UNIVERSAL GLOBAL HUB INC. - Quarter Report: 2019 September (Form 10-Q)

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Mark One

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to _______

COMMISSION FILE NO. 000-54758

201-782-0889

(Telephone number of principal executive offices)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒  No ☐

As of November 19, 2019, there were 49,511,775 shares of common stock, $0.0001 par value outstanding.

FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, Financial Statements and Notes to Financial Statements contain forward-looking statements that discuss, among other things, future expectations and projections regarding future developments, operations and financial conditions. Forward-looking statements may appear throughout this report and other documents we file with the Securities and Exchange Commission (SEC), including without limitation, the following sections: Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q.

Forward-looking statements generally can be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “will be,” “will continue,” “may,” “could,” “will likely result,” and similar expressions. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially from those reflected in the forward-looking statements. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

TABLE OF CONTENTS

Index to Form 10-Q

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ECARD INC.

Financial Statements

September 30, 2019 and December 31, 2018

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To: The Board of Directors and Stockholders of ECARD INC.

Results of Review of Financial Statements

We have reviewed the accompanying condensed balance sheet of ECARD INC. as of September 30, 2019, the related condensed statements of operations for the three and nine month periods ended September 30, 2019 and 2018, and the condensed statements of cash flows for the nine month periods ended September 30, 2019 and 2018, including the related notes (collectively referred to as the “interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the balance sheet of the Company as of December 31, 2018, and the related statements of operations, comprehensive loss, changes in shareholders’ equity and cash flows for the year then ended (not presented herein), and in our report dated April 21, 2019, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying condensed balance sheet as of December 31, 2018 is fairly stated in all material respects in relation to the financial statements from which it has been derived.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company had incurred substantial losses during the period, and has a working capital deficit, which raises substantial doubt about its ability to continue as a going concern. Management’s plan regarding these matters are described in Note 3. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Review Results

These interim financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the 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 review in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

WWC, P.C.

Certified Public Accountants

San Mateo, CA

November [  ], 2019

ECARD INC.

Condensed Balance Sheets

September 30, 2019 and December 31, 2018

(Unaudited)

See accompanying notes to the financial statements

ECARD INC.

Condensed Statements of Operations

For the three and nine months ended September 30, 2019 and 2018

(Unaudited)

See accompanying notes to these financial statements

ECARD INC.

Statements of Stockholders’ Deficiency

For the nine months ended September 30, 2019 and 2018

(Unaudited)

See accompanying notes to these financial statements

ECARD INC.

Condensed Statements of Cash Flows

For the nine months ended September 30, 2019 and 2018

(Unaudited)

See accompanying notes to these financial statements

ECARD INC.

Notes to Financial Statements

NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS

ECARD INC. (the “Company”), formerly known as The Enviromart Companies, Inc. until October 23, 2017, was incorporated under the laws of the State of Delaware on June 18, 2012. On June 21, 2013, the Company completed an acquisition of intangible assets comprised of intellectual properties and trademarks from its former Chief Executive Officer. In conjunction with the acquisition of the intangible assets, the Company commenced operations.

On October 5, 2017, the Company entered into a Stock Purchase Agreement (the “SPA”) with Eastone Equities, LLC, a New York limited liability company (the “Purchaser”), and certain selling stockholders, pursuant to which the Purchaser acquired 44,566,412 shares of common stock of the Company from the sellers for an aggregate purchase price of $295,000. The transaction contemplated in the SPA closed on October 9, 2017. The acquired shares represented approximately 90% of issued and outstanding shares of common stock of the Company. The transaction resulted in a change in control of the Company.

On October 23, 2017, the Company filed a Certificate of Amendment with the Secretary of State of Delaware. As a result, the name of the Company was changed to “ECARD INC.”, effective as of October 23, 2017.

Currently, the Company only possesses minimal assets and liabilities, and does not have any substantial business operations; accordingly, there were no significant revenues or positive cash flows for the nine months ended September 30, 2019. Management’s efforts are focused on acquiring a new and profitable operating business with strong growth potential. Unless and until the Company completes an acquisition, its expenses are expected to consist solely of legal, accounting and compliance costs, including those related to complying with reporting obligations under the Securities and Exchange act of 1934.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying financial statements of the Company have been prepared using the accrual basis of accounting and in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules of the Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented herein have been reflected.

The condensed financial statements of the Company as of and for the nine months ended September 30, 2019 and 2018 are unaudited. In the opinion of management, all adjustments (including normal recurring adjustments) have been made that are necessary to present fairly the financial position of the Company as of September 30, 2019, the results of its operations for the three and nine months ended September 30, 2019 and 2018, and its cash flows for the nine months ended September 30, 2019 and 2018. Operating results for the interim periods presented are not necessarily indicative of the results to be expected for a full fiscal year. The condensed balance sheet at December 31, 2018 has been derived from the Company’s audited financial statements included in the Form 10-K for the year ended December 31, 2018.

The statements and related notes have been prepared pursuant to the rules and regulations of the SEC. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the financial statements and other information included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, as filed with the SEC.

ECARD INC.

Notes to Financial Statements

Use of Estimates and Assumptions

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments with original maturities of three months or less when acquired to be cash equivalents.

Concentration of Risk

Deposits made at financial institutions in the United States are subject to federally depository insurance maximum; deposits in excess of the amount are subject to concentrations of credit risk of the financial institution; however, Management believe that financial institutions located in the US are unlikely to become insolvent.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized.

Basic and Diluted Earnings (Loss) Per Share

Basic earnings per share is based on the weighted average number of common shares outstanding. Diluted earnings per share is based on the weighted average number of common shares outstanding and dilutive common stock equivalents. Basic earnings per share is computed by dividing net income/loss available to common stockholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Weighted average number of shares used to calculate basic and diluted loss per share is considered the same as the effect of dilutive shares is anti-dilutive for all periods presented. There were no potentially dilutive or anti-dilutive securities during the nine months ended September 30, 2019, and 2018.

Stock-Based Compensation

The Company expenses all stock-based payments to employees and non-employee directors based on the grant date fair value of the awards over the requisite service period, adjusted for estimated forfeitures.

Recently Issued Financial Accounting Standards

Management has considered all recent accounting pronouncements issued. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.

NOTE 3. GOING CONCERN

During the nine months ended September 30, 2019, the Company has been unable to generate cash flows sufficient to support its operations. The Company has been dependent on capital contributions from its prior controlling shareholders and related party advances from its current controlling shareholder. In addition, the Company has experienced recurring net losses. As of September 30, 2019, the Company has accumulated deficits of $1,163,351 and working capital deficits of $98,527. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.

ECARD INC.

Notes to Financial Statements

There can be no assurance that sufficient funds required during the next year or thereafter will be generated from any future operations or that funds will be available from external sources such as debt or equity financings or other potential sources.  If the Company is unable to raise capital from external sources when required, there would be a material adverse effect on its business.  Furthermore, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significant dilutive effect on the Company’s existing stockholders. Management is now seeking to acquire an operating company. In the foreseeable future, the Company will rely on related parties such as its controlling shareholder, to provide advances to funds general corporate purposes and any potential acquisitions of profitable investments. There is no assurance, however, that the Company will achieve its objectives or goals.

NOTE 4. RELATED PARTY TRANSACTIONS

During the nine months ended September 30, 2019, the Company’s shareholder paid expenses on behalf of the Company in the amount of $17,526. This amount has been recorded as amount due to related party. As of September 30, 2019 and December 31, 2018, the outstanding balance was $87,721 and $70,195, respectively. The balance is unsecured, non-interest bearing, and due on demand with no specified repayment schedule.

NOTE 5. STOCKHOLDERS’ EQUITY

Shares issued and outstanding

As of September 30, 2019 and December 31, 2018, there were 49,511,775 and 49,511,775 shares issued and outstanding, respectively.

NOTE 6. COMMITMENTS AND CONTINGENCIES

Except as disclosed herein, we are not a party to any pending legal proceeding. To the knowledge of our management, except as disclosed herein, no federal, state or local governmental agency is presently contemplating any proceeding against us.

NOTE 7. SUBSEQUENT EVENTS

The Company evaluates subsequent events that have occurred after the balance sheet date but before the financial statements are issued. There are two types of subsequent events: (1) recognized, or those that provide additional evidence with respect to conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements, and (2) non-recognized, or those that provide evidence with respect to conditions that did not exist at the date of the balance sheet but arose subsequent to that date.

The Company has evaluated subsequent events through the date the financial statements were issued and up to the time of filing with the Securities and Exchange Commission. The Company’s management has determined that there was no material subsequent events required disclosure.

ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

Overview

On June 21, 2013, the Company completed the acquisition of certain assets from Michael R. Rosa, its Chief Executive Officer, and commenced business operations. From the closing of the acquisition, the Company had raised capital, hired employees, leased space, engaged consultants and advisors, conducted extensive sales and marketing related activities both domestically and internationally, negotiated vendor relationships and engaged sales representatives.

As of January 2, 2015, the Company’s business was operated through its wholly-owned subsidiary, Enviro Pack Technologies, Inc. Effective on or about January 15, 2015, the Company changed its name to The Enviromart Companies, Inc. and the Company’s wholly-owned subsidiary, EnviroPack Technologies, Inc., changed its name to Enviromart Industries, Inc.

On October 23, 2017, the Company changed its name to “ECARD INC.”, effective as of October 23, 2017.

Sale of Operating Business

On February 16, 2016, The Rushcap Group, Inc. (“Rushcap”), an affiliate of Mark Shefts (then a significant shareholder of the Company), notified us that it would discontinue its funding of our wholly owned subsidiary, effective March 31, 2016, under the Inventory Financing Agreement dated June 19, 2015.

In light of the discontinuation of funding, our Board assessed the operating company’s current business and funding prospects, including whether to transfer the operating subsidiary to Michael R. Rosa, our founder and a significant shareholder, in accordance with that certain agreement among the Company, Mr. Rosa and Mr. Shefts, dated July 14, 2014 (the “Break-up Agreement”). The Break-up Agreement was disclosed in the Company’s Current Report on Form 8-K filed July 18, 2014, which is incorporated herein by reference.

Our Board concluded that the discontinuation of funding would have a material adverse effect on our business, financial condition and results of operation, as it did not believe that it would be able to timely secure funding to replace the discontinued Inventory Financing and on March 17, 2016, our Board approved the sale of our sole operating subsidiary, Enviromart Industries, Inc., to Michael R. Rosa.

On March 21, 2016, we entered into a Stock Purchase and Sale Agreement with Michael R. Rosa and Enviromart Industries, Inc., our sole operating subsidiary, pursuant to which we transferred to Mr. Rosa all the issued and outstanding capital stock of Enviromart Industries, Inc. In consideration for such transfer, Mr. Rosa transferred all of the 13,657,500 shares of the Company’s common stock owned by him, which have been since reclassified as authorized and unissued shares.

The above-described transaction closed on July 21, 2016, effective April 1, 2016, and was approved by a majority of the Company’s shareholders by written consent on May 4, 2016. Upon consummation of the transaction, the Company’s operating business was discontinued and the Company started seeking to acquire an operating business with strong growth potential. Upon the closing of the transaction, Mr. George Adyns resigned from the Board and resigned from his position as the Company’s Chief Financial Officer.

On October 5, 2017, the Company entered a share exchange agreement with Eastone Equities, LLC and certain stockholders of the Companies (the “SPA”), pursuant to which Eastone Equities, LLC acquired 44,566,412 shares of common stock of the Company (the “SPA Shares”) from the selling stockholders for an aggregate purchase price of $295,000. The transaction contemplated in the SPA closed on October 9, 2017. The shares so acquired represent approximately 90% of the Company’s issued and outstanding shares of common stock. The transaction resulted in a change in control of the Company.

On October 23, 2017, the Company changed its name to “ECARD INC.”, effective as of October 23, 2017.

On July 6, 2018, the Company submitted application materials to FINRA and requested to change its then ticker symbol from “EVRT” to “ECRD.” The Company’s common stock is currently quoted on the OTC Pink Market under the symbol “ECRD”.

All of the disclosures in this Quarterly Report on Form 10-Q must be viewed in light of the disposition of our sole operating subsidiary and the value of the value of the Company is now dependent upon its ability to locate and consummate the acquisition of an operating business with strong growth potential.

Results of Operations

For the quarter ended September 30, 2019, we had a net loss of $1,279, as compared to that of $10,406 for the same period in 2018. The decrease in loss was primarily due to a decrease in the Company’s operating expenses, which can be attributed to the Company’s better budget control. We do not expect this loss to recur in subsequent periods. Unless and until the Company acquires an operating business, we expect our expenses to consist of legal fees, accounting fees, and administrative costs related to maintaining a public company.

General and Administrative Expenses

General and administrative expenses were $1,279 as of September 30, 2019, as compared to that of $10,406 for the same period in 2018. General and administrative expenses consist primarily of professional fees.

Recent Developments

None.

Critical Accounting Policies and Significant Judgments and Estimates

The Securities and Exchange Commission (“SEC”) issued disclosure guidance for “critical accounting policies.” The SEC defines “critical accounting policies” as those that require the application of management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

Our significant accounting policies are described below. We anticipate that the following accounting policies will require the application of our most difficult, subjective or complex judgments:

Concentration of Risk

Financial instruments, which potentially subject us to concentrations of credit risk, consist principally of cash. Our cash balances are maintained in accounts held by major banks and financial institutions located in the United States. The Company occasionally maintains amounts on deposit with a financial institution that are in excess of the federally insured limits. The risk is managed by maintaining all deposits in high quality financial institutions.

Income Taxes

Income taxes are provided in accordance with FASB ASC 740 “Accounting for Income Taxes”. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carry forwards. Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. As of September 30, 2019, all deferred tax assets continue to be fully reserved.

Liquidity and Capital Resources

As of September 30, 2019, the Company had minimal cash.

As disclosed elsewhere in this Report, on October 5, 2017, the Company entered a certain SPA with Eastone Equities, LLC and certain selling stockholders, pursuant to which Eastone Equities, LLC acquired 44,566,412 shares of common stock of the Company from the selling stockholders for an aggregate purchase price of $295,000. The transactions contemplated in the SPA closed on October 9, 2017 and resulted in a change of control.

Simultaneously with the closing of the transactions contemplated in the SPA, effective as of October 23, 2017, Mr. Wayne Tsao was appointed as the Company’s Chief Executive Officer, President and Chairman of the Board. Ms. Charlene Cheng was appointed as the Chief Financial Officer and as a Director of the Board.

As a result of the closing of the transactions contemplated in the SPA and the resulting change of control, the Company started seeking to acquire an operating business with strong growth potential.

The value of the Company is now dependent upon our ability to locate and consummate the acquisition of an operating business with strong growth potential. As of the date of this Report, we have minimal cash. However, unless and until the Company acquires an operating business, we expect our expenses to consist of legal fees, accounting fees, and administrative costs related to maintaining a public company.

If the Company needs to raise additional funds, we intend to do so through equity and/or debt financing.

Going Concern Consideration

During the nine months ended September 30, 2019, the Company was unable to generate cash flows sufficient to support its operations and was dependent on capital contributions made by one significant stockholder. In addition, the Company has experienced recurring net losses, and has an accumulated deficit of $1,163,351 as of September 30, 2019. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

There can be no assurance that sufficient funds required during the next year or thereafter will be generated from any future operations or that funds will be available from external sources such as debt or equity financings or other potential sources. If the Company were unable to raise capital from external sources when required, there would be a material adverse effect on its business. Furthermore, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significant dilutive effect on the Company’s existing stockholders. The Company is currently seeking to acquire an operating company. However, there is no assurance that the Company will achieve this goal.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements as defined in Item 303(a) (4) (ii) of the SEC’s Regulation SK.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company is not required to provide the information required by this Item as it is a smaller reporting company.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Control and Procedures. 

Under the supervision and with the participation of our management, including our president and controller, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based upon that evaluation, our president and treasurer concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were not effective, based on having insufficient resources to establish an effective control and procedures environment during third quarter of 2019. Although we do have a subcontracted outside accountant, there is not enough personnel to establish proper controls and procedures with checks and balances at this time.

A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. We believe our disclosure on controls and procedures are designed to provide reasonable assurance of achieving their objectives and our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective.

Changes in Internal Controls over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the last quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Management is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this Quarterly Report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.

ITEM 1A. RISK FACTORS.

Not applicable to a smaller reporting company.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no issuance of options or shares, registered or not, during three-month period ended September 30, 2019.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

No senior securities were issued and outstanding during the three-month period ended September 30, 2019.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. 

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