PART
I
Item
1.
|
Identity
of Directors, Senior Management and Advisers
|
Our
directors and senior management are:
LAW
Lok Bun
has served as President and a director of Dragon Jade International Limited since April
17, 2012 and as a Director of Alpha Ultimate Ltd. since inception on April 11, 2012.
LAI
Yat Man
has served as Chief Executive Officer and a Director of Dragon Jade International Limited
since September 1, 2012 and as a director of United Asia Medical Network Co. Ltd. since inception on May 6, 1998.
FUNG
Kwok Wing
has served as Chief Financial Officer and a Director of Dragon Jade International
Limited since September 1, 2012
and
as a director of United Asia Medical Network Co. Ltd. since inception on July 27, 2016.
LO
Tsz Fung Philip
has served as Independent Non-executive Director of Dragon Jade International
Limited since September 1, 2012.
TAI
Kam Chiu Daniel
(formerly known as TAI Tze Yu Daniel) has served as Independent Non-executive
Director and a director of Dragon Jade International Limited since September 1, 2012.
LAM
Dominic Man Kit
has served as Independent Non-executive Director of Dragon Jade International
Limited since February 1, 2019.
David
P BENNETT
has served as Independent Non-executive Director of Dragon Jade International Limited
since February 1, 2019.
KWONG
Suk Kwan
has served as Independent Non-executive Director of Dragon Jade International Limited
since February 1, 2019.
Marc-Andre
TREMBLAY
has served as Independent Non-executive Director of Dragon Jade International Limited
since February 1, 2019.
NGAI
Wing Mui Phoenix
has served as Secretary of Dragon Jade International Limited since June 22,
2012.
The
business address of all our directors and senior management is Unit 2, 23/F, New World Tower I, 18 Queens Road Central, Hong Kong
SAR, China.
Our
principal bankers are:
The
Hong Kong and Shanghai Banking Corporation Ltd., 1 Queen’s Road Central, Central, Hong Kong
The
Company’s independent registered public accounting firm is Centurion ZD CPA & Co. (“Centurion ZD”), Unit
1304, 13th Floor, Two Harbourfront, 22 Tak Fung Street, Hunghom, Hong Kong.
Our
securities counsel is Ortoli Rosenstadt LLP, 366 Madison Avenue, 3
rd
Floor, New York, NY 10022.
Our
legal advisor is K&L Gates, 44th Floor, Edinburgh Tower, The Landmark, 15 Queen’s Road Central, Hong Kong.
Item
2.
|
Offer
Statistics and Expected Timetable
|
Not
applicable.
A.
|
Selected
financial data
:
|
Dragon Jade International Limited (the “Company”) was
incorporated on April 14, 2008 in the British Virgin Islands. The principal activity
of the Company is investment holding.
In
April 2012, the Company chartered a subsidiary, Alpha Ultimate Limited, under the laws of the Special Administrative Region of
Hong Kong, which operates in the health supplement industry.
On
August 31, 2012, the Company entered into a stock exchange agreement with United Century Holdings Limited, a privately held corporation.
On September 1 2012, the Company consummated the transaction contemplated by that stock exchange agreement. All of the capital
stock of United Century Holdings Limited was exchanged for an aggregate of 20,003,319 shares of the Company’s common stock.
The Company became a 100% holding company of United Century Holdings Limited.
United
Century Holdings Limited (“UCHL”) was incorporated on March 2, 2012 under the British Virgin Islands Business Companies
Act, 2004 with limited liabilities. UCHL was established as a special purpose holding company whose objective is to become a holding
company to consummate an acquisition, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses located in Hong Kong. On July 10, 2012, UCHL executed an acquisition of 7,879,500 out
of 8,000,000 ordinary shares, par value $0.1282 (HK$1) per share, of the United Asia Medical Network Company Limited (“UAM”)
and became a 98.49% holding company of UAM.
UAM
was incorporated on May 6, 1998, as a limited liability company under predecessor Hong Kong Companies Ordinance, Chapter 32. Its
principal business is the marketing and sale of health supplement products and the providing of related medical and health consultancy
services.
On
December 31, 2018, the Company executed an acquisition of 100% issued and outstanding ordinary shares of Montrose Food & Wine
H.K. Limited (“Montrose HK”) in consideration of $256,410.26 and 100,000 shares of the Company’s common stock.
Montrose HK was incorporated on June 30, 1989, as a limited liability company under predecessor Hong Kong Companies Ordinance,
Chapter 32. Montrose HK’s business primarily focuses on importing and distribution of fine wine within Hong Kong and Macau
SAR.
The
following table presents selected financial data for the fiscal year ended March 31, 2019, for the Company:
|
|
For the Years Ended March 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Revenue
|
|
$
|
923,158
|
|
|
$
|
121,618
|
|
|
$
|
224,920
|
|
|
$
|
336,906
|
|
|
$
|
86,086
|
|
Cost of revenue
|
|
|
(401,785
|
)
|
|
|
(17,113
|
)
|
|
|
(50,155
|
)
|
|
|
(95,103
|
)
|
|
|
(32,186
|
)
|
Loss from operations
|
|
|
(5,263,043
|
)
|
|
|
(6,013,120
|
)
|
|
|
(2,251,716
|
)
|
|
|
(472,153
|
)
|
|
|
(465,361
|
)
|
Net gain/(loss)
|
|
|
(5,468,758
|
)
|
|
|
(5,969,001
|
)
|
|
|
(1,980,785
|
)
|
|
|
292,647
|
|
|
|
(1,842,912
|
)
|
Net gain/(loss) per share
|
|
|
(0.096
|
)
|
|
|
(0.105
|
)
|
|
|
(0.038
|
)
|
|
|
0.006
|
|
|
|
(0.036
|
)
|
|
|
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Total assets
|
|
$
|
2,740,892
|
|
|
$
|
6,677,434
|
|
|
$
|
12,526,391
|
|
|
|
290,595
|
|
|
$
|
56,278
|
|
Net assets/(liabilities)
|
|
|
1,402,167
|
|
|
|
6,522,399
|
|
|
|
12,143,593
|
|
|
|
(1,946,715
|
)
|
|
|
(2,234,599
|
)
|
Common stock
|
|
|
17,543,961
|
|
|
|
17,543,961
|
|
|
|
17,183,961
|
|
|
|
1,103,961
|
|
|
|
1,103,961
|
|
Dividend declared
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Currency
Exchange Rates.
All dollar amounts in this Form 20-F are in United States dollars.
B.
|
Capitalization
and indebtedness:
|
The
Company is authorized to issue 100,000,000 shares of common stock, no par value. As of March 31, 2019, there were 57,023,319 issued
and outstanding shares of common stock.
On
December 31, 2012, the Company entered into definitive agreements relating to a private placement of $300,000 in principal amount
of Convertible Notes due on December 31, 2013, and warrants to the purchasers of such Convertible Notes giving such purchasers
the right to purchase up to an aggregate of 600,000 shares of our common stock at an exercise price of $0.50 per share. At March
31, 2016, the outstanding principal and accrued interest under those Convertible Notes was $300,000. On April 12, 2016, the Convertible
Note was fully converted into 600,000 shares of our common stock. The outstanding principal of $300,000 was converted into 600,000
shares of our common stock at an exercise price of $0.50 per share in a transaction exempt from the registration and prospectus
delivery requirements of the Securities Act of 1933.
On
April 1, 2013, the Company entered into definitive agreements relating to a private placement of $100,000 in principal amount
of Convertible Notes due on March 31, 2014, and warrants to the purchasers of such Convertible Notes giving such purchasers the
right to purchase up to an aggregate of 200,000 shares of our common stock at an exercise price of $0.50 per share. At March 31,
2016, the outstanding principal and accrued interest under those Convertible Notes was $100,000. On March 3, 2017, the Convertible
Note was fully repaid.
On
March 6, 2017, the Company issued 5,000,000 shares of its common stock to 2 persons at a consideration of $3 per share in transactions
exempt from the registration and prospectus delivery requirements of the Securities Act of 1933, which exemption is specified
by the provisions of Regulation S promulgated pursuant to the provisions of that act. None of the recipients of those shares is
a U.S. Person, as that term is defined by the provisions of Regulation S. Those shares were issued in off-shore transactions.
No directed selling efforts were made in the United States by the Company, any distributor, any of their respective affiliates
or any person acting on behalf of the foregoing.
C.
|
Reasons
for the offer and use of proceeds.
|
Not
applicable.
The following risk factors make the Company and our securities speculative and of high risk. Our business,
operating results and financial position may be adversely affected by these risk factors, some of which we can’t control.
Additional risk factors not presently known by us or that we presently consider immaterial also could adversely affect our business,
operating results and financial position, if any of them were to occur. In addition to these risk factors, shareholders and prospective
investors should read the forward-looking statements about our future performance and expected results set forth in this annual
report carefully before deciding to buy or sell our securities. See “Forward-Looking Statements,” below.
Risks
Related to Our Business
Our
business is affected by global, national and local economic conditions, as the products we sell are discretionary
. We depend
upon factors relating to discretionary consumer spending in the East Asia. These factors include economic conditions, consumers,
employment rates, the amounts of consumers’ disposable income, business conditions, interest rates, consumer debt, availability
of credit and applicable taxation in regional and local markets where we sell our products. There can be no assurance that consumer
spending for our products will not be adversely affected by changes in economic conditions.
Our
ability to establish effective marketing and advertising campaigns is the key to our success
. Our advertisements promote our
products and the pricing of such products. If we are unable to increase awareness of our brands and our products, we may not be
able to attract new customers. Our marketing activities may not be successful in promoting or pricing our products or retaining
and enlarging our customer base. We cannot assure you that our marketing programs will be adequate to support our future growth,
which may lead to material adverse effects on our results of operations.
Consumer
preferences in the health care industry change rapidly
and are difficult to predict. The success of our business depends on
our ability to anticipate accurately and respond to future changes in consumer demand, maintain the correct inventory, deliver
the appropriate products at the right prices and purchase at minimum costs. We must optimize our product selection and inventory
based on consumer preferences and sales trends. If we fail to anticipate, identify or react appropriately to changes in consumer
demand, we could experience excess inventories, higher than normal markdowns or inability to sell the products, which will reduce
our revenue, financial position and results of operations.
While
we must maintain sufficient inventory to operate our business successfully and meet our customers’ demands, we must be careful
to not overstock
. Changing consumer demands, manufacturer backorders and uncertainty surrounding new product launches expose
us to increasing inventory risks. Demand for products can change rapidly and unexpectedly, including the back order time and availability
for sale. We carry a wide variety of products and must maintain sufficient inventory amounts. We may be unable to sell certain
products, in the event that consumer demand changes. Our inventory holding costs will increase if we maintain excess inventory.
However, if we do not have sufficient inventory to fulfill customer orders, we may lose orders or customers, which may adversely
affect our business, financial condition and results of operations. We cannot assure you that we can accurately predict consumer
demand and events and avoid over- stocking or under-stocking products.
We
sell substantially all of our products by our distribution network, which is comprised of small distribution companies that are
located in Hong Kong
. Our ability to meet customer demand may be significantly limited, if we do not successfully operate
our distribution network and logistics facilities, as well as efficiently conduct our distribution activities, or if one or more
of our distribution companies or logistics facilities are destroyed or shut down for any reason, including as a result of a natural
disaster. Any disruption in the operation of our distribution network could result in higher costs or longer lead times associated
with distributing our products.
We
may not be successful in expanding a distribution network
. Although we intend to expand our distribution network including
additional cities and rural areas in East Asia in an effort to increase our geographic appearance. Our distribution, logistics
and products may encounter various competitions from similar or substitutive businesses. Therefore, the success of expansion will
depend upon many factors, including our ability to form relationships with, and manage an increasing number of, customers base
and optimize our distribution network. We must also be able to anticipate and respond effectively to competition. If we fail to
expand our distribution network in East Asia as planned or if we are unable to compete effectively, our business, financial condition
and results of operations may be materially and adversely affected.
All
of our products are shipped using third-party carriers.
If a strike or other event prevents or disrupts these carriers from
transporting our products, other carriers may
be unavailable or may not have the capacity to deliver our products. If adequate
third-party sources to ship our products were unavailable at any time, our business would be materially adversely affected.
For
our product distribution network, we engaged with a few small suppliers for a steady supply of products
. We typically distribute
products pursuant to annual agency or distribution agreements entered between us and our suppliers or upstream distributors, under
which our suppliers provide us with a series of economic incentives and other support. We cannot assure you that manufacturers
and other suppliers will continue to sell products to us on commercially reasonable terms, or at all. We also cannot ensure that
we will be able to establish new manufacturer and other supplier relationships or extend existing relationships with suppliers
when our agreements with them expire. Our annual agency or distribution agreements with suppliers may be terminated from time
to time due to various reasons beyond our control.
We
do not directly own any land use rights in connection with the properties we rent.
We may lose our rental properties or may
not be able to renew leases for them on terms that are reasonable or favorable to us, when those leases expire
. This may adversely
impact our business, including disrupting our operations or increasing our cost of operations.
We
will be exposed to risks inherent in the packaging and distribution of healthcare products
, such as the unintentional distribution
of counterfeit products. Furthermore, we may sell products which inadvertently have an adverse effect on the health of individuals.
Product liability claims may be asserted against us, although we may have the right under applicable Hong Kong laws, rules and
regulations to recover from the relevant manufacturer compensation we pay to our customers in connection with a product liability
claim. Any product liability claim, product recall or adverse side effects caused by improper use of the products we sell or manufacturing
defects may result in adverse publicity regarding us and the products we sell, which would harm our reputation. If we are found
liable for product liability claims, we could be required to pay substantial monetary damages. Furthermore, even if we successfully
defend ourselves against this type of claim, we could be required to spend significant management, financial and other resources,
which could disrupt our business.
Any
significant growth in the market for our products or our entry into new markets may require additional employees for managerial,
operational, financial and other purposes. As of the date of this annual report, we had 10 full-time employees.
During any
growth, we may encounter problems related to our operational and financial systems and controls, including quality control and
delivery and service capacities
. We would also need to continue to expand, train and manage our employees. Continued future
growth will impose significant added responsibilities upon our management to identify, recruit, maintain, integrate, and motivate
new employees.
We
may, also, encounter working capital shortage, as we may need additional funds to finance the purchase of materials and supplies,
development of new products, and hiring of additional employees
. For effective growth management, we will be required to continue
improving our operations, management, and financial systems and controls. Our failure to manage growth effectively may lead to
operational and financial inefficiencies, which will have a negative effect on our profitability. We cannot assure investors that
we will be able to timely and effectively meet increased demand and maintain the quality standards required by our existing and
potential customers.
If
adequate additional financing is not available on reasonable terms, we may not be able to undertake our expansion plan or purchase
additional equipment for our operations, and we would have to modify our business plans accordingly.
There is no assurance
that additional funds will be available to us.
We
may experience increased capital requirements and, accordingly, we may not have sufficient capital to fund our future operations,
without additional capital investments
. Our capital needs will depend on numerous factors, including (i) our profitability;
(ii) the release of competitive products by our competitors; and (iii) the amount of our capital expenditures, including acquisitions.
We cannot assure you that we will be able to obtain capital in the future to meet our needs.
If
we cannot obtain additional funds, we may be required to (i) limit our marketin
g
efforts and (ii) decrease or eliminate
capital expenditures
. Such reductions could materially adversely affect our business and ability to compete.
We
may not be able to negotiate terms and conditions for obtaining adequate funds that are acceptable to us.
Any future capital
investments could dilute or otherwise materially and adversely affect the holdings or rights of our existing shareholders
.
We cannot give you any assurance that any additional funds will be available to us or, if available, will be on terms favorable
to us.
We
will require substantial additional funding in the future
. We have been dependent upon proceeds received from private equity
and debt financing to meet our capital requirements in the past. In the future, we likely will require additional funding to meet
our capital requirements for our health supplement and traditional Chinese medicine operations and to expand those operations.
If we were unable to meet our future funding requirements for working capital and for general business purposes, we could experience
operating losses and fail to expand our future operations. If so, our operating results, business results and financial position
would be adversely affected.
We
are dependent upon our senior management
, particularly LAW Lok Bun and LAI Yat Man, to achieve profitability, and the loss
of either one of them could have a material adverse effect upon our business, operating results and financial position. Our operating
results and future success depend on our senior management’s services and our ability to retain members of our senior management
or to replace any of them by attracting, hiring, retaining and motivating other highly skilled personnel who are experienced in
managing, marketing and customer servicing. The loss of or inability to replace any member of our senior management could have
a material adverse effect upon our business, operating results and financial position.
Our
success is dependent upon our ability to compete in providing our health supplements and traditional Chinese medicine
. In
our industries, there is intense competition, including individuals and large and small entities. Many competitors have substantially
greater financial and marketing resources than we do, stronger name recognition, and longer histories of operations. Our success
is dependent upon our ability to compete, and our failure to do so could adversely affect our business, financial condition and
results of operation.
Our
operating results may fluctuate
. Our operating results are dependent on a number of factors, many of which we do not control,
including (i) the general economic conditions in Hong Kong, China and the world, (ii) the competition, and (iii) our ability to
obtain necessary additional funds to maintain operations.
We
are subject to certain requirements of the Sarbanes-Oxley Act of 2002 and the related rules and regulations adopted by the Securities
Exchange Commission pursuant to that act.
If we are unable to comply timely with such requirements or if the costs of compliance
are too great, our profitability, the market price of our common stock, and our results of operations and financial condition
could be materially adversely affected
. The requirements, rules and regulations to which we are subject to include Chief Executive
Officer/Chief Financial Officer certifications of disclosure in periodic reports and annual reports under the Securities Act of
1933; disclosure regarding conclusions of evaluation of disclosure controls and procedures and internal control of financial reporting;
conditions for use of non-GAAP financial measures; disclosure in Management’s Discussion and Analysis of certain off-balance
sheet arrangements and aggregate contractual arrangements; disclosure of whether or not we have an audit committee financial expert
who is independent and experienced, and if not, why not; and disclosure of whether or not we have adopted a written code of ethics
for our Chief Executive Officer and senior financial officers, and if not, why not. These requirements involve substantial additional
time and effort by our Chief Executive Officer/Chief Financial Officer and additional time, effort and expense for our auditors
and counsel, as well as for us, all of whom are subject to potential liabilities for failure to comply with these requirements
and some of whom may be unwilling or unable to satisfy these requirements.
Risks
Related to Doing Business in China
Any
change in government regulations or administrative practices in China and Hong Kong concerning our business may have a negative
impact on our business, operating results and financial position. The laws, regulations and policies of the governments in China
and Hong Kong and administrative practices in China, our principal jurisdiction, may be changed, applied or interpreted in a manner
that will fundamentally alter our ability to carry on our business. The laws, regulations and policies of the government and the
administrative practices in China, if changed, may have a detrimental effect on our business, operating results and financial
position, resulting in our inability to promote our products and/or operate profitably.
Risks
Related to Our Common Stock
Our
common stock may be considered a “penny stock” under SEC rules, which would limit the market for our common stock
and our ability to raise capital in an offering of our securities. If shares of our common stock are not listed on a national
securities exchange or Nasdaq and do not have a minimum bid price of $5.00 per share, our common stock is considered a “penny
stock,” as defined in Rule 3a51-1 of the Securities Exchange Act of 1934. SEC rules impose additional specific disclosure
and other requirements on broker-dealers effecting transactions in penny stocks, which rules may reduce the market liquidity for
our shares.
The
Securities and Exchange Commission has adopted Rule
15g-9 for transactions in penny stocks which requires that
:
In
order to approve a person’s account for transactions in penny stocks, the broker or dealer must:
|
●
|
obtain
financial information and investment experience objectives of that person; and
|
|
|
|
|
●
|
make
a reasonable determination that transactions in penny stocks are suitable for that person and that person has sufficient knowledge
and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
|
The
broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating
to the penny stock market, which, in highlight form:
|
●
|
sets
forth the basis on which the broker or dealer made the suitability determination;
|
|
|
|
|
●
|
that
the broker or dealer received a signed, written agreement from the investor prior to the transaction; and
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|
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|
●
|
the
broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity
of
the penny stock to be purchased.
|
Disclosure
also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading; the commissions
and other compensation payable to both the broker-dealer and the registered representative in connection with the penny stock
transaction; current quotations for the penny stocks and other information relating to the penny stock market; and the rights
and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in an account and information regarding the limited market in penny
stocks.
Our
three principal shareholders control us. None of our three principal shareholders holds a majority of our outstanding shares,
which is required for the election of directors and other corporate action. But two of our three principal shareholders, Woody
Fire Consultancy Limited (28%) and LAI Yat Man (22.38%), acting together, have a majority of our outstanding shares (50.38%) and,
therefore, are able to elect all of the members of our board of directors. Those two shareholders, acting together, also are able
to block any takeover bid or merger or acquisition proposal that may be beneficial to our other shareholders.
We
have not paid and do not intend to pay cash or other dividends on our common stock. Rather, we expect that any earnings will be
used in our operations and to finance the expansion of our business. Shareholders and investors in our company will not receive
any cash or other dividends in the future and are advised to take this into consideration before making their investment decisions.
Other
Risks
Enforcement
of certain civil liabilities
. We are a British Virgin Islands corporation doing business outside the United States, in Hong
Kong and China. UCHL is a group of Hong Kong corporations doing business in Hong Kong. All of our officers and directors are residents
of Hong Kong. All of our assets and those of our officers and directors are located outside the United States, in Hong Kong. Under
these circumstances, shareholders and investors may not be able to effect service of process within the United States on such
persons and may not be able to enforce against such persons judgments obtained in United States courts predicated on the civil
liability provisions of the federal securities laws of the United States; moreover, it is unlikely that foreign courts would enforce,
in original actions, liabilities against such persons predicated solely upon the federal securities laws of the United States.
Neither the Company nor any of its subsidiaries or officers and directors presently has agreed to accept service of process in
the United States or to abide by any judgments obtained in United States courts predicated upon the civil liability provisions
of the federal securities laws of the United States, but all would possibly consider doing so in the future, based upon the facts
and circumstances presented at that time.
The
audit report included in this Annual Report was prepared by auditors who are not inspected by the Public Company Accounting Oversight
Board and, as a result, you are deprived of the benefits of such inspection
. The independent registered public accounting
firm that issues the audit reports included in our annual reports filed with the SEC, as auditors of companies that are traded
publicly in the United States and a firm registered with the Public Company Accounting Oversight Board (United States), or the
“PCAOB”, is required by the laws of the United States to undergo regular inspections by the PCAOB to assess its compliance
with the laws of the United States and professional standards. Because our auditors are located in the PRC, a jurisdiction where
the PCAOB is currently unable to conduct inspections without the approval of the PRC authorities, our auditors are not currently
inspected by the PCAOB. Inspections of other firms that the PCAOB has conducted outside China have identified deficiencies in
those firms’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to
improve future audit quality. The inability of the PCAOB to conduct inspections in China prevents the PCAOB from regularly evaluating
our auditor’s statements, audits and quality control procedures. As a result, investors may be deprived of the benefits
of PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate
the effectiveness of our auditor’s quality control and audit procedures as compared to auditors outside of China that are
subject to PCAOB inspections. Investors may lose confidence in our reported financial information and procedures and the quality
of our financial statements.
Item
4.
|
Other
Information
|
A.
|
History
and Development of the Company
|
Dragon
Jade International Limited (“Dragon Jade,” “the Company,” “we,” “us”, “our”
and similar terms) was incorporated in the British Virgin Islands, with limited liabilities on April 14, 2008. When the Company
was incorporated, its business plan was to engage in a merger or acquisition with a company with operations. The Company is not
and does not intend to be an “investment company,” as that term is defined in the Investment Company Act of 1940;
in that, it is engaged and proposes to engage in business, by and through wholly owned or majority owned subsidiaries.
In
April 2012, the Company chartered a subsidiary, Alpha Ultimate Limited, under the laws of the Special Administrative Region of
Hong Kong, which operates in the health supplement industry.
On
August 31, 2012, the Company entered into a stock exchange agreement with United Century Holdings Limited, a privately held corporation.
On September 1, 2012, the Company consummated the transaction contemplated by that stock exchange agreement. All of the capital
stock of United Century Holdings Limited was exchanged for an aggregate of 20,003,319 shares of the Company’s capital stock.
As a result, the Company became a 100% holding company of United Century Holdings Limited.
United
Century Holdings Limited (“UCHL”) was incorporated on March 2, 2012, under the British Virgin Islands Business Companies
Act, 2004, with limited liabilities. UCHL is established as a special purpose holding company, whose objective was to become a
holding company by an acquisition, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more business located in Hong Kong. On July 10, 2012, UCHL executed an acquisition of 7,879,500 out of
8,000,000 ordinary shares, par value $0.1282 (HK$1) per share, of the United Asia Medical Network Company Limited (“UAM”)
and became a 98.49% holding company of UAM.
UAM
was incorporated on May 6, 1998, as a limited liability company under predecessor Hong Kong Companies Ordinance, Chapter
32.
Its principal business is trading of health supplement products and providing related medical and health consultancy services.
On
March 20, 2018, the Company acquired 3,000 shares of Dragon Jade Medical Company Limited (DJMC), representing 30% of the total
issued and outstanding shares of DJMC, at a purchase price of $300 per share for a total consideration of $900,000. On January
31, 2019, the Company has sold the 3,000 shares of DJMC to the major shareholder of DJMC for $900,000.
On
December 31, 2018, the Company executed an acquisition of 100% issued and outstanding ordinary shares of Montrose Food &
Wine H.K. Limited (“Montrose HK”) in consideration of $256,410.26 and 100,000 shares of the Company’s
common stock. Montrose HK was incorporated on June 30, 1989, as a limited liability company under predecessor Hong Kong
Companies Ordinance, Chapter 32. Montrose HK’s business primarily focuses on importing and distribution of fine wine
within Hong Kong and Macau SAR.
Details
of the Company’s subsidiaries and associate (which together with the Company are collectively referred to as the “Group”)
and their principal activity as of March 31, 2019 were as follows:
Name
|
|
Date of incorporation/ establishment
|
|
Place of incorporation/ registration and operation
|
|
Percentage of equity interest attributable to the Company
|
|
|
Principal activities
|
Alpha Ultimate Ltd. (“AUL”)
|
|
April 11, 2012
|
|
Hong Kong
|
|
|
100
|
%
|
|
Health supplement trading
|
United Century Holdings Ltd. (“UCHL”)
|
|
March 2, 2012
|
|
BVI
|
|
|
100
|
%
|
|
Investment holding
|
United Asia Medical Network Company Limited (“UAM”)
|
|
May 6, 1998
|
|
Hong Kong
|
|
|
98.49
|
%
|
|
Health supplement trading
|
Montrose Food & Wine H.K. Limited (“Montrose HK”)
|
|
June 30, 1989
|
|
Hong Kong
|
|
|
100
|
%
|
|
Fine wine distribution
|
Montrose Fine Wines (Macau) Limited
|
|
March 28, 2013
|
|
Macau SAR
|
|
|
100
|
%
|
|
Inactive
|
Montrose Fine Wines Beijing Limited
|
|
September 7, 2017
|
|
PR China
|
|
|
100
|
%
|
|
Inactive
|
The
principal executive offices of the Group are located at Unit 2, 23/F, New World Tower I, 18 Queens Road, Central Hong Kong, SAR,
China; the telephone number is 852-3580 1788. There is no agent for service in the United States, LAI Yat Man is the contact person
for purposes of this Annual Report on Form 20-F.
The
Company engages in the health supplement business by and through Alpha Ultimate Ltd. (“AUL”) and United Asia Medical
Network Company Limited (“UAM”), which sells health supplements (without any limitation or restriction as to customer
size, industry or business). UAM is a company incorporated in Hong Kong with a business network across Asia, including Hong Kong,
mainland China, Taiwan, Japan, Korea, Singapore, Malaysia and Thailand. UAM believes that, with its experience in human biological
knowledge and marketing experience, it is able to provide beneficial nutritional products and medical services. UAM operations
include the unique combined use of traditional Chinese medicine and modern western medicine in treatment. Considering the adverse
side effects of modern western medicine, the medical professionals of UAM believe that traditional Chinese medicine, with thousands
of years of enhancement and empirical evidence, can complement western medicine, which will better serve patients.
In
September 2015, AUL has begun to sell and distribute the Ultroid® Hemorrhoid Management System (“Ultroid® System”)
in Hong Kong. The Ultroid® System, which is FDA cleared and also approved for use in many other nations, is a non-surgical,
non-anesthetic and rapid treatment for hemorrhoidal disease (HD). The Ultroid® System is unique to the market and currently
the only FDA cleared device to treat and cure all four grades of internal and mixed hemorrhoids. The non-surgical technology is
a break-through in painless hemorrhoid therapy requiring no anesthesia and no recuperation time. Performed in the physician’s
office in minutes, patients are immediately able to resume their daily activities.
Recent
Development
In
May 2018, the Company has started to develop and operate the human resources business which focuses on recruiting medical practitioners
to work in the healthcare industry in China, taking advantage of the Group’s close association with the medical community
in Taiwan and Hong Kong to access experienced medical professionals, who have the necessary language and cultural skills, and
are experienced in both Western and Chinese medicines. We will provide screening, interviews, recommendation, evaluation and review
when it comes to recruitments for enterprises. A recruitment advertisement service would also be provided for different industries
to show job vacancies on the Company’s website. We also provide job consultation, career advice and interview training for
job seekers. With our professional medical team, we provide medical consultation, medical advice on new drugs and a worldwide
hospital referral service to our clients in Mainland China. We assist our clients to overcome geographical and language barriers
by providing a visa application service and medical record translation service.
C.
|
Organizational
Structure
|
D.
|
Property,
Plants and Equipment
|
Except
for some furniture and fixtures and office equipment, such as desks and chairs and computers, no member of the Group has any property.
Item
4A. Unresolved Staff Comments
None.
Item
5. Operating and Financial Review and Prospects.
The
Company had sustained losses totaling $5,468,758 for the fiscal year ending March 31, 2019, and had a retained earnings deficit
of $16,449,316 as of March 31, 2019.
Revenue
for the fiscal year ended March 31, 2019 increased by $801,541 to $923,158 from $121,617 for the fiscal year ended March 31, 2018.
Increase of revenue mainly arose from the revenue of Montrose HK amounted to $599,276 was included after the acquisition at December
31, 2018. $202,264 was increased due to growing in sales of healthcare product.
Selling, general and administrative expenses
totaled $5,784,416 for the fiscal year ended March 31, 2019, a decrease of $333,209, or 5.45% from $6,117,625 for the fiscal year
ended March 31, 2018. The general and administrative expenses consist primarily of business development expenses of $2,950,179,
salary of $568,515, and audit, legal and other professional fees of $1,359,567. We expect our general and administrative expenses
to increase as we expand our offices into new jurisdictions.
Our
senior management, nevertheless, has determined to devote considerable efforts to marketing during the fiscal year ended March
31, 2020, in an attempt to generate new business. Management participated in more seminars for customers in Hong Kong, in order
to get into contact with more potential customers. Efforts will also be spent to maintain friendly relationships with former customers,
with the aim of acquiring new customers through referrals.
B.
|
Liquidity
and capital resources.
|
As
of March 31, 2019, the Company had a working capital surplus of $1,292,720 and cash of $483,377. This compares with working capital
surplus of $5,525,037 and cash of $4,756,354 as of March 31, 2018. The Company estimates its working capital needs for the next
12 months to be approximately $2,500,000. As of March 31, 2019, it had insufficient funds on hand to meet such needs.
On
December 31, 2012, The Company entered into definitive agreements relating to a private placement of $300,000 in principal amount
of Convertible Notes due on December 31, 2013, and warrants to the purchasers of such Convertible Notes giving such purchasers
the right to purchase up to an aggregate of 600,000 shares of our common stock at an exercise price of $0.50 per share. At March
31, 2016, the outstanding principal and accrued but unpaid interest under those Convertible Notes was $300,000. On April 12, 2016,
the Convertible Note was fully converted into 600,000 shares of our common stock. The outstanding principal of $300,000 was converted
into 600,000 shares of our common stock at an exercise price of $0.50 per share in a transaction exempt from the registration
and prospectus delivery requirements of the Securities Act of 1933.
On
April 1, 2013, the Company entered into definitive agreements relating to a private placement of $100,000 in principal amount
of Convertible Notes due on March 31, 2014, and warrants to the purchasers of such Convertible Notes giving such purchasers the
right to purchase up to an aggregate of 200,000 shares of our common stock at an exercise price of $0.50 per share. At March 31,
2016, the outstanding principal and accrued interest under those Convertible Notes was $100,000. On March 3, 2017, the Convertible
Note was fully repaid.
On
March 6, 2017, the Company issued 5,000,000 shares of its common stock to 2 persons at a consideration of $3 per share in transactions
exempt from the registration and prospectus delivery requirements of the Securities Act of 1933, which exemption is specified
by the provisions of Regulation S promulgated pursuant to the provisions of that act. None of the recipients of those shares is
a U.S. Person, as that term is defined by the provisions of Regulation S. Those shares were issued in off-shore transactions.
No directed selling efforts were made in the United States by the Company, any distributor, any of their respective affiliates
or any person acting on behalf of the foregoing. First installment of the consideration amounted to $4,462,935 was received on
March 2, 2017 and second installment of the consideration amounted to $10,537,065 was received on May 31, 2017. The Company intends
to use the amount received from the shares issuance on its future development activities.
C.
|
Research
and development, patents and licenses, etc.
|
Not
Applicable.
We
expect the serious financial crisis in the United States and elsewhere in the world to continue to adversely affect our business
and, therefore, our results of operation during the calendar year 2020. We anticipate that we will continue to reduce our expenses
and may consider making an offering of our securities to raise capital, in the United States and/or in China and Hong Kong.
On
December 31, 2018, the Company executed an acquisition of 100% issued and outstanding ordinary shares of Montrose Food & Wine
H.K. Limited (“Montrose HK”) in consideration of $256,410.26 and 100,000 shares of the Company’s common stock.
Montrose HK was incorporated on June 30, 1989, as a limited liability company under predecessor Hong Kong Companies Ordinance,
Chapter 32. Montrose HK’s business primarily focuses on importing and distribution of fine wine within Hong Kong and Macau
SAR.
E.
|
Off-balance
sheet arrangements
|
Not
Applicable.
F.
|
Tabular
disclosure of contractual obligations
|
Not
Applicable.
Item 6.
|
Directors,
Senior Management and Employees
|
A.
Directors and senior management.
Our directors and senior management are:
Mr.
Law Lok Bun, age 67, is an Executive Director and the President of the Company. He was appointed as an Executive Director of the
Company on April 17, 2012. He is responsible for planning the overall direction of the Company and managing the Company’s
day to day affairs. He has more than thirty years of experience in pharmaceutical manufacturing, wholesaling and retail operations.
He is currently, a managing director of Merika Medicine Factory Limited. Mr. Law is a graduate of Hong Kong Baptist University,
from which he received a B.A. Degree in Analytical Chemistry.
Dr.
Lai Yat Man, age 59, is an Executive Director and the Chief Executive Officer of the Company. He was appointed as an Executive
Director of the Company on September 1, 2012. He is primarily responsible for the Company’s business planning, strategy
and management, as well as providing medical and biological information support. He has more than 25 years of experience in the
medical and pharmaceutical industries. From 1987 to 1988, he served as the Chief Resident of Emergency Internal Medicine Department
of Neihu General Hospital in Taipei. From 1988 to 1995, he served as the Chief of Internal Medicine Department of Tamsui First
Hospital in Taipei County. In 1998, he founded United Asia Medical Network Company Limited in Hong Kong. He is, currently, the
Chairman of United Asia Medical Network Company Limited. Dr. Lai received his medical degree from the Medical College of National
Taiwan University in 1985.
Mr.
Fung Kwok Wing, age 45, is an Executive Director and the Chief Financial Officer of the Company. He was appointed as an Executive
Director of the Company on September 1, 2012. He is primarily responsible for the business operations, developing the financial
strategy, overseeing financial and administrative operations, and the human resources management of the Company. He has more than
10 years of experience in accounting and finance. He is also currently the Chief Financial Officer of United Asia Medical Network
Company Limited. Mr. Fung is a member of the American Institute of Certified Public Accountants. Mr. Fung obtained a Bachelor
of Social Science in Economics Degree from The Chinese University of Hong Kong in 1995.
Mr.
Lo Tsz Fung Philip, age 53, was appointed as an Independent Non-executive Director of the Company on September 1, 2012. Mr. Lo
was appointed as a director and the Chairman of the Audit Committee and a member of the Compensation Committee and Corporate Governance
Committee of QKL Stores Inc. (NASDAQ: QKLS) in November 2011. Mr. Lo has served as managing director of Shenzhen Xin Wei Managing
Consultancy Limited since August 2011, independent non-executive director of Styland Holdings Limited (Hong Kong Exchange Code:
211) since April 2009 and managing director of P&L Financial Consultancy Limited since December 2007. Mr. Lo also served as
Chief Financial Officer of Wuhan General Group (China) Inc. (NASDAQ: WUHN) from February 2010 to January 2012; Chief Financial
Officer of Wuhan Zhongye Yangluo Heavy Machinery Co., Ltd. from December 2007 to January 2009; and Senior Manager of Albert Wong
& Co, from June 2006 to December 2007. Mr. Lo received his Bachelor’s Degree from University of Wollongong, Australia.
He is a member of CPA Australia and a member of HKICPA. We believe that Mr. Lo’s knowledge of finance and accounting matters
brings a unique expertise to our Board of Directors.
Mr.
Tai Kam Chiu Daniel (formerly known as TAI Tze Yu Daniel), age 58, was appointed as an Independent Non-executive Director of the
Company on September 1, 2012. He has more than 20 years of management and supervision experience in various enterprises, which
engage in the businesses of electronic products, catering and trading. From 1990 to 2006, he was a Manager and General Manager
of Sharp-Roxy (HK) Limited in Hong Kong. He was primarily responsible for the planning, direction and control of all sales, advertising
and promotion activities related to consumer electronic products. In addition to the local sales in Hong Kong, he had full responsibility
and accountability of the corporate sales, sales administration and support and new business development. From 2006 to 2007, he
was a manager and director of Rakutei Dinning & Bar. From 2007 to 2009, he was a General Manager of Kelvin Electric Trading
Company Limited. He is currently a Managing Director of Aqua Gold Holding Company Limited since 2009. From 2003 to the present,
Mr. Tai has served as a Director and Executive Director of Radio Association of Hong Kong. He was the Fellow of The Professional
Validation Centre of Hong Kong Business Sector in 2005.
Mr.
David P. Bennett, age 62, was appointed as an Independent Non-executive Director of the Company on February 1, 2019. He has been
the managing member of Health & Wealth Management (HWM), LLC since 1999. HWM offers investment management and health and fitness
services to its clients. Since 1999, Mr. Bennett has been the CIO of Bennett Capital Management (BCM), which is the investment
management subsidiary of HWM. BCM is a long-term value investor that invests in a wide selection of potential investment opportunities.
Prior to starting HWM and BCM, Mr. Bennett was an analyst and portfolio manager at value investor May Management from 1995-1998
located in the Pacific Northwest in the U.S. Before joining May Management, Mr. Bennett was an analyst at Prudential Securities
in New York City from 1984-1995. While at Prudential he covered stocks, bonds, currencies and commodities. Mr. Bennett earned
his M.B.A. in Finance/International Business from the Stern School of Business at New York University in New York City. Mr. Bennett
received his B.G.S., focusing on international affairs and biological sciences, from the University of Maryland in College Park,
Maryland.
Ms.
Kwong Suk Kwan, age 43, was appointed as an Independent Non-executive Director of the Company on February 1, 2019. She has been
a registered nurse and holder of nursing practicing certificate issued by the Nursing Council of Hong Kong since 2000. She has
extensive experience in both public and private medical sectors. Ms. Kwong has worked as a head nurse in Solve Medical Centre
in Hong Kong since 2017. She has been responsible for the management of the daily operations of Solve Medical Centre. From 2014
to 2017, Ms. Kwong has worked as Registered Nurse in Sage Bradbury Home for the Elderly in Hong Kong. She has worked in division
of general medicine, cardiology and surgery in various hospitals and medical centers in Hong Kong from 2000 to 2013. Ms. Kwong
has completed nurse training from the School of Nursing of Kwong Wah Hospital in Hong Kong in 2000.
Mr.
Marc-Andre Tremblay, age 39, was appointed as an Independent Non-executive Director of the Company on February 1, 2019. He has
been a business consultant active in the field of health education for many years in Canada and abroad, with a vested interest
in both traditional and modern health technology. Mr. Tremblay has acted as a consultant in Intercontinental Group since 2017.
From 2014 to 2016, he was employed by Great Man International Education group in Guangzhou, China as a consultant, manager and
international kindergarten director of operations. He has been a teacher in Prince Albert Catholic School in Saskatchewan, Canada.
Mr. Tremblay received his B.A. in 2007 and M.A. in 2011 from the University of Quebec, Canada.
Dr.
Lam Dominic Man-Kit, age 72, was appointed as an Independent Non-executive Director of the Company on February 1, 2019. He is
a world acclaimed scientist, medical professor, entrepreneur, philanthropist, educator and artist. Hailed as the “21st Century
Renaissance Man”, Professor Lam’s career started in 1970 at Harvard Medical School, and includes listing on the US
stock market the first biotech company in Texas; developing and patenting what Time Magazine called “one of 10 most important
inventions for the 21st Century”, and MIT called “one of 5 patents that will transform business and technology”;
receiving the Presidential Medal of Merit; founding a charitable organization providing medical services to hundreds of thousands;
and being an award winning artist. Professor Lam was born in China, grew up in Hong Kong, studied in Canada, and trained under
two Nobel Laureates at Harvard Medical School before being invited to teach there in 1972. In 1977, Lam became Professor of Ophthalmology
at Texas Medical Center in Houston and in 1983, he founded the Center for Biotechnology and the first biotech company in Texas,
taking it public on the US stock market in 1988, receiving the US High-Tech Entrepreneur of the Year in 1989 and being recognized
as the Father of Texas Biotechnology. In 1988, he was invited by Nobelists C.N Yang and Charles Kao to find the Hong Kong Institute
of Biotechnology, leading to the establishment of what is now the Hong Kong Science and Technology Park. Professor Lam has been
named “One of the Eight Most Representative Artists in Hong Kong”; one of the Top 100 artists in China; awarded the
“Prix d’honneur” from French National Society of Fine Art for his sculptures exhibited at the Grand Palais in
Paris; and a Gold Medal issued by the International Olympic Fine Art Committee for his painting “Millennium Odyssey II:
From the Great War to River Thames – Embrace the World” exhibited at the Barbican Centre during the 2012 London Olympic
Games. He invented a novel painting process named “Chromoskedasic Painting” and a unique calligraphic style named
“Calligraphy of the Mind”, both processes amalgamating art and science.
There
is no family relationship between any of the directors and officers of the Company or AUL or UCHL or UAM.
The
Company has paid and will pay each independent director annual compensation of US $5,000. None of our officers and none of our
non-independent directors receive any compensation from the Company. Also, all of our officers and directors are entitled to receive
compensation from UAM for services rendered to UAM.
None
of the members of our senior management receives any other form of remuneration, such as bonuses, stock awards, stock options
or benefits, such as country club memberships or automobiles.
No
amounts were set aside or accrued by UAM to provide pension, retirement or similar benefits to senior management.
The
current terms of office of our directors expire at the next annual meeting of our shareholders, when their successors are elected
and qualified.
There
currently is no agreement as to compensation to be paid to the executive officers who also serve as non-independent directors
(LAW Lok Bun, LAI Yat Man and FUNG Kwok Wing). Each of such executive officers / directors has other employment and provides services
to the Company on an as-needed basis. The Company has not accrued salary to these persons, issued shares as compensation, issued
stock options or warrants or recorded contributed capital for the services provided by them and no employment agreements exist.
The Company is not aware of any accounting pronouncement that requires the compensation of executive officers / directors (other
than for certain non-profit organizations) who provide executive services on an as-needed basis.
Our
board of directors maintains an Audit Committee. Lo Tsz Fung Philip serves as the chairman, Tai Kam Chiu Daniel and David P. Bennett,
serve as members of the Audit Committee. Lo Tsz Fung Philip is an “audit committee financial expert” as defined by
the rules of the NASDAQ Stock Market, Inc. and Rule 10A-3(b)(i) under the Securities Exchange Act of 1934, applicable to members
of an audit committee. The Audit Committee is appointed by our board of directors to assist our board of directors in monitoring
(1) the integrity of our financial statements, (2) our compliance with legal and regulatory requirements, and (3) the independence
and performance of our internal and external auditors.
Our
board of directors maintains a Nomination Committee. David P. Bennett serves as the chairman, Lo Tsz Fung Philip and Kwong Suk
Kwan, serve as members of the Nomination Committee. The Nomination Committee is appointed by our board of directors to assist
our board of directors in the discharge of the responsibilities of the Board relating to the appropriate size, functioning and
needs of the Board including, but not limited to, identification, recommendation, recruitment and retention of high quality Board
members and committee composition and structure.
Our
board of directors maintains a Compensation Committee. Kwong Suk Kwan serves as the chairman, Lo Tsz Fung Philip and Marc- Andre
Tremblay, serve as members of the Compensation Committee. The Audit Committee is appointed by our board of directors to assist
our board of directors in the discharge of its responsibilities with respect to the compensation of the Company’s directors,
executive officers and other key employees and consultants, and for such purpose shall review compensation arrangements for the
Company’s executive officers and administer all employee benefit plans, including any equity incentive plan adopted by the
Company.
As
of March 31, 2019, we had 8 full-time employees. As of that date, none of our employees were represented by a labor union.
The
shares of the Company that are beneficially owned by LAW Lok Bun, LAI Yat Man and Woody Fire Consultancy Limited “control”
the Company, because of their shareholdings and related management positions. The following table sets forth, as of March 31,
2019, the beneficial ownership of shares of the common stock of the Company beneficially owned by (1) each person known to be
the beneficial owner of more than 5% of our shares of our common stock and (2) each of the members of senior management identified
in Item 6.A., above. (The term “beneficial owner” of securities refers to any person who, even if not the record owner
of the securities, has or shares the underlying benefits of ownership. These benefits include the power to direct the voting or
disposition of the securities or to receive the economic benefit of ownership of the securities. A person also is considered to
be the “beneficial owner” of securities that such person has the right to acquire within 60 days by option or other
agreement. Beneficial owners include persons who hold their securities through one or more trustees, brokers, agents, legal representatives
or other intermediaries, or through companies in which they have a “controlling interest,” which means the direct
or indirect power to direct the management and policies of the entity.)
NAME
|
|
SHARES
OWNED
|
|
|
PERCENT OF CLASS
|
|
Woody Fire Consultancy Limited*
|
|
|
15,970,000
|
|
|
|
28.00
|
%
|
Lai Yat Man
|
|
|
12,762,804
|
|
|
|
22.38
|
%
|
Law Lok Bun
|
|
|
7,000,000
|
|
|
|
12.28
|
%
|
Fung Kwok Wing
|
|
|
-
|
|
|
|
-
|
|
Lo Tsz Fung Philip
|
|
|
-
|
|
|
|
-
|
|
Tai Kam Chiu Daniel
|
|
|
-
|
|
|
|
-
|
|
Lam Dominic Man-Kit
|
|
|
-
|
|
|
|
-
|
|
David P. Bennett
|
|
|
-
|
|
|
|
-
|
|
Kwong Suk Kwan
|
|
|
-
|
|
|
|
-
|
|
Marc-Andre Tremblay
|
|
|
-
|
|
|
|
-
|
|
Officers & Directors as a Group (10 persons)
|
|
|
19,762,804
|
|
|
|
34.66
|
%
|
*
|
LO
Hsin Yu is the shareholder of and has a controlling interest in Woody Fire Consultancy Limited.
|
There
is no arrangement involving any person named in the table that involves the issue or grant of options for our shares or any shares.
Item
7.
|
Major
Shareholders and Related Party Transactions
|
As
of March 31, 2019, our major shareholders, LAW Lok Bun, LAI Yat Man and Woody Fire Consultancy Limited, beneficially own, respectively,
7,000,000 shares of the Company’s common stock, or 12.28%, 12,762,804 shares or 22.38% and 15,970,000 shares or 28%. See
Item 6.E., above. On April 15, 2012, the shareholders of the Company entered into a Purchase and Sales Agreement with a group
led by LAW Lok Bun to acquire 27,910,000 issued shares of the Company’s common stock. That agreement, also, provided that
Mr. Law be elected to the Board of Directors and the Company charter a new subsidiary, Alpha Ultimate Limited, under the laws
of the Special Administrative Region of Hong Kong, which will operate in the traditional Chinese medicine industry. The transaction
closed on June 22, 2012. On September 1, 2012, the Company acquired 100% of the total issued shares of UCHL capital stock from
its original shareholders, in exchange for an aggregate of 20,003,319 shares of the Company’s common stock.
We
are not, directly or indirectly, owned or controlled by another corporation, by any foreign government, or by any other natural
or legal person, severally or jointly. We know of no arrangement the operation of which may at a subsequent date result in a change
in control.
Our
shareholders do not have different voting rights.
B.
|
Related
Party Transactions.
|
Since
April 1, 2012, there has been no related party transaction, except (i) business development fees of $2,823,000 paid to Woody Fire
Consultancy Limited, a major shareholder of the Company and (ii) the amount of $87,774 due LAI Yat Man for funds advanced to the
Company, AUL and UAM, which amount has no due date or maturity date and does not accrue any interest. (Related party transactions
are transactions or loans between the Company and (a) enterprises directly or indirectly controlled by the Company; (b) associates
of our major shareholders; (c) our major shareholders; (d) our senior management or (e) entities directly or indirectly controlled
by our major shareholders or senior management.)
C.
|
Interests
of experts and counsel.
|
No
counsel or accountant for the Company has been employed on a contingent basis or owns shares of common stock of the Company or
of AUL, UCHL or UAM.
Item
8.
|
Financial
Information
|
A.
|
Consolidated
Statements and Other Financial Information
|
The
following consolidated financial statements and other financial information are included as part of this Annual Report, after
“Signatures” from page 21 to 39 as following:
Dragon
Jade International Limited.
Legal
and Administrative Proceedings
Except
as set forth below and disclosed elsewhere in the annual report, currently there is no legal proceeding pending or threatened
against to which we are a party of. However, from time to time, we may become involved in various lawsuits and legal proceedings
which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these
or other matters may arise.
Dragon
Jade International Limited, the Plaintiff in Civil Action No.8:17-cv-02422, United States District Court for the Middle District
of Florida, Tampa Division, has made claims against the Defendants, Ultroid LLC and Ultroid Technologies Inc, for breaches of
an Exclusive Option and Remediation Agreement dated January 19, 2017 and a Security Agreement dated January 20, 2017, for compensatory
damages and liquidated damages of US$2,000,000, including the marshalling of assets identified in the Security Agreement and enforcing
its rights under the UCC Financing Statements and interest. Following various motions for judgment on the pleadings and amendments
of the Counterclaims of the Defendants, the Plaintiff defeated all RICO counterclaims and alleged lack of shareholder approval
counterclaim brought by the Defendants. All remaining counterclaims of the Defendants except for one counterclaim alleging breach
of contract by the Plaintiff are the subject of a Motion for Partial Summary Judgment made by the Plaintiff against the Defendants,
for which the Plaintiff is expecting a decision of the court. In the event that these counterclaims of the Defendants are dismissed,
the case will go to trial on September 30, 2019 to resolve the claims of the Plaintiff and the remaining counterclaim(s) of the
Defendants.
Dividend
Policy
We
have never declared or paid any cash dividends on our common shares. We anticipate that we will retain any earnings to support
operations and to finance the growth and development of our business. Therefore, we do not expect to pay cash dividends in the
foreseeable future. Any future determination relating to our dividend policy will be made at the discretion of our Board of Directors
and will depend on a number of factors, including future earnings, capital requirements, financial conditions and future prospects
and other factors the Board of Directors may deem relevant.
Under
British Virgin Islands law, we may only pay dividends from surplus (the excess, if any, at the time of the determination of the
total assets of our company over the sum of our liabilities, as shown in our books of account, plus our capital), and we must
be solvent before and after the dividend payment in the sense that we will be able to satisfy our liabilities as they become due
in the ordinary course of business; and the realizable value of assets of our company will not be less than the sum of our total
liabilities, other than deferred taxes as shown on our books of account, and our capital.
None.
Item
9.
|
The
Offer and Listing
|
A.
|
Offer
and listing details.
|
The
initial bid and asked prices submitted for quotation by the sponsoring broker-dealer are determined arbitrarily by negotiation
between that broker-dealer and us and may not necessarily have any relationship to our asset value, earnings, financial condition
or other established criteria of value; such prices will be subject to change, as a result of market conditions and other factors.
The
prices of our shares of common stock are quoted on the OTCQX market. The OTCQX market is a significantly more limited market than
the New York Stock Exchange or NASDAQ system. The quotation and the prices of our shares of common stock on the OTCQX market may
result in a less liquid market available for existing and potential stockholders to trade shares of our common stock and could
depress the trading price of our common stock and have a long-term adverse impact on our ability to raise capital in the future.
When
fewer shares of a security are traded on the OTCQX market, volatility of prices may increase and price movement may outpace the
ability to deliver accurate quote information. Due to lower trading volumes in shares of our common stock, there may be a lower
likelihood of a person’s orders for shares of our common stock being executed, and current prices may differ significantly
from the price one was quoted at the time of a person’s order entry.
For
the periods indicated, the following table sets forth the high and low bid prices per share of common stock.
Fiscal Year March 31, 2020
|
|
High Bid
|
|
|
Low Bid
|
|
03/31/2019-06/30/2019
|
|
$
|
4.80
|
|
|
$
|
2.26
|
|
Fiscal Year March 31, 2019
|
|
High Bid
|
|
|
Low Bid
|
|
03/31/2018-06/30/2018
|
|
$
|
4.00
|
|
|
$
|
1.65
|
|
07/01/2018-09/30/2018
|
|
$
|
3.00
|
|
|
$
|
1.50
|
|
10/01/2018-12/31/2018
|
|
$
|
3.60
|
|
|
$
|
0.68
|
|
01/01/2019-03/31/2019
|
|
$
|
4.00
|
|
|
$
|
1.50
|
|
Fiscal Year March 31, 2018
|
|
High Bid
|
|
|
Low Bid
|
|
03/31/2017-06/30/2017
|
|
$
|
8.00
|
|
|
$
|
4.00
|
|
07/01/2017-09/30/2017
|
|
$
|
6.30
|
|
|
$
|
3.30
|
|
10/01/2017-12/31/2017
|
|
$
|
4.99
|
|
|
$
|
1.14
|
|
01/01/2018-03/31/2018
|
|
$
|
3.30
|
|
|
$
|
0.72
|
|
The
transfer agent for our shares of common stock is Pacific Stock Transfer Company, 6725 Via Austi Pkwy, Suite 300, Las Vegas, NV
89119.
Not
applicable.
See
Item 9.A., above.
Not
applicable.
Not
applicable.
F.
|
Expenses
of the issue.
|
Not
applicable.
Item
10. Additional Information
Pursuant
to Section 6.1 of our Memorandum of Association, we are authorized to issue 100,000,000 shares of no par value common stock. As
of March 31, 2019, our recent fiscal year end, 57,023,319 of our authorized shares of common stock were issued and outstanding,
As of August 2, 2019, the latest practical date, 57,138,319 of our authorized shares of common stock were issued and outstanding,
Pursuant to Section 7 of our Memorandum of Association, holders of our common stock are entitled to one vote per share on each
matter submitted to a vote of our shareholders, the right to an equal share in any dividend paid by the Company, and the right
to an equal share in the distribution of surplus assets, if any, on liquidation of the Company. Holders of our common stock do
not have preemptive rights to purchase additional shares of our common stock or other subscription rights. Our common stock has
no conversion rights and is not subject to redemption or any sinking fund provisions. All shares of our common stock are entitled
to share equally in dividends from legally available sources, as determined by the board of directors. Upon dissolution or liquidation
of the Company, whether voluntary or involuntary, holders of our common stock are entitled to receive assets of the Company available
for distribution to our shareholders.
There
were no changes in voting rights involved in this transaction.
B.
|
Memorandum
and Articles of Association.
|
(1)
The Company was incorporated under the Territory of the British Virgin Islands BVI Business Companies Act 2004, on April 14, 2008.
Section 5.1 of our Memorandum of Association provides that the Company has full capacity to carry on or undertake any business
or activity, do any act and enter into any transaction.
(2)
Section 8 of our Articles of Association provides that the minimum number of directors shall be one; there is no maximum number
of directors. There are no limitations or restrictions on the borrowing power of directors; there are no age limit requirements
and no shareholding requirements.
Section
13 of our Articles of Association, concerning conflicts of interest, provides that a director shall disclose that he is interested
in a transaction entered into or to be entered into by the Company and such director may vote on a matter relating to such transaction,
attend a meeting of directors relating to such transaction, and sign a document on behalf of the Company or do anything in his
capacity as a director that relates to such transaction.
(3)
Section 18 of our Articles of Association provides that our directors may authorize a distribution by way of dividend at any time,
if they are satisfied that immediately after such distribution the value of the Company’s assets will exceed its liabilities
and the Company will be able to pay its debts as they become due. Section 7 of our Memorandum of Association provides that each
share of our common stock is entitled to one vote at a meeting of our shareholders or on any resolution of our shareholders; share
equally in any dividend paid by the Company; and share equally in the distribution of any surplus assets of the Company on its
liquidation. There are no pre-emptive rights.
(4)
Section 8 of our Articles of Association provides that the rights of our shareholders may be varied with the consent in writing,
or by resolution passed at a meeting, by holders of more than 50% of our issued shares of our common stock.
(5)
Section 7 of our Articles of Association provides that any director may convene a meeting of our shareholders and our shareholders
entitled to exercise 30% or more of the voting rights may request directors in writing to convene a meeting of our shareholders.
(6)
There are no limitations or restrictions on the rights of non-resident or foreign shareholders to own shares of our common stock
or to hold or exercise voting rights.
(7)
There are no provisions that would have an effect of delaying, deferring or preventing a change in control of the Company.
(8)
There are no provisions governing the threshold above which shareholder ownership must be disclosed.
There
have been no material contracts since the formation of the Company.
Neither
the British Virgin Islands nor Hong Kong has any system of exchange controls, and there is no restriction of any kind on the repatriation
of capital or the remittance of dividends, profits, interests, royalties or other payments to non-resident holders of the Company’s
securities.
Foreign
exchange in China is primarily regulated by:
|
●
|
The
Foreign Currency Administration Rules (1996), as amended; and
|
|
●
|
The
Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), or the Administration Rules.
|
Under
the Foreign Currency Administration Rules, if documents certifying the purposes of the conversion of RMB into foreign currency
are submitted to the relevant foreign exchange conversion bank, the RMB will be convertible for current account items, including
the distribution of dividends, interest and royalties payments, and trade and service-related foreign exchange transactions. Conversion
of RMB for capital account items, such as direct investment, loans, securities investment and repatriation of investment, however,
is subject to the approval of SAFE or its local counterpart.
Under
the Administration Rules for the Settlement, Sale and Payment of Foreign Exchange, foreign-invested enterprises may only buy,
sell and/or remit foreign currencies at banks authorized to conduct foreign exchange business after providing valid commercial
documents and, in the case of capital account item transactions, obtaining approval from SAFE or its local counterpart.
Shareholders
will not be subject to taxation, including withholding provisions, in the British Virgin Islands or Hong Kong. The Company assumes
no responsibility for the withholding of any tax upon the payment of dividends, and there is no tax treaty between the British
Virgin Islands and the United States regarding such withholding.
The
Company is subject to applicable taxes in Hong Kong, but our shareholders are exempt.
There is no tax treaty between the United
States and Hong Kong.
For United States federal income tax purposes, the gross amount of all distributions paid with respect to
our common stock to a person subject to United States federal income taxation, generally, will be treated as foreign source dividend
income to such person. Gain or loss from the sale of shares of our common stock, generally, will be subject to federal income
taxation at a maximum federal income tax rate from 15% to 20%, if that common stock was held for more than 12 months or as ordinary
income or if that common stock was held for less than 12 months.
The auditors of the Company are Centurion ZD CPA & Co., Unit 1304, 13
th
Floor, Two Harbourfront,
22 Tak Fung Street, Hunghom, Hong Kong. The financial statements included as part of this Annual Report have been included herein
in reliance upon the authority of such auditors, as experts in accounting and auditing.
Item 19 sets forth a list of exhibits; that list is incorporated herein by reference.
I.
|
Subsidiary
information.
|
Information concerning AUL, UCHL, UAM,
Montrose HK, Montrose Macau and Montrose Beijing, our subsidiaries, is included throughout this Annual Report; AUL’s, UCHL’s,
UAM’s, Montrose HK, Montrose Macau and Montrose Beijing’s financial statements, also, are included in the consolidated
financial statements. Montrose Macau and Montrose Beijing are not active in operation.
Item
11. Quantitative and Qualitative Disclosures About Market Risk
We have not entered into market
risk sensitive instruments for any purpose.
Item
12. Description of Securities Other than Equity Securities.
Not
applicable.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
1.
The Company
Dragon
Jade International Limited (the “Company”) was incorporated on April 14, 2008 in the British Virgin Islands. The principal
activity of the Company is investment holding.
In
April 2012, the Company chartered a subsidiary, Alpha Ultimate Limited under the laws of the Special Administrative Region of
Hong Kong which operates in the health supplement industry.
On
August 31, 2012 the Company entered into a stock exchange agreement with United Century Holdings Limited, a privately held corporation.
On September 1 2012, the Company consummated the transaction contemplated by the stock exchange agreement. All of the capital
stock of United Century Holdings Limited was exchanged for an aggregate of 20,003,319 shares of the Company’s capital stock.
The Company became a 100% holding company of United Century Holdings Limited.
United
Century Holdings Limited (“UCHL”) was incorporated on March 2, 2012 under the British Virgin Islands Business Companies
Act, 2004 with limited liabilities. UCHL is established as a special purpose holding company whose objective is to become a holding
company by consummate an acquisition, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more business located in Hong Kong. On July 10, 2012, UCHL executed an acquisition of 7,879,500 out of
8,000,000 ordinary shares, par value $0.1282 (HK$1) per share, of the United Asia Medical Network Company Limited (“UAM”)
and became a 98.49% holding company of UAM.
UAM
was incorporated on May 6, 1998 as a limited liability company under predecessor Hong Kong Companies Ordinance, Chapter 32. Its
principal business is trading of health supplement products and providing related medical and health consultancy services.
On
March 20, 2018, the Company acquired 3,000 shares of Dragon Jade Medical Company Limited (DJMC), representing 30% of the total
issued shares of DJMC, at a purchase price of $300 per share for total consideration of $900,000. On January 31, 2019, the Company
has sold the 3,000 shares of DJMC to the major shareholder of DJMC at $900,000.
On
December 31, 2018, the Company executed an acquisition of 100% issued and outstanding ordinary shares of Montrose Food & Wine
H.K.
Limited (“Montrose HK”) in consideration of $256,410.26 and 100,000 shares of the Company’s common stock. Montrose
HK was incorporated on June 30, 2019, as a limited liability company under predecessor Hong Kong Companies Ordinance, Chapter
32. Montrose HK’s business primarily focuses on importing and distribution of fine wine within Hong Kong and Macau SAR.
Details
of the Company’s subsidiaries (which together with the Company are collectively referred to as the “Group”)
and their principal activity as of March 31, 2019 were as follows:
Name
|
|
Date of incorporation/ establishment
|
|
Place of incorporation/ registration and operation
|
|
Percentage of equity interest attributable to the Company
|
|
|
Principal activities
|
Alpha Ultimate Ltd. (“AUL”)
|
|
April 11, 2012
|
|
Hong Kong
|
|
|
100
|
%
|
|
Health supplement trading
|
United Century Holdings Ltd. (“UCHL”)
|
|
March 2, 2012
|
|
BVI
|
|
|
100
|
%
|
|
Investment holding
|
United Asia Medical Network Company Limited (“UAM”)
|
|
May 6, 1998
|
|
Hong Kong
|
|
|
98.49
|
%
|
|
Health supplement trading
|
Montrose Food & Wine H.K. Limited (“Montrose HK”)
|
|
June 30, 1989
|
|
Hong Kong
|
|
|
100
|
%
|
|
Fine wine distribution
|
Montrose Fine Wines (Macau) Limited (‘Montrose Macau”)
|
|
March 28, 2013
|
|
Macau SAR
|
|
|
100
|
%
|
|
Inactive
|
Montrose Fine Wines Beijing Limited (“Montrose Beijing”)
|
|
September 7, 2017
|
|
PR China
|
|
|
100
|
%
|
|
Inactive
|
2.
Summary of Significant Accounting Policies
(a)
Basis of Consolidation
The
accompanying consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting
principles in the United States of America.
The
consolidated financial statements include the accounts of the Company and its subsidiary. All significant inter-company accounts
and transactions have been eliminated in consolidation.
(b)
Use of Estimates
In
preparing financial statements in conformity with US GAAP, 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 periods. Significant estimates include depreciation. Actual results could
differ from those estimates.
(c)
Cash and Cash Equivalents
The
Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be
cash equivalents. As of March 31, 2019, the Company did not have any cash equivalents.
(d)
Inventories
Inventories
are stated at the lower of cost or net realizable value (market value). The cost of raw materials is determined on the basis of
weighted average. The cost of finished goods is determined on the weighted average basis and comprises direct materials, direct
labor and an appropriate proportion of overhead.
Net
realizable value is based on estimated selling prices less any further costs expected to be incurred for completion and selling
expense.
(e)
Accounts Receivable
Accounts
receivable are recognized and carried at net realizable value. An allowance for doubtful accounts will be recorded in the period
when a loss is probable based on an assessment of specific evidence indicating troubled collection, historical experience, accounts
aging, ongoing business relation and other factors. Accounts are written off after exhaustive efforts at collection. If accounts
receivable are to be provided for, or written off, they would be recognized in the consolidated statement of operations within
operating expenses. At March 31, 2019, the Company has no allowance for doubtful accounts, as per the management’s judgment
based on their best knowledge.
(f)
Deposit and prepayments
Deposit
and Prepayments represent cash paid in advance to suppliers. As of March 31, 2019, prepayments included cash paid advances to
suppliers, and prepaid expenses, such as water and electricity fees.
(g)
Plant and Equipment
Plant
and equipment is stated at cost. Depreciation is provided principally by use of the straight-line method over the useful lives
of the related assets, except for leasehold properties, which are depreciated over the terms of their related leases or their
estimated useful lives, whichever is less. Expenditures for maintenance and repairs, which do not improve or extend the expected
useful life of the assets, are expensed to operations while major repairs are capitalized.
The
estimated useful lives are as follows:
Furniture
and fittings
|
|
5
years
|
Computer
equipment
|
|
5
years
|
The
gain or loss on disposal of property, plant and equipment is the difference between the net sales proceeds and the carrying amount
of the relevant assets, and, if any, is recognized in the statement of operations.
(h)
Impairment of Assets
The
Company periodically evaluates the carrying value of long-lived assets to be held and used, including intangible assets subject
to amortization, when events and circumstances warrant such a review, pursuant to the guidelines established in FASB ASC 360 Property,
Plant, and Equipment (formerly Statement of Financial Accounting Standards (“SFAS”) No. 144). The carrying value of
a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable
and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds
the fair market value of the long-lived asset. Fair market value is determined primarily using the anticipated cash flows discounted
at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in a similar manner,
except that fair market values are reduced for the cost to dispose.
(i)
Income Taxes
Income
taxes are provided on an asset and liability approach for financial accounting and reporting of income taxes. Any tax paid
by subsidiaries during the year is recorded. Current tax is based on the profit or loss from ordinary activities adjusted for
items that are non- assessable or disallowable for income tax purpose and is calculated using tax rates that have been
enacted or substantively enacted at the balance sheet date. Deferred income tax liabilities or assets are recorded to reflect
the tax consequences in future years of differences between the tax basis of assets and liabilities and the financial
reporting amounts at each year end.
A
valuation allowance is recognized if it is more likely than not that some portion, or all, of a deferred tax asset will not be
realized.
(j)
Revenue Recognition
Revenues
represent the invoiced value of goods sold recognized upon the shipment of goods to customers. Revenues are recognized when all
of the following criteria are met:
●
|
Persuasive
evidence of an arrangement exists;
|
|
|
●
|
Delivery
has occurred or services have been rendered;
|
|
|
●
|
The
seller’s price to the buyer is fixed or determinable; and
|
|
|
●
|
Collectability
is reasonably assured.
|
(k)
Foreign Currency Transactions
The
consolidated financial statements of the Company are presented in United States Dollars (“US$”). Transactions in foreign
currencies during the period are translated into US$ at the exchange rates prevailing at the transaction dates. Monetary assets
and liabilities denominated in foreign currencies at the balance sheet date are translated into US$ at the exchange rates prevailing
at that date. All transaction differences are recorded in the income statement.
The
accompanying consolidated financial statements are presented in United States dollars (US$). The Company’s subsidiary in
Hong Kong has its local currency, Hong Kong Dollars (“HK$”), as its functional currency. On consolidation, the financial
statements of the Company’s subsidiary in Hong Kong is translated from HK$ into US$ in accordance with FASB ASC Topic 830
Foreign Currency Matters (formerly SFAS No. 52, “Foreign Currency Translation”). During 2017, 2018 and 2019, the Hong
Kong dollars are translated from HK$ with a ratio of US$1.00=HK$7.80, a fixed exchange rate maintained between Hong Kong and United
States derived from the Hong Kong Monetary Authority pegging HK$ and US$ monetary policy. Accordingly, all assets and liabilities
are translated at the exchange rates prevailing at the balance sheet dates and all income and expenditure items are translated
at the average rates for each of the period. Translation of amounts from HK$ into US$ has been made at the following exchanges
rates for the respective periods:
|
|
For the Years Ended March 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Twelve months ended HKD:USD exchange rate
|
|
|
7.8
|
|
|
|
7.8
|
|
|
|
7.8
|
|
Average twelve months ended HKD:USD exchange rate
|
|
|
7.8
|
|
|
|
7.8
|
|
|
|
7.8
|
|
Twelve months ended RMB:USD exchange rate
|
|
|
N/A
|
|
|
|
6.23944
|
|
|
|
N/A
|
|
Average twelve months ended RMB:USD exchange rate
|
|
|
N/A
|
|
|
|
6.23944
|
|
|
|
N/A
|
|
(l) Fair Value of Conversion Features
In accordance with FASB ASC
815 Derivatives and Hedging, the conversion feature of the Convertible Notes is separated from the debt instrument and accounted
for separately as a derivative instrument. On the date the Convertible Notes are issued, the conversion feature was recorded as
a liability at its fair value, with future decreases in fair value recognized as earnings and increases in fair values recognized
as expenses.
The Company used the
Black-Scholes-Merton option-pricing model to obtain the fair value of the conversion feature. The Company’s expected
volatility assumption is based on the historical volatility of the Company’s stock. The expected life assumption is
primarily based on the expiration date of the conversion features. The risk-free interest rate for the expected term of the
conversion features is based on the U.S. Treasury yield curve in effect at the time of measurement.
(m)
Earnings/(Losses) Per Share
Basic losses per share is
computed by dividing the earnings for the year by the weighted average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution of securities by including other potential common stock, including stock options
and warrants, in the weighted average number of common shares outstanding for a period, if dilutive.
(n)
Accumulated Other Comprehensive Income
Comprehensive income is
defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among
other disclosures, all items that are required to be recognized under current accounting standards as components of
comprehensive income are required to be reported in a financial statement that is presented with the same prominence as other
financial statements. Comprehensive income includes net income and the foreign currency translation changes for the year in
which such are obtained.
(o)
Stock-Based Compensation
We account for stock-based
compensation in accordance with FASB ASC 718 Compensation – Stock Compensation which requires that companies account for
awards of equity instruments issued to employees under the fair value method of accounting and recognize such amounts in their
statements of operations. Under FASB ASC 718 we are required to measure compensation costs for all stock-based awards at fair value
on the date of grant and recognize compensation expense in our consolidated statements of operations over the service period that
the awards are expected to vest.
(p)
Equity-Based Payments to Non-employees
The Company accounts for equity-based
compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50, Equity-Based Payments
to Non-Employees that are issued to Other Than Employees for Acquiring or in Conjunction with Selling Goods or Services. If the
fair value of goods or services received in a share-based payment transaction with nonemployees is more reliably measureable than
the fair value of the equity instruments issued, the fair value of the goods or services received shall be used to measure the
transaction. In contrast, if the fair value of the equity instruments issued in a share-based payment transaction with nonemployees
is more reliably measured than the fair value of the consideration received, the transaction shall be measured based on the fair
value of the equity instruments issued.
(q)
Going Concern
As shown in the accompanying consolidated financial
statements, the Company has an accumulated deficit of $16,449,314 as of March 31, 2019. The Company will be required to raise additional
capital to fund its operations, and will continue to attempt to raise capital resources from both related and unrelated parties
until such time as the Company is able to generate revenues sufficient to maintain itself as a viable entity. These factors have
raised substantial doubt about the Company’s ability to continue as a going concern. There can be no assurances that the
Company will be able to raise additional capital or achieve profitability. These consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
The Company plans to strengthen its core business,
control its overall expenditures, improve the efficiency of its operations and continue its efforts to expand by exploring additional
product lines and market opportunities.
The FASB has issued Accounting
Standards Update (ASU) No. 2018-01, Leases (Topic 842):Land Easement Practical Expedient for Transition to Topic 842, which clarifies
the application of the new leases guidance to land easements and eases adoption efforts for some land easements. ASU 2018-01 is
expected to reduce the cost of adopting the new leases standard for certain land easements. It is also an attempt to help ensure
that companies can make a successful transition to the standard without compromising the quality of information provided to investors
about these transactions. Land easements (also commonly referred to as rights of way) represent the right to use, access, or cross
another entity’s land for a specified purpose. Land easements are used by utility and telecommunications companies, for example,
when they need to take a small strip of land, or easement, to bury wires. Not all companies have historically accounted for them
as leases. Stakeholders pointed out that the requirement to evaluate all old and existing land easements, sometimes numbering in
the tens of thousands, to determine if they meet the definition of a lease under the new standard could be very costly. They also
noted there would be limited benefit to applying this requirement, as many of their land easements would not meet the definition
of a lease, or even if they met that definition, many of their easements are prepaid and, therefore, already are recognized on
the balance sheet. The land easements ASU addresses this by providing an optional transition practical expedient that, if elected,
would not require an organization to reconsider their accounting for existing land easements that are not currently accounted for
under the old leases standard; and Clarifying that new or modified land easements should be evaluated under the new leases standard,
once an entity has adopted the new standard.
The FASB issued an Accounting Standards Update
(ASU) that helps organizations address certain stranded income tax effects in accumulated other comprehensive income (AOCI) resulting
from the Tax Cuts and Jobs Act.
ASU No. 2018-02, Income Statement—Reporting Comprehensive
Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, provides financial statement
preparers with an option to reclassify stranded tax effects within AOCI to retained earnings in each period in which the effect
of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded.
The ASU requires financial statement preparers to disclose:
|
●
|
A description of the accounting policy for releasing
income tax effects from AOCI;
|
|
●
|
Whether they elect to reclassify the stranded income
tax effects from the Tax Cuts and Jobs Act; and
|
|
●
|
Information about the other income tax effects that
are reclassified.
|
The amendments affect any organization that is required
to apply the provisions of Topic 220, Income Statement—Reporting Comprehensive Income, and has items of other comprehensive
income for which the related tax effects are presented in other comprehensive income as required by GAAP. The amendments are effective
for all organizations for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early
adoption is permitted. Organizations should apply the proposed amendments either in the period of adoption or retrospectively to
each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs
Act is recognized.
The FASB Issues ASU
No. 2018-06 to Supersede Circular 202 for Depository and Lending Institutions. The FASB has issued Accounting Standards
Update (ASU) No.2018-06,Codification Improvements to Topic 942, Financial Services—Depository and Lending. ASU 2018-06
removes outdated guidance related to the Office of the Comptroller of the Currency’s Banking Circular 202, Accounting
for Net Deferred Tax Charges (Circular 202) in Subtopic 942-740, Financial Services—Depository and Lending—Income
Taxes and should have no effect on reporting entities. The amendments in ASU 2018-06 are effective immediately.
The FASB has issued
Accounting Standards Update (ASU) No. 2018-11 (“Targeted Improvements”—ASC 842 (“Leases”)).
This Update provides entities with an additional (and optional) transition method of which an entity initially applies new
lease standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings
in the fiscal year of adoption. Consequently, an entity’s reporting for the comparative periods presented in the
financial statements in which it adopts ASC 840 will continue to be in accordance with ASC 840. This Update also provides
lessors with a practical expedient, by class of underlying asset, to not separate nonlease components from the associated
lease component, where the timing and pattern of transfer of the nonlease component(s) and associated lease component are the
same, and the lease component, if accounting for separately, would be classified as an operating lease.
The FASB has issued Accounting Standards Update
(ASU) No. 2018-20 (“Narrow-Scope Improvements for Lessors”—ASC 842 (“Leases”)) as amendments of the
new lease standard. The amendments in this Update (1) provide an entity with an accounting policy election to account for the payment
for all sales (and other similar) taxes as a lessor cost; (2) require lessors to exclude from variable payments lessor costs paid
by lessees directly to third parties, and also require lessors to account for costs excluded from consideration of a contract that
are paid by the lessor and reimbursed by the lessee as variable payments; and (3) require lessors to allocate (rather than recognize
as currently required) certain variable payments to the lease and nonlease components when the changes in facts and circumstances
on which the variable payment is based occur and recognize the amount of variable payments allocated to nonlease components as
income in profit or loss in accordance with other Accounting Standards, such as ASC 606.
The FASB has issued Accounting Standards Update
(ASU) No. 2019-01 (“Codification Improvements”—ASC 842 (“Leases”)) as amendments of the new lease
standard. This Update reinstates the exception in the new lease standard for lessors that are not manufacturers or dealers to use
their costs, reflecting discounts, as the fair value of the underlying asset; and this Update clarifies the board’s original
intent by explicitly providing an exception to ASC 250-10-50-3 (“Accounting Changes and Error Corrections—General”)
interim disclosure requirements in the new lease standard transition disclosure requirements.
These Updates, excluding Accounting Standards Update
2019-01, are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. A modified
retrospective transition approach is required, applying the new lease standard to all leases existing at the date of initial adoption.
An entity may choose to use either (1) the beginning of the fiscal year of adoption or (2) the beginning of the earliest comparative
period presented in the financial statements as its date of initial adoption. Accounting Standards Update 2019-01 is effective
for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early application is permitted.
Accounting Standards Update 2019-01 is applied retrospectively as of the date that the new lease standard is first applied. The
Company and its subsidiaries will adopt these Updates, including Accounting Standards Update 2019-01, on April 1, 2019 and use
the beginning of the fiscal year of adoption as the date of initial adoption. Consequently, financial information of comparative
period will not be updated and the disclosures required under the new lease standard will not be provided for periods before April
1, 2019.
The FASB has issued Accounting Standards Update
(ASU) No. 2018-12 (“Targeted Improvements to the Accounting for Long-Duration Contracts”—ASC 944 (“Financial
Services—Insurance”)). This Update changes the recognition, measurement, presentation and disclosure requirements for
long duration contracts issued by an insurance entity. This Update requires an insurance entity to review and, if there is a change,
update cash flow assumptions at least annually and to update discount rate used for liability for future policy benefits at each
reporting date for nonparticipating traditional long-duration and limited-payment contracts. The effect of updating the discount
rate is recognized in other comprehensive income (loss). This Update also requires market risk benefits to be measured at fair
value, and simplifies amortization of deferred acquisition costs. Furthermore, this Update requires additional disclosures for
long-duration contracts. This Update is effective for fiscal years beginning after December 15, 2020, and interim periods within
those fiscal years. Early application is permitted. For the liability for future policy benefits and deferred acquisition costs,
this Update is applied to contracts in force as of beginning of the earliest period presented (hereinafter, “the transition
date” of this Update) on a modified retrospective basis, and an insurance entity may elect to apply retrospectively. For
the market risk benefits, this Update is applied retrospectively at the transition date, and the difference between fair value
and carrying value requires an adjustment to retained earnings at the transition date. The cumulative effect of changes in the
instrument-specific credit risk between contract inception date and the transition date should be recognized in accumulated other
comprehensive income at the transition date. The Company and its subsidiaries will adopt this Update on April 1, 2021. The Company
and its subsidiaries are currently evaluating the effect that the adoption of this Update will have on the Company and its subsidiaries’
results of operations or financial position, as well as changes in disclosures required by this Update.
In August 2018, Accounting
Standards Update 2018-13 (“Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement”—ASC
820 (“Fair Value Measurement”)) was issued. This Update modifies and adds the disclosure requirements for Fair Value
Measurements. This Update also removes disclosure requirements of the amount of and reasons for transfers between Level 1 and Level
2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation processes for Level 3 fair
value measurements. This Update is effective for fiscal years, and interim periods within those fiscal years, beginning after December
15, 2019 and early adoption is permitted. An entity is also permitted to early adopt any removed or modified disclosure requirements
and delay adoption of the additional disclosure requirements until their effective date. Removals and modifications of disclosure
requirements should be mainly applied retrospectively to all periods presented upon their effective date, while the additional
disclosure requirements should be applied prospectively for only the most recent interim or annual period presented in the initial
fiscal year of adoption. The Company and its subsidiaries early adopted the removals of disclosure requirements from the three
months ended September 30, 2018. The Company and its subsidiaries will adopt the modifications and additions of disclosure requirements
from fiscal 2021. Since this Update relates to disclosure requirements, the adoption will not have an effect on the Company and
its subsidiaries’ results of operations or financial position.
In August 2018, Accounting
Standards Update 2018-14 (“Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans”—ASC
715-20 (“Compensation—Retirement Benefits—Defined Benefit Plans—General”)) was issued. This Update
adds and clarifies the disclosure requirements for Pension Plans, and removes certain disclosure requirements such as the amounts
in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal
year. This Update is effective for fiscal years ending after December 15, 2020. The amendments in this Update should be applied
on a retrospective basis to all periods presented. Early adoption is permitted. The Company and its subsidiaries will adopt this
Update from fiscal 2021. Since this Update relates to disclosure requirements, the adoption will not have an effect on the Company
and its subsidiaries’ results of operations or financial position.
3.
Income Taxes
BRITISH VIRGIN ISLANDS
The Company was incorporated in the British Virgin
Islands and, under the current laws of the British Virgin Islands, is not subject to income taxes.
HONG KONG
No Hong Kong Profits Tax has been provided in the financial
statements as Alpha Ultimate Ltd, United Asia Medical Network Co Ltd and Montrose Food & Wine H.K. Limited were in a tax loss
position during the year.
4.
Retirement and Welfare Benefits
The employees of the Company are members of the Mandatory
Provident Fund operated by the Hong Kong government. The company contributes 5% according to the different payroll range of the
employee, and the maximum amount of contribution is up to $192 (HK$1,500) per month.
5.
Cash and Bank Deposit
Cash and cash equivalents are summarized as follows:
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Cash at Bank
|
|
$
|
483,377
|
|
|
$
|
4,756,354
|
|
Cash on Hand
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
483,377
|
|
|
$
|
4,756,354
|
|
6.
Loan Receivable
On January 19, 2017, Dragon Jade
International Limited entered into an agreement with an unrelated party in the amount of $65,850. The amount is interest
free, secured by the assets of unrelated party and has no fixed term of repayment. Balance due at March 31, 2019 is $184,879.
This loan was rendered to the unrelated party in connection with FDA compliance service for the benefit of the Company.
On March 7, 2017, a subsidiary, United Asia Medical
Network Company Limited (“UAMN”) entered into the loan agreement with an unrelated party in the amount of $256,410,
plus the term of the loan amount is bearing 12% interest per annum, without collateral and the due date is extended from March
7, 2018 to May 31, 2018 as agreed by UAMN and the unrelated party.
On August 7, 2017, a subsidiary, United Asia Medical
Network Company Limited (“UAMN”) entered into the loan agreement with an unrelated party in the amount of $256,410,
plus the term of the loan amount is bearing 5% interest per annum, without collateral and the due date is on August 7, 2019.
On January 31, 2019, the Company has sold the
3,000 shares of Dragon Jade Medical Company Limited (DJMC) to the major shareholder of DJMC at $900,000. $549,873 have been received
before March, 31, 2019. $350,127 have been received before May 31, 2019.
|
|
2019
|
|
|
2018
|
|
Loans receivable
|
|
|
|
|
|
|
An unrelated party (Interest-free)
|
|
$
|
535,006
|
|
|
$
|
184,879
|
|
An unrelated party (12% interest bearing)
|
|
|
-
|
|
|
|
289,287
|
|
An unrelated party (5% interest bearing)
|
|
|
145,571
|
|
|
|
226,273
|
|
Total
|
|
$
|
680,577
|
|
|
$
|
700,439
|
|
|
|
|
|
|
|
|
|
|
Loan interest earned and accrued
|
|
$
|
14,183
|
|
|
$
|
39,337
|
|
7.
Trade Receivables, Net
Trade receivables comprise the followings:
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Trade receivables, gross
|
|
$
|
541,064
|
|
|
$
|
2,090
|
|
Provision for doubtful debts
|
|
|
-
|
|
|
|
-
|
|
Trade receivables, net
|
|
$
|
541,064
|
|
|
$
|
2,090
|
|
All of the above trade receivables are dued and collected
within a period of one year of aging.
Allowance was made when collection
of the full amount is no longer probable. Management reviews and adjusts this allowance periodically based on historical experience,
current economic climate as well as its evaluation of the collectability of outstanding accounts. The Group evaluates the credit
risks of its customers utilizing historical data and estimates of future performance. No provision for doubtful debts have been
provided as of March 31, 2019 and 2018 as the Company does not have bad debt history before.
The following table sets forth the major trade receivable
accounts:-
|
|
|
|
|
Aging
|
|
Customers
|
|
Amount
|
|
|
Rate
|
|
|
Not past
due
|
|
|
Past due 1-30 days
|
|
|
Past due 30 days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer A
|
|
$
|
46,310
|
|
|
|
8.56
|
%
|
|
$
|
46,310
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Customer B
|
|
$
|
40,308
|
|
|
|
7.45
|
%
|
|
$
|
7,426
|
|
|
$
|
-
|
|
|
$
|
32,882
|
|
Customer C
|
|
$
|
17,095
|
|
|
|
3.16
|
%
|
|
$
|
12,370
|
|
|
$
|
4,725
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trade receivables
|
|
$
|
541,064
|
|
|
|
100.00
|
%
|
|
$
|
372,059
|
|
|
$
|
76,670
|
|
|
$
|
92,335
|
|
8. Trade Payables
The following table sets forth the major trade payables accounts:-
|
|
|
|
|
Aging
|
|
Suppliers
|
|
Amount
|
|
|
Rate
|
|
|
Not past
due
|
|
|
Past due 1-30 days
|
|
|
Past due 30 days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplier A
|
|
$
|
156,901
|
|
|
|
33.50
|
%
|
|
$
|
156,901
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Supplier B
|
|
$
|
38,623
|
|
|
|
8.25
|
%
|
|
$
|
38,623
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Supplier C
|
|
$
|
35,760
|
|
|
|
7.64
|
%
|
|
$
|
8,059
|
|
|
$
|
27,701
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trade payables
|
|
$
|
468,362
|
|
|
|
100.00
|
%
|
|
$
|
347,333
|
|
|
$
|
78,905
|
|
|
$
|
42,127
|
|
9. Inventories
Inventories comprise the followings:
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Finished goods
|
|
$
|
750,028
|
|
|
$
|
124,556
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
750,028
|
|
|
$
|
124,556
|
|
10. Property, Plant and Equipment, Net
Property, plant and equipment, net comprise the followings:
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
At cost
|
|
|
|
|
|
|
Leasehold improvement, furniture and office equipment
|
|
$
|
516,382
|
|
|
$
|
179,198
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
Less: accumulated depreciation
|
|
|
(406,935
|
)
|
|
|
(73,820
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
109,447
|
|
|
$
|
105,378
|
|
Depreciation expenses are included in the statement
of income as follows:
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
$
|
59,645
|
|
|
$
|
38,922
|
|
|
|
|
|
|
|
|
|
|
Total depreciation expenses
|
|
$
|
59,645
|
|
|
$
|
38,922
|
|
11.
Earnings Per Share
The computations of basic earnings per share of common
stock are as follows:
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Net Gain / (Loss)
|
|
$
|
(5,468,758
|
)
|
|
$
|
(5,969,001
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
$
|
57,023,319
|
|
|
$
|
56,880,579
|
|
|
|
|
|
|
|
|
|
|
Earnings / (losses) per share
|
|
$
|
(0.096
|
)
|
|
$
|
(0.105
|
)
|
Dilutive earnings
per share will not be calculated if the effect is anti-dilutive.
12.
Common Shares To Be Issued
On December 31, 2018, the Company executed an acquisition of
100% issued and outstanding ordinary shares of Montrose Food & Wine H.K. Limited (“Montrose HK”) in consideration
of $256,410.26 and 100,000 shares of the Company’s common stock. 100,000 shares of the Company’s common stock were
issued on April 9, 2019. Issuance of the 100,000 shares was recorded at $360,000 based on $3.60 per share, the closing price of
the Company’s common stock as of December 31, 2018.
13. Income Taxes
The Company, including the
holding company Dragon Jade International Limited and intermediate holding company United Century Holdings Ltd., is being registered
in the British Virgin Islands and which conducts all of its business through its subsidiaries incorporated in Hong Kong, is not
subject to federal income tax until the operating profits was rebounded back to Untied States. The subsidiaries are Alpha Ultimate
Ltd, United Asia Medical Network Co Ltd and Montrose Food & Wine H.K. Limited (see note 1).
Alpha Ultimate Ltd, United
Asia Medical Network Co Ltd, and Montrose Food & Wine H.K. Limited, being registered in the Hong Kong, are subject to HK’s
Profit Tax (“HKPT”). Under applicable income tax laws and regulations, an enterprise located in Hong Kong, including
the district where our operations are located, is subject to a rate of 16.5% for the years ended March 31, 2019.
The Group
uses the asset and liability method, where deferred tax assets and liabilities are determined based in the expected future tax
consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting
purposes.
A reconciliation between the income tax computed at
the HK statutory rate and the Group’s provision for income tax is as follows:
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
HKPT
|
|
|
16.5
|
%
|
|
|
16.5
|
%
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
16.5
|
%
|
|
|
16.5
|
%
|
14. Related Party Transactions
Since April 1, 2012, there
has been no related party transaction, except (i) business development fees of $$2,823,000 paid to Woody Fire Consultancy Limited,
a major shareholder of the Company and (ii) the amount of $87,774 due LAI Yat Man for funds advanced to the Company, AUL and UAM,
which amount has no collateral, due date or maturity date and does not accrue any interest.
15. Concentrations and Credit Risk
The Company operates principally in Hong Kong and grants
credit to its customers in this geographic region. Hong Kong has a relatively stable economy. However, it is always possible that
unanticipated events in foreign countries could disrupt the Company’s operations.
Financial instruments that potentially subject
the Group to a concentration of credit risk consist of cash and accounts receivable. The Company does not require collateral to
support financial instruments that are subject to credit risk.
16. Commitments and Contingencies
As of March 31, 2019 and 2018,
the company did not have any contingent liabilities.
17. Acquisition
On December 31, 2018, the
Company executed an acquisition of 100% issued and outstanding ordinary shares of Montrose Food & Wine H.K. Limited
(“Montrose HK”) in consideration of $256,410.26 and 100,000 shares of the Company’s common stock. Montrose
HK was incorporated on June 30, 1989, as a limited liability company under predecessor Hong Kong Companies Ordinance, Chapter
32. Montrose HK’s business primarily focuses on importing and distribution of fine wine within Hong Kong and Macau
SAR.
The purchase price has been allocated
based on Management’s estimates and independent appraisal of fair values as follows:
Component
|
|
Acquiree’s carrying
amount
|
|
|
Fair value adjustments
|
|
|
Purchase price
allocated
|
|
Property, plant and equipment
|
|
$
|
14,324
|
|
|
|
-
|
|
|
$
|
14,324
|
|
Inventories
|
|
$
|
592,681
|
|
|
|
-
|
|
|
$
|
592,681
|
|
Trade receivables, deposits, prepayment and other receivables
|
|
$
|
648,693
|
|
|
|
-
|
|
|
$
|
648,693
|
|
Trade payables and accruals
|
|
$
|
(591,811
|
)
|
|
|
-
|
|
|
$
|
(591,811
|
)
|
Cash
|
|
$
|
83,536
|
|
|
|
-
|
|
|
$
|
83,536
|
|
Loan payables
|
|
$
|
(453,225
|
)
|
|
|
-
|
|
|
$
|
(453,225
|
)
|
Intangible assets - Customer relationship
|
|
|
-
|
|
|
|
62,692
|
|
|
|
62,692
|
|
|
|
$
|
294,198
|
|
|
|
62,692
|
|
|
$
|
356,890
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
$
|
259,520
|
|
Total purchase price
|
|
|
|
|
|
|
|
|
|
$
|
616,410
|
|
Montrose HK’s results of operations are consolidated
with the Company effective January 1, 2019.
Goodwill of $259,520 and intangible asset of customer relationship
of $62,692 were written off because the Company estimated that the wine business of Montrose HK is expected to be adversely affected
by the economic downturn in Hong Kong.
18. Investment in Associate
On March 20, 2018, the Company acquired 3,000 shares
of Dragon Jade Medical Company Limited (DJMC), representing 30% of the total issued shares of DJMC, at a purchase price of $300
per share for total consideration of $900,000.
DJMC was incorporated on January 25, 2017, as
a limited liability company under Hong Kong Companies Ordinance, Chapter 32. DJMC was formed to offering medical equipment and
aircraft financing solutions, including both direct financial leasing and sale-leaseback services to customers in health care and
airlines in China through 100% owned subsidiary Shenzhen Dragon Jade Financial Leasing Company Limited formed under the laws of
the Peoples’ Republic of China. On January 25, 2017, Kwok Wing Fung, CFO of the Company, was appointed as a director of DJMC.
On January 31, 2019, the Company has sold the 3,000
shares of DJMC to the major shareholder of DJMC at $900,000.
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Balance at the beginning of year
|
|
|
891,984
|
|
|
|
-
|
|
Acquisition of 3,000 shares in DJMC
|
|
$
|
-
|
|
|
$
|
900,000
|
|
Share of equity gain / (loss)
|
|
|
1,573
|
|
|
|
(8,016
|
)
|
Disposition of 3,000 shares in DJMC
|
|
|
(900,000
|
)
|
|
|
-
|
|
Gain on disposition of 3,000 shares in DJMC
|
|
|
6,443
|
|
|
|
-
|
|
Balance at the end of year
|
|
$
|
-
|
|
|
$
|
891,984
|
|
19. Segment Reporting
Business segments of the Company
are primarily Healthcare products and services (HC) and Wine Distribution (WD). Businesses of HC are operated by United Asia Medical
Network Company Limited and Alpha Ultimate Limited. Businesses of WD are operated by Montrose Food & Wine H.K. Limited.
Business segments
Year ended March 31, 2019
|
|
HC
|
|
|
WD
|
|
|
Total
|
|
Revenues
|
|
$
|
323,883
|
|
|
$
|
599,275
|
|
|
$
|
923,158
|
|
Cost of revenues
|
|
|
(31,373
|
)
|
|
|
(370,412
|
)
|
|
|
(401,785
|
)
|
Gross profits
|
|
|
292,510
|
|
|
|
228,863
|
|
|
|
521,373
|
|
Identifiable operating expenses
|
|
|
(3,902,731
|
)
|
|
|
(346,524
|
)
|
|
|
(4,249,255
|
)
|
Segment loss
|
|
|
(3,610,221
|
)
|
|
|
(54,969
|
)
|
|
|
(3,727,882
|
)
|
Un-allocable expenses
|
|
|
|
|
|
|
|
|
|
|
(1,523,687
|
)
|
Operating loss
|
|
|
|
|
|
|
|
|
|
|
(5,251,569
|
)
|
Other income, net
|
|
|
|
|
|
|
|
|
|
|
40,758
|
|
Goodwill written-off
|
|
|
|
|
|
|
|
|
|
|
(259,520
|
)
|
Share in associate’s profit / (loss)
|
|
|
|
|
|
|
|
|
|
|
1,573
|
|
Loss before income tax
|
|
|
|
|
|
|
|
|
|
|
(5,468,758
|
)
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
(5,468,758
|
)
|
20. Legal Proceedings
Dragon
Jade International Limited, the Plaintiff in Civil Action No.8:17-cv-02422, United States District Court for the Middle District
of Florida, Tampa Division, has made claims against the Defendants, Ultroid LLC and Ultroid Technologies Inc, for breaches of an
Exclusive Option and Remediation Agreement dated January 19, 2017 and a Security Agreement dated January 20, 2017, for compensatory
damages and liquidated damages of US$2,000,000, including the marshalling of assets identified in the Security Agreement and enforcing
its rights under the UCC Financing Statements and interest. Following various motions for judgment on the pleadings and amendments
of the Counterclaims of the Defendants, the Plaintiff defeated all RICO counterclaims and alleged lack of shareholder approval
counterclaim brought by the Defendants. All remaining counterclaims of the Defendants except for one counterclaim alleging
breach of contract by the Plaintiff are the subject of a Motion for Partial Summary Judgment made by the Plaintiff against the
Defendants, for which the Plaintiff is expecting a decision of the court. In the event that these counterclaims of the Defendants
are dismissed, the case will go to trial on September 30, 2019 to resolve the claims of the Plaintiff and the remaining counterclaim(s)
of the Defendants.
21. Subsequent Events
The Company has evaluated events subsequent to
March 31, 2019 to assess the need for potential recognition or disclosure in this report. Such events were evaluated through the
date these financial statements were available to be issued. Based upon this evaluation, it was determined that no subsequent events
occurred that require recognition or disclosure in the financial statements.
39