UBI
Blockchain Internet Ltd.
(Formerly
JA Energy)
Balance
Sheets
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|
February
28, 2017
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|
|
August
31, 2016
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|
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|
(Unaudited)
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|
ASSETS
|
|
|
|
|
|
|
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Current Assets
|
|
|
|
|
|
|
|
|
Prepaid
expenses
|
|
$
|
6,000
|
|
|
$
|
-
|
|
Total current
assets
|
|
|
6,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Office Equipment,
net of accumulated depreciation
|
|
|
6,363
|
|
|
|
-
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|
Total assets
|
|
$
|
12,363
|
|
|
$
|
-
|
|
|
|
|
|
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LIABILITIES AND STOCKHOLDERS’
DEFICIT
|
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|
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|
|
|
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Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
and accrued liabilities
|
|
$
|
20,131
|
|
|
$
|
68,419
|
|
Advances from former
related party
|
|
|
-
|
|
|
|
26,981
|
|
Due to related parties
|
|
|
149,485
|
|
|
|
-
|
|
Accrued stock-based
compensation
|
|
|
280,000
|
|
|
|
-
|
|
Bank overdraft
|
|
|
-
|
|
|
|
1,202
|
|
Note
payable - former related party
|
|
|
-
|
|
|
|
50,000
|
|
Total current
liabilities
|
|
|
449,616
|
|
|
|
146,602
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
449,616
|
|
|
|
146,602
|
|
|
|
|
|
|
|
|
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|
Stockholders’ deficit
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|
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Preferred stock, $0.001 par value,
5,000,000 shares authorized, 0 and 1,000,000 shares issued and outstanding as of’ February 28, 2017 and August
31, 2016, respectively
|
|
|
-
|
|
|
|
1,000
|
|
Class A common stock,
$0.001 par value, 130,000,000 shares authorized, 30,217,046 and 217,046 shares issued and outstanding as of February
28, 2017 and August 31, 2016, respectively
|
|
|
30,217
|
|
|
|
217
|
|
Class B Common stock,
$0.001 par value, 6,000,000 shares authorized, 6,000,000 shares issued and outstanding as of ‘February 28, 2017
|
|
|
6,000
|
|
|
|
-
|
|
Class C Common stock, $0.001 par value,
64,000,000 shares authorized, -0- shares issued and outstanding as of February 28, 2017
|
|
|
-
|
|
|
|
-
|
|
Additional paid-in
capital
|
|
|
4,444,684
|
|
|
|
4,315,919
|
|
Stock subscription
payable
|
|
|
90,521
|
|
|
|
90,521
|
|
Accumulated
deficit
|
|
|
(5,008,675
|
)
|
|
|
(4,554,259
|
)
|
Total stockholders’
deficit
|
|
|
(437,253
|
)
|
|
|
(146,602
|
)
|
Total liabilities
and stockholders’ deficit
|
|
$
|
12,363
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these financial statements.
UBI
Blockchain Internet Ltd.
(Formerly
JA Energy)
Statements
of Operations
(Unaudited)
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|
For the
three months
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|
|
For the
three months
|
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For the
six months
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For the
six months
|
|
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|
ended
|
|
|
ended
|
|
|
ended
|
|
|
ended
|
|
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February
28, 2017
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|
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29-Feb-2016
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February
28, 2017
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29-Feb-2016
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Operating expenses:
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|
|
|
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|
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|
|
|
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Salaries
(including stock - based compensation of $48,333, $0, $48,333 and $0 respectively)
|
|
$
|
179,569
|
|
|
|
-
|
|
|
$
|
179,569
|
|
|
$
|
-
|
|
Consulting
fees (including stock - based compensation of $231,667, $0, $231,667 and $0 respectively)
|
|
|
231,667
|
|
|
|
-
|
|
|
|
256,667
|
|
|
|
-
|
|
Legal
& Professional fees
|
|
|
8,147
|
|
|
|
|
|
|
|
39,516
|
|
|
|
-
|
|
Other
general and administrative
|
|
|
6,739
|
|
|
|
12,025
|
|
|
|
26,239
|
|
|
|
25,281
|
|
Total
operating expenses
|
|
|
426,122
|
|
|
|
12,025
|
|
|
|
501,991
|
|
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|
25,281
|
|
|
|
|
|
|
|
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Other income (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Gain
on settlement of bank overdraft
|
|
|
|
|
|
|
-
|
|
|
|
572
|
|
|
|
-
|
|
Gain
on settlement of accounts payable and accrued liabilities
|
|
|
47,003
|
|
|
|
-
|
|
|
|
47,003
|
|
|
|
-
|
|
Total
other income (expenses)
|
|
|
47,003
|
|
|
|
-
|
|
|
|
47,575
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Net
income (loss)
|
|
$
|
(379,119
|
)
|
|
|
(12,025
|
)
|
|
$
|
(454,416
|
)
|
|
$
|
(25,281
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Net
loss per share of Class A common stock – basic and diluted
|
|
$
|
(0.01
|
)
|
|
|
(0.06
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.12
|
)
|
|
|
|
|
|
|
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|
|
|
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Weighted
average number of Class A common shares outstanding - basic and diluted
|
|
|
30,217,046
|
|
|
|
217,046
|
|
|
|
24,250,195
|
|
|
|
217,046
|
|
The
accompanying notes are an integral part of these financial statements.
UBI
Blockchain Internet Ltd.
(Formerly
JA Energy)
Statements
of Cash Flows
(Unaudited)
|
|
For six months
|
|
|
For six months
|
|
|
|
ended
|
|
|
ended
|
|
|
|
February
28, 2017
|
|
|
February
29, 2016
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
(454,416
|
)
|
|
$
|
(25,281
|
)
|
Adjustments to reconcile
net income (loss) to net cash used by operating activities
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
280,000
|
|
|
|
-
|
|
Gain on settlement
of bank overdraft
|
|
|
(572
|
)
|
|
|
-
|
|
Gain on settlement
of accounts Payable and accrued liabilities
|
|
|
(47,003
|
)
|
|
|
-
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
(6,000
|
)
|
|
|
(3,000
|
)
|
Bank overdraft
|
|
|
(630
|
)
|
|
|
-
|
|
Accounts
payable and accrued liabilities
|
|
|
(1,285
|
)
|
|
|
16,031
|
|
Net cash used by operating activities
|
|
|
(229,906
|
)
|
|
|
(12,250
|
)
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Purchase
of office equipment
|
|
|
(6,363
|
)
|
|
|
-
|
|
Net cash used
by investing activities
|
|
|
(6,363
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Due to related parties
|
|
|
149,485
|
|
|
|
-
|
|
Advances from former
related party
|
|
|
(26,981
|
)
|
|
|
12,250
|
|
Repayment of note
payable to former related party
|
|
|
(50,000
|
)
|
|
|
-
|
|
Buyback of preferred
stock
|
|
|
(33,735
|
)
|
|
|
-
|
|
Proceeds from sale
of common Stock-net
|
|
|
180,000
|
|
|
|
-
|
|
Contributed
capital
|
|
|
17,500
|
|
|
|
-
|
|
Net cash provided
by financing activities
|
|
|
229,906
|
|
|
|
12,250
|
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS -
|
|
|
|
|
|
|
|
|
BEGINNING OF
PERIOD
|
|
|
-
|
|
|
|
-
|
|
END OF PERIOD
|
|
$
|
-
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these financial statements.
UBI
Blockchain Internet Ltd.
(Formerly
JA Energy)
Notes
to Financial Statements
Three
and Six Months Ended February 28, 2017 and 2016
(Unaudited)
NOTE
1 – ABOUT THE COMPANY
The
Company was organized August 26, 2010 (Date of Inception) under the laws of the State of Nevada, as JA Energy. The Company was
incorporated as a subsidiary of Reshoot Production Company, a Nevada corporation. Reshoot Production Company was incorporated
October 31, 2007, and, at the time of spin off was listed on the Over-the- Counter Bulletin Board. On November 21, 2016 the Company
reincorporated in Delaware under the name UBI Blockchain Internet Ltd.
On
September 30, 2014, the Board of Directors passed a resolution to form a new company called Peak Energy Holdings (Peak) with each
shareholder in the Company receiving one share of common of Peak for each share of common stock in the Company and one share of
preferred stock of Peak for each share of preferred share of the Company.
On
November 9, 2014, JA Energy (the “Company”) entered into an Irrevocable Asset and Liability Exchange Agreement (the
“Agreement”). The Agreement dealt with the dividend spin-off JA Energy’s wholly owned subsidiary, Peak Energy
Holdings. At the JA Energy annual shareholder meeting, held on September 30, 2014, the shareholders of the Company approved the
transfer of all of the assets and liabilities of the Parent into a wholly owned subsidiary. The subsidiary had the same characteristics
and number of authorized and issued shares as the Parent, whereby all Preferred and Common shareholders in the Parent received
a pro-rata stock dividend in the subsidiary that is equal to the number of shares they owned in the Parent on a one-for-one (1:1)
basis. The major shareholders of the Company entered into a separate agreement with regards to the dividend spin-off. They agreed
to and put into effect the following points upon the dividend spin-off of the Peak Energy Holdings from JA Energy:
|
●
|
Mr.
James Lusk (the largest debtor of JA Energy) transferred all assets and liabilities, as of March 31, 2014, from JA Energy
to the Subsidiary to the extent legally assignable.
|
|
|
|
|
●
|
Two
of the major shareholders in JA Energy transferred all ownership of their Preferred and Common stock held in the subsidiary
to Mr. James Lusk.
|
|
|
|
|
●
|
Mr.
James Lusk transferred all of the common stock ownership he owned and controlled in JA Energy to the major shareholders.
|
|
|
|
|
●
|
Mr.
James Lusk provided a notarized signed letter addressed to the Company and auditor that he agreed to transfer all assets and
liabilities, as of March 31, 2014, from the Parent to the Subsidiary to the extent legally assignable.
|
|
|
|
|
●
|
JA
Energy warranted that any new liabilities incurred on the books of JA Energy after April 1, 2014 would not be transferred
to the subsidiary.
|
|
|
|
|
●
|
JA
Energy represented and warranted that there were no liabilities, actual or contingent, created in the subsidiary. Prior to
the effective time of the transfer, the subsidiary would have no assets nor liabilities.
|
|
|
|
|
●
|
JA
Energy warranted that since April 1, 2014, with the exception of the preferred voting shares, no other shares were issued,
awarded or pledged to be issued. The number of common shares issued and outstanding in JA Energy at March 31, 2014 were the
same number of the shares issued at the date of transfer.
|
|
●
|
Upon
the completion of the transfer of assets and liabilities, shares were exchanged and the subsidiary was divested from JA Energy
and now operates independent as a separate entity of JA Energy with its own management;
|
|
|
|
|
●
|
Mr.
James Lusk took control of Peak Energy Holdings, independent of JA Energy.
|
|
|
|
|
●
|
All
Parties indemnified and held harmless the other Parties from and against any and all losses, damages, liabilities, resulting
or arising from these transactions
|
The
Agreement did not affect any other shareholders in the Company who maintained their share ownership of JA Energy, and have pro-rata
ownership in Peak Energy Holdings following the dividend spin-off.
On
September 15, 2016, the Company, with the approval of the Board of Directors agreed to issue (issued October 7, 2016) 30,000,000
shares of unregistered restricted Class A Common Stock, 6,000,000 shares of unregistered restricted Class B Voting Common Stock,
which carries a voting weight equal to ten (10) Common Shares, and 40,000,000 shares of unregistered restricted Class C Common
Stock to UBI Blockchain Internet, LTD (“UBI Hong Kong”), a Hong Kong company, in exchange for $200,000. On September
26, 2016, pursuant to NRS 78.1955, the Board of Directors approved the filing of a Certificate of Designation with the Nevada
Secretary of State to designate Class A, B and C common shares, par value $0.001. Concurrently with the filing of this Certificate
of Designation, all Common Stock issued and outstanding shall become Class A Common Stock. Class B Common Stock carries a voting
weight equal to ten (10) Common Shares. The Class B shares can be converted into fully paid and non-assessable Common Shares,
on a one-to-one basis, at the option of the holder at any time upon written notice to the Company and its authorized transfer
agent. Class C Common Stock has no voting rights. Upon the conversion or other exchange of all outstanding shares of Class B Common
Stock into or for shares of Class A Common Stock, all shares of Class C Common Stock shall be automatically, without further action
by any holder thereof, converted into an identical number of fully paid and non-assessable shares of Class A Common Stock on the
date fixed therefore by the Board of Directors that is no less than sixty-one days and no more than one hundred and eighty days
following such conversion or exchange.
On
October 7, 2016, the 30,000,000 Class A shares and 6,000,000 Class B shares were issued. On November 21, 2016, the Company reincorporated
in Delaware under the name UBI Blockchain Internet LTD. and increased the number of authorized shares from 75,000,000 to 200,000,000
shares consisting of 130,000,000 authorized shares of Class A Common Stock, 6,000,000 authorized shares of Class B Common Stock
and 64,000,000 authorized shares of Class C Common Stock. On March 1, 2017, 40,000,000 shares of Class C shares were issued. All
of the preceding shares were issued in reliance on the exemption under Section 4(2) of the Securities Act of 1933, as amended
(the “Act”) and were issued under Regulation S to one (1) foreign entity who attested it is an accredited investor
who is not a citizen or a resident of the USA.
On
January 3, 2017, the Company appointed four new directors, accepted the resignations of its two former directors and appointed
Tony Liu (who controls UBI Hong Kong) as Chief Executive Officer of the Company.
Commencing
in the three months ended February 28, 2017, the Company started research activities in Hong Kong relating to “blockchain”
technology planned to be provided for future customers.
NOTE
2 - GOING CONCERN
These
financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern
which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.
The Company has an accumulated deficit since inception of $5,008,674. The Company has not generated any meaningful revenues to
date, and its ability to continue as a going concern is contingent upon the successful completion of additional financing arrangements
and its ability to achieve and maintain profitable operations. Management plans to raise equity capital to finance the operating
and capital requirements of the Company. As described above, there was a change in control of the Company in October 2016.
These
conditions raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements
do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification
of liabilities that might result from the outcome of this uncertainty.
NOTE
3 - SIGNIFICANT ACCOUNTING POLICIES
The
relevant accounting policies are listed below.
Basis
of Accounting
The
basis is United States generally accepted accounting principles.
Earnings
per Share.
The
basic earnings (loss) per share of Class A common stock is calculated by dividing the Company’s net income (loss) available
to Class A common shareholders by the weighted average number of Class A common shares issued and outstanding during the year.
The diluted earnings (loss) per share is of Class A common stock calculated by dividing the Company’s net income (loss)
available to Class A common shareholders by the diluted weighted average number of Class A shares outstanding during the year.
The diluted weighted average number of Class A shares outstanding is the basic weighted number of Class A shares adjusted as of
the first of the year for any potentially dilutive debt or equity.
Cash
and Cash Equivalents
The
Company considers all short-term investments with a maturity of three months or less at the date of purchase to be cash and cash
equivalents.
Use
of Estimates
In
preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from
those estimates.
Property
and Equipment
Property
and equipment is stated at cost less accumulated depreciation. Depreciation is calculated on the straight-line basis over the
estimated useful lives of the respective assets. Expenditures for repairs and maintenance are expenses as incurred.
Foreign
Currency Translation
The
reporting currency of the Company is the United States Dollar and the accompanying financial statements are expressed in United
States Dollars.
Transactions
denominated in currencies other than the United States Dollar (principally the Hong Kong Dollar) are translated in United States
Dollars at the exchange rates prevailing at the dates of the transactions. Exchange gains and losses, which were not significant
in the six months ended February 28, 2017 and February 29, 2016 are reflected in income.
Income
Taxes
The
provision for income taxes is the total of the current taxes payable and the net of the change in the deferred income taxes. Provision
is made for the deferred income taxes where differences exist between the period in which transactions affect current taxable
income and the period in which they enter into the determination of net income in the financial statements.
Revenue
recognition
The
Company recognizes revenue from services and product sales once all the following criteria for revenue recognition have been met:
pervasive evidence that an agreement exists; the services have been rendered; the fee is fixed and determinable and not subject
to refund or adjustment; and collection of the amount due is reasonably assured. For the periods presented, the Company had no
revenues.
Stock-Based
Compensation
The
Company accounts for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718, “Compensation
- Stock Compensation,” which requires all share-based payments to employees, including grants of employee stock options,
to be recognized in the financial statements based on their fair values. The Company does not have an employee stock option plan.
The
Company follows ACS topic 505-50, formerly EITF 96-18, “
Accounting for Equity Instruments that are Issued to Other than
Employees for Acquiring, or in Conjunction with Selling Goods and Services
,” for stock issued to consultants and other
non-employees. In accordance with ACS Topic 505-50, the stock issued as compensation for services provided to the Company are
accounted for based upon the fair value of the services provided or the estimated fair market value of the stock, whichever can
be more clearly determined. The fair value of the equity instrument is charged directly to consulting expense over the period
during which services are rendered.
Year
end
The
Company’s fiscal year-end is August 31.
Reverse
Stock Split
All
references to numbers of shares of our common stock and per-share information in the accompanying financial statements have been
adjusted retroactively to reflect the Company’s 1-for- 200 reverse stock split effected on January 20, 2016. The par value
was not adjusted as a result of the reverse stock split.
Recent
Accounting Pronouncements
The
Company’s management has evaluated recently issued accounting pronouncements through February 28, 2017 and concluded that
they will not have a material effect on future financial statements.
NOTE
4 – TRANSFER OF ASSETS AND LIABILITIES TO PEAK ENERGY HOLDINGS
In
accordance with the Agreement described in Note 1 to these financial statements, during the year ended August 31, 2015 certain
assets with a book value of $9,340, net of depreciation, and liabilities totaling $628,210 were transferred to Peak Energy Holdings.
This transfer resulted in other income of $618,870. In addition to the $628,210 liabilities transferred to Peak, approximately
$68,090 of additional liabilities as of March 31, 2014 not legally assignable to Peak without the consent of the respective debtors
were the responsibility of Peak under the Agreement. As of February 28, 2017 and August 31, 2015, accounts payable and accrued
liabilities include liabilities that are the responsibility of Peak totaling $20,131 and $57,541, respectively. The Company will
contest any request for payment of any of these pre-Agreement liabilities.
NOTE
5 - STOCKHOLDERS’ DEFICIT
The
Company is authorized to issue 130,000,000 shares of its $0.001 par value Class A common stock, 6,000,000 shares of its $0.001
par value Class B common stock, 64,000,000 shares of its $0.001 par value Class C common stock and 5,000,000 shares of its $0.001
par value preferred stock.
Pursuant
to the September 15, 2016 change in control agreement, a representative of UBI paid into an attorney trust account $150,000 on
September 14, 2016 and $67,500 on October 11, 2016, for a total of $217,500. The $217,500 consisted of $200,000 for the newly
issued shares of Class A, Class B Voting, and Class C Common Stock and $17,500 for the payment of specific expenses.
Starting
in December 2016, the Company engaged the services of a total of 44 employees and non-employees to perform certain marketing,
research and development and investor relations services. The related agreements, which were executed in March 2017, provide for
the contractors to work for the Company for terms ranging from September 2016 to January 1, 2017 to December 31, 2017 for compensation
including the issuance of a total of 8,400,000 shares of Class C common stock (which occurred April 3, 2017). At February 28,
2017, we have accrued stock-based compensation expense totaling $280,000 for these issuances based on an estimated fair value
of $1,680,000 for 8,400,000 shares using $0.20 per share and a 2 month (of 12 month) expense recognition. The remaining expense
of $1,400,000 will be amortized evenly over the 10 months ending December 31, 2017.
During
the year ended August 31, 2012, the Company committed to issue a total of approximately 1,390 shares of common stock to various
parties for services rendered or other consideration valued at a total of $90,521 based on the prevailing trading price of the
Company’s common stock at the dates of the respective commitments. The related expenses were recorded in the year ended
August 31, 2012 but the shares have never been issued.
NOTE
6 - RELATED PARTY TRANSACTIONS
As
described in Note 8, the Company was obligated to Mr. Mark DeStefano (“DeStefano”) for a $50,000 note payable and
$26,981 for payments made on behalf of the Company. Subsequently, Mr. DeStefano advanced $1,285 to the Company. During the three
months ended November 30, 2016 the Company satisfied these obligations. DeStefano had voting control of the Company from June
2014 (see Note 8) to October 24, 2016 (when the Company purchased from DeStefano the 1,000,000 shares of Preferred Stock for $33,735)
through his ownership of the 1,000,000 shares of Voting Preferred Stock issued and outstanding (equivalent to 50,000,000 votes).
For
the six months ended February 28, 2017, consulting fees paid to former related parties consists of a total of $15,000 paid to
the two then directors of the Company and $10,000 paid to an entity controlled by DeStefano.
Commencing
in the three months ended February 28, 2017, the Company has been using office space provided by UBI Blockchain Internet, LTD.
(Hong Kong) (“UBI Hong Kong”) at no cost to the Company. UBI Hong Kong owns 30,000,000 shares of the Company’s
Class A common stock.
In
the three months ended February 28, 2017, Tony Liu, chief executive officer of the Company, and UBI Hong Kong paid a total of
$149,485 of expenditures on behalf of the Company. The amount due to these related parties for these expenditures is $149,485
at February 28, 2017. The liabilities are non-interest bearing and are due on demand.
NOTE
7 - PROVISION FOR INCOME TAXES
The
Company accounts for income taxes under FASB Accounting Standard Codification ASC 740 “Income Taxes”. ASC 740 requires
use of the liability method. ASC 740 provides that deferred tax assets and liabilities are recorded based on the differences between
the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary
differences. Deferred tax assets and liabilities at the end of each period are determined using the currently enacted tax rates
applied to taxable income in the periods in which the deferred tax assets and liabilities are expected to be settled or realized.
As
of February 28, 2017, the Company had net operating loss carry forwards of approximately $1,196,161 that may be available to reduce
future years’ taxable income through 2037. Future tax benefits which may arise as a result of these losses have not been
recognized in these financial statements as their realization has not been determined likely to occur. Also, due to the change
in control, there are annual limitations on future net operating loss carry forward deductions.
NOTE
8 - NOTES PAYABLE – Former Related Party
On
April 4, 2014, the Company issued a One-year Promissory Note (“the Note”) in the amount of $50,000 to Mark DeStefano
(“DeStefano) (see Note 6). The Note bore interest at 12% percent per annum with interest due each month. In the event that
interest was not paid within three days from the time it was due the Note was to be considered in default and was to be fully
due and payable. Additional consideration for the Note included the Chief Executive Officer of the Company giving the note holder
his voting proxy for all of the shares he held with the exception of voting on a tender offer or a sale of the Company’s
assets. As of May 8, 2014, the Note was in default.
On
May 5, 2014, the Company issued a second One-Year Promissory Note (“the Second Note”) in the amount of $20,000 to
the same stockholder noted above. The Second Note was issued with the restriction that the funds be used specifically to pay the
Company’s Patent Counsel for fees to finalize certain patent filings and was secured by all patents, and patent applications
held by the Company. The Second Note was to bear interest at 12% percent per annum with interest due each month. In the event
that interest was not paid within three days from the time it was due the Second Note would be considered in default and would
be fully due and payable.
On
June 6, 2014, the Company received notices that it was in default of the two Promissory Notes described above. Rather than default
on the Notes the Company issued 1,000,000 shares of $0.001 par value Voting Preferred Stock in exchange for Notes Payable totaling
$20,000 plus forgiveness of interest totaling $1,900. Additionally, the Company agreed to designate with the State of Nevada Secretary
of State that each share of preferred carries the voting power of 50 common shares. Finally, the shareholder agreed to cancel
the shares upon full payment of the $50,000 Note, without accrued interest and the sale of five units of the MDU.
In
October 2016, the $50,000 note payable was satisfied.
NOTE
9 – OTHER INCOME AND EXPENSE
During
the three months ended November 30, 2016, the Company settled a bank overdraft of $942 for $370. This settlement resulted in income
of $572.
On
January 27, 2017, the Company entered into a Settlement Agreement with a former landlord satisfying a $35,868 accrued liability
(see Note 4) for $4,100. This settlement, along with an arrangement with another vendor, resulted in other income of $47,003.
NOTE
10 – REVERSE STOCK SPLIT
On
January 20, 2016, the Company effected a 1-for-200 reverse stock split of its outstanding common stock, par value $0.001 per share
(the “Reverse Stock Split”). As a result of the Reverse Stock Split, each two hundred shares of the Company’s
Common Stock issued and outstanding immediately prior to the Reverse Stock Split were automatically combined into and became one
share of common stock. No fractional shares were issued as a result of the Reverse Stock Split and any stockholder who otherwise
would have been entitled to receive fractional shares received an additional share. Also, as a result of the Reverse Stock Split,
the per share exercise price of, and the number of shares of common stock underlying our warrants outstanding immediately prior
to the Reverse Stock Split were automatically proportionally adjusted based on the 1-for-200 split ratio in accordance with the
terms of such warrants. Share and per-share amounts of the Company’s common stock and warrants included herein have been
adjusted to give effect to the Reverse Stock Split. The Reverse Stock Split did not alter the par value of the Common Stock, $0.001
per share, or modify any voting rights or other terms of the common stock.
NOTE
11 – SUBEQUENT EVENTS
On
March 1, 2017, the Company issued 40,000,000 shares of Class C common stock to our chief executive officer Tony Liu pursuant to
the September 15, 2016 agreement (see Note 1).
On
April 3, 2017, the Company issued a total of 8.400,000 shares of Class C common stock to a total of 44 contractor employees and
nonemployees (see Note 5).
On
April 12, 2017, the Board of Directors of the Company approved the increase of the number of authorized common shares from 200,000,000
shares to 2,000,000,000 shares (1,000,000,000 shares of Class A common stock, 500,000,000 shares of Class B common stock, and
500,000,000 shares of Class C common stock). This action is planned to occur in May 2017.
Item
2. - Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking
Statements
This
Quarterly Report on Form 10-Q contains forward-looking statements. When used in this Quarterly Report on Form 10-Q, the words
“may,” “could,” “estimate,” “intend,” “continue,” “believe,”
“expect” or “anticipate” and similar expressions identify forward-looking statements. Although we believe
that our plans, intentions, and expectations reflected in any forward-looking statements are reasonable, these plans, intentions,
or expectations may not be achieved. Our actual results, performance, or achievements could differ materially from those contemplated,
expressed, or implied, by the forward-looking statements contained in this Annual Report on Form 10-Q. Important factors that
could cause actual results to differ materially from our forward-looking statements are set forth in this Quarterly Report on
Form 10-Q. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of
the dates on which they are made. All forward-looking statements attributable to us or persons acting on our behalf are expressly
qualified in their entirety by the cautionary statements set forth in this Annual Report on Form 10-Q, except as required by federal
securities laws, we are under no obligation to update any forward-looking statement, whether as a result of new information, future
events, or otherwise.
Although
we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ
materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results
of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties.
In
this form 10-Q references to “UBI Blockchain Internet, Ltd.,” “JA Energy,” “the Company”,
“we,” “us,” and “our” refer to UBI Blockchain Internet Ltd. (a Delaware Company).
Critical
Accounting Policies
There
have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations”, included in our Annual Report on Form 10-K for
the fiscal year ended August 31, 2016 filed with the Securities and Exchange Commission on December 14, 2016.
Corporate
History and Business Overview
The
Company was organized August 26, 2010 (Date of Inception) under the laws of the State of Nevada, as JA Energy. The Company was
incorporated as a subsidiary of Reshoot Production Company, a Nevada corporation. Reshoot Production Company was incorporated
October 31, 2007, and, at the time of spin off was listed on the Over-the- Counter Bulletin Board.
On
November 21, 2016, the Company reincorporated in Delaware under the name UBI Blockchain Internet LTD. and increased the number
of authorized shares from 75,000,000 to 200,000,000 shares consisting of 130,000,000 authorized shares of Class A Common Stock,
6,000,000 authorized shares of Class B Common Stock and 64,000,000 authorized shares of Class C Common Stock. On December 9, 2016,
the Class C shares were issued. All of the preceding shares were issued in reliance on the exemption under Section 4(2) of the
Securities Act of 1933, as amended (the “Act”) and were issued under Regulation S to one (1) foreign entity who attested
it is an accredited investor who is not a citizen nor a resident of the USA.
Business
Description
UBI
Blockchain Internet’s business encompasses the research and application in the blockchain technology with a focus on the
Internet of things (“IoT”) covering areas of food and drugs, healthcare, just to name a few. The Company will leverage
the stock market to build a new business technology platform, specialized in the safety and freshness keeping of food and drugs
within the context of micro and macro environment of the human life.
UBI
plans to set up teams, that are dedicated to blockchain application and research, application of the internet of things, IT and
data analytics in order to achieve its business goals.
An
internet of things is defined as: the internetworking of physical devices, vehicles (also referred to as “connected devices”
and “smart devices”), buildings, and other items embedded with electronics, software, sensors, actuators, and network
connectivity that enable these objects to collect and exchange data. The IoT allows objects to be sensed and/or controlled remotely
across existing network infrastructure, creating opportunities for more direct integration of the physical world into computer-based
systems, and resulting in improved efficiency, accuracy and economic benefit. Blockchain, originally block chain, is defined as
:
a distributed database that maintains a continuously-growing list of ordered records called
blocks
. Each block contains
a timestamp and a link to a previous block. By design, blockchains are resistant to modification of the data - once recorded,
the data in a block cannot be altered retroactively. The Company plans to develop and specialize in the design, development, promotion
and sales of blockchain technology and internet of things.
Blockchain
technology-based applications
Management
plans to focus its business in the integrated wellness industry, which providing procedures for safety and effectiveness in food
and drugs, but also preventing counterfeit or fake food and drugs. With the advancement of the blockchain technology, we can trace
a food or drug product all the way up to its original source within the context of the internet of things.
We
are in the early stages of blockchain technology, which can store decentralized and distributed software ledger with complete
transaction history. Blockchain technology has a wide range of potential applications, in addition to financial, real estate,
back office systems and stock trading applications. Blockchain is a distributed ledger agreement that allows projects or transactions
to be transparently registered and is first developed for use in a variety of industries to offer a wide range of services including
banking, stock trading, real estate and even global diamond sales. More and more financial giants join blockchain technology applications
and research and development, including IBM, Microsoft, Intel, Blockstream and Thompson Reuters, to further accelerate blockchain
technology as a maturity and development system. Management believes the investments in the field of blockchain are growing. Due
to maturity and safety of blockchain technology, it can play a role in many fields, and management believes its application field
and development potential offer a growth opportunity for the Company.
The
five features of blockchain include: de-centralization, openness, autonomy, non-tampering and anonymity. These features make blockchain
an advantage in science and finance. Blockchain technology is a decentralized, distributed ledger that allows each transaction
to be recorded and verified by network, which means that they do not need a central regulator such as a bank or financial institution.
Transactions are also anonymous and theoretically real-time, although recent network over-saturation has led to this problem.
The block-based distributed accounting technology, combined with its artificial intelligence and internet of things technologies,
makes it possible for billions of smart technologies to connect to internet for greater security, allowing virtual time travel
and allowing regulators to return to the point at which the problem occurred. One of potential application of this technology
is the creation of registers based on blockchain of IoT devices, and the use of artificial intelligence programs to perform automated
intelligent diagnostics and more advanced functions, which can ultimately lead engineers and regulators to virtualize clock backwards.
At the same time, blockchain technology can reduce audit costs; reduce distrust of central node, so that flow of financial assets
is more transparent and convenient. In fact, current blockchain technology is indeed application of digital electronic payments
to “blockchain +” transition extension from financial sector gradually to IoT and other non-financial areas which
will trigger more and greater industrial restructuring and revolution. It is our time to enter real power blockchain technology.
The
central concept and future development of blockchain are trends of things fit, leading gradual self-government of things. Blockchain
technology is a good solution: infrastructure investment, high maintenance costs and data security issues. Blockchain technology
support IoT which is an extension and more advanced stage of internet. Blockchain technology research and application will make
IoT networking shine. Blockchain’s point-to-point communication platform gives a subtle solution. Blockchain technology
creates a shared, distributed, digital book between network nodes to record transactions, rather than storing them on a central
server. Thus, eliminate the need for central verification. It provides a way to create a consensus network without having trust
a single node, and data store does not need to be stored in a central server, but by sharing it to all nodes in the network.
Internet
of Things (IoT) is about creating digital representations of real-world objects. It is a phenomenon that draws on rapid developments
within IT, ICT and telecommunications to spark insights and to help companies create entirely new types of services and business
areas. Management believes that the Internet of Things will be the next technology to promote the rapid development of the world’s
important productive forces.
Health
Care Business Focus
Management
believes that the global IoT in healthcare market is growing at a significant growth rate, due to increasing demand for advanced
healthcare information system, and growing prevalence of chronic and lifestyle associated diseases.
The
IoT applications in healthcare, such as telemedicine, medication management, clinical operations and workflow management, inpatient
monitoring, helps in compiling services related to diagnosis, treatment, care, and rehabilitation. They improve communication
between patients and healthcare providers, in order to reduce medication errors, and provide better coordinated care.
Blockchain
technology supports IoT which is an extension and more advanced stage of internet. Blockchain’s point-to-point communication
platform problem, gives a subtle solution. Blockchain technology creates a shared, distributed, digital book between network nodes
to record transactions, rather than storing them on a central server. Thus eliminating need for central verification. It provides
a way to create a consensus network without having to trust a single node, and data store does not need to be stored in a central
server, but by sharing it to all nodes in network. Blockchain technology can also help solve medical field of data privacy and
other issues, such as custody of electronic medical records, safe storage of genetic data, drug security and so on.
The
Market Opportunity
The
Company is in the early stages of blockchain technology, which can store decentralized and distributed software ledger with complete
transaction history. Blockchain technology has a wide range of potential applications, in addition to financial, real estate,
and back office systems. Blockchain can be utlized as a distributed ledger agreement that allows projects or transactions to be
transparently registered and can be used in a variety of industries to offer a wide range of services including banking, stock
trading, real estate and even global diamond sales.
Blockchain
technology can play a role in many fields. Blockchain transactions are theoretically real-time. The block-based distributed accounting
technology, combined with its artificial intelligence and internet of things technologies, makes it possible for countless of
smart technologies to connect to internet for greater security, allowing technicians to return to the point at which the problem
occurred. One of potential applications of this technology is the creation of registers based on blockchain of IoT devices, and
the use of artificial intelligence programs to perform automated intelligent diagnostics and more advanced functions, which can
ultimately lead engineers and technicians to virtualize clock backwards. At the same time, blockchain technology can reduce audit
costs; reduce distrust of central node, so that flow of financial assets is more transparent and convenient. In fact, current
blockchain technology is indeed application of digital electronic payments to “block chain +” transition extension
from financial sector gradually to IoT and other non-financial areas which will trigger more and greater industrial restructuring
and revolution.
The
internet of things is based on computer science, including network, electronics, radio frequency, induction, wireless, artificial
intelligence, bar code, cloud computing, automation, embedded technology as an integrated technology. Internet of things is called
the third wave of the world information industry revolution, after computer revolution, and the second internet revolution. Management
believes that within 10 years, internet of things will be widely used in intelligent medicine, intelligent transportation, environmental
protection, government work, public safety, safety home, intelligent home appliance, industrial monitoring, elderly care, personal
health, intelligent building, green agriculture and breeding, surveillance, imaging, computers, mobile phones and other fields.
Blockchain
technology is a good solution for: infrastructure investment, high maintenance costs and data security issues. Blockchain technology
supports IoT which is an extension and more advanced stage of internet. Blockchain technology research and application will make
IoT networking more efficient. Blockchain technology creates a shared, distributed, digital book between network nodes to record
transactions, rather than storing them on a central server. This eliminates the need for central verification. It provides a way
to create a consensus network without having to trust a single node, and data store does not need to be stored in a central server,
but by sharing it to all nodes in network. Blockchain technology can also solve medical field of data privacy and other issues,
such as custody of electronic medical records, safe storage of genetic data, and drug security.
Our
Strategy
Our
strategy is to make UBI the premier online investment and communication platform in key markets in China, and later on we may
expand into Europe and North America. To achieve this goal, we intend to do the following:
●
Introducing innovative products
We
plan to develop commercially applicable blockchain based payment and other functions, such as product tracking. We aim at satisfaction
of user experience, covering the consumption after sales.
●
Create brand awareness and drive sales of our products and services in key markets
We
intend to target our marketing efforts to create global awareness of our brand and drive sales of our products and services in
the key markets of China.
●
Employ professional investment professionals, academics, university professors and communication professionals
We
plan to employ investment professionals, academics, university professors and communication professionals from around the world
to develop technologies applications to human beings.
●
Coordinate with strategic partners in each of the target markets for marketing and distribution
We
believe that international markets represent a significant growth opportunity for us and we intend to expand sales of our products
and services globally through selected retailers and strategic partnerships. We plan to work with key partners in the target markets
to provide marketing and distribution expertise and assistance. Although it may be challenging to gain market acceptance in these
markets, we believe the assistance of such experts will expedite the process.
Competitive
Strengths
We
believe that the following strengths position us to build our business model:
1.
Building a Creative Commercial Platform through Independent Design and Development
We
plan to make an integrated platform that incorporates the blockchain technology, internet of things, and a stock market. This
platform when once built, will support blockchain based payment, the convenience of internet of things, with the speed, safety,
and convenience not yet experienced. We plan to establish a brand name of “Global UBI” for our products.
2.
We Believe We Have Good Relations in China’s Healthcare Industry
In
China, we believe that our management has good relations in the field of integrated health industry for scientific research and
development, raw material production base and other industrial chains. Our management is also familiar with the international
pharmaceutical market and the food market. We believe that technology is the top productive force. The effective combination of
blockchain technology and Internet of Things technology which exclude all possible human factors, its centralization, transparency
and chain cannot be tampered with, traceability, etc. can solve the drug and food safety issues.
Target
Market
At
present, fake drugs are common in China, as there exists little regulation of production, and no guaranteed efficacy of traditional
Chinese medicine. There has been an excessive use of antibiotics, poison capsules incidents, vaccine cases ginkgo leaf, licorice
tablets and other major drug cases, seriously affecting people’s physical and mental health. Therefore, food and drug safety
is related to the vital interests of millions of people in China.
Sources
of Income and Pricing
We
plan to use application of information technology (IT), blockchain technology and IoT technology that permeate virtually all aspects
of corporate and social activity, effective combination of food and drugs safety and management of labor relations. The products
and services enabled by it have had a major impact to the healthcare industry. As we look to the future, emerging technologies
raise new trend in security, law enforcement, privacy, safety in food and drug of healthcare industry.
Sales
and Marketing
The
Company plans to place an emphasis on social media for the marketing and advancement of blockchain, internet of things, and technological
innovation platform as well as the traditional health application, food and drug production process chain for more transparent
transactions. The Company plans to implement original sources of procurement advantages, and preferred overseas products. For
the domestic high-end consumers, we provide more efficient, convenient and affordable imports of quality goods.
Management
believes Chinese consumers are more likely to consider buying a product if they see it mentioned on a social-media site and more
likely to purchase a product or service if a friend or acquaintance recommends it on a social-media site.
Chinese
consumers rely heavily upon peer-to-peer recommendations over general mass advertising. In general, the Chinese populace is skeptical
of information from news sources and advertising and rely more on word-of-mouth from friends, family, and key opinion leaders,
many of whom share information on social media.
While
messaging and sharing photos is as popular in China as in other regions, one aspect of usage in the country stands out: social
media has a greater influence on purchasing decisions for consumers in China than for those anywhere else in the world. Due to
the widespread use of social media in China, the Company will focus its marketing efforts on this medium. The Company will be
present with its own social media site on the largest Chinese social media platforms. Sale of products and services will take
place on the portal. With regards to North America and European Market, we anticipate employing a similar strategy. Our most important
profit and revenue will come from our development of drugs, food safety software, and system platform technology to promote sales
and transfer technology. These software technologies and platform technologies will be widely used in health industry businesses
and regulatory agencies.
Manufacturing
The
Company does not at this time engage in any manufacturing but may engage in manufacturing of products to be sold on the Company’s
website in the future.
Government
Regulation
We
are or may become subject to a variety of laws and regulations in the United States and abroad that involve matters central to
our business, including laws and regulations regarding privacy, data protection, data security, data retention, consumer protection,
advertising, electronic commerce, intellectual property, manufacturing, anti-bribery and anti-corruption, and economic or other
trade prohibitions or sanctions. These laws and regulations are continuously evolving and developing. The scope and interpretation
of the laws that are or may be applicable to us are often uncertain and may be conflicting, particularly with respect to foreign
laws.
In
particular, there are numerous U.S. federal, state, and local laws and regulations and foreign laws and regulations regarding
privacy and the collection, sharing, use, processing, disclosure, and protection of personal information and other user data,
the scope of which is changing, subject to differing interpretations, and may be inconsistent among different jurisdictions. We
strive to comply with all applicable laws, policies, legal obligations, and industry codes of conduct relating to privacy, data
security, and data protection. However, given that the scope, interpretation, and application of these laws and regulations are
often uncertain and may be conflicting, it is possible that these obligations may be interpreted and applied in a manner that
is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. Any failure or perceived
failure to comply with our privacy or security policies or privacy-related legal obligations by us or third-party service-providers
or the failure or perceived failure by third-party apps, with which our users choose to share their data, to comply with their
privacy policies or privacy-related legal obligations as they relate to the data shared with them, or any compromise of security
that results in the unauthorized release or transfer of personally identifiable information or other user data, may result in
governmental enforcement actions, litigation, or negative publicity, and could have an adverse effect on our brand and operating
results.
We
plan to develop solutions to ensure that data transfers from the E.U. provide adequate protections to comply with the E.U. Data
Protection Directive. If we fail to develop such alternative data transfer solutions, one or more national data protection authorities
in the European Union could bring enforcement actions seeking to prohibit or suspend our data transfers to the U.S. and we could
also face additional legal liability, fines, negative publicity, and resulting loss of business.
Governments
are continuing to focus on privacy and data security and it is possible that new privacy or data security laws will be passed
or existing laws will be amended in a way that is material to our business. Any significant change to applicable laws, regulations,
or industry practices regarding our users’ data could require us to modify our services and features, possibly in a material
manner, and may limit our ability to develop new products, services, and features. Although we have made efforts to design our
policies, procedures, and systems to comply with the current requirements of applicable state, federal, and foreign laws, changes
to applicable laws and regulations in this area could subject us to additional regulation and oversight, any of which could significantly
increase our operating costs.
The
labeling, distribution, importation, marketing, and sale of our products are subject to extensive regulation by various U.S. state
and federal and foreign agencies, including the CPSC, Federal Trade Commission, Food and Drug Administration, or FDA, Federal
Communications Commission, and state attorneys general, as well as by various other federal, state, provincial, local, and international
regulatory authorities in the countries in which our products and services are distributed or sold. If we fail to comply with
any of these regulations, we could become subject to enforcement actions or the imposition of significant monetary fines, other
penalties, or claims, which could harm our operating results or our ability to conduct our business.
The
global nature of our business operations also create various domestic and foreign regulatory challenges and subject us to laws
and regulations such as the U.S. Foreign Corrupt Practices Act, or FCPA, the U.K. Bribery Act, and similar anti-bribery and anti-corruption
laws in other jurisdictions, and our products are also subject to U.S. export controls, including the U.S. Department of Commerce’s
Export Administration Regulations and various economic and trade sanctions regulations established by the Treasury Department’s
Office of Foreign Assets Controls. If we become liable under these laws or regulations, we may be forced to implement new measures
to reduce our exposure to this liability. This may require us to expend substantial resources or to discontinue certain products
or services, which would negatively affect our business, financial condition, and operating results. In addition, the increased
attention focused upon liability issues as a result of lawsuits, regulatory proceedings, and legislative proposals could harm
our brand or otherwise impact the growth of our business. Any costs incurred as a result of compliance or other liabilities under
these laws or regulations could harm our business and operating results.
Employees
We
have 11 full-time employees. Within our workforce, 4 employees are engaged in product development and 7 employees are engaged
in business development, finance, human resources, facilities, information technology and general management and administration.
We expect the number of employees to rise to more than 25 by the end of December, 2017. We have no collective bargaining agreements
with our employees and we have not experienced any work stoppages. We consider our relationship with our employees to be good.
Results
of Operations
Revenues
During
the six month period ended February 28, 2017, the Company had no revenues.
Expenses
For
the three months ended February 28, 2017, the Company had total operating expenses of $426,122 as compared to $12,025 in 2016.
The 2017 operating expenses consisted of salaries of $179,569, consulting fees of $231,667, legal and professional fees of $8,147
and other general and administrative expenses of $6,739. For the six months ended February 28, 2017, the Company had total operating
expenses of $501,991 as compared to $25,281 in 2016. The 2017 operating expenses consisted of salaries of $179,569, consulting
fees of $256,667, legal and professional fees of $39,516 and other general and administrative expenses of $26,239.
For
the three months ended February 28, 2017, the Company had a net loss of $(379,119) or $(0.01) per share of Class A common stock
and compared to a loss of $(12,025) or $(0.06) per share of Class A common stock for the same period last year.
Net
Loss
For
the six months ended February 28, 2017, the Company had a net loss of $(454,416) or $(0.02) per share of Class A common stock
and compared to a loss of $(25,281) or $(0.12) per share of Class A common stock for the same period last year.
Going
Concern
The
financial statements included with this quarterly report have been prepared in accordance with generally accepted accounting principles
applicable to a going concern which contemplates the realization of assets business. As of February 28, 2017, the Company has
accumulated operating losses of approximately $5,008,675 since inception. The Company’s ability to continue as a going concern
is contingent upon the successful completion of additional financing arrangements and its ability to achieve and maintain profitable
operations. Management plans to raise equity capital to finance the operating and capital requirements of the Company. Amounts
raised will be used to further development of the Company’s services, to provide financing for marketing and promotion and
for other working capital purposes. While the Company is putting forth its best efforts to achieve the above plans, there is no
assurance that any such activity will generate funds that will be available for operations.
These
conditions raise substantial doubt about the Company’s ability to continue as a going concern. Our financial statements
do not include any adjustments that might arise from this uncertainty.
Liquidity
and Capital Resources
As
of February 28, 2017 the Company has total assets of $12,363 consisting of office equipment of $6,363 and prepaid expenses of
$6,000 and total liabilities of $449,616. The negative working capital at February 28, 2017 is $443,616.
The
Company has limited financial resources available, which has had an adverse impact on the Company’s liquidity, activities
and operations. These limitations have adversely affected the Company’s ability to obtain certain projects and pursue additional
business. Without realization of additional capital, it would be unlikely for the Company to continue as a going concern. In order
for the Company to remain a Going Concern it will need to find additional capital. Additional working capital may be sought through
additional debt or equity private placements, additional notes payable to banks or related parties (officers, directors or stockholders),
or from other available funding sources at market rates of interest, or a combination of these. The ability to raise necessary
financing will depend on many factors, including the nature and prospects of any business to be acquired and the economic and
market conditions prevailing at the time financing is sought. No assurances can be given that any necessary financing can be obtained
on terms favorable to the Company, or at all. Currently, the Company has ceased most operations with the exception of certain
aspects of its product development and protecting its intellectual property.
Off-Balance
Sheet Arrangements
We
do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results or operations, liquidity, capital expenditures or capital
resources that is material to investors.
Critical
Accounting Policies and Estimates
Revenue
Recognition: We recognize revenue from services and product sales once all of the following criteria for revenue recognition have
been met: pervasive evidence that an agreement exists; the services have been rendered; the fee is fixed and determinable and
not subject to refund or adjustment; and collection of the amount due is reasonable assured.
New
Accounting Standards
Management
has evaluated recently issued accounting pronouncements through February 28, 2017 and concluded that they will not have a material
effect on future financial statements.