hot_10k
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☑ ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2019
or
□ TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from ____________________to
____________________
333-194748
Commission file number
HotApp Blockchain Inc.
(Exact name of registrant as specified in its charter)
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Delaware
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45-4742558
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(State or other jurisdiction of incorporation or
organization)
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(I.R.S. Employer Identification No.)
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4800 Montgomery Lane, Suite 210
Bethesda MD
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20814
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(Address of principal executive offices)
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(Zip Code)
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301-971-3940
Registrant’s telephone number, including area
code
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
None
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☑
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Exchange
Act.
Yes ☐ No
☑
Indicate by check mark whether the registrant (1) has filed all
reports required by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files).
Yes ☑ No ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and
“smaller reporting company” in Rule 12b-2 if the
Exchange Act.
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Large accelerated
filer
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☐
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Accelerated
filer
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☐
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Non-accelerated
filer
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☐
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Smaller reporting
company
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☑
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(Do not check if a
smaller reporting company)
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Emerging growth
company
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☐
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act. ☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes □
No ☑
State the aggregate market value of voting and non-voting common
equity held by non-affiliates computer by reference to the price at
which the common equity was last sold, or the average bid and asked
price of such common equity, as of the last business day of the
registrant’s most recently completed second fiscal
quarter. The Company’s common stock did not trade
during the year ended December 31, 2019. As of June 30, 2019,
606,500 shares were held by non-affiliates. The most recent known
price for private sales of the registrant’s securities was
$.50 per share, reflecting a total value for the outstanding
non-affiliate shares of our common stock of
$303,250.
Indicate the number of shares outstanding of each the
registrant’s classes of common stock, as of the latest
practicable date. As of March 30, 2020, there were 506,898,576
shares outstanding of the registrant’s common stock $0.001
par value.
DOCUMENTS INCORPORATED BY REFERENCE
-None
Throughout this Report on Form 10-K, the terms
“Company,” “we,” “us” and
“our” refer to HotApp Blockchain Inc., and “our
board of directors” refers to the board of directors of
HotApp Blockchain Inc.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements that involve a
number of risks and uncertainties. Although our forward-looking
statements reflect the good faith judgment of our management, these
statements can be based only on facts and factors of which we are
currently aware. Consequently, forward-looking statements are
inherently subject to risks and uncertainties. Actual results and
outcomes may differ materially from results and outcomes discussed
in the forward-looking statements.
Forward-looking statements can be identified by the use of
forward-looking words such as “may,”
“will,” “should,” “anticipate,”
“believe,” “expect,” “plan,”
“future,” “intend,” “could,”
“estimate,” “predict,” “hope,”
“potential,” “continue,” or the negative of
these terms or other similar expressions. These statements include,
but are not limited to, statements under the captions “Risk
Factors,” “Management’s Discussion and Analysis
or Plan of Operation” and “Description of
Business,” as well as other sections in this report. Such
forward-looking statements are based on our management’s
current plans and expectations and are subject to risks,
uncertainties and changes in plans that may cause actual results to
differ materially from those anticipated in the forward-looking
statements. You should be aware that, as a result of any of these
factors materializing, the trading price of our common stock may
decline. These factors include, but are not limited to, the
following:
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the
availability and adequacy of capital to support and grow our
business;
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economic,
competitive, business and other conditions in our local and
regional markets;
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actions
taken or not taken by others, including competitors, as well as
legislative, regulatory,
judicial
and other governmental authorities;
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competition
in our industry;
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changes
in our business and growth strategy, capital improvements or
development plans;
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the
availability of additional capital to support development;
and
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other
factors discussed elsewhere in this annual report.
The cautionary statements made in this annual report are intended
to be applicable to all related forward-looking statements wherever
they may appear in this report.
We urge you not to place undue reliance on these forward-looking
statements, which speak only as of the date of this report. We
undertake no obligation to publicly update any forward
looking-statements, whether as a result of new information, future
events or otherwise.
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TABLE
OF CONTENTS
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PART I
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PART
II
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PART
III
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PART
IV
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PART I
Business Description
HotApp Blockchain Inc., formerly HotApp International, Inc. (the
“Company” or “Group”) was incorporated in
the State of Delaware on March 7, 2012 and established a fiscal
year end of December 31. The Company’s initial business plan
was to be a financial acquisition intermediary which would serve
buyers and sellers for companies that are in highly fragmented
industries. Our Board determined it was in the best interest of the
Company to expand our business plan. On October 15, 2014, through a
sale and purchase agreement, the Company acquired all the issued
and outstanding stock of HotApps International Pte Ltd
(“HIP”) from Singapore eDevelopment Limited
(“SeD”). SeD is presently our largest stockholder. HIP
owned certain intellectual property relating to instant messaging
for portable devices (referred to herein as the “HotApp
Application”).
The HotApp Application is a cross-platform mobile application that
incorporates instant messaging and ecommerce. This application can
be used on any mobile platform (i.e. IOS Online or Android). The
HotApp Application offered messaging and calling services for
HotApp Application users (text, photo, audio); however, the messaging and calling services we
offered were terminated in 2017.
On December 29, 2017, our Board approved a change of the
Company’s name from “HotApp International, Inc.”
to “HotApp Blockchain Inc.” to reflect the
Board’s determination that it was in the best interest of the
Company to expand its activities to include the development and
commercialization of blockchain-related technologies. One area we
are presently exploring is providing technology consulting for
security token offerings (“STO”). Such services, which
have not yet commenced commercially, would include STO white paper
development, technology design and web development. We intend to
outsource certain aspects of these projects to potential partners
we have identified. We have no plans to launch our own token
offering, but rather may develop technologies that could facilitate
such offerings by other companies.
We believe that the increasing acceptance of distributed ledger
technologies by potential customers will benefit us. The growth of
network marketing throughout the world would impact our
technologies that target that industry. In this rapidly evolving
field, however, technology is advancing quickly and it is possible
that our competitors could create products that gain market
acceptance before our products.
In 2018, one of our main developments was a broadening of our scope
of planned operations into a digital transformation technology
business. As a digital transformation technology business, we are
committed to enabling enterprises we work with to engage in a
digital transformation by providing consulting, implementation and
development services with various technologies, including instant
messaging, blockchain, e-commerce, social media and payment
solutions. We continue to be involved in mobile application product
development and other businesses, providing information technology
services to end-users, service providers and other commercial users
through multiple platforms.
We are focused on serving business-to-business (B2B) needs in
e-commerce, collaboration and supply chains. We will help
enterprises and community users to transform their business model
with digital economy in a more effective manner. With our platform,
users can discover and build their own communities and create
valuable content. Enterprises can in turn enhance the user
experience with premium content, all of which are facilitated by
the transactions of every stakeholder via e-commerce.
Our technology platform consists of instant messaging systems,
social media, e-commerce and payment systems, network marketing
platforms and e-real estate. We are focused on business-to-business
solutions such as enterprise messaging and workflow. We have
successfully implemented several strategic platform developments
for clients, including a mobile front-end solution for network
marketing, a hotel e-commerce platform for Asia and a real estate
agent management platform in China. We have also enhanced our
technological capability from mobile application development to
include blockchain architectural design, allowing mobile-friendly
front-end solutions to integrate with software platforms. Our main
digital assets at the present time are our applications. Our
emphasis will be on developing solutions and providing
services.
In January 2017, we entered into a revenue-sharing agreement with
iGalen, a network marketing company selling health products (SeD,
our majority stockholder, is also a significant stockholder of
iGalen). Under the agreement, we customized a secure app for
iGalen’s communication and management system. The app enables
mobile friendly backend access for iGalen Inc. members, among other
functions. We are continuing to improve this secure app. In
particular, we intend to utilize blockchain supply logistics to
improve its functions (the original iGalen app did not utilize the
latest distributed ledger technology). Once the improvements to
this technology are completed, and initially utilized by iGalen, We
intend to then attempt to sell similar services to other companies
engaged in network marketing, as members of our management have a particular
experience offering services to that industry and we believe our
solutions are particularly suited to that industry’s needs.
This app can be modified to meet the specific needs of any network
marketing company. We believe that these technologies will, among
other benefits, make it easier for network marketing companies to
securely and effectively manage their systems of compensation. Our
current plan is to commence sales of this technology in
2020.
As of December 31, 2019, details of the Company’s
subsidiaries were as follows:
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Subsidiaries
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Date of Incorporation
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Place of Incorporation
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Percentage of Ownership
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1st Tier Subsidiary:
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HotApps International Pte Ltd (“HIP”)
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May 23, 2014
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Republic of Singapore
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100% by Company
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Crypto Exchange Inc.
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December 15, 2017
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State of Nevada, the United States of America
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100% by Company
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HWH World Inc.
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August 28, 2018
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State of Delaware, the United States of America
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100% by Company
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2nd Tier Subsidiaries:
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HWH World Pte. Ltd. (formerly known as Crypto Exchange Pte.
Ltd.)
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September 15, 2014
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Republic of Singapore
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100% owned by HIP
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HotApp International Limited*
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July 8, 2014
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Hong Kong (Special Administrative Region)
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100% owned by HIP
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* On March 25, 2015, HotApps International Pte Ltd
(“HIP”) acquired 100% of issued share capital in HotApp
International Limited.
Our Plan of Operations
We believe that we have significant opportunities to further
enhance the value we deliver to our users. We intend to pursue the
following strategy:
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continual
focus in business-to-business market;
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identify
strategic partnership opportunities in digital transformation for
enterprises
Achieved and Target Milestones
In 2019, we have achieved the following milestones:
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continuous
enhancement of the B2B platform;
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built
a scalable Multilevel Marketing Front End App through partnership
with iGalen
Over the next twelve months we plan to:
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continuous
business development effort to identify licensing and solution
integration opportunities on our platform
Our Business Model and User Monetization Plan
We plan to generate revenue through the following:
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white
label of network marketing solutions;
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integration
services for enterprises and
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blockchain
related consulting services
Our Competitiveness in the Businesses in Which we
Operate
With the focus on being a service provider, our competitiveness is
strengthened by:
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strengthening
the methodology for project management and development through
continuous improvement through project engagement;
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understanding
the industry’s need, such as network marketing, hospitality,
supply chain and engineering services;
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sharpening
technology focus and continuous moving up to new area such as
blockchain; and
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operating
within effective overhead to reduce operational risk.
Our Challenges
Our ability to execute our growth strategies is subject to risks
and uncertainties, including those relating to our ability
to:
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raise
additional funding for the continuous development of our technology
and project and to pursue our business strategy;
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maintain the
trusted status of our ecosystem;
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grow our user
base, enhance user engagement and create value services for
communities and enterprises;
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market and
profit from our service offerings, monetize our user base and
achieve profitability;
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keep up with
technological developments and evolving user
expectations;
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effectively
manage our growth and control our costs and expenses;
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address
privacy and security concerns relating to our services and the use
of user information;
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identify a
management team with owner mentality and proven track record;
and
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changing
market behavior for those using competitive platform.
Please see “Risk Factors” and other information
included in this report for a detailed discussion on the above and
other challenges and risks.
Our Key Competitive Strengths
We believe building the following will provide us with some key
competitive strengthens:
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understanding
local market needs - establish brand presence for local enterprises
and communities based on the established HotApp
Platform;
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thin and lean
organization structure - to effectively adapt to the growth and
shrink of operation based on market and sales pipelines;
and
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HotApp
ecosystem - to work closely with technology developers to further
enhance the HotApp ecosystem to better fit local
needs.
Our Technology
Based on our core HotApp’s infrastructure engine, we are
building up additional functions on top of this stable and scalable
infrastructure. The system architecture is designed in modular form
so that we continue to add new applications modules while we are
growing our customer base. In addition, we shall also be able to
incorporate third party application module effectively to continue
building localized HotApp services.
Key aspects or strengths of our technology include:
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scalable
infrastructure;
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modular
design to add on and modify individual HotApp
offering;
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quick
adaptation to third party services, such as payment and loyalty
program; and
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dedicated
to continuous improvement of user experience in local
context.
Regulatory Matters
We are subject to the laws and regulations of those jurisdictions
in which we plan to conduct our services, primarily the United
States and certain countries in Asia, which are generally
applicable to business operations, such as business licensing
requirements, income taxes and payroll taxes. In general, the
development and operation of our business is not subject to special
regulatory and/or supervisory requirements. Please see
“Risk Factors” and other information included in this
report for further discussion on the above matters.
Employees and Employment Agreements
Since the completion of the sale of all of the issued and
outstanding shares of HotApps Information Technology Co. Ltd. (also
known as Guangzhou HotApps Technology Ltd.) on January 14, 2019, we
have not paid any employees, and our largest stockholder, SeD, has
provided staff without charge to our Company. We intend to
outsource many functions of our business for the immediate
future.
Insurance
We do not maintain property insurance, business interruption
insurance or general third-party liability insurance, nor do we
maintain product liability or key-man insurance.
An investment in our common stock involves a high degree of risk.
Investors should carefully consider the following factors and other
information before deciding to invest in our Company. If any of the
following risks occur, our business, financial condition, results
of operations and prospects for growth would likely suffer. As a
result, you could lose all or part of your investment.
Our business is subject to numerous risk factors, including the
following:
RISKS RELATED TO OUR FINANCIAL CONDITION
There is substantial doubt about the Company’s ability to
continue as a going concern.
The report of Rosenberg Rich Baker Berman & Company, P.A., our
independent registered public accounting firm, with respect to our
financial statements at December 31, 2019 contains an explanatory
paragraph as to our potential ability to continue as a going
concern. As a result, this may adversely affect our
ability to obtain new financing on reasonable terms or at all.
Investors may be unwilling to invest in a company that will not
have the funds necessary to continue to deploy its business
strategies.
Failure to raise additional capital to fund future operations could
harm our business and results of operations.
As reflected on our audited consolidated financial statements for
the year ended December 31, 2019 contained herein, we have incurred
net losses, and have a working capital deficit of $1,272,422. We
will require additional financing in order to maintain our
corporate existence and to implement our business plans and
strategy. The timing and amount of our capital requirements will
depend on a number of factors, including our operational results,
the need for other expenditures, and competitive pressures. If
additional funds are raised through the issuance of equity or
convertible debt securities, the percentage ownership of our
then-existing stockholders will likely be reduced significantly. We
cannot make assurances that any financing will be available on
terms favorable to us or at all. If adequate funds are not
available on acceptable terms, our ability to fund our business
strategy, ongoing operations, take advantage of unanticipated
opportunities, and in turn our business, financial condition and
results of operations will be significantly and adversely
affected.
RISKS RELATED TO OUR BUSINESS
Management has
identified a material weakness in the design and effectiveness of
our internal controls, which, if not remediated could
affect the accuracy and timeliness of our financial reporting and
result in misstatements in our financial
statements.
In connection with the preparation of our Report on Form 10-K, an
evaluation was carried out by management, with the participation of
our Acting Chief Executive Officer and Chief Financial Officer, of
the effectiveness of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934 (the “Exchange Act”) as of
December 31, 2019. Disclosure controls and procedures are designed
to ensure that information required to be disclosed in reports
filed or submitted under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified, and that
such information is accumulated and communicated to management,
including the Acting Chief Executive Officer and Chief Financial
Officer, to allow timely decisions regarding required
disclosure.
During evaluation of disclosure controls and procedures as of
December 31, 2019 conducted as part of our annual audit and
preparation of our annual financial statements, management
conducted an evaluation of the effectiveness of the design and
operations of our disclosure controls and procedures and concluded
that our disclosure controls and procedures were not effective.
Management determined that at December 31, 2019, we had a material
weakness that relates to the relatively small number of staff who
have bookkeeping and accounting functions (this staff is provided
by SeD, our largest shareholder, at no cost to us). This limited
number of staff prevents us from segregating duties within our
internal control system.
This material weakness, which remained unremediated by the company
as of December 31, 2019, could result in a misstatement to the
accounts and disclosures that would result in a material
misstatement to our annual or interim consolidated financial
statements that would not be prevented or detected. If we do not
remediate the material weakness or if other material weaknesses are
identified in the future, we may be unable to report our financial
results accurately or to report them on a timely basis, which could
result in the loss of investor confidence and have a material
adverse effect on our stock price as well as our ability to access
capital and lending markets.
Our Company cannot predict if it can achieve profitable
operations.
The Company has only had limited operations to date and requires
significant additional financing to reach its projected milestones,
which include further product development, product marketing and
general overhead expenditures. It may be difficult for the Company
to attract funding necessary to reach its projected milestones.
Moreover, even if it achieves its projected milestones, the Company
cannot predict whether it will reach profitable
operations.
The coronavirus or other adverse public health developments could
have a material and adverse effect on our business operations,
financial condition and results of operations.
In December 2019, a novel strain of coronavirus was first
identified in Wuhan, Hubei Province, China, and has since spread to
a number of other countries, including the United States. The
coronavirus’ far-reaching impact on the global economy could
negatively affect various aspects of our business. In addition, the
coronavirus could directly impact the ability of our staff and
service providers to continue to work, and our ability to conduct
our operations in a prompt and efficient manner. Accordingly, the
coronavirus may cause the completion of important stages in our
projects to be delayed. The extent to which the coronavirus may
impact our business will depend on future developments, which are
highly uncertain and cannot be predicted.
Our business is highly competitive. Competition presents an ongoing
threat to the success of our business.
We face significant competition in every aspect of our business,
including from companies that provide tools to facilitate the
sharing of information, companies that enable marketers to display
advertising and companies that provide development platforms for
applications developers. We compete with companies that offer
full-featured products that replicate the range of communications
and related capabilities we provide. We also compete with companies
that develop applications, particularly mobile applications, that
provide social or other communications functionality, such as
messaging, photo- and video-sharing and micro-blogging, and
companies that provide web- and mobile-based information and
entertainment products and services that are designed to engage
users and capture time spent online and on mobile devices. In
addition, we face competition from traditional, online, and mobile
businesses that provide media for marketers to reach their
audiences and/or develop tools and systems for managing and
optimizing advertising campaigns.
Most, if not all, of our current and potential competitors may have
significantly greater resources or better competitive positions in
certain product segments, geographic regions or user demographics
than we do. These factors may allow our competitors to respond more
effectively than us to new or emerging technologies and changes in
market conditions.
Our competitors may develop products, features, or services that
are similar to ours or that achieve greater acceptance, may
undertake more far-reaching and successful product development
efforts or marketing campaigns, or may adopt more aggressive
pricing policies. Certain competitors could use strong or dominant
positions in one or more markets to gain competitive advantage
against us in our target market or markets. As a result,
our competitors may acquire and engage users or generate revenue at
the expense of our own efforts, which may negatively affect our
business and financial results.
We believe that our ability to compete effectively depends upon
many factors both within and beyond our control,
including:
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the
popularity, usefulness, ease of use, performance, and reliability
of our products compared to our competitors' products, particularly
with respect to mobile products;
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the size and
composition of our user base;
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the
engagement of our users with our products and competing
products;
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the timing
and market acceptance of products, including developments and
enhancements to our or our competitors' products;
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our ability
to monetize our products;
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customer
service and support efforts;
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acquisitions
or consolidation within our industry, which may result in more
formidable competitors;
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our ability
to attract, retain, and motivate talented employees, particularly
software engineers, designers, and product managers;
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our ability
to cost-effectively manage and grow our operations;
and
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our
reputation and brand strength relative to those of our
competitors.
The regulatory situation regarding ICOs and STOs is dynamic, and
may experience changes that could impact our ability to provide
consulting and other services in this field.
ICOs and STOs are currently perceived by the public as vulnerable
to misrepresentation, fraud and manipulation. There is a strong
possibility that regulators will make policies to control the risks
associated with ICOs and STOs that might adversely impact our
ability to provide consulting and other services related to ICOs
and STOs.
We are a development stage company and we may never generate
significant revenues which could cause our business to
fail.
We are a development stage company and have generated limited
revenues as of the date of this Report. Since inception, the
Company has incurred net losses of $5,616,908 and has net working
capital deficit of $1,272,422 at December 31, 2019. We expect to
operate with net losses for the next financial year-ending December
31, 2020 or longer. We cannot predict the extent of these future
net losses, or when we may attain profitability, if at all. If we
are unable to generate significant revenue or attain profitability,
we will not be able to sustain operations and will have to curtail
significantly or cease operations.
We have a limited operating history that investors can use to
evaluate us, and the likelihood of our success must be considered
in light of the problems, expenses, difficulties, complications and
delays frequently encountered by a small developing
company.
We were incorporated in Delaware on March 7, 2012. We have no
significant financial resources and have recorded minimal revenues,
including no revenues in the year ended December 31, 2019. The
likelihood of our success must be considered in light of the
problems, expenses, difficulties, complications and delays
frequently encountered by a small developing company starting a new
business enterprise and the highly competitive environment in which
we will operate. Since we have a limited operating history, we
cannot assure you that our business will be profitable or that we
will ever generate sufficient revenues to meet our expenses and
support our anticipated activities.
If we do not successfully develop new products and services, our
business may be harmed.
Our business and operating results may be harmed if we fail to
expand our various product and service offerings (either through
internal product or capability development initiatives or through
partnerships and acquisitions) in such a way that achieves
widespread market acceptance or that generates significant revenue
and gross profits to offset our operating and other costs. We may
not successfully identify, develop and market new product and
service offerings in a timely manner. If we introduce new products
and services, they may not attain broad market acceptance or
contribute meaningfully to our revenue or profitability.
Competitive or technological developments may require us to make
substantial, unanticipated capital expenditures in new products and
technologies or in new strategic partnerships, and we may not have
sufficient resources to make these expenditures. Because the
markets for many of our products and services are subject to rapid
change, we may need to expand and/or evolve our product and service
offerings quickly. Delays and cost overruns could affect our
ability to respond to technological changes, evolving industry
standards, competitive developments or customer requirements and
harm our business and operating results.
The loss of one or more of our key personnel, or our failure to
attract and retain other highly qualified personnel in the future,
could harm our business.
We depend on the services and performance of our key personnel,
including Mr. Chan Heng Fai and Mr. Lum Kan Fai. The loss of key
personnel, including members of management, could disrupt our
operations and have an adverse effect on our business.
Each of Mr. Chan and Mr. Lum are engaged in other business
ventures, including other technology-related businesses. In order
to successfully implement our businesses plans, we will need to
recruit additional qualified personnel.
We may incur significant costs to be a public company to ensure
compliance with U.S. corporate governance and accounting
requirements, and we may not be able to absorb such
costs.
We may incur significant costs associated with our public company
reporting requirements, costs associated with corporate governance
requirements, including requirements under the Sarbanes-Oxley Act
of 2002 and other rules implemented by the Securities and Exchange
Commission. We expect these costs to equal at least $50,000 per
year, consisting of $10,000 in legal, $35,000 in audit and $5,000
for financial printing and transfer agent fees. We expect all of
these applicable rules and regulations to significantly increase
our legal and financial compliance costs and to make some
activities more time consuming and costly. We may not be able
to cover these costs from our operations’ revenue and may
need to raise or borrow additional funds. We also expect that
these applicable rules and regulations may make it more difficult
and more expensive for us to obtain director and officer liability
insurance and we may be required to accept reduced policy limits
and coverage or incur substantially higher costs to obtain the same
or similar coverage. As a result, it may be more difficult for
us to attract and retain qualified individuals to serve on our
board of directors or as executive officers. We are currently
evaluating and monitoring developments with respect to these newly
applicable rules, and we cannot predict or estimate the amount of
additional costs we may incur or the timing of such costs. In
addition, we may not be able to absorb these costs of being a
public company which will negatively affect our business
operations.
Singapore eDevelopment Limited owns a significant amount of the
outstanding common stock of the Company and could take actions
which other investors may deem as detrimental to the
Company.
Singapore eDevelopment Limited beneficially owns approximately
99.852% of the outstanding common stock of our Company as of the
date of this filing. Through this ownership, this stockholder has
the ability to substantially influence our board, our management,
and our policies and business operations. In addition, the
rights of the holders of our common stock will be subject to and
may be adversely affected by, the rights of holders of any
preferred stock that may be issued in the future. Because of
this majority ownership, SeD may cause the Company to engage in
business combinations without having to seeking other
stockholders’ approval.
Such concentration of ownership also may have the effect of
delaying or preventing a change in control, which may be to the
benefit of this one stockholder but not in the interest of the
other investors. Additionally, minority stockholders would not be
able to obtain the necessary stockholder vote to affect any change
in the course of our business. This concentration of control could
prevent minority stockholders from removing from our Board
directors who may be perceived as not performing at an appropriate
level.
We may face liability for information displayed on or accessible
via our website, and for other content and commerce-related
activities, which could cause us to suffer losses.
We could face claims for errors, defamation, negligence, copyright
or trademark infringement based on the nature and content of
information displayed on or accessible via our website, which could
adversely affect our financial condition. Even to the extent that
claims made against us do not result in liability, we may incur
substantial costs in investigating and defending such
claims.
Our insurance, if any, may not cover all potential claims to which
we might be exposed to or may not be adequate to indemnify us for
all liabilities that we may incur. Any imposition of liability that
is not covered by insurance or is in excess of insurance coverage
would cause us to suffer losses.
If our costs and expenses are greater than anticipated and we are
unable to raise additional working capital, we may be unable to
fully fund our operations and to otherwise execute our business
plan.
We do not currently have sufficient funds or any agreements for
additional funds, for us to continue our business for the next 12
months. Should our costs and expenses prove to be greater than we
currently anticipate, or should we change our current business plan
in a manner that will increase or accelerate our anticipated costs
and expenses, the depletion of our working capital would be
accelerated. To the extent it becomes necessary to raise additional
cash in the future as our current cash and working capital
resources are depleted, we will seek to raise it through the public
or private sale of debt or equity securities, funding from
joint-venture or strategic partners, debt financing or short-term
loans, or a combination of the foregoing. We may also seek to
satisfy indebtedness without any cash outlay through the private
issuance of debt or equity securities. We currently do not have any
binding commitments for, or readily available sources of,
additional financing. We cannot give you any assurance that we will
be able to secure the additional cash or working capital that we
may require to continue our operations.
If we require additional capital and even if we are able to raise
additional financing, we might not be able to obtain it on terms
that are not unduly expensive or burdensome to the Company or
disadvantageous to our existing stockholders.
If we require additional capital and even if we are able to raise
additional cash or working capital through the public or private
sale of debt or equity securities, funding from joint-venture or
strategic partners, debt financing or short-term loans, or the
satisfaction of indebtedness without any cash outlay through the
private issuance of debt or equity securities, the terms of such
transactions may be unduly expensive or burdensome to the Company
or disadvantageous to our existing stockholders. For example, we
may be forced to sell or issue our securities at significant
discounts to market, or pursuant to onerous terms and conditions,
including the issuance of preferred stock with disadvantageous
dividend, voting or veto, board membership, conversion, redemption
or liquidation provisions; the issuance of convertible debt with
disadvantageous interest rates and conversion features; the
issuance of warrants with cashless exercise features; the issuance
of securities with anti-dilution provisions; and the grant of
registration rights with significant penalties for the failure to
quickly register. If we raise debt financing, we may be required to
secure the financing with all of our business assets, which could
be sold or retained by the creditor should we default in our
payment obligations.
We may not timely and effectively scale and adapt our existing
technology and network infrastructure to ensure that our services
and solutions are accessible within an acceptable load time.
Additionally, other catastrophic occurrences beyond our control
could interfere with access to our services.
A key element to our potential growth is the ability of our users
(whom we define as anyone who downloads and uses the app) in all
geographies to access our services and solutions within acceptable
load times. We may, in the future, experience service disruptions,
outages and other performance problems due to a variety of factors,
including infrastructure changes, human or software errors, and
denial of service, fraud or security attacks. In some instances, we
may not be able to identify the cause or causes of these website
performance problems within an acceptable period of time. If our
services are unavailable when users attempt to access them as
quickly as they expect, users may seek other services to obtain the
information for which they are looking, and may not return to use
our services as often in the future, or at all. This would
negatively impact our ability to attract new users and increase
engagement of our existing users. We expect to continue to make
significant investments to maintain and improve mobile application
performance and to enable rapid releases of new features and
products. To the extent that we do not effectively address capacity
constraints, upgrade our systems as needed and continually develop
our technology and network architecture to accommodate actual and
anticipated changes in technology, our business and operating
results may be harmed.
Our systems are also vulnerable to damage or interruption from
catastrophic occurrences such as earthquakes, floods, fires, power
loss, telecommunication failures, terrorist attacks and other
similar events. Despite any precautions we may take, the occurrence
of a natural disaster or other unanticipated problems could result
in lengthy interruptions in our services.
We do not carry business interruption insurance sufficient to
compensate us for the potentially significant losses, including the
potential harm to the growth of our business that may result from
interruptions in our services as a result of system
failures.
If our security measures are compromised, or if our websites are
subject to attacks that degrade or deny the ability of members or
customers to access our solutions, or if our member data is
compromised, members and customers may curtail or stop to use our
solutions.
Our applications will involve the collection, processing, storage,
sharing, disclosure and usage of members’ and
customers’ information and communications, some of which may
be private. We are vulnerable to computer viruses, break-ins,
phishing attacks, attempts to overload our servers with
denial-of-service or other attacks and similar disruptions from
unauthorized use of our computer systems, any of which could lead
to interruptions, delays, or website shutdowns, causing loss of
critical data or the unauthorized disclosure or use of personally
identifiable or other confidential information. If we experience
compromises to our security that result in website performance or
availability problems, the complete shutdown of our websites, or
the loss or unauthorized disclosure of confidential information,
such as credit card information, our members or customers may be
harmed or lose trust and confidence in us, and decrease the use of
our website and services or stop using our services in their
entirety, and we would suffer reputational and financial
harm.
In addition, we could be subject to regulatory investigations and
litigation in connection with a security breach or related issues,
and we could also be liable to third parties for these types of
breaches. Such litigation, regulatory investigations and our
technical activities intended to prevent future security breaches
are likely to require additional management resources and
expenditures. If our security measures fail to protect this
information adequately or we fail to comply with the applicable
credit card association operating rules, we could be liable to both
our customers for their losses, as well as the vendors under our
agreements with them. In addition, we could be subject to fines and
higher transaction fees, we could face regulatory action, and our
customers and vendors could end their relationships with us. Any of
these developments could harm our business and financial
results.
Public scrutiny of internet privacy and security issues may result
in increased regulation and different industry standards, which
could deter or prevent us from providing our current products and
solutions to our members and customers, thereby harming our
business.
The regulatory framework for privacy and security issues worldwide
is evolving and is likely to remain in flux for the foreseeable
future. Practices regarding the collection, use, storage, display,
processing, transmission and security of personal information by
companies offering online services have recently come under
increased public scrutiny. The U.S. government, including the White
House, the Federal Trade Commission, the Department of Commerce and
many state governments, are reviewing the need for greater
regulation of the collection, use and storage of information
concerning consumer behavior with respect to online services,
including regulation aimed at restricting certain targeted
advertising practices and collection and use of data from mobile
devices. The FTC in particular has approved consent decrees
resolving complaints and their resulting investigations into the
privacy and security practices of a number of online, social media
companies. Similar actions may also impact us
directly.
Our business, including our ability to operate and expand
internationally or on new technology platforms, could be adversely
affected if legislation or regulations are adopted, interpreted, or
implemented in a manner that is inconsistent with our current
business practices that may require changes to these practices, the
design of our websites, mobile applications, products, features or
our privacy policy. In particular, the success of our business is
expected to be driven by our ability to responsibly use the data
that our members share with us. Therefore, our business could be
harmed by any significant change to applicable laws, regulations or
industry standards or practices regarding the storage, use or
disclosure of data our members choose to share with us, or
regarding the manner in which the express or implied consent of
consumers for such use and disclosure is obtained. Such changes may
require us to modify our products and features, possibly in a
material manner, and may limit our ability to develop new products
and features that make use of the data that we collect from our
members.
We will rely on outside firms to host our servers and to provide
telecommunication connections, and a failure of service by these
providers could adversely affect our business and
reputation.
We will rely upon third party providers to host a number of our
servers and provide telecommunication connections. In the event
that these providers experience any interruption in operations or
cease operations for any reason or if we are unable to agree on
satisfactory terms for continued hosting relationships, we would be
forced to enter into a relationship with other service providers or
assume hosting responsibilities ourselves. If we are forced to
switch hosting facilities, we may not be successful in finding an
alternative service provider on acceptable terms or in hosting the
computer server ourselves. We may also be limited in our remedies
against these providers in the event of a failure of service. A
failure or limitation of service or available capacity by any of
these third-party providers could adversely affect our business and
reputation.
Our products and internal systems rely on software that is highly
technical, and if it contains undetected errors, our business could
be adversely affected.
Our products and internal systems rely on software, including
software developed or maintained internally and/or by third
parties, that is highly technical and complex. In addition, our
products and internal systems depend on the ability of such
software to store, retrieve, process and manage immense amounts of
data. The software on which we rely has contained, and may now or
in the future contain, undetected errors, bugs or vulnerabilities.
Some errors may only be discovered after the code has been released
for external or internal use. Errors or other design defects within
the software on which we rely may result in a negative experience
for users and marketers who use our products, delay product
introductions or enhancements, result in measurement or billing
errors or compromise our ability to protect the data of our users
and/or our intellectual property. Any errors, bugs or defects
discovered in the software on which we rely could result in damage
to our reputation, loss of users, loss of revenue or liability for
damages, any of which could adversely affect our business and
financial results.
A significant or prolonged economic downturn would have a material
adverse effect on our results of operations.
Our results of operations are expected to be affected by the level
of business activity of our users, many of whom are expected to be
businesses. These businesses, in turn, can be affected by general
economic conditions and the level of economic activity in the
industries and markets that they serve. On an aggregate basis, our
clients may be less likely to hire as many senior executives or
consultants during economic downturns and periods of economic
uncertainty. To the extent our clients delay or reduce hiring
senior executives or consultants due to an economic downturn or
economic uncertainty, our results of operations will be adversely
affected. A continued economic downturn or period of economic
uncertainty and a decline in the level of business activity of our
clients would have a material adverse effect on our business,
financial condition and results of operations.
Any intellectual property rights we develop will be valuable and
any inability to protect them could reduce the value of our
products, services and brand.
Any trademarks, trade secrets, copyrights and other intellectual
property rights that we develop will be important assets to us.
There can be no assurance that the protections provided by these
intellectual property rights will be adequate to prevent our
competitors from misappropriating our technology or that our
competitors will not independently develop technologies that are
substantially equivalent or superior to our technology. There are
events that are outside of our control that could pose a threat to
our intellectual property rights. Additionally, protecting our
intellectual property rights is costly and time consuming. Any
increase in the unauthorized use of our intellectual property could
make it more expensive to do business and harm our operating
results.
We may be subject to intellectual property rights claims in the
future, which may be costly to defend, could require the payment of
damages and could limit our ability to use certain technologies in
the future.
Companies in the Internet, technology and media industries own
large numbers of patents, copyrights, trademarks and trade secrets
and frequently enter into litigation based on allegations of
infringement or other violations of intellectual property rights.
As our product usage becomes more wide-spread, the possibility of
intellectual property rights claims increases. Our technologies may
not be able to withstand any third-party claims or rights against
their use. Any intellectual property claims, with or without merit,
could be time consuming, expensive to litigate or settle and could
divert management resources and attention. An adverse determination
also could prevent us from offering our products and services to
others and may require that we procure substitute products or
services for these members.
With respect to any intellectual property rights claim, we may have
to pay damages or stop using technology found to be in violation of
a third party’s rights. We may have to seek a license for the
technology, which may not be available on reasonable terms and may
significantly increase our operating expenses. The technology also
may not be available for license to us at all. As a result, we also
may be required to develop alternative non-infringing technology,
which could require significant effort and expense. If we cannot
license or develop technology for any infringing aspects of our
business in the future, we may be forced to limit our product and
service offerings and may be unable to compete effectively. Any of
these results could harm our brand and operating
results.
RISKS RELATED TO OUR COMMON STOCK
Once publicly trading, the application of the “penny
stock” rules could adversely affect the market price of our
common shares and increase your transaction costs to sell those
shares.
The Securities and Exchange Commission has adopted Rule 15g-9 which
establishes the definition of a “penny stock,” for the
purposes relevant to us, as any equity security that has a market
price of less than $5.00 per share or with an exercise price of
less than $5.00 per share, subject to certain exceptions. For any
transaction involving a penny stock, unless exempt, the rules
require:
●
that
a broker or dealer approve a person's account for transactions in
penny stocks; and
●
that
a broker or dealer receive from the investor a written agreement to
the transaction, setting forth the identity and quantity of the
penny stock to be purchased.
In order to approve a person's account for transactions in penny
stocks, the broker or dealer must:
●
obtain
financial information and investment experience objectives of the
person; and
●
make
a reasonable determination that the transactions in penny stocks
are suitable for that person and the person has sufficient
knowledge and experience in financial matters to be capable of
evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in
a penny stock, a disclosure schedule prescribed by the Commission
relating to the penny stock market, which, in highlight
form:
●
sets
forth the basis on which the broker or dealer made the suitability
determination; and
●
that
the broker or dealer received a signed, written agreement from the
investor prior to the transaction.
Generally, brokers may be less willing to execute transactions in
securities subject to the “penny stock” rules. This may
make it more difficult for investors to dispose of our common stock
and cause a decline in the market value of our stock.
Disclosure also has to be made concerning the risks of investing in
penny stocks in both public offerings and in secondary trading and
regarding the commissions payable to both the broker-dealer and the
registered representative, current quotations for the securities
and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have
to be sent disclosing recent price information for the penny stock
held in the account and information on the limited market in penny
stocks.
We do not expect to pay dividends in the future; any return on
investment may be limited to the value of our common
stock.
We do not currently anticipate paying cash dividends in the
foreseeable future. The payment of dividends on our common stock
will depend on earnings, financial condition and other business and
economic factors affecting it at such time as the Board of
Directors may consider relevant. Our current intention is to apply
net earnings, if any, in the foreseeable future to increasing our
capital base and development and marketing efforts. There can be no
assurance that the Company will ever have sufficient earnings to
declare and pay dividends to the holders of our common stock, and
in any event, a decision to declare and pay dividends is at the
sole discretion of our Board of Directors. If we do not pay
dividends, our common stock may be less valuable because a return
on your investment will only occur if our stock price
appreciates.
Our common stock price is likely to be highly volatile which may
subject us to securities litigation thereby diverting our resources
which may affect our profitability and results of
operation.
Once listed, due to the nature of our Company and its business, the
market price for our common stock is expected to be limited and
highly volatile. The following factors will add to our common stock
price's volatility:
●
the
number of users of our applications;
●
actual
or anticipated variations in our quarterly operating
results;
●
announcements
of acquisitions;
●
additions
or departures of our key personnel; and
●
sales
of our common stock.
Some of these factors are beyond our control. These factors may
decrease the market price of our common stock, regardless of our
operating performance. In the
past, plaintiffs have initiated securities class action litigation
against a company following periods of volatility in the market
price of its securities. We may be the target of similar litigation
in the future. Securities litigation could result in substantial
costs and liabilities and could divert management’s attention
and resources.
In addition, as a result of the expected volatility of our stock
price, investors may be unable to resell their shares at a fair
price or at a price lower than their entry price.
The trading market for our common stock may be
limited.
If a market for our common stock develops, it is expected to be
limited and thinly traded, and we can provide no assurance to
investors that a more robust market will develop. If a market for
our common stock does not develop, our stockholders may not be able
to resell the shares of our common stock they have purchased and
they may lose all of their investment.
By issuing preferred stock, we may be able to delay, defer, or
prevent a change of control.
Our Articles of Incorporation permit us to issue, without approval
from our stockholders, a total of 15,000,000 shares of preferred
stock. Our Board of Directors can determine the rights,
preferences, privileges and restrictions granted to, or imposed
upon, the shares of preferred stock and to fix the number of shares
constituting any series and the designation of such series. It is
possible that our Board of Directors, in determining the rights,
preferences and privileges to be granted when the preferred stock
is issued, may include provisions that have the effect of delaying,
deferring or preventing a change in control, discouraging bids for
our common stock at a premium over the market price, or that
adversely affect the market price of our common stock and the
voting and other rights of the holders of our common
stock.
We have not voluntarily implemented various corporate governance
measures, in the absence of which stockholders may have more
limited protections against interested director transactions,
conflicts of interests and similar matters.
We have not yet adopted any corporate governance measures and,
since our securities are not yet listed on a national securities
exchange, we are not required to do so. We have not adopted
corporate governance measures such as an audit or other independent
committees of our Board of Directors as we presently have only one
independent director. If we expand our board membership in future
periods to include additional independent directors, we may seek to
establish an audit and other committees of our Board of Directors.
It is possible that if our Board of Directors included additional
independent directors and if we were to adopt some or all of these
corporate governance measures, stockholders would benefit from
somewhat greater assurances that internal corporate decisions were
being made by disinterested directors and that policies had been
implemented to define responsible conduct. For example, in the
absence of audit, nominating and compensation committees comprised
of at least a majority of independent directors, decisions
concerning matters such as compensation packages to our senior
officers and recommendations for director nominees may be made by a
majority of directors who have an interest in the outcome of the
matters being decided. Prospective investors should bear in mind
our current lack of corporate governance measures in formulating
their investment decisions.
Securities analysts may not cover our common stock and this may
have a negative impact on our common stock’s market
price.
The trading market for our common stock in the future may depend on
the research and reports that securities analysts publish about us
or our business. We do not have any control over these analysts.
There is no guarantee that securities analysts will cover our
common stock. If securities analysts do not cover our common stock,
the lack of research coverage may adversely affect our common
stock’s market price, if any. If we are covered by securities
analysts, and our stock is downgraded, our stock price would likely
decline. If one or more of these analysts ceases to cover us or
fails to publish regularly reports on us, we could lose visibility
in the financial markets, which could cause our stock price or
trading volume to decline.
Since some members of our board of directors are not residents of
the United States and certain of our assets are located outside of
the United States, you may not be able to enforce a U.S. judgment
for claims you may bring against such directors or
assets.
Several members of our senior management team, including our Acting
Chief Executive Officer and Chief Financial Officer, have their
primary residences and business offices in Asia, and a portion of
our assets and a substantial portion of the assets of these
directors are located outside the United States. As a result, it
may be more difficult for you to enforce a lawsuit within the
United States against these non-U.S. residents than if they were
residents of the United States. Also, it may be more difficult for
you to enforce any judgment obtained in the United States against
our assets or the assets of our non-U.S. resident management
located outside the United States than if these assets were located
within the United States. We cannot assure you that foreign courts
would enforce liabilities predicated on U.S. federal securities
laws in original actions commenced in such foreign jurisdiction, or
judgments of U.S. courts obtained in actions based upon the civil
liability provisions of U.S. federal securities laws.
Item 1B. Unresolved Staff
Comments.
Not Applicable
Our US office is located at 4800 Montgomery Lane, Suite 210,
Bethesda MD 20814. We occupy one office at this location free of
rent based on a month-to-month arrangement with an affiliate of
SeD, the Company’s largest stockholder.
Item 3. Legal Proceedings.
The Company is not a party to any proceedings, and no such
proceedings are known to be contemplated.
There are no material proceedings to which any director, officer or
affiliate of the Company, or any beneficial owner of record of more
than five percent of any class of voting securities of the Company,
or any associate of any such director, office, affiliate of the
Company, or security holder is a party adverse to the Company or
any of its subsidiaries or has a material interest adverse to the
Company or any of its subsidiaries.
Item 4. Mine Safety
Disclosure.
Not Applicable.
PART II
Item 5. Market for Registrant’s
Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
Market Information
Presently, there is no established public trading market for our
shares of common stock. On June 9, 2015, the Financial Industry
Regulatory Authority (“FINRA”), cleared the
Company’s request under Rule 15c2-11 for an unpriced
quotation on the OTC Bulletin Board and in OTC Link under the
symbol HTPN. Since that time, through the date of this Annual
Report, the Company has not had any trading in its stock. The
Company’s stock symbol has been changed to HTBC to reflect
the Company’s new name.
Holders
As of the date of this filing, we had 63 stockholders of our common
stock.
Dividends
Since inception we have not paid any dividends on our common stock.
We currently do not anticipate paying any cash dividends in the
foreseeable future on our common stock. Although we intend to
retain our earnings, if any, to finance the exploration and growth
of our business, our Board of Directors will have the discretion to
declare and pay dividends in the future. Payment of dividends in
the future will depend upon our earnings, capital requirements and
other factors, which our Board of Directors may deem
relevant.
Securities authorized for issuance under equity compensation
plans
On July 30, 2018, the Company adopted an Equity Incentive Plan (the
“Plan”). The Plan is intended to encourage ownership of
our shares by employees, directors and certain consultants to the
Company, in order to attract and retain such people, to induce them
to work for the benefit of the Company. The Plan provides for the
grant of options and/or other stock-based or stock-denominated
awards. Subject to adjustment in accordance with the terms of the
Plan, 50,000,000 shares of Common Stock of the Company have been
reserved for issuance pursuant to awards under the Plan. The Plan
will be administered by the Company’s Board of Directors.
This Plan shall terminate ten (10) years from the date of its
adoption by the Board of Directors. The Plan was approved by the
stockholder holding a majority of the Company’s issued and
outstanding shares of common stock.
Recent sales of unregistered securities; use of proceeds from
registered securities
On March 27, 2017, the Company sold 500,988,889 shares of common
stock to SeD in exchange for the conversion of $450,890 of debt
owed by the Company to SeD at a conversion price of $0.0009 per
share. The issuance of these shares was completed in accordance
with the exemption provided by Section 4(a)(2) of the Securities
Act of 1933, as amended.
Performance Graph
Not applicable to smaller reporting companies.
Purchases of Equity Securities by the issuer and affiliated
purchasers
During the period covered by this report, the Company did not
repurchase any shares of the Company’s common
stock.
Item 6. Selected Financial
Data.
Not applicable to smaller reporting companies.
Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of
Operations.
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2019 COMPARED
TO
YEAR ENDED DECEMBER 31, 2018
Results of Operations
For the years ended December 31, 2019 and 2018
Revenue
Revenue consists primarily of the services rendered on software
projects. Some of the projects require significant software
production. The Company had no revenue during the year ended
December 31, 2019. In 2018, three projects were completed, one of
which was started in 2017. Total revenue for the year ended
December 31, 2018 for continuing operations were $140,652,
including $115,135 from related parties. Total revenue for the year
ended December 31, 2018 for discontinued operations were
$7,325.
Cost of revenue
Cost of revenue consists primarily of salary and outside consulting
expenses incurred directly by the projects. Total cost of revenue
for the years ended December 31, 2019 and 2018 for continuing
operations were $0 and $74,129, respectively. Total cost of revenue
for the years ended December 31, 2019 and 2018 for discontinued
operations were $0 and $4,527, respectively.
General and Administrative
General and administrative expenses consist primarily of salary and
benefits, professional fees, rental expenses and maintenance
expenses of existing software framework. We expect to maintain our
general and administrative expenses with moderate changes in line
with business activities. Total general and administrative expenses
for the years ended December 31, 2019 and 2018 for continuing
operations were $323,585 and $413,922, of which $0 and $7,842 were
depreciation expenses, respectively. Total general and
administrative expenses for the years ended December 31, 2019 and
2018 for discontinued operations were $3,710 and $99,726, of which
$48 and $6,544 were depreciation expenses,
respectively.
Other (Expenses) / Income
For the years ended December 31, 2019 and 2018, we have
incurred a net balance of
$34,113 and $(43,641) in foreign exchange gain/(loss), of which $0
and $168 are realized foreign exchange gain, $299,255 and $0 in
gain on disposal of investment, $0 and $(8,303) in (loss) on
disposal of fixed assets, and $55 and $22 in interest income,
respectively for continuing operations. For the years ended
December 31, 2019 and 2018, we have incurred $(2) and $(236) in
unrealized foreign exchange (loss), and $0 and $415 in other sundry
income, respectively for discontinued
operations.
Liquidity and Capital Resources
At December 31, 2019, we had cash of $55,752, working capital
deficit of $1,272,422. The decrease in cash and increase in working
capital deficit during year 2019 were primarily due to incurred
operating losses.
We had a total stockholders’ deficit of $1,272,320 and an
accumulated deficit of $5,616,908 as of December 31, 2019 compared
with a total stockholders’ deficit of $1,193,272 and an
accumulated deficit of $5,623,034 as of December 31, 2018. This
difference is primarily due to the net effect of the net income
incurred and the loss in foreign currency translation with
depreciation in US dollar, the presentation currency during the
year.
For the year ended December 31, 2019, we recorded a net income of
$6,126.
We had net cash used in operating activities of $389,488 for the
year ended December 31, 2019. We had a positive change of $588 due
to prepaid expenses and a positive change of $462 due to security
deposit and other assets. We had a negative change of $100,000 due
to promissory note of a related party. We had a negative change of
$12,756 due to accounts payable and accrued expenses.
For the year ended December 31, 2018, we recorded a net loss of
$496,070.
We had net cash used in operating activities of $327,476 for the
year ended December 31, 2018. We had a positive change of $57,698
due to accounts receivable. We had a positive change of $6,944 due
to prepaid expenses and a positive change of $7,928 due to security
deposit and other assets. We had a positive change of $29,458 due
to accounts payable and accrued expenses.
In the year ended December 31, 2019, we spent $102
in other non-current assets and have a net cash inflow $68,940 on
the disposal of subsidiary, resulting in net cash provided by
investing activities of $68,838 for the year.
In the year ended December 31, 2018, we spent $1,517 on the
acquisition of fixed assets, resulting in net cash used in
investing activities of $1,517 for the year.
For the year ended December 31, 2019, we had net cash provided by
financial activities of $274,867 due to advances from related
parties.
For the year ended December 31, 2018, we had net cash provided by
financial activities of $301,897 due to advances from related
parties.
We will need to raise additional capital through equity or debt
financings. However, we cannot be certain that such capital (from
SeD or third parties) will be available to us or whether such
capital will be available on a term that is acceptable to us. Any
such financing likely would be dilutive to existing stockholders
and could result in significant financial and operating covenants
that would negatively impact our business. If we are unable to
raise sufficient additional capital on acceptable terms, we will
have insufficient funds to operate our business and pursue our
business plan.
Consistent with Section 144 of Delaware General Corporation Law, it
is our current policy that all transactions between us and our
officers, directors and their affiliates will be entered into only
if such transactions are approved by a majority of the
disinterested directors, are approved by vote of the stockholders,
or are fair to us as corporation as of the time it is authorized,
approved or ratified by the board. We will conduct an appropriate
review of all related party transactions on an ongoing
basis.
Critical Accounting Policies
Our discussion and analysis of the financial condition and results
of operations are based upon the Company’s financial
statements, which have been prepared in accordance with generally
accepted accounting principles in the United States
(“GAAP”). The preparation of these financial statements
requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses and
related disclosure of contingent assets and liabilities. We believe
that the estimates, assumptions and judgments involved in the
accounting policies described below have the greatest potential
impact on our financial statements, so we consider these to be our
critical accounting policies. Because of the uncertainty inherent
in these matters, actual results could differ from the estimates we
use in applying the critical accounting policies. Certain of these
critical accounting policies affect working capital account
balances, including the policies for revenue recognition, allowance
for doubtful accounts, inventory reserves and income taxes. These
policies require that we make estimates in the preparation of our
financial statements as of a given date.
Within the context of these critical accounting policies, we are
not currently aware of any reasonably likely events or
circumstances that would result in materially different amounts
being reported.
Revenue recognition
Accounting Standards Codification ("ASC") 606, Revenue from
Contracts with Customers ("ASC 606"), establishes principles for
reporting information about the nature, amount, timing and
uncertainty of revenue and cash flows arising from the entity's
contracts to provide goods or services to customers. Under the new
standard, revenue is recognized when a customer obtains control of
promised goods or services in an amount that reflects the
consideration the entity expects to receive in exchange for those
goods or services. The Company adopted this new standard on January
1, 2018 under the modified retrospective method to all contracts
not completed as of January 1, 2018 and the adoption did not have a
material effect on our financial statements but we expanded our
disclosures related to contracts with customers below.
Revenue is recognized when (or as) the Company transfers promised
goods or services to its customers in amounts that reflect the
consideration to which the Company expects to be entitled to in
exchange for those goods or services, which occurs when (or as) the
Company satisfies its contractual obligations and transfers over
control of the promised goods or services to its customers. Costs
to obtain or fulfill a contract are expensed as
incurred.
Disaggregation of Revenue
We generate revenue from a project involving provision of services
and web/software development for customers. In respect to the
provision of services, the agreements are less than one year with
cancellable clause and customers are typically billed on a monthly
basis. The following table depicts the disaggregation of revenue
according to revenue type and is consistent with how we evaluate
our financial performance:
|
|
For the year ended December 31, 2019
|
|
|
|
Web / Software Development
|
|
|
Primary Geographical Markets
|
|
|
|
|
Continuing operations
|
|
|
|
|
North
America
|
$-
|
$-
|
$-
|
|
Asia
|
-
|
-
|
-
|
|
|
$-
|
$-
|
$-
|
|
|
|
|
|
|
Discontinued operations
|
|
|
|
|
Asia
|
$-
|
$-
|
$-
|
|
|
$-
|
$-
|
$-
|
|
|
|
|
|
|
Timing of Revenue Recognition
|
|
|
|
|
Goods
transferred at a point in time
|
$-
|
$-
|
$-
|
|
Services
transferred over time
|
-
|
-
|
-
|
|
|
$-
|
$-
|
$-
|
|
|
For the year ended December 31, 2018
|
|
|
|
Web / Software Development
|
|
|
Primary Geographical Markets
|
|
|
|
|
|
|
|
|
|
North
America
|
$115,135
|
$-
|
$115,135
|
|
Asia
|
-
|
25,517
|
25,517
|
|
|
$115,135
|
$25,517
|
$140,652
|
|
|
|
|
|
|
|
|
|
|
|
Asia
|
$-
|
$7,325
|
$7,325
|
|
|
$-
|
$7,325
|
$7,325
|
|
|
|
|
|
|
Timing of Revenue Recognition
|
|
|
|
|
Goods
transferred at a point in time
|
$-
|
$32,842
|
$32,842
|
|
Services
transferred over time
|
115,135
|
-
|
115,135
|
|
|
$115,135
|
$32,842
|
$147,977
|
Contract assets and contract liabilities
Based on our contracts, we usually invoice our customers once our
performance obligations have been satisfied, at which point payment
is unconditional. Accordingly, our contracts do not give rise to
contract assets or liabilities under ASC 606. Accounts receivable
are recorded when the right to consideration becomes
unconditional.
Remaining performance obligations
As of December 31, 2019, the aggregate amount of the transaction
price allocated to the remaining performance obligation is
$0.
Income taxes
Current income taxes are provided for in accordance with the laws
of the relevant tax authorities. Deferred income taxes are
recognized when temporary differences exist between the tax bases
of assets and liabilities and their reported amounts in the
consolidated financial statements. Net operating loss carry
forwards and credits are applied using enacted statutory tax rates
applicable to future years. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is
more-likely-than-not that a portion of or all of the deferred tax
assets will not be realized. The components of the deferred tax
assets and liabilities are individually classified as current and
non-current based on their characteristics.
The impact of an uncertain income tax position on the income tax
return is recognized at the largest amount that is
more-likely-than-not to be sustained upon audit by the relevant tax
authority. An uncertain income tax position will not be recognized
if it has less than a 50% likelihood of being sustained. Interest
and penalties on income taxes will be classified as a component of
the provisions for income taxes. The Group did not recognize any
income tax due to uncertain tax position or incur any interest and
penalties related to potential underpaid income tax expenses for
the years ended December 31, 2019 or 2018,
respectively.
Recent Accounting Pronouncements
Recent accounting pronouncements
On Feb. 25, 2016, the Financial Accounting Standards Board (FASB)
released Accounting Standards Update (ASU) No. 2016-02, Leases
(Topic 842) (the Update). The ASU requires lessees to recognize
leases on-balance sheet and disclose key information about leasing
arrangements. In July 2018, the FASB issued ASU 2018-10 and ASU
2018-11, Codification Improvements to Topic 842, Leases, amending
various aspects of Topic 842. The new standard establishes a
right-of-use model (ROU) that requires a lessee to recognize a ROU
asset and lease liability on the balance sheet for all leases with
a term longer than 12 months. Leases will be classified as finance
or operating, with classification affecting the pattern and
classification of expense recognition in the income
statement.
Topic 842 is effective for annual and interim periods beginning in
the first quarter 2019, with early adoption permitted. A modified
retrospective transition approach is required, applying the new
standard to all leases existing at the date of initial application.
An entity may choose to use either (1) its effective date or (2)
the beginning of the earliest comparative period presented in the
financial statements as its date of initial application. If an
entity chooses the second option, the transition requirements for
existing leases also apply to leases entered into between the date
of initial application and the effective date. The entity must also
recast its comparative period financial statements and provide the
disclosures required by the new standard for the comparative
periods. We have adopted the new standard on January 1, 2019 and
use the effective date as our date of initial
application.
The new standard provides a number of optional practical expedients
in transition. We elected the ‘package of practical
expedients’, which permits us not to reassess under the new
standard our prior conclusions about lease identification, lease
classification and initial direct costs, and we do not expect to
elect the use-of-hindsight.
The new standard also provides practical expedients for an
entity’s ongoing accounting. We elected the short-term lease
recognition exemption for all leases that qualify. For those leases
that qualify, we will not recognize ROU assets or lease
liabilities, and this includes not recognizing ROU assets or lease
liabilities for existing short-term leases of those assets in
transition. We also elected the practical expedient to not separate
lease and non-lease components for all of our leases.
The adoption of Topic 842 had no material impact on the
Company.
In February 2018, the FASB issued Accounting Standards Update No.
2018-02, Income Statement – Reporting Comprehensive Income
(Topic 220): Reclassification of Certain Tax Effects from
accumulated Other Comprehensive Income, or ASU 2018-02, which
requires the reclassification from accumulated other comprehensive
income to retained earnings for the stranded tax effects arising
from the change in the reduction of the U.S. federal statutory
income tax rate to 21% from 35%. ASU 2018-02 is effective for
interim and annual periods beginning after December 15, 2018. We
have adopted ASU 2018-02 on January 1, 2019. The adoption of this
Update had no material effect on the Company.
In June 2018, the FASB issued Accounting Standards Update No.
2018-07, which simplifies several aspects of the accounting for
nonemployee share-based payment transactions resulting from
expanding the scope of Topic 718, Compensation-Stock Compensation,
to include share-based payment transactions for acquiring goods and
services from nonemployees. Some of the areas for simplification
apply only to nonpublic entities. The amendments specify that Topic
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 amendments also clarify that Topic 718 does not apply
to share-based payments used to effectively provide (1) financing
to the issuer or (2) awards granted in conjunction with selling
goods or services to customers as part of a contract accounted for
under Topic 606, Revenue from Contracts with Customers. The
amendments in this Update are effective for public business
entities for fiscal years beginning after December 15, 2018,
including interim periods within that fiscal year. We have adopted
ASU 2018-07 on January 1, 2019. The adoption of this Update had no
material effect on the Company.
Off –Balance Sheet Arrangements
As of December 31, 2019, we do not have any off-balance sheet
arrangements, as defined under applicable SEC rule.
Item 7A. Quantitative and Qualitative
Disclosures About Market Risk.
Not applicable.
Item 8. Financial
Statements.
HOTAPP BLOCKCHAIN INC. (FORMERLY KNOWN AS HOTAPP INTERNATIONAL,
INC.)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
|
Report of Independent Registered Public Accounting
Firm
|
|
25
|
|
|
|
|
|
Consolidated Financial Statements
|
|
|
|
|
|
|
|
Consolidated Balance Sheets as of December 31, 2019 and
2018
|
|
26
|
|
|
|
|
|
Consolidated Statements of Operations and Comprehensive Loss for
the Years Ended December 31, 2019 and 2018
|
|
27
|
|
|
|
|
|
Consolidated Statements of Stockholders’ Equity (Deficit) for
the Period from January 1, 2018 through
December 31, 2019
|
|
28
|
|
|
|
|
|
Consolidated Statements of Cash Flows for the Years Ended December
31, 2019 and 2018
|
|
29
|
|
|
|
|
|
Notes to Consolidated Financial Statements
|
|
30
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and
Stockholders
of HotApp Blockchain, Inc.
Opinion on the Financial Statements
We have
audited the accompanying consolidated balance sheets of HotApp
Blockchain, Inc. (the Company) as of December 31, 2019 and 2018,
and the related consolidated statements of operations and
comprehensive loss, stockholders’ equity (deficit), and cash
flows for each of the years in the two-year period ended December
31, 2019 and 2018, and the related notes (collectively referred to
as the financial statements). In our opinion, the consolidated
financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2019 and,
2018, and the results of its operations and its cash flows for each
of the years in the two-year period ended December 31, 2019, in
conformity with accounting principles generally accepted in the
United States of America.
Basis for Opinion
These
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the
Company’s consolidated financial statements based on our
audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting.
As part of our audits, we are required to obtain an understanding
of internal control over financial reporting, but not for the
purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
The
accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As more
fully discussed in Note 1 to the consolidated financial statements,
the Company has incurred net losses, net cash used in operating
activities, and has a working capital deficit at December 31, 2019.
These conditions raise substantial doubt about its ability to
continue as a going concern. Management’s plans in regard to
these Matters are also described in Note 1. The consolidated
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/
Rosenberg Rich Baker Berman P.A.
We have
served as the Company’s auditor since 2013.
Somerset,
New Jersey
March
30, 2020
HOTAPP BLOCKCHAIN INC. (FORMERLY KNOWN AS HOTAPP INTERNATIONAL,
INC.)
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2019 AND 2018
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
Cash
|
$55,752
|
$108,777
|
|
Accounts
receivable-related parties, net of allowance
|
-
|
39,427
|
|
Accounts
receivable-trade, net of allowance
|
-
|
10,216
|
|
Prepaid
expenses
|
-
|
588
|
|
Deposit
and other receivable
|
-
|
549
|
|
Promissory
note-related parties
|
100,000
|
-
|
|
Current
assets of discontinued operations
|
-
|
14,317
|
|
TOTAL
CURRENT ASSETS
|
155,752
|
173,874
|
|
|
|
|
|
Other
non-current assets
|
102
|
-
|
|
Non-current
assets of discontinued operations
|
-
|
1,765
|
|
TOTAL ASSETS
|
$155,854
|
$175,639
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
Accounts
payable and accrued expenses
|
$18,561
|
$59,559
|
|
Accrued
taxes
|
7,742
|
7,742
|
|
Amount
due to related parties
|
1,401,871
|
1,127,004
|
|
Current
liabilities of discontinued operations
|
-
|
174,606
|
|
TOTAL
CURRENT LIABILITIES
|
1,428,174
|
1,368,911
|
|
|
|
|
|
TOTAL LIABILITIES
|
1,428,174
|
1,368,911
|
|
|
|
|
|
STOCKHOLDERS'
(DEFICIT):
|
|
|
|
Preferred
stock, $0.0001 par value, 15,000,000 shares authorized, 0 issued
and outstanding as of December 31, 2019 and December 31,
2018
|
-
|
-
|
|
Common
stock, $0.0001 par value, 1,000,000,000 shares authorized,
506,898,576 shares issued and outstanding, as of December 31, 2019
and December 31, 2018
|
50,690
|
50,690
|
|
Accumulated
other comprehensive loss
|
(310,293)
|
(225,119)
|
|
Additional
paid-in capital
|
4,604,191
|
4,604,191
|
|
Accumulated
deficit
|
(5,616,908)
|
(5,623,034)
|
|
TOTAL STOCKHOLDERS' DEFICIT
|
(1,272,320)
|
(1,193,272)
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
|
$155,854
|
$175,639
|
The accompanying notes to the consolidated financial statements are
an integral part of these statements.
HOTAPP BLOCKCHAIN INC. (FORMERLY KNOWN AS HOTAPP INTERNATIONAL,
INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
LOSS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
Service
fee revenue-related party
|
$-
|
$115,135
|
|
Project
fees
|
-
|
25,517
|
|
|
-
|
140,652
|
|
|
|
|
|
Cost
of revenues
|
-
|
74,129
|
|
|
|
|
|
Gross
profit
|
$-
|
$66,523
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
Depreciation
|
-
|
7,842
|
|
General
and administrative
|
323,585
|
406,080
|
|
Total
operating expenses
|
323,585
|
413,922
|
|
|
|
|
|
Loss
from operations
|
(323,585)
|
(347,399)
|
|
|
|
|
|
Other
income (expenses):
|
|
|
|
Interest
income
|
55
|
22
|
|
Gain
on disposal of subsidiary
|
299,255
|
-
|
|
(Loss)
on disposal of fixed assets
|
-
|
(8,303)
|
|
Foreign
exchange gain (loss)
|
34,113
|
(43,641)
|
|
Total
other income (expenses)
|
333,423
|
(51,922)
|
|
|
|
|
|
Income
(Loss) before taxes
|
9,838
|
(399,321)
|
|
Income
tax provision
|
-
|
-
|
|
Net
income (loss) from continuing operations
|
9,838
|
(399,321)
|
|
(Loss)
from discontinued operations, net of tax
|
(3,712)
|
(96,749)
|
|
Net
income (loss) applicable to common shareholders
|
$6,126
|
$(496,070)
|
|
|
|
|
|
Net
income (loss) from continuing operations per share - basic and
diluted
|
$0.00
|
$(0.00)
|
|
Net
(loss) from discontinued operations per share - basic and
diluted
|
$(0.00)
|
$(0.00)
|
|
Net
income (loss) per share - basic and diluted
|
$0.00
|
$(0.00)
|
|
|
|
|
|
Weighted
number of shares outstanding -
|
|
|
|
Basic
and diluted
|
506,898,576
|
506,898,576
|
|
|
|
|
|
Comprehensive
Income (Loss):
|
|
|
|
Net
income (loss)
|
$6,126
|
$(496,070)
|
|
Foreign currency translation
(loss)gain
|
(85,174)
|
64,279
|
|
Total
comprehensive (loss)
|
$(79,048)
|
$(431,791)
|
The accompanying notes to the consolidated financial statements are
an integral part of these statements.
HOTAPP BLOCKCHAIN INC. (FORMERLY KNOWN AS HOTAPP INTERNATIONAL,
INC.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DEFICIT)
FOR THE PERIOD FROM JANUARY 1, 2018 TO DECEMBER 31,
2019
|
|
Common
|
|
|
|
|
|
|
|
|
|
Accumulated
Other
Comprehensive
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2017
|
506,898,576
|
$50,690
|
$4,604,191
|
$(289,398)
|
$(5,126,964)
|
$(761,481)
|
|
Net
loss for period
|
-
|
-
|
-
|
-
|
(496,070)
|
(496,070)
|
|
Foreign
currency translation adjustment
|
-
|
-
|
-
|
64,279
|
-
|
64,279
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2018
|
506,898,576
|
$50,690
|
$4,604,191
|
$(225,119)
|
$(5,623,034)
|
$(1,193,272)
|
|
Net
income for period
|
-
|
-
|
-
|
-
|
6,126
|
6,126
|
|
Foreign
currency translation adjustment
|
-
|
-
|
-
|
(85,174)
|
-
|
(85,174)
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2019
|
506,898,576
|
$50,690
|
$4,604,191
|
$(310,293)
|
$(5,616,908)
|
$(1,272,320)
|
The accompanying notes to the consolidated financial statements are
an integral part of these statements.
HOTAPP BLOCKCHAIN INC. (FORMERLY KNOWN AS HOTAPP INTERNATIONAL,
INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
Net
Income (Loss) including noncontrolling interests from continuing
operations:
|
$9,838
|
$(399,321)
|
|
Net
(Loss) including noncontrolling interests from discontinued
operations:
|
(3,712)
|
(96,749)
|
|
Net
Income (Loss) including noncontrolling interests,
total
|
6,126
|
(496,070)
|
|
Adjustments
to reconcile net income (loss) to cash used in
operations:
|
|
|
|
Depreciation
|
48
|
14,386
|
|
(Gain)
on disposal of subsidiary
|
(299,255)
|
-
|
|
Loss
on disposal of fixed asset
|
-
|
8,303
|
|
Impairment
on accounts receivable
|
49,410
|
-
|
|
Foreign
exchange (gain) loss
|
(34,111)
|
43,877
|
|
|
|
|
|
Change
in operating assets and liabilities:
|
|
|
|
Accounts
receivable-related parties
|
-
|
50,000
|
|
Accounts
receivable-trade
|
-
|
7,698
|
|
Security
deposit and other assets
|
462
|
7,928
|
|
Prepaid
expenses
|
588
|
6,944
|
|
Promissory
note-related party
|
(100,000)
|
-
|
|
Accounts
payable and accrued expenses
|
(12,756)
|
29,458
|
|
Net
cash used in operating activities
|
$(389,488)
|
$(327,476)
|
|
|
|
|
|
CASH
FLOW FROM INVESTING ACTIVITIES:
|
|
|
|
Other
non-current assets
|
(102)
|
-
|
|
Net
cash inflow on disposal of subsidiary
|
68,940
|
-
|
|
Acquisition
of fixed assets
|
-
|
(1,517)
|
|
Net
cash provided by (used in) investing activities
|
$68,838
|
$(1,517)
|
|
|
|
|
|
CASH
FLOW FROM FINANCING ACTIVITIES:
|
|
|
|
Advance
from related parties
|
274,867
|
301,897
|
|
Net
cash provided by financing activities
|
$274,867
|
$301,897
|
|
|
|
|
|
NET
(DECREASE)/INCREASE IN CASH
|
(45,783)
|
(27,096)
|
|
Effects
of exchange rates on cash
|
(16,510)
|
20,402
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS at beginning of period
|
118,045
|
124,739
|
|
CASH
AND CASH EQUIVALENTS at end of period
|
$55,752
|
$118,045
|
|
|
|
|
The accompanying notes to the consolidated financial statements are
an integral part of these statements.
HOTAPP BLOCKCHAIN INC. (FORMERLY KNOWN AS HOTAPP INTERNATIONAL,
INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1.
ORGANIZATION AND PRINCIPAL BUSINESS ACTIVITIES
HotApp Blockchain Inc., formerly HotApp International, Inc., (the
“Company” or “Group”) was incorporated in
the State of Delaware on March 7, 2012 and established a fiscal
year end of December 31. The Company’s initial business plan
was to be a financial acquisition intermediary which would serve
buyers and sellers for companies that are in highly fragmented
industries. Our Board determined it was in the best interest of the
Company to expand our business plan. On October 15, 2014, through a
sale and purchase agreement, the Company acquired all the issued
and outstanding stock of HotApps International Pte Ltd
(“HIP”) from Singapore eDevelopment Limited
(“SeD”). SeD is presently our largest stockholder. HIP
owned certain intellectual property relating to instant messaging
for portable devices (referred to herein as the “HotApp
Application”).
The HotApp Application is a cross-platform mobile application that
incorporates instant messaging and ecommerce. This application can
be used on any mobile platform (i.e. IOS Online or Android). The
HotApp Application offered messaging and calling services for
HotApp Application users (text, photo, audio); however, the
messaging and calling services we offered were terminated in
2017.
On December 29, 2017, our Board approved a change of the
Company’s name from “HotApp International, Inc.”
to “HotApp Blockchain Inc.” to reflect the
Board’s determination that it was in the best interest of the
Company to expand its activities to include the development and
commercialization of blockchain-related technologies. One area we
are presently exploring is providing technology consulting for
security token offerings (“STO”). Such services, which
have not yet commenced commercially, would include STO white paper
development, technology design and web development. We intend to
outsource certain aspects of these projects to potential partners
we have identified. We have no plans to launch our own token
offering, but rather may develop technologies that could facilitate
such offerings by other companies.
We believe that the increasing acceptance of distributed ledger
technologies by potential customers will benefit us. The growth of
network marketing throughout the world would impact our
technologies that target that industry. In this rapidly evolving
field, however, technology is advancing quickly and it is possible
that our competitors could create products that gain market
acceptance before our products.
In 2018, one of our main developments was a broadening of our scope
of planned operations into a digital transformation technology
business. As a digital transformation technology business, we are
committed to enabling enterprises we work with to engage in a
digital transformation by providing consulting, implementation and
development services with various technologies, including instant
messaging, blockchain, e-commerce, social media and payment
solutions. We continue to be involved in mobile application product
development and other businesses, providing information technology
services to end-users, service providers and other commercial users
through multiple platforms.
We are focused on serving business-to-business (B2B) needs in
e-commerce, collaboration and supply chains. We will help
enterprises and community users to transform their business model
with digital economy in a more effective manner. With our platform,
users can discover and build their own communities and create
valuable content. Enterprises can in turn enhance the user
experience with premium content, all of which are facilitated by
the transactions of every stakeholder via e-commerce.
Our technology platform consists of instant messaging systems,
social media, e-commerce and payment systems, network marketing
platforms and e-real estate. We are focused on business-to-business
solutions such as enterprise messaging and workflow. We have
successfully implemented several strategic platform developments
for clients, including a mobile front-end solution for network
marketing, a hotel e-commerce platform for Asia and a real estate
agent management platform in China. We have also enhanced our
technological capability from mobile application development to
include blockchain architectural design, allowing mobile-friendly
front-end solutions to integrate with software platforms. Our main
digital assets at the present time are our applications. Our
emphasis will be on developing solutions and providing
services.
As of December 31, 2019, details of the Company’s
subsidiaries are as follows:
|
Subsidiaries
|
Date of Incorporation
|
Place of Incorporation
|
Percentage of Ownership
|
|
1st Tier Subsidiary:
|
|
|
|
|
HotApps International Pte Ltd (“HIP”)
|
May 23, 2014
|
Republic of Singapore
|
100% by Company
|
|
Crypto Exchange Inc.
|
December 15, 2017
|
State of Nevada, the United States of America
|
100% by Company
|
|
HWH World Inc.
|
August 28, 2018
|
State of Delaware, the United States of America
|
100% by Company
|
|
2nd Tier Subsidiaries:
|
|
|
|
|
HWH World Pte. Ltd. (formerly known as Crypto Exchange Pte.
Ltd.)
|
September 15, 2014
|
Republic of Singapore
|
100% owned by HIP
|
|
HotApp International Limited*
|
July 8, 2014
|
Hong Kong (Special Administrative Region)
|
100% owned by HIP
|
* On March 25, 2015, HotApps International Pte Ltd
(“HIP”) acquired 100% of issued share capital in HotApp
International Limited.
The financial statements have been prepared using accounting
principles generally accepted in the United States of America
applicable for a going concern, which assumes that the Company will
realize its assets and discharge its liabilities in the ordinary
course of business. Since inception, the Company has incurred net
losses of 5,616,908 and has net working capital deficit of
$1,272,422 at December 31, 2019. Management has concluded that due
to the conditions described above, there is a substantial doubt
about the entity’s ability to continue as a going concern
through March 30, 2021. We have evaluated the significance of the
conditions in relation to our ability to meet our obligations and
believe that our current cash balance along with our current
operations will not provide sufficient capital to continue
operations through 2021. Our ability to continue as a going concern
is dependent upon achieving sales growth, management of operating
expenses and ability of the Company to obtain the necessary
financing to meet its obligations and pay its liabilities arising
from normal business operations when they come due, and upon
profitable operations.
Our majority stockholder has advised us not to depend solely on it
for financing. We have increased our efforts to raise additional
capital through equity or debt financings from other sources.
However, we cannot be certain that such capital (from our
stockholders or third parties) will be available to us or whether
such capital will be available on terms that are acceptable to us.
Any such, financing likely would be dilutive to existing
stockholders and could result in significant financial operating
covenants that would negatively impact our business. If we are
unable to raise sufficient additional capital on acceptable terms,
we will have insufficient funds to operate our business or pursue
our planned growth.
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
this uncertainty.
Note 2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis of presentation
The consolidated financial statements have been prepared in
accordance with the accounting principles generally accepted in the
United States of America (“U.S. GAAP”).
Basis of consolidation
The consolidated financial statements of the Group include the
financial statements of HotApp Blockchain Inc. and its
subsidiaries. All inter-company transactions and balances have been
eliminated upon consolidation.
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, liabilities, revenues, cost
and expenses in the financial statements and accompanying notes.
Significant accounting estimates reflected in the Group’s
consolidated financial statements include revenue recognition, the
useful lives and impairment of property and equipment, valuation
allowance for deferred tax assets.
Cash and cash equivalents
The Company considers all highly liquid investments with a maturity
of three months or less at the date of acquisition to be cash
equivalents. There were no cash equivalents as of December 31, 2019
and December 31, 2018.
Foreign currency risk
Because of its foreign operations, the Company holds cash in non-US
dollars. As of December 31, 2019, cash and cash equivalents of the
Group include, on an as converted basis to US dollars, $32,283, and
$23,131, in Hong Kong Dollars (“HK$”), and Singapore
Dollars (“S$”), respectively.
Concentrations
Financial instruments that potentially expose the Group to
concentration of credit risk consist primarily of cash. Although
the cash at each particular bank in the United States is insured up
to $250,000 by Federal Deposit Insurance Corporation (FDIC), the
Group is exposed to risk due to its concentration of cash in
foreign countries. The Group places its cash with financial
institutions with high-credit ratings and quality. The Group is
also exposed to credit risk due to its concentration of customers
with revenue in excess of 10%.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivables, net of allowance
|
|
|
|
|
|
|
As
of December 31, 2019
|
$-
|
$-
|
-%
|
$-
|
-%
|
|
As
of December 31, 2018
|
$49,643
|
$39,427
|
79%
|
$10,216
|
21%
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
Continuing operations
|
|
|
|
|
|
|
For
the year ended December 31, 2019
|
$-
|
$-
|
-%
|
$-
|
-%
|
|
For
the year ended December 31, 2018
|
$140,652
|
$115,135
|
82%
|
$25,517
|
18%
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
Discontinued operations
|
|
|
|
|
|
|
For
the year ended December 31, 2019
|
$-
|
$-
|
-%
|
$-
|
-%
|
|
For
the year ended December 31, 2018
|
$7,325
|
$-
|
-%
|
$7,325
|
100%
|
|
|
|
|
|
|
|
During the year of 2019, the Company has made full provision for
the amount of accounts receivables brought forward from
2018.
Fixed assets, net
Property and equipment are stated at cost less accumulated
depreciation. Depreciation is calculated on a straight-line basis
over the following estimated useful lives:
|
Office equipment
|
3 years
|
|
Computer equipment
|
3 years
|
|
Furniture and fixtures
|
3 years
|
Fair value
Fair Value of Financial Instruments
The carrying value of cash and cash equivalents, accounts payable
and accrued liabilities, and short-term borrowings, as reflected in
the balance sheets, approximate fair value because of the
short-term maturity of these instruments. All other significant
financial assets, financial liabilities and equity instruments of
the Company are either recognized or disclosed in the financial
statements together with other information relevant for making a
reasonable assessment of future cash flows, interest rate risk and
credit risk. Where practicable the fair values of financial assets
and financial liabilities have been determined and disclosed;
otherwise only available information pertinent to fair value has
been disclosed. The Company classifies and discloses assets and
liabilities carried at fair value in one of the following three
categories:
●
Level
1 - quoted prices in active markets for identical assets and
liabilities;
●
Level
2 - observable market based inputs or unobservable inputs that are
corroborated by market data; and
●
Level
3 - significant unobservable inputs in which little or no market
data exists, therefore requiring an entity to develop its own
assumptions.
Revenue recognition
Accounting Standards Codification ("ASC") 606, Revenue from
Contracts with Customers ("ASC 606"), establishes principles for
reporting information about the nature, amount, timing and
uncertainty of revenue and cash flows arising from the entity's
contracts to provide goods or services to customers. Under the new
standard, revenue is recognized when a customer obtains control of
promised goods or services in an amount that reflects the
consideration the entity expects to receive in exchange for those
goods or services. The Company adopted this new standard on January
1, 2018 under the modified retrospective method to all contracts
not completed as of January 1, 2018 and the adoption did not have a
material effect on our financial statements but we expanded our
disclosures related to contracts with customers below.
Revenue is recognized when (or as) the Company transfers promised
goods or services to its customers in amounts that reflect the
consideration to which the Company expects to be entitled to in
exchange for those goods or services, which occurs when (or as) the
Company satisfies its contractual obligations and transfers over
control of the promised goods or services to its customers. Costs
to obtain or fulfill a contract are expensed as incurred when the
amortization period is less than one-year.
Disaggregation of Revenue
We generate revenue from the project involving provision of
services and web/software development for customers. In respect to
the provision of services, the agreements are less than one year
with cancellable clause and customers are typically billed on a
monthly basis. The following table depicts the disaggregation of
revenue according to revenue type and is consistent with how we
evaluate our financial performance:
|
|
For the year ended December 31, 2019
|
|
|
|
Web / Software Development
|
|
|
Primary Geographical Markets
|
|
|
|
|
Continuing operations
|
|
|
|
|
North
America
|
$-
|
$-
|
$-
|
|
Asia
|
-
|
-
|
-
|
|
|
$-
|
$-
|
$-
|
|
|
|
|
|
|
Discontinued operations
|
|
|
|
|
Asia
|
$-
|
$-
|
$-
|
|
|
$-
|
$-
|
$-
|
|
|
|
|
|
|
Timing of Revenue Recognition
|
|
|
|
|
Goods
transferred at a point in time
|
$-
|
$-
|
$-
|
|
Services
transferred over time
|
-
|
-
|
-
|
|
|
$-
|
$-
|
$-
|
|
|
For the year ended December 31, 2018
|
|
|
|
Web / Software Development
|
|
|
Primary Geographical Markets
|
|
|
|
|
|
|
|
|
|
North
America
|
$115,135
|
$-
|
$115,135
|
|
Asia
|
-
|
25,517
|
25,517
|
|
|
$115,135
|
$25,517
|
$140,652
|
|
|
|
|
|
|
|
|
|
|
|
Asia
|
$-
|
$7,325
|
$7,325
|
|
|
$-
|
$7,325
|
$7,325
|
|
|
|
|
|
|
Timing of Revenue Recognition
|
|
|
|
|
Goods
transferred at a point in time
|
$-
|
$32,842
|
$32,842
|
|
Services
transferred over time
|
115,135
|
-
|
115,135
|
|
|
$115,135
|
$32,842
|
$147,977
|
Contract assets and contract liabilities
Based on our contracts, we normally invoice customers once our
performance obligations have been satisfied, at which point payment
is unconditional. Accordingly, our contracts do not give rise to
contract assets or liabilities under ASC 606. Accounts receivable
are recorded when the right to consideration becomes
unconditional.
Remaining performance obligations
As of December 31, 2019, the aggregate amount of the transaction
price allocated to the remaining performance obligation is
$0.
Income taxes
Current income taxes are provided for in accordance with the laws
of the relevant tax authorities. Deferred income taxes are
recognized when temporary differences exist between the tax bases
of assets and liabilities and their reported amounts in the
consolidated financial statements. Net operating loss carry
forwards and credits are applied using enacted statutory tax rates
applicable to future years. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is
more-likely-than-not that a portion of or all of the deferred tax
assets will not be realized. The components of the deferred tax
assets and liabilities are individually classified as current and
non-current based on their characteristics.
The impact of an uncertain income tax position on the income tax
return is recognized at the largest amount that is
more-likely-than-not to be sustained upon audit by the relevant tax
authority. An uncertain income tax position will not be recognized
if it has less than a 50% likelihood of being sustained. Interest
and penalties on income taxes will be classified as a component of
the provisions for income taxes. The Group did not recognize any
income tax due to uncertain tax position or incur any interest and
penalties related to potential underpaid income tax expenses for
the years ended December 31, 2019 or 2018,
respectively.
Foreign currency translation
Items included in the financial statements of each entity in the
Group are measured using the currency of the primary economic
environment in which the entity operates (“functional
currency”).
The functional and reporting currency of the Company is the United
States dollar (“U.S. dollar”). The financial records of
the Company’s subsidiaries located in Singapore, Hong Kong
and the PRC are maintained in their local currencies, the Singapore
Dollar (S$), Hong Kong Dollar (HK$) and Renminbi ("RMB"), which are
also the functional currencies of these entities.
Monetary assets and liabilities denominated in currencies other
than the functional currency are translated into the functional
currency at the rates of exchange ruling at the balance sheet date.
Transactions in currencies other than the functional currency
during the year are converted into functional currency at the
applicable rates of exchange prevailing when the transactions
occurred. Transaction gains and losses are recognized in the
statement of operations.
The Company’s entities with functional currency of Renminbi,
Hong Kong Dollar and Singapore Dollar, translate their operating
results and financial positions into the U.S. dollar, the
Company’s reporting currency. Assets and liabilities are
translated using the exchange rates in effect on the balance sheet
date. Revenues, expenses, gains and losses are translated using the
average rate for the year. Translation adjustments are reported as
cumulative translation adjustments and are shown as a separate
component of comprehensive income (loss).
For the year ended December 31, 2019, the Company recorded other
comprehensive loss from a translation loss of $85,174 in the
consolidated financial statements. For the year ended December 31,
2018, the Company recorded other comprehensive loss from a
translation gain of $64,279 in the consolidated financial
statements.
Comprehensive income (loss)
Comprehensive income (loss) includes gains (losses) from foreign
currency translation adjustments. Comprehensive income (loss) is
reported in the consolidated statements of operations and
comprehensive loss.
Loss per share
Basic loss per share is computed by dividing net loss attributable
to stockholders by the weighted average number of shares
outstanding during the period.
The Company's convertible preferred shares are not participating
securities and have no voting rights until converted to common
stock. As of December 31, 2019, no shares of preferred stock are
eligible for conversion into voting common stock.
Recent accounting pronouncements
On February 25, 2016, the Financial Accounting Standards Board
(FASB) released Accounting Standards Update (ASU) No. 2016-02,
Leases (Topic 842) (the Update). The ASU requires lessees to
recognize leases on-balance sheet and disclose key information
about leasing arrangements. In July 2018, the FASB issued ASU
2018-10 and ASU 2018-11, Codification Improvements to Topic 842,
Leases, amending various aspects of Topic 842. The new standard
establishes a right-of-use model (ROU) that requires a lessee to
recognize a ROU asset and lease liability on the balance sheet for
all leases with a term longer than 12 months. Leases will be
classified as finance or operating, with classification affecting
the pattern and classification of expense recognition in the income
statement.
Topic 842 is effective for annual and interim periods beginning in
the first quarter 2019, with early adoption permitted. A modified
retrospective transition approach is required, applying the new
standard to all leases existing at the date of initial application.
An entity may choose to use either (1) its effective date or (2)
the beginning of the earliest comparative period presented in the
financial statements as its date of initial application. If an
entity chooses the second option, the transition requirements for
existing leases also apply to leases entered into between the date
of initial application and the effective date. The entity must also
recast its comparative period financial statements and provide the
disclosures required by the new standard for the comparative
periods. We have adopted the new standard on January 1, 2019 and
use the effective date as our date of initial
application.
The new standard provides a number of optional practical expedients
in transition. We elected the ‘package of practical
expedients’, which permits us not to reassess under the new
standard our prior conclusions about lease identification, lease
classification and initial direct costs, and we do not expect to
elect the use-of- hindsight.
The new standard also provides practical expedients for an
entity’s ongoing accounting. We elected the short-term lease
recognition exemption for all leases that qualify. For those leases
that qualify, we will not recognize ROU assets or lease
liabilities, and this includes not recognizing ROU assets or lease
liabilities for existing short-term leases of those assets in
transition. We also elected the practical expedient to not separate
lease and non-lease components for all of our leases.
The adoption of Topic 842 had no material impact on the
Company.
In February 2018, the FASB issued Accounting Standards Update No.
2018-02, Income Statement – Reporting Comprehensive Income
(Topic 220): Reclassification of Certain Tax Effects from
accumulated Other Comprehensive Income, or ASU 2018-02, which
requires the reclassification from accumulated other comprehensive
income to retained earnings for the stranded tax effects arising
from the change in the reduction of the U.S. federal statutory
income tax rate to 21% from 35%. ASU 2018-02 is effective for
interim and annual periods beginning after December 15, 2018. We
have adopted ASU 2018-02 on January 1, 2019. The adoption of this
Update had no material effect on the Company.
In June 2018, the FASB issued Accounting Standards Update No.
2018-07, which simplifies several aspects of the accounting for
nonemployee share-based payment transactions resulting from
expanding the scope of Topic 718, Compensation-Stock Compensation,
to include share-based payment transactions for acquiring goods and
services from nonemployees. Some of the areas for simplification
apply only to nonpublic entities. The amendments specify that Topic
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 amendments also clarify that Topic 718 does not apply
to share-based payments used to effectively provide (1) financing
to the issuer or (2) awards granted in conjunction with selling
goods or services to customers as part of a contract accounted for
under Topic 606, Revenue from Contracts with Customers. The
amendments in this Update are effective for public business
entities for fiscal years beginning after December 15, 2018,
including interim periods within that fiscal year. We have adopted
ASU 2018-07 on January 1, 2019. The adoption of this Update had no
material effect on the Company.
Note 3. FIXED ASSETS, NET
Fixed assets, net consisted of the following:
|
|
|
|
|
|
|
|
Computer
equipment
|
$-
|
$45,458
|
|
Office
equipment
|
-
|
20,886
|
|
Furniture
and fixtures
|
-
|
4,847
|
|
Total
|
$-
|
$71,191
|
|
Less:
accumulated depreciation
|
-
|
(69,426)
|
|
Fixed
assets, net
|
$-
|
$1,765
|
Depreciation expenses for continuing operations charged to the
consolidated statements of operations for the years ended December
31, 2019 and 2018 were $0 and 7,842, respectively. Depreciation
expenses for discontinued operations charged to the consolidated
statements of operations for the years ended December 31, 2019 and
2018 were $48 and 6,544, respectively.
Note 4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accrued expenses and other current liabilities consisted of the
following:
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
|
Accrued
professional fees
|
$16,712
|
$55,894
|
|
Other
|
1,849
|
3,665
|
|
Total
|
$18,561
|
$59,559
|
|
Discontinued operations
|
|
|
|
Accrued
payroll and related costs
|
$-
|
$163,653
|
|
Other
|
-
|
10,953
|
|
Total
|
$-
|
$174,606
|
Note 5. INCOME TAXES
The provision for income taxes for the years ended December 31,
2019 and 2018, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations, before income taxes
|
$(6,756)
|
$16,594
|
$9,838
|
$(137,914)
|
$(261,407)
|
$(399,321)
|
|
Income
tax at statutory rate
|
(1,419)
|
3,209
|
1,790
|
(28,962)
|
(43,431)
|
(72,393)
|
|
Items
not taxable for tax purposes
|
(10,584)
|
(58,649)
|
(69,233)
|
-
|
(6,095)
|
(6,095)
|
|
Items
not deductible for tax purposes
|
9
|
7,535
|
7,544
|
16,207
|
-
|
16,207
|
|
Change
in valuation allowance
|
11,994
|
47,905
|
59,899
|
12,755
|
49,526
|
62,281
|
|
Income tax expense
|
$-
|
$-
|
$-
|
$-
|
$-
|
$-
|
|
|
|
|
|
|
|
|
Deferred income tax assets/(liabilities):
|
|
|
|
|
|
|
Operating loss carry forwards
|
172,334
|
856,725
|
1,029,059
|
160,340
|
863,293
|
1,023,633
|
|
Unrealized exchange (gain)/loss
|
(10,575)
|
3,249
|
(7,326)
|
16,207
|
(448)
|
15,759
|
|
Total deferred assets
|
$161,759
|
$859,974
|
$1,021,733
|
$176,547
|
$862,846
|
$1,039,393
|
|
Less: valuation
allowance
|
(161,759)
|
$(859,974)
|
$(1,021,733)
|
$(176,547)
|
$(862,846)
|
$(1,039,393)
|
|
Total net deferred tax assets
|
$-
|
$-
|
$-
|
$-
|
$-
|
$-
|
On December 22, 2017, the Tax Cuts and Jobs Act was signed into
legislation, lowering the corporate income tax rate to 21%
effective January 1, 2018 and making many other significant changes
to the US income tax code. Under ASC740, the effects of changes in
tax rates and laws are recognized in the period in which the new
legislation is enacted.
The Company provided a valuation allowance equal to the deferred
income tax assets for period ended December 31, 2019 because it is
not presently known whether future taxable income will be
sufficient to utilize the loss carry-forwards.
As of December 31, 2019, the Company had approximately $5,104,265
in tax loss carry-forwards that can be utilized in future periods
to reduce taxable income, and which expire by the year 2035. The
Company did not identify any material uncertain tax positions. The
Company did not recognize any interest or penalties for
unrecognized tax benefits.
The federal income tax returns of the Company are subject to
examination by the IRS, generally for three years after they are
filed. The tax returns for the years ended December 31, 2018, 2017
and 2016 are still subject to examination by the taxing
authorities.
Note 6. SHARE CAPITALIZATION
The Company is authorized to issue 1 billion shares of common stock
and 15 million shares of preferred stock. The authorized share
capital of the Company’s common stock was increased from 500
million to 1 billion on May 5, 2017. Both share types have a
$0.0001 par value. As of December 31, 2019 and 2018, the Company
had issued and outstanding, 506,898,576 of common stock, and 0
shares of preferred stock.
Common Shares:
Pursuant to the Purchase Agreement, dated October 15, 2014, the
Company issued 1,000,000 shares of common stock to SeD. Such amount
represented 19% ownership in the Company.
On July 13, 2015, SeD acquired 777,687 shares of the
Company’s common stock by converting outstanding loans made
to the Company into common stock of the Company at a rate of $5.00
per share (rounded to the nearest full share). After such
transactions SeD owned 98.17% of the Company.
On March 27, 2017, the Company entered into a Loan Conversion
Agreement with SeD, pursuant to which SeD agreed to convert
$450,890 of debt owed by the Company to SeD into 500,988,889 common
shares at a conversion price of $0.0009. The captioned shares were
issued on June 9, 2017, and SeD owned 99.979% of the Company after
such transactions.
On December 20, 2018, the Board of Directors of SeD announced its
intention to sell up to 3,200,000 shares of the Company to
independent third parties at US$0.50 per share for an aggregate
cash consideration of up to US$1,600,000. The purpose of this
proposed sale was to raise funds to continue to support the general
corporate and working capital of the Company, including but not
limited to the operating costs of the Company. As of December 31,
2019, SeD has sold 606,900 shares of the Company to independent
third parties, and SeD owned 99.859% of the Company after such
transactions.
Preferred Shares:
Pursuant to the Purchase Agreement, dated October 15, 2014, the
Company issued 13,800,000 shares of a class of preferred stock
called Perpetual Preferred Stock (“Preferred Stock”) to
SeD. The Preferred Stock has no dividend or voting rights. The
Preferred Stock is convertible to common stock of the Company
dependent upon the number of commercial users of our software. For
each 1,000,000 commercial users of the software (without
duplication), SeD shall have the right to convert 1,464,000 shares
of Perpetual Preferred Stock into 7,320,000 shares of Common Stock,
so that there must be a minimum of 9,426,230 commercial users in
order for all of the shares of the Perpetual Preferred Stock to be
converted into common stock of the Company (13,800,000 shares of
Preferred Stock convertible into 69,000,000 shares of common
stock).
On March 27, 2017, SeD and the Company entered into a Preferred
Stock Cancellation Agreement, by which SeD agreed to cancel its
13,800,000 shares Perpetual Preferred Stock issued by the Company.
On June 8, 2017, a Certificate of Retirement for 13,800,000 shares
of the Perpetual Preferred Stock has been filed to the office of
Secretary of State of the State of Delaware.
Other than the conversion rights described above, the Preferred
Stock has no voting, dividend, redemption or other
rights.
Note 7. EQUITY INCENTIVE PLAN
On July 30, 2018, the Company adopted the Equity Incentive Plan
(“The Plan”). The Plan is intended to encourage
ownership of shares by employees, directors and certain consultants
to the Company in order to attract and retain such people, to
induce them to work for the benefit of the Company. The Plan
provides for the grant of options and/or other stock-based or
stock-denominated awards. Subject to adjustment in accordance with
the terms of the Plan, 50,000,000 shares of Common Stock of the
Company have been reserved for issuance pursuant to awards under
the Plan. The Plan will be administered by the Company’s
Board of Directors. This Plan shall terminate ten (10) years from
the date of its adoption by the Board of Directors. There have been
no awards issued under the Plan as of December 31,
2019.
Note 8. DISCONTINUED OPERATIONS
On October 25, 2018, HotApps International Pte. Ltd.
(“HIP”) entered into an Equity Purchase Agreement with
DSS Asia Limited (“DSS Asia”), a Hong Kong subsidiary
of DSS International Inc. (“DSS International”),
pursuant to which HIP agreed to sell to DSS Asia all of the issued
and outstanding shares of HotApps Information Technology Co. Ltd.,
also known as Guangzhou HotApps Technology Ltd. (“Guangzhou
HotApps”). Guangzhou HotApps was a wholly owned subsidiary of
HIP, which was primarily engaged in engineering work for software
development, mainly voice over internet protocol. Guangzhou HotApps
was also involved in a number of outsourcing projects, including
projects related to real estate and lighting.
The parties to the Equity Purchase Agreement agreed that the
purchase price for this transaction would be $100,000, which would
be paid in the form of a two-year, interest free, unsecured, demand
promissory note in the principal amount of $100,000, and that such
note would be due and payable in full in two years. The closing of
the Equity Purchase Agreement was subject to certain conditions;
these conditions were met and the transaction closed on January 14,
2019.
The composition of assets and liabilities included in discontinued
operations was as follows:
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
Cash
|
$31,060
|
$9,268
|
|
Deposit
and other receivable
|
5,136
|
5,049
|
|
TOTAL
CURRENT ASSETS
|
36,196
|
14,317
|
|
|
|
|
|
Fixed
assets, net
|
1,717
|
1,765
|
|
TOTAL ASSETS
|
$37,913
|
$16,082
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
Accounts
payable and accrued expenses
|
$202,848
|
$174,606
|
|
TOTAL
CURRENT LIABILITIES
|
202,848
|
174,606
|
|
TOTAL LIABILITIES
|
$202,848
|
$174,606
|
The aggregate financial results of discontinued operations were as
follows:
|
|
Period Ended January 14, 2019
|
Year Ended December 31, 2018
|
|
|
|
|
|
Revenues:
|
|
|
|
Project
fee-others
|
$-
|
$7,325
|
|
|
-
|
7,325
|
|
|
|
|
|
Cost of revenues
|
-
|
4,527
|
|
|
|
|
|
Gross profit
|
$-
|
$2,798
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
Depreciation
|
48
|
6,544
|
|
General
and administrative
|
3,662
|
93,182
|
|
Total operating expenses
|
3,710
|
99,726
|
|
|
|
|
|
(Loss) from operations
|
(3,710)
|
(96,928)
|
|
|
|
|
|
Other
income (expenses):
|
|
|
|
Other
sundry income
|
-
|
415
|
|
Foreign
exchange (loss)
|
(2)
|
(236)
|
|
Total other (expenses) income
|
(2)
|
179
|
|
|
|
|
|
Loss from discontinued operations
|
$(3,712)
|
$(96,749)
|
Note 9. INVESTMENT IN SUBSIDIARIES
a.
Composition of the Group
|
Name of company
|
Country of incorporation
|
Proportion of (%) of ownership interest
|
|
1st Tier Subsidiary:
|
|
December 31, 2019
|
December 31, 2018
|
|
HotApps International Pte Ltd (“HIP”)
|
Republic of Singapore
|
100% by Company
|
100% by Company
|
|
Crypto Exchange Inc.
|
State of Nevada, the United States of America
|
100% by Company
|
100% by Company
|
|
HWH World Inc.
|
State of Delaware, the United States of America
|
100% by Company
|
100% by Company
|
|
2nd Tier Subsidiaries:
|
|
|
|
|
HWH World Pte. Ltd. (formerly known as Crypto Exchange Pte.
Ltd.)
|
Republic of Singapore
|
100% owned by HIP
|
100% owned by HIP
|
|
HotApp International Limited*
|
Hong Kong (Special Administrative Region)
|
100% owned by HIP
|
100% owned by HIP
|
|
HotApps Information Technology Co Ltd (also known as Guangzhou
HotApps Technology Ltd.)
|
People’s Republic of China
|
-% owned by HIP
|
100% owned by HIP
|
b.
Gain on disposal of subsidiary
As mentioned in Note 8 above, on October 25, 2018, HotApps
International Pte. Ltd. (“HIP”) entered into an Equity
Purchase Agreement with DSS Asia Limited (“DSS Asia”),
a Hong Kong subsidiary of DSS International Inc. (“DSS
International”), pursuant to which HIP agreed to sell to DSS
Asia all of the issued and outstanding shares of HotApps
Information Technology Co. Ltd., also known as Guangzhou HotApps
Technology Ltd. (“Guangzhou HotApps”). Guangzhou
HotApps was a wholly owned subsidiary of HIP. The parties to the
Equity Purchase Agreement agreed that the purchase price for this
transaction would be $100,000, which would be paid in the form of a
two-year, interest free, unsecured, demand promissory note in the
principal amount of $100,000, and that such note would be due and
payable in full in two years. The closing of the Equity Purchase
Agreement was subject to certain conditions; these conditions were
met and the transaction closed on January 14, 2019.
|
Consideration
received
|
$100,000
|
|
Net
liabilities disposal of
|
164,935
|
|
Cumulative
exchange gain in respect of the net liabilities of
subsidiary
|
34,320
|
|
Gain
on disposal
|
$299,255
|
c.
Net cash inflow on disposal of subsidiary
|
Consideration
received
|
$100,000
|
|
Less:
cash and cash equivalent balances disposed of
|
(31,060)
|
|
Net
cash inflow on disposal of disposed subsidiary
|
$68,940
|
Note 10. COMMITMENTS AND CONTINGENCIES
On May 9, 2016, the Company entered into a lease agreement for
1,231 square feet of office space in Guangzhou, China. The lease
commenced on May 9, 2016 and run through May 8, 2018 with monthly
payments of $2,330. The Company renewed the lease agreement with
monthly payments of $2,447. The Company was required to put up a
security deposit of $4,491. For the year ended December 31, 2018,
the Company recorded rent expense of $28,897 for Guangzhou office.
On January 14, 2019, the sale of our operations in Guangzhou
closed. Accordingly, we no longer have this office space or any
continuing obligations for this rent.
On April 10, 2015, the Company entered into a lease agreement for
347 square feet of office space in Kowloon, Hong Kong. This lease
commenced on April 20, 2015 and run through April 19, 2017 with
monthly payments of $2,552. The Company was required to put up a
security deposit of $5,108. On March 16, 2017, the Company entered
into a lease agreement for 1,504 square feet of office space in
Kowloon, Hong Kong. This lease commenced on March 16, 2017 and runs
through March 31, 2019 with monthly payments of $3,253. The Company
was required to put up a security deposit of $6,512. For the year
ended December 31, 2018, the Company recorded rent expense of
$29,277 for this office. The lease was terminated on September 30,
2018 and the security deposit has been returned in the last quarter
of 2018.
Note 11. RELATED PARTY BALANCES AND TRANSACTIONS
SeD is the Company’s majority stockholder. Chan Heng Fai, the
Executive Chairman and Acting Chief Executive Officer of the
Company’s Board of Directors, is also the Chief Executive
Officer and a member of SeD’s Board of Directors, as well as
the majority stockholder of SeD. Conn Flanigan, who served as a
member of the Company’s Board of Directors until September of
2018, serves in various director and officer positions with
subsidiaries of SeD. Lui Wai Leung Alan, the Company’s Chief
Financial Officer, is also the Chief Financial Officer of SeD. As
of the date of this report, the Company has not entered into any
employment arrangement with any director or officer
On March 1, 2018, the Company’s subsidiary HotApp
International Ltd. entered into an Outsource Technology Development
Agreement (the “Agreement”) with Document Security
Systems, Inc. (“Document Security Systems”), which may
be terminated by either party on 30-days’ notice. The purpose
of the Agreement is to facilitate Document Security Systems’
development of a software application to be included as part of
Document Security Systems’ AuthentiGuard® Technology
suite. Under this agreement, Document Security Systems agreed to
pay $23,000 per month for access to HotApp International
Ltd.’s software programmers. The agreement was terminated on
July 31, 2018. Mr. Chan Heng Fai is a member of the Company’s
Board of Directors and, through his control of the Company’s
majority stockholder, the beneficial owner of a majority of the
Company’s common stock. Mr. Chan is also a member of the
Board of Document Security Systems and a stockholder of Document
Security Systems.
As of December 31, 2019, the Company has amount due to SeD of
$1,396,426, an amount due to a director of $5,343, plus an amount
due to an affiliate of $102 and an amount due from an affiliate of
$2,228. The Company has made full impairment provision for the
amount due from the affiliate. As of December 31, 2018, the Company
has amount due to SeD of $1,121,730, plus an amount due to a
director of $5,274 and an amount due from an affiliate of $2,200.
The Company has made full impairment provision for the amount due
from the affiliate.
The account receivable as of December 31, 2019 includes a trade
receivable from an affiliate by common ownership amounting to
$39,427 resulting from the revenue earned from that affiliate
during the year 2017, and the company has put up a full allowance
for the said amount.
On October 25, 2018, HotApps International Pte. Ltd.
(“HIP”) entered into an Equity Purchase Agreement with
DSS Asia Limited (“DSS Asia”), a Hong Kong subsidiary
of DSS International Inc. (“DSS International”),
pursuant to which HIP agreed to sell to DSS Asia all of the issued
and outstanding shares of HotApps Information Technology Co. Ltd.,
also known as Guangzhou HotApps Technology Ltd. (“Guangzhou
HotApps”). Guangzhou HotApps was a wholly owned subsidiary of
HIP, which was primarily engaged in engineering work for software
development, mainly voice over internet protocol. Guangzhou HotApps
was also involved in a number of outsourcing projects, including
projects related to real estate and lighting.
The parties to the Equity Purchase Agreement agreed that the
purchase price for this transaction would be $100,000, which would
be paid in the form of a two-year, interest free, unsecured, demand
promissory note in the principal amount of $100,000, and that such
note would be due and payable in full in two years. The closing of
the Equity Purchase Agreement was subject to certain conditions;
these conditions were met and the transaction closed on January 14,
2019.
Mr. Chan Heng Fai is the Acting Chief Executive Officer and a
Member of the Board of Directors of the Company. He is also the
Chief Executive Officer, Chairman and controlling stockholder of
Singapore eDevelopment Limited, the majority stockholder of the
Company. Mr. Chan is also the Chief Executive Officer and Chairman
of DSS International and a significant stockholder and a member of
the Board of Document Security Systems Inc., which is the sole
owner of DSS International. Mr. Chan Heng Fai is also a member of
the Board of Directors of Document Security Systems and a
stockholder of Document Security Systems. Lum Kan Fai, a member of
the Board of Directors of the Company, is also an employee of DSS
International.
Since the completion of the sale of all of the issued and
outstanding shares of HotApps Information Technology Co. Ltd. (also
known as Guangzhou HotApps Technology Ltd.) on January 14, 2019, we
have not paid any employees, and our largest stockholder, SeD, has
provided staff without charge to our Company. We intend to
outsource many functions of our business for the immediate
future.
Item 9. Changes in and Disagreements
with Accountants on Accounting and Financial
Disclosure.
None
Item 9A. Controls and
Procedures.
Evaluation of Disclosure Controls and Procedures
In connection with the preparation of our Report on Form 10-K, an
evaluation was carried out by management, with the participation of
our Acting Chief Executive Officer and Chief Financial Officer, of
the effectiveness of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934 (Exchange Act) as of December 31, 2019.
Disclosure controls and procedures are designed to ensure that
information required to be disclosed in reports filed or submitted
under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified, and that such
information is accumulated and communicated to management,
including the Acting Chief Executive Officer and Chief Financial
Officer, to allow timely decisions regarding required
disclosure.
During evaluation of disclosure controls and procedures as of
December 31, 2019 conducted as part of our annual audit and
preparation of our annual financial statements, management
conducted an evaluation of the effectiveness of the design and
operations of our disclosure controls and procedures and concluded
that our disclosure controls and procedures were not effective.
Management determined that at December 31, 2019, we had a material
weakness that relates to the relatively small number of employees,
provided by SeD, who have bookkeeping and accounting functions and
therefore prevents us from segregating duties within our internal
control system.
Management’s Report on Internal Control over Financial
Reporting
Management is responsible for the preparation and fair presentation
of the financial statements included in this annual report. The
financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of
America and reflect management’s judgment and estimates
concerning effects of events and transactions that are accounted
for or disclosed.
Management is also responsible for establishing and maintaining
adequate internal control over financial reporting. Our internal
control over financial reporting includes those policies and
procedures that pertain to our ability to record, process,
summarize and report reliable data. Management recognizes that
there are inherent limitations in the effectiveness of any internal
control over financial reporting, including the possibility of
human error and the circumvention or overriding of internal
control. Accordingly, even effective internal control over
financial reporting can provide only reasonable assurance with
respect to financial statement presentation. Further, because of
changes in conditions, the effectiveness of internal control over
financial reporting may vary over time.
In order to ensure that our internal control over financial
reporting is effective, management regularly assesses controls and
did so most recently for its financial reporting as of December 31,
2019. This assessment was based on criteria for effective internal
control over financial reporting described in the Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations (COSO) of the Treadway Commission. Based on this
assessment, management has concluded that, as of December 31, 2019,
we had a material weakness that relates to the relatively small
number of employees, provided by SeD, who have bookkeeping and
accounting functions and therefore prevents us from segregating
duties within our internal control system. The inadequate
segregation of duties is a weakness because it could lead to the
untimely identification and resolution of accounting and disclosure
matters or could lead to a failure to perform timely and effective
reviews. The Company also noted the internal staff has limited US
GAAP and SEC Reporting experience.
This annual report filed on Form 10-K does not include an
attestation report of the Company’s registered public
accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation
by our registered public accounting firm pursuant to temporary
rules of the Securities and Exchange Commission that permit us to
provide only management’s report in this annual
report.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial
reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the
Exchange Act) that occurred during the quarterly period ended
December 31, 2019 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.
Item 9B. Other
Information.
None
PART III
Item 10. Directors, Executive Officers
and Corporate Governance.
Identification of directors and officers
The following table sets forth the name and age of officers and
director as of the date hereof. Our executive officers are elected
annually by our board of directors. Our executive officers hold
their offices until they resign, are removed by the Board, or his
successor is elected and qualified.
Directors and Executive Officers
|
Name
|
|
Age
|
|
Position
|
|
Chan Heng Fai
|
|
75
|
|
Acting Chief Executive Officer, Executive Chairman of the
Board
|
|
Lum Kan Fai
|
|
57
|
|
Vice Chairman of the Board
|
|
Sanjib Kalita
|
|
47
|
|
Director
|
|
Lui Wai Leung Alan
|
|
49
|
|
Chief Financial Officer
|
On October 21, 2014, the Company reported under Form 8-K the Sale
& Purchase Agreement (“Purchase Agreement”) with
Singapore eDevelopment Limited (“SeD”), a Singapore
exchange listed company, dated October 15, 2014. The Purchase
Agreement also granted SeD the right to nominate one member to the
Company’s Board of Directors.
The mailing address for each of the officers and directors named
above is c/o the Company at: 4800 Montgomery Lane, Suite 210,
Bethesda, Maryland 20814.
Business Experience
Mr. Chan has served as a
Director since October 23, 2014, as the Executive Chairman of the
Company’s Board of Directors since December 1, 2017, and the
Acting Chief Executive Officer since August 8, 2018. Mr. Chan
previously served as the Company’s Chief Executive Officer
from December 31, 2014 until June 21, 2017. Mr. Chan is an expert
in banking and finance, with 45 years of experience in these
industries. He has also restructured numerous companies in various
industries and countries during the past 40 years. Mr. Chan has
served as the Chief Executive Officer of Singapore eDevelopment
Limited, a diversified holding company listed on the Catalist of
the Singapore Exchange Securities Trading Limited, since April
2014, and has served as a director of that company since May of
2013. Since March, 2018, Mr. Chan has served as a Chairman of the
Board and Chief Executive Officer of HF Enterprises Inc. Mr. Chan
has served as a member of the Board of Directors of SeD Intelligent
Home Inc. since January 10, 2017, and has served as Co-Chief
Executive Officer of SeD Intelligent Home since December 29, 2017.
He has served as a non-executive director of Document Security
Systems, Inc., an NYSE listed company, since January 2017 and as
Chairman of the Board since March of 2019. Mr. Chan has also served
as a non-executive director of Holista CollTech Ltd., an ASX listed
company, since July 2013 and has served as a director of Vivacitas
Oncology Inc. since May of 2017. Mr. Chan has served as a director
of OptimumBank Holdings, Inc. and Optimum Bank since June
2018.
Mr. Chan’s previous experiences include serving as Managing
Chairman of ZH International Holdings Limited (formerly known as
Heng Fai Enterprises Limited), an investment holding company listed
on the HKSE, from 1992 to 2015. Mr. Chan was formerly the Managing
Director of SingHaiyi Group Ltd., a property development,
investment and management company listed on the Singapore Exchange
Mainboard, from November 2003 to September 2013, and the Executive
Chairman of China Gas Holdings Limited, a Hong Kong listed investor
and operator of city gas pipeline infrastructure in China from 1997
to 2002. Mr. Chan served on the Board of RSI International Systems,
Inc., the developer of RoomKeyPMS, a web based property management
system, from June 2014 to February 2019.
Mr. Chan has also served as a director of Global Medical REIT
Inc., a healthcare facility real estate company, from December 2013
to July 2015. He was a director of American Housing REIT Inc. from
October of 2013 to July of 2015. He served as a director of Skywest
Ltd., a public Australian airline company from 2005 to 2006. Mr.
Chan was a director of Global Med Technologies, Inc., a medical
company engaged in the design, development, marketing and support
information for management software products for healthcare-related
facilities, from May 1998 until December 2005.
Director Qualifications of Chan Heng Fai:
The board of directors appointed Mr. Chan in recognition of his
abilities to assist the Company in expanding its business and the
contributions he can make to the Company’s strategic
direction.
Mr. Lum has served as a member
of the Company’s Board of Directors since June of 2015. Mr.
Lum served as Chief Technology Officer (“CTO”) from
June of 2015 until June of 2017. In June of 2017, the Company
appointed Mr. Lum Kan Fai as the Company’s CEO and President,
and Mr. Lum resigned as CTO. In December of 2017, Mr. Lum Kan Fai
resigned as CEO and President of the Company and was appointed as
Vice Chairman of the Company’s Board of Directors. Mr. Lum
currently is the President, Digital Group of DSS Inc and President
of DSS Asia, who is responsible for P&L long term development
of DSS digital product division and Asia Pacific operation of DSS
Inc, a NYSE listed company. Mr. Lum was the founder, and since 2009
had served as Chief Executive Officer, of FUNboxx Ltd. Prior to
that, Mr. Lum held senior management positions with Vitop Holding,
a HK listed company, York International (Now Johnson Controls),
Apple and Datacraft Asia. Mr. Lum graduated from the University of
Essex (UK) in 1985, first class honor degree in Computer and
Communication Engineering.
Director Qualifications of Mr. Lum Kan Fai:
The board of directors appointed Mr. Lum in recognition of his
extensive knowledge in information technology business and his
ability to assist in the Company’s continuous growth. He has
over 30 years of technology business experience in multinational
corporations.
Mr. Kalita has served as a
member of the Company’s Board of Directors since February of
2018. Mr. Kalita is presently the Chief Executive Officer of the
Guppy Group, a next generation credit bureau built on blockchain
technology. Mr. Kalita has held this position since June of 2016.
In addition, since April of 2013 Mr. Kalita has worked for and
helped build Money 20/20, a leading fintech industry event focusing
on disruptive technology in financial technology and payments. His
positions at Money 20/20 have included Knowledge Director (from
April of 2013 until December of 2014), Head of Marketing (from
January of 2015 until August of 2016) and Chief Marketing Officer
(since August of 2016). He is also an advisor to multiple startups
including MPOWER Financing, an alternative lender for international
students studying in the USA, and Impact Analytics, which provides
advanced analytics and data services for the retail industry. Mr.
Kalita is also a Member of the Advisory Board to the SXSW
Accelerator. Previously, Mr. Kalita served in business development
for Google Wallet from April 2012 to April 2013. Prior to that
position, Mr. Kalita was involved with several successful startups
including TxVia, a payment platform building technology company
acquired by Google in 2012, and Irynsoft, a mobile education app
company. Mr. Kalita has also worked for Intel and Citibank. Mr.
Kalita has an M.B.A. from the Kellogg School of Management, as well
as a B.S. and Masters in Engineering from Cornell University where
he majored in Electrical Engineering.
Director Qualifications of Sanjib Kalita:
Mr. Kalita’s service as an officer, director and employee of
various entities has provided him with significant knowledge and
experience regarding financial technology and
payments.
Mr. Lui Wai Leung Alan has
served as Chief Financial Officer since May 12, 2016. Mr. Lui has
been Chief Financial Officer of Singapore eDevelopment Limited, the
Company’s majority stockholder, since November 2016 and
served as its Acting Chief Financial Officer from June 2016 until
November 2016. Since October of 2016, Mr. Lui has also served as a
director of BMI Capital Partners International Ltd, a Hong Kong
investment consulting company. He has also served as a director of
LiquidValue Asset Management Pte Limited (formerly known as Hengfai
Asset Management Pte. Ltd.), a Singapore fund management company,
since April, 2018. Mr. Lui has served as Co-Chief Financial Officer
of SeD Intelligent Home Inc. since December 2017. Mr. Lui has
served a Co-Chief Financial Officer of HF Enterprises Inc. since
March 2018. From June of 1997 through March of 2016, Mr. Lui served
in various executive roles at ZH International Holdings Ltd. (a
Hong Kong-listed company formerly known as Heng Fai Enterprises
Ltd), including as Financial Controller. Mr. Lui oversaw the
financial and management reporting and focusing on its financing
operations, treasury investment and management. He has extensive
experience in financial reporting, taxation and financial
consultancy and management in Hong Kong. Mr. Lui is a Certified
Practicing Accountant in Australia and received a Bachelor’s
Degree in Business Administration from the Hong Kong Baptist
University in 1993.
Section 16(a) Beneficial Ownership Reporting
Compliance
Not Applicable.
Corporate Governance
Board of Directors
The varying business experience of each of our directors led to the
conclusion that each such party should be a member of our Board of
Directors. The minimum number of directors we are authorized to
have is one and the maximum is eight. In no event may we have less
than one director.
Directors on our Board of Directors are elected for one-year terms
and serve until the next annual security holders’ meeting or
until their death, resignation, retirement, removal,
disqualification, or until a successor has been elected and
qualified. All officers are appointed annually by the Board of
Directors and serve at the discretion of the Board. Currently,
directors receive no compensation for their services on our
Board.
All directors will be reimbursed by us for any accountable expenses
incurred in attending directors' meetings provided that we have the
resources to pay these fees. We will consider applying for officers
and directors’ liability insurance at such time when we have
the resources to do so.
Committees of the Board of Directors
Concurrent with having sufficient members and resources, our Board
of Directors intends to establish an audit committee and a
compensation committee. The audit committee will review the results
and scope of the audit and other services provided by the
independent auditors and review and evaluate the system of internal
controls. The compensation committee will review and recommend
compensation arrangements for the officers and employees. No final
determination has yet been made as to the memberships of these
committees or when we will have sufficient members to establish
committees. We believe that we will need a minimum of three
independent directors to have effective committee
systems.
As of the date hereof, we have not established any Board
committees.
Family Relationships
No family relationship exists between any director, executive
officer, or any person contemplated to become such.
Director Independence
In light of the relationships between certain members of our Board
and our majority stockholder, only one of our directors, Mr. Sanjib
Kalita, may be deemed to be independent. Our board of directors has
voluntarily adopted the corporate governance standards defining the
independence of our directors imposed by the NASDAQ Capital
Market's requirements for independent directors pursuant to Rule
5605(a)(2) of the Marketplace Rules of The NASDAQ Stock Market
LLC.
Potential Conflicts
None of the members of our management work for the Company on a
full-time basis. Both our Acting Chief Executive Officer and our
Chief Financial Officer are employed by our largest stockholder,
Singapore Development, and their services are being temporarily
provided to us at no cost. Certain conflicts of interest may arise
between us and our officer(s) and director(s) in that they may have
other business interests in the future to which they devote their
attention, and they may be expected to continue to do so although
management time must also be devoted to our business. As a result,
conflicts of interest may arise that can be resolved only through
their exercise of such judgment as is consistent with each
officer's understanding of his/her fiduciary duties to
us.
We will seek to add additional officer(s) and/or director(s) as and
when the proper personnel are located and terms of employment are
mutually negotiated and agreed, and we have sufficient capital
resources and cash flow to make such offers.
We cannot provide assurances that our efforts to eliminate the
potential impact of conflicts of interest will be
effective.
Involvement in Certain Legal Proceedings
None of our directors or executive officers has, during the past
ten years:
|
●
|
had any bankruptcy petition filed by or against any business of
which he was a general partner or executive officer, either at the
time of the bankruptcy or within two years prior to that
time;
|
|
●
|
been convicted in a criminal proceeding or been subject to a
pending criminal proceeding (excluding traffic violations and other
minor offences);
|
|
●
|
been subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of
business, securities, futures, commodities or banking
activities;
|
|
●
|
been found by a court of competent jurisdiction (in a civil
action), the Securities and Exchange Commission or the Commodity
Futures Trading Commission to have violated a federal or state
securities or commodities law, and the judgment has not been
reversed, suspended, or vacated; and
|
|
●
|
been subject or a party to or any other disclosable event required
by Item 401(f) of Regulation S-K.
|
Code of Business Conduct and Ethics
We currently do not have a Code of Business Conduct and Ethics. We
intend to adopt one in the immediate future.
EXECUTIVE COMPENSATION
Summary Compensation Table for 2019 and 2018
The following table presents summary information regarding the
total compensation awarded to, earned by, or paid to each of the
named executive officers for services rendered to us for the
calendar years ended December 31, 2019 and December 31, 2018.
Name and Principal Position
|
|
|
|
|
All Other
Compensation
($)
|
|
|
Chan
Heng Fai, Executive Chairman, Acting CEO
|
2019
|
--
|
--
|
--
|
--
|
--
|
|
Lum
Kan Fai, Director, Vice Chairman
|
2019
|
--
|
--
|
--
|
--
|
--
|
|
Sanjib
Kalita
|
2019
|
--
|
--
|
--
|
--
|
--
|
|
Lui
Wai Leung Alan, CFO
|
2019
|
--
|
--
|
--
|
--
|
--
|
Name and Principal Position
|
|
|
|
|
All Other
Compensation
($)
|
|
|
Chan
Heng Fai, Executive Chairman, Acting CEO
(appointed
as Acting CEO as of August 8, 2018)
|
2018
|
--
|
--
|
--
|
--
|
--
|
|
Conn
Flanigan, Director, Secretary (effective as of September 19, 2018
resigned as director and Secretary)
|
2018
|
--
|
--
|
--
|
--
|
--
|
|
Lum
Kan Fai, Director, Vice Chairman
|
2018
|
--
|
--
|
--
|
--
|
--
|
|
Sanjib
Kalita
(from
February 20, 2018)
|
2018
|
--
|
--
|
--
|
--
|
--
|
|
Lee
Wang Kei, CEO, CTO
(effective
as of August 8, 2018, resigned as CEO and CTO)
|
2018
|
36,439
|
--
|
--
|
1,359
|
37,798
|
|
Lui
Wai Leung Alan, CFO
|
2018
|
--
|
--
|
--
|
--
|
--
|
Other than as set forth in the table above, there has been no cash
or non-cash compensation awarded to, earned by or paid to any of
our officers and directors since inception. On July 30, 2018, the
Company adopted the Equity Incentive Plan intended to encourage
ownership of Shares by Employees and directors of and certain
consultants to the Company in order to attract and retain such
people, to induce them to work for the benefit of the
Company.
Director Compensation
Our directors will not receive a fee for attending each board of
directors meeting or meeting of a committee of the board of
directors. All directors will be reimbursed for their reasonable
out-of-pocket expenses incurred in connection with attending board
of director and committee meetings.
Employment Agreement
We do not currently have any employment agreements with our
officers and directors.
Item 12. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder
Matters.
The following table sets forth certain information as of March 30,
2020 with respect to the beneficial ownership of our common stock,
the sole outstanding class of our voting securities, by (i) any
person or group owning more than 5% of each class of voting
securities, (ii) each director, (iii) each executive officer named
in the Summary Compensation Table in the section entitled
“Executive Compensation” above and (iv) all executive
officers and directors as a group. As of March 30, 2020, we had
506,898,576 shares of common stock issued and
outstanding.
Beneficial ownership is determined under the rules of the
Securities and Exchange Commission and generally includes voting or
investment power over securities. Except in cases where community
property laws apply or as indicated in the footnotes to this table,
we believe that each stockholder identified in the table possesses
sole voting and investment power over all shares of common stock
shown as beneficially owned by the stockholder.
Shares of common stock subject to options or warrants that are
currently exercisable or exercisable within 60 days of the date of
this Form 10-K are considered outstanding and beneficially owned by
the person holding the options for the purpose of computing the
percentage ownership of that person but are not treated as
outstanding for the purpose of computing the percentage ownership
of any other person.
|
Name and Address (1)
|
|
|
|
Greater than 5% Holders
|
|
|
|
Singapore
eDevelopment Limited (2)
|
506,148,676
|
99.852%
|
|
Officers and Directors
|
|
|
|
Chan
Heng Fai (3)
|
506,148,676
|
99.852%
|
|
Sanjib
Kalita
|
0
|
0%
|
|
Lum
Kan Fai
|
0
|
0%
|
|
Lui
Wai Leung Alan
|
0
|
0%
|
|
All
directors and officers as a group (5 persons)
|
|
|
_____________________
|
(1)
(2)
(3)
|
Unless otherwise stated, the address is 4800 Montgomery Lane, Suite
210, Bethesda MD 20814, the address of the Company
The address is: 7 Temasek Boulevard #29-01B, Suntec Tower One,
Singapore 038987.
Mr. Chan, as the Chief Executive Officer and majority stockholder
of Singapore eDevelopment Limited, is deemed to be the beneficial
owner of those shares owned by Singapore eDevelopment
Limited.
|
Item 13. Certain Relationships and
Related Transactions, and Director Independence.
SeD is the Company’s majority stockholder. Chan Heng Fai, the
Executive Chairman and Acting Chief Executive Officer of the
Company’s Board of Directors, is also the Chief Executive
Officer and a member of SeD’s Board of Directors, as well as
the majority stockholder of SeD. Lui Wai Leung Alan, the
Company’s Chief Financial Officer, is also the Chief
Financial Officer of SeD. As of the date of this report, the
Company has not entered into any employment arrangement with any
director or officer.
On December 31, 2014, the Company owed Singapore eDevelopment
Limited (SeD), its majority stockholder, $4,428,438. This amount
reflects a loan of $50,000 and the US equivalent of S$5,702,500. It
also includes $32,574 in payments made by SeD on behalf of the
Company. On December 28, 2014, SeD loaned the Company under a
promissory note (the “Note”) $3,988,831
(S$5,250,533.93). The Note is non-interest bearing and matures on
June 25, 2015. The Note has no prepayment penalty. The other loans
and expenses covered by SeD for the benefit of the Company are not
covered under a loan document.
On July 13, 2015, the Company entered into a Loan Conversion
Agreement with SeD, pursuant to which SeD converted outstanding
loans made to the Company into common stock of the Company at a
rate of $5.00 per share (rounded to the nearest full share). The
total amount converted consists of outstanding principal in the
amount of $5,250,554 Singapore Dollars or $3,888,437 USD as of
exchange rate on July 10, 2015, which amount was evidenced by a
promissory note in favor of SeD effective December 28, 2014
(“SeD Promissory Note”). The principal amount of
$3,888,437 was converted to common stock of the Company, and in
exchange, SeD received 777,687 shares of common stock of the
Company. The other loans and expenses covered by SeD for the
benefit of the Company are not covered under a loan
document.
On March 25, 2015, HotApps International Pte Ltd
(“HIP”) acquired 100% of issued share capital in HotApp
International Limited, a Hong Kong company, for a cash
consideration of HK$1.00 from Mr. Chan Heng Fai, a substantial
stockholder and the Company’s Executive Director and Acting
CEO. HotApp International Limited is a corporation incorporated in
Hong Kong Special Administrative Region of the People’s
Republic of China with a total issued share capital of HK$1.00
represented by one (1) issued share at HK$1.00 each. The
consideration of the acquisition was based on the issued share
capital of HotApp International Limited, which is principally
engaged in the sales and marketing of mobile application. HotApp
International Limited was dormant and has a net equity deficiency
of HK$5,456 due to incorporation expenses as at the date of
acquisition.
On January 25, 2017, the Company entered into an Agreement for
Services with iGalen International Inc. (“iGalen”), a
company specializing in dietary supplements, to provide iGalen with
a mobile enterprise resource planning platform (“Mobile
App”) for iGalen’s members. Under the terms of the
agreement, iGalen, a U.S.-based network marketing company which is
53% owned by SeD, agreed to share 3% of its entire annual global
revenue with the Company for the financial year ending December 31,
2017. In exchange, the Company assumed responsibility for
maintaining and upgrading the Mobile App platform, as well as
providing the required cloud infrastructure. The Company agreed to
absorb the cost of development of the Mobile App, and agreed not to
charge individual members for use of the Mobile App’s
standard functions.
On March 27, 2017, the Company entered into a Loan Conversion
Agreement with SeD, pursuant to which SeD agreed to convert
$450,890 of debt owed by the Company to SeD into 500,988,889 common
shares at a conversion price of $0.0009. The captioned shares were
issued on June 9, 2017, and SeD owned 99.979% of the Company after
such transactions.
On December 20, 2018, the Board of Directors of SeD announced its
intention to sell up to 3,200,000 shares of the Company to
independent third parties at US$0.50 per share for an aggregate
cash consideration of up to US$1,600,000. The purpose of this
proposed sale was to raise funds to continue to support the general
corporate and working capital of the Company, including but not
limited to the operating costs of the Company. As of December 31,
2019, SeD has sold 606,900 shares of the Company to independent
third parties, and SeD owned 99.859% of the Company after such
transactions.
On March 27, 2017, SeD and the Company entered into a Preferred
Stock Cancellation Agreement, by which SeD agreed to cancel its
13,800,000 shares of Perpetual Preferred Stock issued by the
Company. On June 8, 2017, a Certificate of Retirement for
13,800,000 shares of the Perpetual Preferred Stock has been filed
with the office of Secretary of State of the State of
Delaware.
On October 25, 2018, HotApps International Pte. Ltd.
(“HIP”) entered into an Equity Purchase Agreement with
DSS Asia Limited (“DSS Asia”), a Hong Kong subsidiary
of DSS International Inc. (“DSS International”),
pursuant to which HIP agreed to sell to DSS Asia all of the issued
and outstanding shares of HotApps Information Technology Co. Ltd.,
also known as Guangzhou HotApps Technology Ltd. (“Guangzhou
HotApps”). Guangzhou HotApps was a wholly owned subsidiary of
HIP, which was primarily engaged in engineering work for software
development, mainly voice over internet protocol. Guangzhou HotApps
was also involved in a number of outsourcing projects, including
projects related to real estate and lighting.
The parties to the Equity Purchase Agreement agreed that the
purchase price for this transaction would be $100,000, which would
be paid in the form of a two-year, interest free, unsecured, demand
promissory note in the principal amount of $100,000, and that such
note would be due and payable in full in two years. The closing of
the Equity Purchase Agreement was subject to certain conditions;
these conditions were met and the transaction closed on January 14,
2019.
Mr. Chan Heng Fai is the Acting Chief Executive Officer and a
Member of the Board of Directors of the Company. He is also the
Chief Executive Officer, Chairman and controlling stockholder of
Singapore eDevelopment Limited, the majority stockholder of the
Company. Mr. Chan is also the Chief Executive Officer and Chairman
of DSS International and a significant stockholder and a member of
the Board of Document Security Systems Inc., which is the sole
owner of DSS International. Mr. Chan Heng Fai is also a member of
the Board of Directors of Document Security Systems and a
stockholder of Document Security Systems. Lum Kan Fai, a member of
the Board of Directors of the Company, is also an employee of DSS
International.
We believe that the foregoing transactions were in our best
interests. Consistent with Section 144 of the Delaware General
Corporation Law, it is our current policy that all transactions
between us and our officers, directors and their affiliates will be
entered into only if such transactions are approved by a majority
of the disinterested directors, are approved by vote of the
stockholders or are fair to us as a corporation as of the time they
were authorized, approved or ratified by the board. We will conduct
an appropriate review of all related party transactions on an
ongoing basis, and, where appropriate, we will utilize our audit
committee for the review of potential conflicts of
interest.
Except as set forth above, none of the following persons has any
direct or indirect material interest in any transaction to which we
are a party since our incorporation or in any proposed transaction
to which we are proposed to be a party:
|
|
(A)
|
Any of our directors or officers;
|
|
|
(B)
|
Any proposed nominee for election as our director;
|
|
|
(C)
|
Any person who beneficially owns, directly or indirectly, shares
carrying more than 10% of the voting rights attached to our common
stock; or
|
|
|
(D)
|
Any relative or spouse of any of the foregoing persons, or any
relative of such spouse, who has the same house as such person or
who is a director or officer of any parent or subsidiary of our
Company.
|
Item 14. Principal Accounting Fees and
Services.
The following table indicates the fees paid by us for services
performed for the:
|
|
|
|
|
|
|
|
Audit
Fees
|
$40,000
|
$40,000
|
|
Tax
Fees
|
4,000
|
4,000
|
|
Total
|
$44,000
|
$44,000
|
PART IV
Item 15. Exhibits, Financial Statement
Schedules
(a)(1)
List
of Financial Statements included in Part II hereof:
Consolidated Balance Sheets as of December 31, 2019 and
2018
Consolidated Statements of Operations and Comprehensive Loss for
the Years Ended December 31, 2019 and 2018
Consolidated Statements of Stockholder Equity (Deficit) for the
Period January 1, 2018 to December 31, 2019
Consolidated Statements of Cash Flows for the Years Ended December
31, 2019 and 2018
(a)(2)
List
of Financial Statement schedules included in Part IV
hereof:
None
The following exhibits are included herewith:
|
Exhibit
Number
|
|
Description
|
|
|
|
|
|
|
|
|
Certificate of
Incorporation (incorporated herein by reference to Exhibit 3.1 to
the Company’s Registration Statement on Form S-1 filed on
March 21, 2014).
|
|
|
|
|
|
Certificate of
Amendment to the Certificate of Incorporation (incorporated herein
by reference to Exhibit 3.1.(i) to the Company’s Current
Report on Form 8-K filed on December 9, 2014).
|
|
|
|
|
|
Certificate of
Amendment to the Certificate of Incorporation (incorporated herein
by reference to Exhibit 3.1.2 to the Company’s Annual Report
on Form 10-K for the period ended December 31, 2017 filed on April
2, 2018).
|
|
|
|
|
|
Bylaws
(incorporated herein by reference to Exhibit 3.2.1 to the
Company’s Annual Report on Form 10-K for the period ended
December 31, 2017 filed on April 2, 2018).
|
|
|
|
|
|
Agreement for
Services dated January 25, 2017, by and between the Company and
IGalen International Inc. (incorporated herein by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K
filed on February 21, 2017).
|
|
|
|
|
|
Loan Conversion
Agreement, by and among HotApp International Inc. and Singapore
eDevelopment Limited, dated as of March 27, 2017 (incorporated
herein by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed on March 31, 2017).
|
|
|
|
|
|
Preferred Stock
Cancellation Agreement, by and among HotApp International Inc.
and Singapore eDevelopment Limited, dated as of March 27, 2017
(incorporated herein by reference to Exhibit 10.2 to the
Company’s Current Report on Form 8-K filed on March 31,
2017).
|
|
|
|
|
|
Outsource
Technology Development Agreement, by and between Document Security
Systems, Inc. and HotApp International Ltd., dated as of March 1,
2018 (incorporated by reference to Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q for the period ended
March 31, 2018, filed on May 15, 2018).
|
|
|
|
|
|
HotApp Blockchain
Inc. 2018 Equity Incentive Plan (incorporated herein by reference
to Exhibit 10.1 to the Company’s Current Report on Form 8-K
filed on August 3, 2018).
|
|
|
|
|
|
Term Sheet, by and
between HotApps International Pte Ltd and Alpha Mind Pte Ltd, dated
as of September 14, 2018 (incorporated herein by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K
filed on September 20, 2018).
|
|
|
|
|
|
Guangzhou HotApp
Equity Purchase Agreement (incorporated herein by reference to
Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q
for the period ended September 30, 2018 filed on November 14,
2018).
|
|
|
|
|
|
Subsidiaries of the
Registrant
|
|
|
|
|
|
Certification of
Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a)
under the Securities Exchange Act of 1934, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
Certification of
Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a)
under the Securities Exchange Act of 1934, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
Certification of
Chief Executive and Financial Officer Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
|
|
|
|
101.INS*
|
|
XBRL Instance
Document
|
|
|
|
101.SCH*
|
|
XBRL Taxonomy
Extension Schema Document
|
|
|
|
101.CAL*
|
|
XBRL Taxonomy
Extension Calculation Linkbase Document
|
|
|
|
101.DEF*
|
|
XBRL Taxonomy
Extension Definition Linkbase Document
|
|
|
|
101.LAB*
|
|
XBRL Taxonomy
Extension Label Linkbase Document
|
|
|
|
101.PRE*
|
|
XBRL Taxonomy
Extension Presentation Linkbase Document
|
|
|
|
*
|
Filed with this document
|
|
|
|
|
|
|
Item 16. Form 10-K
Summary
None.
Pursuant to the requirements of Section 13 or 15(d) of the Exchange
Act, the registrant caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
|
|
HOTAPP BLOCKCHAIN INC.
|
|
|
Date: March 30, 2020
|
By:
|
/s/ Chan Heng Fai
|
|
|
|
|
Chan Heng Fai
|
|
|
|
|
Acting Chief Executive Officer
(Principal Executive Officer)
|
|
|
Date: March 30, 2020
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By:
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/s/ Lui Wai Leung, Alan
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Lui Wai Leung, Alan
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Chief Financial Officer
(Principal Financial and Accounting Officer)
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Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities indicated and on the
dates indicated.
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Signature
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Title
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Date
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/s/ Chan Heng Fai
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Acting Chief Executive Officer, Executive Chairman of the
Board
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March 30, 2020
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Chan Heng Fai
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(Principal Executive Officer)
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/s/ Lui Wai Leung, Alan
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Chief Financial Officer
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March 30, 2020
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Lui Wai Leung, Alan
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(Principal Financial and Accounting Officer)
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/s/ Lum Kan Fai
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Vice Chairman of the Board
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March 30, 2020
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Lum Kan Fai
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/s/ Sanjib Kalita
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Director
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March 30, 2020
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Sanjib Kalita
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