Quarterly Report (10-q)

Date : 04/21/2017 @ 2:05PM
Source : Edgar (US Regulatory)
Stock : Ubi Blockchain Internet Ltd. (QB) (UBIA)
Quote : 4.705  0.255 (5.73%) @ 3:55PM

Quarterly Report (10-q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

(Mark one)
   
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended February 28, 2017

OR

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

For the transition period from _________________ to

 
Commission File Number : 0-54236
 

UBI Blockchain Internet Ltd.

( Exact name of registrant as specified in its charter )

 

Nevada   27-3349143
(State or Other Jurisdiction   (I.R.S. Employer
of Incorporation or Organization)   Identification No.)

 

Unit 03, Level 9, Core F, Smart Space,

Block 3, 100 Cyberport Rd.,

Hong Kong, People's Republic of China

   
(Address of principal executive offices)   (Zip Code)

 

(212) 372-8836

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [ ] Not Applicable

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer [  ] Accelerated filer [  ] Non-accelerated filer [  ] Smaller reporting company [X]

 

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

 

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section S 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [ ] No [X]

 

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of April 21, 2017, there were 30,217,046 Series A shares of common stock, par value $0.001; 6,000,000 Series B shares of common stock, par value $0.001, and 48.400,000 Series C shares of common stock, par value $0.001 of the registrant issued and outstanding.

 
 

 

Table of Contents

UBI Blockchain Internet Ltd.

Index to Form 10-Q

For the Quarterly Period Ended February 28, 2017

 

 

PART I - FINANCIAL INFORMATION 3
Item I. Financial Statements 3

Balance Sheets as of February 28, 2017 (Unaudited) and August 31, 2016

Statements of Operations for the Three Months and Six Months Ended February 28, 2017 and February 29, 2016 (Unaudited)

4
      Statements of Cash Flows for the Six Months Ended February 28, 2017 and February 29, 2016 (Unaudited) 5
      Notes to the Unaudited Financial Statements (Unaudited) 6
Item 2. - Management's Discussion and Analysis of Financial Condition and Results of Operations 13
      Results of Operations 21
Item 3. Quantitative and Qualitative Disclosures about Market Risk 23
Item 4T. Controls and Procedures 23
PART II. OTHER INFORMATION 27
Item 1 -- Legal Proceedings 27
Item 1A - Risk Factors 27
Item 2 -- Unregistered Sales of Equity Securities and Use of Proceeds 27
Item 3 -- Defaults Upon Senior Securities 27
Item 4 -- Submission of Matters to a Vote of Security Holders 27
Item 5 -- Other Information 27
Item 6 – Exhibits 28
SIGNATURES 29

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 
 

PART I - FINANCIAL INFORMATION

 

UBI Blockchain Internet Ltd.
(Formerly JA Energy)
Balance Sheets
               
         February 28,     August 31,
                             2017     2016
        (Unaudited)      
  ASSETS            
  Current Assets            
  Prepaid expenses    $                      6,000    $                            -  
  Total current assets     6,000     -
               
  Office Equipment, net of accumulated depreciation     6,363     -
  Total assets    $                    12,363    $                            -  
               
  LIABILITIES AND STOCKHOLDERS' DEFICIT            
               
  Current liabilities            
  Accounts payable and accrued liabilities    $                    20,131    $                     68,419
  Advances from former related party                                -                           26,981
  Due to related parties                      149,485                                -  
  Accrued stock-based compensation                      280,000                                -  
  Bank overdraft                                -                             1,202
  Note payable - former related party                                -                           50,000
  Total current liabilities                      449,616                       146,602
               
  Total liabilities                      449,616                       146,602
               
  Stockholders' deficit            
 

Preferred stock, $0.001 par value, 5,000,000 shares

authorized, 0 and 1,000,000 shares issued

and outstanding as of' February 28, 2017

and August 31, 2016, respectively

          1,000
 

Class A common stock, $0.001 par value, 

130,000,000 shares authorized, 30,217,046 and

217,046 shares issued and outstanding as of

February 28, 2017 and August 31, 2016, respectively

    30,217     217
 

Class B Common stock, $0.001 par value, 

6,000,000 shares authorized, 6,000,000 shares issued

and outstanding as of 'February 28, 2017

    6,000      
 

Class C Common stock, $0.001 par value, 

64,000,000 shares authorized, -0- shares issued

and outstanding as of February 28, 2017

    -      
  Additional paid-in capital                   4,444,684                    4,315,919
  Stock subscription payable                        90,521                         90,521
  Accumulated deficit                  (5,008,675)                  (4,554,259)
  Total stockholders' deficit                     (437,253)                     (146,602)
  Total liabilities and stockholders' deficit   $                    12,363    $                            -  
               
The accompanying notes are an integral part of these financial statements.

 

3

 
 

 

UBI Blockchain Internet Ltd.
(Formerly JA Energy)
Statements of Operations
(Unaudited)
                       
       For the three months    For the three months      For the six months      For the six months
       ended     ended       ended       ended 
       February 28, 2017   29 Feb 2016      February 28, 2017     29 Feb 2016
  Operating expenses:                    
        Salaries (including stock - based compensation of $48,333, $0, $48,333 and $0 respectively)  $           179,569                      -      $           179,569    $                    -  
        Consulting fees (including stock - based compensation of $231,667, $0, $231,667 and $0 respectively)             231,667                      -                 256,667                        -  
        Legal & Professional fees                 8,147                     39,516                        -  
  Other general and administrative                 6,739               12,025                 26,239                 25,281
  Total operating expenses             426,122               12,025               501,991                 25,281
                       
  Other income (expenses):                    
  Gain on settlement of bank overdraft                          -                        572                        -  
  Gain on settlement of accounts payable and accrued liabilities               47,003                      -                   47,003                        -  
  Total other income (expenses)               47,003                      -                   47,575                        -  
                       
  Net income (loss)  $         (379,119)             (12,025)    $         (454,416)    $           (25,281)
                       
  Net loss per share of Class A common stock – basic and diluted  $          (0.01)            (0.06)    $               (0.02)    $               (0.12)
                       
  Weighted average number of Class A common                     
  shares outstanding - basic and diluted          30,217,046             217,046            24,250,195                 217,046
                       
The accompanying notes are an integral part of these financial statements.

4

                         
UBI Blockchain Internet Ltd.  
(Formerly JA Energy)  
Statements of Cash Flows  
(Unaudited)  
       
      For six months     For six months  
      ended     ended  
      February 28, 2017     February 29, 2016  
OPERATING ACTIVITIES              
Net income (loss)    $                 (454,416)    $                     (25,281)  

Adjustments to reconcile net income

(loss) to net cash used by operating

activities

             
    Stock-based compensation                       280,000                                     -  

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                         (6,000)                           (3,000)  
   Bank overdraft                            (630)                                     -  

Accounts payable and accrued

liabilities

                        (1,285)                           16,031  
Net cash used by operating activities                     (229,906)                         (12,250)  
               
INVESTING ACTIVITIES              
   Purchase of office equipment     (6,363)     -  
Net cash used by investing activities     (6,363)        
               
FINANCING ACTIVITIES              
Due to related parties                       149,485                           -  

Advances from former related

party

                      (26,981)     12,250  

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                       229,906                           12,250  
               
NET CHANGE IN CASH                                  -                                     -  
               
CASH AND CASH EQUIVALENTS -               
BEGINNING OF PERIOD                                  -                                     -  
END OF PERIOD    $                            -      $                                 -  
                                         

The accompanying notes are an integral part of these financial statements.

5

 
 


UBI Blockchain Internet Ltd.

(Formerly JA Energy)

Notes to Financial Statements

Three and Six Months Ended February 28, 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 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:

 

· 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.

 

6

 

 

 
 

· 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 (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 Hong Kong”), 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 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, 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 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.

 

 

 

 

7

 
 

 

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 $5,008,674. 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.

 

Earnings per Share.

The basic earnings (loss) per share of Class A common stock is calculated by dividing the Company's net income (loss) available to Class A common shareholders by the weighted average number of Class A common shares issued and outstanding during the year. The diluted earnings (loss) per share is of Class A common stock calculated by dividing the Company's net income (loss) available to Class A common shareholders by the diluted weighted average number of Class A shares outstanding during the year. The diluted weighted average number of Class A shares outstanding is the basic weighted number of Class A 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.

 

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 expenses as incurred.

 

 

8

 
 

 

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 six months ended February 28, 2017 and February 29, 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 ACS 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 February 28, 2017 and concluded that they will not have a material effect on future financial statements.

 

 

 

9

 
 

 

 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 February 28, 2017 and August 31, 2015, accounts payable and accrued liabilities include liabilities that are the responsibility of Peak totaling $20,131 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.

 

Starting in December 2016, the Company engaged the services of a total of 44 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). At February 28, 2017, we have accrued stock-based compensation expense totaling $280,000 for these issuances based on an estimated fair value of $1,680,000 for 8,400,000 shares using $0.20 per share and a 2 month (of 12 month) expense recognition. The remaining expense of $1,400,000 will be amortized evenly over the 10 months ending December 31, 2017.

 

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 six months ended February 28, 2017, 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.

 

10

 
 

 

Commencing in the three months ended February 28, 2017, the Company has been using office space provided by UBI Blockchain Internet, LTD. (Hong Kong) ("UBI Hong Kong") at no cost to the Company. UBI Hong Kong owns 30,000,000 shares of the Company's Class A common stock.

 

In the three months ended February 28, 2017, Tony Liu, chief executive officer of the Company, and UBI Hong Kong paid a total of $149,485 of expenditures on behalf of the Company. The amount due to these related parties for these expenditures is $149,485 at February 28, 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 February 28, 2017, the Company had net operating loss carry forwards of approximately $1,196,161 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.

 

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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 (see Note 4) 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 – SUBEQUENT EVENTS

 

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 Note 1).

 

On April 3, 2017, the Company issued a total of 8.400,000 shares of Class C common stock to a total of 44 contractor employees and nonemployees (see Note 5).

 

On April 12, 2017, the Board of Directors of the Company approved the increase of 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). This action is planned to occur in May 2017.

 

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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 December 9, 2016, the 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.

 

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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.

 

 

 

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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.

 

 

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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.

 

 

 

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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.

 

 

 

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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.

 

 

 

 

 

 

 

 

 

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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.

 

 

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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.

 

 

 

 

 

 

 

 

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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.

 

 

Results of Operations

 

Revenues

 

During the six month period ended February 28, 2017, the Company had no revenues.

 

Expenses

 

For the three months ended February 28, 2017, the Company had total operating expenses of $426,122 as compared to $12,025 in 2016. The 2017 operating expenses consisted of salaries of $179,569, consulting fees of $231,667, legal and professional fees of $8,147 and other general and administrative expenses of $6,739. For the six months ended February 28, 2017, the Company had total operating expenses of $501,991 as compared to $25,281 in 2016. The 2017 operating expenses consisted of salaries of $179,569, consulting fees of $256,667, legal and professional fees of $39,516 and other general and administrative expenses of $26,239.

 

For the three months ended February 28, 2017, the Company had a net loss of $(379,119) or $(0.01) per share of Class A common stock and compared to a loss of $(12,025) or $(0.06) per share of Class A common stock for the same period last year.

 

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Net Loss

 

For the six months ended February 28, 2017, the Company had a net loss of $( 454,416 ) or $(0.02) per share of Class A common stock and compared to a loss of $( 25,281 ) or $(0.12) per share of Class A 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 business. As of February 28, 2017, the Company has accumulated operating losses of approximately $ 5,008,675 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 February 28, 2017 the Company has total assets of $12,363 consisting of office equipment of $6,363 and prepaid expenses of $6,000 and total liabilities of $449,616. The negative working capital at February 28, 2017 is $443,616.

 

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. Currently, the Company has ceased most operations with the exception of certain aspects of its product development and protecting its intellectual property.

 

 

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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 February 28, 2017 and concluded that they will not have a material effect on future financial statements.

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

 

Not required for smaller reporting companies.

 

 

Item 4T. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Our disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in rules and forms adopted by the SEC, and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.

 

 

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Management, with the participation of the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, our disclosure controls and procedures were not effective. Our disclosure controls and procedures were not effective because of the "material weaknesses" described below under "Management's report on internal control over financial reporting," which are in the process of being remediated as described below under "Management Plan to Remediate Material Weaknesses."

 

Management's Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting, as defined in rules promulgated under the Exchange Act, is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and affected by our Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that:

 

· pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

 

· provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our Board of Directors; and

 

· provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

 

Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable, not absolute, assurance that the objectives of the control system are met and may not prevent or detect misstatements. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process, and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Further, over time control may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate.

 

 

 

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Our management assessed the effectiveness of our internal control over financial reporting as of February 28, 2017. In making its assessment, management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on its assessment, management has concluded that we had certain control deficiencies described below that constituted material weaknesses in our internal controls over financial reporting. As a result, our internal control over financial reporting was not effective as of February 28, 2017.

 

A "material weakness" is defined under SEC rules as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company's annual or interim financial statements will not be prevented or detected on a timely basis by the company's internal controls. As a result of management's review of the investigation issues and results, and other internal reviews and evaluations that were completed after the end of quarter related to the preparation of management's report on internal controls over financial reporting required for this quarterly report on Form 10-Q, management concluded that we had material weaknesses in our control environment and financial reporting process consisting of the following:

 

1)   lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; and

 

2)   insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements.

 

We do not believe the material weaknesses described above caused any meaningful or significant misreporting of our financial condition and results of operations for the quarter ended February 28, 2017. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

 

Management Plan to Remediate Material Weaknesses

 

Management is pursuing the implementation of corrective measures to address the material weaknesses described below. In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures:

 

We will create a position to segregate duties consistent with control objectives and will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to us. We plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management when funds are available to us.

 

 

 

25

 
 

  

We believe the remediation measures described above will remediate the material weaknesses we have identified and strengthen our internal control over financial reporting. We are committed to continuing to improve our internal control processes and will continue to diligently and vigorously review our financial reporting controls and procedures. As we continue to evaluate and work to improve our internal control over financial reporting, we may determine to take additional measures to address control deficiencies or determine to modify, or in appropriate circumstances not to complete, certain of the remediation measures described above.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

26

 

   

 
 

PART II. OTHER INFORMATION

 

Item 1 -- Legal Proceedings

 

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

 

We are not presently a party to any material litigation, nor to the knowledge of management is any litigation threatened against us, which may materially affect us.

 

Item 1A - Risk Factors

 

See Risk Factors set forth in Part I, Item 1A of the Company's Annual Report on 10-K for the fiscal year ended August 31, 2016 and the discussion in Item 2 of Part I above, under "Liquidity and Capital Resources." Additionally see Risk Factors set forth in the Form 10 Information disclosed in the Company's Amended Current Report in Form 8-K/A filed in the Commission on April 11, 2017.

 

Item 2 -- Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3 -- Defaults Upon Senior Securities

 

None.

 

 

Item 4 -- Submission of Matters to a Vote of Security Holders

 

None.

 

Item 5 -- Other Information

 

None.

 

 

 

 

 

 

 

 

 

 

 

27

 
 

 

Item 6 -- Exhibits

  

Exhibit Number   Ref   Description of Document
31.1       Certifications of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
         
31.2       Certifications of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
         
32.1       Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
         
32.2       Certification of Principal Financial Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
         

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

28

 

 
 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

UBI Blockchain Internet, Ltd.

Registrant

   
Date:  April 21, 2017        /s/  Tony Liu
 

Name: Tony Liu

Principal Executive Officer

   
Date:  April 21, 2017        /s/  Chan Cheung
 

Name: Chan Cheung

Principal Accounting Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

29

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