In
order to manufacture many of the Company’s products, the Company purchases components from several key China-based suppliers,
Jiada Toys Co., Ltd., Hangzhou Heli Electronics Co., Limited,
King Honor Enterprises Limited and Major Toys Limited. The Company’s Asian office is located adjacent to China, in Hong Kong. As
a result of the rapid spread of the novel coronavirus (“COVID-19”), China began quarantines related to COVID-19 on
January 23, 2020 and Hong Kong imposed a compulsory nationwide quarantine on March 19, 2020. In addition, the Company has
a number of suppliers and customers located in other parts of Asia, which have also been severely impacted by the spread of COVID-19,
with many Asian nations correspondingly imposing quarantines on their citizens.
The
Company’s Asian operations and suppliers usually suspend operations for the Chinese New Year, which began on January 25th
and ended February 8th this year. However, as a result of the COVID-19 quarantines described above, the
Company’s operations in Asia have been unable to fully resume since the end of the Chinese New Year, with an
immediate result of such on-going operational suspension being that the Company’s finance team will be unable to complete
the preparation of the Company’s consolidated financial statements and its Annual Report on Form 10-K until after March
30, 2020. Accordingly, the Company will be unable to file its 2019 Annual Report on Form 10-K by the original deadline of March
30, 2020. The Company expects operations to fully resume in the 2nd quarter of 2020.
Therefore, the Company is relying on the Securities
and Exchange Commission’s order dated March 4, 2020 (Release No. 34-88318), the Securities and Exchange Commission’s
order dated March 25, 2020 (Release No. 34-88465), and Rule 12b-25 of the Exchange Act, to extend the due date for the filing
of its 2019 Annual Report on Form 10-K until May 14, 2020 (45 days after the original due date). The Company will work diligently
to comply with such requirement and, at this time, management believes that it will need the entire available extension period.
In
reliance on the aforementioned SEC order, the Company intends to include the following risk factor in its 2019 Annual Report on
Form 10-K:
“Our
business operations have been and may continue to be materially and adversely affected by the outbreak of the novel respiratory
illness coronavirus (“COVID-19”).
On
March 11, 2020, the World Health Organization declared the outbreak of the novel respiratory illness COVID-19 a pandemic. The
new strain of COVID-19 is considered to be highly contagious and poses a serious public health threat. The outbreak of COVID-19
emerged in China, where many of the Company’s suppliers and customers are located. COVID-19 has been expanding within Asia
and globally, such that the Company’s operations in Asia have been largely suspended since January 2020.
Any
outbreak of such epidemic illness or other adverse public health developments may materially and adversely affect the global economy,
our markets and our business. In the first quarter of 2020, the COVID-19 outbreak has caused disruptions in our manufacturing
operations, which have resulted in delays in the shipment of products to certain of our customers and ultimately, a suspension
of our Asian operations in January 2020. A prolonged disruption or any further unforeseen delay in our operations of the manufacturing,
delivery and assembly process within any of our production facilities could continue to result in delays in the shipment of products
to our customers, increased costs and reduced revenue.
We
cannot foresee whether the outbreak of COVID-19 will be effectively contained, nor can we predict the severity and duration of
its impact. If the outbreak of COVID-19 is not effectively and timely controlled, our business operations and financial condition
may be materially and adversely affected as a result of the deteriorating market outlook for automobile sales, the slowdown in
regional and national economic growth, weakened liquidity and financial condition of our customers or other factors that we cannot
foresee. Any of these factors and other factors beyond our control could have an adverse effect on the overall business environment,
cause uncertainties in the regions where we conduct business, cause our business to suffer in ways that we cannot predict and
materially and adversely impact our business, financial condition and results of operations.”
The
information contained in this Current Report on Form 8-K shall not be deemed “filed” for purposes of Section 18 of
the Exchange Act, or incorporated by reference in any filing under the Securities Act of 1933, as amended or the Exchange Act,
except as shall be expressly set forth by specific reference in such a filing. The furnishing of the information in this Current
Report on Form 8-K is not intended to, and does not, constitute a representation that such furnishing is required by Regulation
FD or that the information contained in this Current Report on Form 8-K constitutes material investor information that is not
otherwise publicly available.
The
Securities and Exchange Commission encourages registrants to disclose forward-looking information so that investors can better
understand the future prospects of a registrant and make informed investment decisions. This Current Report on Form 8-K and exhibits
may contain these types of statements, which are “forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995, and which involve risks, uncertainties and reflect the Company’s judgment as of the date
of this Current Report on Form 8-K. Forward-looking statements may relate to, among other things, operating results and are indicated
by words or phrases such as “expects,” “should,” “will,” and similar words or phrases. These
statements are subject to inherent uncertainties and risks that could cause actual results to differ materially from those anticipated
at the date of this Current Report on Form 8-K. Investors are cautioned not to rely unduly on forward-looking statements when
evaluating the information presented within.