Item 8. Financial Statements and
Supplementary Data.
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
of
JA Energy
We have audited the accompanying balance
sheet of JA Energy as of August 31, 2015 and the related statements of operations, stockholders’ equity (deficit), and cash
flows for the year ended August 31, 2015. JA Energy’s management is responsible for these financial statements. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards
of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required
to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration
of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of JA Energy as of August 31, 2015 and the results of its operations
and cash flows for the year ended August 31, 2015 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 2 to the financial statements, the Company has
no meaningful revenues, has negative working capital at August 31, 2015, has incurred recurring losses and recurring negative cash
flow from operating activities, and has an accumulated deficit which raises substantial doubt about its ability to continue as
a going concern. Management’s plans concerning these matters are also described in Note 2. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Seale and Beers, CPAs
Seale and Beers, CPAs
Las Vegas, Nevada
December 14, 2015
F-2
UBI Blockchain Internet, Ltd., formerly known as JA Energy
|
Balance Sheets
|
(Audited)
|
|
|
|
|
August 31,
|
|
|
August 31,
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
68,419
|
|
$
|
68,275
|
|
|
Advances from stockholder
|
|
|
26,981
|
|
|
14,046
|
|
|
Bank overdraft
|
|
|
1,202
|
|
|
1,202
|
|
|
Note payable - related party
|
|
|
50,000
|
|
|
50,000
|
|
|
Total current liabilities
|
|
|
146,602
|
|
|
133,523
|
|
|
Total liabilities
|
|
|
146,602
|
|
|
133,523
|
|
|
Stockholders' deficit
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value, 5,000,000
shares authorized 1,000,000 shares issued
|
|
|
|
|
|
|
|
|
and outstanding as of August 31, 2016
and
August 31, 2015
|
|
|
1,000
|
|
|
1,000
|
|
|
Common stock, $0.001 par value,
|
|
|
|
|
|
|
|
|
70,000,000 shares authorized, 217,046
Shares issued and outstanding as of
|
|
|
|
|
|
|
|
|
August 31, 2016 and August 31, 2015
|
|
|
217
|
|
|
217
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
4,315,919
|
|
|
4,315,919
|
|
|
Stock subscription payable
|
|
|
90,521
|
|
|
90,521
|
|
|
Accumulated deficit
|
|
|
(4,554,259)
|
|
|
(4,541,180)
|
|
|
Total stockholders' deficit
|
|
|
(146,602)
|
|
|
(133,523)
|
|
|
Total liabilities and stockholders' deficit
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
F-3
UBI Blockchain Internet, Ltd., formerly known as JA Energy
|
Statements of Operations
|
(Audited)
|
|
|
|
|
|
|
|
|
|
|
|
For the year
|
|
|
For the year
|
|
|
|
|
ended
|
|
|
ended
|
|
|
|
|
August 31, 2016
|
|
|
August 31, 2015
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
General and administrative
|
$
|
13,079
|
|
$
|
32,948
|
|
|
Total operating expenses
|
|
13,079
|
|
|
32,948
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses):
|
|
|
|
|
|
|
|
Forgiveness of accounts
payable
|
|
-
|
|
|
59,308
|
|
|
Transfer of assets and
liabilities to spin-off
company (Note 4)
|
|
|
|
|
618,870
|
|
|
Interest expense
|
|
-
|
|
|
(5,833)
|
|
|
Total other income (expenses)
|
|
-
|
|
|
672,345
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
(13,079)
|
|
$
|
639,397
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
$
|
(0.06)
|
|
$
|
2.95
|
|
|
Diluted earnings (loss) per share
|
$
|
(0.06)
|
|
$
|
2.95
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common
|
|
|
|
|
|
|
|
shares outstanding - basic
|
|
217,046
|
|
|
217,046
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common
|
|
|
|
|
|
|
|
shares outstanding - diluted
|
|
217,046
|
|
|
217,046
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
F-4
UBI Blockchain Internet, Ltd., formerly known as JA Energy
|
Statements of Stockholders' Deficit
|
(Audited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
Stock
|
|
|
|
|
|
|
|
Preferred Stock
|
|
Common Stock
|
|
Paid in
|
|
Subscription
|
|
Accumulated
|
|
Stockholders'
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Payable
|
|
Deficit
|
|
Deficit
|
|
|
BALANCE, AUGUST 31, 2014
|
100,000
|
|
$1,000
|
|
217,046
|
|
$217
|
|
$4,315,919
|
|
$90,521
|
|
$(5,180,577)
|
|
$(772,920)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
639,397
|
|
639,397
|
|
|
BALANCE, AUGUST 31, 2015
|
100,000
|
|
1,000
|
|
217,046
|
|
217
|
|
4,315,919
|
|
90,521
|
|
(4,541,180)
|
|
(133,523)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(13,079)
|
|
(13,079)
|
|
|
BALANCE, AUGUST 31, 2016
|
100,000
|
|
$1,000
|
|
217,046
|
|
$217
|
|
$4,315,919
|
|
$90,521
|
|
$(4,554,259)
|
|
$(146,602)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
F-5
UBI Blockchain Internet, Ltd., formerly known as JA Energy
|
Statements of Cash Flows
|
(Audited)
|
|
|
|
|
For the year
|
|
|
For the year
|
|
|
|
|
|
ended
|
|
|
ended
|
|
|
|
|
|
August 31, 2016
|
|
|
August 31, 2015
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(13,079)
|
|
$
|
639,397
|
|
|
Adjustments to reconcile net income (loss)
|
|
|
|
|
|
|
|
|
to net cash used by operating activities:
|
|
|
|
|
|
|
|
|
Write-off of intangible assets
|
|
|
|
|
|
|
|
|
spin-off, net (note 4)
|
|
|
-
|
|
|
(613,036)
|
|
|
Forgiveness of accounts payable
|
|
|
-
|
|
|
(59,308)
|
|
|
Depreciation expense
|
|
|
-
|
|
|
599
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expense
|
|
|
144
|
|
|
18,302
|
|
|
Net cash used by operating activities
|
|
|
(12,935)
|
|
|
(14,046)
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Advances from stockholder
|
|
|
12,935
|
|
|
14,046
|
|
|
Net cash provided by financing activities
|
|
|
12,935
|
|
|
14,046
|
|
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS -
|
|
|
|
|
|
|
|
|
BEGINNING OF PERIOD
|
|
|
-
|
|
|
-
|
|
|
END OF PERIOD
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
F-6
UBI Blockchain Internet, Ltd., formerly
known as JA Energy
Notes to Financial Statements
Years Ended August 31, 2016 and
2015
NOTE 1 – ABOUT THE COMPANY
The Company was organized August 26,
2010 (Date of Inception) under the laws of the State of Nevada, as UBI Blockchain Internet, Ltd., formerly known as JA Energy.
The Company was incorporated as a subsidiary of Reshoot Production Company, a Nevada corporation. Reshoot Production Company was
incorporated October 31, 2007, and, at the time of spin off was listed on the Over-the- Counter Bulletin Board.
On September 30, 2014, the Board of Directors passed
a resolution to form a new company called Peak Energy Holdings (Peak) with each shareholder in the Company receiving one share
of common of Peak for each share of common stock in the Company and one share of preferred stock of Peak for each share of preferred
share of the Company.
On November 9, 2014, UBI Blockchain Internet, Ltd.,
formerly known as JA Energy (the "Company") entered into an Irrevocable Asset and Liability Exchange Agreement (the “Agreement”).
The Agreement dealt with the dividend spin-off UBI Blockchain Internet, Ltd., formerly known as JA Energy's wholly owned subsidiary,
Peak Energy Holdings. At the UBI Blockchain Internet, Ltd., formerly known as JA Energy annual shareholder meeting, held on September
30, 2014, the shareholders of the Company approved the transfer of all of the assets and liabilities of the Parent into a wholly
owned subsidiary. The subsidiary had the same characteristics and number of authorized and issued shares as the Parent, whereby
all Preferred and Common shareholders in the Parent received a pro-rata stock dividend in the subsidiary that is equal to the number
of shares they owned in the Parent on a one-for-one (1:1) basis. The major shareholders of the Company entered into a separate
agreement with regards to the dividend spin-off. They agreed to and put into effect the following points upon the dividend spin-off
of the Peak Energy Holdings from UBI Blockchain Internet, Ltd., formerly known as JA Energy:
|
·
|
Mr. James Lusk (the largest debtor of UBI Blockchain Internet, Ltd.,
formerly known as JA Energy) transferred all assets and liabilities, as of March 31, 2014, from UBI Blockchain Internet, Ltd.,
formerly known as JA Energy to the Subsidiary to the extent legally assignable.
|
|
·
|
Two of the major shareholders in UBI Blockchain Internet, Ltd., formerly
known as JA Energy transferred all ownership of their Preferred and Common stock held in the subsidiary to Mr. James Lusk.
|
|
·
|
Mr. James Lusk transferred all of the common stock ownership he owned
and controlled in UBI Blockchain Internet, Ltd., formerly known as JA Energy to the major shareholders.
|
|
·
|
Mr. James Lusk provided a notarized signed letter addressed to the Company
and auditor that he agreed to transfer all assets and liabilities, as of March 31, 2014, from the Parent to the Subsidiary to the
extent legally assignable.
|
|
·
|
UBI Blockchain Internet, Ltd., formerly known as JA Energy warranted
that any new liabilities incurred on the books of UBI Blockchain Internet, Ltd., formerly known as JA Energy after April 1, 2014
would not be transferred to the subsidiary.
|
|
·
|
UBI Blockchain Internet, Ltd., formerly known as JA Energy represented
and warranted that there were no liabilities, actual or contingent, created in the subsidiary. Prior to the effective time of the
transfer, the subsidiary would have no assets nor liabilities.
|
|
·
|
UBI Blockchain Internet, Ltd., formerly known as JA Energy warranted
that since April 1, 2014, with the exception of the Preferred voting shares, no other shares were issued, awarded or pledged to
be issued. The number of common shares issued and outstanding in UBI Blockchain Internet, Ltd., formerly known as JA Energy at
March 31, 2014 were the same number of the shares issued at the date of transfer.
|
|
·
|
Upon the completion of the transfer of assets and liabilities, shares
were exchanged and the subsidiary was divested from UBI Blockchain Internet, Ltd., formerly known as JA Energy and now operates
independent as a separate entity of UBI Blockchain Internet, Ltd., formerly known as JA Energy with its own management;
|
F-7
|
·
|
Mr. James Lusk took control of Peak Energy Holdings, independent of
UBI Blockchain Internet, Ltd., formerly known as JA Energy.
|
|
·
|
All Parties indemnified and held harmless the other Parties from and
against any and all losses, damages, liabilities, resulting or arising from these transactions
|
The Agreement did not affect any other shareholders
in the Company who maintained their share ownership of UBI Blockchain Internet, Ltd., formerly known as JA Energy, and have pro-rata
ownership in Peak Energy Holdings following the dividend spin-off.
NOTE 2 - GOING CONCERN
These financial statements have been prepared in accordance
with generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and the
satisfaction of liabilities and commitments in the normal course of business. The Company has an accumulated deficit since inception
of $4,506,809. The Company has not generated any meaningful revenues to date, and its ability to continue as a going concern is
contingent upon the successful completion of additional financing arrangements and its ability to achieve and maintain profitable
operations. Management plans to raise equity capital to finance the operating and capital requirements of the Company. In October
2016 (see Note 12), there was a change in control of the Company.
These conditions raise substantial doubt about the Company's
ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability
and classification of recorded asset amounts, or amounts and classification of liabilities that might result from the outcome of
this uncertainty.
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES
The relevant accounting policies are listed below.
Basis of Accounting
The basis is United States generally accepted accounting
principles.
Earnings per Share.
The basic earnings (loss) per share is calculated by dividing
the Company's net income (loss) available to common shareholders by the weighted average number of common shares issued and outstanding
during the year. The diluted earnings (loss) per share is calculated by dividing the Company's net income (loss) available to common
shareholders by the diluted weighted average number of shares
outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted
as of the first of the year for any potentially dilutive debt or equity.
Cash and Cash Equivalents
The Company considers all short-term investments with a maturity
of three months or less at the date of purchase to be cash and cash equivalents.
Use of Estimates
In preparing financial statements in conformity with generally
accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and
expenses during the reported period. Actual results could differ from those estimates.
F-8
Income Taxes
The provision for income taxes is the total of the current
taxes payable and the net of the change in the deferred income taxes. Provision is made for the deferred income taxes where differences
exist between the period in which transactions affect current taxable income and the period in which they enter into the determination
of net income in the financial statements.
Revenue recognition
The Company recognizes revenue from product sales once all
the following criteria for revenue recognition have been met: pervasive evidence that an agreement exists; the services have been
rendered; the fee is fixed and determinable and not subject to refund or adjustment; and collection of the amount due is reasonably
assured. For the periods presented, the Company had no revenues.
Year end
The Company's fiscal year-end is August 31.
Reverse Stock Split
All references to numbers of shares of
our common stock and per-share information in the accompanying financial statements have been adjusted retroactively to reflect
the Company’s 1-for- 200 reverse stock split effected on January 20, 2016. The par value was not adjusted as a result of
the reverse stock split.
Recent Accounting Pronouncements
The Company’s management has evaluated recently issued
accounting pronouncements through August 31, 2016 and concluded that they will not have a material effect on future financial statements.
NOTE 4 – TRANSFER OF ASSETS AND LIABILITIES TO
PEAK ENERGY HOLDINGS
In accordance with the Agreement described in Note 1 to these
financial statements, during the year ended August 31, 2015 certain assets with a book value of $9,340, net of depreciation, and
liabilities totaling $628,210 were transferred to Peak Energy Holdings. This transfer resulted in other income of $618,870. In
addition to the $628,210 liabilities transferred to Peak, approximately $68,090 of additional liabilities as of March 31, 2014
not legally assignable to Peak without the consent of the respective debtors were the responsibility of Peak under the Agreement.
As of August 31, 2016 and 2015, accounts payable and accrued liabilities include liabilities that are the responsibility of Peak
totaling $57,451 and $57,451, respectively. The Company will contest any request for payment of any of these pre-Agreement liabilities.
NOTE 5 - STOCKHOLDERS’ DEFICIT
At August 31, 2016, the Company was
authorized to issue 70,000,000 shares of its $0.001 par value common stock and 5,000,000 shares of its $0.001 par value preferred
stock. On November 21, 2016 (see Note 12), the Company changed its authorized capital stock.
During the year ended August 31, 2012,
the Company committed to issue a total of approximately 1,390 shares of common stock to various parties for services rendered or
other consideration valued at a total of $90,521 based on the prevailing trading price of the Company’s common stock at the
dates of the respective commitments. The related expenses were recorded in the year ended August 31, 2012 but the shares have never
been issued.
F-9
NOTE 6 - RELATED PARTY TRANSACTIONS
On October 15, 2014, a total amount
of $617,475 owed to the former CEO was transferred to Peak Energy Holding, in accordance with the agreement described in Note 1
to these financial statements. Included in this amount were notes payable and accrued interest of $605,980, unpaid consulting fees
of $9,550 and advances of $1,945.
As of August 31, 2016, the Company was
obligated to Mr. Mark DeStefano (“DeStefano”) for a $50,000 note payable and $26,981 for payments made on behalf of
the Company. DeStefano had voting control of the Company from June 2014 (see Note 8) to October 24, 2016 (see Note 12) through
his ownership of the 1,000,000 shares of Voting Preferred Stock issued and outstanding (equivalent to 50,000,000 votes).
NOTE 7 - PROVISION FOR INCOME TAXES
The Company accounts for income taxes
under FASB Accounting Standard Codification ASC 740 “Income Taxes”. ASC 740 requires use of the liability method. ASC
740 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences. Deferred tax assets
and liabilities at the end of each period are determined using the currently enacted tax rates applied to taxable income in the
periods in which the deferred tax assets and liabilities are expected to be settled or realized.
As of August 31, 2016, the Company had
net operating loss carry forwards of approximately $1,021,745 that may be available to reduce future years’ taxable income
through 2035. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements,
as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the
deferred tax asset relating to these tax loss carry-forwards. Net operating losses will begin to expire in 2031.
Components of net deferred tax assets, including a valuation
allowance, are as follows at August 31, 2016 and August 31, 2015:
|
August 31,
2016
|
August 31, 2015
|
Deferred tax assets:
|
|
|
Net operating loss carry forward
|
$ 1,021,745
|
$ 1,008,666
|
|
|
|
Total deferred taxes
|
$ 357,611
|
$ 353,033
|
Less: valuation allowance
|
(357,611)
|
(353,033)
|
Net deferred tax assets
|
$ -
|
$ -
|
The valuation allowance for deferred
tax assets as of August 31, 2016 was $357,611, as compared to $353,033 as of August 31, 2015. In assessing the recovery of the
deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets
will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income
in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred
tax assets, projected future taxable income, and tax planning strategies in making this assessment. As a result, management determined
it was more likely than not the deferred tax assets would not be realized as of May 31, 2016 and May 31, 2015.
F-10
The provision for income taxes differs
from the amount computed by applying the statutory federal income tax rate to income before provision for income taxes. The sources
and tax effects of the differences are as follows:
|
U.S federal statutory rate
|
35.0%
|
|
Valuation reserve
|
(35.0%)
|
|
Total
|
0.0 %
|
Current United States income tax laws
limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore,
the amount available to offset future taxable income may be limited.
NOTE 8 - NOTES PAYABLE – Related
Party
On April 4, 2014, the Company issued
a One-year Promissory Note (“the Note”) in the amount of $50,000 to Mark DeStefano (“DeStefano") (see Note
6). The Note bore interest at 12% percent per annum with interest due each month. In the event that interest was not paid within
three days from the time it was due, the Note was to be considered in default and was to be fully due and payable. Additional consideration
for the Note included the Chief Executive Officer of the Company giving the note holder his voting proxy for all of the shares
he held with the exception of voting on a tender offer or a sale of the Company’s assets. As of May 8, 2014, the Note was
in default.
On May 5, 2014, the Company issued a
second One-Year Promissory Note (“the Second Note”) in the amount of $20,000 to the same stockholder noted above. The
Second Note was issued with the restriction that the funds be used specifically to pay the Company’s Patent Counsel for fees
to finalize certain patent filings and was secured by all patents, and patent applications held by the Company. The Second Note
was to bear interest at 12% percent per annum with interest due each month. In the event that interest was not paid within three
days from the time it was due the Second Note would be considered in default and would be fully due and payable.
On June 6, 2014, the Company received
notices that it was in default of the two Promissory Notes described above. Rather than default on the Notes the Company issued
1,000,000 shares of $0.001 par value Voting Preferred Stock in exchange for Notes Payable totaling $20,000 plus forgiveness of
interest totaling $1,900. Additionally, the Company agreed to designate with the State of Nevada Secretary of State that each share
of preferred carries the voting power of 50 common shares. Finally, the shareholder agreed to cancel the shares upon full payment
of the $50,000 Note, without accrued interest and the sale of five units of the MDU.
In October 2016 (see Note 12), the $50,000
note payable was satisfied.
NOTE 9 – OTHER INCOME AND EXPENSE
As described in Note 4, during the year
ended May 31, 2015 an asset with a book value of $9,340, net of depreciation, and liabilities totaling $628,210 were transferred
to Peak Energy Holdings. This transfer resulted in other income of $618,870.
On October 27, 2014 the Company entered
into an agreement with two former employees, one of whom was a former director of the Company, whereby all parties agreed to release
and hold harmless from any liabilities that existed prior to the date of the agreement. The result of this agreement was the forgiveness
by the former employees of $38,186 in compensation owed to the employees.
F-11
NOTE 10 – REVERSE STOCK SPLIT
On January 20, 2016, the Company effected
a 1-for-200 reverse stock split of its outstanding common stock, par value $0.001 per share (the "Reverse Stock Split").
As a result of the Reverse Stock Split, each two hundred shares of the Company’s Common Stock issued and outstanding immediately
prior to the Reverse Stock Split were automatically combined into and became one share of common stock. No fractional shares were
issued as a result of the Reverse Stock Split and any stockholder who otherwise would have been entitled to receive fractional
shares and received an additional share. Also, as a result of the Reverse Stock Split, the per share exercise price of, and the
number of shares of common stock underlying our warrants outstanding immediately prior to the Reverse Stock Split were automatically
proportionally adjusted based on the 1-for-200 split ratio in accordance with the terms of such warrants. Share and per-share amounts
of the Company’s commons stock and warrants included herein have been adjusted to give effect to the Reverse Stock Split.
The Reverse Stock Split did not alter the par value of the Common Stock, $0.001 per share, or modify any voting rights or other
terms of the common stock.
NOTE 11 – EXCERCISABLE WARRANTS
On March 1, 2011, the Company received
$15,000 as a loan from a non-related third party. The loan was unsecured, payable on demand and non-interest bearing. Effective
March 19, 2013, the debt was exchanged for warrants to purchase up to 6,000 shares of common $.001 par value stock at $200 per
share after March 19, 2014 and before March 19, 2017.
NOTE 12 – SUBSEQUENT EVENTS
On September 15, 2016, the Company,
with the approval of the Board of Directors agreed to issue (issued October 3, 2016) 30,000,000 shares of unregistered restricted
Class A Common Stock, 6,000,000 shares of unregistered restricted Class B Voting Common Stock, which carries a voting weight equal
to ten (10) Common Shares and 40,000,000 shares of unregistered restricted Class C Common Stock to UBI Blockchain Internet, LTD
(“UBI"), a Hong Kong company, in exchange for $200,000. These shares were issued in reliance on the exemption under
Section 4(2) of the Securities Act of 1933, as amended (the "Act") and were issued under Regulation S to one (1) foreign
entity who attested it is an accredited investor who is not a citizen nor a resident of the USA.
On September 26, 2016, pursuant to NRS
78.1955, the Board of Directors approved the filing of a Certificate of Designation with the Nevada Secretary of State to designate
Class A, B and C common shares, par value $0.001. Concurrently with the filing of this Certificate of Designation, all Common Stock
issued and outstanding shall become Class A Common Stock. Class B Common Stock carries a voting weight equal to ten (10) Common
Shares. The Class B shares can be converted into fully paid and non-assessable Common Shares, on a one-to-one basis, at the option
of the holder at any time upon written notice to the Company and its authorized transfer agent. Class C Common Stock has no voting
rights. Upon the conversion or other exchange of all outstanding shares of Class B Common Stock into or for shares of Class A Common
Stock, all shares of Class C Common Stock shall be automatically, without further action by any holder thereof, converted into
an identical number of fully paid and non-assessable shares of Class A Common Stock on the date fixed therefor by the Board of
Directors that is no less than sixty-one days and no more than one hundred and eighty days following such conversion or exchange.
Pursuant to the September 15, 2016 change
in control agreement, a representative of UBI paid into an attorney trust account $150,000 on September 14, 2016 and $67,500 on
October 11, 2016, for a total of $217,500. The $217,500 consisted of $200,000 for the newly issued shares of Class A, Class B Voting,
and Class C Common Stock and $17,500 for the payment of specific expenses.
F-12
In September and October 2016, a total of $175,557 was paid
from the attorney trust account to:
|
Mark DeStefano (in satisfaction of the $50,000
|
|
|
|
note payable and the $26,981 advances
|
|
|
|
|
payable at August 31, 2016, and for the
|
|
|
|
|
retirement of the 1,000,000 shares of Voting Preferred Stock
owned by
DeStefano
|
$
|
112,000
|
|
Finder for Finder's Fee
|
|
|
|
20,000
|
|
Directors of the Company for services
|
|
15,000
|
|
Entity controlled by DeStefano for services
|
|
10,000
|
|
OTC Markets Group, Inc. for fees
|
|
12,500
|
|
Auditor for audit fees
|
|
|
|
5,000
|
|
Other
|
|
|
|
|
1,057
|
|
|
Total
|
|
|
|
$
|
175,557
|
On November 21, 2016, the Company reincorporated in Delaware
under the name UBI Blockchain Internet LTD. and increased the number of authorized shares from 75,000,000 to 200,000,000 shares
consisting of 130,000,000 authorized shares of Class A Common Stock, 6,000,000 authorized shares of Class B Common Stock and 64,000,000
authorized shares of Class C Common Stock.
F-13