UBI
Blockchain Internet Ltd.
(Formerly
JA Energy)
Balance
Sheets
|
|
May 31,
|
|
|
August 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Current portion of prepaid
stock-based salaries and consulting fees
|
|
$
|
1,658,333
|
|
|
$
|
-
|
|
Prepaid expenses
|
|
|
3,000
|
|
|
|
-
|
|
Total current
assets
|
|
|
1,6661,333
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Office Equipment, net of accumulated
depreciation
|
|
|
6,045
|
|
|
|
-
|
|
Non-current portion
of prepaid stock-based salaries and consulting fees
|
|
|
740,000
|
|
|
|
-
|
|
Total assets
|
|
$
|
2,407,378
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
and accrued liabilities
|
|
$
|
20,131
|
|
|
$
|
68,419
|
|
Advances from former
related party
|
|
|
-
|
|
|
|
26,981
|
|
Due to related parties
|
|
|
333,169
|
|
|
|
-
|
|
Bank overdraft
|
|
|
-
|
|
|
|
1,202
|
|
Note
payable - former related party
|
|
|
-
|
|
|
|
50,000
|
|
Total current
liabilities
|
|
|
353,300
|
|
|
|
146,602
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
353,300
|
|
|
|
146,602
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value,
5,000,000 shares authorized, 0 and 1,000,000 shares issued and outstanding as of’ May 31, 2017 and August 31, 2016,
respectively
|
|
|
-
|
|
|
|
1,000
|
|
Class A common stock,
$0.001 par value, 1,000,000,000 shares authorized, 30,717,046 and 217,046 shares issued and outstanding as of May 31, 2017
and August 31, 2016, respectively
|
|
|
30,717
|
|
|
|
217
|
|
Class B common stock,
$0.001 par value, 500,000,000 shares authorized, 6,000,000 shares issued and outstanding as of May 31, 2017
|
|
|
6,000
|
|
|
|
|
|
Class C common stock, $0.001 par value,
500,000,000 shares authorized, 48,400,000 shares issued and outstanding as of May 31, 2017
|
|
|
48,400
|
|
|
|
|
|
Additional paid-in
capital
|
|
|
7,555,784
|
|
|
|
4,315,919
|
|
Stock subscription
payable
|
|
|
90,521
|
|
|
|
90,521
|
|
Accumulated
deficit
|
|
|
(5,677,344
|
)
|
|
|
(4,554,259
|
)
|
Total stockholders’
equity
|
|
|
2,054,078
|
|
|
|
(146,602
|
)
|
Total liabilities
and stockholders’ equity
|
|
$
|
2,407,378
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these financial statements.
UBI
Blockchain Internet Ltd.
(Formerly
JA Energy)
Statements
of Operations
(Unaudited)
|
|
For the three months
|
|
|
For the three months
|
|
|
For the nine months
|
|
|
For the nine months
|
|
|
|
ended
|
|
|
ended
|
|
|
ended
|
|
|
ended
|
|
|
|
May
31, 2017
|
|
|
May
31, 2016
|
|
|
May
31, 2017
|
|
|
May
31, 2016
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries (including stock
- based compensation of $72,500, $0, $120,833 and $0 respectively)
|
|
$
|
190,701
|
|
|
|
-
|
|
|
$
|
370,270
|
|
|
$
|
-
|
|
Consulting fees (including stock
- based compensation of $409,167, $0, $640,834 and $0 respectively)
|
|
|
409,167
|
|
|
|
-
|
|
|
|
665,834
|
|
|
|
-
|
|
Legal and professional fees
|
|
|
53,652
|
|
|
|
|
|
|
|
93,168
|
|
|
|
-
|
|
Depreciation
|
|
|
318
|
|
|
|
|
|
|
|
318
|
|
|
|
-
|
|
Other general
and administrative
|
|
|
14,831
|
|
|
|
10,573
|
|
|
|
41,070
|
|
|
|
35,854
|
|
Total operating
expenses
|
|
|
668,669
|
|
|
|
10,573
|
|
|
|
1,170,660
|
|
|
|
35,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on settlement of bank overdraft
|
|
|
|
|
|
|
-
|
|
|
|
572
|
|
|
|
-
|
|
Gain on settlement
of accounts payable and accrued liabilities
|
|
|
|
|
|
|
-
|
|
|
|
47,003
|
|
|
|
-
|
|
Total other income
(expenses)
|
|
|
|
|
|
|
-
|
|
|
|
47,575
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(668,669
|
)
|
|
|
(10,573
|
)
|
|
$
|
(1,123,085
|
)
|
|
$
|
(35,854
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per
share of Class A and Class C common stock – basic and diluted
|
|
$
|
(0.01
|
)
|
|
|
(0.05
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.17
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of Class A and Class C common
shares
outstanding - basic and diluted
|
|
|
75,772,480
|
|
|
|
217,046
|
|
|
|
41,424,290
|
|
|
|
217,046
|
|
The
accompanying notes are an integral part of these financial statements.
UBI
Blockchain Internet Ltd.
(Formerly
JA Energy)
Statements
of Cash Flows
(Unaudited)
|
|
For the nine months
|
|
|
For the nine months
|
|
|
|
ended
|
|
|
ended
|
|
|
|
May
31, 2017
|
|
|
May
31, 2016
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
(1,123,085
|
)
|
|
$
|
(35,854
|
)
|
Adjustments to reconcile
net income (loss) to net cash used by operating activities
|
|
|
|
|
|
|
|
|
Stock-based salaries
and consulting fees
|
|
|
761,667
|
|
|
|
-
|
|
Depreciation
|
|
|
318
|
|
|
|
-
|
|
Gain on settlement
of bank overdraft
|
|
|
(572
|
)
|
|
|
-
|
|
Gain on settlement
of accounts Payable and accrued liabilities
|
|
|
(47,003
|
)
|
|
|
-
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
(3,000
|
)
|
|
|
(1,500
|
)
|
Bank overdraft
|
|
|
(630
|
)
|
|
|
-
|
|
Accounts
payable and accrued liabilities
|
|
|
(1,285
|
)
|
|
|
24,419
|
|
Net cash used
by operating activities
|
|
|
(413,590
|
)
|
|
|
(12,935
|
)
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Purchases
of office equipment
|
|
|
(6,363
|
)
|
|
|
-
|
|
Net cash used
by operating activities
|
|
|
(6,363
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Due to related parties
|
|
|
333,169
|
|
|
|
-
|
|
Advances from former
- related party
|
|
|
(26,981
|
)
|
|
|
12,935
|
|
Repayment of note
payable to former related party
|
|
|
(50,000
|
)
|
|
|
-
|
|
Buyback of preferred
stock
|
|
|
(33,735
|
)
|
|
|
-
|
|
Proceeds from sale
of common stock - net
|
|
|
180,000
|
|
|
|
-
|
|
Contributed
capital
|
|
|
17,500
|
|
|
|
-
|
|
Net cash provided
by financing activities
|
|
|
419,953
|
|
|
|
12,935
|
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS -
|
|
|
|
|
|
|
|
|
BEGINNING OF
PERIOD
|
|
|
-
|
|
|
|
-
|
|
END OF PERIOD
|
|
$
|
-
|
|
|
$
|
-
|
|
SUPPLEMENTAL CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
$
|
-
|
|
|
$
|
-
|
|
Interest paid
|
|
$
|
-
|
|
|
$
|
-
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Issuance of 8,400,000 shares of Class
C common stock to 7 employees and 38 consultants on April 3, 2017 charged to prepaid stock based salaries and consulting fees
|
|
$
|
1,680,000
|
|
|
$
|
-
|
|
Issuance of 500,000
shares of Class A common stock to consultant on May 1, 2017 charged to prepaid stock based salaries and consulting fees
|
|
$
|
1,480,000
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these financial statements.
UBI
Blockchain Internet Ltd.
(Formerly
JA Energy)
Notes
to Financial Statements
Three
and Nine Months Ended May 31, 2017 and 2016
(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 stock 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 of 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:
|
●
|
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.
|
|
|
|
|
●
|
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.
|
|
|
|
|
●
|
Mr.
James Lusk transferred all of the common stock ownership he owned and controlled in 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.
|
|
|
|
|
●
|
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.
|
|
●
|
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.
|
|
|
|
|
●
|
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.
|
|
|
|
|
●
|
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;
|
|
|
|
|
●
|
Mr.
James Lusk took control of Peak Energy Holdings, independent of 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 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 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 Hong Kong”), a Hong Kong company, or assigns 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 became 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 therefore
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 March 1, 2017, the 40,000,000 shares of Class C common stock 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 or a resident of the USA.
On
January 3, 2017, the Company appointed four new directors, accepted the resignations of its two former directors and appointed
Tony Liu (who controls UBI Hong Kong) as Chief Executive Officer of the Company.
Commencing
in the three months ended February 28, 2017, the Company started research activities in Hong Kong relating to “blockchain”
technology planned to be provided for future customers.
On
March 1, 2017, the Company issued 40,000,000 shares of Class C common stock to our chief executive officer Tony Liu pursuant to
the September 15, 2016 agreement (see above).
On
April 3, 2017, the Company issued a total of 8.400,000 shares of Class C common stock to a total of 45 contractor employees and
nonemployees (see Note 5).
On
May 1, 2017, the Company issued 500,000 restricted shares of Class A common stock to an independent consultant for consulting
services to be performed for the Company (see Note 5).
On
May 24, 2017, the Company increased the number of authorized common shares from 200,000,000 shares to 2,000,000,000 shares (1,000,000,000
shares of Class A common stock, 500,000,000 shares of Class B common stock, and 500,000,000 shares of Class C common stock).
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 $5,677,344. 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.
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.
Interim
Financial Statements
The
consolidated balance sheet for the Company at the end of the preceding fiscal year has been derived from the audited balance sheet
and notes thereto contained in the Company’s annual report on Form 10-K for the fiscal year ended August 31, 2016 and is
presented herein for comparative purposes. All other financial statements are unaudited. In the opinion of management, all adjustments,
which include only normal recurring adjustments necessary to present fairly the financial position, results of operations and
cash flows for all period presented, have been made. The results of operations for the interim periods presented are not necessarily
indicative of the operating results for the respective full years.
Certain
footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally
accepted in the United States (“US GAAP”) have been omitted in accordance with the published rules and regulations
of the Securities and Exchange Commission (“SEC”). These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended August
31, 2016 filed with the SEC on December 14, 2016.
Earnings
per Share.
The
basic earnings (loss) per share of Class A and Class C common stock is calculated by dividing the Company’s net income (loss)
available to Class A and Class C common shareholders by the weighted average number of Class A and Class C common shares issued
and outstanding during the year. The diluted earnings (loss) per share of Class A and Class C common stock is calculated by dividing
the Company’s net income (loss) available to Class A and Class C common shareholders by the diluted weighted average number
of Class A and Class C shares outstanding during the year. The diluted weighted average number of Class A and Class C shares outstanding
is the basic weighted number of Class A and Class C shares adjusted as of the first of the year for any potentially dilutive debt
or equity. For the periods presented, the Class A and Class C common stock shares underlying the following dilutive securities
were excluded from the calculation of diluted shares outstanding as the effect of their inclusion would be anti-dilutive:
|
|
For
the three months ended
May 31,
|
|
|
For
the nine months ended
May 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Class
B common stock
|
|
|
6,000,000
|
|
|
|
-
|
|
|
|
5,208,791
|
|
|
|
-
|
|
Total
|
|
|
6,000,000
|
|
|
|
-
|
|
|
|
5,208,791
|
|
|
|
-
|
|
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.
Property
and Equipment
Property
and equipment is stated at cost less accumulated depreciation. Depreciation is calculated on the straight-line basis over the
estimated useful lives of the respective assets. Expenditures for repairs and maintenance are expensed as incurred.
Foreign
Currency Translation
The
reporting currency of the Company is the United States Dollar and the accompanying financial statements are expressed in United
States Dollars.
Transactions
denominated in currencies other than the United States Dollar (principally the Hong Kong Dollar) are translated in United States
Dollars at the exchange rates prevailing at the dates of the transactions. Exchange gains and losses, which were not significant
in the nine months ended May 31, 2017 and May 31, 2016 are reflected in income.
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 services and 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.
Stock-Based
Compensation
The
Company accounts for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718, “Compensation
- Stock Compensation,” which requires all share-based payments to employees, including grants of employee stock options,
to be recognized in the financial statements based on their fair values. The Company does not have an employee stock option plan.
The
Company follows ASC topic 505-50, formerly EITF 96-18, “
Accounting for Equity Instruments that are Issued to Other than
Employees for Acquiring, or in Conjunction with Selling Goods and Services
,” for stock issued to consultants and other
non-employees. In accordance with ACS Topic 505-50, the stock issued as compensation for services provided to the Company are
accounted for based upon the fair value of the services provided or the estimated fair market value of the stock, whichever can
be more clearly determined. The fair value of the equity instrument is charged directly to consulting expense over the period
during which services are rendered.
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 May 31, 2017 and concluded that they
will not have a material effect on future financial statements.
NOTE
4 – PREPAID STOCK BASED SALARIES AND CONSULTING FEES
Prepaid
stock-based salaries and consulting fees at May 31, 2017 consist of:
|
|
Fair
value of stock
issuance (Note 5)
|
|
|
Prepaid
balance
at May 31, 2017
|
|
|
|
|
|
|
|
|
1,450,000 shares of Class
C common stock issued to 7 employees on April 3, 2017 pursuant to service agreements with a service term of one year expiring
December 31, 2017
|
|
$
|
290,000
|
|
|
$
|
169,167
|
|
6,950,000 shares of Class C common stock
issued to 38 consultants on April 3, 2017 pursuant to service agreements with a service term of one year expiring December
31, 2017
|
|
|
1,390,000
|
|
|
|
810,833
|
|
500,000 shares
of Class A common stock issued to a consultant on May 1, 2017 pursuant to Consulting Agreement dated April 28, 2017 with a
service term of two years expiring April 30, 2019
|
|
|
1,480,000
|
|
|
|
1,418,333
|
|
Total
|
|
$
|
3,160,000
|
|
|
|
2,398,333
|
|
Current
portion
|
|
|
|
|
|
|
(1,658,333
|
)
|
Non-current
portion
|
|
|
|
|
|
$
|
740,000
|
|
NOTE
5 - STOCKHOLDERS’ EQUITY
Pursuant
to the September 15, 2016 change in control agreement (see Note 1), 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.
Starting
in December 2016, the Company engaged the services of a total of 45 employees and non-employees to perform certain marketing,
research and development and investor relations services. The related agreements, which were executed in March 2017, provide for
the contractors to work for the Company for terms ranging from September 2016 to January 1, 2017 to December 31, 2017 for compensation
including the issuance of a total of 8,400,000 shares of Class C common stock (which occurred April 3, 2017).
The
$1,680,000 estimated fair value of the 8,400,000 shares of Class C common stock (using a price of $0.20 per share) was recorded
as prepaid expenses and is being expensed evenly over the year ended December 31, 2017 (see Note 4). For the three and nine months
ended May 31, 2017, we recognized stock-based salaries expense of $72,500 and $120,833, respectively, and recognized stock-based
consulting fees expe3nse of $347,500 and $579,167, respectively, from these agreements.
On
May 1, 2017, the Company issued 500,000 restricted shares of Class A common stock to a consultant pursuant to a Consulting Agreement
dated April 28, 2017 with a service term of two years expiring April 30, 2019. The $1,480,000 estimated fair value of the 500,000
shares of Class A common stock (using a price of $2.96 per share based on a $3.95 closing trading price on April 28, 2017 less
a 25% restricted stock discount) was recorded as a prepaid expense and is being expensed evenly over the 2 year service period
expiring April 30, 2019. For the three and nine months ended May 31, 2017, we recognized stock-based consulting fees expense of
$61,667 and $61,667, respectively, from this agreement.
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 (when the Company purchased from DeStefano the 1,000,000 shares of Preferred Stock for $33,735)
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 former 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.
Commencing
March, 2017, the Company has been using office space provided by an affiliate of UBI Blockchain Internet, LTD. (Hong Kong) (“UBI
Hong Kong”) at a monthly rent of 21,000 Hong Kong Dollars (approximately $2,692 at the May 31, 2017 exchange rate) per month.
UBI Hong Kong owns 30,000,000 shares of the Company’s Class A common stock.
In
the nine months ended May 31, 2017, Tony Liu, chief executive officer of the Company, and UBI Hong Kong paid a total of $333,169
of expenditures on behalf of the Company. The amount due to these related parties for these expenditures is $333,169 at May 31,
2017. The liabilities are non-interest bearing and are due on demand.
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 May 31, 2017, the Company had net operating loss carry forwards of approximately $1,383,163 that may be available to reduce
future years’ taxable income through 2037. 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 limitations on future net operating loss carry forward deductions.
NOTE
8 - NOTES PAYABLE – Former 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.
On
January 27, 2017, the Company entered into a Settlement Agreement with a former landlord satisfying a $35,868 accrued liability
for $4,100. This settlement, along with an arrangement with another vendor, resulted in other income of $47,003.
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 - COMMITMENTS AND CONTINGENCIES
Acquisition
Agreement
On
May 16, 2017, the Company executed an Acquisition Agreement with Shenzhen Nova E-commerce, Ltd. (“NOVA”), a private
Shenzhen Chinese corporation. Upon satisfaction of conditions precedent to closing (including regulatory approval of the transfer
of NOVA’s Hong Kong business license to the Company), the Company is to acquire 100% ownership of NOVA in exchange for the
Company’s issuance of a total of 25,000,000 shares of its Class C common stock to the 130 owners of NOVA. NOVA, incorporated
on May 26, 2016, currently operates an online store in China selling a wide range of products.
Item 2. - Management’s
Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Quarterly Report on Form 10-Q
contains forward-looking statements. When used in this Quarterly Report on Form 10-Q, the words “may,” “could,”
“estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate”
and similar expressions identify forward-looking statements. Although we believe that our plans, intentions, and expectations
reflected in any forward-looking statements are reasonable, these plans, intentions, or expectations may not be achieved. Our
actual results, performance, or achievements could differ materially from those contemplated, expressed, or implied, by the forward-looking
statements contained in this Annual Report on Form 10-Q. Important factors that could cause actual results to differ materially
from our forward-looking statements are set forth in this Quarterly Report on Form 10-Q. Accordingly, readers are cautioned not
to place undue reliance on forward-looking statements, which speak only as of the dates on which they are made. All forward-looking
statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements
set forth in this Annual Report on Form 10-Q, except as required by federal securities laws, we are under no obligation to update
any forward-looking statement, whether as a result of new information, future events, or otherwise.
Although we believe that the expectations
reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected
or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any
forward-looking statements, are subject to change and inherent risks and uncertainties.
In this form 10-Q references to “UBI
Blockchain Internet, Ltd.,” “JA Energy,” “the Company”, “we,” “us,” and
“our” refer to UBI Blockchain Internet Ltd. (a Delaware Company).
Critical Accounting Policies
There have been no material changes
to our critical accounting policies and estimates from the information provided in Item 7, “Management’s Discussion
and Analysis of Financial Condition and Results of Operations”, included in our Annual Report on Form 10-K for the fiscal
year ended August 31, 2016 filed with the Securities and Exchange Commission on December 14, 2016.
Corporate History and Business Overview
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. 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 October 7, 2016, 30,000,000 shares of Class A common stock and 6,000,000
shares of Class B common stock were issued. On March 1, 2017, 40,000,000 shares of Class C common stock 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.
Business Description
UBI Blockchain Internet’s business
encompasses the research and application in the blockchain technology with a focus on the Internet of things (“IoT”)
covering areas of food and drugs, healthcare, just to name a few. The Company will leverage the stock market to build a new business
technology platform, specialized in the safety and freshness keeping of food and drugs within the context of micro and macro environment
of the human life.
UBI plans to set up teams, that are
dedicated to blockchain application and research, application of the internet of things, IT and data analytics in order to achieve
its business goals.
An internet of things is defined as:
the internetworking of physical devices, vehicles (also referred to as “connected devices” and “smart devices”),
buildings, and other items embedded with electronics, software, sensors, actuators, and network connectivity that enable these
objects to collect and exchange data. The IoT allows objects to be sensed and/or controlled remotely across existing network infrastructure,
creating opportunities for more direct integration of the physical world into computer-based systems, and resulting in improved
efficiency, accuracy and economic benefit. Blockchain, originally block chain, is defined as
:
a distributed database that
maintains a continuously-growing list of ordered records called
blocks
. Each block contains a timestamp and a link to a
previous block. By design, blockchains are resistant to modification of the data - once recorded, the data in a block cannot be
altered retroactively. The Company plans to develop and specialize in the design, development, promotion and sales of blockchain
technology and internet of things.
Blockchain technology-based applications
Management plans to focus its business
in the integrated wellness industry, which providing procedures for safety and effectiveness in food and drugs, but also preventing
counterfeit or fake food and drugs. With the advancement of the blockchain technology, we can trace a food or drug product all
the way up to its original source within the context of the internet of things.
We are in the early stages of blockchain
technology, which can store decentralized and distributed software ledger with complete transaction history. Blockchain technology
has a wide range of potential applications, in addition to financial, real estate, back office systems and stock trading applications.
Blockchain is a distributed ledger agreement that allows projects or transactions to be transparently registered and is first
developed for use in a variety of industries to offer a wide range of services including banking, stock trading, real estate and
even global diamond sales. More and more financial giants join blockchain technology applications and research and development,
including IBM, Microsoft, Intel, Blockstream and Thompson Reuters, to further accelerate blockchain technology as a maturity and
development system. Management believes the investments in the field of blockchain are growing. Due to maturity and safety of
blockchain technology, it can play a role in many fields, and management believes its application field and development potential
offer a growth opportunity for the Company.
The five features of blockchain include:
de-centralization, openness, autonomy, non-tampering and anonymity. These features make blockchain an advantage in science and
finance. Blockchain technology is a decentralized, distributed ledger that allows each transaction to be recorded and verified
by network, which means that they do not need a central regulator such as a bank or financial institution. Transactions are also
anonymous and theoretically real-time, although recent network over-saturation has led to this problem. The block-based distributed
accounting technology, combined with its artificial intelligence and internet of things technologies, makes it possible for billions
of smart technologies to connect to internet for greater security, allowing virtual time travel and allowing regulators to return
to the point at which the problem occurred. One of potential application of this technology is the creation of registers based
on blockchain of IoT devices, and the use of artificial intelligence programs to perform automated intelligent diagnostics and
more advanced functions, which can ultimately lead engineers and regulators to virtualize clock backwards. At the same time, blockchain
technology can reduce audit costs; reduce distrust of central node, so that flow of financial assets is more transparent and convenient.
In fact, current blockchain technology is indeed application of digital electronic payments to “blockchain +” transition
extension from financial sector gradually to IoT and other non-financial areas which will trigger more and greater industrial
restructuring and revolution. It is our time to enter real power blockchain technology.
The central concept and future development
of blockchain are trends of things fit, leading gradual self-government of things. Blockchain technology is a good solution: infrastructure
investment, high maintenance costs and data security issues. Blockchain technology support IoT which is an extension and more
advanced stage of internet. Blockchain technology research and application will make IoT networking shine. Blockchain’s
point-to-point communication platform gives a subtle solution. Blockchain technology creates a shared, distributed, digital book
between network nodes to record transactions, rather than storing them on a central server. Thus, eliminate the need for central
verification. It provides a way to create a consensus network without having trust a single node, and data store does not need
to be stored in a central server, but by sharing it to all nodes in the network.
Internet of Things (IoT) is about creating
digital representations of real-world objects. It is a phenomenon that draws on rapid developments within IT, ICT and telecommunications
to spark insights and to help companies create entirely new types of services and business areas. Management believes that the
Internet of Things will be the next technology to promote the rapid development of the world’s important productive forces.
Health Care Business Focus
Management believes that the global
IoT in healthcare market is growing at a significant growth rate, due to increasing demand for advanced healthcare information
system, and growing prevalence of chronic and lifestyle associated diseases.
The IoT applications in healthcare,
such as telemedicine, medication management, clinical operations and workflow management, inpatient monitoring, helps in compiling
services related to diagnosis, treatment, care, and rehabilitation. They improve communication between patients and healthcare
providers, in order to reduce medication errors, and provide better coordinated care.
Blockchain technology supports IoT
which is an extension and more advanced stage of internet. Blockchain’s point-to-point communication platform problem, gives
a subtle solution. Blockchain technology creates a shared, distributed, digital book between network nodes to record transactions,
rather than storing them on a central server. Thus eliminating need for central verification. It provides a way to create a consensus
network without having to trust a single node, and data store does not need to be stored in a central server, but by sharing it
to all nodes in network. Blockchain technology can also help solve medical field of data privacy and other issues, such as custody
of electronic medical records, safe storage of genetic data, drug security and so on.
The Market Opportunity
The Company is in the early stages
of blockchain technology, which can store decentralized and distributed software ledger with complete transaction history. Blockchain
technology has a wide range of potential applications, in addition to financial, real estate, and back office systems. Blockchain
can be utlized as a distributed ledger agreement that allows projects or transactions to be transparently registered and can be
used in a variety of industries to offer a wide range of services including banking, stock trading, real estate and even global
diamond sales.
Blockchain technology can play a role
in many fields. Blockchain transactions are theoretically real-time. The block-based distributed accounting technology, combined
with its artificial intelligence and internet of things technologies, makes it possible for countless of smart technologies to
connect to internet for greater security, allowing technicians to return to the point at which the problem occurred. One of potential
applications of this technology is the creation of registers based on blockchain of IoT devices, and the use of artificial intelligence
programs to perform automated intelligent diagnostics and more advanced functions, which can ultimately lead engineers and technicians
to virtualize clock backwards. At the same time, blockchain technology can reduce audit costs; reduce distrust of central node,
so that flow of financial assets is more transparent and convenient. In fact, current blockchain technology is indeed application
of digital electronic payments to “block chain +” transition extension from financial sector gradually to IoT and
other non-financial areas which will trigger more and greater industrial restructuring and revolution.
The internet of things is based on
computer science, including network, electronics, radio frequency, induction, wireless, artificial intelligence, bar code, cloud
computing, automation, embedded technology as an integrated technology. Internet of things is called the third wave of the world
information industry revolution, after computer revolution, and the second internet revolution. Management believes that within
10 years, internet of things will be widely used in intelligent medicine, intelligent transportation, environmental protection,
government work, public safety, safety home, intelligent home appliance, industrial monitoring, elderly care, personal health,
intelligent building, green agriculture and breeding, surveillance, imaging, computers, mobile phones and other fields.
Blockchain technology is a good solution
for: infrastructure investment, high maintenance costs and data security issues. Blockchain technology supports IoT which is an
extension and more advanced stage of internet. Blockchain technology research and application will make IoT networking more efficient.
Blockchain technology creates a shared, distributed, digital book between network nodes to record transactions, rather than storing
them on a central server. This eliminates the need for central verification. It provides a way to create a consensus network without
having to trust a single node, and data store does not need to be stored in a central server, but by sharing it to all nodes in
network. Blockchain technology can also solve medical field of data privacy and other issues, such as custody of electronic medical
records, safe storage of genetic data, and drug security.
Our Strategy
Our strategy is to make UBI the premier
online investment and communication platform in key markets in China, and later on we may expand into Europe and North America.
To achieve this goal, we intend to do the following:
• Introducing innovative products
We plan to develop commercially applicable
blockchain based payment and other functions, such as product tracking. We aim at satisfaction of user experience, covering the
consumption after sales.
• Create brand awareness
and drive sales of our products and services in key markets
We intend to target our marketing efforts
to create global awareness of our brand and drive sales of our products and services in the key markets of China.
• Employ professional investment
professionals, academics, university professors and communication professionals
We plan to employ investment professionals,
academics, university professors and communication professionals from around the world to develop technologies applications to
human beings.
• Coordinate with strategic
partners in each of the target markets for marketing and distribution
We believe that international markets
represent a significant growth opportunity for us and we intend to expand sales of our products and services globally through
selected retailers and strategic partnerships. We plan to work with key partners in the target markets to provide marketing and
distribution expertise and assistance. Although it may be challenging to gain market acceptance in these markets, we believe the
assistance of such experts will expedite the process.
Competitive Strengths
We believe that the following strengths
position us to build our business model:
1. Building a Creative Commercial
Platform through Independent Design and Development
We plan to make an integrated platform
that incorporates the blockchain technology, internet of things, and a stock market. This platform when once built, will support
blockchain based payment, the convenience of internet of things, with the speed, safety, and convenience not yet experienced.
We plan to establish a brand name of “Global UBI” for our products.
2. We Believe We Have Good Relations
in China’s Healthcare Industry
In China, we believe that our management
has good relations in the field of integrated health industry for scientific research and development, raw material production
base and other industrial chains. Our management is also familiar with the international pharmaceutical market and the food market.
We believe that technology is the top productive force. The effective combination of blockchain technology and Internet of Things
technology which exclude all possible human factors, its centralization, transparency and chain cannot be tampered with, traceability,
etc. can solve the drug and food safety issues.
Target Market
At present, fake drugs are common in
China, as there exists little regulation of production, and no guaranteed efficacy of traditional Chinese medicine. There has
been an excessive use of antibiotics, poison capsules incidents, vaccine cases ginkgo leaf, licorice tablets and other major drug
cases, seriously affecting people’s physical and mental health. Therefore, food and drug safety is related to the vital
interests of millions of people in China.
Sources of Income and Pricing
We plan to use application of information
technology (IT), blockchain technology and IoT technology that permeate virtually all aspects of corporate and social activity,
effective combination of food and drugs safety and management of labor relations. The products and services enabled by it have
had a major impact to the healthcare industry. As we look to the future, emerging technologies raise new trend in security, law
enforcement, privacy, safety in food and drug of healthcare industry.
Sales and Marketing
The Company plans to place an emphasis
on social media for the marketing and advancement of blockchain, internet of things, and technological innovation platform as
well as the traditional health application, food and drug production process chain for more transparent transactions. The Company
plans to implement original sources of procurement advantages, and preferred overseas products. For the domestic high-end consumers,
we provide more efficient, convenient and affordable imports of quality goods.
Management believes Chinese consumers
are more likely to consider buying a product if they see it mentioned on a social-media site and more likely to purchase a product
or service if a friend or acquaintance recommends it on a social-media site.
Chinese consumers rely heavily upon
peer-to-peer recommendations over general mass advertising. In general, the Chinese populace is skeptical of information from
news sources and advertising and rely more on word-of-mouth from friends, family, and key opinion leaders, many of whom share
information on social media.
While messaging and sharing photos
is as popular in China as in other regions, one aspect of usage in the country stands out: social media has a greater influence
on purchasing decisions for consumers in China than for those anywhere else in the world. Due to the widespread use of social
media in China, the Company will focus its marketing efforts on this medium. The Company will be present with its own social media
site on the largest Chinese social media platforms. Sale of products and services will take place on the portal. With regards
to North America and European Market, we anticipate employing a similar strategy. Our most important profit and revenue will come
from our development of drugs, food safety software, and system platform technology to promote sales and transfer technology.
These software technologies and platform technologies will be widely used in health industry businesses and regulatory agencies.
Manufacturing
The Company does not at this time engage
in any manufacturing but may engage in manufacturing of products to be sold on the Company’s website in the future.
Government Regulation
We are or may become subject to a variety
of laws and regulations in the United States and abroad that involve matters central to our business, including laws and regulations
regarding privacy, data protection, data security, data retention, consumer protection, advertising, electronic commerce, intellectual
property, manufacturing, anti-bribery and anti-corruption, and economic or other trade prohibitions or sanctions. These laws and
regulations are continuously evolving and developing. The scope and interpretation of the laws that are or may be applicable to
us are often uncertain and may be conflicting, particularly with respect to foreign laws.
In particular, there are numerous U.S.
federal, state, and local laws and regulations and foreign laws and regulations regarding privacy and the collection, sharing,
use, processing, disclosure, and protection of personal information and other user data, the scope of which is changing, subject
to differing interpretations, and may be inconsistent among different jurisdictions. We strive to comply with all applicable laws,
policies, legal obligations, and industry codes of conduct relating to privacy, data security, and data protection. However, given
that the scope, interpretation, and application of these laws and regulations are often uncertain and may be conflicting, it is
possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another
and may conflict with other rules or our practices. Any failure or perceived failure to comply with our privacy or security policies
or privacy-related legal obligations by us or third-party service-providers or the failure or perceived failure by third-party
apps, with which our users choose to share their data, to comply with their privacy policies or privacy-related legal obligations
as they relate to the data shared with them, or any compromise of security that results in the unauthorized release or transfer
of personally identifiable information or other user data, may result in governmental enforcement actions, litigation, or negative
publicity, and could have an adverse effect on our brand and operating results.
We plan to develop solutions to ensure
that data transfers from the E.U. provide adequate protections to comply with the E.U. Data Protection Directive. If we fail to
develop such alternative data transfer solutions, one or more national data protection authorities in the European Union could
bring enforcement actions seeking to prohibit or suspend our data transfers to the U.S. and we could also face additional legal
liability, fines, negative publicity, and resulting loss of business.
Governments are continuing to focus
on privacy and data security and it is possible that new privacy or data security laws will be passed or existing laws will be
amended in a way that is material to our business. Any significant change to applicable laws, regulations, or industry practices
regarding our users’ data could require us to modify our services and features, possibly in a material manner, and may limit
our ability to develop new products, services, and features. Although we have made efforts to design our policies, procedures,
and systems to comply with the current requirements of applicable state, federal, and foreign laws, changes to applicable laws
and regulations in this area could subject us to additional regulation and oversight, any of which could significantly increase
our operating costs.
The labeling, distribution, importation,
marketing, and sale of our products are subject to extensive regulation by various U.S. state and federal and foreign agencies,
including the CPSC, Federal Trade Commission, Food and Drug Administration, or FDA, Federal Communications Commission, and state
attorneys general, as well as by various other federal, state, provincial, local, and international regulatory authorities in
the countries in which our products and services are distributed or sold. If we fail to comply with any of these regulations,
we could become subject to enforcement actions or the imposition of significant monetary fines, other penalties, or claims, which
could harm our operating results or our ability to conduct our business.
The global nature of our business operations
also create various domestic and foreign regulatory challenges and subject us to laws and regulations such as the U.S. Foreign
Corrupt Practices Act, or FCPA, the U.K. Bribery Act, and similar anti-bribery and anti-corruption laws in other jurisdictions,
and our products are also subject to U.S. export controls, including the U.S. Department of Commerce’s Export Administration
Regulations and various economic and trade sanctions regulations established by the Treasury Department’s Office of Foreign
Assets Controls. If we become liable under these laws or regulations, we may be forced to implement new measures to reduce our
exposure to this liability. This may require us to expend substantial resources or to discontinue certain products or services,
which would negatively affect our business, financial condition, and operating results. In addition, the increased attention focused
upon liability issues as a result of lawsuits, regulatory proceedings, and legislative proposals could harm our brand or otherwise
impact the growth of our business. Any costs incurred as a result of compliance or other liabilities under these laws or regulations
could harm our business and operating results.
Employees
We have 11 full-time employees. Within
our workforce, 4 employees are engaged in product development and 7 employees are engaged in business development, finance, human
resources, facilities, information technology and general management and administration. We expect the number of employees to
rise to more than 25 by the end of December, 2017. We have no collective bargaining agreements with our employees and we have
not experienced any work stoppages. We consider our relationship with our employees to be good.
Recent Event
On May 16, 2017, UBI executed an agreement
to acquire Shenzhen Nova E-commerce, Ltd., (“NOVA”) a private Shenzhen Chinese corporation. Under the terms of the
Agreement UBI is to acquire 100% ownership of Nova in exchange for 25,000,000 unregistered restricted Class C common shares by
UBI. The 130 owners of NOVA are to receive Class C common shares, based on their pro-rata ownership of NOVA, when the transferred
ownership of NOVA has been completed. Following the acquisition and the licensee name change to UBI, NOVA will be a 100% owned
subsidiary of the Company.
The owners of NOVA will exchange their shares
for Class C common shares of UBIA. Upon exchange, the NOVA shares are to be cancelled. In China, the exchange of shares requires
the cancellation of registered shares of NOVA with the Chinese authorities. This process can take a few weeks to a couple of months
to complete. The acquisition officially takes place when the governmental cancellation of the NOVA shares is effective. Management
expects government approval by the end of July, 2017.
About Shenzhen Nova E-commerce, Ltd
Shenzhen Nova E-commerce Ltd. (“NOVA”)
was incorporated on May 26, 2016 and currently operates an online store in China selling a wide range of products including maternal
and infant products, cosmetics, wine, household goods, digital and luxury products. Nova’s website became operational in
April, 2017.
NOVA
is
registered in Qianhai Free Trade Zone, China. Its business operation is an e-commerce platform offering online retail service,
via OYA Mall. From its inception on May 26, 2016 through April, 2017, NOVA has been building its website and infrastructure.
Nova
has commenced its operation in April 2017.
NOVA’s
Chinese language website is: www.oyamall.com. The website
is operational, where customers
can buy products, including food, non-prescription medicine, skin care products etc. offered on the website. For the purpose of
this filing, the website is not part of this filing, but referenced for informational purposes.
Results of
Operations
Revenues
During the nine month period ended
May 31, 2017, the Company had no revenues.
Expenses
For the three months ended May 31,
2017, the Company had total operating expenses of $668,669 as compared to $10,573 in 2016. The 2017 operating expenses consisted
of salaries of $190,701, consulting fees of $409,167, legal and professional fees of $53,652 and other general and administrative
expenses of $15,149. For the nine months ended May 31, 2017, the Company had total operating expenses of $1,170,660 as compared
to $35,854 in 2016. The 2017 operating expenses consisted of salaries of $370,270, consulting fees of $665,834, legal and professional
fees of $93,168 and other general and administrative expenses of $41,388.
Net Loss
For the three months ended May 31,
2017, the Company had a net loss of $(668,669) or $(0.01) per share of Class A and Class C common stock and compared to a loss
of $(10,573) or $(0.05) per share of Class A and Class C common stock for the same period last year.
For the nine months ended May 31, 2017,
the Company had a net loss of $(1,123,085) or $(0.03) per share of Class A and Class C common stock and compared to a loss of
$(35,854) or $(0.17) per share of Class A and Class C common stock for the same period last year.
Going Concern
The financial statements included with
this quarterly report 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.
As of May 31, 2017, the Company has accumulated losses of approximately $5,677,344 since inception. The Company’s 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. Amounts raised will be used to further development of the Company’s services, to provide financing for marketing
and promotion and for other working capital purposes. While the Company is putting forth its best efforts to achieve the above
plans, there is no assurance that any such activity will generate funds that will be available for operations.
These conditions raise substantial
doubt about the Company’s ability to continue as a going concern. Our financial statements do not include any adjustments
that might arise from this uncertainty.
Liquidity and Capital Resources
As of May 31, 2017 the Company has
total assets of $2,407,378 consisting of office equipment of $6,045, prepaid stock-based compensation of $2,398,333 and prepaid
expenses of $3,000 and total liabilities of $353,300.
The Company has limited financial resources
available, which has had an adverse impact on the Company’s liquidity, activities and operations. These limitations have
adversely affected the Company’s ability to obtain certain projects and pursue additional business. Without realization
of additional capital, it would be unlikely for the Company to continue as a going concern. In order for the Company to remain
a Going Concern it will need to find additional capital. Additional working capital may be sought through additional debt or equity
private placements, additional notes payable to banks or related parties (officers, directors or stockholders), or from other
available funding sources at market rates of interest, or a combination of these. The ability to raise necessary financing will
depend on many factors, including the nature and prospects of any business to be acquired and the economic and market conditions
prevailing at the time financing is sought. No assurances can be given that any necessary financing can be obtained on terms favorable
to the Company, or at all.
Off-Balance Sheet Arrangements
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 or operations, liquidity, capital expenditures or capital resources that is material
to investors.
Critical Accounting Policies and
Estimates
Revenue Recognition: We recognize revenue
from services and product sales once all of 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 reasonable assured.
New Accounting Standards
Management has evaluated recently issued
accounting pronouncements through May 31, 2017 and concluded that they will not have a material effect on future financial statements.