UMeWorld Inc 20-F for FY2023
UMeWorld Inc. (UMEW)
About this 20-F
UMeWorld Inc filed this 20-F on January 31, 2024, covering the fiscal year ended September 30, 2023 (FY2023).
Headline figures
Fiscal year ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1401
- up 1406.5% from $93 a year earlier
- Net loss
- $306.34K
- compared with a net loss of $147.69K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
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OR | |
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
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OR | |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND EXCHANGE ACT OF 1934 | |
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OR | |
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SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND EXCHANGE ACT OF 1934 | |
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For the transition period from ___________ to ____________
Commission File Number:
(Exact name of Registrant as specified in its charter) |
N/A
(Translation of Registrant’s name into English)
(Jurisdiction of incorporation or organization)
(Address of principal executive offices)
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class |
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| Name of each exchange on which registered |
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Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
Title of Class
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
Title of Class
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
As of September 30, 2023, there were
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
If the report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Security Exchange Act of 1934. Yes ☐
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Security Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Security Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See the definitions of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one).
Large accelerated filer | ☐ | ☒ | |
Accelerated filer | ☐ | Emerging growth company |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
☒ | International Financial Reporting Standards as issued by the International Accounting Standards Board | ☐ | Other | ☐ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐
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FORM 20-F
For the Years Ended September 30, 2023, 2022 and 2021
INDEX
PRELIMINARY NOTES
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Material Modifications to the Rights of Securities Holders and Use of Proceeds |
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Purchases of Equity Securities by the Issuer and Affiliated Purchasers |
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Disclosure Regarding Foreign Jurisdictions That Prevent Inspections |
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| Table of Contents |
INTRODUCTION
In this annual report, except where the context otherwise requires and for purposes of this annual report only:
| · | “we”, “us”, “our company”, “our” and “the Company” and similar words refer to UMeWorld Limited, a British Virgin Islands company, and its consolidated subsidiaries and affiliated entities, as appropriate, including its consolidated variable interest entity (“VIE”); |
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| · | “China” or “PRC” refers to People’s Republic of China, and for the purpose of this annual report, excludes Taiwan, Hong Kong and Macau; |
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| · | “shares”, or “ordinary shares” refers to our ordinary shares, par value US$0.0001 per share; |
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| · | “RMB” or “Renminbi” refers to the legal currency of China, “HK$” refers to the legal currency of Hong Kong and “$,” “dollars,” “US$” or “U.S. dollars” refers to the legal currency of the United States; |
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| · | “U.S. GAAP” refers to generally accepted accounting principles in the United States; and |
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| · | “VIE” refers to Guangzhou XinYiXun Network Technology Co. Ltd., a domestic PRC company in which we do not have equity interests but its financial results have been consolidated into our consolidated financial statements in accordance with U.S. GAAP. |
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| Table of Contents |
Our financial statements are expressed in U.S. dollars, which is our reporting currency. Certain of our financial data in this annual report on Form 20-F are translated into U.S. dollars solely for the reader’s convenience. Unless otherwise noted, all foreign currency translations in this annual report on Form 20-F can be found on Note 2 of our audited consolidated financial statements on page F-10. We make no representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, at the rate stated above, or at all.
FORWARD-LOOKING INFORMAITON
This annual report contains forward-looking statements that reflect our current expectations and views of future events. These forward looking statements are made under the “safe-harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by these forward-looking statements.
You can identify some of these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to” or other similar expressions. These forward-looking statements include statements relating to:
| · | our mission, goals and strategies; |
| · | competition in our industry; |
| · | our future business development, results of operations and financial condition; |
| · | expected changes in our revenues and certain cost and expense items; |
| · | our expectations regarding demand for and market acceptance of our products; |
| · | our expectations regarding our relationships with consumers, suppliers, local distributors, and our other business partners; and |
| · | relevant government policies and regulations relating to our business and our industry. |
You should read this annual report and the documents that we refer to in this annual report and have filed as exhibits to this annual report completely and with the understanding that our actual future results may be materially different from what we expect. Other sections of this annual report discuss factors which could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.
You should not rely upon forward-looking statements as predictions of future events. The forward-looking statements made in this annual report relate only to events or information as of the date on which the statements are made in this annual report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.
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| Table of Contents |
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not Applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not Applicable.
ITEM 3. KEY INFORMATION
We are a holding company that is incorporated in the British Virgin Islands. As a holding company with no operations, we conduct all of our operations through our subsidiary Dagola Inc. in the United States. Holders of our Ordinary Shares are shares of the holding company that is incorporated in the British Virgin Islands and should be aware that they may never directly hold equity interests in our subsidiary. Prior to January 2022, we conducted substantially all of our operations through our VIE, Guangzhou XinYiXun Network Technology Co. Ltd and its wholly owned subsidiary, in China. The VIE structure was terminated and the education business in China was dissolved in December 2021.
A. | Selected Financial Data |
The following selected financial information should be read in connection with, and is qualified by reference to, our consolidated financial statements and their related notes and the section entitled “Operating and Financial Review and Prospects” included elsewhere in this annual report. The consolidated statements of operations and other comprehensive loss data for the fiscal years ended September 30, 2023, 2022 and 2021 and the consolidated balance sheets data as of September 30, 2023, 2022 and 2021 are derived from audited consolidated financial statements included elsewhere in this annual report. Our historical results for any prior period are not necessarily indicative of results to be expected in any future period.
Selected Consolidated Statements of Operations and Other Comprehensive Loss Data:
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| For the Years Ended September 30, |
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| 2023 |
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| 2022 |
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| 2021 |
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Revenues |
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| 1,401 |
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| 93 |
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| 2,832 |
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Gross (loss) income |
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| (3,145 | ) |
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| (766 | ) |
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| (16,809 | ) |
Operating expenses |
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| (303,195 | ) |
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| (85,686 | ) |
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| (86,848 | ) |
Loss from continuing operations |
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| (306,340 | ) |
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| (86,452 | ) |
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| (103,657 | ) |
Other income (expense), net |
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| - |
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| 2,850 |
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| (3,779 | ) |
Net loss from continuing operations |
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| - |
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| (83,602 | ) |
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| (107,436 | ) |
Net loss from discontinued operations, net of tax |
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| - |
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| (64,084 | ) |
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Net loss |
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| (306,340 | ) |
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| (147,686 | ) |
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| (107,436 | ) |
Selected Consolidated Balance Sheets Data:
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| As of September 30, |
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| 2021 |
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Current assets |
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| 59,003 |
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| 27,726 |
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| 36,963 |
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Total assets |
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| 59,003 |
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| 27,726 |
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| 56,203 |
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Current liabilities |
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| 434,873 |
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| 382,176 |
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| 262,969 |
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Total liabilities |
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| 434,873 |
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| 382,176 |
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| 262,969 |
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Total stockholders’ deficit |
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| (375,870 | ) |
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| (354,450 | ) |
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| (206,766 | ) |
| 6 |
| Table of Contents |
Selected Consolidated Statements of Cash Flows Data:
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| For the Years Ended September 30, |
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| 2021 |
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Net cash used in operating activities |
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| (66,848 | ) |
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| (113,757 | ) |
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| (120,144 | ) |
Net cash used in investing activities |
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| - |
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| (20,687 | ) |
Net cash provided by financing activities |
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| 121,840 |
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| 105,552 |
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| 120,634 |
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Effect of exchange rate changes on cash and cash equivalents |
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| - |
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| 2,828 |
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| 11,127 |
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Net (decrease) increase in cash |
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| 54,992 |
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| (5,377 | ) |
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| (9,070 | ) |
Cash and cash equivalents, beginning of the year |
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| 2,443 |
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| 7,820 |
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| 16,890 |
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Cash and cash equivalents, end of the year |
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| 57,435 |
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| 2,443 |
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| 7,820 |
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B. | Capitalization and Indebtedness |
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| Not applicable. |
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C. | Reasons for the Offer and Use of Proceeds |
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| Not applicable. |
D. | Risk Factors |
Investment in our ordinary shares involves a high degree of risk. You should carefully consider, among other matters, the following risk factors in addition to the other information in this annual report on Form 20-F when evaluating our business because these risk factors may have a significant impact on our business, financial condition, operating results or cash flow. If any of the material risks described below or in subsequent reports we file with the Securities and Exchange Commission (“SEC”) actually occur, they may materially harm our business, financial condition, operating results or cash flow. Additional risks and uncertainties that we have not yet identified or that we presently consider to be immaterial may also materially harm our business, financial condition, operating results or cash flow.
Risks Related to Our Company, Business and Industry
A pandemic, epidemic or outbreak of an infectious disease in the United States or elsewhere may adversely affect our business.
If a pandemic, epidemic or outbreak of an infectious disease occurs in the United States or elsewhere, our business may be adversely affected. COVID-19 has spread worldwide and has resulted in government authorities implementing numerous measures to try to contain it, such as travel bans and restrictions, quarantines, shelter-in-place orders and shutdowns. These measures have impacted our workforce and operations, the operations of our customers and our partners, and those of our respective vendors and suppliers.
The spread of COVID-19 has caused us to modify our business practices, as we comply with mandated requirements for safety in the workplace to ensure the health, safety and well-being of our employees. These measures may include personal protective equipment, social distancing, cleanliness of the facilities and daily monitoring of the health of employees in our facilities, as well as modifying our policies on employee travel and the cancellation of physical participation in meetings, events and conferences. We may take further actions as required by government authorities or that we determine are in the best interests of our employees, customers, partners and suppliers. However, we do not currently have a specific and/or comprehensive contingency plan in place that is designed to address the challenges and risks presented by the COVID-19 pandemic or similar outbreak and, even if and when we do develop such a plan, there can be no assurance that such plan will be effective in mitigating the potential adverse effects on our business, financial condition and results of operations.
We may fail to successfully execute our business plan.
Our shareholders may lose their entire investment if we fail to execute our business plan. Our prospects must be considered in light of the following risks and uncertainties, including but not limited to, competition, the erosion of ongoing revenue streams, the ability to retain experienced personnel and general economic conditions. We cannot guarantee that we will be successful in executing our business plan. If we fail to successfully execute our business plan, we may be forced to cease operations, in which case our shareholders may lose their entire investment.
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| Table of Contents |
Our acquisition strategy creates risks for our business.
We expect that we will pursue acquisitions of other businesses, assets, or technologies to grow our business. We may fail to identify attractive acquisition candidates, or we may be unable to reach acceptable terms for future acquisitions. We might not be able to raise enough cash to compete for attractive acquisition targets. If we are unable to complete acquisitions in the future, our ability to grow our business at our anticipated rate will be impaired.
We may pay for acquisitions by issuing additional shares of our common stock, which would dilute our stockholders, or by issuing debt, which could include terms that restrict our ability to operate our business or pursue other opportunities and subject us to meaningful debt service obligations. We may also use significant amounts of cash to complete acquisitions. To the extent that we complete acquisitions in the future, we likely will incur future depreciation and amortization expenses associated with the acquired assets. We may also record significant amounts of intangible assets, including goodwill, which could become impaired in the future. Acquisitions involve numerous other risks, including:
| · | difficulties integrating the operations, technologies, services, and personnel of the acquired companies; |
| · | challenges maintaining our internal standards, controls, procedures, and policies; |
| · | diversion of management’s attention from other business concerns; |
| · | over-valuation by us of acquired companies; |
| · | litigation resulting from activities of the acquired company, including claims from terminated employees, customers, former stockholders and other third parties; |
| · | insufficient revenues to offset increased expenses associated with the acquisitions and unanticipated liabilities of the acquired companies; |
| · | insufficient indemnification or security from the selling parties for legal liabilities that we may assume in connection with our acquisitions; |
| · | entering markets in which we have no prior experience and may not succeed; |
| · | risks associated with foreign acquisitions, such as communication and integration problems resulting from geographic dispersion and language and cultural differences, compliance with foreign laws and regulations and general economic or political conditions in other countries or regions; |
| · | potential loss of key employees of the acquired companies; and |
| · | impairment of relationships with clients and employees of the acquired companies or our clients and employees as a result of the integration of acquired operations and new management personnel. |
Our management team’s attention may be diverted by recent acquisitions and searches for new acquisition targets, and our business and operations may suffer adverse consequences as a result.
Mergers and acquisitions are time intensive, requiring significant commitment of our management team’s focus and resources. If our management team spends too much time focused on recent acquisitions or on potential acquisition targets, our management team may not have sufficient time to focus on our existing business and operations. This diversion of attention could have material and adverse consequences on our operations and our ability to be profitable.
We may be unable to complete key acquisitions.
The completion of key acquisitions may rest upon factors outside of our control, and may, notwithstanding the stage of negotiation, end up failing before completion. In such event key acquisitions are left incomplete, the Company may be materially adversely affected, owing to the significant devotion of resources thereto.
We may be unable to scale our operations successfully.
Our growth strategy will place significant demands on our management and financial, administrative, and other resources. Operating results will depend substantially on the ability of our officers and key employees to manage changing business conditions and to implement and improve our financial, administrative, and other resources. If the Company is unable to respond to and manage changing business conditions, or the scale of its operations, then the quality of its services, its ability to retain key personnel, and its business could be harmed.
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| Table of Contents |
We have significant historical losses and may continue to incur losses in the future.
We have incurred annual operating losses since our inception. Consequently, as of September 30, 2023, we had an accumulated deficit of $31,447,003. Our revenues for the years ended September 30, 2023, 2022, and 2021 were $1,401, $93, and $2,832, respectively. Our revenues have not been sufficient to sustain our operations. In order to achieve profitability our revenue streams will have to increase and there is no assurance that revenues can increase to such a level. We may never be profitable. Our ability to achieve profitability is affected by various factors, including:
| - | growth of the health and wellness market; |
| - | Our ability to develop and maintain our brand and reputation for our product offerings; |
| - | our efforts to sell and market our products through local distributors and business partners; |
| - | our ability to establish partnerships arrangements; |
| - | the time and costs involved in obtaining regulatory approvals if any; |
| - | our ability to control our costs and expenses; and |
| - | the continued ability to source investments from our investors. |
Many of these factors are beyond our control. We may continue to incur net losses in the future due to our continued investments in content, bandwidth and technology. If we cannot successfully offset our increased costs with an increase in net revenues, our gross margin, financial condition and results of operations could be materially and adversely affected. We may also continue to incur net losses in the future due to changes in the macroeconomic and regulatory environment, competitive dynamics and our inability to respond to these changes in a timely and effective manner.
The Company has limited cash resources and a history of operating losses. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. We believe we have developed a viable plan to continue as a going concern. However, the plan relies upon our ability to obtain additional sources of capital and financing. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, is not sufficient to satisfy our capital needs, we may be required to cease operations.
Our auditors have indicated that there is substantial doubt about our ability to continue as a going concern.
Our financial statements have been prepared assuming that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of the financial statements for the Company included elsewhere in this report. We have incurred significant operating losses since inception. Because we do not expect that existing operational cash flow will be sufficient to fund presently anticipated operations, this raises substantial doubt about our ability to continue as a going concern. Therefore, we will need to raise additional funds and is currently exploring alternative sources of financing. Our continuation as a going concern is dependent upon the ability to raise financing from third parties and generating revenues from operations. There is no assurance that we will be successful in doing so.
We will require additional financing to sustain our operations, and our ability to secure additional financing is uncertain.
We may be unable to raise on acceptable terms, if at all, the substantial capital resources necessary to conduct our operations. If we are unable to raise the required capital, we may be forced to curtail business development activities and, ultimately, cease operations. As at September 30, 2023, we had working capital deficiency of $375,870 as compared to working capital deficiency of $354,450 as at September 30, 2022. The independent auditor’s report for the year ended September 30, 2022 includes an explanatory paragraph stating that our recurring losses from operations and working capital levels raise substantial doubt about our ability to continue as a going concern.
We may be unable to retain key employees or recruit additional qualified personnel.
Our success depends to a significant extent on the continued services of our senior management and other members of management.
If members of our senior management team do not continue in their present positions, our business may suffer. Because of the nature of our business, we are highly dependent upon attracting and retaining qualified personnel. There is significant competition for qualified personnel in our industry. Therefore, we may not be able to attract and retain the qualified personnel necessary for the development of our business. The loss of the services of existing personnel, as well as the failure to recruit additional key technical and managerial personnel in a timely manner, could harm our business.
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| Table of Contents |
The Company’s success depends upon the ability to adapt to a changing market and continued development of additional products and services.
Although we expect to provide a broad and competitive range of products and services, there can be no assurance of acceptance by the marketplace. The procurement of new contracts by the Company may be dependent upon the continuing results achieved, upon pricing and operational considerations, as well as the potential need for continuing improvement to existing products and services. Moreover, the markets for such products and services may not develop as expected nor can there be any assurance that we will be successful in our marketing of any such services.
Our products may not meet health and safety standards or could become contaminated.
We do not have control over all of the third parties involved in the manufacturing of our products and their compliance with government health and safety standards. Even if our products meet these standards, they could otherwise become contaminated. A failure to meet these standards or contamination could occur in our operations or those of our manufacturers, distributors or suppliers. This could result in expensive production interruptions, recalls and liability claims. Moreover, negative publicity could be generated from false, unfounded or nominal liability claims or limited recalls. Any of these failures or occurrences could negatively affect our business and financial performance.
The sale of our products involves product liability and related risks that may have a material adverse effect on us.
We face an inherent risk of exposure to product liability claims if the use of our products results in, or is believed to have resulted in, illness or injury. Our products contain combinations of ingredients, and there is little long-term experience with the effect of these combinations. In addition, interactions of these products with other products, prescription medicines and over-the-counter treatments have not been fully explored or understood and may have unintended consequences. Any product liability claims could have a material adverse effect on us. We do not currently have any product liability insurance. Although we will apply for product liability insurance when it deems it appropriate, there can be no assurance that: a) we will be able to obtain or maintain product liability insurance on acceptable terms; b) we will be able to secure increased coverage if requested; or c) any insurance will provide adequate protection against potential liabilities.
The success of our business will depend upon our ability to create and expand our brand awareness.
The edible oil markets we compete in, and the nutritional supplement markets we intend to compete in, are highly competitive, with many well-known brands leading the industry. Our ability to compete effectively and generate revenue will be based upon our ability to create and expand awareness of our products distinct from those of our competitors. It is imperative that we are able to convey to consumers the benefits of our products. However, advertising and packaging and labeling of such products will be limited by various regulations. Our success will be dependent upon our ability to convey to consumers that our products are superior to those of our competitors.
The requirements of remaining a public company may strain our resources and distract our management, which could make it difficult to manage our business.
We are required to comply with various regulatory and reporting requirements, including those required by the SEC. Complying with these reporting and other regulatory requirements are time-consuming and expensive and could have a negative effect on our business, results of operations and financial condition.
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| Table of Contents |
The commercial success of our products and services is dependent, in part, on factors outside our control.
The commercial success of our products and services is dependent upon unpredictable and volatile factors beyond our control, such as the success of our competitors’ products and services. Our failure to attract market acceptance and a sustainable competitive advantage over our competitors would materially harm our business.
We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses to us.
As discussed above, we are a foreign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last Business Day of an issuer’s most recently completed second fiscal quarter, and, accordingly, the next determination will be made with respect to us on March 31, 2024. In the future, we would lose our foreign private issuer status if (1) more than 50% of our outstanding voting securities are owned by U.S. residents and (2) a majority of our directors or executive officers are U.S. citizens or residents, or we fail to meet additional requirements necessary to avoid the loss of foreign private issuer status. If we lose our foreign private issuer status, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer.
You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under British Virgin Islands law.
We are an exempted company incorporated under the laws of the British Virgin Islands with limited liability. Our corporate affairs are governed by our memorandum and articles of association, as amended from time to time, the Companies Act and the common law of the British Virgin Islands. The rights of our shareholders to take action against our directors and us, actions by minority shareholders and the fiduciary duties of our directors to our Company under British Virgin Islands law are to a large extent governed by the common law of the British Virgin Islands. The common law of the British Virgin Islands is derived in part from comparatively limited judicial precedent in the British Virgin Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the British Virgin Islands. The rights of our shareholders and the fiduciary duties of our directors under the laws of the British Virgin Islands are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the British Virgin Islands has a different body of securities laws than the United States, which may provide significantly less protection to investors. In addition, British Virgin Islands companies may not have the standing to initiate a shareholder derivative action in a federal court of the United States.
Shareholders of British Virgin Islands exempted companies like us have no general rights under British Virgin Islands law to inspect corporate records (other than the Memorandum and Articles of Association) or to obtain copies of lists of shareholders of these companies. Our directors are not required under our Memorandum and Articles of Association to make our corporate records available for inspection by our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder resolution or to solicit proxies from other shareholders in connection with a proxy contest.
Certain corporate governance practices in the British Virgin Islands, which is our home country, differ significantly from requirements for companies incorporated in other jurisdictions such as U.S. states. Currently, we do not plan to rely on home country practice with respect to any corporate governance matter. In the event we opt to do so in the future, our shareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers.
As a result of all of the above, shareholders may have more difficulty in protecting their interests in the face of actions taken by our management, members of the board of directors or controlling shareholders than they would as shareholders of a company incorporated in a U.S. state.
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Certain judgments obtained against us by our shareholders may not be enforceable.
We are a British Virgin Islands exempted company and substantially all of our assets are located outside of the United States. In addition, all of our current directors and officers are nationals and residents of countries other than the United States and substantially all of the assets of these persons are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon these persons or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States. Even if you are successful in bringing an action of this kind, the laws of the British Virgin Islands may render you unable to enforce a judgment against our assets or the assets of our directors and officers. As a result of all of the above, our shareholders may have more difficulties in protecting their interests through actions against us or our officers, directors or major shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.
We are required to comply with certain provisions of Section 404 of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”) and if we fail to continue to comply, our business could be harmed, and the price of our securities could decline.
Rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act require an annual assessment of internal control over financial reporting, and for certain issuers an attestation of this assessment by the issuer’s independent registered public accounting firm. The standards that must be met for management to assess the internal control over financial reporting as effective are evolving and complex, and require significant documentation, testing, and possible remediation to meet the detailed standards. We expect to incur significant expenses and to devote resources to Section 404 compliance on an ongoing basis. It is difficult for us to predict how long it will take or costly it will be to complete the assessment of the effectiveness of our internal control over financial reporting for each year and to remediate any deficiencies in our internal control over financial reporting. As a result, we may not be able to complete the assessment and remediation process on a timely basis. In the event that our Chief Executive Officer or Chief Financial Officer determines that our internal control over financial reporting is not effective as defined under Section 404, we cannot predict how regulators will react or how the market prices of our securities will be affected; however, we believe that there is a risk that investor confidence and the market value of our securities may be negatively affected.
Compliance with changing corporate governance regulations and public disclosures may result in additional risks and exposures.
Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and new regulations from the SEC, have created uncertainty for public companies such as ours. These laws, regulations, and standards are subject to varying interpretations in many cases, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. As a result, our efforts to comply with evolving laws, regulations, and standards have resulted in, and are likely to continue to result in, increased expense and significant management time and attention.
Risks Related to Our Ordinary Shares
The market price of our ordinary shares is volatile.
The market price of our ordinary shares has been, and we expect it to continue to be, highly unstable. Factors, including our announcement of technological improvements or announcements by other companies, regulatory matters, research and development activities, new or existing products or procedures, signing or termination of licensing agreements, concerns about our financial condition, operating results, litigation, government regulation, developments or disputes relating to agreements, patents or proprietary rights, and public concern over the safety of activities or products have had a significant impact on the market price of our stock. We expect such factors to continue to impact our market price for the foreseeable future.
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Our ordinary shares are classified as “penny stock” under SEC rules that may make it more difficult for our shareholders to resell our ordinary shares.
Our ordinary shares are traded on the OTC Market. As a result, the holders of our ordinary shares may find it more difficult to obtain accurate quotations concerning the market value of the ordinary shares. Shareholders also may experience greater difficulties in attempting to sell the shares than if there were listed on or quoted on a national stock exchange. Because our ordinary shares are not traded on a national stock exchange , and the market price of our ordinary shares is less than $5.00 per share, our ordinary shares are classified as “penny stock.” Rule 15g-9 of the Securities Exchange Act of 1934 imposes additional sales practice requirements on broker-dealers that recommend the purchase or sale of penny stocks to persons other than those who qualify as an “established customer” or an “accredited investor.” This includes the requirement that a broker-dealer must make a determination that investments in penny stocks are suitable for the customer and must make special disclosures to the customer concerning the risks of penny stocks. Application of the penny stock rules to our ordinary shares could adversely affect the market liquidity of the shares, which in turn may affect the ability of holders of our ordinary shareholders to resell the shares. We have a significant number of options and warrants outstanding that could be exercised in the future. Subsequent resales of these and other shares could cause our share price to decline. This could also make it more difficult to raise funds at acceptable levels, via future securities offerings.
We have identified material weaknesses in our internal control over financial reporting. If we fail to develop and maintain an effective system of internal control over financial reporting, we may be unable to accurately report our financial results or prevent fraud, and investor confidence and the market price of our ordinary shares may be materially and adversely affected.
We have identified “material weaknesses” and other control deficiencies including significant deficiencies in our internal control over financial reporting. As defined in the standards established by the Public Company Accounting Oversight Board of the United States, or PCAOB, a “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
One material weakness that has been identified related to our lack of sufficient financial reporting and accounting personnel with appropriate knowledge of U.S. GAAP and SEC reporting requirements to properly address complex U.S. GAAP accounting issues and to prepare and review our consolidated financial statements and related disclosures to fulfill U.S. GAAP and SEC financial reporting requirements. As our operations continue to expand, we plan to hire additional accounting and finance staff to increase segregation of duties and also invest in technology infrastructure to support our financial reporting function. Despite all these remedial measures, we might efficiently address the weaknesses we have identified.
During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify other weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. If we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of our ordinary shares. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial statements from prior periods.
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Lack of independent directors
We cannot guarantee that our Board of Directors will have a majority of independent directors in the future. In the absence of a majority of independent directors, our executive officers, who are also shareholders and directors, could establish policies and enter into transactions without independent review and approval thereof. This could present the potential for a conflict of interest between us and our shareholders generally and the controlling officers, stockholders or directors.
Ownership of our ordinary shares by current officers and directors.
The present officers and directors own approximately 15.29% of our issued and outstanding ordinary shares, and are therefore no longer in a position to elect all of our directors and otherwise control the Company. As of the date of this annual report, Vago International Limited controlled by Yee W. Chu beneficially owned approximately 47.98% of our outstanding capital stock. Chu therefore has significant influence over management and affairs and over all matters requiring shareholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or our assets, for the foreseeable future. This concentrated control limits or severely restricts our shareholders’ ability to influence corporate matters and, as a result, we may take actions that our shareholders do not view as beneficial. As a result, the market price of our ordinary shares could be adversely affected.
We do not expect to pay dividends, and any return on your investment will likely be limited to the appreciation of our common stock.
We currently intend to retain our future earnings, if any, for the foreseeable future, to repay indebtedness and to fund the development and growth of our business. We do not intend to pay any dividends to holders of our ordinary shares and the agreements governing our credit facility significantly restrict our ability to pay dividends. As a result, capital appreciation in the price of our ordinary shares, if any, will be your only source of gain or income on an investment in our ordinary shares.
Certain judgments obtained against us by our shareholders may not be enforceable.
We are a British Virgin Islands company and most of our directors and officers are nationals and residents of countries other than the United States. A substantial portion of the assets of these persons are located outside the United States. As a result, it may be difficult to effect service of process within the United States upon these persons. It may also be difficult to enforce in U.S. court judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors, most of whom are residents of countries other than the United States and the substantial majority of whose assets are located outside of the United States. In addition, there is uncertainty as to whether the courts of the British Virgin Islands would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state. In addition, there is uncertainty as to whether such British Virgin Islands courts would be competent to hear original actions brought in the British Virgin Islands against us or such persons predicated upon the securities laws of the United States or any state.
ITEM 4. INFORMATION OF THE COMPANY
A. | History and Development of the Company |
|
|
| Introduction and History |
We were originally incorporated as AlphaRx Inc. (“AlphaRx”) under the laws of the State of Delaware in 1997 as a pharmaceutical research & development company. We were domiciled in the British Virgin Islands (the “BVI”) and continued as a BVI registered company in January 2013. On March 8, 2013, AlphaRx changed its name to UMeWorld Limited.
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AlphaRx was a specialty pharmaceutical company dedicated to developing therapies to treat and manage pain. Prior to November 2011, the business of the Company was focused on reformulating FDA approved and marketed drugs using its proprietary site-specific nano drug delivery technology. From 2000 until June 2011, substantial efforts and resources were devoted to understanding our nano drug delivery technology and establishing a product development pipeline that incorporated this technology with selected molecules.
On November 4, 2011, we ceased all operations in the drug development business and adopted a new corporate development strategy that changed the business operation of the Company to digital media and digital education with an intense focus on China.
On August 30, 2012, we acquired all of the issued and outstanding shares of UMeLook Holdings Limited (“UMeLook”), a digital media & education startup with an intense focus on China. The acquisition of UMeLook was completed as a share exchange through the issuance of 70,000,000 common shares of AlphaRx to the shareholders of UMeLook in exchange for all of the issued and outstanding shares in UMeLook. There were no changes of control of our officers and Board of Directors as a result of the UMeLook acquisition. Due to PRC’s legal restrictions on foreign ownership and investment in the value-added telecommunications market, we operated our online platform through Guangzhou XinYiXun Technology Co. Ltd (“Guangzhou XinYiXun”), our consolidated variable interest entity, or VIE, in the PRC. Guangzhou XinYiXun held our VATS (“Value-Added Telecommunication Services”) license necessary to operate our online platform in China, our registered trademarks in China and three of our registered software copyright that are essential to the Company's operation in PRC.
As a holding company with no material operations of our own. We relied on a series of contractual arrangements among UMeLook (Guangzhou) Information Technology Co., Ltd (“UMeLook Guangzhou”), Guangzhou XinYiXun and its shareholders to operate our business in China. Neither we nor our subsidiaries owned any share in Guangzhou XinYiXun. However, as a result of these contractual arrangements, we were the primary beneficiary of Guangzhou XinYiXun and treated it as our consolidated VIE under U.S. GAAP.
In 2017, we launched a day-care & private tutoring product trial targeting Grade 1 to Grade 6 students under the UMTang brand, this UMTang product trail was terminated in 2017 due to government regulations and licensing issues.
On November 4, 2019, the Company entered into an acquisition agreement with Beijing Radish Green Vegetable Education Technology Co., Ltd. (“Proud Kids”) in an all-stock transaction. Pursuant to the agreement, Proud Kids’ shareholders will receive up to 37,500,000 ordinary shares of the Company upon closing. The acquisition agreement, as amended, was terminated by the Company on April 30, 2020.
On May 20, 2021, we entered into a Platform Usage Agreement for Easy Learn English with Beijing Deyibai Education Technology Co., Ltd. Easy Learn English combines artificial intelligence with human tutors to deliver personalized one on one English learning for Grade 5 to University level students. Under the terms of this Agreement, the Company setup both corporate-owned and franchised centers surrounding the Greater Bay area in Guangdong province.
In December 2021, we terminated the contractual arrangements among UMeLook Guangzhou, Guangzhou XinYiXun and its shareholder and dissolved our education business in China. Due to the termination of the VIE structure, we no longer own the VATS license, registered trademarks, and registered software copyrights which were held by Guangzhou XinYiXun. Please refer to Note 11 - Discontinued Operations to our consolidated financial statements.
In June 2022, we launched DAGola brand DAG (diacylglycerol) cooking oil into the U.S. market through Amazon.com. DAGola oil is a revolutionary cooking oil scientifically shown to promote lower triglycerides and uric acid levels. The Company is transitioning itself into a health and wellness company through its DAGola brand cooking oil business unit and nutritional supplement distribution business unit.
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On September 30, 2022, the Company entered into two sale and purchase agreements with an individual to dispose UMeLook HK and UMeZone Adaptive Learning Technology Limited (“UMeZone”) for a consideration of $0.13 (equivalent to HK$1) each.
By the end of 2022, we began negotiations with third parties in Malaysia to discuss the potential acquisition of three distinct palm oil mills within the country. In furtherance thereof, we worked towards a letter of intent with the associated parties. We expect that the transaction will be completed via execution of a definitive joint venture agreement in 2024. In consideration of the prior, we intend to make a significant pivot towards becoming a fully integrated edible oils company, capable of the manufacturing, refining, packaging and sale of palm oil, palm oil derivative products, and other vegetable oils.
B. | Business Overview |
UMeWorld Limited is a holding company with an operating subsidiary Dagola Inc. located in Miami, Florida. We are a health and wellness company with a mission to help our customers live healthier, and seek to become an integrated edible oils company through a series of significant acquisitions expected to be completed in the latter half of 2023, going into 2024. The Company, through its subsidiary, plans to operate in the sales and marketing of DAG (Diacylglycerol) cooking oils and nutritional supplements, and intends to acquire and form additional subsidiaries operating within the edible oils industry, producing, refining and preparing for sale our own distinct brands of vegetable oils to consumers located internationally. Our management team brings deep expertise in heavily regulated industries, operating, brand identity and services, and raising capital to the public market. We seek synergistic and complementary mergers and acquisition opportunities, implementing operational efficiencies to eliminate duplicative measures and centralize administrative operations to achieve more significant revenues and profitability. Additionally, we expect to leverage our network of retail relationships, as well as acquire and manage brands and services cultivated in the health and wellness industry to secure sales in major retailers in the United States and globally. Our management team monitors a variety of trends and factors that follow which could impact our operating performance.
On December 31, 2021, UMeLook Guangzhou, Guangzhou XinYiXun, and the shareholders of Guangzhou XinYiXun mutually agreed to terminate the series of contractual arrangements, which consisted of the Exclusive Management Service Agreement, the Proxy Agreement, the Equity Pledge Agreement, the Exclusive Technology Consultation and Services Agreement, and the Call Option Agreement, due to the education policy chang in the PRC. As a result, the education business of the Company was dissolved.
Our Revenue Strategy
Our revenue growth strategy follows a dual buy and build model in which we acquire brands and related infrastructure, as well as develop brands and related infrastructure in-house. In addition to scaling the Company’s wholly-owned subsidiary, Dagola Inc, which currently owns and operates our DAGola brand cooking oil, we have executed a definitive agreement to acquire a nutritional supplement retailer in Florida, U.S, and have begun negotiation for a letter of intent and execution of a definitive joint venture agreement with a palm oil mill operator in Malaysia. The closing of these transactions is dependent on numerous factors including but not limited to satisfactory completion of due diligence, capital constraints, and more. These contemplated transactions will likely have a material impact on the Company’s operating performance.
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Our Principal Product
DAGola DAG Cooking and Salad Oil -- a revolutionary cooking and salad oil clinically shown to help in the fight against body fat, obesity and promotes lowering of serum triglycerides and uric acid levels.
What is DAG (Diacylglycerol) Oil? All conventional cooking oils currently in the market (vegetable, corn, soy, canola, olive, etc.) are triglyceride-based oils (TAG) and contain some small amounts of diacylglycerols. High levels of triglycerides in the bloodstream, a condition referred to as hypertriglyceridemia, occurs in many different populations in the world today and is strongly correlated to the quantity of fat consumed in the diet. An excess of triglycerides in the body results in it being stored in the liver or in fat cells in reserve to supply energy when needed. Unlike triglycerides, DAG is metabolized (broken down) directly by the body as energy, rather than stored as fat. According to clinical studies, DAG oil may help individuals maintain or lose weight when included as part of a sensible diet.
DAG oil was developed by a Japanese multinational company as a substitute for fat and sugary oils currently in the market. It became the most popular cooking oil in Japan, following its introduction in 1999. In 2009, DAG oil was pulled from the worldwide market voluntarily, due to concerns about adverse health reactions to glycidyl ester, one of the ingredients in vegetable oils. The Company’s strategic partner has solved this problem so that DAG oil’s health benefits can now be safely available to help enhance people’s health.
The FDA has designated DAG oil as a GRAS (“Generally Regarded as Safe”) substance, while other countries such as Canada, Australia, China and the European Union have recognized DAG oil as a novel food and can be marketed to consumers freely. It is worth noting that in order to have medical benefits, DAG oil should contain at least 27% DAG according to clinical studies. In China, a cooking oil must contain at least 40% DAG in order to make the DAG oil claim on its product label. The Company’s DAG oils have been the subject of an ongoing clinical trial with 400 type 2 diabetic patients, showing a significant reduction in body weight, body mass index, total serum cholesterol and a significant reduction in serum uric acid.
The Company’s DAG oil is made from all natural canola, it has less saturated fat than conventional cooking and salad oils, has zero grams of trans fat per serving, no cholesterol and is a source of polyunsaturated and monounsaturated fatty acids. DAG oil fits within the dietary guidelines of many medical associations and might be an effective tool for the reduction of lifestyle-related diseases such as obesity, visceral obesity, postprandial hyperlipidemia, insulin resistance, and atherosclerosis.
Market Opportunity
We aim to become a major participant in the $1.5 trillion global wellness industry. We see great potential to grow and generate revenues in this expanding market. We expect consumer trends towards adoption of a healthier lifestyle to continue. Furthermore, we see significant potential within the edible oils industry, and see potential to leverage synergies with DAG oil production methods to create widely available and healthier alternatives to many edible oils as currently exist.
Competition
We compete with companies that operate in the health and wellness market, and in the edible oils industry. Many of our competitors have substantially greater financial resources, broader market presence, longer-standing relationships with distributors, retailers, and suppliers, longer operating histories, more extensive production and distribution capabilities, more robust brand recognition, more significant marketing resources, and more comprehensive product lines than us. We believe that principal competitive factors in this category include, among others, quality ingredients, wellness profile, cost, convenience, branding, and marketing.
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C. | Organizational Structure |
UMeWorld Limited is a holding company without substantive operations and we conduct our businesses through our wholly-owned subsidiary in the U.S. The chart below summarizes our corporate legal structure as of the date of this annual report:
Deconsolidation of VIE and Subsidiaries
Prior to January 2022, we conducted substantially all of our operations through our VIE, Guangzhou XinYiXun Network Technology Co. Ltd and its wholly owned subsidiary Guangzhou Youmanfen Education Technology Co. Ltd, in China. The VIE structure was dissolved in December 31 2021. Please refer to our Discontinued Operations in Note 11 to our consolidated financial statements.
D. | Properties, Plants & Equipment |
We do not own any real property. We do not lease any office space at this time. We currently use office space provided by an unrelated party free of charge.
Our servers are primarily hosted at internet data centers owned by major domestic internet data center providers. The hosting services agreements typically have terms of one year. We believe that we will be able to obtain adequate facilities, principally through leasing, to accommodate our future expansion plans.
E. | Smaller Reporting Company |
We qualify as a “smaller reporting company” as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and have elected to take advantage of certain of the scaled disclosure available to smaller reporting companies. There are certain exemptions available to us as a smaller reporting company, including: (1) not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes Oxley Act; (2) scaled executive compensation disclosures; and (3) the requirement to provide only two years of audited financial statements, instead of three years. As long as we maintain our status as a “smaller reporting company”, these exemptions will continue to be available to us.
ITEM 4A. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the consolidated financial statements and the related notes included elsewhere in this annual report on Form 20-F. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Item 3.D. Key Information—Risk Factors” and elsewhere in this annual report on Form 20-F.
Overview
We are a holding company that is incorporated in the British Virgin Islands. As a holding company with no operations, we conduct all of our operations through our subsidiary in the United States. Prior to January 2022, we conducted substantially all of our operations through our VIE, Guangzhou XinYiXun, in China. The VIE structure was terminated and the education business was dissolved in December 2021.
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We are a health and wellness company with a mission to help our customers live healthier. The Company, through its subsidiary, operates in the sales and marketing of DAG (Diacylglycerol) cooking oils and nutritional supplements, and intends to, through a series of acquisitions expected to occur in the first half of 2024 going into 2025, enter into the palm oil industry through the manufacturing, refining and sale thereof. Our management team brings deep expertise in heavily regulated industries, operating, brand identity and services, and raising capital to the public market. We seek synergistic and complementary mergers and acquisition opportunities, implementing operational efficiencies to eliminate duplicative measures and centralize administrative operations to achieve more significant revenues and profitability. Additionally, we expect to leverage our network of retail relationships, as well as acquire and manage brands and services cultivated in the health and wellness industry to secure sales in major retailers in the United States and globally. Our management team monitors a variety of trends and factors that follow which could impact our operating performance.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. We have limited cash resources, recurring cash used in operations and operating losses history. As shown in the accompanying consolidated financial statements, we have an accumulated deficit of approximately $31.45 million as of September 30, 2023, net loss of $0.31 million, and net cash used in operating activities of $0.07 million for the year ended September 30, 2023. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.
Results of Operations
The following tables summarize the results of operations for the years ended September 30, 2023, 2022 and 2021 and the annual results of operations for the past three years:
Years Ended September 30 |
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
|
| $ |
|
| $ |
|
| $ |
| |||
Revenue |
|
| 1,401 |
|
|
| 93 |
|
|
| 2,832 |
|
Cost of revenue |
|
| (4,546 | ) |
|
| (859 | ) |
|
| (19,641 | ) |
Selling, general and administrative expenses |
|
| (303,195 | ) |
|
| (85,686 | ) |
|
| (86,848 | ) |
Other income |
| - |
|
|
| 2,850 |
|
|
| - |
| |
Interest income |
|
| - |
|
|
| - |
|
|
| 31 |
|
Other expense |
|
| - |
|
|
| - |
|
|
| (3,810 | ) |
Income tax expense |
|
| - |
|
|
| - |
|
|
| - |
|
Net loss from continuing operations |
|
| (306,340 | ) |
|
| (83,602 | ) |
|
| (107,436 | ) |
Net loss from discontinued operations |
|
| - |
|
|
| (64,084 | ) |
|
| - |
|
Net loss |
|
| (306,340 | ) |
|
| (147,686 | ) |
|
| (107,436 | ) |
RESULTS OF OPERATIONS
The Year Ended September 30, 2023 Compared to the Year Ended September 30, 2022
Revenues
Our revenues increased from $93 in 2022 to $1,401 in 2023. This increase was related to the revenue stream from the sales of DAG Oil and a calcium product.
Cost of Revenues
Our cost of revenues increased from $859 in 2022 to $4,546 in 2023. The increase was due to the sales of DAG Oil.
Selling, General and Administrative Expenses
Our selling, general and administrative expenses increased from $85,686 in 2022 to $303,195 in 2023.
Other Income
Other Income decreased from $2,850 in 2022 to $0 in 2023.
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Income Tax Expense
There was no income tax expense incurred for the years ended September 30, 2023 and 2022.
Net Loss From Discontinued Operations
Net loss from discontinued operation decreased from $64,084 in 2022 to $0 in 2023.
Net Loss
As a result of the cumulative effect of the foregoing factors, we incurred a net loss of $306,340 for the year ended September 30, 2023 as compared to net loss of $147,686 for the year ended September 30, 2022, an increase of $158,654 or about 107%. The increase was mainly attributed from the loss from discontinued operations.
The Year Ended September 30, 2022 Compared to the Year Ended September 30, 2021
Revenues
Our revenues decreased from $2,832 in 2021 to $93 in 2022.
Cost of Revenues
Our cost of revenues decreased from $19,641 in 2021 to $859 in 2022. The decrease was due to headcount-related expenses to serve Easy Learn English product.
Selling, General and Administrative Expenses
Our selling, general and administrative expenses have a relatively small decrease from $86,848 in 2021 to $85,686 in 2022.
Other Income
We had $0 other income in 2021, as compared to other income of $2,850 in 2022.
Other Expense
We had $0 other expense in 2022, as compared to other expense of $3,810 in 2021.
Income Tax Expense
There was no income tax expense incurred for the years ended September 30, 2022 and 2021.
Net loss
As a result of the cumulative effect of the foregoing factors, we incurred a net loss of $147,686 for the year ended September 30, 2022 as compared to net loss of $107,436 for the year ended September 30, 2021, an increase of $40,250 or about 37.46%. The increase was mainly attributable to the termination of the VIE structure and the dissolution of the education business in China.
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Liquidity and Capital Resources
Our principal sources of liquidity have been proceeds from the issuance of our ordinary shares and promissory notes to our CEO, directors and shareholders. We intend to finance our future working capital requirements and capital expenditures from cash generated from operating activities and funds raised from financing activities. However, we may require additional cash resources due to changing business conditions or other future developments, including any investments or acquisitions we may decide to selectively pursue. If our existing cash resources are insufficient to meet our requirements, we may seek to sell equity, sell debt securities or borrow from banks. We cannot assure you that financing will be available in the amounts we need or on terms acceptable to us, if at all. The sale of additional equity securities would result in additional dilution to our shareholders. The incurrence of indebtedness and issuance of debt securities would result in debt service obligations and could result in operating and financial covenants that restrict our operations and our ability to pay dividends to our shareholders.
Going Concern
In assessing the Company’s liquidity and its ability to continue as a going concern, the Company monitors and analyzes its cash and cash equivalents and its operating and capital expenditure commitments. The Company’s liquidity needs are to meet its working capital requirements, operating expenses and capital expenditure obligations. If the Company is unable to obtain the additional funding in the immediate future, it will have to cease all operations on a permanent basis.
Working Capital
As of September 30, 2023 and 2022, we had cash balances of $57,435 and $2,443 respectively. These funds are primarily located in various financial institutions located in Canada and USA.
As of September 30, 2023, we had working capital deficiency of approximately $375,870 as compared to a working capital deficiency of $354,450 as of September 30, 2022. Since inception, we have financed operations primarily from the issuance of ordinary shares and promissory notes. We expect to continue ordinary share issuances and issuance of promissory notes to fund our ongoing activities.
We currently do not have sufficient resources to carry out our entire business strategy. Therefore, we will need to raise additional capital to fund our operations sometime in the future. We cannot be certain that any financing will be available when needed. Any additional equity financings will be dilutive to our existing shareholders, and debt financing, if available, may involve restrictive covenants on our business and also the issuance of warrants or conversion features which may further dilute our existing shareholders.
We expect to continue to spend capital on the sales and marketing activities related to our DAG cooking oil business. The inability to raise capital would have a material adverse effect on the Company.
We further expect to spend capital consummating significant acquisition transactions. The failure to raise capital would prevent us from closing on the aforementioned.
Off-Balance Sheet Arrangements
We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any unconsolidated third parties. In addition, we have not entered into any derivative contracts that are indexed to our shares and classified as shareholders’ equity, or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. Moreover, we do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us.
Holding Company Structure
Overview
We are a holding company with no material operations of our own, we conduct all of our operations through our subsidiary in the United States.
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| Table of Contents |
Dividend Distributions
The payment of dividends will be determined at the discretion of our board of directors and is also subject to British Virgin Islands law and our articles of association, as amended from time to time. Under the laws of the British Virgin Islands, a British Virgin Islands company may pay a dividend out of profits or its share premium account, provided that in no circumstances may a dividend be paid out of the share premium account unless, immediately following the date on which the dividend is proposed to be paid, the company shall be able to pay its debts as they fall due in the ordinary course of business. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant. In addition, we are a holding company and depend on the receipt of dividends and other distributions from our subsidiaries to pay dividends on our ordinary shares.
There are no foreign exchange controls or foreign exchange regulations under current applicable laws of the various places of incorporation of our significant subsidiaries that would affect the payment or remittance of dividends.
The Company has been in a net loss position since inception. We do not currently intend to declare a dividend on our ordinary shares in the foreseeable future. If we decide in the future to declare a dividend, our board of directors shall take into account, among other things, the following factors when deciding whether to propose a dividend and in determining the dividend amount: (a) operating and financial results; (b) cash flow situation; (c) business conditions and strategies; (d) future operations and earning (e) taxation considerations; (f) interim dividend paid, if any; (g) capital requirement and expenditure plans; (h) interests of shareholders; (i) statutory and regulatory restrictions; (j) any restrictions on payment of dividends; and (k) any other factors that our Board may consider relevant. Currently, we do not have any predetermined dividend distribution ratio.
Contractual Obligations and Commitments
Excluding accounts payable and accrued liabilities, we do not have any contractual obligations and commitments for the years ended September 30, 2023, 2022 and 2021.
Certain Factors That May Affect Future Results
Certain of the information contained in this document constitutes “forward-looking statements”, including but not limited to those with respect to the future revenues, our development strategy, involve known and unknown risks, uncertainties, and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the risks and uncertainties associated with an educational technology company including a history of net losses, unproven technology, current and potential competitors with significant technical and marketing resources, need for future capital and dependence on collaborative partners and on key personnel. Additionally, we are subject to the risks and uncertainties associated with all educational technology companies, including compliance with government regulations and the possibility of patent infringement litigation, as well as those factors disclosed in our documents filed from time to time with the United States Securities and Exchange Commission.
Significant Accounting Policies
Please refer to our significant accounting policies in Note 2 to our consolidated financial statements.
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| Table of Contents |
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. | Directors and Senior Management |
The following table sets forth information regarding our executive officers and directors as of the date of this annual report.
Name |
| Age |
| Position |
| Term |
Michael M. Lee |
| 60 |
| Founder, Chairman, Chief Executive Officer |
| Since 8/8/1997 |
Winfield, Yongbiao Ding |
| 59 |
| Chief Financial Officer (Part time) |
| Since 6/5/2017 |
Dr. David Milroy |
| 71 |
| Independent Director |
| Since 4/15/2003 |
Dr. Ford Moore |
| 71 |
| Independent Director |
| Since 4/15/2003 |
Michael M. Lee: Mr. Lee is our founder. Mr. Lee has over 30 years of business experience in the areas of high-tech development, marketing and corporate finance. Mr. Lee holds a B.Sc. in Applied Mathematics from the University of Western Ontario. Mr. Lee founded the Company in August 1997.
Winfield, Yongbiao Ding, CA, MBA: Mr. Ding is a seasoned senior finance executive with over fifteen years of finance and operations experience and has held CFO, board director and audit committee chair positions at several public and privately held companies in the education, technology, energy and mining industries. Mr. Ding began his career as an Audit Manager with McGovern Hurley Cunningham LLP. At McGovern, he worked in their audit and assurances practice across a wide range of industries, focusing on companies in the entertainment and media space. He holds a Master of Business Administration from the University of Hong Kong and is a Member of the Chartered Accountants of Ontario.
David Milroy, D.D.S. M.R.C.D. (C): Dr. Milroy is a Certified Oral & Maxillofacial Surgeon and has been in private practice in Richmond Hill, Woodbridge, and Port Hope, Ontario for the past twenty years. He graduated from the University of Toronto, Faculty of Dentistry with a Doctor of Dental Surgery degree in 1976 and a Residency in Oral & Maxillofacial Surgery at the University of Toronto, Toronto General and Toronto Doctor’s Hospitals in 1982.
Ford Moore, D.D.S. F.R.C.D. (C): Dr. Moore is a certified Oral & Maxillofacial Surgeon, is engaged in a full-time private practice in Newmarket, Ontario that he established in 1981. Dr. Moore graduated from the University of Toronto with a Doctor of Dental Surgery degree in 1976, and completed a hospital Residency in Oral Surgery and Anesthesia at Toronto General Hospital, Toronto Doctor’s Hospital and the University of Toronto in 1980.
Our directors are not subject to a term of office and hold office until their successors have been elected or qualified or until their death, resignation, retirement, removal, or disqualification. Vacancies on the board will be filled by a majority vote of the remaining directors. Officers of the Company serve at the discretion of the board of directors.
B. | Compensation of Directors and Executive Officers |
Our independent directors did not receive any compensation for the year ended September 30, 2023, 2022 and 2021. Directors are reimbursed for direct out-of-pocket expenses for attendance at meetings of the Board of Directors and for expenses incurred for and on behalf of the Company.
Summary of Executive Compensation
The table below summarizes the compensation received by our Chief Executive Officer for the fiscal years ended September 30, 2023, 2022 and 2021 and any other executive officer of the Company who received compensation in excess of $40,000 for services rendered during any of those years (“named executive officers”).
|
|
|
|
|
|
|
|
|
|
| Non-equity incentive plan compensation (S) |
|
|
|
|
|
|
| |||||||||||||||||||||
Name and Principal Position |
| Year |
| Salary ($) |
|
| Share based awards ($) |
| Option based awards ($) |
| Annual incentive plans |
| Long term incentive plans |
| Pension value ($) |
| All other compensation ($) |
| Total ($) |
| |||||||||||||||||||
Michael Lee (1)(2) |
| 2023 |
|
| 80,000 |
|
| Nil |
| Nil |
| Nil |
| Nil |
| Nil |
| Nil |
|
| 80,000 |
| |||||||||||||||||
Chairman and CEO |
| 2022 |
|
| 30,000 |
|
| Nil |
| Nil |
| Nil |
| Nil |
| Nil |
| Nil |
|
| 30,000 |
| |||||||||||||||||
|
| 2021 |
|
| 30,000 |
|
| Nil |
| Nil |
| Nil |
| Nil |
| Nil |
| Nil |
|
| 30,000 |
| |||||||||||||||||
Notes:
(1) | Mr. Michael Lee is not compensated with respect to his appointment as director. |
(2) | Mr. Michael Lee agreed to accrue compensation payable to him for the 2023, 2022 and 2021 fiscal years and payable at such times as determined by the Company. |
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| Table of Contents |
Summary of Stock Plans
2013 Share Incentive Plan
Our Board of Directors adopted the 2013 Share Incentive Plan, or the 2013 Plan, which became effective in July 2013. A total of 17,000,000 ordinary shares of our company are reserved for issuance under the 2013 Plan. A general description of the terms of the 2013 Plan is set forth below:
Plan Administration. Our Board of Directors or one or more committees appointed by our Board acts as of the administrator of the 2013 Plan.
Award Document. Awards granted under the 2013 Plan are evidenced by an award document that sets forth the terms and conditions applicable to each of these awards, as determined by the administrator in its sole discretion.
Termination of the 2013 Plan. Without further action by our Board of Directors, the 2013 Plan will terminate in July 2023. Our Board of Directors may amend, suspend or terminate the 2013 Plan at any time, provided, however, that our Board of Directors must first seek the approval of the participants of the 2013 Plan if such amendment, suspension or termination would materially adversely affect the rights of participants with respect to any of their existing awards.
The following table summarizes, as of the date of this annual report, the outstanding options granted to our directors and executive officer(s) under the 2013 Plan.
Name |
| Ordinary Shares Underlying Options Awarded |
|
| Exercise Price (US$/Share) |
|
| Date of Grant |
| Date of Expiration | |||
Michael Lee |
|
| 4,000,000 |
|
|
| 0.15 |
|
| May 29, 2014 |
| May 29, 2024 | |
Dr. David Milroy |
|
| 1,000,000 |
|
|
| 0.15 |
|
| May 29, 2014 |
| May 29, 2024 | |
Dr. Ford Moore |
|
| 1,000,000 |
|
|
| 0.15 |
|
| May 29, 2014 |
| May 29, 2024 | |
Winfield Ding |
|
| 300,000 |
|
|
| 0.2 |
|
| May 29, 2014 |
| May 29, 2024 | |
Total |
|
| 6,300,000 |
|
|
|
|
|
|
|
|
| |
As of the date of this annual report, other current and former employees as a group held options to purchase 4,000,000 ordinary shares of our company, with an exercise price of US$0.15 per ordinary share.
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| Table of Contents |
C. | Board Practices |
Board of Directors
Our Board of Directors consists of three directors. A director is not required to hold any shares in our company to qualify to serve as a director. A director may vote with respect to any contract, proposed contract, or arrangement in which he or she is materially interested. A director may exercise all the powers of the company to borrow money, mortgage its business, property and uncalled capital, and issue debentures or other securities whenever money is borrowed or as security for any obligation of the company or of any third party.
Duties of Directors
Under British Virgin Islands Law, our directors have a statutory duty of loyalty to act honestly in good faith with a view to our best interests. Our directors also have a duty to exercise the care, diligence and skills that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must ensure compliance with our amended and restated memorandum and articles of association. A shareholder has the right to seek damages if a duty owed by our directors is breached.
The functions and powers of our Board of Directors include, among others:
| · | convening shareholders’ annual general meetings and reporting its work to shareholders at such meetings; |
| · | issuing authorized but unissued shares; |
| · | declaring dividends and distributions; |
| · | exercising the borrowing powers of our company and mortgaging the property of our company; |
| · | approving the transfer of shares of our company, including the registering of such shares in our share register; and |
| · | exercising any other powers conferred by the shareholders’ meetings or under our amended and restated memorandum and articles of association. |
Committees
Nominating and Corporate Governance Committee
The Board of Directors does not have a nominations committee or a formal procedure with respect to the nomination of directors. In addition, we do not have any defined policy or procedure requirements of shareholders to submit recommendations or nominations for directors, and we have not established any specific or minimum criteria for nominating directors or specific process for evaluating any such nominees. Our directors expect to identify future potential director candidates from recommendations made by our directors, management and shareholders, as appropriate.
Compensation Committee
The Board of Directors has not yet established a compensation committee.
Audit Committee
We are not yet required to have an Audit Committee as a result of the fact that our ordinary shares are not considered a “listed security” as defined in Rule 10A-3 of the Exchange Act. Based on our size, however, effective controls over financial reporting and internal financial controls can still be effectively maintained without an audit committee.
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| Table of Contents |
Terms of Directors and Officers
Our officers are elected by and serve at the discretion of the Board of Directors. Our directors are not subject to a term of office and hold office until such time as they resign or are removed from office by ordinary resolution or the unanimous written resolution of all shareholders. A director will be removed from office automatically if, among other things, the director (1) becomes bankrupt or makes any arrangement or composition with his creditors; or (2) dies or is found by our company to be or becomes of unsound mind.
D. | Employees |
As of the date of this annual report, we had 1 full-time employee and outsourced services as and when required.
E. | Share Ownership |
The following table sets forth information with respect to the beneficial ownership of our ordinary shares as of the date of this annual report by (i) each person or entity known to us to beneficially own more than 5% of our outstanding ordinary shares; (ii) each of our executive officers and directors individually; and (iii) all of our executive officers and directors as a group. As of the date of this annual report, we had 110,545,005 ordinary shares issued and outstanding.
Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days, including through the exercise of any option, warrant or other right or the conversion of any other security. These shares, however, are not included in the computation of the percentage ownership of any other person.
Except as indicated in the footnotes below, we believe that the persons named in the table below have sole voting and investment power with respect to the ordinary shares indicated in the table as being beneficially owned by them.
|
| Shares Beneficially Owned |
| |||||
Name |
| Number |
|
| Percentage |
| ||
Directors & Executive Officers |
|
|
|
|
|
| ||
Michael Lee (1) |
|
| 10,623,703 |
|
|
| 9.09 | % |
Winfield Ding (2) |
|
| 1,719,326 |
|
|
| 1.47 | % |
Ford Moore (3) |
|
| 3,446,214 |
|
|
| 2.95 | % |
David Milroy (4) |
|
| 2,080,130 |
|
|
| 1.78 | % |
All Directors and Executive Officers as a group (5) |
|
| 17,869,373 |
|
|
| 15.29 | % |
|
|
|
|
|
|
|
|
|
5% or More Beneficial Owner |
|
|
|
|
|
|
|
|
Vago International Limited (6) |
|
| 56,066,020 |
|
|
| 47.98 | % |
Ruby Hui (7) |
|
| 6,982,358 |
|
|
| 5.98 | % |
First Scion Investments Limited (8) |
|
| 10,656,642 |
|
|
| 9.12 | % |
| (1) | Includes 6,623,703 ordinary shares and vested options to purchase 4,000,000 ordinary shares. |
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| Table of Contents |
| (2) | Includes 1,419,326 ordinary shares and vested options to purchase 300,000 ordinary shares. |
| (3) | Includes 2,446,214 ordinary shares and vested options to purchase 1,000,000 ordinary shares. |
| (4) | Includes 1,080,130 ordinary shares and vested options to purchase 1,000,000 ordinary shares. |
| (5) | The business address for these individuals is Unit B, 12/F, Hang Seng Causeway Bay Building, 28 Yee Wo Street, Causeway Bay, Hong Kong SAR. |
| (6) | The business address of Vago International Limited is Flat 6, Block 8, Oak Mansion, 7 Tak Fund Street, Kowloon, Hong Kong SAR. Vago International Limited is wholly owned by Yee W. Chu. |
| (7) | Includes 3,982,358 ordinary shares and vested options to purchase 3,000,000 ordinary shares. The business address for Ruby Hui is 2601B, Parkway Court, 4 Park Road, Mid-levels, Hong Kong SAR. |
| (8) | The registered office address of First Scion Investments Limited is Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands. First Scion Investment Limited is wholly owned by Francis Mak. |
None of our shareholders have voting rights different from the voting rights of other shareholders.
To our knowledge, other than Vago International Limited, we are not owned or controlled, directly or indirectly, by another corporation, by any foreign government or by any other natural or legal persons, severally or jointly. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.
ITEM 7. MAJOR SHARHEOLDERS AND RELATED PARTY TRANSACTION
A. | Major Shareholders |
Please refer to Item 6E. “Share Ownership.”
B. | Related Party Transactions |
Share Incentive Plan
See “Item 6. Directors, Senior Management and Employees - B. Compensation - Share Incentive Plan.”
Transactions with Our Chief Executive Officer and Other Related Parties
During the year ended September 30, 2023, Michael Lee provided management services to the Company with the amount of $80,000. Together with the balance due to him carried over from prior years, the total balance due to him as of September 30, 2023 is $138,302
During the year ended September 30, 2022, Michael Lee provided management services to the Company with the amount of $30,000. Together with the balance due to him carried over from prior years, the total balance due to him as of September 30, 2022 is $98,971.
During the year ended September 30, 2021, Michael Lee provided management services to the Company with the amount of $30,000, paid $4,906 expenses on behalf of the Company, advanced $191,318 to the Company, and received $268 repayment in cash from the Company. Together with the balance due to him carried over from prior years, the total balance due to him as of September 30, 2021 is $415,347.
During the year ended September 30, 2020, Michael Lee provided management services to the Company with the amount of $30,000, paid $21,260 expenses on behalf of the Company, advanced $3,084 to the Company, and received $78,992 repayment in cash from the Company. Together with the balance due to him carried over from prior years, the total balance due to him as of September 30, 2020 is $110,358.
During the quarter ended June 30, 2023, the Company issued an aggregated 699,734 shares at a price of $0.3 per share to three individual investors for net proceeds of $209,920, and issued 300,000 shares at a price of $0.25 for service.
During the year ended September 30, 2022, the Company did not issue any shares.
During the quarter ended June 30, 2021, the Company issued an aggregated 1,139,995 shares at a price of $0.12 per share to three individual investors for net proceeds of $136,800.
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| Table of Contents |
During the quarter ended March 31, 2021, the Company issued an aggregated 500,000 shares at a price of $0.12 per share to two individual investors for net proceeds of $60,000.
On February 23, 2021, the Company issued 100,000 shares at a price of $0.12 per share to Winfield, Yongbiao Ding, the Chief Financial Officer of the Company for net proceeds of $12,000.
On October 28, 2020, the Company issued 800,000 shares at a price of $0.05 per share to Ruby Hui, the shareholder of the Company for net proceeds of $40,000.
On April 13, 2020, the Company issued 1,000,000 shares at a price of $0.05 per share to Ford Moore, a director of the Company for net proceeds of $50,000.
On November 22, 2019, the Company issued 300,000 shares at a price of $0.10 per share to Winfield, Yongbiao Ding, the CFO of the Company for net proceeds of $30,000.
On September 30, 2018, the Company issued 2,869,764 shares to Michael Lee, the CEO of the Company in exchange for the cancellation of $860,929 in debt owed by the Company.
On September 30, 2018, the Company issued 534,578 shares to Ford Moore, a director of the Company in exchange for the cancellation of $160,373 in debt owed by the Company.
On September 30, 2018, the Company issued 380,130 shares to David Milroy, a director of the Company in exchange for the cancellation of $114,039 in debt owed by the Company.
On September 30, 2018, the Company issued 113,723 shares to Ruby Hui, over 5% shareholder of the Company in exchange for the cancellation of $34,117 in debt owed by the Company.
On September 30, 2018, the Company issued 66,020 shares to Vago International Limited, over 10% shareholder of the Company in exchange for the cancellation of $19,806 in debt owed by the Company.
On September 30, 2018, the Company issued 7,390,709 shares to First Scion Investments Limited, over 5% shareholder of the Company in exchange for the cancellation of $2,217,213 in debt owed by the Company.
On September 30, 2018, the Company issued 715,113 shares to Dong Liang, an affiliate of the Company in exchange for the cancellation of $214,514 in debt owed by the Company.
On January 30, 2018, the Company issued 600,000 shares at a price of $0.12 per share to Winfield, Yongbiao Ding, the CFO of the Company for net proceeds of $72,000.
On July 6, 2017, the Company issued 168,000 shares at a price of $0.3 per share to Winfield, Yongbiao Ding, the CFO of the Company for net proceeds of $50,400.
Except as disclosed above, there have been no other material transactions, series of similar transactions or currently proposed transactions, to which the Company was or is to be a party, and in which any director or executive officer, or any security holder who is known to the Company to own of record or beneficially more than five percent of the Company’s ordinary shares, or any member of the immediate family of any of the foregoing persons, had a material interest.
C. | Interests of experts and counsel. |
Not applicable.
ITEM 8. FINANCIAL INFORMATION
A. | Consolidated Financial Statements and Other Financial Information |
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| Table of Contents |
The financial statements required by this item may be found at the end of this annual report, beginning on page F-1.
Dividend Policy
We have never declared or paid any dividend on our ordinary shares and we do not anticipate paying any dividends on our ordinary shares in the future. We currently retain all future earnings to finance our operations and to expand our business.
Legal Proceedings
We are currently not a party to, and we are not aware of any threat of, any legal, arbitral or administrative proceedings, which, in the opinion of our management, is likely to have a material and adverse effect on our business, financial condition or results of operations. We may from time to time become a party to various legal, arbitral or administrative proceedings arising in the ordinary course of our business.
B. | Significant Changes |
Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.
ITEM 9. THE OFFER AND LISTINGS
A. | Offering and Listing Details |
See “C. Markets”
B. | Plan of Distribution |
Not applicable.
C. | Markets |
Our ordinary shares are traded over-the-counter and its quotations are carried by the OTC Market Group.
The following table sets forth the range of high and low bid quotations for our ordinary shares for the periods indicated from sources we deem reliable.
|
|
| High $ |
| Low $ |
|
Fourth Quarter | (Ended September 30, 2023) |
| 0.48 |
| 0.35 |
|
Third Quarter | (Ended June 30, 2023) |
| 0.46 |
| 0.14 |
|
Second Quarter | (Ended March 31, 2023) |
| 0.14 |
| 0.14 |
|
First Quarter | (Ended December 31, 2022) |
| 0.16 |
| 0.12 |
|
Fourth Quarter | (Ended September 30, 2022) |
| 0.30 |
| 0.10 |
|
Third Quarter | (Ended June 30, 2022) |
| 0.15 |
| 0.07 |
|
Second Quarter | (Ended March 31, 2022) |
| 0.16 |
| 0.13 |
|
First Quarter | (Ended December 31, 2021) |
| 0.16 |
| 0.11 |
|
The foregoing quotations reflect inter-dealer prices without retail mark-up, markdown or commissions and may not necessarily represent actual transactions. Records of our stock transfer agent indicate that as of September 30, 2023 there were approximately 53 record holders of our ordinary shares. This does not include an indeterminate number of shareholders may hold their shares in “street name” or in nominee form.
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| Table of Contents |
D. | Selling Shareholders |
Not applicable.
E. | Dilution |
Not applicable.
F. | Expenses of the Issue |
Not applicable.
ITEM 10. ADDITIONAL INFORMATION
A. | Share Capital |
Not applicable.
B. | Memorandum and Articles of Association |
We are a British Virgin Islands company and our affairs are governed by our memorandum and articles of association, the Companies Law of the British Virgin Islands, or the Companies Law, and the common law of the British Virgin Islands.
C. | Material Contracts |
We have not entered into any material contracts other than in the ordinary course of business and other than those described in “Item 4. Information of the Company”, “Item 7. Major Shareholders and Related Party Transaction – B. Related Party Transactions” or elsewhere in this annual report.
D. | Exchange Controls |
British Virgin Islands
There are currently no exchange control regulations in the British Virgin Islands applicable to us or our shareholders.
E. | Taxation |
British Virgin Islands Taxation
In the BVI there are no taxes on profits, income or dividends, nor is there any capital gains tax, estate duty or death duty. Profits can be accumulated, and it is not obligatory for a company to pay dividends. Stamp duty is not chargeable in respect of the incorporation, registration or licensing of an exempted company, nor, subject to certain minor exceptions, on their transactions.
F. | Dividends and Paying Agents |
Not Applicable.
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| Table of Contents |
G. | Statement by Experts |
Not Applicable
H. | Documents on Display |
We are subject to the periodic reporting and other informational requirements of the Exchange Act. Under the Exchange Act, we are required to file reports and other information with the SEC. Specifically, we are required to file annually a Form 20-F within four months after the end of each fiscal year. Copies of reports and other information, when so filed, may be inspected without charge and may be obtained at prescribed rates at the public reference facilities maintained by the SEC at Judiciary Plaza, 100 F Street, N.E., Washington, D.C. 20549, and at the regional office of the SEC located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The public may obtain information regarding the Washington, D.C. Public Reference Room by calling the Commission at 1-800-SEC-0330. The SEC also maintains a web site at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding registrants that make electronic filings with the SEC using its EDGAR system. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.
I. | Subsidiary Information |
For a listing of our subsidiaries, see “Item 4. Information of the Company - C. Organizational Structure.”
J. | Annual Report to Security Holders |
Not Applicable.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have not entered into market risk sensitive instruments for any purposes.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A. | Debt Securities |
Not applicable.
B. | Warrants and Rights |
Not applicable.
C. | Other Securities |
Not applicable.
D. | American Depositary Shares |
Not applicable.
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| Table of Contents |
PART II
ITEM 13. DEFAULT, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITIES HOLDERS AND USE OF PROCEEDS
None.
ITEM 15. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15I under the Exchange Act) as of the end of the period covered by this report, as required by Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were ineffective as of September 30, 2023 and as of the date that the evaluation of the effectiveness of our disclosure controls and procedures was completed, because of the material weakness in our internal control over financial reporting described below. Our disclosure controls and procedures were not effective to satisfy the objectives for which they are intended.
Notwithstanding management’s assessment that our internal control over financial reporting was ineffective as of September 30, 2023 due to the material weakness described below, we believe that the consolidated financial statements included in this annual report on Form 20-F fairly present our financial position, results of operations and cash flows for the fiscal years covered thereby in all material respects.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements in accordance with U.S. GAAP and includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of a company’s assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that a company’s receipts and expenditures are being made only in accordance with authorizations of a company’s management and directors, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of a company’s assets that could have a material effect on the consolidated financial statements.
Our management, with the participation of our chief executive officer and chief financial officer, conducted an evaluation of the effectiveness of our company’s internal control over financial reporting as of September 30, 2023 based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO 2013 Framework). Based on this evaluation, we noted the following deficiencies that we believe to be material weaknesses:
| a. | Failure to provide oversight for the system of internal control and failure to effectively consider the potential for fraud and non-compliance with laws and regulations in assessing risks to the achievement of objectives; |
|
|
|
| b. | Lack of sufficient requisite skills for the financial reporting under U.S. GAAP; |
|
|
|
| c. | Failure to align incentives and rewards with the fulfillment of internal control responsibilities in the achievement of objectives; |
|
|
|
| d. | Lack of sufficient controls designed and implemented for the credit approval, initiation, recording, allocation and cash collection with respect to revenue transactions; |
| 32 |
| Table of Contents |
| e. | Lack of sufficient controls designed and implemented for authorization, validation and payment with respect to cost or expense transactions; |
|
|
|
| f. | Failure to evaluate and implement a mix of control activities, considering both manual and automated controls for other routine transactions; |
|
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|
| g. | Lack of sufficient segregation of duties and appropriate skill or competence of control owners at certain control activity level; and |
|
|
|
| h. | Failure to develop control activities to restrict technology access right to authorized users commensurate their job responsibilities; |
As a result of the above material weaknesses, management has concluded that our internal control over financial reporting was not effective as of September 30, 2023.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness of our internal control over financial reporting 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 and procedures may deteriorate.
Management’s Remediation Initiatives
In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we will prepare written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines, to establish a formal process to close our books monthly on an accrual basis and account for all transactions, including equity and debt transactions.
Attestation Report of Independent Registered Public Accounting Firm
This annual report on Form 20-F does not include an attestation report of our independent registered public accounting firm on internal control over financial reporting because we qualified as a “smaller reporting company and non-accelerated filer.”
Changes in Internal Control over Financial Reporting
There were no significant changes in our internal controls over financial reporting that occurred during the period covered by this annual report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 16. [RESERVED]
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Not Applicable.
ITEM 16B. CODES OF ETHICS
We have not adopted a formal code of ethics at this time, as our focus has been on our product development and enhancement. We do follow what are considered proper business ethics and labor law in the US, China and Hong Kong ensures that our employees are treated with a minimum standard of care and consideration.
| 33 |
| Table of Contents |
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees: For the year ended September 30, 2023, we incurred $10,000 in external audit fees to our principal accountants as compared to approximately $12,750 for the year ended September 30, 2022.
Audit-Related Fees: For the years ended September 30, 2023 and 2022, we incurred no fees for assurance and related services by the principal accountant.
Tax Fees: For the years ended September 30, 2023 and 2022, we incurred NIL tax fees with our principal accountants.
All Other Fees: For the years ended September 30, 2023 and 2022, we incurred NIL in other fees with our principal accountants.
Audit Committee’s Pre-Approval Policies and Procedures: The Company currently does not have a designated Audit Committee, and accordingly, the Company’s Board of Directors policy is to pre-approve all audit and permissible non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services and other services. The independent auditors and management are required to periodically report to the Company’s Board of Directors regarding the extent of the services to be provided. Pre-approval is generally provided prior to the service commencing.
ITEM 16D. EXEMPTION FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE
Not Applicable.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATD PURCHASERS
None.
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not Applicable.
ITEM 16G. CORPORATE GOVERNANCE
Not Applicable.
ITEM 16H. MINE SAFETY DISCLOSURE
Not Applicable.
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not Applicable.
| 34 |
| Table of Contents |
PART III
ITEM 17. FINANCIAL STATEMENTS
Financial Statements are set forth under Item 18.
ITEM 18. FINANCIAL STATEMENTS
The consolidated financial statements and related notes required by this item are included at the end of this annual report.
| 35 |
| Table of Contents |
ITEM 19. EXHIBITS
The following exhibits are incorporated by reference.
Exhibit No. |
| Description of Document |
| ||
| ||
| ||
| ||
| ||
| ||
| Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| ||
| Certification by Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101.INS* |
| Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). |
101.SCH* |
| Inline XBRL Taxonomy Extension Schema Document. |
101.CAL* |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF* |
| Inline XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB* |
| Inline XBRL Taxonomy Extension Labels Linkbase Document. |
101.PRE* |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
104* |
| Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
* To be filed by amendment.
| 36 |
| Table of Contents |
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing its annual report on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
| UMEWORLD LIMITED |
| |
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|
Dated: January 31, 2024 | By: | /s/ Michael M. Lee |
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| Michael M. Lee, President and |
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| Chief Executive Officer |
|
| 37 |
| Table of Contents |
UMEWORLD LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2022, 2021 AND 2020
TABLE OF CONTENTS
| PAGE (S) |
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| F-2 |
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CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2023 AND 2022 |
| F-3 |
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| F-4 |
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| F-5 |
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CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED SEPTEMBER 30, 2023, 2022 AND 2021 |
| F-6 |
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| F-7 |
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| F-1 |
| Table of Contents |
| J&S ASSOCIATE PLT 202206000037 (LLP0033395-LCA) & AF002380 (Registered with PCAOB and MIA) B-11-14, Megan Avenue II 12,Jalan Yap Kwan Seng, 50450, Kuala Lumpur, Malaysia | Tel: +603-4813 9469 Email : info@jns-associate.com Website : jns-associate.com |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Director and Stockholder of
UMeWorld Limited
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of UMeWorld and its subsidiaries (collectively, the “Company”) as of September 30, 2022 and 2023, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ deficit and cash flows for each of the years ended September 30, 2023 and 2022, 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 September 30, 2023 and 2022, and the results of its operations and its cash flows for the years ended September 30, 2023 and 2022 are in conformity with accounting principles generally accepted in the United States of America.
Substantial Doubt about the Company’s Ability to Continue as a 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 suffered from an accumulated deficit of $31,447,003 as at September 30, 2023. These factors create uncertainty as to 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 audit. 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, 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 audit 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 audit 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 audit provides a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or are required to be communicated to the audit committee and that (1) relate to accounts or disclosure that are material to the financial statement and (2) involved especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ |
|
Certified Public Accountants PCAOB Number: |
|
January 31, 2024
We have served as the Company’s auditor since 2021.
| F-2 |
| Table of Contents |
UMEWORLD LIMITED
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2023 AND 2022
(All amounts in US Dollars, except share and share related data or otherwise noted)
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| 2022 |
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ASSETS |
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CURRENT ASSETS |
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Cash |
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Deposit |
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Prepayment |
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Accounts Receivable |
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Inventory |
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TOTAL CURRENT ASSETS |
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NON-CURRENT ASSETS |
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Property and equipment, net |
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TOTAL NON-CURRENT ASSETS |
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TOTAL ASSETS |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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CURRENT LIABILITIES |
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Accounts payable |
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Due to related parties |
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Accrued liabilities and other payables |
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TOTAL CURRENT LIABILITIES |
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TOTAL LIABILITIES |
| $ |
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| $ |
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Commitments and Contingencies |
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STOCKHOLDERS’ DEFICIT |
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Ordinary shares: $ |
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Authorized: |
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Additional paid-in capital |
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Accumulated other comprehensive income |
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Accumulated deficit |
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Total stockholders’ deficit |
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TOTAL LIABILITES AND STOCKHOLDERS’ DEFICIT |
| $ |
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| $ |
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The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
| Table of Contents |
UMEWORLD LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE YEARS ENDED SEPTEMBER 30, 2023, 2022 AND 2021
(All amounts in US Dollars, except share and share related data or otherwise noted)
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| 2023 |
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| 2022 |
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| 2021 |
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Revenues |
| $ |
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| $ |
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| $ |
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TOTAL REVENUES |
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Cost of revenues |
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GROSS (LOSS) INCOME |
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OPERATING EXPENSES |
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Selling, general and administrative expenses |
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TOTAL OPERATING EXPENSES |
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LOSS FROM CONTINUING OPERATIONS |
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OTHER INCOME (EXPENSE) |
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Other income |
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Interest income |
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Other expense |
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TOTAL OTHER EXPENSE, NET |
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LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES |
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INCOME TAX EXPENSE OF CONTINUING OPERATIONS |
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NET LOSS FROM CONTINUING OPERATIONS |
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Net loss from discontinued operations, net of tax |
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NET LOSS |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
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Comprehensive loss: |
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Net loss |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Foreign currency translation (loss) income |
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Total comprehensive loss |
| $ | ( | ) |
| $ | ( | ) |
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Loss per share: |
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Net loss from continuing operations per share of ordinary share - basic and diluted |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Net loss from discontinued operations per share of ordinary share – basic and diluted |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Weighted average number of ordinary shares outstanding: |
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Basic and diluted |
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The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
| Table of Contents |
UMEWORLD LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE YEARS ENDED SEPTEMBER 30, 2023, 2022 AND 2021
(All amounts in US Dollars, except share and share related data or otherwise noted)
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| Ordinary Shares |
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| Additional |
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| Accumulated Other |
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| Total |
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| Number of Shares |
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| Amount |
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| Paid in Capital |
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| Comprehensive Income |
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| Accumulated Deficit |
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| Stockholders' Deficit |
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Balance as of September 30, 2020 |
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Stock issued for cash |
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Foreign currency translation adjustment |
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Net loss for the year |
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Should Balance as of September 30, 2021 |
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Stock issued for cash |
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Foreign currency translation adjustment |
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Net loss for the year |
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Balance as of September 30, 2022 |
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Stock issued for cash |
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Foreign currency translation adjustment |
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Net loss for the year |
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Balance as of September 30, 2023 |
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The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
| Table of Contents |
UMEWORLD LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 2023, 2022 AND 2021
(All amounts in US Dollars)
|
| 2023 |
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| 2022 |
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| 2021 |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net loss |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation expense |
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Loss from discontinued operations |
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Stock issued for service |
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Changes in assets and liabilities: |
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Accounts receivable |
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| ( | ) |
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Deposit |
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Prepayment |
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Inventory |
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| ( | ) |
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Accounts payable |
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Accrued liabilities and other payables |
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| ( | ) |
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NET CASH USED IN OPERATING ACTIVITIES |
|
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Purchase of property and equipment |
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NET CASH USED IN INVESTING ACTIVITIES |
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Proceeds from issuance of common stock |
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Repayments to related parties |
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| ( | ) |
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| ( | ) | |
Advances from related parties |
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NET CASH PROVIDED BY FINANCING ACTIVITIES |
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Effect of exchange rate changes on cash and cash equivalents |
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NET (DECREASE) INCREASE IN CASH |
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| ( | ) |
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| ( | ) | |
Cash and cash equivalents at beginning of year |
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Cash and cash equivalents at end of year |
| $ |
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| $ |
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| $ |
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SUPPLEMENTARY DISCLOSURE: |
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Income tax paid |
| $ |
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| $ |
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| $ |
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Interest paid |
| $ |
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| $ |
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| $ |
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The accompanying notes are an integral part of these consolidated financial statements.
| F-6 |
| Table of Contents |
UMEWORLD LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2022, 2021 AND 2020
NOTE 1. NATURE OF BUSINESS AND GOING CONCERN
UMeWorld Limited (the “Company”), the holding company for a group of companies, was originally incorporated as AlphaRx Inc. (“AlphaRx”) under the laws of the State of Delaware on
UMeLook Limited (“UMeLook HK”), the Company’s
UMeLook HK held all of the outstanding equity interest in UMeLook (Guangzhou) Technology Co., Ltd., a company established on October 29, 2012 in the People’s Republic of China (“PRC”) as a wholly foreign owned enterprise (“WFOE”). Other than the equity interest in WFOE, UMeLook HK did not own any material assets or liabilities except for notes payable as disclosed below. Guangzhou XinYiXun Technology Co., Ltd (“XinYiXun”) was incorporated on July 9, 2012 as a domestic Chinese corporation. XinYiXun was owned by Mr. Yilun Liang (“YL”) (10%) and Guangzhou Zhongda No. 3 Venture Investment Co., Ltd. (“Zhongda No. 3”) (90%). XinYiXun operated UMFun.com, an online learning and assessment platform used by teachers, students and parents in China’s K-12 education system.
Prior to January 2022, the Company conducted its primary business operations through WFOE, which in turn, conducted its business through XinYiXun. Effective control over XinYiXun was transferred to the Company through the series of contractual arrangements without transferring legal ownership in XinYiXun (“reorganization”). As a result of these contractual arrangements, the Company maintained the ability to approve decisions made by XinYiXun and was entitled to substantially all of the economic benefits of XinYiXun.
Under the laws and regulations of the PRC, foreign persons and foreign companies are restricted from investing directly in certain businesses within the PRC. Online education businesses are subject to these restrictions on foreign investment. In order to comply with these laws and regulations, on March 29, 2013, XinYiXun and its shareholders, YL and Zhongda No. 3, entered into an Exclusive Management Service Agreement and Proxy Agreement with WFOE, which provides that WFOE will be entitled to the full guarantee for the performance of such contracts, agreements or transactions entered into by XinYiXun. WFOE is also entitled to receive the residual return of XinYiXun. As a result of the agreement, WFOE will absorb 100% of the expected losses and gains of XinYiXun.
| F-7 |
| Table of Contents |
WFOE also entered into a pledge of equity agreement with XinYiXun’s shareholders, YL and Zhongda No.3, who pledged all of their equity interests in XinYiXun to WFOE. In addition, WFOE entered into an option agreement to acquire its shareholder’s equity interest in the entities at such times as it may wish to do so.
The followings are brief descriptions of contracts entered between WFOE, XinYiXun and its shareholders:
(1) Exclusive Management Service Agreement. Pursuant to the Exclusive Management Services Agreement, WFOE have the exclusive right to provide comprehensive technical and business support services to XinYiXun. Such services include conducting market research, offering strategic business advice and providing information technology services, advice on mergers and acquisitions, human resources management services, intellectual property licensing services, support for teaching activities and other services that the parties may mutually agree. Without the prior consent WFOE, XinYiXun may not accept such services from any third party. In addition, XinYiXun is entitled to pay a service fee to the WFOE, the amount of which is equal to its total revenue less any necessary costs, taxes and expenses.
(2) Proxy Agreement. In order to ensure that WFOE are able to make all of the decisions concerning XinYiXun, WFOE have entered into a proxy agreement with the shareholders of XinYiXun. Pursuant to the proxy agreement, each of its shareholders has irrevocably appointed WFOE as such shareholder’s attorney-in-fact to act for all matters pertaining to such shareholder’s shares in XinYiXun and to exercise all of their rights as shareholders, including but not limited to attending and voting at shareholders’ meetings. As such, WFOE have the sole rights to designate and appoint directors and senior management members of XinYiXun.
(3) Equity pledge agreement. In order to secure the performance of XinYiXun and its shareholders under the contractual arrangements, each shareholder of XinYiXun has undertaken to pledge all of their shares in XinYiXun to WFOE. If XinYiXun or any of its shareholders breaches or defaults under any of the contractual arrangements, WFOE have the right to require the transfer of the pledged equity interests in XinYiXun to WFOE or its designee, to the extent permitted by laws, or require a sale of the pledged equity interest and have priority in any proceeds from the auction or sale of such pledged interests.
(4) Exclusive Technology Consultation and Services Agreement. Pursuant to the Exclusive Technology and Services Agreement, we have the exclusive right to provide technical services to XinYiXun. In exchange, XinYiXun pays a service fee to WFOE that is based on the financial performance of XinYiXun. WFOE will exclusively own any intellectual property arising from the performance of this agreement.
(5) Call option agreement. In order to ensure that we are able to acquire all of the equity interests in XinYiXun at our discretion, we have entered into a call option agreement with the shareholders of XinYiXun. The option is exercisable by WFOE at any time, provided that doing so is not prohibited by law. The exercise price under the option will be determined based on the evaluation made by the assets evaluation body designated by WFOE. During the terms of the call option agreement, the shareholders will not grant a similar right or transfer any of the equity interests in XinYiXun to any party other than us or our designee, nor will such shareholder pledge, create or permit any security interest or similar encumbrance to be created on any of the equity interests.
Upon executing the above agreements, XinYiXun is considered a VIE and WFOE is the primary beneficiary. Accordingly, XinYiXun is consolidated into WFOE under the guidance of FASB Accounting Standards Codification (“ASC”) 810, Consolidation.
Except as the disclosed above, there are no arrangements that could require the Company to provide financial support to XinYiXun, including events or circumstances that could expose the Company to a loss. As stated in the disclosure of various agreements between the Company and XinYiXun, the Company has rights to acquire any portion of the equity interests of XinYiXun. Also, the Company may allocate its available funds to XinYiXun for business purposes. There are no fixed terms of such arrangements.
| F-8 |
| Table of Contents |
Although the structure the Company has adopted is consistent with longstanding industry practice, and is commonly adopted by comparable companies in China, the PRC government may not agree that these arrangements comply with PRC licensing, registration or other regulatory requirements, with existing policies or with requirements or policies that may be adopted in the future. There are uncertainties regarding the interpretation and application of PRC laws and regulations including those that govern the Company’s contractual arrangements, which could limit the Company’s ability to enforce these contractual arrangements. If the Company or any of its variable interest entities are found to be in violation of any existing or future PRC laws, rules or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures, including levying fines, revoking business and other licenses of the Company’s variable interest entities, requiring the Company to discontinue or restrict its operations, restricting its right to collect revenue, requiring the Company to restructure its operations or taking other regulatory or enforcement actions against the Company. In addition, it is unclear what impact the PRC government actions would have on the Company and on its ability to consolidate the financial results of its variable interest entities in the consolidated financial statements, if the PRC government authorities were to find the Company’s legal structure and contractual arrangements to be in violation of PRC laws, rules and regulations. If the imposition of any of these government actions causes the Company to lose its right to direct the activities of XinYiXun, the Company would no longer be able to consolidate XinYiXun.
On May 8, 2021, XinYiXun incorporated a wholly owned subsidiary named Guangzhou YouManFen Education Technology Co., Ltd. (“YMF”) in China. The principal activity of YMF was the provision of private tutoring. Subsequently on December 31, 2021, YMF changed its name to Guangzhou YouManFen Information Technology Co., Ltd.
On December 31, 2021, WFOE, XinYiXun, YL, and Zhongda No. 3 mutually agreed to terminate the series of contractual arrangements, which consisted of the Exclusive Management Service Agreement, the Proxy Agreement, the Equity Pledge Agreement, the Exclusive Technology Consultation and Services Agreement, and the Call Option Agreement, due to the education policy changes in the PRC. As a result, the digital media and digital education business of the Company was dissolved.
On September 30, 2022, the Company entered into two sale and purchase agreements with an individual to dispose UMeLook HK and UMeZone Adaptive Learning Technology Limited (“UMeZone”) for a consideration of $0.13 (equivalent to HK$1) each.
As of September 30, 2023 and 2022, the carrying amount and classification of the assets and liabilities in the Company’s balance sheets that relate to the VIEs are as follows:
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| As of September 30, |
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Assets |
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Cash |
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Prepayment and other assets |
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Property and equipment, net |
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Total assets of VIEs |
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Liabilities |
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Accrued liabilities and other payable |
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Due to VIE holding companies |
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Due to related parties |
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Total liabilities of VIEs |
| $ |
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| $ |
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On January 28, 2022, Dagola Inc. (“Dagola”) was incorporated in the state of Wyoming with the authorized common shares of
As of September 30, 2022, details of the remaining subsidiary of the Company are as follows:
Name |
| Date of Incorporation |
| Place of Incorporation |
| Percentage of Interest |
| Principal Activities |
| Nature of company |
Dagola Inc. |
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Going concern
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
The Company has suffered from a net loss of $
| F-9 |
| Table of Contents |
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements of the Group have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Basis of Consolidation
The consolidated financial statements include the financial statements of the Company, its subsidiaries and its VIEs. All inter-company transactions and balances have been eliminated upon consolidation.
Consolidation of Variable Interest Entities
In accordance with U.S. GAAP regarding “Consolidation of Variable Interest Entities (VIE)”, the Company identifies entities for which control is achieved through means other than through voting rights, and determines when and which business enterprise, if any, should consolidate the VIE. The Company evaluated its participating interest in XinYiXun and concluded it is the primary beneficiary of XinYiXun, a VIE. On May 8, 2021, XinYiXun incorporated a wholly owned subsidiary named Guangzhou YouManFen Education Technology Co., Ltd. (“YMF”) in China. The principal activity of YMF is the provision of private tutoring. Subsequently in December 2021, YMF changed its name to Guangzhou YouManFen Information Technology Co., Ltd. The Company consolidated XinYiXun, YMF, and all significant intercompany transactions and balances have been eliminated. In December 2021, the Company terminated its VIE contractual arrangements among UMeLook Guangzhou, Guangzhou XinYiXun and its shareholder and dissolved its education business in China. In September, 2022, the Company entered into two sale and purchase agreements with an individual to dispose UMeLook HK and UMeZone Adaptive Learning Technology Limited (“UMeZone”).
Use of Estimates
The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates in amounts than may be material to the consolidated financial statements. Management believes that these estimates and assumptions used are reasonable. These estimates are reviewed periodically and as adjustments become necessary, they are reported in earnings in the period in which they become known. Estimates were used in determining the amounts of accrued liabilities, useful lives of property and equipment, stock based compensation, and valuation allowances.
Foreign Currency Translation
Transactions denominated in other than the functional currencies are re-measured into the functional currency of the entity at the exchange rates prevailing on the transaction dates. Monetary assets and liabilities denominated in currencies other than the applicable functional currencies are translated into the functional currency at the prevailing rates of exchange at the balance date. The resulting exchange differences are reported in the statements of operations and comprehensive loss.
| F-10 |
| Table of Contents |
In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “ Translation of Financial Statement”. Under the current rate method all assets and liabilities are translated at the current rate, stockholders’ equity accounts are translated at historical rates and revenues and expenses are translated at average rates for the year. Cumulative net translation adjustments are included as a separate component of stockholders’ deficit.
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| September 30, 2023 |
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| September 30, 2021 |
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Year-end CAD: USD exchange rate |
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Annual average CAD: USD exchange rate |
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Year-end HKD: USD exchange rate |
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Annual average HKD: USD exchange rate |
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Comprehensive income
ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying consolidated statements of changes in stockholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.
Earnings or Loss Per Share
The Company calculates net loss per share in accordance with ASC Topic 260, “Earnings per Share.” Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the year. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus Common stock equivalents (if dilutive) related to stock options and warrants for each year.
The following table presents securities that could potentially dilute basic loss per share in the future. For all periods presented, the potentially dilutive securities were not included in the computation of diluted loss per share because these securities would have been antidilutive for the years ended September 30:
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| 2021 |
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Stock options |
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Common stock warrants |
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| - |
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Total |
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Cash
Cash and cash equivalents primarily consist of cash and deposits with financial institutions which are unrestricted as to withdrawal and use. Cash equivalents consist of highly liquid investments that are readily convertible to cash generally with original maturities of three months or less when purchased.
As of September 30, 2023 and 2022, the Company had cash in the amount of $
Inventory
The Company’s inventory is stated at the lower of cost or net realizable value, net of reserves and allowances, with cost determined using the average cost method, with average cost approximating current cost. Inventory cost consists of the direct cost of merchandise including freight. The carrying value of the inventory is affected by shrinkage, damages and obsolescence.
| F-11 |
| Table of Contents |
Income Taxes
The Company adopted the ASC 740 Income tax provisions of paragraph 740-10-25-13, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the consolidated financial statements. The Company accounts for income taxes using the asset and liability method whereby it calculates deferred tax assets or liabilities for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, net operating loss carry forwards and credits by applying enacted tax rates applicable to the years in which those temporary differences are expected to be reversed or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities. The components of the deferred tax assets and liabilities are individually classified as non-current amounts.
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statement or tax returns. Deferred income taxes are provided using the liability method. Under the liability method, deferred income taxes are recognized for all significant temporary differences between the tax and financial statement bases of assets and liabilities. Effects of changes in enacted tax laws on deferred tax assets and liabilities are reflected as adjustments to tax expense in the period of enactment. Deferred tax assets may be reduced, if deemed necessary based on a judgmental assessment of available evidence, by a valuation allowance for the amount of any tax benefits which are more likely, based on current circumstances, not expected to be realized.
Property and Equipment
The Company management review the carrying values of long-lived assets whenever events and circumstances, such as a significant decline in the asset’s market value, obsolescence or physical damage affecting the asset, significant adverse changes in the assets use, deterioration in the expected level of the assets performance, cash flows for maintaining the asset are higher than forecast, indicate that the net book value of an asset may not be recovered through expected future cash flows from its use and eventual disposition. If the estimated cash flows from the use of the asset and its eventual disposition are below the asset’s carrying value, then the asset is deemed to be impaired and written down to its fair value.
There was no impairment charge recognized for long-lived assets for the years ended September 30, 2023, 2022, and 2021.
Property and equipment are stated at cost less accumulated depreciations and impairment. Depreciation is provided on the straight-line basis over the estimated useful lives of property and equipment. The principal useful lives and residual value are as follows:
Furniture and Fixtures | |
Machinery and Equipment |
The Company capitalizes expenditures that materially increase assets’ lives and expenses ordinary repairs and maintenance to operations as incurred. When assets are sold or disposed or otherwise fully depreciated, the cost and related accumulated depreciation is removed from the accounts and any gain or loss is included in the statement of income and retained earnings.
Impairment of long-lived assets
In accordance with the provisions of ASC Topic 360, “Impairment or Disposal of Long-Lived Assets”, all long-lived assets such as plant and equipment, as well as intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. There has been no impairment charge for the years presented.
| F-12 |
| Table of Contents |
Related Parties
The Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions.
Revenue Recognition
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“Topic 606”). This standard replaces existing revenue recognition rules with a comprehensive revenue measurement and recognition standard and expanded disclosure requirements. The Company adopted the new standard as of October 1, 2017 using the full retrospective method which requires the company to present its financial statements for all periods as if Topic 606 had been applied to all prior periods.
The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. The Company’s revenue is reported net of discount, value added tax and related surcharges.
Revenue is comprised of sales of goods and represents the amount of consideration the Company is entitled to upon the transfer of goods. Revenue was recorded on a gross basis, net of surcharges and value added tax (“VAT”) of gross sales. Pursuant to FASB ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), the Company recorded revenue on a gross basis because the Company is the primary obligor of the sales arrangements has latitude in establishing prices, has discretion in suppliers’ selection and assumes credit risks on receivables on gross sales from customers.
The Company’s revenue is reported net of discounts, value added tax and surcharges. During the years ended September 30, 2023, 2022, and 2021 the Company recognized revenue in the amount of $
Stock-Based Compensation
The Company applies ASC 718, Compensation-Stock Compensation, in connection with its share-based compensation. In accordance with ASC 718, all grants of share options and restricted share units are recognized in the consolidated financial statements based on their grant date fair values.
The Company recognizes compensation cost for third party and employee services rendered in exchange for an equity instrument award based on the fair value of the award on the date of grant. The Company uses the Black-Sholes option-pricing model in determining the fair value of options and warrants. In determining the expected volatility, the Company bases this assumption on the historical volatilities of the Company’s common stock over the expected life of the stock acquisition rights.
Commitments and Contingencies
The Company follows the ASC 450-20, Commitments to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
| F-13 |
| Table of Contents |
If the assessment of a contingency indicates that 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 the Company’s financial statements. If the assessment indicates that 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, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
Fair Value of Financial Instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:
Level 1 | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. |
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Level 2 | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. |
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Level 3 | Pricing inputs that are generally observable inputs and not corroborated by market data. |
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, approximate their fair values because of the short maturity of these instruments.
| F-14 |
| Table of Contents |
Recent Issued Accounting Pronouncement
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact that the standard will have on its CFS.
In August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for convertible debt by eliminating the beneficial conversion and cash conversion accounting models. Upon adoption of ASU 2020-06, convertible debt, unless issued with a substantial premium or an embedded conversion feature that is not clearly and closely related to the host contract, will no longer be allocated between debt and equity components. This modification will reduce the issue discount and result in less non-cash interest expense in financial statements. ASU 2020-06 also updates the earnings per share calculation and requires entities to assume share settlement when the convertible debt can be settled in cash or shares. For contracts in an entity’s own equity, the type of contracts primarily affected by ASU 2020-06 are freestanding and embedded features that are accounted for as derivatives under the current guidance due to a failure to meet the settlement assessment by removing the requirements to (i) consider whether the contract will be settled in registered shares, (ii) consider whether collateral is required to be posted, and (iii) assess shareholder rights. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, and only if adopted as of the beginning of such fiscal year. The Company adopted ASU 2020-06 effective July 1, 2021. The adoption of ASU 2020-06 did not have any impact on the Company’s CFS presentation or disclosures.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50), Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”). ASU 2021-04 provides guidance as to how an issuer should account for a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option (i.e., a warrant) that remains classified after modification or exchange as an exchange of the original instrument for a new instrument. An issuer should measure the effect of a modification or exchange as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification or exchange and then apply a recognition model that comprises four categories of transactions and the corresponding accounting treatment for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination or modification). ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications or exchanges occurring on or after the effective date. Early adoption is permitted for all entities, including adoption in an interim period. If an entity elects to early adopt ASU 2021-04 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period. The adoption of ASU 2021-04 is not expected to have any impact on the Company’s CFS presentation or disclosures.
The Company’s management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company’s financial statement presentation or disclosures.
NOTE 3. PROPERTY AND EQUIPMENT
For the years ended September 30, 2023, 2022 and 2021 the Company recorded depreciation expense of $
| F-15 |
| Table of Contents |
NOTE 4. ACCOUNTS PAYABLE, ACCRUED LIABILITIES AND OTHER PAYABLES
Accounts payable, accrued liabilities and other payables are comprised of the following:
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| September 30, 2023 |
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| September 30, 2022 |
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Accounts Payable |
| $ |
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| $ |
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Accrued Liabilities and Other Payables |
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TOTAL |
| $ |
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| $ |
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The accounts payable comprises amounts owing to individuals for professional and technical services provided to the Company.
Items included in the accrued liabilities and other payables are advances from non-related parties and accrued expenses for services received. As of September 30, 2022, the balance mainly consisted of advances from individuals. As of September 30, 2023, the balance mainly consisted of advances from individuals of $
NOTE 5. DUE TO RELATED PARTIES
The amounts represented temporary advances from the directors and a shareholder of the Company, which were unsecured, interest-free and had no fixed terms of repayments.
NOTE 6. COMMITMENTS AND CONTINGENCIES
As of September 30, 2023 and 2022, the Company has no material commitments and contingencies.
NOTE 7. ORDINARY SHARES
The Company is authorized to issue up to
On November 22, 2019, the Company issued
On December 19, 2019, the Company issued
On April 13, 2020, the Company issued
On August 27, 2020 and September 16, 2020, the Company issued a total of
On October 28, 2020, the Company issued a total of
On February 23, 2021, the Company issued
On March 29, 2021, the Company issued
On March 30, 2021, the Company issued
On April 9, 2021, the Company issued
On April 12, 2021, the Company issued a total of
On April 30, 2021, the Company issued
On April 25, 2023, the Company issued
On May 19, 2023, the Company issued a total of
| F-16 |
| Table of Contents |
As of September 30, 2023 and 2022, there were
NOTE 8. INCOME TAXES
BVI
UMeWorld Limited was incorporated in the BVI and, under the current laws of the BVI, are not subject to income taxes.
Hong Kong
UMeLook HK, and UMeZone Adaptive Learning Technology Limited were incorporated and subject to the Hong Kong Profits Tax at the income tax rates ranging from
On September 30, 2022, the Company has disposed these two Hong Kong companies to an independent third party.
PRC
The Company’s subsidiaries, WFOE and YouYiXue (Guangzhou) Information Technology Co. Ltd., and VIE, XinYiXun, registered in the PRC are subject to PRC Enterprise Income Tax (“EIT”) of
In December 2021, the VIE contractual arrangements between WFOE, XinYiXun, and the shareholders of XinYiXun was terminated.
The tax effect of material temporary differences representing deferred tax assets is estimated as follows:
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| As of September 30, |
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| 2022 |
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| 2021 |
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Deferred tax assets: |
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Canada |
| $ |
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| $ |
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| $ |
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Hong Kong |
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PRC |
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Subtotal |
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Less: Valuation allowance |
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Net deferred tax assets |
| $ |
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| $ |
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| $ |
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The valuation allowance as of September 30, 2023 and 2022 totaled $
ASC 740 requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. The management evaluated the Company’s tax positions and considered that no provision for uncertainty in income taxes was necessary as of September 30, 2023 and 2022.
| F-17 |
| Table of Contents |
NOTE 9. SHARE OPTION PLANS
On July 1, 2013, the Company adopted a share option plan entitled “The 2013 Share Incentive Plan” (2013 Plan) under which the Company may grant options to purchase up to
On February 1, 2018, the Company granted
The following table summarizes the Company’s share option activity during the years ended September 30, 2023, 2022 and 2021:
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| Number Outstanding |
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| Exercise Price Per Share |
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| Weighted- Average Exercise Price |
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Outstanding as of September 30, 2021 |
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| $ | |
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| $ |
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Granted |
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| - |
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Exercised |
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| - |
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| - |
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| - |
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Options forfeited/cancelled |
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| - |
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| - |
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| - |
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Outstanding as of September 30, 2022 |
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| $ |
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| $ |
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Granted |
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| - |
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| - |
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| - |
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Exercised |
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| - |
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| - |
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| - |
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Options forfeited/cancelled |
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| - |
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| - |
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| - |
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Outstanding as of September 30, 2023 |
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| $ |
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| $ |
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| F-18 |
| Table of Contents |
The following table summarizes the ordinary shares of the Company issuable upon exercise of options outstanding as of September 30, 2023, 2022 and 2021.
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| Share Options Outstanding/ Exercisable |
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| Range of Exercise Price |
| Number Outstanding |
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| Weighted- Average Remaining Contractual Life (Years) |
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September 30, 2023 |
| $ |
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September 30, 2022 |
| $ |
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September 30, 2021 |
| $ |
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As of September 30, 2022 and 2021, the intrinsic values of both outstanding options and exercisable options were $
| F-19 |
| Table of Contents |
NOTE 10. RELATED PARTY TRANSACTIONS
During the year ended September 30, 2021, Michael Lee provided management services to the Company with the amount of $
During the year ended September 30, 2022, Michael Lee provided management services to the Company with the amount of $
During the year ended September 30, 2023, Michael Lee provided management services to the Company with the amount of $
On November 22, 2019, the Company issued
On April 13, 2020, the Company issued
On August 27, 2020 and September 16, 2020, the Company issued a total of
On October 28, 2020, the Company issued a total of
On February 23, 2021, the Company issued
Note 11. DISCONTINUED OPERATIONS
(a) UMeLook Limited and UMeZone Adaptive Learning Technology Limited
On September 30, 2022, the Company entered into two sale and purchase agreements with an individual to dispose UMeLook HK and UMeZone Adaptive Learning Technology Limited (“UMeZone”) for a consideration of $0.13 (equivalent to HK$1) each.
(b) UMeLook (Guangzhou) Technology Co., Ltd., Guangzhou XinYiXun Technology Co., Ltd., and Guangzhou Youmanfen Education Technology Co. Ltd.
On December 31, 2021, WFOE, XinYiXun, YL, and Zhongda No. 3 mutually agreed to terminate the series of contractual arrangements, which consisted of the Exclusive Management Service Agreement, the Proxy Agreement, the Equity Pledge Agreement, the Exclusive Technology Consultation and Services Agreement, and the Call Option Agreement, due to the education policy changes in the PRC. As a result, the digital media and digital education business of the Company was dissolved. In accordance with ASU No. 2014-08, Reporting of Discontinued Operations and Disclosures of Disposals of Components of an Entity, a disposal is categorized as a discontinued operation if the disposal group is a component of an entity or group of components that meets the held for sale criteria, is disposed of by sale, or is disposed of other than by sale, and represents a strategic shift that has or will have a major effect on an entity’s operations and financial results.
| F-20 |
| Table of Contents |
Summary of financial information for the loss from discontinued operations, net of taxes in the statements of operations for the year ended September 30, 2022 are as follows:
Loss from discontinued operations, net of taxes: |
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Revenues |
| $ |
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TOTAL REVENUES |
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Expenses: |
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Cost of revenue |
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General and administrative expenses |
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TOTAL EXPENSES |
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Loss from discontinued operations before income tax expense |
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| ( | ) |
Income tax expense |
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Loss from discontinued operations, net of taxes |
| $ | ( | ) |
NOTE 12. CONCENTRATIONS OF RISK
(a) Exchange rate risk
The value of RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other changes in political and economic conditions and the foreign exchange policy adopted by the PRC government. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the RMB and the U.S. dollar in the future. There remains significant international pressure on the PRC government to adopt a more flexible currency policy, which could result in greater fluctuation of the RMB against the U.S. dollar. The Company is a holding company and it relies on dividends paid by the Company’s operating subsidiaries in China for its cash needs. Any significant revaluation of the RMB may materially and adversely affect its liquidity and cash flows. To the extent that the Company needs to convert U.S. dollars into RMB for its operations, appreciation of the RMB against the U.S. dollar would have an adverse effect on the RMB amount the Company would receive. Conversely, if the Company decides to convert RMB into U.S. dollars for other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount the Company would receive.
As the Company has disposed off all its subsidiaries during the year, its exposure to foreign currency exchange risk has been reduced to low. This is because the Company no longer needs to engage in transactions denominated in RMB.
(b) Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty raising liquid funds to meet commitments as they fall due. The Company continues to focus on increasing its revenue through the sale of consumer health care products on its online platform, and obtaining financing from its shareholders or directors.
(c) Accrued product liability
The Company records accruals for product liability when deemed probable and estimable based on facts and circumstances, and prior claims experience. Accruals for product credit are valued based upon the Company’s prior claims experience, including defective goods and goods lost in transit. We have experienced an insignificant amount of goods returned and claims from goods lost in transit in the past, so our product liability is insignificant; therefore, Management believes product liability accrual as at September 30, 2023, and 2022, is not required.
(d) Concentration of customers and vendors
For the year ended September 30, 2023, there is one customer accounted for
For the year ended September 30, 2023,
NOTE 13. SUBSEQUENT EVENTS
In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for events that occur after the balance sheet date but before consolidated financial statements are issued, the Company has evaluated all events or transactions that occurred after September 30, 2023, up to the date that the audited consolidated financial statements were available to be issued. During this period, there was no subsequent event that required recognition or disclosure.
| F-21 |
EXHIBIT 12.1
Certification by the Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Michael Lee, certify that:
| 1. | I have reviewed this annual report on Form 20-F of UMeWorld Limited; |
| 2.
| Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
| 4. | The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
| (c) | Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and |
| 5. | The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting. |
| Date: January 31, 2024 | By: | /s/ Michael Lee |
|
| Name: | Michael Lee |
| |
| Title: | President and Chief Executive Officer |
|
EXHIBIT 12.2
Certification by the Principal Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Winfield Ding, certify that:
| 1. | I have reviewed this annual report on Form 20-F of UMeWorld Limited; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
| 4.
| The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
| (c) | Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and |
| 5. | The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting. |
| Date: January 31, 2024 | By: | /s/ Winfield Ding |
|
| Name: | Winfield Ding |
| |
| Title: | Chief Financial Officer |
|
EXHIBIT 13.1
Certification by the Principal Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report of UMeWorld Limited (the “Company”) on Form 20-F for the year ended September 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael Lee, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: January 31, 2024 | By: | /s/ Michael Lee |
|
| Name: | Michael Lee |
| |
| Title: | President and Chief Executive Officer |
|
EXHIBIT 13.2
Certification by the Principal Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report of UMeWorld Limited (the “Company”) on Form 20-F for the year ended September 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Winfield Ding, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: January 31, 2024 | By: | /s/ Winfield Ding |
|
| Name: | Winfield Ding |
| |
| Title: | Chief Financial Officer |
|