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Item 15.
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Controls and Procedures.
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Evaluation of Disclosure Controls and
Procedures
Our management, with the participation of
our chief executive officer and chief financial officer, has performed an evaluation of the effectiveness of our disclosure controls
and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report, as required
by Rule 13a-15(b) under the Exchange Act.
Based upon that evaluation, our management
has concluded that, in light of the material weakness of our internal controls over financial reporting identified below, as of
December 31, 2016, our disclosure controls and procedures were ineffective in ensuring that the information required to be disclosed
by us in the reports that we file and furnish under the Exchange Act was recorded, processed, summarized and reported within the
time periods specified in the SEC’s rules and forms, and that the information required to be disclosed by us in the reports
that we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive
officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal
Control over Financial Reporting
Our management is responsible for establishing
and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process
designed under the supervision of our chief executive officer and chief financial officer to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of our consolidated financial statements for external reporting purposes
in accordance with U.S. generally accepted accounting principles.
After our acquisition of JMU HK, the scope
of our internal controls over financial reporting was also enlarged significantly. We also performed a related assessment based
on this new control environment and change in scope.
Management assessed the effectiveness of
our internal control over financial reporting as of December 31, 2016. In making this assessment, management used the framework
set forth in the report Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission, or COSO. The COSO framework summarizes each of the components of a company’s internal control system,
including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication and (v)
monitoring.
Based on that evaluation, our management
concluded that these controls were not effective at December 31, 2016. We did not maintain sufficient controls over financial reporting
processes due to an insufficient complement of internal personnel with a level of accounting knowledge, experience and training
in the application of U.S. GAAP to ensure that the consolidated financial statements were prepared in compliance with U.S. GAAP
and SEC requirements properly. This deficiency constitutes as a material weakness of our internal control over financial reporting.
Attestation Report of the Registered
Public Accounting Firm
This annual report does not include an attestation
report of our registered public accounting firm pursuant to the transition periods established by rules of the SEC for an Emerging
Growth Company.
Changes in Internal Control over Financial
Reporting
We identified four material weaknesses
in internal control over financial reporting during our preparation of the financial statements for the year ended December 31,
2015
:
(i) lack of accounting personnel with appropriate knowledge
of accounting principles generally accepted in the United States of America, or U.S. GAAP, (ii) lack of comprehensive accounting
policies and procedures manual in accordance with U.S. GAAP, (iii) lack of risk assessment process, and (iv) lack of qualified
internal control team with sufficient control experience. Since then, we have implemented the following measures to remediate these
material weakness:
·
We
hired a reporting manager in the first half of 2016 with experience in U.S. GAAP accounting and reporting, skills and knowledge
in the preparation of financial statements under the requirements of U.S. GAAP and financial reporting disclosure under the requirement
of SEC rules. This reporting manager has been involved in preparing and reviewing our consolidated financial statements under
U.S. GAAP;
·
We
hired a controlling manager responsible for internal control establishment and implementation in the first half of 2016 with years
of working experience in one of big 4 accounting firms as well as rich experience in internal control, skills and knowledge in
the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or
COSO framework;
·
We
established comprehensive accounting policies and procedures manual in accordance with U.S. GAAP in the first half of 2016 which
is monitored by the reporting manager on a continuing basis;
·
We
established, implemented and improved internal control system including entity level and process level key controls as well as
policies monitored by the controlling manager according to COSO framework during 2016. Risk assessment and control evaluation
process were conducted by the controlling manager in 2016;
As a result, material weakness
(ii)
to (iv)
in internal control over financial reporting
have been
remediated. However, we still have an insufficient number of financial reporting personnel with an appropriate level of knowledge,
experience and training in application of U.S. GAAP and SEC rules and regulations commensurate with our reporting requirements
.
We will
(i) hire additional qualified financial reporting personnel with
U.S. GAAP and SEC reporting experience, and, (ii) improve the capabilities of existing financial reporting personnel through training
and education in the accounting and reporting requirements under U.S. GAAP, and SEC rules and regulations. In addition, we will
establish effective monitoring and oversight controls for non-recurring and complex transactions to ensure the accuracy and completeness
of the Company’s consolidated financial statements and related disclosures.