NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019 (UNAUDITED) AND DECEMBER 31, 2018
DBUB
GROUP, INC. AND SUBSIDIARIES
|
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MARCH
31, 2019
(UNAUDITED)
|
|
|
|
December
31,
2018
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
Cash
and equivalents
|
|
$
|
1,376,965
|
|
|
$
|
1,554,049
|
|
Advances
to suppliers
|
|
|
67,556
|
|
|
|
105,824
|
|
Other
receivables
|
|
|
7,551
|
|
|
|
305,523
|
|
Prepaid
expenses
|
|
|
119,000
|
|
|
|
235,265
|
|
Deposits
|
|
|
45,843
|
|
|
|
606,336
|
|
Advance
to related party
|
|
|
82,213
|
|
|
|
33,693
|
|
Total
current assets
|
|
|
1,699,128
|
|
|
|
2,840,690
|
|
NON-CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
Fixed
assets, net
|
|
|
239,321
|
|
|
|
108,006
|
|
Intangible
assets, net
|
|
|
133,660
|
|
|
|
20,354
|
|
Total
noncurrent assets
|
|
|
372,981
|
|
|
|
128,360
|
|
TOTAL
ASSETS
|
|
$
|
2,072,109
|
|
|
$
|
2,969,050
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
—
|
|
|
$
|
11,837
|
|
Advance
from customers
|
|
|
4,455
|
|
|
|
4,362
|
|
Accrued
expenses and other payables
|
|
|
540,650
|
|
|
|
402,976
|
|
Income
tax payable
|
|
|
1,085
|
|
|
|
990
|
|
Advance
from related parties
|
|
|
2,619,922
|
|
|
|
3,231,871
|
|
Total
liabilities
|
|
|
3,166,112
|
|
|
|
3,652,036
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
DEFICIT
|
|
|
|
|
|
|
|
|
Common stock, $0.001
par value, 50,000,000 shares authorized, 20,935,106 shares issued and outstanding as of March, 31 2019 and December 31, 2018
|
|
|
20,935
|
|
|
|
20,935
|
|
Additional
paid-in capital
|
|
|
29,145,246
|
|
|
|
29,145,246
|
|
Other
accumulated comprehensive income
|
|
|
11,687
|
|
|
|
22,939
|
|
Accumulated
deficit
|
|
|
(30,271,871
|
)
|
|
|
(29,872,106
|
)
|
Total
stockholders’ deficit
|
|
|
(1,094,003
|
)
|
|
|
(682,986
|
)
|
TOTAL
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
$
|
2,072,109
|
|
|
$
|
2,969,050
|
|
See
accompanying notes to financial statements.
DBUB
GROUP, INC. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
|
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE
MONTHS ENDED MARCH 31,
|
|
|
2019
|
|
2018
|
Revenue
|
|
$
|
—
|
|
|
$
|
—
|
|
Cost of revenue
|
|
|
—
|
|
|
|
—
|
|
Gross profit
|
|
|
—
|
|
|
|
—
|
|
General
and administrative expenses
|
|
|
297,135
|
|
|
|
67,420
|
|
Loss from operations
|
|
|
(297,135
|
)
|
|
|
(67,420
|
)
|
|
|
|
|
|
|
|
|
|
Other (income) expenses
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
263
|
|
|
|
—
|
|
Interest
expense
|
|
|
(136,303
|
)
|
|
|
—
|
|
Bank
charge
|
|
|
(1,284
|
)
|
|
|
—
|
|
Other
income
|
|
|
34,694
|
|
|
|
218
|
|
Total
other expenses, net
|
|
|
(102,630
|
)
|
|
|
218
|
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations before income tax
|
|
|
(399,765
|
)
|
|
|
(67,638
|
)
|
Provision
for income tax
|
|
|
—
|
|
|
|
—
|
|
Loss
from continuing operations
|
|
|
(399,765
|
)
|
|
|
(67,638
|
)
|
Loss
from operations of discontinued entities, net of income tax
|
|
|
—
|
|
|
|
(152,034
|
)
|
Net
loss including noncontrolling interest
|
|
|
(399,765
|
)
|
|
|
(219,672
|
)
|
Net
loss attributable to noncontrolling interest
|
|
|
—
|
|
|
|
(25,122
|
)
|
Net
loss attributable to DBUB Group
|
|
|
(399,765
|
)
|
|
|
(194,550
|
)
|
|
|
|
|
|
|
|
|
|
Other
comprehensive items:
|
|
|
|
|
|
|
|
|
Foreign
currency translation loss attributable to DBUB Group
|
|
|
(11,252
|
)
|
|
|
(156,650
|
)
|
Foreign
currency translation loss attributable to noncontrolling interest
|
|
|
—
|
|
|
|
(5,232
|
)
|
Comprehensive
loss attributable to DBUB Group
|
|
$
|
(411,017
|
)
|
|
$
|
(351,200
|
)
|
Comprehensive
loss attributable to noncontrolling interest
|
|
$
|
—
|
|
|
$
|
(30,354
|
)
|
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per share:
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
(0.02
|
)
|
|
$
|
(0.01
|
)
|
Discontinued
operations
|
|
$
|
—
|
|
|
$
|
(0.01
|
)
|
Net
loss per share
|
|
$
|
(0.02
|
)
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding:
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
20,935,106
|
|
|
|
11,267,918
|
|
See
accompanying notes to financial statements.
DBUB
GROUP, INC. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE
MONTHS ENDED MARCH 31,
|
|
|
2019
|
|
2018
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net
loss including noncontrolling interest
|
|
$
|
(399,765
|
)
|
|
$
|
(219,672
|
)
|
Adjustments
to reconcile net loss including noncontrolling interest to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Stock
based compensation
|
|
|
39,667
|
|
|
|
39,667
|
|
Depreciation
and amortization
|
|
|
14,593
|
|
|
|
19,352
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivables
|
|
|
—
|
|
|
|
51,025
|
|
Other
receivables
|
|
|
297,086
|
|
|
|
(3,247
|
)
|
Inventories
|
|
|
—
|
|
|
|
52,456
|
|
Prepaid
expenses and deposits
|
|
|
558,071
|
|
|
|
(8,000
|
)
|
Advance
to suppliers
|
|
|
(18,824
|
)
|
|
|
23,963
|
|
Other
noncurrent asset
|
|
|
—
|
|
|
|
40,154
|
|
Accounts
payable
|
|
|
(12,068
|
)
|
|
|
(135,848
|
)
|
Accrued
expenses and other payables
|
|
|
2,639
|
|
|
|
59,711
|
|
Advance
from customers
|
|
|
4,447
|
|
|
|
(34,041
|
)
|
Income
tax payable
|
|
|
73
|
|
|
|
600
|
|
Net
cash provided by (used in) operating activities
|
|
|
485,919
|
|
|
|
(113,880
|
)
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(140,345
|
)
|
|
|
(4,971
|
)
|
Payment
for intangible asset
|
|
|
—
|
|
|
|
(47,839
|
)
|
Net
cash used in investing activities
|
|
|
(140,345
|
)
|
|
|
(52,810
|
)
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Changes
in advance from / to related parties
|
|
|
(517,508
|
)
|
|
|
90,230
|
|
Net
cash provided by (used in) financing activities
|
|
|
(517,508
|
)
|
|
|
90,230
|
|
|
|
|
|
|
|
|
|
|
EFFECT
OF EXCHANGE RATE CHANGE ON CASH AND EQUIVALENTS
|
|
|
(5,150
|
)
|
|
|
85,139
|
|
NET
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
|
|
|
(177,084
|
)
|
|
|
8,679
|
|
CASH
AND EQUIVALENTS, BEGINNING OF PERIOD
|
|
|
1,554,049
|
|
|
|
23,048
|
|
CASH
AND EQUIVALENTS, END OF PERIOD
|
|
$
|
1,376,965
|
|
|
$
|
31,727
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Income
taxes paid
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest
paid
|
|
$
|
184,529
|
|
|
$
|
51,658
|
|
See
accompanying notes to financial statements.
DBUB
GROUP INC. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
|
FOR
THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018 (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
Amount
|
|
|
|
Additional
Paid-in Capital
|
|
|
|
Subscription
Receivable
|
|
|
|
Statutory
Reserve
|
|
|
|
Other
Comprehensive Income
|
|
|
|
Accumulated
Deficit
|
|
|
|
Total
|
|
|
|
Noncontrolling
Interest
|
|
Balance at January 1, 2018
|
|
|
11,267,918
|
|
|
$
|
11,268
|
|
|
$
|
28,443,515
|
|
|
$
|
(50,000
|
)
|
|
$
|
11,542,623
|
|
|
$
|
7,953,635
|
|
|
$
|
(51,980,658
|
)
|
|
$
|
(4,079,617
|
)
|
|
$
|
(76,066
|
)
|
Foreign
currency translation adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(156,650
|
)
|
|
|
—
|
|
|
|
(156,650
|
)
|
|
|
(5,232
|
)
|
Conversion of loan
into shares
|
|
|
—
|
|
|
|
—
|
|
|
|
717,887
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
717,887
|
|
|
|
—
|
|
Net
loss for the quarter
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(194,550
|
)
|
|
|
(194,550
|
)
|
|
|
(25,122
|
)
|
Balance
at March 31, 2018
|
|
|
11,267,918
|
|
|
$
|
11,268
|
|
|
$
|
29,161,402
|
|
|
$
|
(50,000
|
)
|
|
$
|
11,542,623
|
|
|
$
|
7,796,985
|
|
|
$
|
(52,175,208
|
)
|
|
$
|
(3,712,930
|
)
|
|
$
|
(106,420
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
Amount
|
|
|
|
Additional
Paid-in Capital
|
|
|
|
Subscription
Receivable
|
|
|
|
Statutory
Reserve
|
|
|
|
Other
Comprehensive Income
|
|
|
|
Accumulated
Deficit
|
|
|
|
Total
|
|
|
|
Noncontrolling
Interest
|
|
Balance at January
1, 2019
|
|
|
20,935,106
|
|
|
$
|
20,935
|
|
|
|
29,145,246
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
22,939
|
|
|
$
|
(29,872,106
|
)
|
|
|
(682,986
|
)
|
|
$
|
—
|
|
Foreign
currency translation adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(11,252
|
)
|
|
|
—
|
|
|
|
(11,252
|
)
|
|
|
—
|
|
Net
loss for the quarter
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(399,765
|
)
|
|
|
(399,765
|
)
|
|
|
—
|
|
Balance
at March 31, 2019
|
|
|
20,935,106
|
|
|
$
|
20,935
|
|
|
|
29,145,246
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11,687
|
|
|
$
|
(30,271,871
|
)
|
|
$
|
(1,094,003
|
)
|
|
$
|
—
|
|
See
accompanying notes to financial statements.
DBUB
GROUP, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2019 (UNAUDITED) AND DECEMBER 31, 2018
Note
1 -
ORGANIZATION
DBUB
Group, Inc. (the “Company” or “DBUB”) is a Nevada corporation, organized on August 20, 1998 under the
name Editworks Ltd. The Company changed its name several times since its incorporation. On December 21, 2012, the Company changed
its name to Yosen Group, Inc. On September 5, 2018, the Company changed its name to DBUB Group Inc. pursuant to a merger of the
Company with its wholly-owned subsidiary, DBUB Group Inc., a Nevada corporation.
The
Company’s former business was conducted through Capital Future Developments Limited (“Capital”). On May
22, 2018, the Company transferred all of its equity in Capital and its affiliates to the former chief executive officer
for the transfer by him to the Company of 1,738,334 shares of common stock, which was the common stock owned by him pursuant
to an agreement dated March 29, 2018. The 1,738,334 shares of common stock were canceled on May 22, 2018 . The
transfer of the equity in Capital included Capital’s subsidiaries and Capital’s equity interest in its affiliates.
The Company’s former business is treated as a discontinued operation.
On
February 6, 2018, the Company established a wholly owned subsidiary in British Virgin Islands, DB-Link Ltd (“DB-Link”).
The Company plans to operate franchising or operations of restaurants through DB-Link. On June 12, 2018, the Company established
a wholly owned subsidiary DBUB PTE. LTD (“DBUB Pte”) in Singapore. On August 30, 2018, the Company established Huantai
(Shanghai) Catering Management Co, Ltd. (“Huantai”), a wholly foreign owned subsidiary in China to execute its plan
to execute its restaurant franchise business.
The
consolidated interim financial information as of March 31, 2019 and for the three month periods ended March 31, 2019 and 2018
was prepared without audit, pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures, which
are normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted
in the United States of America (“US GAAP”) were not included. The interim consolidated financial information should
be read in conjunction with the Financial Statements and the notes thereto, included in the Company’s Annual Report on Form
10-K for the fiscal year ended December 31, 2018, previously filed with the SEC. In the opinion of management, all adjustments
(which include normal recurring adjustments) necessary to present a fair statement of the Company’s consolidated financial
position as of March 31, 2019, results of operations for the three months ended March 31, 2019 and 2018, and cash flows for the
three months ended March 31, 2019 and 2018, as applicable, were made. The interim results of operations are not necessarily indicative
of the operating results for the full fiscal year or any future periods.
ORGANIZATIONAL
CHART
The
Company’s corporate structure as of March 31, 2019 is as follows:
Note
2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
financial statements included herein were prepared by the Company, pursuant to the rules and regulations of the Securities
and Exchange Commission (“SEC”). The information furnished herein reflects all adjustments (consisting of normal
recurring accruals and adjustments) that are, in the opinion of management, necessary to fairly present the operating results
for the respective periods. Certain information and footnote disclosures normally present in annual financial statements prepared
in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) were omitted
pursuant to such rules and regulations.
The
parent company does not have operations. Its main activities were incurring expenses relating to its status as a public company
in the United States.
Going
Concern
The accompanying consolidated financial statements (“CFS”) were
prepared on a going concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal
course of business. For the three months ended March 31, 2019, the Company had a net loss of $399,765. The Company has an accumulated
deficit of $30.27 million as of March 31, 2019. There can be no assurance that the Company will become profitable or obtain necessary
financing for its business or that it will be able to continue in business. As of March 31, 2019, related parties, including the
Company’s chief executive officer, made advances to the Company of $2.62 million. These issues raise substantial doubt regarding
the Company’s ability to continue as a going concern.
Principles
of Consolidation
The
CFS include the accounts of the Company and its subsidiaries, DB-Link, DBUB Pte and Huantai. All material intercompany accounts,
transactions, balances and profits were eliminated in consolidation.
Currency
Translation
The
reporting currency of the Company is the United States dollar. The accounts of Huantai were maintained, and its financial statements
were expressed RMB and the accounts of DBUB Pte Singapore dollars (SGD), which are the respective functional currency of the subsidiaries.
The Company’s financial statements were translated into United States dollars in accordance with FASB ASC Topic 830-10,
”Foreign
Currency Translation,”
with the RMB and SGD as the functional currency. According to FASB ASC Topic 830-10, assets
and liabilities were translated at the ending exchange rate, stockholders’ equity is translated at the historical rates
and income statement items are translated at the average exchange rate for the year. The resulting translation adjustments are
reported as other comprehensive income in accordance with FASB ASC Topic 220,
”Reporting Comprehensive Income,”
as
a component of shareholders’ equity. Transaction gains and losses are reflected in the consolidated statements of operations
and comprehensive loss.
The
impact of foreign translation from our accounts in RMB and SGD to U.S. dollars on the Company’s operating results was not
material for the three months ended March 31, 2019 and 2018. During the translation process, the assets and liabilities of all
subsidiaries are translated into US dollars at period-end exchange rates. The revenues and expenses are translated into U.S. dollars
at average exchange rates of the periods. Resulting translation adjustments are recorded as a component of accumulated other comprehensive
income within stockholders’ equity.
|
|
March 31,
|
|
|
2019
|
|
2018
|
RMB to
USD exchange rate at period end
|
|
|
0.1485
|
|
|
|
0.1594
|
|
Average RMB to USD
exchange rate for the period
|
|
|
0.1482
|
|
|
|
0.1572
|
|
|
|
|
|
|
March
31,
|
|
|
2019
|
|
2018
|
SGD to
USD exchange rate at period end
|
|
|
0.7383
|
|
|
|
—
|
|
Average SGD to USD
exchange rate for the period
|
|
|
0.7381
|
|
|
|
—
|
|
Transaction
gains or losses arising from exchange rate fluctuation on transactions denominated in a currency other than the functional currency
were included in the consolidated Statements of Operations and Comprehensive Loss. As a result of the translation, the Company
recorded a foreign currency loss of $11,252 and $156,650 for the three months ended March 31, 2019 and 2018.
Use
of Estimates
The
preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. These significant accounting estimates
or assumptions bear the risk of change because there are uncertainties attached to these estimates or assumptions, and certain
estimates or assumptions are difficult to measure or value.
Management
bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the
financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates
the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and
circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates
are adjusted accordingly. Actual results could differ from those estimates.
Business
Combinations
For
a business combination, the assets acquired, the liabilities assumed and any non-controlling interest in the acquiree are recognized
at the acquisition date, measured at their fair values as of that date. In a business combination achieved in stages, the identifiable
assets and liabilities, as well as the non-controlling interest in the acquiree, are recognized at the full amounts of their fair
values. In a bargain purchase in which the total acquisition-date fair value of the identifiable net assets acquired exceeds the
fair value of the consideration transferred plus any non-controlling interest in the acquiree, that excess in fair value is recognized
as a gain attributable to the acquirer.
Deferred
tax liability and assets are recognized for the deferred tax consequences of differences between the tax bases and the recognized
values of assets acquired and liabilities assumed in a business combination in accordance with FASB ASC Subtopic 740-10.
Risks
and Uncertainties
The
Company is subject to risks from, among other things, intense competition associated with the industry in general, other risks
associated with financing, liquidity requirements, rapidly changing customer tastes and requirements, limited operating history,
foreign currency exchange rates and the volatility of public markets as well as other risks associated with the restaurant and
related industries.
In
addition, the Company’s operations are in the PRC and Singapore. Accordingly, the Company’s business, financial condition
and results of operations may be influenced by the political, economic and legal environments in the PRC and Singapore and by
the general state of the PRC’s and Singapore’s economy. The Company’s business may be influenced by changes
in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance
abroad, and rates and methods of taxation, among other things.
Contingencies
The
Company follows subtopic 450-20 of the FASB ASC to report accounting for contingencies. Certain conditions may exist
as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved
when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment
inherently involves an exercise of judgment.
In
assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result
in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived
merits of the amount of relief sought or expected to be sought therein.
If
the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability
can be reasonably estimated, then the estimated liability would be accrued in the Company’s financial statements.
If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable
but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable
and material, would be disclosed.
Loss
contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would
be disclosed. Management does not believe, based upon information available at this time, that these matters will have a
material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance
that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations
or cash flows.
Cash
and Equivalents
Cash
and equivalents include cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid
investments with an original maturity of three months or less as of the purchase date of such investments.
Accounts
Receivable, net
The
Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts
receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and
changes in customer payment patterns to evaluate the adequacy of these reserves.
Property
and Equipment, net
Property
and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals
and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated
depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property
and equipment is provided using the straight-line method for substantially all assets with estimated lives of:
Automotive
|
|
|
5
years
|
|
Office Equipment
|
|
|
5
years
|
|
As
of March 31, 2019, and December 31, 2018, property and equipment consisted of the following:
|
|
2019
|
|
2018
|
Automotive
|
|
$
|
256,234
|
|
|
$
|
116,284
|
|
Less:
accumulated depreciation
|
|
|
(16,913
|
)
|
|
|
(8,278
|
)
|
Total
|
|
$
|
239,321
|
|
|
$
|
108,006
|
|
Long-Lived
Assets
The
Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with FASB ASC 360, “
Property,
Plant and Equipment,”
which requires impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the
assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the
fair market value of the long-lived assets. Losses on long-lived assets to be disposed of are determined in a similar manner,
except that fair market values are reduced for the cost of disposal. Based on its review, the Company believes that, as of March
31, 2019 and December 31, 2018, there were no significant impairments of its long-lived assets not related to the discontinued
operations.
Fair
Value of Financial Instruments
For
certain of the Company’s financial instruments, including cash and equivalents, accrued liabilities and accounts payable,
carrying amounts approximate their FV due to their short maturities. FASB ASC Topic 825, “Financial Instruments,”
requires disclosure of the FV of financial instruments held by the Company. The carrying amounts reported in the balance sheets
for current liabilities each qualify as financial instruments and are a reasonable estimate of their FVs because of the short
period of time between the origination of such instruments and their expected realization and the current market rate of interest.
Fair
Value Measurements and Disclosures
FASB
ASC Topic 820, “Fair Value Measurements and Disclosures,” defines FV, and establishes a three-level valuation hierarchy
for disclosures of fair value measurement that enhances disclosure requirements for FV measures. The three levels are defined
as follow:
•
|
Level
1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
|
|
|
•
|
Level
2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs
that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial
instrument.
|
|
|
•
|
Level
3 inputs to the valuation methodology are unobservable and significant to the FV measurement.
|
As
of March 31, 2019, and December 31, 2018, the Company did not identify any assets and liabilities that are required to be presented
on the balance sheet at FV.
Revenue
Recognition
In
May 2014 the FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which
supersedes all existing revenue recognition requirements, including most industry-specific guidance. This new standard requires
a company to recognize revenues when it transfers goods or services to customers in an amount that reflects the consideration
that the company expects to receive for those goods or services. The FASB subsequently issued the following amendments to ASU
No. 2014-09 that have the same effective date and transition date: ASU No. 2016-08, Revenue from Contracts with Customers (Topic
606): Principal versus Agent Considerations; ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance
Obligations and Licensing; ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical
Expedients; and ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. The
Company adopted these amendments with ASU 2014-09 (collectively, the new revenue standards).
The
new revenue standards became effective for the Company on January 1, 2018, and were adopted using the modified retrospective method.
The adoption of the new revenue standards as of January 1, 2018 did not change the Company’s revenue recognition as the
Company does not have any revenue yet. As the Company will not identify any accounting changes that impacted the amount of reported
revenues with respect to its product revenues, no adjustment to retained earnings will be required upon adoption.
Under
the new revenue standards, the Company recognizes revenues when its customer obtains control of promised goods or services, in
an amount that reflects the consideration which it expects to receive in exchange for those goods. The Company recognizes revenues
following the five step model prescribed under ASU No. 2014-09: (i) identify contract(s) with a customer; (ii) identify the performance
obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations
in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation.
General
and Administrative Expenses
General
and administrative expenses are comprised principally of payroll and benefits costs for corporate employees, occupancy costs of
corporate facilities, lease expenses, management fees, traveling expenses and other operating and administrative expenses, including
freight charges, purchase and delivery costs, internal transfer freight charges and other distribution costs.
Share
Based Payment
The
Company accounts for share-based compensation to employees in accordance with FASB ASC Topic 718, “Compensation –
Stock Compensation”, which requires that share-based payment transactions with employees be measured based on the grant-date
FV of the equity instrument issued and recognized as compensation expense over the requisite service period.
The
Company accounts for share-based compensation awards to non-employees in accordance with FASB ASC Topic 718 and FASB ASC Subtopic
505-50, “Equity-Based Payments to Non-employees”. Share-based compensation associated with the issuance of equity
instruments to non-employees is measured at the FV of the equity instrument issued or committed to be issued, as this is more
reliable than the FV of the services received. The FV is measured at the date that the commitment for performance by the counterparty
has been reached or the counterparty’s performance is complete.
Income
Taxes
Income
taxes are accounted for using an asset and liability method. Under this method, deferred income taxes are recognized for the tax
consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts
at each period end based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected
to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected
to be realized.
The
Company follows ASC Topic 740, which prescribes a more-likely-than-not threshold for financial statement recognition and measurement
of a tax position taken or expected to be taken in a tax return. ASC Topic 740 also provides guidance on recognition of income
tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest
and penalties associated with tax positions, accounting for income taxes in interim periods, and income tax disclosures.
Under
the provisions of ASC Topic 740, when tax returns are filed, it is likely that some positions taken would be sustained upon examination
by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the
position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period
during which, based on all available evidence, management believes it is more likely than not that the position will be sustained
upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated
with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount
of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The
portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as
a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties
that would be payable to the taxing authorities upon examination. Interest associated with unrecognized tax benefits are classified
as interest expense and penalties are classified in selling, general and administrative expenses in the statements of income.
At March 31, 2019 and December 31, 2018, the Company did not take any uncertain positions that would necessitate recording a tax
related liability.
DBUB
is subject to U.S. corporate income taxes on its taxable income at a rate of up to 21% for taxable years beginning after December 31,
2017 and U.S. corporate income tax on its taxable income of up to 35% for prior tax years. On December 22, 2017, the Tax Cut and
Jobs Act (“Tax Act”) was signed into law. The Tax Act introduced a broad range of tax reform measures that significantly
changed the federal income tax laws. The provisions of the Tax Act that may have significant impact on the Company, including
the permanent reduction of the corporate income tax rate from 35% to 21% effective for tax years including or commencing on January
1, 2018, one-time transition tax on post-1986 foreign unremitted earnings, provision for Global Intangible Low Tax Income (“GILTI”),
deduction for Foreign Derived Intangible Income (“FDII”), repeal of the corporate alternative minimum tax, limitation
of various business deductions, and modification of the maximum deduction of net operating loss with no carryback but indefinite
carryforward provision. Many provisions in the Tax Act are generally effective in tax years beginning after December 31, 2017.
Taxpayers may elect to pay the one-time transition tax over eight years, or in a single lump-sum payment.
To
the extent that portions of its U.S. taxable income, such as Subpart F income or GILTI, are determined to be from sources outside
of the U.S., subject to certain limitations, the Company may be able to claim foreign tax credits to offset its U.S. income tax
liabilities. Any remaining liabilities are accrued in the Company’s consolidated statements of comprehensive income and
estimated tax payments are made when required by U.S. law.
The
Act also created new taxes on certain foreign-sourced earnings such as global intangible low-taxed income (“GILTI”)
under IRC Section 951A, which is effective for the Company for tax years beginning after January 1, 2018. For the three months
ended March 31, 2019, the Company has calculated its best estimate of the impact of the GILTI in its income tax provision in accordance
with its understanding of the Act and guidance available as of the date of this filing.
Basic
and Diluted Earnings (Loss) per Share
The
Company presents net income (loss) per share (“EPS”) in accordance with FASB ASC Topic 260, “Earning Per Share.” Basic
EPS is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS
is computed similar to basic EPS except that the denominator is increased to include the number of additional common shares that
would have been outstanding if all the potential common shares, warrants and stock options had been issued and if the additional
common shares were dilutive. Diluted EPS is based on the assumption that all dilutive convertible shares and stock options and
warrants were converted or exercised. Dilution is computed by applying the treasury stock method for the outstanding options and
warrants, and the if-converted method for the outstanding convertible instruments. Under the treasury stock method, options and
warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later) and as if funds obtained
thereby were used to purchase common stock at the average market price during the period. Under the if-converted method, outstanding
convertible instruments are assumed to be converted into common stock at the beginning of the period (or at the time of issuance,
if later).
Statement
of Cash Flows
In
accordance with FASB ASC Topic 230, “Statement of Cash Flows”, cash flows from the Company’s operations are
calculated based upon local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash
flows may not necessarily agree with changes in the corresponding balances on the balance sheet. Cash from operating, investing
and financing activities is net of assets and liabilities acquired.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk are cash, accounts receivable, advances to suppliers
and other receivables arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy
financial institutions. Since the Company has not generated any revenues or commenced operations in its continuing business, the
Company cannot evaluate the risk of a concentration of credit risk.
Segment
Reporting
FASB
ASC Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting.
The management approach model is based on the way a company’s management organizes segments within the company for making
operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure,
management structure, or any other manner in which management disaggregates a company. Following the Company’s disposal
of its existing business in 2018, the Company has one operating segment, the restaurant business, which has not generated any
revenues for the three months ended March 31, 2019.
Recent
Accounting Pronouncements
In
June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure
all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions,
and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement
of credit losses on financial assets measured at amortized cost. This guidance is effective for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2019. Early application will be permitted for all entities for fiscal
years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the
impact that the standard will have on its CFS.
In
January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the
goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount
by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance
should be adopted on a prospective basis for the annual or any interim goodwill impairment tests beginning after December 15,
2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1,
2017. The Company is currently evaluating the impact of adopting this standard on its CFS.
In
June 2018, the FASB issued ASU 2018-07, “Compensation — Stock Compensation (Topic 718): Improvements to Nonemployee
Share-Based Payment Accounting,” which expands the scope of ASC 718 to include share-based payment transactions for acquiring
goods and services from non-employees. An entity should apply the requirements of ASC 718 to non-employee awards except for specific
guidance on inputs to an option pricing model and the attribution of cost. The amendments specify that ASC 718 applies to all
share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own
operations by issuing share-based payment awards. The new guidance is effective for SEC filers for fiscal years, and interim reporting
periods within those fiscal years, beginning after December 15, 2019 (i.e., January 1, 2020, for calendar year entities). Early
adoption is permitted. The Company is evaluating the effects of the adoption of this guidance and currently believes that it will
impact the accounting of the share-based awards granted to non-employees.
Other
recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified
Public Accountants, and the SEC did not or are not believed by management to have a material impact on the Company’s present
or future CFS.
Note
3 -
ADVANCES TO SUPPLIERS
Advances
to suppliers represent advance payments to suppliers for the purchase of inventory.
Note
4 -
PREPAID EXPENSES
Prepaid
expenses as of March 31, 2019 and December 31, 2018 was $119,000 and $235,265, respectively. Prepaid expense consists primarily
the deferred stock compensation for restricted stocks issued on December 23, 2016. The deferred stock compensation is expensed
over three years.
Note
5 -
INTANGIBLE ASSETS
Intangible
assets consisted of 1) vehicle license fee. Shanghai City controls the number of automobiles to prevent heavy traffic jam and
issues certain number of vehicle licenses plate each year by auction, the Company needs to win the auction and pay for the vehicle
license plate fee, 2) signing fee to Alvin Leung.
On
April 3, 2018, DB-Link entered into a cooperation agreement with Alvin Leung, as co-founder, regarding brand cooperation and the
catering business in the territory of the Mainland China, Australia, New Zealand and the United States (the “initial territory”).
The agreement provides that Mr. Leung will exclusively work with DB-Link in the initial territory and will provide DB-Link with
the brand names of “Bo” and “Daimon” in the initial territory, and he granted DB-Link the right of first
cooperation before seeking similar cooperation with other parties in Canada, Hong Kong and Europe. DB-Link’s business will
be operated by joint venture entities in which DB-Link will hold a 66% equity interest and Mr. Leung a 34% interest. In addition,
DB-Link will pay Mr. Leung RMB 800,000 (approximately $127,000), half was paid with the balance payable in 2019.
Intangible
assets consisted of the following at March 31, 2018 and December 31, 2018:
|
|
2019
|
|
2018
|
Signing
fee
|
|
$
|
118,808
|
|
|
$
|
—
|
|
Vehicle
license
|
|
|
20,792
|
|
|
|
20,354
|
|
Subtotal
|
|
|
80,196
|
|
|
|
20,354
|
|
Less:
accumulated amortization
|
|
|
(5,940
|
)
|
|
|
—
|
|
Net
|
|
$
|
133,660
|
|
|
$
|
20,354
|
|
Amortization
of intangible assets for the three months ended March 31, 2019 and 2018 was $5,928 and $0. As of March 31, 2019, the annual amortization
for next five years is expected to be $16,039 for each year.
Note
6 -
ACCRUED EXPENSES AND OTHER PAYABLES
Accrued
expense and other payables consisted of the following at March 31, 2019 and December 31, 2018:
|
|
2019
|
|
2018
|
Accrued
expenses
|
|
$
|
101,332
|
|
|
$
|
41,650
|
|
Due
to unrelated parties
|
|
|
306,361
|
|
|
|
39,256
|
|
Payable
for social insurance
|
|
|
377
|
|
|
|
—
|
|
Signing
fee payable
|
|
|
59,405
|
|
|
|
—
|
|
Franchise
fee
|
|
|
73,175
|
|
|
|
73,449
|
|
Total
|
|
$
|
540,650
|
|
|
$
|
402,976
|
|
Accrued
expenses mainly consisted of accrued payroll, audit and legal fee, etc. Due to unrelated parties were short term advance for the
Company’s working capital needs, which bore no interest and payable upon demand.
The
Company entered a franchise agreement in August 2018, the Company will grant the franchise right and assist the franchisee to
open a franchise restaurant in Taipei City. The franchisee shall pay RMB 1.00 million ($0.15 million) for entering this agreement,
50% of it was paid at signing of the agreement, the remaining 50% shall be paid when the franchisee raised enough restaurant starting
fund (not less than RMB 6.00 million ($0.89 million)). The franchisee will receive 50,000 shares of the Company’s stock
when the RMB 1.00 million ($0.15 million) is fully paid to the Company. However, as of March 31, 2019, the franchise agreement
was ceased and other terms of the franchise agreement was not fulfilled and unlikely to be fulfilled. Accordingly and until the
settlement is reached by both parties, the 1
st
RMB 0.50 million ($0.07 million) that the Company received was recorded
as the Company’s liability.
Note
7 -
RELATED PARTY TRANSACTIONS
Advance
to related party
Advance
to related party at March 31, 2019 and December 31, 2018 was $82,213 and $33,693, respectively, representing the advance to the
director of DBUB Pte, for his business related use, such as business travel and lodging.
Advance
from related parties
The
Company borrowed money from certain related parties for its working capital needs. At March 31, 2019 and December 31, 2018, advance
from related parties were consisting of the following:
|
|
2019
|
|
2018
|
Loan
from CEO (including accrued interest)
|
|
$
|
2,070,110
|
|
|
$
|
2,687,008
|
|
Loan from an officer
(including accrued interest)
|
|
|
531,780
|
|
|
|
424,942
|
|
Loan from affiliated
companies (no interest, payable upon demand)
|
|
|
18,032
|
|
|
|
83,357
|
|
Loan from other
related party (no interest, payable upon demand)
|
|
|
—
|
|
|
|
36,564
|
|
Total
|
|
$
|
2,619,922
|
|
|
$
|
3,231,871
|
|
On
June 14, 2018, DBUB Pte entered a loan agreement with the Company’s CEO for the amount of SGD 5.00 million ($3.69 million)
for a term of 24 months. The annual interest rate is 24%. The borrower can make repayment of the loan anytime without prepayment
penalty. As of March 31, 2019 and December 31, 2019, DBUB Pte owed CEO principal and accrued interest of $1.95 million and $2.57
million, respectively.
On
January 25, 2018, Huantai entered a loan agreement with the Company’s CEO for the amount of RMB 700,000 ($0.10 million)
with maturity on December 31, 2018. The monthly interest rate is 2%. The borrow may choose to make the repayment anytime without
prepayment penalty. The loan agreement is orally extended at maturity and become payable upon demand. As of March 31, 2019 and
December 31, 2019, Huantai owed CEO principal and accrued interest of $0.12 million and $0.12 million, respectively.
On
July 2, 2018, Huantai entered a loan agreement with the Company’s officer for the amount of RMB 5.00 million ($0.74 million
) with maturity on December 31, 2018. The monthly interest rate is 2%. The borrow may choose to make the repayment anytime without
prepayment penalty. The loan agreement is orally extended at maturity and become payable upon demand. As of March 31, 2019 and
December 31, 2019, Huantai owed this officer principal and accrued interest of $0.53 million and $0.42 million, respectively.
Note
8 -
COMMON STOCK
On
March 18, 2016, the Company issued warrants to purchase 190,532 shares of common stock at $0.75 per share as part of a private
placement of 190,532 units with each unit consisting of one share of common stock and a three-year warrant to purchase one share
of common stock. The Company determined that the fair value of these warrants was $206,917 based on the following assumptions:
Term
|
|
3 years
|
Expected volatility
|
|
|
178
|
%
|
Risk – free interest rate
|
|
|
1.0
|
%
|
Dividend yield
|
|
|
0
|
%
|
Weighted-average grant date fair value
|
|
$
|
1.086
|
|
The
warrants were expired on March 17, 2019, there is no any outstanding warrants and options at March 31, 2019.
Note
9 -
INCOME TAXES
The
parent company is subject to the U.S. federal income tax at 21% in three months ended March 31, 2019 and 2018. The parent company
does not conduct any operations and only incurs expenses, such as legal fees, accounting fees, investor relations expenses and
filing fees, relating to the Company’s status as a reporting company under the U.S. securities laws. DB-Link Ltd is
not subject to U.S. or PRC income tax and is not subject to income tax in the British Virgin Islands.
In
three months ended March 31, 2019 and 2018, the U.S. parent company incurred a net operating loss of $41,681 and $59,541. As a
result, $8,753 and $12,504 of deferred tax assets and the same amount of valuation allowance were recorded to offset deferred
tax assets in three months ended March 31, 2019 and 2018.
The
Company’s PRC subsidiary Huantai was subject to the PRC income tax at a rate of 25%. Singapore subsidiary DBUB Pte was subject
to an income tax rate of 17%.
The
components of deferred income tax assets and liabilities as of March 31, 2019 and December 31, 2018 are as follows:
|
|
2019
|
|
2018
|
Deferred
tax assets:
|
|
|
|
|
|
|
|
|
U.S.
net operating losses
|
|
$
|
71,920
|
|
|
$
|
63,167
|
|
PRC
operation
|
|
|
105,856
|
|
|
|
69,593
|
|
Singapore
operation
|
|
|
128,517
|
|
|
|
89,133
|
|
Discontinued
operation
|
|
|
—
|
|
|
|
37,753
|
|
Total
deferred tax assets
|
|
|
306,293
|
|
|
|
259,646
|
|
Less
valuation allowance
|
|
|
(306,293
|
)
|
|
|
(259,646
|
)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Reconciliation
of the differences between the statutory U.S. Federal income tax rate and the effective rate is as follows for the three months
ended March 31, 2019 and 2018.
|
|
2019
|
|
2018
|
Tax benefit
at US Statutory Rate
|
|
|
(21.0
|
)%
|
|
|
(21.0
|
)%
|
Tax rate difference
|
|
|
0.8
|
%
|
|
|
(2.9
|
)%
|
Valuation
allowance
|
|
|
20.2
|
%
|
|
|
23.9
|
%
|
Effective
rate
|
|
|
—
|
%
|
|
|
—
|
%
|
Note
10 –
DISCONTINUED OPERATIONS
The
Company’s former business was the distribution of imported products, including digital products, baby products, health nutrition
and frozen food through its online store, applications on mobile devices and also in physical stores. The Company had sustained
continuing losses in this business and did not believe it will be able to operate that business profitably. As a result, the Company
transferred the equity in Capital to its former chief executive officer in May 2018. The Company’s former business is treated
as a discontinued operation.
As
of December 31, 2018, the Company had no assets and liabilities associated with the discontinued operations. As a result of the
sale of Capital to former chief executive officer, the Company recognized a gain of $4,077,267 from the disposition of Capital
and its affiliates stock in the year ended December 31, 2018. This amount consists of a $2,456,389 gain from sale of the Company’s
equity in Capital and its affiliates and $1,620,878 reflecting the principal of loans by Capital on the date of the transfer,
which, as a result of the transfer of the equity in Capital, are no longer obligations of the Company. The obligations were liabilities
of Capital with no recourse to the Company.