Document/ExhibitDescriptionPagesSize 1: 10-K Annual Report HTML 543K
2: EX-21.1 Subsidiaries List HTML 14K
3: EX-31.1 Certification -- §302 - SOA'02 HTML 21K
4: EX-31.2 Certification -- §302 - SOA'02 HTML 21K
5: EX-32.1 Certification -- §906 - SOA'02 HTML 17K
6: EX-32.2 Certification -- §906 - SOA'02 HTML 17K
13: R1 Document and Entity Information HTML 53K
40: R2 Consolidated Balance Sheets HTML 67K
44: R3 Consolidated Balance Sheets (Parentheticals) HTML 35K
33: R4 Consolidated Statements of Operations and HTML 77K
Comprehensive Loss
16: R5 Consolidated Statements of Changes in HTML 46K
Stockholders' Deficit
43: R6 Consolidated Statements of Cash Flows HTML 76K
47: R7 Organization, Description of Business, and Going HTML 32K
Concern
29: R8 Significant Accounting Policies HTML 68K
17: R9 Business Combination HTML 27K
36: R10 Prepaid Expenses and Deposits HTML 25K
51: R11 Inventories HTML 18K
24: R12 Accounts Payable and Accrued Liabilities HTML 24K
19: R13 Income Taxes HTML 94K
37: R14 Related-Party Transactions HTML 25K
52: R15 Stockholders' Deficit HTML 21K
25: R16 Concentration Risk HTML 19K
20: R17 Subsequent Events HTML 19K
38: R18 Significant Accounting Policies (Policies) HTML 113K
50: R19 Significant Accounting Policies (Tables) HTML 25K
31: R20 Business Combination (Tables) HTML 26K
14: R21 Prepaid Expenses and Deposits (Tables) HTML 24K
41: R22 Accounts Payable and Accrued Liabilities (Tables) HTML 24K
45: R23 Income Taxes (Tables) HTML 95K
32: R24 Organization, Description of Business, and Going HTML 51K
Concern (Detail Textuals)
15: R25 Significant Accounting Policies (Details ) HTML 22K
42: R26 Business Combination (Details) HTML 34K
46: R27 Prepaid Expenses and Deposits (Details) HTML 25K
30: R28 Inventories (Details Textuals) HTML 18K
18: R29 Accounts Payable and Accrued Liabilities (Details) HTML 23K
23: R30 Income Taxes (Details) HTML 27K
27: R31 Income Taxes (Details 1) HTML 35K
49: R32 Income Taxes (Details 2) HTML 34K
35: R33 Income Taxes (Details 3) HTML 34K
22: R34 Income Taxes (Details 4) HTML 30K
26: R35 Income Taxes (Detail Textuals) HTML 38K
48: R36 Related-Party Transactions (Detail Textuals) HTML 56K
34: R37 Stockholders' Deficit (Detail Textuals) HTML 39K
21: R38 Concentration Risk (Details) HTML 26K
53: XML IDEA XML File -- Filing Summary XML 87K
39: EXCEL IDEA Workbook of Financial Reports XLSX 43K
7: EX-101.INS XBRL Instance -- ughl-20191231 XML 544K
9: EX-101.CAL XBRL Calculations -- ughl-20191231_cal XML 87K
10: EX-101.DEF XBRL Definitions -- ughl-20191231_def XML 220K
11: EX-101.LAB XBRL Labels -- ughl-20191231_lab XML 703K
12: EX-101.PRE XBRL Presentations -- ughl-20191231_pre XML 425K
8: EX-101.SCH XBRL Schema -- ughl-20191231 XSD 90K
28: ZIP XBRL Zipped Folder -- 0001640334-20-000465-xbrl Zip 70K
Registrant’s telephone number, including area code:
(852) 2468 3103
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value
Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
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 ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such fi les). Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) 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. ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,”“accelerated filer,”“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☒
Smaller reporting company
☒
Emerging
Growth Company
☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
This report contains forward-looking statements. The Securities and Exchange Commission encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This report and other written and oral statements that we make from time to time contain such forward-looking statements that set out anticipated results based on management’s plans and assumptions regarding future events or performance. We have tried, wherever possible, to identify such statements by using words such as “anticipate,”“estimate,”“expect,”“project,”“intend,”“plan,”“believe,”“will” and similar expressions
in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, future performance or results of current and anticipated sales efforts, expenses, the outcome of contingencies, such as legal proceedings, and financial results. Factors that could cause our actual results of operations and financial condition to differ materially are discussed in greater detail under Item 1A - “Risk Factors” of this report.
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.
Union
Bridge Holdings Limited (the “Company” or “we”) was incorporated under the laws of the State of Nevada on May 6, 2014 under the name Costo, Inc. to engage in the business of distributing automobile parts and components necessary for the maintenance and repair of automobiles and specialty equipment, including construction and road machinery, principally in China, Europe and certain Commonwealth of Independent States countries (Kyrgyzstan, Kazakhstan, Armenia, Azerbaijan, Tajikistan and Uzbekistan). We changed our name to Union Bridge Holdings Limited on May 23, 2016 in connection with our expanded business plan under which we determined to expand operations into the health care industry. We never achieved any revenues from our automobile and specialty equipment business and during the fourth quarter of 2017 we determined to discontinue that area of business.
The
Company incorporated a new wholly owned subsidiary in the British Virgin Islands, First Channel Limited (“FC”), on March 18, 2016. This subsidiary was formed for investment holding.
The Company incorporated two new wholly owned subsidiaries in the British Virgin Islands: 1.) Phoenix Creation Global Limited (“PC”) on October 26, 2017 and 2.) Windsor Honour Limited (“WH”) on October 30, 2017, respectively. These subsidiaries were formed with the intent to sell healthcare products and services
to seniors and individual with disabilities. The Company procured samples of motorized wheelchairs, as the first product in an expected of a portfolio of products targeted at this market.
On February 2, 2018, the Company’s subsidiary Union Beam Investment Limited (“UB”) established Qianhai Lianqiao Investment Consulting (Shenzhen) Company Limited, renamed as Union Beam Trading (Shenzhen) Limited (“UB Trading”), a wholly foreign owned entity in the People’s Republic of China (“PRC”), to engage in the sale of healthcare products and services. On November 6, 2019, the
Company disposed UB Trading to an unrelated party at no consideration.
On February 13, 2018, the Company’s subsidiary PC established Union Care Investment Limited (“UC”) in Hong Kong engaging the senior care services.
On May 25, 2018, our subsidiary, Union Care Investment Limited in Hong Kong (“UC”) established Sino Silver (Qianhai) Holdings Ltd. (“Sino Silver Qianhai”), a wholly owned entity in the PRC, to engage in the provision of elderly home care services, to establish senior care centers and to provide community services. On November 6, 2019, the
Company disposed Sino Silver Qianhai to an unrelated party at no consideration.
On September 20, 2018, Sino Silver Qianhai and UB established Sino Sliver (Beijing) Elderly Service Ltd. (“Sino Silver Beijing”) in the PRC to engaging elderly home care services, operate senior care centers and provide community services in the Beijing region. Due to the disposal of Sino Silver Qianhai and UB Trading to an unrelated party in November 6, 2019, Sino Silver Beijing is no longer the Company’s subsidiary.
On December 27, 2018, the Company’s subsidiary UC established
Sino Silver (Zhuhai Hengqin) Elderly Service Limited “(Sino Silver Zhuhai”), a wholly owned entity in the PRC engaging the elderly home care services, senior care centers and community services. On December 17, 2019, the Company disposed Sino Silver Zhuhai to an unrelated party.
A loss of approximately $7,662 incurred in connection with the disposal of UB Trading, Sino Silver Qianhai and Sino Silver Zhuhai.
On
September 24, 2019, we entered into a Stock Purchase Agreement (the “Purchase Agreement”), with shareholders of Conperin Group Inc., a British Virgin Islands company, who together own shares constituting 100% of the issued and outstanding ordinary shares Shares of Conperin Group Inc. Pursuant to the terms of the Purchase Agreement, the shareholders of Conperin Group Inc. transferred to us all of their shares of Conperin Group Inc. in exchange for the issuance of 187,546,887 shares of our common stock (the “Stock Purchase”). As a result of the Stock Purchase, we are now a holding company, is engaged in providing technology in digital media industry, including developing a branded social network and e-commerce app platform aiming to promote a high quality of life for families and seniors by using artificial intelligence, blockchain and cognitive e-commerce technology in China, Hong Kong and Asia Pacific. As
a result of the consummation of the Stock Purchase, we are no longer a shell company as that term is defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended.
We develop and operate CircleYY, a mobile-based social networking and premium e-commerce app and website platform that will also use impactful editorial content to promote a balanced quality of life for families and seniors aged 50 and above by understanding their behavior, tastes and needs. The platform enables users around the world to share family stories, build meaningful interactions between 50+ users and their family members, discover and buy fashion, beauty and other daily accessories products. We connect people and facilitate human interactions based on cities, interests and a variety of activities including pictures and short videos.
Our
CircleYY mobile application can be downloaded and used free of charge, and we will generate our revenues from the various services we offer on our platforms, dedicated to a 50+ client base and their families: (i) collaborations with brands and users on the creation of premium content (ii) the sale of advertising on our social media platform (iii) the sale of third-party branded items, mainly fashion, beauty, daily accessories and services on our e-commerce platform.
As a global platform, CircleYY is expected to target a global audience with content designed for universal appeal amongst family members, notably 50+, along with a local focus for marketing campaigns. The initial opening market is intended to be Hong Kong SAR, followed by similar markets in the Asia-Pacific area and subsequently Europe and North America.
On September 27, 2019,
our wholly-owned subsidiary Conperin Group Inc. established Circle YY International Inc., a limited company incorporated in the British Virgin Islands (“Circle International”), to engage in new business when any suitable business opportunity arises. As of December 31, 2019, Circle International is ready to be engaged in the business activities of the Company.
On November 11, 2019, our subsidiary Circle YY Technologies Hong Kong Limited, which operates our CircleYY platforms, launched its unique ecosystem technology covering social networking, content and e-commerce.
Material Commitments
Chang
Mai Project
On March 23, 2018, our subsidiary, Windsor Honour Limited (“WHL”) entered into a Binding Heads of Agreement with the owner of a land parcel for a senior care facility to be established in Chang Mai, Thailand. The parties will negotiate in good faith toward definitive agreements regarding the project. WHL would lease the land and be the developer of the project and would own the buildings on the site. WHL would have full control of the design and supervision of the construction of the project, as well as daily operations and management of the project. The land owner would be responsible for obtaining necessary construction, operation and other permits for the project and would provide necessary liaison with government officials. Total investment in the project for development and construction is estimated to be approximately 200 million Thai Baht (approximately
US$6.4 million at current exchange rates), for which WHL would be responsible to obtain financing. WHL would also be responsible for arranging financing of operating costs until they can be funded from operations. The project would lease the land for 90 years with automatic renewals, each for 30 years. The total rent for the first 90 years would be 10 million Thai Baht (approximately US$320,000 at current exchange rates). In addition to the rent, WHL may consider a discretionary bonus to the land owner (with details to be agreed in the definitive agreements).
Upon signing the definitive agreement, WHL will pay 2 million Thai Baht (approximately US$64,300 at current exchange rates) as a deposit to the land owner within 90 days, which will be refundable if the development plan for the land as a senior nursing home facility has not been approved by the competent government authority within one year, or if before that date such authority
has definitively denied the application for the development plan upon the request of WHL. Otherwise, the deposit will be applied to the rent for the land.
No assurance can be given, however, that the Chang Mai, Thailand senior facility project will be successfully developed and operated because, (i) WHL may not successfully negotiate definitive agreements for the project, (ii) required permits may not be obtained, and (iii) required financing may not be obtainable.
The pace of population ageing around the world is growing faster than at any time in the past. According to the World Health Organization, the proportion of the world’s population over 60 years will nearly double from 12% to 22% between 2015 and 2050. A longer life brings with it opportunities, not only for older people and their families, but also for societies as a whole. Additional years provide the chance to pursue new activities such as further education, a new career or pursuing a long- neglected passion. Older people also contribute in many ways to their families and communities. Yet the extent of these opportunities and contributions depends heavily on two factors: their health and their quality of life.
According to the Hong Kong Census and Statistics Department (report no.67, June 2019), between 2016 and 2018, smartphone users aged over 65 increased
by 35%. 95% of internet users aged over 65 used the internet for online social activities. Retirees spent an average of 7.1 hours per week for online social activities and this number is increasing. There is still a strong margin of progression for e-commerce use: only 37% of the aged 45-54 population bought online in the last 12 months, so did 18.4% of the aged 55-64 population and 2.8% of the aged over 65 population. This means there are already 325,100 online shoppers in the 50+ group: the total catchment audience in Hong Kong SAR of adult users is around 1.2 million users.
Corporate Structure
Our current corporate structure is set forth below:
We believe that we have the following key competitive strengths:
●
First-mover advantages and strong brand recognition. There are plenty of social networks and e-commerce platforms but we believe that CircleYY will be the first to combine these two components along with a consistent theme, that of building a family lifestyle with positive values and empowering the 50+ population. Combined with a brand that boldly showcases the company values, this delivers a clear first mover advantage
that we expect to quickly provide strong brand recognition amongst the target audience.
●
User-friendly website and app design. We have designed and developed our app and website with a sleek and user-friendly interface, which can support visitors and branded products for sale on our e-commerce platform. Simplicity and accessibility are extremely important factors given our target user audience, which includes people aged above 50+ who will appreciate ease of use.
●
A
strong technology back office. Our technology team has built a back office that uses the latest advances to create a strong data analytics function.
-
Artificial intelligence powered e-commerce and data analytics. This enables to track the popularity of editorial articles, e-commerce products, photos, videos, advertisements and have a deeper understanding of the preferences of our visitors, followers and online shoppers.
-
Blockchain technology is used for both payment security, transaction tractability and product authenticity.
-
Cognitive computing helps to improve the user experience, a very important factor when catering for 50+ users.
-
Organic data collection will help the system keep learning and improving in order to serve the users.
●
Advanced technology to provide efficient and scalable service to meet future user growth. The CircleYY vertical social eCommerce platform is built in microservices architecture. The platform is fully modularized, which enables us to easily upgrade each microservice**
module without any effect on another part of the system. While we design the API (application programming interface) by using the RESTful*** standard, we have built an implement API gateway with GraphQL, which makes our agile software development even faster.
●
Appealing fun and interactive loyalty program. We believe that it is important to ensure that our users join the app but also return afterwards. To that effect, an entertaining loyalty system based on gamification processes and interaction between users has been put into place to reward and incentivize repeat users.
●
Experienced management team with a
proven track record. We have a professional and experienced senior management team with a proven track record. Shan Ho, CircleYY’s CEO and founder, has vast experience as a start-up entrepreneur. Chris Zhang is our Chief Operating Officer, a senior technology business management executive and specialist software development engineer with over a 10+ successful international track record extending nationally across China, through South East Asia to Europe. By combining our management’s capability in implementing growth strategies and our in-depth knowledge in the digital media industry, our management team is well suited to capture potential market opportunities in social networking and e-commerce segments.
Our user target group is comprised of families and users aged 50 and above, both active and retired. We expect that these user groups will be a major target of our editorial content which will aim to create a new market standard in terms of a healthy, positive quality of life for 50+ users and stimulate them to stay active, whilst staying connected to current trends. Users will also be encouraged to post content on the social media feed and share their expertise in certain fields (business, crafts, cooking, hiking, travel experiences etc) in order to inspire others whilst becoming key opinion leaders (KOLs).
Growth Strategy
Our
objectives are to build and consolidate our position as one of the most innovative social networking and e-commerce platforms and to achieve rapid but sustainable growth. We intend to achieve these objectives by implementing the following strategies, although there is no guarantee that our growth plan will be successful:
Internationally expanding our e-commerce platform
We intend to expand our platform in order to facilitate penetration into different markets and build a global brand. To achieve this goal, we intend to further customize our digital media platform to cater for visitors from different parts of the world with different language preference. After launching with an initial marketing strategy based around Hong Kong SAR, we will expand to other regional cities with sizeable English language speaking demographics,
such as Singapore, Kuala Lumpur, and Manilla, and countries before targeting other global destinations, notably Europe and North America.
Increasing CircleYY branded products
We intend to add new CircleYY branded products, notably in the technology and lifestyle fields, in order to create a strong brand image and provide accessible items that will be ideal gifts to 50+ users.
Enhancing the fun and interactive loyalty program
We intend to add new features to our loyalty program in order to attract more users, notably via a gamification process.
Promoting our CircleYY Brand name to
attract a wider customer base and increase consumer loyalty
Enhancing our brand name in the industry will allow us to solidify and broaden our customer base by growing market awareness of our products. We intend to seek partnerships with well-known premium fashion and lifestyle brands for the e-commerce component, which we believe will help position CircleYY as the ideal platform when it comes to purchasing gifts for and showing appreciation to 50+ users.
Collaborating with leading Non-Governmental Orgnizations to promote common values and corporate social responsibilities.
CircleYY promotes positive values such as an improved quality of life for 50+ people, bringing together families irrespective of generations and distance and generally positive change in the mindset of society.
As such its values are aligned with several global non-governmental organisations and campaigns, such as the Junior Chamber International or the United Nations Sustainable Development Goals. CircleYY intends to seek partnerships with like-minded corporations
The CircleYY platform, aiming at revolutionizing intergenerational relationships by becoming the first family focused vertical social network platform, includes the CircleYY mobile application
and a variety of related properties, features, functionalities, tools and services that we intend to provide to users, customers and platform partners. The CircleYY mobile application, which is available on Android and iOS platforms, enables users to share family stories, build meaningful interactions between seniors and their family members, discover and buy fashion, beauty and other daily lifestyle products and services. We connect people and facilitate interactions based on location, interests and a variety of activities including pictures and short videos. CircleYY offers a personal and lively way for users of all ages to get to know their family members better and enables 50+ users to meet like-minded people. It facilitates connecting, communicating, interacting, and content sharing with others. CircleYY features various social networking features, including uploading functions, pictures and short video services, hobby groups, a private family network and other
live interactive experiences. CircleYY’s social features are increasingly integrated with video and audio functions to offer more fun and entertaining contents and to enhance and encourage social interactions between users. On December 2019, CircleYY launched its website (www.circleyy.com) and the CircleYY mobile application expects to be launched around mid-2020.
Key features and functionalities offered by the CircleYY mobile platform include the following:
Follow functions
The Follow tab aggregates content that a user chooses to follow and video content
our algorithm “thinks” the user might want to follow based on our data analytics. There are two subsections within the tab. The “Follow” section under the Follow tab contains a stream of feeds created by people followed by the user while the “Recommended” section features popular short video content that our recommendation engine, based on our data analytics, believes the user might like or suggests the user to follow. The algorithm of the recommendation engine computes and makes recommendations based on a variety of factors including users’ personal preferences as well as the overall popularity of a specific short video clip.
Family and group functions
Our application allows users to create and/or participate in family groups and social groups created across points of interest. Each group is given a shared
CircleYY discussion page on which group members can discuss their common interests, post their photos, exchange messages and organize other online and offline events. Individuals can connect with each other regarding common interests.
User Profile Page
If a user is interested in finding out more about another user on our platform, he or she can review the User Profile page, which is a function that we offer to provide a quick snapshot of a user. Information featured on this page includes profile pictures, account status such as activeness, popularity, the user’s historical posts and videos shared as well as the broadcasters.
Our website CircleYY.com has been launched in December 2019 which provides a platform for the publication of news and articles that update our followers and visitors about the latest lifestyle trends for 50+ users, notably with articles or videos about fashion, footwear, entertainment, music, lifestyle, technology and design. We expect to bring to our followers and visitors the latest trends in fashion, lifestyle, culture and music, that interest our senior users and their family member followers and visitors. Our content is updated on a continuous basis. It will also have similar family network, e-commerce and social network functions to the mobile app.
CircleYY caters to consumers’ ever-growing demand for high-quality products and premium shopping experience. We have positioned CircleYY as a trusted platform for senior consumers and their family members. CircleYY is intended to be the partner of choice for brands. Brands and retailers are expected to operate their own flagship stores on the CircleYY platform with unique brand identities and look and feel, accompanied by full control over their own branding and merchandising. We seek to build our mind-share among consumers to position CircleYY as the premier shopping destination for premium items, highlighting value and convenience for senior people and their families. We plan to strengthen consumer recognition of CircleYY’s value proposition in consumer products through
promotional events and strategic partnerships.
Our Digital Content
As an operator of social networking and e-commerce platforms, we view content management and monitoring as a critical part of our operations. We monitor and screen user information and user generated content against a spam list, which is a list of content and behaviors that we have determined are likely to be indicative of inappropriate or illegal content or illegal activities. Additionally, our users can also easily report fraud if they come across suspicious content, and each user complaint is processed by our content management and monitoring system.
Our editorial teams follow the latest trends in fashion, lifestyle, culture and music and gather information from various sources. Our editors select and present news
and events which appeal to families and people of 50+ through our editorial experience and knowledge in the fashion and digital media industries. When appropriate, our editors also seek to verify information gathered by conducting independent research or interviews with third-parties. Through our rigorous curation and review process, our editors seek to report and produce digital content such as articles and videos that are most relevant and interesting to our audience. We utilise data analytics to track the popularity of articles such that our editorial teams are able to choose better content that is suitable for different user groups according to their preferences.
Our Services and Products
We currently generate revenues primarily from value-added service, mobile marketing services, and other services.
Value-added
Service
Our value-added service primarily consists of subscription services that provide paying users with features and functions for better user-friendly experience on CircleYY. We provide enhanced membership privileges to CircleYY users who subscribe to our membership package by paying membership fees.
Mobile Marketing Services
We seek to provide advertising and marketing solutions to enable our customers to promote their brands and conduct effective marketing activities. We provide our customers with analytical tools to enable them to track and improve the effectiveness of their marketing campaigns on our platform. Our advertising and marketing customers include brand marketers, local merchants, application developers and publishers as well as other small and medium-sized
businesses and individuals. Our mobile marketing services currently include the following:
In-feed marketing solutions.
We offer advertising units that appear as feeds on the CircleYY social platform features. We offer advertising units in various formats, including text-based content, pictures, video clips and function that enables direct application downloads. In addition, our advertising system also allows customers to target certain cohorts of users based on their geographic locations, gender, age, type of mobile operating systems and some other parameters. Our customers can use a combination of the various formats and targeting capabilities to create their marketing campaigns more effectively.
Display ads.
We
offer a variety of marketing products in display format, including full screen banner ads that appear before the application is loaded, banners on frequently visited pages and other sponsored images displayed elsewhere within our application. Unlike the in-feed ad units, the display ad units are not sold through the bidding system.
We also offer integrated marketing packages that include multiple advertising units such as feeds, banners, video ads and sponsorships in order to serve a broader sets of marketing objectives of our marketing customers.
Loyalty
Program
We believe that it is important to ensure that users join the app but also return afterwards. To that effect, an entertaining loyalty system based on gamification processes and interaction between users has been put into place to reward and incentivize repeat users.
Key Opinion Leaders (KOLs) Services
CircleYY will encourage 50+ users to post videos and other forms of content to the social network in order to boost their lifestyle and share their expertise. To this effect, they will be empowered to become Key Opinion Leaders for the platform and share the values of CircleYY to other users in their age group.
Orange Label Solutions (OLS)
CircleYY
offers users new opportunity to grow brand awareness and global expansion to local and international business. We select brands which we believe are aligned with our values. Selected brands will be offered service packages starting from Gold, Platinum to Orange Label Solutions (“OLS”). Our first OLS service package, charged on a fixed monthly fee basis, will include 10 SKUs products and model photo shooting, online sales, fulfillment and professional reports. The CircleYY fulfillment offers users fully customizable experience and enables us to control our inventory and warehouse operations.
For Business to Business, OLS provides a one stop service fulfillment to vendors which features lower operation costs, inventory storage space and cost, centralized returns policies and management. With OLS tags, OLS promotes merchants’ brand value. For Business to Customers, OLS creates prestige and unique brand image value and desirable
first impression. While we ensure OLS service quality, we provide special box design for easy use and returns.
Other Services
Our other services will include subscriptions to gifting programs for other family members, business gift sales for companies who want to add a special touch for their regular customers and online to offline events that are produced with partner brands. Our other services also includes model photo shooting. We are planning to establish Studio O, a state-of-the-art photography studio, which will also provide for space for multipurpose, including warehouse and fulfillment operations.
Sales and marketing
Digital
Media Services
We have a sales and marketing team responsible for sales and marketing activities for the promotion of our digital media services.
Our brand and our CircleYY platforms act as a marketing tool for our company. We continuously post updates on fashion, lifestyle, culture and music on our platforms. Many of our digital media customers learn about us through our platforms.
Members of our sales and marketing team maintain regular contacts with our existing media customers to understand their marketing needs and keep them updated on our advertising products and services. For potential advertising customers, we inform them of our recent developments and achievements by distributing project portfolios and background materials. Our sales and marketing
team also attends events organised by brands to broaden the team’s network and provide coverage of these events on our digital media platforms. We constantly look for and identify synergies among various digital publications, social media platforms and apps and devise impactful cross advertising opportunities.
Our e-commerce segment primarily engages in the operation of CircleYY store that primarily sells third-party branded clothing, shoes
and daily accessories to our customers. We believe that a considerable portion of our e-commerce customers are also followers and visitors to our digital media platforms. The rest of our customers are obtained through our other marketing efforts which include search results returned from search engines and advertisements we place on other websites and on our digital media platforms.
Research and Development
Our research and development efforts focus on product development, architecture and technological infrastructures, as well as the security and integrity of our platform to protect our user data.
Our product development endeavors revolve around continuous innovations
to help users discover and make new connections as well as building effective interactions. As our user base continues to expand and consumer behaviors constantly evolve, the social demands from the users become increasingly diversified. We make significant investments in technology to optimize our existing products and services and to develop new ones so that we can expand the social use offerings to satisfy the diversifying user demands.
In addition, we are also investing in building and maintaining the technological infrastructures to support the delivery and usage of our products and services in a fast and efficient manner within a safe and secured environment.
Intellectual Property
We rely on a combination of copyright, trademark and trade secret laws and restrictions on disclosure
to protect our intellectual property rights. We are in the process of registering 37 trademarks in 12 countries. The source codes and the design architecture are wholly owned by CircleYY. We have also registered 13 domain names, including CircleYY.com.
Competition
As a mobile social networking and e-commerce platform, we are subject to intense competition from providers of similar services, as well as potential new types of online services.
Our competitors may have substantially more cash, traffic, technical, performer and other resources, as well as broader product or service offerings and can leverage their relationships based on other products or services to gain a larger share of marketing budgets from customers. We believe that our ability to compete effectively depends upon many
factors, including composition and engagement of our user base, our ad targeting capabilities, market acceptance of our mobile marketing services, our marketing and selling efforts, and the strength and reputation of our brand. We also experience significant competition for highly skilled personnel, including management, engineers, designers and product managers. Our growth strategy depends in part on our ability to retain our existing personnel and add additional highly skilled employees.
Insurance
We do not maintain property insurance, business interruption insurance or general third-party liability insurance, nor do we maintain key-man life insurance.
Legal Proceedings
We are currently
not a party to any legal or administrative proceedings and are not aware of any pending or threatened legal or administrative proceedings against us in all material aspects. We may from time to time become a party to various legal or administrative proceedings arising in the ordinary course of our business.
The following table summarizes the location of real property we own or lease.
Item
Address
Leased/Owned
1
Suite 4801, 48/F, Central Plaza, 18
Leased
Harbour Road, Wan Chai, Hong Kong S.A.R.
Employees
As of December 31, 2019, we have 13 full-time employees, 2 in management, 7 of which are in sales and marketing and 4 in technology and R & D.
We are compliant with local prevailing wage, contractor
licensing and insurance regulations, and have good relations with our employees.
Generally we enter into a long term standard employment contract with our officers and managers and a long term standard employment contract with other employees. According to these contracts, all of our employees are prohibited from engaging in any activities that compete with our business during the period of their employment with us. Furthermore, the employment contracts with officers or managers include a covenant that prohibits officers or managers from engaging in any activities
that compete with our business for two years after the period of their employment
Corporation Information
Our principal executive offices are located at Suite 4801, 48/F, Central Plaza, 18 Harbour Road, Wan Chai, Hong Kong S.A.R. Our telephone number at this address is (852) 2468 3103. Our filings with the Securities Exchange Commission, or SEC, are available free of charge through the SEC website.
Government Regulation
We believe that at the current stage, the field of activity in which CircleYY operates is not subject to any industry-specific government regulations,
however we observe strict compliance to all legal frameworks pertaining to our business and activity.
,
our annual reports on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. Our Internet website and the information contained therein or connected thereto are not intended to be, and are not, incorporated into this Annual Report. Our reports, registration statements and other information can be inspected on the SEC’s website at
www.sec.gov
.
Implications of Being an Emerging Growth Company
We
qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act, or JOBS Act, enacted in April 2012. An emerging growth company may take advantage of reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:
●
not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes- Oxley Act of 2002, or Sarbanes-Oxley Act;
●
reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and
●
exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and approval of any golden parachute payments not previously approved.
We may take advantage of these provisions through December 31, 2020. If certain events occur prior to December 31, 2020, including if we become a “large accelerated filer,” our annual gross revenues exceed $1 billion or we issue more than $1 billion of non-convertible debt in any three-year period, we would cease to be an emerging growth company prior to December 31, 2020.
We may choose to take advantage of some but not all of these reduced
burdens. We have taken advantage of certain of the reduced disclosure obligations regarding executive compensation in this registration statement and may elect to take advantage of other reduced burdens in future filings. As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.
Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. However, we have irrevocably elected not to avail ourselves of this extended transition period for complying with new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
We are also a “smaller reporting
company” as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and have elected to take advantage of certain of the scaled disclosure available to smaller reporting companies.
An investment in our common stock involves a high degree of risk. Investors should carefully consider the risks described below, together with all of the other information included in this Annual Report, before making an investment decision. If any of the following risks actually occurs, our business, financial condition or results of operations could suffer. In that case, the trading price of our common stock could decline, and investors may lose all or part of their investment. Investors should
read the section entitled “Cautionary Note Regarding Forward-Looking Statements” above for a discussion of what types of statements are forward-looking statements as well as the significance of such statements in the context of this Annual Report.
Risks Related To Our Business and Financial Condition
There is substantial doubt as to our ability
to continue as a going concern.
Since our inception, we have achieved revenues and have suffered recurring losses from operations. We expect to achieve continuous revenues. We had a working capital deficiency of $1,294,297 as of December 31, 2019. Further losses are anticipated in the development of our business. Therefore, our continuation as a going concern is dependent upon our completion of a future financing. However, there is no assurance that we will be successful in completing such a financing. If we are unable to fund future operations by way of financing, including public or private offerings of equity or debt securities, our business and financial condition will be adversely impacted. As a result, there is substantial doubt as to our ability to continue as a going concern.
The audit opinion and notes that accompany
our consolidated financial statements for the year ended December 31, 2019, refer to the substantial doubt regarding our ability to continue as a going concern. The accompanying financial statements have been prepared assuming that we will continue as a going concern. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty. We do not have sufficient cash to fund planned operations or meet our obligations for the next 12 months without raising additional funds.
We have a limited operating history in a dynamic market, which makes it difficult to evaluate our future prospects.
The market for social e-commerce platforms is relatively new, highly dynamic and may not
develop as expected. Our users, customers and platform partners may not fully understand the value of our services, and potential new users, customers and platform partners may have difficulty distinguishing our services from those of our competitors. Convincing potential users, customers and platform partners of the value of our services is critical to the growth of our user base and the success of our business.
If we fail to educate potential users, customers and platform partners about the value of our services, if the market for our platform does not develop as we expect or if we fail to address the needs of this dynamic market, our business will be harmed. Failure to adequately address these or other risks and challenges could harm our business and cause our operating results to suffer.
If we fail to retain our existing users, further grow our user base, or if user engagement on
our platform declines, our business and operating results may be materially and adversely affected.
The size of our user base and the level of our user engagement are critical to our success.
Growing our user base and increasing the overall level of user engagement on our social e-commerce platform are critical to our business. If our user growth rate slows down, our success will become increasingly dependent on our ability to retain existing users and enhance user engagement on our platform. If our CircleYY mobile application is no longer one of the social e-commerce tools that people frequently use, or if people do not perceive our services to be interesting or useful, we may not be able to attract users or increase the frequency or depth of their engagement. A number of factors could negatively affect user retention, growth and engagement, including if:
●
we
are unable to attract new users to our platform or retain existing ones;
●
we fail to introduce new and improved services, or if we introduce services that are not favorably received by users;
●
we are unable to combat spam on or inappropriate or abusive use of our platform, which may lead to negative public perception of us and our brand;
●
technical
or other problems prevent us from delivering our services in a rapid and reliable manner or otherwise adversely affect the user experience;
●
we suffer from negative publicity, fail to maintain our brand or if our reputation is damaged;
●
we fail to address user concerns related to privacy and communication, safety, security or other factors; and
●
there
are adverse changes in our services that are mandated by, or that we elect to make to address, legislation, regulations or government policies.
If we are unable to grow our user base or enhance user engagement, our platform will become less attractive to our users, customers and platform partners, which would have a material and adverse impact on our business and operating results.
Our business
is dependent on the strength of our brand and market perception of our brand.
We market our product under the brand “CircleYY.” Our business and financial performance are highly dependent on the strength and the market perception of our brand and services. A well-recognized brand is critical to increasing our user base and, in turn, facilitating our efforts to monetize our services and enhancing our attractiveness to customers. From time to time, we conduct marketing activities across various media to enhance our brand and to guide public perception of our brand and services. In order to create and maintain brand awareness and brand loyalty, to influence public perception and to retain existing and attract new mobile users, customers and platform partners, we may need to substantially increase our marketing expenditures. We cannot assure you, however, that these activities will be successful or that we will
be able to achieve the brand promotion effect we expect.
Negative publicity may harm our brand and reputation and have a material adverse effect on our business and operating results.
Negative publicity involving us, our users, our management, our social networking platform or our business model may materially and adversely harm our brand and our business. We cannot assure you that we will be able to defuse negative publicity about us, our management and/or our services to the satisfaction of our investors, users, customers and platform partners. Such negative publicity, especially when it is directly addressed against us, may also require us to engage in defensive media campaigns. This may cause us to increase our marketing expenses and divert our management’s
attention and may adversely impact our business and results of operations.
Our brand image, business and operating results may be adversely impacted by user misconduct and misuse of our platform.
Our platform allows mobile users to freely contact and communicate with people nearby. Because we do not have full control over how and what users will use our platform to communicate, our platform may be misused by individuals or groups of individuals to engage in immoral, disrespectful, fraudulent or illegal activities. We have implemented control procedures to detect and block illegal or inappropriate content and illegal or fraudulent activities conducted through the misuse of our platform, but such procedures may not prevent all such content from being posted or activities
from being carried out. Our business and the public perception of our brand may be materially and adversely affected by misuse of our platform. In addition, if any of our users suffers or alleges to have suffered physical, financial or emotional harm following contact initiated on our platform, we may face civil lawsuits or other liabilities initiated by the affected user, or governmental or regulatory actions against us. As a result, our business may suffer and our user base, revenues and profitability may be materially and adversely affected.
We may incur liability for counterfeit, unauthorized, illegal, or infringing products sold or misleading information available on our platform.
Our platform provides sale channels for reputable brands and online retailers.
However, brands’ and online retailers’ measures of safeguarding against counterfeit, unauthorized, illegal, or infringing products sold through e-commerce platforms may not be adequate. Although we have indemnity clauses in most of our contracts with our brands and online retailers, sales could decline and our reputation may be adversely affected. We may be subject to sanctions under applicable laws and regulations if we are deemed to have participated or assisted in infringement activities associated with counterfeit goods, which may include injunctions to cease infringing activities, rectification, compensation, administrative penalties and even criminal liability, depending on the gravity of such misconduct. Furthermore, counterfeit products may be defective or inferior in quality as compared to authentic products and may pose safety risks to consumers. If consumers are injured
by counterfeit, unauthorized, illegal, or infringing products sold on our sales and marketing platform, we may be subject to lawsuits, severe administrative penalties and criminal liability. We believe our reputation is extremely important to our success and our competitive position. The discovery of counterfeit, unauthorized, illegal, or infringing products sold on our sales and marketing platform may severally damage our reputation among brand partners, and they may refrain from using our services in the future, which would materially and adversely affect our operations and financial results.
If
we fail to keep up with technological developments and evolving user expectations, we may fail to maintain or attract users and customers or generate revenues, and our business and operating results may be materially and adversely affected.
We operate in a market characterized by rapidly changing technologies, evolving industry standards, new product and service announcements, new generations of product enhancements and changing user expectations. Accordingly, our performance and the ability to further monetize the services on our platform will depend on our ability to adapt to these rapidly changing technologies and industry standards, and our ability to continually innovate in response to both evolving demands of the marketplace and competitive services. There may be occasions when we may not be as responsive as our competitors in adapting our services to changing industry standards and the needs of our users. Historically,
new features may be introduced by one player in the industry, and if they are perceived as attractive to users, they are often quickly copied and improved upon by others.
Introducing new technologies into our systems involves numerous technical challenges, substantial amounts of capital and personnel resources and often takes many months to complete. We intend to continue to devote resources to the development of additional technologies and services. We may not be able to effectively integrate new technologies on a timely basis or at all, which may decrease user satisfaction with our services. Such technologies, even if integrated, may not function as expected or may be unable to attract and retain a substantial number of mobile device users to use our CircleYY mobile application. Our failure to keep pace with rapid technological changes may cause us to fail to retain or attract users or generate revenues, and could have a material
and adverse effect on our business and operating results.
Privacy concerns relating to our services and the use of user information could negatively impact our user base or user engagement, or subject us to governmental regulation and other legal obligations, which could have a material and adverse effect on our business and operating results.
We collect user profile, user location and other personal data from our users in order to better understand our users and their needs and to support our social interest graph engine and our big data analytical capabilities for more targeted services such as interest- or location- based user groups and mobile marketing services. Concerns about the collection, use, disclosure or security of personal information or chat history
or other privacy-related matters, even if unfounded, could damage our reputation, cause us to lose users and customers and subject us to regulatory investigations, all of which may adversely affect our business. While we strive to comply with applicable data protection laws and regulations, as well as our privacy policies pursuant to our terms of use and other obligations we may have with respect to privacy and data protection, any failure or perceived failure to comply with these laws, regulations or policies may result, and in some cases have resulted, in inquiries and other proceedings or actions against us by government agencies or others, as well as negative publicity and damage to our reputation and brand, each of which could cause us to lose users and customers and have an adverse effect on our business and operating results.
Any systems failure or compromise of our security that results in the unauthorized access to or
release of the data or chat history of our users, customers or platform partners data or chat history could significantly limit the adoption of our services, as well as harm our reputation and brand. We expect to continue expending significant resources to protect against security breaches. The risk that these types of events could seriously harm our business is likely to increase as we expand the number of services we offer and increase the size of our user base.
Our practices may become inconsistent with new laws or regulations concerning data protection, or the interpretation and application of existing consumer and data protection laws or regulations, which is often uncertain and in flux. If so, in addition to the possibility of fines, this could result in an order requiring that we change our practices, which could have an adverse effect on our business and operating results. Complying with new laws and regulations could
cause us to incur substantial costs or require us to change our business practices in a manner materially adverse to our business.
The continuing and collaborative efforts of our senior management and key employees are crucial to our success, and our business may be harmed if we were to lose their services.
We depend on the continued contributions of our senior management, especially the executive officers
listed in “Management” section of this report, and other key employees, many of whom are difficult to replace. The loss of the services of any of our executive officers or other key employees could materially harm our business. Competition for qualified talent in the market is intense. Our future success is dependent on our ability to attract a significant number of qualified employees and retain existing key employees. If we are unable to do so, our business and growth may be materially and adversely affected. Our need to significantly increase the number of our qualified employees and retain key employees may cause us to materially increase compensation-related costs, including stock-based compensation.
We may not be able to adequately protect our intellectual property, which could cause us to be less competitive
and third-party infringements of our intellectual property rights may adversely affect our business.
We rely on a combination of copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. Despite our efforts to protect our proprietary rights, third parties may attempt to copy or otherwise obtain and use our intellectual property or seek court declarations that they do not infringe upon our intellectual property rights. Monitoring unauthorized use of our intellectual property is difficult and costly, and we cannot be certain that the steps we have taken will prevent misappropriation of our intellectual property. From time to time, we may have to resort to litigation to enforce our intellectual property rights, which could result in substantial costs and diversion of our resources.
We
may be subject to intellectual property infringement claims or other allegations by third parties for information or content displayed on, retrieved from or linked to our platform, or distributed to our users, which may materially and adversely affect our business, financial condition and prospects.
We may in the future be subject to intellectual property infringement claims or other allegations by third parties for services we provide or for information or content displayed on, retrieved from or linked to our platform, or distributed to our users, which may materially and adversely affect our business, financial condition and prospects.
Companies in the internet, technology and media industries are frequently involved in litigation based on allegations of infringement of intellectual property rights, unfair competition, invasion of privacy, defamation and other violations
of other parties’ rights. The validity, enforceability and scope of protection of intellectual property rights in internet-related industries, are uncertain and still evolving. We face, from time to time, and expect to face in the future, allegations that we have infringed the trademarks, copyrights and other intellectual property rights of third parties, including our competitors, or allegations that we are involved in unfair trade practices. We allow users to upload text, graphics, audio, video and other content to our platform and download, share, link to and otherwise access games and other content on our platform. We have procedures designed to reduce the likelihood that content might be used without proper licenses or third-party consents. However, these procedures may not be effective in preventing the unauthorized posting of copyrighted content. Therefore, we may face liability for copyright or trademark infringement, defamation, unfair competition, libel, negligence,
and other claims based on the nature and content of the materials that are delivered, shared or otherwise accessed through our platform.
Defending intellectual property litigation is costly and can impose a significant burden on our management and employees, and there can be no assurances that favorable final outcomes will be obtained in all cases. Such claims, even if they do not result in liability, may harm our reputation. Any resulting liability or expenses, or changes required to our platform to reduce the risk of future liability, may have a material adverse effect on our business, financial condition and prospects.
User growth and engagement depend upon effective interoperation with mobile operating systems, networks, mobile devices and standards that we do not control.
We make our services available across a variety of mobile operating systems and devices. We are dependent on the interoperability of our services with popular mobile devices and mobile operating systems that we do not control, such as Android, iOS and Windows. Any changes in such mobile operating systems or devices that degrade the functionality of our services or give preferential treatment to competitive services could adversely affect usage of our services. Further, if the number of platforms for which we develop our services increases, which is typically seen in a dynamic
and fragmented mobile services market, it will result in an increase in our costs and expenses. In order to deliver high quality services, it is important that our services work well across a range of mobile operating systems, networks, mobile devices and standards that we do not control. We may not be successful in developing relationships with key participants in the mobile industry or in developing services that operate effectively with these operating systems, networks, devices and standards. In the event that it is difficult for our users to access and use our services, particularly on their mobile devices, our user growth and user engagement could be harmed, and our business and operating results could be adversely affected.
Our operations depend on the performance of the internet infrastructure and fixed telecommunications
networks.
We primarily rely on a limited number of telecommunication service providers to provide us with data communications capacity through local telecommunications lines and internet data centers to host our servers. We have limited access to alternative networks or services in the event of disruptions, failures or other problems with internet infrastructure or the fixed telecommunications networks provided by telecommunication service providers. With the expansion of our business, we may be required to upgrade our technology and infrastructure to keep up with the increasing traffic on our platform. We cannot assure you that the internet infrastructure and the fixed telecommunications networks will be able to support the demands associated with the continued growth in internet usage. If we cannot increase our capacity to deliver our online services, we may not be able to the increases in traffic we anticipate
from our expanding user base, and the adoption of our services may be hindered, which could adversely impact our business.
In addition, we have no control over the costs of the services provided by telecommunication service providers. If the prices we pay for telecommunications and internet services rise significantly, our results of operations may be materially and adversely affected. Furthermore, if internet access fees or other charges to internet users increase, some users may be prevented from accessing the mobile internet and thus cause the growth of mobile internet users to decelerate. Such deceleration may adversely affect our ability to continue to expand our user base.
Our business and operating results may be harmed by service disruptions, or by our failure to timely
and effectively scale and adapt our existing technology and infrastructure.
People use our platform for socializing and information. We may experience, service disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, human or software errors, hardware failure, capacity constraints due to an overwhelming number of people accessing our mobile services simultaneously, computer viruses and denial of service, fraud and security attacks. Any disruption or failure in our infrastructure could hinder our ability to handle existing or increased traffic on our platform or cause us to lose content stored on our platform, which could significantly harm our business and our ability to retain existing users and attract new users.
As the number of our users increases and our users generate more content on our platform, we may be required
to expand and adapt our technology and infrastructure to continue to reliably store and analyze this content. It may become increasingly difficult to maintain and improve the performance of our services, especially during peak usage times, as our services become more complex and our user traffic increases. If our users are unable to access CircleYY platform in a timely fashion, or at all, our user experience may be compromised and the users may seek other mobile social networking tools to meet their needs, and may not return to CircleYY or use CircleYY as often in the future, or at all. This would negatively impact our ability to attract users and maintain the level of user engagement.
Future strategic alliances may have a material and adverse effect on our business, reputation and results of operations.
We
may in the future enter into strategic alliances with various third parties. Strategic alliances with third parties could subject us to a number of risks, including risks associated with sharing proprietary information, non-performance by the counterparty and an increase in expenses incurred in establishing new strategic alliances, any of which may materially and adversely affect our business. We may have little ability to control or monitor their actions and to the extent strategic third parties suffer negative publicity or harm to their reputation from events relating to their business, we may also suffer negative publicity or harm to our reputation by virtue of our association with such third parties.
We face risks related to health epidemics and natural disasters.
Our business could be adversely affected by the effects of epidemics. In recent years, there have been breakouts of epidemics globally. For example, there has been an outbreak of 2019 novel coronavirus since January 2020 which has resulted in lockdowns implemented in many cities in China. Our business operations could be disrupted if one of our employees is suspected of having H1N1 flu, avian flu or another epidemic, since it could require our employees to be quarantined and/or our offices to be disinfected. In addition, our results of operations could be adversely affected to the extent that the outbreak harms the global economy in general and the mobile internet
industry in particular.
We are also vulnerable to natural disasters and other calamities. Although we have servers that are hosted in an offsite location, our backup system does not capture data on a real-time basis and we may be unable to recover certain data in the event of a server failure. We cannot assure you that any backup systems will be adequate to protect us from the effects of fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks or similar events. Any of the foregoing events may give rise to server interruptions, breakdowns, system failures, technology platform failures or internet failures, which could cause the loss or corruption of data or malfunctions of software or hardware as well as adversely affect our ability to provide services on our platform.
Risks
Associated With Doing Business In Hong Kong
Political consideration of Hong Kong
As Hong Kong is a special administrative region of the PRC, the PRC may, by its political and economic policies, exert influence on the foregoing aspects of Hong Kong. The PRC economy features a high degree of government involvement. In recent years, the PRC Government has implemented various measures to guide the allocation of resources so as to narrow the gaps between economic developments in different regions in the country. We cannot foresee or give any assurance that the PRC Government will not in the near future adopt policies that will adversely affect the political, legal and economic conditions of Hong Kong which may in turn materially affect our business.
Costs
of conducting business in Hong Kong
The costs of doing business in Hong Kong is high as compared to its surrounding regions. We rent our office space in Hong Kong. The majority of our workforce is also based in Hong Kong. In view of the high rental price and high labour cost in Hong Kong, our company needs to exercise careful control over our expenditures in these areas. Should we fail to control our costs, the financial performance of our Company may be adversely affected.
The global nature of our operations exposes us to numerous risks that could materially adversely affect our consolidated financial
condition and results of operations.
We intend to offer and sell our products and services in several countries subjecting us to the risks inherent in foreign operations. Economic uncertainty in some of the geographic regions in which we intend to operate, including developing regions, could result in the disruption of commerce and negatively impact cash flows in those areas.
Risks inherent in our international operations include:
●
foreign currency exchange controls and tax rates;
●
foreign currency exchange rate fluctuations, including
devaluations;
●
the potential for changes in regional and local economic conditions, including local inflationary pressures;
●
restrictive governmental actions such as those on transfer or repatriation of funds and trade protection matters, including antidumping duties, tariffs, embargoes and prohibitions or restrictions on acquisitions or joint ventures;
changes in laws and regulations, including laws and policies affecting trade and foreign investment;
●
the difficulty of enforcing agreements and collecting receivables through certain foreign legal systems;
●
more expansive legal rights of foreign unions or works councils;
●
changes in labor conditions and difficulties
in staffing and managing international operations;
●
the potential for nationalization of enterprises or facilities; and
●
unsettled political conditions and possible terrorist attacks
These and other factors may have material adverse effect on our operations and, consequently, on our consolidated financial condition or results of operations.
Political and economic instability and risk of government actions affecting our business and our customers or suppliers may adversely impact
our business, results of operations and cash flows.
We will be exposed to risks inherent in doing business in each of the countries or regions in which we or our customers or suppliers operate including civil unrest, acts of terrorism, sabotage, epidemics, force majeure, war or other armed conflict and related government actions, including sanctions/embargoes, the deprivation of contract rights, the inability to obtain or retain licenses or permits required to operate facilities or import or export goods or raw materials, the expropriation or nationalization of our assets, and restrictions on travel, payments or the movement of funds.
We intend to conduct business in China
which subjects us to certain risks.
We intend to conduct certain of our distribution and senior care operations in China. As a result, our business is subject to risks associated with doing business in China, including:
●
trade protection measures, such as tariff increases, and import and export licensing and control requirements;
●
potentially negative consequences from changes in tax laws;
●
difficulties associated with the Chinese legal
system, including increased costs and uncertainties associated with enforcing contractual obligations in China;
●
historically lower protection of intellectual property rights;
●
unexpected or unfavorable changes in regulatory requirements; and
●
changes and volatility in currency exchange rates.
We may enter into strategic collaborations or alliances with third parties that may not
result in the development of commercially viable operations or the generation of significant future revenue.
In the ordinary course of our business, we may enter into strategic collaborations or alliances to distribute product candidates, to operate senior care facilities and to pursue new markets. Proposing, negotiating and implementing strategic collaborations or alliances may be a lengthy and complex process. Other companies, including those with substantially greater financial, marketing, sales, technology or other business resources, may compete with us for these opportunities or arrangements. We may not identify, secure, or complete any such transactions or arrangements in a timely manner, on a cost-effective basis, on acceptable terms or at all. In particular, these collaborations may not result in the development of products that achieve commercial success or result in significant revenue.
Additionally, we may not be in a position to exercise sole decision making authority regarding the transaction or arrangement, which could create the potential risk of creating impasses on decisions, and our collaborators may have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals. We may have limited control over the amount and timing of resources that any future collaborators devote to our joint ventures. Disputes between us and our collaborators may result in litigation or arbitration that would increase our expenses and divert the attention of our management. Further, these transactions and arrangements are contractual in nature and may be terminated or dissolved under the terms of the applicable agreements and, in such event, we may not continue to have rights to the products and services relating to such transaction or
arrangement or may need to purchase such rights at a premium.
We may seek to grow our business through acquisitions of complementary businesses, and the failure to manage acquisitions, or the failure to integrate them with our existing business, could impair our ability to execute our business strategies.
From time to time, we may consider opportunities to acquire other businesses that may enhance our then existing business or, expand the breadth of our markets or customer base, or advance our business strategies. Potential acquisitions involve numerous risks, including:
●
problems
assimilating the new business;
●
issues maintaining uniform standards, procedures, controls and policies;
●
unanticipated costs associated with acquisitions;
●
diversion of management’s attention from then existing businesses;
●
risks associated with entering new markets in which we have limited or no experience; and
●
increased
legal and accounting costs relating to the acquisitions or compliance with regulatory matters.
We do not know if we will be able to identify acquisitions we deem suitable, whether we will be able to successfully complete any such acquisitions on favorable terms or at all, or whether we will be able to successfully integrate any acquired products or technologies. Our inability to integrate any acquired products or technologies effectively could impair our ability to execute our business strategies.
We will need to raise additional funds in the future, and these funds may not be available on acceptable terms or at all.
We require additional capital to further our business plans and grow our business. The
expected growth of our business will significantly increase our expenses. As a result, we will need to raise additional capital, which may not be available on reasonable terms, if at all. Our future capital requirements will depend on many factors, including:
●
the revenue generated by our products and services;
●
the costs associated with expanding our operations;
●
the costs associated with developing and commercializing our senior care operations;
●
the
costs of obtaining and maintaining regulatory clearance or approval for products and services;
●
the costs of ongoing compliance and regulatory requirements;
●
expenses we incur in connection with potential litigation or governmental investigations;
●
anticipated or unanticipated capital expenditures; and
●
unanticipated general and administrative expenses.
As a result of these and other factors, we do not know the extent to which we may be required to raise additional capital from public or private offerings of our capital stock, borrowings under credit lines or other sources. If we issue equity or debt securities to raise additional funds, our existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders.
If we are unable to raise additional capital, we will not be able to expand our infrastructure, enhance our products and services or take advantage of future opportunities, or respond to competitive pressures, changes in supplier relationships, or unanticipated changes in customer demand. Any of these events could adversely affect our ability to achieve our strategic objectives and impact our
ability to continue as a going concern.
We will face competition from numerous companies, many of whom will have greater resources than we do.
We will compete with a number of companies engaged in the senior care product business segments in which we intend to operate. Many of these competitors will be large, well-capitalized companies with significantly greater market share and resources than we have. As a result, these companies may be better positioned than we are to spend more aggressively on marketing, sales, and other product and service initiatives.
In addition, competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer requirements.
If we are unable to offer products and services that compete effectively against the products and services of existing or future competitors, our future revenue could be negatively impacted. Some of our competitors may compete by changing their pricing model or by lowering the price of their products and services. If these competitors’ pricing techniques are effective, it could result in downward pressure on the price of our products and services. If we are unable to maintain or increase our selling prices in the face of competition, we may not improve our gross margins.
We may acquire other businesses, form joint ventures or make investments in other companies or technologies that could negatively affect our operating results, dilute our stockholders’ ownership, increase our debt or cause us to incur significant expense.
We
intend to pursue acquisitions of businesses and capabilities. We also intend to pursue strategic alliances and joint ventures that leverage our industry experience to expand our offerings or distribution capabilities. We have no experience with acquiring other companies and forming strategic partnerships. We may not be able to find suitable partners or acquisition candidates, and we may not be able to complete such transactions on favorable terms, if at all. If we make any acquisitions, we may not be able to integrate these acquisitions successfully into our existing business, and we could assume unknown or contingent liabilities. Any future acquisitions could also result in the incurrence of debt, contingent liabilities or future write-offs of intangible assets or goodwill, any of which could have a negative impact on our cash flows, financial condition and results of operations. Integration of an acquired company may also disrupt ongoing operations and require management
resources that we would otherwise focus on developing our existing business. We may experience losses related to investments in other companies, which could harm our financial condition and results of operations. We may not realize the anticipated benefits of any acquisition, strategic alliance or joint venture.
Foreign acquisitions involve unique risks in addition to those mentioned above, including those related to integration of operations across different cultures and languages, currency risks and the particular economic, political and regulatory risks associated with specific countries.
To finance any acquisitions or joint ventures, we may choose to issue common stock as consideration, which could dilute the ownership of our stockholders. Additional funds may not be available on terms that are favorable to us, or at all. If the price of our common stock is low or volatile, we may
not be able to acquire other companies or fund a joint venture project using our stock as consideration.
Risks Related to Administrative, Organizational and Commercial Operations and Growth
We may be unable to manage our anticipated future growth effectively, which could make it difficult to execute our business strategy.
We
anticipate growth in our business operations. This future growth could create a strain on our organizational, administrative and operational infrastructure. We may not be able to maintain the quality of our products or satisfy customer demand as it grows. Our ability to manage our growth properly will require us to continue to improve our operational, financial and management controls, as well as our reporting systems and procedures. We may implement new enterprise software systems in a number of areas affecting a broad range of business processes and functional areas. The time and resources required to implement these new systems is uncertain and failure to complete this in a timely and efficient manner could harm our business.
If we are unable to support demand for our products and services, including ensuring that
we have adequate resources to meet increased demand, our business could be harmed.
As our commercial operations and sales volume grow, we will need to continue to increase our workflow capacity for manufacturing, customer service, billing and general process improvements and expand our internal quality assurance program, among other things. We cannot assure you that any of these increases in scale, expansion of personnel, purchase of equipment or process enhancements will be successfully implemented.
The loss of our Chief Executive Officer or Chief Financial Officer or our inability to attract and retain highly skilled personnel could negatively impact our business. Our management has no experience in the segments of the healthcare industry in which we are intend
to operate.
Our success depends on the skills, experience and performance of our President and Chief Executive Officer, Joseph Ho or our Chief Financial Officer, Kenny Chow. The individual and collective efforts of these employees will be important as we continue to develop our business and as we expand our commercial activities. The loss or incapacity of existing members of our executive management team could negatively impact our operations if we experience difficulties in hiring qualified successors. Our executive officers do not presently have employment agreements. Our executive officers have no experience in the segments of the healthcare industry in which we intend to operate. We expect to hire qualified employees with industry experience and/or partner with persons
or entities with such experience.
Our future operations will depend, in part, on our ability to attract and retain highly skilled employees and project partners. We may not be able to attract or retain qualified employees and project partners in the future due to the competition for qualified personnel among our competitors. Recruiting and retention difficulties can limit our ability to support our current operations and anticipated future growth programs. All of our employees are and will be at-will, which means that either we or the employee may terminate his or her employment at any time.
Risks Related to Ownership of Our Common Stock
There is currently a limited market
for our common stock and there can be no assurance that any market will ever develop. You may therefore be unable to re-sell shares of our Common Stock at times and prices that you believe are appropriate.
Our common stock is not listed on a national securities exchange or any other exchange, and is presently quoted on the OTCQB tier of OTC Markets. There is no active trading market for our common stock and our common stock may never be included for trading on any stock exchange. Accordingly, our common stock is highly illiquid and you may experience difficulty in re-selling shares of our common stock at times and prices that you may desire.
The designation of our common stock as a “penny stock” may limit the liquidity of our Common Stock.
Our common stock may be deemed a “penny stock” (as that term is defined under Rule 3a51-1 of the Exchange Act) in any market that may develop in the future. Generally, a “penny stock” is a common stock that is not listed on a securities exchange and trades for less than $5.00 a share. Prices often are not available to buyers and sellers and the market may be very limited. Broker-dealers who sell penny stocks must provide purchasers of these stocks with a standardized risk-disclosure document prepared by the SEC. The document provides information about penny stocks and the nature and level of risks involved in
investing in the penny stock market. A broker must also provide purchasers with bid and offer quotations and information regarding broker and salesperson compensation and make a written determination that the penny stock is a suitable investment for the purchaser and obtain the purchaser’s written agreement to the purchase. Many brokers choose not to participate in penny stock transactions. Because of the penny stock rules, there may be less trading activity in penny stocks in any market that develops for our common stock in the future and stockholders may have difficulty selling their shares.
FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our stock.
The Financial Industry Regulatory Authority, or FINRA, has adopted rules requiring
that, in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative or low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA has indicated its belief that there is a high probability that speculative or low-priced securities will not be suitable for at least some customers. If these FINRA requirements are applicable to us or our securities, they may make it more difficult for broker-dealers to recommend that at least some of their customers buy our Common Stock, which may limit the ability of our stockholders to buy and sell our Common Stock and could have an adverse effect on the market for and price of our Common Stock.
The
market price of our common stock may be highly volatile, and may be influenced by numerous factors, some of which are beyond our control.
If an active market for our common stock develops, its market price could fluctuate substantially due to a variety of factors, including market perception of our ability to meet our growth projections and expectations, quarterly operating results of other companies in the same industry, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting our business and the business of others in our industry. In addition, the stock market itself is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons related and unrelated to their operating performance and could have the same effect on our common stock.
The market price of shares of our common stock could be subject to wide fluctuations in response to many risk factors listed in this section, and others beyond our control, including:
●
regulatory actions with respect to our products and services or our competitors’ products and services;
●
actual or anticipated fluctuations in our financial condition and operating results;
●
publication of research reports by securities analysts about us or our competitors or our industry;
●
our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market;
●
additions and departures of key personnel;
●
strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy;
●
the passage of legislation or other regulatory developments affecting us or our industry;
●
fluctuations in the valuation of companies perceived by investors to be comparable to us;
●
sales of our Common Stock by us, our insiders or our other stockholders;
●
speculation in the press or investment community;
●
announcement or expectation of additional financing efforts;
●
changes in accounting
principles;
●
terrorist acts, acts of war or periods of widespread civil unrest;
●
natural disasters and other calamities; and
●
changes in general market and economic conditions.
Our
principal stockholders and management own a significant percentage of our stock and will be able to exercise significant influence over matters subject to stockholder approval.
As of March 10, 2020, our executive officers, directors and principal (5% or greater) stockholders, together with their respective affiliates, owned approximately 89% of our common stock. Accordingly, these stockholders will be able to exert a significant degree of influence over our management and affairs and over matters requiring stockholder approval, including the election of our board of directors and approval of significant corporate transactions. This concentration of ownership could have the effect of entrenching our management and/or the board of directors, delaying or preventing a change in our control or otherwise discouraging a potential acquirer from attempting to obtain control
of us, which in turn could have a material and adverse effect on the fair market value of our common stock.
Because we became a reporting company under the Exchange Act by means other than a traditional underwritten initial public offering, we may not be able to attract the attention of research analysts at major brokerage firms.
Because we did not become a reporting company by conducting an underwritten initial public offering of our common stock, and because our common stock is not listed on a national securities exchange, security analysts of brokerage firms may not provide coverage of our company. In addition, investment banks may be less likely to agree to underwrite secondary offerings on our
behalf than they might if we became a public reporting company by means of an underwritten initial public offering, because they may be less familiar with our company as a result of more limited coverage by analysts and the media. The failure to receive research coverage or support in the market for our shares will have an adverse effect on our ability to develop a liquid market for our common stock.
If we fail to implement and maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, our ability to operate our business and investors’ views of us.
We are required to
comply with Section 404 of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), subject to certain exceptions. Section 404 of the Sarbanes-Oxley Act requires public companies to conduct an annual review and evaluation of their internal controls and to obtain attestations of the effectiveness of internal controls by independent auditors. However, as discussed in detail below, as an emerging growth company and a smaller reporting company, we are not required to obtain an auditor attestation. As a private company, Sincerity Australia Pty Ltd. was not subject to requirements to establish, and did not establish, internal control over financial reporting and disclosure controls and procedures consistent with those of a public company. Our management team and board of directors will need to devote significant efforts to implementing and maintaining adequate and effective disclosure controls and procedures and internal control over financial reporting
in order to comply with applicable regulations, which may include hiring additional legal, financial reporting and other finance and accounting staff. Any of our efforts to improve our internal controls and design, implement and maintain an adequate system of disclosure controls may not be successful and will require that we expend significant cash and other resources.
Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that will need to be evaluated frequently. Our failure to maintain the effectiveness of our internal controls in accordance with the requirements of the Sarbanes-Oxley Act could have a material adverse effect on the tradability of our common stock, which in turn would negatively impact our business. We could lose investor confidence in the accuracy and completeness
of our financial reports, which could have an adverse effect on the price of our common stock. In addition, if our efforts to comply with new or changed laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed.
We currently have a small team with primary responsibility for performing most of our accounting and financial reporting duties. As a result, certain aspects of internal accounting control which require adequate segregation of duties are missing. We believe we do not currently have sufficient accounting and supervisory personnel with the appropriate level of technical accounting experience and training necessary or adequate accounting policies, processes and procedures, particularly in the areas of revenue recognition, equity related transactions
and other complex, judgmental areas for U.S. generally accepted accounting principles, or GAAP, financial reporting and SEC reporting purposes and consequently, we must rely on third party consultants. These deficiencies represent a material weakness (as defined under the Exchange Act) in our internal control over financial reporting in both design and operation. We may identify additional material weaknesses in the future. Under the Exchange Act, a material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls. We are currently developing a plan to design, review, implement and refine internal control over financial
reporting. However, we may identify deficiencies and weaknesses or fail to remediate previously identified deficiencies in our internal controls. If material weaknesses or deficiencies in our internal controls exist and go undetected or unremediated, our financial statements could contain material misstatements that, when discovered in the future, could cause us to fail to meet our future reporting obligations and cause the price of our common stock to decline.
We
are not subject to compliance with rules requiring the adoption of certain corporate governance measures and as a result, our stockholders have limited protections against interested director transactions, conflicts of interest and similar matters.
The Sarbanes-Oxley Act, as well as resulting rule changes enacted by the SEC, the New York Stock Exchange and the NASDAQ Stock Market, require the implementation of various measures relating to corporate governance. These measures are designed to enhance the integrity of corporate management and the securities markets and apply to securities which are listed on those exchanges. Because we are not listed on the NASDAQ Stock Market or the New York Stock Exchange, we are not presently required to comply with many of the corporate governance provisions and we have not yet adopted most of these measures. Until we comply with such corporate governance measures, regardless of
whether such compliance is required, the absence of such standards of corporate governance may leave our stockholders without protections against interested director transactions, conflicts of interest and similar matters.
We are a smaller reporting company, and we cannot be certain if the reduced disclosure requirements applicable to smaller reporting companies will make our common stock less attractive to investors.
We are currently a “smaller reporting company,” meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company and have a public float of less than $75 million and annual revenues of less than $50 million during the most recently completed fiscal
year. “Smaller reporting companies” are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; and have certain other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two years of audited financial statements in annual reports and in a registration statement under the Exchange Act on Form 10. Decreased disclosures in our SEC filings due to our status as a “smaller reporting company” may make it harder for investors to analyze our results of operations and financial prospects.
If we
are deemed to have been a former shell company, Rule 144 of the General Rules and Regulations under the Securities Act of 1933, as amended, will be available to our shareholders only during such times that we remain current with our SEC reporting requirements and satisfy other Rule 144 requirements applicable to former shell companies.
We do not believe that we are or have ever been a “shell company” as such term is defined in Rule 405 and Rule 12b-2 of the Securities Exchange Act of 1934. Rule 144 of the General Rules and Regulations under the Securities Act of 1933, as amended (the “Securities Act”) provides conditions under which restricted and control securities of issuers can be sold without registration under the Securities Act. Rule 144(i) limits the availability of Rule 144 to shareholders of former shell companies to circumstances where former shell companies have ceased to be shell companies,
have filed Form 10 type information, one year has elapsed since the filing of such Form 10 type information and the former shell company is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act and has filed all reports and other materials required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 month period or such shorter period that the former shell company was subject to such reporting requirements. Should it be determined that we were a shell company, absent registration or other exemption therefrom, holders of our restricted and control shares will not be able to sell their shares in the public market.
Investors may experience dilution of their ownership interests because of the future issuance of additional shares of our common or preferred stock or other
securities that are convertible into or exercisable for our common or preferred stock.
In the future, we may issue our authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our existing stockholders. We are authorized to issue an aggregate of one billion shares of common stock and 20 million shares of “blank check” preferred stock. We may issue additional shares of common stock or other securities that are convertible into or exercisable for common stock in connection with hiring or retaining employees, future acquisitions, future sales of our securities for capital raising purposes, or for other business purposes. The future issuance of any such additional shares of our common stock may create downward pressure on the trading price of the common stock. We may need to raise additional capital in the near future to meet our working capital needs, and there
can be no assurance that we will not be required to issue additional shares, warrants or other convertible securities in the future in conjunction with these capital raising efforts.
Issuance of stock to fund our operations may dilute your investment and reduce your equity interest.
We will need to raise capital in the future to fund the development of our products and services or for other purposes.
Any equity financing may have a significant dilutive effect to stockholders and a material decrease in our stockholders’ equity interest in us. Equity financing, if obtained, could result in substantial dilution to our existing stockholders. At its sole discretion, our board of directors may issue additional securities without seeking stockholder approval, and we do not know when we will need additional capital or, if we do, whether it will be available to us.
Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.
You should not rely on an investment in our Common Stock to provide dividend income. We do not anticipate that we will pay any cash dividends
to holders of our Common Stock in the foreseeable future. Instead, we plan to retain any earnings to maintain and expand our operations. In addition, any future debt financing arrangement may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our Common Stock. Accordingly, investors must rely on sales of their Common Stock after price appreciation, which may never occur, as the only way to realize any return on their investment. As a result, investors seeking cash dividends should not purchase our Common Stock.
Our
executive offices are located at Suite 4801, 48/F, Central Plaza, 18 Harbour Road, Wan Chai, Hong Kong S.A.R., where we share approximately 2,200 square feet of office space with a related party of our controlling shareholder. We intend to seek additional space in connection with our anticipated future growth.
The following table summarizes the location of real property we own or lease.
From time to time we may become involved in various legal proceedings that arise in the ordinary course of business, including actions related to our intellectual property. Although the outcomes of these legal proceedings cannot be predicted with certainty, we are currently not aware of any such legal proceedings or claims that we believe, either individually or in the aggregate, will have a material adverse effect on our business, financial condition, or results of operations.
Our common stock is quoted on the OTCQB tier of the OTC Markets Group, Inc. and is traded under the symbol “UGHL”. Our stock is thinly traded on the OTCQB and there can be no assurance that a liquid market for our common stock will ever develop.
Security Holders
As of February 28, 2019, we had approximately 188 individual shareholders of record of our Common Stock.
Dividend Policy
We have never paid a cash dividend on our common stock. We currently intend to retain all earnings, if any, to finance the growth and development of our business. We do not anticipate paying
any cash dividends in the foreseeable future.
Equity Compensation Plans
None.
Recent Sales of Unregistered Securities
In connection with the Stock Purchase we issued an aggregate of 187,546,887 shares of our common stock to the shareholders of Conperin Group Inc. We received in exchange from the shareholders Conperin Group Inc.2,500,000 ordinary shares of Conperin Group Inc., representing 100% of the issued and outstanding shares of Conperin Group Inc., which exchange resulted in Conperin Group Inc. becoming our wholly-owned subsidiary. We relied on the status of the Conperin Group Inc. shareholders as non-US persons, in claiming an exemption from registration of the shares under
Regulation S promulgated under the Securities Act.
We
were incorporated under the laws of the State of Nevada on May 6, 2014 under the name Costo, Inc. to engage in the business of distributing automobile parts and components necessary for the maintenance and repair of automobiles and specialty equipment, including construction and road machinery, principally in China, Europe and certain Commonwealth of Independent States countries. We changed our name to Union Bridge Holdings Limited on May 23, 2016 in connection with our expanded business plan under which we determined to expand operations into including but not limited to high technology, health care, healthy and high quality life style industry. We never achieved any revenues from our automobile and specialty equipment business and during the fourth quarter of 2017 we determined to discontinue that area of business.
Recent
Development
On February 2, 2018, the Company’s subsidiary Union Beam Investment Limited (“UB”) established Qianhai Lianqiao Investment Consulting (Shenzhen) Company Limited, renamed as Union Beam Trading (Shenzhen) Limited (“UB Trading”), a wholly foreign owned entity in the People’s Republic of China (“PRC”), to engage in the sale of healthcare products and services. On November 6, 2019, the Company disposed UB Trading to an unrelated party at no consideration.
On May 25, 2018, our subsidiary, Union Care Investment Limited in Hong Kong (“UC”)
established Sino Silver (Qianhai) Holdings Ltd. (“Sino Silver Qianhai”), a wholly owned entity in the PRC, to engage in the provision of elderly home care services, to establish senior care centers and to provide community services. As of September 30, 2019, UC is ready to be engaged in the business activities of the Company. On November 6, 2019, the Company disposed Sino Silver Qianhai to an unrelated party at no consideration. A loss of approximately $1,800 incurred in connection with the disposal of UB Trading and Sino Silver Qianhai.
On December 27, 2018, the
Company’s subsidiary UC established Sino Silver (Zhuhai Hengqin) Elderly Service Limited (“Sino Silver Zhuhai”), a wholly owned entity in the PRC engaging the elderly home care services, senior care centers and community services. As of September 30, 2019, Sino Silver Zhuhai is ready to be engaged in the business activities of the Company.
On September 24, 2019, we entered into a Stock Purchase Agreement (the “Purchase Agreement”), with shareholders of Conperin Group Inc., a British Virgin Islands company, who together own shares constituting 100% of the issued and outstanding ordinary shares Shares of Conperin Group Inc. Pursuant to the terms of the Purchase Agreement, the shareholders of Conperin Group Inc. transferred to
us all of their shares of Conperin Group Inc. in exchange for the issuance of 187,546,887 shares of our common stock (the “Stock Purchase”). As a result of the Stock Purchase, we are now a holding company, is engaged in providing technology in digital media industry, including developing a branded social network and e-commerce app platform aiming to promote a high quality of life for families and seniors by using artificial intelligence, blockchain and cognitive e-commerce technology in China, Hong Kong and Asia Pacific. As a result of the consummation of the Stock Purchase, we are no longer a shell company as that term is defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended.
We develop and operate CircleYY, a mobile-based social networking and premium e-commerce app and website platform
that will also use impactful editorial content to promote a balanced quality of life for families and seniors aged 50 and above by understanding their behavior, tastes and needs. The platform enables users around the world to share family stories, build meaningful interactions between 50+ users and their family members, discover and buy fashion, beauty and other daily accessories products. We connect people and facilitate human interactions based on cities, interests and a variety of activities including pictures and short videos.
The launch of CircleYY was planned to take place at the end of December 2019. Within the first quarter of 2020, we are planning to build a user base of 100,000, rising to 500,000 by the end of 2020.
Our CircleYY mobile application can be downloaded and used free of charge, and we will generate our revenues from the various services we offer on our platforms, dedicated to a 50+ client base and their families: (i) collaborations with brands and users on the creation of premium content (ii) the sale of advertising on our social media platform (iii) the sale of third-party branded items, mainly fashion, beauty, daily accessories and services on our e-commerce platform.
As a global platform, CircleYY will target a global audience with content designed for universal appeal amongst family members, notably 50+, along with a local focus for marketing campaigns. The initial opening market will be Hong Kong SAR, followed by similar markets in the Asia-Pacific area and subsequently Europe and North America.
On September
27, 2019, our wholly-owned subsidiary Conperin Group Inc. established Circle YY International Inc., a limited company incorporated in the British Virgin Islands (“Circle International”), to engage in new business when any suitable business opportunity arises. As of September 30, 2019, Circle International is ready to be engaged in the business activities of the Company.
On November 11, 2019, our subsidiary Circle YY Technologies Limited launched its unique ecosystem technology covering social networking, content and e-commerce.
RESULTS OF OPERATIONS
We are a development stage company and
have generated minimal revenue to date. We have incurred recurring losses to date. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.
The following comparative analysis on results of operations was based on the comparative financial statements, footnotes and related information for the years ended December 31, 2019 and 2018. This analysis should be read in conjunction with the financial statements
and the notes to those statements that are included elsewhere in this report.
During
the years ended December 31, 2019 and December 31, 2018 we generated revenue, from a related party, of $86,939 and $6,389, respectively. The increase in revenue is due to increased work done in the website design.
Total operating
expenses for the year ended December 31, 2019, increased by $697,536 to $926,972 compared to the year ended December 31, 2018. The increases were primarily a result of an increase in payroll and marketing expenses. We are unable to predict the level of our operating expenses as we continue to develop our business.
Net Loss
The net loss for the year ended December 31, 2019 was $912,099, an increase of $622,913 compared to the year ended December 31, 2018. The increase is primarily a result of increase in general and administrative expenses.
Liquidity
is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. As of December 31, 2019, we had a working capital deficit of $1,294,297, an increase of $809,385 from our working capital deficit of $484,912 at December 31, 2018. The increase in the deficit is primarily a result of an increase in accounts payable and accrued liabilities and due to related parties, As of December 31, 2019, our total assets were $188,166 compared to $156,532 in total assets at December 31, 2018. Total assets as of December 31, 2019 were comprised of $22,339 in cash and cash equivalents, $135,112 in prepaid expenses and $30,715 in inventory, while as at December
31, 2018 total assets were comprised $97,870 in cash and $58,662 in prepaid expenses. As of December 31, 2019, our current liabilities were $1,482,463 comprised of $1,187,828 due to related parties and $294,635 for accounts payable and accrued liabilities. As of December 31, 2018, our current liabilities were $641,444 comprised of $531,261 due to related parties and $128,183 in accounts payable and accrued liabilities.
We have not generated positive cash flows from operating activities. Net cash used in operating activities for the year ended December 31, 2019 was $260,539 primarily due to a net loss of $912,099 which was reduced by expenses of $594,053 paid by a related party on behalf of the
Company, $3,993 loss on disposal of subsidiaries, and a net increase in change in operating assets and liabilities of $53,514. Net cash flows used in operating activities was $230,449 for the year ended December 31, 2018 primarily due to a net loss of $289,186 and an increase in prepaid expenses of $45,829, which was reduced by the increase in expenses of $38,707 paid by a related party on behalf of the Company and an increase in accounts payable and accrued liabilities of $65,859.
Cash Flows From Investing Activities
Net cash used in investing activities for the year ended December
31, 2019 was $3,669 from cash disposed with subsidiaries.
Cash Flows From Financing Activities
We have financed our operations primarily from advances from shareholders. For the year ended December 31, 2019, net cash provided by financing activities was $186,968 arising from a loan from related parties of $202,328 reduced by repayment to related parties of $15,360. For the year ended December 31, 2018, net cash provided by financing activities was $266,244 arising from a loan from our principal shareholder.
Plan of Operation and Funding
We
expect that working capital requirements will continue to be funded through further issuances of our securities and loans from our executive officers and principal shareholders, including Joseph Ho. Our working capital requirements are expected to increase in line with the growth of our business.
Existing working capital, further advances and debt instruments, and anticipated cash flow are not expected to be adequate to fund our operations and potential acquisitions over the next twelve months. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt instruments. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) the acquisition of businesses
in the health-related industry; (ii) acquisition of inventory; (iii) developmental expenses associated with a start-up business; and (iv) marketing expenses. We intend to finance these expenses with further issuances of equity securities and debt instruments. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.
Material
Commitments
As of December 31, 2019, we had no material commitments, other than the following:
Chang Mai Project
On March 23, 2018, our subsidiary, Windsor Honour Limited (“WHL”) entered into a Binding Heads of Agreement with the owner of a land parcel for a senior care facility to be established in Chang Mai, Thailand. The parties will negotiate in good faith toward definitive agreements regarding the project. WHL would lease the land and be the developer of the project and would own the buildings on the site. WHL would have full control of the design and supervision of the construction of the project, as well as daily operations and management of the project. The land
owner would be responsible for obtaining necessary construction, operation and other permits for the project and would provide necessary liaison with government officials. Total investment in the project for development and construction is estimated to be approximately 200 million Thai Baht (approximately US$6.4 million at current exchange rates), for which WHL would be responsible to obtain financing. WHL would also be responsible for arranging financing of operating costs until they can be funded from operations. The project would lease the land for 90 years with automatic renewals, each for 30 years. The total rent for the first 90 years would be 10 million Thai Baht (approximately US$320,000 at current exchange rates). In addition to the rent, WHL may consider a discretionary bonus to the land owner (with details to be agreed in the definitive agreements).
Upon signing the definitive agreement, WHL will pay 2 million Thai Baht (approximately US$64,300 at current exchange rates) as a deposit to the land owner within 90 days, which will be refundable if the development plan for the land as a senior nursing home facility has not been approved by the competent government authority within one year, or if before that date such authority has definitively denied the application for the development plan upon the request of WHL. Otherwise, the deposit will be applied to the rent for the land.
No assurance can be given, however, that the Chang Mai, Thailand senior facility project will be successfully developed and operated because, (i) WHL may not successfully negotiate definitive agreements for the project, (ii) required permits may not be obtained, and (iii) required financing may not be obtainable.
Inflation
In
the opinion of management, inflation has not and will not have a material effect on our operations in the immediate future. Management will continue to monitor inflation and evaluate the possible future effects of inflation on our business and operations.
Off-Balance Sheet Arrangements
As of the date of this Annual Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Going Concern
As reflected in the accompanying consolidated
financial statements, the Company had an accumulated deficit at December 31, 2019 of $1,294,297, a net loss for the year ended December 31, 2019 of $912,099 and net cash used in operating activities for the year ended December 31, 2019 of $260,539. These conditions raise substantial doubt about our ability to continue as a going concern.
The Company is attempting to produce sufficient revenue; however, the Company’s cash position is not sufficient to support its daily operations. While the
Company believes in the viability of its strategy to produce sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon its ability to further implement its business plan and generate sufficient revenues and in its ability to raise additional funds.
The audited financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
The independent auditors’ report accompanying our financial statements
contain an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared “assuming that we will continue as a going concern,” which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.
We have identified the following policies below as critical to our business and results of
operations. Our reported results are impacted by the application of the following accounting policies, certain of which require management to make subjective or complex judgments. These judgments involve making estimates about the effect of matters that are inherently uncertain and may significantly impact quarterly or annual results of operations. For all of these policies, management cautions that future events rarely develop exactly as expected, and the best estimates routinely require adjustment. Specific risks associated with these critical accounting policies are described in the following paragraphs.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements as well as the reported amount of revenues and expenses during the reporting period. Actual results could differ from these estimates.
The consolidated financial statements and Reports of Independent Registered Public Accounting Firms are listed in the “Index to Consolidated Financial Statements” on page F-1 and included on pages F-2 through F-15.
The audit report of WWC on the financial statements of the Company as of and for the years December 31, 2017 and 2018 did not contain any adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope, or accounting principles, except that the audit reports on the financial statements of the Company for the two years contained an uncertainty about the Company’s ability to continue as a going concern.
There were no disagreements with WWC on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedures, from the time of WWC’s engagement up to the date of dismissal which disagreements that, if not resolved to WWC’s satisfaction, would have caused WWC to make reference in connection with its opinion to the subject matter of the disagreement. None of “reportable events”, as that term is described in Item 304(a)(1)(v)(A)-(D) of Regulation S-K occurred within the two fiscal years of the Company ended December 31, 2017 and 2018 and subsequently up to the date of dismissal.
On October 22, 2019, the Company engaged L&L CPAS, P.A.
(“L&L”) to serve as its principal independent accountant. The decision to engage L&L as the Company’s principal independent accountant was approved by the Board of Directors of the Company on October 22, 2019. During the two years period ended December 31, 2017 and 2018 and in the subsequent interim period prior to October 22, 2019, the Company did not consult with L&L regarding (i) the application of accounting principles to a specific completed or contemplated transaction, or the type of audit
opinion that might be rendered on the Company’s consolidated financial statements and no written or oral advice was provided by L&L that was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue or (ii) any matter that was either the subject of a “disagreement” or “reportable event” within the meaning set forth in Item 304(a)(1)(iv) or Item 304(a)(1)(v) of Regulation S-K.
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed by us in reports that we file under the Exchange Act is recorded, processed, summarized and reported as specified in the SEC’s rules and forms and that such information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial
Officer, to allow timely decisions regarding required disclosure. Management, with the participation of our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2019. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were not effective as of December 31, 2019 due to the material weaknesses and significant deficiencies discussed below.
Management’s Annual Report on Internal Control over Financial Reporting
Management is responsible for the preparation
of our financial statements and related information. Management uses its best judgment to ensure that the 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 and our Chief Financial Officer, we conducted an evaluation of the effectiveness
of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and subsequent guidance prepared by the Commission specifically for smaller public companies as of December 31, 2019. Based on that evaluation, our management concluded that our internal control over financial reporting was not effective as of December 31, 2019 because it identified the following material weakness and significant deficiencies:
●
Material Weakness - The Company did not maintain effective
controls over certain aspects of the financial reporting process because we lacked a sufficient complement of personnel with a level of accounting expertise and an adequate supervisory review structure that is commensurate with our financial reporting requirements.
●
Significant Deficiencies - Inadequate segregation of duties.
A material weakness is a deficiency or a combination of deficiencies in internal control over financial
reporting such that there is a reasonable possibility that a material misstatement of the annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
We expect to be materially dependent upon third parties to provide us with accounting consulting services for the foreseeable future which we believe mitigates the impact of the material weaknesses discussed above. Until such time as we have a chief financial officer with the requisite expertise in U.S. GAAP and establish an audit committee and implement internal controls and procedures, there are no assurances that the material weaknesses and significant deficiencies in our disclosure controls and procedures will not result in errors in our financial statements which could lead to a restatement of those financial statements.
Our management, including our Chief Executive Officer and Chief Financial
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 does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was
not subject to attestation by the company’s registered public accounting firm pursuant to SEC rules that permit us to provide only management’s report on internal control over financial reporting in this annual report on Form 10-K.
Changes in Internal Controls over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Set forth below are the names and ages of our current 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. Our Board of Directors appoints officers annually and each Executive Officer serves at
the discretion of our Board of Directors.
The following is a brief description of the background on our officers and directors.
has been the Chief Executive Officer and a Director of the Company since July 3, 2017. Mr. Ho also served as our Chief Financial Officer from July 3, 2017 until February 7, 2018. Mr. Ho has been the Chairman and owner of Union Glory Gold Limited, a company incorporated in Ontario, Canada involved in mining exploration/development
and finance, since January 2012. He has operated the Tudor Gold Property located in the Tudor Township of Ontario, Canada since 2007, including the Addington Gold Property and the Schefferville Iron Ore Project, which are located in Quebec, Canada. Both the Tudor and Addington Gold Properties have been extensively drilled and ore samples assayed. Mr. Ho graduated from Jinan University (Guangzhou) in 1981 with a Bachelor Degree in Economics. Mr. Ho is the father of Shan Ho, the a director of the Company’s, and the spouse of of Mary Ho, a beneficial owner of more than 10% of the Company’s outstanding common stock, and is the father of Moana Ho, the
Company’s former director, and of Lily Ho, who owns over 5% of the Company’s outstanding common stock. We believe that Mr. Ho is qualified to serve on our Board of Directors based upon his business and management experience.
has served as a director of the Company since February 7, 2018. From 2013 to 2017 Mr. Ho served as a director and chief executive officer at 2377547 Ontario Inc., operating as Roll Play Café, a company based in Canada. Mr. Ho is a beneficial owner of more than 10% of the
Company’s outstanding common stock. Mr. Ho is the son of Joseph Ho, the Company’s Chief Executive Officer and director, and of Mary Ho, a beneficial owner of more than 10% of the Company’s outstanding common stock, and is the brother of Moana Ho, the Company’s former director, and of Lily Ho, who owns over 5% of the Company’s outstanding common stock. We believe that Mr. Ho is qualified to serve on our Board of Directors based upon his business and management experience.
has served as our Chief Financial Officer since January 2019. Mr. Chow has over 25 years of experience in finance and accounting. Mr. Chow has been a financial consultant to a group of companies involved in mining exploration and investments, since February 2016. Prior thereto, from January 2014 to January 2016, Mr. Chow worked as a financial consultant for companies in various industries, including beverages and mineral exploration.
Except as set forth above, there are no family relationships between any of the executive officers and directors.
Our board of directors has not established any committees, including an audit committee, a compensation committee or a nominating committee, or any committee performing a similar function. The functions of those committees are being undertaken by our board. Because we do not have any independent directors, our board believes that the establishment of committees of our board would not provide any benefits to our company and could be considered more form than substance.
We do not have a policy regarding the consideration of any director candidates that may be recommended by our stockholders, including the minimum qualifications for director candidates, nor has our officers and 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 officers and directors have 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 current members of our board will participate in the consideration of director nominees.
As with most small, early stage companies until such time as we further develop our business, achieve a stronger revenue base and have sufficient working capital to purchase
directors’ and officers’ insurance, we do not have any immediate prospects to attract independent directors. When we are able to expand our board to include one or more independent directors, we intend to establish an audit committee of our board of directors. It is our intention that one or more of these independent directors will also qualify as an audit committee financial expert. 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.
Code of Ethics
We expect that we will adopt a code of business
conduct and ethics that applies to all of our employees, officers and directors, including those officers responsible for financial reporting. Once adopted, we will make the code of business conduct and ethics available on our website at
. We intend to post any amendments to the code, or any waivers of its requirements, on our website.
Role of Board in Risk Oversight Process
Management is responsible
for the day-to-day management of risk and for identifying our risk exposures and communicating such exposures to our board. Our board is responsible for designing, implementing and overseeing our risk management processes. The board does not have a standing risk management committee, but administers this function directly through the board as a whole. The whole board considers strategic risks and opportunities and receives reports from its officers regarding risk oversight in their areas of responsibility as necessary. We believe our board’s leadership structure facilitates the division of risk management oversight responsibilities and enhances the board’s efficiency in fulfilling its oversight function with respect to different areas of our business risks and our risk mitigation practices.
Stockholders with questions about the Company are encouraged to contact the Company by sending communications to the attention of the Chief Executive Officer at Suite 4801, 48/F, Central Plaza, 18 Harbour Road, Wan Chai, Hong Kong S.A.R.. If stockholders feel that their questions have not been sufficiently addressed through communications with the Chief Executive Officer, they may communicate with the Board of Directors by sending their communications to the Board of Directors, c/o the Chief Executive Officer at the same address.
Director
Compensation
Historically, our non-employee directors have not received compensation for their service outside the compensation set forth in the Summary Compensation Table below, but we may compensate our directors for their service in the future. We reimburse our non-employee directors for reasonable travel expenses incurred in attending board and committee meetings. We also intend to allow our non-employee directors to participate in any equity compensation plans that we adopt in the future.
Procedures for Nominating Directors
There have been no material changes to the procedures by which security holders may recommend nominees to the Board during the quarter ended December 31, 2019.
The
full board of directors discusses with management our major risk exposures, their potential impact on us, and the steps we take to manage them. This enables the board of directors to coordinate the risk oversight role, particularly with respect to risk interrelationships.
Limitation on Liability and Indemnification Matters
Our Articles of Incorporation contains provisions that
limit the liability of our directors for monetary damages to the fullest extent permitted by Nevada law. Consequently, our directors and officers will not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duties as directors or officers, except liability for any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law.
Our Articles of Incorporation and ByLaws provide that we are required to indemnify our directors and officers, in each case to the fullest extent permitted by Nevada law. Our bylaws also provide that we may advance expenses incurred by a director or officer
in advance of the final disposition of any action or proceeding, and permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his, her or its actions in that capacity regardless of whether we would otherwise be permitted to indemnify him, her or it under Nevada law.
We believe that these provisions in our Articles of Incorporation and ByLaws are necessary to attract and retain qualified persons as directors and officers. This description of the limitation of liability and indemnification provisions of our Articles of Incorporation and ByLaws
is qualified in its entirety by reference to these documents, each of which is included as an exhibit to this Report.
Involvement in Certain Legal Proceedings
None of our directors or executive officers has been involved in any of the following events during the past 10 years:
●
any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
●
any conviction
in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
●
being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; or
●
being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially own more than 10% of a registered class of our equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common shares and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by the SEC regulations to furnish us with copies of all Section 16(a) reports they file. Based on our review of the copies of such forms received by us, and to the best of our knowledge, all executive officers, directors and persons holding greater than 10% of our issued and outstanding stock have filed the required reports in a timely manner during the fiscal year ended December
31, 2019.
The following table sets forth information concerning the total compensation paid or accrued by us during the two fiscal years ended December 31, 2019 to (i) all individuals that served as our principal executive officer or acted in a similar capacity for us at any time during the fiscal year ended December
31, 2019 and (ii) all individuals that served as executive officers of ours at any time during the fiscal year ended December 31, 2019 that received annual compensation during the fiscal year ended December 31, 2019 in excess of $100,000. Except as disclosed in the following table, none of our executive officers received annual compensation during the fiscal year ended December 31, 2019 in excess of $100,000.
Anthony Leung resigned as our Chief Technology Officer on February 7, 2020.
We do not currently pay any compensation to our executive officers.
Employment Agreements with Executive Officers
At
this time, we do not have any written employment agreement or other formal compensation agreements with our new officers and director. Compensation arrangements are the subject of ongoing development and we will make appropriate additional disclosures as they are further developed and formalized.
The following table sets forth certain information regarding beneficial ownership of our common stock as of March 10, 2020 by (i) each person (or group of affiliated persons) who is known by us to own more than five percent of the outstanding shares of our common stock, (ii) each director, executive officer and director nominee, and (iii) all of our directors, executive officers and director nominees as a group. As of March 10, 2020, we had 241,146,887 shares of common stock issued and outstanding.
Beneficial ownership
is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. Unless otherwise noted, the principal address of each of the stockholders, directors and officers listed below is Suite 4801, 48/F, Central Plaza, 18 Harbour Road, Wan Chai, Hong Kong S.A.R.
All share ownership figures include shares of our common stock issuable upon securities convertible or exchangeable into shares of our common stock within sixty (60) days of March 10, 2020, which are deemed outstanding and beneficially owned by such person for purposes of computing his or her percentage ownership, but not for purposes of computing the percentage ownership of any other person.
Name
and Address of Beneficial Owner Officers and Directors
Total
Held by Officers and Directors as a Group (3 persons):
208,860,869
86.61
%
Five Percent Shareholders
Mary Ho(3)
16,988,046
7.04
%
__________
(1)
Based
on 241,146,887 shares of common stock outstanding on March 10, 2020. Includes, where applicable, shares of common stock issuable upon the exercise of warrants and conversion of debt held by such person that may be exercised within 60 days after March 10, 2020. Unless otherwise indicated, we believe that all persons named in the table above have sole voting power and/or investment power with respect to all shares of common stock beneficially, warrants and convertible debt owned by them..
(2)
Consists of 16,988,046 shares owned by Mary Ho, Joseph Ho’s wife and 131,282,821 shares owned by Joseph Ho himself.
(3)
Address
is: 3400 Bayview Avenue, Toronto, Ontario, M2M 3S3, Canada
Policy Regarding Transactions with Related Persons
We do not have a formal, written policy for the review, approval or ratification of transactions between us and any director or executive officer, nominee for director, 5% stockholder or member of the immediate family of any such person that are required to be disclosed under Item 404(a) of Regulation S-K. However,
our policy is that any activities, investments or associations of a director or officer that create, or would appear to create, a conflict between the personal interests of such person and our interests must be assessed by our Chief Executive Officer and must be at arms’ length.
SEC rules require us to disclose any transaction or currently proposed transaction in which we were a participant and in which any related person has or will have a direct or indirect material interest involving the lesser of $120,000 or 1% of the average of our total assets as of the end of last two completed fiscal years. A related person is any executive officer, director, nominee for director, or holder of 5% or more of our Common Stock,
or an immediate family member of any of those persons.
For the years ended December 31, 2019 and 2018, the Company received advances of $202,328 and $266,244 from the Company’s director, who is also our CEO and majority shareholder, and Union Glory Gold Holdings Limited (“Union Glory”), a Company controlled by our CEO, repaid $15,360 and $0, and the Company’s director paid operating expenses of $594,053 and $38,707 on behalf of the Company, respectively.
As
of December 31, 2019 and 2018, the balances owed to the related parties totaled $1,187,828 and $513,261, respectively.
For the years ended December 31, 2019 and 2018, the Company has provided computer services to Union Glory Gold Holdings Limited and earned a service income of $86,939 and $6,389, respectively. Union Glory Gold Holdings Limited is under the control of the Company.
On September 24, 2019, the
Company entered into a share exchange agreement (the “SEA”) with Conperin Group Inc. (“Conperin”) and Conperin’s shareholders whereby the Company issued 187,546,887 new common shares in exchange for all of the issued and outstanding common shares of Conperin, which totaled 2,500,000. Conperin is a private limited liability company, incorporated and domiciled in the British Virgin Islands. The Company and Conperin were under common control before the acquisition. Among the 187,546,887 new common shares, 131,282,821 shares were issued to our CEO and Director of the Company, and 56,264,066 shares were issued to a Director of the
Company.
On November 6, 2019, the Company disposed of UB Trading, Sino Silver Qianhai and Sino Silver Beijing to unrelated parties at no consideration. On December 17, 2019, the Company disposed of Sino Silver Zhuhai to unrelated parties at no consideration. The Company’s director, who is also our CEO and majority shareholder, and Union Glory Gold Holdings Limited have agreed not to require the Company to repay the amounts due to them by the disposed subsidiaries
and the Company recorded debt forgives of $97,542 as additional paid in capital. Loss on disposal of the subsidiaries have been charged to the consolidated statements of operations and comprehensive loss.
The Company’s principal executive offices are located in Hong Kong. The office premises were provided by our CEO at no charge to the Company.
The Company is subject to the risk that if the related parties do not continue to provide services and advances
to fund the company’s operations or expansion, or if those related parties demand immediate repayment, the Company may become insolvent.
The following table shows the fees that were billed
for the audit and other services provided by our principal auditor, for the periods presented, as follows:
- This category includes the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the independent registered public accounting firm in connection with engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.
Audit-Related Fees
- This category consists of assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence with the SEC and
other accounting consulting.
Tax Fees
- This category consists of professional services rendered by our independent registered public accounting firm for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.
All Other Fees
- This category consists of fees for other miscellaneous items.
Our Board of Directors has adopted a procedure for pre-approval of all fees charged by our independent registered public accounting firm. Under the procedure, the Board approves the engagement letter with respect to audit, tax and review services. Other fees are subject to pre-approval by the Board, or, in the period between meetings, by a designated
member of the Board. Any such approval by the designated member is disclosed to the entire Board at the next meeting.
The consolidated financial statements and Report of Independent Registered Public Accounting Firm are listed in the “Index to Consolidated Financial Statements” on page F-1 and included on pages F-2 through F-15.
2. Financial Statement Schedules
All schedules for which provision is made in the applicable accounting regulations of the SEC are either not required under the related instructions, are not applicable (and therefore have been omitted), or the required disclosures are contained in the financial statements included herein.
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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.
We have audited the accompanying balance sheets of Union Bridge Holdings Limited and its subsidiaries (“the Company”) as of December 31, 2019 and the related statement of operations, stockholders’ deficit, cash flow and the related notes to consolidated financial statements (collectively referred to as the consolidated financial statements) for the year ended December 31, 2019. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December
31, 2019, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, 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.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
The Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements
have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has an accumulated deficit, recurring losses, and expects continuing future losses, and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The firm has served this client since October 2019.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To:
The Board of Directors and Stockholders of
Union Bridge Holdings Limited
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Union Bridge Holdings Limited (the
Company) as of December 31, 2018 and 2017, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2018, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the two years ended December 31, 2018, in conformity with accounting
principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company had incurred substantial losses during the year, and has a working capital deficit, which raises substantial doubt about its ability to continue as a going concern. Management’s plan in regards to these matters are described in Note 1. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial
statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, 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.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
NOTE 1 – ORGANIZATION, DESCRIPTION OF BUSINESS, AND GOING CONCERN
UNION BRIDGE HOLDINGS LIMITED (the “Company”) was incorporated under the laws of the State of Nevada on May 6, 2014. The Company did not have operations that generated revenues and positive cash flows; however, the Company’s
management has been reviewing investment opportunities. As described below in “Recent Developments”, Management has identified certain opportunities that it believes may generate profits for the Company in the future.
Recent Developments
The Company incorporated two new wholly owned subsidiaries in the British Virgin Islands: 1.) Phoenix Creation Global Limited (“PC”) on October 26, 2017 and 2.) Windsor Honour Limited (“WH”) on October 30, 2017,
respectively. These subsidiaries were formed with the intent to sell healthcare products and services to seniors and individual with disabilities. The Company recently procured samples of motorized wheelchairs, as the first product in an expected portfolio of products targeted at this market.
On February 2, 2018, the Company’s subsidiary Union Beam Investment Limited (“UB”) established Qianhai Lianqiao Investment Consulting (Shenzhen) Company Limited, renamed as Union Beam Trading (Shenzhen) Limited (“UB Trading”), a wholly foreign owned entity in the People’s Republic of China (“PRC”), to engage
in the sale of healthcare products and services.
On February 13, 2018, the Company’s subsidiary PC established Union Care Investment Limited (“UC”) in Hong Kong, to engage in the provision of senior care services.
On May 25, 2018, UC established Sino Silver (Qianhai) Holdings Ltd. (“Sino Silver Qianhai”), a wholly owned entity in the PRC, to engage in the provision of elderly home care services, to establish senior care centers and to provide community services. As of December 31, 2019, UC is ready to be engaged in the business activities of the Company.
On September 20, 2018, Sino Silver Qianhai established Sino Sliver (Beijing) Elderly Service Ltd. (“Sino Silver Beijing”) in the PRC, to engage in the provision of elderly home care services, to establish senior care centers and to provide community services in Beijing region.
On December 27, 2018, the Company’s subsidiary UC established Sino Silver (Zhuhai Hengqin) Elderly Service Limited (“Sino Silver Zhuhai”), a wholly owned entity in the PRC engaging the elderly home care services, senior care centers and community services.
On September 24, 2019, the
Company entered into a share exchange agreement (the “SEA”) with Conperin Group Inc. (“Conperin”) and Conperin’s shareholders whereby the Company issued 187,546,887 new common shares in exchange for all of the issued and outstanding common shares of Conperin, which totaled 2,500,000. Conperin is a private limited liability company, incorporated and domiciled in the British Virgin Islands. The Company and Conperin were under common control before the acquisition; therefore, the transaction has been accounted for as business combination under common control in accordance to ASC-805-50-30-5, in which the assets and liabilities of Conperin have been presented at their carrying values at the date of common control on March 12, 2019.
On
March 12, 2019, Conperin established Circle YY Technologies Inc., a limited company incorporated in the British Virgin Islands (“Circle BVI”). Circle BVI’s principal business activity is investment holding.
On March 27, 2019, Conperin established Circle YY Technologies Limited, a limited company incorporated in Hong Kong (“Circle HK”). Circle HK’s principal business activity is development of website and mobile apps to promote positive communication between the elders and young people.
On September 27, 2019, Conperin established Circle YY International Inc., a limited company incorporated in the British Virgin
Islands (“Circle International”). As of December 31, 2019, Circle International are ready to be engaged in the business activities of the Company.
On November 6, 2019, the Company disposed of UB Trading, Sino Silver Qianhai and Sino Silver Beijing to unrelated parties at no consideration. On December 17, 2019, the Company disposed of Sino Silver Zhuhai to unrelated parties at no consideration. Before the disposal, the subsidiaries
have minimal business activities. The Company finds no business rationale to maintain these subsidiaries.
The accompanying consolidated financial statements have been prepared assuming that the
Company will continue as a going concern; however, the Company has incurred a net loss of $912,099 for the year ended December 31, 2019. As of December 31, 2019, the Company had an accumulated deficit of $1,632,986, working capital deficit of $1,294,297, and stockholders’ deficit of $1,294,297; its net cash used in operating activities for year ended December 31, 2019 was $260,539.
These factors raise substantial doubt on the Company's ability to continue as a going concern. The accompanying financial statements do not
include any adjustments that might result from the outcome of this uncertainty. Management’s plan for the Company’s continued existence is dependent upon Management's ability to identify investment opportunities, develop those opportunities to generate profit; additionally, Management will need to continue to rely on certain related parties to provide funding for investment, working capital, and general corporate purposes, and management expertise to the Company at less than prevailing market rates. If Management is unable to execute its plan, the Company may become insolvent.
The Company’s
controlling shareholder and Chief Executive Officer has provided a personal guarantee of loan that he would provide to the Company of up to $1 million for investment and working capital purposes. Management believes this guarantee should be considered a material event in executing its overall plan described in the foregoing.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements and related disclosures have been prepared pursuant to the rules and regulations of Securities and Exchange Commission (SEC). The financial statements have been prepared using the accrual basis of accounting in accordance with Generally
Accepted Accounting Principles (GAAP) in the United States of America. The Company use a calendar year for accounting purposes. The financial statements are presented in United States dollars.
Basis of Consolidation
These financial statements include the accounts of the Company and its wholly-owned subsidiaries: First Channel Limited (“FC”), UB, PC, WH, UC, Conperin, Circle BVI, Circle HK and Circle International. These financial statements have also included the accounts of the subsidiaries
previously wholly owned by the Company and have been disposed during the year, up to the date of disposal of the subsidiaries: UB Trading, Sino Silver Qianhai, Sino Silver Beijing and Sino Silver Zhuhai. All intercompany sales, purchases, balances, investments, and capital have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amount of revenues and expenses during the reporting
period. Actual results could differ from these estimates.
Foreign Currency Translation and Re-measurement
The Company translates its foreign operations to the U.S. dollar in accordance with ASC 830, “Foreign Currency Matters”.
The reporting currency for the Company and its subsidiaries is the U.S. dollar. The functional currency of FC, PC, WH and UB is U.S. dollar; the functional currency of UB Trading, Sino Silver Qianhai, Sino Silver Beijing and Sino Silver Zhuhai is Chinese Renminbi (“RMB”); and the functional
currencies of UC, Conperin, Circle BVI, Circle HK and Circle International is the Hong Kong dollar (“HKD”).
The Company’s subsidiaries, whose records are not maintained in those entities’ respective functional currencies, re-measure their records into their functional currency as follows:
●
Monetary assets and liabilities at exchange rates in effect at the end of each period
●
Nonmonetary assets and
liabilities at historical rates
●
Revenue and expense items at the average rate of exchange prevailing during the period
Gains and losses from these re-measurements were not significant and have been included in the Company’s results of operations.
The
RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into U.S. dollar at the rates used in translation.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents. The Company’s bank deposits are held with large financial institutions located in Hong Kong. These deposits are not protected under FDIC; however, the
Company has determined that there is no significant credit risk for these deposits and does not believe these institutions will become insolvent.
Prepaid expenses
The Company makes certain payments for general corporate purposes to service providers that render services over time. The Company amortizes these services to its results of operations over the span of time that the services are contracted. Certain prepayments that are to be delivered after one operating period to the Company have been classified as long-term prepaid expenses. Management does not believe
these prepayments qualify as financial instruments that require fair value consideration and disclosure.
Inventories
Inventories are computed using the first-in, first-out method and valued at the lower of cost or net realizable value. The Company periodically reviews inventories for obsolescence and any inventories identified as obsolete are written down or written off.
Fair value of financial instruments
The carrying value of the Company’s financial
instruments: cash and cash equivalents, prepaid expenses and deposits, accounts payable and accrued liabilities and amount due to a related party at their fair values because of the short-term nature of these financial instruments.
The Company also follows the guidance of the ASC Topic 820-10, “Fair Value Measurements and Disclosures” ("ASC 820-10"), with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:
●
Level 1 : Inputs are based upon unadjusted quoted
prices for identical instruments traded in active markets;
●
Level 2 : Inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques (e.g. Black-Scholes Option-Pricing model) for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs; and
●
Level
3 : Inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models.
Fair value estimates are made at a specific point in time based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment
and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Commitments and contingencies
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an
exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency
is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
Income
taxes
The Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of
tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company’s management determined that the Hong Kong is the Company’s major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of December 31, 2019. The Company is currently not aware of any issues under
review that could result in significant payments, accruals or material deviation from its position.
The Company conducts businesses in China and Hong Kong and is subject to tax in this jurisdiction. As a result of its business activities, the Company will file tax returns that are subject to examination by the foreign tax authority.
Net loss per share
The Company calculates net loss per share in accordance with ASC Topic 260, “Earnings per Share.” Basic income per share is computed by dividing the net income by the weighted-average
number of common shares outstanding during the period. Diluted income per share is computed similar to basic income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive. As of December 31, 2019, the Company has no dilutive securities.
Related Parties
Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise
significant influence over the other party in making financial and operational decisions. Companies are also considered to be related if they are subject to common control or common significant influence.
The Company adopts ASC606 “Revenue Recognition”, and recognizes revenue when control of the promised goods or services is transferred
to customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
The Company derives its revenues from the rendering of computer consulting services. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
identify
the performance obligations in the contract;
●
determine the transaction price;
●
allocate the transaction price to performance obligations in the contract; and
●
recognize revenue as the performance obligation is satisfied.
Reclassification
Certain amounts from prior periods have been reclassified to conform to the current
period presentation.
Recent Accounting Pronouncements
In October 2018, FASB issued ASU No. 2018-17,
Consolidation - Targeted Improvements to Related Party Guidance for Variable Interest Entities (Topic 810).
ASU No. 2018-17 guidance eliminates the requirement that entities consider indirect interests held through related parties under common control in their entirety when assessing whether a decision-making fee is a variable interest. Instead, the reporting entity will consider such indirect interests on a proportionate basis. This pronouncement is effective for public entities for fiscal years ending after December 15, 2019, with early adoption permitted. The
Company does not expect the adoption to have a material impact on its consolidated financial statements.
Management has considered all recent accounting pronouncements issued. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.
NOTE 3 –
BUSINESS COMBINATION
The assets, liabilities and net asset value of Conperin and its subsidiaries as of the date of beginning of common control
is as follow:
The
Company and Conperin were under common control before the acquisition; therefore, the transaction has been accounted for as business combination under common control in accordance to ASC-805-30-5, in which the assets and liabilities of Conperin have been presented at their carrying values at the date of common control on March 12, 2019, and no goodwill is recognized.
Union Bridge Holdings Limited was formed in 2014. Prior to the establishments of subsidiaries in China in 2018, the Company only had operations in the United States. In February 2018, the Company became the parent of Union Beam Trading ( Shenzhen ) Limited, a China subsidiary, which files tax returns in China. In March 2019, the Company became the parent of Circle YY Technologies Hong Kong Limited, a Hong Kong subsidiary, which files tax returns in Hong Kong.
For the years ended December
31, 2019 and 2018, the local (“United States of America”) and foreign components of loss before income taxes were comprised of the following:
Union Bridge Holdings Limited operates in the United States and files tax returns in these jurisdictions.
On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act
(the “Act”) resulting in significant modifications to existing law. The Company’s financial statements for the period ended December 31, 2019 reflect certain effects of the Act which includes a reduction in the corporate tax rate from 35% to 21% as well as other changes. The reconciliation of income tax rate to the effective income tax rate for the year ended December 31, 2019 and 2018 is as follows:
As of December 31, 2019, the operations in the United States incurred $1,271,075 of cumulative net operating losses which can be carried forward to offset future taxable income. The Company has provided for a full valuation allowance against the deferred tax assets of $289,338 on the expected future
tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not be realized in the future.
The Company’s subsidiaries UB Trading, Sino Silver Qianhai, Sino Silver Beijing and Sino Silver
Zhuhai operating in China is subject to the China Corporate Income Tax at a standard income tax rate range of 25% on the assessable income arising in China during its tax year. The reconciliation of income tax rate to the effective income tax rate for the years ended December 31, 2019 and 2018 is as follows:
As of December 31, 2019, the operations in China incurred $110,164 of cumulative net operating losses which can be carried forward to offset future taxable income. The Company has provided for a full valuation allowance against the deferred tax assets of $27,541 on the expected future tax benefits
from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not be realized in the future and the subsidiaries in China have been disposed during the year.
Hong Kong
The Company’s subsidiary Circle HK operating in Hong Kong is subject to the Hong Kong Profits Tax at a standard income tax rate range of 8.25% on the assessable income arising in Hong Kong during its tax year. The reconciliation of income tax rate to the effective income tax rate for the years ended December 31, 2019 and 2018 is
as follows:
As of December 31, 2019, the operations in Hong Kong incurred $2251,747 of cumulative net operating losses which can be carried forward to offset future taxable income. The Company has provided for a full valuation allowance against the deferred tax assets of $20,769 on the expected future tax benefits
from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not be realized in the future.
Management
believes that it is more likely than not that the deferred tax assets will not be fully realizable in the future. Accordingly, the Company provided for a full valuation allowance against its deferred tax assets of $337,648 as of December 31, 2019. In the period, the valuation allowance increased by $162,434.
NOTE 8 - RELATED-PARTY TRANSACTIONS
For the years ended December 31, 2019 and 2018, the Company received advances of $202,328 and $266,244 from the
Company’s director, who is also our CEO and majority shareholder, and Union Glory Gold Holdings Limited (“Union Glory”), a Company controlled by our CEO, repaid $15,360 and $0, and the Company’s director paid operating expenses of $594,053 and $38,707 on behalf of the Company, respectively.
As of December 31, 2019 and 2018, the balances owed to the related parties totaled $1,187,828 and $513,261, respectively.
For the years ended December 31, 2019 and 2018, the
Company has provided computer services to Union Glory Gold Holdings Limited and earned a service income of $86,939 and $6,389, respectively. Union Glory Gold Holdings Limited is under the control of the Company.
On September 24, 2019, the Company entered into a share exchange agreement (the “SEA”) with Conperin Group Inc. (“Conperin”) and Conperin’s shareholders whereby the Company issued 187,546,887 new common shares in exchange for all of the issued and outstanding common shares of Conperin, which totaled 2,500,000. Conperin is a private limited liability company, incorporated and domiciled in the British
Virgin Islands. The Company and Conperin were under common control before the acquisition. Among the 187,546,887 new common shares, 131,282,821 shares were issued to our CEO and Director of the Company, and 56,264,066 shares were issued to a Director of the Company.
On November 6, 2019, the Company disposed of UB Trading, Sino Silver Qianhai and Sino Silver Beijing to unrelated parties at no consideration. On December 17, 2019, the
Company disposed of Sino Silver Zhuhai to unrelated parties at no consideration. The Company’s director, who is also our CEO and majority shareholder, and Union Glory Gold Holdings Limited have agreed not to require the Company to repay the amounts due to them by the disposed subsidiaries and the Company recorded debt forgiveness of $97,542 as additional paid in capital. Loss on disposal of the subsidiaries have been charged to the consolidated statements of operations and comprehensive loss.
The
Company’s principal executive offices are located in Hong Kong. The office premises were provided by Company’s controlled by our CEO at no charge to the Company.
The Company is subject to the risk that if the related parties do not continue to provide services and advances to fund the company’s operations or expansion, or if those related parties demand immediate repayment, the Company may become insolvent.
NOTE 9 - STOCKHOLDERS’ DEFICIT
The
Company is authorized to issue up to 1,000,000,000 shares of Common Stock, par value $0.001 per share, and 20,000,000 of Preferred Stock, par value $0.001 per share.
On September 24, 2019, in connection with the Exchange with Conperin (see Notes 1 and 8), the
Company issued 187,546,887 shares of Common Stock.
As of December 31, 2019 and 2018, 241,146,887 and 53,600,000 shares of Common Stock were issued and outstanding, respectively.
NOTE 10 – CONCENTRATION RISK
During the years ended December 31, 2019 and 2018, 100% of the revenue of $86,939 and $6,389, respectively, was received from a single client, who is a related party to the Company (Note 8).
NOTE
11 - SUBSEQUENT EVENTS
In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued, the Company has evaluated all events or transactions that occurred after December 31, 2019, up through the date the Company issued the financial statements. During the period, the Company did not have any material recognizable subsequent events.
F-15
Dates Referenced Herein and Documents Incorporated by Reference
