and the consolidated financial statements after completion of the Share Exchange will include the assets and liabilities of our company and Pulse Entertainment, and the historical operations of Pulse Entertainment and the combined operations with our company from the initial closing date under the Share Exchange Agreement.

Results of Operations

The following analysis on results of operations was based primarily on the comparative consolidated financial statements, footnotes and related information for the periods identified below and should be read in conjunction with the consolidated financial statements and the notes to those statements that are included elsewhere in this report. The results discussed below are for the fiscal year ended June 30, 2015 and period from October 10, 2013 through June 30, 2014.

Revenues

Revenues during the year ended June 30, 2015 and period from October 10, 2013 through June 30, 2014 were $88,151 and $1,451,534, respectively. Revenues in 2014 included amounts received by the Company for work on the Michael Jackson Billboard Awards presentation, whereas in 2015 the Company focused on core technology development in preparation for large scale theatrical productions.

Costs and Expenses

For the years ended June 30, 2015 and period from October 10, 2013 through June 30, 2014, we incurred operating expenses of $13,115,411 and $9,774,946, respectively. The principal components of operating expenses for the year ended June 30, 2015, are payroll and contract services of $7,425,602 (2014: $2,976,558), professional fees of $1,871,017 (2014: $747,431), public company costs of $1,083,565 (2014: not separately recorded) and general & administrative expenses of $2,735,227 (2014: $6,050,956, which included physical production costs). In 2014, a significant portion of our operating cost related to the development and physical production of the Michael Jackson Billboard Awards show. In 2015, the majority of our operating expenses are devoted to the development of digital likeness assets and entertainment properties related to our revenue share agreements with the estates of Michael Jackson, Elvis Presley and Marilyn Monroe. The increase in operating expenses from 2014 to 2015 is a result of a longer fiscal period, additional professional fees and public company costs and the focus on development multiple digital likenesses and the underlying technology and tools, offset by the lack of a major event during the year.

Though it would be customary in the entertainment industry to capitalize such expenses as assets available for future use, thus far have expensed the material portions of the costs of building our principal character assets and developing our shows. We anticipate continuing this practice until such time as there is either a proven business model for the continuing performance and appearance of our digital celebrities, or upon our entering into an agreement to commence a specific theatrical production featuring one of our digital celebrities.

Net Loss

Net loss during the years ended June 30, 2015 and period from October 10, 2013 through June 30, 2014 was $13,027,260 and $8,323,412, respectively.

Liquidity and Capital Resources

Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. At June 30, 2015 and June 30, 2014, we had a cash balance of $899,174 and $1,539,719, respectively, and working capital (deficit) of ($2,096,088) and $726,842, respectively.

Net cash used in operating activities was $9,723,313 and $6,162,016 for the year ended June 30, 2015 and period from October 10, 2013 through June 30, 2014, respectively. The increase in cash used in operating activities was primarily a result of the net loss from operations before non-controlling interests of $13,027,260 for the year ended June 30, 2015, compared to $8,323,412 for the period from October 10, 2013 through June 30, 2014 and the purchase of $1,000,000 of licensing rights during the year ended June 30, 2015, offset by accounts payable of $1,349,638 mainly due to shares to be issued for services and payroll accruals, as well as the changes in various other balances.

Net cash used in investing activities was $27,174 and $9,805 for the fiscal year ended June 30, 2015 and period from October 10, 2013 through June 30, 2014, respectively. The increase was primarily a result of the purchase of property and equipment.

Net cash provided by financing activities was $9,109,942 and $7,711,540 for the fiscal year ended June 30, 2015 and period from October 10, 2013 through June 30, 2014, respectively. The increase was primarily a result of additional sales of our common and preferred stock, net of stock issuance costs.

Issuances of our Common Stock

As is more fully described in Note 7 to our consolidated financial statements contained elsewhere in this annual report on Form 10-K, we have raised approximately $16.9 million from inception through June 30, 2015 through the issuances of our common stock.

Common Stock and Preferred Stock Issued in Private Placements

From July 2014 until June 30, 2015, we sold (i) an aggregate of 9,691,185 shares of our common stock at an average price of $0.53 per share, for total proceeds of $5,059,308, which are net of fees of $116,060, and (ii) an aggregate of 6,000,000 shares of our preferred shares at an average price of $0.62, for total proceeds of $3,718,613.

Common Stock Issued in Share Exchange

On September 30, 2014, the Company completed the initial closing under the Share Exchange Agreement pursuant to which it agreed to issue 35,827,309 shares of its unregistered Common Stock, net of cancellations, to the shareholders of Pulse Entertainment in exchange for 17,466,383 shares of its common stock. As part of the Share Exchange, certain of the Company’s shareholders who are also shareholders of Pulse Entertainment agreed to cancel 60,910,113 shares of the Company’s common stock issuable to them in connection with the Share Exchange. Upon completion of the initial closing, Pulse Entertainment became a subsidiary of the Company in which the Company owned an 81.1% interest at that time. In October 2014, under the terms of the Share Exchange Agreement, the Company issued 15,135,973 shares of its unregistered common stock to shareholders of Pulse Entertainment in exchange for 2,732,869 shares of its common stock raising its ownership percentage in Pulse Entertainment to 93.8% from 81.1%. In April 2015, under the terms of the Share Exchange Agreement, the Company issued 6,801,268 shares of its unregistered common stock to shareholders of Pulse Entertainment in exchange for 1,228,000 shares of its common stock raising its ownership percentage in Pulse Entertainment to 99.5% from 93.8%. In June 2015, the Company issued 398,772 shares of its unregistered common stock to shareholders of Pulse Entertainment in exchange for 72,000 shares of its common stock, raising its ownership percentage in Pulse Entertainment to 99.9%. On July 30, 2015, the remaining 36,000 shares of Pulse Entertainment common stock were exchanged by the Pulse Entertainment shareholder pursuant to the Share Exchange Agreement for 199,386 shares of the Company’s unregistered common stock, which is when Pulse Entertainment became a wholly owned subsidiary of the Company.

Common Stock Issued in Payment of Subsidiary Payable

Pulse Entertainment entered into an Investor Introduction Agreement (the “Introduction Agreement”) with an international advisory services group (the “Advisor”) in March 2014. Pursuant to the terms of the Introduction Agreement, the Advisor agreed to support the Company in its fund raising process through introductions of potential investors and to assist the Company in developing its investor relations strategy. Pulse Entertainment agreed to pay the Advisor a success fee in cash equal to 6% of all investments resulting from introductions by the Advisor. In addition, the Advisor is entitled to Pulse Entertainment shares equal to 3% of the underlying shares issued in any such transactions.

As of June 30, 2014, the Advisor had earned 488,830 shares of Pulse Entertainment common stock, of which 224,869 shares of common stock were issued. A liability had been recognized by Pulse Entertainment for the portion of shares not issued as of June 30, 2014 totaling $456,653. In September 2014, the Company issued 1,461,946 shares of its common stock in payment of the liability as if Pulse Entertainment had paid the Advisor in its shares, and the Advisor immediately exchanged the shares in the company’s stock under the Share Exchange Agreement described above. As of March 31, 2015, the Company recorded the par value of the stock at $1,492 and additional paid in capital of $455,191.

Common Stock and Stock Options Issued to Service Providers

In determining the fair value of the services rendered by third parties, the Company uses the value of the services or the fair value of the common stock at the time the common stock was issued whichever is more readily determinable at the time the services are rendered.

Pulse Entertainment entered into a business development advisory agreement (the “Business Development Agreement”) with a consulting firm (the “Consultant”) in May 2014, wherein the Consultant agreed to provide certain production and promotion services to Pulse Entertainment in exchange for consideration including cash, equity, an operating budget and production credits as specified in the Business Development Agreement. The Business Development Agreement provides for certain performance milestones and for termination by either party with 30 days’ notice. The maximum potential equity consideration is comprised of up to 200,000 stock options with an exercise price of $1.73 per share as follows:

The Business Development Agreement was terminated in September 2014. As of June 2015, 125,000 stock options to the Consultant in Pulse Entertainment were vested but not yet issued.

In September 2014, the Company entered into an exclusive financial services and advisory agreement with a consultant to assist the Company in its capital market strategies. Under the terms of the agreement, the Company is to pay the consultant three nonrefundable monthly payments of $30,000, and quarterly restricted stock grants equal to one half of one percent of the outstanding shares of common stock of the Company each quarter to a maximum of two and one half percent of the outstanding shares of common stock. The fee is payable equally in cash and stock. The Company recorded stock compensation expense of $368,305 upon issuance of 594,039 shares of its common stock. The agreement also calls for a ten percent fee in the event that a qualified financing transaction, as defined in the agreement, is closed. No such qualified financing transaction was contemplated as of December 31, 2014. This agreement has been terminated as of December 31, 2014.

During the year ended June 30, 2015, the Company issued 1,598,906 shares of its common stock to the Advisor in payment of the services provided under the Agreement. As of June 30, 2015, the Company recorded the par value of the stock at $1,599 and additional paid in capital of $521,369.

During the year ended June 30, 2015, the Company issued 124,268 shares of its common stock to a consultant in payment of the services to the Company’s fundraising efforts. As of June 30, 2015, the Company recorded the par value of the stock at $124 and additional paid in capital of $76,922.

On June 30, 2015, the Company issued warrants to a shareholder for their services provided during the capital raise of the preferred stock purchased during the period of January through June 2015. The shareholder was issued a warrant to purchase 324,000 shares of common stock at a price per share equal to $0.01. The warrants have a term of 5 years.

During the year ended June 30, 2015, the Company issued 635,107 shares of its common stock to various vendors in payment of the services provided under their individual agreements, where the Company recorded the par value of the stock at $635 and additional paid in capital of $393,324.

Common Stock Isssued in Private Placement

In July 2015, the Company entered into a stock purchase agreement with Mr. Taku Toguichi, Chairman and CEO of SpaceBoy, a Japan-based artificial intelligence company with which the Company intends to be engaged in the development of digital humans for artificial intelligence. Pursuant to the terms of this agreement, Mr. Toguichi funded $806,000 in exchange for 1,300,000 shares of unregistered common stock.

Cash Requirements

The Company broadly consists of a Core operations, management and administration team and In-House Production Talent. Upon commencement of production of a specific concert or theatrical show, the In-House Production Talent team would be required to provide animation services related to the performance of the primary celebrity character, such services to be funded by a show-specific production entity that would likely be managed by the Company and funded materially by third-party entertainment production investors. While we intend to fund an initial portion of production costs of a show from internal sources, we expect a large portion of these costs to be funded by such third parties, including affiliated production companies, associated celebrity estates, corporate sponsors and other entertainment finance vehicles. We do not, however, currently have any such funding or financing arrangements currently in place. Our ability to fund our In-House Production Talent and meet our obligations on a timely basis relies on our ability to raise funds for the productions. If we are unable to successfully raise sufficient production capital through future debt and equity financings or strategic and collaborative ventures with potential partners, we would likely have to reduce our dependence on In-house Production Talent and limit many, if not all, of our activities as a producer.

We have raised approximately $16.9 million of core development capital from inception through June 30, 2015. Our plan to develop, produce and operate full scale productions will require significant direct funding, similar to that of a mid-sized theatrical show. Until we secure production capital and generate revenues, the company will continue to rely on raising capital to support the development of technology and digital likenesses of its portfolio of celebrities. We believe that full scale shows will require in excess of $25m of development and operating financing and we plan to fund each of our productions within a production entity, similar to the structure used by movie studios.

Subsequent to the year end, the Company sourced several short term bridge loans and equity investments, as detailed in note 12 (Subsequent Events). Notably, in January 2016, we secured a $10m equity investment from Original Force and U9. We have analyzed its liquidity requirements and have determined that we have sufficient liquidity to execute our business plan Model for the 12 months from the balance sheet date and beyond that will be raising production funds to support the launch of our shows.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements including arrangements that would affect liquidity, capital resources, market risk support and credit risk support or other benefits.

Critical Accounting Policies

We prepare our financial statements in conformity with GAAP. The preparation of the financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Critical accounting policies are those we believe are both most important to the portrayal of our financial condition and results, and require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Judgments and uncertainties affecting the application of those policies may result in materially different amounts being reported under different conditions or using different assumptions. We believe the following policies to be the most critical in understanding the judgments that are involved in preparing our financial statements.

Intangible Assets

Definite-lived intangibles, which are made up of license agreements as described in Note 3 Intangible and Other Assets, are amortized on a straight-line basis over their useful lives. We review our intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. As of June 30, 2015, we have determined that there is no impairment of the intangible assets.

Stock based Compensation

ASC 718, “Compensation Stock Compensation” requires recognition in the financial statements of the cost of employee services received in exchange for an award of equity instruments over the period the employee is required to perform the services in exchange for the award (presumptively the vesting period). We measure the cost of employee services received in exchange for an award based on the grant date fair value of the award. We account for nonemployee share based awards based upon ASC 505-50, “Equity Based Payments to Non Employees.” ASC 505-50 requires the costs of goods and services received in exchange for an award of equity instruments to be recognized using the fair value of the goods and services or the fair value of the equity award, whichever is more reliably measurable. The fair value of the equity award is determined on the measurement date, which is the earlier of the date that a performance commitment is reached or the date that performance is complete. Generally, our awards do not entail performance commitments. When an award vests over time such that performance occurs over multiple reporting periods, we estimate the fair value of the award as of the end of each reporting period and recognize an appropriate portion of the cost based on the fair value on that date. When the award vests, we adjust the cost previously recognized so that the cost ultimately recognized is equivalent to the fair value on the vesting date, which is presumed to be the date performance is complete.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

The financial statements and schedules referred to in the index contained on page F-1 of this annual report are incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Internal Control over Financial Reporting

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as a result of the material weakness in our internal control over financial reporting described below, our disclosure controls and procedures were not effective as of June 30, 2015.

Management’s Annual Report on Internal Control over Financial Reporting

Management is responsible for the preparation of our consolidated financial statements and related information. Management uses its best judgment to ensure that the consolidated financial statements present fairly, in material respects, our financial position and results of operations in conformity with generally accepted accounting principles. Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in the Exchange Act. These internal controls are designed to provide reasonable assurance that the reported financial information is presented fairly, that disclosures are adequate and that the judgments inherent in the preparation of financial statements are reasonable. There are inherent limitations in the effectiveness of any system of internal controls including the possibility of human error and overriding of controls. Consequently, an ineffective internal control system can only provide reasonable, not absolute, assurance with respect to reporting financial information.

Our internal control over financial reporting includes policies and procedures that: (i) pertain to maintaining records that, in reasonable detail, accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements in accordance with generally accepted accounting principles and that the receipts and expenditures of company assets are made in accordance with our management and directors authorization; and (iii) provide reasonable assurance regarding the prevention of or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.

Under the supervision of management, including our Chief Executive Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, our management concluded that our internal control over financial reporting was not effective as of June 30, 2015. We have identified the following material weaknesses as of June 30, 2015:

Remediation of Material Weakness in Internal Control

We believe the following actions we have taken since June 30, 2015 and are taking will be sufficient to remediate the material weaknesses described above:

Management believes the actions described above will remediate the material weaknesses we have identified and strengthen our internal control over financial reporting. As we work towards improvement of our internal control over financial reporting and implement the remediation measures, we will supplement or modify these remediation measures as appropriate.

Our management, including our Chief Executive Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected.

This annual report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.

Changes in Internal Controls over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Set forth below are the names and ages of our directors and executive officers and their principal occupations at present and for at least the past five years.

Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board. All officers and directors listed above will remain in office until the next annual meeting of our stockholders, and until their successors have been duly elected and qualified. There are no agreements with respect to the election of directors.

John Textor has been Chairman of our Board of Directors since May 2014 and the Chairman of the Board of Directors of Pulse Entertainment since founding this company in October of 2013. He has been acting Chief Financial Officer since January 2015 and acting Chief Executive Officer since May 2015 when, according to the by-laws of the Company, he filled vacancies left by predecessors. Mr. Textor is widely credited as a pioneer of the new industry of Virtual Performance, also known as Holographic Entertainment. He is responsible for the 2012 appearance of Virtual Tupac Shakur at the Coachella Valley Music Festival in 2012 and the 2014 performance of Virtual Michael Jackson at the 2014 Billboard Music Awards, the latter generating more than 35 million YouTube views and 98 billion Internet impressions worldwide. Mr. Textor is currently active in the development of entertainment properties across a broad spectrum of venues and technology platforms. In addition to his leadership in the extended uses of photo-realistic, digital humans, he is also currently a Producer of Art Story, an original animated feature film currently being developed by Disney veteran filmmaker Aaron Blaise. He was also Producer and Executive Producer of Ender’s Game, a science fiction fantasy film released in November 2013. Mr. Textor was previously Chairman and CEO of Digital Domain Productions and Chairman and CEO of its parent company, Digital Domain Media Group, having led its acquisition and restructuring from 2005 to 2012. Together the Digital Domain companies were responsible for the visual effects of more than 80 large scale feature films, 25 of which were completed during Mr. Textor’s leadership, including such films as Transformers, Flags of our Fathers, Tron: Legacy, Real Steel and Pirates of the Caribbean at World’s End. During Mr. Textor’s leadership, Digital Domain was reestablished as a market leader in visual effects, winning multiple Academy Awards®, Clio advertising awards and, importantly, being recognized as the first visual effects company to deliver a believable digital human actor in The Curious Case of Benjamin Button. This achievement earned the company a 2009 Academy Award® for Achievement in Visual Effects. Other highlights during Mr. Textor’s tenure included the Virtual Tupac Shakur, the consummation of a joint venture for the digital resurrection of Elvis Presley, the creation of a first of its kind, dual-enrollment Bachelor’s program with Florida State University, the completion of a $100 million joint venture agreement with the sovereign media authority of Abu Dhabi and the transformation of Digital Domain into a film production and intellectual property company with the co-production of Ender’s Game.

Mr. Textor is also the Founder of Wyndcrest Holdings, LLC, a Florida-based private holding company focused on technology-related opportunities in entertainment, telecommunications and the Internet, and has served as its (and its predecessor’s) President since 1997. Wyndcrest was best known for its role as an early lead investor in Art Technology Group (then NASDAQ “ARTG”), a principal pioneer of internet personalization technology that achieved a liquid $10.5 billion valuation as one of the most successful IPOs of 1999. He also served as the Chairman and CEO of BabyUniverse, Inc., a leading e-tailer of baby-related products, which Mr. Textor saved from insolvency with only a $300,000 investment in 2001, increasing revenues from $1 million to $40 million, and selling in October of 2007 for roughly $90 million. Mr. Textor was also a founding director and the largest shareholder of Virtual Bank, a Florida-based Internet banking startup that ultimately became a multi-billion dollar diversified financial services company. He was also a director of Multicast Media Technologies, Inc., a global provider of Internet-based broadcast media, which was sold successfully to KIT Digital of Czechoslovakia. He was previously Chairman of the Board and principal owner of Sims Snowboards, the world’s 2^nd leading snowboard brand, with which Mr. Textor also invented the World Snowboarding Championship. Mr. Textor is a graduate of Wesleyan University in Middletown, CT.

Mr. Textor brings our board his considerable experience in the strategic planning and growth of entertainment properties and companies, which qualifies him to continue to serve as a director of our company.

René P. Eichenberger has served as the Vice Chairman of our Board of Directors of our company since May 2014 and has been the Executive Vice Chairman of Pulse Entertainment since October 2013. He has also been the Chairman of (Alternative)2 Holding AG, a private equity company based in Zurich, Switzerland since 2005 and the Vice Chairman at Acron AG, an international real estate investment firm headquartered in Zurich, since 2013. From 2011 to 2013, Mr. Eichenberger served as a member of the strategic advisory council of the ClearSky Power and Technology Fund, a venture fund sponsored by Nextera/FPL, a leading clean energy company in North America, and he served on the advisory board of Sterling Partners, a $6 billion private equity firm with offices in Baltimore, Chicago and Miami. Starting his career as an attorney in Switzerland, Dr. Eichenberger served as General Counsel of Jet Aviation from 1991 to 1998, which under his tenure relocated its worldwide headquarters from Zurich to West Palm Beach, Florida and was subsequently positioned as the global leader in general aviation and successfully sold to a private equity fund. In 1998, Mr. Eichenberger founded Crossbow Ventures, a venture capital firm located in West Palm Beach. In 2004, he sold Crossbow to Horizon21 in Switzerland and subsequently served as CEO of Horizon21 Private Equity, which grew to over $3 billion in assets under management. Mr. Eichenberger is the former Chairman of the SwissAmerican Chamber of Commerce in Florida and served on the board of directors of a number of privately held companies in North America and Europe. Mr. Eichenberger holds a Ph.D. in law from the University of Zurich and is a graduate of the Venture Capital Institute and of the Executive Program at Stanford University, Graduate School of Business.

Mr. Eichenberger’s experience in strategic planning, corporate growth, corporate governance, corporate finance, mergers and acquisitions and business development, as well as his leadership role and board performance, has led our board to conclude that he should continue to serve as a director.

Frank Patterson. Mr. Patterson has served as Pulse Evolution’s Chief Creative Officer since May 2015, and previously served as Pulse Entertainment’s Chief Executive Officer since December 2013 until May 2015 and as Pulse Evolution’s Chief Executive Officer since May 2014 until May 2015. He has served on the faculty of three top-ranked U.S. film schools, including the position of dean of the Florida State University College of Motion Picture Arts, a position he currently holds and has held since 2003. Previously, he was on the faculty of Chapman University from 2001 through 2003, the University of Texas from 1999 through 2000, and Florida State University from 1990 through 1999. Mr. Patterson is a 25-year veteran of the entertainment industry who has produced, written and directed feature films, commercials, and a variety of media content for some of the leading agencies in the nation. He most recently produced the Virtual Michael Jackson show on the 2014 Billboard Music Awards. Throughout his career, Mr. Patterson has founded several media production companies that produced film library assets and profited from the marketing and sale of motion picture intellectual property in domestic and international markets, including The Houston Cinema Group, Inc. (198892), Envisage Media Group, Inc. (199399), and Red Hills Motion Picture Releasing Company, LLC (201011). Mr. Patterson is a highly regarded educator, who was named by “The Hollywood Reporter” one of the nation’s top mentors to a generation of Hollywood filmmakers. Mr. Patterson earned a Bachelor of Arts from the Film & Media Division at Baylor University in 1985 and a Master of Arts from the Film & Media Division at Baylor University in 1987.

As the Chief Creative Officer of our company, Mr. Patterson brings our board his considerable experience in the entertainment industry and growth of companies, which qualifies him to continue to serve as a director or our company.

Jim Berney. Prior to joining our company in May 2014 as our President and Head of Studio Production, Mr. Berney has been Head of Studio production at Pulse Entertainment since October 2013 and was Head of Studio at Digital Domain in 2012. He was previously an Academy Award®nominated visual effects supervisor at Sony Pictures Imageworks from 2008 until 2012, ultimately becoming responsible for creative supervision and direction for all artists at Sony’s Albuquerque visual effects studio. In addition to his regular supervisory responsibilities on projects, he served as General Manager for the first two years of the facility’s infancy. As visual effects supervisor, Mr. Berney worked on numerous notable films including Green Lantern, I Am Legend, and The Chronicles of Narnia, for which he was nominated for an Academy Award for Outstanding Visual Effects. Previously, Mr. Berney was the visual effects supervisor for Sony Imageworks from 1995 until 2008 and had worked on films including The Matrix Reloaded, The Matrix Revolutions, The Lord of the Rings: The Two Towers, and Harry Potter and the Sorcerer’s Stone. Jim also served as CG supervisor for Hollow Man (2000 Academy Award® nominee, Best Visual Effects). He received his Master’s degree in Computer Science from California Polytechnic, San Luis Obispo, specializing in the research and development of a new global illumination paradigm. He holds two undergraduate degrees in Computer Science and Economics from the University of California, Irvine, focusing in artificial intelligence research. Mr. Berney also studied computer architectures at the Royal Institute of Technology, Stockholm, Sweden.

Committees of our Board of Directors

Our securities are not quoted on an exchange that has requirements that a majority of our Board members be independent and we are not currently otherwise subject to any law, rule or regulation requiring that all or any portion of our Board of Directors include “independent” directors, nor are we required to establish or maintain an Audit Committee or other committee of our Board of Directors.

We had not established any committees, including an Audit Committee, a Compensation Committee or a Nominating Committee, any committee performing a similar function. The functions of those committees are being undertaken by Board of Directors as a whole. Because we had only three directors, none of whom are independent, we believe that the establishment of these committees would be more form over substance. As we have recently expanded our Board to five, we plan to create a number of committees in the coming months.

We do not have a policy regarding the consideration of any director candidates which may be recommended by our stockholders, including the minimum qualifications for director candidates, nor has our Board of Directors established a process for identifying and evaluating director nominees. We have not adopted a policy regarding the handling of any potential recommendation of director candidates by our stockholders, including the procedures to be followed. Our Board has not considered or adopted any of these policies as we have never received a recommendation from any stockholder for any candidate to serve on our Board of Directors. Given our relative size and lack of directors and officers insurance coverage, we do not anticipate that any of our stockholders will make such a recommendation in the near future. While there have been no nominations of additional directors proposed, in the event such a proposal is made, all members of our Board will participate in the consideration of director nominees. In considering a director nominee, it is likely that our Board will consider the professional and/or educational background of any nominee with a view towards how this person might bring a different viewpoint or experience to our Board.

None of our directors is an “audit committee financial expert” within the meaning of Item 401(e) of Regulation SK.

Director Compensation

For the fiscal year ended June 30, 2015, we paid Mr. Textor an additional $50,000 to serve in his role on the Board of Directors of the Company as Chairman of the Board. We also paid each of Messrs. Eichenberger and Patterson $25,000 to serve as directors.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Since none of our securities have been registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934, our officers and directors and persons who own more than 10% of our common stock are not required to file Section 16(a) beneficial ownership reports.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth certain compensation information for: (i) our principal executive officer or other individual serving in a similar capacity during the fiscal year ended June 30, 2015; (ii) our two most highly compensated executive officers other than our principal executive officer who were serving as executive officers at June 30, 2015 whose compensation exceed $100,000; and (iii) up to two additional individuals for whom disclosure would have been required but for the fact that the individual was not serving as an executive officer at June 30, 2015. Compensation information is shown for the fiscal years ended June 30, 2015 and 2014:

We have not entered into employment agreements with any of our executive officers. Each of Messrs. Textor, Eichenberger, Patterson and Berney is employed on an at will basis. Each received an annual base salary of $350,000, plus a performance based cash bonus as determined by the Company’s Board of Directors from time to time. In addition, each of Messrs. Textor, Eichenberger, Patterson and Berney receives health and welfare benefits as are in effect at the Company’s discretion from time to time and reimbursement of out of pocket expenses for travel and business expenses in connection with his duties.

During the year, Messrs Textor, Eichenberger, Patterson and Berney deferred a portion of their salary. As of June 30, 2015, a total of $288,830 was accrued.

Outstanding Equity Awards at Fiscal Year-End

At June 30, 2015, none of the persons listed in the Summary Compensation Table set forth above held any Restricted Stock, stock options or stock appreciation rights awards.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

At April 29, 2016, we had 149,913,343 shares of common stock issued and outstanding. The following table sets forth information known to us as of Mar 3, 2016 relating to the beneficial ownership of shares of our voting securities by:

Unless otherwise indicated, the business address of each person listed is in care of Pulse Evolution Corporation, 10521 SW Village Center Drive, Suite 201 Port St. Lucie, FL 34987.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Related Party Transactions

We have specified the following transactions involving related parties that occurred in fiscal 2015 and 2014:

On May 15, 2014, Alon Nigri, former Chief Executive Officer and former sole director (the “Seller”), entered into and closed on a Share Purchase Agreement (the “Agreement”) with, Tradition Studios IP Acquisition LLC, (Alternative)2 Holding AG, and Scenic Loop Holding, LLC (each a “Purchaser” and collectively, the “Purchasers”) whereby the Purchasers purchased from the Seller a total of 53,612,600 shares of our common stock for an aggregate of $107,225, representing approximately 80.68% of our issued and outstanding shares of common stock at the time of purchase. The Purchasers own or control as a group, Pulse Entertainment.

Pursuant to the terms of the Share Exchange Agreement pursuant to which we agreed to issue 96,737,422 shares of our unregistered common stock to the shareholders of Pulse Entertainment, a related party in exchange for 17,466,383 shares of common stock of Pulse Entertainment, certain of our shareholders who are also shareholders of Pulse Entertainment and are executive officers or directors have agreed to cancel 60,910,113 shares of our common stock issuable to them in connection with the exchange resulting in net shares issued in connection with such exchange of 35,827,309.

On December 10, 2014, the Company entered into a secured promissory note with a related party. The Company received cash of $250,000 which bears interest at a rate of 8% a year. The note is collateralized by certain property owned by the Company. All remaining unpaid principal and accrued interest is due on January 31, 2015. The Company must also pay an additional $50,000 if paid after December 31, 2014. The Company did not pay the note at December 31, 2014. As of June 30, 2015, the Company had unpaid principal and interest of $230,000 and $6,166. The loan was repaid by February 2016.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The board of directors of the Company selected Friedman, LLP, (“Freidman”) an independent registered public accounting firm, to audit the financial statements for the years ended June 30, 2015 and 2014. The board of directors approves in advance all audit and non-audit services to be provided by our independent registered public accounting firm. All services reported in the audit, audit related, tax and all other fees categories below with respect to this Annual Report on Form 10-K for the years ended June 30, 2015 and 2014 were approved by the board of directors.

The following table summarizes the aggregate auditor fees that were allocated to us for independent auditing, tax and related services for each of the last two fiscal years:

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

+ Management contract or compensatory plan or arrangement.

* Portions of this agreement have been omitted and redacted and separately filed with the Securities and Exchange Commission with a request for confidential treatment.

Signatures

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

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Frank Patterson as his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

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

PULSE EVOLUTION CORPORATION

Index to the Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders
Pulse Evolution Corporation

We have audited the accompanying balance sheet of Pulse Evolution Corporation (“Company”) as of June 30, 2015 and 2014 and the related statements of operations, stockholders’ equity (deficit), and cash flows for the year ended June 30, 2015 and period from October 10, 2013 (inception) through June 30, 2014. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits 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 Pulse Evolution Corporation at June 30, 2015 and 2014, and the results of its operations and its cash flows for the year ended June 30, 2015 and period from October 10, 2013 (inception) through June 30, 2014, in conformity with accounting principles generally accepted in the United States of America.

East Hanover, New Jersey

May 20, 2016

PULSE EVOLUTION CORPORATION

Consolidated Balance Sheets

See accompanying notes to the consolidated financial statements.

PULSE EVOLUTION CORPORATION

Consolidated Statements of Operations

See accompanying notes to the consolidated financial statements.

PULSE EVOLUTION CORPORATION

Consolidated Statements of Stockholders’ Equity (Deficit)

For the period from October 10, 2013 (inception) through June 30, 2015