Attached files
| file | filename |
|---|---|
| EX-32.1 - United Royale Holdings Corp. | ex32-1.htm |
| EX-31.1 - United Royale Holdings Corp. | ex31-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended June 30, 2020
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 Number 333-208978
United Royale Holdings Corp.
(Exact name of registrant issuer as specified in its charter)
| Nevada | 98-1253258 | |
| (State
or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
RM
405, 4/F, Energy Plaza, 92 Granville Road
Tsim Sha Tsui, Kowloon, Hong Kong
(Address of principal executive offices, including zip code)
Registrant’s phone number, including area code (852) 2733 6100
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A | N/A |
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 [X] 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 (section 232.405 of this chapter) during the preceding twelve months (or shorter period that the registrant was required to submit such files).
YES [ ] NO [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large Accelerated Filer [ ] | Accelerated Filer [ ] | Non-accelerated Filer [ ] | Smaller reporting company [X] |
| Emerging growth company [X] |
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 [X]
APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING 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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class | Outstanding at July 31, 2020 | |
| Common Stock, $.0001 par value | 141,990,387 |
TABLE OF CONTENTS
| -2- |
PART I — FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNITED ROYALE HOLDINGS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2020 AND DECEMBER 31, 2019
(Currency expressed in United States Dollars (“US$”), except for number of share)
As of June 30, 2020 | As of December 31, 2019 | |||||||
| (Unaudited) | (audited) | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | 6,315 | $ | 63,839 | ||||
| Prepaid expenses | 13,325 | 21,157 | ||||||
| TOTAL CURRENT ASSETS | $ | 19,640 | $ | 84,996 | ||||
| NON-CURRENT ASSETS | ||||||||
| Plant and equipment, net | 1,211 | 2,006 | ||||||
| Biological assets | 39,172 | 37,297 | ||||||
| Operating lease right-of-use assets, net | 17,164 | 19,563 | ||||||
| TOTAL ASSETS | $ | 77,187 | $ | 143,862 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accrued liabilities | $ | 3,515 | $ | 20,698 | ||||
| Due to director | 39,259 | 11,284 | ||||||
| Operating lease liabilities, current portion | 3,178 | 3,221 | ||||||
| TOTAL CURRENT LIABILITIES | $ | 45,952 | $ | 35,203 | ||||
| NON-CURRENT LIABILITIES | ||||||||
| Operating lease liabilities, net of current portion | 13,986 | 16,342 | ||||||
| TOTAL LIABILITIES | $ | 59,938 | $ | 51,545 | ||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock – Par value $0.0001; Authorized: 200,000,000 None issued and outstanding | - | - | ||||||
| Common stock – Par value $ 0.0001; Authorized: 600,000,000 Issued and outstanding: 141,990,387 shares as of June 30, 2020 and December 31, 2019 | 14,199 | 14,199 | ||||||
| Additional paid-in capital | 789,468 | 789,468 | ||||||
| Accumulated other comprehensive income/(loss) | (1,903 | ) | 953 | |||||
| Accumulated deficit | (784,515 | ) | (712,303 | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY | 17,249 | 92,317 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 77,187 | $ | 143,862 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-1 |
UNITED ROYALE HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| REVENUE | $ | - | - | $ | - | - | ||||||||||
| COST OF REVENUE | $ | - | - | $ | - | - | ||||||||||
| GROSS PROFIT | $ | - | - | $ | - | - | ||||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| General and administrative | $ | (23,855 | ) | (66,906 | ) | $ | (72,211 | ) | (117,093 | ) | ||||||
| LOSS FROM OPERATIONS | $ | (23,855 | ) | (66,906 | ) | $ | (72,211 | ) | (117,093 | ) | ||||||
| OTHER EXPENSE | ||||||||||||||||
| Other income (expense), net | - | 347 | - | 347 | ||||||||||||
| LOSS BEFORE INCOME TAX | (23,855 | ) | (66,559 | ) | (72,211 | ) | (116,746 | ) | ||||||||
| INCOME TAX EXPENSE | - | - | ||||||||||||||
| NET LOSS | $ | (23,855 | ) | (66,559 | ) | $ | (72,211 | ) | (116,746 | ) | ||||||
| Other comprehensive loss: | ||||||||||||||||
| - Foreign currency translation income (loss) | 398 | 90 | (2,856 | ) | (29 | ) | ||||||||||
| COMPREHENSIVE LOSS | (23,457 | ) | (66,469 | ) | (75,067 | ) | (116,775 | ) | ||||||||
| NET LOSS PER SHARE, BASIC AND DILUTED | $ | (0.00 | ) | (0.00 | ) | $ | (0.00 | ) | (0.00 | ) | ||||||
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED | 141,990,387 | 141,965,520 | 141,990,387 | 141,965,520 | ||||||||||||
See accompanying notes to the unaudited consolidated financial statements.
| F-2 |
UNITED ROYALE HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
Three and six months ended June 30, 2020 (Unaudited)
| COMMON STOCK | ADDITIONAL | ACCUMULATED OTHER | TOTAL | |||||||||||||||||||||
| Number of Shares | Amount | PAID-IN CAPITAL | COMPREHENSIVE LOSS | ACCUMULATED
DEFICIT | STOCKHOLDERS’ EQUITY | |||||||||||||||||||
| Balance as of December 31, 2019 (audited) | 141,990,387 | $ | 14,199 | $ | 789,468 | $ | 953 | $ | (712,303 | ) | $ | 92,317 | ||||||||||||
| Net loss for the three months ended March 31, 2020 | - | - | - | - | (48,357 | ) | (48,357 | ) | ||||||||||||||||
| Foreign currency translation | - | - | - | (3,254 | ) | - | (3,254 | ) | ||||||||||||||||
| Balance as of March 31, 2020 (Unaudited) | 141,990,387 | $ | 14,199 | $ | 789,468 | $ | (2,301 | ) | $ | (760,660 | ) | 40,706 | ||||||||||||
| Net loss | - | - | - | - | (23,855 | ) | (23,855 | ) | ||||||||||||||||
| Foreign currency translation | - | - | - | 398 | - | 398 | ||||||||||||||||||
| Balance as of June 30, 2020 (Unaudited) | 141,965,520 | $ | 14,199 | $ | 789,468 | $ | (1,903 | ) | $ | (784,515 | ) | $ | 17,249 | |||||||||||
Three and six months ended June 30, 2019 (Unaudited)
| COMMON STOCK | ADDITIONAL | ACCUMULATED OTHER | TOTAL | |||||||||||||||||||||
| Number of Shares | Amount | PAID-IN CAPITAL | COMPREHENSIVE LOSS | ACCUMULATED
DEFICIT | STOCKHOLDERS’ EQUITY | |||||||||||||||||||
| Balance as of December 31, 2018 (audited) | 141,965,520 | $ | 14,197 | $ | 650,712 | $ | (460 | ) | $ | (450,568 | ) | $ | 213,881 | |||||||||||
| Net loss | - | - | - | - | (50,187 | ) | (50,187 | ) | ||||||||||||||||
| Foreign currency translation | - | - | - | (119 | ) | - | (119 | ) | ||||||||||||||||
| Balance as of March 31, 2019 (Unaudited) | 141,965,520 | $ | 14,197 | $ | 650,712 | $ | (579 | ) | $ | (500,755 | ) | $ | 163,575 | |||||||||||
| Net loss | - | - | - | - | (66,559 | ) | (66,559 | ) | ||||||||||||||||
| Foreign currency translation | - | - | - | 90 | - | 90 | ||||||||||||||||||
| Balance as of June 30, 2019 (Unaudited) | 141,965,520 | $ | 14,197 | $ | 650,712 | $ | (489 | ) | $ | (567,314 | ) | $ | 97,106 | |||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-3 |
UNITED ROYALE HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
For the six months ended | For the six months ended | |||||||
| (Unaudited) | (Unaudited) | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (72,211 | ) | $ | (116,746 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Depreciation and amortization expenses | 2,255 | 738 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Increase/ (Decrease) in accrued liabilities | (17,091 | ) | (21,067 | ) | ||||
| Decrease/ (Increase) in prepaid expenses | 7,798 | (1,057 | ) | |||||
| Decrease in lease liabilities | (1,521 | ) | - | |||||
| Net cash flows used in operating activities | (80,770 | ) | (138,132 | ) | ||||
| CASH FLOWS USED IN INVESTING ACTIVITIES: | ||||||||
| (Increase)/ Decrease in biological assets | (4,522 | ) | (6,866 | ) | ||||
| Net cash flows used in investing activities | (4,522 | ) | (6,866 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Advance from directors | 27,987 | 12,148 | ||||||
| Net cash provided by financing activities | 27,987 | 12,148 | ||||||
| Effect of exchange rate changes in cash and cash equivalents | (219 | ) | (60 | ) | ||||
| Net changes in cash and cash equivalents | (57,524 | ) | (132,910 | ) | ||||
| Cash and cash equivalents, beginning of period | 63,839 | 261,930 | ||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 6,315 | $ | 129,020 | ||||
| SUPPLEMENTAL CASH FLOWS INFORMATION | ||||||||
| Income taxes paid | $ | - | $ | - | ||||
| Interest paid | $ | - | $ | - | ||||
| SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Initial recognition of operating lease right-of-use assets and operating lease obligations upon adoption of ASC Topic 842 | $ | 21,330 | $ | - | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-4 |
UNITED ROYALE HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019 (UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| 1. | BASIS OF PRESENTATION |
The accompanying unaudited condensed consolidated financial statements have been prepared by management in accordance with both accounting principles generally accepted in the United States (“GAAP”), and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and note disclosures normally included in audited financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.
In the opinion of management, the balance sheet as of June 30, 2020 which has been derived from unaudited financial statements and these unaudited condensed consolidated financial statements reflect all normal and recurring adjustments considered necessary to state fairly the results for the periods presented. The results for the period ended June 30, 2020 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2020 or for any future period.
These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Management’s Discussion and the audited financial statements and notes thereto included in the Form 10-K for the year ended December 31, 2019.
| 2. | DESCRIPTION OF BUSINESS AND ORGANIZATION |
United Royale Holdings Corp., formerly known as Bosy Holdings Corp. (“the Company”, “we”, “us” or “our”) was incorporated in the State of Nevada on June 23, 2015. We intend to offer planting and cultivation services to land owners in regards to the planting and cultivation of Aquilaria Subintegra & Aquilaria Sinensis trees. We also intend to provide services relating to the extraction of Agarwood from such trees through a process known as “inoculation.”
On September 30, 2018, the Company and Mr. CHEN Zheru, representing the sole shareholder of IV Enterprises Development Limited, a Seychelles corporation (“IVED”), entered into a Sale and Purchase Agreement, pursuant to which the Company acquired 100% (one hundred percent) of the shareholding of IVED. IVED provides tree nurseries, including planting, cultivation and inoculation services through its wholly-owned subsidiary, Oudh Tech Sdn Bhd, in Malaysia. The acquisition is completed on September 30, 2018.
Mr. CHEN Zheru is the common director and major shareholder of the Company and IVED. As a result of this common ownership and in accordance with the FASB Accounting Standards Codification Section 805 “Business Combination”, the transaction is being treated as a combination between entities under common control. The recognized assets and liabilities were transferred at their carrying amounts at the date of the transaction. The equity accounts of the combining entities are combined. Further, the companies will be combined retrospectively for prior year comparative information as if the transaction had occurred on January 1, 2017.
| 3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of presentation
The accompanying financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).
The accompanying financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany transactions and balances were eliminated in consolidation.
| F-5 |
Below is the organization chart of the Group.
Use of estimates
Management uses estimates and assumptions in preparing these financial statements in accordance with US GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities in the balance sheet, and the reported revenue and expenses during the periods reported. Actual results may differ from these estimates.
Going Concern
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. During the six months ended June 30, 2020, the Company incurred a net loss of $72,211 and used cash in operations of $80,770. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s December 31, 2019 financial statements, has expressed substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The Company’s ability to continue as a going concern is dependent upon improving its profitability and the continuing financial support from its shareholders. Management believes the existing shareholders or external financing will provide the additional cash to meet the Company’s obligations as they become due. Despite the amount of funds that we have raised, no assurance can be given that any future financing, if needed, will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, if needed, it may contain undue restrictions on its operations, in the case of debt financing, or cause substantial dilution for its stockholders, in the case of equity financing.
COVID-19 outbreak
In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. The COVID-19 pandemic has negatively impacted the global economy, workforces, customers, and created significant volatility and disruption of financial markets. It has also disrupted the normal operations of many businesses, including ours. This outbreak could decrease spending, adversely affect demand for our services and harm our business and results of operations. It is not possible for us to predict the duration or magnitude of the adverse results of the outbreak and its effects on our business or results of operations at this time.
Cash and cash equivalents
Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.
Our deposit in Hong Kong is currently deposit in HSBC Hong Kong, and there is a Deposit Protection Scheme protects our eligible deposits held with bank in Hong Kong which is members of the Scheme. The scheme will pay us a compensation up to a limit of HKD500,000, which is equivalent to $64,102, if HSBC Hong Kong fails.
Our deposit in Malaysia is currently deposit in Malayan Banking Berhad, and there is a Perbadanan Insurans Deposit Malaysia protects our eligible deposits held with bank in Malaysia which is members of the Scheme. The scheme will pay a compensation up to a limit of Malaysia Ringgit (“MYR”) 250,000 per deposit per member bank, which is equivalent to $61,234, if the aforementioned banks fails.
| F-6 |
Plant and equipment
Plant and equipment are stated at cost less accumulated depreciation and impairment. Depreciation of plant, equipment and software are calculated on the straight-line method over their estimated useful lives or lease terms generally as follows:
| Classification | Useful Life | |
| Computer and Software | 3 years | |
| Equipment | 10 years |
The Company purchased 2 computers at the end of June 2017, and the computers has been subject to depreciation since the utilization in July 2017. Expenditures for maintenance and repairs will be expensed as incurred.
Biological Assets
Biological Assets of the Company comprise of agarwood sapling and plantation cost of agarwood.
Pursuant to ASC 905-360-25-2, Biological Assets are planted and brought to production by the Company or on a contract basis. Saplings are usually purchased as nursery stock and transplanted into the farmland in the desired pattern. Cost of biological assets consists of accumulated planation development costs incurred from commencement of planting of seedlings up to maturity of the crop cultivated. Capitalization of planation development and other operating costs ceases upon commencement of commercial harvesting, which range from 7 to 9 years. Net proceeds from sales of products before commercial production begins shall be applied to the capitalized cost of the plants, trees, or vines.
Biological Assets is measured using average cost, and is measured at the lower of cost and net realizable value. When evidence exists that the net realizable value of biological Assets is lower than its cost, the difference shall be recognized as a loss in earnings in the period in which it occurs. Impairment loss may be required, for example, due to damage, physical deterioration, obsolescence, changes in price levels, or other causes.
Pursuant to ASC 905-360-35-4, when production in commercial quantities begins, the accumulated costs shall be depreciated over the estimated useful life of the particular farmland.
Foreign currencies translation
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statement of operations.
The reporting currency of the Company is the United States Dollars (“US$”) and the accompanying financial statements have been expressed in US$. Hong Kong Dollars (“HK$”), which is the respective functional currencies for the Company as the deposit is currently kept in HSBC Hong Kong. In addition, the Company’s subsidiaries maintain their books and records in their respective local currency, which consists of the Hong Kong Dollars (“HK$”) and Malaysian Ringgit (“MYR”), which is also the respective functional currency of the subsidiaries.
Translation of amounts from the local currencies of the Company into US$ has been made at the following exchange rates for the respective periods:
| As of and for the six months ended June 30 | ||||||||
| 2020 | 2019 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Period-end MYR : US$1 exchange rate | 4.28 | 4.13 | ||||||
| Period-average MYR : US$1 exchange rate | 4.26 | 4.11 | ||||||
| Period-end / average HK$ : US$1 exchange rate | 7.75 | 7.75 | ||||||
| F-7 |
Income taxes
The Company accounts for income taxes using the asset and liability method. The asset and liability method requires recognition of deferred tax assets and liabilities for expected future tax consequences of temporary differences that currently exist between tax bases and financial reporting bases of the Company’s assets and liabilities. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these 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. A valuation allowance is provided on deferred taxes if it is determined that it is more likely than not that the asset will not be realized. The Company recognizes penalties and interest accrued related to income tax liabilities in the provision for income taxes in its Consolidated Statements of Income.
Significant management judgment is required to determine the amount of benefit to be recognized in relation to an uncertain tax position. The Company uses a two-step process to evaluate tax positions. The first step requires an entity to determine whether it is more likely than not (greater than 50% chance) that the tax position will be sustained. The second step requires an entity to recognize in the financial statements the benefit of a tax position that meets the more-likely-than-not recognition criterion. The amounts ultimately paid upon resolution of issues raised by taxing authorities may differ materially from the amounts accrued and may materially impact the financial statements of the Company in future periods.
| F-8 |
Fair value of financial instruments
The carrying value of the Company’s financial instruments: cash and cash equivalents, prepayments, amount due to a director and accrued liabilities approximate at their fair values because of the short-term nature of these financial instruments.
The Company follows the guidance of the ASC Topic 820-10, “Fair Value Measurements and Disclosures” (“ASC 820-10”), with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:
● Level 1 : Observable inputs such as quoted prices in active markets;
● Level 2 : Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
● Level 3 : Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions
Lease
Prior to January 1, 2019, the Company had not entered into formal lease agreement and the Company accounted for leases under ASC 840, Accounting for Leases. Effective July 1, 2019, the Company adopted the guidance of ASC 842, Leases, which requires an entity to recognize a right-of-use asset and a lease liability for virtually all leases. The implementation of ASC 842 did not have a material impact on the Company’s consolidated financial statements and did not have a significant impact on our liquidity or on our compliance with our financial covenants associated with our loans. The Company adopted ASC 842 using a modified retrospective approach. As a result, the comparative financial information has not been updated and the required disclosures prior to the date of adoption have not been updated and continue to be reported under the accounting standards in effect for those periods. The adoption of ASC 842 on January 1, 2019 resulted in the recognition of operating lease right-of-use assets of $21,330, lease liabilities for operating leases of $21,330, and a zero cumulative-effect adjustment to accumulated deficit. See Note 8 for further information regarding the impact of the adoption of ASC 842 on the Company’s financial statements.
Recent accounting pronouncements
In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326). ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. ASU 2016-13 is effective for the Company beginning January 1, 2023, and early adoption is permitted. The Company does not believe the potential impact of the new guidance and related codification improvements will be material to its financial position, results of operations and cash flows.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements.
| F-9 |
| 4. | PREPAID EXPENSES |
The prepaid expenses as of June 30, 2020 included OTCQB annual fee of $6,000, deposit of $215 in transfer agent, deposit of $6,410 in the consulting service provider and $700 in our farmland provider, while the prepaid expenses as of December 31, 2019 included OTCQB annual fee of $12,000, deposit of $2,013 and $6,410 in transfer agent and our consultancy firm, and deposit of $734 in our farmland provider.
| 5. | PLANT AND EQUIPMENT, NET |
| As
of June 30, 2020 | As
of December 31, 2019 | |||||||
| (Unaudited) | ||||||||
| Computer and Software | $ | 3,878 | $ | 3,878 | ||||
| Equipment | 1,751 | 1,816 | ||||||
| 5,629 | 5,694 | |||||||
| Less: Accumulated Depreciation | (4,418 | ) | (3,688 | ) | ||||
| Plant and equipment, net | $ | 1,211 | $ | 2,006 | ||||
The Company acquired computers and a software at $3,878 in 2017, and the accumulated depreciations as of June 30, 2020 and December 31, 2019 were $3,878 and $3,232 respectively.
The Company acquired Engine Pump at $1,816 in 2017. The accumulated depreciations as of June 30, 2020 and December 31, 2019 were $540 and $456 respectively.
The depreciation expense for June 30, 2020 and 2019 were $795 and $738 respectively.
| 6. | BIOLOGICAL ASSETS |
Biological Assets of the Company comprise of agarwood sapling and plantation cost of agarwood.
The Company acquired the agarwood sapling at MYR98,800 (approximately $23,587) in 2017. The accumulated planation development costs incurred from commencement of planting of seedlings up to June 30, 2020 and December 31, 2019 were $39,172 and $37,297 respectively.
| 7. | AMOUNT DUE TO DIRECTOR |
As of June 30, 2020, and December 31, 2019, our directors has loaned to the Company $39,259 and $11,284 as working capital, respectively. This loan is unsecured, non-interest bearing and due on demand. We performed the calculation of imputed interest and believed the imputed interest is not significant when compare to our balance sheet size and total expense, and as a result, we didn’t capture this figure into our financial statements.
| F-10 |
| 8. | OPERATING LEASE |
The Company has operating lease agreements for a farmland with remaining lease terms of 6 years. The Company does not have any other leases. The Company accounts for the lease and non-lease components of its leases as a single lease component. Lease expense is recognized on a straight-line basis over the lease term.
Operating lease right-of-use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Generally the implicit rate of interest in arrangements is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The operating lease ROU asset includes any lease payments made and excludes lease incentives.
This standard did not have a significant impact on our liquidity.
The components of lease expense and supplemental cash flow information related to leases for the period are as follows:
| Six months ended June 30, 2020 | ||||
| (Unaudited) | ||||
| Lease Cost | ||||
| Operating lease cost (included in general and administrative expenses in the Company’s unaudited condensed statement of operations) | $ | 2,113 | ||
| Other Information | ||||
| Cash paid for amounts included in the measurement of lease liabilities for the six months ended June 30, 2020 | $ | 2,113 | ||
| Remaining lease term – operating lease (in years) | 4.75 | |||
| Discount rate – operating lease | 6.65 | % | ||
| As of June 30, 2020 | ||||
| (Unaudited) | ||||
| Operating lease | ||||
| Right-of-use assets, net | $ | 17,164 | ||
| Operating lease liabilities – current portion | 3,178 | |||
| Operating lease liabilities – non-current portion | 13,986 | |||
| Total operating lease liabilities | $ | 17,164 | ||
| F-11 |
Maturity of the Company’s lease liabilities are as follows:
| Year Ending | Operating Lease | |||
| 2020 (remaining 6 months) | $ | 2,100 | ||
| 2021 | 4,201 | |||
| 2022 | 4,201 | |||
| 2023 | 4,201 | |||
| 2024 | 4,201 | |||
| 2025 (first 3 months of the fiscal year) | 1,050 | |||
| Total lease payments | $ | 19,954 | ||
| Less: Present value discount | (2,790 | ) | ||
| Present value of lease liabilities | $ | 17,164 | ||
Lease expenses were $2,113 during the six months ended June 30, 2020, and there was no rent incurred during the six months ended June 30, 2019.
| 9. | STOCKHOLDERS’ EQUITY |
As of June 30, 2020, and December 31, 2019, there were 141,990,387 and 141,990,387 shares of common stock issued and outstanding respectively.
There were no stock options, warrants or other potentially dilutive securities outstanding as of June 30, 2020.
10. SUBSEQUENT EVENTS
On March 16, 2020, Malaysia Prime Minister announced the implementation of Movement Control Order (“MCO”) under Control of Infectious Diseases Act 1988 and the Police Act 1967 to contain the spread of coronavirus disease 2019 (“COVID-19”). Pursuant to the declaration, initial phase of the MCO effectively take place from March 18, 2020 to March 31, 2020 for a period of 14 days, and subsequently extended to May 12, 2020 with three 14-day MCO extensions declared by Malaysia Prime Minister.
Pursuant to the MCO, all government and private premises except those involved in essential supply of goods and services such as water, electricity, energy, telecommunications, postal, transportation, irrigation, oil, gas, fuel, lubricants, broadcasting, finance, banking, health, pharmacy, fire, prison, port, airport, safety, defense, cleaning, retail and food supply should be closed.
On May 1, 2020, Malaysia Prime Minister announced that Conditional Movement Control Order (“CMCO”), a relaxation of MCO will replaced existing MCO on May 4, 2020 onwards and scheduled to expire on original 4th MCO expiration date, May 12, 2020. On May 10, 2020, Malaysia Prime Minister announced that the CMCO will be extended for a period of 4 weeks from May 13, 2020 until June 9, 2020.
On June 7, 2020, Malaysia Prime Minister announced that Recovery Movement Control Order (“RMCO”) would take place from June 10, 2020 to August 31, 2020, while preserving previous allowable economic activity, interstate travelling is now permissible.
The temporary close down does not have much impact on our current operation, because currently we are in the plantation progress of Aquilaria Subintegra trees and we expect the harvest will take place within future 4 years’ time. At this moment, the trees are located at Johor, Malaysia, with sufficient rainfall and sunlight for growing. We have already entered into operation to take care of those trees in our plantation site.
| F-12 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information contained in this quarter report on Form 10-Q is intended to update the information contained in our Form 10-K dated March 30, 2020, for the year ended December 31, 2019 and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other information contained in such Form 10-K. The following discussion and analysis also should be read together with our financial statements and the notes to the financial statements included elsewhere in this Form 10-Q.
The following discussion contains certain statements that may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including, without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Forward-looking statements speak only as of the date of this quarterly report. You should not put undue reliance on any forward-looking statements. We strongly encourage investors to carefully read the factors described in our Form 10-K dated March 30, 2020, in the section entitled “Risk Factors” for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements. We assume no responsibility to update the forward-looking statements contained in this transition report on Form 10-Q. The following should also be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto that appear elsewhere in this report.
Company Overview
United Royale Holdings Corp. (the “Company”) was incorporated under the laws of the State of Nevada on June 23, 2015. United Royale Holdings Corp., is a developmental stage company that intends to offer planting and cultivation services to land owners in regards to the planting and cultivation of Aquilaria Subintegra & Aquilaria Sinensis trees. The company also intend to provide services relating to the extraction of Agarwood (Agarwood is extracted from those tree, about 10-15% wood of the tree can become Agarwood) from such trees, through the process of “fungal inoculation.”
We offer planting and cultivation services to land owners in regards to the planting and cultivation of Aquilaria Subintegra & Aquilaria Sinensis trees. We also intend to provide services relating to the extraction of Agarwood from such trees through a process known as “inoculation.”
On February 1, 2018, the majority of the directors and shareholders of the Company adopted the resolution to request a name change of the Company from “Bosy Holdings Corp.” to “United Royale Holdings Corp.”. The name change became effective with the State of Nevada on February 5, 2018. FINRA announced on February 14, 2018 that the new name of “United Royale Holdings Corp.” was be effective on February 15, 2018, and the new ticker symbol of “URYL” was effective on February 15, 2018.
On March 30, 2018, Mr. Teoh Kooi Sooi resigned from the President of the Company. And Mr. Teoh retained his position of Chief Executive Officer, treasurer, and director in the board. The resignation was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices. Mr. Teoh Kooi Sooi has been the President of the Company since September 18, 2015.
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On March 30, 2018, Mr. Chen Zheru resigned from the Secretary of the Company. And Mr. Chen will retain his position of director in the board. The resignation was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices. Mr. Chen Zheru has been the Secretary of the Company since September 18, 2015.
On March 30, 2018, Ms. Jaya C Rajamanickam was appointed as the Company’s new President. Ms. Feliana Binti Johny was appointed as the Company’s new Secretary. The biographies for new officers of the Company was filed in the Form 8-K filed with SEC on March 30, 2018.
On September 30, 2018, the Company and Mr. CHEN Zheru, representing the sole shareholder of IV Enterprises Development Limited, a Seychelles corporation (“IVED”), entered into a Sale and Purchase Agreement, pursuant to which the Company acquired 100% (one hundred percent) of the shareholding of IVED. IVED provides tree nurseries, including planting, cultivation and inoculation services through its wholly-owned subsidiary, Oudh Tech Sdn Bhd, in Malaysia. The acquisition is completed on September 30, 2018.
On October 22, 2018, Mr. David Edwin Evans was appointed as the Company’s Chief Operating Officer. Mr. Liao Lin was appointed as the Company’s Chief Sales Officer. The biographies for new officers of the Company was filed in the Form 8-K filed with SEC on October 22, 2018.
On November 30, 2018, Mr. Chen Zheru resigned from the board of directors with the Company. The resignation was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices. Mr. Chen Zheru has been the director of the Company since September 18, 2015. On the same day, Mr. Li Gongming was appointed as the Company’s new member of board of directors.
On December 5, 2018, as a result of a private transaction, 100% shareholding of Bosy Holdings Limited has been transferred from Mr. Chen Zheru to Mr. Li Gongming. The consideration paid for the transaction was $50,000. The source of the cash consideration for the transaction was personal funds of the Purchaser. Bosy Holdings Limited, a limited liability company incorporated in Seychelles, holds 78,415,100 shares of United Royale Holdings Corp. The Transaction resulted in the Purchaser acquiring a total of 55.235% of the issued and outstanding share capital of the Company on a fully-diluted basis, which caused a change in control of the Company. And Mr. Li owns 6,000,000 shares of the Company as of December 7, 2018, which constitutes a total shareholding of 59.461% of the Company.
On April 1, 2019, the Company entered into a six-year tenancy agreement with Halaman Girang Sdn Bhd, the landlord of the farmland, for renting Lot 4316, Batu 20, Jalan Segamat, 84900, Tangkak, Johor, Malaysia. The monthly rental payment is MYR1,500, equivalent to around $363. The tenancy period is valid from April 1, 2019 to March 31, 2025.
On April 1, 2019, the Company entered into an agarwood management agreement with Mr. Simone Yap Xin Wei for providing agarwood plantation management and farming operations in the farmland. The agreement is valid from April 1, 2019 to March 31, 2020, with monthly service fee of MYR2,640, equivalent to $639. Nevertheless the agreement was expired, we still work with Mr. Simon Yap Xin Wei currently for managing the agarwood plantation.
On June 12, 2019, Mr. Soh Khay Wee was appointed as the Company’s Director. The biographies for new officers of the Company was filed in the Form 8-K filed with SEC on June 12, 2019.
Due to the Coronavirus outbreak since December, 2019, Malaysia government declared a Movement Control Order from March 18, 2020 to April 14, 2020. The temporary close down does not have much impact on our current operation, because currently we are in the plantation progress of Aquilaria Subintegra trees and we expect the harvest will take place within future 4 years’ time. At this moment, the trees are located at Johor, Malaysia, with sufficient rainfall and sunlight for growing. Once the Movement Control Order is expired or not extended, we will collaborate with our service provider to performance the maintenance work of the farmland.
| -4- |
Results of Operation
For the three and six months ended June 30, 2020 and 2019
Revenues
We have not generated any revenue for the three and six months ended June 30, 2020 and 2019.
General and administrative expenses
We incurred a total of $23,855 and $72,211 general and administrative expenses during the three and six months ended June 30, 2020, while we incurred a total of $66,906 and $117,093 general and administrative expenses during the three and six months ended June 30, 2019 respectively. The general and administrative expenses are mainly comprised of salary, Form 10-Q review fee, consulting fee, legal fee, transfer agent fee and Edgar Filing fee. The increase of general and administrative expenses is due to increase in salary expense and consulting fee.
Net loss
For the three and six months ended June 30, 2020 and 2019, we had generated no revenues. We incurred a total net loss of $23,855 and $72,211 for the three and six months ended June 30, 2020 respectively, while we incurred a total net loss of $66,559 and $116,746 for the three and six months ended June 30, 2019 respectively.
Liquidity and Capital Resources
Cash Used In Operating Activities
For the six months ended June 30, 2020 and 2019, the cash flows used in operating activities was $80,770 and $138,132 respectively, consists of net loss and change in assets and liabilities.
Cash Used In Investing Activities
For the three months ended June 30, 2020 and 2019, the cash flows used in investing activities was $4,522 and $6,866 respectively, consists of accumulation of cost of biological assets.
Cash Provided By Financing Activities
For the three months ended June 30, 2020 and 2019, the cash flows provided by financial activities was $27,987 and $12,148 respectively, consists of advance from directors.
Off-balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders as of June 30, 2020.
Contractual Obligations
As of June 30, 2020, the Company’s subsidiary leased a farmland in Tangkak, Johor, Malaysia under an operating lease, which have a term of six years commencing from April 1, 2019 to March 31, 2025. As of June 30, 2020, the future minimum rental payments under these leases aggregate approximately $19,954 and are due as follows: 2020: $2,100; 2021: $4,201; 2022: $4,201; 2023: $4,201; 2024: $4,201; and 2025: $1,050.
| -5- |
Item 3 Quantitative and Qualitative Disclosures About Market Risk.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
Item 4 Controls and Procedures.
Evaluation of Disclosure Controls and Procedures:
We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2020. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Operations Officer. Based upon that evaluation, our Chief Executive Officer and Chief Operations Officer concluded that, as of June 30, 2020, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that, as of June 30, 2020, our disclosure controls and procedures were not effective: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.
Changes in Internal Control over Financial Reporting:
There were no changes in our internal control over financial reporting during the quarter ending June 30, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| -6- |
We know of no materials, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any beneficial shareholder are an adverse party or has a material interest adverse to us.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
None.
| 31.1 | Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer | |
| 32.1 | Section 1350 Certification of principal executive officer | |
| -7- |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| UNITED ROYALE HOLDINGS CORP. | ||
| (Name of Registrant) | ||
| Date: July 31, 2020 | ||
| By: | /s/ Teoh Kooi Sooi | |
| Title: | Chief Executive Officer, Treasurer, Director (Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer) | |
| -8- |