UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 8-K
Amendment
No. 2
CURRENT REPORT
Pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
Date
of Report (Date of Earliest Event Reported): January 26, 2016 (October 19, 2015)
WAVE SYNC
CORP.
(Exact
name of registrant as specified in its charter)
Delaware |
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001-34113 |
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74-2559866 |
(State or other jurisdiction
of incorporation) |
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(Commission
File Number) |
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(IRS Employer
Identification No.) |
40 Wall Street, 28th Floor, New York, NY 10005 |
(Address of principal executive offices) |
Registrant’s telephone number,
including area code: 646-512-5855
Check the appropriate box below
if the Form 8-K filing is intended to simultaneously satisfy the filing obligation to the registrant under any of the following
provisions:
¨ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain information
contained in this Current Report on Form 8-K include forward-looking statements which are not historical reflect our current expectations
and projections about our future results, performance, liquidity, financial condition, prospects and opportunities and are based
upon information currently available to us and our management and our management’s interpretation of what is believed to
be significant factors affecting the business, including many assumptions regarding future events. Such forward-looking
statements include statements regarding, among other things:
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our
ability to reach widespread commercial viability; |
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our anticipated
future operation and profitability; |
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our future
financing capabilities and anticipated need for working capital; |
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the anticipated
trends in our industry; |
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our ability
to expand our marketing and sales capabilities; |
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acquisitions
of other companies or assets that we might undertake in the future; |
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our operations
in China and the regulatory, economic and political conditions in China; and |
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current and
future competition. |
Forward-looking
statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable
by use of the words “may,” “should,” “expect,” “anticipate,” “estimate,”
“believe,” “intend,” or “project” or the negative of these words or other variations on these
words or comparable terminology. Actual results, performance, liquidity, financial condition, prospects and opportunities
could differ materially from those expressed in, or implied by, these forward-looking statements as a result of various risks,
uncertainties and other factors, including the ability to raise sufficient capital to continue our operations. Actual
events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including,
without limitation, the risks outlined under “Risk Factors” and matters described in this Current Report on Form 8-K
generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements
contained herein will in fact occur.
Potential purchasers
of our common stock or other securities should not place undue reliance on any forward-looking statements. Except as expressly
required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether
as a result of new information, future events, changed circumstances or any other reason.
EXPLANATORY
NOTE
Wave Sync
Corp., formerly known as China Bio-Energy Corp. (the “Company”), is filing this Amendment No.2 to the
Company’s Current Report on Form 8-K (the “Amendment No. 1”) to amend the Company’s Current Report on
Form 8-K (the “Original 8-K”) originally filed with the Securities and Exchange Commission (the
“SEC”) on October 20, 2015 as amended on December 14, 2015.
This Current Report on
Form 8-K/A being filed in connection with a series of transactions consummated by the Registrant, and certain related events and
actions taken by the Registrant.
This Current Report
on Form 8-K/A includes the following items on Form 8-K/A:
Item 1.01 |
Entry into a Material Definitive Agreement |
Item 2.01 |
Completion of Acquisition or Disposition of Assets |
Item 3.02 |
Unregistered Sale of Equity Securities |
Item 5.01 |
Changes in Control of Registrant |
Item 5.02 |
Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers |
Item 5.03 |
Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year |
Item 5.06 |
Change in Shell Company Status |
Item 9.01 |
Financial Statements and Exhibits |
Certain Definitional Conventions
Used in this Current Report
In this Current
Report on Form 8-K/A, unless the context requires or is otherwise specified, references to the “Registrant,” “Company,”
“we,” “us,” “our” and similar expressions include the following entities, after giving effect
to the Acquisition (as defined herein):
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(i) |
Wave Sync Corp., formerly known as China Bio-Energy Corp., a Delaware company (most commonly referred to herein as the “Registrant” or “WAYS” as the context requires), which is our publicly traded parent company; |
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(ii) |
EGOOS Mobile Technology Company Limited, a British Virgin Islands company and a wholly-owned subsidiary of the Registrant (“EGOOS BVI”); |
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(iii) |
EGOOS Mobile Technology Company Limited, a Hong Kong company (“EGOOS HK”) and a wholly owned subsidiary of EGOOS BVI; |
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(iv) |
Move the Purchase Consulting Management (Shenzhen) Co., Ltd., a wholly owned subsidiary of EGOOS HK incorporated in the People’s Republic of China, or PRC, or China as a wholly foreign-owned enterprise (“WFOE” or “Yigou”); |
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(v) |
Guangzhou Yuzhi Information Technology Co., Ltd., our principal operating subsidiary, which is a Chinese variable interest entity that the WOFE controls through certain contractual arrangements (“Guangzhou Yuzhi”); |
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(vi) |
Shenzhen Qianhai Exce-card Technology Co., Ltd., a Chinese corporation and a wholly owned subsidiary of Guangzhou Yuzhi (“Shenzhen Exce-card”); and |
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(vii) |
Guangzhou Rongsheng Information Technology Co., Ltd., a Chinese corporation and a wholly owned subsidiary of Shenzhen Exce-card (“Guangzhou Rongsheng”, together with Guangzhou Yuzhi and Shenzhen Exce-card, is collectively referred to herein as “Guangzhou Yuzhi and its Subsidiaries”). |
Item 1.01 Entry into a Material
Definitive Agreement
Share Purchase Agreement
Reference is
made to Item 2.01 of this Current Report for a description of a Share Purchase Agreement, entered into on October 19, 2015 (the
“Share Purchase Agreement”), and a related acquisition transaction (the “Acquisition”) by and between
the Registrant, EGOOS BVI and the sole shareholder of EGOOS BVI.
As a result
of the Acquisition, EGOOS BVI has become a wholly-owned subsidiary of the Registrant and business of the Registrant is now the
business of EGOOS’ indirect, controlled subsidiaries Guangzhou Yuzhi, Shenzhen Exce-card and Guangzhou Rongsheng, corporations
organized in the PRC.
Item 2.01 Completion of Acquisition
or Disposition of Assets
On October 19, 2015,
Wave Sync Corp., formerly known as China Bio-Energy Corp.(the “Registrant” or the “Company”) entered into
a Share Purchase Agreement (the “Share Purchase Agreement”) with EGOOS Mobile Technology Company Limited, a British
Virgin Islands holding company (“EGOOS BVI”), which owns 100% of EGOOS Mobile Technology Company Limited, a Hong Kong
company (“EGOOS HK”), which owns 100% of Move the Purchase Consulting Management (Shenzhen) Co., Ltd. (“WOFE”
or “Yigou”), a foreign investment enterprise organized under the laws of the PRC, and which has, through various contractual
agreements, management control and the rights to the profits of Guangzhou Yuzhi Information Technology Co., Ltd., a corporation
organized under the laws of the PRC as a variable interest entity(“Guangzhou Yuzhi”), which owns 100% of Shenzhen
Qianhai Exce-card Technology Co., Ltd., a Chinese corporation (“Shenzhen Exce-card”), which owns 100% of Guangzhou
Rongsheng Information Technology Co., Ltd., a Chinese corporation (“Guangzhou Rongsheng”, together with Guangzhou
Yuzhi and Shenzhen Exce-card, is collectively referred to herein as “Guangzhou Yuzhi and its Subsidiaries”), and the
sole shareholder of EGOOS BVI. Guangzhou Yuzhi and its Subsidiaries engage in research, development, marketing and distribution
of inlays/audio chips for audio bank card products.
The Share
Purchase Agreement provides for an acquisition transaction (the “Acquisition”) in which the Registrant, through
the issuance of a convertible note in the principal sum of Fifteen Million U.S. Dollars ($15,000,000) to EGOOS BVI’s
sole shareholder, will acquire 100% of EGOOS BVI. Such note is convertible at a conversion price equal to $1.00 per share
into 15,000,000 shares of the Company’s common stock, on a post Reverse Split (as defined below) basis, at
noteholder’s election, at any time after 30 days following issuance of such note but prior to two year anniversary of
the date of such note (the “Maturity Date”), provided that the Company has effectuated a reverse split of all of
the issued and outstanding Common Stock as of the date of the issuance of the note (the “Reverse Split”). The
outstanding principal amount of this note is payable on the Maturity Date, without interest, unless this note has been
earlier converted. Upon conversion of the note (the “Conversion”), the existing shareholders of the Registrant
will own an aggregate of 24.7% of the post-acquisition entity.
The closing of the
Acquisition (the “Closing”) took place on October 19, 2015 (the “Closing Date”). On the Closing Date,
pursuant to the terms of the Share Purchase Agreement, the Registrant acquired all of the outstanding equity securities of EGOOS
BVI from the sole shareholder of EGOOS BVI; and the shareholder of EGOOS BVI transferred and contributed all of his issued and
outstanding shares of EGOOS BVI to the Registrant. In exchange, the Registrant issued to the sole shareholder of EGOOS BVI a convertible
note, which may be converted into an aggregate of 15,000,000 Post-Split Common Shares of the Registrant. There is no material
relationship between the sole shareholder of EGGOS BVI and/or EGOOS BVI, on one hand, and the Company and its affiliates or associates,
on the other hand.
On August 5, 2015, Yigou entered into an Exclusive Service Agreement which entitles Yigou to substantially all
of the economic benefits of Guangzhou Yuzhi and its Subsidiaries in consideration of services provided by Yigou to Guangzhou Yuzhi
and its Subsidiaries. In addition, Yigou entered into certain agreements with each of Wenbin Yang, Ping Li, (collectively, the
“Guangzhou Yuzhi shareholders”), as well as Guangzhou Yuzhi and its Subsidiaries, including (i) a Call Option Agreement
allowing Yigou to acquire the shares of Guangzhou Yuzhi as permitted by PRC laws, (ii) a Voting Rights Proxy Agreement that provides
Yigou with the voting rights of the Guangzhou Yuzhi shareholders and those of Guangzhou Yuzhi, and (iii) an Equity Pledge Agreement
that pledges the shares in Guangzhou Yuzhi and its Subsidiaries to Yigou. This VIE structure provides Yigou, a wholly-owned subsidiary
of EGOOS HK, with control over the operations and benefits of Guangzhou Yuzhi and its Subsidiaries without having a direct equity
ownership in Guangzhou Yuzhi and its Subsidiaries (EGOOS BVI, EGOOS HK, Guangzhou Yuzhi, Shenzhen Exce-card, Guangzhou Rongsheng
and Yigou are collectively referred to herein as the “Group”).
A director
and former CEO of the Company, Ms. Mei Yang, has since December 2013 worked as a vice president of Shenzhen Exce-Card, a wholly
owned subsidiary of Guangzhou Yuzhi, which is indirectly wholly-controlled by EGOOS BVI. Ms. Yang therefore was on both sides
of the Company’s transactions with EGOOS BVI. Ms. Yang does not hold any equity interest in EGOOS BVI or Shenzhen Exce-Card
and received no consideration in connection with the Acquisition.
As all of the
companies in the Group are under common control, this has been accounted for as a reorganization of entities and the financial
statements have been prepared as if the reorganization had occurred retroactively. The Registrant has consolidated the operating
results, assets and liabilities of Guangzhou Yuzhi and its Subsidiaries within its financial statements.
FORM 10 INFORMATION
Information in
response to this Item 2.01 below is keyed to the item numbers of Form 10.
Part I
Item 1. Description of Business.
Overview
Wave Sync Corp.
(“WAYS”) was incorporated on December 23, 1988 as a Delaware corporation. It became a shell company in July 2015 as
a result of terminating its contractual relationship with its then existing “variable interest entity” subsidiaries.
Through the Acquisition, the Registrant acquired EGOOS BVI and its principal operating subsidiaries, Guangzhou Yuzhi, Shenzhen
Exce-card and Guangzhou Rongsheng (“Guangzhou Yuzhi and its Subsidiaries”). A summary of the business of Guangzhou
Yuzhi and its Subsidiaries is described below.
General
EGOOS BVI, a
British Virgin Islands business company, acts as a holding company and indirectly controls Guangzhou Yuzhi (a variable interest
entity in China) and its Subsidiaries. EGOOS BVI’s sole source of income and operations is through its indirect, contractual
control of Guangzhou Yuzhi and its Subsidiaries.
Based in the
city of Guangzhou, Guangdong Province, China, Guangzhou Yuzhi and Guangzhou Rongsheng are principally engaged in software and information
technology services and share full-time employees with Shenzhen Exce-card.
Shenzhen Exce-card
is based in the city of Guangzhou, Guangdong Province, China, with branches in Beijing and Shanghai, and a business development
department in New York. Additionally, Shenzhen Exce-card has entered into a partnership agreement with UINT France located in
Saint Aubin, France (“UINT”), amended and supplemented by an amendment dated March 27, 2015 (as amended and supplemented,
the “Partnership Agreement”), pursuant to which UINT is engaged by Shenzhen Exce-card to conduct product research
and development (“R&D”) and other related services in connection with new audio signals, testing and producing
new inlays for audio bank card and assisting the card manufacturers with lamination test, new generation of audio card, and assisting
the card manufacturers with certification of the new audio card products.
Shenzhen Exce-card
is principally engaged in the design and production of inlays composed of flexible circuit boards for active smart cards and other
products in the related technological field, which provide a comprehensive solution for mobile payment. As of the date of this
Current Report, Shenzhen Exce-card has approximately 23 full-time employees.
In February
2015, Shenzhen Exce-card developed an electronic inlay utilizing innovative audio technology and embedded in a specialized IC
card product, namely, “audio bank card.” We were granted the patent (expiring in 2023) pertaining to such audio bank
cards inlay. The audio bank cards meets innovative product standards set forth by UnionPay, the only domestic bank card organization
in China as well as the only interbank network in mainland China. UnionPay has authorized its logo to be displayed on the audio
bank cards. However, it should be noted that we have no contractual agreement or arrangement with UnionPay with respect to audio
bank cards.
We supply and
sell electronic inlays embedded with audio chips and other modules to card manufacturers, such as Hengbao Co., Ltd. (“Hengbao”)
and Wuhan Tianyu Information Industry Co., Ltd. (“Tianyu”), which have established relationships with major banks
in China. Up to date in 2015, we generated revenue in the amount of RMB150,000 (approximately $23,602.72), from the aforementioned
sales to Tianyu.
We believe
our growth in the coming years may be supported by the continuing expansion of the market for bank cards and electronic payment
in the PRC. According to data compiled by the People’s Bank of China (the “PBOC”), by the end of 2014, the amount
of bank cards issued in aggregate reached 5 billion in the PRC.
We are seeking to develop and maintain long-term relationships
with major card issuers in China. Since 2014, they have been actively communicating with China Construction Bank (“CCB”),
one of China’s four major banks, in the pursuit of promoting new audio bank cards embedded with our inlays, which communications
led to CCB’s desire to launch a pilot audio bank card program to be operated by its Guangdong branch offices (“CCB
Guangdong”). Under this proposed program, 500,000 audio cards are expected to be manufactured by Tianyu, with inlays supplied
by Shenzhen Exce-card, and issued and distributed by CCB Guangdong to some of its 25 million customers. At a meeting among Shenzhen
Exce-card, Tianyu, and CCB Guangdong in Guangzhou, Guangdong Province, PRC held on September 24, 2015, CCB Guangdong indicated
that they would report to the individual finance department and procurement department of CCB’s headquarters for approval
to start the procurement process regarding these 500,000 audio bank cards. As of the date of this Current Report, there is no
definitive agreement entered into by CCB Guangdong regarding the procurement of the audio bank cards, and there is no assurance
that such agreement will be entered into or the pilot program will be launched. If this pilot program is launched and proved to
be successful, CCB is expected to issue 4 million audio bank cards in various locations in China.
We also plan
to develop relationships with the other three of China’s four major banks, i.e., China Industrial and Commercial Bank, Bank
of China, and Agricultural Bank of China, with the goal of substituting 10% of their bank card issuance with audio bank cards,
which represents up to 75 million audio bank cards annually.
Other than the research,
development, marketing and distribution of inlays for audio bank cards, we will seek to develop and expand our product and services
to other fields, which may include providing business consulting services, solutions and software products, and system development
services to card issuing banks, third party payment entities, and other card issuing entities, and may also include entering into
cooperation agreements with banks to issue co-branded cards in order to share annual fees and transaction fees generated by these
co-branded cards, and developing customers and commercial users via the operation of audio payment platform. Up to date in 2015,
we generated revenue in the amount of RMB900,000 (approximately $141,616.31) from selling a set of audio payment platform software
to Tianyu.
The executive office of the Company is located at 40 Wall Street, 28th Floor, New York, NY 10005.
Organization and Consolidated
Subsidiaries
EGOOS BVI’s
organizational structure was crafted to abide by the laws of the PRC and maintain tax benefits as well as internal organizational
efficiencies. EGOOS BVI’s post–acquisition organization structure is summarized below:
Overview of the Audio Bank Card
Market
The Global Bank Card Market
A report published
by the Euromonitor International in March 2015 titled “Consumer Payments 2015: Trends, Developments and Prospects”
indicates that the global consumer payment market has more than doubled over the last decade, to reach US$47 trillion in payment
volume in 2014. American Express, Diners Club, JCB, MasterCard, UnionPay, and Visa brand cards generated 168.56 billion transactions
at merchants in 2013, an increase of 19.17 billion or 12.8% over 2012, according to the Nilson Report on “Global Cards –
2013” published in July 2015. Credit, debit, and prepaid cards in circulation totaled 8.33 billion at the end of 2013, up
13.3% or 975.0 million cards over year-end 2012.
The Global Contactless Bank Card
Market
Contactless
bank cards are bank cards that allow holders to make a transaction without actually swiping or inserting the card into a payment
terminal. Instead, at the point of transaction, the card holder taps or touches the contactless reader with their bank cards.
The contactless reader then scans the payment information using radio frequency identification (RFID) technology for secure payments.
An audio bank card, a type of contactless bank card, is an IC card embedded with active integrated circuit, which enable it to
communicate via unique audio frequency with receiving devices without any physical contact (“audio chip”). Audio bank
cards can be broadly used in electronic payment and card transactions, providing safer and more convenient card-using experience
for cardholders in the internet era. Audio bank cards embedded with our inlays are described as bank cards with audio dynamic
password. Such innovative technology meets international standards of bank cards such as those standards established by MasterCard
for active smart bank cards. Audio chips for bank cards are highly innovative and are new to the industry, world-wide and in the
PRC.
The Chinese Bank Card Market
According to
a report published by the PBOC, in 2014, an aggregate of 4.936 billion bank cards were issued in China, an increase of 17.13% over
2013; national cardholding per capita was 3.64, an increase of 17.04% over 2013. 59.573 billion transactions were made by bank
cards in China in 2014, totaling 449.90 trillion renminbi or RMB. Furthermore, in 2014, electronic payment reached 1.4 quadrillion
RMB, among which 22.59 trillion RMB was mobile payment, an increase of 134.3% over 2013; 6.04 trillion RMB was telephone payment,
an increase of 27.41% over 2013; 1.376 quadrillion RMB was online payment, an increase of 30.65% over 2013. Additionally, with
the promotion by the PBOC on upgrading magnetic stripe cards to IC cards with a statement that national commercial banks should
no longer issue magnetic stripe bank cards after January 2015, leading banks in China have been making great efforts to such replacement.
The Chinese Contactless Bank
Card Market
Audio bank cards enable
a direct communication between bank cards and electronic devices (including telephones, cell phones, tablets, and computers),
allowing electronic payment by bank cards. Audio bank cards can be used in swiped transactions (including point of sale payment
and ATM deposit, withdrawal and transfer) as a regular bank card as well as transactions via electronic payment which, according
to the Payment and Settlement System Report published by the PBOC in April 2014, is a combined market of potentially up to 1.85
quadrillion RMB.
Supportive Government Policies and Legislation in the PRC
On January 1,
2008, the National People’s Congress of China passed “the Enterprise Income Tax Law of the People's Republic of China.”
Accordingly, “the enterprise income tax on important high- and new-tech enterprises that are necessary to be supported by
the state shall be levied at the reduced tax rate of 15%”, which applies to Guangzhou Yuzhi and its Subsidiaries. The regular
enterprise income tax rate is 25% in China.
On July 18,
2015, the PBOC, the Ministry of Industry and Information Technology, the Ministry of Finance and 7 other state government authorities
jointly issued the Guideline Opinions on Promoting the Healthy Development of Internet Finance (the “Guidelines”),
which aim to encourage innovation and to support the steady development of internet finance.
In April 2005,
the PBOC and other state departments jointly promulgated Certain Opinions on Promoting the Development of Bank Card Industry, which
encouraged and promoted work emphasis of related government authorities on, among other things, meeting the demand and improving
the varieties and functions of bank cards, promoting a fast and sound development of bank card handling market, enhancing the risk
management of bank cards, and implementing industrial incentive policies to support the bank card industry.
Technology and Product Description
An audio bank
card is a dual interface card with financial IC module and audio IC module. Financial IC chip performs UnionPay standard functions
such as debit and credit, and small amount payment transactions. It also supports communications with the audio IC chip. Moreover,
the financial IC chip processes and modulates banking data to sound wave signal in order to communicate with cell phones, PCs,
telephones and other audio receiving devices. The financial IC module may work independently from the audio IC module.
All of the components
used in our core inlays for an audio bank card including PCB, paper battery, processor, buzzer, and button are bendable and can
be integrated into an ISO7810 card. Audio bank cards embedded with our inlays are described as bank cards with audio dynamic password.
Such technology meets international standards of bank cards such as those standards established by MasterCard for active smart
bank cards. An audio bank card can be used for 5 to 10 years and for 30,000 to 50,000 times. It is anti-bending, anti-embossment,
anti-electromagic, anti-noise, and is adaptable to high and low temperature.
An Audio bank card
operates as follows: first, personalized banking information, customer information and security verification information are stored
in a chip embedded in the audio bank card; at point of transaction, a cardholder pushes the button on the bank card, which triggers
the modulation of banking information and security information into sound wave; a receiving device recognizes this sound wave
and completes the transaction by processing information received from the audio bank card. Information transmitted by audio bank
card via such sound wave includes bank card number, dynamic expiration date, dynamic CVN2, dynamic password and encrypted verification
information. Receiving devices can be a telephone, a mobile phone, a laptop, a personal computer or any personal electronic devices
embedded with audio-receiving microphones. A special receiving device or a reader is not necessary. Upon receipt of the audio
frequency, the receiving device converts the module received into the data originally stored in that particular audio bank card,
which will then be sent to bank for interactive voice response (IVR) de-coding.
Compared with traditional magnetic stripe bank
cards and bank cards only embedded with financial IC chips, audio bank cards are more secure, more convenient and enjoy wider
applications. Data and programs stored in the audio IC chip are equipped with anti-tampering mechanism, guaranteeing the security
of the data-storage key. Technology such as parity bit, cyclic redundancy check (CRC), and dynamic encryption ensures data security.
When executing contactless communication, the sound wave emitted by our audio cards differ each time with different unique passwords,
through hardware dynamic encryption; repetitive use by recording is prevented by event calculation; communication errors are avoided
by CRC. Additionally, audio bank card holders can conduct transactions without binding devices or signing receipts. Our audio
bank cards can be used in a wide range of areas such as electronic bank, mobile payment, telephone payment, online payment, industrial
practice, and can also be used as a regular bank card.
R&D Partner
Shenzhen Exce-card
entered into a partnership agreement with UINT France (“UINT”) located in Saint Aubin, France, which was amended and
supplemented by an amendment dated March 27, 2015 (as amended and supplemented, the “Partnership Agreement”) with a
term from May 1, 2014 to April 30, 2016 (the “Term”), to engage UINT in product research and development (R&D)
of new audio wave emission device and new inlay for audio bank cards. Pursuant to the Partnership Agreement, Shenzhen Exce-card
paid UINT €120,000 for R&D, and loaned €60,000 to UINT for operation costs, both of which will be refunded to Shenzhen
Exce-card if Shenzhen Exce-card acquires UINT within 18 months after the date of execution, i.e., November 1, 2015. Both parties
are currently negotiating on the details of such acquisition. However, if such acquisition does not occur within this time frame,
UINT will repay the loan via fees charged on issuance of cards. Such repayment will be triggered after Shenzhen Exce-card has ordered
1 million audio bank cards from UINT. Further, the costs and rights of any patent related to the new audio bank card product arises
during the Term are borne by and shared costs and rights of any patent by both parties.
Additionally,
for five years from the date on which the first audio bank card is officially deployed by any commercial banks in China, which
is expected to be in the first quarter of 2016, Shenzhen Exce-card will be the exclusive distributor of the audio card products
within the territory of China, including Hong Kong, Macau and Taiwan (the “Greater China Area”), and the distributor
of the audio card product within the United States territory. A €0.1 per audio card product will be paid by UINT to Shenzhen
Exce-card as royalty in other areas the product is distributed, while no such royalty will be paid in the Greater China Area or
the United States. In the event that Shenzhen Exce-card acquires 100% of UINT, UINT will cease to pay such royalty.
Manufacturing Partner
Currently, we engage
UINT to manufacture our inlays for the audio bank cards and some of the 10,000 beta testing audio bank cards for Guangzhou Yuzhi
and its Subsidiaries in its 9,000 square feet manufacturing facility (including a 5,000 square feet “clean room” in
which the concentration of airborne particles is controlled to specified limits) located in Limoges, France. The plant is fully
operational and has a production capacity of 6 million cards per year.
Customers
Our inlays and relevant
technology support are expected to be sold to bank card manufacturers. Audio bank cards embedded with our inlays are then expected
to be sold to the CCB Guangdong via its pilot program. In addition, we expect to develop and maintain our relationships with other
banks throughout China.
Shenzhen Exce-card
has entered into cooperation agreements on July 23, 2014 and July 7, 2014, respectively, to partner with two bank card manufacturers
in China, Hengbao and Tianyu, both of which are publicly traded on China’s Shenzhen Stock Exchange and have established
relationships with major commercial banks in China as their bank card providers, including Bank of China, Bank of Communications,
CCB, Agricultural Bank of China, and Industrial and Commercial Bank of China.
Additionally, Shenzhen Exce-card and Tianyu signed
a more detailed audio bank card production preparation service agreement, according to which, from May 1, 2015 to May 1, 2016,
Shenzhen Exce-card is to provide inlays for testing, technology and support to Tianyu for the manufacturing of the audio bank
card end product, and in return, Tianyu pays RMB150,000 (approximately $23,630.61) for Shenzhen Exce-card’s services. Tianyu,
headquartered at Huazhong University of Science and Technology Science Park in Wuhan City, Hubei Province, China, is a high-tech
enterprise focusing on the research and development, manufacturing, and sale of products and services related to data security,
mobile internet, and payment services. It has an annual production capacity of 500 million IC cards, and an estimated annual production
capacity of 10 million audio bank cards. At present, Tianyu is testing and digesting the technics for the lamination of audio
bank cards, and thus, is manufacturing a portion of the 10,000 beta testing audio bank cards for Guangzhou Yuzhi and its Subsidiaries.
Shenzhen Exce-card
has also entered into a cooperation agreement with Hengbao on September 28, 2015, according to which, for 10 years from the date
of this agreement, Shenzhen Exce-card is to provide inlays, technology and support to Hengbao for the manufacturing of the audio
card end product, and in return, Hengbao pays RMB200,000 (approximately $31,507.48) for Shenzhen Exce-card’s services. Shenzhen
Exce-card and Hengbao also agree to cooperate and develop the market application and to gradually increase the market shares of
audio bank cards. Hengbao, headquartered in Beijing, China, with a manufacturing facility in Danyang City, Jiangsu Province, China,
is one of the largest card manufacturers and providers in China. Hengbao has recently started to test and adjust the technics
for the lamination of audio bank cards according to the cooperation agreement between Shenzhen Exce-card and Hengbao.
The Manufacturing Process
Audio bank
cards are produced through the following process:
| 1. | Inlay
production. Pieces of electro-circuit are tested, and then embedded in a flexible circuit
board through fine technics to build up the “brain” of the card. Several
functional modules including an audio IC chip, a paper battery, a button, and a buzzer
which can generate unique audio wave are then installed onto this flexible circuit board. |
| 2. | Lamination.
The assembled inlay will be implanted into a card base laminated with multiple foils
and the financial IC chip. |
Competition
We currently are not
aware of any other companies in China or outside of China which is producing or marketing the similar products as ours.
However, upon the introduction
of our products and technology into the market, our potential competitors worldwide may include NagraID Security SA, a Switzerland-based
technology and security services supplier for governments, enterprises, the banking industry and online electronic transactions;
SmartPlayer Technology Co., Ltd., a Taiwan-based developer of viable display module for smart card applications; Suzhou HierStar
System Limited, a PRC-based company that focuses on display cards embedded with one-time password (OTP) and public key infrastructure
(PKI) technologies; and UINT.
Our Growth Strategy
In
the next five years, we seek to grow our business by pursuing the following strategies:
|
● |
Focus on
active smart cards, and research and develop active financial IC card products and applications that meet the market needs; |
|
● |
Actively
explore options in modern service industry, such as Internet finance and mobile payment services; |
|
● |
Develop
electronic payment channel of audio bank cards, and to structure application environment for audio bank cards issued by CCB;
and |
|
● |
Strengthen
and/or develop relationships with major banks. |
Our
Strengths and Competitive Advantages
We
believe we are well positioned to achieve our business objectives and to execute our strategies due to the following competitive
strengths:
|
● |
Audio bank cards embedded with our inlays may solve the issues related to electronic payment security and terminal adaption problems pertaining to transactions by electronic devices; |
|
● |
Compared
to third party payment solutions, bank cards are accepted more by the general public as the regular and more secured payment
method; |
|
● |
Audio bank
cards embedded with our inlays support a wide range of transaction channels and can be adapted easily by retail clients in various
sectors as well as clients with online payment options; |
|
|
|
|
● |
We have a
team of management with ample experience in financial IC card technology, operation of banking systems, microwave photonics
and software security, as well as business operation and management. |
Marketing
Since we supply audio
chips/inlays for bank cards, we have not engaged in direct advertising efforts for marketing our products to the mass bank card
end users.
Our
marketing strategy is to develop relationships with large banks in China, starting with the pilot program expected to launch
the first quarter of 2016 when CCB introduces the audio bank cards embedded with our flexible circuit board with the audio chips
to its customers. Along with and subsequent to such pilot program, we may seek to further develop relationships with China Industrial
and Commercial Bank, Bank of China, Agricultural Bank of China, and Bank of Communications. Issuance of audio bank cards by these
large banks may in turn encourage other smaller banks in China to work with us and market our products to their customers.
Pricing
At present, there are
no similar products on the market. Taking into account the level of acceptance by the market and the negotiation with issuing
banks, we suggest that the unit price of the audio bank cards with our inlays to be set at 55 RMB, approximately $8.65, and inlay
audio chip at 45 RMB, approximately $7.08. Price will be adjusted downwards upon the increase of volume issued and appearance
of competitors.
R&D
Pursuant to
the Partnership Agreement between Shenzhen Exce-card and UINT, for the period from May 1, 2014 to April 30, 2016, Shenzhen Exce-card
paid UINT €120,000 for R&D services, €20,000 of which was for developing new audio signals of new audio card product,
€30,000 of which was for the testing of new Inlay and assisting the card manufacturers with lamination test , €50,000
of which was for the conception of new generation audio cards, and the last €20,000 of which was for assisting the card manufacturers
with certification of the new audio card product. Another €60,000 was loaned to UINT to cover its operation costs.
UINT currently
have 12 employees for R&D. We expect to invest resources to retain more qualified employees and update our R&D equipment
in China for our second generation audio bank cards with one chip of a combined function of audio chip and financial chip, and
third generation audio bank cards with fingerprint sensor chips and other personalized functions.
Seasonality
We do not expect
our operating results and operating cash flows to be subject to seasonal variations.
Employees
Substantially
all of our employees are located in China. As of October 6, 2015, Guangzhou Yuzhi and its Subsidiaries had 23 employees.
There are no collective bargaining contracts covering any of our employees. We believe our relationship with our employees is
satisfactory.
We are required
to contribute a portion of our employees’ total salaries to the Chinese government’s social insurance funds, including
medical insurance, unemployment insurance and workers’ compensation insurance, and a housing assistance fund, in accordance
with relevant regulations. Guangzhou Yuzhi and its Subsidiaries are currently paying social insurance for all of their
23 full-time employees through a third party agent. We expect the amount of contribution to the government’s social
insurance funds to increase in the future as we expand our workforce and operations.
Insurance companies
in China offer limited business insurance products. While business interruption insurance is available to a limited extent in
China, we have determined that the risks of interruption, cost of such insurance and the difficulties associated with acquiring
such insurance on commercially reasonable terms make it impractical for us to have such insurance. As a result, we could face
liability from the interruption of our business.
Forward-Looking Statements
Forward-looking
statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from those anticipated
and you should not rely on them as predictions of future events. Although information is based on our current estimates, forward-looking
statements depend on assumptions, data or methods which may be incorrect or imprecise. You are cautioned not to place undue reliance
on this information as we cannot guarantee that any future expectations and events described will happen as described or that
they will happen at all. You can identify forward-looking statements by the use of forward-looking terminology such as “believes,”
“expects,” “may,” “should,” “seeks,” “approximately,” “intends,”
“plans,” “pro forma,” “estimates” or “anticipates” or the negative of these words
and phrases or similar words or phrases. You can also identify forward-looking statements by discussions of strategy, plans or
intentions.
Intellectual Property
Currently we have
two granted patents whose terms are ten years from April 21, 2015 and September 4, 2013, the dates of application, respectively,
and four pending patent applications in the PRC, all of which are related to the technology and design utilized in the audio bank
card and its transaction system. We also have three pending trademark applications in the PRC, two of which are with respect to
financial and monetary affairs and one is with respect to computer programs, magnetic data media and internet communication devices.
Pursuant to the Partnership Agreement,
any background information and know-how used in connection with the agreement remain the property of the party introducing such
background information. UINT’s know-how relating to the services it provides under this agreement remains the exclusive
property of UINT and it may use such know-how for other clients. Additionally, the costs and rights of any patent related to the
new audio bank card product arises during the Term are borne by and shared equally by both parties.
Government Regulation
We believe that we
have been compliant to date with all requirements required by the applicable governing authorities in China for the research,
development, production and distribution of audio bank cards embedded with our inlays, and that such laws, rules and regulations
do not currently have a material impact on our operations. However, it is possible that more stringent rules or regulations could
be adopted, which may increase our operating costs and expenses.
Additionally, since 1997, the PBOC has issued several versions
of Financial IC Card Specifications. On November 3, 2014, PBOC published a Notice on Further Application of Financial IC Card,
proposing a time frame, i.e., from April 1, 2015, new financial IC cards issued by any issuing banks should comply with the PBOC
Financial IC Card Specifications version 3.0. We believe that we are in compliance with these requirements by the PBOC.
Properties
Guangzhou Yuzhi’s
office is located at Suite 1601-A, 437 Middle Dongfeng Road, Yuexiu District, Guangzhou City, Guangdong Province, China. We lease
a total of approximately 40 square meters (approximately 431 square feet) of office space at the aforementioned address pursuant
to one lease agreement. Pursuant to this agreement, which will expire on May 1, 2017, the monthly rent is approximately RMB 6,004
(approximately $941).
Shenzhen Exce-card’s
corporate headquarters is located at Suite 1601-C, 437 Middle Dongfeng Road, Yuexiu District, Guangzhou City, Guangdong Province,
China. We lease a total of approximately 126 square meters (approximately 1,356 square feet) of office space at the aforementioned
address pursuant to one lease agreement. Pursuant to this agreement, which will expire on May 1, 2017, the monthly rent is approximately
RMB 16,000 (approximately $2,508).
Shenzhen Exce-card’s
Beijing branch is located at Suite 1505, Zhujiang Dijing District D, Building No.5, Xidawang Road, Chaoyang District, Beijing,
China. We lease a total of approximately 140 square meters (approximately 1,507 square feet) of office space at the aforementioned
address pursuant to one lease agreement. Pursuant to this agreement, which will expire in August 2017, the monthly rent is approximately
RMB 12,000 (approximately $1,866).
Shenzhen Exce-card’s
Shanghai branch is located at 212 Jiangning Road, Dike Building, 20th Floor, Shanghai, China. We lease two cubicles in the co-working
space at the aforementioned address with monthly rent of approximately RMB 6,000 (approximately $933) pursuant to one lease agreement.
Pursuant to this agreement, the lease term is flexible with a two-month notice for termination.
Shenzhen Exce-card’s
New York branch is located at 40 Wall Street, 28th Floor, New York, NY. We lease a total of approximately 323 square feet of two
offices at the aforementioned address pursuant to two lease agreements. Accordingly, the lease term for one office will expire
in January 2016, and the other will expire in Novebmer 2016, both of which will be automatically renewed unless a 90-day notice
is given. The total monthly rent for these two offices is approximately $5,439.
Current, we do not have our own manufacturing facility.
For more details
please refer to the section titled “Risks Related to the Overall Business of Guangzhou Yuzhi and its Subsidiaries”
included in “Item 1A Risk Factors” below.
Item 1A. Risk
Factors.
Our business, operations and
financial condition are subject to various risks. Some of these risks are described below and you should take these risks into
account in making a decision to invest in our Common Stock. If any of the following risks actually occurs, we may not be able
to conduct our business as currently planned and our financial condition and operating results could be seriously harmed. In that
case, the market price of our Common Stock could decline and you could lose all or part of your investment in our Common Stock.
Risks Related
to the Business and Operations of Guangzhou Yuzhi and its Subsidiaries
Risks Related to the Overall
Business of Guangzhou Yuzhi and its Subsidiaries
Guangzhou Yuzhi and its Subsidiaries
have a limited operating history, which makes it difficult to evaluate its financial position and future success.
Guangzhou Yuzhi
and its Subsidiaries have had a limited prior operating history by which to evaluate the likelihood of success or its ability
to continue as a going concern. Although Guangzhou Yuzhi and its Subsidiaries have been developing technology for and producing
inlays for audio bank cards, and may participate in a pilot program with China Construction Bank to launch 500,000 audio bank
cards through the bank’s branches in Guangdong Province, China, there is no assurance our production capacity and sales
will keep increasing in a profitable manner.
Guangzhou Yuzhi and its Subsidiaries
are expected to be heavily dependent on sales of one key product, namely, inlays for audio bank cards.
Guangzhou Yuzhi and
its Subsidiaries are expected to begin generating revenue in 2016 from the sale of inlays for audio bank cards, and are expected
to continue to derive a significant portion of its future revenue from sales of inlays for audio bank cards.
Audio bank cards embedded
with our inlays are expected to be sold in the People’s Republic of China as a new generation of bank cards, seeking to
substitute the traditional magnetic stripe bank cards. Demand for audio bank cards may not meet our expectation if audio bank
cards do not gain broad market acceptance and build consumer confidence in their quality, security and availability, or if the
technology in audio bank cards is replaced by a more innovative alternate, our prospects will be negatively impacted.
The results of operations, financial
position and business outlook of Guangzhou Yuzhi and its Subsidiaries will be highly dependent on the market’s response.
Although the audio
bank card meets the international standards such as those established by Mastercard for active smart bank cards and the innovative
product standards set forth by UnionPay, CCB will only be testing the market’s response in Guangdong Province, China with
the first 500,000 cards. In addition, bank cards with IC chips have just been popularized in China since January 1, 2015. The
market may not respond immediately to another new bank card technology. Further, the market may perceive the traditional cash
payment method or the cardless payment method (e.g., mobile wallet) to be more convenient or secured. If the market does not respond
to the product as quickly or does not accept the product as widely as expected, the results of operations, financial position
and business outlook of Guangzhou Yuzhi and its Subsidiaries will be negatively affected.
The results of operations, financial
position and business outlook of Guangzhou Yuzhi and its Subsidiaries will be highly dependent on Shenzhen Exce-card being and
remaining the exclusive distributor of audio chips and audio bank card products in the Greater China Area.
According to
the Partnership Agreement with UINT, Shenzhen Exce-card will be the exclusive distributor in the Greater China Area for five years
from the date on which the first audio bank card is officially deployed by any commercial banks in China, which is expected to
be in the first quarter of 2016, and to keep its exclusivity status, Shenzhen Exec-card has to order 1 million audio card products
from UINT annually. In the event that Shenzhen Exce-card does not meet this annual quota, it will lose its status of exclusive
distributor in the Greater China Area, which may have an adverse effect on our results of operations, financial position and business
outlook.
EGOOS BVI is a holding company
and there are significant limitations on its ability to receive distributions from its subsidiaries.
EGOOS BVI conducts
substantially all of its operations through subsidiaries and through contractual arrangements with Guangzhou Yuzhi, an affiliated
variable interest entity (“VIE”) and Guangzhou Yuzhi’s subsidiaries Shenzhen Exce-card and Guangzhou Rongsheng,
and is dependent on dividends and other intercompany transfers of funds from its subsidiaries and affiliated VIE to meet its financial
obligations. EGOOS BVI’s subsidiaries have not made significant distributions to it and may not have funds legally available
for dividends or distributions in the future. In addition, EGOOS BVI may enter into credit or other agreements that would contractually
restrict its subsidiaries or affiliated VIE from paying dividends or making distributions. Any inability of EGOOS BVI to receive
funds from its subsidiaries including Guangzhou Yuzhi can be expected to impair its ability to pay dividends on the Common Stock
and may otherwise have an adverse effect on our future operating or growth prospects.
The research and development of audio
chip/inlay is entirely dependent on the partnership relationship between Guangzhou Yuzhi and UINT.
Shenzhen Exce-card
engaged UINT pursuant to the Partnership Agreement with a term from May 1, 2014 to April 30, 2016 to research and develop audio
bank card technology. Although Guangzhou Yuzhi or its Subsidiaries intends to acquire UINT by November 1, 2015, there is no assurance
that the transaction will be consummated, or that UINT will continue to develop any audio bank card technology for Guangzhou Yuzhi.
In addition, pursuant to the Partnership Agreement, the know-how relating to the services provided by UINT will remain the exclusive
property of UINT, and UINT may use such know-how for its other clients. Competitors of Guangzhou Yuzhi and its Subsidiaries may
engage UINT to develop new technology and potentially compete with the audio bank card product of Guangzhou Yuzhi and its Subsidiaries.
Any such incidents may harm the financial condition, results of operations and future growth prospects of Guangzhou Yuzhi and
its Subsidiaries.
Currently, the production of inlays
for audio bank cards is entirely dependent on the operations of UINT in Limoges, France.
A significant portion
of EGOOS BVI’s revenues will be derived from the sale of inlays for audio bank cards and some end product manufacturing
of which is in Limoges, France. Although Guangzhou Yuzhi and its Subsidiaries will probably construct and operate production
factories in China in the near future. Manufacturing operations are subject to inherent risks, all of which could have a material
adverse effect on its financial condition or results of operations. Risks affecting operations include:
|
● |
unexpected
changes in regulatory requirements; |
|
● |
political
and economic instability; |
|
● |
terrorism
and civil unrest; |
|
● |
equipment
and machinery breakdowns; |
|
● |
injuries
or accidents at our facilities |
|
● |
severe weather
or other natural disasters; |
|
● |
work stoppages
or strikes; |
|
● |
difficulties
in staffing and managing operations; and |
|
● |
variations
in tariffs, quotas, taxes and other market barriers. |
Some
of these hazards may cause severe damage to, or destruction of, property and equipment or environmental damage, and may result
in suspension of operations and the imposition of civil or criminal penalties. Any such delay or disruption can be expected to
harm EGOOS BVI’s financial condition, results of operations and future growth prospects.
Guangzhou Yuzhi and its Subsidiaries
have not entered into and may not be able to enter into any enforceable agreement with CCB in connection with the pilot program
in which CCB will distribute 500,000 of audio bank cards with our inlays.
As of the date of this
Current Report, Guangzhou Yuzhi and its Subsidiaries have negotiated with CCB and have obtained an oral agreement from CCB Guangdong
for CCB to issue 500,000 audio bank cards with our inlays through its Guangdong branches. In the event that CCB partially or completely
fails to implement the pilot program, such oral agreement is not enforceable against CCB. Moreover, there is no assurance that
an enforceable agreement in writing between CCB and Guangzhou Yuzhi or its Subsidiaries will be entered into regarding this pilot
program. Our future operating results and financial condition could be significantly disrupted if the pilot program is not implemented
as planned.
In the near future, the distribution
of audio bank cards embedded with our inlays may be entirely dependent on the distribution of one proposed pilot program of the
Guangdong branches of CCB in China.
In the near future,
CCB may be the only distributor of the audio bank cards with our inlays in China when CCB’s proposed pilot program is launched
in the first quarter of 2016, if being launched at all. In the event that the CCB’s pilot program in Guangdong Province,
China fails to gain positive market response as expected, CCB may elect to discontinue the distribution of audio bank card products.
Although Guangzhou Yuzhi and its Subsidiaries are actively developing relationships with other major banks in China for the distribution
of the audio bank cards with our inlays, there is no assurance such efforts will be successful or will result in steady income
cash flow for the Company. Therefore, the financial condition, results of operations and future growth prospects may be materially
negatively affected in the event that CCB discontinues the distribution of the audio bank cards with our inlays.
Currently, our revenues are primarily
dependent on two customers that are engaged in the mass production of audio bank cards.
The partnership between
Shenzhen Exce-card and each of Hengbao and Tianyu will expire by September 27, 2025 and May 1, 2016, respectively, there is no
assurance that these agreements will be renewed or extended, or these agreements will not be terminated earlier, and Guangzhou
Yuzhi and its Subsidiaries may not be able to secure orders from other card manufacturers. Any such incidents may harm the financial
condition, results of operations and future growth prospects of Guangzhou Yuzhi and its Subsidiaries.
Gross
margins are principally dependent on the spread between development and production cost and sale price. If the cost of development
and production increases and sale price does not increase or if the sale price decreases and the cost of development and production
does not decrease, gross margins will decrease and EGOOS BVI’s results of operations could be harmed should the sales volume
of the product does not increase.
EGOOS
BVI’s gross margins depend principally on the spread between development and production cost and sale price.
While moving
the production from France to China could potentially decrease the cost of production, the sale price of audio chips/inlays may
decrease as well, as potential competitors start developing and producing like products, which may narrow the gross margins should
the sales volume does not increase. Any event that tends to negatively impact the sales volume of audio chips of Guangzhou Yuzhi
and its Subsidiaries will potentially harm its financial condition and results of operation.
Consumer
acceptance or rejection of audio bank cards will have a material impact on EGOOS BVI’s future prospects.
The
market in China for audio bank cards has not developed. Therefore, widespread acceptance of audio bank cards is not assured and
depends on market acceptance of audio bank cards as an addition, or an alternative, to traditional bank cards or other channels
to bank or make payment. Because this market is new, it is difficult to predict its potential size or future growth rate. In addition,
a long-term customer base has not been adequately defined. The success of Guangzhou Yuzhi and its Subsidiaries in generating revenue
in this emerging market will depend, among other things, on its ability to educate potential customers and end-users about the
practical benefits of audio bank cards. In the event a substantial market for audio bank cards fails to materialize, or if we
fail to properly capitalize on such market, our growth and future operating prospects will be materially harmed.
Unanticipated
problems or delays with product quality or product performance could result in a decrease in customers and revenue, unexpected
expenses and loss of market share.
EGOOS
BVI’s cash flow depends on the timely and economical operations of and its partnership with the R&D and production centers
in France, and potentially other production facilities in
China.
The development and
production of audio chips are complex, and the audio chips must meet detailed quality requirements in order to ensure the safety
and efficiency of use. Concerns about audio chips quality may impact the ability of Guangzhou Yuzhi and its Subsidiaries to successfully
market their audio chips and audio bank cards embedded with our inlays to a larger market. If the product does not meet its promised
and marketed quality standards, its credibility and the market acceptance and sales volume could be negatively affected. In addition,
actual or perceived problems with protection of user’s information in the industry generally may lead to a lack of consumer
confidence in bank cards encrypted with chips of new technology. Prolonged problems may threaten the commercial viability of audio
bank cards generally or the production and sale of the product specifically.
Guangzhou Yuzhi and its Subsidiaries
plan to primarily sell their audio chips/inlays and relevant technology to card manufacturers, which are expected to sell audio
bank cards through banks in China and if their relationships with one or more of these card manufacturers or banks were to end,
their operating results could be harmed.
Guangzhou Yuzhi
and its Subsidiaries are expected to market and distribute a substantial portion of its audio chips/inlays and relevant
technology to card manufacturers, which are expected to sell audio bank cards through major banks in China. Their future
operating results and financial condition could be significantly disrupted by the loss of one or more of these card
manufacturers or banks with current or future relationships, order cancellations or the failure of the card manufacturers or
banks to successfully sell the products.
Financial instability
in the Chinese financial markets could materially and adversely affect our results of operations and financial condition.
The
Chinese financial markets and the Chinese economy are influenced by economic and market conditions in other countries, particularly
in other Asian emerging market countries and the United States. Financial turmoil in Asia, Russia and elsewhere in the world in
recent years has affected the Chinese economy. Although economic conditions are different in each country, investors’ reactions
to developments in one country can have adverse effects on the securities of companies operating in other countries, including
China. A loss in investor confidence in the financial systems of other countries may cause increased volatility in Chinese financial
markets and, indirectly, in the Chinese economy in general. Financial disruptions could harm Guangzhou Yuzhi’s operation
or its stock price, results of operations and financial condition.
Natural
calamities could have a negative impact on the Chinese economy and harm the business of Guangzhou Yuzhi and its Subsidiaries.
China
has experienced natural calamities such as earthquakes, floods, droughts and a tsunami in recent years. The extent and severity
of these natural disasters determines their impact on the economies in the local communities that experience these calamities.
Natural disasters could have an adverse impact on the economies in the geographic regions in which Guangzhou Yuzhi and its Subsidiaries
operate, which could adversely affect their operating and growth prospects.
Growth
may impose a significant burden on the administrative and operational resources of Guangzhou Yuzhi and its Subsidiaries which,
if not effectively managed, could impair their growth.
The
strategy of Guangzhou Yuzhi and its Subsidiaries envisions a period of rapid growth that may impose a significant burden on their
administrative and operational resources. The growth of their business will require significant investments of capital and management’s
close attention. Their ability to effectively manage their growth will require them to substantially expand the capabilities of
their administrative and operational resources and to attract, train, manage and retain qualified management, technicians and
other personnel. Failure to successfully manage their growth could result in their sales not increasing commensurately with capital
investments. If Guangzhou Yuzhi and its Subsidiaries are unable to successfully manage their growth, they may be unable to achieve
their growth goals.
Guangzhou
Yuzhi and its Subsidiaries may be unable to protect their intellectual property, which could negatively affect its ability to
compete.
Guangzhou
Yuzhi and its Subsidiaries rely on a combination of patent, registered trademark, confidentiality agreements, and other contractual
restrictions on disclosure to protect their intellectual property rights. They also enter into confidentiality agreements with
their employees, consultants, and corporate partners, and control access to and distribution of their confidential information.
These measures may not preclude the disclosure of their confidential or proprietary information. Despite efforts to protect their
proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use their proprietary technologies and information.
Monitoring unauthorized use of confidential information is difficult, and Guangzhou Yuzhi and its Subsidiaries cannot be certain
that the steps they takes to prevent unauthorized use of its proprietary technologies and confidential information, particularly
in foreign countries where the laws may not protect proprietary rights as fully as in the U.S., will be effective. Failure to
protect our intellectual property rights can be expected to have a material, adverse impact on our competitive advantage and potentially
on our financial condition, stock price and future growth prospects.
Guangzhou
Yuzhi and its Subsidiaries will be required to hire and retain skilled technical and managerial personnel.
Personnel
qualified to continue researching and developing, and to operate and manage production center and other facilities are in demand.
The success of Guangzhou Yuzhi and its Subsidiaries depends in large part on their ability to attract, train, motivate and retain
qualified management and highly-skilled employees, particularly managerial, technical, sales and marketing personnel, technicians,
and other critical personnel. Any failure to attract and retain such personnel may have a negative impact on the operations of
Guangzhou Yuzhi and its Subsidiaries, which would have a negative impact on revenues.
Guangzhou
Yuzhi and its Subsidiaries are dependent upon their officers and directors for management and direction and the loss of any of
these persons could adversely affect their operations and results.
Guangzhou
Yuzhi and its Subsidiaries are dependent upon their officers and directors for implementation and execution of their business
plan. The loss of any of their officers or directors could have a material adverse effect upon their results of operations and
financial position. Guangzhou Yuzhi and its Subsidiaries do not maintain “key person” life insurance for any of their
officers. The loss of any of their officers or directors could delay or prevent the achievement of their business objectives.
EGOOS
BVI’s lack of business diversification could result in the devaluation of its securities if it does not generate revenue
from its primary products, or such revenues decrease.
The
current business of Guangzhou Yuzhi and its Subsidiaries consists solely of the research and development, production and sale
of audio chips in China. Currently, sales of the products account for 100% of EGOOS BVI’s revenues.
The lack of business diversification could cause you to lose all or some of your investment, since EGOOS BVI does not have any
other lines of business or alternative revenue sources.
Failure
to fully comply with PRC labor laws, including laws relating to social insurance, may expose Guangzhou Yuzhi and its Subsidiaries
to potential liability and increased costs.
Companies
operating in China must comply with a variety of labor laws, including certain pension, health insurance, unemployment insurance
and other welfare-oriented payment obligations. Guangzhou Yuzhi and its Subsidiaries are currently paying social insurance for
all of 23 of their full-time employees through a third party agent. If the PRC regulatory authorities take the view that payment
of social insurance through a third party agent is invalid, the failure to comply may be in violation of applicable PRC labor
laws and we cannot assure you that PRC governmental authorities will not impose penalties on Guangzhou Yuzhi and its Subsidiaries
therefor, which could have a material adverse effect on the financial condition and results of operations of Guangzhou Yuzhi and
its Subsidiaries.
In
addition, the new PRC Labor Contract Law took effect January 1, 2008 and governs standard terms and conditions for employment,
including termination and lay-off rights, contract requirements, compensation levels and consultation with labor unions, among
other topics. In addition, the law limits non-competition agreements with senior management and other employees who have access
to confidential information to two years and imposes restrictions or geographical limits. This new labor contract law will increase
the labor costs of Guangzhou Yuzhi and its Subsidiaries, which could adversely impact the results of operations.
EGOOS
BVI may have difficulty establishing adequate management, governance, legal and financial controls in the PRC.
The
PRC historically has been deficient in western style management, governance and financial reporting concepts and practices, as
well as in modern banking and other control systems. Our current management has little experience with western style management,
governance and financial reporting concepts and practices, and we may have difficulty in hiring and retaining a sufficient number
of qualified employees to work in the PRC. As a result of these factors, and especially given that we expect to be a publicly
listed company in the U.S. and subject to regulation as such, we may experience difficulty in establishing management, governance
legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records
and instituting business practices that meet western standards. We may have difficulty establishing adequate management, governance,
legal and financial controls in the PRC. Therefore, we may, in turn, experience difficulties in implementing and maintaining adequate
internal controls as required under applicable U.S. laws, rules and regulations. This may result in significant deficiencies or
material weaknesses in our internal controls which could impact the reliability of our financial statements and prevent us from
complying with SEC rules and regulations. Any such deficiencies, weaknesses or lack of compliance could have a materially adverse
effect on our business and the public announcement of such deficiencies could adversely impact our stock price.
The
Company has not yet developed comprehensive independent corporate governance.
Although
the Company has formed audit, compensation and nominating committees of its board of directors, it is inexperienced in formal
U.S. corporate governance procedures. A lack of functioning independent controls over the Company’s corporate affairs may
result in potential or actual conflicts of interest between controlling shareholders and other shareholders. It presently has
no policy to resolve such conflicts. The absence of customary standards of corporate governance may leave its shareholders without
protections against interested director transactions, conflicts of interest, if any, and similar matters and any potential investors
may be reluctant to provide the Company with funds necessary to expand its operations.
Risks Related to the VIE Agreements
The PRC government may determine
that the VIE Agreements are not in compliance with applicable PRC laws, rules and regulations.
EGOOS BVI manages
and operates the business of Guangzhou Yuzhi and its Subsidiaries through Yigou pursuant to the rights it holds under the VIE
Agreements. Almost all economic benefits and risks arising from the operations of Guangzhou Yuzhi and its Subsidiaries are transferred
to EGOOS BVI under these agreements.
There are risks
involved with the operation of the business of Guangzhou Yuzhi and its Subsidiaries in reliance on the VIE Agreements, including
the risk that the VIE Agreements may be determined by PRC regulators or courts to be unenforceable. If the VIE Agreements were
for any reason determined to be in breach of any existing or future PRC laws or regulations, the relevant regulatory authorities
would have broad discretion in dealing with such breach, including:
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imposing
economic penalties; |
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discontinuing
or restricting the operations of Yigou or Guangzhou Yuzhi and its Subsidiaries; |
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● |
imposing
conditions or requirements in respect of the VIE Agreements with which the Group may not be able to comply; |
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requiring
EGOOS BVI to restructure the relevant ownership structure or operations; |
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taking other
regulatory or enforcement actions that could adversely affect its business; and |
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revoking
the business licenses or certificates of Guangzhou Yuzhi and its Subsidiaries and/or voiding the VIE Agreements. |
Any of these
actions could adversely affect EGOOS BVI’s ability to manage, operate and gain the financial benefits of Guangzhou Yuzhi
and its Subsidiaries, which represents its sole operations, which would have a material adverse impact on its business, financial
condition and results of operations.
EGOOS BVI’s ability to
manage and operate Guangzhou Yuzhi and its Subsidiaries under the VIE Agreements may not be as effective as direct ownership.
EGOOS BVI’s
plans for future growth are based substantially on growing the operations of Guangzhou Yuzhi and its Subsidiaries. However,
the VIE Agreements may not be as effective in providing EGOOS BVI with control over Guangzhou Yuzhi and its Subsidiaries as direct
ownership. Under the current VIE arrangements, as a legal matter, if Guangzhou Yuzhi and its Subsidiaries fail
to perform their obligations, EGOOS BVI may have to (i) incur substantial costs and resources to enforce such arrangements, and
(ii) rely on legal remedies under PRC law, which it cannot be sure would be effective. Therefore, if EGOOS BVI is unable
to effectively control Guangzhou Yuzhi and its Subsidiaries, it may have an adverse effect on its ability to achieve its business
objectives and grow its revenues.
Risks Related
to Doing Business in the PRC
The Chinese government exerts
substantial influence over the manner in which Guangzhou Yuzhi and its Subsidiaries must conduct their business activities.
Guangzhou Yuzhi
and its Subsidiaries are dependent on its relationship with the local government in Guangdong province where they operate. The
Chinese government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy
through regulation and state ownership. The ability of Guangzhou Yuzhi and its Subsidiaries to operate in China may be harmed
by changes in its laws and regulations, including those relating to taxation, environmental regulations, land use rights, property
and other matters. The central or local governments of the PRC may impose new, stricter regulations or interpretations of existing
regulations that would require additional expenditures and efforts on Guangzhou Yuzhi and its Subsidiaries’ part to ensure
compliance with such regulations or interpretations. Accordingly, government actions in the future, including any decision not
to continue to support recent economic reforms and to return to a more centrally planned economy, or regional or local variations
in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions
thereof, and could require EGOOS BVI to divest itself of any interest it then holds in Chinese properties.
Future inflation
in China may inhibit the ability of Guangzhou Yuzhi and its Subsidiaries to conduct business in China. In recent years, the Chinese
economy has experienced periods of rapid expansion and high rates of inflation. Rapid economic growth can lead to growth in the
money supply and rising inflation. If prices for the products of Guangzhou Yuzhi and its Subsidiaries rise at a rate or unchanged
or even decrease so that they are insufficient to compensate for the rise in the costs of development and production, it may have
an adverse effect on profitability. These factors have led to the adoption by the Chinese government, from time to time, of various
corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. High inflation may
in the future cause Chinese government to impose controls on credit and/or prices, or to take other action which could inhibit
economic activity in China, and thereby harm the market for audio chips and audio bank cards products.
The operations and assets of
Guangzhou Yuzhi and its Subsidiaries in China are subject to significant political and economic uncertainties and EGOOS BVI may
lose all of their assets and operations if the Chinese government alters its policies to further restrict foreign participation
in business operating in the PRC.
Changes in PRC
laws and regulations, or their interpretation, or the imposition of confiscatory taxation, restrictions on currency conversion,
imports and sources of supply, devaluations of currency or the nationalization or other expropriation of private enterprises could
have a material adverse effect on the business, results of operations and financial condition of. Under its current leadership,
the Chinese government has been pursuing economic reform policies that encourage private economic activities and greater economic
decentralization. There is no assurance, however, that the Chinese government will continue to pursue these policies, or that
it will not significantly alter these policies from time to time without notice. EGOOS BVI may lose all of its assets
and operations if the Chinese government alters its policies to further restrict foreign participation in business operating in
the PRC.
EGOOS BVI derives all of its
sales in China and a slowdown or other adverse development in the PRC economy may materially and adversely affect the customers
and end-users of Guangzhou Yuzhi and its Subsidiaries, demand for their products and their business.
All of the sales
of Guangzhou Yuzhi and its Subsidiaries are generated in China and they anticipates that sales of their audio bank cards and audio
chips in China will continue to represent all of their total sales in the near future. Although the PRC economy has grown significantly
in recent years, no assurances can be given that such growth will continue. The industry in which Guangzhou Yuzhi and its Subsidiaries
is involved in the PRC is new and growing, but Guangzhou Yuzhi and its Subsidiaries do not know how sensitive this industry is
to a slowdown in economic growth or other adverse changes in the PRC economy which may affect demand for audio chips and audio
bank cards products. In addition, the Chinese government also exercises significant control over Chinese economic growth through
the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing
preferential treatment to particular industries or companies. Efforts by the Chinese government to slow the pace of growth of
the Chinese economy could result in reduced demand for biodiesel products. A slowdown in overall economic growth, an economic
downturn or recession or other adverse economic developments in the PRC may materially reduce the demand for bank cards in general
or audio bank cards in particular and materially and adversely affect the business, results of operations and future operating
prospects of Guangzhou Yuzhi and its Subsidiaries.
Currency
fluctuations and restrictions on currency exchange may adversely affect the business of Guangzhou Yuzhi and its Subsidiaries,
including limiting the ability to convert Chinese Renminbi into foreign currencies and, if Chinese Renminbi were to decline
in value, reducing EGOOS BVI’s financial results in U.S. dollar terms.
EGOOS BVI’s
reporting currency is the U.S. dollar and the operations of Guangzhou Yuzhi and its Subsidiaries in China use China’s local
currency as their functional currency. Substantially all of EGOOS BVI’s revenues and expenses are in the Chinese currency,
the Renminbi, or RMB. EGOOS BVI is subject to the effects of exchange rate fluctuations with respect to both of these currencies.
For example, the value of the Renminbi depends to a large extent on Chinese government policies and China’s domestic and
international economic and political developments, as well as supply and demand in the local market. Since 1994, the official
exchange rate for the conversion of the Renminbi to the U.S. dollar had generally been stable and the Renminbi had appreciated
slightly against the U.S. dollar. In July 2005, the Chinese government changed its policy of pegging the value of the Renminbi
to the U.S. dollar. Under this policy, which was halted in 2008 due to the worldwide financial crisis, the Renminbi was permitted
to fluctuate within a narrow and managed band against a basket of certain foreign currencies. In June 2010, the Chinese government
announced its intention to again allow the Renminbi to fluctuate within the 2005 parameters. It is possible that the Chinese government
could adopt an even more flexible currency policy, which could result in more significant fluctuation of Renminbi against the
U.S. dollar, or it could adopt a more restrictive policy. Thus, no assurance can be given that the Renminbi will remain stable
against the U.S. dollar or any other foreign currency.
EGOOS BVI’s
financial statements are translated into U.S. dollars at the average exchange rates in each applicable period. To the extent the
U.S. dollar strengthens against the RMB, the translation of RMB-denominated transactions will result in reduced revenue, operating
expenses and net income. Similarly, to the extent the U.S. dollar weakens against the RMB, the translation of RMB-denominated
transactions will result in increased revenue, operating expenses and net income. EGOOS BVI is also exposed to foreign exchange
rate fluctuations as it converts the financial statements of its foreign consolidated subsidiaries into U.S. dollars in consolidation.
If there is a change in RMB exchange rates, such conversion into U.S. dollars will lead to a translation gain or loss which is
recorded as a component of other comprehensive income. EGOOS BVI has not entered into agreements or purchased instruments to hedge
its exchange rate risks, although it may do so in the future. The availability and effectiveness of any hedging transaction may
be limited and EGOOS BVI may not be able to effectively hedge its exchange rate risks.
The State Administration of
Foreign Exchange (“SAFE”) restrictions on currency exchange may limit EGOOS BVI’s ability to receive and use
its funds effectively and to pay dividends.
All of EGOOS
BVI’s sales revenue and expenses are denominated in RMB. Under PRC law, the Renminbi is currently convertible under the
“current account,” which includes dividends and trade and service-related foreign exchange transactions, but not under
the “capital account,” which includes foreign direct investment and loans. Currently, Guangzhou Yuzhi and its Subsidiaries
may purchase foreign currencies for settlement of current account transactions, including distributions in the form of consulting
fees and payments of dividends to EGOOS BVI, without the approval of SAFE, by complying with certain procedural requirements.
However, the relevant PRC government authorities may limit or eliminate their ability to purchase foreign currencies in the future.
All of EGOOS
BVI’s income is derived from the consulting fees it receives from Guangzhou Yuzhi and its Subsidiaries through the VIE Agreements.
SAFE restrictions may delay the payment of dividends, since Guangzhou Yuzhi and its Subsidiaries have to comply with certain procedural
requirements and they may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign
currency for the distribution of consulting fees or payment of dividends.
Foreign exchange
transactions by PRC operating subsidiaries under the capital account continue to be subject to significant foreign exchange controls
and require the approval of or need to register with PRC government authorities, including SAFE. In particular, if Guangzhou Yuzhi
and its Subsidiaries borrow foreign currency through loans from EGOOS BVI or other foreign lenders, these loans must be registered
with SAFE, and if Guangzhou Yuzhi and its Subsidiaries refinance by means of additional capital contributions, these capital contributions
must be approved by certain PRC government authorities, including the PRC Ministry of Commerce, or their respective local counterparts.
These limitations could affect the ability of Guangzhou Yuzhi and its Subsidiaries to conduct foreign exchange through debt or
equity financing.
The PRC government
also may at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign
exchange control system prevents Guangzhou Yuzhi and its Subsidiaries from obtaining foreign currency, they may be unable to pay
dividends or meet obligations that may be incurred in the future that require payment in foreign currency.
PRC regulations relating to
investments in offshore companies by PRC residents may subject our PRC-resident beneficial owners or our PRC subsidiaries to liability
or penalties, limit our ability to inject capital into our PRC subsidiaries or limit our PRC subsidiaries’ ability to increase
their registered capital or distribute profits.
SAFE promulgated
the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing
and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, on July 4, 2014, which replaced the former circular
commonly known as “SAFE Circular 75” promulgated by SAFE on October 21, 2005. SAFE Circular 37 requires PRC residents
to register with local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity,
for the purpose of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests
in domestic enterprises or offshore assets or interests, referred to in SAFE Circular 37 as a “special purpose vehicle.”
SAFE Circular 37 further requires amendment to the registration in the event of any significant changes with respect to the special
purpose vehicle, such as increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division
or other material event. In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the
required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from making profit distributions
to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle
may be restricted in its ability to contribute additional capital into its PRC subsidiary. Moreover, failure to comply with the
various SAFE registration requirements described above could result in liability under PRC law for evasion of foreign exchange
controls. According to the Notice on Further Simplifying and Improving Policies for the Foreign Exchange Administration of Direct
Investment released on February 13, 2015 by SAFE, local banks will examine and handle foreign exchange registration for overseas
direct investment, including the initial foreign exchange registration and amendment registration, under SAFE Circular 37 from
June 1, 2015.
The nationality
of EGOOS BVI’s sole shareholder, Mr. Jie Yang, is the Republic of Guinea-Bissau and he resides in the PRC. We do not have
control over our beneficial owner and our future beneficial owner(s), and cannot assure you that all of our PRC-resident beneficial
owners will comply with SAFE Circular 37 and subsequent implementation rules. The failure of our beneficial owners who are PRC
resident to register or amend their foreign exchange registration in a timely manner pursuant to SAFE Circular 37 and subsequent
implementation rules, or the failure of future beneficial owners of our company who are PRC residents to comply with the registration
procedures set forth in SAFE Circular 37 and subsequent implementation rules, may subject such beneficial owners or our PRC subsidiaries
to fines and legal sanctions. Furthermore, since SAFE Circular 37 was recently promulgated and it is unclear how this regulation,
and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the
relevant PRC government authorities, we cannot predict how these regulations will affect our business operations or future strategy.
Failure to register or comply with relevant requirements may also limit our ability to contribute additional capital to our PRC
subsidiaries and limit our PRC subsidiaries’ ability to distribute dividends to our company. These risks may have a material
adverse effect on our business, financial condition and results of operations.
Because all of EGOOS BVI’s
assets are located outside of the United States and its sole director resides outside of the United States, and because all of
Guangzhou Yuzhi and its Subsidiaries’ officers reside outside of the United States, it may be difficult for you to enforce
your rights against EGOOS BVI based on United States federal securities laws or against these persons in the United States or
to enforce judgments of United States courts against EGOOS BVI or the officers or directors of EGOOS BVI in the PRC.
The sole director
of EGOOS BVI, Mr. Jie Yang, as well as all of Guangzhou Yuzhi and its Subsidiaries’ officers reside outside of the United
States. Furthermore, the operating subsidiaries, Guangzhou Yuzhi and its Subsidiaries, are located in the PRC. All of their assets
are located outside of the United States. China does not have a treaty with United States providing for the reciprocal recognition
and enforcement of judgments of courts. It may therefore be difficult for investors in the United States to enforce their legal
rights based on the civil liability provisions of the United States federal securities laws against EGOOS BVI in the courts of
either the United States or the PRC or France and, even if civil judgments are obtained in courts of the United States, to enforce
such judgments in the PRC courts or French courts. Further, it is unclear if extradition treaties now in effect between the United
States and the PRC would permit effective enforcement against EGOOS BVI or its officers and directors of criminal penalties, under
the United States federal securities laws or otherwise.
EGOOS BVI may have limited legal
recourse under PRC laws if disputes arise under contracts with third parties.
The Chinese
government has enacted laws and regulations dealing with matters such as corporate organization and governance, foreign investment,
commerce, taxation and trade. However, their experience in implementing, interpreting and enforcing these laws and regulations
is limited, and EGOOS BVI’s ability to enforce commercial claims or to resolve commercial disputes is unpredictable. The
resolution of these matters may be subject to the exercise of considerable discretion by agencies of the Chinese government, and
forces unrelated to the legal merits of a particular matter or dispute may influence their determination. Any rights Guangzhou
Yuzhi and its Subsidiaries may have to specific performance, or to seek an injunction under PRC laws, in either of these cases,
are severely limited, and without a means of recourse by virtue of the Chinese legal system, Guangzhou Yuzhi and its Subsidiaries
may be unable to prevent these situations from occurring. The occurrence of any such events could have a material adverse effect
on EGOOS BVI’s business, financial condition and results of operations. Although legislation in China has significantly
improved the protection afforded to various forms of foreign investment and contractual arrangements in China, these laws, regulations
and legal requirements are relatively new and their interpretation and enforcement involve uncertainties, which could limit the
legal protection available to Guangzhou Yuzhi and its Subsidiaries as well as foreign investors. The inability to enforce or obtain
a remedy under any of the future agreements of Guangzhou Yuzhi and its Subsidiaries could result in a significant loss of business,
business opportunities or capital and could have a material adverse impact on EGOOS BVI’s results of operations and future
business prospects.
Failure to comply with the registration
requirements for employee share option plans may subject our PRC equity incentive plan participants or us to fines and other legal
or administrative sanctions.
On February
15, 2012, SAFE promulgated the Circular of the SAFE on Relevant Issues Concerning the Foreign Exchange Administration for Domestic
Individuals’ Participating in the Share Incentive Schemes of Overseas-Listed Companies, or SAFE Circular 7, to replace the
previous Operating Procedures for Administration of Domestic Individuals Participating in the Employee Stock Ownership Plan or
Stock Option Plan of Offshore Listed Companies issued by SAFE in March 2007, also known as “SAFE Circular 8.” SAFE
Circular 7 regulates foreign exchange matters associated with employee stock option incentives or similar incentives permitted
under applicable laws and regulations granted to PRC residents by companies whose shares are listed on offshore stock exchanges.
In accordance
with SAFE Circular 7, all PRC residents who participate in share incentive plans of an overseas publicly-listed company are required,
through the PRC subsidiary of the overseas publicly-listed company, to jointly entrust a PRC agent to handle foreign exchange
registration with SAFE or its local office and complete procedures relating to the share incentive schemes such as opening accounts
and capital transfers. PRC residents include PRC nationals or foreign citizens having been consecutively residing in PRC for not
less than one year, acting as directors, supervisors, senior management personnel or other employees of PRC companies affiliated
with such offshore listed company. A PRC agent can be one of the PRC subsidiaries of the offshore listed company participating
in the share incentive scheme or another PRC institution qualified for asset trusteeship s as designated by the PRC subsidiary
and in accordance with PRC laws. The foreign exchange proceeds received by the PRC residents from sale of shares under share incentive
plans granted by offshore listed companies must be remitted to bank accounts in China opened by the PRC agents. Further, a Notice
Concerning Individual Income Tax on Earnings from Employee Stock Options, jointly issued by the Ministry of Finance and the State
Administration of Taxation provides that domestic companies that implement employee share option programs must file the employee
share option plans and other relevant documents with local tax authorities having jurisdiction over the companies before implementing
such plans, and must file share option exercise notices and other relevant documents with local tax authorities before their employees
exercise any share options.
We may adopt
an equity incentive plan and make numerous stock option grants under the plan to its officers, directors and employees, some of
whom are PRC citizens and may be required to complete the relevant foreign exchange registration procedures in accordance with
SAFE Circular 7. We plan to advise our employees to complete these procedures in connection with our future share incentive plans.
However, we cannot assure you that registration procedures with SAFE or its local counterparts in full compliance with SAFE Circular
7 will be completed on a timely basis, if at all. The failure to complete these procedures may subject us or our PRC employees
holding restricted shares or share options under our share incentive plans to fines and other legal or administrative sanctions.
Due to various restrictions
under PRC laws on the distribution of dividends by PRC operating subsidiaries and VIE affiliates, EGOOS BVI may not be able to
pay dividends to its stockholders.
The Wholly-Foreign
Owned Enterprise Law (1986), as amended, and the Wholly-Foreign Owned Enterprise Law Implementing Rules (1990), as amended, and
the Company Law of the PRC (2006) contain the principal regulations governing dividend distributions by wholly foreign owned enterprises.
Under these regulations, wholly foreign owned enterprises, such as Yigou, may pay dividends only out of their accumulated profits,
if any, as determined in accordance with PRC accounting standards and regulations. Additionally, Yigou is required to set aside
a certain amount of their accumulated profits each year, if any, to fund certain reserve funds. These reserves are not distributable
as cash dividends except in the event of liquidation and cannot be used for working capital purposes.
Furthermore,
if the consolidated subsidiaries incur debt on their own in the future, the instruments governing the debt may restrict EGOOS
BVI’s ability to pay dividends or make other payments. If EGOOS BVI or its consolidated subsidiaries and VIE affiliates
are unable to receive all of the revenues from operations due to these contractual or dividend arrangements, EGOOS BVI may be
unable to pay dividends.
EGOOS BVI may have difficulty
establishing adequate management, governance, legal and financial controls in the PRC.
The PRC historically
has been deficient in western style management, governance and financial reporting concepts and practices, as well as in modern
banking, and other control systems. EGOOS BVI’s current management has little experience with western style management,
governance and financial reporting concepts and practices, and it may have difficulty in hiring and retaining a sufficient number
of qualified employees to work in the PRC. As a result of these factors, and especially given that EGOOS BVI expects to be a publicly
listed company in the U.S. and subject to regulation as such, it may experience difficulty in establishing management, governance
legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records
and instituting business practices that meet western standards. EGOOS BVI may have difficulty establishing adequate management,
governance, legal and financial controls in the PRC. Therefore, it may, in turn, experience difficulties in implementing and maintaining
adequate internal controls as required under applicable U.S. laws, rules and regulations. This may result in significant deficiencies
or material weaknesses in its internal controls which could impact the reliability of its financial statements and prevent it
from complying with SEC rules and regulations. Any such deficiencies, weaknesses or lack of compliance could have a materially
adverse effect on EGOOS BVI’s business and the public announcement of such deficiencies could adversely impact its stock
price.
Risks Related
to Our Common Stock
Trading in our common stock
over the last 12 months has been non-existent, so investors may not be able to sell as many of their shares as they want at prevailing
prices.
Shares of our common
stock are quoted on the OTC Market Pink Sheets under the symbol “WAYS.PK”. If limited trading in the Common Stock
continues, it may be difficult for investors to sell such shares in the public market at any given time at prevailing prices.
Also, the sale of a large block of Common Stock could depress the market price of the Common Stock to a greater degree than a
company that has a higher volume of trading of its securities.
An active and visible trading
market for our Common Stock may not develop.
We cannot predict
whether an active market for our Common Stock will develop in the future. In the absence of an active trading market:
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Investors may have difficulty
buying and selling or obtaining market quotations; |
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Market visibility for our Common
Stock may be limited; and |
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A lack of visibility for our
Common Stock may have a depressive effect on the market price for our Common Stock. |
The Pink Sheets
market is an unorganized, inter-dealer, over-the-counter market that provides significantly less liquidity than other OTC market,
NASDAQ or the NYSE AMEX. The trading price of the Common Stock is expected to be subject to significant fluctuations in response
to variations in quarterly operating results, changes in analysts’ earnings estimates, announcements of innovations by us
or our competitors, general conditions in the industry in which we operate and other factors. These fluctuations, as well as general
economic and market conditions, may have a material or adverse effect on the market price of our Common Stock.
The market price for our stock
may be volatile.
The market price
for our stock may be volatile and subject to wide fluctuations in response to factors including the following:
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actual or anticipated fluctuations
in our quarterly operating results; |
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changes in financial estimates
by securities research analysts; |
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announcements by us or our competitors
of acquisitions, strategic partnerships, joint ventures or capital commitments; |
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addition or departure of key
personnel; |
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fluctuations of exchange rates
between RMB and the U.S. dollar; |
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intellectual property or other
litigation; and |
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general economic or political
conditions in China. |
In
addition, the securities markets have from time to time experienced significant price and volume fluctuations that are
not related to the operating performance of particular companies. These market fluctuations may also materially and adversely
affect the market price of our stock.
Compliance with changing regulation
of corporate governance and public disclosure, and our management’s inexperience with such regulations will result in additional
expenses and creates a risk of non-compliance.
Changing laws,
regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and
related SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated
with accessing the public markets and public reporting. Our management team will need to invest significant management time and
financial resources to comply with both existing and evolving standards for public companies, which will lead to increased general
and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance
activities. In addition, our management located in the PRC has little experience with compliance with U.S. laws (including securities
laws). This inexperience may cause us to fall out of compliance with applicable regulatory requirements, which could lead to enforcement
action against us and a negative impact on our stock price.
We do not foresee paying cash
dividends in the foreseeable future and, as a result, our investors’ sole source of gain, if any, will depend on capital
appreciation, if any.
We do not plan
to declare or pay any cash dividends on our shares of Common Stock in the foreseeable future and currently intend to retain any
future earnings for funding growth. As a result, investors should not rely on an investment in our securities if they require
the investment to produce dividend income. Capital appreciation, if any, of our shares may be investors’ sole source of
gain for the foreseeable future. Moreover, investors may not be able to resell their Common Stock at or above the price they paid
for them.
Item 2. Financial Information.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS
The following
discussion and analysis of our results of operations and financial condition since the Company’s inception should be read
in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Prospectus.
All statements, other than statements of historical facts, included in this report are forward-looking statements. When used in
this report, the words “may,” “will,” “should,” “would,” “anticipate,”
“estimate,” “possible,” “expect,” “plan,” “project,” “continuing,”
“ongoing,” “could,” “believe,” “predict,” “potential,” “intend,”
and similar expressions are intended to identify forward-looking statements. Forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include,
but are not limited to, availability of additional equity or debt financing, changes in sales or industry trends, competition,
retention of senior management and other key personnel, availability of materials or components, ability to make continued product
innovations, casualty or work stoppages at our facilities, adverse results of lawsuits against us and currency exchange rates.
Forward-looking statements are based on assumptions and assessments made by our management in light of their experience and their
perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate.
Readers of this report are cautioned not to place undue reliance on these forward-looking statements, as there can be no assurance
that these forward-looking statements will prove to be accurate and speak only as of the date hereof. Management undertakes no
obligation to publicly release any revisions to these forward-looking statements that may reflect events or circumstances after
the date hereof or to reflect the occurrence of unanticipated events. This cautionary statement is applicable to all forward-looking
statements contained in this report.
Overview of Business
The Company
is a development stage in the business of design, development, and proliferation of next generation technology for debit
and credit cards for financial institutions employing innovative secured encryption technology transmitted via audio wave technology;
the audio bank card with our inlay meets the innovative product standards set forth by China UnionPay and the Company has maintained
working relationship and communications with China Construction Bank, which led to the bank’s desire to launch a pilot program
to develop and market to the bank’s customers and business operators to adopt these next generation of cards by developing
point of sale and commercial interfaces via software and other solutions to generate demand for these cards as a value-added alternative
to current generation debit and credit cards.
Critical Accounting Policies
We
prepare our consolidated financial statements in conformity with GAAP, which requires management to make certain estimates and
apply judgments. We base our estimates and judgments on historical experience, current trends and other factors that management
believes to be important at the time the consolidated financial statements are prepared. Due to the need to make estimates about
the effect of matters that are inherently uncertain, materially different amounts could be reported under different conditions
or using different assumptions. On a regular basis, we review our critical accounting policies and how they are applied
in the preparation of our consolidated financial statements.
While
we believe that the historical experience, current trends and other factors considered support the preparation of our consolidated
financial statements in conformity with GAAP, actual results could differ from our estimates and such differences could be material.
Results
of Operations
We
are a development stage company and have generated minimal revenues from operations since our inception on November 11, 2013 to
June 30, 2015. As of June 30, 2015, we had total assets of $2,147,836 and total liabilities of $851,053. We expect we will
require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among
other things, the sale of equity or debt securities.
We
are in the process of developing our products and services. Consequently, we generated minimal revenues as of the date of this
report. We have an accumulated deficit and have incurred operating losses since our inception and expect losses to continue
during 2015.
Revenue
Revenue
commenced during May 2015 from audio banking card inlay sales (including software and hardware). We
earned revenues of $162,003 for the six months ended June 30, 2015 from Wuhan Tianyu Chengdu Westone Information Industry Inc.
Expenses
During
the six month period ended June 30, 2015, we incurred general and administrative expenses and professional fees of $247,584. During
the year ended December 31, 2014, we incurred general and administrative expenses and professional fees of $487,818. General
and administrative and professional fee expenses were generally related to corporate overhead, financial and administrative contracted
services, such as legal and accounting, developmental costs, and marketing expenses.
LIQUIDITY AND CAPITAL RESOURCES
We
anticipate taking the following steps to implement our business plan in the next 12 months. Our capital requirements for
implementation of these steps are estimated at $40,000,000 as set forth in the table below. During the next 12 months, we anticipate
engaging in the following operational activities, although we may vary our plans depending upon operational conditions and available
funding:
PLAN OF OPERATION AND FUNDING
Event |
|
Actions |
|
Expected
Timeframe |
|
|
Estimated
Cost |
|
|
|
|
|
|
|
|
|
|
Step 1
Co Branded
Operations |
|
Further increase efforts
to promote the use of audio bank card, handle multiple functions simultaneously,
enhance cooperation, expand trade cooperation model.
Quarter 1 set up the
headquarter of the CCB electronic channel audio applications, To provide service to headquarters of center
of CCB credit card
Quarter 2 Establish e-banking mobile
banking headquarters
Quarter 3 Acquisition
or licensing of third-party payment companies, after transforming the main audio card online and offline payment services
Quarter 4 Operating acoustic payment platform
|
|
|
extending efforts promotional in 12 months
|
|
|
$ |
13,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Step 2
Acquiring UINT
|
|
Acquire
core technology, expand the plant of Limmoge in France, reach the production of
6M cards/yr |
|
|
Completion of acquisition of target in 3
months
|
|
|
$ |
15,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Step 3
Domestic Investment
|
|
Build up factory in
china (R & D centers and chip production plant). Recruiting research &
management personnel.100M/yr producing target
Quarter 1&
Quarter
2 Plant construction period is expected to be 6 months, (we are expected to
only invest in facilities for manufacturing the core components of active circuit board).
Quarter
3 Invest in the construction
of active circuit board between super clean workshop
Quarter 4 Commissioning
stage
|
|
|
Completion of construction of plant in 12
months
|
|
|
$ |
12,000,000 |
|
| · | The
12 months timeframe shown in the Table is an estimate.
There is no assurance this timeframe could be met. |
We expect that working capital requirements
will continue to be funded through a further issuances of securities. Our working capital requirements are expected to increase
in line with the growth of our business.
Anticipated
cash flow are expected to be adequate to fund our operations over the next twelve months assuming the company may generate
revenues from sales of inlays to bank card manufacturers in connection with the proposed CCB pilot program. There is
no assurance, however, that the program will be carried out as scheduled, or at all. Generally, we have financed operations
to date through the proceeds of the private placement of equity and debt instruments. In connection with our business
plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i)
developmental expenses associated with a start-up business; and (ii) marketing expenses. We intend to finance these expenses
with further issuances of securities, and debt issuances. Thereafter, we expect we will need to raise additional capital and
generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities
will result in dilution to our current shareholders. Additional financing may not be available upon acceptable terms, or at
all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage
of prospective new business endeavors or opportunities, which could significantly and materially restrict our
business operations. As of the date of this Current Report, we do not
have any current arrangements or understandings for the sale of debt or equity securities.
Off-Balance Sheet Arrangements
We do not have any
off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources
that is material to investors.
Recent Accounting Pronouncements
Except
for rules and interpretive releases of the SEC under authority of federal securities laws and a limited number of grandfathered
standards, the FASB Accounting Standards Codification™ (“ASC”) is the sole source of authoritative GAAP literature
recognized by the FASB and applicable to our company. Management has reviewed the aforementioned rules and releases and
believes any effect will not have a material impact on our company's present or future consolidated financial statements.
Quantitative and Qualitative
Disclosures About Market Risk
As a “smaller
reporting company”, we are not required to provide the information required by this Item.
Item 3. Properties.
Guangzhou Yuzhi’s
office is located at Suite 1601-A, 437 Middle Dongfeng Road, Yuexiu District, Guangzhou City, Guangdong Province, China. We lease
a total of approximately 40 square meters (approximately 431 square feet) of office space at the aforementioned address pursuant
to one lease agreement. Pursuant to this agreement, which will expire on May 1, 2017, the monthly rent is approximately RMB 6,004
(approximately $941).
Shenzhen Exce-card’s
corporate headquarters is located at Suite 1601-C, 437 Middle Dongfeng Road, Yuexiu District, Guangzhou City, Guangdong Province,
China. We lease a total of approximately 126 square meters (approximately 1356 square feet) of office space at the aforementioned
address pursuant to one lease agreement. Pursuant to this agreement, which will expire on May 1, 2017, the monthly rent is approximately
RMB 16,000 (approximately $2,508).
Shenzhen Exce-card’s
Beijing branch is located at Suite 1505, Zhujiang Dijing District D, Building No.5, Xidawang Road, Chaoyang District, Beijing,
China. We lease a total of approximately 140 square meters (approximately 1,507 square feet) of office space at the aforementioned
address pursuant to one lease agreement. Pursuant to this agreement, which will expire in August 2017, the monthly rent is approximately
RMB 12,000 (approximately $1,866).
Shenzhen Exce-card’s
Shanghai branch is located at 212 Jiangning Road, Dike Building, 20th Floor, Shanghai, China. We lease two cubicles in the co-working
space at the aforementioned address with monthly rent of approximately RMB 6,000 (approximately $933) pursuant to one lease agreement.
Pursuant to this agreement, the lease term is flexible with a two-month notice for termination.
Shenzhen Exce-card’s
New York branch is located at 40 Wall Street, 28th Floor, New York, NY. We lease a total of approximately 323 square feet of two
offices at the aforementioned address pursuant to two lease agreements. Accordingly, the lease term for one office will expire
in January 2016, and the other will expire in Novebmer 2016, both of which will be automatically renewed unless a 90-day notice
is given. The total monthly rent for these two offices is approximately $5,439.
Current, we do not have our own manufacturing facility.
For more details
please refer to the section titled “Risks Related to the Overall Business of Guangzhou Yuzhi and its Subsidiaries”
included in Item 1A Risk Factors above.
Item 4. Security Ownership
of Certain Beneficial Owners and Management.
The following table
sets forth information known to us with respect to the beneficial ownership of Common Stock immediately after the consummation
of the Acquisition and immediately after the Reverse Split and Conversion (assuming such Conversion is consummated), respectively
by each person who beneficially owns more than 5% of the Common Stock and each post-acquisition officer and director, and all
post-acquisition officers and directors as a group.
Common Stock which an individual or group has a right to acquire within 60
days pursuant to the exercise or conversion of options, warrants or other similar convertible or derivative securities are deemed
to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to
be outstanding for the purpose of computing the percentage ownership of any other person shown in the table.
Name
and Address of Beneficial Owner (1) | |
Amount
and Nature of
Beneficial Ownership Post
Acquisition
(2) | | |
Percentage of Class
Post Acquisition
(2) | | |
Amount
and Nature of Beneficial Ownership Post Reverse Split and Conversion
(5) | | |
Percentage of Class
Post Reverse Split and Conversion (5) | |
Directors
and Executive Officers | |
| | |
| | |
| | |
| |
Mei
Yang, Chairman of the Board | |
| 40,000,000 | | |
| 40.6 | % | |
| 2,000,000 | | |
| 10.04 | % |
Ming
Yi, Chief Financial Officer and Director | |
| 863,738 | | |
| * | | |
| 43,187 | | |
| * | |
Zuyue
Xiang, Chief Executive Officer and Director | |
| - | | |
| * | | |
| - | | |
| * | |
Xinqian
Zhang, Director and Secretary | |
| - | | |
| * | | |
| - | | |
| * | |
PokKam
Li, Director | |
| 1,000,000 | | |
| 1.0 | % | |
| 50,000 | | |
| * | |
Hongxia
Zhao, Director | |
| - | | |
| * | | |
| - | | |
| * | |
Xiaoqiang
Zuo, Director | |
| - | | |
| * | | |
| - | | |
| * | |
All
directors and executive officers as a group (7 persons) | |
| 41,863,738 | | |
| 42.5 | % | |
| 2,093,187 | | |
| 10.05 | % |
| |
| | | |
| | | |
| | | |
| | |
5%
Holders | |
| | | |
| | | |
| | | |
| | |
Mei
Yang | |
| 40,000,000 | | |
| 40.6 | % | |
| 2,000,000 | | |
| 10.04 | % |
Zhenyu
Wang | |
| 7,532,945 | | |
| 7.7 | % | |
| 376,647 | | |
| ** | |
US
New Media Holding Group Inc. (3) 86 Bowery St Ste 201, New York, NY 10013 | |
| 20,000,000 | | |
| 20.3 | % | |
| 1,000,000 | | |
| 5.02 | % |
Nie
Xingfeng Co., Ltd. (4)
PO Box 957 Offshore Incorporations Ctr, Road Town, Tortola, BVI | |
| 6,492,038 | | |
| 6.6 | % | |
| 324,602 | | |
| ** | |
Jie
Yang | |
| - | | |
| * | | |
| 15,000,000 | | |
| 75.30 | % |
All
5% holders as a group post Acquisition (4 persons) | |
| 74,024,983 | | |
| 75.2 | % | |
| | | |
| | |
All
5% holders as a group post Reverse Split and Conversion (3 persons) | |
| | | |
| | | |
| 18,000,000 | | |
| 90.36 | % |
* |
Less than
1%. |
** |
Less than 5%.
|
(1) |
Unless otherwise noted, the
address is c/o 40 Wall Street, 28th Floor, New York, NY. |
(2) |
The securities “beneficially owned” by an individual are determined in
accordance with the definition of “beneficial ownership” set forth in the regulations promulgated under the Exchange
Act and, accordingly, may include securities owned by or for, among others, the spouse and/ or minor children of an individual
and any other relative who resides in the same home as such individual, as well as other securities as to which the individual
has or shares voting or investment power or which each person has the right to acquire within sixty (60) days through the exercise
of options or otherwise. Beneficial ownership may be disclaimed as to certain of the securities. This table has been prepared
based on 98,405,005 shares of common stock outstanding as of October 16, 2015. |
(3) |
Mr. Xiaodong Wang is the 100% owner of this entity. |
(4) |
Mr. Nie Xingfeng is the 100% owner of this entity. |
(5) |
After the Reverse Split, assuming the Conversion is consummated, the shares of common stock outstanding immediately
after the Conversion will be 19,920,250. |
Change in Control
Reference is
made to Item 5.01 for a description of the change in control of the Registrant as a result of the transactions disclosed herein.
Item 5. Directors and Executive
Officers.
The Board and
executive officers of the Company as of the date of this Current Report are as follows:
Directors and Executive Officers |
|
Age |
|
Position / Title |
Zuyue Xiang |
|
45 |
|
Chief Executive
Officer and Director |
Hongxia Zhao |
|
45 |
|
Director |
Xiaoqiang
Zuo |
|
47 |
|
Director |
PokKam Li |
|
58 |
|
Director |
Ming Yi |
|
35 |
|
Chief Financial
Officer and Director |
Xinqian Zhang |
|
25 |
|
Director
and Secretary |
Mei Yang
|
|
44 |
|
Chairman
of the Board |
Mr. Zuyue
Xiang has served as the chief executive officer and director of the Company since October 16, 2015. Mr. Xiang commenced his
employment with Shenzhen Exce-card as managing staff in July 2014, and since April 2015, he served as the president of Shenzhen
Exce-card overseeing the company’s software product and IT solution business, including its financial IC card business,
as well as the research and development of its financial IC card technology. From March 2007 to March 2015, Mr. Xiang served as
the general manager of Beijing Yuxin Shangfang Technology Company Limited, a PRC-based technology company, responsible for and
oversaw the operation and development of the company’s business, the human resources and coordination with government agencies.
Mr. Xiang holds a B.S. in management from South China University of Technology.
Ms. Mei
Yang has ample managerial experience in businesses in the field of bank card technology solution. She has served as the chairman
of the Board of the Company since January 2015. She has also served as the vice president of Shenzhen Exce-card since December
2013. From June 2009 to November 2013, Ms. Yang served as the chief financial officer of Beijing Yuxin ShangFang Technology Company,
a PRC-based debit card technology solution company. Ms. Yang holds a B.S. in economic information management from Xinjiang Agricultural
University.
Ms. Hongxia
Zhao has more than 10 years of experience in information technology and more than 5 years of experience in financial consulting.
He has served as the director of the Company since March 2015. She has also served as manager of Wall Street Standard Capital
Inc., a financial consulting company since January 2010, and as the president of Huayuan Kaituo Limited Company, an information
technology company since January 2004. Ms. Zhao holds a B.S. in renewable resources engineering from Anhui Finance and Economics
University.
Mr. Xiaoqiang
Zuo has more than 20 years of experience in the engineering and technology in banking and clearing systems. Mr. Zuo has served
as the director of the Company since March 2015. He has also served as the president of Shenzhen Tianshi Future Electronic Technology
Company, a PRC-based company specializing in surface mounted technology and manufacturing electronics since June 2010, and as
the president of Huayuan Runtong (Beijing) Technology Company, a PRC-based software development company since December 2004. Mr.
Zuo holds a B.S. in electronics and information system from Mongolia University.
Mr. PokKam
Li has extensive experience in providing consulting services to large companies in various industries, including but not limited
to hotel development and management, real estate investment, and international trading of petroleum products. Mr. Li has served
as a director of the Company since May 2012. From May 2012 to January 2015, he served as the chief executive officer of the Company.
Since August 2007, Mr. Li has served as consultant to China Grand Forestry Green Resources Group Ltd., a public company traded
on the Hong Kong Stock Exchange (910.HK) engaged in the ecological forestry business in China. Since May 2008, Mr. Li has acted
as consultant to China E-Learning Group Ltd., a company traded on the Hong Kong Stock Exchange (8055.HK) providing occupational
education, industry certification course, skills training, and education consultation services in China. Mr. Li holds a B.S. in
International Trade from the University of International Business and Economics in Beijing, China.
Mr.
Yi Ming has years of experience in accounting. He served as the chief financial officer and director of the Company since
June 2011, overseeing the issuance of the Company’s financial information, reviewing and approving the Company’s quarterly
and annual reports, its budgets and tax returns. From September 2009 to April 2011, he served as a senior manager in Qi He Certified
Public Accountants Co. Ltd., a PRC-based accounting firm,
responsible for client acquisition and project management, and managed different aspects of business operation such as staffing,
budgeting, and global resource coordination. Mr. Yi holds a B.S. in Accounting from School of Business Administrations of Liaoning
University, and an M.S. in Accounting and Finance from Victory University, Australia. Mr.Yi is a Certified Public Account in Australia.
Ms. Xinqian
Zhang has acute business sense due to her unique background and experience, and is familiar with the financial markets in
both the U.S. and China. She served as the secretary of the board of the Company since March 2015 and a director of the Company
since October 16, 2015. From January 2013 to December 2014, she served as an accounting research and teaching assistant of the
University of Massachusetts, Boston, and the fund administrator of the global service department of State Street, a U.S.-based
financial services firm. Ms. Zhang holds a dual B.S. in business management from Dongbei University of Finance and Economics and
the University of Surrey, and an M.S. in accounting from the University of Massachusetts, Boston.
Independence of Directors
Ms. Hongxia Zhao and
Mr. Xiaoqiang Zuo are “independent directors” as defined by the NASDAQ Marketplace Rules and will meet the independence
standards set forth in Rule 10A-3 of the Exchange Act.
Item 6. Executive Compensation
The following
summary compensation table sets forth information concerning compensation for services rendered in all capacities during the period
through December 31, 2014, earned by or paid to our executive officers.
SUMMARY COMPENSATION TABLE |
| |
| | |
| | |
| | |
| | |
| | |
Non-Equity | | |
Change in | | |
| | |
| |
Name and | |
| | |
| | |
| | |
Stock | | |
Option | | |
Incentive Plan | | |
Pension Value | | |
All Other | | |
| |
Principal | |
Fiscal | | |
Salary | | |
Bonus | | |
Awards | | |
Awards | | |
Compensation | | |
and | | |
Compensation | | |
Total | |
Position | |
Year | | |
($) | | |
($) | | |
($) | | |
($) | | |
($) | | |
Nonqualified | | |
($) | | |
($) | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
PokKam Li, | |
| 2014 | | |
| 1 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1 | |
CEO | |
| 2013 | | |
| 1 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1 | |
| |
| 2012 | | |
| 1 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Ming Yi, | |
| 2014 | | |
| 1 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1 | |
CFO | |
| 2013 | | |
| 1 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1 | |
| |
| 2012 | | |
| 1 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1 | |
| |
| 2011 | | |
| 170,116 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 170,116 | |
On June 17, 2011,
Mr. Ming Yi and the Company entered into an employment agreement which provides for an initial term of three (3) years and an
annual base compensation of RMB 1,088,000 (approximately $170,116). The Agreement also contains a 12 month post-termination
non-competition covenant and standard confidentiality provisions.
Mr.
Zuyue Xiang (in his capacity as general manager of Shenzhen Exce-card) has a written employment agreement with
Shenzhen Exce-card for a term of 5 years from January 1, 2015 to December 31, 2019. He commenced his employment
with Shenzhen Exce-card as managing staff in July 2014, and since April 2015, he served as the President of Shenzhen Exce-card.
Mr. Xiang receives an annual salary of RMB 420,000 (approximately $66,062.67).
None of the officers and directors receives any other compensation or reimbursement
from the Group.
Item 7. Certain Relationships
and Related Transactions, and Director Independence.
The Group
Reorganization Related Transactions
On August 5, 2015,
Yigou entered into an Exclusive Service Agreement which entitles Yigou to substantially all of the economic benefits of Guangzhou
Yuzhi and its Subsidiaries in consideration of services provided by Yigou to Guangzhou Yuzhi and its Subsidiaries. In addition,
Yigou entered into certain agreements with each of Wenbin Yang, Ping Li, (collectively, the “Guangzhou Yuzhi shareholders”),
as well as Guangzhou Yuzhi and its Subsidiaries, including (i) a Call Option Agreement allowing Yigou to acquire the shares of
Guangzhou Yuzhi as permitted by PRC laws, (ii) a Voting Rights Proxy Agreement that provides Yigou with the voting rights of the
Guangzhou Yuzhi shareholders and those of Guangzhou Yuzhi, and (iii) an Equity Pledge Agreement that pledges the shares in Guangzhou
Yuzhi and its Subsidiaries to Yigou. This VIE structure provides Yigou, a wholly-owned subsidiary of EGOOS HK, with control over
the operations and benefits of Guangzhou Yuzhi and its Subsidiaries without having a direct equity ownership in Guangzhou Yuzhi
and its Subsidiaries.
Acquisition
A
director and former CEO of the Company, Ms. Mei Yang, has since December 2013 worked as a vice president of Shenzhen
Exce-Card, a wholly owned subsidiary of Guangzhou Yuzhi, which is
indirectly wholly-controlled by EGOOS BVI. Ms. Yang therefore was on both sides of the Company’s transactions with
EGOOS BVI. Ms. Yang does not hold any equity interest in EGOOS BVI or Shenzhen Exce-Card.
Loan to Management
Guangzhou
Yuzhi extended a loan to Xiang, Zuyue, our Chief Executive Officer, in the amount of approximately $1.6 million, which is
unsecured and does not bear interest. Such referenced loan was extended to Mr. Xiang by Guangzhou Yuzhi in May 2014, prior to
the consummation of our acquisition of EGOOS BVI (as well as Guangzhou Yuzhi) on October 19, 2015. The Company and Mr. Xiang
has established a repayment schedule and such loan is expected to be fully repaid by December 2016. The Company is aware
of the ramifications of Section 13(k) of the Exchange Act, which prohibits any issuer from extending or maintaining
any personal loans to or for any director or executive officer of the issuer, and the Company has implemented control
procedure to prevent violation of Section 13(k) in the future.
Board Meetings and Committees
We do not have a standing audit committee of
the Board of Directors. We do not have a financial expert serving on the Board of Directors or employed as an officer based on
management’s belief that the cost of obtaining the services of a person who meets the criteria for a financial expert under
Item 407(d) of Regulation S-K is beyond its limited financial resources and the financial skills of such an expert are simply
not required or necessary for us to maintain effective internal controls and procedures for financial reporting in light of the
limited scope and simplicity of accounting issues raised in its financial statements at this stage of its development.
Item 8. Legal Proceedings.
To the best
of our knowledge, other than as disclosed below, none of our directors or executive officers has, during the past ten years:
|
● |
been
convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other
minor offenses); |
|
● |
had
any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or
business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or
within two years prior to that time; |
|
● |
been
subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction
or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement
in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities,
or to be associated with persons engaged in any such activity; |
|
● |
been
found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity
Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been
reversed, suspended, or vacated; |
|
● |
been
the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently
reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an
alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial
institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement
or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or
any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
|
● |
been
the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of
the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority
over its members or persons associated with a member. |
We have no material
proceedings pending nor are we aware of any pending investigation or threatened litigation by any third party.
Item 9. Market Price of and
Dividends on the Registrant’s Common Equity and Related Stockholder Matters.
The following
table shows, for the periods indicated, the high and low bid prices per share of our common stock as reported by the OTC quotation
service. These bid prices represent prices quoted by broker-dealers on the OTC quotation service. The quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commissions, and may not represent actual transactions.
| |
Fiscal Year Ended December 31, 2015 | | |
Fiscal Year Ended December 31, 2014 | | |
Fiscal Year Ended December 31, 2013 | |
| |
Low
| | |
High
| | |
Low | | |
High | | |
Low | | |
High | |
First Quarter ended March 31 | |
$ | 0.03 | | |
$ | 0.03 | | |
$ | 0.04 | | |
$ | 0.04 | | |
$ | 0.03 | | |
$ | 0.29 | |
Second Quarter ended June 30 | |
$ | 0.03 | | |
$ | 0.08 | | |
$ | 0.03 | | |
$ | 0.49 | | |
$ | 0.03 | | |
$ | 0.20 | |
Third Quarter ended September 30 | |
$ | 0.08 | | |
$ | 1.00 | | |
$ | 0.05 | | |
$ | 0.03 | | |
$ | 0.04 | | |
$ | 0.70 | |
Fourth Quarter ended December 31 | |
| 0.51 | | |
| 0.51 | | |
$ | 0.03 | | |
$ | 0.48 | | |
$ | 0.04 | | |
$ | 0.04 | |
On October 16, 2015,
the closing price for our common stock, as reported by the OTC Market, was $0.31 per share. As of October 16, 2015, the Company
had an aggregate of 98,405,005 shares of common stock issued and outstanding and 120 shareholders of record.
Dividends
We have never
declared or paid any cash dividends or distributions on our Common Stock. We currently intend to retain our future earnings to
support operations and to finance future growth and expansion and, therefore, do not anticipate paying any cash dividends on our
common stock in the foreseeable future.
Code of Ethics
We do not have
a code of ethics that applies to our officers, employees and directors.
Corporate Governance
The business
and affairs of the company are managed under the direction of our board. In addition to the contact information in this annual
report, each stockholder will be given specific information on how he/she can direct communications to the officers and directors
of the corporation at our annual stockholders meetings. All communications from stockholders are relayed to the members of the
board of directors.
Role in Risk Oversight
Our board of directors
is primarily responsible for overseeing our risk management processes. The board of directors receives and reviews periodic reports
from management, auditors, legal counsel, and others, as considered appropriate regarding our company’s assessment of risks.
The board of directors focuses on the most significant risks facing our company and our company’s general risk management
strategy, and also ensures that risks undertaken by our company are consistent with the board’s appetite for risk. While
the board oversees our company’s risk management, management is responsible for day-to-day risk management processes. We
believe this division of responsibilities is the most effective approach for addressing the risks facing our company and that
our board leadership structure supports this approach.
Securities Authorized for Issuance
under Equity Compensation Plans
Outstanding Equity Awards at
2014 Fiscal Year End
There were no
outstanding equity awards for the fiscal year ended December 31, 2014.
Item 10. Recent Sales of Unregistered
Securities.
Issuance of Shares
The Company’s common stock issued within
the past 4 years were summarized as follows:
|
|
|
|
|
|
|
|
Issue |
|
|
|
|
|
|
|
|
|
|
|
Value |
|
|
|
|
|
|
|
|
Number of |
|
|
Per |
|
|
|
Name of Shareholder |
|
Date |
|
|
Shares |
|
|
Share |
|
|
Reason for Issuance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ming Yi |
|
|
April 11, 2012 |
|
|
|
863,738 |
|
|
$ |
0.001 |
|
|
Employee shares |
Zhenyu Wang |
|
|
April 11, 2012 |
|
|
|
2,000,000 |
|
|
$ |
0.001 |
|
|
Consulting service fee |
PokKam Li |
|
|
June 26, 2012 |
|
|
|
1,000,000 |
|
|
$ |
0.001 |
|
|
Employee shares |
Johnson Chen |
|
|
June 26, 2012 |
|
|
|
500,000 |
|
|
$ |
0.2 |
|
|
Purchase |
Chi Yuen Andrew Chu |
|
|
June 26, 2012 |
|
|
|
250,000 |
|
|
$ |
0.2 |
|
|
Purchase |
Elite International Group Ltd |
|
|
August 10, 2012 |
|
|
|
5,000,000 |
|
|
$ |
0.001 |
|
|
Consulting service fee |
US New Media Holding Group Inc |
|
|
September 18, 2014 |
|
|
|
20,000,000 |
|
|
$ |
0.003 |
|
|
Consulting service fee |
Mei Yang |
|
|
January 16, 2015 |
|
|
|
40,000,000 |
|
|
$ |
0.0075 |
|
|
Employee shares |
Total |
|
|
|
|
|
|
69,613,738 |
|
|
|
|
|
|
|
The Company relied upon the exemption from
registration under Section 4(2) in connection with these issuances.
Item 11. Description of Registrant’s
Securities
The Registrant’s
authorized capital stock currently consists of one hundred million (100,000,000) shares of common stock, par value $0.001 per
share, of which there are 98,405,005 shares of common stock issued and outstanding as of the date of this Report. There are no
shares of preferred stock authorized, issued or outstanding. Holders of common stock are entitled to one (1) vote for each share
on all matters to be voted on by the Registrant’s stockholders. Holders of common stock do not have cumulative voting rights.
Holders of common stock are entitled to share ratably in dividends, if any, as may be declared from time to time by the Board
in its discretion from funds legally available therefore. In the event of any liquidation, dissolution or winding up, the holders
of common stock are entitled to a pro-rata share of all assets remaining after payment in full of all liabilities and preferential
payments, if any, to holders of preferred stock. Holders of common stock have no preemptive rights to purchase additional common
stock. Furthermore, there are no conversion or redemption rights or sinking fund provisions with respect to the common stock.
Anti-Takeover Effects of Provisions
of Delaware Law
Provisions of
Delaware law could make acquisition of the Company through a tender offer, a proxy contest or other means more difficult and could
make the removal of incumbent officers and directors more difficult. The Company expects these provisions to discourage coercive
takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of the Company to first negotiate
with its Board of Directors. The Company believes that the benefits provided by its ability to negotiate with the proponent of
an unfriendly or unsolicited proposal outweigh the disadvantages of discouraging these proposals. The Company believes the negotiation
of an unfriendly or unsolicited proposal could result in an improvement of its terms.
Item 12. Indemnification of
Officers and Directors.
Our Certificate
of Incorporation (as amended) provides that no director shall be personally liable to the Company or its stockholders for monetary
damages for any breach of fiduciary duty by such director as a director. Notwithstanding the foregoing sentence, a director shall
be liable to the extent provided by applicable law, (i) for breach of the director’s duty of loyalty to the Registrant or
its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) pursuant to Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which the director
derived an improper personal benefit. No amendment or repeal shall apply to or have any affect on the liability of any director
of the Registrant for or with respect to any acts or omissions of such director occurring prior to such amendment.
Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to
the foregoing provisions, it is the opinion of the SEC that such indemnification is against public policy as expressed in the
act and is therefore unenforceable.
Item 13. Financial Statements
and Supplementary Data.
See Item 9.01
of this Form 8-K for the financial statements required hereunder.
Item 14. Changes in and Disagreements
with Accountants on Accounting and Financial Disclosure.
On June 20,
2011, the Board approved the dismissal of Malone Bailey, LLP (“Malone Bailey”) as the Company’s independent
registered public accounting firm, effective as of June 21, 2011 (the “Dismissal Date”).
During the Company’s
fiscal years ended December 31, 2009 and December 31, 2008, Malone Bailey’s audit reports on the Company’s financial
statements did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope or accounting principles.
During the Company’s
fiscal years ended December 31, 2009 and December 31, 2008 and the subsequent period through the Dismissal Date: (i) there were
no disagreements between the Company and Malone Bailey on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedures which, if not resolved to Malone Bailey’s satisfaction, would have caused Malone
Bailey to make reference in connection with Malone Bailey’s opinion to the subject matter of the disagreement; and (ii)
there were no reportable events as the term described in Item 304(a)(1)(iv) of Regulation S-K disclosing that, except as reported
on the Company’s Current Report on Form 8-K, filed with the SEC on April 22, 2011, Malone Bailey notified the Company on
March 30, 2011 that during Malone Bailey’s revenue and account receivables confirmation process, Malone Bailey discovered
that Fujian Union Oil & Chemistry Ltd., allegedly one of the Company’s customers during the fiscal years of 2008, 2009
and 2010, did not conduct transactions with the Company as recorded in the Company’s books. The Company formed an independent
committee and conducted a thorough investigation with respect to this matter. Based on such investigation, the committee concluded
that the aforementioned transactions were entered into by the Company and a PRC resident who wrongfully presented himself as one
of Union Oil’s authorized representatives and the Company recorded the related revenues as received from Union Oil based
on those transactions.
Concurrently
with the decision to dismiss Malone Bailey as the Company’s independent auditor, the Board appointed WWC, P.C. (“WWC”)
as the Company’s independent registered public accounting firm as of June 22, 2011.
During the
years ended December 31, 2010 and December 31, 2009 and through the date hereof, neither the Company nor anyone acting on its
behalf consulted WWC with respect to (i) the application of accounting principles to a specified transaction, either completed
or proposed, nor the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written
report was provided to the Company or oral advice was provided that WWC concluded was an important factor considered by the Company
in reaching a decision as to any accounting, auditing or financial reporting issue; or (ii) any matter that was the subject of
a disagreement or reportable events set forth in Item 304(a)(1)(iv) and (v), respectively, of Regulation S-K.
Item 15. Financial Statements
and Exhibits.
The exhibits
are listed and described in Item 9.01 of this Form 8-K.
Item 3.02 Unregistered Sale
of Equity Securities
The Share
Purchase Agreement
On October
19, 2015, Wave Sync Corp., formerly known as China Bio-Energy Corp.(the “Registrant” or the “Company”)
entered into a Share Purchase Agreement (the “Share Purchase Agreement”) with EGOOS Mobile Technology Company Limited,
a British Virgin Islands holding company (“EGOOS BVI”), which owns 100% of EGOOS Mobile Technology Company Limited,
a Hong Kong company (“EGOOS HK”), which owns 100% of Move the Purchase Consulting Management (Shenzhen) Co., Ltd.
(“WOFE” or “Yigou”), a foreign investment enterprise organized under the laws of the PRC, and which has,
through various contractual agreements, management control and the rights to the profits of Guangzhou Yuzhi Information Technology
Co., Ltd., a corporation organized under the laws of the PRC as a variable interest entity(“Guangzhou Yuzhi”), which
owns 100% of Shenzhen Qianhai Exce-card Technology Co., Ltd., a Chinese corporation (“Shenzhen Exce-card”), which
owns 100% of Guangzhou Rongsheng Information Technology Co., Ltd., a Chinese corporation (“Guangzhou Rongsheng”, together
with Guangzhou Yuzhi and Shenzhen Exce-card, is collectively referred to herein as “Guangzhou Yuzhi and its Subsidiaries”),
and the sole shareholder of EGOOS BVI. Guangzhou Yuzhi and its Subsidiaries engage in research, development, marketing and distribution
of audio bank card products.
The Share
Purchase Agreement provides for an acquisition transaction (the “Acquisition”) in which the Registrant, through
the issuance of a convertible note in the principal sum of Fifteen Million U.S. Dollars ($15,000,000) to EGOOS BVI’s
sole shareholder, will acquire 100% of EGOOS BVI. Such note is convertible at a conversion price equal to $1.00 per share
into 15,000,000 shares of the Company’s common stock, at noteholder’s election, at any time after 30 days
following the issuance of such note but prior to two year anniversary of the date of such note, provided that the Company has
effectuated a reverse split of all of the issued and outstanding Common Stock as of the date of the issuance of the note (the
“Reverse Split”). The outstanding principal amount of this note is payable on the Maturity Date, without
interest, unless this note has been earlier converted. Upon conversion of the note (the “Conversion”), the
existing shareholders of the Registrant will own an aggregate of 24.7% of the post-acquisition entity.
The closing
of the Acquisition (the “Closing”) took place on October 19, 2015 (the “Closing Date”). On the Closing
Date, pursuant to the terms of the Share Purchase Agreement, the Registrant acquired all of the outstanding equity securities
of EGOOS BVI from the sole shareholder of EGOOS BVI; and the shareholder of EGOOS BVI transferred and contributed all of their
issued and outstanding shares of EGOOS BVI to the Registrant. In exchange, the Registrant issued to the sole shareholder of EGOOS
BVI a convertible note, which may be converted into an aggregate of 15,000,000 Post-Split Common Shares of the Registrant. The
Company relied upon the exemption from registration under Section 4(2) in connection with the issuance of the convertible note.
Item 5.01 Changes in Control
of Registrant
On the Closing Date,
pursuant to the terms of the Share Purchase Agreement, the Registrant acquired all of the outstanding equity securities of EGOOS
BVI from the sole shareholder of EGOOS BVI; and the shareholder of EGOOS BVI transferred and contributed all of their issued and
outstanding shares of EGOOS BVI to the Registrant. In exchange, the Registrant issued to the sole shareholder of EGOOS BVI a convertible
note, which may be converted into 15,000,000 Post-Split Common Shares of the Registrant, representing approximately 75.3% of all
Post-Split Common Shares. The change in control of Registrant will occur upon Conversion of such convertible note.
On October 19,
2015, two (2) incoming directors were appointed to the Board (as detailed in Item 5.02 herein below).
Item 5.02 Departure of Directors
or Principal Officers; Election of Directors; Appointment of Principal Officers
(a) Appointment
of Directors and Officers
On October 16, 2015,
the following persons were appointed as our directors and officers:
Directors and Executive Officers |
|
Age |
|
Position / Title |
Zuyue Xiang |
|
45 |
|
Chief Executive
Officer and Director |
Xinqian Zhang |
|
25 |
|
Director
and Secretary |
For further
information on these individuals, please see the Section entitled “Item 5 Directors and Executive Officers” herein
above.
(b) Employment
Agreements
Mr. Zuyue Xiang
(in his capacity as general manager of Shenzhen Exce-card) has a written employment agreement with Shenzhen Exce-card for a term
of 5 years from January 1, 2015 to December 31, 2019. Mr. Xiang receives an annual salary of RMB 420,000 (approximately $66,062.67).
(c) Departure of Directors
or Principal Officers
Ms. Mei Yang resigned
from her position as the Company’s Chief Executive Officer on October 16, 2015.
Item 5.03 Amendments to Articles
of Incorporation or Bylaws; Change in Fiscal Year.
In connection
with the Acquisition, the Company is expected to effectuate a 1:20 reverse split of its common stock on or after November 10, 2015,
effectively reducing the number of issued and outstanding shares of common stock to 4,920,250 shares.
The Company
is expected to file an amendment to its Certificate of Incorporation to reflect the Reverse Split on or after November 10, 2015.
Item 5.06 Change in Shell Company
Status.
As explained
more fully in Item 2.01 above, the Registrant was a “shell company” (as such term defined in Rule 12b-2 under the
Exchange Act) immediately before the Closing of the Acquisition. As a result of the Acquisition, EGOOS BVI became wholly owned
subsidiary and Guangzhou Yuzhi and its Subsidiaries became the main operational businesses of the Registrant, which is no longer
a shell company. Reference is made to Item 2.01 for a more complete description of the transaction and the business of the Registrant
subsequent to the Closing date.
Item 9.01 Financial Statements
and Exhibits
|
(a) |
Financial
statements of the business acquired. |
Exhibit 99.1 – Audited
Financial Statements of EGOOS HK for the fiscal year ended December 31, 2014 (5)
Exhibit 99.2 – Unaudited
Pro Forma Consolidated Financial Statements of Wave Sync Corp. as of June 30, 2015 and the corresponding footnotes (5)
Exhibit 99.3 – Audited
Financial Statements of Wave Sync Corp. for the fiscal years ended December 31, 2014, 2013, 2012, 2011 and 2010, respectively
(5)
Exhibit 99.4 – Unaudited
Financial Statements of Wave Sync Corp. for the six months ended June 30, 2015 and 2014 (5)
Exhibit 99.5 – Audited
Financial Statements of Shenzhen Qianhai Exce-card Company Limited for the fiscal years ended December 31, 2014 and 2013, respectively
(5)
Exhibit 99.6 – Unaudited
Financial Statement of Shenzhen Qianhai Exce-card Company Limited for the period ended June 30, 2015 (5)
Exhibit 99.7 – Consolidated
Audited Financial Statements of EGOOS BVI for the fiscal year ended December 31, 2014 (5)
Exhibit No. |
|
Description |
2.1 |
|
Share
Purchase Agreement, dated October 19, 2015, by and among the Registrant, EGOOS BVI and Shareholders of EGOOS BVI (1) |
3.1 |
|
Certification
of Incorporation of the Registrant (2) |
3.2 |
|
Company’s
Restated Certificate of Incorporation, dated August 12, 1998 (2) |
3.3 |
|
Certificate
of Amendment to the Company’s Certificate of Incorporation, dated August 8, 2006 (2) |
3.4 |
|
Certificate
of Amendment to the Company’s Certificate of Incorporation, dated September 8, 2006 (2) |
3.5 |
|
Certificate
of Amendment to the Company’s Certificate of Incorporation, dated December 1, 2015 (5) |
3.6 |
|
Amended
and Restated Bylaws of the Registrant (3) |
4.1 |
|
Convertible
Note dated October 19, 2015 (1) |
10.1 |
|
Exclusive
Service Agreement, dated August 5, 2015, by and among Guangzhou Yuzhi, Shenzhen Exce-card, Guangzhou Rongsheng and the WFOE
(1) |
10.2 |
|
Voting
Rights Proxy Agreement, dated August 5, 2015, by and among Guangzhou Yuzhi, its shareholders, Shenzhen Exce-card, Guangzhou
Rongsheng and the WFOE (1) |
10.3 |
|
Equity
Pledge Agreement, dated August 5, 2015, by and among Guangzhou Yuzhi, its shareholders, Shenzhen Exce-card, Guangzhou Rongsheng
and the WFOE (1) |
10.4 |
|
Call
Option Agreement, dated August 5, 2015, by and among Guangzhou Yuzhi, its shareholders, Shenzhen Exce-card, Guangzhou Rongsheng
and the WFOE (1) |
10.5 |
|
Partnership
Agreement with UINT dated August 7, 2014 and its Amendment dated March 27, 2015 (1) |
10.6 |
|
Unofficial
English translation of Cooperation Agreement, dated July 23, 2014, by and between Shenzhen Exce-card and Hengbao (5) |
10.7 |
|
Unofficial
English translation of Cooperation Agreement, dated July 7, 2014, by and between Shenzhen Exce-card and Tianyu (5) |
10.8 |
|
Unofficial
English translation of Cooperation Agreement, dated September 28, 2015, by and between Shenzhen Exce-card and Hengbao (5) |
10.9 |
|
Unofficial
English translation of Preparation Service Agreement, dated May 1, 2015, by and between Shenzhen Exce-card and Tianyu
(5) |
99.1 |
|
Audited
Financial Statements of EGOOS HK for
the fiscal year ended December 31, 2014 (5) |
99.2 |
|
Unaudited
Pro Forma Consolidated Financial Statements of Wave Sync Corp. as of June 30, 2015 and the corresponding footnotes (1) |
99.3 |
|
Audited
Financial Statements of Wave Sync Corp. for the fiscal years ended December 31, 2014, 2013, 2012, 2011 and 2010 respectively
(4) |
99.4 |
|
Unaudited
Financial Statements of Wave Sync Corp. for the six months ended June 30, 2015 and 2014 (4) |
99.5 |
|
Audited
Financial Statements of Shenzhen Qianhai Exce-card Company Limited for the fiscal years ended December 31, 2014 and 2013,
respectively (1) |
99.6 |
|
Unaudited
Financial Statements of Shenzhen Qianhai Exce-card Company Limited for the period ended June 30, 2015 (1) |
99.7 |
|
Consolidated
Audited Financial Statements of EGOOS BVI for the fiscal year ended December 31, 2014 (5) |
* |
Filed
herewith |
(1) |
Incorporated by reference to the Company’s Current Report on Form 8-K as filed
with the SEC on October 20, 2015 (i.e., the “Original 8-K”). |
(2) |
Incorporated
by reference to the Company’s Current Report on Form 8-K as filed with the SEC on December 20, 2007. |
(3) |
Incorporated
by reference to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2008. |
(4) |
Incorporated by reference to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014. |
(5) |
Incorporated by reference to the Amendment No. 1 to the Company’s current
report on Form 8-K as filed with the SEC on December 14, 2015. |
SIGNATURES
Pursuant to
the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
January 26,
2016 |
WAVE
SYNC CORP. |
|
|
|
|
By: |
/s/
Zuyue Xiang |
|
Name: |
Zuyue Xiang |
|
Title: |
Chief Executive
Officer |
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