BCRD 10-K/A
BlueOne Technologies, Inc. (BCRD)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Amendment No. 1)
(Mark One)
For
the Year Ended
OR
For the transition period from _______ to _______
Commission
file number:
(Exact Name of Registrant as Specified in Charter)
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Securities registered pursuant to Section 12(b) of the Act:
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| N/A | N/A | N/A |
Securities
registered pursuant to Section 12(g) of the Act:
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
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by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
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by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
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to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Smaller
reporting company |
Emerging
growth company |
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. ☐
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by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.
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by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No
The
aggregate market value of voting stock held by non-affiliates of the Registrant, computed by reference to the price at which the common
equity was last sold and issued, was $
The number of shares of Common Stock, $0.001 par value, of the registrant outstanding at July 10, 2024 was .
DOCUMENTS INCORPORATED BY REFERENCE
EXPLANATORY NOTE
In accordance with Rule 12b-15 and Rule 13a-14 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) , this Amendment also includes new certifications by the Principal Executive Officer and Principal Financial Officer of the Company dated as of the date of this filing.
Except for the revisions in response to comments conveyed by the SEC as described above and the inclusion of new certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, this Amendment does not supersede, modify or update any other items or disclosures found in the Original Filing. In addition, this Amendment does not reflect any information, events or transactions occurring after the reporting period of the Original Filing and does not supersede, modify or update those disclosures affected by subsequent events. As a result, information included in the report continues to speak as of the date of the Original Filing. Accordingly, this Amendment should be read in conjunction with the Original Filing together with the Company’s other filings with the SEC.
BLUEONE CARD, INC.
TABLE OF CONTENTS
In this Annual Report on Form 10-K (the “Annual Report”), unless otherwise stated or as the context otherwise requires, references to “BlueOne Card, Inc.,” “BlueOne,” “the Company,” “we,” “us,” “our” and similar references refer to BlueOne Card, Inc., a Nevada corporation formerly known as “Avenue South Ltd.,” “TBSS International, Inc.,” or “Manneking Inc.”. Our logo and other trademarks or service marks of the Company appearing in this Annual Report are the property of BlueOne Card, Inc. This Annual Report also contains registered marks, trademarks, and trade names of other companies. All other trademarks, registered marks, and trade names appearing in this Annual Report are the property of their respective holders.
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Cautionary Note Regarding Forward-Looking Statements and Industry Data
This Annual Report, in particular, Part II Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements represent our expectations, beliefs, intentions, or strategies concerning future events, including, but not limited to, any statements regarding our assumptions about financial performance; the continuation of historical trends; the sufficiency of our cash balances for future liquidity and capital resource needs; the expected impact of changes in accounting policies on our results of operations, financial condition or cash flows; anticipated problems and our plans for future operations; and the economy in general or the future of the defense industry, all of which were subject to various risks and uncertainties.
When used in this Annual Report and other reports, statements, and information we have filed with the Securities and Exchange Commission (“Commission” or “SEC”), in our press releases, presentations to securities analysts or investors, in oral statements made by or with the approval of an executive officer, the words or phrases “believes,” “may,” “expects,” “should,” “continue,” “anticipates,” “intends,” “will likely result,” “estimates,” “projects” or similar expressions and variations thereof are intended to identify such forward-looking statements. However, any statements contained in this Annual Report that are not statements of historical fact may be deemed to be forward-looking statements. These statements are only predictions. All forward-looking statements included in this Annual Report are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Any or all of our forward-looking statements in this document may turn out to be wrong. Actual events or results may differ materially. Our forward-looking statements can be affected by inaccurate assumptions we might make or by known or unknown risks, uncertainties, and other factors.
This Annual Report also contains estimates, projections, and other information concerning our industry, our business, and the markets for certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research, or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market, and other data from reports, research surveys, studies, and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data, and similar sources.
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PART I
| ITEM 1. | BUSINESS |
Overview
BlueOne Card Inc., a Nevada corporation (the “Company”), through our relationship with our new master program manager, Expanse Financial Technologies, Inc., (the “Program Manager”), a Delaware corporation, is a reseller of an all-in-one prepaid, branded card to be issued by the Program Manager which we believe has numerous user benefits. We are aiming to provide innovative payout solutions and prepaid cards to consumers. Unlike other prepaid card distributors and companies, we specifically aim to target those customers who are unbanked, or non-bankable, and who have needs crossing international borders. The Program Manager has a well-established full functioning platform and has numerous clients in the United States of America (“USA”).
According to the data from the Federal Reserve, there are an estimated 60-65 million adults residing in the USA, who are unbanked or underbanked.1 This means that about 18% of the entire USA population has difficulties utilizing the standard banking system. This is our target group of customers. Through our relationship with the Program Manager, we will earn revenues mostly through transaction and monthly fees charged to customers by the Program Manager provided by us for the issued general purpose reloadable prepaid debit card, and reloading fees, ATM withdrawal fees, and card to card money transaction fees. We will be acting as an independent sales representative of the Program Manager and we will receive revenues from end-customer contracts, which will be executed with the Program Manager.
To date, we have generated nominal revenues from our planned business and our business is now in a new development stage. The new Program Manager’s platform is being customized for us, and, to date revenues have been derived from the sales of prepaid debit and gift cards using the prior Program Manager. Once the Program Manager’s platform is customized, we anticipate deriving revenues from processing and other fees.
We are currently headquartered in Newport Beach, California.
Background
BlueOne Card, Inc. (formerly known as “Avenue South Ltd.,” “TBSS International, Inc.,” or “Manneking Inc.”) was incorporated on July 6, 2007, under the laws of the State of Nevada. We started our business as a retailer and importer of domestic home furnishings from Hong Kong. On September 30, 2011, we changed our name to TBSS International, Inc., and got engaged in gold mining and drilling and general construction.
On April 26, 2019, Corporate Compliance, LLC filed a re-application for custodianship pursuant to Nevada Revenue Statute NRS 78.347. The Eighth Judicial District Court of Clark County, Nevada granted custodianship of TBSS International, Inc. to Corporate Compliance, LLC. On October 15, 2019, we changed our name to “Manneking Inc.,” and then to “BlueOne Card, Inc.” on June 30, 2020.
On October 15, 2019, we executed a 1 for 100 reverse stock-split. On June 30, 2020, we also executed a 1 for 100 reverse stock-split with a Certificate of Change and changed our trading symbol to “BCRD.” We filed a FINRA corporate action pursuant to FINRA Rule 6490 which was announced on the Daily List as of July 23, 2020.
1https://www.self.inc/info/unbanked-and-underbanked-population/#:~:text=The%20Federal%20Reserve%20found%20that,million%20people%20in%20the%20U.S.
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Reseller Agreement with EndlessOne Global, Inc.
Effective August 15, 2020, we entered into an Authorized Reseller Agreement with EndlessOne Global, Inc. (“E1G”) as our Program Manager (the “E1G Reseller Agreement”) pursuant to which we agreed to be a reseller or an independent sales representative of E1G and its products, and E1G has agreed to support our reselling efforts. The E1G Reseller Agreement did not provide exclusivity and there were no volume sales requirements pertaining to our reselling efforts. On December 18, 2023, E1G notified us that their sponsor bank (“Bank”) has terminated its services to E1G. As a result, E1G is unable to continue servicing BlueOne Card, Inc.’s customers.
Agreement with Expanse Financial Technologies, Inc.
Expanse Financial Technologies, Inc. (“ExpanseFT”) (“Program Manager”), uses a platform that allows a company to process as a Payment Card Issuer, and a Banking Software company. ExpanseFT has card experts to serve and provide its clients/customers with the next generation of card and banking software. ExpanseFT is ushering in a new kind of debit card, one with comprehensive services and instant upfront reward packages. As an eWallet provider creating all different types of debit cards that are used every day, ExpanseFT will focus on driving digital commerce with eWallet software which works for all people. The easy-to-use eWallet will allow the banked or unbanked customers the ability and freedom to manage their money.
Effective February 27, 2024, we entered into a Master Program Manager Services Agreement, an authorized reseller agreement with a new Program Manager (the “Reseller Agreement”), pursuant to which we have agreed to be a reseller or an independent sales representative of the Program Manager and its products, and the Program Manager has agreed to support our reselling efforts. The Reseller Agreement does not provide exclusivity and there are no volume sales requirements pertaining to our reselling efforts.
The term of the Reseller Agreement is for five (5) years. The Reseller Agreement is renewable by mutual consent of each of the parties for two-year terms unless either party provides written notice to the other party at least 180 days prior to the termination of the term of the Reseller Agreement. The Reseller Agreement may be terminated by either party upon a material breach of either party with the non-breaching party providing written notice to the breaching party and the breach remaining uncured with 30 days of the notice. The Reseller Agreement may also be terminated by either party by written notice if either party ceases to carry on as a going concern, becomes the object of the institution of voluntary or involuntary proceedings in bankruptcy, insolvency, or liquidation, makes an assignment for the benefit of creditors, or if a receiver is appointed with respect to all or a substantial part of its assets.
Our duties under the Reseller Agreement are to use our best efforts to promote and market the products of the Program Manager including, but not limited to providing the first introduction of the products to prospective customers, conducting the preliminary qualification of prospective customers for the products of the Program Manager, conducting sales presentations and obtaining commitments from prospects, and distribution of the Program Manager’s collateral materials, as appropriate.
We agreed to use all reasonable resources, including the assignment of adequate personnel to assure timely performance of those functions required by us under the start-up, and comply with all reasonable directions of the Program Manager so as to enable start-up to be completed on or before the scheduled start-up date. We agreed to pay any required start-up, set-up and/or implementation fees, any costs and expenses incurred in connection with the start-up of card programs for our customers and software development under this agreement.
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During the term of this agreement, we agreed to conduct our business and make all undertakings consistent with their policies in order that we may be eligible for sponsorship by a sponsor bank member of the associations/networks, .
We agreed to pay the Program Manager the processing fees as set forth in this agreement. The Program Manager and BlueOne Card can agree to modify charges for services, add, delete or modify services from time to time.
The Program Manager shall provide us with prepaid debit and gift cards of requested quantity, create a range of prepaid debit accounts, using banking identification numbers provided to the Program Manager by our issuing bank and produce and deliver plastic card production tape media, including personal identification number (PIN) generation for the range of created prepaid debit accounts. Upon the first loading of value to a prepaid debit account, the Program Manager will create and activate a cardholder account on the Program Manager’s system and create linkage between the cardholder account on ExpanseFT system and our cardholder aggregate settlement account at our issuing bank or another bank.
We agreed to pay for all new programming outside the scope listed in this agreement such as but not limited to mobile apps, websites back office and the integrations with the sponsoring banks and processors as we go. We agreed to pay a one-time fee of $60,000 to initiate the process to establish one banking identification number, including the program setup, integration, API connection and implementation process required to bring the program live.
On March 1, 2024, we made a payment of $42,500 towards the one-time fee of $60,000 as discussed above, for program implementation to the Program Manager towards implementation and customization fees for our program.
The Program Manager’s Unique Platform
We believe the Program Manager will provide a unique platform different from other competitors. Unlike many other institutions and companies who only do card-to-card transfer domestically, the Program Manager’s prepaid debit and gift cards will instantly transfer money from card-to-card across the border through a mobile application. Consumers who receive the card-to-card transfer will easily be able to cash out the money at any Automated Teller Machine (“ATM”) in the world. Thus, using the Program Manager’s platform, consumers will save time, as well as enjoy reasonable foreign exchange rate cost.
Principal Products and Services
The Program Manager offers prepaid, branded cards that provide consumer benefits such as no overdraft fees, no interest fees, virtual bank accounts, and free direct deposit. We act as a reseller of the Program Manager’s prepaid, branded cards pursuant to the Reseller Agreement.
Some of the benefits of the Program Manager’s prepaid, branded cards will be as follows:
| ● | A mobile application for iOS devices (Apple), and android. | |
| ● | The Program Manager and BlueOne Card provides a Global Remittance Network (“GRN”) meaning that it will connect any proprietary accounts or card systems to other systems worldwide. | |
| ● | Option to provide free checking account and check books by BlueOne Card. | |
| ● | We intend to resell the Program Manager’s prepaid, branded cards to liquor stores throughout the U.S. and online at www.blueonecard.com as well. | |
| ● | The Program Manager’s prepaid, branded cards provide a dynamic Card Verification Value (“CVV”) function including a chip and Personal Identification Number (“PIN”) capability. |
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| ● | The Program Manger’s prepaid, branded cards access are lock and unlocked with Sensor Assisted Flight Envelope (“SAFE”) technology. Consumers will also instantly be able to lock and unlock the cards via text Short Message Service (“SMS”). | |
| ● | We believe payroll checks will be deposited via the Program Manager’s mobile application. |
Market Strategy
Currently, without the Program Manager’s prepaid, branded cards, numerous of those users who are unbanked or underbanked, use methods such as Western Union, or its mobile application, in order to send and receive funds to and from others, especially if it is an international money transfer and non-domestic. This makes the user’s experience more complicated as cashing in checks and paying bills becomes a lot more costly and also very time-consuming. Also, other ordinary prepaid debit cards may charge very high fees.
In comparison, we believe the Program Manager’s prepaid, branded cards will be safer than cash, more convenient than checks, and very easy to obtain through liquor stores or online, which are the principal methods we intend to resell the cards. Not only this, but there are also no troubles with exchange rates, and transfers being cancelled or rejected after days unlike using other financial service companies. With the Program Manager’s prepaid, branded cards, high cash checking fees will be eliminated, and direct deposits can be made to save the consumer’s time and money. Also, with its global remittance network provided by the Program Manager, the Program Manager’s prepaid, branded cards connect proprietary accounts or card systems to other systems in any part of the world.
We have studied and tested the Latino market for over two years, completed marketing data and studies including consumer usage in the Southern California market. We have tested with live, in production cards for this pilot and have further advertised in Latino magazines, newspapers, YouTube commercials and direct mailing. The program was successful, and we will now focus on the Latino market with the new program and we will also build new custom products and services to offer to the Latino market. Using the analytics of the database of over 5,000 consumer cards and their habits and needs, we feel that the product and its features will be successful.
Distribution of Products and Services
Looking solely at other prepaid card competitors located in big grocery stores such as Walmart, Target, etc., we aim to differentiate ourselves from them by targeting liquor stores across the U.S. for distribution of the Program Manager’s prepaid, branded cards. The reason for this is that we believe that many of the unbanked with lower income users access liquor stores more frequently than the larger stores. Not only this, we anticipate that setting up a money loading system in liquor stores will save time in the lives of most consumers.
According to industry data, we believe there are approximately 34,000 liquor stores currently in the U.S. and we initially intend to target up to 7,000 of those stores for distribution of the Program Manager’s prepaid, branded cards. We resell the Program Manager’s prepaid, branded cards through our website. If we are able to distribute the Program Manager’s prepaid, branded cards to these stores throughout the U.S. under the terms of the Reseller Agreement, we estimate our revenues would be extensive. We believe that the Program Manager’s prepaid, branded card will be very affordable compared to the traditional alternatives. The reasons for this are as follows:
World Safest Card Security Suite
| ● | Lock and Unlock – SAFE Technology allows cardholders to instantly lock and unlock their cards via SMS or Cardholder online Portal. Cardholders can personalize the lock feature for ATM, POS, withdrawals, transfers, recurring payments, auto-lock and more. | |
| ● | Dynamic CVV Technology – Dynamic CVV Technology SAFE Technology empowers cardholders to easily change their CVV code for one-time use. Through mobile authorization, SAFE Technology offers the most secure armored layer of security available for cardholders. |
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Global Remittance Network (“GRN”)
| ● | GRN is a worldwide remittance messaging system, an “any-to-any” switch that connects any proprietary account or card system to other systems in the world. | |
| ● | This remittance network can link card to card, regardless of Network, account to account, including a credit or debit card to account. | |
| ● | Initial customer acquisition is based on leveraging and empowering existing card portfolios and global business relationships in both sending and receiving countries. | |
| ● | GRN operates within a closed loop of banks, accounts, card, or wallet programs. | |
| ● | Participants in the GRM Network will share in the margins generated out of the transaction fees. |
We believe that we will be able to enter into distribution agreements with liquor store owners to distribute the Program Manager’s prepaid, branded card in their respective stores due to the fact that we believe it will greatly increase traffic to the respective stores due to demand for the card. With heavier traffic, we believe there will be increased sales in each liquor store as numerous people will walk in to load money and purchase GPR prepaid cards. We believe this will also benefit the store owner as there will be increased premiums later on for the store itself. Thus, there will be an exchange of benefit between the multitude of liquor stores throughout the U.S. that we intend to target and our Company.
Marketing of Products and Services
We market the Program Manager’s products and services through an extensive network of sales representatives and through our website, www.blueonecard.com.
Intellectual Property
All intellectual property required for the operation of our business is provided through our relationship with the Program Manager.
Employees
As of June 30, 2024, we had one employee, Mr. James Koh, our Chief Executive Officer (“CEO”), who is also a full-time employee. At any given time, we engage 2-5 independent contractors who have very extensive experience in operations, compliance and risk management and marketing.
On December 1, 2020, we entered into an Employment Agreement with James Koh, our President and CEO. The terms of the agreement are stated in PART III, Item 11 “Executive Compensation” section.
Competition
Our core business includes the offering of the Program Manager’s prepaid debit and gift cards that provide consumer benefits such as no overdraft fees, no interest fees, virtual bank accounts, and free direct deposit. Consequently, we, as a reseller of the cards, compete against companies and financial institutions across the retail banking, financial services, transaction processing, consumer technology and financial technology services industries and we may also compete with others in the market who may in the future provide offerings similar to ours. Furthermore, many of our competitors are entities substantially larger in size (such as Green Dot Corporation), more highly diversified in revenue, and substantially more established with significantly more broadly known brand awareness than ours. As such, many of our competitors can leverage their size, robust networks, financial wherewithal, brand awareness, pricing power and technological assets to compete with us. Additionally, some of our current and potential competitors are subject to fewer regulations and restrictions than we are and thus may be able to respond more quickly in the face of regulatory and technological changes.
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Government Regulations
Although the Program Manager and sponsor bank are subject to government regulation, as a reseller we are not subject to the same regulations. If the Program Manager fails to comply with government regulations applicable to it, it could have a material adverse effect on our business.
U.S. Securities Laws
We are subject to regulations by U.S. federal and state securities laws as a public company, including the Securities Act of 1933, as amended (the “Securities Act”) and the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
SEC Reporting
We are an OTCQX issuer filing current, public information with OTC Markets Group Inc. electronic quotation venue under the trading symbol “BCRD.” There is a highly illiquid nature in investing in our common stock.
We are a fully-reporting public reporting company filing reports, proxy statements, information statements and other information with the SEC. You may read and copy this information, for a copying fee, at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for more information on its Public Reference Room. Our SEC filings will also be available to the public from commercial document retrieval services, and at the website maintained by the SEC at http://www.sec.gov.
| ITEM 1A. | RISK FACTORS |
Risks Related to Our Business
Any reference to risks associated with the Program Manager are not the official stance of the Program Manager and should not be interpreted as such. All assertions pertaining to the Program Manager herein are reasonable assumptions of risks facing the Program Manager. As a reseller of the Program Manager’s prepaid debit and gift cards, our business is dependent upon the Program Manager.
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Our business is dependent upon our contractual relationship with Expanse Financial Technologies, the Program Manager, and, if the Reseller Agreement is terminated or if the Program Manager defaults on its contractual obligations or its business experiences difficulties, our business would likely fail.
We have entered into a single Reseller Agreement with Expanse Financial Technologies, Inc. pursuant to which we have agreed to be a reseller of the Program Manager’s prepaid debit and gift cards. At the time, our ability to generate revenues is completely dependent upon our ability to resell the Program Manager’s prepaid debit and gift cards to end customers. If we are unable to have success as a reseller, our business will be likely to fail. If the Program Manager’s business or products and services experience difficulties, our business can also suffer drastically.
The Reseller Agreement terminates five (5) years from the date of the Reseller Agreement, subject to two-year extensions and early termination. If the Reseller Agreement is terminated at any time and we are unable to engage a different program manager at terms similar or better than those in the Reseller Agreement, our business will likely fail. It is our intention to appoint a second Program Manager to resolve these types of issues when they arise. The Reseller Agreement does not grant us exclusivity as a reseller of the Program Manager’s products and services. In the event that the Program Manager engages others to act as resellers of its products and services, we may experience a decrease in our ability to make sales as a reseller, which would likely have a material adverse impact on our business and may cause it to fail.
The platform(s) of the Program Manager may cause our business to fail because of data integrity issues, hacking, etc.
The Program Manager’s platform is currently being set up with BlueOne Cards business program. Prolonged functionality or banking delays could have a material adverse effect on our business.
Our operating results may fluctuate in the future, which could cause our stock price to decline.
Our quarterly and annual results of operations may fluctuate in the future as a result of a variety of factors, many of which are outside of our control. If our results of operations fall below the expectations of investors or any securities analysts who follow our Common Stock, the trading price of our Common Stock could decline substantially. Fluctuations in our quarterly or annual results of operations might result from a number of factors, including, but not limited to:
| ● | The unprecedented impact of COVID-19 like pandemics on our business, customers, employees, consultants, service providers, stockholders, investors and other stakeholders | |
| ● | the timing and volume of purchases and use of our products and services by our customers; | |
| ● | our ability to effectively sell our products through direct-to-consumer initiatives; | |
| ● | the timing and success of new product or service introductions by us or our competitors; | |
| ● | changes in the level of interchange rates that are paid to us; | |
| ● | fluctuations in customer retention rates; |
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| ● | changes in the mix of products and services that we sell; | |
| ● | changes in the mix of retail distributors through which we sell our products and services; | |
| ● | the timing of commencement of new product development and initiatives, the timing of costs of existing product rollouts and the length of time we must invest in those new products, channels or retail distributors before they generate material operating revenues; | |
| ● | changes in our or our competitors’ pricing policies or sales terms; | |
| ● | costs associated with significant changes in our or our banks risk policies and controls; | |
| ● | the amount and timing of costs related to the acquisition of complementary businesses; | |
| ● | the amount and timing of costs of any major litigation to which we are a party; | |
| ● | disruptions in the performance of our products and services, including interruptions in the services we provide to other businesses, and the associated financial impact thereof; | |
| ● | the amount and timing of capital expenditures and operating costs related to the maintenance and expansion of our business, operations and infrastructure; | |
| ● | accounting charges related to impairment of intangible assets; | |
| ● | our ability to control costs, including third-party service provider costs and sales and marketing expenses in an increasingly competitive market; | |
| ● | volatility in the trading price of our Common Stock, which may lead to higher or lower stock-based compensation expenses; and | |
| ● | changes in the political or regulatory environment affecting the banking or electronic payments industries. |
If we are unable to find and retain distributors for the Program Manager’s prepaid debit and gift cards, our business will fail.
Through the Reseller Agreement with the Program Manager, we are a reseller of the Program Manager’s prepaid, branded cards. In order to generate revenues pursuant to the Reseller Agreement, we will need to either sell the cards directly to the end user or find distributors for the cards. Initially, we plan to target up to 7,000 liquor stores throughout the U.S. as distributors. In the event we are unable to make sales directly to end users or establish relationships with distributors, we will be unable to generate revenues and our business will fail.
The loss of operating revenues from our anticipated retail distributors would adversely affect business.
We expect that a significant portion of our operating revenues are derived from revenues generated from the sales of the Program Manager’s prepaid, branded cards sold through distributors such as liquor stores, which we estimate will be our largest retail distributors. We expect that liquor stores will have a significant impact on our operating revenues in future periods. Once we have established distribution through liquor stores, it would be difficult to replace them and the operating revenues derived from products and services sold therein. Accordingly, the loss of liquor stores as a primary means of distribution would have a material adverse effect on our business and results of operations. In addition, any publicity associated with the loss of any of our distributors could harm our reputation, making it more difficult to attract and retain consumers and other distributors, and could lessen our negotiating power with our remaining and prospective distributors.
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Our future success depends upon the active and effective promotion of our Program Manager’s products and services by retail distributors, but their interests and operational decisions might not always align with our interests.
Most of our operating revenues will be derived from commissions on the sales of our Program Manager’s products and services sold at the stores of our retail distributors, including liquor stores. Revenues from commissions will depend on a number of factors outside our control and may vary from period to period. Because we will compete with many other providers of our Program Manager’s products and services, including competing prepaid cards, for placement and promotion of products in the stores of our prospective retail distributors, our success depends on our retail distributors and their willingness to promote our products and services successfully. In general, our contracts with these third parties will likely allow them to exercise significant discretion over the placement and promotion of our Program Manager’s products and services; which means that they could give higher priority to the products and services of other companies for a variety of reasons. Accordingly, losing the support of our retail distributors might limit or reduce the sales of our Program Manager’s products and services. Our operating revenues and operating expenses may also be negatively affected by operational decisions by our retail distributors. For example, if a retail distributor reduces shelf space for our Program Manager’s products or implements changes in its systems that disrupt the integration between its systems and ours, our resales could be reduced or decline and we may incur additional merchandising costs to ensure our Program Manager’s products are appropriately stocked. Even if our retail distributors actively and effectively promote our Program Manager’s products and services, there can be no assurance that their efforts will maintain or result in growth of our operating revenues.
Due to the fact that most of our revenues will be derived from commissions from the resale of the Program Manager’s products and services, future revenue growth depends on our ability to retain and attract new long-term users of the Program Manager’s products.
Our ability to increase account usage and account holder retention and to attract new long-term users of our Program Manager’s products can have a significant impact on our operating revenues. We may be unable to generate increases in account usage, account holder retention or attract new long-term users of our Program Manager’s products for a number of reasons, including if our Program Manager is unable to maintain its existing distribution channels, predict accurately consumer preferences or industry changes and to modify its products and services on a timely basis in response thereto, produce new features and services that appeal to existing and prospective customers, and influence account holder behavior through cardholder retention and usage incentives. Our results of operations could vary materially from period to period based on the degree to which we are successful in increasing usage and retention and attracting long-term users of our Program Manager’s products.
The industries in which we compete are highly competitive, which could adversely affect our results of operations.
The industries in which we compete are highly competitive and subject to rapid and significant changes. Due to our relationship with the Program Manager as a reseller of its prepaid, branded cards, we compete against companies and financial institutions across the retail banking, financial services, transaction processing, consumer technology and financial technology services industries and may compete with others in the market who may in the future provide offerings similar to those of the Program Manager, and, particularly, our Program Manager competes with vendors who may provide program management and other services though a platform similar to its Backend as a Service (“BaaS”) platform. These and other competitors in the banking and electronic payments industries are introducing innovative products and services that may compete with those of our Program Manager. We expect that this competition will continue as the banking and electronic payments industries continue to evolve, particularly if non-traditional payments processors and other parties gain greater market share in these industries. If we are unable to differentiate our Program Manager’s products and platform from and successfully compete with those of our competitors, our business, results of operations and financial condition will be materially and adversely affected.
Many existing and potential competitors are entities substantially larger in size, more highly diversified in revenue and substantially more established with significantly more broadly known brand awareness than ours. As such, many of our competitors can leverage their size, robust networks, financial wherewithal, brand awareness, pricing power and technological assets to compete with us. We could also experience increased price competition as a result of new entrants offering free or low-cost alternatives to our Program Manager’s products and services. If this happens, we expect that the purchase and use of our Program Manager’s products and services would decline. If price competition materially intensifies, we may have to increase the incentives that we offer to our retail distributors and decrease the prices of our Program Manager’s products and services, any of which would likely adversely affect our results of operations.
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Our long-term success depends on our ability to compete effectively against existing and potential competitors that seek to provide banking and electronic payment products and services. If we fail to compete effectively against these competitors, our revenues, results of operations, prospects for future growth and overall business could be materially and adversely affected.
The Program Manager may make significant investments in products and services that may not be successful.
Our prospects for growth depend on the Program Manager’s ability to innovate by offering new and adding value to its existing product and service offerings and on its ability to effectively commercialize such innovations. The Program Manager will continue to make investments in research, development, and marketing for new products and services. Investments in new products and services are speculative. Commercial success depends on many factors, including innovation, price, the competitive environment and effective distribution and marketing. If customers do not perceive the Program Manager’s new offerings as providing significant value, they may fail to accept the Program Manager’s new products and services, which would negatively impact on our operating revenues.
The Program Manager’s business is dependent on the efficient and uninterrupted operation of computer network systems and data centers, including third party systems, and any disruption in the operations of these systems and data centers could materially and adversely affect our business.
The Program Manager’s ability to provide reliable service to its customers and other network participants depends on the efficient and uninterrupted operation of its computer network systems and data centers as well as those of our retail distributors, network acceptance members and third-party processors. The Program Manager’s business involves the movement of large sums of money, processing of large numbers of transactions and management of the data necessary to do both. Our success depends on the Program Manager’s account programs, including the Program Manager’s BaaS programs, as well as the Program Manager’s processing and settlement services, the efficient and error-free handling of the money that is collected, remitted or deposited in connection with the provision of the Program Manager’s products and services. The Program Manager relies on the ability of its employees, systems and processes and those of the banks that issue its cards, retail distributors, other business partners and third-party processors to process and facilitate these transactions in an efficient, uninterrupted and error-free manner. Their failure to do so could materially and adversely impact our operating revenues and results of operations.
The Program Manager’s systems and the systems of third-party processors are susceptible to outages and interruptions due to fire, natural disaster, power loss, telecommunications failures, software or hardware defects, terrorist attacks and similar events. The Program Manager uses both internally developed and third-party systems, including cloud computing and storage systems, for its services and certain aspects of transaction processing. Interruptions in the Program Manager’s service may result for a number of reasons.
Any damage to, or failure of, the Program Manager’s processes or systems generally, or those of its vendors (including as a result of disruptions at the Program Manager’s third-party data center hosting facilities and cloud providers), or an improper action by its employees, agents or third-party vendors, could result in interruptions in its service, causing customers, retail distributors and other partners to become dissatisfied with the Program Manager’s products and services or obligate the Program Manager to issue credits or pay fines or other penalties to them. Sustained or repeated process or system failures could reduce the attractiveness of the Program Manager’s products and services, including its BaaS platform, and result in contract terminations, thereby reducing operating revenue and harming our results of operations. Further, negative publicity arising from these types of disruptions could be damaging to the Program Manager’s and our reputation and may adversely impact use of the Program Manager’s products and services, including its BaaS platform, and adversely affect our ability to attract new customers and distributors. Additionally, some of our contracts with retail future distributors may contain service level standards pertaining to the operation of the Program Manager’s systems, and provide the retail distributor with the right to collect damages and potentially to terminate its contract with us for system downtime exceeding stated limits. If the Program Manager faces system interruptions or failures, our business interruption insurance may not be adequate to cover the losses or damages that we incur.
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If the Program Manager is unable to keep pace with the rapid technological developments in its industry and the larger electronic payments industry necessary to continue providing its BaaS platform partners and cardholders with new and innovative products and services, the use of the Program Manager’s cards and other products and services could decline.
The electronic payments industry is subject to rapid and significant technological changes. We cannot predict the effect of technological changes on our business. The Program Manager relies, in part, on third parties for the development of, and access to, new technologies. We expect those new services and technologies applicable to our industry will continue to emerge, and these new services and technologies may be superior to, or render obsolete, the technologies we currently utilize through resale of the Program Manager’s products and services. Additionally, the Program Manager may make future investments in, or enter into strategic alliances to develop, new technologies and services or to implement infrastructure change to further its strategic objectives, strengthen its existing businesses and remain competitive. However, the Program Manager’s ability to transition to new services and technologies that it develops may be inhibited by a lack of industry-wide standards, by resistance from our retail distributors, its BaaS platform partners, third-party processors or consumers to these changes, or by the intellectual property rights of third parties. Since we are a reseller of the Program Manager’s prepaid, branded cards, our future success will depend, in part, on the Program Manager’s ability to develop new technologies and adapt to technological changes and evolving industry standards. These initiatives are inherently risky, and they may not be successful or may have an adverse effect on our business, financial condition and results of operations.
Fraudulent and other illegal activity involving the Program Manager’s products and services could lead to reputational damage to us, reduce the use and acceptance of the Program Manager’s cards and reload network, and may adversely affect our financial position and results of operations.
Criminals are using increasingly sophisticated methods to engage in illegal activities using deposit account products (including prepaid cards), reload products, or customer information. Illegal activities involving the Program Manager’s products and services often include malicious social engineering schemes. Illegal activities may also include fraudulent payment or refund schemes and identity theft. The Program Manager relies upon third parties for transaction processing services, which subjects the Program Manager and its end customers to risks related to the vulnerabilities of those third parties. A single significant incident of fraud, or increases in the overall level of fraud, involving the Program Manager’s cards and other products and services, have in the past and could in the future result in reputational damage it and to us. Such damage could reduce the use and acceptance of the Program Manager’s cards and other products and services, cause retail distributors to cease doing business with us or lead to greater regulation that would increase the Program Manager’s compliance costs. Fraudulent activity could also result in the imposition of regulatory sanctions, including significant monetary fines on the Program Manager, which could adversely affect our business, results of operations and financial condition.
The Program Manager operates in a highly regulated environment, and failure by it, the banks that issue its cards, and the businesses that participate in it reloads network to comply with applicable laws and regulations could have an adverse effect on our business, financial position and results of operations.
The Program Manager operates in a highly regulated environment, and failure by it, the banks that issue its cards or the businesses that participate in it reloads network or other business partners to comply with the laws and regulations to which it is subject could negatively impact our business. The Program Manager is subject to state money transmission licensing requirements and a wide range of U.S. federal and other state laws and regulations. In particular, the Program Manager’s products and services are subject to an increasingly strict set of legal and regulatory requirements intended to protect consumers and to help detect and prevent money laundering, terrorist financing and other illicit activities. For example, the Program Manager is subject to the anti-money laundering reporting and recordkeeping requirements the Bank Secrecy Act (“BSA”), as amended by the PATRIOT Act. In addition, legal requirements relating to the collection, storage, handling, use, disclosure, transfer, and security of personal data continue to increase, along with enforcement actions and investigations by regulatory authorities related to data security incidents and privacy violations.
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Many of these laws and regulations are evolving, can be unclear and inconsistent across various jurisdictions, and ensuring compliance with them is difficult and costly. Failure by the Program Manager or those businesses to comply with the laws and regulations to which they are or may become subject could result in fines, penalties or limitations on our ability to conduct our business, or federal or state actions, any of which could significantly harm the Program Manager’s and our reputation with consumers, banks that issue the Program Manager’s prepaid cards and regulators, and could materially and adversely affect our business, operating results and financial condition.
Changes in the laws and regulations to which the Program Manager is subject, or to which they may become subject, may increase our costs of operation, decrease our operating revenues and disrupt our business.
The banking, financial technology, transaction processing service industries are highly regulated and, from time to time, the regulations affecting these industries, and the manner in which they are interpreted, are subject to change and legal action. Accordingly, changes in laws and regulations or the interpretation or enforcement thereof may occur that could increase our compliance and other costs of doing business, require significant systems redevelopment, or render the Program Manager’s products or services less profitable or obsolete, any of which could have an adverse effect on our results of operations. For example, the Program Manager could face more stringent anti-money laundering rules and regulations, as well as more stringent licensing rules and regulations, compliance with which could be expensive and time consuming. In addition, adverse rulings relating to the industries in which the Program Manager participates in the countries in which it and we operate could cause the Program Manager’s products and services to be subject to additional laws and regulations, which could make the Program Manager’s products and services, of which we are a reseller, less profitable.
If additional regulatory requirements were imposed on the sale of the Program Manager’s products and services, the requirements could lead to a loss of retail distributors, which, in turn, could materially and adversely impact our operations. Moreover, if the Program Manager’s products are adversely impacted by the interpretation or enforcement of these regulations or we or any of our retail distributors were unwilling or unable to make any such operational changes to comply with the interpretation or enforcement thereof, we would no longer be able to resell the Program Manager’s products and services through that noncompliant retail distributor, which could have a material adverse effect on our business, financial position and results of operations.
From time to time, international, U.S. federal and state legislators and regulatory authorities, including state attorneys general, increase their focus on the banking and consumer financial services industries and may propose and adopt new legislation that could result in significant adverse changes in the regulatory landscape for financial institutions and financial services companies.
If new regulations or laws result in changes in the way the Program Manager is regulated, these regulations could expose the Program Manager to increased regulatory oversight, more burdensome regulation of its business, and increased litigation risk, each of which could increase the Program Manager’s costs which may decrease our operating revenues. Furthermore, limitations placed on fees we charge or the disclosures that must be provided with respect to the Program Manager’s products and services could increase our costs and may decrease our operating revenues.
Changes in rules or standards set by the payment networks, such as Visa and MasterCard, or changes in debit network fees or products or interchange rates, could adversely affect our business, financial position and results of operations.
The Program Manager is subject to association rules that could subject it to a variety of fines or penalties that may be levied by the card associations or networks for acts or omissions by the Program Manager or businesses that work with it, including card processors, such as MasterCard PTS. The termination of the card association registrations held by the Program Manager or any changes in card association or other debit network rules or standards, including interpretation and implementation of existing rules or standards, that increase the cost of doing business or limit the Program Manager’s ability to provide its products and services could have an adverse effect on our business, operating results and financial condition. In addition, from time to time, card associations may increase the fees that they charge, which could increase our operating expenses, reduce our profit margin and adversely affect our business, results of operations and financial condition.
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Furthermore, we expect a substantial portion of our operating revenues to be derived from interchange fees. The amount of interchange revenues that we earn is highly dependent on the interchange rates that the payment networks set and adjust from time to time. The current interchange lawsuit settlement may possibly have a dampening effort on higher interchange fees. Visa and Mastercard tack on additional charges to transaction interchange fees, which may cause them to raise fees to other parties like us.
The enactment of the Dodd-Frank Act required the Federal Reserve Board to implement regulations that have substantially limited interchange fees for many issuers. While the interchange rates that may be earned by us are exempt from the limitations imposed by the Dodd-Frank Act, there can be no assurance that future regulation or changes by the payment networks will not impact on our interchange revenues substantially. If interchange rates decline, whether due to actions by the payment networks or future regulation, we would likely need to change our fee structure to offset the loss of interchange revenues. However, our ability to make these changes will be limited by the terms of our future contracts and other commercial factors, such as price competition. To the extent we increase the pricing of the Program Manager’s products and services, we might find it more difficult to acquire consumers and to maintain or grow card usage and customer retention, and we could suffer reputational damage and become subject to greater regulatory scrutiny. The Program Manager’s may also have to discontinue certain products or services. As a result, our total operating revenues, operating results, prospects for future growth and overall business could be materially and adversely affected.
The Program Manager receives important services from third-party vendors. Replacing them would be difficult and disruptive to its business.
Some services relating to the Program Manager’s business, including fraud management and other customer verification services, transaction processing and settlement, card production, and customer service, are outsourced to third-party vendors. It would be difficult to replace some of the Program Manager’s third-party vendors in a timely manner if they were unwilling or unable to provide the Program Manager with these services during the term of their agreements with us and our business and operations could be adversely affected.
Our business could suffer if there is a decline in the use of prepaid cards as a payment mechanism or there are adverse developments with respect to the prepaid financial services industry in general.
As the prepaid financial services industry evolves, consumers may find prepaid financial services to be less attractive than traditional or other financial services. Consumers might not use prepaid financial services for any number of reasons, including the general perception of our industry, new technologies and a decrease in our distribution partners’ willingness to sell these products as a result of a more challenging regulatory environment. If consumers do not continue or increase their usage of prepaid cards, including making changes in the way prepaid cards are loaded, our operating revenues may decline. Any projected growth for the industry may not occur or may occur more slowly than estimated.
If consumer acceptance of prepaid financial services does not continue to develop or develops more slowly than expected or if there is a shift in the mix of payment forms, such as cash, credit cards, traditional debit cards and prepaid cards, away from our products and services, it could have a material adverse effect on our financial position and results of operations.
A data security breach could expose the Program Manager to liability and protracted and costly litigation, and could adversely affect its and our reputation and operating revenues.
The Program Manager and its retail distributors, network acceptance members, third-party processors and the merchants that accept the Program Manager’s cards receive, transmit and store confidential customer and other information in connection with the sale and use of the Program Manager’s products and services. The Program Manager’s encryption software and the other technologies the Program Manager uses to provide security for storage, processing and transmission of confidential customer and other information may not be effective to protect against data security breaches by third parties. The risk of unauthorized circumvention of its security measures has been heightened by advances in computer capabilities and the increasing sophistication of hackers. The Program Manager’s network acceptance members, other business partners, third-party processors and the merchants that accept the Program Manager’s cards also may experience similar security breaches involving the receipt, transmission and storage of the Program Manager’s confidential customer and other information. Improper access to the Program Manager or these third parties’ systems or databases could result in the theft, publication, deletion or modification of confidential customer and other information.
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A data security breach of the systems on which sensitive cardholder or other customer or end-customer data and account information are stored could lead to fraudulent activity involving the Program Manager’s products and services, reputational damage and claims or regulatory actions against the Program Manager and possibly us. If we are sued in connection with any data security breach, we could be involved in protracted and costly litigation. If unsuccessful in defending that litigation, we might be forced to pay damages and/or change our business practices, any of which could have a material adverse effect on our operating revenues and profitability. The Program Manager would also likely have to pay (or indemnify the banks that issue our cards for) fines, penalties and/or other assessments imposed by Visa or MasterCard as a result of any data security breach. Further, a significant data security breach could lead to additional regulation, which could impose new and costly compliance obligations. In addition, a data security breach at one of the third-party banks that issue the Program Manager’s cards or at the Program Manager’s network acceptance members, other business partners, third-party processors or the merchants that accept the Program Manager’s cards could result in significant reputational harm to the Program Manager and, as a reseller of the Program Manager’s prepaid, branded cards, to us and cause the use and acceptance of the Program Manager’s cards or other products and services to decline, either of which could have a significant adverse impact on our operating revenues and future growth prospects.
Litigation or investigations could result in significant settlements, fines or penalties.
The Program Manager or we may be subject to securities class actions and other litigation or regulatory or judicial proceedings or investigations. The outcome of litigation and regulatory or judicial proceedings or investigations is difficult to predict. Plaintiffs or regulatory agencies or authorities in these matters may seek recovery of very large or indeterminate amounts, seek to have aspects of our business suspended or modified or seek to impose sanctions, including significant monetary fines. The monetary and other impact of these actions, litigations, proceedings or investigations may remain unknown for substantial periods of time. The cost to defend, settle or otherwise resolve these matters may be significant. Further, an unfavorable resolution of litigation, proceedings or investigations against us could have a material adverse effect on our business, operating results, or financial condition. If regulatory or judicial proceedings or investigations were to be initiated against the Program Manager or us by private or governmental entities, adverse publicity that may be associated with these proceedings or investigations could negatively impact our relationships with retail distributors and decrease acceptance and use of, and loyalty to, the Program Manager’s products and related services, and could impact the price of our Common Stock. In addition, such proceedings or investigations could increase the risk that we will be involved in litigation. The outcome of any such litigation is difficult to predict and the cost to defend, settle or otherwise resolve these matters may be significant. For the foregoing reasons, if regulatory or judicial proceedings or investigations were to be initiated against us by private or governmental entities, our business, results of operations and financial condition could be adversely affected or our stock price could decline.
We may be unable to adequately protect our brand and third parties may allege that we are infringing their intellectual property rights.
The “BlueOne Card” brand is important to our business, and we plan to utilize trademark registrations and other means to protect it. Our business would be harmed if we were unable to protect our brand against infringement and its value was to decrease as a result.
The Program Manager may be unable to adequately protect its brand and its intellectual property rights related to its products and services and third parties may allege that it is infringing their intellectual property rights.
The Program Manager’s brands and marks are important to its business, and it utilizes trademark registrations and other means to protect them. The Program Manager’s business would be harmed if it was unable to protect its brand against infringement and its value was to decrease as a result.
The Program Manager relies on a combination of patent, trademark and copyright laws, trade secret protection and confidentiality and license agreements to protect the intellectual property rights related to the Program Manager’s products and services. The intellectual property rights of the Program Manager could be challenged, invalidated or circumvented.
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The Program Manager may unknowingly violate the intellectual property or other proprietary rights of others and, thus, may be subject to claims by third parties. These assertions may increase over time as a result of growth and the general increase in the pace of patent claims assertions, particularly in the U.S. Because of the existence of a large number of patents in the mobile technology field, the secrecy of some pending patents, and the rapid rate of issuance of new patents, it is not economically practical or even possible to determine in advance whether a product or any of its elements infringes or will infringe on the patent rights of others. Regardless of the merit of these claims, the Program Manager may be required to devote significant time and resources to defending against these claims or to protecting and enforcing its own rights. The Program Manager might also be required to develop a non-infringing technology or enter into license agreements and there can be no assurance that licenses will be available on acceptable terms and conditions, if at all. Some of our intellectual property rights may not be protected by intellectual property laws, particularly in foreign jurisdictions. The loss of the Program Manager’s intellectual property or the inability to secure or enforce its intellectual property rights or to defend successfully against an infringement action could harm our business, results of operations, financial condition and prospects.
The Program Manager is exposed to losses from customer accounts.
Fraudulent activity involving the Program Manager’s products may lead to customer disputed transactions, for which the Program Manager may be liable under banking regulations and payment network rules. The Program Manager’s fraud detection and risk control mechanisms may not prevent all fraudulent or illegal activity. To the extent the Program Manager incurs losses from disputed transactions, our business, results of operations and financial condition could be materially and adversely affected.
Additionally, the Program Manager’s cardholders can incur charges in excess of the funds available in their accounts, and the Program Manager may become liable for these overdrafts. While the Program Manager declines authorization attempts for amounts that exceed the available balance in a cardholder’s account, the application of card association rules, the timing of the settlement of transactions and the assessment of the card’s monthly maintenance fee, among other things, can result in overdrawn accounts.
Maintenance fee assessment overdrafts occur as a result of the Program Manager charging a cardholder, pursuant to the card’s terms and conditions, the monthly maintenance fee at a time when he or she does not have sufficient funds in his or her account. The Program Manager’s remaining overdraft exposure arises primarily from late-posting. A late-post occurs when a merchant posts a transaction within a payment network-permitted timeframe but subsequent to the Program Manager’s release of the authorization for that transaction, as permitted by card association rules. Under card association rules, the Program Manager may be liable for the amount of the transaction even if the cardholder has made additional purchases in the intervening period and funds are no longer available on the card at the time the transaction is posted.
Economic, political and other conditions may adversely affect trends in consumer spending.
The electronic payments industry, including the prepaid financial services segment within that industry, depends heavily upon the overall level of consumer spending. If conditions in the U.S. become uncertain or deteriorate, we may experience a reduction in the number of our accounts that are purchased or reloaded, the number of transactions involving the Program Manager’s prepaid, branded cards and the use of our reload network and related services. A sustained reduction in the use of the Program Manager’s products and related services, either as a result of a general reduction in consumer spending or as a result of a disproportionate reduction in the use of card-based payment systems, would materially harm our business, results of operations and financial condition.
We must be able to operate and scale our technology effectively.
The Program Manager’s ability to continue to provide its products and services to network participants, as well as to enhance its existing products and services and offer new products and services, is dependent on its information technology systems. If the Program Manager is unable to manage and scale the technology associated with its business effectively, it could experience increased costs, reductions in system availability and losses of its network participants. Any failure of our systems in scalability and functionality would adversely impact our business, financial condition and results of operations.
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We are highly dependent on the services of our key executive, the loss of whom could materially harm our business and our strategic direction. If we lose key management or significant personnel, cannot recruit qualified employees, directors, officers, or other personnel or experience increases in our compensation costs, our business may materially suffer.
We are highly dependent on our management, specifically James Koh. We have an employment agreement in place with Mr. Koh. If we lose our key employee(s), our business may suffer. Furthermore, our future success will also depend, in part, on the continued service of our management personnel and our ability to identify, hire, and retain additional key personnel. We do not carry “key-man” life insurance on the lives of any of our executives, employees or advisors. We experience intense competition for qualified personnel and may be unable to attract and retain the personnel necessary for the development of our business. Because of this competition, our compensation costs may increase significantly.
Our future success depends on our ability to attract, integrate, retain and incentivize key personnel.
Our future success will depend, to a significant extent, on our ability to attract, integrate, retain and recognize key personnel, namely our management team and experienced sales, marketing and program and technology development personnel. Replacing departing key personnel can involve organizational disruption and uncertainty. We do not carry “key-man” life insurance on the lives of any of its executives, employees or advisors. We experience transitions among our executive officers from time to time. If we fail to manage any future transitions successfully, we could experience significant delays or difficulty in the achievement of our development and strategic objectives and our business, financial condition and results of operations could be materially and adversely harmed. We must retain and motivate existing personnel, and we must also attract, assimilate and motivate additional highly qualified employees. We may experience difficulty in managing transitions and assimilating our newly hired personnel, which may adversely affect our business. Competition for qualified management, sales, marketing and program and technology development personnel can be intense. Competitors may in the future attempt to recruit our top management and employees. If we fail to attract, integrate, retain and incentivize key personnel, our ability to manage and grow our business could be harmed.
We might require additional capital to support our business in the future, and this capital might not be available on acceptable terms, or at all.
If our unrestricted cash and cash equivalents balances and any cash generated from operations are not sufficient to meet our future cash requirements, we will need to access additional capital to fund our operations. We may also need to raise additional capital to take advantage of new business or acquisition opportunities. We may seek to raise capital by, among other things:
| ● | issuing additional shares of our Common Stock or other equity securities; | |
| ● | issuing convertible or other debt securities; and | |
| ● | borrowing funds under a credit facility. |
We may not be able to raise needed cash in a timely basis on terms acceptable to us or at all. Financings, if available, may be on terms that are dilutive or potentially dilutive to our stockholders. The holders of new securities may also receive rights, preferences or privileges that are senior to those of existing holders of our Common Stock. In addition, if we were to raise cash through a debt financing, the terms of the financing might impose additional conditions or restrictions on our operations that could adversely affect our business. If we require new sources of financing but they are insufficient or unavailable, we would be required to modify our operating plans to take into account the limitations of available funding, which would harm our ability to maintain or grow our business.
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The occurrence of catastrophic events could damage our facilities or the facilities of third parties on which we depend, which could force us to curtail our operations.
We and some of the third-party service providers on which we depend for various support functions, such as customer service and card processing, are vulnerable to damage from catastrophic events, such as power loss, natural disasters, terrorism and similar unforeseen events beyond our control. Our principal offices, for example, are situated in southern California near known earthquake fault zones. If any catastrophic event were to occur, our ability to operate our business could be seriously impaired. In addition, we might not have adequate insurance to cover our losses resulting from catastrophic events or other significant business interruptions. Any significant losses that are not recoverable under our insurance policies, as well as the damage to, or interruption of, our infrastructure and processes, could seriously impair our business and financial condition.
If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired, which could result in a loss of investor confidence in our financial reports and have an adverse effect on our stock price.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. If we are unable to maintain adequate internal control over financial reporting, we might be unable to report our financial information on a timely basis and might suffer adverse regulatory consequences. There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements. We have in the past and may in the future discovered areas of our internal financial and accounting controls and procedures that need improvement. Our internal control over financial reporting will not prevent or detect all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company will be detected. If we are unable to maintain proper and effective internal controls, we may not be able to produce accurate financial statements on a timely basis, which could adversely affect our ability to operate our business and could result in regulatory action, and could require us to restate, our financial statements. Any such restatement could result in a loss of public confidence in the reliability of our financial statements and sanctions imposed on us by the SEC.
Changes in accounting standards or inaccurate estimates or assumptions in the application of accounting policies could adversely affect our financial condition and results of operations.
Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. Some of these policies require use of estimates and assumptions that may affect the reported value of our assets or liabilities and results of operations and are critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain. If those assumptions, estimates or judgments were incorrectly made, we could be required to correct and restate prior period financial statements. Accounting standard-setters and those who interpret the accounting standards (such as the Financial Accounting Standards Board, the SEC and banking regulators) may also amend or even reverse their previous interpretations or positions on how various standards should be applied. These changes can be difficult to predict and can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retroactively, resulting in the need to revise and republish prior period financial statements.
Risks Related to Our Financial Condition
There are doubts about our ability to continue as a going concern.
We are a development stage enterprise and have recently commenced planned principal operations. We have not earned any significant revenues and have incurred net loss of $1,613,140 and cash used in operations of $1,146,710 for the fiscal year ended March 31, 2024 as compared to net loss of $1,118,799 and cash used in operations of $331,574 for the fiscal year ended March 31, 2023. These factors raise substantial doubt about our ability to continue as a going concern.
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There can be no assurance that sufficient funds required during the next year or thereafter will be generated from operations or that funds will be available from external sources, such as debt or equity financing or other potential sources. The lack of additional capital resulting from the inability to generate cash flow from operations, or to raise capital from external sources would force us to substantially curtail or cease operations and would, therefore, have a material adverse effect on our business. Furthermore, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significant dilutive effect on our existing stockholders.
We intend to overcome the circumstances that impact on our ability to remain a going concern through a combination of the commencement of revenues, with interim cash flow deficiencies being addressed through additional equity and debt financing. We anticipate raising additional funds through public or private financing, strategic relationships or other arrangements in the near future to support our business operations; however, we may not have commitments from third parties for a sufficient amount of additional capital. We cannot be certain that any such financing will be available on acceptable terms, or at all, and our failure to raise capital, when needed, could limit our ability to continue our operations. Our ability to obtain additional funding will determine our ability to continue as a going concern. Failure to secure additional financing in a timely manner and on favorable terms would have a material adverse effect on our financial performance, results of operations, and stock price and require us to curtail or cease operations, sell off our assets, seek protection from its creditors through bankruptcy proceedings, or otherwise. Furthermore, additional equity financing may be dilutive to the holders of our Common Stock, and debt financing, if available, may involve restrictive covenants, and strategic relationships, if necessary, to raise additional funds, and may require that we relinquish valuable rights.
Our management has limited experience operating a public company and is subject to the risks commonly encountered by early-stage companies.
Although our management has experience in operating small companies, our management has not had to manage expansion while being a public company. Many investors may treat us as an early-stage company. In addition, our management has not overseen a company with large growth. Because we have a limited operating history, our operating prospects should be considered in light of the risks and uncertainties frequently encountered by early-stage companies in rapidly evolving markets. These risks include:
| ● | risks that we may not have sufficient capital to achieve our growth strategy; | |
| ● | risks that we may not develop our product and service offerings in a manner that enables us to be profitable and meet our customers’ requirements; and | |
| ● | risks that our growth strategy may not be successful; |
These risks are described in more detail herein. Our future growth will depend substantially on our ability to address these and the other risks described herein. If we do not successfully address these risks, our business could be significantly harmed.
We have a limited operational history in an emerging industry, making it difficult to accurately predict and forecast business operations.
As we have limited operations in our business and have yet to generate significant revenue, it is extremely difficult to make accurate predictions and forecasts of our finances. This is compounded by the fact that we operate in a rapidly transforming industry. There is no guarantee that our products or services will remain attractive to potential and current users as these industries undergo rapid change, or that potential customers will utilize our services.
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As a growing company, we have yet to achieve a profit and may not achieve a profit in the near future, if at all.
We have not yet produced a net profit and may not in the near future, if at all. While we expect to earn revenues and grow, we have not achieved profitability and cannot be certain that we will be able to sustain our current growth rate or realize sufficient revenue to achieve profitability. Our ability to continue as a going concern may be dependent upon raising capital from financing transactions, generating revenues throughout the year and keeping operating expenses below revenue levels in order to achieve positive cash flows, none of which can be assured.
We may be unable to manage growth, which may impact our potential profitability.
Successful implementation of our business strategy requires us to manage our growth. Growth could place an increasing strain on our management and financial resources. To manage growth effectively, we will need to:
| ● | establish definitive business strategies, goals and objectives; | |
| ● | maintain a system of management controls; | |
| ● | attract and retain qualified personnel, as well as develop, train, and manage management-level and other employees. |
If we fail to manage our growth effectively, our business, financial condition, or operating results could be materially harmed, and our stock price may decline.
Our lack of adequate D&O insurance may also make it difficult for it to retain and attract talented and skilled directors and officers.
In the future, we may be subject to additional litigation, including potential class action and stockholder derivative actions. Risks associated with legal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. To date, we have not obtained directors and officers liability (“D&O”) insurance. Without adequate D&O insurance, the amounts we would pay to indemnify its officers and directors should they be subject to legal action based on their service to the Company could have a material adverse effect on our financial condition, results of operations and liquidity. Furthermore, our lack of adequate D&O insurance may make it difficult for it to retain and attract talented and skilled directors and officers, which could adversely affect our business.
We expect to incur substantial expenses to meet our reporting obligations as a public company. In addition, failure to maintain adequate financial and management processes and controls could lead to errors in our financial reporting and could harm our ability to manage our expenses.
We estimate that it will cost approximately $300,000 annually to maintain the proper management and financial controls for our filings required as a public reporting company. In addition, if we do not maintain adequate financial and management personnel, processes and controls, we may not be able to accurately report our financial performance on a timely basis, which could cause a decline in our stock price and adversely affect our ability to raise capital.
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Risks Related to Ownership of Our Common Stock
The price of Common Stock may be volatile.
In the recent past, stocks generally, and financial services company stocks in particular, have experienced high levels of volatility. The trading price of our Common Stock has been highly volatile since trading commenced. The trading price of our Common Stock depends on a number of factors, including those described in this “Risk Factors” section, many of which are beyond our control and may not be related to our operating performance. Factors that could cause fluctuations in the trading price of our Common Stock include the following:
| ● | price and volume fluctuations in the overall stock market from time to time; | |
| ● | significant volatility in the market prices and trading volumes of financial services company stocks; | |
| ● | actual or anticipated changes in our results of operations or fluctuations in our operating results; | |
| ● | actual or anticipated changes in the expectations of investors or the recommendations of any securities analysts who follow our Common Stock; | |
| ● | actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally; | |
| ● | the public’s reaction to our press releases, other public announcements and filings with the SEC; | |
| ● | business disruptions and costs related to shareholder activism; | |
| ● | litigation and investigations or proceedings involving us, our industry or both or investigations by regulators into our operations or those of our competitors; | |
| ● | new laws or regulations or new interpretations of existing laws or regulations applicable to our business; | |
| ● | changes in accounting standards, policies, guidelines, interpretations or principles; |
| ● | general economic conditions; | |
| ● | changes to the markets in which our Common Stock is traded; and | |
| ● | sales of shares of our Common Stock by us or our stockholders. |
In the past, many companies that have experienced volatility in the market price of their stock have become subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.
Our Common Stock is very thinly traded, our stockholders may be unable to sell at or near ask prices or at all if they need to sell their shares to raise money or otherwise desire to liquidate their shares.
Our Common Stock has historically been sporadically traded on the OTC Markets, meaning that the number of people interested in purchasing our shares at, or near ask prices at any given time, may be relatively small or non-existent. This situation is attributable to a number of factors, including the fact that we are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as us or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer, which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give shareholders any assurance that a broader or more active public trading market for our shares of Common Stock will develop or be sustained, or that current trading levels will be sustained.
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The market price for our Common Stock is particularly volatile given our status as a relatively unknown company with a small and thinly traded public float, limited operating history, and lack of revenue, which could lead to wide fluctuations our share price. The price at which a shareholder purchases our shares may not be indicative of the price that will prevail in the trading market. Our shareholders may be unable to sell their shares at or above the purchase price, which may result in substantial losses to our shareholders.
The market for our shares of Common Stock is characterized by significant price volatility when compared to seasoned issuers and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. The volatility in our share price is attributable to a number of factors. First, as noted above, our shares are sporadically traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our shares is sold into the market without commensurate demand, as compared to a seasoned issuer which could better absorb those sales without adverse impact on its share price. Secondly, we are a speculative investment due to, among other matters, our limited operating history and lack of significant revenue or profit to date, and the uncertainty of future market acceptance for our products and services. As a consequence of this enhanced risk, more risk-averse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the securities of a seasoned issuer. The following factors may add to the volatility in the price of our shares: actual or anticipated variations in our quarterly or annual operating results, government regulations, announcements of significant acquisitions, strategic partnerships or joint ventures, our capital commitments, and additions or departures of our key personnel. Many of these factors are beyond our control and may decrease the market price of our shares regardless of operating performance. We cannot make any predictions or projections as to what the prevailing market price for our shares will be at any time, including as to whether our shares will sustain their current market prices, or as to what effect the sale of shares or the availability of shares for sale at any time will have on the prevailing market price.
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 on our Common Stock in the foreseeable future. The payment of dividends on 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 we 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 investment will only occur if our stock price appreciates.
Our charter documents and Nevada law could discourage, delay or prevent a takeover that stockholders consider favorable and could also reduce the market price of our Common Stock.
Our Articles of Incorporation and Bylaws contain provisions that could delay or prevent a change in control of our company. These provisions could also make it more difficult for stockholders to nominate directors for election to our board of directors and take other corporate actions. These provisions, among other things:
| ● | provide for non-cumulative voting in the election of directors; | |
| ● | authorize our board of directors, without stockholder approval, to issue preferred stock with terms determined by our board of directors and to issue additional shares of our Common Stock; and | |
| ● | provide that only our board of directors may set the number of directors constituting our board of directors or fill vacant directorships. |
These and other provisions in our Articles of Incorporation and Bylaws, as well as provisions under Nevada law, could discourage potential takeover attempts, reduce the price that investors might be willing to pay in the future for shares of our Common Stock and result in the trading price of our Common Stock being lower than it otherwise would be.
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| ITEM 1B. | UNRESOLVED STAFF COMMENTS |
None.
| ITEM 1C. | CYBERSECURITY |
The identification, detection, prevention and remediation of known or potential IT security vulnerabilities, including those arising from third-party hackers, hardware or software, is extremely costly and time consuming. The Company does not have the manpower, expertise or financial resources to effectively identify, detect, prevent or remediate cybersecurity risks. No assurance or guarantee whatsoever can be given that the Company will not be damaged by the exploitation of its cybersecurity vulnerabilities.
During the year ended March 31, 2024, we did not identify any cybersecurity threats that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition. However, we may not be aware of all vulnerabilities or might not accurately assess the risks of incidents, and such preventative measures cannot provide absolute security and may not be sufficient in all circumstances or mitigate all potential risks.
| ITEM 2. | PROPERTIES |
Our principal corporate office is located at 4695 MacArthur Court, Suite 1100, Newport Beach, CA 92660.
On August 27, 2020, we formally executed a month-to-month cancellable operating lease for leasing office space in an executive suite, commencing on September 1, 2020 for $259 per month. We paid a security deposit of $259 on September 7, 2020. The monthly rent increased to $279 effective January 1, 2021, and then to $289 effective October 9, 2022.
On October 26, 2020, we executed a non-cancellable operating lease agreement for our principal office for a monthly rent of $5,500 with the lease commencing on November 1, 2020 for a period of 12 months. We paid a security deposit of $5,500 on October 28, 2020. On November 25, 2021, the Company amended the terms of the operating lease agreement to be on a month-to-month basis, and agreed to increase the security deposit to $6,500 and a monthly lease payment of $6,500.
On April 13, 2023, we executed a multi-tenant shopping center lease for a sales office for a monthly rent of $2,196 for a term of three years and two months. The rent is payable on the first day of the opening of business or 60 days after the commencement date. The lease required a monthly common area maintenance expense of $1,531 and a security deposit of $4,392.
We believe our facilities are adequate to meet our current and near-term needs.
| ITEM 3. | LEGAL PROCEEDINGS |
We anticipate that we (including any future subsidiaries) will from time to time become subject to claims and legal proceedings arising in the ordinary course of business. It is not feasible to predict the outcome of any such proceedings and we cannot assure you that their ultimate disposition will not have a materially adverse effect on our business, financial condition, cash flows or results of operations. As of the filing of this Annual Report, we are not a party to any pending legal proceedings, nor are we aware of any civil proceeding or government authority contemplating any legal proceeding.
| ITEM 4. | MINE SAFETY DISCLOSURES |
Not applicable.
PART II
| ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Our Common Stock is quoted on the OTCQX under the symbol “BCRD.” The table below sets forth for the periods indicated the quarterly high and low bid prices as reported by OTC Markets. Limited trading volume has occurred during these periods. These quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions.
| Quarter | High | Low | ||||||||
| FISCAL YEAR ENDED MARCH 31, 2025 | First | $ | 5.93 | $ | 5.15 | |||||
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| Quarter | High | Low | ||||||||
| FISCAL YEAR ENDED MARCH 31, 2024 | First | $ | 8.75 | $ | 5.00 | |||||
| Second | $ | 5.25 | $ | 5.00 | ||||||
| Third | $ | 5.75 | $ | 5.05 | ||||||
| Fourth | $ | 5.75 | $ | 5.75 | ||||||
| Quarter | High | Low | ||||||||
| FISCAL YEAR ENDED MARCH 31, 2023 | First | $ | 8.50 | $ | 8.50 | |||||
| Second | $ | 8.50 | $ | 8.50 | ||||||
| Third | $ | 8.50 | $ | 8.50 | ||||||
| Fourth | $ | 8.75 | $ | 8.50 | ||||||
Dividend Information
We have not paid any cash dividends on our Common Stock to our shareholders. The declaration of any future cash dividends is at the discretion of our board of directors and depends upon our earnings, if any, our capital requirements and financial position, our general economic conditions, and other pertinent conditions. It is our present intention not to pay any cash dividends in the foreseeable future, but rather to reinvest earnings, if any, in our business operations.
Holders of Record
As of July 10, 2024, an aggregate of 12,087,454 shares of our Common Stock were issued and outstanding and were owned by approximately 96 stockholders of record. An additional number of stockholders are beneficial holders of our Common Stock in “street name” through banks, brokers and other financial institutions that are the record holders.
Unregistered Sales of Equity Securities
On February 20, 2024, we sold 25,000 shares of common stock to an investor for gross proceeds of $100,000.
On March 13, 2024, we sold 6,250 shares of common stock to two investors for gross proceeds of $25,000.
The shares of common stock were issued and sold pursuant to exemptions from the registration requirements of Section 5 of the Securities Act contained in Section 4(a)(2) and/or Regulation D thereof. No sales commissions were paid in connection with the sales of these securities and no general solicitation was used.
| ITEM 6. | [RESERVED] |
| ITEM 7. | MANAGEMENTS’ DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and the related notes and other financial information included elsewhere in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements.”
Cautionary Note Concerning Factors That May Affect Future Results
This Annual Report, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Company may also make forward-looking statements in other reports filed with the SEC in materials delivered to shareholders and in press releases. In addition, the Company’s representatives may from time to time make oral forward-looking statements.
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Forward-looking statements relate to future events and typically address the Company’s expected future business and financial performance. Words such as “plan,” “expect,” “aim,” “believe,” “project,” “target,” “anticipate,” “intend,” “estimate,” “should,” “could,” “forecast” and other words and terms of similar meaning, typically identify such forward-looking statements. In particular, these include, among others, statements relating to:
| ● | the Company’s strategy for growth, future revenues, earnings, cash flow, uses of cash and other measures of financial performance, and market position, | |
| ● | worldwide economic, political, and capital markets conditions, such as interest rates, foreign currency exchange rates, financial conditions of our suppliers and customers, and natural and other disasters or climate change affecting the operations of the Company or our suppliers and customers, | |
| ● | new business opportunities, product development, and future performance or results of current or anticipated products, | |
| ● | the scope, nature or impact of acquisition, strategic alliance and divestiture activities, | |
| ● | the outcome of contingencies, such as legal and regulatory proceedings, | |
| ● | future levels of indebtedness, common stock repurchases and capital spending, | |
| ● | future availability of and access to credit markets, | |
| ● | pension and postretirement obligation assumptions and future contributions, | |
| ● | asset impairments, | |
| ● | tax liabilities, | |
| ● | information technology security, and | |
| ● | the effects of changes in tax (including the newly enacted Tax Cuts and Jobs Act), environmental and other laws and regulations in the United States and other countries in which we operate. |
Overview
BlueOne Card Inc., a Nevada corporation (the “Company”), through our relationship with our program manager, Expanse Financial Technologies, Inc. (the “Program Manager”), is a reseller of an all-in-one prepaid, branded card to be issued by the Program Manager which we believe has numerous user benefits. The Company terminated its relationship with EndlessOne Global, Inc. on or about December 18, 2023. Through our relationship with our Program Manager, we are aiming to provide innovative pay out solutions and prepaid cards to consumers. Unlike other prepaid card distributors and companies, we specifically aim to target those customers who are unbanked, or non-bankable, and who have need to crossing international borders. The Program Manager’s platform has to be functional to derive revenues therefrom.
Through our relationship with the Program Manager, we expect to earn revenues mostly through the sale of prepaid debit cards, and commissions derived from monthly fees charged to customers to the Program Manager provided by us for the issued general purpose reloadable prepaid card, reloading fees, ATM withdrawal fees, and card to card money transaction fees. We will be acting as an independent sales representative of the Program Manager and we will not receive revenue from customer contracts, which will be executed with the Program Manager.
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To date, we have generated minimal revenues from our planned business and our business is in a development stage.
We are currently headquartered in Newport Beach, California.
Background
BlueOne Card, Inc. (formerly known as “Avenue South Ltd.,” “TBSS International, Inc.,” or “Manneking Inc.”) was incorporated on July 6, 2007, under the laws of the State of Nevada. We started our business as a retailer and importer of domestic home furnishings from Hong Kong. On September 30, 2011, we changed our name to TBSS International, Inc., and got engaged in gold mining and drilling and general construction. On April 26, 2019, Corporate Compliance, LLC filed a re-application for custodianship pursuant to NRS 78.347. The Eighth Judicial District Court of Clark County, Nevada granted custodianship over TBSS International, Inc. to Corporate Compliance, LLC. On October 15, 2019, we changed our name to “Manneking Inc.,” and then to “BlueOne Card, Inc.” on June 30, 2020.
On October 15, 2019, we executed a 1 for 100 reverse stock-split. On June 30, 2020, we also executed a 1 for 100 reverse stock-split with a Certificate of Change and changed our trading symbol to “BCRD.” We filed a FINRA corporate action pursuant to FINRA Rule 6490 which was announced on the Daily List as of July 23, 2020.
Critical Accounting Policies and Estimates
We apply the following critical accounting policies in the preparation of our financial statements:
Inventory
Inventory of finished goods consists of plastic prepaid debit cards and gift cards and is valued at the lower of cost or net realizable value using the specific identification method. The reported net value of inventory includes saleable prepaid debit cards and gift cards that will be sold or used in future periods. The Company reserves for obsolete and slow-moving inventory.
Internal-Use Software Development Costs
Costs incurred to develop internal-use software during the preliminary project stage are expensed as incurred. Internal-use software development costs are capitalized during the application development stage, which is after: (i) the preliminary project stage is completed; and (ii) management authorizes and commits to funding the project and it is probable the project will be completed and used to perform the function intended. Capitalization ceases at the point the software project is substantially complete and ready for its intended use, and after all substantial testing is completed. Upgrades and enhancements are capitalized if it is probable that those expenditures will result in additional functionality. Amortization is provided for on a straight-line basis over the expected useful life of five years of the internal-use software development costs and related upgrades and enhancements. When existing software is replaced with new software, the unamortized costs of the old software are expensed when the new software is ready for its intended use.
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Stock-based Compensation
The Company accounts for equity-based transactions with non-employees under the provisions of ASC Topic No. 505-50, Equity-Based Payments to Non-Employees (“ASC 505-50”). The Company has established that equity-based payment transactions with non-employees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The fair value of common stock issued for payments to non-employees is measured on the date of the grant. The fair value of equity instruments, other than common stock, is estimated using the Black-Scholes option valuation model. In general, we recognize the fair value of the equity instruments issued as deferred stock compensation and amortize the cost over the term of the contract.
The Company accounts for employee stock-based compensation in accordance with the guidance of ASC Topic 718, Compensation—Stock Compensation. Under the fair value recognition provisions, stock-based compensation expense is measured at the grant date based on the fair value of the award and is recognized ratably over the requisite service period.
Revenue Recognition
The Company recognizes revenues from card sales, when the product is deemed delivered to the customer, and the ownership/control is transferred. The Company will recognize revenue from card services fees and card transactions once the service or transaction is completed, respectively. The Company’s revenue recognition policy is based on the revenue recognition criteria established under the Financial Accounting Standards Board – Accounting Standards Codification 606 “Revenue From Contracts With Customers” which has established a five-step process to govern contract revenue and satisfy each element is as follows: (1) Identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when or as you satisfy a performance obligation. The Company records the revenue once all the above steps are completed.
Under this guidance, revenue is recognized when control of promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We review our sales transactions to identify contractual rights, performance obligations, and transaction prices, including the allocation of prices to separate performance obligations, if applicable. Revenue and costs of sales are recognized once products are delivered to the customer’s control and performance obligations are satisfied.
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Recent Accounting Pronouncements
See Note 2 of Notes to Financial Statements contained in this Annual Report for management’s discussion of recent accounting pronouncements.
Results of Operations for the Year Ended March 31, 2024 Compared to the Year Ended March 31, 2023
Revenue and Cost of Sales
We recorded $4,000 and $25,000 in revenues from the sale of prepaid debit cards for the years ended March 31, 2024 and 2023, respectively. We recorded $1,600 and $14,000 for the cost associated with the purchase of debit cards for the years ended March 31, 2024 and 2023, respectively. In addition, we recorded $72,900 and $26,385 as reserve for the net realizable value of prepaid cards inventory and charged to cost of sales for the year ended March 31, 2024 and 2023, respectively. As a result, we reported a gross (loss) of ($70,500) and ($15,385) for the years ended March 31, 2024 and 2023, respectively.
Operating Expenses
Operating expenses included legal, accounting and professional fees, all costs associated with marketing, rent and other expenses. We recorded operating expenses of $1,553,729 and $1,098,486 for the years ended March 31, 2024 and 2023, respectively. The increase of $455,243 in operating expenses was primarily due to the increase in filing and regulatory fees of $5,149, increase in rent of $51,565 due to leasing additional office space, increase in marketing and advertising and promotions of $414,125, increase in bad debt expenses related to uncollectible promissory notes of $102,305, increase in research and development expense of $102,217, and increase in depreciation and amortization of leaseholds of $79,473. Increase in operating expenses during fiscal 2024 was offset by a reduction in consulting and business advisory expense to consultants totaling $418,981 for the year ended March 31, 2024 as compared to March 31, 2023.
Other Income (Expense)
Other income and expenses included interest income of $11,137 and $0 for the years ended March 31, 2024 and 2023, respectively. Interest income was earned on cash balances invested in money market funds due to higher interest rates in 2024 compared to 2023. Interest expense was relating to the finance arrangement on purchase of Company vehicle, and interest on credit cards. Interest expense totaled $48 and $4,928 for the years ended March 31, 2024 and 2023, respectively. Interest expense decreased as a result of the sale of vehicle during the year ended March 31, 2023.
Net Losses
We incurred a net loss of $1,613,140 for the year ended March 31, 2024 as compared to a net loss of $1,118,799 for the year ended March 31, 2023. The increase in loss of $494,341 was primarily due to the increase in operating expenses incurred by us.
Liquidity and Capital Resources
Liquidity and Capital Resources for the Year Ended March 31, 2024 Compared to the Year Ended March 31, 2023.
| March 31, 2024 | March 31, 2023 | |||||||
| Summary of Cash Flows: | ||||||||
| Net cash used in operating activities | $ | (1,146,710 | ) | $ | (331,574 | ) | ||
| Net cash used in investing activities | (841,345 | ) | (28,700 | ) | ||||
| Net cash provided by financing activities | 1,395,000 | 987,074 | ||||||
| Net increase in cash and cash equivalents | (593,055 | ) | 626,800 | |||||
| Beginning cash and cash equivalents | 668,118 | 41,318 | ||||||
| Ending cash and cash equivalents | $ | 75,063 | $ | 668,118 | ||||
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To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities may result in dilution to existing stockholders. If additional funds are raised through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of common stock and the terms of such debt could impose restrictions on our operations. Regardless of whether our cash assets prove to be inadequate to meet our operational needs, we may seek to compensate providers of services by issuance of stock in lieu of cash, which may also result in dilution to existing shareholders. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing.
No assurance can be given that sources of financing will be available to us and/or that demand for our equity/debt instruments will be sufficient to meet our capital needs, or that financing will be available on terms favorable to us. If funding is insufficient at any time in the future, we may not be able to take advantage of business opportunities or respond to competitive pressures or may be required to reduce the scope of our planned service development and marketing efforts, any of which could have a negative impact on our business and operating results. In addition, insufficient funding may have a material adverse effect on our financial condition, which could require us to:
| ● | Curtail our operations significantly, or | |
| ● | Seek arrangements with strategic partners or other parties that may require us to relinquish significant rights to technology platform and correlated services, or | |
| ● | Explore other strategic alternatives including a merger or sale of our Company. |
Operating Activities
Net cash used in operations of $1,146,710 for the year ended March 31, 2024 was primarily a result of a net loss of $1,613,140, depreciation and amortization of $111,943, write down of inventory of prepaid cards of $72,900, and bad debt provision on notes receivable of $102,305. In addition, the Company recorded a net increase in operating assets and liabilities of $179,282 due to reduction in inventory of $1,600, decrease in prepaid deposits of $289, decrease in accounts payable and accrued liabilities of $8,012, increase in compensation payable to officer of $190,575, and decrease in related party payables of $5,170.
Net cash used in operations of $331,574 for the year ended March 31, 2023 was primarily a result of a loss of $1,118,799, inventory reserve of $26,385, depreciation of $32,470, noncash rent expense of $6,155, loss on sale of vehicle of $2,196 and stock-based compensation expense of $500,000. In addition, the Company recorded a net increase in operating assets and liabilities of $232,329 due to an increase in inventory of $22,985, decrease in prepaid deposits of $68,366, increase in accounts payable and accrued liabilities of $40,445, decrease in customer deposits of $20,000, increase in compensation payable to officer of $173,250, and decrease in related party payables of $6,747.
Investing Activities
Net cash used in operating activities for the year ended March 31, 2024 was $841,345 due to cash paid $405,791 for purchase of internal-use software development costs, cash paid $333,249 for purchase of property and equipment, and cash of $102,305 advanced against promissory notes receivable.
Net cash used in investing activities for the year ended March 31, 2023 was $28,700 which resulted from purchase of software development costs.
Financing Activities
Net cash provided by financing activities for the year ended March 31, 2024 was $1,395,000, consisting of cash proceeds of $1,335,000 received from sale of common stock of the Company, and $60,000 in cash proceeds received from common stock subscriptions.
Net cash provided by financing activities for the year ended March 31, 2023 was $987,074, consisted of cash proceeds from the sale of common stock of $372,500, cash received from common stock subscriptions of $617,700, and cash paid for loan payable of $3,126.
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Future Capital Requirements
Our current available cash and cash equivalents are insufficient to satisfy our liquidity requirements. Our capital requirements for the next fiscal years will depend on numerous factors, including management’s evaluation of the timing of projects to pursue. Subject to our ability to generate revenues and cash flow from operations and our ability to raise additional capital (including through possible joint ventures and/or partnerships), we expect to incur substantial expenditures to carry out our business plan, as well as costs associated with our capital raising efforts and being a public company.
Our plans to finance our operations include seeking equity and debt financing, alliances or other partnership agreements, or other business transactions, that would generate sufficient resources to ensure continuation of our operations.
The sale of additional equity or debt securities may result in additional dilution to our shareholders. If we raise additional funds through the issuance of debt securities or preferred stock, these securities could have rights senior to those of our common stock and could contain covenants that would restrict our operations. Any required additional capital may not be available on reasonable terms, if at all. If we were unable to obtain additional financing, we may be required to reduce the scope of, delay or eliminate some or all of our planned activities and limit our operations which could have a material adverse effect on our business, financial condition and results of operations.
Inflation
The amounts presented in our financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.
Going Concern
The accompanying financial statements have been prepared on a going concern basis. For the year ended March 31, 2024, we recorded a net loss of $1,613,140, reported net cash used in operating activities of $1,146,710, and recorded a working capital deficit of $624,037 and an accumulated deficit of $3,871,752 as of March 31, 2024. These matters raise substantial doubt about our ability to continue as a going concern for a period of one year from the date of this filing. Our ability to continue as a going concern is dependent upon our ability to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due, to fund possible future acquisitions, and to generate profitable operations in the future. Our management plans to provide for our capital requirements by continuing to issue additional equity and debt securities. The outcome of these matters cannot be predicted at this time and there are no assurances that, if achieved, we will have sufficient funds to execute our business plan or generate positive operating results. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Contingencies
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. Our management, in consultation with its legal counsel as appropriate, assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against us or unasserted claims that may result in such proceedings, we, in consultation with legal counsel, evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in our financial statements. If the assessment indicates a potentially material loss contingency is not probable, but is reasonably possible, or is probable, but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.
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| ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Not required for smaller reporting companies.
| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
The financial statements of the Company are included beginning on page F-1 immediately following the signature page to this Annual Report.
| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
None.
| ITEM 9A. | CONTROLS AND PROCEDURES |
Disclosure Controls and Procedures
We have established disclosure controls and procedures that 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 in the rules and forms of the SEC and, as such, is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer, James Koh, who serves as our principal executive officer and principal financial and accounting officer, as appropriate to allow timely decisions regarding required disclosure. Mr. Koh evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, as of March 31, 2024. Based on his evaluation, Mr. Koh concluded that, due to a material weakness in our internal control over financial reporting as described below, our disclosure controls and procedures were not effective as of March 31, 2024. In light of the material weakness in internal control over financial reporting, we completed substantive procedures, including validating the completeness and accuracy of the underlying data used for accounting prior to filing this Annual Report.
These additional procedures have allowed us to conclude that, notwithstanding the material weakness in our internal control over financial reporting, the financial statements included in this report fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States of America.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management conducted an evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2024 based upon Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
During its evaluation, management noted certain matters involving internal control and its operation that we consider to be material weaknesses under standards of the Public Company Accounting Oversight Board (“PCAOB”). A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.
We noted deficiencies involving lack of segregation of duties, lack of internal control documentation that we believe to be material weaknesses. Other material weaknesses include lack of monitoring controls over the evaluation of impairment of intangibles and long-lived assets.
Because of these material weaknesses, management concluded that we did not maintain effective internal control over financial reporting as of March 31, 2024, based on criteria described in Internal Control – Integrated Framework (2013) issued by COSO.
Plan for Remediation of Material Weaknesses
Since these entity level controls have a pervasive effect across the organization, management has determined that these circumstances constitute material weaknesses.
We believe that, since the date that we were made aware of our material weakness, we have improved our internal control over financial reporting by taking certain corrective steps that we believe minimize the likelihood of a recurrence. We have designed a disclosure controls and procedures regime pursuant to which our management has, among other things:
(a) identified the definition, objectives, application and scope of our internal control over financial reporting.
(b) delineated the duties of each member of the group responsible for maintaining the adequacy of our internal control over financial reporting. This group consists of:
(i) our Chief Executive Officer; and
(ii) an independent consultant who was engaged to prepare and assure compliance with both our internal control over financial reporting as well as our disclosure controls and procedures and review our disclosure controls and procedures on a regular basis, subject to our management’s supervision.
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We continue to work with our structure in which we have an independent consultant, in order to continue implementation of required key controls, the necessary steps required for procedures to ensure the appropriate communication and review of inputs necessary for the financial statement closing process, as well as for the appropriate presentation of disclosures within the financial statements. The remediation steps taken are subject to the Chief Executive Officer’s oversight. While management believes there have been improvements of internal controls over financial reporting during the year ended March 31, 2024, management anticipates that further continuing efforts will be needed to effectively remediate the material deficiencies relating to segregation of duties and maintaining adequate supporting documentation to substantiate the information reported in the financial statements which existed as of March 31, 2024, and to assure that complex transactions are properly recorded as the business continues to grow. Our management has been actively engaged in planning for, designing and implementing the corrective steps described above to enhance the effectiveness of our disclosure controls and procedures as well as our internal control over financial reporting. Our management is committed to achieving and maintaining a strong control environment, high ethical standards, and financial reporting integrity, and will take further steps to ensure that personnel are adequate in terms of sophistication and quantity to adequately assure that the financial reporting process is efficient and operated with the sufficient level of integrity to meet and surpass all regulatory standards.
While management is implementing corrective steps to remediate its internal control deficiencies, we cannot assure you that they will be sufficient to be free of a material weakness. If we should in the future conclude that our internal control over financial reporting suffers from a material weakness, we will be required to expend additional resources to improve it. Any additional instances of material weaknesses could require a restatement of our financial statements. If such restatements are required, there could be a material adverse effect on our investors’ confidence that our financial statements fairly present our financial condition and results of operations, which in turn could materially and adversely affect the market price of our common stock.
Changes in Internal Control over Financial Reporting
Other than the remediation activities undertaken by us as disclosed above, there have been no changes in our internal control over financial reporting during the year ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| ITEM 9B. | OTHER INFORMATION |
During the year ended March 31, 2024, no director or officer of the Company adopted or terminated a Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
| ITEM 9C. | DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS |
None.
PART III
| ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
The following table sets forth the names, positions and ages of our current executive officers and directors. All directors serve until the next annual meeting of stockholders or until their successors are elected and qualified. Officers are appointed by our board of directors and their terms of office are, except to the extent governed by an employment contract, at the discretion of our board of directors.
| Name | Age | Title | ||
| James Koh* | 56 | President, Chief Executive Officer, Chief Financial Officer, Secretary and Chairman of the Board of Directors | ||
| Taugyu Choi | 51 | Director, Audit, Compensation, and Corporate Governance and Nominating Committee Member | ||
| Dong Sung Lee | 54 | Director, Audit, Compensation, and Corporate Governance and Nominating Committee Member |
| * | Mr. Koh is the majority shareholder of our Company. |
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Our President, CEO, CFO and Chairman
Mr. Koh was appointed as an officer and director of the Company on October 7, 2019. Mr. Koh has extensive experience in the wireless telecommunications industry having worked for the past 16 years in R&D, manufacturing, and within senior management positions engaged in developing cellular phones for AT&T, T-Mobile, Telcel (Mexico), and Fido (Canada). From his role as the Chief Executive Officer of Tiger Stand Corp. from 2005 to 2017, he was engaged in sales, marketing, and operations management. Mr. Koh has been a private pilot and FAA licensed since 1990.
Taegyu Choi
Mr. Choi has served as a director of the Company since October 2023. Mr. Choi has technical and managerial-level experience for more than 20 years in software development in various fields with fluent knowledge of hardware and networking. He demonstrates an impeccable sense of ownership to his duties and projects with excellent leadership abilities. His strengths are within the Inventory System, OTT Streaming, e-commerce development, Customer Billing System, and Contents Management System (CMS). He is the founder of A to Z Services Inc. (2021), and previously served as vice president of Data Stream for digital marketing.
Dong Sung Lee
Mr. Lee has served as a director of the Company since October 2023. Mr. Lee was selected as the operator of the South Korean government program CATV, in 1994, which produced TV programs for KBS (Korean Broadcasting System Company) and SBS. From 2000 to 2010, he served as an Executive Producer and Marketing Director of News for KBS America in the U.S. Mr. Lee is a 2006 recipient of the George W. Bush President Award. Since 2010, Mr. Lee has been the owner of the Maeil Broadcasting Network (MBN) in the U.S. which entails exclusive rights, and Maekyung Money TV in Korea.
Associations with Companies with a Class of Securities Registered Pursuant to Section 12 or 15(d) of the Exchange Act
None.
Legal Proceedings
During the past ten years, none of the following events would apply to any of our directors or executive officers:
| ● | A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing; | |
| ● | Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); | |
| ● | Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities: |
| ● | Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity; | |
| ● | Engaging in any type of business practice; or | |
| ● | Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws; |
| ● | Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity; | |
| ● | Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated; |
| ● | Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated; |
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| ● | Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: |
| ● | Any Federal or State securities or commodities law or regulation; or | |
| ● | Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or | |
| ● | Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
| ● | Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
Code of Ethics.
We have yet to adopt a Code of Ethics due to the fact we have only two independent directors and an Executive Director/Officer and we have minimal operations or business, and generated minimal revenues. We do not believe that the adoption of an Ethical Code would serve the primary purpose of such a code to provide a manner of conduct as the development, execution and enforcement of such a code would be by the same persons and only persons to whom such code applied. At such a time as we commence more significant business operations, management will recommend that such a code be adopted.
Corporate Governance
On October 2, 2023, the Company established a Corporate Governance and Nominating Committee, Compensation Committee, and an Audit Committee of the board of directors. At such time as the Company commences more significant business operations and/or has additional shareholders and a larger board of directors, the Company will propose expanding its committees of its board of directors, including the Nominating, Compensation, and Audit Committee. Mr. Dong Sung Lee, an independent director, serves as the Chairman of Audit Committee and Mr. Taegyu Choi, an independent director, serves as a member of the Audit Committee. Choi serves as Chairman of the Corporate Governance and Nominating Committee and Compensation Committee, and Lee serves as a member of such committees.
Beneficial Ownership Reporting Compliance – Delinquent Section 16(a) Reports
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s executive officers and directors, and persons who beneficially own more than 10% of the Company’s stock, to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission. Executive officers, directors and greater than 10% beneficial owners are required by applicable regulations to furnish the Company with copies of all Section 16(a) forms they file. Based solely upon a review of the copies of the forms furnished to the Company and information involving securities transactions of which the Company is aware, none of the Company’s officers, directors and holders of more than 10% of the outstanding common stock of the Company failed to timely file reports required by Section 16(a) of the Exchange Act during the year ended March 31, 2024.
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| ITEM 11. | EXECUTIVE COMPENSATION |
Executive Compensation
The following table and related footnotes show the compensation paid to our named executive officers during the last fiscal years ended March 31, 2024 and 2023, and information concerning all compensation paid for services rendered to us in all capacities for our last two fiscal years.
| Name and Principal Position | Year-Ended | Salary($) | All Other Compensation($) |
Total($) | ||||||||||
| James Koh, President, CEO, and Chairman** | March 31, 2024 | 190,575 | - | 190,575 | ||||||||||
| March 31, 2023 | 173,250 | - | 173,250 | |||||||||||
** All compensation in the form of salary owed pursuant to the employment agreement has been unpaid and is being deferred by Mr. Koh. The Company intends to defer payment of executive’s salary compensation until the Company has sufficient amounts to fund both the Company’s operations and executive’s salary.
Employment Agreements
CEO Employment Agreement
On December 1, 2020, we entered into an Employment Agreement with James Koh, our President, CEO, Secretary, and Chairman. The initial term of the agreement is for three years and, if written notice is not provided within 90 days of the termination of each term, the term is automatically extended for an additional year term. The agreement may be terminated by either party upon 90 days’ prior written notice. Whether the agreement is terminated without “Cause,” for “Good Reason,” or for “Cause,” as defined in the agreement, determines what compensation is owed and when. There is also a 30-day cure period for any termination for “Cause,” as defined in the agreement. The agreement contains confidentiality, non-compete, and non-solicitation provisions.
As a bonus for entering into the agreement, Mr. Koh was issued 1,000,000 shares of our common stock and, in the event that the agreement is terminated prior to one year from the date of the agreement, Mr. Koh is obligated to return the shares to us. Pursuant to the agreement, Mr. Koh is entitled to an annual base salary of $150,000 and that amount is subject to an automatic 10% annual increase.
Pursuant to the agreement, Mr. Koh is entitled to bonuses, reimbursement of expenses, a vehicle allowance, four weeks of paid vacation, and other incentives.
This agreement does provide for payments to be made as a result of any “Change in Control,” as defined in the agreement, of us.
Outstanding Equity Awards at Fiscal Year-End
None.
Director Compensation
At this time, our directors do not receive any cash compensation for serving as a member of our Board of Directors. The term of office for each Director is one year, or until his/her successor is elected at our annual meeting and qualified. The term of office for each of our officers is at the pleasure of the Board of Directors. The selection of a person or election to the Board of Directors was neither independently made nor negotiated at arm’s length.
During the fiscal years ended March 31, 2024 and 2023, our directors received no compensation for services provided to the Company as directors.
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Limitation on Liability and Indemnification
The Nevada Revised Statutes limits or eliminates the personal liability of directors to corporations and their stockholders for monetary damages for breaches of directors’ fiduciary duties as directors.
The limitation of liability and indemnification provisions under the Nevada Revised Statues and in our governing documents may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. These provisions may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. However, these provisions do not limit or eliminate our rights, or those of any stockholder, to seek non-monetary relief such as injunction or rescission in the event of a breach of a director’s fiduciary duties. Moreover, the provisions do not alter the liability of directors under the federal securities laws. In addition, your investment may be adversely affected to the extent that, in a class action or direct suit, we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
Equity Compensation Plan Information
2022 Stock Incentive Plan
On March 11, 2022, the Board of Directors adopted the 2022 Stock Incentive Plan (the “2022 Plan”). The purpose of the 2022 Plan is (a) to enhance our ability to attract and retain the services of qualified employees, officers, directors, consultants, and other service providers upon whose judgment, initiative and efforts the successful conduct and development of our business largely depends, and (b) to provide additional incentives to such persons or entities to devote their utmost effort and skill to the advancement and betterment of our company, by providing them an opportunity to participate in the ownership of our Company and thereby have an interest in the success and increased value of our Company.
The 2022 Plan is administered by our board of directors; however, the board of directors may designate administration of the 2022 Plan to a committee consisting of at least two independent directors. Awards may be made under the 2022 Plan for up to 5,000,000 shares of common stock of the Company. Only employees of our Company or of an “Affiliated Company”, as defined in the 2022 Plan, (including members of the board of directors if they are employees of our Company or of an Affiliated Company) are eligible to receive incentive stock options under the 2022 Plan. Employees of our Company or of an Affiliated Company, members of the board of directors (whether or not employed by our Company or an Affiliated Company), and “Service Providers”, as defined in the 2022 Plan, are eligible to receive non-qualified options, restricted stock units, and stock appreciation rights under the 2022 Plan. All awards are subject to Section 162(m) of the Internal Revenue Code.
No option awards may be exercisable more than ten years after the date it is granted. In the event of termination of employment for cause, the options terminate on the date of employment is terminated. In the event of termination of employment for disability or death, the optionee or administrator of optionee’s estate or transferee has six months following the date of termination to exercise options received at the time of disability or death. In the event of termination for any other reason other than for cause, disability or death, the optionee has 30 days to exercise his or her options.
The 2022 Plan will continue in effect until all the stock available for grant or issuance has been acquired through exercise of options or grants of shares, or until ten years after its adoption, whichever is earlier. Awards under the 2022 Plan may also be accelerated in the event of certain corporate transactions such as a merger or consolidation or the sale, transfer or other disposition of all or substantially all our assets.
As of March 31, 2024, the Board had awarded consultants 250,000 shares of Common Stock under the 2022 Plan.
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| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
The following table and footnotes thereto sets forth information regarding the number of shares of Common Stock beneficially owned by (i) each director and named executive officer of our Company, (ii) named executive officers, executive officers, and directors of the Company as a group, and (iii) each person known by us to be the beneficial owner of 5% or more of our issued and outstanding shares of Common Stock. In calculating any percentage in the following table of common stock beneficially owned by one or more persons named therein, the following table assumes 12,087,454 shares of Common Stock outstanding. Unless otherwise further indicated in the following table, the footnotes thereto and/or elsewhere in this report, the persons and entities named in the following table have sole voting and sole investment power with respect to the shares set forth opposite the shareholder’s name, subject to community property laws, where applicable. Unless as otherwise indicated in the following table and/or the footnotes thereto, the address of our named executive officers and directors in the following table is: 4695 MacArthur Court, Suite 1100, Newport Beach, CA 92660.
| Name and Address of Beneficial Owners | Amount and Nature of Beneficial Ownership(1) | Percent of Class(1) | ||||||
| Named Executive Officers and Directors’ | ||||||||
| James Koh, President, CEO, Secretary, and Chairman | 301,000,000 | (2) | 98.98 | % | ||||
| Mr. Taegyu Choi | — | 0 | % | |||||
| Mr. Dong Sung Lee | — | 0 | % | |||||
| Executive Officers, Named Executive Officers, and Directors as a Group (One Person) | 301,000,000 | 98.98 | % | |||||
| 5% Beneficial Holders (Not Named Above) | ||||||||
| None | ||||||||
| (1) | Under Rule 13d-3 of the Exchange Act, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the number of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in the above table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding on the date of this Annual Report. | |
| (2) | Includes 292,000,000 shares issuable upon the conversion of 292,000 shares of Series A Convertible Preferred Stock owned by Mr. Koh. |
Changes in Control
There are no arrangements known to us the operation of which may at a subsequent date result in a change in control of the Company.
| ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
Except as disclosed below, for transactions with our executive officers and directors, please see the disclosure under “EXECUTIVE COMPENSATION” above.
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On September 30, 2020, our Chief Executive Officer converted 8,000 shares of Series A Convertible Preferred Stock into 8,000,000 shares of our Common Stock.
Our CEO, from time to time, has provided advances to us for our working capital needs. We have recorded a payable to the CEO of $20,595 and $25,765 at March 31, 2024 and at March 31, 2023, respectively. The funds advanced are unsecured, non-interest bearing, and due on demand.
| ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES |
Audit Fees
The aggregate fees incurred for the years ended March 31, 2024 and 2023 for professional services rendered by the independent registered public accounting firm for the audits of the Company’s annual financial statements and review of financial statements included in the Company’s Form 10-K and Form 10-Q reports and services normally provided in connection with statutory and regulatory filings or engagements were as follows:
March 31, 2024 | March 31, 2023 | |||||||
| Audit Fees | $ | 48,000 | $ | 26,000 | ||||
| Audit Related Fees | - | - | ||||||
| Tax Fees | - | - | ||||||
| All Other Fees | $ | 48,000 | $ | 26,000 | ||||
The Company’s Audit Committee evaluates and approves in advance the scope and cost of the audit engagement of an auditor before the auditor renders audit and non-audit services. The Company does not rely on pre- approval policies and procedures.
PART IV
| ITEM 15. | EXHIBIT AND FINANCIAL STATEMENT SCHEDULES |
(a) (1) Financial Statements. The financial statements filed as part of this report are listed in the index to financial statements at the beginning of this document.
(a) (2) Financial Statement Schedules. Financial statement schedules are omitted because of the absence of the conditions under which they are required or because the required information is included in the Financial Statements or the notes thereto.
(a) (3) Exhibits. The exhibits are either filed with this report or incorporated by reference into this report. Exhibit numbers. See (b) Exhibits, which follow.
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(b) Exhibits.
*Filed herewith.
**Furnished herewith.
| † | Management contract or compensatory plan |
| ± | Portions of the exhibit have been omitted |
| (1) | Filed as Exhibit 3.1 to the Company’s Form S-1/A filed with the Commission on July 28, 2010 under Commission File No. 333-168346 |
| (2) | Filed as an exhibit to the Company’s Form 10 filed with the Commission on December 29, 2020 under Commission File No. 000-56060 |
| (3) | Portions of the exhibit have been omitted |
| (4) | Filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the Commission on March 17, 2022 under Commission File No. 000-56060 |
| (5) | Filed as Exhibit 10.1 to the Company’s Form 10-Q filed with the Commission on November 21, 2022 under Commission File No. 000-56060 |
| (6) | Filed as Exhibit 23.1 to the Company’s Form S-8 filed with the Commission on March 18, 2022 under Commission File No. 333-263668 |
| (7) | Filed as Exhibit 23.1 to the Company’s Form S-1/A filed with the Commission on September 28, 2022 under Commission File No. 333-259222 |
| (8) | Filed as Exhibit 10.6 to the Company’s Form 10-K filed with the Commission on July 11, 2024 under Commission File No. 000-56060 |
| ITEM 16. | FORM 10-K SUMMARY |
None.
| 42 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| BlueOne Card, Inc. | ||
| Date: July 15, 2024 | By: | /s/ James Koh |
| James Koh | ||
Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial and Accounting Officer) | ||
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the registrant and in the capacities and on the date indicated.
| NAME | TITLE | DATE | ||
| /s/ James Koh | Director | July 15, 2024 | ||
| Mr. James Koh | ||||
| /s/ Taegyu Choi | Director | July 15, 2024 | ||
| Mr. Taegyu Choi | ||||
| /s/ Dong Sung Lee | Director | July 15, 2024 | ||
| Mr. Dong Sung Lee |
| 43 |
BLUEONE CARD, INC.
FINANCIAL STATEMENTS
FOR THE YEARS ENDED
MARCH 31, 2024 AND 2023
INDEX TO FINANCIAL STATEMENTS
| F-1 |
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of:
BlueOne Card, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of BlueOne Card, Inc. (the “Company”) as of March 31, 2024 and 2023, the related statements of operations, changes in stockholders’ equity and cash flows for each of the two years in the period ended March 31, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended March 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has minimal revenues, has suffered operating losses since inception and in fiscal 2024 has a net loss of $1,613,140 and cash used in operations of $1,146,710. The Company also had a working capital deficit and an accumulated deficit as of March 31, 2024 of $624,037 and $3,871,752, respectively. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s Plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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 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 audits 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 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.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Valuation of Software Development Costs
As described in the footnote 1 policy “Internal-Use Software Development Costs” and in footnote 5 “Internal-Use Software Development Costs” the Company capitalizes its internal-use software development costs and periodically and at least annually conducts an impairment test. The Company first conducts a qualitative assessment under the criteria of ASC 350-40-35 and if there are indicators that the carrying value may not be recoverable then the Company conducts a quantitative assessment in accordance with ASC 360-10-35.
The Company conducted a qualitative assessment and determined that there were no indicators of impairment.
We identified the valuation of capitalized internal-use software development costs as a critical audit matter. Auditing management’s judgments regarding the qualitative factors involved a high degree of subjectivity.
The primary procedures we performed to address this critical audit matter included (a) gained an understanding of management’s process for assessing the qualitative factors, (b) read the authoritative literature regarding qualitative assessments for internal-use software development costs impairment, (c) examined management’s documented qualitative assessment, (d) read management’s documentation about the software in development, and (e) interviewed and made inquiries of two technical consultants to the Company who are involved in the software development process and business development processes. We agreed with management’s conclusion.
/s/
SALBERG & COMPANY, P.A.
We have served as the Company’s auditor since 2023.
July 10, 2024
2295 NW Corporate Blvd., Suite 240 ● Boca Raton, FL 33431-7326
Phone: (561) 995-8270 ● Toll Free: (866) CPA-8500 ● Fax: (561) 995-1920
www.salbergco.com ● [email protected]
Member National Association of Certified Valuation Analysts ● Registered with the PCAOB
Member CPAConnect with Affiliated Offices Worldwide ● Member AICPA Center for Audit Quality
| F-2 |
BLUEONE CARD, INC.
BALANCE SHEETS
| March 31, 2024 | March 31, 2023 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Inventory | ||||||||
| Prepaid deposits and other current assets | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Internal-use software development | ||||||||
| Right-of-use asset | ||||||||
| Deposits | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Compensation payable to officer | ||||||||
| Related party payables | ||||||||
| Lease liability - current maturity | ||||||||
| Total Current Liabilities | ||||||||
| Lease liability - net of current maturity | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (See Note 7) | ||||||||
| Stockholders’ Equity | ||||||||
| Preferred stock, $ par value; shares authorized, Series A Preferred Stock, shares designated, shares issued and outstanding at March 31, 2024 and 2023, respectively | ||||||||
| Common stock, $ par value; shares authorized, shares and shares issued and outstanding at March 31, 2024 and 2023, respectively | ||||||||
| Additional paid in capital | ||||||||
| Stock subscriptions received | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
| F-3 |
BLUEONE CARD, INC.
STATEMENTS OF OPERATIONS
| For the Year Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenues | $ | $ | ||||||
| Cost of sales | ||||||||
| Cost of sales - Inventory reserve | ||||||||
| Gross Profit (Loss) | ( | ) | ( | ) | ||||
| Operating Expenses | ||||||||
| Legal and filing fees | ||||||||
| Rent | ||||||||
| General and administrative | ||||||||
| Total Operating Expenses | ||||||||
| Loss from Operations | ( | ) | ( | ) | ||||
| Other Income (Expense) | ||||||||
| Interest income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Total Other Income (Expense) | ( | ) | ||||||
| Loss before Income Taxes | ( | ) | ( | ) | ||||
| Provision for Income Tax | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Basic and Diluted Net Loss Per Share | $ | ) | $ | ) | ||||
| Weighted Average Number of Shares Outstanding - Basic and Diluted | ||||||||
The accompanying notes are an integral part of these financial statements.
| F-4 |
BLUEONE CARD, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
| For the Year Ended March 31, 2024 | ||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid-in | Subscriptions | Accumulated | Total | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Received | Deficit | Equity | |||||||||||||||||||||||||
| Balance - March 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Sale of common stock | - | ( | ) | |||||||||||||||||||||||||||||
| Stock subscriptions received | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance - March 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| For the Year Ended March 31, 2023 | ||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid-in | Subscriptions | Accumulated | Total Equity | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Received | Deficit | (Deficit) | |||||||||||||||||||||||||
| Balance - March 31, 2022 | $ | $ | $ | $ | $ | ( | ) | |||||||||||||||||||||||||
| Sale of common stock | - | |||||||||||||||||||||||||||||||
| Common stock issued for services | - | |||||||||||||||||||||||||||||||
| Stock subscriptions received | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance - March 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
| F-5 |
BLUEONE CARD, INC.
STATEMENTS OF CASH FLOWS
| For the Year Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash Flows From Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Inventory reserve | ||||||||
| Bad debt expense | ||||||||
| Non-cash rent expense | ( | ) | ||||||
| Loss on sale of vehicle | ||||||||
| Stock compensation expense | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Decrease (increase) in inventory | ( | ) | ||||||
| (Increase) in prepaid deposits and other current assets | ||||||||
| (Decrease) increase in accounts payable and accrued liabilities | ( | ) | ||||||
| (Decrease) in customer deposit | ( | ) | ||||||
| Increase in compensation payable to officer | ||||||||
| (Decrease) in related party payables | ( | ) | ( | ) | ||||
| Net Cash Used In Operating Activities | ( | ) | ( | ) | ||||
| Cash Flows From Investing Activities: | ||||||||
| Cash paid for purchase of internal-use software development costs | ( | ) | ( | ) | ||||
| Cash paid for purchase of property and equipment | ( | ) | ||||||
| Loan disbursement for loans made | ( | ) | ||||||
| Net Cash Used In Investing Activities | ( | ) | ( | ) | ||||
| Cash Flows From Financing Activities: | ||||||||
| Cash proceeds from sale of common stock | ||||||||
| Cash received from stock subscriptions | ||||||||
| Cash paid for loan payable | ( | ) | ||||||
| Net Cash Provided By Financing Activities | ||||||||
| Net (Decrease) Increase in Cash | ( | ) | ||||||
| Cash - Beginning of the Year | ||||||||
| Cash - End of the Year | $ | $ | ||||||
| Supplemental Disclosures of Cash Flows | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Supplemental Disclosures of Non-Cash Investing and Financing Activities | ||||||||
| Sale of vehicle | $ | $ | ||||||
| Present value of initial lease liability and right-of-use asset | $ | |||||||
| Reclassification of prepaid assets to software development | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
| F-6 |
BLUEONE CARD, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2024 AND 2023
NOTE 1 – NATURE OF OPERATIONS AND GOING CONCERN
BlueOne Card, Inc. (“BlueOne” or the “Company”), was incorporated on July 6, 2007 under the laws of the state of Nevada. The Company intends to provide innovative payout solutions and prepaid debit card and gift card solutions to consumers and corporations transforming card-to-card cross border real time global money transfers.
Going Concern
The
financial statements have been prepared on a going concern basis which contemplates the realization of assets and settlement of
liabilities and commitments in the normal course of business. The Company has not yet generated any significant revenues and has
suffered operating losses since July 6, 2007 (Inception Date) to date. The Company recorded a net loss of $
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following summary of significant accounting policies of the Company is presented to assist in the understanding of the Company’s financial statements. These accounting policies conform to GAAP in all material respects and have been consistently applied in preparing the accompanying financial statements.
| F-7 |
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the valuation of its assets, liabilities, equity and operations. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about its estimates that are not readily apparent from other sources. Significant estimates in the accompanying financial statements include the valuation of inventory, internal-use software development costs, right-of-use assets, stock-based compensation and deferred tax assets. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Cash and Cash Equivalents
The
Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.
The Company did
Concentrations
Cash Concentration
Cash is maintained at one financial institution and at times, balances may exceed federally insured limits. We have not experienced any losses related to these balances. As of March 31, 2024, the Company did not have any cash balances in a financial institution which exceeded federally insured limits. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company’s financial condition, results of operation and cash flows.
Customer Concentration
For
the year ended March 31, 2024,
Significant Vendor and Concentration
The Company relied solely on one vendor for key components and processing services related to the manufacturing, distribution and servicing of its prepaid debit cards and gift cards. The same vendor was also the sole developer and provider of the software for Company’s operations. The Company terminated its relationship with this vendor on or around December 18, 2023, and entered into an agreement with a new vendor on February 27, 2024.
Inventory
Inventory
of finished goods consists of plastic prepaid debit cards and gift cards and is valued at the lower of cost or net realizable value
using the specific identification method. The reported net value of inventory includes saleable prepaid debit cards and gift cards
that will be sold or used in future periods. The Company reserves for obsolete and slow-moving inventory. At March 31, 2024 and
2023, the Company recorded a reserve to cost of sales of $
Loans Receivables
The Company has advanced loans during fiscal
2024 to certain third parties on short-term basis. The
Company assesses loans
for their collectability under ASC 326 – Financial
Instruments – Credit Losses and recognize and records the reserve accordingly. For
the years ended March 31, 2024 and 2023, the Company has
advanced $
Property and Equipment
Property
and equipment are recorded at cost, less accumulated depreciation. The Company provides for depreciation on a straight-line basis over
the estimated useful lives of the assets which range from to
| F-8 |
Internal-Use Software Development Costs
Costs
incurred to develop internal-use software during the preliminary project stage are expensed as incurred. Internal-use software development
costs are capitalized during the application development stage, which is after: (i) the preliminary project stage is completed; and (ii)
management authorizes and commits to funding the project and it is probable the project will be completed and used to perform the function
intended. Capitalization ceases at the point the software project is substantially complete and ready for its intended use, and after
all substantial testing is completed. Upgrades and enhancements are capitalized if it is probable that those expenditures will result
in additional functionality. Amortization is provided for on a straight-line basis over the expected useful life of
The Company conducts a qualitative assessment of internal-use software impairment using the guidelines of ASC 350-40-35-1 Internal-Use Software. If impairment is indicated, then the Company conducts a quantitative impairment test under ASC 360 for long lived assets (see below).
Long-lived Assets
The
Company tests long-lived assets or asset groups for recoverability in accordance with GAAP, when events or changes in circumstances indicate
that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant
decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs
significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow
or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current
expectation that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life.
Recoverability is assessed based on the carrying amount of the asset compared to the estimated future undiscounted cash flows expected
to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss
equal to the excess of the carrying value over the assets fair market value is recognized when the carrying amount exceeds the undiscounted
cash flows. The impairment loss is recorded as an expense and a direct write-down of the asset.
Leases
The Company has operating leases for its offices. Management determines if an arrangement is a lease at inception of the contract and whether a contract is or contains a lease by determining whether it conveys the right to control the use of the identified asset for a period of time. If the contract provides the Company the right to substantially all of the economic benefits from the use of the identified asset and the right to direct the use of the identified asset, the Company consider it to be, or contain, a lease.
The Company accounts for its vehicle leases under ASC 842, Leases. Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded on the balance sheet as both a right of use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate which is consummate with the respective lease term. Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right of use asset result in straight-line rent expense over the lease term.
| F-9 |
In calculating the right of use asset and lease liability, the Company elects to combine lease and non-lease components as permitted under ASC 842. The Company excludes short-term leases having initial terms of 12 months or less from the new guidance as an accounting policy election and recognizes rent expense on a straight-line basis over the lease term.
Fair value of Financial Instruments and Fair Value Measurements
ASC 820, “Fair Value Measurements and Disclosures”, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company has established a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company’s financial instruments consist principally of prepaid assets, accounts payable and accrued liabilities, related party payable, and lease liability. The Company believes that the recorded values of all the financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
Revenue Recognition
The
Company recognizes revenues from card sales when the product is deemed delivered to the customer, and the ownership/control is transferred.
The Company will recognize revenue from card service fees and card transactions once the service or transaction is completed, respectively.
The Company’s revenue recognition policy is based on the revenue recognition criteria established under the Financial Accounting
Standards Board – Accounting Standards Codification 606 “Revenue From Contracts With Customers” which has established
a five-step process to govern contract revenue and satisfy each element is as follows: (1) Identify the contract(s) with a customer;
(2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to
the performance obligations in the contract; and (5) recognize revenue when or as you satisfy a performance obligation. The Company records
revenue once all the above steps are completed. Revenues earned by the Company of $
The Company accounts for equity-based transactions with non-employees under the provisions of ASC Topic No. 505-50, Equity-Based Payments to Non-Employees (“ASC 505-50”). The Company has established that equity-based payment transactions with non-employees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The fair value of common stock issued for payments to non-employees is measured on the date of grant. The fair value of equity instruments, other than common stock, is estimated using the Black-Scholes option valuation model. In general, we recognize the fair value of the equity instruments issued as deferred stock compensation and amortize the cost over the term of the contract.
| F-10 |
The Company accounts for employee stock-based compensation in accordance with the guidance of ASC Topic 718, Compensation—Stock Compensation. Under the fair value recognition provisions, stock-based compensation expense is measured at the grant date based on the fair value of the award and is recognized ratably over the requisite service period.
Research and Development Costs
Costs
incurred for research and development are expensed as incurred. The salaries, benefits, and overhead costs of personnel conducting research
and development of the Company’s products comprise research and development expenses. Purchased materials that do not have an alternative
future use are also expensed. The Company recorded research and development costs of $
Advertising and Marketing Costs
The Company expenses advertising and marketing costs
in the year when expenses are incurred. The Company recorded $
Income Taxes
The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes”. The asset and liability method provide that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
The
Company follows the provisions of ASC 740-10, “Accounting for Uncertain Income Tax Positions.” When tax returns are
filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are
subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance
with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which,
based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination,
including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions.
Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is
The Company computes earnings (loss) per share in accordance with ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. The Company computes Basic EPS by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible notes and preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options, warrants and convertible preferred stock. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
| For the Year Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Net loss computation of basic and diluted net loss per common share: | ||||||||
| Net loss attributable to common stockholders | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted net loss per share: | ||||||||
| Basic and diluted net loss per common share | $ | ) | $ | ) | ||||
| Basic and diluted weighted average common shares outstanding | ||||||||
| F-11 |
| March 31, 2024 | March 31, 2023 | |||||||
| Preferred stock | ||||||||
| Total anti-dilutive weighted average shares | ||||||||
NOTE 3 – INVENTORY
Inventory of prepaid debit cards and gift cards consisted of the following:
| March 31, 2024 | March 31, 2023 | |||||||
| Prepaid cards inventory | $ | $ | ||||||
| Less: reserve to reduce to net realizable value | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
The Company terminated its relationship with its
Program Manager since the Program Manager was notified by its sponsor bank that they were unable to continue servicing the
Company’s customers. As a result, the prepaid debit cards inventory became unusable, and the Company provided an additional
reserve of $
NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment, stated at cost, consisted of the following:
| Estimated Life | March 31, 2024 | March 31, 2023 | ||||||||
| Furniture and fixtures | $ | $ | ||||||||
| Office equipment | ||||||||||
| Leasehold improvements | ||||||||||
| Less: Accumulated depreciation and amortization | ( | ) | ( | ) | ||||||
| Total | $ | $ | ||||||||
Depreciation
and amortization expense amounted to $
NOTE 5 – INTERNAL-USE SOFTWARE DEVELOPMENT COSTS
The
Company capitalized costs of $
| March 31, 2024 | March 31, 2023 | |||||||
| Software development cost | $ | $ | ||||||
| Less: Accumulated amortization | ||||||||
| Total | $ | $ | ||||||
| F-12 |
NOTE 6 – RELATED PARTY TRANSACTIONS
The
Company’s Chief Executive Officer (“CEO”), from time to time, provided advances to the Company for its working
capital purposes. The CEO had advanced net funds to the Company totaling $
On
December 1, 2020, the Company entered into an employment agreement with its CEO for a three-year term, for an annual compensation of
$, with a
NOTE 7 – COMMITMENTS AND CONTINGENCIES
Leases
The Company reported the following summary of non-cancellable operating leases in accordance with the provisions of ASC 842 Topic 842 “Leases” as follows:
Summary of Non-Cancellable Operating Leases:
| Vehicle | Office Lease | Total | ||||||||||
| Right-of-use asset, net | $ | $ | $ | |||||||||
| Current lease liabilities | $ | $ | $ | |||||||||
| Non-current lease liabilities | ||||||||||||
| Total operating lease liabilities | $ | $ | $ | |||||||||
Vehicle
On
July 12, 2022, the Company executed a non-cancellable operating lease for a vehicle with the lease commencing on July 12, 2022 for a
three-year term. The Company paid $
The
Company recorded an initial right-of-use asset and lease liability of $
Supplemental balance sheet information related to the lease is as follows as of March 31, 2024:
| Operating Lease | ||||
| Right-of-use asset, net | $ | |||
| Current lease liabilities | $ | |||
| Non-current lease liabilities | ||||
| Total operating lease liabilities | $ | |||
| Weighted average remaining lease term (years) | ||||
| Weighted average discount rate per annum | % | |||
As the lease do not provide an implicit rate, the Company used an incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payment, which is reflective of the specific term of the lease.
| F-13 |
Anticipated future costs are as follows:
| For the years ending | Vehicle Lease | |||
| March 31, 2025 | $ | |||
| March 31, 2026 | ||||
| Total lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Present value of lease liabilities | $ | |||
Office Lease – J Plaza
On
April 13, 2023, the Company executed a non-cancellable office space in a retail shopping center, for a monthly base rent of $
The
Company recorded rent expense including common area maintenance of $
Supplemental balance sheet information related to the lease is as follows as of March 31, 2024:
| Operating Lease | ||||
| Right-of-use asset, net | $ | |||
| Current lease liabilities | $ | |||
| Non-current lease liabilities | ||||
| Total operating lease liabilities | $ | |||
| Weighted average remaining lease term (years) | ||||
| Weighted average discount rate per annum | % |
As the lease do not provide an implicit rate, the Company used an incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payment, which is reflective of the specific term of the lease.
Anticipated future costs are as follows:
| For the years ending | Office Lease J Plaza | |||
| March 31, 2025 | $ | |||
| March 31, 2026 | ||||
| March 31, 2027 | ||||
| Total lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Present value of lease liabilities | $ | |||
| F-14 |
Office Lease - Others
On
August 27, 2020, the Company executed a month-to-month cancellable operating lease for leasing office space in an executive suite, commencing
on September 1, 2020 for $
On
October 26, 2020, the Company executed a non-cancellable operating lease agreement for its principal office for a monthly rent of $
The
Company has recorded total aggregate rent expense of $
The Company has considered the provisions of ASC 842 Topic 842 “Leases”. The Company has elected not to recognize lease assets and lease liabilities for leases with a term of 12 months or less, as it is permitted to make an accounting policy election. The Company has elected to record the rent expense on a straight-line basis ratable over the term of the lease.
Employment Agreement
On December 1, 2020, the Company entered into an Employment Agreement (the “Agreement”) with its President, CEO, Secretary, and Chairman (the “Officer”). The initial term of the Agreement is for three years and, if written notice is not provided within 90 days of the termination of each term, the term is automatically extended for an additional one-year term. The Agreement may be terminated by either party upon 90 days’ prior written notice. Whether the Agreement is terminated without “Cause,” for “Good Reason,” or for “Cause,” as defined in the Agreement, determines what compensation is owed and when. There is also a 30-day cure period for any termination for “Cause,” as defined in the Agreement. The Agreement contains confidentiality, non-compete, and non-solicitation provisions. Pursuant to the terms of Agreement, Mr. Koh is entitled to bonuses, reimbursement of expenses, a vehicle allowance, four weeks of paid vacation, and other incentives. The Agreement does provide for payments to be made as a result of any “Change in Control,” as defined in the agreement.
Pursuant
to the Agreement, the Officer is entitled to an annual base salary of $
Service Agreement with EndlessOne Global Inc. (“E1G”)
The
Company entered into a Service Agreement with E1G on September 1, 2020 whereby, E1G provided data processing, transaction processing
and related services for its cardholders, mobile apps, website’s back office and integration services with sponsoring banks and
processors. The Service Agreement required a one-time fee of $
On December 18, 2023, E1G notified the Company that their sponsor bank has terminated its relationship and services to E1G. As a result, E1G was unable to continue servicing BlueOne Card, Inc.’s customers. (See new Program Manager Agreement below).
Reseller Agreement with Expanse Financial Technologies, Inc. (“ExpanseFT”)
Effective February 27, 2024, we entered into an Authorized Reseller Agreement (the “Reseller Agreement”) with ExpanseFT (the “Program Manager”) pursuant to which we have agreed to be a reseller or an independent sales representative of the Program Manager and its products, and the Program Manager has agreed to support our reselling efforts. The Reseller Agreement does not provide exclusivity and there are no volume sales requirements pertaining to our reselling efforts.
The term of the Reseller Agreement is for five (5) years. The Reseller Agreement is renewable by mutual consent of each of the parties for two-year terms unless either party provides written notice to the other party at least 180 days prior to the termination of the term of the Reseller Agreement. The Reseller Agreement may be terminated by either party upon a material breach of either party with the non-breaching party providing written notice to the breaching party and the breach remaining uncured with 30 days of the notice. The Reseller Agreement may also be terminated by either party by written notice if either party ceases to carry on as a going concern, becomes the object of the institution of voluntary or involuntary proceedings in bankruptcy, insolvency, or liquidation, makes an assignment for the benefit of creditors, or if a receiver is appointed with respect to all or a substantial part of its assets. The Program Manager shall provide us with prepaid debit and gift cards of requested quantity, create a range of prepaid debit accounts, using banking identification numbers provided to the Program Manager by our issuing bank and produce and deliver plastic card production tape media, including personal identification number (PIN) generation for the range of created prepaid debit accounts. Upon the first loading of value to a prepaid debit account, the Program Manager will create and activate a cardholder account on the Program Manager’s system and create linkage between the cardholder account on ExpanseFT system and our cardholder aggregate settlement account at our issuing bank or another bank.
| F-15 |
The Company agreed to pay for all new
programming outside the scope listed in this agreement such as but not limited to mobile apps, websites back office and the
integrations with the sponsoring banks and processors as we go. The Company agreed to pay a one-time fee of $
| Months 0-3 | $ | |||
| Months 4 – 12 | $ | |||
| Year 2 | $ | |||
| Year 3 and thereafter | $ |
Legal Costs and Contingencies
In the normal course of business, the Company incurs costs to hire and retain external legal counsel to advise it on regulatory, litigation and other matters. The Company expenses these costs as the related services are received.
If a loss is considered probable and the amount can be reasonable estimated, the Company recognizes an expense for the estimated loss. If the Company has the potential to recover a portion of the estimated loss from a third party, the Company makes a separate assessment of recoverability and reduces the estimated loss if recovery is also deemed probable. The Company was not aware of any loss contingencies as of March 31, 2024 and 2023, respectively.
NOTE 8 – STOCKHOLDERS’ EQUITY
The Company’s capitalization at March 31, 2024 and 2023 was authorized common shares with a par value of $ per share, and authorized preferred shares with a par value of $ per share.
Common Stock
During
the year ended March 31, 2024, the Company sold
shares of common stock for cash consideration of $
As a result of all common stock issuances, the total issued and outstanding shares of common stock were and shares as of March 31, 2024 and 2023, respectively.
Preferred Stock
The Board of Directors, without further approval of its stockholders, is authorized to fix the dividend rights and terms, conversion rights, voting rights, redemption rights, liquidation preferences and other rights and restrictions relating to any series. Issuances of shares of preferred stock, while providing flexibility in connection with possible financings, acquisitions and other corporate purposes, could, among other things, adversely affect the voting power of the holders of our Common Stock and other series of Preferred Stock then outstanding.
Designation
There are shares of Series A Convertible Preferred Stock designated and shares issued and outstanding as of March 31, 2024 and 2023, respectively.
Liquidation Rights
In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, after setting apart or paying in full the preferential amounts due to Holders of senior capital stock, if any, the Holders of Series A Preferred Stock and parity capital stock, if any, shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the Holders of junior capital stock, including Common Stock, an amount equal to $ per share (the “Liquidation Preference”). If upon such liquidation, dissolution or winding up of the Corporation, the assets of the Corporation available for distribution to the Holders of the Series A Preferred Stock and parity capital stock, if any, shall be insufficient to permit in full the payment of the Liquidation Preference, then all such assets of the Corporation shall be distributed ratably among the Holders of the Series A Preferred Stock and parity capital stock, if any. Neither the consolidation or merger of the Corporation nor the sale, lease or transfer by the Corporation of all or a part of its assets shall be deemed a liquidation, dissolution or winding up of the Corporation for purposes of these Liquidation Rights.
| F-16 |
Stock Splits, Dividends and Distributions
If the Corporation, at any time while any Series A Convertible Preferred Stock is outstanding, (a) shall pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock payable in shares of its capital stock [whether payable in shares of its Common Stock or of capital stock of any class], (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine outstanding shares of Common Stock into a smaller number of shares. or (d) issue reclassification of shares of Common Stock for any shares of capital stock of the Corporation, the conversion ratio, as defined, shall be adjusted by multiplying the number of shares of Common Stock issuable by a fraction of which the numerator shall be the number of shares of Common Stock of the Company outstanding after such event and of which the denominator shall be the number of shares of Common Stock outstanding before such event. Any adjustment made pursuant to this paragraph (e)(iii) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification.
Conversion Rights
Voting Rights
As a result of all preferred stock issuances, the total issued and outstanding shares of preferred stock were shares as of March 31, 2024 and 2023, respectively.
2022 Stock Incentive Plan
On March 11, 2022, the Board of Directors adopted the 2022 Stock Incentive Plan (the “2022 Plan”). The purposes of the 2022 Plan are (a) to enhance our ability to attract and retain the services of qualified employees, officers, directors, consultants, and other service providers upon whose judgment, initiative and efforts the successful conduct and development of our business largely depends, and (b) to provide additional incentives to such persons or entities to devote their utmost effort and skill to the advancement and betterment of our company, by providing them an opportunity to participate in the ownership of our Company and thereby have an interest in the success and increased value of our Company.
The 2022 Plan is administered by our board of directors; however, the board of directors may designate administration of the 2022 Plan to a committee consisting of at least two independent directors. Awards may be made under the 2022 Plan for up to shares of common stock of the Company. Only employees of our Company or of an “Affiliated Company”, as defined in the 2022 Plan, (including members of the board of directors if they are employees of our Company or of an Affiliated Company) are eligible to receive incentive stock options under the 2022 Plan. Employees of our Company or of an Affiliated Company, members of the board of directors (whether or not employed by our company or an Affiliated Company), and “Service Providers”, as defined in the 2022 Plan, are eligible to receive non-qualified options, restricted stock units, and stock appreciation rights under the 2022 Plan. All awards are subject to Section 162(m) of the Internal Revenue Code.
No option awards may be exercisable more than ten years after the date it is granted. In the event of termination of employment for cause, the options terminate on the date of employment is terminated. In the event of termination of employment for disability or death, the optionee or administrator of optionee’s estate or transferee has six months following the date of termination to exercise options received at the time of disability or death. In the event of termination for any other reason other than for cause, disability or death, the optionee has 30 days to exercise his or her options.
The 2022 Plan will continue in effect until all the stock available for grant or issuance has been acquired through exercise of options or grants of shares, or until ten years after its adoption, whichever is earlier. Awards under the 2022 Plan may also be accelerated in the event of certain corporate transactions such as a merger or consolidation or the sale, transfer or other disposition of all or substantially all our assets.
The Board did not award any shares of common stock to consultants under the 2022 Plan for the year ended March 31, 2024. The Board had awarded to consultants shares of Common Stock under the 2022 Plan for the year ended March 31, 2023.
| F-17 |
NOTE 9 – INCOME TAXES
The following is a reconciliation of the provision for income taxes at the U.S. Federal income tax rate to the income reflected in the Statement of Operations:
| March 31, 2024 | March 31, 2023 | |||||||
| Tax at statutory tax rate | % | % | ||||||
| State taxes | % | % | ||||||
| Other permanent items | ||||||||
| Change in valuation allowance | - | % | - | % | ||||
| Income tax expense | ||||||||
The tax effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities at March 31, 2024 and 2023, are as follows:
| March 31, 2024 | March 31, 2023 | |||||||
| Deferred tax assets: | ||||||||
| Net operating loss carry forward | $ | $ | ||||||
| Total gross deferred tax assets | ||||||||
| Less: valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax assets | $ | $ | ||||||
Deferred income taxes are provided for the tax effects of transactions reported in the financial statements and consist of deferred taxes related primarily to differences between the bases of certain assets and liabilities for financial and tax reporting. The deferred taxes represent the future tax return consequences of those differences, which will either be deductible or taxable when the assets and liabilities are recovered or settled.
As
of March 31, 2024 and 2023, the Company had accumulated net operating loss carryforwards of approximately $
Based
on the weight of available evidence, including cumulative losses in recent years and expectations of future taxable income, the Company
has determined that it was more likely than not that its deferred tax assets would not be realized at March 31, 2024 and 2023, respectively.
Accordingly, the Company has recorded a valuation allowance for
In the ordinary course of business, the Company’s income tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax and interest assessment by these taxing authorities. Accordingly, the Company believes that it is more likely than not that it will realize the benefits of tax positions it has taken in its tax returns or for the amount of any tax benefit that exceeds the cumulative probability threshold in accordance with FASB ASC 740. Differences between the estimated and actual amounts determined upon ultimate resolution, individually or in the aggregate, are not expected to have a material adverse effect on the Company’s financial position. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for unrecognized tax benefits. As of March 31, 2024, tax years 2023, 2022, 2021, and 2020 remain open for examination by the Internal Revenue Service and the Nevada Division of Revenue. The Company has received no notice of audit from the Internal Revenue Service or the Nevada Division of Revenue for any of the open tax years.
NOTE 10 – SUBSEQUENT EVENTS
Common stock issued for subscriptions received in fiscal 2024
On
April 8, 2024, the Company issued shares of common stock to six accredited investors for a cash consideration of $
| F-18 |