The following management's discussion and analysis should be read in conjunction
with the historical financial statements and the related notes thereto contained
in this Quarterly Report. The discussion highlights the Company's results of
operations and the principal factors that have affected the Company's financial
condition, as well as its liquidity and capital resources for the periods
described, and provides information that management believes is relevant for an
assessment and understanding of the statements of financial condition and
results of operations presented herein. The following discussion and analysis
are based on the Company's unaudited financial statements contained in this
Quarterly Report, which we have prepared in accordance with United States
generally accepted accounting principles. You should read this discussion and
analysis together with such financial statements and the related notes thereto.
Overview
We were incorporated under the laws of the State of Nevada on May 6, 2014 under
the name Costo, Inc. to engage in the business of distributing automobile parts
and components necessary for the maintenance and repair of automobiles and
specialty equipment, including construction and road machinery, principally in
China, Europe and certain Commonwealth of Independent States countries. We
changed our name to Union Bridge Holdings Limited on May 23, 2016 in connection
with our expanded business plan under which we determined to expand operations
into the health care industry. We never achieved any revenues from our
automobile and specialty equipment business and during the fourth quarter of
2017 we determined to discontinue that area of business.
On September 24, 2019, we entered into a Stock Purchase Agreement (the "Purchase
Agreement"), with shareholders of Conperin Group Inc., a British Virgin Islands
company, who together owned shares constituting 100% of the issued and
outstanding ordinary shares of Conperin Group Inc. Pursuant to the terms of the
Purchase Agreement, the shareholders of Conperin Group Inc. transferred to us
all of their shares of Conperin Group Inc. in exchange for the issuance of
187,546,887 shares of our common stock (the "Stock Purchase"). As a result of
the Stock Purchase, we are now a holding company, is engaged in providing
technology in digital media industry, including developing a branded social
network and e-commerce app platform aiming to promote a high quality of life for
families and seniors by using artificial intelligence, blockchain and cognitive
e-commerce technology in China, Hong Kong and Asia Pacific. As a result of the
consummation of the Stock Purchase, we are no longer a shell company as that
term is defined in Rule 12b-2 of the Securities Exchange Act of 1934, as
amended.
We develop and operate CircleYY, a mobile-based social networking and premium
e-commerce app and website platform that will also use impactful editorial
content to promote a balanced quality of life for families and seniors aged 50
and above by understanding their behavior, tastes and needs. The platform
enables users around the world to share family stories, build meaningful
interactions between 50+ users and their family members, discover and buy
fashion, beauty and other daily accessories products. We connect people and
facilitate human interactions based on cities, interests and a variety of
activities including pictures and short videos.
Our CircleYY mobile application can be downloaded and used free of charge, and
we will generate our revenues from the various services we offer on our
platforms, dedicated to a 50+ client base and their families: (i) collaborations
with brands and users on the creation of premium content, (ii) the sale of
advertising on our social media platform, and (iii) the sale of third-party
branded items, mainly fashion, beauty, daily accessories and services on our
e-commerce platform.
As a global platform, CircleYY is expected to target a global audience with
content designed for universal appeal amongst family members, notably 50+, along
with a local focus for marketing campaigns. The initial opening market is
intended to be Hong Kong SAR, followed by similar markets in the Asia-Pacific
area and subsequently Europe and North America.
On September 27, 2019, our wholly-owned subsidiary Conperin Group Inc.
established Circle YY International Inc., a limited company incorporated in the
British Virgin Islands ("Circle International"), to engage in new business when
any suitable business opportunity arises. As of today, Circle International has
no business activities yet.
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On November 11, 2019, our subsidiary Circle YY Technologies Hong Kong Limited,
which operates our CircleYY platforms, launched its unique ecosystem technology
covering social networking, content and e-commerce. Our CircleYY website
platform had 63 registered members as of June 30, 2020.
Recent Development
In response to the coronavirus (COVID-19) pandemic situation, since January
2020, the Company has taken several actions to protect its employees, including
asking employees to work from home, establishing split working schedules and
restricting travel business travel. On March 11, 2020, the World Health
Organization (WHO) officially declare COVID-19 a pandemic, pointing to the cases
of COVID-19 illness in over 110 countries and territories around the world and
the sustained risk of further global spread. Since March 19, 2020, the other
floor of the office premises of the Company has a confirmed infection case of
COVID-19 and the infected floor was temporary closed for immediate special
cleaning and disinfecting actions by the building management. Given the dynamic
nature of these circumstances, the duration and intensity of the impact of the
COVID-19 and resulting disruption to the Company's operations cannot be
reasonably estimated at this time. While not yet quantifiable, the Company
believes this situation had an adverse impact on its operating results for this
fiscal quarter and continues to assess the financial impact for the remainder of
the year.
RESULTS OF OPERATIONS
We are a technology company have incurred recurring losses to date. Our
financial statements have been prepared assuming that we will continue as a
going concern and, accordingly, do not include adjustments relating to the
recoverability and realization of assets and classification of liabilities that
might be necessary should we be unable to continue in operation. We expect we
will require additional capital to meet our long term operating requirements. We
expect to raise additional capital through, among other things, the sale of
equity or debt securities.
The following comparative analysis on results of operations was based on the
comparative financial statements, footnotes and related information for the
three and six months ended June 30, 2020 and 2019. This analysis should be read
in conjunction with the financial statements and the notes to those statements
that are included elsewhere in this report.
Three Month Period Ended June 30, 2020 Compared to the Three Month Period Ended
June 30, 2019
For the Three Months Ended
June 30,
2020 2019 Change %
Revenues - related party $ - $ 21,760 $ (21,760 ) (100%)
Revenues - unrelated party 52,520 - 52,520 100 %
Cost of revenue (46,520 ) (16,000 ) (30,520 ) 191 %
Gross Profit 6,001 5,760 241 4 %
General and administrative
expenses (143,607 ) (27,381 ) (116,226 ) 424 %
Professional fees (26,838 ) (41,308 ) 14,470 (35 )%
Interest income - 17 (17 ) (100 )%
Net loss $ (164,445 ) $ (62,912 ) $ (101,533 ) 161 %
Revenue
For the three months ended June 30, 2020, we generated revenue of $52,520 from
our sales of fashion and wellness products and surgical masks via our e-commerce
platform compared with $21,760 for the same period in 2019 from computer
consulting services provided to a client. The increase was mainly attributed to
greater amount of sales of products compared with the computer consulting
services provided.
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Cost of Revenue
For the three months ended June 30, 2020, we have cost of revenue of $46,520,
compared with $16,000 for the same period in 2019. The increase was mainly
attributed to greater purchase cost of products for sales compared with the cost
of providing computer consulting services.
Operating Expenses
Total operating expenses for the three months ended June 30, 2020 were $170,445,
an increase of $101,756, compared to $68,689 for the same period in 2019. The
increase was primarily due to the increase in salaries.
Net Loss
The net loss for the three months ended June 30, 2020 was $164,445, an increase
of $101,533, compared to $62,912 for the same period of 2019. The increase was
primarily the result of the increase in operating expenses.
Six Month Period Ended June 30, 2020 Compared to the Six Month Period Ended June
30, 2019
For the Six Months Ended
June 30,
2020 2019 Change %
Revenues - related party $ - $ 43,419 $ (43,419 ) (100%)
Revenues - unrelated party 95,885 - 95,885 100 %
Cost of revenue (68,307 ) (31,938 ) (36,369 ) 114 %
Gross Profit 27,579 11,481 16,098 140 %
General and administrative
expenses (400,543 ) (69,470 ) (331,073 ) 477 %
Professional fees (57,755 ) (60,478 ) 2,723 (5 )%
Interest income - 32 (32 ) (100 )%
Net loss $ (430,719 ) $ (118,435 ) $ (312,284 ) 264 %
Revenue
For the six months ended June 30, 2020, we generated revenue of $95,885 from our
sales of fashion and wellness products and surgical masks via our e-commerce
platform compared with $43,419 for the same period in 2019 from computer
consulting services provided to a client. The increase was mainly attributed to
greater amount of sales of products compared with the computer consulting
services provided.
Cost of Revenue
For the six months ended June 30, 2020, we have cost of revenue of $68,307,
compared with $31,938 for the same period in 2019. The increase was mainly
attributed to greater purchase cost of products for sales compared with the cost
of providing computer consulting services.
Operating Expenses
Total operating expenses for the six months ended June 30, 2020 were $458,298,
an increase of $328,350, compared to the six months ended June 30, 2019 when
total operating expenses were $129,948. The increase was primarily due to the
increase in salaries.
Net Loss
The net loss for the six months ended June 30, 2020 was $430,719, an increase of
$312,284, compared to the six months ended June 30, 2019 when the net loss was
$118,435. The increase was primarily the result of the increase in operating
expenses.
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Liquidity and Capital Resources
June 30, December 31,
2020 2019 Change %
Cash $ 42,153 $ 22,339 $ 19,814 89 %
Total assets $ 361,881 $ 188,166 $ 173,715 92 %
Total liabilities $ 2,086,897 $ 1,482,463 $ 604,434 41 %
Stockholders' equity $ (1,725,016 ) $ (1,294,297 ) $ (430,719 ) 33 %
June 30, December 31,
2020 2019 Change %
Current assets $ 361,881 $ 188,166 $ 173,715 92 %
Current liabilities $ 2,086,897 $ 1,482,463 $ 604,434 41 %
Working capital deficiency $ (1,725,016 ) $ (1,294,297 ) $ (430,720 ) 33 %
Liquidity is the ability of an enterprise to generate adequate amounts of cash
to meet its needs for cash requirements. As of June 30, 2020, we had a working
capital deficit of $1,725,016, an increase of $430,720 from our working capital
deficit of $1,294,297 at December 31, 2019. The increase in the deficit is
primarily a result of an increase in accounts payable and accrued liabilities
and due to related parties, partially offset by an increase in cash and cash
equivalent, accounts receivable, prepaid expenses and deposits and inventories.
As of June 30, 2020, our total assets were $361,881 compared to $188,166 in
total assets at December 31, 2019. Total assets as of June 30, 2020 were
comprised of $42,153 in cash and cash equivalents, $38,462 in accounts
receivable, $153,061 in prepaid expenses and deposits and $128,205 in
inventories, while as at December 31, 2019 total assets were comprised $22,339
in cash, $135,112 in prepaid expenses and deposits and $30,715 in inventories.
As of June 30, 2020, our current liabilities were $2,086,897 comprised of
$1,738,621 due to related parties and $348,276 for accounts payable and accrued
liabilities. As of December 31, 2019, our current liabilities were $1,482,463
comprised of $1,187,828 due to related parties and $294,635 in accounts payable
and accrued liabilities.
For the Six Months Ended
June 30,
2020 2019 Change %
Cash used in operating
activities $ (530,979 ) $ (131,310 ) $ (399,669 ) 304 %
Cash provided by financing
activities 550,793 79,439 471,354 593 %
Effects on changes in foreign (100 )%
exchange rate - 884 (884 )
Net change in cash and cash (139 )%
equivalents $ 19,814 $ (50,987 ) $ 70,801
Cash Flows Used in Operating Activities
Net cash used in operating activities for the six month period ended June 30,
2020 was $530,979, compared to $131,310 for the six month period ended June 30,
2019. The increase of $399,669 was primarily a result of an increase in net loss
and accounts receiable, prepaid expenses and deposits and inventories, partially
offset by the increase in accounts payable and accrued liabilities, during the
period.
Cash Flows From Financing Activities
We have financed our operations primarily with advances from shareholders. Net
cash provided by financing activities was $550,793 during the six month period
ended June 30, 2020 compared to $79,439 in the six month period ended June 30,
2019. The increase in cash provided by financing activities was primarily a
result of an increase in advances from shareholders.
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Plan of Operation and Funding
We expect that working capital requirements will continue to be funded through
further issuances of our securities and loans from our executive officers and
principal shareholders, including Joseph Ho. Our working capital requirements
are expected to increase in line with the growth of our business.
Existing working capital, further advances and debt instruments, and anticipated
cash flow are not expected to be adequate to fund our operations and potential
acquisitions over the next twelve months. We have no lines of credit or other
bank financing arrangements. Generally, we have financed operations to date
through the proceeds of the private placement of equity and debt instruments. In
connection with our business plan, management anticipates additional increases
in operating expenses and capital expenditures relating to: (i) the acquisition
of businesses in the health-related industry; (ii) acquisition of inventory;
(iii) developmental expenses associated with a start-up business; and (iv)
marketing expenses. We intend to finance these expenses with further issuances
of equity securities and debt instruments. Thereafter, we expect we will need to
raise additional capital and generate revenues to meet long-term operating
requirements. Additional issuances of equity or convertible debt securities will
result in dilution to our current shareholders. Further, such securities might
have rights, preferences or privileges senior to our common stock. Additional
financing may not be available upon acceptable terms, or at all. If adequate
funds are not available or are not available on acceptable terms, we may not be
able to take advantage of prospective new business endeavors or opportunities,
which could significantly and materially restrict our business operations.
Material Commitments
On March 23, 2018, our subsidiary, Windsor Honour Limited ("WHL") entered into a
Binding Heads of Agreement with the owner of a land parcel for a senior care
facility to be established in Chang Mai, Thailand. The parties will negotiate in
good faith toward definitive agreements regarding the project. WHL would lease
the land and be the developer of the project and would own the buildings on the
site. WHL would have full control of the design and supervision of the
construction of the project, as well as daily operations and management of the
project. The land owner would be responsible for obtaining necessary
construction, operation and other permits for the project and would provide
necessary liaison with government officials. Total investment in the project for
development and construction is estimated to be approximately 200 million Thai
Baht (approximately US$6.4 million at current exchange rates), for which WHL
would be responsible to obtain financing. WHL would also be responsible for
arranging financing of operating costs until they can be funded from operations.
The project would lease the land for 90 years with automatic renewals, each for
30 years. The total rent for the first 90 years would be 10 million Thai Baht
(approximately US$320,000 at current exchange rates). In addition to the rent,
WHL may consider a discretionary bonus to the land owner (with details to be
agreed in the definitive agreements).
Upon signing the definitive agreement, WHL will pay 2 million Thai Baht
(approximately US$64,300 at current exchange rates) as a deposit to the land
owner within 90 days, which will be refundable if the development plan for the
land as a senior nursing home facility has not been approved by the competent
government authority within one year, or if before that date such authority has
definitively denied the application for the development plan upon the request of
WHL. Otherwise, the deposit will be applied to the rent for the land.
No assurance can be given, however, that the Chang Mai, Thailand senior facility
project will be successfully developed and operated because, (i) WHL may not
successfully negotiate definitive agreements for the project, (ii) required
permits may not be obtained, and (iii) required financing may not be obtainable.
Inflation
In the opinion of management, inflation has not and will not have a material
effect on our operations in the immediate future. Management will continue to
monitor inflation and evaluate the possible future effects of inflation on our
business and operations.
Off-Balance Sheet Arrangements
As of the date of this Quarterly Report, we do not have any off-balance sheet
arrangements that have or are reasonably likely to have a current or future
effect on our financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital
resources that are material to investors.
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Going Concern
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern, which contemplates continuity of
operations, realization of assets, and liquidation of liabilities in the normal
course of business.
As reflected in the accompanying condensed consolidated financial statements,
the Company had an accumulated deficit at June 30, 2020 of $2,063,705, a net
loss for the six months ended June 30, 2020 of $430,719 and net cash used in
operating activities for the six months ended June 30, 2020 of $530,979. These
conditions raise substantial doubt about our ability to continue as a going
concern.
The Company is attempting to produce sufficient revenue; however, the Company's
cash position is not sufficient to support its daily operations. While the
Company believes in the viability of its strategy to produce sufficient revenue
and in its ability to raise additional funds, there can be no assurances that
the Company will accomplish its goals. The ability of the Company to continue as
a going concern is dependent upon its ability to further implement its business
plan and generate sufficient revenues and in its ability to raise additional
funds.
The condensed consolidated financial statements do not include any adjustments
related to the recoverability and classification of recorded asset amounts or
the amounts and classification of liabilities that might be necessary should the
Company be unable to continue as a going concern.
The independent registered public accounting firm's opinion accompanying our
December 31, 2019 consolidated financial statements contained an explanatory
paragraph expressing substantial doubt about our ability to continue as a going
concern. The consolidated financial statements have been prepared "assuming that
we will continue as a going concern," which contemplates that we will realize
our assets and satisfy our liabilities and commitments in the ordinary course of
business.
The Company's controlling shareholder and Chief Executive Officer, Joseph Ho has
provided a personal guarantee of loan in writing that he would provide to the
Company of up to $1.0 million for investment and working capital purposes. The
Company believes this guarantee should be considered a material event in
executing its overall plan described in the foregoing.
Critical Accounting Policies
We have identified the following policies below as critical to our business and
results of operations. Our reported results are impacted by the application of
the following accounting policies, certain of which require management to make
subjective or complex judgments. These judgments involve making estimates about
the effect of matters that are inherently uncertain and may significantly impact
quarterly or annual results of operations. For all of these policies, management
cautions that future events rarely develop exactly as expected, and the best
estimates routinely require adjustment. Specific risks associated with these
critical accounting policies are described in the following paragraphs..
Use of Estimates
The preparation of financial statements in conformity with U.S. 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 as well as the reported amount of revenues
and expenses during the reporting period. Actual results could differ from these
estimates.
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