Notes to Financial Statements
Three Months Ended November 30,
2016 and 2015
(Unaudited)
NOTE 1 – ABOUT THE COMPANY
The Company was organized August 26, 2010 (Date
of Inception) under the laws of the State of Nevada, 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 November 21, 2016 the Company reincorporated in Delaware under the name UBI Blockchain
Internet Ltd.
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, JA Energy (the "Company")
entered into an Irrevocable Asset and Liability Exchange Agreement (the “Agreement”). The Agreement dealt with the
dividend spin-off JA Energy's wholly owned subsidiary, Peak Energy Holdings. At the 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 JA Energy:
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Mr. James Lusk (the largest debtor of JA Energy) transferred all assets
and liabilities, as of March 31, 2014, from JA Energy to the Subsidiary to the extent legally assignable.
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Two of the major shareholders in JA Energy transferred all ownership
of their Preferred and Common stock held in the subsidiary to Mr. James Lusk.
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Mr. James Lusk transferred all of the common stock ownership he owned
and controlled in JA Energy to the major shareholders.
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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.
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JA Energy warranted that any new liabilities incurred on the books of
JA Energy after April 1, 2014 would not be transferred to the subsidiary.
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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.
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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 JA Energy at March 31, 2014 were the same number of the shares issued at the date of transfer.
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Upon the completion of the transfer of assets and liabilities, shares
were exchanged and the subsidiary was divested from JA Energy and now operates independent as a separate entity of JA Energy with
its own management;
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Mr. James Lusk took control of Peak Energy Holdings, independent of
JA Energy.
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All Parties indemnified and held harmless the other Parties from and
against any and all losses, damages, liabilities, resulting or arising from these transactions
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The Agreement did not affect any other shareholders
in the Company who maintained their share ownership of JA Energy, and have pro-rata ownership in Peak Energy Holdings following
the dividend spin-off.
On September 15, 2016, the Company,
with the approval of the Board of Directors agreed to issue (issued October 7, 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. 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.
On October 7, 2016, the 30,000,000 Class
A shares and 6,000,000 Class B shares were issued. 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. On December 9, 2016, 40,000,000 shares of Class C shares were issued. All of the preceding 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.
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 $4,629,556. 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. As described
above, there was a change in control of the Company in October 2016.
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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.
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 November 30, 2016 and concluded that they will not have a material effect on future financial
statements.
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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 November 30, 2016 and August 31, 2015, accounts payable and accrued liabilities include liabilities that are the responsibility
of Peak totaling $55,406 and $57,541, respectively. The Company will contest any request for payment of any of these pre-Agreement
liabilities.
NOTE 5 - STOCKHOLDERS’ DEFICIT
The Company is authorized to issue 130,000,000
shares of its $0.001 par value Class A common stock, 6,000,000 shares of its $0.001 par value Class B common stock, 64,000,000
shares of its $0.001 par value Class C common stock and 5,000,000 shares of its $0.001 par value preferred stock.
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.
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.
NOTE 6 - RELATED PARTY TRANSACTIONS
As described in Note 8, 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. Subsequently, Mr. DeStefano advanced $1,285 to the Company. During the three months ended November 30, 2016 the
Company satisfied these obligations. 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).
For the three months ended November
30, 2016, consulting fees paid to related parties consists of a total of $15,000 paid to the two then directors of the Company
and $10,000 paid to an entity controlled by DeStefano.
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 November 30, 2016, the Company
had net operating loss carry forwards of approximately $1,097,042 that may be available to reduce future years’ taxable income
through 2036. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements
as their realization has not been determined likely to occur. Also, due to the change in control, there are annual limitation on
future net operating loss carry forward deductions.
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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, the $50,000 note payable
was satisfied.
NOTE 9 – OTHER INCOME AND EXPENSE
During the three months ended November
30, 2016, the Company settled a bank overdraft of $942 for $370. This settlement resulted in income of $572.
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 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
common 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.
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